Weekly Business Insights

It is 70 years since AT&T’s Bell Labs unveiled a new technology for turning sunlight into power. The phone company hoped it could replace the batteries that run equipment in out-of-the-way places. It also realised that powering devices with light alone showed how science could make the future seem wonderful.  Panels now occupy an area around half that of Wales, and this year they will provide the world with about 6% of its electricity—which is almost three times as much electrical energy as America consumed back in 1954. Yet this historic growth is only the second-most-remarkable thing about the rise of solar power. The most remarkable is that it is nowhere near over.

To call solar power’s rise exponential is not hyperbole, but a statement of fact. Installed solar capacity doubles roughly every three years, and so grows ten-fold each decade. Solar cells will in all likelihood be the single biggest source of electrical power on the planet by the mid 2030s. By the 2040s they may be the largest source not just of electricity but of all energy. On current trends, the all-in cost of the electricity they produce promises to be less than half as expensive as the cheapest available today. This will not stop climate change, but could slow it a lot faster. Much of the world—including Africa, where 600m people still cannot light their homes—will begin to feel energy-rich. That feeling will be a new and transformational one for humankind.

In earlier energy transitions—from wood to coal, coal to oil or oil to gas—the efficiency of extraction grew, but it was eventually offset by the cost of finding ever more fuel.  As the Economist explains this week, solar power faces no such constraint. The resources needed to produce solar cells and plant them on solar farms are silicon-rich sand, sunny places and human ingenuity, all three of which are abundant. Making cells also takes energy, but solar power is fast making that abundant, too. As for demand, it is both huge and elastic—if you make electricity cheaper, people will find uses for it. The result is that, in contrast to earlier energy sources, solar power has routinely become cheaper and will continue to do so.

Other constraints do exist. Given people’s proclivity for living outside daylight hours, solar power needs to be complemented with storage and supplemented by other technologies. Heavy industry and aviation and freight have been hard to electrify. Fortunately, these problems may be solved as batteries and fuels created by electrolysis gradually become cheaper.

The vast majority of the world’s solar panels, and almost all the purified silicon from which they are made, come from China. Its solar industry is highly competitive, heavily subsidised and is outstripping current demand—quite an achievement given all the solar capacity China is installing within its own borders. This means that Chinese capacity is big enough to keep the expansion going for years to come, even if some of the companies involved go to the wall and some investment dries up.

The aim should be for the virtuous circle of solar-power production to turn as fast as possible. That is because it offers the prize of cheaper energy. The benefits start with a boost to productivity. Anything that people use energy for today will cost less—and that includes pretty much everything.

A simpler way to take the pulse of competitiveness is to measure investment. Why? First, investment matters. From 1997 to 2022, 70 to 80 percent of productivity growth was the result of capital deepening—investment in infrastructure, property, plants, machinery, equipment, and so on.1 The rest came from total factor productivity that often relates to innovation, which, in turn, links with investment in R&D, human capital, and other intangible assets. Half of the slowdown in productivity growth in Europe and the United States since the mid-2000s can be traced to a persistent decline in the growth of capital per worker.   Second, investment is more forward-looking than many other economic indicators, such as productivity and GDP, and represents a commitment to a region. Third, it is strikingly simple and can therefore help stakeholders negotiate their way through complexity and trade-offs.

A region that is not investing cannot be competitive, and a region that is not competitive will fail to attract domestic or foreign investment: a vicious circle. For Europe, defined here as the 27 member states of the European Union (EU) plus Norway, Switzerland, and the United Kingdom (also referred to as Europe 30), failing to increase investment puts Europe’s prosperity, way of life, and place in the world at risk.

Europe’s net investment in the most productive assets is low both in comparison with the level before the global financial crisis and in comparison with that of the United States.

After the global financial crisis, net investment in the United States and Europe fell significantly, but the decline was especially pronounced in Europe amid the Eurozone crisis, an environment of austerity, and weak demand. In the past decade, European net investment rates as a share of GDP were on average 2.8 percentage points or about €550 billion a year (nominal) lower than in the decade before the global financial crisis.

Over the past 25 years, capital per worker has grown by 10 percent in real terms in Western Europe, by 50 percent in North America, and by 700 percent in China.  Western Europe is the only region whose total factor productivity has fallen over the past quarter-century.

While Europe’s investment share of GDP appears to be healthy on the surface, Europe is not investing on the same order of magnitude as the United States in what are typically the most productive types of investments, namely machinery and equipment, IP, and intangibles. Intangibles, including R&D and software in particular, play an increasingly important role in today’s economies. They generate economic returns of about 25 percent—that is, an increase in annual GDP of 25 cents on each dollar invested—more than other assets.   It is notable that Europe’s share of gross domestic expenditure on R&D relative to the United States and China fell from 39 percent in 2010 to 29 percent in 2021. Moreover, Europe’s spending has tended to be directed toward midtech sectors much more than high-tech ones.

Europe surpasses both the United States and China in the production of scientific and journal articles.  But its commercial innovation falls short. Europe accounts for only about 5 percent of global patent filings, compared with 15 percent for the United States and 80 percent for China.  Competitive funding and institutional autonomy could increase the output of patents by European universities.

Europe continues to face a range of barriers to investment that are well known and much discussed, but progress in bringing them down has faltered.  In one survey, European executives highlighted five main barriers to investment: high energy costs, a scarcity of people with the right skills, uncertainty about the future, regulation of businesses, and regulation of labor markets.  The most important barriers cited in comparison with the United States were energy costs and uncertainty, which executives say are higher obstacles in Europe than in the United States.

Video games are carefully crafted objects, part of a multibillion-dollar industry, that are designed to be consumed. You play them, you loot a few stagecoaches, you finish, you move on. It may not always be like that. Just as it is upending other industries, generative AI is opening the door to entirely new kinds of in-game interactions that are open-ended, creative, and unexpected. The game may not always have to end.

Startups employing generative-AI models, like ChatGPT, are using them to create characters that don’t rely on scripts but, instead, converse with you freely. Others are experimenting with NPCs (animated people- “nonplayer characters”— who populate the bars, city streets, or space ports of games) who appear to have entire interior worlds, and who can continue to play even when you, the player, are not around to watch. Eventually, generative AI could create game experiences that are infinitely detailed, twisting and changing every time you experience them. 

The field is still very new, but it’s extremely hot. In 2022 the venture firm Andreessen Horowitz launched Games Fund, a $600 million fund dedicated to gaming startups. A huge number of these are planning to use AI in gaming. And the firm, also known as A16Z, has now invested in two studios that are aiming to create their own versions of AI NPCs. A second $600 million round was announced in April 2024.

Early experimental demos of these experiences are already popping up, and it may not be long before they appear in full games. But some in the industry believe this development will not just make future open-world games incredibly immersive; it could change what kinds of game worlds or experiences are even possible. Ultimately, it could change what it means to play.

It’s like you experience a new work of art as it is being created, with the player participating in its creation. “You’re inside of something like Lord of the Rings as it’s being written. You’re inside a piece of literature that is unfolding around you in real time,”. It is also possible to imagine strategy games where the players and the AI work together to reinvent what kind of game it is and what the rules are, so it is never the same twice.  LLM-powered NPCs can make games unpredictable—and that’s exciting.

It might mean games that are unlike anything we’ve seen thus far. Gaming experiences that unspool as the characters’ relationships shift and change, as friendships start and end, could unlock entirely new narrative experiences that are less about action and more about conversation and personalities.  AI NPCs won’t just enhance player interactions—they might interact with one another in weird ways.

It raises complex questions as well.  “One is: What are the ethical dimensions of pretend violence? And the other is: At what point do AIs become moral agents to which harm can be done?”  There are other potential issues too. An immersive world that feels real, and never ends, could be dangerously addictive.

There are some who believe using AI to enhance existing games is thinking too small. Instead, we should be leaning into the weirdness of LLMs to create entirely new kinds of experiences that were never possible before.

It took five decades of failure to turn Tide Pods into an overnight success.  Today, the Tide Pods’ failed forebears have a place of honor in the “Wall of Failures” exhibit at P&G’s Heritage Center and Archives in Cincinnati—an internal museum at headquarters aimed at helping P&G’s product-development teams find the next big thing.   Over the years, the company has kept meticulous records of its misfires, seeing them as a valuable resource. “Failure cases are a critical learning area,” says Shane Meeker, P&G’s historian and corporate storyteller. “If you’re not failing, you’re not innovating.”

P&G is hardly alone among big corporations in running an in-house museum. Countless others meticulously maintain storehouses of records, prototypes, board meeting minutes, discontinued gadgets, old press releases, marketing materials, and all manner of paraphernalia. In Billund, Denmark, Lego has five miles’ worth of shelves in climate-controlled facilities where it stores nearly every “brick set” it has ever produced. At the Atlanta airport, Delta Air Lines has two entire hangars that showcase ephemera ranging from old propeller-driven planes to bar carts from aviation’s glamorous age.

Many companies go a step further, employing trained historians and organizing their archives into exhibits that tell stories and impart important lessons. These collections open stunning windows into the business world’s history. But for the companies, they transcend nostalgia and marketing: They serve a practical purpose, guiding product development, C-suite decision-making, and culture-building. 

The unifying principle among these disparate collections is that in an economy full of young disrupter companies, older brands have a huge intangible asset in their rich and long histories—resources that can help them build and fine-tune products for the future.

Museums and archives also help companies, particularly those of a certain age, foster a feeling of belonging to an entity with a history and a greater purpose, without the “here today, gone tomorrow” vibe that characterizes tech unicorns. That sense of purpose is especially important among new hires.  At some companies, C-suite leaders are avid users of these resources. 

Above all, well-stocked archives can help companies avoid the trap of short-termism. “It suggests a value orientation in the company toward thinking bigger,” says Caitlin Rosenthal, a history professor at the University of California at Berkeley. There’s nothing like a museum to remind leaders that their choices, and their consequences, could endure long after they’ve moved on.

The majority of the research on succession focuses on the “how.” What that research typically neglects, however, are the actions and emotions (particularly late in the process) of one central protagonist: the outgoing CEO.

Most CEOs spent years striving to get to the top. During their time in office, they work long hours nurturing the firm’s culture, setting the strategic vision, and improving operations. For many CEOs the role is less a job and more an all-encompassing identity. So leaving it can be emotional, and that’s something directors need to pay attention to.  Five psychological crossroads that outgoing CEOs confront, those if the Boards and incoming CEOs should understand will be better equipped to avoid problems.

1. Initiating a Succession.  Two factors can contribute to psychological tensions: CEOs’ reasons for stepping down and boards’ reactions to their decision. Most successions (83%) were initiated by the CEO, with the three most-often cited reasons being age and tenure, or temporal factors; the future needs of the organization; and personal reasons.  Understanding more about what drives the desire to step down should help directors.  Advice for CEOs is cultivating deep relationships with board members is crucial. 
2. Relinquishing Control.  Five kinds of succession activities: canvassing for potential candidates, creating their successor’s ideal profile, interviewing potential candidates, preparing candidates for the vetting process, and onboarding the chosen successor. However, outgoing CEOs involvement often dwindled as things moved along.  That can be jarring to someone who is used to being in the driver’s seat.  That kind of view is shortsighted. Research showed that when CEOs were more involved in the succession process, they were more confident in the new CEOs’ ability to lead the organization.
3. Managing Emotions.  Over the course of succession, CEOs had to address both the reactions of others and their own complex emotions.  CEOs experienced both positive and negative emotions when announcing that they’d be leaving.  Outgoing CEOs also had to manage the doubts of their top team members. They often had to justify why they were stepping down. They had to alleviate concerns about what new leadership would mean for the future of the team and the organization.  Boards need to be aware of the unexpected mix of emotions CEOs may experience. 
4. Planning for What’s Next.  While outgoing CEOs were aware of the importance of considering their next act, urgent day-to-day responsibilities frequently sucked up all their bandwidth. Perhaps not surprisingly, CEOs who did not plan ahead experienced more negative emotions during the transition. Post-CEO options could include corporate or nonprofit board service, writing books, joining a private equity firm, creating a foundation, serving in government, and mentoring emerging leaders.  Board members can help outgoing CEOs navigate this challenging time by offering networking help and mentoring or serving as a sounding board.
5. Detaching from the Role and the Organization.  It’s not uncommon for outgoing CEOs to have a hard time disengaging from the role and relinquishing the CEO title. In authors’ data, there was a relatively even split between CEOs who viewed the role as their job (43%) and those who saw it as their identity (47%), with the remainder feeling it was a little of both. Although some were aware of the dangers of entangling their identity with the CEO role, it often was hard to avoid, given the way other people responded to them. Viewing the CEO role as part of their identity was a double-edged sword.  Boards should consider holding an event or creating other mechanisms to celebrate the success of outgoing CEOs and demarcate the end of their tenures.  Advice for CEOs is it’s important not to let your personal identity become too closely tied to the company or the job.

The people at the top felt like the people in the layers below just didn’t take the needed initiative. As a result, the managers felt an obligation and responsibility to tell the direct reports what to do and how to do it. The direct reports, on the other hand, used to complain that the top managers didn’t trust them enough and acted paternalistic. As a result, the direct reports feared that if they took the initiative and something didn’t work as planned, they’d be punished.

That’s a parent-child dynamic in all its dysfunctional glory at the workplace. Is your organization falling into this damaging trap? How to spot the trouble signs and move the culture toward an adult-adult dynamic. Six Key Indicators of Parent-Child Dynamics are: 

1. An unwillingness to be vulnerable at the top. Like actual parents, leaders often fear showing their weaknesses. Revealing fears and insecurities to children is something that parents “just don’t do.” In this situation, leaders rarely disclose their own failures and hard-won lessons, and a culture develops where mistakes are swept under the rug.
2. A lack of trust from the top down. Its about competence-based trust – the upper echelons see the lower echelons as lacking competence and needing to be told what to do and how to do it. This attitude can not only be paternalistic but also can descend into the realm of insulting.
3. An unwillingness to appropriately empower individuals. If people in the levels below aren’t seen as competent, then they’re also not seen as ready to have shared power. So power stays at the top, and those people below don’t get the appropriate and necessary chances for development.
4. An unwillingness to try something new, for fear of disappointing leaders or incurring punishment. Parent-child dynamics can manifest in people at the lower levels as the tendency to rarely innovate or push boundaries. 
5.  The need to cover up mistakes. When management takes on a parental role — especially a disciplinarian-parent role — the result is often that people feel little psychological safety to share mistakes, both standard and exceptional.
6. An unwillingness to pull the plug.  Leaders pile initiative on top of initiative, without a willingness to let any one of them go or to identify or communicate strategic priorities. This aversion to prioritization often comes from a fear of disappointing anyone. 

Three ways to move into a healthier way of interacting could be: examine gaps in trust — in both directions, leaders must habitually ask more questions of team members, and remember to listen to the answers.  At a cultural level, two things must be true for the transition from a parent-child dynamic to an adult-adult dynamic to be successful. First, and most obviously, there must be an awareness of the current dynamic. Second, there needs to be a sincere dissatisfaction with the current culture.

Problems continuously arise in organizational life, making problem-solving an essential skill for leaders. Leaders who are good at tackling conundrums are likely to be more effective at overcoming obstacles and guiding their teams to achieve their goals. So, what’s the secret to better problem-solving skills?

1. Understand the root cause of the problem.  “Too often, people fail because they haven’t correctly defined what the problem is,” says David Ross, an international strategist, founder of consultancy Phoenix Strategic Management and author of Confronting the Storm: Regenerating Leadership and Hope in the Age of Uncertainty.  Ross explains that as teams grapple with “wicked” problems – those where there can be several root causes for why a problem exists – there can often be disagreement on the initial assumptions made. As a result, their chances of successfully solving the problem are low.  “Before commencing the process of solving the problem, it is worthwhile identifying who your key stakeholders are and talking to them about the issue,” Ross recommends. “Who could be affected by the issue? What is the problem – and why? How are people affected?”  He argues that if leaders treat people with dignity, respecting the worth of their insights, they are more likely to successfully solve problems.
2. Unfocus the mind.  “To solve problems, we need to commit to making time to face a problem in its full complexity, which also requires that we take back control of our thinking,” says Chris Griffiths, an expert on creativity and innovative thinking skills, founder and CEO of software provider OpenGenius, and co-author of The Focus Fix: Finding Clarity, Creativity and Resilience in an Overwhelming World.  To do this, it’s necessary to harness the power of the unfocused mind, according to Griffiths. “It might sound oxymoronic, but just like our devices, our brain needs time to recharge,” he says. “A plethora of research has shown that daydreaming allows us to make creative connections and see abstract solutions that are not obvious when we’re engaged in direct work.”  To make use of the unfocused mind in problem solving, you must begin by getting to know the problem from all angles. “At this stage, don’t worry about actually solving the problem,” says Griffiths. “You’re simply giving your subconscious mind the information it needs to get creative with when you zone out. From here, pick a monotonous or rhythmic activity that will help you to activate the daydreaming state – that might be a walk, some doodling, or even some chores.”  Do this regularly, argues Griffiths, and you’ll soon find that flashes of inspiration and novel solutions naturally present themselves while you’re ostensibly thinking of other things.
3. Be comfortable making judgment calls.  “Admitting to not knowing the future takes courage,” says Professor Stephen Wyatt, founder and lead consultant at consultancy Corporate Rebirth and author of Antidote to the Crisis of Leadership: Opportunity in Complexity. “Leaders are worried our teams won’t respect us and our boards will lose faith in us, but what doesn’t work is drawing up plans and forecasts and holding yourself or others rigidly to them.”  Wyatt advises leaders to heighten their situational awareness – to look broadly, integrate more perspectives and be able to connect the dots. “We need to be comfortable in making judgment calls as the future is unknown,” he says. “There is no data on it. But equally, very few initiatives cannot be adjusted, refined or reviewed while in motion.”
4. Be prepared to fail and learn.  “Organisations, and arguably society more widely, are obsessed with problems and the notion of problems,” says Steve Hearsum, founder of organizational change consultancy Edge + Stretch and author of No Silver Bullet: Bursting the Bubble of the Organisational Quick Fix.  Hearsum argues that this tendency is complicated by the myth of fixability, namely the idea that all problems, however complex, have a solution. “Our need for certainty, to minimize and dampen the anxiety of ‘not knowing,’ leads us to oversimplify and ignore or filter out anything that challenges the idea that there is a solution,” he says.  Leaders need to shift their mindset to cultivate their comfort with not knowing and couple that with being OK with being wrong, sometimes, notes Hearsum. He adds: “That means developing reflexivity to understand your own beliefs and judgments, and what influences these, asking questions and experimenting.”
5. Unleash the power of empathy.  Leaders must be able to communicate problems in order to find solutions to them. But they should avoid bombarding their teams with complex, technical details since these can overwhelm their people’s cognitive load, says Dr Jessica Barker MBE, author of Hacked: The Secrets Behind Cyber Attacks.  Instead, she recommends that leaders frame their messages in ways that cut through jargon and ensure that their advice is relevant, accessible and actionable.

Every business founder wishes that he could predict whether his idea could be the “next big thing,” before he spent his life savings and years of energy on it. Investors, on the other hand, typically don’t even look very hard at the product or service but prefer to evaluate first the business owner, and secondly the business plan, before really looking at the solution.

Product ideas must be assessed against the following five key qualities:

1. Depth. A deep product or service has a robust set of features. It means you’ve anticipated what your customers will need as they move up the power curve, For example, Google is a one-stop source for your online needs, ranging from simple search to managing your e-mail, to analyzing your Web site. The selection is incredibly deep. 
2. Intelligence. An intelligent solution solves people’s problems in smart ways. Smart solutions are the ones that look simple in retrospect, don’t require a genius with an instruction manual to use them, and the benefits are easily quantified. In the computer world, the advent of the mouse for interface control and selection was such a product.
3. Completeness. A complete solution provides a great experience that includes service, support, and a string of enhancements. For example, the Lexus experience is more than the steel, leather, glass, and rubber. After-sales support, comfort, accessories, and brand image are as much a part of owning a Lexus as the car itself.
4. Empowering ability. An empowering solution enables you to do old things better and to do new things you couldn’t do at all. It increases your confidence and your ability to control your life. This feeling of empowerment is the essence of why young people love their smartphones and often consider their phone an extension of themselves.
5. Elegance.  An elegant solution is not opulent but embodies creativity and polish, and enhances the user experience. An elegant solution works with people. An inelegant solution fights people. It looks right. It feels right. It works right. And it doesn’t make more work for you. This may be hard to define, but you know it when you see it.

The best product or service is a full-featured one (deep) that shows you understand customer needs (intelligent), comes with support (complete), makes customers better (empowering), and is easy to use (elegant). As you create your solutions, ask yourself if they are deep, intelligent, complete, empowering, and elegant. 

Of course, great startup solutions need an alignment with personal values and a track record to give you credibility.

According to the author, his time in the Israeli Defense Forces (IDF) profoundly influenced his early development, shaping the leader he is today. From the rigors of basic training to the life-or-death situations on the battlefield, his military experience taught him invaluable lessons — lessons he has successfully translated into a thriving business career.  Nevertheless, according to him by no means, he is trying to directly equate military service with leading a business. Still, there is undoubtedly a vast pool of wisdom and lessons born from military experience yielding significant value in the corporate environment.

1. Clarity of mission.  In the military, success begins with understanding your mission. A well-defined mission provides a clear “North Star,” a guiding light that fuels action and strategy. It drives the “why” behind every order, providing the motivation needed to endure potentially life-threatening scenarios.  Retention of this lesson in business life has allowed the author the clarity of goals.
2. Decisiveness under pressure.  In the military, situations often call for lightning-fast decisions. There is no room for indecisiveness; hesitation can lead to catastrophic outcomes.  The business realm too, though less life-threatening, demands quick decision-making at times. Market conditions can shift rapidly, unexpected situations arise, or difficult choices must be made.  The author’s military life helped him in such scenarios, ensuring prompt and decisive action even under unwanted pressure.
3. Responsibility and accountability.  In the military, responsibility stretched beyond just one’s personal duties — it extended to the lives and welfare of one’s fellow troops. The weight of this responsibility compelled a high degree of accountability.  This degree of accountability has proven necessary in business, especially in starting one.  Being a CEO, your decisions impact not only the financial success of your company but also the livelihoods of all your employees.  This sense of responsibility cultivates an environment of trust and motivates high standards of performance throughout the organization.
4. Adaptability and resilience.  There’s one thing military service undoubtedly forges — resilience.  It trains the individuals to adapt swiftly to changing circumstances and not falter in the face of adversity. Because a failed mission doesn’t have to be the end; it’s a chance to assess, adapt and emerge stronger.  Treating failures as learning opportunities is the cornerstone of business. If this resilience and adaptability extend to your employees, they will effortlessly promote a culture of constant improvement, even in the face of adversity.
5. Precise communication.  Explicit communication is life-or-death in military. No one has time for ambiguity because it’s so good at forging misunderstandings and risking lives and missions. Through his military training, the author has honed his communication skills to be precise, clear and straightforward.  In business, he has found clear communication to be an equally invaluable asset. Be it articulating strategic vision, delegating tasks or giving feedback, precise communication ensures that everyone is on the same page, fostering a harmonious, efficient work environment.
6. Mentoring and developing leaders.  The military is the perfect place to learn all the things he has mentioned, and to teach them.  In the IDF, he was taught to identify potential, nurture skills and empower individuals — priming them to take up leadership positions in the future.  With this insight from the military, he always strives to mentor team leaders and open himself to the learning opportunities they bring.
7. Teamwork and cohesion.  Last, but definitely a highlight, military service engrains a profound sense of camaraderie. There is a shared commitment to accomplish the mission you’re all in. It’s about team over individual — an ethos pivotal to success on the battlefield.