Jan 3, 2018

Axios Trends

By Mike Allen
Mike Allen

Welcome back to our quarterly newsletter, Axios Future Trends, where the Axios subject-matter experts bring you this exclusive look ahead.

I'd love to hear what you think: mike@axios.com. We look forward to '18 together. Here's what we're seeing:

Politics: Trump's 2020 strategy

In conversations at Mar-a-Lago and back in Washington, friends and advisers have begun giving President Trump advice about how to win reelection in 2020.

  • The clearest signal that Trump is thinking about the re-elect: In a conversation with someone he was about to send to an ambassadorship, Trump said he needed that person back in the U.S. in 2019 to help run his campaign.

This might seem premature. But Trump's friends believe he will run again, even though he finds parts of the job a drag. The Mar-a-Lago 2020 bull sessions gave them a chance to shape the upcoming legislative debates around his one abiding obsession: winning.

The formula he's hearing:

  • You have prosperity, with tax cuts fueling an already growing economy. So you can't mess it up with unnecessary trade wars. You need to make sure you keep peace, too. That means avoiding inflaming hot spots, especially North Korea.
  • Your campaign will need a team that works as an actual team, unlike the fiefdoms of the White House's early months.Trump was taken aback by the instant leak about an Oval Office fight about his political team. He knows he needs to shake things up, but is uncertain how to pull it off.A huge problem: Getting top-shelf candidates to consider coming in. One well-known Washington power broker says he can't give the West Wing the name of a single top talent who'd be willing to go in, now or later.The other huge problem: Reince Priebus and others are privately warning Trump that Republicans will lose the House. If that happens, all hell would break loose on the impeachment and investigations front.

Why it matters: Trump is getting conflicting advice. The Bannon purists want America First, and most of his friends want Economy First. So far, he's governed like a fairly conventional Republican, so the Economy First camp is winning. The next month — with pending decisions on immigration and trade wars — will show whether he reverts to his campaign norm in action, not just words.

What to watch: The Bannon-Breitbart-Stephen Miller wing believes Trump has to deliver on building a wall, curtailing immigration and cracking down on China. Moderating forces like Gary Cohn, Steven Mnuchin, James Mattis and Rex Tillerson are counseling against moves that could alienate allies and roil global markets. Watch for a hot war this next month in conservative media on this front.

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Tech: Your voice takes control

Voice assistants are going to become more pervasive across the devices you use every day.

There is a big land grab underway as the leaders in voice assistants try to get their technology built into more products. Amazon has the lead here with Alexa, but both it and Google are pushing hard to get their assistants integrated into other companies' gear. Amazon has an Alexa fund designed to invest in startups with potential to use voice technology in their products.

Why it matters: For consumers, digital assistants can replace and augment cumbersome controls and provide access to information on the internet without needing big displays and a means to enter text. Digital assistants also open up big money-making opportunities, adding what amounts to a voice-based search box to create a gateway for both commerce and advertising revenue.

  • Cars will be a big opportunity, as they are a natural place for voice interfaces since people should have their eyes on the road and hands on the steering wheel (for now anyway.)
  • The smart home is the next venue, especially TVs and appliances.

The downsides: Not everyone wants to talk to their washing machine or toaster. Also, in order to hear your commands, voice-activated gadgets have to be always listening. Those who have avoided Amazon's Echo and Google Home for that reason are going to have a tough time as the technology finds its way into all manner of gear. — Ina Fried

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Media trends: It'll be harder to make money off crap content

Google and Facebook are removing the financial incentives that drive some publishers to create clickbait and spam. Their efforts come amid criticism that they haven't taken enough responsibility for bad content on their platforms.

Why it matters: The new policies, like blocking ads from publishers that publish clickbait or algorithmically weeding them out, don't address "fake news" head-on, but will make it much harder for bad actors that use outrage-driven content and spammy tactics to make money.

To avoid the scrutiny Twitter is facing of bias against individual accounts, Google and Facebook mostly tackle fake news and disinformation through the lens of consumer safety and integrity, not necessarily accuracy or context.

  • Critics argue that access to inaccurate information should be targeted along with clickbait and spam. But our laws don't support that premise, so tech companies have little legal incentive to tackle editorially inaccurate information. — Sara Fischer

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China: trade confrontation likely

Trump has taken a much softer approach to China than his "America First" campaign slogan promised, mostly because of the crisis over North Korea's nuclear weapons program. That looks to be about to change, for several reasons:

  • The Trump administration reframed its view of China in the National Security Strategy, warning that China is expanding its power at the expense of others and is spreading "features of its authoritarian system, including corruption and the use of surveillance."
  • Trump also hinted that he may be losing patience with China over North Korea, saying for the first time in an interview with the New York Times that he's "been soft" with China on trade.

The "America First" trade contingent, led by U.S. Trade Representative Robert Lighthizer, is back in the ascendance, and if Director of the National Economic Council Gary Cohn leaves the White House soon, as is expected, there will be few people left in the White House to push back on a much more confrontational approach to trade. Several trade actions are in the planning stages and they will likely hit in the first quarter. — Bill Bishop

Go deeper: 7 things to watch in China in 2018

Sign up for Bill's weekly Axios China newsletter here. And if you want more than a weekly dose of China, subscribe to his Sinocism China Newsletter here.

Health: Assessing damage to the ACA

Congress and the Trump administration are trying to figure out just how severely they want to undermine the Affordable Care Act's insurance markets — and insurers need them to make a decision soon.

  • Threat level: Repealing the individual mandate will likely pull healthy people out of the ACA's exchanges. New regulations implementing Trump's executive orders on health care will likely do the same.
  • Right now, insurance companies are sweating every little detail of those regulations, while also taking stock of the new customers they picked up for the year. This is all uncharted territory — insurers are just trying to make their best guess about how much they'll need to raise their premiums and where they should simply pull up stakes.

Congress is an X factor. When government funding runs out again later this month, Congress will have to return to health care. Insurers need some kind of read, even a broad one, on willingness of policymakers to offset some of the turmoil they've helped create. — Sam Baker

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Future of work: the retail implosion

Big Retail is coming off its worst year since the financial crash and there will be more bloodletting: 50 retailers declared bankruptcy in 2017, and next year looks worse.

Fitch forecasts $7 billion in retail defaults in 2018, 23% higher than the $5.7 billion this year. That is stunning, as retail accounted for a whopping 30% of all 2017 defaults.

  • Fitch lists these retailers, among others, as most in danger — Sears, Neiman Marcus, J Crew, Talbots, Lands' End and Cole Haan.

What to watch next: whether "experiential" retail, as they call their experiments in transforming physical stores, succeeds in getting people off-line, into their shops, and — most importantly — buying.

  • Also look for retailers to use more augmented reality to bring products right into their customers' home. Ikea is leading the way, letting customers see how furniture will look in their homes before they buy. — Steve LeVine

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Energy: Trade and electricity fights heat up

Since Washington has no coherent energy and climate strategy, federal policy battles on these issues will play out in the courts, regulatory agencies and across the Trump administration. Here are 2 big issues with looming deadlines:

  • Solar imports might be faced with tariffs or other remedies before Jan. 26 when the White House faces a deadline to decide on what to do about cheap imports coming mostly from China or Chinese-owned companies. Other trade cases, such as one involving imported steel used in pipelines and other infrastructure, are pending too.
  • Nuclear and coal utilities want compensation for being able to store fuel, something not granted to most other electricity generators. The Federal Energy Regulatory Commission faces a Jan. 10 deadline to respond to the Energy Department's request for a rule on the issue. It's wonky as all get-out, but the fight over America's stagnant electricity market is a fight that impacts almost all parts of the energy sector. — Amy Harder

Go deeper: 8 energy and climate issues to watch in 2018

Sign up for the daily Axios energy newsletter Generate and weekly Harder Line column here.

Business: new rules for dealmaking

The Justice Department's decision to challenge AT&T's proposed takeover of Time Warner has thrown the country's M&A playbook into limbo, with neither companies nor bankers sure of what is still allowed.

  • Historically, U.S. regulators have blessed vertical mergers, or deals in which the two companies do not directly compete. If the rules have indeed changed, then there could be a lot more hesitance before entering into merger agreements.
  • Silicon Valley is also watching closely, as a big part of AT&T's defense is that it needs to bulk up in order to compete with tech "media" behemoths like Amazon and Facebook. If the court agrees, then it could open up some very different sorts of antitrust arguments. — Dan Primack

Sign up for Dan's daily deals newsletter Axios Pro Rata here.

Science: exoplanets and gene therapy

The search for planets beyond our solar system will be taken up by a new NASA space observatory scheduled to launch this year, the Transiting Exoplanet Survey Satellite. The winter meeting of the American Astronomical Society this month in D.C. will offer a preview of the mission, and all the latest on exoplanets and other new discoveries in the Milky Way and beyond.

Also worth watching:

A year after the March for Science, the American Association for the Advancement of Science will hold their annual meeting reporting on top policy issues and initiatives. This will be the first year of federally funded scientific research under the Trump administration budget. We'll be watching how it unfolds.

  • More approvals could be coming for gene therapies to treat inherited diseases. The first treatment was just approved by the FDA — and the agency revised its guidelines for regulating such therapies. Clinical trials are also underway for combinations of cancer immunotherapies in hopes of increasing the number of people who can be effectively treated with this new generation of medicines. — Alison Snyder

Sign up for Alison's weekly Science newsletter here.

Mike Allen