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I know that it can be hard to keep an eye on business news amidst the impeachment noise, so thanks for reading. As ever, keep the requests coming — I'm on felix@axios.com.

  • In this week's 1,743-word newsletter (< 7 minutes): How restaurants' revenues are being eroded by tech companies; why do-gooder shareholders don't seem to be able to do any good; and a dive into the Apple Card scandal. Enjoy!
1 big thing: Tech is eating restaurants' lunch

Illustration: Aïda Amer/Axios

"The real purpose of digital capitalism is to extract value from the economy and deliver it to those at the top."
Douglas Rushkoff, author of "Throwing Rocks at the Google Bus"

The restaurant industry is increasingly digital. That's good news for tech bros, but it's bad news for restaurateurs.

  • The big picture: Restaurants have always embodied the perils and the promise of capitalism. Their failure rate is high — they're startups, after all — but they're also a time-honored way for immigrants in particular to use hard work and entrepreneurial zeal to break into the middle classes.
  • The catch: Tech companies are changing the economic calculus for restaurateurs. A decade ago, restaurants might have had to pay rent only to their landlord. Now, payments go out to a slew of digital platforms, all of which are looking to extract their own little slice of total restaurant-industry revenues.

Driving the news: Travis Kalanick's new startup, CloudKitchens, raised $400 million from Saudi Arabia’s sovereign-wealth fund, at a valuation of about $5 billion, according to the WSJ.

  • The idea behind the company: That as people move from eating out to having meals delivered, there's no need to bother with things like tables and waiters. Just put a kitchen in a cheap warehouse, and deliver multiple kinds of food with minimal overhead.
  • If Kalanick disrupts restaurants in the same way that he disrupted taxis, then the big losers will, once again, largely be immigrants of color.

As restaurants position themselves to compete against Kalanick's cut-price offerings, they find themselves paying increasing amounts of money for other digital services.

  • Delivery is migrating to big online platforms like Uber Eats, DoorDash and Grubhub (which owns Seamless, and which is facing a federal lawsuit over phantom fees). These services often take 25% or more of each order for their services.
  • Reservations are taken increasingly online, and are invariably offered via platforms like OpenTable and Resy that charge restaurants for their services while remaining free for diners.
  • Seated is an app that aims to fill open seats at restaurants by offering diners as much as 30% of their check back in the form of gift cards to Amazon and other merchants. Naturally, the restaurants pay even more than that to the platform.

All of these services can feel a bit like a protection racket. Some restaurants join because they genuinely think these services will be good for business, but most join because they worry, with good reason, that if they don't join, their customers will just migrate to more convenient competitors.

"Without them you're dead, with them it is a slow death."
— N.Y. Councilman Mark Gjonaj on the delivery apps he's trying to regulate, quoted by Crain's

The bottom line: Digital platforms are not restaurants' friends. If the amount Americans spend at restaurants stays roughly constant as a percentage of GDP, then all the customer money flowing to the lavishly financed startups is money that ultimately comes out of restaurateurs' pockets.

2. Apple's secretive financial services

Illustration: Aïda Amer/Axios

Is the Apple Card sexist? It certainly seems that way, judging by anecdotal evidence from David and Jamie Heinemeier Hansson, Apple co-founder Steve Wozniak, and countless other individuals on Twitter who say that wives were given lower credit limits than their husbands, even when they had the same income and even when the wife had a higher credit score.

  • That wouldn't be surprising, given that the underwriting algorithm was almost certainly written by men who didn't put a lot of thought into counteracting their unconscious bias. (Such biases can't be overcome or eradicated, but they can be identified and addressed early on in the development process.)
  • As we've seen in auto insurance, discrimination against women is not hard to find in financial services.
  • New York's Department of Financial Services is now investigating the issue, which has already provided grist for Sen. Elizabeth Warren on the campaign trail.

The other side: Goldman Sachs, which runs the underwriting and issues the credit for the Apple Card, told Axios' Dan Primack yesterday that the consulting firm Charles River Associates signed off on the card even before it was launched. CRA certified that there was no “unintended bias coming out of the decision engine,” according to Goldman’s consumer bank CEO Carey Halio. (I emailed CRA to confirm this, but did not receive a reply.)

The big picture: Wall Street in general, and Goldman Sachs in particular, is notoriously secretive when it comes to proprietary algorithms. But Apple, if anything, is even more secretive.

"It’s unaccountable and opaque, and Apple doesn’t really care. We should demand that they do better than that. We should demand accountability on the part of anybody who’s using an algorithm like that."
— Data scientist Cathy O'Neil, talking to Slate's Aaron Mak

Go deeper: Dan's podcast with David Heinemeier Hansson is excellent. Also worth reading: Dieter Bohn's essay at The Verge on how "Apple owns every mistake Goldman Sachs makes with its card."

Bonus: Facebook and Google want in, too
Via Sam Biddle/Twitter

Facebook is resuscitating its peer-to-peer payments service even as Google is planning to launch a checking account.

  • Facebook's move arrives after the de facto death of its Libra cryptocurrency project. CEO Mark Zuckerberg has said that Libra won't become a reality without U.S. regulatory approval, and there's no chance of any such approval arriving in the foreseeable future.
  • Facebook's financial-services ambitions live on, however.

Why it matters: Facebook and Google make billions of dollars every year from monetizing the data of individuals around the world. The most valuable data of all is financial data and health data.

  • That explains why both companies want to get into financial services, and why Google wants to get into health. (It's buying Fitbit for $2.1 billion, and has secretly been amassing health data on millions of Americans in 21 states.)
  • There's now a federal inquiry into Google's health care project.
3. The paradox of shareholder capitalism

Illustration: Sarah Grillo/Axios

How much power do shareholders have over companies? Judging by Uber CEO Dara Khosrowshahi's comments to "Axios on HBO" this week, it must be quite a lot.

  • Khosrowshahi praised Yasir Al-Rumayyan, who sits on Uber's board and is a close friend of Saudi Crown Prince Mohammed bin Salman. "He's been a very constructive board member," Khosrowshahi said, "and I personally have valued his input greatly."
  • When Axios' Dan Primack pointed out that Al-Rumayyan represents the government that murdered Washington Post columnist Jamal Khashoggi, Khosrowshahi's first instinct was to play down the enormity of the crime. "I think that government — said that they made a mistake," he said, before later clarifying that "there's no forgiving or forgetting what happened."

Enormous shareholders like Larry Fink, the CEO of BlackRock, are regularly imbued with awe-inspiring powers. Fink is "one of the most influential investors in the world," per NYT's Andrew Ross Sorkin, wielding "clout" and "outsize influence."

  • Protestors at the reopening of the Museum of Modern Art last month targeted Fink in particular, saying that because BlackRock owns shares in private prison companies, he was not doing enough to "get rid of mass incarceration."
  • Fink would seem to be a juicier target even than MoMA chairman Leon Black, who runs a multibillion-dollar private equity firm and who gave $10 million to Jeffrey Epstein's personal charitable foundation.

Reality check: Fink in reality has very little clout. Most of the money that he manages is in index funds, which means he has no discretion as to where to put it. If a private prison company is in an investable index, then BlackRock is going to be one of its shareholders.

  • Fink has some discretion over which companies are included in his environmentally conscious fund. Yet even that fund invests in massive polluters like ExxonMobil.
  • Even if Fink divested entirely from such fossil fuel and private prison companies, that would make no difference to their business model or their profitability.

Driving the news: Just about the only real power Fink has comes from his ability to vote his shares to nudge companies in a more ethical direction. But a Reuters analysis of his voting record shows that he doesn't even do that.

  • By the numbers: BlackRock backed only 10% of climate-related shareholder resolutions in 2018.

The bottom line: Activist hedge funds can strike fear into the heart of CEOs, as can countries using their sovereign wealth funds to achieve geopolitical ends. But those skills seem to elude individuals, social activists, and even multitrillion-dollar investors like Fink.

4. Common sense arrives on Wall Street

The subway is good enough for Mike. Photo: Andrew Lichtenstein/Corbis via Getty Images

The financial crisis saw bank CEOs engaging in some extremely dangerous activities. For instance, Andrew Ross Sorkin recounts a fraught journey by Morgan Stanley CEO John Mack in his book, "Too Big To Fail."

  • Mack had been summoned from his office in Times Square to the New York Fed, and so he jumped into his chauffeur-driven Audi, only to find it stuck in traffic on the West Side Highway.
  • Mack's driver, a former police officer, beat the traffic by "speeding" down a separated bike lane that runs along the Hudson River instead.

Goldman Sachs CEO David Solomon knows that it would have been quicker still for Mack to have just jumped on a subway from midtown. (Or, if he wanted to borrow a move from Michael Bloomberg, get his driver to drive him to the 4 train.)

  • Although some of his board members are reportedly horrified, Solomon tells Fortune that he regularly travels by the most efficient means available. "Why wouldn’t you take the subway?” he told reporter Jen Wieczner. “It’s quicker and more efficient."
5. Coming up: A key moment in PG&E's bankruptcy

Photo: Smith Collection/Gado via Getty Images

Bankrupt power utility PG&E wants to pay $11 billion in cash to companies that insured Californian property against fires it caused. It will find out on Tuesday whether it can, Axios' Courtenay Brown writes.

  • The $11 billion marks a significant discount to the roughly $20 billion in nominal claims held by insurers and by hedge funds who bought insurers' claims. Seth Klarman's hedge fund Baupost is a large holder not only of insurance claims but also of PG&E stock.
  • But the settlement has loud opponents, including California Gov. Gavin Newsom and many uninsured wildfire victims. They worry that if $11 billion in cash goes to the insurers and the hedge funds, individual wildfire victims will be left with PG&E stock.
  • If the settlement is approved, expect Newsom to continue to push for the state to get involved in the case.
6. Building of the week: Salesforce Transit Center

Photo: Jane Tyska/Digital First Media/The Mercury News via Getty Images

César Pelli's $2.2 billion Salesforce Transit Center and Park — a massive four-block-long, million-plus-square-foot structure that forms a terminus for trains, buses, and even a gondola — opened in the summer of 2018. And then, just 6 weeks later, it closed again.

  • The building, in earthquake-prone San Francisco, was meant to be ultra-safe. It wasn't.
  • Workers found "a jagged crack in a steel beam supporting the park and bus deck," as John Brant's yarn in Popular Mechanics puts it.
  • The investigation into how the crack got there and whether it was replicated elsewhere in the structure kept the center closed until July 2019, the same month that Pelli died.

The center is back open now, complete with an "undulating white aluminum exoskeleton patterned by physicist Sir Roger Penrose," Brant writes.