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Auction houses aim to lure Asia’s ultra-rich with new openings

Bonhams, Christie’s, Phillips and Sotheby’s open Hong Kong headquarters and expand exhibition spaces and sales

The world’s top auction houses are looking to the ultra-rich to defy an economic slowdown in China and boost their Asian sales, as they open new headquarters and exhibition spaces in Hong Kong and unveil an amped-up sales schedule.

The 250-year-old auction house Christie’s will move its regional headquarters to a 50,000 sq ft site in Hong Kong’s new Henderson skyscraper in September. It hopes to increase the volume of items sold in Asia by hosting a year-round schedule of auctions there.

Rival Sotheby’s unveiled a new retail site in the heart of Hong Kong’s business district in July, and has moved to new offices in the city. Bonhams, another of the world’s top auction houses, will open its new Hong Kong headquarters in September, while Phillips occupied a new site last year.

The moves come despite a slowdown in the global art market, drastically weaker luxury spending in China and dented growth prospects in the country.

Sales of art at Hong Kong evening sales, which refer to the most prominent auctions, fell 40 per cent by value in the first six months of this year compared with a year earlier, hitting their lowest level since 2017, according to research group ArtTactic.

China’s economy eked out growth of 4.7 per cent in the second quarter of this year, below estimates, and has been struggling with persistently weak consumption, with some analysts cautioning this would affect the art and luxury industries.

Francis Belin, Christie’s president for Asia, disagrees. “[Overall] Luxury numbers are not great in China . . . but our aggregate numbers, I don’t think, reflect the macro,” he said, adding that clients in the region — 80 per cent of whom come from mainland China, Taiwan or Hong Kong — were concentrated at the ultra-high end, largely insulating them from any economic slowdown.

“To buy the objects that we sell, you don’t need just to have money, you need to have a lot of money . . . it’s a very small pool.”

Asians accounted for 41 per cent of buyers in the company’s luxury sales in the first half.

The rarer objects sold by the auction house were more likely to exhibit a “de-correlation” to negative macroeconomic events, he maintained.

“What happens in China, consumption is weak . . . [But] is a rare object a way for you to keep your money as opposed to real estate or bonds or stocks? . . . I think so.”

Nonetheless, Asian buyers’ contribution to Christie’s total auction sales fell from 39 per cent in mid-2021, when the company announced its plan to move to the new site, to 21 per cent in the first six months of this year.

The company’s recent sales for 21st century art in Hong Kong fell short of their low estimate, while sales of 20th century art were just in line.

But Belin said only about half of Asian clients’ spending at Christie’s typically occurred in Hong Kong, meaning that there was still untapped demand to bring more sales to the city.

“We have consistently seen Asian collectors be more active overseas . . . than they could be actually in Hong Kong,” he said.

Rival auction group Sotheby’s, which has also struggled with slowing global auction sales and job cuts in recent months, began a foray into Asian retail last month. The two-storey “maison” it opened in a mall in Hong Kong’s Central district will sell rare books, paintings and sculptures ranging from HK$5,000 (US$640) to HK$50mn.

“On the prospects of China ultra-high net worth, we see still at the very top end of the market . . . some very, very high ticket prices from Chinese collectors,” Nathan Drahi, managing director for Sotheby’s Asia, said at the opening, adding that more than a third of buyers at the company’s recent New York auctions came from Asia. “We believe in the long-term prospects . . . of that market.”

But Meg Maggio, a Hong Kong-based art adviser and global managing director of Pearl Lam Galleries, said that while she saw underlying strength in the arts and luxury sectors, the expansion came at a “skittish” time for the market given rising geopolitical uncertainty and “fierce” competition.

“The challenge is: are there going to be too many auctions and too many auction house activities in Hong Kong? Are they saturating the market?” she asked.

The mysterious appeal of the superyacht summer

What better way for the mega-rich to show off their powers than to corral famous people on board and hold them captive for sport?

I wonder if the Beckhams suffer from the pruney, shrivelled fingers that come from bathing in briny waters? How Kevin Costner keeps his white shorts so sparkly. And whether Beyoncé experiences that unique discomfort that develops while sitting in one’s soggy bikini bottoms for too long? 

These are just some of the questions I ask while admiring the 0.1 per cent aboard their boats each summer. For many, the season is initiated by the lengthening of hours in a day, or the beginning of the school recess. For me, the start of summer is marked by the first paparazzi images to emerge of the actor and climate activist Leonardo DiCaprio cruising in the sun.

No one enjoys, nor lives the superyacht summer so completely as DiCaprio: the usually reclusive 49-year-old seems to come alive the moment he sets foot aboard the deck. At a time when the news cycle is ordinarily sluggish, I am endlessly entertained by DiCaprio’s life of leisure, whose chief entertainments include gambolling through the waves astride a jet ski (no carbon footprint there eh, Leo?) and keeping in proximity to whichever supermodel’s derrière he has deigned to squire this year. 

His current squeeze appears to be the brunette Italian model Vittoria Ceretti (keep up, guys) who, at 26 years old, is thought to be the first girlfriend he has engaged beyond the quarter-century mark. I don’t begrudge DiCaprio his instincts. He represents the person — like a young Jack Nicholson — we all aspire to be. He sates every tiny appetite. And embodies the essential creed of not seeming to have a single care. Not for him the petty vanities of six-packs or full body tanning: he just wants to let it all hang out, unleash his inner five-year-old, and plunge gleefully into the sea. 

This summer has found DiCaprio holidaying aboard the yacht Koru, with Jeff Bezos and Lauren Sánchez, to whom Bezos became engaged last year. The world’s second-richest man has afforded DiCaprio some downtime as one of the cluster of celebrities sucked into Bezos’s orbit. Singer Katy Perry and her little Legolas Orlando Bloom have made up the odd sextuplet seen bobbing about Sardinia this past week. 

The Koru took four years to build at the cost of an estimated $500mn. It’s just one of the post-divorce assets Bezos has acquired — along with celebrity acquaintances and ferocious biceps — following his split from MacKenzie Scott in 2019. The 417-foot schooner is said to be an homage to his new beloved, with a busty figurehead at its bow that bears an uncanny likeness to Sánchez. As with his US Vogue shoot, and his too-tight cream trousers, Bezos’ mid-life era acquires another cliché every month.

But whatever. Every billionaire should have a big boat: it’s what being a billionaire is all about. Bernard Arnault’s Symphony boasts interiors by Zuretti, a cinema and grand piano, while the Octopus, built for Microsoft’s Paul Allen, has a large pool, a hangar for two copters and two helipads. Big yachts are, as pointed out by the FT’s unofficial boat correspondent Brendan Greeley, “a terrible asset”. And yet, they remain an almost irresistible indulgence for the super-rich. After all, what better way to boast your superpower credentials than to round up flocks of famous people, get them to take their clothes off, and hold them captive for your sport?

Sadly, the charms of superyachts evade me: I see them only as prisons on the sea. The thought of being moored for days with only bare acquaintances — while wearing a bikini, for God’s sake — strikes me as one of the more appalling ways to spend one’s down time. And that’s before the nagging nausea of all that floating, the persistent threat of drowning or being whacked across the head. All those bloody ropes, all that tack and jibing. And while, yes, I know that superyachts aren’t really boats as I might recognise them, there’s still no escaping that fact that, you know, it’s all quite wet. 

Add to that the bougie cocktail parties, the endless peacocking, plus the dilemma of how to pull off a cocktail dress while having to pad around in deck shoes, or worse, bare feet. I hope Bezos retains a podiatrist aboard the Koru: DiCaprio may be unkempt but he is by no means gnarly, and I need to know someone is attending to his toes.

I envy not these people on their superyacht adventure: examining Bezos’s onshore excursions I feel not one jot of jealousy. I’m just thrilled he’s ponied up for more DiCaprio content. “The king of the world”, forever: our prince of the vacation seas. 

The chair will lay the groundwork for the central bank’s next phase of monetary policy. It will be the highest-stakes event for the economy and markets this fall.

The most consequential event this fall won’t be the U.S. election, a war in the Middle East, or even baseball’s World Series. For most Americans, it will be the first reduction in U.S. interest rates in more than four years. An expected rate cut by the Federal Reserve in mid-September won’t change the price of eggs or businesses’ hiring plans overnight, but it will signal the start of the next phase of the monetary-policy cycle, with important consequences for the economy, financial markets, and consumers.

The most consequential event this fall won’t be the U.S. election, a war in the Middle East, or even baseball’s World Series. For most Americans, it will be the first reduction in U.S. interest rates in more than four years. An expected rate cut by the Federal Reserve in mid-September won’t change the price of eggs or businesses’ hiring plans overnight, but it will signal the start of the next phase of the monetary-policy cycle, with important consequences for the economy, financial markets, and consumers.

If the Fed eases insufficiently in this cycle, the economy could tip into a recession. If it cuts rates too quickly, it could reignite inflation, not to mention a speculative frenzy in the markets. But if Fed Chair Jerome Powell and his colleagues thread the needle just right, the central bank could execute a fabled soft landing that would keep the economy growing at a just-right rate without the threat of recession or pronounced inflation.

There is a decent chance, this time, that the Fed will succeed.

Powell’s keynote address on Aug. 23 at the Fed’s annual Jackson Hole Monetary Policy Symposium will lay the groundwork for the coming shift in rates, spurred by the deceleration of inflation in the past two years toward the central bank’s 2% annual target and policymakers’ desire to get ahead of a softening labor market. Expect Powell to reiterate that the Fed’s decisions are data-dependent, while confirming Fed officials’ dovish stance.

July’s consumer- and producer-price-index readings, released this past week, set the stage for another benign inflation print on Aug. 30, when the government releases last month’s personal consumption expenditures price index, the Fed’s preferred inflation gauge. The year-over-year CPI inflation rate fell to 2.9% last month, the first reading below 3% since the spring of 2021. Recent monthly readings are at a pace that would total 2% or less if they continue for a year.

The jobs and inflation reports for August, to be released in early September, will be the last major economic releases ahead of the Federal Open Market Committee meeting on Sept. 17-18. Markets are betting that the Fed will cut the federal-funds rate by at least 25 basis points, or a quarter of a percentage point, at that meeting, bringing the target range down to 5.00%-5.25%.

The Fed last lowered rates in March 2020, at the start of the Covid-19 pandemic, to a range of 0%-0.25%, before embarking on a hiking cycle in March 2022 to cool inflation, which peaked several months later at 9% year over year. All told, Fed officials raised rates 11 times, to a target range of 5.25%-5.50%, which they have maintained since July 2023.

With a September rate cut all but assured, the debate on Wall Street increasingly is shifting to what the easing cycle will look like thereafter. The Fed’s latest Summary of Economic Projections, released at the conclusion of the FOMC meeting in June, implies a quarter-point cut per quarter through the end of 2026, culminating in a longer-term fed-funds rate of 2.8%. Officials’ next so-called dot plot of rate projections will be released after the September FOMC meeting.

Futures markets are betting on a more aggressive, front-loaded easing cycle. Current pricing implies the greatest odds of a full percentage point of cuts before the end of 2024, followed by another percentage point of cuts in 2025.

Importantly, the path of the rate-cut cycle will depend on why the Fed is cutting. Will it lower interest rates to rescue the economy from a recession, or merely normalize rates that have grown too restrictive? The U.S. economy’s so-called neutral rate of interest—a rate that neither stimulates nor restricts economic activity—would be the end point in the normalization scenario. Economists’ estimates of that unmeasurable rate tend to fall in the 3%-3.5% range today, well above where it is thought to have been in the years preceding Covid.

Interest-rate expectations have been on a roller-coaster ride this year, soaring or swooping with nearly every data release or Fed pronouncement. Expect another loop-the-loop or two before 2024 draws to a close.

In January, futures markets were pricing in more than 1.5 percentage points of rate cuts in ’24, based on the prior quarter’s deceleration in price growth. By the spring, after a series of hot inflation reports, many traders, investors, and even Barron’s saw no likelihood of a rate cut this year. But by August, after interest-rate expectations had taken a few more hairpin turns, tamer inflation readings and evidence of slowing job growth had markets betting on a series of cuts through the fall.

Soft-landing wagers are prevalent on Wall Street, and not without reason.

The economy isn’t in or on the precipice of a recession. Conditions have cooled off from overheated postpandemic levels, but jobs remain plentiful, consumers are spending, and economic output is growing. Real U.S. gross domestic product rose at a 2.8% annualized rate in the second quarter, and the Federal Reserve Bank of Atlanta’s GDPNow estimate puts growth at 2.0% in the third quarter.

As for the labor market, the unemployment rate climbed to 4.3% this July from 3.4% in April 2023. That is still lower than during 75% of months in the current century, and employers continue to add jobs even as the unemployment rate rises. In other words, the recent increase has been driven primarily by the growth of the labor pool, not layoffs.

“I don’t think the labor market in its current state is a likely source of significant inflationary pressures,” Powell said in his post-FOMC news conference on July 31. “So, I would not like to see material further cooling in the labor market.”

That said, the labor market recently gave economists and investors a scare. On Aug. 2, the Bureau of Labor Statistics reported a gain of 114,000 in July’s nonfarm payrolls, far below the past year’s average monthly addition of 215,000 jobs. The uptick in the unemployment rate, from 4.1% in June, triggered the Sahm Rule recession indicator, which posits that a recession has begun once the three-month moving average of the unemployment rate exceeds its low from the prior year by at least half a percentage point. But even Claudia Sahm, the former Fed economist who codified the rule, doesn’t think a downturn is imminent.

“The expansion remains intact, and the job market right now is in a fine place, but in order to keep it there, we think policy restriction needs to be dialed back somewhat,” says Wells Fargo senior economist Sarah House.

Monetary policy famously works with “long and variable lags,” as the economist Milton Friedman said in the 1950s. That is motivating the Fed to get ahead of further labor-market weakness by cutting rates before unemployment spikes further. The Powell Fed was widely panned for being late to hike rates at the front end of the cycle, declaring inflation “transitory.” Presumably, it is keenly aware of the reputational risk of being too late to cut them now.

“It makes sense to take a risk-management approach here,” says Evan Brown, head of multi-asset strategy at UBS Asset Management. “If it turns out they cut rates too soon and we get an inflation acceleration, they can deal with that down the road. But it’s much harder to interrupt the negative spiral of rising unemployment and falling consumer spending if they’re late on that.”

Based on futures market pricing as relayed by the CME FedWatch tool, the odds of a quarter-point rate cut at the September FOMC meeting stood at 73% Friday, although they have fluctuated widely in the past month. Tom Porcelli, chief U.S. economist at PGIM Fixed Income, favors a larger, half-percentage-point cut.

“Fed policy is calibrated for notably higher inflation than we have today,” says Porcelli. “The inflation half of the Fed’s mandate has essentially been met, while the employment side is showing some deterioration. It’s time for them to act.”

Porcelli also argues for a front-loaded cutting cycle. Wells Fargo economists expect half-point cuts at the Fed’s September and November meetings, then another quarter-point reduction in December.

But conditions in the economy and markets would need to deteriorate further for the Fed to deliver a jumbo cut in September. “There are two main paths to a [half point] cut in September,” says Goldman Sachs chief economist Jan Hatzius. “The first is another downside surprise in the next jobs report. The second is renewed sharp tightening in financial conditions and/or a rise in financial stress that creates greater economic risks.”

Hatzius expects the Fed to cut rates by a quarter of a percentage point at all three of its remaining meetings in 2024, as do Morgan Stanley’s chief U.S. economist, Ellen Zentner, and Rick Rieder, BlackRock’s chief investment officer of global fixed income.

A half-point cut in September could be counterproductive, says Antulio Bomfim, head of global macro for the global fixed income team at Northern Trust Asset Management. “It could send a message that policymakers are panicking about the economy, that they are seeing something that we are not, and then it becomes a self-fulfilling, perverse cycle,” he says.

For the real economy, the difference between a quarter-point and half-point reduction in the fed-funds rate in September isn’t make-or-break. But it is psychologically significant in the message it sends to markets and consumers.

Don’t expect a formal plan from the Fed, either at Jackson Hole or subsequently. Rather, rate cuts will be data-dependent, with decisions made on a meeting-by-meeting basis, at least initially. Promising to cut by too much too soon would risk a repeat of the 1970s experience of resurgent inflation after the Fed took its foot off the monetary brakes.

“The joke goes that ‘economists spend half of their time forecasting and the other half of their time explaining why their forecast didn’t work out,’ ” says Bomfim. “It would be really hard for policymakers to provide precise forward guidance in an environment like this, at an inflection point for the economy.”

Richard Bernstein, CEO and CIO of Richard Bernstein Advisors, advocates that the Fed take a wait-and-see approach and delay any rate cuts. He points to rising container shipping rates and still-elevated wage growth as indications that inflation might not be vanquished. “The liquidity junkies on Wall Street have forgotten the role of the central bank,” Bernstein says. “Where, exactly, is the tightening of credit in the financial system? Where is the stress on bank balance sheets? The answer is, it’s nowhere to be seen.”

To be sure, the market has already done some of the Fed’s work on easing. Bond yields, which move inversely to prices, have tumbled since the spring, particularly yields on bonds with shorter maturities. The yield on the two-year U.S. Treasury note has dropped by nearly a percentage point since late April to about 4%, as markets have priced in rate cuts this year and next.

“At the front end of the yield curve, there’s almost no juice left, with [futures] pricing in more than four cuts this year,” says BlackRock’s Rieder. “There isn’t a lot of money left to be made there unless you really think the economy is going to slow dramatically, which I don’t.”

The BlackRock Flexible Income exchange-traded fund (ticker: BINC), which Rieder manages, has a weighted average maturity of five years, in the so-called belly of the yield curve. The $3.7 billion ETF is heavily weighted in high-yield corporate bonds and securitized products such as collateralized loan obligations, where payouts are more attractive and credit risk is modest in a no-recession scenario, Rieder says. It has a 6.5% yield and an average rating of BBB+, in the middle of investment grade.

For equities, a still-expanding economy paired with declining interest rates is as close to a Goldilocks backdrop as investors can get. It would mean more earnings growth for more companies and a boost to valuations from lower yields.

“The equity market tends to cheer on the idea of Fed cutting, but it depends on why the Fed is cutting,” says PGIM’s Porcelli. “If the tone is that they’re cutting because recession risks are rising, that tends not to bode too well for equities.”

Fed officials, economists, and policymakers will descend on Jackson Hole, Wyo., in just a few days to discuss this year’s wonky but unusually relevant symposium theme, “Reassessing the Effectiveness and Transmission of Monetary Policy.”

The coming months could see much more policy evaluation.

Whether the U.S. economy enjoys a soft landing will depend largely on the Fed’s prowess and consumers’ and corporations’ response. As for investors, remember to fasten your safety harness and keep your arms and legs inside the ride at all times.

Le premier ministre démissionnaire suggère que chaque contribuable puisse déterminer l’usage d’une partie de son impôt. Un vieux projet rejeté jusqu’ici par les macronistes.

Comment réconcilier les Français avec l’impôt ? Peut-être en instaurant une forme d’« impôt participatif », qui permettrait à chaque contribuable de déterminer l’usage d’une partie de ce qu’il verse à l’Etat. Telle est du moins l’idée de Gabriel Attal. Le premier ministre démissionnaire mentionne cette proposition dans le « pacte d’action pour les Français » qu’il a transmis le 12 août aux présidents des groupes parlementaires comme base de discussion pour « bâtir des compromis législatifs » et surmonter l’absence de toute majorité dans la nouvelle Assemblée nationale.

Désormais patron des députés macronistes, Gabriel Attal y suggère de donner à chaque contribuable la « possibilité de flécher une partie de son impôt sur le revenu ou une contribution additionnelle sur une mission du budget de l’Etat librement choisie ». L’ancien ministre délégué chargé des comptes publics dans le gouvernement Borne relance ainsi un projet évoqué de longue date, mais rejeté jusqu’ici par son parti.

 C’est une vieille idée libérale, celle de l’impôt volontaire », explique Philippe Juvin, député (Droite républicaine) des Hauts-de-Seine, qui l’avait défendue avec vigueur lors de sa candidature aux primaires de la droite, en 2021. Pour certains libéraux, sceptiques par principe à l’égard des contraintes fixées par l’Etat, l’impôt pourrait être versé de façon volontaire, comme un don, une contribution justifiée pour chacun par son propre intérêt à l’existence de services publics, au maintien de l’ordre, etc. En 1789, la première « contribution patriotique » des révolutionnaires n’était-elle pas censée être versée à titre volontaire ? Son rendement fut très médiocre.

Redonner du sens à la fiscalité

Le philosophe allemand Peter Sloterdijk a ranimé la piste de l’impôt volontaire dans son livre Repenser l’impôt, Pour une éthique du don démocratique (Libella/Maren Sell, 2012). Pour redonner du sens à la fiscalité, il recommandait que les citoyens puissent choisir non pas le montant qu’ils versent, mais au moins à quoi une fraction de cet argent est employée. Exactement ce qu’évoque Gabriel Attal.

Le dispositif n’est techniquement pas impossible. Il existe déjà en Italie avec le « huit pour mille ». Depuis 1986, chaque Italien peut indiquer sur sa déclaration de revenus à quoi il souhaite voir consacré 0,8 % de son impôt : soit à des actions sociales ou humanitaires menées par les pouvoirs publics, soit à l’une des religions qui ont conclu un accord avec l’Etat. Ce système est devenu la principale source de financement des cultes et des activités humanitaires dans la Péninsule.

En France, « le fléchage de l’impôt existe aussi, mais de façon indirecte », relève Pierre Boyer, professeur à Polytechnique et auteur de Peut-on être heureux de payer des impôts ? (PUF). Les contribuables peuvent en effet orienter vers les causes de leur choix une partie de ce qu’ils versent en effectuant des dons partiellement déductibles de l’impôt sur le revenu ou de celui sur la fortune immobilière. Quelque 5,9 milliards d’euros de dons ont ainsi été déclarés à l’administration fiscale par les particuliers et les entreprises pour obtenir une réduction d’impôt en 2021. Le Loto du patrimoine, créé par Stéphane Bern en 2018, constitue aussi une forme d’impôt volontaire, dont les recettes sont affectées à l’entretien de monuments en péril.

L’idée d’un fléchage de l’impôt sur le revenu va plus loin, en permettant à chacun de choisir où va une part de ce qu’il donne directement à l’Etat. A droite, cette piste a séduit des élus comme Eric Woerth, député (Ensemble) de l’Oise, qui évoquait en 2019 l’hypothèse que les contribuables puissent orienter 5 % de leur impôt sur le revenu vers la politique publique de leur choix ou le remboursement de la dette. « Les prélèvements obligatoires ont tant augmenté qu’un jour les gens vont refuser de payer, appuie Philippe Juvin. Donc, soit on baisse les impôts, soit on trouve des innovations de ce type. » Au passage, ajoute-t-il, ce système peut pousser les élus à mieux tenir compte du point de vue des contribuables : « Imaginez que tout le monde veuille financer une action A, personne une action B. Quelle sera la légitimité de l’action B ? »

« Faire de la pédagogie »

A gauche, ce fléchage a aussi trouvé des défenseurs, dont les socialistes André Urban et Christine Pirès Beaune. Députée (PS) du Puy-de-Dôme, celle-ci a tenté en 2023 de faire voter par l’Assemblée ce qu’elle appelle un « budget participatif », donnant à chacun la possibilité de choisir l’affectation de 5 % de ce dont il s’acquitte. « Le but est de faire de la pédagogie et, surtout, de renforcer le consentement à l’impôt, qui s’est malheureusement beaucoup étiolé ces dernières années », plaidait-elle.

Un amendement alors balayé par la majorité, en particulier par les élus macronistes. Leurs arguments ? D’abord, c’est au Parlement, et non à tout un chacun, de décider ce que l’Etat doit faire de l’argent public. « Si l’on introduit le principe selon lequel 5 % d’un impôt a vocation à financer des projets selon le bon vouloir de nos concitoyens, on mettra à mal la démocratie représentative », avait déclaré Mathieu Lefèvre, député (Ensemble) du Val-de-Marne, « très défavorable à cette mesure ».

Certains redoutaient ensuite que ce mécanisme ne favorise les missions de l’Etat à l’image la plus positive, au détriment d’autres, indispensables mais moins cotées. « Je crains que la possibilité de choisir telle ou telle cause n’en vienne à porter atteinte aux politiques publiques », s’était alarmé Jean-René Cazeneuve (Ensemble), alors rapporteur général du budget.

Autre problème, un tel schéma permettrait à ceux qui gagnent assez d’argent pour payer l’impôt de peser sur les actions de l’Etat, en écartant les plus pauvres. Une sorte de suffrage censitaire, donc.

Jusqu’à présent, ces obstacles avaient suffi à bloquer toute tentative de fléchage de l’impôt. Mais Gabriel Attal, qui, lorsqu’il était au budget, avait lancé une consultation sans lendemain appelée « En avoir pour mes impôts », n’a visiblement pas oublié que cette idée avait des soutiens à droite comme à gauche. Une condition inévitable alors que l’Assemblée est fragmentée comme jamais.

Snowflake shone bright in the last tech epoch. Keeping up with the AI boom falls to Sridhar Ramaswamy, an exacting ex-Googler.

Sridhar Ramaswamy seldom takes a day off. He prefers to work seven days a week, putting in a “non-small number of hours” on the weekend, he said, usually in the morning before his wife, a dentist, wakes up and then again in the afternoon.

“Listen, I’m from India: We’re always very insecure. I can’t sit around and not do anything,” he said. “I like to work.”

As the new CEO of Snowflake, a struggling data and software company that epitomized the last tech era’s cloud boom, he has sought to shake up the place and has dispensed with some parts of the looser management style favored by his predecessor, Frank Slootman. One basic change: Slootman preferred to operate from his Montana house. Ramaswamy has a fourth-floor desk next to other engineers in the company’s San Mateo, Calif., office.

Another difference between the two: Whereas Slootman might’ve tasked an executive with a project and anticipated a summary several months later, Ramaswamy expects his reports to keep him in the loop. “I don’t want to dampen creativity,” he said. “But I also don’t want it to be the case that I disagree with a premise, someone works on it for three weeks and then on slide one, I go, ‘This is a disaster!’”

Ramaswamy’s reply to someone who chafes under the expectations? “For the really recalcitrant ones: Trust is earned,” he said as we hiked through the hills near his South Bay home. “Nobody deserves independence. They earn independence.”

We’d ended up there—on a sunny day that felt hotter than the mid-80s outside—because I’d asked him where he goes to relax and unwind. Quickly, we came to an uncomfortably vertical climb up a few hundred feet involving several dozen wooden steps. In the past, Ramaswamy’s friends, like Sequoia Capital’s Jim Goetz, have joined him on this route; in other moments, Ramaswamy, 57, has enjoyed testing his fitness by doing the climb while breathing only through his nose.

“Just a fun little exercise of ‘Can you be zen?’” he said as we reached the stairs’ end. Still, he conceded, “some friends call it cardiac hill.”

Come to think of it, Snowflake itself is in a bit of an uphill battle at the moment. Lately, its stock has, well, melted. The shares have lost nearly half their

value since the company named Ramaswamy, a former top Google executive, as CEO in February just as it was forecasting disappointing sales growth.

Snowflake was an early pioneer in selling data-warehousing services, where companies store mass amounts of data from multiple sources in the cloud. But, increasingly, it faces stiff competition from rivals like Databricks, Amazon and Google, and it has lagged behind in adding artificial intelligence to its products.

What happens next at Snowflake might serve as a fair bellwether for what’ll happen across Silicon Valley in the immediate future. Many companies find themselves in the same uncomfortable position: needing to satisfy investor—and customer—demands to seize this moment in AI and do so faster than competitors.

The contrast between Snowflake’s present and past adds some dramatic complexity to the situation. This is the first real struggle for Snowflake, which enjoyed a charmed early life and investment from Silicon Valley’s top names, including Sequoia. Sure, Snowflake sells nothing sexy, but the startup had an honest-to-goodness mystique, especially after Slootman led it in a gusher of an IPO just four years ago, the largest ever for a software company. On the stock’s debut, it began trading at $245, more than double its $120 IPO price.

Some further irony to the scenario: Ramaswamy certainly didn’t expect to find himself in the position of leading Snowflake’s comeback. When he sold his AI search startup, Neeva, to Snowflake in 2023, he’d planned to exit Snowflake at the end of six months.

Ramaswamy would’ve been a hot free agent. He’s not a mass-market name like, say, a Benioff, but he did have a long tenure at Google, which ended with running its all-important ads business. The experience put him in good stead with Silicon Valley insiders. Elon Musk, for instance, tried to woo him to join Twitter as CEO before the Neeva sale to Snowflake.

Once at Snowflake, Slootman talked him into its top job, hoping Ramaswamy’s AI background would accelerate Snowflake’s own AI plans.

So Ramaswamy finds himself currently leading perhaps the most interesting turnaround story unfolding in Silicon Valley. If the exacting Ramaswamy can’t steady Snowflake, his efforts will underscore how daunting it’ll be for other businesses with less experienced leaders to navigate AI, which remains a hugely costly and ultimately unproven technology.

Even if Ramaswamy hasn’t convinced the public markets, billionaire venture capitalist Reid Hoffman, who helped talk Ramaswamy into joining Greylock Partners when he left Google, has plenty of confidence in him. “Sridhar plays to win,” Hoffman told me. “He’ll either change for the game he’s playing—or he’ll change the game he’s playing and win. He doesn’t delude himself.”

While at Google, Ramaswamy had a reputation among his colleagues: He enjoyed challenging their ideas, even ones from then-CEO Eric Schmidt or co-founders Larry Page and Sergey Brin.

“I saw him have heated debates with Larry, with Sergey, with Eric, and he’d say, ‘You’re wrong—here’s the six reasons you’re wrong,’” recalled Patrick Pichette, who served as Google’s chief financial officer. (Said Ramaswamy: “I’ve never been shy about my opinions.”)

Ramaswamy, who was born in southern India and later earned a doctorate in computer science at Brown University, joined Google in April 2003. (Previously, he’d worked at Bell Labs and at Epiphany, a dot-com–era software startup.) As Google went public and started to form into the megagiant we know today, Ramaswamy became a valuable engineer and manager within the company’s drive to bolster its digital ads business.

At Google, Ramaswamy impressed co-workers and his staff with his detached, calculating manner. “He’s like Data from ‘Star Trek’: Compute, compute, compute,” recalled one former Google executive who worked with him. And he excelled at leading during stressful moments—in what Ramaswamy called a “war room” setting, when small groups of engineers would need to fix a problem, including the issue of what to call their efforts.

“Funny thing is, there was a colleague at Google who was offended that I called something a war room: ‘What’s with this martial metaphor shit?’ So to make him happy, I started calling them our ‘basket-weaving efforts,’” Ramaswamy told me. “Look, it’s all about working together: weaving baskets, war rooms—same thing.”

He took over running Google’s ads and commerce team in 2014 with Susan Wojcicki when the ads business totaled around $50 billion in sales. (After an internal fight with Wojcicki, he assumed solo control of the team a year later.) When Ramaswamy left Google in 2018, ads had grown to nearly $120 billion.

His departure came amid personal disillusionment over the economic pressure from online advertising. To reach $100 billion–plus in sales, Ramaswamy had needed to relentlessly push Google ads at users. And he felt the company had gone too far: A breaking point for Ramaswamy, a father of two, came in 2017 when a Times of London investigation revealed Google had sold ads against YouTube videos of children that appealed to pedophiles.

For a time, he joined Hoffman at Greylock, but almost immediately he started working on Neeva, a search startup that would charge users a $5 monthly subscription rather than rely on ads for revenue. “We were going to build a search engine with 40 people that was powered by AI and had no ads in it,” recalled Vivek Raghunathan, who worked with Ramaswamy at Google and left to co-found Neeva with him. They brainstormed their initial plans on walks through Google’s campus. “The mission was audacious,” Raghunathan said.

As Ramaswamy and Raghunathan set out on Neeva, Frank Slootman was settling into Snowflake’s CEO role, then the third person to have the job.

A pair of technology wonks—two Frenchmen, Benoît Dageville and Thierry Cruanes—had founded the company in 2012. They quickly realized they would need help running the company. (“I’m an engineer. I’m not a business guy,” Dageville told me. “I’m not a manager either—I hate managing people.”)

Snowflake’s first CEO was also one of the startup’s major investors, Sutter Hill’s Mike Speiser. He helped Dageville and Cruanes commercialize their idea: data warehouses in the cloud rather than ones held within internal servers. Since a data warehouse is exactly what it sounds like—a digital repository of large amounts of data from various sources—it can overflow with too much stuff and become unruly, just like a physical warehouse with real-life goods. Snowflake’s software made it easier for customers like Rent the Runway and Capital One to study and analyze their company’s data.

In 2014, Speiser turned over the CEO spot to Bob Muglia, a 23-year Microsoft veteran. That went well, and Snowflake’s valuation shot up from $75 million the year Muglia joined to nearly $4 billion four years later. But as Snowflake’s investors began eyeing a possible IPO, the company’s board recruited Slootman to take Muglia’s place.

Slootman’s speciality was IPOs—readying a company for a listing and guiding it through its initial years as a public firm. He’d enjoyed great success at this while running two other software companies, Data Domain and ServiceNow.

Slootman had expected to retire after ServiceNow but got coaxed into a final run with Snowflake. He made some straightforward changes, like hiring a new CFO, and by the time he set out to create a pandemic-era virtual road show for the IPO, he had impressive figures to wow investors. In fact, Snowflake’s revenue climbed to over $260 million in the company’s fiscal year ending in January 2020, nearly triple from a year earlier.

When Snowflake’s board initially persuaded Slootman to take the position, he’d told the directors to expect him to keep the job for no more than five years. So who could take his spot?

Just as Slootman’s fifth year at Snowflake neared, Ramaswamy sensed he and Raghunathan had largely taken their audacious mission as far as it could go. They’d made an excellent product, Ramaswamy felt, but found limited consumer demand for a subscription-based search engine.

“We weren’t quite seeing hockey-stick growth at that point,” he admitted. “And a lot of folks on my team I had recruited from pretty plum jobs at Google and other places. They’d been living on just a salary.” He wanted them to share in the rewards of an exit sooner than later.

When Ramaswamy began to shop Neeva around, he weighed several acquirers before settling on Snowflake, sensing he and his team would fit in best there. Slootman initially spoke to Ramaswamy about acquiring Neeva on a Thursday. By Monday, they had signed terms.

If Slootman had one eye on the door at Snowflake, so did Ramaswamy. During the negotiations, Ramaswamy made it clear to Slootman that he intended to leave by the end of the year.

As Slootman crunched the numbers for Neeva, his CFO, Mike Scarpelli, encouraged him to think about whether he could convince Ramaswamy to stay. “I told Frank at the time, ‘Sridhar could be your successor—you need to spend some time with him,’” Scarpelli recalled.

Before officially joining Snowflake, Ramaswamy and Raghunathan shut down Neeva entirely: Snowflake had no interest in a consumer search engine. They wanted Ramaswamy and his team for their “technical chops,” as Ramaswamy put it. Snowflake wanted the new team to build AI tools.

In his first few months, Ramaswamy operated with no direct reports but nonetheless hoped to ignite Snowflake’s AI efforts. “I’ve joked to friends: It was an exercise in soft power to try to persuade a company of 7,500 people that change was needed,” he said.

As the six-month mark neared, Ramaswamy went on a weeklong trip to Europe with Slootman. Mostly, they went to meet with customers, whose loyalty to Snowflake's products impressed Ramaswamy. “Honestly, that’s what convinced me there was a future here,” he said.

At a dinner in London overlooking the Thames, Slootman, who by then had come to realize how much AI would matter to Snowflake’s next CEO, pitched Ramaswamy on stepping in to replace him.

Later, Ramaswamy called his mother in India to tell her the news. She was thrilled. “I come from a pretty humble family,” he said, “so absolutely I think my mom was more excited about me becoming CEO than, honestly, I was.”

In February, Slootman announced the change. (Slootman, who wouldn’t comment for this story, remains chair.) With the CEO swap coming on top of a lackluster sales forecast, Wall Street panicked. Snowflake shares slid nearly 20% in a day to under $190. And they’ve continued to slide for the last several months, recently down to around $110.

Ramaswamy believes the changes he’s made at Snowflake can eventually restore investor confidence—“It’s nothing where we can wave a magic wand and have things get better instantly,” he said—and over the past year, Snowflake has released a raft of AI features.

Those features probably aren’t extraordinary enough to change the world—or destroy it. (“I don’t feel I’m qualified to comment on how fast the technology can get to where it’s scary,” Ramaswamy said.) Rather, many are AI basics.

Snowflake, for example, has introduced a chatbot for data search and has released proprietary large language models so customers can build their own AI apps. A more complex feature can convert what’s called unstructured data (prose, images, video) into structured data (spreadsheets, databases, Excel-type files). A chatbot can parse the latter much more easily.

Eventually, someone using Snowflake software might see nothing more than a single text field: Plug in a query involving the data, and the answer appears below. “It’ll be a way for users to talk to their data using natural language,” said Raghunathan, who is now a Snowflake vice president. “People will talk to their structured data and say, ‘Why are same-store sales in Texas down today?’”

Within the sales department, Ramaswamy has pushed staff away from “the whale-hunting game,” he said, eschewing Snowflake’s past prioritization for landing big deals over amassing a significant bedrock of clients that bring in $100,000 to $2 million in annual revenue.

Ramaswamy has urged staff across the company to adopt “a spirit of urgency and continuous self-improvement,” he said. “Snowflake had that in part, but it was not running through the entire company as a way of living.” This has involved, for instance, asking engineers to consider how they can cut down on the time required for tasks that would take “tens of minutes to minutes.”

As Snowflake continues on its turnaround, Ramaswamy has made it clear to his direct reports that they should expect him to deeply examine their proposals. “One thing that was somewhat surprising—and still is—to internal folks is my demand and desire to understand,” he said.

It’s a change from the Slootman days. “Frank probably made faster decisions and shot more from the hip,” said Scarpelli, the CFO. “Sridhar’s a little bit more data driven—that’s probably the engineer in him—and doesn’t mind getting into the details. I cannot believe the volume of information that he reads and can retain. It’s mind boggling.”

I heard much the same from Denise Persson, the chief marketing officer. “He’s very hands-on: I don’t think anyone else on the planet would have this commitment to being hands-on,” Persson said. “He’s relentless.”

“Frank’s obviously a legendary CEO—I’m much more in the thick of it,” Ramaswamy explained. “I want to look at steps along the way and not wait for a month or a quarter.”

Even with all that planning, Ramaswamy has hit some notable speed bumps. In May, Snowflake had to scrap plans to buy Reka AI, a startup that makes LLMs. (Ramaswamy wouldn’t comment on exactly why the deal fell through.) Around the same time, it had to publicly announce that hackers had accessed some Snowflake customer accounts; Ramaswamy says those accounts weren’t using safety features like two-factor authentication correctly.

As much as Ramaswamy evangelizes about AI, he also seemed compelled to assure me that “it’s not as if everybody now works on AI” at Snowflake. It seemed like a rare admission from a CEO at this moment—that other parts of the business matter as much as AI, and that eventually Silicon Valley’s obsession with AI will ebb.

Ramaswamy expects many of the changes he has made—the greater rigor, the improved speed—to serve the company well no matter what era dawns next. “There’s a permeation process going on,” he said.

When Ramaswamy has made time on his calendar for leisure recently, he has been preparing for a mile-plus swim from Alcatraz Island to San Francisco that he hopes to do this fall.

To train, he previously had a coach critique his form and study it by swimming under Ramaswamy as he swam. Recently, he joined a Pacific Heights swim club. “The first time I went, they gave me some helpful advice: ‘You’ll be in a little bit of a shock, but in five minutes, your face will be numb. You won’t feel a thing. You’ll be fine,’” he recalled.

Ramaswamy only learned to swim as an adult, and only after wearing out his knees as an obsessive marathoner. “I was a huge runner: Zen for me was a 20-mile run,” he said. “There’s nothing like running in 34-degree rain that can make you feel what cold is like.”

Epic Games, Spotify among the developers taking advantage of European rule changes

BRUSSELS—Apple AAPL 0.55%increase; green up pointing triangle has long kept a tight grip on its iPhone ecosystem. In Europe, its hold is starting to weaken.

“Fortnite” maker Epic Games on Friday launched an alternative app store for iPhone users in Europe. Spotify this week began directing Europeans on its iOS music-streaming app to the company’s website to sign up for subscriptions, something it wasn’t previously permitted to do.

Apple separately said Wednesday that it plans to make it possible for developers in the U.S. and several other countries to offer secure contactless payments through their own apps on iPhones. Apple had previously committed to opening contactless payment technology in Europe to settle a European Union antitrust case.

The changes are opening up Apple’s devices to outside developers in new ways, allowing third parties to bypass elements of its control and, in some cases, its fees. They show how a wave of new regulations, antitrust enforcement and rulings, many in Europe, are chipping away at Apple’s “walled garden” of devices and software.

Apple has long argued that its approach supports users’ privacy and security. It has also become a lucrative part of the company’s business model. Apple’s services unit, which includes the App Store, generated $85.2 billion in sales during the 2023 fiscal year, accounting for about 22% of overall revenue.

Epic Games said Friday that its new app store for iPhone users in Europe will initially offer three games: “Fortnite,” “Fall Guys” and “Rocket League Sideswipe.” Those games will also be made available through other alternative app stores in Europe beginning with one called AltStore, Epic said.

The move takes advantage of a recent EU law called the Digital Markets Act, which requires some of the world’s biggest technology companies to comply with rules meant to boost competition in digital advertising, online search and app ecosystems.

Epic said it can’t offer the store for iPhone users outside Europe because Apple doesn’t allow alternative app stores in other regions. The developer has also expressed frustration at the number of steps European users must follow to access its new app store.

Apple said Friday that the DMA required it to enable new capabilities for developers in the EU, and that it had worked to make the changes “as easy as possible for users” while also trying to protect them from risks.

The company has previously said that it wasn’t applying the same changes outside the bloc because it is concerned about the impact on users’ privacy and security.

Epic and Spotify have both been engaged in a long-running feud with Apple. They say the iPhone maker imposes unfair rules through its App Store and takes too large a cut of developers’ revenue.

“Fortnite” was kicked off Apple and Google’s app stores in 2020 after Epic attempted to bypass the tech companies’ standard 30% concession for in-app purchases. The game could still be downloaded on Android devices through Epic’s website.

Earlier this year, Apple revoked Epic’s developer account after Tim Sweeney, the game developer’s chief executive, publicly criticized its new European App Store rules. It later reinstated the account.

Sweeney said Europe’s approach to setting and enforcing new rules for big tech companies showed that “regulation can have teeth and can succeed.”

“It also provides a road map for every other country’s regulators,” Sweeney added.

Apple is facing pressure in the U.S. too. The company is already being forced to allow developers to process purchases outside of the App Store following the verdict of a U.S. lawsuit brought by Epic.

But Apple’s plan to comply with the 2021 ruling has stirred outrage among developers because of its high fees. Apple collects a 27% commission on app transactions that go through an alternative payment system, compared with the company’s standard 30% fee.

A U.S. federal judge is currently examining Apple’s compliance with the ruling in the Epic case. In hearings, the judge has questioned Apple executives on its fees and the array of warnings that now precede a user’s choice of a non-Apple form of payment.

“Other than to stifle competition, I see no other answer,” Judge Yvonne Gonzalez Rogers told an Apple executive in court about the company’s system. In court, Apple said that it believes it is complying with the court’s order and not trying to stifle options for its users. Instead, it is trying to maintain the privacy and security of its users while also running a business, a company executive said.

Earlier this year, the U.S. Justice Department also sued Apple, alleging that the company had violated the country’s antitrust laws by making it difficult for third-party developers to integrate with the iPhone. Apple, the lawsuit alleges, does this to keep users locked into its ecosystem.

Apple said it would defend itself against the government’s lawsuit and filed a motion to dismiss the case earlier this month.

While Apple has made concessions in Europe to allay regulatory scrutiny, some app developers have said those changes don’t go far enough.

Spotify began posting subscription pricing information in its iOS app on Wednesday after the company said it opted into a new program that allows music-streaming apps to inform European users about alternative ways to make purchases.

However, users still can’t directly subscribe to Spotify through the company’s iOS app or click on an in-app link to purchase a subscription because Spotify doesn’t want to pay a commission to Apple that it views as unreasonable.

The Spotify move follows an EU antitrust ruling earlier this year, in which Apple was fined roughly $2 billion for allegedly setting unfair rules for developers of music-streaming apps. Apple has appealed the ruling.

Spotify said it wasn’t satisfied with the changes Apple has made so far. It said music-streaming services should be allowed to give users a link for purchasing subscriptions without being charged a fee if a user subscribes after clicking the link.

Apple has previously said that Spotify gets significant benefits from its presence on the App Store and doesn’t pay Apple any commission.

The EU has in recent years passed a raft of rules affecting tech companies, at times prompting complaints from business groups about the difficulty of operating in the market of roughly 450 million consumers.

Meta Platforms and Apple both said earlier this year that they would delay the launch of new artificial-intelligence products and features because of concerns over the EU’s regulatory environment.

The European Commission in June alleged that Apple wasn’t doing enough to comply with its digital-competition law, including rules related to the App Store. Apple could be fined as much as 10% of its worldwide revenue if regulators ultimately determine that it broke the rules.

Apple said at the time that it had made changes in response to feedback from app developers and the Commission and was confident that its plan complies with the law. It added it would continue to listen and engage with regulators.