Business

1. Tariffs are here
2. Chasing beta
3. Antitrust cop takes a bow
4. Perplexity’s predicament
5. Meta’s manifestos

The billion-dollar doodle complex

In 2016, my then-colleague at The Wall Street Journal, Tim Martin, wrote a delightful story about the Nevada state pension, which was one guy in Carson City watching computers all day. The state had moved nearly all its retirement assets into boring index funds. The kicker? Nevada’s returns were as good or better than those deep in business with Wall Street money managers.

That debate — whether to try to beat the market, or just mirror it — has gained fresh urgency as the Magnificent 7 made US index funds the best-performing investment of our time. (Just ask the Buss family, which would have been financially better off owning the S&P 500 instead of the Los Angeles Lakers.)

I talked this week to Drew Warshaw, who’s campaigning for New York state comptroller and wants to run the Nevada play on its $270 billion pension plan. “It has been trying and failing to beat the market,” Warshaw told me. “I don’t think taxpayers should be funding something that’s impossible.”

Private investors had an edge for a while, hunting for value in unloved corners of the market. But the more money they raise — potentially trillions with President Donald Trump’s executive order allowing private assets in 401(k) accounts — the more they will whittle away at their advantage. We’ve seen it happen before: KKR’s wildcatters once returned 40% or more from early funds, but today the industry celebrates half that as a home run.

The iron law of investing is already reshaping alternatives. BlackRock, which put many stock-pickers out of business by launching index funds that showed their shortcomings, is quietly on the case. Apollo and State Street just launched an exchange-traded fund for private loans and more are coming. Passive investing will eventually colonize alternatives too — right around the time we stop calling them alternatives.

A programming note: We’re on vacation next week. Hope you’re all getting some time off, and we’ll see you on Aug. 19.

Cook comes bearing gifts

Trump’s global tariffs have mostly kicked in. Though key trading partners, including the EU and Japan, secured lower rates than initially threatened, Washington’s three biggest markets — Canada, China, and Mexico — are still negotiating, and the effective US tariff rate now sits at its highest level since World War II.

Meanwhile, tech companies hoping to get a pass from semiconductor tariffs will need to invest in US manufacturing. That brought Apple’s Tim Cook to the Oval Office yesterday, where he promised an additional $100 billion of investment and presented Trump with a plate of iPhone glass made in Kentucky. Cook, who proved a nimble political operator during Trump’s first term, has had a rockier go this time and now needs tariff exemptions to keep Apple’s profit margins high.

A plan for New York’s pension

A candidate running to be New York state’s chief money manager says he would pull the state’s huge pension fund — the third largest in America — away from Wall Street firms.

Drew Warshaw is running for New York state comptroller, a job most voters would struggle to define but one that includes oversight of the state’s $270 billion pension fund, which has about one-third of its money invested in private equity, private credit, and other unlisted assets. If he unseats 18-year incumbent Thomas DiNapoli, Warshaw’s plan is to move much of that into ultra-cheap, passive index funds.

“My starting position is ‘deeply skeptical’ and that these alternative asset classes have to prove their value,” Warshaw told Semafor. The fund, which has fallen short of its return goals over the past decade, “has been trying and failing to beat the market,” Warshaw said. “I don’t think taxpayers should be funding something that’s impossible.”

The question facing New York and other pension funds, endowments, and government funds around the world: Are these high-priced managers worth the fees they’re charging? And as they chase trillions of dollars from retail investors — aided this week by Trump’s executive order allowing private assets in 401(k) plans — can they keep up their returns?

‘You’re welcome,’ Biden DOJ chief tells Figma’s billionaires

When Adobe’s $20 billion deal for design software firm Figma collapsed in 2023 under global antitrust scrutiny, investors complained loudly about Biden’s competition cops. Now out of office, one of them has a message: “You’re welcome,” Jonathan Kanter, who investigated the Figma sale as the Justice Department’s antitrust chief, tells Semafor.

Figma’s IPO last week made those same investors far more money than selling to Adobe would; shares have nearly tripled. “The Mag Seven, in my view, should be the Mag 70. So I’m very excited for Figma,” Kanter said.

Kanter sees Figma’s early thriving, as a public company worth $44 billion rather than an Adobe offering, as vindication. In a wide-ranging interview, Kanter defended his and FTC Chair Lina Khan’s record and puzzled through the Trump administration’s approach to antitrust, which appears torn between a reflexive bent toward deregulation and a populist distrust of corporate power. He also said he’s concerned about antitrust enforcement being politicized in the Trump era, as seen in the recent firing of two DOJ deputies working on the review of HPE’s $14 billion acquisition of Juniper.

“It’s a big problem if decisions are being made based on political favors and lobbying,” he said.

Why Perplexity didn’t wait for perfection

AI is in its “minimum viable product” age. When CEO Aravind Srinivas launched Perplexity’s Comet web browser last month, he knew it wouldn’t live up to his vision of an operating system for the AI era, handling monotonous, time-sucking online tasks without any human help. The AI models that power it weren’t good enough, and compute costs were astronomical. But out it went.

“You’ve got to position your product and your technology with the assumption that the models are eventually going to be great and also going to be affordable,” Srinivas said in an in-depth interview with Semafor’s Reed Albergotti.

Silicon Valley has never waited for perfection — “move fast and break things” was then-Facebook’s internal mantra for years — but the speed of AI development has only increased its tolerance. OpenAI’s chief product officer recently talked about “building products that only kind of work.” That’s unnerving AI critics, who worry about the technology’s destructive potential.

Meta’s manifesto moment(s)

Mark Zuckerberg is a manifesto guy. At various crisis points in Meta’s history, he has penned memos meant to calm critics, refocus employees, rebrand the company — literally, in 2019 — around the order of the day: connection, privacy, the metaverse, and now, AI.

His manifesto last week on “personal superintelligence” finally put a vision, if not product specifics, behind the huge checkbook he’s been dangling across Silicon Valley to lure AI talent. He paints other unnamed AI executives as dystopian autocrats creating a centrally planned AI economy, “and then humanity will live on a dole of its output.” He manages not to use the word “agent” once.

Om Malik, a longtime Zuckerberg watcher who founded the now-defunct tech media company GigaOm, published an intriguing dissection of Meta’s manifestos as a way to understand the key to its success: corporate shape-shifting. “Most CEOs defend their existing moats,” he writes. “Zuckerberg systematically abandons them.” His lack of any single vision is his vision, Malik told Liz, and it’s served Meta well.

But Zuckerberg’s understanding that “Meta’s real asset isn’t any app, it’s attention” will make it harder for the company to build products to own the AI future, he said. Meta has bought or copied all of its big winners, cribbing behaviors (like swipe, snap, message) from others. It lacks a cloud business that will benefit from AI adoption, and its bet for the moment seems to be that AI will create better, more-targeted, and cheaper ads. “Other companies are out building ambitious products,” Malik said. “Meta has never really done that.”

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➚ BUY: Ships. Maersk raised its investor guidance as its CEO noted “strong export growth pretty much everywhere,” except the US.

➘ SELL: Chips. Trump demanded the resignation of Intel’s CEO, whose personal investments in China have become problematic for a company that depends on Washington’s support.

Companies & Deals

• Lagging indicator: Snap’s ad revenue is barely outpacing US nominal GDP growth. Like Meta, it’s betting on AI to turn the tide.
• Teddy-bear hug: US Foods’ CEO, on his quarterly earnings call, took the opportunity to publicly plead with a rival they’ve been pursuing, Performance Foods, to call him back. “Our ask of PFG is to simply work together,” CEO Dave Flitman said.
• Carry me into the night: The number of UK private-equity dealmakers receiving a slice of investment profits declined in 2024 for the first time in seven years, tax data shows.
• Bitter pill: Eli Lilly’s long-awaited obesity pill helped patients lose weight but still disappointed investors, who sent shares down 14% today. The drug is likely to be a blockbuster, showing that the market may be over its skis on GLP-1s.

Watchdogs

• Once more with feeling: The CEOs of Citi and Bank of America met with Trump to discuss plans to privatize Fannie Mae and Freddie Mac, Reuters reported.
• Private-to-public: Trump’s campaign against alleged antisemitism on campuses has expanded from private to public universities. UCLA is facing a nearly $600 million freeze in research funding.
• Into the frying pan: Trump could punish banks that have already taken steps to address allegations that they “debanked” customers for political or religious reasons, according to a draft of a forthcoming executive order.
• Waller world: Fed governor Chris Waller has emerged among Trump’s advisors as the frontrunner to replace Jerome Powell as Fed chair, Bloomberg reported.

Markets

• Squaring the Circle: A new fund will give investors twice the daily price moves of Circle, the stablecoin issuer whose stock price has quintupled since its June IPO. More than 150 turbocharged ETFs have launched since 2022, the largest of which amplifies Tesla’s gains and losses. “There’s potential for one of these products to lose their complete value in a single day,” a Bloomberg analyst warned.