Behind the Tom Cruise deepfakes that can evade disinformation tools

Not since he was last seen jumping on Oprah Winfrey’s sofa has a video of Tom Cruise generated so many headlines.

Except this time it was not Tom Cruise, but a set of sophisticated deepfakes so convincing that they quickly generated nearly 12m views when they appeared on TikTok last week under the account @deeptomcruise.

Their incredible realism stoked new fears over the implications of the technology in the hands of those intent on spreading disinformation, but the man behind the videos, Belgian visual effects expert Chris Ume, wants people to know the sophistication of his videos is not so easily replicable.

“It’s a fantasy that people can do this from their own computer,” said Ume, a former cameraman who entered the visual effects field around five years ago. “You can’t create art using a bicycle.”

The hyperrealism achieved in these particular clips required months of preparation on top of Ume’s skills in traditional visual effects and deepfakes, high-end hardware, and the talents of Tom Cruise impersonator Miles Fisher.

Ume spent two months training an artificial intelligence program with a huge number of images of Cruise in order to create a digital replica, with a few additional days to adjust it for each individual scene. The videos, which are less than a minute long, required 24 hours of post-production work each.

The end results are startlingly realistic. In one of the videos, the synthetic Cruise shows off a coin trick, ending with the line: “It’s all the real thing”, followed by the actor’s signature laugh. In other videos, he can be seen golfing or tripping over a carpet, without breaking the illusion.

Henry Ajder, an expert on synthetic media, noted that even some of the publicly available deepfake detectors had been fooled. “The fact that these examples evaded some tools shows there is a long way to go before we can have confidence deploying them in critical scenarios, at least in the case of videos,” he said.

Deepfakes have been the subject of distrust over the potential for disinformation since they emerged in 2017. But Ajder pointed out that documented political deepfakes to date have been satirical or educational. Over-emphasising their prevalence, he said, risked giving politicians plausible deniability in genuine cases of wrongdoing.

Several social media companies have taken steps to prohibit or limit deepfakes. In August, TikTok announced a ban on misleading “synthetic or manipulated content”. Facebook announced a specific ban on deepfakes in January with exceptions for parody and satire, while Twitter’s policy is to label tweets with manipulated or synthetic media, but only to remove them if they are likely to cause harm.

© Kris Van Exel

Ume said he supported laws to govern the misuse of the technology. “The technique might get better and in a few years, people with bad intentions might start to use it,” he said. “I strongly think there should be laws: There is always going to be misuse — every tech has to deal with these kind of things.”

“I never want to use it in a malicious way, I just want to make people smile,” he added. “I’m glad I did this — it managed to create awareness and actually fulfilled its purpose.”

Ume, who is among the vanguard of deepfake creators who turned their hobbies into professional-grade work, began dabbling in synthetic media in 2018, after watching a news bulletin about the subject.

His earlier work on YouTube includes a video of Kit Harington, the actor who played Jon Snow, apologising for the controversial final season of Game of Thrones. “I really didn’t like Season 8”, he said.

Synthetic media is increasingly ubiquitous. Last week, MyHeritage and computer vision company D-ID unveiled ‘deep nostalgia’, which can create short videos from uploaded photos

The $100 bill as animated by the MyHeritage Deep Nostalgia site

Ume is currently working on Sassy Justice, a synthetic media show from South Park creators Trey Parker and Matt Stone, alongside British comic Peter Serafinowicz.

Ume, who appears to be enjoying his recent notoriety, said he had achieved one of his dreams by working with Parker and Stone. The other is to be part of a new Lord of the Rings.

“If Peter Jackson is reading this I’m here,” he said, pointing to an animation he made of Gollum singing along to Sinead O’Connor.

US hiring roared back in February as Covid cases declined

The US economy created 379,000 jobs in February, pointing to a sharp rebound in the American labour market amid a rapid decline in coronavirus cases nationwide.

The increase in employment last month was more than double its pace in January, when the economy created 166,000 jobs after shedding 306,000 positions during the pandemic’s winter surge in December.

However, it still leaves the world’s largest economy 9.5m jobs short of its pre-pandemic levels. The US unemployment rate edged down to 6.2 per cent.

A sell-off in US government debt accelerated after the jobs report was released on Friday. The yield on 10-year Treasury bond climbed 0.05 percentage points to 1.62 per cent — its highest since February 2020 —extending losses that wracked up yesterday after Federal Reserve chairman Jay Powell failed to quell concerns about the destabilising rise in Treasury yields in recent weeks.

Treasuries came under extreme pressure last week, as investors positioned for higher inflation and the potential for the Fed to tighten its ultra-easy monetary policy earlier than expected.

S&P 500 futures pointed to a slight gain at the start of trading in New York, while the US dollar index edged higher by 0.5 per cent.

The figures from the US labour department offered critical guidance to economists and policymakers about the trajectory of the US recovery at a moment of high sensitivity in the markets, with both equities and long-term US Treasuries hit by a sell-off on Thursday.

Many economists have recently upgraded their outlook for growth in 2021 on expectations of a swift vaccination rollout and the implementation of president Joe Biden’s $1.9tn stimulus plan.

But Jay Powell, the Fed chairman, sparked the market losses on Thursday after he said that the US central bank was unlikely to act in response to any temporary jump in inflation or rise in debt yields caused by the economic improvement.

The labour market is one of the weakest spots of the US recovery, with nearly 10m fewer Americans employed compared to the start of the pandemic, mainly in service-sector jobs most affected by the crisis.

After the dramatic hit suffered in March and April of last year, Americans went back to work in large numbers over the summer, but that progress stalled over the winter months.

Economists fear that even as jobs growth accelerates this year as the pandemic recedes and more fiscal support is added, many Americans will fail to return to their old jobs and could even be left out of the workforce.

Iran urges US to lift sanctions within a year to restart nuclear talks

Iran would be ready to resume talks on the nuclear deal with the US and other western powers if they provide a “clear signal” that sanctions will be lifted within a year, a senior Iranian conservative figure and a potential presidential candidate has said.

“They can announce and reassure us that all sanctions imposed after the JCPOA [the 2015 nuclear accord] would be lifted in less than one year and tell us to go and negotiate this process,” Mohsen Rezaei, who led the Revolutionary Guards for 16 years, said in an interview with the Financial Times. These comments are the clearest indication yet of the Islamic republic’s willingness to engage with the US.

Donald Trump pulled the US out of the nuclear deal with global powers in 2018, imposing the toughest sanctions yet on the republic as his administration sought to secure a new deal that included Iran’s regional and military policies.

President Joe Biden is willing to return to the deal provided Iran, which has rolled back most of its commitments under the accord, also returns to full compliance. Iran said the US should return to the nuclear agreement unconditionally because it was the one that left it.

“We have to see every month during the talks that some sanctions which are of urgency to us are being lifted,” Rezaei said, outlining Iran’s most detailed demands yet for a return to the discussions.

“For instance, sanctions on financial transactions and restrictions that European banks have imposed should be lifted in the first month. Oil exports are also among our top priorities.”

He said other US moves such as, for example, helping unfreeze billions of dollars of Iranian money held in overseas banks as an encouragement to start talks, would be akin to giving the republic “a candy”.

In recent weeks, all sides have taken steps to demonstrate their determination to find a way out. After a last-minute deal with the UN atomic watchdog, Iran softened the impact of its decision to stop snap inspections for three months.

European countries this week did not submit a resolution at the International Atomic Energy Agency, which was planned to criticise Tehran for its breaches of the nuclear deal. The US has said that it will be prepared to meet Iran in a format organised by the EU, as co-ordinator of the JCPOA joint commission. 

Rezaei, centre, pictured in May 2013 walking through a bazaar in Tehran © Majid Saeedi/Getty

Iran would use its “numerous leverages within our rights and international norms to make the US retreat and lift the sanctions”, Rezaei said, adding that Iran “will not put a step forward as long as we do not see any actions from Americans and as long as there is no trust-building”. “Our nuclear programme will go ahead,” he added.

While the US and European countries have long wanted further agreements to curb Iran’s missile programme and role in regional conflicts, Tehran has always resisted this pressure. “Mr Biden may have some wishes,” but “they cannot be materialised in these fields”, Rezaei said.

“Iran also enjoys a very significant geopolitical position in the region. No issue can be addressed in the region without Iran’s involvement.”

Rezaei said Iran saw no reason not “to develop defensive weapons within our legitimate defence policies which exclude atomic bombs and weapons as they are not acceptable to us”. Asked if the country intended to extend the current range for ballistic missiles, he added: “We consider such limitations [keeping the range for ballistic missiles at 2,000km] for now as long as our enemies do not develop missiles beyond this range to hit us.”

Rezaei, 66, is the secretary of the Expediency Council, which drafts the country’s macro policies for approval by supreme leader Ayatollah Ali Khamenei, and stepped down as head of the guards in 1997. Unusually, he was allowed to return to the military seven years ago and still wears his uniform on special occasions.

With centrist president Hassan Rouhani set to stand down this year after two terms, a power struggle between hardliners has intensified. Rezaei, who has run for president twice before, is tipped as a hardline presidential candidate. Asked about the presidency, he said he had not decided.

Pro-reform forces have voiced concern about military figures occupying one of the state’s most senior roles. “What’s wrong if military figures come to power [presidency] through democratic means?” Rezaei said, citing France’s Charles de Gaulle and the US’s Dwight D Eisenhower. “Iranians have come to the conclusion that they need a strong, effective and responsible government which is held accountable. These features are stronger in a veteran and military figures than others.”

He rejected speculation that hardliners might delay engagement with the US until after the election. The timing of talks depends on the country’s “national interests”, he said, stressing that it was the supreme leader who defined the policy on negotiation. “This time again there is one voice coming out of Iran as happened during the nuclear talks [2013-2015] and that is what the supreme leader says.”

Rezaei shrugged off the impact of sanctions on a country that is battling high inflation and recession and said Iran should prioritise its economy.

“There is no reason for us to help security in Iraq and Syria, and then to see other countries reap economic benefits. Iranian-made goods should have a strong presence in the region,” he said.

New York state of mind: optimism fuels the property market

New York’s rebirth began in mid-February, after the final dump of snow, while Texas shivered in an unforeseen freeze. Spring came all at once, with blue skies and jostling for the outdoor tables at the coffee shop around the corner. For months, they had lain as empty as a seaside promenade in winter.

The masked dog-walkers now stopped and chatted to each other, instead of circling the park in silent meditation. The vaccines are arriving, lurch by lurch, and New York’s governor, Andrew Cuomo, is getting his comeuppance: for years he prided himself on his alpha-male management style, which culminated in praise for his early handling of the pandemic.

Now it is alleged he understated the effect of the virus on nursing home residents and two of his former female employees have accused him of inappropriate behaviour. The many politicians he stamped on over the years are now clamouring for his removal. After the plague, the purge.

It is a reach to say the city’s property markets are roaring back, but the beast is certainly stirring. The first two months of 2021 have been the strongest opening to a year in Manhattan since 2015, the height of the market. February alone saw more new deals than any single month since May 2013.

Stylish Gramercy Park in Manhattan: February alone saw more new property transactions than any month since May 2013 © SZENES/EPA-EFE/REX/Shutterstock

People in one-bedroom apartments are trading up. Families are looking for extra rooms and outdoor space. And wealthy opportunists, both American and international, are looking for abandoned trophies and fistfuls of apartments from hollow-eyed developers. High levels of inventory and discriminating buyers mean that prices are still well below their peak, but at least contracts are once again flying.

I moved into a five-storey apartment building in Gramercy last August, a premature bet on the end of the crisis. Until December, every apartment but mine was empty. The Italian couple next door had decided to stay in Italy. The family below had returned to France with no plans to return.

Others had fled west and south in search of space. While the stock markets blazed, all the heat went to Florida, as the wagon train of money managers rumbled out of the city that had made them rich. Others settled for Connecticut and New Jersey.

New Yorkers brave the February cold to dine out — literally New Yorkers brave the February cold to dine out — literally © Bloomberg

The Macedonian super and I would chat, sifting through the drifts of mail in the lobby. It felt as if we had been abandoned to a city under siege. If the hordes were arming trebuchets in Astoria before the assault on Manhattan, we would be the last to know.

The local gym stayed open but felt like a meat processing plant, with endless temperature checks and spritzes of disinfectant every time you touched a surface. The muscle freaks sat gloomily on their machines, heaving away, then scrolling through their phones in search of god knows what.

Bar chart of Contracts signed in Jan & Feb, year-on-year, by price bracket showing New property deals in Manhattan

After 9/11, as the ashes fell and firefighters bivouacked along the West Side Highway, the property sharks began circling for deals downtown. You don’t win in New York real estate by being squeamish. Ask Donald Trump. But the pandemic was different. Its slow unfurling kept even the most aggressive off balance for months, not hours.

Last March the property markets crashed and froze. Showings were halted and closings stalled. In April, when Jeff Bezos spent $16m on a fourth apartment to add to the three he already owned at 212 Fifth Avenue, next to Madison Square Park, there was hope that the dead cat of Manhattan real estate might bounce.

It didn’t. Developers were left dusting miles of unwanted marble countertops and commiserating with their creditors.

Line chart of Median price ($m) showing New York property prices

Raymond Chalmé, the chief executive of Broad Street Development, was hitting the final stages of his latest project, 40 Bleecker Street in NoHo, just as the pandemic struck. “The market stopped completely. We had sold over 50 per cent of the building and now we had to deliver. But you had a city that couldn’t figure out which way to go,” he says.

Summer came and went, with Black Lives Matter protests, midnight drag racing on the West Side Highway and a disturbing rise in homelessness. Brokers figured out how to stage virtual showings and execute closings online. Buyers went to Brooklyn and Queens and the nearby suburbs, in search of space, preferably houses with gardens.

Pebble Beach, Main Street Park, Brooklyn: the pandemic sent many homebuyers out of central New York to find more space Pebble Beach, Main Street Park, Brooklyn: the pandemic sent many homebuyers out of central New York to find more space © Bloomberg

While the Hamptons heaved, tumbleweed blew through the streets of Manhattan.

Nikki Field, who runs a team of 22 sales agents at Sotheby’s International Realty, says the crisis forced everyone in her profession to sit back and take stock. As autumn approached, her team was reaching out to potential clients, including individuals, family offices and wealth advisers, telling them to “come now, come fast for the greatest deals in a generation”.

Developers were getting desperate to sell and willing to do deals, to cut prices and increase the perks — such as covering charges and taxes — especially if you were ready to buy in bulk. There were flickers of life in the market. With the election and the arrival of vaccines, the flickers turned to flames.

Pamela Liebman, chief executive of the Corcoran Group, says the comeback is now exceeding expectations and puts it down to low interest rates, affordability and a combination of significant inventory and pent-up demand.

“When the pandemic started, it caused a lot of New Yorkers to reconsider their living situations. If they were thinking of leaving for the suburbs or a lower-tax state, this accelerated their decision. Those who stayed took a microscope to their apartments — do I need a home office, do I need another bedroom, do I need outdoor space? What’s wrong with my place, how can I make it better?”

Mural featuring the late Supreme Court Justice Ruth Bader Ginsburg by street artist Elle, East Village Mural featuring the late Supreme Court Justice Ruth Bader Ginsburg by street artist Elle, East Village © Getty Images

During the darkest months, Liebman says, looking at real estate websites was like looking at Netflix. A source of entertainment. But now buyers are serious and the company had its busiest January since 2015. “It’s people who need multiple bedrooms trading up. People who live in the suburbs who could never afford a pied-à-terre [before] are a huge part of the buying population. [As are] people helping their kids buy versus rent. People who want outdoor space.”

According to Garrett Derderian of the Serhant brokerage, prices across the board are down about 10 per cent from the pandemic, but the discounts go higher the more expensive the property, particularly over $20m.

Alexa Lambert at Compass, another of the city’s top brokers, says the past year has been a “complete rollercoaster”. In the midst of the pandemic, people were asking for a “Covid discount” of 20-30 per cent. But by mid-to-late fall, the mindset shifted. Since then, Lambert has sold all but two of the 15 apartments at the Benson, a new development on the Upper East Side. The least expensive was just under $13m.

Visitors queue for the reopening of the Metropolitan Museum of Art in August: many people are missing the cultural offerings of New York and are looking to move back after the pandemic pushed them out Visitors queue for the reopening of the Metropolitan Museum of Art in August: many people are missing the cultural offerings of New York and are looking to move back after the pandemic pushed them out © Bloomberg

“I feel this vibe now that people who have left New York are bored where they are,” says Lambert. “They want to come back, eat in restaurants, go to museums, go to the ballet. They’re thinking, we’ve walked down this country lane one too many times.”

She and her husband, a commissioner with the New York Police Department, never left and saw the city adapt rather than die. Lambert wore a ski jacket and fingerless mittens to make the most of sub-zero outdoor dining, and regularly booked tickets to visit an empty Metropolitan Museum of Art. “It was the most amazing museum experience I’ve had in my life.”

In January, I went to see the Donald Judd show at the Museum of Modern Art three times in a week, to try to figure what if anything I thought of his minimalist monoliths. The usually crowded museum was quiet. And more enticing than Judd’s sterile work were the photographs of his home and working spaces in Marfa, Texas, which seemed boundless compared with bunched-up New York.

For Chalmé and 40 Bleecker Street, the interminable wait of last year is now just an unpleasant memory. In July, he was able to restart construction. “Thank God, our buyers held firm. They understood the neighbourhood and that this would get resolved.”

Developer Raymond Chalmé was finalising his project at 40 Bleecker Street, in NoHo, when the pandemic struck — ‘The market stopped completely,’ he says, but he has since been able to restart construction Developer Raymond Chalmé was finalising his project at 40 Bleecker Street, in NoHo, when the pandemic struck — ‘The market stopped completely,’ he says, but he has since been able to restart construction © BROOKE HOLM 2017

Now, he says, buyers are returning to good buildings in good neighbourhoods where there is scarcity of supply. “We may never have YOLO [You Only Live Once],” he says, referring to the recklessness that once might have caused super-wealthy buyers to risk overpaying for luxury homes, “but there’s FOMO [Fear of Missing Out] now in established areas.”

Chalmé believes that eventually, New York real estate will follow the financial markets, as investors look beyond the current crisis to price assets according to their post-pandemic prospects. Deep-pocketed investors have been piling in for the past couple of months.

But the better news for a sustainable recovery is that New Yorkers who live and work and raise their families in the city, the “regular rich”, are once again on the march, putting in multiple bids on homes in the most liveable neighbourhoods, such as the Upper East Side and the West Village. The market for homes around $4m is as busy as it has ever been.

Low interest rates, affordability and pent-up demand are contributing to the rise in property market activity Low interest rates, affordability and pent-up demand are contributing to the rise in property market activity © Getty Images

In his own development, Chalmé says buyers “aren’t the typical investors looking for the best value or to move money around, but people who want to live here. That’s a very promising thing for New York City.”

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Field says that there has not been the massive dump of inventory she feared. Many of those who left New York were hesitant to sever their relationship entirely. Families “were handcuffed with pleasure to their schools. They loved the advantages their children were getting, the networks. The schools [have been] the anchor keeping them in the city and they were hesitant to sell.” There was never the desperate fire sale some had anticipated.

As the market returns to normal, foreclosures will restart on the developers who didn’t make it through and the bargain hunters will have another feast. International buyers will come back to give prices another goose.

The other day, for the first time in nearly a year, there wasn’t a Citi Bike to be had at the stand at the end of my street. For months, I had my pick of 25. Restaurants are back at 35 per cent indoor capacity. Subways are filling up. The museums are still quiet but no longer silent.

The gangs of teenagers on fat-tyred bikes who used to cruise an empty Park Avenue every afternoon have vanished. I wouldn’t quite say I was nostalgic, but in a strange way I’m glad I didn’t miss out.

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UBS chief Hamers on track to be one of Europe’s best-paid bankers

UBS’s new chief executive Ralph Hamers has been paid SFr4.2 ($4.5m) for his first four months of work, more than his entire annual earnings during his time at the head of Dutch bank ING.

The bumper payout, which was revealed on Friday by the Swiss bank in its latest annual report, puts him on course to contend with his predecessor, Sergio Ermotti, as one of Europe’s highest-paid bankers and chief executives.

Profits at UBS surged in 2020 despite the economic turmoil caused by the coronavirus pandemic, as the bank’s super-wealthy clients moved to protect their assets and take advantage of dislocations, earning huge fees for their advisers.

Hamers started at UBS on September 1, and took over from Ermotti as chief executive on November 1.

“Ralph Hamers decisively led UBS as Group CEO through the fourth quarter and delivered very strong results, thereby successfully completing the year and contributing to achieving the best results for UBS in a decade,” the UBS compensation committee said in the bank’s annual report.

UBS increased its total bonus pool to SFr3.3bn for 2020 after beating all of its key quantitative financial performance targets, the report added.

The first few months in charge at UBS have not been without challenges for Hamers.

He was forced on to the back foot barely a month into his tenure as chief executive when a Dutch court announced it was investigating him for his role in a money-laundering scandal during his time at ING.

Hamers has vigorously rejected any wrongdoing and the UBS board has said it fully supports him.

The bank is also waiting on the outcome of a big tax case in France, which it had hoped to resolve months ago. An appeal against a €4.5bn fine for facilitating tax evasion is due to be heard this spring.

Payouts at UBS are up by 24 per cent compared to 2019 — when it undershot financial targets — and 6 per cent on 2018. Total pay for members of the lender’s executive committee rose by a fifth, year on year.

UBS said it had awarded Ermotti a total package of SFr13.3 ($14.4m) for 2020, meaning he has earned more than SFr60m over the course of his nine-year tenure at the head of the bank. The 60-year-old Swiss national is to take over as chairman of insurer Swiss Re this year.

Unveiling its full-year results in January, UBS pledged to return billions of dollars to shareholders in the coming months on the back of a sharp rise in profits. Full-year net earnings for the bank rose 54 per cent to $6.6bn.

The bank intends to buy back $4.5bn of stock over the next three years.

Hamers has said he intends to prioritise cost control and digitisation efforts at the group, but he has so far stopped short of unveiling a full strategic plan.

Shares in UBS rose 0.7 per cent to SFr14.54 by noon on Friday.

The CEO whisperer: ‘Every leader needs a fool’

“Everybody is normal until you know them better,” Manfred Kets de Vries tells me. As a leading explorer of top executives’ psyches, Kets de Vries has, for decades, had a close-up view of what drives those at the top, and what dark thoughts lurk behind their domineering facades.

The 78-year-old professor has written more than 50 books and 400 articles and book chapters, many of them examining leaders’ narcissism, how they are affected by their early relationships, and what that does to their communication — or lack of it — with their loved ones and staff. I observe that not many people have, as he puts it in his most recent book, combined John Maynard Keynes’s “dismal science” with Sigmund Freud’s “impossible profession”.

“Not many people are as crazy,” he says. While trained in classical psychoanalysis, along with a Harvard MBA and doctorate, he says that when it comes to encouraging self-reflection in his top-executive students, “I do anything that works. I’m not a holy man.” 

We are talking over video from our kitchens, mine in north London, his up a mountain outside Grasse. He has chosen to sit out the coronavirus pandemic in his farmhouse there, finding it a more congenial base than his Paris apartment.

This is not to be one of those Zoom lunches where the two sides order a takeaway. In an email the week before, Kets de Vries tells me that he will be having a four-course meal, partly cooked by his Swedish wife, Elisabet Engellau, his co-teacher at the Fontainebleau-based business school Insead and “somewhat of a two-star Michelin cook”, supplemented by specialities from nearby Cannes. I have, in my kitchen, tried to match Engellau’s efforts, in quantity if not in skill.

Both our kitchens are gleaming with winter sunlight. He introduces me to two wines he will be drinking. He holds up a glass of white, 2016 Chablis Grenouille, and then a glass of red. The executives on one of the seminars he runs at Insead decided they needed something to bind them together afterwards, so they bought a vineyard in Mendoza, Argentina, and gave him a small share. He holds up the bottle: Alpasión Grand Malbec. The label carries the fingerprints of everyone in the class, and his. 

He and Engellau bought his starter, foie gras, the day before from Ernest Traiteur, one of their favourite Cannes food places. “This is the best foie gras I know,” he says. I have a home-made bowl of hummus.

Kets de Vries was born in 1942 in Nazi-occupied Holland. “Food has always been a very important thing in my life because there was not much available in the war. My mother had to go on expeditions, very dangerous actually, to get food, to do some trading with the farmers on the other side of the country.” 

I have done some reading about his family, his maternal grandparents and mother, and his Jewish father. The website of Yad Vashem, the Holocaust remembrance centre in Jerusalem, lists Kets de Vries’s grandparents, Florian and Emilie Houtman, and his mother, Henriette, as “righteous among the nations” — non-Jews who saved Jews during the war. His grandfather, a Dutchman, had lived in Germany, where he had married and had two girls. The family moved to the Netherlands in the 1930s, where both daughters married Jewish men. During the occupation, his grandparents hid up to 10 Jews in the farmhouse. 

“I was not very conscious of it, but I was a danger, of course, because I was a small kid and I could talk when the police would pass,” he says. “My mother was very much affected by it. [After the war] she talked all the time about it. With my grandfather, a strong memory I have is sitting with him listening to the radio about the Nuremberg trials.” We are barely a quarter of an hour into our conversation. His voice is faltering. 

“I think it has affected me. What can I do? I run this little seminar at Insead, for example. Maybe 21 people I take every year. [They are] maybe responsible for 100,000 people. If I can make them a bit more humane, a little more effective, it can have a trickle effect into the rest of the organisation. That’s my fantasy. You have to dream.”

At 17, Kets de Vries began his association with Harvard, attending a summer school there. After studying economics in the Netherlands, he headed back to the US and to Harvard Business School, where someone suggested he take “this funny course by a man named Abraham Zaleznik: psychoanalytic psychology and management theory”. 

Zaleznik was one of the pioneers of examining management through a psychoanalytic lens. Kets de Vries was initially awed by him. “Coming from a European setting, professors were always very glorious. Everybody else always called him Abe. I called him Professor Zaleznik. Partly it’s the Dutch culture. In the Dutch culture you had the polite form and the not-so-polite form. I always called my father in the polite form, my mother in the informal form.”

He had hopes of a Harvard career. His teaching was highly rated. But the business school refused him a full-time job. He was too close to Zaleznik, who had fallen out with the school’s organisational behaviour professors. “Academics can be very good at character assassination.”

His wife appears with his main course, sea bass with beurre blanc sauce, whose ingredients include lemons from a tree in their garden that they brought back from Tajikistan. I hold up the sea bass I have baked: a Greek dish with tomatoes, bay leaves, lemon and honey. 

We return to his academic trajectory. Over the years, his wife has persuaded him that the Harvard rejection was for the best. He has spent his career at Insead, with an 11-year stint at McGill University in Montreal. If he had won a post at Harvard, he would have had to fit into its framework. “At Insead and McGill I was free. As long as I performed, I could do what I wanted.”

What he wanted was to be a “corporate pathologist”. He has written about how some narcissism can be helpful in a leader. How does one stop that from progressing to someone like Donald Trump, whom he calls “a malignant narcissist”?

“This is the most difficult question to answer.” As soon as you become a leader, he says, you are surrounded by liars. People tell you what you want to hear. “Very quickly, you find yourself in a hall of mirrors . . . And people who don’t tell you what you want to hear, you fire. So you get into this echo chamber.”


Manfred Kets de Vries
At home in Grasse, France

Foie gras truffé
Sea bass with beurre blanc
Cherry tomato and avocado salad with Mont d’Or cheese
Lemon meringue cake

Wine: 2016 Chablis Grenouille 
Alpasión Grand Malbec 

Michael Skapinker
At home in London

Baked sea bass
Tomato and avocado salad with Lubborn Creamery English goat’s cheese
Fresh fruit salad
Fresh mint tea

Wine: Fish Hoek Chenin Blanc 

He moves on to his next course: cherry tomatoes and avocado with Mont d’Or cheese. I have the same salad, with an English goat’s cheese. What can be done to break into that echo chamber? “Every leader needs a fool,” he says. Someone to tell them the truth? Who: the chairman, their best friend? “Your wife, your husband. And the fool should tell you you’re full of shit, on a regular basis.” Consultants? “Never hire a hungry consultant. Never.” Because they will tell you what you want to hear? “Exactly.” 

I ask him about corporate greed and excessive executive pay. Are these overpaid bosses trying to fill an emotional hole? “It will never be filled. It’s like taking cocaine. You need your fix all the time. It’s actually quite sad. My father always said, ‘you can only eat one steak a day’.”

What’s missing in these people’s lives? “To be very simple, they didn’t get enough attention when they were younger.” What can be done? “They could actually be helped by seeing a psychotherapist, spending some time with them.” They could explore the meaning of their lives, he says. “What is meaning? I’ll give you a little lecture. In the first place, it has to do with belonging, having good friends and family members. That’s the most important thing. The second thing is having some purpose in life. I have a little purpose, I want to make a better world by helping some executives. The third thing has to do with competence. You’re a writer. I’m a writer too and I get pleasure sometimes when I see a nice paragraph after bumbling around and trying to reconstruct things.” Then there is choice, of a partner and career. The final requirement is “transcendence, to go beyond yourself”, he says. “Happiness is something to do, someone to love and something to hope for.”

Isn’t the problem that many executives are sceptical about psychotherapy? Yes, he says, so these business leaders call it something else. “Why do you think everybody calls himself a coach?”

We move on to dessert. Lemon meringue cake for him from Lenôtre, a pastry shop in Cannes, and fruit salad with a dollop of Greek yoghurt for me.

I observe that he has mentioned his father several times. He pauses, and returns to the war years. “In Holland, all the Jews were picked up. And Holland was very well organised, the percentage of people who were killed was extremely high, in spite of all the heroic statements made afterwards.” Because his father was married to a non-Jew, he was initially left alone. But then he was detained. Twice he was put in a holding camp, awaiting deportation to Auschwitz. 

“My mother somehow, I think, bribed, or whatever she did, the camp commander and got him out. She spoke fluent German, remember she was brought up in Germany.” Other members of his father’s family did not escape. “They all ended up there, in . . .” His voice trails off.

Unlike his mother, his father, who ran a textile company, never spoke about that time. “Having close family members — brother, sister — die, he couldn’t talk about it. Basically, he blanked it out. And it was not like he was resentful towards Germans. He built up a very good relationship with Germans. He was ready to forgive.”

His parents’ marriage did not survive. “I think my father was quite confused at the time. He fell in love with a Czech woman, he didn’t know what to do with himself. But he also must have felt very guilty because my mother saved his life. We saw him regularly. I was intrigued by the way he ran the company. He was a very good businessman, a very honourable businessman.”

He switches to talking about his grandfather and the Polish teenager he hid, Nathan. “He stayed for four years or so. He became like a son to him.” Later, Nathan went to live in Israel. He had two children who both died young. “It’s a very sad story. I remember he came to my mother’s funeral. He specially made the trip from Israel to be at her funeral.”

He is looking tearful. He takes a sip of his Argentinian wine. He must often see, in the people he teaches, the events that shaped their lives, I say. “Oh, very much so.” He tries to get them to talk. “If you can tell your story to a sympathetic audience, it has a fantastic effect on you,” he says.

“I once broke my spine on top of a mountain. Normally change is very incremental. After that crazy accident, which was very painful, they say that I am somewhat of a nicer person.” He writes about the accident in his new book, The CEO Whisperer: on a trip to Siberia, his snowmobile driver, excited by a sighting of brown bears, failed to notice a crevice in the snow. One thing I’m not clear about: were they chasing the bears to see them or to shoot them?

He takes another sip of wine. “I’m a killer,” he says. I tell him animal-loving readers, who may already have been choking over his foie gras, will be upset. “My darker side. Really, I’m a closet zoologist and what I’ve discovered, obviously this maybe sounds like a rationalisation, is that I’m fascinated by bears.” To the point of shooting them? Hunting encourages countries to ensure animals’ survival, he says. “Your readers at the FT may get upset about it, but when you talk about the ability to have animals, what doesn’t pay doesn’t stay. And you saw that in Kenya. They stopped hunting — all the elephants got killed.”

He pauses. “By the way, I ate the bears.” He ate them? “Yeah, of course.” What do they taste like? “Like wild boar.” He gestures outside. There are five wild boars in his garden, he says. “I once shot a wild boar for dinner. I don’t know if you’ve ever had a wild boar in your garden.” No, I tell him, just squirrels and foxes. “Foxes are nothing compared to wild boars. They are bulldozers. The last thing you want in your garden is a wild boar. But tell that to the animal lovers. They think ‘these cute wild boars’. They’re not cute.”

I try to move on. “Final statement. Big bears eat young bears, for your information. They’re cannibalistic. But that doesn’t fit the Disney image.”

The next day he emails: “I hope that these expeditions (including my hunting for moose, deer, wild boar and bear) will not ‘derail’ the focus on my work activities. As I am not a vegetarian, my favourite food has always been the game and fish I collected (and that includes wild mushrooms).”

In his kitchen, he sips an espresso. I am drinking fresh mint tea. I say that he writes, at 78, quite pessimistically about old age’s physical deterioration. His father, he says, lived to 101. “He was lucky. He lived in his own house, he had someone taking care of him; it couldn’t be better, to be honest. I would sign up for that.” 

But life is fickle. “I think about my accident at the top of the mountain. I broke my spine. I had four operations. It doesn’t take much.” His wife comes to say goodbye. She stands behind him, arms around him. “The best leaders,” he says, “are the ones who act and reflect. I sometimes ask them: ‘Can I see your agenda?’ And every moment is full. I ask them: ‘Are you out of your mind? Cross out some afternoons, walk around and think.’” 

Michael Skapinker is an FT columnist

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SoftBank said on Friday that Katsunori Sago, its chief strategy officer who was viewed as a potential successor to founder Masayoshi Son, will resign after less than three years at the technology conglomerate.

The departure of Sago, a top banker who was once tipped as a possible president of Goldman Sachs Japan before he joined SoftBank, is the latest in a string of high-profile exits at a company whose strategy investors said has become increasingly difficult to define.

His exit marks the second-time that a high-profile executive has quit after being recruited as potential heir to Son, following the 2016 departure of former Google executive Nikesh Arora. It comes as Son, who is 63, has recently said that he plans to stay as the leader of the group beyond the age of 70.

The loss of Sago adds to a succession of high-level management departures over the past 12 months, including by the company’s chief compliance officer, chief legal officer and chief communications officer. The executive positions were meant to act as guardrails within SoftBank to Son’s unruly style of managing the company.

“As CSO, [Sago] played a crucial part in expanding SBG’s potential as an investment company,” Son said in a statement. “We would like to express our heartfelt gratitude for his contributions and achievements.”

SoftBank said Sago had asked to resign but it declined to comment on why he was leaving and where he was heading next. The company has yet to find a successor for his role. His exit comes as SoftBank’s share price recently surpassed the all-time high it reached just before the dotcom bubble burst in 2000. 

Sago left Goldman Sachs in 2015 to manage the $1.9tn investment portfolio of Japan Post Bank — a high-profile position in which he was expected to stay for many years. His sudden departure for SoftBank, said people close to Sago at the time, came with an implicit promise that by making the move, he stood a good chance of one day becoming Son’s successor.

Upon joining SoftBank in June 2018, Sago appeared to make a swift impact: he convinced almost a dozen of his former Goldman Sachs colleagues in Tokyo to join him at SoftBank. By importing a significant team of Goldman bankers, Sago appeared on track to create an internal counterweight to the group of former Deutsche Bank traders who had been brought in by the London-based head of the $100bn Vision Fund, Rajeev Misra.

Sago’s exact role at SoftBank remained unclear but people close to the company said his team was brought in to rein in the group’s bloated balance sheet. His lieutenants also ran a unit that focused on offering Vision Fund companies cheaper financing options to purchase assets such as property and cars using SoftBank’s credit and equity.

But over the past 18 months, said people familiar with the situation, Sago and his team have found themselves underused in a company that has shifted from an operator of assets to a global technology investor. 

“It is not a surprise for me,” said one person close to Sago. “He does not have much to do — he had been doing nothing for the last 18 months. He is good so he wasn’t losing money but he was watching people in the company losing money and he started looking for other positions elsewhere. He knew that he wasn’t going to become Son’s successor.”

SoftBank’s Vision Fund has recorded its best performance in the final three months of 2020 in a dramatic turnround following the failure of some of its high-profile bets including US property group WeWork. But the rebound follows a turbulent year during which it carried out a huge restructuring of assets alongside aggressive purchases of US equity derivatives using its new cash pile.

In recent months, Michael Ronen, another former Goldman Sachs banker and a top US executive at the Vision Fund, left the group after expressing concerns about “issues”. Last year, Chad Fentress, the group’s chief compliance officer, resigned due to concerns about its governance measures. 

US trade agency criticises Ford over battery deals with SK Innovation

The US International Trade Commission has lambasted Ford for pursuing deals with South Korean company SK Innovation despite evidence that it had misappropriated trade secrets from LG Chem to develop electric vehicle batteries.

The sharp criticism of the US carmaker came almost a month after the ITC imposed a 10-year ban on SKI from importing components to make lithium-ion batteries and granted Ford and Volkswagen a grace period to find a new supplier.

Ford and VW have both signed contracts to purchase batteries from SKI’s new $2.6bn battery plant in the US state of Georgia and were granted grace periods of four and two years respectively. But the companies have argued the ban will jeopardise their plans to transition to greener vehicles.

The ITC reaffirmed its February ruling against SKI for trade secret violations. “The Commission finds SK’s destruction of evidence in this case to be extraordinary,” it said in a statement on Thursday. “The destruction was ordered at a high level and was carried out by department heads throughout SK.”

It also said SKI’s conduct demonstrated “flagrant bad faith” and questioned why Ford had continued to pursue battery contracts with the company after the “misconduct in this investigation had come to light”.

“The fault here belongs with SK, as well as with those, like Ford, who deliberately chose to continue to cultivate prospective business relationships predicated on SK’s trade secret misappropriation,” the ITC added.

The exemptions would allow Ford to bring its fully electric F-150 truck to market by mid-2022 but the ruling threatens to disrupt the long-term supply of batteries for the carmaker. The ITC rejected Ford’s request to extend exemptions to its unannounced new electric vehicles.

SKI said on Friday that the ITC decision would weaken the US’s electric vehicle competitiveness by limiting competition and cause serious economic and environmental harm.

“It would endanger US national security by making us more dependent on Chinese companies in this fast-developing, critically important field,” SKI said. “Thankfully, it is entirely within the discretion of the Biden administration to undo it.”

SKI said it would ask Joe Biden to overturn the ban, a decision the US president can make within 60 days. SKI said it had promised to hire 2,600 workers by 2024 in its Georgia plant, which will be completed by 2022.

Domestic political pressure is piling pressure on SKI and LG to pursue an out-of-court settlement, as Seoul has been dismayed by the rivalry spilling out on to the global stage. South Korea is the world’s largest producer of batteries for electric vehicles, controlling more than a third of the global market. But the two sides remain far apart over a settlement, with an LG executive saying “there is a gap of more than Won1tn” ($885m).

SKI shares fell 4.6 per cent on Friday while LG Chem stock jumped 4.5 per cent. The benchmark Kospi Composite index closed down 0.6 per cent.

Companies rush to issue convertible debt at rock-bottom rates

Companies have issued a record amount of convertible debt since the start of the year, rushing to lock in rock-bottom interest rates in case recent wobbles in stock and bond markets dent investor enthusiasm.

Convertible bonds come with the right to swap the debt for shares in the issuing company at a pre-agreed price, making them a hybrid instrument sensitive to the outlook for both markets.

Airbnb on Tuesday announced a $2bn convertible deal, the biggest of the year so far, on the heels of Twitter, which announced a $1.25bn convertible bond issue on Monday and Spotify, which priced $1.3bn in notes last week. Beyond Meat increased the size of a convertible bond issue on Tuesday from $750m to $1bn.

All four companies will pay no interest at all on the debt, and investors agreed to conversion prices at hefty premiums to current share prices — ranging from 47.5 per cent in the case of Beyond Meat to 70 per cent at Spotify. For companies, a higher premium means less dilution for existing shareholders if the debt converts; for investors, it means the option to convert is more likely to prove worthless.

“We’ve never seen pricing like this ever in the convertible market,” said Michael Voris, head of convertible bond financing at Goldman Sachs.

The low interest rate environment, coupled with high equity valuations and high volatility in markets amounts to a “triumvirate” that leads to “very attractive convertible pricing”, he said.

The favourable conditions have fuelled the busiest start to a year since Refinitiv started tracking global convertible bond proceeds in 1980. In January and February, companies raised just shy of $34bn, 68 per cent more than in the first two months of last year.

In the US, which accounted for most of the deals, issuers were largely split into two categories: high-growth companies, particularly in the tech sector, and companies that have been hard hit by the pandemic, which have been using convertible debt to repair their balance sheets. The latter category included Expedia, the travel agent, which used the proceeds from its $900m offering last month to buy back existing bonds on which it was paying a higher interest rate.

Companies say investor enthusiasm for convertible bonds has allowed them to raise more than they could elsewhere in the credit markets.

BridgeBio, a biotech start-up, raised $750m in convertible debt in January. “If we’d gone to the senior secured market, I think we probably could have found an additional couple-hundred million dollars of debt,” said Brian Stephenson, its chief financial officer. “It’s just a different order of magnitude.”

And zero-coupon debt would be hard to find outside of the convertible debt market.

“If we were to look at a more traditional term loan, like we had with our prior facility, the interest rate associated with that was much higher,” said Kyle Wailes, chief financial officer at SmileDirectClub, a retailer of teeth straighteners, which issued $650m in convertible bonds a month ago.

But the window for the rosy deals may be closing. The US stock market has wiped out almost all its gains for the year and the tech-heavy Nasdaq is down more than 10 per cent from its peak — declines tied to the recent rise in long-term interest rates.

“If equity markets declined significantly, then companies will be a little more careful about their . . . willingness to issue converts,” said Venu Krishna, deputy head of US equity research at Barclays, citing the higher equity dilution implied by lower share prices.

Companies should take a “very, very close look” at the convertible market now, said Voris of Goldman Sachs. “A year from now, coupons could be 1 per cent. Interest rates could be higher.”

Bank of America reaps trading windfall during Texas blackouts

Bank of America gained hundreds of millions of dollars in trading revenue when the Texas electric grid failed in a winter storm last month, highlighting the upside for Wall Street from mayhem that knocked out power and heat across the state, industry executives and traders said. 

The bank’s Houston-based energy trading group had electricity contracts that soared in value when wholesale Texas power prices rose 10,000 per cent to a cap of $9,000 a megawatt-hour the third week of February. 

The prices were ordered by the Texas utility regulator in an attempt to bring more generation into service. But almost half the state’s capacity fell offline as an arctic freeze blocked supplies of natural gas, froze coal piles and iced wind farms. Blackouts lasted days, leaving millions in the dark.

BofA takes part in the Texas energy market by trading power and gas and selling products that enable generators and other asset owners to hedge against fluctuating prices. That activity left BofA with an inventory of power contracts that surged in value during the blackouts. “The volatility of the energy market has heightened the value of risk management,” the bank’s website says.

Banks have said little about their trading activities during the longest spell of cold weather ever to test the Texas grid. One exception is Macquarie, the Australian bank with a Houston-based energy business, which reported an A$300m (US$234m) gain related to natural gas trading, lifting annual group profit by 5-10 per cent. 

“So far we’re only hearing from the losers, and furthermore, we’re only hearing what the losers have chosen to tell us,” said Ross Baldick, an emeritus professor of engineering at the University of Texas at Austin. 

BofA declined to comment on the amount of revenue its energy trading generated during the Texas blackouts, but it said: “Revenue related to this activity will be offset by losses and reduced revenues related to investments in wind and other alternate power suppliers in Texas and other affected markets.”

The financial group was the lead bank on a $480m line of credit to Brazos Electric Power Co-operative, a generation and transmission company that filed for bankruptcy protection this week because it was unable to pay for power purchases racked up during the storm. The bank also had a $6.9m claim in the case related to power sales and derivatives, according to a court filing

BofA expanded deeply into North American power and gas markets when it acquired the Merrill Lynch investment bank in 2009. The energy desk is part of its fixed income, currencies and commodities division that made revenues of $1.7bn in the fourth quarter. 

Mark Egan, a senior Houston energy trader at the bank, serves as a board member of the Gulf Coast Power Association. According to the group, Egan has “structured and executed energy hedges for 7,000MW (megawatts) of natural gas fired generation and 2,500MW of wind capacity” for clients in the Texas power market, with relationships that “span the industry”.

However, BofA has a smaller energy trading business than many peers. Citigroup was the fourth-largest seller of US wholesale power in the third quarter of 2020, while Morgan Stanley was 15th, according to government data compiled by S&P Global Platts. Bank of America was not in the top 20.

The bank, which has dozens of retail branches across Texas, pledged $1.1m to charities to provide shelter, water, food and other essentials after the weather catastrophe. 

“From the Rio Grande Valley to the panhandle, this winter storm affected the entire state, including our 19,000 employees in Texas, and for many, the recovery is just beginning,” Nikki Graham, the bank’s Austin market president, said in a statement last month. 

BofA’s trading gains could be diminished as Texas officials ponder retroactively reducing prices for some of the $50bn in electricity sales executed during the blackouts.