Posts in category Business


ApprovedBusinessBusiness and finance

How Donald Trump is monetising his presidency

Golf conflict

“PRETTY close to a laughing stock.” That is Walter Shaub’s verdict on America’s standing in the world, at least from an ethics point of view, under President Donald Trump. Mr Shaub’s view counts: he stepped down this week as head of the Office of Government Ethics, a federal watchdog.

He is leaving his job six months early, frustrated at the president’s failure to separate himself from his businesses, at White House foot-dragging on disclosing ethics waivers for staff, at its failure to admonish a Trump adviser who plugged the family’s products in an interview, and more. “It’s hard for the United States to pursue international anticorruption and ethics initiatives when we’re not even keeping our own side of the street clean,” Mr Shaub told the New York Times.

No American leader has ever entered office with such wide business interests as Mr Trump. In the context of the country’s corporate…Continue reading

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An overhaul of Brazilian labour law should spur job creation

IN THE litany of bosses’ gripes about Brazil’s inclement business climate, rigid labour laws vie for pride of place with its convoluted tax laws and its licensing rules (on everything from health and safety to protection of cultural heritage). No wonder: Brazil ranks a miserable 117th out of 138 countries on labour-market efficiency, according to the World Economic Forum. Its rigid labour law was transplanted from Benito Mussolini’s Italy in 1943. Employers find it thoroughly unsuited to a modern economy and cheered on July 13th, when the president, Michel Temer, signed into law the biggest overhaul of the unwieldy statute in 50 years.

The reform is a big victory for the unpopular Mr Temer, who is under investigation in a corruption scandal (he denies wrongdoing). It introduces more flexible working hours, eases restrictions on part-time work, relaxes how workers can divvy up their holidays and cuts the statutory lunch hour to 30 minutes. It also scraps dues that all employees must pay to…Continue reading

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An action plan for Uber’s next chief executive

IT IS said that Travis Kalanick, who resigned as Uber’s boss last month, has been reading Shakespeare’s “Henry V”. Prince Hal’s transformation, from wastrel prince to sober monarch, is doubtless one he would like to emulate. But as a guide to the ride-hailing firm’s financial dilemma, “Macbeth” is the best play. This line especially resonates: “I am in blood stepp’d in so far that, should I wade no more, returning were as tedious as go o’er.”

Uber has bled money for years in an attempt to become the absolute ruler of its industry. Once Mr Kalanick’s replacement is found, voices will whisper that the firm, like Macbeth himself, is in too deep to alter course. But the new boss must change Uber from a company that sacrifices anything for its ambitions, to one which has a realistic valuation and uses resources efficiently.

Its product is elegantly simple. Uber makes a market between drivers and passengers and takes a cut of about a fifth of the fare. The…Continue reading

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Demand for exorcists is soaring in France

FOR A man poised for combat with evil spirits, Philippe Moscato looks remarkably at ease. In casual clothes and chatting about the tools of his trade—a “Vogel” crystal, compass, steel crucifix, pendulum and bag of salt from Jerusalem—he says he can deliver unreal results. Hired to exorcise an apartment in a wealthy district of central Paris, he predicts that the air will change. In the winter, he says, the owners will no longer need their central heating, the result of beneficial vibrations.

Mr Moscato’s work involves first waggling a pendulum, supposedly to assess the flat’s readiness, then lighting a candle, reciting from an exorcism manual, before blessing salty water that he splashes in every room. As he sprinkles, he delivers a flow of incantations. For an hour’s work he pockets €155 ($178). He has requests three or four times a week to de-spook property, and exorcises a person on average once a week. Paris, Lyon and the French Riviera are the areas most contaminated…Continue reading

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The spread of 3D models creates intellectual-property problems

Do try this at home

GROOT, a character from Disney’s film “Guardians of the Galaxy”, is usually mass-produced by the entertainment company as a small, collectable figurine and sold by retailers such as Toys “R” Us. But just before the release of the second film in the franchise earlier this year, Byambasuren Erdenejargal, a Mongolian enthusiast, noticed that people in a 3D-printing group on Facebook were searching for a computer model of Groot. So Mr Erdenejargal decided to create one. He spent four days perfecting the design and its printability before uploading his creation to Thingiverse, an online 3D-printing community based in New York. His digital model of the arboreal creature has since been downloaded (and probably printed in physical form) over 75,000 times.

Fans of popular TV programmes and films have long used arts and crafts to express their attachment to fictional characters. Etsy, an online marketplace for artisanal products, is full of…Continue reading

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The Trump presidency may not have helped Kushner Companies

WHEN the deal was struck just over a decade ago, for $1.8bn, 666 Fifth Avenue, a 41-storey Manhattan skyscraper, became the most expensive office building ever sold in America. Now it is in limbo, awaiting billions of dollars of investment to rebuild it and raise it almost twice as high. Across the Hudson River, another hunt for money is under way, to build a property called One Journal Square in Jersey City. In June a property-investing start-up called Cadre attracted financial backing from Silicon Valley luminaries including Andreessen Horowitz, a venture-capital company.

The thread linking these ventures is Jared Kushner, Donald Trump’s senior adviser and son-in-law, whose family business, like that of the president, is in property. Mr Kushner helped conceive all three projects. He has a “passive ownership interest” in Cadre (meaning he is not actively involved in its management). His family co-owns 666 Fifth Avenue and One Journal Square.

Unlike the president, Mr…Continue reading

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Millions of things will soon have digital twins

THE factory of the future will be a building stuffed full of robots making robots. A factory in Amberg, a small town in Bavaria, is not quite that, but it gets close. The plant is run by Siemens, a German engineering giant, and it makes industrial computer-control systems, which are essential bits of kit used in a variety of automated systems, including the factory’s own production lines.

The Amberg plant is bright, airy and squeaky clean. It produces 15m units a year—a tenfold increase since opening in 1989, and without the building being expanded or any great increase in the 1,200 workers employed in three shifts. (Production is about 75% automated, as Siemens reckons some tasks are still best done by humans.) The defect rate is close to zero, as 99.9988% of units require no adjustment, a remarkable feat considering they come in more than 1,000 different varieties.

Such achievements are largely down to the factory’s “digital twin”. For there is another factory, a…Continue reading

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Norwegian might still transform long-haul flying

Freddie Laker saw it coming

A DECADES-old dream of many low-cost carriers (LCCs), to break into the market for long-haul flights, has also been a long-standing nightmare for executives at full-service airlines, who earn their corn chiefly on such routes. So a series of setbacks for Norwegian, the latest LCC to try its hand at long-haul flights, has set off a round of Schadenfreude at established airlines across Europe. On July 13th, Norwegian revealed a disappointing set of results for the three months to June. A week earlier its chief financial officer of 15 years, Frode Foss, resigned with immediate effect, sending the share price down by 8%. Over the past year the shares have lost a third in value, as investors grow nervous.

The worries go back to Norwegian’s decision to begin long-haul flights. Founded in 1993 by Bjørn Kjos, still its CEO and biggest shareholder, it took over some domestic routes in Norway from a bankrupt charter…Continue reading

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An illustrious Hong Kong container firm sells to China

Terminal value

STONECUTTERS ISLAND in Hong Kong used to be a favoured habitat for poisonous snakes and eye-catching birds such as the white-bellied sea eagle. Thanks to Hong Kong’s rapid development, it is no longer so hospitable. Its sky is full of gantry cranes, stacking 20-foot-long shipping containers in multicoloured tessellations, like giant Lego bricks. A cluster of decorative containers, daubed in graffiti, line the perimeter of container terminal eight, which is partly operated by COSCO, a state-owned Chinese shipping giant. In bright yellow lettering, one slogan instructs passers-by to “Respect Past, Embrace Future”.

Few Hong Kong companies have as much to tell about the past as Orient Overseas Container Line (OOCL), the world’s seventh-biggest container shipping line. Its founder, Tung Chao-yung, owned the first Chinese-crewed steamship to travel from Shanghai to France in 1947, and went on to build a shipping empire of over 150 vessels. His…Continue reading

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The fashion industry pays attention to plus-size women

Hot to trot

A GOOD fit is everything, stylists often counsel, but in assessing its market America’s fashion business appears to have mislaid the measuring tape. A frequently-cited study done a few years ago by Plunkett Research, a market-research firm, found that 67% of American women were “plus-size”, meaning size 14 or larger. That figure will not have changed much, but in 2016, only 18% of clothing sold was plus-size, according to NPD Group, another research firm.

Designers and retailers have long thought of the plus-size segment as high-risk. Predicting what these customers will buy can be difficult, as they tend to be more cautious about styles. Making larger clothes is more expensive; higher costs for fabric cannot always be passed on to consumers. In turn, plus-size women shopped less because the industry was not serving them well. “We have money but nowhere to spend it,” says Kristine Thompson, who runs a blog called Trendy Curvy and has nearly…Continue reading

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ApprovedBusinessBusiness and finance

The United States of debt

POLITICS in America may be an arena of mutual incomprehension with few settled facts, but the debate about the health of American firms’ balance-sheets is, if anything, even more bewildering. Ranged on one side are those who complain that America Inc is hoarding $2trn of idle cash and that this acts as a powerful drag on the economy. On the other are those, including the IMF, who yell that firms are bingeing on debt, with borrowing hitting an all-time high of $8.4trn last year. As a result firms are simultaneously accused of being timid wimps and reckless idiots.

In fact, the numbers show that they are by and large a sensible bunch (especially compared with the country’s bankers and politicians). What is more, the debate over debt, as framed, misses the most intriguing thing about their balance-sheets. These have been radically reshaped to adapt to three national economic sicknesses—a financial system that companies still mistrust after the crisis; a broken tax code; and monopoly…Continue reading

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China may match or beat America in AI

AT THE start of this year, two straws in the wind caught the attention of those who follow the development of artificial intelligence (AI) globally. First, Qi Lu, one of the bosses of Microsoft, said in January that he would not return to the world’s largest software firm after recovering from a cycling accident, but instead would become chief operating officer at Baidu, China’s leading search engine. Later that month, the Association for the Advancement of Artificial Intelligence postponed its annual meeting. The planned date for the event in January conflicted with the Chinese new year.

These were the latest signals that China could be a close second to America—and perhaps even ahead of it—in some areas of AI, widely considered vital to everything from digital assistants to self-driving cars. China is simply the place to be, explains Mr Lu, and Baidu the country’s most important player. “We have an opportunity to lead in the future of AI,” he says.

Other…Continue reading

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Craft beer in America goes flat

Over a barrel

JULY 4th is a day to celebrate American independence, first and foremost, but also to grill meat and swill beer. For American beer lovers in particular, the pint-glass runneth over in terms of choice. They had 5,000 breweries to pick from this year; 35 years ago there were under 100. Drinkers can enjoy time-honoured traditions, guzzling Budweiser to wash down all that sizzling beef, and newer ones such as sipping ale “finished with fennel, liquorice and anise” at Tørst, a Brooklyn bar.

For the producers of beer, the mood is darker. Though the number of brands has proliferated, the number of drinkers has not. Sales have been flat for a few years and 2017 has been especially slow so far. The volumes of beer sold at stores for the three months to June 17th were 1% lower than in the same period last year, according to Nielsen, a market-research firm. Brewers are now waiting with some anxiety for data about sales during the July 4th…Continue reading

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A reality check for virtual headsets

JUSTIN WILLIAMS takes off a virtual-reality (VR) headset and wobbles away from a demo area at E3, the world’s largest gaming convention, in Los Angeles. The bottoms of his feet and calves are “on fire,” he says. Mr Williams, a 32-year-old former marine, was playing “Sprint Vector”, a VR running game: players swing hand-held controllers to simulate motion. Though he has been standing in one place, his brain believes he has just run for several miles.

This sensation of complete immersion is called “presence”. Boosters of VR say it is what will drive the technology’s mass adoption, in time. When Facebook bought Oculus, a VR startup, for $2bn in 2014, and sent interest in the technology rocketing, it was this feeling of being present that Mark Zuckerberg, the social network’s boss, described as “incredible”.

Yet despite many pronouncements that 2016 was the year of VR, a more apt word for virtual reality might be absence. Of the 6.3m headsets that were…Continue reading

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Why Brexit could entail a hard landing for low-cost carriers

THE European Commission celebrated 25 years of the EU’s internal aviation market in June. The liberalisation of European aviation, which allowed EU carriers to fly between any airport within the bloc, opened the skies to the masses. Greater choice of airlines has cut fares—by as much as 96% between Paris and Milan since 1992, for example, in large part because of low-cost carriers (LCCs). Cheap fares have pushed passenger volumes to record levels, from 360m in 1993 to 920m this year.

Yet the bosses of Europe’s two biggest LCCs, Ireland’s Ryanair and Britain’s easyJet, are in no mood to cheer. The problem is the possibility of a hard Brexit. In the 1990s Britain was the country driving forward airline liberalisation in Europe, against the instincts of France and Italy, which preferred to protect their own flag carriers. The British government’s plan to leave the EU by March 2019 means that the country will probably exit the European Common Aviation Area (as an expanded version of that…Continue reading

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Food-delivery firms like Delivery Hero are thriving

Bringing home the bacon

NIKLAS OSTBERG spent much of his youth as a competitive cross-country skier in Sweden. Then he ditched his skis for a less healthy cause. A decade ago he founded a firm that matched online pizza orders to restaurants. It grew into Delivery Hero, a Berlin-based service that last year dispatched nearly 200m takeaway dinners to customers around the world. It is in over 40 countries and claims to be the local leader in 35, including Germany.

The recipe has delivered in financial terms. The company’s initial public offering (IPO) on June 30th proved popular with investors and its share price has climbed since. Delivery Hero is now valued above $5bn, a handy premium over a valuation of $3.1bn in May, when Naspers, a South African online giant, invested in it.

It is not alone; shares in similar businesses have performed well after going public in recent years. Shares in Just Eat, a British company with a market value of £4.5bn…Continue reading

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Hollywood studios dip their toes in virtual reality

For your eyes only

OUTSIDE a squat grey building in Santa Monica, the California sun melts the tar. Inside, in a dark room roughly the size of a small shipping container, two men are exploring the world by means of virtual reality (VR). They squash spiders in an abandoned temple, hit a home run at Yankee Stadium and float through a Blade Runner-esque landscape, all in the span of eight minutes. It feels much longer than that, and also shorter—time is hard to grasp in VR.

The creator of the experience is Walter Parkes, a former boss of DreamWorks Pictures, a film studio, who last year co-founded Dreamscape Immersive. The startup plans a chain of VR multiplex cinemas offering ten-minute interactive experiences for around $15 each. The first will open at a shopping mall near Beverly Hills at the end of the year; another 14 are planned for 2018. Mr Parkes says it costs about $2m to make a ten-minute VR experience, compared with around $200m for a big-budget…Continue reading

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Russian oligarch Vladimir Yevtushenkov falls from grace, again

HE WAS back in favour, or so it appeared. After spending several months under house arrest in late 2014, Vladimir Yevtushenkov, a Russian oligarch, relinquished control of Bashneft, a midsized oil firm, to the state. “If you like another company tomorrow and want to take it, you are welcome,” he told Vladimir Putin at the time, he later recalled. The president publicly gave his approval to Sistema, Mr Yevtushenkov’s conglomerate, shares in which had plunged. Mr Yevtushenkov subsequently appeared at annual Kremlin receptions and late last year joined a presidential delegation to Crimea.

Now he is under pressure again, facing a lawsuit from Rosneft, a state-run oil giant, which is demanding 171bn roubles ($2.8bn) in damages. Rosneft’s boss is Igor Sechin, a Putin confidant, who many in Moscow reckon orchestrated the initial 2014 case against Mr Yevtushenkov as well. (Rosneft and Mr Sechin have denied any involvement in it.) Late last year, Rosneft purchased Bashneft from the state…Continue reading

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Who would buy Air India?

A FAMOUS brand in the world’s fastest-growing aviation market, sitting on valuable slots at international airports and able to borrow cheaply thanks to being state-owned: Air India ought to be hugely profitable. But under state ownership it has guzzled public funds as hungrily as its jets consume kerosene. Last week the authorities threw in the towelette and announced an “in principle” cabinet agreement to privatise it. The chances of that going ahead rose on June 30th when IndiGo, a well-run private low-cost carrier, said it wanted to bid.

Whoever seizes the controls can expect a hard task. Air India has struggled since private rivals were first allowed in 1994 to fly in India’s skies. Together with Indian Airlines, another state-owned carrier with which it merged in 2007, it has a domestic market share of just 13% and is shedding one percentage point or so every six months. A bail-out of 300bn rupees ($4.7bn) agreed in 2012 was meant to stop losses, but has…Continue reading

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Detroit’s car firms try to match Silicon Valley

IT IS fashionable to say that the city of Detroit is on the up after decades of decline. Amid the derelict buildings there are signs of revival; art shops and trendy food trucks abound. But for a truer augury of the city’s possible future, consider the rock-bottom stockmarket valuations of Ford and General Motors (GM), Motor City’s two big domestic car firms. (A third, Chrysler, is owned by Fiat Chrysler Automobiles, whose chairman is a director of The Economist’s parent company.) If you put the members of the S&P 500 index in order of their price-earnings ratios, Ford and GM are at the bottom, among the walking dead.

For their investors, creditors and 426,000 staff, about 18% of whom are in Detroit, it is a terrifying signal. A low price-earnings ratio is the stockmarket’s way of telling you that business as you know it is over. GM and Ford together made $18bn of underlying profit last year but have a market value of $98bn. That ratio implies that their…Continue reading

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What Rosneft’s purchase of Essar’s oil refinery means

Turning on the loan pipe

CONGLOMERATES sometimes sell their least promising units, thereby ginning up returns for the remaining empire. But groups saddled with huge debts do not have that luxury; only by disposing of the most profitable parts can they raise enough funds to satisfy creditors. Such is the story of the Essar Group, which is in the final stages of selling its crown jewel, India’s second-biggest private oil refinery, to a consortium led by Rosneft, a Russian oil titan. The slimming of what was once the country’s third-largest diversified corporate group is a welcome signal that an era of powerful industrialists running rings round their creditors is ending.

The purchase by Rosneft (along with a Russian investment fund and Trafigura, a trading firm) of the giant Vadinar refinery in the state of Gujarat for $12.9bn will be the largest-ever foreign investment in India. It has been a long time coming. It was first mooted over two years ago and…Continue reading

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The new old thing

In Apple we trust

APPLE has a new hit device, so popular that it has sold out across most of America and Britain. If you order it online it takes six weeks to arrive. “Best Apple product in a long time,” sings one online review. Useful and (of course) slickly designed, it enjoys the highest consumer satisfaction of any Apple product in history, according to a study by two firms, Creative Strategies and Experian.

Such enthusiasm must be bittersweet for Apple’s bosses. The gadget in question is AirPods, a set of wireless headphones that look a lot like Apple’s traditional ear buds, just without a wire. Priced at $159, AirPods could become a business worth billions of dollars, like the Apple Watch, a wearable device that Apple started selling in 2015. But headphones are hardly the transformative, vastly profitable innovation that many have been waiting for.

That wait started only a few years after its biggest blockbuster launched. On June…Continue reading

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An activist investor bites into Nestlé

NESTLÉ is not easily rattled, to some investors’ chagrin. The world’s biggest food company accounts for about half of all sales of instant coffee, not to mention one quarter of grub for babies, dogs and cats. Thirty-four of its brands, including KitKat and Nespresso, earn over $1bn each. Yet many investors complain that Nestlé is falling behind, and this week Daniel Loeb, an American activist investor who runs Third Point, a hedge fund, gave voice to their concerns. On June 25th, in a letter, he attacked Nestlé’s “staid culture and tendency towards incrementalism”.

Third Point has acquired a small stake in Nestlé, less than 2% of the company. But it was enough to spark a jump of over 4% in the company’s share price on hopes that its bosses would respond. On June 27th Nestlé announced its own menu of changes—all unrelated, the company claimed, to the urging of any individual investor. Third Point will keep pushing for more.

The skirmish points to a basic question facing not just Nestlé but many of its peers: how should a consumer-goods giant operate? Big brands can no longer assert their dominance by securing spots on store shelves and spending millions on television ads. Now they must also succeed online and meet demand for “healthy” and “natural” fare. In rich countries, in particular, large companies are squeezed on one side…Continue reading

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The European Commission levies a huge fine on Google

SHE was born to Lutheran ministers known to be both tough and principled. As a child, she thought it unfair that pupils were not allowed to sell fruit and milk in school and successfully lobbied for change. In her office in Brussels she keeps a statue of a raised middle finger, a gift from a trade union when she was deputy prime minister of Denmark, as a reminder that there will always be critics.

It shouldn’t have come as a surprise that Margrethe Vestager, the European Union’s competition commissioner, took a tough line against Google this week. The size of the fine the tech giant will have to pay for abusing its monopoly in online search, €2.4bn ($2.7bn), sets a record for European antitrust penalties (see chart). Yet more important than the amount is that she provided a rough guide to how the European Commission plans to deal with online firms which not only dominate a market, but essentially are the market.

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