Summary of WSJ What’s News Episode: “Why Costco Is Holding Onto Its Diversity Initiatives”

Released on January 23, 2025, by The Wall Street Journal

1. President Donald Trump's America First Strategy at the World Economic Forum

The episode opens with a focus on President Donald Trump's recent address at the World Economic Forum in Davos, Switzerland. Host Alex Osila highlights Trump's stern message to global business leaders, emphasizing his commitment to prioritizing American manufacturing.

Key Points:

• Tariff Threats: Trump warned that businesses not producing in the U.S. would face tariffs. He stated, “My message to every business in the world is very simple. Come make your product in America and we will give you among the lowest taxes of any nation on earth... if you don't make your product in America... you will have to pay a tariff” (00:56).
• Frustration with European Tariffs: Trump expressed dissatisfaction with European tariffs on American agricultural products and automobiles, signaling potential retaliatory measures.
• Oil Price Pressure on Russia: He urged OPEC, led by Saudi Arabia, to reduce oil prices as a strategy to pressure Russia to cease its invasion of Ukraine, although no immediate response was received from the Saudi government.

Impact on Markets: Trump’s rhetoric correlated with a positive movement in U.S. stock indices. The S&P 500 achieved its first record of the year, the Dow Jones Industrial Average climbed by approximately 0.9%, and the Nasdaq increased by roughly 0.2% (01:29).

2. MicroStrategy’s Bold Bet on Bitcoin and Its Appeal to Conservative Investors

A significant portion of the episode delves into MicroStrategy's strategic investment in Bitcoin, exploring how it has attracted a unique group of conservative investors traditionally risk-averse.

Key Points:

• Massive Bitcoin Holdings: MicroStrategy owns approximately $48 billion in Bitcoin, a move financed partly through issuing convertible bonds. Last year alone, the company issued $6.2 billion in convertible debt—the highest ever by a single company in a calendar year (02:00).

• Attraction to Conservative Investors: Vicky Huang, a WSJ crypto reporter, explains that unlikely investors, such as insurance companies, are drawn to MicroStrategy's bonds due to their strong performance and the belief in Bitcoin’s growth potential (03:22).

  Vicky Huang: “What we found is it's a three-part answer... the performance of these bonds have been really, really strong... they're essentially Bitcoin bonds...” (03:22).

• Convertible Arbitrage Strategy: Hedge funds and mutual fund asset managers utilize MicroStrategy’s volatile stock to profit through convertible arbitrage, benefiting from the stock’s volatility which aligns with Bitcoin’s inherent fluctuations (05:17).

• Replication by Other Companies: MicroStrategy's success has inspired other firms, including Bitcoin miners like Mara, to adopt similar investment strategies (05:37).

3. Costco’s Commitment to Diversity Amid Increasing Pressure

Post-break, the discussion shifts to Costco’s steadfast dedication to its Diversity, Equity, and Inclusion (DEI) initiatives amidst a growing backlash against such programs in both government and the private sector.

Key Points:

• Shareholder Opposition: Costco faces a shareholder vote on a proposal by a conservative activist group aiming to evaluate the financial risks of DEI initiatives. The company has urged shareholders to reject this proposal (06:45).

• Rationale Behind DEI Commitment: Sarah Nassauer, a WSJ reporter covering big retailers, explains that Costco views DEI as integral to its success. The company believes that these initiatives help attract top talent, foster innovation, and enhance product selection, thereby benefiting the overall business (06:45).

  Sarah Nassauer: “They said that their DEI efforts are part of what has made them so successful... we're committed to this and it's good for our business.” (06:45).

• Customer Loyalty and Corporate Strategy: With a 92% annual membership renewal rate, Costco’s loyal customer base enables it to maintain its DEI focus without being as reactive as other companies. Unlike firms with significant public relations departments or heavy reliance on e-commerce, Costco emphasizes in-store experiences and employs a higher wage and benefit structure to support its DEI goals (06:45).

• Scope of DEI Initiatives: Costco’s efforts are more understated compared to other corporations. Instead of extensive public campaigns, their approach includes tying executive bonuses to social objectives and regularly reporting workforce demographics (09:22).

4. Additional Business Highlights

The episode also touches on other significant business news:

• Sackler Family Opioid Litigation Settlement: The Sackler family, owners of Purdue Pharma, has agreed to a $7.4 billion settlement over lawsuits related to the opioid crisis. This includes $6.5 billion paid over 15 years and a one-time payment of $900 million by the company. Importantly, family members retain the potential for future liabilities (09:22).

• CNN’s Workforce Reduction: CNN is laying off approximately 200 employees (6% of its workforce) as part of a strategic shift towards digital growth and the launch of a new streaming service (09:22).

Conclusion

This episode of WSJ What’s News provides an in-depth analysis of current business strategies and market movements, from President Trump’s protectionist policies to innovative investment approaches in the crypto space, and steadfast corporate commitments to diversity. Through expert insights and detailed reporting, listeners gain a comprehensive understanding of the forces shaping today’s economic landscape.

Produced by Pierre Bienname and Anthony Banci with supervising producer Michael Kosmides. Host: Alex Osila for The Wall Street Journal.