Extractive summaries of and key takeaways from the articles curated from TOP TEN BUSINESS MAGAZINES to promote informed business decision-making | Week 280 |January 20-26, 2023
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Shaping Section : Ideas and forces shaping economies and industries
Investment banks are struggling in a high-interest-rate world
The Economist | January 17, 2023
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Shareholders like profits: a steady stream of income they can count on, quarter after quarter. The earnings America’s biggest banks make, however, are often pushed around by the volatility of the economy they serve. If the economy accelerates, demand for loans takes off; if it slows, bankers must set aside provisions for bad loans. Investment banks’ trading businesses tend to do well in times of volatility and uncertainty, but their advisory services sell best when markets are healthy and stable. Bank bosses must try to balance their exposure to these forces.
The past three years, during which the American economy has experienced a pandemic-induced shutdown, a financial boom and a rate shock, have been unusually volatile. As a result, the period has been an interesting test of just how successful bank bosses have been in their efforts to balance the performance of their businesses. The results were on show between January 13th and 17th as Bank of America, Citigroup, Goldman Sachs, JPMorgan Chase, Morgan Stanley and Wells Fargo took it in turns to report fourth quarter and full-year earnings.
Altogether profits at the six banks fell by 20% from $34bn in the fourth quarter of 2021 to around $27bn in the same period of 2022—but the pain was not evenly spread. Some of this gap can be explained by their different strengths. Firms with big consumer banks, such as Bank of America and JPMorgan, typically do well when interest rates jump. Rising rates tend to increase the difference between what banks pay out on deposits and earn on loans. Net interest income, as this gap is called, zoomed higher in 2022. It climbed by $17bn between the end of 2021 and 2022 across the big six banks, reaching $66bn. This increase is partly offset by the fact that higher interest rates will make it harder for consumers and companies to pay back debts.
The pain at Wells can be explained by regulatory troubles. In December the bank agreed to pay an enormous fine of $1.7bn to the Consumer Financial Protection Bureau, for improperly managing millions of consumer accounts. The enormous economic shocks in recent years have revealed just how different the six banks have become. In some cases, the shocks have also revealed just how poorly they have been managed.
3 key takeaways from the article
- The past three years, during which the American economy has experienced a pandemic-induced shutdown, a financial boom and a rate shock, have been unusually volatile. As a result, the period has been an interesting test of just how successful bank bosses have been in their efforts to balance the performance of their businesses.
- Altogether profits at the six banks i.e., Bank of America, Citigroup, Goldman Sachs, JPMorgan Chase, Morgan Stanley and Wells Fargo fell by 20% from $34bn in the fourth quarter of 2021 to around $27bn in the same period of 2022—but the pain was not evenly spread. Some of this gap can be explained by their different strengths.
- The pain at Wells can be explained by regulatory troubles. In some cases, the shocks have also revealed just how poorly they have been managed.
(Copyright)
Topics: Financial Markets, Financial Performance, Banking Industry
The complication of concentration in global trade
By Olivia White et al., | McKinsey & Company | January 12, 2023
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We live in a highly interconnected world. Every region relies on imports for more than 25 percent of at least one important type of good. Interconnections have created broad benefits over time, improving efficiency, increasing global product availability, and fostering economic growth. But recent supply chain disruptions, Russia’s invasion of Ukraine, and rising tensions between China and the United States have highlighted the importance of resilience. Firms and policy-makers alike are examining where inputs come from and, in some cases, contemplating reconfiguring or even breaking certain long-standing trade ties.
Concentrated global trade creates complications. On the one hand, concentrated trade relationships can reflect and drive efficiency gains. On the other, interruption of concentrated trade flows can be particularly disruptive if products are harder to replace on short notice due to a lack of visibility and alternatives.
For many products, countries rely on a diversified pool of trade partners. However, for 40 percent of global trade, the importing economy relies on three or fewer nations for the supply of a given resource or manufactured good. These “concentrated” trade relationships exist in all sectors, at all stages of the production process, and in all economies. In some instances, concentration arises because only relatively few economies export a given product, defined as “global concentration.” However, most concentration arises when individual countries source from only a few trading partners even when global supply options are diversified, defined as “economy-specific concentration.”
Every country participates in concentrated trade relationships. Every country sources at least 20 percent of imports (by value) from three or fewer trading partners. Imports to smaller economies, which have smaller trading volumes, are, on average, 50 percent more concentrated. But even large economies often develop concentrated relationships with trading partners for specific products. Economies have often been most vulnerable to disruptions in sectors where domestic consumption relies on inputs that come from a concentrated set of trading relationships. Between 2016 and 2021, these large economies largely did not diversify origins of imports.
In a world that demands resilience, firms and policy makers are reexamining supply chains and trade relationships. Informed reimagination of what comes next requires a granular approach, both in mapping concentrated trade relationships and in deciding on action—whether to double down, decouple, or diversify. Not every concentrated relationship is a source of vulnerability. Nor can every product be substituted. Decision makers can develop a portfolio of actions to derisk growth by tailoring the option by product and trade corridor. They can double down, decouple or diversify their sources of supply.
3 key takeaways from the article
- We live in a highly interconnected world. Every region relies on imports for more than 25 percent of at least one important type of good.
- Interconnections have created broad benefits over time, improving efficiency, increasing global product availability, and fostering economic growth. But recent supply chain disruptions, Russia’s invasion of Ukraine, and rising tensions between China and the United States have highlighted the importance of resilience.
- Firms and policy-makers alike are examining where inputs come from and, in some cases, contemplating reconfiguring or even breaking certain long-standing trade ties.
(Copyright)
Topics: Global Economy, Supply Chain, Globalization
India’s population will soon overtake China’s—if it hasn’t already. The boom should benefit India’s economy—but experts warn it could be a liability
By Nicholas Gordon | Fortune Magazine | January 22, 2023
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India is likely to overtake China as the world’s most populous country in 2023—if it hasn’t already. It will be the first shake-up at the top of the globe’s population rankings in centuries—one that reflects the two country’s divergent demographic and economic trajectories. India is expected to continue growing, in terms of both population and economy. China, meanwhile, is unlikely to return to its heady pre-pandemic GDP growth rates, and on Tuesday reported its first population decline since 1961. The UN expects the gap between Nos. 1 and 2 to only grow from here, with India’s population swelling to 1.7 billion by 2050, compared to China’s 1.3 billion. (The U.S. will remain a distant third with a projected 375 million people by mid-century.)
Indian officials, including Prime Minister Narendra Modi, are painting the demographic reordering as a reason to bet on the country’s future manufacturing success, since the country’s population boom is causing its working-age population to bulge. More workers can produce more goods and services, earning heftier incomes that fuel higher consumption and investment.
This so-called “demographic dividend”—in which demographic changes foster a large pool of working-age people—helped South Korea, Taiwan and mainland China become manufacturing powerhouses, and India hopes the same will happen to its economy. Gautam Adani, the world’s fourth-richest man, has suggested that India’s young population will add $1 trillion to India’s GDP every 12 to 18 months. The Confederation of Indian Industry (CII), a trade association of local manufacturers, forecast in a March report that India could grow to a $40 trillion economy—larger than the U.S.’s today—by 2047 if it adequately leverages its young population.
But the CII also warned that “if India does not create enough jobs and its workers are not adequately prepared for those jobs, its demographic dividend may turn into a liability.”
Economists and experts have long warned that the Indian economy can’t coast on a growing population alone. The country continues to struggle with high unemployment, low labor participation, and a sizable informal economy. India’s failure to provide good jobs could squander its demographic opportunity, preventing it from capitalizing on its working-age population boom.
3 key takeaways from the article
- India is likely to overtake China as the world’s most populous country in 2023—if it hasn’t already. India is expected to continue growing, in terms of both population and economy. China, meanwhile, is unlikely to return to its heady pre-pandemic GDP growth rates, and on Tuesday reported its first population decline since 1961.
- Indian officials, including Prime Minister Narendra Modi, are painting the demographic reordering as a reason to bet on the country’s future manufacturing success, since the country’s population boom is causing its working-age population to bulge.
- Economists and experts have long warned that the Indian economy can’t coast on a growing population alone. The country continues to struggle with high unemployment, low labor participation, and a sizable informal economy. India’s failure to provide good jobs could squander its demographic opportunity, preventing it from capitalizing on its working-age population boom.
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Topics: Global Economy, India, China, Population
Strategy & Business Model Section
How Frank Gehry Delivers On Time and On Budget
By Bent Flyvbjerg and Dan Gardner | Harvard Business Review Magazine | January–February 2023 Issue
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When the Guggenheim Museum in Bilbao, Spain, opened, in 1997, critics hailed Frank Gehry’s masterpiece as one of the architectural wonders of the past century. The provincial government’s ambitious projections had called for 500,000 people a year to make the trek to Bilbao to visit the museum; in the first three years alone, 4 million came. The term “Bilbao effect” was coined in urban planning and economic development to describe architecture so spectacular it could transform neighborhoods, cities, and regions.
But what’s less well-known is that the Guggenheim Bilbao also set a management standard that very few large projects have attained: It was delivered on time, within just six years, and cost $3 million less than the $100 million budgeted. And it has brought more attention, tourism, and development to Bilbao than the sponsors had hoped for, even in their wildest dreams. This was not his first project rather in half of the century Bildao built all his buildings to the budgets agreed upon with the clients. His record for meeting deadlines and working within budgets isn’t perfect. But it is extraordinary.
A study of more than 16,000 projects—everything from large buildings to tunnels, bridges, dams, power stations, mines, rockets, railroads, highways, oil and gas facilities, solar and wind farms, information technology systems, and even the Olympic Games – 99.5% of large projects failed to deliver as promised. In that light, what Frank Gehry accomplished in Bilbao and elsewhere is astonishing.
So how does he succeed where so many others fail? Four lessons that may help you make better decisions on the projects you manage: Make Sure You Have the Power to Deliver What You’re Accountable For, Always Ask Why, Simulate, Iterate, Test, and Think Slow, Act Fast.
3 key takeaways from the article
- When the Guggenheim Museum in Bilbao, Spain, opened, in 1997, critics hailed Frank Gehry’s masterpiece as one of the architectural wonders of the past century.
- But what’s less well-known is that the Guggenheim Bilbao also set a management standard that very few large projects have attained: It was delivered on time, within just six years, and cost $3 million less than the $100 million budgeted. This was not his first project rather in half of the century Bildao built all his buildings to the budgets, with respect to finance and money, agreed upon with the clients.
- So how does he succeed where so many others fail? Four lessons that may help you make better decisions on the projects you manage: Make Sure You Have the Power to Deliver What You’re Accountable For, Always Ask Why, Simulate, Iterate, Test, and Think Slow, Act Fast.
(Copyright)
Topics: Project Management, Efficiency, Creativity, Innovation
Leading & Managing Section
Skills You Need To Build Now To Get Ahead In The New World Of Work
By Alisa Cohn | Forbes Magazine | January 25, 2023
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The workplace and the workforce are undergoing massive change. Much of the focus on “future-proofing” your career skills centers on building your technical skills. And of course, you need to develop digital literacy and be up to date on technology. But the future of work is human, and building your interpersonal and leadership skills is what will help you thrive in the workplace in 2023 and beyond. Here are 5 skills you’ll need to build to give you an edge in the new world of work.
Creativity. You can build creativity by making time for it. You can’t be creative when you’re in back-to-back-to-back meetings. Audit your time and see if there are some meetings you can jettison to help you have white space, the fuel of creativity. In that white space seek out people who think differently from you, read widely to infuse you with new ways of thinking and then proactively see if you can apply models and techniques from what you learn to your current environment.
Agility. It’s true. Your ability to embrace reality and adapt quickly will set you apart since most people cling to the past. To be agile your first step, and one that people often have the hardest time with–is to accept things as they are. Next, practice acting nimbly before change happens by developing your own “what if” scenarios. They can be broad and organizational or personal. Finally, take action. Rapidly.
Empathy. Looking at something from the other person’s point of view – it’s an incredibly potent weapon to persuade people, to motivate people, and to get people’s discretionary effort. People think of empathy as emotional, but you can think of it as analytical instead. One of the best ways to ignite empathy is to ask questions.
Emotional regulation. When you stay calm, you are able to respond. You don’t merely react. You can then make good decisions and keep your focus on your goals. You can develop equanimity by maintaining perspective. There are ups and downs at work, sometimes intense ones. Recognize that the issue you’re having with some coworker or policy is temporary. Maintain perspective by reminding yourself of other issues you had in the past, and how they got resolved. You’re still here. This too shall pass.
Entrepreneurial mindset. Proactive self-motivated and persistent–these are adjectives that leaders consistently apply to their most valued employees. It turns out that these are all traits of entrepreneurs. So cultivating an entrepreneurial mindset is a useful differentiator for you. To think like an entrepreneur, ask yourself such questions: What if I had been the person who founded the company/product/service line? Where would I want to take it, and how would I do it? When you ask yourself such questions, find ways to answer them, and then take action, you’re showcasing self-determination, a proactive stance, and a desire to take ownership.
3 key takeaways from the article
- The workplace and the workforce are undergoing massive change. Much of the focus on “future-proofing” your career skills centers on building your technical skills. And of course, you need to develop digital literacy and be up to date on technology.
- But the future of work is human, and building your interpersonal and leadership skills is what will help you thrive in the workplace in 2023 and beyond.
- 5 skills you’ll need to build to give you an edge in the new world of work are: creativity, agility, empathy, emotional regulation, and entrepreneurial mindset.
(Copyright)
Topics: Leadership, Entrepreneurship, Career, Personal Development
Entrepreneurship Section
3 Tips for Turning a Passion Into a Business
By John Hall | Inc Magazine | January 23, 2023
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When you think about what you want to do in life, you know that it is something that you both excel at and love doing. However, this is easier said than done in many cases. To transform what you love doing into a strongly reputable and profitable business in 2023, you need to create a clear and strategic roadmap to guide your way and, if required, create a new passion for getting started. The following three tips will provide you with a starting point in creating your dream job in the new year.
- Stay cautious but optimistic. While having a passion for what you do is a great career goal, it is essential to realize that the path to success will not be easy. There will be times this year when you will want to give up, so persistence and hard work will be vital to succeeding now and in the future. Recognize that finding your passion and turning it into a business isn’t simply asking, “What do I love doing more than anything else?” It is also about understanding your mission and how that will transform your consumers’ lives. When you are cautiously optimistic about what you will be able to achieve now, and in the future, you are more likely to set yourself up for success rather than feeling you are on the wrong track.
- Use your current expertise to build a solution. We all have insights that are explicitly tied to our life experiences. That being the case, it’s our shared responsibility to correctly identify how these experiences and insights might help change the world for the better.
- Build the right support system. There are several reputable organizations available that seek to help startup companies, entrepreneurs, and small business leaders hit the ground running. Likewise, you have numerous online and personal resources at your fingertips. Once you have started turning your passion into a business, you will want to enlist your personal and professional networks across social media, your business website, and other digital platforms. This will give you a constant communication and sales platform in which you have complete control at all stages of your business.
- Harnessing Intrinsic Motivation for Personal Success. There are few things more refreshing than waking up with purpose and passion. The old adage still stands: “Find what you love to do, and you’ll never work a day in your life.”
3 key takeaways from the article
- When you think about what you want to do in life, you know that it is something that you both excel at and love doing. However, this is easier said than done in many cases. To transform what you love doing into a strongly reputable and profitable business in 2023, you need to create a clear and strategic roadmap to guide your way and, if required, create a new passion for getting started.
- Of course, passion alone won’t get you anywhere. However, by being cautious, leaning into your expertise, and patiently building a solid platform for your work, you can lose track of time as you make your living…simply because you sincerely enjoy what you do.
(Copyright)
Topics: Entrepreneurship, Startups, Passion, Network
Fixing Your Facebook Ads: How to Create a Strategy That Works
By Adam Petrilli | Entrepreneur Magazine | January 25, 2023
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While traditional and modern media provide various outlets for marketing efforts, few compare to the power and prevalence of the humble Facebook Ad — when done correctly. The platform delivers metrics, capabilities and audience numbers far exceeding any other. To capitalize on the advantages of the social media juggernaut, you must learn the art of creating appealing Facebook ads and campaigns. Three pieces of advice are:
- Ad leakage: understanding and correcting marketing loss. Unfortunately, because many business owners and entrepreneurs are unfamiliar with optimization strategies, Facebook Ads can quickly envelop profits and marketing budgets. Correcting marketing losses is about identifying a campaign’s leaks or weak points. The only way to identify ineffective ads is to compare advertisements. Still, it is only possible to identify and correct potential errors if you know the right design, implementation, and measurement strategies.
- Social media strategy: building a better foundation for advertising success. As easy as it is to create social media ads, rushing the design process is a mistake. By approaching Facebook ads strategically, you can develop a measurable and changeable foundation, allowing you to weigh the cause and effect of various decisions. Before developing ads, consider your audience, motivations, and needs. Do not allow bias to motivate your marketing decisions. Hire a research team to survey the market, or invest in market research on your own. Further, when talking to marketing experts, you will hear them talk about five aspects of ad design: image, headline, text, call to action, and value proposition. While important, the fundamentals of ad design are only one element of the building blocks of marketing. The other blocks include target audience, testing, and optimization. Finally, one critical but oft-forgotten element of advertisement prep is creating and identifying clear and measurable objectives. Every advertisement must have a purpose. For example, do you need a Facebook campaign to increase brand awareness or improve sales of a specific product or service? Knowing what you expect from an ad campaign will help you identify its performance.
- Budget and costs: creating enticements and measuring success. The success of every Facebook or marketing effort comes down to original budgets and costs. After the campaign, you want to make more money than you spent, hopefully, a lot more. Your profits will stem from your ability to create ads with appealing offers, measurable performance (focus on hard data), and a genuine understanding of a customer’s lifetime value.
2 key takeaways from the article
- While traditional and modern media provide various outlets for marketing efforts, few compare to the power and prevalence of the humble Facebook Ad — when done correctly. The platform delivers metrics, capabilities and audience numbers far exceeding any other.
- To capitalize on the advantages of the social media juggernaut, you must learn the art of creating appealing Facebook ads and campaigns. Three pieces of advice are: understanding and correcting marketing loss by identifying ad leakage, build a better foundation for advertising success by creating an effective social media strategy, and creating enticements and measure success to remain within budget and cost.
(Copyright)
Topics: Entrepreneurship, Marketing, Advertisement