Business

➚ BUY: Private sector. SpaceX conducted the first commercial spacewalk — led, naturally, by a billionaire.

➘ SELL: Public feuds. The Murdoch family’s yearslong succession battle heads into a courtroom finale this week. Rupert will battle three of his four kids for control of his media empire, though the proceedings are sealed.

China detains investment bankers… US inflation extends cooling streak … But Trump win risks a resurgence… JPMorgan cuts hours for junior bankers after industry deaths… Harvey Weinstein re-indicted… Was Citi’s “most profitable trader” as good as he claims?... PwC McKinseys itself…

Warnings piled up inside CrowdStrike before giant outage

THE SCOOP

Software engineers at the cybersecurity firm CrowdStrike complained about rushed deadlines, excessive workloads, and increasing technical problems to higher-ups for more than a year before a catastrophic failure of its software paralyzed airlines and knocked banking and other services offline for hours.

“Speed was the most important thing,” said Jeff Gardner, a senior user experience designer at CrowdStrike who said he was laid off in January 2023 after two years at the company. “Quality control was not really part of our process or our conversation.”

The issues were raised during meetings, in emails, and in exit interviews, ex-employees told Semafor. Almost two dozen former software engineers, managers and other staff described a workplace where executives prioritized speed over quality, workers weren’t always sufficiently trained, and mistakes around coding and other tasks were rising. One former senior manager said they sat in multiple meetings where staff warned company leaders that CrowdStrike would “fail” its customers by releasing products that couldn’t be supported.

Of the 24 former employees who spoke to Semafor, 10 said they were laid off or fired and 14 said they left on their own. One was at the company as recently as this summer. Three former employees disagreed with the accounts of the others. Joey Victorino, who spent a year at the company before leaving in 2023, said CrowdStrike was “meticulous about everything it was doing.”

CrowdStrike disputed much of Semafor’s reporting and said the information came from “disgruntled former employees, some of whom were terminated for clear violations of company policy.” The company told Semafor: “CrowdStrike is committed to ensuring the resiliency of our products through rigorous testing and quality control, and categorically rejects any claim to the contrary.”

Founded in 2011, CrowdStrike quickly rose as an industry leader in cybersecurity with the 2013 launch of its Falcon antivirus package. It went public in 2019, kicking off a massive growth spurt, adding thousands of workers and increasing revenue by more than a thousand percent by the end of fiscal year 2024.

A bad software update by CrowdStrike in July caused what may be the biggest IT outage in history, shutting down 8.5 million computers and costing Fortune 500 companies as much as $5.4 billion in damages. It stranded travelers at airports, locked customers out of online banking accounts, and took emergency call centers offline. The incident cost CrowdStrike about $60 million in deals it had expected to close during the fiscal quarter that ended July 31, Chief Financial Officer Burt Podbere told analysts on its Aug. 28 earnings call, when the company lowered its revenue and profit guidance for the rest of the year. Adam Meyers, senior vice president of counter adversary operations, will testify in front of Congress later this month.

“The magnitude of the July 19th incident will never be lost on me, and my commitment is to make sure this never happens again,” CEO George Kurtz told analysts on the call. “Beyond apologies, I want our actions to speak even louder than our words. We work to recover customers quickly no matter the location or need.”

The former employees Semafor spoke to described a range of issues that long preceded the outage at the company. There’s been no determination that those problems were related to the July incident.

Europe’s economy is sputtering and its engine, Germany, is to blame. Rising tensions between the bloc’s economic motor and Brussels spilled out into the open this week, when Germany rejected calls for common borrowing that Mario Draghi, the former central banker and godfather of Europe’s economic establishment, says is needed to drag the region out of a funk that has seen it slip behind the US and China. “Germany will not agree to this,” the country’s punchy finance minister, Christian Lindner, told Politico. “More government debt costs interest, but does not necessarily create more growth.”

That isolationist nein would be more understandable if Germany itself weren’t a big part of the problem. The country’s economy is shrinking, weighed down by industrial stagnation and what one economist called a “self-inflicted wound of continuous under-investment.” Its industrial champion, Volkswagen, is considering once-unthinkable factory closures. Lindner himself acknowledges the country is, if perhaps not the sick man of Europe, at least “hungover.”

Deutsche Bank CEO Christian Sewing’s diagnosis is laziness: “Investors have been telling us for more than a year that they doubt Germany’s and Europe’s ability to perform, and even worse, the will to perform,” he said at a conference earlier this month. “We simply have to tell our fellow citizens that we have to do more again.”

• Read Draghi’s prescription for Europe to regain its competitiveness.

Over 120,000 leaders trust this global affairs newsletter. With a dedication to clarity over clickbait, International Intrigue gives you only the most essential stories, helping you stay informed in under 5 minutes. Join Pentagon officials, C-suites and diplomats and sign up for free here.

Choosing sides in AI: The US government is considering allowing Nvidia to export advanced AI chips to Saudi Arabia, Semafor reports, which would help the country train and run the most powerful AI models. The cost to the kingdom: Cutting tech ties with China. There were notably fewer Chinese companies in attendance at Saudi Arabia’s big AI summit this week, and the state-backed tech giants have taken steps to limit their involvement with Chinese firms.

The shift shows how the AI race is reordering geopolitics. Saudi Arabia wants to be an AI leader and has key pieces of the puzzle already — namely, a lot of money and very cheap energy. But it needs advanced hardware, and there are only so many places to get it. The US government curbed exports of chips to the Gulf in the spring out of concern that the region’s ties to Beijing might let valuable AI secrets flow there.

All about retail: The biggest names in alternative investing were in Tampa, Fla. this week jockeying for a lead in a $1.5 trillion race for retail money. Executives from TPG, Carlyle, Blue Owl and others pitched Morgan Stanley’s wealth brokers on their private equity and credit funds. These firms, which for decades have gotten their money from pension funds, endowments, and insurers, now see rich individuals as the next big pot. Blackstone has the lead, but others are close behind. The big question is suitability: Retail investors like the idea of private assets — they have higher returns and are cooler than a classic 60/40 portfolio — but few truly understand what they’re getting.

Ink by the barrel: Right-wing billionaires using their money to grab hold of media assets isn’t just an American phenomenon. A bidding war is heating up for Britain’s Telegraph, a key arbiter of populist tensions inside the UK’s Conservative Party, Semafor scoops. The latest bidder is Dovid Efune, a British-born publisher with deep roots in American conservative Jewish media, with backing from hedge-fund manager and pro-Israel philanthropist Mike Leffell, among others. (Republican megadonor Ken Griffin is backing a rival bid with Paul Marshall, the UK investor and leading Brexiteer.)

• Republicans have a Laura Loomer problem
• Britain’s National Health Service must “reform or die,” PM says
• Can hog poop solve AI’s water crisis?