Extractive summaries of and key takeaways from the articles curated from TOP TEN BUSINESS MAGAZINES to promote informed business decision making | Week 231|February 11-17, 2022
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Shaping Section : Ideas and forces shaping economies and industries
What would happen if financial markets crashed?
The Economist | February 12, 2022
Today America’s financial system looks nothing like it did before the crashes of 2001 and 2008, yet lately there have been some familiar signs of froth and fear on Wall Street: wild trading days on no real news, sudden price swings and a queasy feeling among many investors that they have overdosed on techno-optimism. Having soared in 2021, shares on Wall Street had their worst January since 2009, falling by 5.3%. The prices of assets favoured by retail investors, like tech stocks, cryptocurrencies and shares in electric-car makers, have plunged.
It is tempting to think that the January sell-off was exactly what was needed, purging the stockmarket of its speculative excesses. But America’s new-look financial system is still loaded with risks. Asset prices are high: the last time shares were so pricey relative to long-run profits was before the slumps of 1929 and 2001, and the extra return for owning risky bonds is near its lowest level for a quarter of a century. Many portfolios have loaded up on “long-duration” assets that yield profits only in the distant future. And central banks are raising interest rates to tame inflation.
The mix of sky-high valuations and rising interest rates could easily result in large losses, as the rate used to discount future income rises. If big losses do materialise, the important question, for investors, for central bankers and for the world economy, is whether the financial system will safely absorb them or amplify them. The answer is not obvious, for that system has been transformed over the past 15 years by the twin forces of regulation and technological innovation.
Yet the reinvention of finance has not eliminated hubris. Two dangers stand out. First, some leverage is hidden in shadow banks and investment funds. The second danger is that, although the new system is more decentralised, it still relies on transactions being channelled through a few nodes that could be overwhelmed by volatility.
Ordinary citizens may not think it matters much if a bunch of day-traders and fund managers get burned. But such a fire could damage the rest of the economy.
3 key takeaways from the article
- Today America’s financial system looks nothing like it did before the crashes of 2001 and 2008, yet lately there have been some familiar signs of froth and fear on Wall Street: wild trading days on no real news, sudden price swings and a queasy feeling among many investors that they have overdosed on techno-optimism.
- Having soared in 2021, shares on Wall Street had their worst January since 2009, falling by 5.3%.
- The mix of sky-high valuations and rising interest rates could easily result in large losses, as the rate used to discount future income rises. If big losses do materialise, the important question, for investors, for central bankers and for the world economy, is whether the financial system will safely absorb them or amplify them.
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Topics: Financial Systems, Global Economy, Capital Markets
Global Economics Intelligence executive summary, January 2022
McKinsey & Company | February 7, 2022
The global economy experienced a strong finish in 2021, with economic performance accelerating in the absence of most pandemic restrictions. Trade in goods expanded through the year, and manufacturing and services continued to grow in most surveyed economies. The International Monetary Fund (IMF) projects 5.9% global growth for 2021. The US economy had a very strong fourth quarter, with GDP expanding at a rate of 6.9% and annual GDP growth estimated at 5.7%. China’s economy expanded 8.1% in 2021; eurozone GDP growth should reach 5.2% (OECD). Estimates of GDP growth for India’s fiscal year, which extends through March of 2022, are around 9.0% (IMF).
To check rising consumer inflations, analysts expect several rate hikes,including policy interest rates, in 2022, beginning in March. While rising consumer inflation in most of the world China remained an as exception, where inflation dipped to 1.5% in December. Depending on how well the measures to control inflation succeed, economic momentum from 2021 could carry over into 2022.
Executive respondents to McKinsey’s December survey on economic conditions were fairly optimistic about 2022: most expect better economic conditions despite heightened risks from the pandemic and inflation. Given that economies are expected to shift away from stimulus spending and other policy supports, forecasters and economists generally project a slower pace for global growth in 2022—but one that is still faster than prepandemic levels. Estimates range from 4.5% (OECD) to 4.1% (World Bank, IMF), rates of growth not seen since 2010, the bounce-back year after the global financial crisis.
Turning to the most recent monthly economic data, consumer confidence, both globally and in individual economies, dipped in December 2021 with the resurgence of the pandemic. Retail sales remained strong in the United States in December and even spiked in the latest eurozone data (for November), which show strong improvement from holiday buying. This trend was also substantaited by solid expansion as indicated by global purchasing managers’ indexes (PMIs) for both manufacturing (54.2) and services (54.6) in December. As of November 2021, the most recent month for which data are available, trade continued to improve.
Unemployment rates are approaching prepandemic lows in all surveyed economies. Pandemic-driven labor shortages continue to act as a drag on recovery. Heightening geopolitical tensions are cited by most analysts as a growth-limiting risk for 2022.
3 key takeaways from the article
- The global economy experienced a strong finish in 2021, with economic performance accelerating in the absence of most pandemic restrictions. Trade in goods expanded through the year, and manufacturing and services continued to grow in most surveyed economies. To check rising consumer inflations, analysts expect several rate hikes,including policy interest rates, in 2022, beginning in March.
- Executive respondents to McKinsey’s December survey on economic conditions were fairly optimistic about 2022
- Heightening geopolitical tensions are cited by most analysts as a growth-limiting risk for 2022.
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Topics: Global Economy, Inflation, International Politics
The Data Boom Is Here — It’s Just Not Evenly Distributed
By Viktor Mayer-Schönberger and Thomas Ramge | MIT Sloan Management Review | February 09, 2022
Joseph Schumpeter was deeply worried about innovation. The renowned economist, who coined the term creative destruction, championed entrepreneurship as the engine of economic growth but feared that small players lacked the key resource needed to implement their pathbreaking ideas: capital. Fortunately, he turned out to be wrong. Since the 1950s, a thriving ecosystem of angel investors and venture capitalists has supplied enough money to startups for their ideas to change the world.
But the data age has revived Schumpeter’s concern that innovators could be blocked from accessing the resources they need. As Big Tech becomes evermore powerful thanks to the vast troves of data that the major platforms have collected, and innovation becomes increasingly data-driven, entrepreneurs and enterprises may find it difficult to seize new opportunities. Keeping the engine of innovation running will require access not only to capital but to data as well.
While great ideas can spring up anywhere, access to data is not evenly distributed. Today, the collective we refer to as Big Tech — Google/Alphabet, Amazon, Facebook/Meta, Apple, and Microsoft — has a far greater capacity to collect data than startups and smaller competitors do. Even large corporations in other sectors often have only limited ability to access relevant data.
Such traditional antitrust remedies don’t address the source of Big Tech’s competitive power. Unlike Microsoft during the browser wars a quarter century ago, in most cases the platform giants aren’t dominant because they are illegally tying multiple services. They are successful because their exclusive access to huge piles of valuable data translates into competitive advantage.
So far, debates on how to regulate Big Tech have examined market concentration and monopoly power. Remedies include breaking up large platform companies and treating them as common carriers. These tough measures are based on previous cases of dealing with powerful monopolies, such as Standard Oil and AT&T. But they are a bad fit for what we face today.
A far better approach is to ensure that many players can innovate, by granting them access to platform companies’ data. Unlike a tax, a data access mandate does not expropriate property. The Big Tech companies can continue to use the data they have. But it ensures that others have access to data to transform their ideas into innovative new products and services. This is economically efficient because no company can extract all value from the data it has: Others will have different ideas on how to use data to create additional value.
3 key takeaways from the article
- Schumpeter’s concern that innovators could be blocked from accessing the resources they need: after capital the new worries is data.
- As Big Tech becomes evermore powerful thanks to the vast troves of data that the major platforms have collected, and innovation becomes increasingly data-driven, entrepreneurs and enterprises may find it difficult to seize new opportunities.
- Remedies include breaking up large platform companies and treating them as common carriers. A far better approach is to ensure that many players can innovate, by granting them access to platform companies’ data.
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Topics: Creative Destruction, Data, Competition, Regulation
Leading & Managing Section
When Subtraction Adds Value
By Gabrielle Adams et al., | Harvard Business Review | February 04, 2022
Imagining ways to introduce change is an essential skill no matter one’s occupation, role, or rank. Most of such changes would add something to what already exists. There is nothing inherently wrong with adding. But if it becomes a business’s default path to improvement, that business may be failing to consider a whole class of other opportunities. In one study of organizational change, for example, the authors found that when stakeholders suggested hundreds of ways to improve an organization, fewer than 10% of those improvements involved taking something away. Across a series of follow-up experiments, they demonstrated that people systematically overlook subtractive changes. But subtraction has untapped potential.
From growing organizations to built-up cities to bloated rule books, evidence of additive history is all around us. Evidence of subtraction, however, is less observable — it’s marked only by the absence of something. A company may be flourishing because the previous CEO removed burdensome red tape. A slide deck may precisely showcase the main point because its editor got rid of distracting secondary arguments. In both cases, subtraction is to thank, and in both cases, the subtraction is out of sight and out of mind. How, then, can businesses get better at remembering to subtract?
Remind people that subtracting is an option. Reminders that subtracting is an option can help in practice. Pithy quotes in visible locations about “elimination of the unnecessary” and pursuing “less, but better” help designers imagine subtractive options.
Make subtraction policy. Consider building subtraction into day-to-day business processes.
Make evidence of good subtractions visible. Reminders and policies get us started, but no matter how beneficial any subsequent acts of subtraction are, they still won’t leave as much visible evidence as adding. To address that pesky noticeability problem, consider how you might introduce one last type of cue: visible evidence of good subtractions.
3 key takeaways from the article
- Imagining ways to introduce change is an essential skill no matter one’s occupation, role, or rank. Most of such changes would add something to what already exists.
- There is nothing inherently wrong with adding. But if it becomes a business’s default path to improvement, that business may be failing to consider a whole class of other opportunities i.e., improvment through subtractive changes.
- How, then, can businesses get better at remembering to subtract? Three ways: remind people that subtracting is an option, make subtraction policy, and make evidence of good subtractions visible.
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Topics: Improvement, Innovation, Productivity
Steal These Art World Techniques to Improvise in the C-Suite
Bloomberg Businessweek | February 8, 2022
In her new book, art adviser Maria Brito tells executives to emulate jazz musicians and painters to respond to constant change and uncertainty. The following extractive summary is based on an edited excerpt of this book.
Artists react, improvise, and make hundreds of moment-to-moment decisions about the best way to bring the project to a successful conclusion. Improvisation in art refers broadly to the practice of suddenly composing or inventing something new through a responsive departure from preformed plans or expectations. Improvisation in business is about reacting creatively to possibilities not previously envisioned.
You have to be able to harness your tried-and-true methods and structures, the steps that you mapped out to get to your goal, and the knowledge you already have about your business to embrace the contingencies that will arise. You must take care of them quickly, sometimes in ways you hadn’t considered. This is improvisation. Improvisation isn’t a substitute for planning, but rather an instrument to be used in situations that catch us off-guard or when our strategies haven’t prepared us for an unforeseen circumstance.
The paradox of improvisation is that the more prepared and competent you are, the more creative and unpredictable you can be. The greater your preparation, the easier it is to relinquish control. If you trust that you know enough about your craft or your business to come up with a new gesture, as abstract impressionist painter Jackson Pollock did, you can experiment wildly with a method you have used before to see what happens.
An impromptu move can add that quality of surprise that keeps your clients wanting more, or it can save you at a moment’s notice. Using these elements of improvisation regularly will help you achieve mindfulness—the state of being present, focused, and aware. Mindfulness will increase your emotional intelligence, which will also lead to intuitive insights and creative breakthroughs.
When you accept the idea that there is improvisation in business, you become a leader in charge, not a leader in control. A great leader, who is innovative and always looking toward the future, knows that sometimes their job is to ask the right questions and not have all the answers. It leaves room for improvisation.
2 key takeaways from the article
- In her new book, art adviser Maria Brito tells executives to emulate jazz musicians and painters to respond to constant change and uncertainty.
- Use these five elements when improvising in business:
- Be present and focused in the moment so that you know exactly when to improvise.
- React quickly to what’s being given to you.
- Be aware and adapt to how people around you react to your improvisation. That’s how you know if you are moving in the right direction or if what you are saying is not well taken.
- Practice being a good communicator across the board. Choose the right words so that everyone understands what your improvisation is about.
- Practice the “yes, and” technique.
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Topics: Creativity, Leadership, Improvisation
Entrepreneurship Section
Why You Should Build a Startup When Everything Has Already Been Invented
By Vasily Voropaev | Entrepreneur Magazine | February 13, 2022
Brilliant ideas are few. There are fewer than 100 truly large markets in the world. And there is no point in developing a second Twitter or a second Snapchat. So, every good idea has already been tried, right? And it either took off (and it’s too late to repeat it), or it didn’t take off (and it won’t take off with you, you are no better than tens or hundreds of predecessors). There will be no more hugely successful startups anymore, correct?
Of course not. The world is changing. What could’ve failed 10 years ago may have a chance to become super successful now. Future giants will try what was previously thought unnecessary or impossible. For example, the main technological change of the last 30 years — the reduction in the cost of communication — has made it economically feasible to do regular interaction between cities and continents. The result is Facebook, Amazon, Booking.com, Alibaba and others. For 10 years now, everyone has had a smartphone in their pocket — and this is where Uber, Instagram, and neobanks came in.
While using Nokia 3310 or even Samsung S55, the taxi call client application was completely pointless. Probably, quite a few people tried to start a business similar to Uber, but they had no chance. On June 29, 2007, the first iPhone appeared and the world changed forever. Uber was founded in March 2009 — one of the first of its kind, using the window of opportunity that was open for just a few years. Now the company is worth $85 billion. The same show can be repeated with other actors.
New windows are bound to appear. We just need to be among the first ones to strike. What is there now or what will appear in the near future that was not here ten years ago? There are a lot of things. Someone will definitely mention cryptocurrencies and NFTs. This is where a lot of money is, and where a barrier to entry is still small. Want to see a new Google or Facebook? Look at crypto exchange FTX. Now, its founder Sam Bankman-Fried is valued at $26.5 billion at 29 years old.
But more globally in the IT-sphere, the leader seems to be obvious. In the past few years, artificial intelligence has finally become a reality. This change is massive. A computer now solves any mundane tasks better and cheaper than humans. It can recognize faces, find the best value per buck, hire people, drive cars and even predict customer emotions. This means that almost everyone can be replaced with artificial intelligence. And these game-changing programs would need to be developed by very specific companies, some of which could be startups.
3 key takeaways from the article
- Brilliant ideas are few. There are fewer than 100 truly large markets in the world. And there is no point in developing a second Twitter or a second Snapchat. So, every good idea has already been tried, right? There will be no more hugely successful startups anymore, correct?
- Of course not. The world is changing. What could’ve failed 10 years ago may have a chance to become super successful now. Future giants will try what was previously thought unnecessary or impossible.
- New windows are bound to appear. We just need to be among the first ones to strike.
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Topics: Startups, Technology, Employment, Technology
5 Ways To Collect Exceptional Testimonials
By Stephanie Burns | Forbes Magazine | February 11, 2022
A compliment is the gift that keeps on giving. Not only are compliments free, but they can bring business when you transform them into testimonials. Quote someone as saying that you were worth every penny or you helped them double their income and you’ve just increased your chances of your next sale. Five ways to collect exceptional testimonials are:
- Think Beyond Your Client Base. If you’re just starting out, collecting incredible testimonials can feel like a catch-22. How will you get someone to pay for your services if you can’t get testimonials, because you haven’t had anyone pay for your services yet? But there’s no law that says every testimonial must be from a person who paid to work with you. A testimonial is a quote from someone you helped in some way. That’s it.
- Ask The Right Questions. If you want great testimonials then avoid broad questions that can be answered with a simple yes or no. Instead ask specific questions that require a bit of engaging explanation.
- Don’t Wait Until The End Of The Process. Most people send a feedback form to their clients at the end of the process and try to pull testimonial quotes from there. But you can ask your clients for feedback along the way so that you have testimonials that speak to each stage of the process. When deciding when to prompt your clients with questions, think about the times in your process where you dispel a fear, solve a problem, hand over a deliverable or all of the above.
- Pull From Various Formats. You don’t always have to use a feedback form to collect testimonials. See someone praising your work and methods on Facebook? Take a screenshot. Got an email from a client gushing about how confident they feel working with you? Save it. See someone slide into your Instagram DMs with praise? Capture it. Just be clear with your clients that you would like to share their quote and always give them the option of excluding their name.
- Never Stop At Just Three Or Four. Even if you don’t have really long or elaborate testimonials from many people, as long as you have a higher number of them, that can tip the scale for you when it comes to selling your services.
3 key takeaways from the article
- A compliment is the gift that keeps on giving. Not only are compliments free, but they can bring business when you transform them into testimonials.
- Quote someone as saying that you were worth every penny or you helped them double their income and you’ve just increased your chances of your next sale.
- Five ways to collect exceptional testimonials are: think beyond your client base, ask the right questions, don’t wait until the end of the process, pull from various formats, and never stop at just three or four.
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Topics: Testimonials, Business Model
10 Small Skills That Can Add Up to Huge Success
By Jessica Stillman | Inc Magazine | February 14, 2022
Learn to innovate like Elon Musk, hoop like LeBron James, or act like Meryl Streep and you will, barring spectacularly bad luck, end up successful. But achieving this level of skill is, of course, beyond most of us. Helpfully though there is another way for those not gifted with world-class talent to achieve impressive success.
Einstein is often quoted as saying compound interest is the “most powerful force in the universe.” That story is likely apocryphal, but the underlying truth behind the sentiment is undeniable. Modest investments with small rates of return can add up to huge payoffs over time. And what’s true for money is true for skills, VC Morgan Housel argued on his consistently thought-provoking blog recently. “It’s tempting to want to find the one big skill that will set you apart. But most incredible things come from compounding, and compounding isn’t intuitive because the incremental inputs are never exciting on their own,” he writes.
Launching rockets and winning Oscars grab headlines because big, rare skills are sexy. Smaller skills are less sexy, but honed over time and combined with other humble-but-useful skills, they can still add up to huge success. And this type of skill is far more achievable for most of us mere mortals. What are some examples? Within the long list offered by Housel 10 skills to get you started are::
- Curiosity across disciplines, most of which are outside your profession. (Steve Jobs agreed on the value of this one.)
- A well-calibrated sense of your future regret. (Recommended by Jeff Bezos)
- Respecting luck as much as you respect risk.
- Low susceptibility to Fear of Missing out.
- A sensitive bullsh*t detector.
- Valuing your independence over someone else’s priorities.
- Respecting history more than forecasts.
- Thinking in probabilities vs. certainties, including the idea that a good decision can result in a bad outcome and vice versa.
- Quitting while you’re ahead before you’ve exhausted or outgrown what made you successful.
- Getting along with people you disagree with.
3 key takeaways from the article
- Learn to innovate like Elon Musk, hoop like LeBron James, or act like Meryl Streep and you will, barring spectacularly bad luck, end up successful. But achieving this level of skill is, of course, beyond most of us. Helpfully though there is another way for those not gifted with world-class talent to achieve impressive success.
- Smaller skills honed over time and combined with other humble-but-useful skills, can add up to huge success.
- You don’t need to be a genius to make substantial contributions to the world. You just need to doggedly and thoughtfully cultivate a personal portfolio of relatively uncommon but useful skills. And need to remember that most things that look like superpowers are just a bunch of ordinary skills mixed together at the right time.
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Topics: Entrepreneurship, Personal Development, Branding
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