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Racism Impoverishes the Whole Economy

Discrimination hurts just about everyone, not only its direct victims.

New research shows that while the immediate targets of racism are unquestionably hurt the most, discrimination inflicts a staggering cost on the entire economy, reducing the wealth and income of millions of people, including many who do not customarily view themselves as victims.

The pernicious effects of discrimination on the wages and educational attainment of its direct targets are being freshly documented in inventive ways by scholarship. From the lost wages of African-Americans because of President Woodrow Wilson’s segregation of the Civil Service, to the losses suffered by Black and Hispanic students because of California’s ban on affirmative action, to the scarcity of Black girls in higher-level high school math courses, the scope of the toll continues to grow.

But farther-reaching effects of systemic racism may be less well understood. Economists are increasingly considering the cost of racially based misallocation of talent to everyone in the economy.

My own research demonstrates, for example, how hate-related violence can reduce the level and long-term growth of the U.S. economy. Using patents as a proxy for invention and innovation, I calculated how many were never issued because of the violence — riots, lynchings and Jim Crow laws — to which African Americans were subjected between 1870 and 1940.

The loss was considerable: The patents that African-Americans could have been expected to receive, given equal opportunity, would have roughly equaled the total for a medium-size European country during that time.

Those enormous creative losses can be expected to have had a direct effect on business investment and therefore on total economic activity and growth.

Other economists are beginning to estimate harm to the economy caused by racism in broad ways.

An important principle suggests that the person who can produce a product or service at a lower opportunity cost than his or her peers has a comparative advantage in that activity. Recent research calculates the effects of the discriminatory practice of placing highly skilled African-American workers, who might have flourished as, say, doctors, into lower-skilled occupations where they had no comparative advantage. Such practices 50 years ago — which linger, to a lesser extent, today — have cost the economy up to 40 percent of aggregate productivity and output today.

Similarly, other research estimates that aggregate economic output would have been $16 trillion higher since 2000 if racial gaps had been closed. To put that total in context, the gross domestic product of the United States in 2019 was $21.4 trillion. The researchers estimate that economic activity could be $5 trillion higher over the next five years if equal opportunity is achieved.

Right now, if more women and African-Americans were participating in the technical innovation that leads to patents, the economist Yanyan Yang and I calculate that G.D.P. per capita could be 0.6 to 4.4 percent higher. That is, it would be between $58,841 to $61,064 per person compared with $58,490 per person in 2019.

This entire line of research suggests that organizations — companies, laboratories, colleges and universities — are leaving colossal sums of money on the table by not maximizing talent and living standards for all Americans.

I have thought and written a lot about remedies. Here are a few ideas aimed at addressing discrimination in the innovation economy. First, we need more training in science, technology, engineering and mathematics (STEM), like the extensive and highly successful program once sponsored by Bell Labs to encourage participation in these fields by women and underrepresented minorities

STEM fields should not be the sole target, however, because the innovation economy encompasses more than this narrow set of subjects. Two of the last three people I’ve talked to at tech firms have a B.A. in international relations and a Ph.D. in political science. Clearly, problem-solving skills matter, but these skills are not unique to the STEM majors.

Second, there is substantial evidence of systemic racism in education, which needs to be addressed. Research shows that professors are less likely to respond to email inquiries about graduate study from Black, Hispanic and female students than from people who are discernibly white and male. A system of incentives — and penalties — could hold those responsible accountable at every level of the education and training process.

At the invention stage, such as at corporate, government and university labs, my research shows that mixed-gender teams are more prolific than those whose members are all female or male. And a large body of literature has documented the positive effects of diversity in teams. Managers at each level should be held responsible for being good stewards of the resources of their companies and promoting diverse teams and behavior and, therefore, better outcomes.

When invention is commercialized and companies sell shares to the public, the wealth gaps are stark. Seven of the world’s 10 richest people on the Forbes list are associated with tech companies that commercialize inventions. Jeff Bezos, Bill Gates, Mark Zuckerberg and Elon Musk are in the top five. None among the top 10 (or 50) is Black.

The statistics for venture capital funding are striking. In 2014, less than 1 percent of venture capital funding went to businesses founded by African-American women, and in 2015, only 2 percent of all venture capitalists were African-American.

A number of worthwhile recommendations have been made to address the lack of diversity at the commercialization stage of innovation. These include:

  • Enhancing mentoring opportunities through programs such as those of the Small Business Administration.

  • Seeking and recruiting founders to invest in places like Atlanta, and not exclusively in Silicon Valley.

  • Addressing systemic racism at every level of management and within venture capital firms.

  • Diversifying corporate boards so that senior leadership will be held accountable for diversity and workplace climate. (California has done this with women on the boards of public companies.)

The Kapor Center, a think tank that promotes participation by underrepresented minorities in tech fields and education, has proposed noteworthy remedies at many stages, including at the pre-college level.

The social compact most societies have with their governments is that standards of living will rise continually and that each successive generation will be better off than preceding ones. We are robbing countless people of higher standards of living and well-being when we allow racial discrimination to flourish from generation to generation.

Lisa D. Cook, a professor of economics at Michigan State University, is a member of the Biden-Harris transition team.

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The Hot New Covid Tech Is Wearable and Constantly Tracks You

In Rochester, Mich., Oakland University is preparing to hand out wearable devices to students that log skin temperature once a minute — or more than 1,400 times per day — in the hopes of pinpointing early signs of the coronavirus.

In Plano, Texas, employees at the headquarters of Rent-A-Center recently started wearing proximity detectors that log their close contacts with one another and can be used to alert them to possible virus exposure.

And in Knoxville, students on the University of Tennessee football team tuck proximity trackers under their shoulder pads during games — allowing the team’s medical director to trace which players may have spent more than 15 minutes near a teammate or an opposing player.

The powerful new surveillance systems, wearable devices that continuously monitor users, are the latest high-tech gadgets to emerge in the battle to hinder the coronavirus. Some sports leagues, factories and nursing homes have already deployed them. Resorts are rushing to adopt them. A few schools are preparing to try them. And the conference industry is eyeing them as a potential tool to help reopen convention centers.

“Everyone is in the early stages of this,” said Laura Becker, a research manager focusing on employee experience at the International Data Corporation, a market research firm. “If it works, the market could be huge because everyone wants to get back to some sense of normalcy.”

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Credit…BioIntelliSense, Inc.

Companies and industry analysts say the wearable trackers fill an important gap in pandemic safety. Many employers and colleges have adopted virus screening tools like symptom-checking apps and temperature-scanning cameras. But they are not designed to catch the estimated 40 percent of people with Covid-19 infections who may never develop symptoms like fevers.

Some offices have also adopted smartphone virus-tracing apps that detect users’ proximity. But the new wearable trackers serve a different audience: workplaces like factories where workers cannot bring their phones, or sports teams whose athletes spend time close together.

This spring, when coronavirus infections began to spike, many professional football and basketball teams in the United States were already using sports performance monitoring technology from Kinexon, a company in Munich whose wearable sensors track data like an athlete’s speed and distance. The company quickly adapted its devices for the pandemic, introducing SafeZone, a system that logs close contacts between players or coaches and emits a warning light if they get within six feet. The National Football League began requiring players, coaches and staff to wear the trackers in September.

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Credit…Brandon Wade/Associated Press

The data has helped trace the contacts of about 140 N.F.L. players and personnel who have tested positive since September, including an outbreak among the Tennessee Titans, said Dr. Thom Mayer, the medical director of the N.F.L. Players Association. The system is particularly helpful in ruling out people who spent less than 15 minutes near infected colleagues, he added.

College football teams in the Southeastern Conference also use Kinexon trackers. Dr. Chris Klenck, the head team physician at the University of Tennessee, said the proximity data helped teams understand when the athletes spent more than 15 minutes close together. They discovered it was rarely on the field during games, but often on the sideline.

“We’re able to tabulate that data, and from that information we can help identify people who are close contacts to someone who’s positive,” Dr. Klenck said.

Civil rights and privacy experts warn that the spread of such wearable continuous-monitoring devices could lead to new forms of surveillance that outlast the pandemic — ushering into the real world the same kind of extensive tracking that companies like Facebook and Google have instituted online. They also caution that some wearable sensors could enable employers, colleges or law enforcement agencies to reconstruct people’s locations or social networks, chilling their ability to meet and speak freely. And they say these data-mining risks could disproportionately affect certain workers or students, like undocumented immigrants or political activists.

“It’s chilling that these invasive and unproven devices could become a condition for keeping our jobs, attending school or taking part in public life,” said Albert Fox Cahn, executive director of the Surveillance Technology Oversight Project, a nonprofit in Manhattan. “Even worse, there’s nothing to stop police or ICE from requiring schools and employers to hand over this data.”

Executives at Kinexon and other companies that market the wearable trackers said in recent interviews that they had thought deeply about the novel data-mining risks and had taken steps to mitigate them.

Devices from Microshare, a workplace analytics company that makes proximity detection sensors, use Bluetooth technology to detect and log people wearing the trackers who come into close contact with one another for more than 10 or 15 minutes. But the system does not continuously monitor users’ locations, said Ron Rock, the chief executive of Microshare. And it uses ID codes, not employees’ real names, to log close contacts.

Mr. Rock added that the system was designed for human resources managers or security officials at client companies to use to identify and alert employees who spent time near an infected person, not to map workers’ social connections.

GlaxoSmithKline, the pharmaceutical giant, recently began working with Microshare to develop a virus-tracing system for its sites that make over-the-counter drugs. Budaja Lim, head of digital supply chain technology for Asia Pacific at the company’s consumer health care division, said he wanted to ensure maximum privacy for workers who would wear the proximity detection sensors.

As a result, he said, the system silos the data it collects. It logs close contacts between workers using ID numbers, he said. And it separately records the ID numbers of workers who spent time in certain locations — like a packaging station in a warehouse — enabling the company to hyper-clean specific areas where an infected person may have spent time.

GlaxoSmithKline recently tested the system at a site in Malaysia and is rolling it out to other consumer health plants in Africa, Asia and Europe. The tracking data has also allowed the company to see where workers seem to be spending an unusual amount of time close together, like a security desk, and modify procedures to improve social distancing, Mr. Lim said.

“It was really designed to be a reactive type of solution” to trace workers with possible virus exposure, he said. “But it has actually become a really powerful tool to proactively manage and protect our employee safety.”

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Credit…Emily Rose Bennett for The New York Times

Oakland University, a public research university near Detroit, is at the forefront of schools and companies preparing to making the leap to the BioButton, a novel coin-size sensor attached to the skin 24/7 that uses algorithms to try to detect possible signs of Covid-19.

Whether such continuous surveillance of students, a young and largely healthy population, is beneficial is not yet known. Researchers are only in the early phases of studying whether wearable technology could help flag signs of the disease.

David A. Stone, vice president for research at Oakland University, said school officials had carefully vetted the BioButton and concluded it was a low-risk device that, added to measures like social distancing and mask wearing, might help hinder the spread of the virus. The technology will alert campus health services to students with possible virus symptoms, he said, but the school will not receive specific data like their temperature readings.

“In an ideal world, we would love to be able to wait until this is an F.D.A.-approved diagnostic,” Dr. Stone said. But, he added, “nothing about this pandemic has been in an ideal world.”

Dr. James Mault, chief executive of BioIntelliSense, the start-up behind the BioButton, said students with privacy concerns could ask to have their personal details stripped from the company’s records. He added that BioIntelliSense was preparing to conduct a large-scale study examining its system’s effectiveness for Covid-19.

Oakland had initially planned to require athletes and dorm residents to wear the BioButton. But the university reversed course this summer after nearly 2,500 students and staff members signed a petition objecting to the policy. The tracker will now be optional for students.

“A lot of colleges are doing masks and social distancing,” said Tyler Dixon, a senior at the school who started the petition, “but this seemed like one step too far.”

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For Millions Deep in Student Loan Debt, Bankruptcy Is No Easy Fix

With two mortgages, three children and $83,000 in student loan debt, the financial strain finally became too much for George A. Johnson and Melanie Raney-Johnson.

New bills kept piling up: The couple had to buy another car when Mr. Johnson wrecked one in a snowstorm, but their insurance didn’t fully pay off the totaled vehicle. Old debts never seemed to get any smaller, either: A mortgage modification they spent months working on fell through when the bank lost their paperwork.

And their student debt, an albatross born of aspiration, grew heavier each month.

Bankruptcy was the only way out.

“It was not an easy decision,” Ms. Raney-Johnson said of filing for bankruptcy in 2011. “It was a feeling of despair, for sure.”

Bankruptcy gives over 700,000 debtors a fresh start every year. Bills for credit cards and medical expenses can be wiped away by a few strokes of a judge’s pen, and debts that don’t vanish are reduced.

But student loan debts don’t go away as easily. For decades, politicians have slowly made them harder to discharge, while differing standards in courts across the country mean a debtor’s chances can depend on where he or she lives.

The few debtors who attempt it are subjected to a morality play unlike anything else in the world of personal finance: so-called adversary proceedings, where they must lay themselves bare in court as opposing lawyers question how much they pay for lunch or give to their church.

The Johnsons tried anyway. They had borrowed about $45,000 for Mr. Johnson’s degree in sociology at the University of St. Mary in Kansas and Ms. Raney-Johnson’s pursuit of a bachelor’s degree from the University of California, Davis. Unable to pay, they had received permission to put off their payments, but their balance nearly doubled as interest charges continued to pile up.

Mr. Johnson lost his job after they filed for bankruptcy and, unable to afford a lawyer, Ms. Raney-Johnson prepared their case. She remembers how she felt when they arrived at the Robert J. Dole Federal Courthouse in Kansas City, Kan., on a sunny September day seven years ago.

“My heart was beating, and I was sweating,” said Ms. Raney-Johnson, now in her mid-40s and a billing supervisor for a federal agency.

In 2015, the year the Johnsons got their ruling, 884,956 personal bankruptcy cases flowed through the courts. Only 674 sought to discharge student debt, according to a recent analysis by Jason Iuliano, assistant law professor at Villanova University.

The New York Times reviewed dozens of cases in which a judge issued a published opinion — the Bankruptcy Class of 2015 — to understand the pains and payoffs five years later. Some debtors are on a better course. But for others, the struggles never went away — or came back after they thought they were free.

Bankruptcy begins with debt, and student loans are the second-biggest form of household debt in the United States. More than 43 million borrowers hold over $1.6 trillion in student loans, a sum that has more than tripled in 13 years. It exceeds what Americans owe on credit cards or auto loans and trails only mortgages.

Sixty-two percent of students who graduated from nonprofit colleges in 2019 had student loan debt, according to an Institute for College Access & Success analysis. Their average balance was $28,950 — not including borrowing by their parents.

Many struggle mightily to pay: Before the government’s coronavirus relief efforts paused federal student loan payments, 7.7 million borrowers were in default and nearly two million others were seriously behind.

The solution has been a public-policy patch job.

About eight million additional borrowers use income-driven repayment plans, which can be challenging to enter. And while the plans lower payments, borrowers accrue interest on the unpaid difference. The debt is eventually forgiven — usually after 20 or 25 years — but the forgiven amount is taxable income.

A related program forgives the federal student loan debts of public-service workers, tax free, after 10 years, but it has been deeply troubled. Borrowers have made payments for years only to learn they were in the wrong kind of payment plan. It got so bad that Congress had to create a separate pot of money to try to fix it.

Although some lawmakers have proposed changing bankruptcy rules to treat student loans as if they were any other consumer debt, there is no broad bipartisan support for any existing proposal. A bill in the House has one Republican co-sponsor, Representative John Katko of New York, but the Senate version, led by Senator Richard J. Durbin of Illinois, has only Democratic support.

Election Day did little to change the fraught nature of student debt in Washington, where the Trump administration has explored shortcomings in the bankruptcy law but his Education Department has strongly opposed relief for indebted students — even if their schools defrauded them — and Joseph R. Biden Jr. once voted to make private loans harder to discharge, though he has vowed to try to reverse the rule.

All that debt poses a problem. Its weight, experts say, has macroeconomic effects, dragging on homeownership and small-business formation. But the fallout goes beyond simple economics.

There is also a mental toll.

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Credit…Terry Ratzlaff for The New York Times

Noelle DeLaet earned a bachelor of fine arts degree from Nebraska Wesleyan University in 2008 — the teeth of the Great Recession. She tacked on another year for a degree in English to make herself more attractive to employers. Perhaps in publishing, she thought.

She left school with $110,000 in debt: roughly $27,000 from the federal government and the rest in private loans co-signed by her mother. The $810 monthly bill, set to climb when the payment plan on one private loan expired, soon overwhelmed her.

Ms. DeLaet, now 34, landed in the child welfare field as a foster care review specialist in Lincoln, Neb. — rewarding, but not lucrative. She sent out hundreds of résumés for better-paying jobs and pleaded with her lenders to reduce her payments. Soon, the creditors started in on her mother and put her on the verge of bankruptcy, too.

Ms. DeLaet’s breaking point came in May 2012 when she ran up against the $4,000 limit on her credit card while trying to buy a burrito at a Mexican grocery. She felt so helpless at times that she considered suicide.

“I looked all over Google for some sort of support group for others going through this,” Ms. DeLaet said. “I felt like there was no way out.”

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When Ms. DeLaet squared off in court against her student-loan creditors, they quibbled with the $12 she spent each month on recycling. She should have tried harder for a promotion, they argued. Or moved somewhere else for more money.

Judge Thomas L. Saladino bristled at that idea. In his opinion, he wrote that she lived in the state’s second-largest city, “as good a place as any to seek a better-paying job.”

The judge discharged about $119,000 in private loans, and an additional $23,000 was forgiven by one of her lenders. But her $27,000 in federal loans stuck: She’s paying those back through an income-driven repayment plan costing about $260 a month. Because she works at a nonprofit, her debt should eventually disappear via the Public Service Loan Forgiveness program.

For Ms. DeLaet, the process was worth it: She has married her boyfriend, had two children and bought a home. Her mother is an “amazing” grandmother, she said, although they still cannot discuss the past.

“It is an untouchable subject,” she said.

The transformation in the bankruptcy rules began in 1976, with unfounded rumors.

A handful of legislators claimed to have heard about a parade of young doctors and lawyers who were trying to game the system and shed their debts while embarking on lucrative careers. The lawmakers toughened the rules, largely preventing borrowers from seeking a discharge within five years of graduation. The rules only got tougher over the next three decades.

Borrowers must show that their student loans are an “undue hardship” — a standard interpreted differently, depending on where you live. Some judicial circuits, including those in Nebraska, where Ms. DeLaet filed, have the judge review a “totality of the circumstances” for the debtor and make a decision.

Other jurisdictions employ a less flexible standard, the Brunner test, named for the case that established it. Judges must answer three questions affirmatively to discharge the debt. First, has the debtor made a good-faith effort to repay the loans? Second, is the debtor unable to maintain a minimal standard of living while making the payments? And, finally, is the debtor’s situation likely to persist?

But even jurisdictions that use the Brunner test apply it differently. Some require the judge to find that the borrowers have a “certainty of hopelessness” in paying off their debt. Other jurisdictions do not.

Here, the Johnsons may have benefited from geographic good fortune.

Lawyers for the Educational Credit Management Corporation — a nonprofit that collects defaulted loans on behalf of the federal government — examined how the Johnsons spent their $2,100 monthly income.

Every expense was scrutinized, including Ms. Raney-Johnson’s $35 monthly union dues, her $100 retirement contribution and $215 to repay loans from her retirement plan. None, the nonprofit’s lawyers argued, were necessary to maintain a “minimal standard of living.”

In his opinion — written more than a year after hearing arguments — Judge Robert D. Berger disagreed. He wrote that the U.S. Court of Appeals for the 10th Circuit, which covers Kansas, had shifted from the most rigid interpretation of the three-part test, which he described as “an unfortunate relic.”

Judge Berger wasn’t sure how the Johnsons were subsisting at all based on their income, and he said courts shouldn’t rely on “unfounded optimism” about a debtor’s future.

“It is disconsonant with public policy and bankruptcy’s fresh start to leave debtors in virtual lifetime servitude to student loans,” he wrote.

The judge discharged their student loans: $83,000 in debt, wiped away.

“I was ecstatic,” Ms. Raney-Johnson said of the moment she received the decision letter. “I probably said some curse words.”

Their good fortune didn’t last.

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Credit…Joseph Rushmore for The New York Times

Opposing lawyers — whether they work for the federal government or for private lenders — are tenacious. Their approach can feel like bullying, if not humiliation.

When Pamela Monroe went to an Arkansas bankruptcy court in 2015, she was 57 with a student-loan balance of about $56,000. She was working in the fragrance section of a Dillard’s department store, and her lunch habits — like $6.10 at Taco Bell and $12.72 at Olive Garden — were a focus of intense interest.

Eating out, Ms. Monroe testified, was her primary form of recreation and a midday necessity: Co-workers would sometimes steal colleagues’ lunches from the break room.

“They laughed about that when I told them,” she said. “I felt at that moment like I was a cornered animal and they were poking sticks at me.”

Ms. Monroe said she had spent her life making choices that others seemed to dictate — marrying two years out of high school and becoming a mother, as her parents seemed to want. After two divorces, she reached for higher education in a bid for independence.

She graduated from the University of Arkansas-Fort Smith with a communications degree and pursued a master’s in speech language pathology. She didn’t finish that program, leaving her with the debt but not the advanced degree. And she couldn’t seem to break out of low-paying work.

“I would have loved to pay them back,” Ms. Monroe said. “But I never could, because nobody ever saw any value in me.”

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Credit…Joseph Rushmore for The New York Times

Judge Ben Barry found Ms. Monroe’s restaurant spending excessive, but noted that she had changed jobs frequently seeking higher pay. Her income, he wrote in his opinion, about doubled between 2010 and 2015, to over $26,000.

But even a reduced budget he outlined would not leave her enough money to make her student loan payments, so he discharged just over half of her student loans.

She would most likely have been paying that off until she was in her 80s. But last year, Ms. Monroe, now 63 and dealing with osteoarthritis and other health problems, received a disability discharge for the rest of her debt.

Now all she wants to do is live out her days in her $510-a-month apartment in a retirement community. “It has a sprinkler system and an elevator, very safe,” she said.

But she hasn’t stopped thinking about the way the system and its actors — like the lawyer on the opposite side in her case — seemed to render judgment on her life choices.

“I didn’t do anything wrong,” she said. “I was just living, but I got in trouble for eating.”

In 2016, the Johnsons learned their loan discharge was being appealed by lawyers for Educational Credit Management Corporation.

Paradoxically, they were worse off because their financial situation had improved: Ms. Raney-Johnson earned a promotion, and Mr. Johnson, now in his mid-40s like his wife, found a stable government job. A year after discharging their loans, Judge Berger concluded that the couple could now “easily” maintain a minimal standard of living and reinstated their debt — which had ballooned even more because of interest charges.

Preparing to send their own children to college, the Johnsons requested another forbearance. Their balance continues to grow: It’s roughly $104,000 today.

Ms. Raney-Johnson took the final class she needed for her biology degree over the summer. But the debt was already piling up for the next generation. Their oldest, a college sophomore, expects to owe about $45,000 when she graduates. Their middle child, a high school senior, is looking at colleges now. Ms. Raney-Johnson said she and her husband — who are putting about $5,000 a year toward their daughter’s tuition — would try to remain in forbearance for now.

In August, they received a notice about an income-driven repayment plan, which would start out costing about $550 a month. From there, the cost depends on many factors, including job changes, raises and eligibility for forgiveness programs. If they’re able to get into the public service program, the debt could go away a decade after they start paying. If not, the bills could continue coming for about 20 years — right around the time the Johnsons will be trying to retire.

The experience, Ms. Raney-Johnson said, has been “disheartening.” She and her husband had run up against opposition that could keep going with little regard for time or expense, knowing that they couldn’t.

“It feels like getting screwed over by someone with a lot more power and money,” she said.

Susan Beachy contributed research.

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