Extractive summaries of and key takeaways from the articles curated from TOP TEN BUSINESS MAGAZINES to promote informed business decision making | Week 233|February 25-March 3, 2022
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Shaping Section : Ideas and forces shaping economies and industries
Despite bulging debt everywhere, the IMF is struggling to be helpful
The Economist | February 26, 2022
Two years of pandemic-fighting and on-off lockdowns have turbocharged global debt, both public and private. In 2020 alone it soared by 28 percentage points, to 256% of GDP—the largest one-year rise in borrowing since the second world war. In recent months, as central banks have raised interest rates to combat inflation, the cost of servicing it has increased, raising demand for the IMF’s assistance. In most large emerging markets the pain is manageable, for now. Soaring inflation and sinking currencies have not yet pushed the likes of Brazil or India towards crisis. Instead a quieter crisis is breaking out in smaller countries devoid of hard currency. Sri Lanka, Tunisia, Lebanon and Ghana are all candidates for loan programmes from the IMF. Among the world’s 60-odd poorest countries, more than half carry debt loads which may need to be restructured. That may be an underestimate: a recent World Bank report found that 40% of low-income countries have not published any data about their sovereign debt since 2020.
The IMF has enough firepower to help solvent countries. Its resources were increased after the global financial crisis, boosting its lending capacity to $1trn today, up from $400bn in 2010. It has also responded creatively to members’ difficulties since the start of the pandemic. When markets melted down in early 2020, it launched a short-term liquidity facility through which countries facing cash squeezes could borrow cheaply. It also lent $170bn through rapid credit facilities similar to its standard loan programmes, but with fewer strings attached.
Such programmes have helped to tide over many solvent countries when markets have dried up. But lending, no matter how easy or cheap, is of little help to countries that are nearly bankrupt. At least a dozen countries today owe more than they can hope to repay. Given the fragile outlook for growth—clouded by tighter monetary policy, a weak Chinese economy and geopolitical tensions—more may join their ranks. Without debt relief, many will only use IMF loans to repay other creditors, leaving the fund with an ever-growing share of the tab. And signs such lack of any commitment from G20 for any expanded debt relief bodes ill for the IMF.
3 key takeaways from the article
- Two years of pandemic-fighting and on-off lockdowns have turbocharged global debt, both public and private. In recent months, as central banks have raised interest rates to combat inflation, the cost of servicing it has increased, raising demand for the IMF’s assistance.
- Among the world’s 60-odd poorest countries, more than half carry debt loads which may need to be restructured. And that may be an underestimate.
- Without debt relief, many countries will only use IMF loans to repay other creditors, leaving the fund with an ever-growing share of the tab. And signs such lack of any commitment from G20 for any expanded debt relief bodes ill for the IMF.
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Topics: IMF, Loans, Global Economy
Russia buys 70% of its chips from China, but the U.S.’s blockade of American semiconductors will still hit Putin hard
By Eamon Barrett | Fortune Magazine February 25, 2022
On February 24, in response to Russian President Vladimir Putin’s invasion of Ukraine, U.S. President Joe Biden unveiled a second tranche of sanctions against Russia’s business interests that contained a dramatic broadside: a complete embargo on selling semiconductors to Russia. “We’re going to impair their ability to compete in the 21st-century economy,” Biden said on Thursday, announcing sanctions that will cut Russia off from the computer chips that power cars, smartphones, and even missiles.
Under Biden’s new embargo, any chip developed with American technology is prohibited from sale to Russia. According to U.S. Assistant Secretary of Commerce for Industry and Security Thea Rozman Kendler, “Even most products made overseas using sensitive U.S. technology will be restricted for export to Russia.”
Although the U.S. has only a relatively small base of semiconductor manufacturing, U.S. companies are leaders in the field of semiconductor design and chip patents. Many foreign manufacturers rely on U.S. intellectual property to design their own chips. The U.S. previously used the same law to block the sale of chips to Chinese telecom equipment manufacturer Huawei Technologies, which decimated the group’s smartphone business. Huawei has dropped from the world’s largest smartphone supplier to not even ranking in the top five.
While the embargo could be devastating for Russia, most global suppliers might hardly notice the cost of compliance. Primarily because Russia is not a significant direct consumer of semiconductors. Russia accounts for only 0.1% of global chip purchases. Research firm IDC estimates the Russian chip market is worth $50 billion in trade out of a $4.5 trillion global industry.
Russia purchases roughly 70% of its chip supplies from China, which will likely ignore Biden’s embargo. But China can produce only relatively low-end chipsets, which are good for automobiles and home appliances but won’t be smart enough to guide Russian missiles.
Russia and Ukraine are major suppliers of neon gas and palladium, which are both vital components in chip manufacturing. Some analysts fear Russia could leverage its position in the market to retaliate against the U.S. chip sanctions. But many chipmakers began to diversify neon sourcing after Russia invaded Ukraine last time, in 2014, causing a 600% spike in neon pricing. Now the chipmakers are better prepared to switch suppliers.
3 key takeaways from the article
- On February 24, in response to Russian President Vladimir Putin’s invasion of Ukraine, U.S. President Joe Biden unveiled a second tranche of sanctions against Russia’s business interests that contained a dramatic broadside: a complete embargo on selling semiconductors to Russia.
- Russia purchases roughly 70% of its chip supplies from China, which will likely ignore Biden’s embargo. But China can produce only relatively low-end chipsets, which are good for automobiles and home appliances but won’t be smart enough to guide Russian missiles.
- Russia and Ukraine are major suppliers of neon gas and palladium, which are both vital components in chip manufacturing. Some analysts fear Russia could leverage its position in the market to retaliate against the U.S. chip sanctions.
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Topics: Technology, Semiconductor, Russia, China, USA
Leading & Managing Section
How to Respectfully Discuss Contentious Issues at Work
By Joseph Grenny | Harvard Business Review | February 23, 2022
People are more hesitant to speak up at work now than they were a few years ago. One of the studies finds nine out of 10 respondents have felt emotionally or physically unsafe to speak their mind more than once in the past 18 months. And 39% reported feeling unsafe either every day or every week. Only 7% report that they are just as confident as ever in social situations.
When we talk about issues that are emotionally and politically risky, we tend to see the other person in a more negative light. We tell ourselves stories that portray us as virtuous victims and the other party as evil villains. This storytelling generates emotions of disgust and fear, which we bring into the conversation. These emotions further provoke the conflict, and lead to a downward spiral that reinforces our self-made judgment and feeds our negative feelings. Based on his research the author revealed a host of tactics that any of us can use to de-escalate our own stories and step into conversations, even conversations around tough topics more effectively.
Make it safe. This tactic was used by 76% of the respondents who felt confident about speaking up. When emotions escalate, reassure others of your respect for them and point out values you both share.
Get curious. Used by 72% of respondents, rather than try to decide “who is right,” aim to understand the world view of the other person. Ask questions, seek to understand, and show interest.
Start with facts, not judgments or opinions. Used by 68% of respondents, carefully lay out the facts behind their point of view. Use specific and observable descriptions.
Don’t focus on convincing. Used by 48% of respondents, don’t let your main goal be to change the other person’s mind. Instead, encourage the sharing of ideas and listen before responding.
Be skeptical of your own point of view. Used by 42% of respondents. Conversations work best when you come in with a combination of confidence and humility. Be confident that you have a point of view that is worth expressing, but humble enough to accept that you don’t have a monopoly on truth and new information might modify your perspective.
Own your right to have your opinion. Used by 11% of respondents, rather than rely on others to validate your right to your opinion, take responsibility to validate yourself.
3 key takeaways from the article
- People are more hesitant to speak up at work now than they were a few years ago. One of the studies finds nine out of 10 respondents have felt emotionally or physically unsafe to speak their mind more than once in the past 18 months. And 39% reported feeling unsafe either every day or every week.
- We tell ourselves stories that portray us as virtuous victims and the other party as evil villains. This generates emotions of disgust and fear, which we bring into the conversation leading to conflict.
- Tactics that any of us can use to de escalate our own stories and step into conversations including around tough topics more effectively include: make it safe, get curious, start with facts, not judgments or opinions, don’t focus on convincing, be skeptical of your own point of view, and own your right to have your opinion.
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Topics: Communication, Team Building, Organizational Behavior
When Losing Money Is Strategic — and When It Isn’t
By Ramon Casadesus-Masanell et al., | MIT Sloan Management Review | February 22, 2022
Focusing on growth in its early years, often, that means a venture will lose money. That’s not unexpected in a startup, of course, but the key question is whether such losses are healthy or unhealthy. If the business model anticipates both creating and capturing value, the losses occur purely because the entrepreneurs are investing in growth and scale. Over time and with scale, the losses should take care of themselves. These are healthy losses.
But if the business model is fundamentally flawed and fails to capture a part of the value it creates, then scale is not going to convert the losses into profits. Contrary to conventional thinking, the approach of absorbing losses year after year to drive revenue growth will not work for most entrepreneurs. It can be a path to certain failure.
There is, however, a simple but often overlooked analysis that can help entrepreneurs determine early on whether they are driving for healthy or unhealthy losses: unit economics (UE), or the contribution margin per unit. This is calculated by taking the expected revenue of the unit under consideration and subtracting the costs the company incurs from offering that unit. The key insight is that if the company sets the price above avoidable costs, larger volumes will likely lead to business profitability; if the price is below avoidable costs, even high revenues will often fail to prevent high losses. Entrepreneurs, investors, and managers can think systematically about using UE to assess the long-term viability of the business model by using three tests.
Scale test: Given enough volume, economies of scale/experience, or bargaining power with suppliers, we will have sufficiently low unit costs.
Sources of revenue test: With enough volume, we will unleash additional sources of revenue.
Value proposition test: With increased volume, our offering will become more and more desirable to customers, thus allowing for improved monetization.
Some of the best practices that managers must consider as the right approach for their particular company and product are: define the unit in unit economics carefully, triangulate, understand the hierarchy of units, make your assumptions explicit, and test them with small-scale experiments, and consider dynamic scenarios.
3 key takeaways from the article
- Focusing on growth in its early years, often, that means a venture will lose money. That’s not unexpected in a startup, of course, but the key question is whether such losses are healthy or unhealthy.
- Unit economics or the contribution margin per unit can help entrepreneurs determine early on whether they are driving for healthy or unhealthy losses.
- Entrepreneurs, investors, and managers can think systematically about using unit economics to assess the long-term viability of the business model by using three tests: the scale test, the sources of revenue test, and the value proposition test.
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Topics: Business Model, Entrepreneurship, Startups
Entrepreneurship Section
How To Leverage Community To Grow Your Business
By Jia Wertz | Forbes | February 25, 2022
With people still working from home two years into this pandemic, and on-again, off-again quarantines and isolation, the lack of in-person interaction has created an environment where people are yearning to build community, arguably more than ever before. And many companies have found creative ways to not only build community from afar, but also to leverage communities to help grow their business.
Create Authentic Connections. With more and more time being spent behind computer screens and on our mobile phones, it’s like a breath of fresh air when you make a connection with an actual human. It’s crucial to keep that in mind when building a community. Make each community member feel special. Taking your community offline from time to time, is also recommended to strengthen the bonds. And be sure not to lose access to the community you’ve built, simply due to the technology or platform you connect with them on. For this you should diversify where your community engages with you.
Loyal Customers Become Brand Advocates. Engaging a community builds trust, and that trust evolves into customer loyalty. Those loyal customers become brand advocates over time – and considering that word-of-mouth is one of the most effective types of marketing, it’s a win-win scenario. Reward and reinforce them. At launch, consider lower reach, higher conversion activities like referrals that build upon that existing loyalty. At scale, reinforce your customer flywheel with membership. Much like the momentum created by a flywheel on a rowing machine, the flywheel effect in business refers to small wins that build on each other, gaining so much momentum over time that growth seems to happen automatically.
Social Connectivity And Community. Fostering a community doesn’t only give a company access to a curated group of people interested in a similar niche topic – but it gives members access to each other, which can be invaluable to them.
Learn About The Metaverse. The way we spend our free time – from shopping to socializing is changing. Our daily lives are rapidly becoming more virtual. Web3 is the place to be – think immersive shopping experiences versus cold, bland websites. Think one-on-one customer service in real time with the avatar of a real person beside you, versus waiting on a direct message.
3 key takeaways from the article
- With people still working from home two years into this pandemic, and on-again, off-again quarantines and isolation, the lack of in-person interaction has created an environment where people are yearning to build community, arguably more than ever before.
- Many companies have found creative ways to not only build community from afar, but also to leverage communities to help grow their business.
- The following considerations should be watched: create authentic connections with the members, out of these loyal customers can become your brand advocates, who could also get benefit from other members, and to keep them engaged diversify your social media presence but also learn about the Metaverse which is becoming the future platform for such engagement.
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Topics: Technology, Community, Marketing, Branding
Pay Attention to These Top Website Navigation Practices to Improve User Experience
By Peter Roesler | Inc Magazine | February 26, 2022
According to the author one of the things he has learned to count on in the search engine marketing (SEM) realm is change. Things are constantly changing and evolving. Because of this, you must keep up. This applies to all aspects of your marketing strategy, including your website navigation. No longer can you take a “set-it-and-forget-it” approach to your website. To ensure a positive user experience, you have to update your site and navigation regularly.
The purpose of website navigation is to help your website visitors search for and find the information they need easily and quickly. Your navigation menu should be simple to use and understand, with links that lead to the most important pages on the site. It’s also smart to make sure search engines can easily index the pages on your navigation menu. Based on his experience in SEM, the author has developed a few top tips to help ensure your navigation menu meets users’ and search engine needs.
Consider the Menu Order Carefully. The order of your navigation menu needs to be precise and based on your website goals. For example, do you want to encourage someone to make an order or reach out to your sales team? Depending on the end goal, you need to alter the navigation and steer people on your site to those desired destinations first.
Consider Structure and Language. Consider the language and make it specific to your audience. You also need easy-to-follow links and clear buttons on your site, which will make navigation simple.
Keep Things Simple. Your website visitors need to be able to find what they are searching for quickly. Your contact information should be clear and in an obvious location, like at the bottom of the home page.
Make sure any drop-down menu options are concise. If you offer too many options, visitors may become confused. This can also lead to a higher bounce rate.
Make Menu Items Specific. You should make sure website visitors always know where they are on your site. This improves your website navigation and helps users find what they are searching for. They will also continue to come back for more.
3 key takeaways from the article
- In the search engine marketing (SEM) the most important realm is change. Things are constantly changing and evolving. Because of this, you must keep up. This applies to all aspects of your marketing strategy, including your website navigation.
- To ensure a positive user experience, you have to update your site and navigation regularly.
- A few top tips to help ensure your navigation menu meets users’ and search engine needs include consider the menu order carefully to make it precise and based on your website goals. Need easy-to-follow links and clear buttons on your site. Keep things simple to ensure your website visitors need to be able to find what they are searching for quickly. And make sure website visitors always know where they are on your site.
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Topics: Marketing, Technology, Search Engine Optimization
4 Critical Traits You Need to Build Wealth
By Brian H. Robb | Entrepreneur Magazine | February 26, 2022
Wealth is not gained by passively reading or listening, but by action. Knowledge is potential or stored energy, essentially worthless until used and turned into deeds. Actions — not thoughts — create wealth by developing a new industry (like Elon Musk) or investing (like Warren Buffett). There are no secrets or shortcuts to riches (excluding marriage to a wealthy spouse). However, those at the top of the financial pyramid typically exhibit four specific characteristics.
Focus. Focus is the ability to set a goal and concentrate solely on it until achieved. The acquisition of wealth is a journey of years, if not a lifetime. While good luck can affect the length of travel, the gift of sudden fortune is granted very few. Most fortunes are built slowly by consistently investing a portion of one’s earnings wisely. Focus on your destination, and you avoid the lost time, energy and capital of detours, wrong directions and chance.
Self-discipline. The yin to the yang of focus is self-discipline, which is the ability to control one’s thoughts and actions. Some have also defined discipline as “the ability to defer gratification.” Most successful people are not extraordinarily gifted or have genius-level IQs, but ordinary people who learn to link today’s actions with tomorrow’s results. To paraphrase humorist Will Rogers, self-discipline enables you to avoid spending money that you don’t have to buy things that you don’t need to impress people you don’t like.
Expertise. Many confuse knowledge with expertise. The former comes from reading and experience; expertise is an ability to use knowledge to obtain specific outcomes. Successful investors need knowledge of such disciplines of accounting, finance and security analysis obtained through study. However, expertise develops through consistent, objective application of the knowledge, or what researchers call “deliberate practice.” Experts are made, not born.
Risk management. Because the future is unknown, all aspects of human existence bear risk. Successful investors must understand the types of risks inherent in action and minimize the likelihood of occurring (frequency) and the loss associated with an occurrence (magnitude). Investors can manage their investments to reduce potential losses by knowing their risk tolerance, ensuring potential return consistently exceeds possible loss, and exercising investment risk reduction tactics.
2 key takeaways from the article
- Wealth is not gained by passively reading or listening, but by action. Knowledge is potential or stored energy, essentially worthless until used and turned into deeds.
- There are no secrets or shortcuts to riches (excluding marriage to a wealthy spouse). However, those at the top of the financial pyramid typically exhibit four specific characteristics. They set a goal and concentrate solely on it until achieved. They remained self disciplined i.e., control their thoughts and actions. They developed expertise i.e., use knowledge to obtain specific outcomes. And they understand the types of risks inherent in action and minimize the likelihood of occurring (frequency) and the loss associated with an occurrence (magnitude).
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Topics: Success, Knowledge, Wealth, Expertise