Facebook has a secret app in China - Axios
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Facebook has a secret app in China

A computer screen displays the social media posting by Mark Zuckerberg on Facebook in Beijing, China, Friday, March 18, 2016. The photo of Facebook founder Mark Zuckerberg jogging in downtown Beijing's notorious smog has prompted a torrent of astonishment, mockery and amusement on Chinese social media. (AP Photo/Ng Han Guan)

Facebook is testing a photo-sharing app in China, called Colorful Balloons, that is similar to Facebook's Moments app, but isn't identified as linked to Facebook, the New York Times reports.

Why this matters: The release of a secret app shows, according to the Times, the "desperation — and frustration" among big tech companies to gain access to the tightly controlled Chinese internet market and its hundreds of millions of users.

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Bark like Bannon, bite like Mattis

Pablo Martinez Monsivais / AP

Donald Trump is a Jekyll and Hyde president: He pops off wildly about everything from war to walls, threatening the unthinkable. But then he acts fairly conventionally when it comes to the actual policy.

  • This phenomenon will be on display at 9 tonight when Trump addresses the nation on Afghanistan for half an hour from Fort Meyer in Arlington, Va., with soldiers in his live audience.
  • A month ago, Steve Bannon and friends thought they were winning their argument for a drawdown, rather than the increase advocated by SecDef Jim Mattis — with Bannonites contending that Americans in general, and Trump country in particular, didn't want to pour more America lives into an unwinnable fight.
  • Now, Trump has settled on a plan that's perfectly satisfactory to the War Cabinet that met with him Friday at Camp David. And we're told the intelligentsia will generally like the plan.

The plan will have the U.S. not winning, but not losing.

The N.Y. Times reports in its lead story that Trump's strategy "is likely to open the door to the deployment of several thousand troops."

Jonathan Swan's bottom line: "Trump has been reluctantly open to the generals' opinion, and I'm told he doesn't want to be the president who loses the country to the terrorists."

Let us count the ways we've seen this movie before:

  • Blowing up NATO.
  • Getting out of NAFTA.
  • Building a wall in first 100 days.
  • Picking a fight with U.S. allies like Mexico.
  • Mass deportations.
  • Trade war with China.
  • Tough talk on North Korea.
  • Threatening to pull out of Afghanistan.

This tendency by Trump, more than anything, is what drove Bannon nuts — and will drive Breitbart's assault on the "globalists," as Bannonites sneeringly call the officials responsible for the more conventional policy actions.

  • Trump has lost both the agitators for radical action to match radical words (Bannon, Mooch), and his enablers (Priebus). He will still talk to them, but power always shrinks on the outside.He's left surrounded by the architects of The Conventional.
  • Be smart: Some of the victories for normality weren't presidential whim, but process victories by inside players who knew how to slow or stall Bannon. This is the hidden hand of the Committee to Save America that we've told you about.
  • Growing Trump threat: GOP lawmakers know his bark is way worse than his bite, and no longer fear his tweet threats or bluster. They not only don't like him, or respect him, they don't fear him, which is power-sapping. Turns out the bully can't throw a punch!

Go deeper:

  • Swan has a cheat sheet on the debate, based on deep reporting from top sources.
  • To get smart fast on the president's decision, our experts recommend "America Needs to Stay in Afghanistan," by Vance Serchuk of the Center for a New American Security, via The Atlantic on Friday: "Rather than following the example of his predecessors in searching for an exit from the outset of his presidency, [Trump] can learn from their experience and commit to stay."

P.S. Josh Rogin on the WashPost opinion page: "Bannon had been busily operationalizing his plan to win the economic war with China. ... The Kushner-Kissinger view holds that the U.S.-China relationship is too complex and important to risk throwing into disarray. They advocate cooperation over confrontation."

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Here’s how long Congress has to renew CHIP

Technically, Congress is supposed to reauthorize the Children's Health Insurance Program by the end of September, and it hasn't gotten very far on that. But here's why some top Republicans think they have a bit more time. This graphic is based on projections from the Medicaid and CHIP Payment and Access Commission (MACPAC), and it shows when states are expected to exhaust their federal CHIP funds.

Yes, but: As we've written, states have to go through a lot of preparations to shut down their programs before then if there's no sign that Congress is getting its act together. It's better for all of them if Congress can renew the program quickly, without a lot of unnecessary drama.

Data: MACPAC 2017 analysis; Cartogram: Andrew Witherspoon / Axios

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10 missing from USS John S. McCain after ship collision

Royal Malaysian Navy / AP

Per the Associated Press:

  • "The Navy says 10 sailors are missing and five were hurt in the collision [of the USS John S. McCain and the Liberian-flagged Alnic MC] in waters east of Singapore and the Strait of Malacca early Monday."
  • "Singapore sent tugboats and naval and coast guard vessels for the search and rescue effort... Osprey aircraft and Seahawk helicopters from the USS America were assisting in the search."
  • President Trump's response, per WH pool: "Thoughts & prayers are w/ our @USNavy sailors aboard the #USSJohnSMcCain..."

Why it matters: "The collision was the second involving a ship from the Navy's 7th Fleet in the Pacific in two months. Seven sailors died in June when the USS Fitzgerald and a container ship collided in waters off Japan."

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The Axios Way: How you do it

Lots of great feedback to our post on The Axios Way — some lessons learned starting two media companies. There were requests for us to expand it to cover tricks/techniques that apply to all organizations, not just media startups.

Why it matters: Thanks to the explosion of technology and social media in particular, every industry — and most jobs — are changing faster than ever. This requires a new set of strategies to thrive in this era of transparency, distraction and disruption.

Market manically. For all the whining about technology, you can reach more people, more frequently, with more precision than at any point in humanity.

  • How you do it: If your marketing plan has conventional media only or catch-all "social media" section, destroy it. You need a specific plan for every media ecosystem — Facebook, video, Twitter, TV, email, etc — and to understand it's a different, often radically different, one for each. Make no mistake, it's harder than ever to punch through the noise, so you need a level of brand marketing sophistication most lack.

Think of your brand as a political candidate. You need to be hyper-aware of how you're seen by your core constituencies (employees and customers) and by the broader public.

  • How you do it: Be vigilant for signs of erosion in your base; or failing to respond forcefully to negative attacks; or underutilizing technology to connect with your people in authentic, compelling ways. And don't forget that people love a good narrative. So write and sell one, internally and externally.

Over communicate. In our short-attention-span world, full of cluttered and distracted minds, every leader and manager needs to explain what they're doing and why they're doing it every week, if not every day.

  • How you do it: It's not enough to save it for the staff retreat. Find a simple, clear way to explain what each person is doing, how they'll be measured, and how it fits into your company's larger purpose. And do it often. If not, you will end up with a bunch of distracted, underperforming malcontents.

Speak like a human. What the hell is the difference between "mission" and "values"? Who the hell really cares? What all employees — millennials in particular — want to know is what you're doing and why you're doing it. So just say it that way. (We're in the process of doing just this, and it's been very clarifying).

  • How you do it: Social media thankfully forces authenticity and writing like you would speak in normal settings. Your "what" and "why" should be in this casual language. If you sound like a corporate robot, reboot.

Force-multiply. It's not just that hiring someone better than you makes you better. It encourages that person to do the same. Soon, you have a talent factory. But many leaders/managers are too insecure to hire others who might outshine them. So they hire middling talent, trained to do the same. Soon you have the hot mess of mediocrity with no easy fix.

  • How you do it: You get this right at the very top by obsessing about finding killer executive talent secure enough to hire/empower stars. This is contagious. As for the flip side, get rid of leaders who don't get it.

The tech wolf is at your door. Your job, your company and your industry face imminent threat from new technologies or robots. This threat will worsen.

  • How you do it: Knowing this alone should instantly sharpen your mind and shorten your planning cycles. You don't have the luxury of five-year plans or one-year budgets. Yes, set a North Star. But constantly adapt to keep pace with technologies and swift changes in your marketplace. Tame the tech wolves eyeballing your lunch — before they eat it.

Heed red flags. Bad values are cancer, and it spreads. We look for killer talent with humility, and never compromise on either half.

  • How you do it: Resist the urge to overlook signs that someone won't fit with your culture, even if they're awesome at what they do. In the past, we occasionally averted our gaze from people with bad values but great gifts — and regretted it every single time. The same will likely happen to you, too.
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Trump heading to the border

Ted S. Warren / AP

President Trump heads to Arizona Tuesday for a visit to the border and a campaign-style rally in Phoenix. Police are braced for mass protests in the wake of Charlottesville, and the Phoenix Mayor, Democrat Greg Stanton, made a startling request that the president stay away from his city because his appearance, and expected pardon of Sheriff Joe Arpaio, would "enflame emotions and further divide our nation."

Why this matters: Trump has an opportunity on Tuesday to show his base that he's still as committed as ever, after the firing of Steve Bannon, to the big, symbolic, promise of his presidency — to build a mammoth wall along the border with Mexico.

  • But, but... I can't get a straight answer from administration sources on whether Trump will make a full-throated demand that Congress fund the wall in the government funding bill due at the end of September.
  • Between the lines: Some Trump administration officials are nervous about making concrete funding demands, in Arizona, that will be almost impossible to get Congress to agree to. Some senior White House officials have told conservative allies the wall fight should be postponed until later in the year, after a three-month, kick the can down the road, government funding bill gets signed in September. Either way, the wall fight could ultimately shut down the government.
  • Trump is also likely to promote the administration's success in driving down illegal entries, according to an administration source. Officials view Arizona as a case study of why border fencing works.

What else we're watching:

  • Trump will likely be joined by Acting Secretary of Homeland Security Elaine Duke, for the official portion of the trip. But which Republican officials will show up to support the president?
  • Will Trump use his speech to attack his enemies in the Republican Senate, Arizona senators Jeff Flake and John McCain?
  • Will Trump pardon Arpaio, as he teased to Fox News? I'm told the relevant paperwork is prepared for Trump to pardon the former sheriff, who was found guilty for defying a judge's order to stop racially profiling Latinos during patrols. But officials won't tell me — and perhaps they haven't decided — whether Trump will announce the pardon on his Arizona swing.
  • Will Trump endorse Kelli Ward as a primary opponent to Sen. Flake? Trump signaled last week that he may be preparing to endorse Ward, but I'm told some of Trump's allies have counseled him to hold off on the endorsement because they think she's a weak candidate.
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Trump to announce Afghanistan plan Monday in TV address

Pablo Martinez Monsivais / AP

President Trump will address the nation on his Afghanistan war strategy tomorrow at 9 p.m. from Fort Myer in Arlington, VA. It's one of the most consequential decisions of his presidency, and it comes after Trump met with his national security team on Friday at Camp David .

  • Defense Secretary James Mattis said on Sunday, per Reuters: "I am very comfortable that the strategic process was sufficiently rigorous and did not go in with a pre-set position."
  • The stakes: Should Trump order a withdrawal of U.S. troops from Afghanistan, advisers believe he'd all but ensure the Taliban completes its takeover of the country. Al-Qaeda and ISIS would be allowed to flourish, and you'd have a terrorist launching pad similar to, or potentially worse than, before 9/11.

Trump's decision hasn't leaked; but I can illuminate some of the private conversations leading up to it, from senior administration sources and former officials close to the Pentagon:

Trump's top national security advisers all agree the only way they'll win their missions in Afghanistan is to modestly increase troop levels, keep training the Afghan military, and keep a strong CIA and special forces presence to run aggressive counter-terrorism operations.

Two missions:

  1. "Operation Resolute Support": While the Trump administration is explicitly repudiating both the idea and the phrase "nation building," ORS is a train, advise and assist mission to help the Afghan army fight the Taliban, an official tells me. It's meant to help keep the government from collapsing while reversing Taliban gains.
  2. Counter-terrorism mission — primarily to eradicate Al-Qaeda, ISIS-K and other terrorist groups from Afghanistan.

Inside Mattis' thinking: The Defense Secretary has been using this line in meetings: "Mr. President, we haven't fought a 16-year war so much as we have fought a one-year war, 16 times."

  • What Mattis means by that: Trump has already given Mattis the authority to increase troop levels in Afghanistan, but the Defense Secretary has refused to exercise that authority, believing that doing so without an agreed-upon strategy would be continuing the failures of previous administrations. Trump officials condemn the Obama administration for falling into a habit of asking each winter "what do we need to do this year to prevent total collapse?"

Trump's team presented him with other scenarios — which everyone on the team agreed would lead to disaster. They included a gradual withdrawal of U.S. forces from Afghanistan (a continuation of what Obama was doing), and counter-terrorism-only options.

  • What Steve Bannon wanted: Mattis and co. never took the idea seriously, but Bannon and Blackwater founder Erik Prince had been pushing for Trump to gradually withdraw the U.S. military from Afghanistan and replace it with private paramilitary forces to hunt terrorists.
  • I'm told the Bannon strategy has never been part of the NSC paperwork, though the former chief strategist circumvented the official process and took his arguments directly to the president.

Trump's instincts: The president has been blunt, telling his team that while he thinks the war in Afghanistan has been a disaster, and the U.S. is losing, he thinks total withdrawal would be bad.

  • Trump saw what happened when Obama withdrew from Iraq and believes that doing so precipitously in Afghanistan would allow the Taliban to take over, and Al-Qaeda would be resurgent. You'd have bad guys in Afghanistan in league with bad guys in Pakistan who want to overthrow the country.
  • Trump has told his advisers he's been shown the maps of Afghanistan, with the red on the map signifying the Taliban's presence in the country. He says that advisers show him the map in 2014 and there's a little bit of red. Look at the 2017 map and half the country's red, therefore "we're losing."
  • The generals' response to Trump: You're right. But we're losing because the strategy has been terrible. We can turn this around.

Bottom line: Trump has been reluctantly open to the generals' opinion and I'm told he doesn't want to be the president who loses the country to the terrorists.


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The coming earthquake

Sam Jayne / Axios

One feature of our time is the disruption du jour — the whiplash of yet another big surprise that promises to upset everything and everyone for years and perhaps decades to come:

  • Brexit, the Trump election, and the broader anti-establishment global uprising, springing from lost jobs, income, stature and community, and making many people ambivalent about the post-war system of collective diplomacy and open borders.
  • Robotization — the shift to hyper-automation and the potential that many of our jobs will be swallowed up by machines.
  • And now the new monopolists, a creeping change in how we view a few tech monoliths that have amassed colossal power — Amazon, Apple, Facebook, Google and Microsoft.

Connecting the dots: These three narratives are melding into a gigantic, compound earthquake. When we speak of the race to artificial intelligence and robotization, we mean research dominated by American big tech, along with its Chinese cousins — Alibaba, Baidu and Tencent. When the workplace is filled with intelligent machines some time in the future, their brains are likely to come from one or more of these companies.

In 2001, Goldman Sachs analyst Jim O'Neill published a paper that coined the term "BRIC." Brazil, Russia, India and China would power the next stage of global growth, O'Neill said. The acronym caught fire. The new powers in global growth are the major U.S. and Chinese tech companies, though they fit less comfortably into an acronym.

For that and other reasons, including the decimation of retail by Amazon, they are core to our unease and alienation, as Axios has reported, and they are facing increasing scrutiny.

Going deep: This week, we look at two forthcoming books and a much-discussed legal paper that explain this evolving mind shift, and point the way forward:

The Four, by NYU professor Scott Galloway; World Without Mind, by Atlantic magazine writer Franklin Foer; and Amazon's Antitrust Paradox, by New America fellow Lina Khan.


Frank Foer: A surrender of free will

We are at the mercy of these companies, with billions of people outside China using Google to search the Internet, Facebook to follow their friends, Apple to talk to them, Amazon to buy stuff, and Microsoft for their office needs. Within China, the same can be said for the BAT companies. But that is more dangerous than seems apparent. Foer notes:
  • Amazon can kill or hobble a book, an author or an entire publisher, and did so to Hachette and Macmillan in 2014, delaying shipments and stripping sales links so books couldn't be bought at all.
  • Google worked to swing the 2012 U.S. presidential election for Barack Obama, boasting about the power of its analytics tool to help his campaign.
  • Facebook can also target and favor candidates of its choosing.
All of this troubles Foer, who delivers a passionate argument for the public to wake up and reconsider its tech idolatry. "Our faith in technology is no longer fully consistent with our belief in liberty," he writes. "We're nearing the moment when we will have to damage one of our revolutions to save the other. Privacy can't survive the present trajectory of technology."
His central message: We are at risk of authoritarianism, and a loss of ourselves — "a breaking point, a point at which our nature is no longer really human."

When Foer started this book, "it felt like I was engaging in a quixotic, esoteric venture," he told me. "The tech companies were held in such high esteem that the possibility that there was something fundamentally wrong with them didn't register with people. But the zeitgeist has started to shift, now in a fairly extreme way."

One of Foer's primary targets is Silicon Valley's war on individual genius in favor of the collaborative and populist crowd. This, he says, flies in the face of how big tech views itself, championing "the fearless entrepreneur, the alienated geek working in the garage" — Steve Jobs, Jack Ma, Bill Gates, Larry Page and Jeff Bezos.

"The titans of technology may be capable of breathtaking originality and solitary genius, but the rest of the world is not," he writes.

Another is tax dodgers: Amazon can offer low prices in large part because for years it paid no taxes, while brick-and-mortar stores forked over both that and rent — Walmart paid a 30% tax rate over the last decade and Home Depot 38%. Amazon's effective tax rate is 13%, and Apple and Alphabet's 16%.
Profits left abroad: Far from reaching their station fair and square, big tech squirrels away its profits overseas, and doesn't pay its fair share at home. Amazon dodges taxes by basing much of its operations in Luxembourg. As of 2015, Google had parked $58.3 billion in tax havens abroad including Ireland and Bermuda. In 2012, Facebook earned $1.1 billion in the U.S., on which it paid not a cent of federal or state tax. "The tech companies maintain every shred of data, yet seem to want to purge every bit of taxable earnings," he writes.
What should be done: Foer urges —
  • The creation of a Data Protection Authority to secure the sanctity of privacy, similar to former government oversight over telephone and TV.
  • The possible breakup of Facebook, Google and Amazon into smaller companies, or, Lina Khan writes (see below), forcing them to act as common carriers, and not predatory platforms for their singular corporate good.
  • "The Internet is amazing," Foer writes, "but we shouldn't treat it as if it exists outside history or is exempt from our moral structures, especially when the stakes are nothing less than the fate of individuality and the fitness of democracy."

Lina Khan: The new railroad barons

In January, the Yale Law Journal published a "note" that has since attracted remarkable attention — more than 50,000 hits — and made Amazon lawyers especially nervous.

  • It all goes back to 1911, and the U.S. Supreme Court decision to break up John D. Rockefeller's Standard Oil. Khan does not name the old oil titan, but she renders Amazon's Jeff Bezos as the Rockefeller of our age. Like him, Bezos subjects lesser competitors to a "good sweating," predatory pressure designed to drive them out and leave the latest market to Amazon.
  • Amazon can afford this approach because it seeks no profit, but only to grow; and pays little taxes or rent.
  • Amazon's reach is breathtaking, Khan notes, comprising "a marketing platform, a delivery and logistics network, a payment service, a credit lender, an auction house, a major book publisher, a producer of television and films, a fashion designer, a hardware manufacturer, and a leading provider of cloud server space and computing power."

They are modern-day railroad barons: Amazon, Khan told me, should be viewed "as an infrastructure company." And as a group, big tech "are utilities on which other companies depend," equating to the 19th century railroads, which their owners exploited to outsized profit advantage because they could.

Khan's intellectual breakthrough: Her big splash is taking explicit and injurious aim at Robert Bork's landmark 1968 book, The Antitrust Paradox, which carved the path to today's casual attitude toward corporate bigness, as Steven Pearlstein writes at the Washington Post.

  • Rather than judging anti-trust impact by pricing, supply and demand, Khan reasons, it should be examined through the lens of 21st century online business
  • The lens should be "whether a company's structure creates certain anticompetitive conflicts of interest; whether it can cross-leverage market advantages across distinct lines of business; and whether the structure of the market incentivizes and permits predatory conduct," Khan writes.

Scott Galloway: Power corrupts

Galloway takes the theme of bigness the next step into popular philosophy: Big tech's success, he writes, pivots on the human need for God (Google) love (Facebook), sex (Apple) and consumption (Amazon). Galloway has mixed success with carrying out the theme, but it's a showcase for a toughly argued, hard-edged message: Big tech's big success is "dangerous for society, and it shows no sign of slowing down. It hollows out the middle class, which leads to bankrupt towns, feeds the angry politics of those who feel cheated, and underpins the rise of demagogues."

Big money, small work force: Google employs 72,000 people, Galloway notes, about 40% of the 185,000 who work for Disney, which has a quarter of Google's $650 billion market cap.

  • As for the whole of big tech, when you include Microsoft, it employs about 660,000 people.
  • By comparison, with 3% of big tech's $3 trillion market cap, the three big American carmakers employ 940,000 workers.

In other words, says Galloway, the spoils of America's old corporate oligarchy was carved out more fairly among many more workers. "Investors and executives got rich, though not billionaires; and workers, many of them unionized, could buy homes and motorboats and send their kids to college," he writes.

  • "That's the America that millions of angry voters want back. They tend to blame global trade and immigrants; however, the tech economy, and its fetishization, is as much to blame."
  • And time will catch up with the companies: "Until now, it's been only sycophancy," Galloway told me. "Everyone wants to hang around the hot girl. They all want to seem young and hip and hold these companies to a different standard. I predict there is going to be a populist uprising. A politician is going to find that the fastest way up is to go after one or more of the companies."
  • He said, "We are already seeing it."
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A brick and mortar juggernaut in the Amazon economy

bargainmoose.ca (Flickr)

The economic recovery is in its 7th year, and unemployment has sunk to levels rarely seen in a generation. Retail sales are picking up, too, growing at their fastest pace in seven months. But you won't see these trends reflected in the performance of most well-known retailers, as department stores like Macy's close stores, and household names like Sports Authority go bankrupt altogether.

This raises a question: Where exactly are consumers spending their money if not at the shopping mall? One answer is Amazon, but it's not alone in avoiding the retail apocalypse: LVMH, the French conglomerate and owner of brands Louis Vuitton and Sephora, had a 15% rise in first-half 2017 revenue, and that did not come by running fire sales — profit was up 23%. Investors have responded enthusiastically, sending up its share price by 20% this year, outperforming retail and and luxury sector indexes.

Why it matters: LVMH's success is a reason for traditional retailers to despair as much as hope. The secret behind LVMH's success is near total control of products from conception through manufacturing and sales, the opposite strategy of traditional mass-market retailers that largely act as middlemen and little more.

It's all about exclusivity: In world where consumers can buy nearly anything they want from anywhere in the world with a tap on a screen, the most desirable product a retailer can offer is one that not everyone can have. Enter Louis Vuitton, the 163-year-old luxury retailer that is LVMH's flagship brand, which accounts for fully half its profits, and gooses customer demand by strategically restricting the supply of certain products. "Vuitton redefined the luxury business model a long time ago," says Oliver Chen, a senior analyst with Cowen. "They own their own factories, they source their own leather, and they own their own stores. When you have that, it's the ultimate leverage."

  • Vuitton has total control over distribution and pricing of its product, protecting its exclusivity and the company's profit margins.
  • This factor in its success was on display in Vuitton's recent partnership with the hyper-trendy lifestyle brand Supreme, where the pair agreed to sell limited editions of streetwear items like jackets, jerseys, and hats.

Make shopping fun: Next to Louis Vuitton, LVMH's most important brand is Sephora, the beauty retailer that has been gobbling up market share in the $22-billion cosmetic retail industry. Customers interviewed by Axios raved foremost about the in-store experience, with freely accessible samples of any product absent any interaction with a salesperson. If shoppers want help, these customers say, Sephora's staff is knowledgable and eager to find them the right look.

Go global: a perkier European economy and stable growth in China are two macroeconomic drivers of LVMH's stock price. According to Jelena Sokolova, a Morningstar analyst, Louis Vuitton's presence in key cities of the emerging world, like Rio and Shanghai, has set the firm up for its current success. LVMH is reaping the benefits as a cache brand in the world's second largest economy, which is still growing at more than twice the U.S. rate.

What goes up, must come down: Sokolova points out that Louis Vuitton's vertically integrated approach is risky. If customer tastes change, for instance, and the company is unable to charge premium prices, its high-priced leases for retail space in the world's most expensive markets could quickly become a millstone around its neck.

What about e-commerce? Cowen's Chen worries that Louis Vuitton isn't doing enough to cater to customers who want quick and convenient electronic shopping. LVMH's answer is Severes24, a multibrand luxury website that it hopes will marry its curatorial talents with the ease of online shopping. It launched in June, though the jury is still out on how the company's high-end customers will embrace it. Tristan d'Aboville, analyst with William O'Neill and Co. points out, however, that this is not LVMH's first on-line foray: it previously pushed products through a site called eLuxury, which it was forced to fold in 2009.

The bottom line: LVMH is demonstrating one formula for making a success of brick-and-mortar retail. That does not mean it can rest: Even high-flying luxury retailers like Louis Vuitton must constantly innovate as e-commerce matures and offers more products and more ways to buy them.

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How to invest in the singularity

Carolyn Kaster / AP

Peter Thiel has made some shrewd bets in his lifetime: a half-million dollar wager as Facebook's first outside investor, earning him roughly $1 billion when he cashed out in 2012; and more recently, his contrarian political bet on Donald Trump.

Need more evidence to recommend Thiel's foresight? Check out this video from the 2007 Singularity Summit (ignore the erroneous year in the video title), in which Thiel suggests how to bet on the singularity, the inflection point when machines achieve super-human intelligence.

Thiel's thesis is that the only real choice is a bet that the singularity wildly succeeds, and not that humanity is doomed (i.e., a Matrix-like conquest of man by machine). "If you are somebody who is predicting the end of the world, even if you are right, I think you will still not make a lot of money," Thiel quips in the video.

  • Thiel did this talk months before the financial crash pulled the U.S. into the Great Recession, and many years before the recovery led to today's lofty valuations for AI-intensive companies like Google and Facebook.
  • "If you have a singularity, there is presumably going to be one entity or one company or one team that's going to take over the whole world and be worth more than everything else put together," Thiel says.
  • In a world where the singularity is nigh, the only way for investors to bet on it is to invest in the entity that triggers it or some proxy for that entity (like, say, the San Francisco real estate market).

Thiel's predictions: We should expect booms and busts of successively greater magnitude as investors go all in on whatever they see as the future source of unbounded technological growth.

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The U.S. is risking an academic brain drain

Sam Jayne / AP

Linsen Li is a Chinese-born, 30-year-old specialist in advanced batteries — a postdoc in MIT's material science and engineering program. He received his Ph.D in chemistry from the University of Wisconsin, in all spending the last seven years in the U.S. His infant son, William, is an American citizen.

But he's reluctantly going home: Li tells Axios that, having received no teaching offers in the U.S., he's accepted a $65,000-a-year teaching slot at Shanghai's Jiao Tong University, along with the equivalent of a fat $900,000 in research funding, in addition to $250,000 to buy a house.

The program that grabbed him: Li is returning under China's Thousand Talents Plan, which seeks to lure back under-40 Chinese students and professionals to bolster the country's research sector. "I just don't want to think about it," Li says. " … I still would like to stay here if I find an opportunity. … I never actually worked in China. I did grow up and go to school, but I've never actually worked in China."

Why it matters: Absent a commitment to scientific research or immigration reform, the U.S. risks losing significant numbers of the foreign-born Ph.Ds and post-docs at its best universities to other nations. And this brain drain has the potential to accelerate should the White House continue its inaction on these issues.

The context: There is very little certainty around the Trump administration's plans for visa and immigration reform, making it easier for highly skilled foreign researchers and workers educated in the U.S. to be poached by offers elsewhere.

And the poachers are determined: Canada, France and China have been most open and aggressive about seeking out foreign talent studying in the United States. Financially, China's offers appear to be the most attractive.

The statistics: The Thousand Talents program is growing, funding 143 returning Chinese scientists in 2011 (out of 1,100 who applied) and 590 last year (from 3,048 applications.).

Li's case: For two years, Li has worked on one of the world's most prestigious advanced battery research teams — run by MIT scientist Yet-Ming Chiang. From there, he applied for research positions at seven U.S. institutions, and received no job offers. That's not a surprise: teaching and research positions are notoriously hard to obtain anywhere, but especially in the U.S. Li might have had a better shot at numerous American startups hungry for battery talent, but he said that, at this point in his career, he wants to try to make a splash in research.

So he turned his gaze back home: "A lot of us choose to go back because there are a lot of positions available — like hundreds of them — because the central government is investing a lot of money into this," he said.

The benefits:

  • Significant research investment: Li said that he'd be receiving a three-year grant worth six million yuan (about $900,000). Meanwhile, colleagues in U.S. academia are finding it increasingly difficult to fund their battery work, and have even begun to seek Chinese grants.
  • Financial flexibility: U.S. universities take about half of research grants as fixed overhead, sapping up funding before it reaches a scientist's hands. In China, overhead is closer to 10%, allowing more staff hiring and equipment purchases, Li said.

The negatives:

  • High expectations: China expects a lot from its repatriated scientists, like scientific breakthroughs and papers in high-profile publications, according to a Nature profile of the Thousand Talents Plan.
  • Reported problems with professionalism: The best Chinese universities — like Jiao Tong, where Li is headed — have research environments comparable to American institutions, but, per Nature, even the best of them can be riven with patronage, plagiarism, and academic fraud.

And it goes beyond academia: A recent Hired analysis found that the U.S. political climate has led tech companies to lose significant interest in hiring foreign workers — down 37% compared with this time last year — even as many foreign-born workers want to remain here.

  • Where they're going: That same Hired analysis found that nearly a third of foreign workers would choose Canada if the United States weren't an option, with Europe being another sought-after destination.
  • What Canada is doing: Canada introduced its Global Skills Strategy program earlier this summer, allowing 80% of foreign work permit applications from highly-skilled workers to be processed within two weeks.
  • What France is doing: After Trump announced his intention to pull out of the Paris climate agreement, French President Emmanuel Macron kicked off the Make Our Planet Great Again initiative, designed to lure climate scientists to France.