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The Private Equity Firm That Grounded Paul Allen’s Dream

The Private Equity Firm That Grounded Paul Allen’s Dream

Hey, everyone. Elon now doesn’t want to buy Twitter because it can’t count its bots. You’d think an AI guy like him would let the robots speak.

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The Plain View

Stratolaunch was based on a dream. Paul Allen, the unspeakably wealthy cofounder of Microsoft, had grown up in the thrall of space exploration, devouring books like the visionary rocketry tomes of science writer Willy Ley. In the early 2000’s, Allen funded a project known as Spaceship One, which snared the X-Prize as the first private venture to send a human into space. He later licensed the technology to Virgin Galactic, which built its own carrier vehicle to send Richard Branson into sub-orbital ecstasy. Meanwhile, Allen, frustrated with what he considered NASA’s timidity, decided to get back into the space business. He retained the legendary aircraft engineer Burt Rutan to design a giant carrier that could launch satellites and other spacecraft beyond the skies. With its twin fuselages and 385-foot wingspan, the Stratolaunch plane, later dubbed Roc, was a breathtaking spectacle in itself, doubly so because of its mission to lift its cargo to the heavens. In 2018, I trekked to the Mojave desert to see the world’s biggest airplane for myself.

But when Allen died in November 2018, after a third bout of the lymphoma that had dogged him for decades, his space dream died as well. While Stratolaunch still lives, it has no designs on crossing the Karman line. It is now an unabashed defense contractor, specializing in what the UN Office for Disarmament Affairs called “a new and destabilizing strategic weapon”: hypersonic technology that propels programmed airborne craft at speeds of Mach 5 and above.

Here’s how that happened. Upon his death, Allen’s holding company Vulcan, which included Stratolaunch, as well as sports teams and an AI think tank, fell to his sister Jodie. Apparently she had no wish to retain a space venture, offering Stratolaunch to buyers for $400 million, far less than her brother’s investment. It was unclear whether there would be any takers for the world’s biggest plane. Richard Branson, who chronically underplays Allen’s contribution to his own space venture, jokingly offered a dollar.

But one mysterious buyer emerged: Cerberus, a private equity firm named after the mythical three-headed dog who guards the gates of hell. When Vulcan made the sale in October 2019, Stratolaunch not only withheld the purchase sum, but also who bought it; reporters discovered the identity through SEC reports some months later. Maybe that was because Cerberus, run by cofounder Stephen Feinberg, has some baggage. It once tried to create a personal weapons juggernaut called Freedom Group by scooping up arms makers like Remington and Bushmaster. In 2012, Cerberus tried to divest itself of the group after a mass murderer used a Bushmaster to slaughter 20 schoolchildren and six teachers at Sandy Hook; ultimately it shifted the assets to its Remington company, which declared bankruptcy in 2018. On top of all that, Feinberg once reportedly joked that if any of his employees had their picture in the paper, “We will do more than fire that person, we will kill him.”

After buying Stratolaunch in late 2019, the private equity firm bulked up the workforce from 13 employees to more than 250 and refocused the company’s mission specifically on hypersonic vehicles. These had been considered as potential payloads during the Allen era, but they were secondary to satellite-launching and a possible manned vehicle called Black Ice. Using a carrier vehicle for hypersonic craft has its advantages; Roc can launch its rocket-propelled cargo over the ocean, where the ear-crushing sonic boom wouldn’t be so disruptive. Feinberg himself is knowledgeable about the defense establishment and served under Donald Trump as the head of the President’s Intelligence Advisory board. In December 2021, Stratolaunch won a contract from the Missile Defense Agency for a feasibility study on how the US might take countermeasures against hypersonic attacks. Stratolaunch is building its own hypersonic missiles, codenamed Talon. The first is intended for a single launch—after the test it will drop into the ocean. The second is a reusable hypersonic vehicle that will retain the key data after tests. For now, the intent is defensive, to mimic the behavior of potential attack missiles. But Stratolaunch doesn’t rule out a future role in creating offensive hypersonic weapons.

Washington State Passed a Contentious New Gig Worker Law

Washington State Passed a Contentious New Gig Worker Law

James Childers says he really likes his job driving for Uber and Lyft in Spokane, a city in Washington State. But since he started working for ride-hailing companies in 2017, he’s seen drivers’ shares of each fare slip. Once, three-quarters of each trip went right into his pocket, he says, and now the companies use formulas that can see drivers earn just $9 per hour before sometimes spotty tips, below the state’s minimum wage.

But Childers only became involved with Drivers Union—an advocacy group affiliated with the local Teamsters labor union—after an intransigent passenger’s accusation of racism got him temporarily kicked off the Uber app. (The company relented when he showed the company a dashcam recording of the incident, he says.) “Uber and Lyft do not care,” he says. “They have other drivers waiting in the wings.” The company declined to comment on the specific incident.

Now Childers is hoping that a new state law governing ride-hailing drivers, signed by Washington governor Jay Inslee on Thursday, will give drivers more recourse against the companies, and pay that at least equals what it was five years ago. The bill, which was the result of negotiations between Uber, Lyft, and the local affiliate of the Teamsters, maintains the independent contractor status of drivers in the state—and protects ride-hailing companies’ core business model.

Drivers statewide will receive new rights. They will accrue sick pay and receive minimum pay guarantees based on the time and distance they spend on each trip, though the guarantees will only apply to the time they are carrying or picking up passengers. Drivers generally report they spend 40 to 60 percent of their time without people in their cars. They can also choose to use a new 15 cent passenger fee to fund a drivers’ resource center, which could provide recourse to those who are kicked off the companies’ apps. But drivers will not get the full set of traditional benefits that come with being staff members, including health care. And ride-hailing companies will still not pay into unemployment insurance programs, a factor that frustrated many drivers during the pandemic, when rides suddenly dried up.

In a statement, Ramona Prieto, Uber’s head of policy in the western US, said the bill allowed drivers “to stay independent while gaining historic new benefits and protections.” Lyft’s head of government relations, Jen Hensley, said the law gives drivers the “flexibility, independence, benefits, and protections they want and deserve.”

At the eleventh hour on Thursday, the National Teamsters labor union’s newly appointed president, Sean O’Brien, publicly called for the state’s governor to veto the bill, saying that it would usher in standards that could erode existing workers’ rights in other sectors.

The Teamsters’ local chapter, which helped draft the bill, disagrees. “Uber and Lyft drivers—like all workers—deserve a labor movement that will respect their right to self-determination to set their own priorities, stand in solidarity with them in their struggles, and never give up the fight for fairness and justice,” union secretary-treasurer John Scearcy said in a statement.

Amazon Union Election Stalls As Ballots Are Challenged

Amazon Union Election Stalls As Ballots Are Challenged

After the vote count was announced Thursday, the outcome of the election to unionize Amazon’s Bessemer, Alabama, warehouse still hung in the balance. The tally stands at 993 votes against unionizing and 875 in favor; however 416 ballots remain challenged, mostly on the grounds of voter eligibility.

The National Labor Relations Board will hold a hearing in the next few weeks to determine if any of the challenged ballots should be counted. Afterwards, it will release a final count that will determine which party wins the election.

Meanwhile, the Amazon Labor Union leads in an election to unionize a Staten Island warehouse, which is expected to conclude tomorrow.

The election was held again in March after the union lost the original vote 1,798 to 738 last year, and Amazon was later found to have violated labor law by installing a mailbox on its premises and using “Vote no” paraphernalia to poll workers.

The gap between yes and no votes narrowed considerably this year, but not enough so far to alter the outcome. Roughly 2,300 out of 6,100 eligible voters cast ballots this year, a turnout rate of 38 percent. This was down from last year’s turnout rate of 52 percent.

The union has filed unfair labor practice charges with the National Labor Relations Board and has until April 7 to file objections to the conduct of the election. If the board determines that Amazon’s behavior interfered with a free and fair election, it could overturn the results once again, leading to a third election round. The charges include allegations that Amazon instituted a rule change limiting workers’ access to the facility during nonwork hours, and that it removed pro-union fliers from break rooms. The company denies these claims.

The vote count caps off a two-year-long effort that drew congressional attention, celebrity endorsements, a presidential pronouncement, and renewed focus on US labor law, which favors employers in union elections.It echoed far beyond a single warehouse. As one of the world’s largest employers and the second largest in the US, Amazon is seen as a standard setter for working conditions across industries. Many in the labor movement see unionization as vital to curb what they describe as a harsh work environment. Amazon, for its part, urged its employees to vote against the union, saying that it already offers everything workers are demanding.

In a statement about the Bessemer facility, which Amazon calls “BHM1,” company spokesperson Kelly Nantel wrote, “We invest in both pay and benefits for our team—regular full-time BHM1 employees earn at least $15.80 an hour and have access to health care on day one, a 401k with company match, and more.”

The effort began humbly enough. In 2020, a warehouse worker named Darryl Richardson, who had previously been a union member at an automobile factory, performed a Google search for a union who could represent Amazon workers. The Retail, Wholesale, and Department Store Union (RWDSU) surfaced in the results, so he filled out a form on its website.

Google Fiber Workers Vote to Unionize

Google Fiber Workers Vote to Unionize

Retail associates at a pair of Google Fiber stores in Kansas City, Missouri, have voted to unionize, becoming the first group represented by the Alphabet Workers Union (AWU) to gain collective bargaining rights and win National Labor Relations Board (NLRB) recognition.

After a campaign that subjected workers to anti-union meetings and messages, despite a request for neutrality, the workers on Friday voted 9 to 1 in favor of representation by the AWU. Several of them huddled around a computer to watch the vote count on Zoom. As the deciding ballot was counted, they grinned and threw their arms in the air.

While the unit is small, AWU hopes it’s the start of something big. “I absolutely think this is going to be the first of many,” says AWU chair Parul Koul. The workers are employed by BDS Connected Solutions, a staffing firm that Google contracts to provide customer service for its broadband offering. The union petitioned to designate Google as a joint employer, which would require it to bargain with the employees, but the company resisted. Rather than fight a protracted battle that would delay the election, the AWU and the workers decided to forfeit the inclusion of Google, meaning the employees will negotiate with BDS alone.

Last summer, when the workers asked BDS management about compensation for extra work they’d been performing, they say they were told that the budget was not available. When the new Google contract rolled around in October, they received 4 percent raises. “That wasn’t even a cost-of-living increase for 2021 to 2022,” says Eris Derickson, a worker at the Westport Road store and organizing committee member. What’s more, they’d foregone raises and bonuses in 2020, despite the fact that the business appeared to be doing well. “Everyone was understandably pretty upset about that. So the decision to unionize came from that.”

“As time went on, it became more clear that if we wanted to protect the things we liked about our job, we needed to unionize,” says Derickson. She was inspired by the wave of labor activity that arose during the pandemic, including the high-profile union campaigns at Starbucks stores. “We felt like we could be the next ones in the chain,” she says.

In a statement, a Google spokesperson wrote, “We have many contracts with both unionized and non-union suppliers, and respect their employees’ right to choose whether or not to join a union. The decision of these contractors to join the Communications Workers of America is a matter between the workers and their employer, BDS Solutions Group.” BDS did not respond to requests for comment.

Derickson heard about the AWU soon after the group went public in January 2021. Later that year, she saw a petition the union was circulating, calling on Google to fairly compensate its temps, vendors, and contractors (TVCs). TVCs comprise more than half of Google’s workforce and typically face lower pay, inferior benefits, and less job security than full-time employees. The practice has become rife within the tech industry since Microsoft popularized it in the 1990s, says Laura Padin, a labor attorney for the National Employment Law Project who coauthored a 2021 report titled “Temps in Tech.” The model allows companies to dodge paying stock options, retirement contributions, and health insurance and avoid responsibility as an employer. After Microsoft settled a lawsuit over the practice in 2000, companies changed their approach, ironically to an even more precarious arrangement, often requiring temps to take six months off before returning to a similar role.

An NFT Bubble Is Taking Over the Gig Economy

An NFT Bubble Is Taking Over the Gig Economy

Jose Fernando Rico Mercado, 34, who co-owns three childcare facilities in Mexico, has always run side gigs, including designing notebooks sold on demand on Amazon. During the pandemic, his monthly earnings fell from $17,000 at their peak to almost zero. He joined Fiverr and set up a team of illustrators fulfilling orders for new NFT collections in mid-2021 to work on that full time. Since then, he has earned $268,000 from NFT collectors.

The amount of money these freelancers are earning appears astronomical, until they’re put into their full context. The NFT market was worth $44 billion in 2021, according to blockchain research firm Chainalysis. At the close of the year, the average value per NFT transaction was around $1,000, Chainalysis data shows—which is more than what three-quarters of those selling their wares on Fiverr are offering freelancers, often for designing an entire collection.

“There’s a bigger problem here in the whole structure of how these economies build up,” says Catherine Flick, a computing and social responsibility academic at De Montfort University. “You’ve got to have somebody who’s doing the labor at the bottom, who creates these 15,000 pieces of art.”

The NFT world’s inequity in distribution of wealth can best be seen through the Bored Ape Yacht Club, its billboard collection. The 10,000 apes are beloved by major celebrities and those who were early to “ape in” to the collection, which is now worth $2.5 billion based on the current floor price. You can’t buy a Bored Ape for less than $250,000 now. Seneca, the pseudonymous Asian-American artist who was approached to design the apes in 2021, has since said the amount she was paid for her work was “definitely not ideal.”

“It has become common to read how many high-ticket projects rely on low-paid artists and designers to make their NFTs,” says Andres Guadamuz, an intellectual-property-law academic at the University of Sussex. “In some instances the artist is at the forefront of the project, but for the most part the art is irrelevant, and the value is in the white paper and the roadmap.”

Flick likens the NFT sector to a “colonialism project,” where the people at the top of the chain are the ones dictating the rules and have the capital and wealth to demand that those beneath them carry out their orders. “The whole system was supposed to be decentralized to free up the economy from these centralized institutions like banks, but what it’s actually doing now is creating a new set of institutions that have almost the same function,” says Flick. “They gate-keep and capitalize on people’s labor.”

Seneca’s thoughts on being taken advantage of when artwork is transformed into a high-selling NFT are shared by others in the community. Tavis—who offers his illustrators a cut of the profits he makes from his clients, including around $20 per trait or accessory they draw—is working on his own NFT collection in an attempt to cut out the gig platform clients and increase profits. “I know right now I’m making only a certain amount for each collection, but if I make my own collection, the amount we can gain from it is much more,” he says.

As quickly as gig economy workers rushed in to service the fast-expanding NFT space, they could be forced to adapt to the next big thing if—as some predict—the NFT bubble is about to burst. If that were to happen, the prognosis isn’t good. “I think they’re probably a bit screwed,” says Flick.

Rico Mercado doesn’t believe the heyday of NFTs will continue for long, but he is preparing for a shift: to the metaverse. “Half the messages I receive daily are related to 3D” avatars and design, he says, both of which will be crucial to the metaverse. “Everyone needs 3D now.”


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