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Despite billions in investment, startups say their androids mostly aren’t useful for industrial or domestic work yet

Makers of humanoid robots seek to temper expectations, citing significant technical challenges and unreliability for complex tasks.

The cost of installing robots is a major deterrent; only 20% of deployment costs go to the machine, with 80% for human safety systems.

While some predict widespread adoption, others argue that specialized robots, not humanoids, offer greater efficiency for factory tasks.

Billions of dollars are flowing into humanoid robot startups, as investors bet that the industry will soon put humanlike machines in warehouses, factories and our living rooms.

Many leaders of those companies would like to temper those expectations. For all the recent advances in the field, humanoid robots, they say, have been overhyped and face daunting technical challenges before they move from science experiments to a replacement for human workers.

“We’ve been trying to figure out how do we not just make a humanoid robot, but also make a humanoid robot that does useful work,” said Pras Velagapudi, chief technology officer at Agility Robotics.

Agility currently has hundreds of its Digit robots working with customers, including Amazon.com and auto-parts company Schaeffler. They perform tasks including picking up items and moving them around a warehouse.

As robots like Digit have begun to find niches of demand, some analysts and technology executives have begun to predict a looming humanoid robot wave.

Velagapudi is skeptical. Getting human-shaped robots into warehouses or industrial sites to move boxes is one thing, he said; building a robot butler is beyond the industry’s current capabilities, with current robots too unreliable to perform complex tasks.

Then there is safety. According to a survey of executives, the cost of installing robots is the biggest reason companies avoid deploying robots, said Ani Kelkar, a partner at McKinsey. For every $100 spent on deploying robots today, only around $20 is the actual machine, with the rest being spent on equipment and systems designed to protect humans from injury, Kelkar said.

In theory, a humanoid robot won’t need the same safeguards as an industrial arm that might weigh thousands of pounds and operate at high speeds. Tesla’s Optimus robot stands approximately 5 feet 8 inches tall and weighs 125 pounds; Unitree’s G1 is even smaller at 4 feet and 77 pounds.

But the gulf between the promise of the technology and what it can do today is wide, Kelkar said. “We’re doing a big extrapolation from watching videos of robots doing laundry to a butler in my house that can do everything,” he said.

At the recent Humanoids Summit in Mountain View, Calif., touted as the world’s largest gathering devoted to the subject, Isaac Qureshi used a virtual-reality headset to control an early prototype of a robot designed to clean office spaces.

The chief executive of the recently formed company that makes it, Gatlin Robotics, followed behind the robot as it attempted to scrub a brick wall.

“Slowly, we’re going to teach the Gatlin robot more things, like starting with dusting, surface cleaning, trash bins and then the toilet,” said Qureshi. “Toilet’s a big North Star.”

On stage at the summit, one startup founder after another sought to tamp down the hype around humanoid robots.

“There’s a lot of great technological work happening, a lot of great talent working on these, but they are not yet well defined products,” said Kaan Dogrusoz, a former Apple engineer and CEO of Weave Robotics.

Today’s humanoid robots are the right idea, but the technology isn’t up to the premise, Dogrusoz said. He compared it to Apple’s most infamous product failure, the Newton hand-held computer.

Launched in the 1990s amid a wave of hype about personal digital assistants, the Newton was a commercial failure that was canceled after only a few years. Just a decade later, however, hand-held computers would become ubiquitous with the launch of the iPhone.

“Full bipedal humanoids are the Newtons of our times,” Dogrusoz said.

Weave is building laundry-folding robots, which are being used in some San Francisco laundromats. But even the founders whose robots are finding some market traction see risks in encouraging the notion that the technology has arrived.

“I think we have to have this sense of responsibility about the timelines we are talking about, the adoption timelines,” said Nicolaus Radford, CEO of Persona AI, in a keynote address at the summit.

Company leaders say there is a narrow set of roles where humanlike robots make sense today, including performing simple, repetitive tasks such as moving boxes. Persona is building a welding robot for a shipbuilding company, a function Radford said is ripe for roboticization because the danger involved makes labor hard to find. For something like robot butlers, the market is farther off, he said.

The cautious, if not downright gloomy, outlook by leaders and engineers of humanoid robot companies stands in contrast to forecasts made by some of the biggest names in technology.

Elon Musk predicts that demand for humanoid robots will be “insatiable” and has said that Tesla aims to produce one million of the company’s Optimus robots a year by 2030. Nvidia CEO Jensen Huang has said he believes the world is on the cusp of making everything that moves robotic. “Humanoid robots, the technology that makes it possible is just around the corner,” Huang said on a podcast in January.

Optimists like Musk and Huang see a confluence in trends behind their predictions. Billions of dollars are being spent on data centers to train the artificial-intelligence models that will power future robots. The aging of populations in many countries means there will be fewer workers as well as a growing cohort of elderly people in need of care. Governments also see robots as a way to win manufacturing jobs back from overseas.

Beyond the macroeconomic trends, improvements in battery and motor technology mean that robots are becoming more adept at mimicking human motion and can work for longer periods. Earlier this month, the CEO of one of the hottest robot startups, Figure AI, posted a video of the company’s latest humanoid bot jogging in a manner eerily similar to a human.

Dozens of robot startups are attracting huge investments, with around $5 billion being invested in humanoid robots this year, said Kelkar of McKinsey.

FEV Consulting, which advises many robotics companies, predicts that by 2035 there will be around one million humanoid robots at work. Holding back the expansion is a lack of training data for robots, with many startups using humans wearing virtual-reality headsets to train robots. Others are experimenting with 3-D models of workspaces to speed up the process.

But no one is sure how much training is required before robots can move from folding shirts to doing multiple household chores, said Dominik Boemer, a manager at FEV.

“Humanoids perhaps solve some specific problems, but it might not be as big of a market in the near term as everyone thinks it is,” Jeff Mahler, chief technology officer at Ambi Robotics, which makes package-sorting robots.

Ultimately, there is a more fundamental question to answer: Do we even need a robot with arms and legs?

There are downsides to the human form: Robots that look like us are prone to tipping over and engineers struggle to create a mechanical version of the human hand. We rely on sensations from our skin to know how much pressure to apply, something robot builders struggle to replicate. Some engineers say the future isn’t in replicating the human shape but in improving on it, with four hands instead of two, or suction grippers instead of fingers.

“My point of view is that we are sticking to the humanoid form too much,” said Max Goncharov, the chief technology officer at RemBrain. “In the factories, it’s all about efficiency, and efficiency means more specialized robots.”

“I think humanoids will do a tiny layer of tasks in factories in the future,” Goncharov said.

Wealthy families are launching offices to manage their money at a record clip and are getting a seat at the table in significant deals

Family offices are the new power players on Wall Street.

A growing number of wealthy Americans are launching family offices, firms that do everything from investing money for the superrich to managing their personal affairs. They are huge and secretive, and their influence on Wall Street and Main Street is only growing.

Families with these offices recently oversaw about $5.5 trillion in wealth, a 67% jump from five years ago, according to Deloitte. The firm expects that figure to rise to $6.9 trillion this year and top $9 trillion by 2030. It estimates that in coming years, these offices will manage more money than hedge-fund firms.

Banks and other firms are hungry to cater to family offices’ every need, while entrepreneurs and investment managers are clamoring to land a slice of these families’ immense wealth.

“It’s not just growing, it’s exploding,” said Hendrik Jordaan, a partner at Nelson Mullins who works exclusively with family offices. “I really think about the family office world being the next private equity.”

Launching a family office is in vogue. While the biggest ones have long managed billions of dollars on behalf of titans such as Jeff Bezos, Michael Dell and Bill Gates, many families with hundreds or tens of millions of dollars in wealth are launching them, too, or turning to so-called multifamily offices to manage their fortunes. There are more than 8,000 single-family offices globally today, up roughly a third from 6,130 in 2019, according to Deloitte. The firm expects that figure to top 10,000 by 2030.

“It’s kind of become the word for ultrahigh-net-worth families. Do you or don’t you have a family office?” said Justin Flach, managing director of wealth strategy for Ascent Private Capital Management at U.S. Bank, who typically works with families with net worths topping $75 million.

“There’s some status assigned to that. You’re at a cocktail party talking about it,” Flach said.

How the superrich deploy their firepower has vast implications for the fortunes of businesses in almost every U.S. industry, global philanthropy and the broader economy. As this money trickles through the economy, it stands to transform the fate of businesses tied to everything from artificial intelligence and data centers to dental offices and medical spas.

Given the sums they can invest, big family offices can sometimes compete against large institutional investors on deals, putting them up against behemoths such as Apollo Global Management and Blackstone.

Family offices can find their way into public-company merger deals, too. The offices of late Pequot Capital founder Arthur Samberg and Addison Fischer are among the backers of fusion-energy company TAE Technologies, which struck a deal this month valued at $6 billion to merge with Trump Media and Technology Group.

Unlike public pension-fund managers, who answer to local teachers and firefighters, or hedge-fund firms, which regularly provide financials to investors, family-office leaders don’t answer to anyone but themselves. That gives them vast latitude to hold investments for decades and ride out periods of stomach-churning volatility, or make large and concentrated wagers. Traders and advisers say that family offices often have little interest in hedging their bets through tools such as derivatives.

That willingness to hold on to bullish bets on particular stocks or sectors makes them an attractive source of funds for many businesses.

“We get pitched a lot,” said entrepreneur and philanthropist Vinod Gupta, who started his family office, Everest Group, more than a decade ago with more than $100 million, after selling one of his companies. “I bet I get three emails a day. Of course, I just delete them.”

Gupta employs about seven people, including two who oversee investments. His donations to organizations such as the University of Nebraska and schools in India have been done through the office, he said.

Family offices are often the centerpieces of wealthy families’ financial lives. Many handle mundane tasks such as paying thousands of bills a year for wealthy individuals and their offspring so they never have to glance at a credit-card statement. They help staff individuals’ estates around the world and liaise with advisers to pick out, and finance, toys such as planes and yachts. They can oversee teams of assistants who do everything from booking travel to managing packing suitcases and making restaurant reservations.

Some employ just a handful of individuals to help with estate planning and investing, while others have dozens or hundreds of employees. Staff can include everyone from household managers to psychologists. More than a fifth of family offices with more than $500 million in assets have art advisers, according to a Citi survey of more than 300 family offices this year.

Betsy Bickar, head of art advisory at Citi, recently took a wealthy Latin American family to the Guggenheim Museum in New York City while its doors were closed to the general public. They roamed the museum while it was virtually empty, viewing artwork by the Brazilian artist Beatriz Milhazes and Rashid Johnson, who is known for monochromatic, textural wall works made from a concoction of soap and wax.

Big banks and money managers are offering family-office services for investors who aren’t quite billionaires, and might have tens or hundreds of millions of dollars. (Sorry, these aren’t for the moderate millionaires.) There are now about 800 registered investment advisers who call themselves multifamily offices, meaning that they can oversee wealth for dozens of families, an estimated 30% increase in the past 10 years, according to Schwab Advisor Services.

Running an individual office can cost millions a year. Firms such as Mercer Advisors and Corient provide these family-office services to clients with more than $25 million in assets. Some firms require minimums of just $10 million.

Ultrarich investors are often nosy about what their peers at other family offices are up to, and which deals they are getting a peek at. They can move in packs, getting in on the same investment after one of them gets a whiff of a particularly attractive opportunity. An office connected to a network of families might be able to secure more attractive deal terms, and clubs of families that invest together have emerged, lawyers and advisers say.

“Family offices love to talk to other family offices,” said Dino De Vita, who works with more than 550 of Northern Trust’s richest clients within its global family and private investment offices group.

Drillers’ injection of wastewater is creating mayhem across the Permian Basin, raising concern about the future of fossil-fuel production there

Shale drillers have turned the biggest oil field in the U.S. into a pressure cooker that is literally bursting at the seams.

Producers in the Permian Basin of West Texas and New Mexico extract roughly half of the U.S.’s crude. They also produce copious amounts of toxic, salty water, which they pump back into the ground. Now, some of the reservoirs that collect the fluids are overflowing—and the producers keep injecting more.

It is creating a huge mess.

A buildup in pressure across the region is propelling wastewater up ancient wellbores, birthing geysers that can cost millions of dollars to clean up. Companies are wrestling with drilling hazards that make it more costly to operate and complaining that the marinade is creeping into their oil-and-gas reservoirs. Communities friendly to oil and gas are growing worried about injection.

“It’s one of the many things that keep me up at night,” said Greg Perrin, general manager of the groundwater-conservation district in Reeves County, Texas, where companies are injecting some of the largest volumes of wastewater.

Swaths of the Permian appear to be on the verge of geological malfunction. Pressure in the injection reservoirs in a prime portion of the basin runs as high as 0.7 pound per square inch per foot, according to a Wall Street Journal analysis of data from researchers at the University of Texas at Austin’s Bureau of Economic Geology.

When pressure exceeds 0.5 pound per square inch per foot, the liquid—if it finds a pathway—can flow to the surface and pose a risk to underground sources of drinking water, Texas regulators have said in industry presentations.

The fracas above ground is raising questions about how the Permian can sustain red-hot production without causing widespread environmental damage that could leave taxpayers on the hook—and complicate the region’s economic plans. The basin is trying to lure data centers with cheap land and energy and has plans to become a hub for burying carbon dioxide captured at industrial plants and sucked out of the air.

“You need to have a stable, locked-down geology that’s going to behave as it’s supposed to,” said Adam Peltz, a director at the Environmental Defense Fund, a nonprofit advocacy group. “Otherwise, you’re going to cause a huge, expensive mess that Texans will pay for for generations.”

The industry is working to clean up its act, but solutions to treat and ditch meaningful volumes of water far from the oil fields remain years away.

Oil-and-gas executives said solving the wastewater issue is an industry priority.

“The size of the Permian is such that this can’t be a limiting factor for the success of the whole basin,” said Scott Neal, director of growth and portfolio for Chevron’s shale and tight business.

In the Delaware portion of the Permian, its most prolific region, drillers crank out between 5 and 6 barrels of water, on average, for every barrel of oil.

For years, they pumped the putrid fluids deep into the ground—and triggered hundreds of earthquakes, some with a magnitude of over 5. They caused little damage in the sparsely populated Permian, but they were felt as far as Dallas, El Paso and San Antonio, where a historic building was damaged.

In 2021, the Railroad Commission of Texas, the agency that oversees the oil-and-gas industry in the state, began cracking down on deep disposal. Companies pivoted to shallow reservoirs, which now absorb roughly three-quarters of the billions of barrels of water that they inject in the Permian every year. The shift largely cured the tremors but has created unintended consequences.

Pressure is mounting, and saltwater is being kicked out over vast distances. It is migrating up some of the decaying wells that litter the Permian, forcing companies and regulators to play a protracted—and expensive—game of whack-a-mole.

In 2022, a 100-foot column of saltwater erupted from an abandoned well in Texas’ Crane County near the unincorporated community of Tubbs Corner. Chevron, which owned the well, plugged it. But nearly two years later, water started to ooze from a different well in the same area, a sign that bottling up the geyser likely repressurized the subsurface and triggered the new outburst, scientists said.

It took the Railroad Commission about 53 days and roughly $2.5 million to plug that leak. Eventually, the agency quietly shut in the injection wells that it said were likely causing the increase in pressure.

The ordeal might not be over. The ground in the area has seen a slight uplift in recent months, a sign that pressure is building up again, scientists said.

Regulators in Texas face a tough balancing act. Oil-and-gas production contributes too much to the state’s economy to be curtailed, but letting the situation fester risks turning supportive communities against the industry. Their task is complicated because New Mexico restricts disposal, so most of the Permian’s wastewater is injected in Texas.

Researchers at the Bureau of Economic Geology painted a critical picture of the frenzied injection in a preliminary, informal project proposal shared with the Railroad Commission last year, an open-records request filed by The Wall Street Journal revealed. Operators were injecting wastewater with little concern over how it might travel underground or its impact on reservoir pressure, they said.

“This behavior inexorably causes waste, regulatory action that impairs operation and investment, and reduction of the intrinsic value” of the injection resource, they said.

The commission has adopted a more-proactive approach to tackle the issue, industry experts said. Staffers routinely rely on satellite data to track down pressure buildups. Earlier this year, it said it would impose limits on injected volumes.

The Railroad Commission at times has appeared concerned about how the mounting crisis might reflect on it and the industry it regulates. It told the Texas Legislature last year that assembling a team to investigate the issue would help increase public confidence, the Journal’s open-records requests revealed. It received $1.3 million to hire the team. It also obtained an additional $100 million to plug leaky oil-and-gas wells.

Increasingly, Permian landowners find themselves dealing with abandoned well bores that come back to life. In May, a well on the Pecos County property of Laura Briggs started spraying saltwater like a fire hydrant. She said it took the Railroad Commission about four months to get it plugged at a cost of about $350,000.

“You’re working with broken, rotten pieces of stuff,” she said.

Some ranchers worry that wastewater might contaminate sources of groundwater and imperil their operations.

“If it breaks loose in a zone where we’re drawing, say, stock water from, it could put you out of business overnight,” said Brad Gholson, a rancher and the owner of Reeves County Feed & Supply, a livestock feed dealer in Pecos.

Perrin of the groundwater-conservation district said he thinks the Railroad Commission doesn’t have enough boots on the ground to handle the situation. His district is starting a campaign to collect samples at water wells and assess whether quality has changed as a result of injection—an effort he expects to cost up to $200,000.

A commission spokesman said its injection program is designed to protect freshwater.

The glitchy Permian plumbing is forcing producers to drill through zones of high pressure, fortify their wells with additional strings of casing, and use protective coating against corrosive saltwater. All this means that companies are having to spend more to extract oil and gas.

“Bit by bit, it adds cost, it adds complexity, it adds mechanical challenges,” said Chevron’s Neal. He said the pressure buildup hasn’t caused any material disruption to its operations.

In addition to these headaches, some drillers report that water is migrating into their oil-and-gas reservoirs. Pecos Valley, a Permian operator, earlier this year filed a lawsuit against the water-handling company NGL, saying water it had injected escaped and flooded four oil-and-gas wells. NGL has denied the allegations.

Oil-and-gas fields in South Texas, North Dakota and Appalachia also produce briny water but in much smaller volumes than in the Permian. As this basin matures, wells keep getting wetter.

The industry is testing technologies to evaporate the liquid faster and strip it of salt so it can be reused outside the oil patch. Companies are crafting plans to release scrubbed water into rivers. Texas lawmakers have passed legislation to help advance these solutions.

But researchers said these alternatives won’t alleviate the near-term need for injection. Katie Smye, a researcher at the Bureau of Economic Geology, said there are areas of the Permian where injecting wastewater can be done safely and the industry must put more work into delineating these zones.

“If we say no to deep injection due to earthquakes, and we say no to shallow injection due to surface flows, and we’re not taking into account the science of areas where injection is proceeding safely,” she said, “then what?”

Veteran U.S. investors say Putin’s Russia will remain a treacherous business environment

For Steve Witkoff and Jared Kushner, President Trump’s billionaire envoys working on a deal to end the Ukraine war, Russia is a land of vast natural resources and rich business opportunities.

Welcoming it back into the world economy will make money for American investors and stabilize Moscow’s relationships with Ukraine and Europe, according to their public comments and people familiar with their thinking.

They aren’t the first U.S. business people to view Russia as a land of bounty—nor the first to advocate for peace through profits.

But many veterans of its volatile economy are skeptical that the country will handsomely reward U.S. capital, or that many American investors will flock to Vladimir Putin’s regime as soon as Washington lifts sanctions.

“Russia is not the Emerald City or El Dorado,” said Charles Hecker, a geopolitical risk analyst who spent four decades working in the Soviet Union and Russia. “The size of the prize is smaller than some people think.”

Russia’s $2.5 trillion economy—the same size as Italy’s—suffers from weak long-term growth prospects, a shrinking population, declining reserves of oil that can be easily extracted, and a lack of growth drivers beyond energy, say economists.

What’s worse, say experienced U.S. investors in Russia, is the risk of losing your assets—and even ending up in jail—in an increasingly autocratic and nationalistic regime that lacks the rule of law, rewrites the terms of deals, seizes property and views the West with deep suspicion.

Hecker, who also wrote “Zero Sum: The Arc of International Business in Russia,” said that even a settlement in Ukraine wouldn’t break the cycles of hostility toward the West, saddling foreign companies with persistent geopolitical uncertainty.

“The general animus of Russia towards the West will stay as long as Putin is in the Kremlin and arguably even longer,” he said. “It’s unwise to assume that now, all of a sudden, the red carpet comes out for Western companies.”

Kremlin spokesman Dmitry Peskov suggested as much this fall. “Everyone should be allowed back in,” he said at an economic forum. “But it will be very expensive for them to come back here.”

Risky business

The notion of companies flocking back to Russia is empty talk, said Alexandra Prokopenko, a former Russian central bank official who is now a fellow at the Carnegie Russia Eurasia Center in Berlin. “For any ordinary foreign investor, Russia is still uninvestable,” she said.

If sanctions are lifted, exporters who can sell goods to Russia without investing much there will likely return—although many will find themselves up against Chinese imports that now dominate many Russian markets, from vehicles to smartphones.

Investors whose assets were expropriated after Russia’s full-scale invasion of Ukraine might seek to claw back some of their money. Exxon Mobil has held talks with Russian energy executives about returning to the Sakhalin oil and gas project, where it took a $4.6 billion write-down after Russia launched its war in 2022.

“If there are unique assets, such as extraordinary gas fields in the Arctic, I wouldn’t be surprised if companies moved to secure an option to access those,” said Michael Calvey, chairman of private-equity firm Baring Ventures, who worked as a financier in Russia for three decades.

“But I’d be surprised if anyone starts sinking billions into real investments for years,” he said.

One deterrent, said Calvey, is that sanctions could return because of renewed war in Ukraine and Russian hybrid war with Europe. Then there are more the personal dangers of doing business in Russia.

Calvey was one of the most prominent U.S. business people in Russia. His firm Baring Vostok financed tech companies such as Yandex, Russia’s answer to Google. In 2019, after getting into a business dispute with Kremlin-connected investors, Calvey found himself arrested and jailed by the FSB, Russia’s internal intelligence agency.

His court conviction for misappropriating funds, widely seen as concocted, was later canceled, but he left Russia after the invasion of Ukraine and says he has no plans to return.

Russia does have valuable natural resources, as well as gifted tech entrepreneurs, Calvey said. “But it also has systemic risks of the kind that I was a victim of,” he said.

Since launching the war, the Kremlin has tightened its grip on Russia’s economy, confiscating property from foreign and domestic investors and handing them to business people loyal to Putin. Some $49 billion in assets have been seized as of this summer, according to Moscow-based law firm Nektorov, Saveliev & Partners. The pace of nationalizations is accelerating.

Any deals that Putin approves involving U.S. investors might only be upheld while President Trump is in power, said Pavel Khodorkovsky, a U.S.-based nonprofit executive and son of Mikhail, Russia’s richest oligarch until he was arrested and jailed in 2003 after clashing with Putin. “Putin will honor his word only to the person he gives it to,” he said.

Capital-intensive foreign investments in the Russian Arctic or elsewhere would involve heavy initial costs and bring returns only years later, he said. Investors would have to be confident of long-term friendly behavior from the Kremlin.

“Anything that involves infrastructure, physical assets—I just don’t think this is going to be an acceptable level of risk,” he said.

Others say there is potential to make money. “The question is should you do business with them at this time,” said Alan Bigman, a Houston-based energy executive who was finance director of Russian oil producer TNK for years.

“Of course, Russia should eventually be reintegrated into the world economy. If you have a nonaggressive Russia, then that economic linkup makes a lot of sense. But not at a time when they’re invading and threatening their neighbors,” said Bigman. He noted that Putin used past trade with the West to build up his military. Most Russia experts predict he’ll do so again.

A history of hope

As Communism was ending, U.S. brands moved in to satisfy Russians eager for a taste of the American lifestyle—such as with the first McDonald’s restaurant, which opened on Moscow’s Pushkin Square in 1990.

But Russia adopted capitalism without the institutions that make it work in the West, such as functioning regulations or protections for property rights, and chaos ensued.

“I thought we can make money if this place goes from terrible to bad,” said Bill Browder, an Anglo-American financier whose firm Hermitage Capital Management ran the biggest foreign investment fund in Russia. “You could lose all your money or multiply it 20 times—and the chance was fifty-fifty,” he said.

In 2005 Browder was expelled from Russia after clashing with the authorities over corruption. His lawyer Sergei Magnitsky died in a Russian police cell, leading the U.S. to pass the Magnitsky Act, sanctioning Russian officials involved.

As Putin’s rule became increasingly autocratic, the predictability of Russia’s business environment “went from bad back to horrible, and it’s been horrible ever since,” said Browder.

Despite mounting tensions, Western Europe, led by Germany, stuck to its belief that trade and investment could eventually tame Russia’s repression at home and revanchism toward its neighbors.

Germany’s theory of “Wandel durch Handel,” or change through trade, survived even Russia’s seizure of Crimea and covert invasion of eastern Ukraine in 2014. Only the full-scale invasion almost four years ago led to sweeping Western sanctions and a mass exodus by Western companies.

Frozen prospects

In wooing the White House, Moscow has talked up opportunities for joint ventures in the Arctic, which holds massive untapped energy resources, as well as for exploring Russia’s rare-earth metals deposits. But many of Russia’s deposits are in remote, hard-to-access environments.

Russia ranks among the world’s top three oil producers, alongside the U.S. and Saudi Arabia. But even before the war, many of Russia’s main oil fields in western Siberia and the Volga-Urals were depleting, forcing producers to shift to more complex and costly oil deposits in the far north and east.

The share of Russia’s oil reserves classified as hard-to-recover is expected to climb to 80% by 2030, from 59% today, according to Russia’s Energy Ministry. As a result, some projections foresee output falling by at least 10% by the end of the decade.

Russia’s best years of growth came between 2000 and 2008, when global oil prices were rising continually. It was one of the original BRICs—the acronym championed by Goldman Sachs to highlight the promise of fast-growing emerging economies—alongside Brazil, India and China. Its performance has been patchy since then. “The motor petered out after commodity prices stopped growing,” said Elina Ribakova, an economist at the Peterson Institute for International Economics in Washington.

The U.S. shale gas boom contributed to Russia’s stagnation, she said. Faced with falling popular support, Putin shifted the narrative to nationalism.

As a foreign investor, said Ribakova, “you’re coming to a midsized European economy that’s slowing down and dependent on arms spending. Why?”

Warner Bros. Discovery is signaling that it wants Paramount Skydance chief David Ellison and his multibillionaire father Larry Ellison to increase their $30-per-share, all-cash “hostile” offer for the media conglomerate – and if they’re willing to do so, WBD is ready to negotiate a possible sale to the duo, The Post has learned.

Not so fast, say the people at Paramount Skydance and their partners at RedBird Capital.

The Ellisons and RedBird, run by savvy media dealmaker Gerry Cardinale, are mulling something known internally as “DefCon 1” – using lingo for the security level when nuclear war is imminent. That plan would entail walking away from the bidding process – including their recent hostile appeal to shareholders – and possibly litigating how WBD’s board handled the process, The Post has learned.

People inside Paramount Skydance allege that directors and management ignored their sixth all-cash offer for the company and favored Netflix’s cash-stock bid throughout the bidding process because of a personal bond between WBD chief David Zaslav and Netflix CEO Ted Sarandos. As this article went to press, they still believed their $78 billion, all-cash offer was far superior to the cash-stock, $82.7 billion winning bid from rival Netflix – and had no intention of increasing the price as they press their case directly to shareholders.

Meanwhile, WBD is expected to formally address Larry Ellison’s personal guarantee backing Paramount’s bid and its impact on the deal process in the coming days. Press reps for WBD, Paramount Skydance and Netflix declined to comment. WBD has in the past denied personal relationships figured in the decision to select Netflix as the winner of the bid war, saying the streaming giant came up with the best offer.

Prime Minister Benjamin Netanyahu is proposing he oversee a commission to determine the scope of an inquiry

Israel’s opposition is demanding an independent state commission to investigate failures leading to the Oct. 7, 2023, Hamas-led attack.

Prime Minister Benjamin Netanyahu proposes overseeing a committee that would determine the investigation's mandate.

Polls consistently show a large majority of Israelis support an independent state commission.

TEL AVIV—For more than two years, Israelis were bitterly divided over the war in Gaza. With the backing of a mass protest movement, political parties opposing Israeli Prime Minister Benjamin Netanyahu demanded his government end the war and strike a deal to return the hostages taken on Oct. 7, 2023.

With a cease-fire in place and nearly all the hostages returned, the opposition is now shifting its focus to demanding an independent state commission to investigate who in the Netanyahu government, and the security establishment, were responsible for the massive failures that allowed Hamas to undertake the worst assault on the Jewish state in its history.

In the months after Oct. 7, Netanyahu rejected calls to launch an independent investigation, which historically has been overseen by the Supreme Court, saying it wasn’t right to do so during a war. Now, with the fighting over, and as he has faced pressure from the Supreme Court, he’s shifted his stance.

Netanyahu is agreeing to an investigation, but one that would be appointed by lawmakers, not the court, arguing that it would better represent all Israelis. He and his allies repeatedly express distrust of the courts. The prime minister himself would oversee a committee that would determine the investigation’s mandate.

Lawmakers in his coalition have argued the mandate’s scope should include not only the Hamas-led attack two years ago, but also how the 1993 Oslo Accords and the protest movement against Netanyahu’s proposed judicial overhaul contributed to the Oct. 7 massacre.

On Wednesday, the Israeli Parliament, or Knesset, narrowly passed the first of three votes required to establish Netanyahu’s proposed commission. Families who had loved ones killed or kidnapped on Oct. 7 shouted their opposition from the Knesset galleries as the bill passed. Members of the opposition tore up paper copies of the bill on the Knesset floor.

The issue is emerging as a central plank in the political opposition’s campaign against Netanyahu as the country heads into an election year. Israel must hold national elections by the end of October.

Israel’s opposition is made up of both right-wing and left-wing parties, so focusing on what his critics claim is Netanyahu’s attempt to evade responsibility for Oct. 7 could be a unifying campaign message.

Critics say Netanyahu is trying to skirt responsibility by appointing a political commission whose mandate he can determine. “That does unite the opposition,” said Yaakov Katz, a senior fellow at the Jerusalem-based Jewish People Policy Institute.

Those hoping to challenge Netanyahu in the coming elections have seized on the issue.

“The moment our government is established, we will establish an impartial state commission of inquiry to investigate the failure of October 7,” said former Israeli Prime Minister Naftali Bennett, who plans to run against Netanyahu in next year’s vote, in a post on X earlier this month.

Polls consistently show that a large majority of Israelis want to see an independent state commission. A poll released earlier this month by Channel 13, an Israeli news outlet, showed that 59% of Israelis support establishing a state commission of inquiry.

Israel has launched 20 independent commissions of inquiry. They include investigations into the failings around the Yom Kippur war in 1973, when Egypt and Syria launched a surprise attack, and the 1982 Sabra and Shatila massacre, in which Israel was determined to have indirect responsibility for allowing Christian militia forces to kill Palestinians, during the First Lebanon War. Such commissions are led by a sitting judge, composed of leading experts, and are independent from the government. They have quasi-judicial powers, such as power of subpoena, and the ability to force witnesses to testify.

By contrast, Netanyahu’s committee would comprise members appointed by the Israeli Parliament and would have a supervision mechanism of families who lost loved ones on or after Oct. 7, some associated with the opposition and others with the coalition.

Netanyahu argues that such a committee would enjoy broader support from the public.

“An unprecedented event like the 7th of October, requires a special committee, a national broad committee that is accepted by most of the people,” Netanyahu said in a statement this week. “I promise you all the subjects will be investigated—political, security, intelligence, legal. Everything.”

If parliament approves it, the government’s proposed commission is likely to face legal challenges, including possible petitions against it to the Supreme Court. In November, the court issued a conditional order instructing the government to explain why it is not establishing a commission of inquiry as required by law to investigate the events of Oct. 7.

The mass-protest movement that pushed for an end to the war in Gaza brought hundreds of thousands of Israelis to the streets weekly for nearly two years largely by focusing on calls to bring the hostages home. With the cease-fire in place, some protest groups are trying to shift the focus toward the commission to bring people back to the streets. They have so far seen limited success.

Families of those killed or kidnapped are leading the protests to demand an independent investigation.

“We need answers to how did all of this happen and how do we prevent such a disaster from ever happening again,” said Jon Polin, whose son, Israeli-American Hersh Goldberg-Polin, was taken at a music festival and survived 328 days before his captors killed him as Israeli troops closed in. “I don’t want any other parents to have to bury their children because we didn’t learn lessons.”

Founded in northern Italy in 1961, Marcolin today distributes its eyewear collections in more than 125 countries.

It’s official. VSP Vision has completed the acquisition of Marcolin, a global leader in eyewear design, manufacturing and distribution, from PAI Partners and other minority shareholders.

“The acquisition of Marcolin marks another important milestone in our 70-year history of providing VSP members, clients, network doctors, owned retail locations and key customers with more value and choice,” VSP Vision president and chief executive officer Michael Guyette said in a statement. “Marcolin’s portfolio of globally renowned brands, manufacturing expertise and geographic presence greatly complement Marchon Eyewear’s brand portfolio and capabilities, further strengthening our ability to meet evolving customer needs throughout the world.”

According to the statement, Marcolin and Marchon, the U.S.-based eyewear designer, manufacturer and distributor of eyewear under VSP, will continue to operate as they do today.

Founded in northern Italy in 1961, Marcolin distributes its eyewear collections in more than 125 countries. Its portfolio of luxury and lifestyle brands includes Tom Ford, Zegna, Christian Louboutin, ic! berlin, Max Mara, Guess and many others.

CapM Advisors acted as the exclusive financial adviser, and Latham & Watkins acted as the legal adviser to the shareholders of Marcolin. Kirkland & Ellis LLP and Chiomenti acted as legal advisers to VSP.

The deal was first signed in September, but the purchase price was not disclosed.

The stock and value of the Goldman Sachs BDC have been falling

Goldman Sachs GS 1.01%increase; green up pointing triangle has been trying to clean up a mess inside its publicly traded private-lending company for more than three years. Investors are still unimpressed.

The bank’s business-development company, Goldman Sachs BDC GSBD 0.42%increase; green up pointing triangle, is primarily a lender to middle-market corporations. Like all BDCs, it raises funds by selling shares, or taking on its own debt, and lends it out in bespoke private-credit deals, with the income paid out in dividends. Those dividends have made BDCs a popular investment for individuals.

Thanks to souring loans, the per share value of Goldman BDC’s holdings has slid for seven straight quarters and its stock price has fallen even further. One analyst ranks Goldman BDC’s credit performance as 25th of 26 publicly traded BDCs, not exactly a place the Wall Street titan is used to holding.

The company has changed management and restructured loans by delaying interest payments and extending maturity dates. It says it is doing better with recent loans and some of its metrics have improved in the past year while waiting on the old loans to be cleared out. Analysts say the old loans are still a sizable portion of the portfolio.

“Where we’ve seen continued write-downs is on the more legacy names where we are not seeing a big turnaround,” David Miller, co-Chief Executive of Goldman Sachs BDC, said on the company’s earnings call last month. “But outside of those legacy names, we feel pretty good about the portfolio.”

The multiyear process and sliding results could signal how private credit, which has dramatically expanded, may sour for investors. Loan restructurings can take years to sort through, tying up capital and dragging down values, keeping stocks under pressure. Many BDCs are down this year.

After banks and lenders took losses this fall on companies allegedly committing fraud, the market has been anxious about the potential that more blowups could be hiding inside the private-credit world. The Goldman BDC trouble shows what can happen with more benign issues.

“The principal problem is credit losses, which have been more severe over the last couple of years,” said Wells Fargo’s BDC analyst Finian O’Shea, who ranked Goldman BDC 25th based on the losses. “You see better performance under recent leadership, but their track record [with the BDC] is still young.”

The BDC’s total assets are about $3.4 billion of the roughly $162 billion that Goldman’s private-credit business manages.

For many years, Goldman’s BDC functioned almost like an island, separate from the rest of Goldman’s private-lending asset management business. It bought loans tied to private-equity deals that were originated by other banks, according to former Goldman private-credit employees. Then it focused on lending directly to small and midsize companies, mostly backed by private-equity firms, ranging from fitness companies to a senior-care search engine. Some employees joked that the BDC wasn’t really part of Goldman—it was just renting Goldman’s office space.

That changed after Goldman CEO David Solomon brought all asset management teams under one umbrella and moved the BDC into its private-credit unit. Executives dug into the BDC’s portfolio and told colleagues that the loans had underwriting issues, including some that had been made to companies with weak financials that should have never been approved, according to former Goldman private-credit employees.

The firm appointed longtime Goldman executives from the bank’s internal private-credit business as new BDC leadership. Goldman also gave the BDC access to the private-equity deals Goldman’s investment bank works on and the means to pursue deals tied to bigger companies alongside the rest of Goldman’s private-credit business.

They are still dealing with loans that predated the changes.

Over the years, several fundings the BDC management highlighted publicly turned out to be weaker than projected shortly afterward. In the third quarter, 2.6% of its investment portfolio was essentially in default and presenting the risk of the BDC incurring a “substantial loss.”

During the coronavirus pandemic, the BDC was part of a group of lenders to Thrasio, a digital consumer-goods company that was buying up third party sellers on Amazon. Sales for Thrasio surged in the 2020 pandemic, allowing it to raise funds from debt and equity investors at valuations worth several billion dollars.

For more than three years, the BDC has been marking down the value of the Thrasio financing. By late 2023, Goldman’s BDC said it had moved at least some of those loans to nonaccrual status. In early 2024, Thrasio filed for bankruptcy, citing declines in online spending. That summer, the BDC said it had restructured a debt position with Thrasio, and that a loan with Thrasio remained in nonaccrual status.

A similar crash happened with Pluralsight, a technology-skills learning platform the BDC lent to in 2021, describing it as a “really attractive opportunity.” By 2024, the BDC had placed Pluralsight loans in nonaccrual status and was working with other lenders on a restructuring.

When an analyst asked if the BDC would factor any lessons from the experience into future underwriting, a BDC executive said that Pluralsight was operating at “negative margins” when the BDC lent to it. Goldman executives say the BDC has stopped originating loans for companies that aren’t generating cash flow.

Loan losses have taken a toll on the BDC’s net asset value, or the value of its underlying investment portfolio after liabilities. NAV fell to $12.75 per share in the third quarter, down about 20% from $15.92 in 2021. The NAV is also down because of several special payouts to investors this year.

The BDC has been doing a variety of loan modifications to keep them out of nonaccrual status. That hasn’t been enough to get some of those loans back on track.

There has also been a pickup in PIKs, short for payment-in-kind, which often involves delaying interest payments the borrower would have had to make, adding it to the loan’s outstanding balance. While it lessens the amount the borrower has to pay today, it pushes potential problems down the road and delays the timing of the interest payments the BDC had expected.

Five years ago, PIK at Goldman’s BDC trended at around 4% of its total investment income. It rose to about 12% last year, though fell to 8% in the third quarter.

Early this year, citing the expectation of the Fed’s rate cuts and an increase in competition, the BDC lowered its dividend. Loan losses also contributed to the decision.

Investing insurance premiums is different game on Wall Street than in Omaha

Lots of people want to invest insurance money these days. Nobody does it quite like Warren Buffett.

The seed capital Buffett’s Berkshire Hathaway BRK.B 0.17%increase; green up pointing triangle uses to maintain its vast investing empire comes from insurance premiums, dollars that often sit unused for months or years before going to pay claims. That cash—or “float” in Buffettspeak—sounds a lot like the money big private-equity and private-credit firms are increasingly seeking to control. Apollo Global Management APO 0.32%increase; green up pointing triangle Chief Executive Marc Rowan cited “elements of Berkshire Hathaway” when the firm merged with its insurance affiliate, Athene, four years ago.

On the surface, Apollo, KKR and others are following in Buffett’s footsteps in buying up insurance companies. But the firms famous for selling some of Wall Street’s most opaque and illiquid assets don’t really have much in common with the Oracle of Omaha.

Private-market managers like humdrum annuities: long-term insurance policies popular with retirees because they offer a regular stream of payments. That predictability allows insurers to be creative in how they invest insurance reserves, locking up money in private credit. The increasing complexity of their portfolios has kept the regulators who vet those investments busy.

Berkshire deploys its creativity on the insurance policy-writing side. The firm’s insurance chief of 39 years, Ajit Jain, once crafted a policy insuring Pepsi against having to award a $1 billion raffle prize. Buffett’s empire also includes auto insurer Geico and a range of other insurance and reinsurance operations that span the globe.

Jain said at Berkshire’s shareholder meeting in May that the firm has opted to shrink its—already comparatively small—life insurance volume over the past several years rather than compete with private-equity firms willing to assume more leverage and credit risk.

“We do not like the risk reward that these situations offer, and therefore we put up the white flag and said, ‘we can’t compete in this segment right now,’” Jain said.

Insurance isn’t the only turf Berkshire now has to share with private-equity firms: They both also buy up promising companies. Berkshire’s newest acquisition, OxyChem, was once courted by Apollo, and KKR has an internal investment arm one executive described as “a mini Berkshire Hathaway.”

But insurance offers a particular window into the radically different philosophies of a 95-year-old legend and the new crop of float-hungry investor-insurers, at a time when much about Berkshire’s future is up in the air.

Berkshire, a sprawling conglomerate that includes an energy company and BNSF Railway, will get a new CEO for the first time since the 1960s when Greg Abel steps into that role next month. Jain, 74, is nearly a decade past retirement age. Todd Combs, a former hedge-fund manager once groomed to help lead Berkshire’s investment portfolio, just left. And conglomerates, which used to dominate the stock market, have fallen out of favor.

Life insurance is changing, too. Athene is now the world’s top seller of annuities. Private-equity companies control about 20% of annuity reserves—money held to pay future claims—up from 2% in 2011, according to ratings firm A.M. Best. Life and annuity companies— whether they are owned by private-equity managers or by more traditional firms—are investing less in plain-vanilla bonds and more in higher-yielding private credit.

Regulators charged with protecting policyholders in market downturns are working to keep up. The National Association of Insurance Commissioners found some smaller ratings firms rating insurers’ private-credit holdings as many as six notches above what regulators believed was appropriate, according to research cited in a Fitch Ratings report earlier this year.

The American Council of Life Insurers said insurer investments, including private credit, are made in “a highly regulated, state-based system with a long track record of identifying and addressing risks.”

Both Athene and KKR-owned Global Atlantic carry strong investment-grade ratings from A.M. Best. Both have said publicly that the majority of their fixed-income holdings are rated by a major ratings firm—as opposed to the smaller groups the NAIC flagged—and that they carry more than four times the amount of capital regulators require.

Global Atlantic said it “manage(s) the business for extreme downside cases.” Apollo said regarding Athene: “Like Ajit Jain, we have been vocal about our decision in recent years not to reinsure run-off annuity books at prices that don’t make economic sense.”

Having loads of capital on hand is less important for an annuities firm than for an insurer like Berkshire that gets surprise bills for car crashes and natural disasters. But Buffett’s firm, with its $358 billion cash pile, is well capitalized even for a P & C firm, with investments equal to 1.1 times tangible equity compared with an industry average of 2.8, according to UBS research. (For life and annuity insurers, that figure is 8.5.)

Berkshire’s reinsurance group wrote nine to 10 cents of premiums per dollar of statutory capital in 2024, whereas the entire rest of the reinsurance industry wrote 87 cents of premiums per dollar of capital, according to calculations by Christopher Bloomstran, president and chief investment officer of Semper Augustus Investments Group.

“Unlike the rest, you will never hear Berkshire say they wrote the maximum business that capital would allow,” Bloomstran, who has invested in Berkshire since 2000, wrote in February.

That famous hold-your-powder strategy helped Buffett and Jain expand Berkshire’s insurance business in 2023 after a one-two punch of hurricanes and market losses left other property insurers and reinsurers reeling. When reinsurer Swiss Re’s investments in credit-default swaps tanked in the 2008 financial crisis, Berkshire injected $3 billion into the firm—an investment that paid out a steep 12%.

Jain predicted in May that private equity-run life insurers will “make a lot of money” in a good economy. But, he said, “at some point the regulators might get cranky and say, you’re taking too much risk on behalf of your policyholders.

“And that could end in tears.”