Pipeline battle shows how legal strife is clogging US energy development
Williams set to escalate dispute with rival Energy Transfer through lawsuit for ‘anti-competitive’ actions
One of the biggest US pipeline companies is preparing to sue its arch-rival, underscoring the legal strife plaguing America’s energy infrastructure buildout.
Alan Armstrong, chief executive of Williams, told the Financial Times his company would seek “big dollars” in damages from Energy Transfer — led by prominent Donald Trump donor Kelcy Warren — as it ratchets up a legal stand-off over allegations of anti-competitive behaviour.
The two pipeline giants have for months been entangled in a courtroom brawl over Energy Transfer’s objections to its competitor’s development of a $1bn conduit to ship natural gas from a Louisiana oilfield to the Gulf Coast. Armstrong said Williams was now taking the matter further.
“The next step for us will be to file for damages that are due from their efforts to stop us,” he said in an interview. “These are big dollars . . . it’s not an immaterial amount of money, that’s for sure.”
Energy Transfer argued in court that Williams had not done enough to ensure the safety of crossing points between the pipeline development and its own conduits.
In a statement to the Financial Times, Energy Transfer said it would “never regret standing up for the safety of its assets and of those whose property we cross, despite the misguided claims of Williams’ CEO.”
The stand-off highlights the pitfalls delaying pipeline construction in the US. It is a particular problem in natural gas as demand swells, driven by surging exports and rising domestic consumption needed to satisfy huge growth in electricity usage for AI and data storage.
Tensions over pipelines have risen in recent years amid a proliferation of lawsuits over permits, as climate activists seek to slow the construction of projects they say will lock in dependence on fossil fuels for decades. It is unusual for companies to lodge objections of this nature to rival projects.
“Most operators that we deal with are responsible operators,” said Armstrong. “I think Energy Transfer is very much an outlier on this and I think they’re going to regret their actions ultimately on this.”
Williams’ Louisiana Energy Gateway project is designed to ship 1.8bn cubic feet a day of natural gas from the Haynesville Shale across Louisiana and Texas to liquefied natural gas terminals on the Gulf Coast. It had been scheduled to come online this year, but the company says the clash with Energy Transfer has delayed the start date until the second half of 2025.
“Holding stuff up like that — there’s consequences in that,” said Armstrong.
Energy Transfer has also opposed pipeline projects by other developers including Momentum Midstream and DT Midstream over crossings with its own network. The dispute with Momentum was settled earlier this month, allowing the company to proceed with its project. DT moved its planned pipeline to avoid crossing Energy Transfer’s operations.
“The truth is that unlike the other parties we have settled with, Williams has not provided the critical information we need to adequately review the impact of the large number of crossings they are seeking,” Energy Transfer said in its statement. “We must wonder as to Williams’ motives in its resistance to sharing this information as this is a standard process when requesting pipeline crossings.”
Litigation surrounding projects has caused a sharp drop-off in US pipeline developments, with less than 1bn cu ft/d of interstate gas capacity added in 2023, the lowest on record, according to the Federal Energy Regulatory Commission, compared with the 28bn cu ft/d added in 2017.
It has also caused costs to spiral: the 300-mile Mountain Valley Pipeline in Virginia came online this month after a barrage of legal challenges, six years late and at a cost of $7.85bn, more than double initial projections.
However, the vast majority of litigation has been led by environmental activists rather than companies and Energy Transfer’s actions in Louisiana have riled industry and politicians.
Jeff Landry, Louisiana’s governor, said in his previous role as attorney-general that Energy Transfer’s litigation, if successful, risked establishing a precedent that “could make it nigh impossible (or at least cost-prohibitive) to bring many energy products to market”.
Energy Transfer and Williams have been bitter rivals since a $33bn takeover bid led by Warren collapsed in 2016, prompting years of litigation. In October, the Delaware Supreme Court ruled Energy Transfer must pay Williams $495mn for walking away from the proposed deal.
Europe’s newest rocket puts bloc’s space ambitions to the test
Successful first flight of Ariane 6 would boost European credibility in commercial rocket launch market
On July 9, Anne-Sophie Chassagnou will judge whether the skies are clear enough for Europe to launch its first new rocket in almost 30 years.
Aged just 26, the chief weather forecaster for Ariane 6’s first flight holds enormous influence over the continent’s space ambitions. Last year, just minutes before ignition, the meteorologist for France’s CNES space agency called off the first attempt to launch Europe’s €1.6bn mission to explore Jupiter’s icy moons,
“My body was shaking when I had to push the red button,” she said from Europe’s spaceport in French Guiana, between Brazil and Suriname, but if conditions are not right for Ariane 6, she will not hesitate to do it again. “I don’t want to, but if I have to I will,” she said.
This time, far more is at stake than a deep space mission. The first flight of the heavy-lift Ariane 6 rocket will test whether Europe can rebuild credibility in the commercial launch market once dominated by Ariane 5 and now by Elon Musk’s SpaceX.
Europe is also counting on Ariane 6 to restore its independent access to space — an increasingly contested domain where global superpowers are fighting for economic and strategic supremacy. For the last year, the bloc has had to rely on SpaceX to launch some of its most sensitive satellites.
It is an uncomfortable position. In the 1970s, the US attempted to bar some European satellites from competing commercially in return for providing launch services. “The Ariane programme was triggered by not having commercial access to space,” said Eric Dalbiès, chair of ArianeGroup, the French-owned joint venture that manufactures Europe’s heavy-lift Ariane rockets. “It revived the need for Europe to have sovereign access.”
Now Europe is again without its own launch capability after Ariane 5 was retired last July. Technological challenges, pandemic lockdowns and skills shortages caused a costly four-year delay to Ariane 6. Co-operation with Russia ended after its invasion of Ukraine, and problems on Italy’s new midsized launcher Vega-C have left that rocket grounded since 2022.
Josef Aschbacher, head of the European Space Agency, has described the situation as a “crisis” for Europe. The EU’s new space strategy for security and defence made restoring autonomous access to space a priority.
At the Guiana Space Centre, situated near the coastal town of Kourou, teams from the ESA, CNES and ArianeGroup have been working hard to achieve that goal.
In April the rocket’s core was transferred to the launch pad and two boosters carrying 140 tonnes of solid propellant were attached. On June 20 Ariane 6 was fuelled and drained in the last rehearsal. Sixteen satellites and experiments have been loaded on to the rocket.
Almost 50 per cent of rockets fail on their first flight, according to Aschbacher, but officials at Kourou hope repeated tests and rehearsals have mitigated the risks. The focus is “making everything right first time”, says Lucia Linares, ESA’s head of strategy.
Even if the first flight fails, Europe’s strategic needs will keep the programme alive. Less certain is whether the rocket can compete in a market that has changed radically since Europe opted in 2014 to build a conventional launcher.
SpaceX’s reusable Falcon 9 has slashed prices, making it the clear leader for low-cost, reliable launches. SpaceX expects Starship, the world’s most powerful rocket which completed its fourth test flight this month, to be reusable too — unlike Ariane 6.
Europe’s decision not to invest in a reusable rocket is widely seen as a mistake. Germany had been reluctant to pay for a new rocket programme, according to former ESA chief Jan Wörner. “The German idea was to continue with Ariane 5 but to have a new upper stage. This was the cheap solution,” he said.
But France, which has long dominated Europe’s launcher industry, wanted to retain the jobs and skills of rocketmaking with a new programme.
A compromise was reached. ArianeGroup, a merger of the Franco-German rocket businesses of Airbus and Safran, promised to design an expendable launcher that was at least 50 per cent cheaper to operate than Ariane 5, would be flying in five years and would require no subsidy, Wörner said. The programme has failed to deliver on all those counts.
Last autumn ESA member states agreed to inject a further €1bn, on top of an estimated €4bn development cost, to enable Ariane 6 to compete with SpaceX.
Some experts defend Europe’s decision to reject reuseability in favour of an expendable launcher with a highly flexible upper stage that can take satellites to different orbits on a single mission. A reusable rocket would have required significant, sustained demand that was not available, they say.
“It was the right decision,” said Linares. “It’s true that if you reuse the first stage . . . normally you lower the cost. But it depends on how many times you are able to launch.”
Yet even for a conventional rocket, demand matters and Ariane 6 enters a tougher commercial market than its predecessor.
Over the next decade the US will launch roughly three times as many satellites as Europe for governments, universities and other institutions, and almost 10 times as many commercial spacecraft, according to analysts Novaspace. The Pentagon, Nasa and Musk’s own Starlink satellite broadband service are likely to turn to SpaceX before Ariane.
Meanwhile, a rash of launcher start-ups around the world are eyeing the booming market for satellite services from low Earth orbit.
“Ariane previously launched two non-institutional satellites for every institutional satellite. But today new launchers are capturing that demand,” said Pierre Lionnet, head of research at trade body ASD-Eurospace.
Novaspace estimates that some 2,800 satellites will be launched annually to 2033. Much of that business will be covered by domestic launchers, but Linares believes enough will still be open to competition — and Ariane’s flexibility will be an advantage.
Ariane 6 is already booked for 30 launches, including 18 for Amazon’s forthcoming Project Kuiper broadband constellation. Customers want a diversity of launch providers beyond SpaceX, Linares said.
But even those involved in the European programme admit the system that produced Ariane 6 — which awards supply contracts by nationality rather than competitiveness — will have to change. This year ESA launched a competition for the development of small commercial launchers, from which it will buy services.
The move was an “electroshock” to the corporate and political complacency that had hindered Ariane 6, one insider said.
Still, the hefty price tag of a heavy-lift rocket means Europe cannot avoid collaboration and compromise, which may further hamper competitiveness.
“I am not convinced that in Europe we will be able to offer launch services at prices as low as SpaceX,” said Carine Leveau, head of space transportation systems at CNES. “But we can be more competitive than we are today and more than we will be with Ariane 6.”
For now however, the priority is ensuring Europe’s access to space. “It is very important that this inaugural flight is a success,” she added. “It will reassure everyone.”
Swiss buyout firm Partners Group lands deal for stake in €900mn biotech
Sale of most of FairJourney Biologics means London-based owner GHO Capital realises close to 10-fold return
Swiss buyout fund Partners Group has bought a majority stake in FairJourney Biologics, a biotechnology company that has helped to discover novel antibody treatments for drugmakers including Johnson & Johnson, valuing the business at about €900mn.
London-based healthcare investor GHO Capital, the company’s owner since 2020, would retain a minority shareholding in the contract research organisation alongside its founder António Parada, according to people familiar with the matter.
The sale marks the biggest exit in GHO’s history, with the private equity group generating close to a 10-fold return after it bought a majority stake in FairJourney for just over €50mn four years ago, according to PitchBook.
Earlier this month, Partners, which had $147bn of assets under management at the end of last year, closed a $15.4bn fund, its largest yet, with a mandate to invest in four sectors, including healthcare.
FairJourney, whose labs are based in the Portuguese city of Porto and Cambridge in the UK, has contributed to the research behind 14 antibody treatments being studied in clinical trials to treat diseases such as cancer and autoimmune disorders.
Its earnings before interest, taxes, depreciation and amortisation were expected to reach €44mn, up from €10mn in 2020 when GHO bought a stake in the company, according to people familiar with the matter. Group revenues are projected to reach €79mn this year.
The deal follows a competitive auction process, with Partners swooping in at the last minute to outbid rival private equity investors. Private equity funds have stepped up investment in pharmaceutical services in recent years as pharma groups have divested manufacturing facilities and research and development assets, and leaned on outsourcers to reduce costs.
Buyout groups also favour pharma services as they benefit from R&D spending without exposing themselves to the risks of drug development. Earlier this year, Blackstone struck a $750mn deal to help fund development of Moderna’s flu vaccines.
Last year, a consortium of investors led by Elliott Management bought drug research outsourcer Syneos Health for $7.1bn including debt, while Advent International and Warburg Pincus bought Simtra, the contract drug manufacturer spun out of Baxter International, for $4.2bn.
Partners has invested billions of dollars in the healthcare and life sciences sector in recent years. The buyout fund bought Greece-based generics manufacturer Pharmathen in 2021 for €1.6bn including debt and last year invested alongside GHO in drug manufacturing outsourcer Sterling Pharma Solutions.
The Partners investment was led by Pascal Noth, head of European healthcare and life sciences at the fund. JPMorgan advised GHO on the deal. GHO said the investment from Partners would “further broaden FairJourney’s innovative offering, whilst maintaining its leading position in the space”. Partners did not immediately respond to a request for comment while JPMorgan declined to comment.
FairJourney has a partnership with Argenx, one of Europe’s largest biotechs, to discover new antibody treatments. It has also worked on drug development for US pharma company J&J and Danish biotech group Genmab.
Germany’s AfD rules out Brussels deal with France’s Le Pen
Alice Weidel has ‘no hard feelings’ towards erstwhile ally and hopes Le Pen’s party tops French poll
The leader of the far-right Alternative for Germany has little hope of healing the party’s rift with France’s Marine Le Pen but is confident of finding new allies and ending the AfD’s isolation in Europe, she said.
Alice Weidel told the Financial Times that the AfD was “looking for new partners and trying to form our own group” in the European parliament. Working with the Rassemblement National party was now “out of the question”, she said, although she had “no hard feelings” towards Le Pen.
She is “keeping her fingers crossed” that the RN will win the French parliamentary election — the first round is being held on Sunday — and that its leader Jordan Bardella will become “France’s youngest prime minister”. “That would be a wonderful result,” she said.
Weidel was speaking shortly after being re-elected as AfD co-leader at the party’s annual conference in the west German city of Essen this weekend.
The event was overshadowed by mass protests as thousands of Germans converged on Essen to express their opposition to a party they see as pro-Russian, xenophobic and anti-democratic.
Organisers said some 70,000 people took part in the protests. Angry demonstrators sought to prevent AfD delegates and journalists from entering the conference venue. Local media said two policemen were attacked and injured as they tried to escort a politician through a group of protesters.
Although it has been designated a suspected extreme rightwing organisation by German domestic intelligence, the AfD is the most successful far-right party in Germany since the Second World War. It scored 15.9 per cent in this month’s European elections, its best ever result in a nationwide vote.
But for months it has been dogged by controversy. Late last year it emerged that party functionaries had met with a notorious white supremacist ideologue to discuss plans to deport millions of foreigners, even those with German passports. That triggered huge demonstrations against the far-right in dozens of German towns and cities.
Its leading candidate for the European elections became embroiled in a series of scandals. Maximilian Krah, an MEP, faced questions about his ties to China after one of his staffers was arrested on suspicion of spying for Beijing. Then he sparked outrage by saying that not everyone who served in the SS, the paramilitary organisation central to Adolf Hitler’s Nazi regime, was a criminal.
In response, Le Pen’s Rassemblement National kicked the AfD out of “Identity and Democracy”, a far-right grouping in the European parliament, saying it could no longer work with its erstwhile German ally.
Weidel acknowledged that the SS interview was “the straw that broke the camel’s back”. “The frustration with our party just became too great,” she said.
She added that Krah’s gaffes and legal problems were one reason why the AfD had not done as well as many had predicted in the European elections. Late last year it was polling at 23 to 24 per cent, way ahead of all the parties in chancellor Olaf Scholz’s three-way coalition.
In her speech to the conference, she admitted the campaign had been “turbulent”. “It was a bumpy ride, we had some God-almighty rows,” she told delegates.
Her co-leader Tino Chrupalla said that in future the party “must look a lot more closely” at its candidates.
Weidel told the FT that frustration within her party about the conduct of the campaign was one of the reasons why she was re-elected leader with only 80 per cent of the vote, compared to 83 per cent for Chrupalla.
She said the party must “accept” its exclusion from ID, adding there was “no way back” into the grouping. But it remains on friendly terms with two parties in ID: Austria’s FPÖ and the Vlaams Belang of Belgium.
She said her “favoured scenario” would be for Le Pen’s party to leave ID and form a new group, possibly with Viktor Orbán’s Fidesz and Matteo Salvini’s Lega. That would provide the AfD with the opportunity to resume co-operation with the parties left behind in the ID.
She said the AfD would not form an alliance with other far-right parties in the parliament “just to be in a group”. “In that case we’d prefer to just stay on our own,” she said.
In a speech to the conference she set out her conditions for co-operation with other parties. They would have to accept that the AfD was opposed to the “redistribution of taxpayers’ money to Europe’s indebted states” and “our national wealth being chucked out of the window for Europe’s von der Leyens and Melonis”.
Potential partners would also have to accept that “Ukraine doesn’t belong to the EU and doesn’t belong to Europe”, she said.
SEC Sues Consensys For Violating Securities Law
The U.S. Securities and Exchange Commission filed a lawsuit against ethereum software firm Consensys over its popular crypto wallet MetaMask, alleging it acted as an unregistered securities broker.
The agency alleged MetaMask’s services violated securities laws by allowing users to buy and sell crypto securities assets and pledge tokens in exchange for earning yield. In a statement, Consensys said it is “confident in our position that the SEC has not been granted authority to regulate software interfaces like MetaMask.”
In April, Consensys sued SEC, seeking confirming that ether is not a security, and that it didn’t violate securities laws by providing MetaMask product.
Fame, Feud and Fortune: Inside Billionaire Alexandr Wang’s Relentless Rise in Silicon Valley
The Scale AI co-founder has turned AI grunt work into a thriving business while hotly pursuing a place among the tech elite.
In January 2021, Alexandr Wang’s friends and colleagues gathered for a party at his swank South of Market apartment, which featured a 2,000-foot private terrace with a hot tub and views of the San Francisco skyline. Wang, co-founder and CEO of Scale AI, wanted to mark his birthday with a bang: He was turning 24.
Wang had spent the holidays with his family in his native New Mexico and returned to San Francisco to celebrate with the clan he had formed in the city, many of whom belonged to Silicon Valley’s most elite circles. The party’s attendees included Sam Altman, OpenAI’s CEO and co-founder, who lived with Wang at the apartment for several months during the pandemic. While others were reveling, Altman sat at his desk working for a portion of the party, one attendee recalled.
In the years since, Wang, who declined to comment for this story, has further cemented himself in the upper echelons of Silicon Valley, partly through his knack for getting into the right rooms and securing the high-powered connections that can propel a young founder’s fortunes.
His climb underscores how interwoven those ties can become: OpenAI, for example, is an important customer of Scale, which supplies AI companies with contract workers to fine-tune their data. Last fall, Altman and Wang actually discussed the prospect of OpenAI buying Scale, according to a person informed about the talks, though the deal never reached a formal stage.
Instead, Wang kept Scale independent and raised $1 billion over the course of several months, with Scale at a $13.8 billion valuation. Thanks partly to Scale’s deals with OpenAI, revenue is booming, and Scale has forecast more than $1 billion in sales this year, catapulting it to the top ranks of generative AI companies by sales.
For the most part, those sales come from what amounts to AI grunt work: Scale employs a vast but relatively low-paid workforce to label and train the data that underpin the AI systems developed by Scale’s customers, including OpenAI, Meta Platforms and Alphabet. They rely on Scale contractors to push their AI products toward creating more human-like responses; the contractors teach the AI by writing their own responses to questions submitted to chatbots.
Over the past eight years, Wang has successfully steered Scale in whatever direction AI was leaning. In the process, he has proven himself a crafty opportunist, shifting Scale toward fresh pools of revenue when old ones dried up. His nimbleness comes from considerable careful study.
“I don’t think he figured out where the world is going by sitting in his bedroom and thinking about it. He spends time with the right people. He gathers a lot of data on where the world is going and can reorient the business around it,” one Scale investor told me.
Wang has also become a polarizing figure in Silicon Valley, as my conversations with more than 30 people who know him make apparent. At times, he has overpromised investors and customers about Scale’s potential, and according to some people who have worked with him, he’s a controlling boss.
For example, even though mutual funds now commonly invest in tech startups, Wang wouldn’t allow any such funds to invest in Scale’s latest round, since they would eventually publicly disclose their private valuations of the startup—information that could embarrass Wang if the numbers began to decline. Internally, Wang has frustrated some staff with his need to approve every hire, even as the company has grown past 800 full-time employees.
Part of his polarizing reputation also comes from the fact that Wang holds grudges. Unhappy with high staff turnover amid intense industrywide competition for AI workers, he has prevented ex-employees from selling shares in an upcoming secondary offering—forcing them to continue waiting to sell their illiquid stock.
Wang also has complained privately that Scale’s rising valuation has made his spurned co-founder, Lucy Guo, much wealthier thanks to the hundreds of millions of dollars of Scale shares she still holds. (A Scale spokesperson denied Wang said this.)
Wang, now 27, is likely to have a long career ahead of him. The tech titans who seem like they have been around Silicon Valley forever were barely getting started at that age. Elon Musk wasn’t yet working at PayPal, Marc Andreessen hadn’t sold Netscape to AOL, Vinod Khosla hadn’t even started Sun Microsystems and Altman wasn’t yet president of Y Combinator.
When I discussed Wang and his relentless scramble to the top of Silicon Valley with a fellow founder who knows him well, the founder described Wang as someone who “needed success like he needed oxygen.”
Wang certainly isn’t shy about expressing his ambition. In an internal Scale database that includes employees’ profiles and icebreaker questions for people to ask their colleagues, Wang has written: “Ask me how to turn Scale into a $100 billion company.”
To the public, Wang presents a curated version of his world and life, one that shows him embracing celebrity and social access.
On his publicly accessible Instagram, he has nearly a million followers. Over roughly the past year, Wang treated his audience to mirror selfies from the Met Gala; photos with famous friends such as actor Kiernan Shipka; and candid shots with the young, rich and famous in tech, including Altman, Brex co-founder Henrique Dubugras and Figma founder Dylan Field. (Don’t bother looking for the photos—Wang recently appeared to set many of them to private.)
When Wang commented on X earlier this year that he had spent the past several years “traveling like crazy,” Altman teased him publicly over the comment. “Truly no one flies in and out to more parties than you,” Altman wrote on X, “it looks like a full time job.”
Inside Scale, employees like to gossip about which startup-investor celebrities Wang is meeting with, a group that has included Orlando Bloom and Jared Leto. His profile rose with a blaring 2022 Forbes headline that heralded him as the world’s youngest self-made billionaire. “Internally, it was, ‘He’s a rock star—he’s our rock star,’” said John Matthews, Scale’s former head of international expansion.
Wang is constantly in motion. In recent months, he has appeared onstage with U.S. army generals in Washington (Scale generates more than $100 million in annual revenue from government contracts) and behind closed doors with government officials in Qatar to pitch Scale’s services. (Qatar, like other countries, has been interested in developing its own large-language models and AI infrastructure.) And in March, Wang hobnobbed at a private conference at the Yellowstone Club ski resort in Montana with Altman, Google billionaire Eric Schmidt and star talent agent Ari Emmanuel.
While he is often one of the youngest in these rooms, Wang sometimes likes to spar with more seasoned tech figures. At the Yellowstone Club, Wang stood up during an AI panel to push back against another speaker, Databricks CEO Ali Ghodsi, who said it would be years before AI models could store an infinite amount of knowledge—a delay that wouldn’t be good for Scale’s customers. No, Wang said, that day was coming soon.
Still, Wang mostly relies more on charm than combativeness. “The first time I met Alex was at a wild dinner in Las Vegas,” recalled Sen. Mark Warner, the Democratic chair of the Senate Select Committee on Intelligence. That was at the 2022 Consumer Electronics Show in Las Vegas at a meal that included celebrity chef José Andrés. (When I pushed for more details on this “wild dinner,” Warner wouldn’t bite: “Note to self: Don’t say to a reporter, ‘It started with an evening in Vegas.’”)
“The kid was pretty impressive,” the senator said. He paused, then edited himself. “Not ‘kid.’ I should say: The guy was impressive.”
To some people who have known Wang the longest, he hasn’t changed all that much since he really was a kid in Los Alamos, N.M., one who liked to jot down startup ideas in a Google Doc during ninth grade and was eager to speak his mind.
“Even when we were kids, if Alex disagreed or had his own view of things, he was never shy of expressing it,” said Scott Wu, his friend since sixth grade, who now runs his own billion-dollar AI startup, Cognition Labs. As teenagers, Wu and Wang initially bonded over their shared love of math competitions.
“Competing was almost our love language,” Wu said.
Wang enjoyed a dizzying number of academic pursuits, including playing the violin and participating in debate tournaments. His parents, who worked as physicists at the Los Alamos National Lab, the birthplace of the atomic bomb, decorated their house with trophies from math, coding and physics competitions that he and his two older siblings won.
It was a demanding childhood, and it left Wang in a permanent “pursuit of excellence almost at all costs,” said his friend Victor Lazarte, a Benchmark venture capitalist. Lazarte described the mentality driving Wang as “How can you push yourself to go as far as you can?”
In high school, Wang raced ahead of his classmates in math and got into Phillips Exeter Academy, the elite New Hampshire boarding school. His parents, however, wanted him to stay in New Mexico, which frustrated Wang, a close high school friend recalled. “He felt he had unfulfilled potential in Los Alamos,” the friend said. Indeed, it seems Wang felt at one remove from his high school classmates. In his senior year book, he quoted singer Fiona Apple: “I stand by everything I’ve ever said, apologies included.” And in the page next to his senior headshot, where some classmates listed their most embarrassing moment, Wang refused, writing: “Nice try, establishment.”
When he applied to colleges, he received a heart-breaking rejection letter from Harvard University but won a spot at the Massachusetts Institute of Technology. Rather than head east immediately, though, 17-year-old Wang went to Silicon Valley, taking coding jobs at Addepar, an investing software startup, and Quora, a question-and-answer site.
Despite his fast start, Wang confessed in a public Quora post at the time that he felt an imposter syndrome: He didn’t really relate to either his older co-workers or the local college students he tried to hang out with. “I fit imperfectly between two worlds,” he wrote.
Wang tried to mitigate the situation by studying the patterns of Silicon Valley startup life as much as he could. He would talk about those rhythms often with Wu, his childhood friend, who had taken an Addepar internship and who roomed with Wang in Mountain View, Calif.
“We’d always talk about different leaders and how different decisions were made: This was right, this is wrong, how this could be done better,” said Wu.
At Quora, Wang struck up a friendship with another young person, Lucy Guo, who was a former Thiel Fellow and worked at Quora as a product designer. They decided to team up.
In 2016, once Wang had dropped out of MIT after a couple semesters, he and Guo tried their hand at building their own startup. They ditched one early half-baked idea, a concept some friends heard them call “ClassPass for clubbing.”
But they got into Y Combinator, which Altman then ran, and worked on another idea, a virtual assistant named Ava. Wang and Guo struck other YC participants as quiet and smart but generally unremarkable. “If you looked back from the first week, they didn’t look like a clear winner of the YC hunger games,” said a fellow YC founder who knew the pair then.
They made a third switch to a project they called Scale API, which would offer software developers “humans on demand” for outsourcing microtasks like image annotations and audio transcription.
Dan Levine, then a 28-year-old investor at Accel, was intrigued, particularly by Wang’s background as a 17-year-old manager of an engineering team at Quora, a startup known for its technical chops. “I thought that was extremely odd,” Levine recalled. Perhaps it was odd, but it was a marker in Wang’s favor nonetheless: Levine wrote a check for Scale before YC Demo Day, surprising other founders in the program.
Afterward, Wang and Guo went to work out of Levine’s Mission District apartment. From there, Wang, Scale’s CEO, helmed a small team of engineers and worked with customers, while Guo worked on operations and design.
One early smart decision: Scale wanted customers to think of it as a provider of critical software infrastructure rather than just another outsourcing firm. It would try to sell its service more to software developers, as Stripe and Twilio had done, rather than to less technical executives.
Much of Scale’s early business came from the boom in autonomous vehicle technology sweeping across Silicon Valley at the time. Companies like Alphabet’s Waymo and General Motors’ Cruise needed to train AI algorithms that would let cars operate on their own, and Scale was in a prime position to help. No other outsourcer had data-labeling capabilities for the type of three-dimensional images generated by the autonomous vehicles’ radars and sensors.
Scale engineers initially built the 3D-labeling product in a couple months for Nuro, an autonomous-delivery startup. Cruise, Waymo and even Apple became Scale customers, too.
By the end of 2017, Scale was employing over 1,000 labelers, largely in the Philippines, a country with a convenient combination of cheap labor and a prevalent videogame culture, which meant the company could find enough people with the high-end computers required to do the work. (On average, contractors earned about $1.50 an hour for 10 hours of work per week, Scale later told investors.)
Scale paid the contractors based on how well they did the work, however, rather than paying an hourly wage, which kept costs down. That also meant contractors often needed to excel to earn a substantial paycheck. The setup was far from perfect. Scale’s system for payouts didn’t always work well, several former employees said, leaving workers with paychecks that were delayed or never came at all.
In San Francisco, Wang’s startup operated from a small South of Market office, with few luxuries. The toilet sometimes broke. Software engineers often had to label tasks themselves to make up for a shortfall in contract workers.
Wang needed more staff as the startup grew. He was a voracious recruiter, often using poker games as a way to meet fellow math-loving and competition-hungry engineers. His unlikely pitch to fresh MIT grads—to throw themselves into solving an unsexy data labeling problem—often landed. But he didn’t always win in poker, sometimes aggressively overplaying his hands, said a friend who has played with him.
Soon Wang had a more serious problem than a malfunctioning toilet: a festering dispute with his co-founder, Guo, which spilled into the view of other employees. Wang grew frustrated with how Guo was running the operations team, a key part of Scale as it set up computer facilities in faraway countries.
Guo, meanwhile, thought Wang wasn’t doing enough to fix problems with contractor payments. She told others at the time she wanted Wang gone and wanted to change the startup’s culture.
But Wang had the upper hand in the fight, given his CEO role and the fact that Levine, the other board member, was on his side. Wang fired Guo in 2018. (“We had a difference of opinion but I am proud of what Scale AI has accomplished,” Guo said in a statement.)
With internal turmoil out of the way, Wang put a lot of his focus on customer relationships. Some early Scale customers like Oscar Beijbom, the machine-learning lead at nuTonomy, a self-driving car startup, remembered Wang as “a larger-than-life person: fast talker, fast thinker.” Scale became the go-to data-labeling provider to autonomous vehicle startups because it offered cheap prices, and because “there was no established really good player,” Beijbom said.
But Beijbom said he found too many mistakes in the company’s data-labeling work. In some images, for example, Scale had labeled a building’s windows as pedestrians. “They weren’t as good as [what] they were selling,” Beijbom said.
Over time, Wang developed a routine for how he liked to run Scale’s all-hands meetings: He wanted each session to end with employees asking him hard-hitting questions. In 2019, one employee asked about poop.
The employee offered a hypothetical to Wang: Would Scale work with a smart toilet company if it meant sending images of feces for contractors to label? It sparked a debate about what kinds of businesses Scale would get into next, two former employees said.
Wang had set some boundaries already. He had avoided pushing Scale into the dark world of content moderation, where some contractors have to look at child porn and death threats. But what about the defense industry? “We will not help build killer robots,” Wang said at the meeting, the two employees recalled.
The conversation about new industries to pursue was timely. Wang wasn’t having trouble raising more money from investors, and in mid-2019, he secured a billion-dollar valuation for Scale in new funding led by Peter Thiel’s Founders Fund, which had previously backed government contractor Palantir.
But Wang needed a fresh source of revenue: The boom in autonomous vehicles was starting to dissipate, and startups like automated shuttle service Drive.ai had sold in fire sales.
At the time, Wang was overoptimistic in his forecasts. In 2019, the company said it would hit $121 million in revenue in 2020, but it only hit about $70 million, according to investor presentations.
To fill the gap between expectations and reality, Wang headed to Capitol Hill to secure new revenue, which meant abandoning his vow to avoid working with defense clients. In 2020, Scale won a $90 million, five-year contract to help the Department of Defense “experiment, develop and iterate on high-quality annotated datasets for artificial intelligence,” the agency said. The next year, the San Francisco startup hired a small team in Washington.
Some employees didn’t celebrate the win, said Matthews, the former Scale employee. They sent in questions about the contract during an all-hands meeting. Wang dismissed their concerns. Of course Scale would continue work with the defense industry, he said. “He seemed unbothered by their opinions,” Matthews said.
Eventually, a far greater source of revenue quickly emerged back in Silicon Valley: the explosion in generative AI companies. By 2019, OpenAI had become a Scale customer, and Scale engineers worked with OpenAI to incorporate human feedback into how it trained its AI models.
When ChatGPT’s splashy debut in November 2022 set off a surge of investment in AI across tech, Wang changed Scale’s business substantially—dropping some of the cheap overseas worker outposts and starting to employ people with doctorates, lawyers and doctors who could help LLMs actually spit out humanlike responses.
Scale needed to remake many of its software tools as the startup shifted from labeling imagery for autonomous vehicles to training AI models. It also needed to improve its payment software for contractors, many of whom were now working out of wealthier countries.
In addition to working with OpenAI, Wang scored contracts with Meta and Alphabet, and Scale’s revenue spiked, going from an annual pace of $227 million in 2022 to $680 million the next year. The growth came at a cost: For the year, Scale’s gross margins had fallen to 49% from 59%—partly the result of those higher-paid contractors.
Eager to keep the party going, Wang set out at the beginning of this year to raise more funding at a $14 billion valuation, nearly double the previous number. Some prospective investors Wang approached had doubts about whether Scale deserved such a price tag: Its revenue seemed highly concentrated, with only a handful of big customers. And if AI turned out to be a short-lived mania, the contracts would fade quickly, as those from autonomous vehicle clients had done previously.
Wang pitched impressive numbers and bold forecasts: 206% revenue growth for 2024 and profits, at least on an adjusted basis. He compared Scale to Nvidia, saying his startup could match the older giant’s revenue growth and gross margins. And he boasted about having already won over major firms like Meta and OpenAI as customers.
Wang’s talk wasn’t enough to sway some wary investors. It took him several months to close the round. The investor that ended up leading the round was one of Wang’s earliest believers and backers: Accel.
With the new cash, Scale still has a substantial amount of growing up to do, and some current investors don’t think it’s particularly close to going public.
It needs to build out a larger, more experienced sales force to sell AI apps to banks and insurance companies, prospective investors said. To reach an IPO, it will likely need to strengthen its corporate governance by adding more directors who have no ties to Wang.
Right now, Scale’s board consists of just four people: Wang; his close friend, Plaid co-founder Will Hockey; and two longtime Scale investors, Accel’s Levine and Index Ventures’ Mike Volpi. Plus, an inconsistent workflow and buggy systems have turned off contractors who’ve worked for Scale on projects for OpenAI and Google.
While AI mania has meant an influx in sales, it has also led Wang to fret recently about falling behind in the scrum for hiring top employees. The company’s Glassdoor reviews are more negative than those of many of its startup peers, for instance. It has a 3.5 rating, significantly lower than startups such as OpenAI (4.3) and Figma (4.4).
To differentiate Scale from competitors like OpenAI and Anthropic, Wang recently went full provocateur.
Earlier this month, he made a public promise on X to hire future staffers like software engineers and operations leaders based on “merit, excellence and intelligence,” an implicit critique of the hiring initiatives based on diversity, equity and inclusion many in liberal Silicon Valley favor. (OpenAI and Anthropic are widely seen as having left-leaning workforces.) This pledge—part of Wang’s unending campaign to expand his profile—won him praise from the billionaire right, including props from Elon Musk, Palmer Luckey and Wall Streeter Bill Ackman.
He meditated on his relationship with the public and the press in a recent interview with investor Harry Stebbings on the latter’s founder-friendly podcast, “20VC.” “I received more fair treatment testifying in front of Congress than I have from various media outlets over the years,” Wang lamented.
In the conversation, he and Stebbings discussed how founders become inextricably tied to their startups. “If you look at the amount of times Sam Altman trends versus the amount of times OpenAI trends, it is disproportionately higher for Sam Altman,” Stebbings said. “People now more than ever love the cult of personality.”
Wang agreed with the assessment. “Fascinating,” he said. “It probably speaks to a deep human need.”
Barron’s Weekend Summary: Jin Wang has experienced significant success in day trading by betting on intraday moves in the S&P 500 index
Cover:
-Jin Wang, a software product manager in Houston, has experienced significant success in day trading by betting on intraday moves in the S&P 500 index. Wang used a strategy called "zero days to expiration" (0DTE), which accounts for nearly half of the daily volume of S&P 500 index options, up from 17% in 2020. 0DTE options offer rare, lottery-like payoffs, with a highly volatile day potentially generating at least a 20% gain. However, traders who aren't quick to lock in gains can lose their entire position before the day's end. Hedging erodes potential gains, adds more costs, and is difficult to execute efficiently. Currently, 0DTE options are limited to major indexes and related ETFs, but brokers and exchanges are in discussions about expanding 0DTE to individual stocks, likely megacaps like Apple and Nvidia. The rise of 0DTE options has not coincided with a spike in volatility, and while volumes have soared, the "0-day space remains well-balanced," according to BofA Securities.
Interview:
-Blake Haxton, a credit analyst at Brandywine Global and a Paralympic athlete, persevered despite suffering a severe bacterial infection and nearly losing his life in high school. He underwent over 20 surgeries, including amputating his legs, to save his life. Now 33, Haxton is part of the Franklin Resources investment boutique team managing the top-performing Brandywine Global High Yield fund and is preparing to represent the U.S. in canoeing. His journey demonstrates the importance of overcoming challenges in investing.
Tech Trader:
-it’s not the usual tech Trader column this week. Eric J. Savitz, who has been running it for the past few years, will be leaving Barron’s. Before leaving, he’s distilled his 40-year experience in technology and innovation for investors to use as guidance in understanding what makes for successful technology investing. He explains that the next great thing often doesn't make much sense, but it always makes for fantastic copy. Savitz cites examples such as 3-D televisions, the metaverse, virtual and augmented reality, 3-D printing, personal drones, cryptocurrency, blockchains, NFTs, Web3, fake meat, legal marijuana, Segways, Quibi, and Napster. He also mentions the rise and fall of Flip camcorders, MoviePass, SecondLife, Hyperloop, WeWork, Jawbone, Webvan, Juicero, nanotech, superconductors, Theranos, Solyndra, SPACs, and direct stock listings.
Savitz emphasizes the importance of being skeptical but not cynical when experimenting with technology. He advises being open to new ideas but not getting sucked into nonsense and tamping down on FOMO. While some of the things on his list were obvious losers, such as 3-D TVs, he emphasizes the importance of trusting common sense and ignoring marketing blather.
The Trader:
-The stock market has been hitting new highs, but most stocks are struggling. Even news that would usually move stocks is not doing the trick, indicating that equities won't be an exciting place to invest in a while. The market is lacking participation, and the market is not responding to a benign inflation report on Friday. The personal consumption expenditures index rose 2.6% year over year in May, sending the two-year Treasury yield down to as low as 4.67% from 4.74% the previous week. However, the S&P 500 gained just 0.1% Friday, as the market turns from focusing on interest rates to worrying about economic growth. This could keep investors in Big Tech, particularly the Magnificent Seven, as their growth doesn't rest on the economy as much as it does on bigger themes such as artificial intelligence. Lower rates make future profits more valuable.
-How to trade Nvidia? Nvidia stock has dropped 17% from its intraday peak of $140 to Monday's low of $116, and is still down 10% after Tuesday's rally. The stock's decline is not due to a catalyst, as the company has not announced any news or guidance. However, Nvidia stock was overextended, reaching 37% above its 50-day moving average at its peak on June 18. When the stock starts falling, it could easily drop all the way to its 50-day moving average, now at $102.29. This suggests the stock could fall another 19% before finding its footing. However, Nvidia will find its footing as long as its financials hold up. Analysts expect sales to hit about $115B this year and to grow at about 25% annually from the end of 2024 through 2026, reaching $183B. Artificial intelligence requires more chips, which carry higher prices and higher gross profit margins, resulting in earnings increasing 27% annually through 2026, ultimately reaching $4.13 a share.
Features:
-President Joe Biden's presidential debate against former President Donald Trump has sparked concerns about his age and fragility among voters. With over two-thirds of the electorate unhappy with either Trump or Biden, policy strategists are trying to determine whether and how the Democratic ticket could change. Biden hasn't indicated any changes, but strategists are handicapping the possibilities. Any changes aren't immediate due to a host of developments in the next two weeks, including Trump's sentencing related to his criminal convictions and his vice presidential pick. Democrats will need to decide by mid-August at the latest and go into the convention with a plan and potential successor to Biden by mid-August. The shortlist of possible replacements is led by Vice President Kamala Harris, California Gov. Gavin Newsom, Commerce Secretary Gina Raimondo, Michigan Gov. Gretchen Whitmer, and Mitch Landrieu, Biden campaign co-chair and administration's former infrastructure adviser. Rep. James Clyburn, who was critical in helping Biden win South Carolina, is critical to any replacement discussion.
-France's potential election of a party with a fringe political stance is raising fears in Europe. President Emmanuel Macron's party's poor performance in a European Union parliament vote led to snap elections, prompting him to call for more extreme policies. The risks are that the parties could push through unfriendly policies, such as curbing immigration and increasing government spending, which could increase inflation. Paris's CAC 40 stock index has fallen 9% since May 15, wiping out over $200B of its market value. European investment manager Phil Macartney warns that markets dislike uncertainty and elections are complicated, but large macro bets on large geographic areas can lead to disastrous results. France's economy is improving, with the International Monetary Fund predicting growth to accelerate to 1.3% next year. Inflation is expected to slow, and the European Central Bank has started cutting interest rates, supporting expansion. France could be a valuable investment destination as the election unfolds. Companies with strong prospects, such as Rémy Cointreau, LVMH, and Schneider Electric, are trading at a discount. These stocks have dropped between 4% and 12% in the past month, with Rémy Cointreau experiencing a 33% drop. Diversifying from the U.S. and taking advantage of political turmoil elsewhere could be beneficial.
Europe:
-The US dollar could be the immediate winner of European elections, especially if the voting results in a hung government. Market tremors have already occurred around the French parliamentary elections, with strategists expecting more disruptions, especially if the vote ends in a hung government. This could create a temporary flight-to-safety into U.S. Treasuries and drive more dollar strength against the euro. The U.K. parliamentary election on July 4 is expected to see the Labour Party oust Conservative rule, with a more focused approach to dealing with the country's structural economic issues. France's election is expected to be more disruptive, with the far-right Rassemblement National leading in polls.
Emerging Markets:
-No update
Commodities:
-Gold prices have risen by nearly 14% this year and are nearing a record high. However, due to geopolitical conflicts and expectations for a Federal Reserve rate cut, financial advisors recommend adding more gold to portfolios. Nearly 30% of the 400 financial advisors surveyed plan to increase their gold allocation over the next 12-18 months, with nearly two-thirds expecting to keep their gold investments steady. Less than 10% will reduce their gold exposure. Experts do not recommend overdoing gold exposure, with 56% having only 1% to 4.9% of their assets allocated to the metal. Most advisors own gold through physically backed gold exchange-traded funds, gold miner stock ETFs, and gold mutual funds. Gold typically performs well during times of turmoil, as it is a safe haven with a finite supply.
Streetwise:
-Canned soup has seen a decline in investment interest due to a shift in consumer preferences. Young consumers prefer digitally ordered burritos and families prefer scratch cooking. The best case for Big Soup is a casserole recipe that calls for a can of broth, but single-serve, ready-to-eat varieties are out of favor. Campbell Soup, a company that traces its roots back to the Civil War, has seen its stock gain popularity. Despite being one of the least loved names on Wall Street, five in 24 analysts are now bullish, and investment bank D.A. Davidson initiated coverage at Buy back in February. J.P. Morgan recently upgraded Campbell to Overweight for the first time in 15 years, with analysts focusing on the potential for a newly acquired sauce brand called Rao's. Campbell has made several significant acquisitions, including Franco American canned pasta, V-8 vegetable juices, Pepperidge Farms breads and snacks, Pacific Foods for organic soups, and Snyder's-Lance snacks. In 2019, a new CEO took over the company.