Skeptics say there's a better way to protect warehouse workers: redesign jobs to make them safe.
If the devices can consistently and accurately identify risky movements, the data could help companies shirk responsibility for creating jobs that cause injuries.
There’s a leaderboard that ranks you against your teammates. There’s a vibrating plastic rectangle that straps to your hip, your belt or your back. Earn enough points, and you might even win a prize: headphones or maybe a flat-screen TV.
But this isn’t laser tag — this is an industrial warehouse.
And this isn’t a game: It’s a system that is supposed to reduce the chance that you might blow out your back or your knees working in one of the countless warehouses, factories, data centers or delivery companies that make up the backbone of the country’s tech industry.
Tech startups like Kinetic, Modjoul and StrongArm, inspired by the popularity of Fitbits, Apple Watches and other consumer wearables, are selling similar devices to companies like Walmart and Amazon with the promise they’ll reduce the nagging — and costly — problem of worker injuries. The pitch: Give watches, belts or harnesses to every worker, track their movements and record their data, buzz them whenever they make an unsafe move, and watch injury rates drop.
The pitch is working, even as workplace safety experts point out the obvious: that the human body is not designed to repeat at rapid-fire pace the tasks required of many of today’s warehouse jobs. Fitting workers with these gadgets could enable companies to avoid bigger, long-term fixes to their workplaces, all while allowing them to record workers’ every twist, fall and bend, skeptics say.
In April, Amazon chose Modjoul for its first round of investments from its new $1 billion Industrial Innovation Fund (Amazon declined to comment further about its investment). Walmart had implemented StrongArm’s wearable tech in 18 buildings and across more than 6,000 workers as of May 2021, and a Walmart spokesperson confirmed in June 2022 that the company is continuing to roll out the technology to more facilities.
These wearable tech companies gamify safety. Most of them give workers a safety score or allot points every day to rank employees against their peers, turning their scores into a competition and urging them to do better when they next clock in. StrongArm goes so far as to call workers “Industrial Athletes” and names its demo devices for famous athletes (I used the “Alex Morgan” device when I tested the system in June).
These tools — whether belts, watches or other wearables — work in the same general way. They record movements like bends, twists and lifts, and then use proprietary algorithms to calculate when those movements cross into territory that could cause an injury, prompting either the worker or the manager to correct how someone is moving. Some record location data when workers move through a facility; some have microphones. All of them promise that they do not collect biometric or sensitive health information.
The analytics tools provide an immense trove of granular data about every worker. StrongArm’s platform shows every worker’s safety score over any time span and specifies the time of day when the riskiest movements occur, both on average across the workplace and for each worker. It even charts “tilt speed,” which is the rate at which someone bends at an angle, and counts “forward bends,” as well as the time of day when they happen. The platform can generate charts for how “athletes” compare to their peers and how facilities compare to industry averages.
We want to make sure that you are able to play with your grandkids and go fish on the weekend when you retire.
Most of these companies were conceived within the last 10 years and moved out of pilot and beta testing just before or during COVID-19. As the market continues to grow, some industry experts worry about the potential for abuse. If the devices can consistently and accurately identify risky movements — still an “if,” according to experts interviewed by Protocol — the data could help companies shirk responsibility for creating jobs that cause injuries. For example, if I received a poor safety score and then pulled a muscle in my back, the injury could be blamed on a failure to move properly as indicated in my safety score, even though the strain of performing the job led to the injury. The data could also be used punitively: A company could generate a list of the least “safe” workers and fire them before they get hurt.
“These companies will not protect workers with highly repetitive jobs where they are forced to do forceful, stressful … positions over and over and again, twisting and turning and bending their wrists and elbows and contorting their body,” said Debbie Berkowitz, a fellow at Georgetown University’s initiative on labor and the working poor as well as a former senior policy official for the Occupational Safety and Health Administration. “The job will still be dangerous.”
All of the company leaders interviewed by Protocol insisted that their technology is not built for punitive or masking purposes. StrongArm has companies pledge not to use its data punitively; Modjoul COO and founder Jen Thorson said that its data focuses on identifying companywide problems. These leaders say their tools are intended to help companies identify poorly designed jobs and reduce injury risk, saving them money on worker compensation payouts and reducing turnover in a tight labor market.
“How we view it and how we think about it is, this is not different from the gloves that protect your hand from laceration,” Thorson said. “This just makes sure we are protecting that part that’s unprotected. We want to make sure that you are able to play with your grandkids and go fish on the weekend when you retire.”
The story of these startups exemplifies a recurring theme in the tech industry. New technology revolutionizes an industry — in this case, ecommerce and delivery — and causes new problems along the way. Startup founders then design more new technologies that promise to address those problems, usually by collecting vast amounts of data and creating proprietary algorithms to analyze it.
Amazon’s shipping and fulfillment revolution has transformed consumer expectations for widespread and almost immediate access to any good at any time. Every major Amazon competitor has been forced to evolve its warehousing and delivery models in response, leading to a dramatic expansion of the industry and the number of people employed in it, as well as major changes to the physical jobs themselves.
Fitting workers with wearables could enable companies to avoid bigger, long-term fixes to their workplaces.Photo: Anna Kramer/Protocol
Heavily roboticized warehouses — especially Amazon’s — have reduced the amount of walking and carrying the average worker needs to do to fill and ship a package.
Instead, workers now perform more specific, repetitive jobs that complement the robotic systems, usually involving constant picking, turning, placing and scanning while standing in one place. Those continual motions, especially at the high speeds required for most workers to meet productivity expectations (and the consumer demand that powers it all), cause musculoskeletal injuries.
Injury data reflects these changes: In 2016, the number of reported injuries in warehousing and storage in the U.S. was just over 14,000, according to occupational injury data estimates from the Bureau of Labor Statistics in a report generated by Protocol. Those numbers steadily increased over the next five years, hitting almost 25,000 in 2020 — approximately a 78% increase. By far the greatest number of injuries fall in the “overexertion and bodily reaction” category, at more than 11,500 such injuries in 2020. Nearly half of all of the 25,000 reported injuries in 2020 were sprains, strains or tears.
The problems are especially bad at Amazon’s warehouses, which had an average injury rate at about double Walmart’s, the ecommerce giant's biggest competitor, from the beginning of 2017 to the end of 2020. Walmart and Amazon are the first- and second-largest private-sector employers in the U.S., respectively; Amazon has averaged somewhere between six and nine injuries for every 100 employees and Walmart has averaged between three and four per 100 employees since 2018, according to an analysis of OSHA data by the research arm of the Strategic Organizing Center, which represents a collection of major unions.
"Like other companies in the industry, we saw an increase in recordable injuries during this time from 2020 to 2021 as we trained so many new people — however, when you compare 2021 to 2019, our recordable injury rate declined more than 13% year over year,” Kelly Nantel, an Amazon spokesperson, wrote in a statement to Protocol in April 2022. “While we still have more work to do and won’t be satisfied until we are excellent when it comes to safety, we continue to make measurable improvements in reducing injuries and keeping employees safe."
The problem has attracted the attention of the Department of Labor, which announced an audit of what OSHA has done to “address the increase in severe injuries at warehouse and order fulfillment facilities of online and other retailers,” according to a December 2021 memo.
“These wearables reduced Walmart's warehouse injuries 64%.” After getting this pitch four times from StrongArm’s press team, I asked the company to let me try out its device. As a notoriously injury-prone person, I felt particularly suited to give these wearables a workout.
On a sweaty Wednesday in June, I hobbled into StrongArm's Brooklyn office about 24 hours after twisting my knee, meaning that it was basically guaranteed I would be unable to move in an injury-free way during our demo. I would be putting StrongArm through its paces.
A black rectangular device, about the size and shape of a flip phone, tracked my movements.Photo: Anna Kramer/Protocol
I chose soccer star Alex Morgan for my demo character and picked up the clearly well-used, dinged-up black rectangular device — about the size and shape of a flip phone — that would track my movements. The sign-in monitor showed that on the previous day, the device's user had scored a 77 for safety, fairly normal for the average worker and probably pretty upsetting for the real Alex Morgan. The black rectangle was slipped into a small backpack that fit over my shoulders, and StrongArm’s product team showed me how to get a reaction from the device.
I picked up the bag containing my heavy laptop and put it back down again, angering the little gadget tucked between my shoulder blades. It started to vibrate wildly as soon as I bent toward the ground, causing me to shoot upright in surprise. I lifted a chair over my head and dropped it to the floor, and my shoulders buzzed again. I leaned awkwardly over a low table to take notes and felt the same warning. Alex Morgan’s safety score probably dropped precipitously during the hour I limped around, testing its limits.
The easiest way to set it buzzing? Simple toe touches.
The toe touches illustrate the pros and cons of a device like StrongArm’s. Leaning over to lift something without bending your knees is one of the easiest ways to hurt yourself. The more vertical your back and the more bent your knees, the less strain you put on your body.
We all know that repetitive stressful movements cause injuries and the way to decrease them is to redesign jobs.
But if your job requires you to bend over again and again, a vibrating device won’t change that; it will, however, irritate the worker wearing it. StrongArm knows this, so its product is designed to stop vibrating if the wearer persists with a dangerous movement despite repeated vibrations. My injured knee made it impossible to bend down in a safe manner; after about five buzzes, the device stayed still and sulkily silent, even when I twisted sideways in a manner that was obviously dangerous.
In an ideal world, this scenario could flag managers and safety professionals that a job is inherently high-risk, making them realize that something about the way it’s performed needs to change. On StrongArm’s demo analytics dashboard, one of the tools available for managers shows a heat map of a prototype warehouse floor, with red indicating spots of high-risk motion where workers consistently score poorly. Theoretically, this would enable a company to focus on addressing problems in these areas of the workplace.
This is where the technology holds the most promise. But it’s also where the tech falls short. Berkowitz believes these bells and whistles detract attention from what every warehouse designer, safety professional, ergonomist and even most people walking down the street know: You shouldn’t be bending down again and again to lift things. Companies like Walmart and Amazon don’t need a device to flag high-risk jobs, she said.
“Warehouses have the data, they know who is reporting to their first aid stations, they have a record of everybody that has come in with hand pain, wrist pain, back pain, shoulder pain. They know exactly what job it was,” Berkowitz said. “It’s well-known what positions are neutral for the body and those that are not neutral, like raising your elbow, bending your wrist, if you’re doing it over and over again and you’re doing it in a forceful way.”
One problem with relying on tech to calculate workplace injury risks is the danger of trusting bad data, said Richard Goggins, an ergonomist who has worked for Washington state’s Labor and Industries department (the state-level OSHA agency) for more than 25 years. “If you don’t know you’re getting bad data and you make decisions based on that, you could say this job appears fine and this job appears risky when that may not be the case,” said Goggins, who spoke to Protocol not as an official spokesperson for the agency but based on his ergonomics expertise.
Goggins said he hasn’t decided if the wearables are worth the hype. He has observed warehousing companies in Washington implement these devices but said that they aren’t eager to share the data with Labor and Industries when he and his team arrive for investigations or inspections.
But companies like Walmart have clearly decided there’s something behind the hype that’s worth paying for. On the day I arrived at the StrongArm offices, the Brooklyn warehouse was stacked high with teetering boxes and shelves overflowing with equipment. The company was preparing to move to a space many times bigger than this one, a manager told me. StrongArm's pallet shipments of equipment are now so large they can’t fit through the doors of the current office, and there’s nowhere near enough space for the number of employees who want to come in for work every day.
David Kabrt, StrongArm’s production director, pulled a much smaller, sleeker, palm-sized black square out of one of the boxes. The new iteration of the company’s wearable wasn’t quite ready for me to test, but it could be worn on a belt instead of between the shoulders and could eventually have the potential to collect environmental data like temperature and sound levels.
StrongArm's data-gathering is meant to help workers perform tasks more safely.Photo: Anna Kramer/Protocol
“This is going to be standard issue," said Kabrt, who sees the wearables eventually becoming status quo in warehouse-type settings. "We have the tech to solve this problem, and there’s a big return on investment.”
While I meandered around the front room of the Brooklyn warehouse, doing my lopsided bends, squats and toe touches, carrying my backpack across the room, I asked Kabrt and Jervon Ralph, a production manager, whether they worry about the data being abused to penalize workers. “That would be very deflating,” Kabrt said as Ralph nodded in agreement.
Ralph used to work in warehousing and started to feel back pain in his early 20s, which is what steered him to work for StrongArm. “One of the older employees told me to get a back brace, and I knew this is a big issue if, at 20, some guy is telling me to get a back brace,” he said.
While I couldn’t see my own safety score — the data had to upload after I removed the device from between my shoulders — Kabrt assured me that it would have plummeted after all the ways we’d deliberately tanked it. If I had come back the next day, Alex Morgan would probably have a bright red square indicating very unsafe behavior.
In that case, StrongArm would advise coaching of the employee and ensuring that the job is designed to be performed in the safest way possible. But it’s impossible to know if companies will heed this advice. “The hope is always that employers will take that coaching approach,” Goggins said.
Berkowitz said the solution is far simpler. “Workers are working so fast that they don’t have time to lift properly,” she said. “We all know that repetitive stressful movements cause injuries and the way to decrease them is to redesign jobs.”
Correction: An earlier version of this story misspelled David Kabrt's name. This story was updated on July 11, 2022.
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Anna Kramer is a reporter at Protocol (Twitter: @ anna_c_kramer, email: akramer@protocol.com), where she writes about labor and workplace issues. Prior to joining the team, she covered tech and small business for the San Francisco Chronicle and privacy for Bloomberg Law. She is a recent graduate of Brown University, where she studied International Relations and Arabic and wrote her senior thesis about surveillance tools and technological development in the Middle East.
A less frothy market means you can differentiate between speculation and building foundations for the future.
Polygon co-founder Antoni Martin spoke with Protocol about crypto regulation, the crash and more.
Antoni Martin, enterprise lead at Polygon, wasn’t happy about the crypto crash. But he thinks that this is the time to “differentiate between speculation and build.”
He’s done his own share of building, starting Hermez, a Layer 2 protocol that merged into Polygon in September and is now known as Polygon Hermez. As enterprise lead, he’s the primary point of contact for everyone from big banks to governments that want to learn more about the blockchain technology effort, which aims to scale up Ethereum by avoiding congestion and allowing it to process more transactions affordably.
Martin, who spent years working for Citibank and Deutsche Bank before diving into the blockchain world, spoke to Protocol about what Polygon could be used for, how the crypto crash has eroded trust and how he’s helping shape the EU’s crypto regulation.
This interview has been edited for brevity and clarity.
How important do you think crypto is to the payments industry right now?
I am speaking a lot with incumbents now, with a lot of banks and people from the financial sector. And the truth is that in this sector especially, they're very scared. In the last 10 years, they are the focus of a lot of regulation mainly as a consequence of what happened in 2008-09, and some of the actions were questionable.
I have been working for 17 years in the financial sector. I created Hermez two years ago, and I know perfectly what happened the last 10 years in this industry. As you know, there are a lot of AML compliance departments scrutinizing every transaction.
If you ask me, payment is a perfect use case for blockchain, or Polygon, or Ethereum. But at the same time, I think that it will be the last one where it will be applied. It will start as it has started now in [our partnership] with Stripe, it’s a way to do payments with USDC. But that is something very specific for Twitter, and not really the core of the payments sector, if we’re honest.
This is just the beginning. We are very happy and we have a lot of hope in this first use case; it’s opening one door. That doesn’t mean the door is already open: I think we should be very cautious, there is still a lot of work to be done. But yes, it’s a first step.
So what are the next steps to find more uses for Polygon?
Another question that is very important is you need to consolidate transactions from a lot of different actors and legal entities. And in this sense, blockchain is also perfect because it applies very well to supply chain use cases, to insurance use cases where there are different legal entities.
But then at the same time, security [matters]. I think that every minute there is a hack in one element of the financial system. But it's also one thing where blockchain can help sort it out.
A very good example is what we are trying to do in the city of Lugano, where you will be able to pay all your fees, your fines, your taxes, even your coffee, because merchants are involved. The idea is that everything will run on top of the platform on Polygon. You will be able to pay with a stablecoin pegged to the Swiss franc, which is named luga, and another one pegged to the dollar, in this case tether. This is the future.
With the recent crypto crash, what happened with luna and the general crypto market downturn, has that affected how Polygon operates? Did you notice any difference in the trust that people have in crypto?
Yes. Honestly, I’m not happy about what’s happened to luna or other protocols, of course. But a stablecoin that was giving you a 20% yield? That's something strange. At least around me, I don't know anybody investing in luna, but not because they were more clever, more silly, whatever it is. But because it was strange. The same applies to other DeFi projects that were giving 90%, 80% [yield]. It's a little bit of common sense, meaning if you see that there are these big yields, normally there is a risk involved.
Obviously, it has decreased a little bit of interest in crypto, yes, that's for sure. At the same time, it's also the moment where you can differentiate between speculation and build. In our case, here at Polygon, we deployed Nightfall, a privacy platform, and Supernet, a sovereign blockchain platform that is like the internet of blockchains. Now, in July, we will deploy the first zkEVM in testnet.
I think it's a moment to be focused on building. You should still look at the price of your token or asset or whatever, because otherwise you will become crazy. But yes, I think it's time to build up, and with time the market will differentiate.
Particularly with the EU’s Markets in Crypto-Assets bill and transfer-of-funds rules, AML checks have been a point of contention. How do you feel about crypto regulation coming up?
I was involved in some consultations with the European Parliament. I can tell you that I have spoken with more than 40 members of the European Parliament and, again, they are trying to understand. Obviously, yes, there is this component of security and AML.
I think at a certain point we should sign a trade-off that if you are the owner of the wallet as you are the owner of a bank account, you should be able to say it. Here in Switzerland, for example, I am declaring my hardware wallet. It's part of my assets, and I pay some taxes on top of it. I understand that for some people it is very attractive to earn a lot of money and yield without paying any tax. Well, maybe we can discuss if the taxes are fair or not; that's not the discussion.
They are trying to establish some control. We should find the right balance between the owner of the assets and total control on all transactions. There should be a midpoint.
When we speak with regulators, with governments, they are not against blockchain [technology]. For example, they are very interested in the field of traceability that blockchain can bring and can be really helpful for AML or KYC. Obviously, here also there is the privacy topic, because otherwise they can trace all your transactions, and we don't want that to be a very Orwellian world. But here zero-knowledge can help a lot to provide this privacy. Here the question is: How can we manage these technologies that are adding privacy and scalability? But regulators and governments are very interested to understand how they can apply these in real life.
Engaging the value chain around emissions reduction will be crucial to success, says PepsiCo.
Chris Stokel-Walker is a freelance technology and culture journalist and author of "YouTubers: How YouTube Shook Up TV and Created a New Generation of Stars." His work has been published in The New York Times, The Guardian and Wired.
Tackling emissions and achieving net zero has become a key part of every company’s environmental, social and governance (ESG) goals. “The threat of climate change is very real. It is one of the most important issues we will encounter in our lifetimes,” said Jim Andrew, PepsiCo’s chief sustainability officer. “What used to be hundred-year weather events are now happening every other year. We need to limit our planet’s temperature increase to 1.5 degrees Celsius to avoid even more severe consequences.”
Jim Andrew is Executive Vice President, Chief Sustainability Officer for PepsiCo.
It's a target that companies worldwide are seeking to meet — including many, like PepsiCo, that are part of the Science Based Targets Network, a group of companies, NGOs, consultancies and coalitions aiming to road-test measurement and reporting methodologies that can help maintain a balanced planetary ecosystem.
As part of PepsiCo Positive (pep+), a strategic end-to-end business transformation with sustainability and human capital at the center, PepsiCo reset its climate change targets, doubling the size of the task ahead of it. “We plan to reduce operational Scope 1 and 2 emissions by 75% and our Scope 3 value-chain emissions by 40% by 2030,” said Andrew. “In addition, we pledged to achieve net-zero emissions by 2040, one decade earlier than called for in the Paris Agreement. It’s not an easy task, but it is important to do for the future of the planet — and one we take seriously as one of the world’s biggest food and beverage companies.” To achieve those goals, PepsiCo has built out a climate action plan that includes scaling regenerative agriculture across the land it sources ingredients from, reducing virgin material usage in packaging and shifting to renewable electricity and fuels.
Alongside the environmental and social benefits of pep+, there are also business benefits. “We are building resilience for the future,” shared Andrew. “Our consumers are watching and factoring sustainability into the choices they make. This is an opportunity for growth and to create value for our shareholders.”
But for many companies on the path to net zero, it’s not always a straightforward journey, particularly when much of the emissions that make up a full greenhouse gas footprint can emanate from outside the four walls of your own manufacturing operations, like in the case of PepsiCo, where 93% of emissions come from its value chain.
This means companies need to be thinking differently and finding ways to support and encourage those along the value chain to also reduce.
“In order for PepsiCo to achieve our net-zero goals, we can’t underestimate the importance of our value chain embracing and implementing science-based goals of their own,” said Andrew. “Our science-based target covers everything from the farmers we rely on at the start of our value chain to our packaging manufacturers.” PepsiCo is asking all partners along the value chain — from suppliers to manufacturers and franchise bottlers — to set their own science-based targets. “It’s the biggest challenge in our journey to net zero. We know this is not going to be an overnight change. We are putting in place the levers and supports now that will have an impact in the future. We don’t have all the answers yet, but we’re making sure that what we do know, we’re sharing to maximize our impact,” said Andrew.
Asking suppliers and associated companies to overhaul the way they work is no small feat, but PepsiCo is taking a three-pronged approach centered around the principles of educating, enabling and incentivizing. An external-facing program, the Sustainability Action Center, aims to engage and equip value chain partners with tools to undergo their own sustainability journey. “We provide a quick assessment to determine their climate maturity level, and those results will then direct them to targeted resources appropriate to their level,” said Andrew. “It’s designed to avoid information overload and to encourage step-by-step action.” A global summit also educated partners on PepsiCo’s pep+ goals and best practices and a new Positive Agriculture playbook has been openly shared with all agricultural suppliers to provide guidance on how to implement regenerative practices on farms, which will deliver an overall reduction in greenhouse gas emissions.
But education is only half the task: To enable partners to make meaningful changes, PepsiCo announced a new initiative: pep+ RENew. “It’s a first-of-its-kind collaboration with Schneider Electric, to provide value chain partners with easy access to renewable electricity and speed their transition to renewable energy through PPAs and other options,” said Andrew.
And incentivizing companies to make a change is vital, too. “We know we’re making a big ask of those we work with, and that it’s not easy,” said Andrew. “We can use our size to send demand signals with others, and also our purchase decisions are meaningful.” In 2021, PepsiCo joined the EPA’s Green Power Partnership, ranking in the top 15 companies nationally in the last two quarters. “We are also members of the Clean Energy Demand Initiative of the State Department, which seeks to build RE demand in developing countries, with the first being Vietnam,” said Andrew.
Recognizing that innovation comes from small startups as well as big corporations, the company has also developed PepsiCo Labs. “It’s a place where we can pilot and scale new innovations,” said Andrew. More than 2,000 startups that could positively impact all parts of the PepsiCo business have been explored, with 150 pilots across 70 countries being put into action. “We’ve taken more than 25 of those ideas and supported them, actively scaling them to become businesses,” said Andrew.
It’s all part of making sure that the company leaves the planet in a better place than it was found. “Companies have to engage their value chain to be impactful in reaching their net-zero goals,” said Andrew. “It’s not possible to do it alone, no matter how big you are. You have to bring everyone else along with you to reach those targets and to ensure that we’re helping the planet.”
Read more about PepsiCo’s progress towards its pep+ ambition here: https://www.pepsico.com/our-impact/sustainability/2021-esg-summary/
Chris Stokel-Walker is a freelance technology and culture journalist and author of "YouTubers: How YouTube Shook Up TV and Created a New Generation of Stars." His work has been published in The New York Times, The Guardian and Wired.
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Our recs for your weekend.
Janko Roettgers (@jank0) is a senior reporter at Protocol, reporting on the shifting power dynamics between tech, media, and entertainment, including the impact of new technologies. Previously, Janko was Variety's first-ever technology writer in San Francisco, where he covered big tech and emerging technologies. He has reported for Gigaom, Frankfurter Rundschau, Berliner Zeitung, and ORF, among others. He has written three books on consumer cord-cutting and online music and co-edited an anthology on internet subcultures. He lives with his family in Oakland.
The dog days of summer aren’t that bad when you have lots to do. If you want a little taste of school, give “Abbott Elementary” a shot. If you want something darker, “Stranger” will keep you busy. If you want to use this time to be a DJ, PatchWork can help with that.
Move over, Ted Lasso: “Abbott Elementary,” a workplace comedy set in a Philadelphia public school, received an Emmy nomination for Best Comedy this week, and rightly so. Shot as a mockumentary, “Abbott Elementary” explores the reality of underfunded public schools — without getting stuck in cliches.
No one is coming to “save these kids.” Instead, the teachers make do, often using hilarious shortcuts to overcome resource scarcities and other challenges. And while all teachers are heroes in my book, “Abbott’s” characters are so lovable and fun to watch because they are imperfect, insecure and quirky.
Apple, Snap and Meta are all trying to invent the next big thing: AR glasses that can be worn for hours at a time and eventually play as big a role in our lives as the smartphone. AR/VR pioneer Avi Bar-Zeev sums up some of the key challenges these companies are facing, and shares his thoughts on how to overcome them.
This South Korean crime drama features Cho Seung-woo as a prosecutor who had a lobotomy that left him unable to feel emotion. It’s a trait that has made him ruthless, and incredibly effective in his job, but also in need of being kept in check.
Enter Bae Doona of “Kingdom” and “Sense8” fame, who plays a cop tasked with grounding her steely partner and helping him with his blind spots. “Stranger” first debuted in 2017, but with Korean fare becoming hugely popular on Netflix in recent months (“Squid Game,” “All of Us Are Dead”), now’s a perfect time to rediscover this gripping gem of a show.
There have been many takes on music experiences in VR. Some are more gamified, like Beat Saber and Audica, whereas others are trying to reinvent more traditional studio or DJ environments in VR (Electronauts, Tribe XR).
PatchWorld aims to combine the best of both worlds by offering access to sequencers and everything else you’d need to make your own tracks, while also letting you jam in weird and trippy underwater worlds with moody ocean spirits. It’s odd, intriguing and a lot of fun.
A version of this story also appeared in today’s Entertainment newsletter; subscribe here.
Janko Roettgers (@jank0) is a senior reporter at Protocol, reporting on the shifting power dynamics between tech, media, and entertainment, including the impact of new technologies. Previously, Janko was Variety's first-ever technology writer in San Francisco, where he covered big tech and emerging technologies. He has reported for Gigaom, Frankfurter Rundschau, Berliner Zeitung, and ORF, among others. He has written three books on consumer cord-cutting and online music and co-edited an anthology on internet subcultures. He lives with his family in Oakland.
Protocol caught up with Twilio CEO Jeff Lawson to discuss Twilio’s outlook, the path to profitability and the company’s approach to compensation.
"When you start a company in 2008 in the midst of the financial crisis, you really do treat every dollar as precious."
Aisha Counts (@aishacounts) is a reporter at Protocol covering enterprise software. Formerly, she was a management consultant for EY. She's based in Los Angeles and can be reached at acounts@protocol.com.
Joe Williams is a writer-at-large at Protocol. He previously covered enterprise software for Protocol, Bloomberg and Business Insider. Joe can be reached at JoeWilliams@Protocol.com. To share information confidentially, he can also be contacted on a non-work device via Signal (+1-309-265-6120) or JPW53189@protonmail.com.
When the stock market is tanking, an oft-cited refrain is that Wall Street activity is not necessarily reflective of the state of the U.S. economy. Many technology vendors are now extending that same thinking to their own businesses.
Amid falling share prices, software CEOs are on the defensive, arguing that company valuations don’t measure the actual results they are posting. And the leaders of SaaS companies that have yet to post a profit after over a decade of operations are steadfast in the belief that, while net income and cash-on-hand are now more significant metrics, growth remains important.
Of course, such a phenomenon is not unique to the industry. For example, it wasn’t until 2001 that Amazon began posting a profit, seven years after it launched and four years after the IPO. That is perhaps why Twilio CEO Jeff Lawson — a former employee of the ecommerce giant and avid fan of Jeff Bezos — is so bullish on his company’s future.
“On the business side, we are performing very well,” he told Protocol. But “now the environment is clearly rewarding profitability.”
Twilio is one of a handful of established IT vendors that are stuck in the enterprise doldrums. Not yet profitable, but working towards it, the company posted 48% year-over-year revenue growth last quarter. Many analysts remain bullish on the opportunity ahead, given Twilio’s prevalence among developers and expansion into first-party data. Still, its stock is down 69% this year.
That’s not only bad news for investors. Employees who have their compensation tied to Twilio’s share performance might also be feeling a little grumpy. But Lawson remains hesitant to pursue any option that could further dilute Twilio’s stock or put the company in a position where it is constantly reacting to Wall Street’s wild fluctuations.
In other words, if you’re a Twilio employee, don’t expect the company to rescue you from the realities of the stock market.
“You can't make people whole in the same way that, when the stock price goes up, you don't ask employees to give it back. When it goes down, the company can't make employees whole. To me, that's not how it works,” said Lawson.
In a conversation with Protocol, Lawson discussed Twilio’s outlook, the path to profitability and the company’s approach to compensation.
The following interview has been edited and condensed for clarity.
Most analysts say the companies that are going to be in the rougher spot are those that are in the growth stage but remain unprofitable. Twilio does fall into that camp. How do you think about your path forward with the backdrop of what's happening from the macro environment?
Let's separate out two things. One is the business and two is the stock price. Right? The two are separate from each other. And on the business side, we are performing very well. We've committed guidance of 30% annual growth through 2024, that we remain committed to … profitability in 2023.
The environment used to reward growth. And now the environment is clearly rewarding profitability, which is fine. I understand all the fundamental reasons why higher interest rates basically changed the reward function for investors. Makes sense. So I understand why from a stock perspective, we are treated the way we are, which is unfortunate for us.
But we remain committed to the goals that we have for ourselves, that balance growth and profitability. And I think that's the right way to run the company.
In economic hard times, one of the first areas that companies usually look to cut has been marketing. Do you see it as different this time around?
No, I think that is happening, right? I mean, look at what Facebook's been saying. They've all but told us that companies are cutting their marketing budgets. We're not tightly coupled to the marketing arena, per se, but you are correct. Our data products make our customers' marketing more efficient.
Why do you think marketing budgets are often the first to get cut? Two reasons. No. 1: they're kind of discretionary. They're easy to cut, as opposed to salaries of employees. Those are painful and they affect humans, whereas cutting a marketing budget is easy.
Second is: In this world where I have no idea which half of my marketing is wasted, it's easy to cut it off. The downsides of the business are probably going to be you know less. I don't think most businesses take their marketing spend to zero, but they moderate it.
Well, what if I can actually try to solve that equation for you: Which half is waste? We can actually start to help you pull out the waste, because you're using better data to buy more effective ads. That is a really compelling value proposition for customers in a time like this. You're spending less on marketing, but you still have the goals you're trying to meet in terms of sales. If you spend less, and then you make less, you sort of spiral.
You’ve talked about this path to profitability. What are you actually going to do to get there?
The reward function for our employees historically has been growth. And now we're changing that to be profitability. It puts a closer eye on a lot of the ROI of the investments we're making and tightening up execution in a lot of places.
You think about a company that's in high-growth mode. You’re optimizing the company for top-line growth to capture a big opportunity. And that's really the mode the company has been in for the first decade or so of its life.
At some point, you get to a certain amount of scale. With the scale that we’re at, we can be — and we should be — much more efficient. And we should be really focused on the ROI of every investment more. It's not that we weren't in the past, but just more so. And that's the transformation that companies go through when they go from optimizing for growth to also optimizing for profitability.
It is a difficult one, but it is not impossible.
Are there specific areas you're looking at? I know some companies are pausing hiring, or they're looking at internal travel or employee perks, or maybe they're trying to get out of real estate.
Those are all areas that make sense. We have slowed down our hiring plans this year. We've cut back on some of our travel. We have announced that we're closing several of our offices.
When you start a company in 2008 in the midst of the financial crisis, you really do treat every dollar as precious. As you grow bigger, it does get harder to do that, but actually becomes more important. Frugality is one of our principles.
How are you thinking about compensation? And has Twilio made any changes to make sure employees who are underwater right now with their stock are made healthy?
You can't make people whole in the same way that, when the stock price goes up, you don't ask employees to give it back. When it goes down, the company can't make employees whole. To me, that's not how it works.
But what you can do is take employees, and based on our performance-based approach, our highest performing employees every year do get grants. And we will give grants at the now-market price to those employees based on their performance.
When you take a long view, it's sort of noise. If you take a short view and this week or this month my compensation feels less than I want it to be, sure, that’s a bummer. And there’s very real impact for folks. But you can’t look at equity investment on a short-term basis. It’s like trying to time the stock market. Buy-and-hold is the only proven approach.
That's what we tell our employees. And employees who aren’t on board with that, I guess some of them leave. And that's a shame. But I think that the right way to use equity compensation for employees is to build that long-term view.
There are a lot of employees who do take that short-term view. And many can now switch to another company and get in on a very low stock price. Are you expecting to see retention go down?
We continue to grant equity at lower prices. We definitely skew that towards our highest-performing employees. Are there going to be folks who hop? Sure. In fact, our attrition went up in the last year, beginning of this year.
People were actually jumping to startups because the money that got pumped into the economy, so much of it went into venture capital. That went into sky-high valuations and huge rounds in the private market. Well, guess what's happened? You're gonna see down rounds, you're gonna see repricing. A bunch of those companies aren't going to make it.
And so what people thought was, “Great, I’m gonna bounce and go get low-priced private company equity pre-IPO.” Well, that's not going to necessarily work out either.
Are one-time cash bonuses something you are looking at?
We did. That’s a bit different. Inflation is very real. And inflation tends to be permanent; not the rate, but unless you have a deflationary environment, inflation compounds over time. So we did an outsized cash adjustment this year. If in a typical year you do 2-3% for inflation, this year was a multiple of that, which obviously makes the goal of profitability harder to obtain but it’s the right thing to do for our employees. That’s different to responding to some startup out there that gave a junior engineer $10 million in equity.
Aisha Counts (@aishacounts) is a reporter at Protocol covering enterprise software. Formerly, she was a management consultant for EY. She's based in Los Angeles and can be reached at acounts@protocol.com.
Celsius and Voyager Digital’s bankruptcies could force courts to weigh difficult questions about how to prioritize customers and value digital assets.
Mt. Gox's collapse led to crypto's most infamous bankruptcy, but the proceedings mostly played out outside U.S. court and started when the industry was much smaller.
The first day in bankruptcy court for crypto lender Voyager Digital came with a warning, from the company's own attorney, that this could get tricky.
“I think for many of us, this is unchartered territory,” said Joshua Sussberg, an attorney with Kirkland & Ellis. “There will be many potential legal issues of first impression.”
The U.S. bankruptcy courts have never dealt with an insolvency proceeding of a crypto company on the scale of Voyager Digital or Celsius. Both companies, which operate lending businesses, are entering Chapter 11 bankruptcy with billions in both assets and liabilities. The filings came just a week apart: Voyager on July 6 and Celsius on July 13.
The uncharted nature of the proceedings means they will be watched closely by policymakers and within the industry, and especially by customers seeking their crypto back.
There are established rules and insurance for customer funds if a broker-dealer or bank goes under that have not been established for crypto. And that type of bankruptcy is relatively rare, said Nizan Geslevich Packin, a professor of law at the Baruch College Zicklin School of Business.
“We don't really have any precedent for crypto firms in the U.S.,” Packin said. “We have an international case from almost a decade ago. But that was early on: a different continent, different rules, with the size of the market significantly smaller."
Packin was referring to Mt. Gox, the most infamous crypto bankruptcy. Mt. Gox customers, along with those who purchased creditor claims, are just now preparing to get some of their crypto back, eight years after the exchange collapsed into bankruptcy and lost 850,000 bitcoins total, valued at $500 million at the time. While the bitcoin that customers receive back will be worth significantly more than when it was stolen, creditors are receiving only a fraction of their initial claims.
Both Voyager and Celsius have offered plans to restart their businesses and are not in "free fall," as Voyager's filing described it. Still, bankruptcies can be years-long proceedings, said Packin, who specialized in Chapter 11 cases at Skadden, Arps, Slate, Meagher & Flom.
One major question, Packin said, is the priority of the creditors: who gets paid back, how much and in what order.
Voyager, for instance, has promised to pay back customers with a combination of their crypto, Voyager’s token, stock in the company and proceeds from its efforts to recover a loan to the bankrupt hedge fund Three Arrows Capital. But that plan would require court approval.
Coinbase sent a scare into the crypto world in May by warning in an SEC filing that customers could be considered unsecured creditors if the exchange went bankrupt. That would mean customer funds are considered part of the bankruptcy estate and those customers are the lowest priority as far as getting paid back.
CEO Brian Armstrong quickly assured customers that Coinbase was not at risk of bankruptcy and the company was only following new federal guidance with the disclosure. But he acknowledged that a court could pool customers' funds as part of the bankruptcy estate, whereas customer accounts have to be kept separate in a stockbroker bankruptcy.
In a smaller-scale crypto bankruptcy case, the lending platform Cred classified its customers as unsecured creditors in its November 2020 Chapter 11 filing, where it reported liabilities in excess of $160 million. The court approved a liquidation plan for the company that started last year amid allegations of fraud and mismanagement. Rick Hyman, a partner with Crowell & Moring, told Protocol that the small size of the company meant the case did not garner nearly the attention of the Coinbase disclosure, but nonetheless offered a cautionary tale.
"I would expect that many of the customers dealing with Cred probably didn't recognize that they will be entitled to nothing more than a general unsecured claim [in bankruptcy],” Hyman said.
There is also the question of valuing volatile digital assets. Bankruptcy proceedings take time, and crypto prices change quickly.
In 2016, nearly two years into the bankruptcy of crypto miner HashFast, a trustee sought to claw back payments to a promoter of about 3,000 bitcoin, paid three years earlier. The value of bitcoin had climbed from about $360,000 to more than $1 million in that time. This caused a dispute: The promoter said the courts should consider bitcoin a currency, which would leave HashFast on the hook for only the value of the bitcoin at the time of the transaction. The trustee, meanwhile, contended that bitcoin is a commodity and therefore must be returned at its current market value, according to bankruptcy laws. Ultimately, the case was settled before the court came down in either direction.
The same questions of classification for crypto could come up in the Voyager or Celsius cases. Robert Honeywell, a restructuring partner at K&L Gates, questioned in an interview with Axios whether crypto customers could claim to be securities holders to improve the priority of their claims.
"The real question is even if they filed as a Chapter 11, will customers who have yield-bearing accounts with Voyager say, 'I’m not just a normal unsecured creditor, I’m a securities holder,' even though no regulator has said they are that," Honeywell said, acknowledging that it is an untested proposition.
The crypto regulation bill from Sens. Cynthia Lummis and Kirsten Gillibrand includes a section that aims to safeguard customer assets in the case of a crypto bankruptcy and treat digital assets similar to commodities in proceedings. But it remains to be seen whether that legislation can garner the support to become law.
In the meantime, the bankruptcies are just the latest fallout from crypto's crash, one that experts say is prompting even greater urgency for regulation. SEC Chair Gary Gensler indicated on Thursday in an interview with Yahoo Finance that the agency has authority to tailor parts of securities law to help bring crypto companies into compliance, potentially increasing investor protections in the process.
Gensler, who has been accused by some in the industry of regulating only by enforcement, said he has said to “the industry, to the lending platforms, to the trading platforms: ‘Come in, talk to us.’”
The current crash should leave more crypto companies open to accepting stronger oversight and regulation, said Diogo Mónica, co-founder and president of Anchorage Digital, the first federally chartered crypto bank.
"People are going to remember this: What happens if the company fails? How are you running risk management?" Mónica said. "All of a sudden those questions are being asked again that, to some extent, get forgotten during bull markets.”
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