Note: some of the linked articles below require an FT subscription to read
Practical ways to ease post-Brexit trade and combat US protectionism.
The Brexit trade headache is about to get worse. As the March 2019 deadline looms, a ‘wait and see’ option is no longer viable for companies trading across EU borders. Fortunately, Chris Giles, the FT’s Economics editor, sets out ‘Nine ways companies can prepare for life outside the EU’. None is straightforward; all involve endless bureaucracy. His advice includes: building a corporate customs infrastructure; gaining Authorised Economic Operator status; making use of EU free trade agreements; auditing supply chains and international contracts; budgeting for VAT and inventory; protecting your IP, and more. In some cases, a transition deal will ease the worst pain, but won’t make it go away. An example of the inherent complications can be found the inscrutable wording used to explain Northern Ireland’s regulatory alignment as explained by David Allen Green.
While EU leaders seem unimpressed by the UK’s Brexit preparations, they are none too happy with the US's own trade-restricting tax reforms either. The FT reports leading EU finance ministers ‘saying it would “be at odds” with free-trade international rules because it risked being discriminatory towards foreign companies.’ In a letter to US Treasury secretary Steve Mnuchin, the EU ministers write that ‘the 20 per cent excise tax on transactions, including a US company’s imports of products from its own foreign factory, would impact genuine commercial arrangements,’ and could ‘discriminate in a manner that would be at odds with international rules of the World Trade Organisation.’
Not that the US necessarily cares about the integrity of WTO rules. One can get a sense of this from the FT’s profile of Robert Lighthizer, Donald Trump’s trade Tsar, who ‘stands to be a more important and potentially disruptive figure in the global economy than either Mr Mnuchin or [Commerce Secretary Wilbur] Ross.’ A China hawk and WTO critic, Mr Lighthizer has fully embraced Mr Trump’s ‘America First’ philosophy. Perhaps naively, he also believes that it is possible to ‘construct a broad bipartisan coalition backing renegotiated agreements like Nafta.’
In Bitcoin we trust- while it's going up
Bitcoin’s unprecedented, 30-fold, price rise in little more than a year has captured wider attention. Nasdaq and other US exchanges even plan to offer trading in cryptocurrency derivatives. As companies try to understand cryptocurrencies and how the underlying technology, Blockchain, might change their industry, FT | IE Corporate Learning Alliance has marshalled its own wide-ranging expertise to explain developments to its clients. Indeed, as noted in the FT’s European Business Schools special report: ‘More institutions would like to teach it now, but it’s a question of having a professor around to do it.’
Those looking for some perspective might start with the FT’s Big Read, Bitcoin: an investment mania for the fake news era. Critics point out that Bitcoin has no income stream and lacks a fundamental basis for valuation, making it more akin to a precious metal than a currency. It also resembles a classic bubble: an invention created during a period of loose monetary policy whose benefits lie in the distant future. Nevertheless, though some early adopters have cashed out with life-changing returns, demand remains as high as ever. This is particularly the case among those who have lost trust in—or in the case of money launderers who wish to circumvent—governments and banks, prompting calls from respected economists, politicians and investors to ban it.
Banning it misses the point. As the FT’s Capital Markets editor Miles Johnson explains: ‘Bitcoin is a faith-based financial asset for a populist era.’ Like other bubbles, Bitcoin reflects its time—in this case, ‘a collapse in confidence in traditional forms of authority and a disdain for experts.’ Indeed, ‘any criticism of bitcoin is greeted by this cohort as inherently corrupt in its motivations, while any alternative opinions are used as evidence that merely confirms existing beliefs.’ In years to come, Bitcoin might be viewed as ‘a speculative barometer of the political forces that are shaping our times.’
Keep up at the back! The urgency of life-long learning
Retraining a workforce to become more innovative is often seen as the business ‘challenge of our times.’ This imperative has become all the more urgent because ‘technology is racing ahead of the skills people have,’ as this article by the FT’s Brian Groom explains. ‘Changing technologies and ways of working, coupled with longer working lives, are intensifying demand for new skills,’ he writes.
It’s a gargantuan task, given that one quarter of adults, for example, already suffer from poor literacy or numeracy, and is not being taken seriously enough. In the US, the share of workers receiving either paid-for or on-the-job training had fallen steadily between 1996 and 2008. In Britain, the average amount of training halved during a similar period to some 40 minutes a week. Even Germany is failing to keep up with the needs of the digital age.
The big question for L&D professionals though is ‘whether people ought to receive this continuous education from the state or their employer, or whether they must instead acquire it for themselves.’ There are some obvious areas where companies might take a lead. ‘Coding skills, for example, are sought outside the technology sector, with data analysts, designers, engineers, scientists and marketeers among those likely to need them.’ It’s not just tech skills that are in high demand. Softer skills such as problem-solving and communication are also valuable, given that so many technical jobs may soon be automated.
One such soft skill, that by definition cannot be automated, is charisma. A charismatic leader possesses ‘emotional intelligence, projects confidence and gravitas and exudes warmth,’ according to one coach interviewed by FT management writer Emma Jacobs, who asks if it can be learned. For some, it is a ‘special, innate quality that sets certain individuals apart and draws others to them.’ Others argue that is ‘a learnable skill or, rather, a set of skills that have been practised since antiquity.’
For managers who no longer believe in the hard graft of learning new skills, Andrew Hill provides a ‘handy guide to sorcery and superstitions in modern leadership’ with feng shui, an unquestioning belief in big data, leaps of faith, and hero worship among the many irrational fads in modern business.
Why no company can now ignore sexual misconduct revelations
As waves of sexual misconduct allegations sweep through business and politics, no firm can now be excused for pretending not to know. As well the overriding obligation to protect staff, employers should not forget the demoralising impact that such a poisoned atmosphere can have on company performance. And if they still claim innocence, then several FT articles provide ample examples of misconduct and how victims can respond.
Laura Noonan surveys FT readers’ ‘allegations of serious crimes, including rape, other physical assault and stalking’ and ‘systematic verbal abuse and objectification’ which have prompted workers to leave their jobs. Equally troubling is that female staff too often report that ‘employers ignored serious allegations and that the perpetrators had gone on to greater careers while their victims were sidelined or sacked.’ As Emma Jacobs, FT work and careers columnist, writes: ‘Sexual harassment — whether reported or unreported — can damage women’s careers by diminishing their confidence and enthusiasm.’ …women typically keep quiet, due to fears about being believed, retaliation and harm to their careers. Others are legally bound to silence by non-disclosure agreements.’ But women (and a few men too) can fight back. This practical guide for victims advises as first steps:
‘Talk to someone outside work whom you trust to provide you with support. You may also wish to consider making a report to the police.’
‘Make a note of what happened as soon as possible after the event — if you can email it to yourself from your private email account, that provides you with a date of the note.’
‘Review your employer’s harassment policy and contact HR or an appropriate manager to report the incident as soon as possible.’
‘Consider seeking legal advice within three months of the incident in case matters are not resolved within work.’
Lawyers add: ‘Ignoring it usually doesn’t end well... Reporting triggers your employer’s duty to investigate, and can protect you later if you experience retaliation for complaining… Except in rare circumstances, don’t resign — and certainly not without advice of counsel. Resignation can negatively affect your rights.’
The fight is on. The FT’s US political correspondent Courtney Weaver reports on the wider #MeToo movement, though points to difficulties in creating ‘a movement that is inclusive of experiences that range from unwanted leg touching to violent rape, without losing the distinction between these transgressions.’ There is also the fears that ‘the near daily deluge of allegations will ultimately bring about a kind of fatigue.’
Finally, an ‘optimistic’ finale to the Weinstein story, according to Lex, would be a female-led takeover of the company. Unfortunately, the producer’s own stake remains a key obstacle to a happier conclusion.
It’s the data, stupid: How to tax tech companies.
Tax is never far from corporate decision-making. As well as helping to determine everything from HR remuneration policy to decisions on corporate locations, it has now become a huge public affairs and social responsibility issue, especially for US tech giants. While many of the arguments around who should benefit most from tax reform are currently being voiced in the US Congress, ‘it’s all a distraction from the debate we should be having,’ writes FT’s global business columnist Rana Foroohar, ‘which is how to come up with a fair, growth-enhancing method of taxation for an age in which most wealth is going to reside in intellectual property that can be located anywhere.’
Ms Foroohar notes that half of all US overseas profits come from tax havens. Many people, understandably, view this is an example of companies not paying their fair share, and is giving rise to anti-democratic forces. Unfortunately, there are no easy answers when the ‘vast majority of wealth is being captured by companies that have no need of a major physical presence in their various markets, or even a fixed national headquarters.’ Some tax experts propose lowering rates to encourage US firms to repatriate their cash hoards. But this approach would also require legislators to close loopholes, which many would deem politically unfeasible, and could trigger an international tax race to the bottom, which would once again send companies off in search of more lucrative tax locations.
It’s not just a question of where value is created, but also what value is being created. ‘In the age of digital commerce, data really is the new oil: consumption of online goods and services is what generates the user data that companies can then monetise.’ It’s the data not the algorithm that creates the value—and the ordinary tax payer now wants to know how these large tech companies are using their data and why this isn't being taxed fairly.
How to talk yourself and others into and out of trouble
Two contrasting FT stories illustrate the importance of self-image and presentation in leadership, whether in business or politics. Advice from comedian and performance coach Viv Groskop on How Theresa May can fix her vocal delivery and public speaking, applies to senior executives too.
The UK Prime Minister’s excruciating election campaign was made so much worse by her inept public speaking. Ms. Groskop writes: ‘Her voice is not assured. Her eye contact is shifty. It is hard to focus on her words because her delivery is so distracting. It is painful to see a woman on a public platform with so little authority.’ While Margaret Thatcher was taught by a National Theatre voice tutor recommended by the great Laurence Olivier, captivating both friends and enemies, and Michelle Obama ‘speaks with expression and emotion without ever overdoing it,’ Ms May sadly provides a poor example to ‘younger women who aspire to lead.’
According to voice coach Caroline Goyder, an expert on stage paralysis, Ms May lacks energy. ‘…Her clarity of thinking is not communicated powerfully enough for the role of prime minister.’ Powerful leadership demands focused self-expression.
May’s posture ‘cuts off the breath support and reduces the power and resonance of the voice.’ Her diplophonic voice ‘alternates between two tones simultaneously, giving it a slightly wobbly effect.’ But the wider problem is tension in the neck, shoulders and mouth, which makes her appear embarrassed about what she’s saying. ‘The voice has to be honest and authentic or we will read the lack of congruence as dishonesty.’
By contrast, consider the self-belief displayed in Dick Fuld’s quiet comeback on Wall Street. The head of Lehman Brothers was responsible for the biggest corporate collapse in history, in 2008, but has now established a new private wealth and asset management partnership to exploit ‘opportunities in a flawed and highly fragmented financial services market.’ This unwarranted self-confidence trick was evident during Congressional hearing into the financial crisis, when he blamed Lehman’s collapse on ‘looser lending standards, homeowners who used their homes “like an ATM” and regulators who “mandated” the firm’s bankruptcy.’ Nothing to do with him, of course.
Finally, if effective storytelling—about yourself or someone else—is indeed key to success, then Amy Goldstein’s gritty tale of a Wisconsin town, Janesville, is worth reading. In describing some of the catastrophic damage caused by Mr Fuld et al, and throwing light on Donald Trump’s subsequent political ascent, it is a worthy winner of the FT-McKinsey 2017 business book of the year.
China’s soft approach to global power
The elevation of President Xi Jinping’s status at last week’s Communist Party of China (CCP) congress marks a political turning point for China. It could also redefine the balance of global power and influence over coming decades. As corporate leaders re-assess their international strategies they might do well to re-envisage risks and opportunities resulting from a more authoritarian and assertive China. ‘The west must be alert to Beijing exporting an authoritarian model’ writes the FT, as ‘China tilts back towards a cult of personality.’ President Xi’s ‘has defined himself in opposition to the “hegemonic” west,’ and for the first time in decades, ‘put forward China’s autocratic system as a model for other countries.’ It seems that China will disprove a long-held western maxim that countries democratise as they get richer.
As well as ‘building a vast and powerful military,’ says the FT, China is ‘also intent on enhancing China’s soft power,’ whether this is through football and entertainment or Confucius Institutes that now operate in more than 500 universities worldwide. These claim to satisfy overseas demand for learning Chinese, and offer language and cultural classes that earn students credits towards a degree. But they are directly administered by Beijing, and stand accused of subverting academic freedom, particularly regarding Tibet, Taiwan and Tiananmen, especially in cash-strapped colleges. Much of China’s movement to ‘charm, co-opt or attack well-defined groups and individuals’ is being run through the so-called United Front Work Department, according to FT’s China editors.
But what exactly is China’s global role to be? Mr Xi has previously spoken about a new parity in China-US relations, especially regarding rules of international institutions. This suggests greater international policy activism, in business as well as politics.
The productivity challenge, with or without robots
Economist are still struggling to explain the UK’s poor productivity performance. ‘Productivity is no higher now than it was just before the 2008 financial crisis,’ writes the FT’s Gemma Tetlow, ‘in stark contrast to the average annual growth of 2.1 per cent recorded during the decade before the crash.’ With the Office for Budget Responsibility, the UK fiscal watchdog, no longer forecasting a return to pre-crisis productivity growth, the UK chancellor (Finance Minister) is now prioritising the issue.
Ms. Tetlow gives four possible reasons for the post-crisis productivity stagnation which afflicts many sectors but is particular weak in finance, telecoms, energy and management consulting. The first explanation is low investment in productivity-enhancing machinery—running at a mere 5% above its pre-crisis peak—and not always in areas that improve worker efficiency. Economic uncertainty may be a big reason for this reluctance to invest. A second explanation might be the way productivity is measured—previously under-playing the longer term costs of investment in, for example, the oil and financial services sectors, while understating the returns on investment in digital technologies. But the FT reckons that this would explain only one quarter of the assumed shortfall. A third reason could be that historic low interest rates have sustained ‘zombie’ companies, with fewer bankruptcies following this recession compared with previous downturns. This, however, would only explain 15% of the assumed productivity gap. Finally, business has not laid off its unproductive workers. With more people now willing to work, labour has become less expensive, resulting in ‘labour hoarding,’ while deterring investment in labour-saving technology.
This latter explanation appears not to apply to sports shoe manufacturer Nike. According to the FT's Long Read on how Nike’s focus on robotics threatens Asia’s low-cost workforce, Nike has been introducing automated gluing and laser cutting at its Mexico plant that is helping to slash costs and increase flexibility in what is normally a fickle, fashion-conscious market. Long a symbol of outsourcing--with almost half a million employees in 15 countries--Nike looks set to reverse that process through automation. As wages rise, automation looks ever more attractive; and Nike’s own labour costs could fall 50%. ‘The apparel industry is likely to watch this closely,’ say analysts.
There are also huge implications for developing markets more generally. As the article notes, the ILO estimates that ‘about 56 per cent of employment in Cambodia, Indonesia, the Philippines, Thailand and Vietnam is at a high risk of being automated over the next decade or two, with clothing and footwear manufacturing jobs among the hardest hit.’ However, for a brand-sensitive company such as Nike, which was once attacked for poor labour practises in its supply chain, closing a factory is likely to be controversial. Nike could be the litmus test for one of the great industrial dilemmas of our era.
When robot recruiters outperform people, and other human failings.
The big HR question that won’t go away—can a robot do your job—is well illustrated by Leslie Hook, the FT’s San Francisco correspondent, in this article on robot recruiters. She refers to a chatbot named Mya that screens high-volume applications for hourly-wage jobs. Its initial filter uses simple questions that require straightforward answers, such as: can you work in the evenings; are you comfortable with the pay range, and how soon can you start? One benefit for applicants is that they get meaningful (if limited) feedback rather than falling into the typical HR black hole. That is not to lay the blame entirely with humans: job hopping is now more common and the internet has made it easier to pump out applications at scale, massively increasing the job of sifting through CVs.
The recruitment process for low-skilled, hourly-wage jobs will be the first to be automated. But machine learning can also assist with searches and matches for more skilled jobs, especially among LinkedIn’s half a billion profiles, and internal job moves. Recruiters themselves probably won’t become extinct anytime soon, if only because in cultural terms, ‘you still need a human to evaluate whether someone is a good fit for a job.’ Nevertheless, the focus may shift to a more ‘sales-type personality’ who can persuade the best candidates to take a job. And when it comes to senior-level recruiting, where personal relationships are vital, the old-fashioned approach seems sure to continue.
Another, example of the clash between human fallibility and high-speed automation can be found in Pilita Clark’s amusing column on the etiquette around email errors. It doesn’t require such egregious examples as the Deutsche Bank staffer who accidentally transferred $6bn to a customer, or the central banker who mistakenly emailed a secret study to a journalist, to elicit concern. Usually, such gaffes generate embarrassment rather than commercial damage, though Ryanair’s email launch of a 24-hour sale ‘to celebrate remaining in Europe’, just before the Brexit vote, was particularly humiliating. But sender beware: most attempts to recall an email sent in error merely draws attention to a mistake that most recipients would otherwise have overlooked. In short, Ms Clark advises: ‘just apologise and move on.’
What keeps you going in your job, or makes you want to leave?
Insecurity is a desirable attribute according to this FT article on ‘insecure overachievers’. Although problem-solving, creativity, intellectual curiosity, energy and passion are deemed desirable traits for ambitious executives, especially in professional services firms, few mention ‘insecure over-achievement.’ Yet companies have found that ‘praise-hungry perfectionists’ tend to be particularly productive. So much so that one HR director, interviewed in Cass Business School research, admits acting ‘like a drug dealer, deliberately seeking out vulnerable people and getting them hooked on the high-status identity.’ If there’s one lesson about how best to harness anxious energy, it’s to avoid undermining the executive's self-esteem and potentially ruining a career in the quest for ever greater output.
Whether similar insecurity applies to executives looking for a career change is touched upon in these FT profiles. Mainly in their 40s and 50s, these executives express a range of fears and emotions, but all embrace change as a means of self-realisation—something that HR professionals might bear in mind as they try to engage and enthuse their staff. A forex trader who became a costume designer is following a long-held interest and is more excited than worried about the life change. A well-paid Google employee left to establish a technology consultancy, and ‘swings between self-doubt and almost manic enthusiasm.’ A supermarket manager overcame the shock of redundancy and wants more family time though worries about her next job. Meanwhile, a 33-year-old rock musician who is retraining as a software developer thinks he may be too old. Finally, a science graduate and full-time mother retrains to be a lawyer but questions if it’s the right for her young family.