Philippa Kaur

The annual meeting of the World Economic Forum (wef) is a study in contrasts: business and politics, East and West, north and south, a few insiders cloistered in wintry Davos and the billions of outsiders on whose fate they pontificate. This time around, as thousands of the world’s movers and shakers belatedly descended on the Swiss ski resort between May 22nd and 26th, the big disparity was between the gloom about the state of the world and the joy of shoulder-rubbing in person (minus the snow) after a two-year pandemic hiatus. The macro mood was sombre for good reason. High inflation doesn’t feature in the Bible but other than that the list of ceos’ top concerns currently reads like the Book of Revelation: war (in Ukraine), pestilence (particularly China’s destructive effort to stamp out covid-19 at home), famine (everywhere, if war and pestilence aren’t staved off). On top of that, one Western boss after another got an earful from their emerging-market counterparts about the global knock-on effects of the American-led sanctions against Russia on food and fuel prices.This apocalyptic backdrop helps explain why companies reined in the pizzazz. JPMorgan Chase, an American bank, cancelled its hot-ticket party. The one thrown by Salesforce, a business-software giant, was as raucous as ever but some other corporate dos looked virtually empty. The boss of one giant firm noted the lack of “vibrancy”. Attendance seemed down on previous years—by half or so, chief executives reckoned. Several American regulars were kept away by prior engagements (Amazon, BlackRock, ExxonMobil and Meta all hosted their annual shareholder meetings this week). Russians were uninvited; Russia House became Russia War Crimes House, displaying images of atrocities committed by Vladimir Putin’s troops. The absence of China, whose representation fell from hundreds to a handful owing to President Xi Jinping’s zero-covid policy, made the talking shop less global—and less useful—than usual. But not useless. This year’s worthy panel discussions will not fix globalisation, avert climate catastrophe or foster inclusive growth. At the same time, in no small part because things were less hectic, attendees reported enjoying the frank back-room chats that are the wef’s main draw more than ever. Individually, these are about corporate self-interest. Collectively, they can add up to something meaningful. Davos needs the world more than the world needs Davos. That isn’t to say there are no mutual benefits.For more expert analysis of the biggest stories in economics, business and markets, sign up to Money Talks, our weekly newsletter. More

There is no better place to experience German efficiency than at Ludwigshafen, a site operated by basf, the world’s largest chemicals company, an hour’s drive south of Frankfurt. Everything is joined together in this city-sized cluster of dozens of plants connected by 2,850km of twisting pipes, from two steam crackers, industrial cathedrals where a hydrocarbon mixture called naphtha is split into its components, to an immense incineration facility, where residues are put to rest. Despite the vast scale of Ludwigshafen everything is accounted for. Reuse and recycling ensure that barely a molecule is wasted. According to basf’s proud tour guide, 94% of the chemicals that enter this system make it into one of the firm’s 45,000 products. Yet basf’s success is not entirely home-baked. Another essential ingredient is cheap Russian gas, reliably delivered via pipeline. The complex in Ludwigshafen is Germany’s biggest industrial consumer of the stuff, piping in about 4% of the country’s total annual gas consumption, enough to heat millions of households through the coldest of winters. basf uses about half to produce steam, the other half as feedstock. “There is no question that low-priced energy has brought wealth to Germany,” says Martin Brudermüller, basf’s chief executive. “If prices had been higher, maybe parts of our production would already be gone.”Now this energy dividend is set to be curtailed, even if the war in Ukraine ends soon. For a generation at least, Germany’s leaders will look to end their country’s dependence on Russian gas and oil. As a result, Europe’s largest economy not only faces a rethink about how much it needs to invest in defence, but an equally difficult economic reckoning. Its industrial titans have started to reconsider their finely tuned business models. basf offers a revealing case study of this shift.How severe a blow Germany’s economy takes will depend on how quickly it can adapt to doing without Russian gas. A group of economists led by Rüdiger Bachmann of the University of Notre Dame recently estimated that the hit from a sudden halt of Russian energy imports would be “substantial but manageable”, causing a decline in gdp of between 0.5% and 3%. That is less severe than the damage done by the coronavirus. But in some locales, such as Ludwigshafen, the shock of shunning Russian gas could be far more dramatic. If pressure in the pipeline that feeds the giant complex drops below 50% of its normal flow, the whole place will have to shut down. That in turn will cause chaos further down the chemical-industry supply chain. “When Ludwigshafen stops,” warns Mr Brudermüller, “there will be no more cars, no more pharmaceuticals and no more many other things.”basf’s boss says that he will try to keep the chemicals flowing by doubling down on the firm’s existing plans to do away with hydrocarbons, hoping that he has time before a European gas embargo takes hold or Russia elects to cut off supply. The firm already aims to achieve net-zero carbon-dioxide emissions by 2050. As part of that process, last year it bought part of the world’s biggest offshore wind farm, off the Dutch coast. It plans to acquire stakes in other such projects. That electricity will replace the gas that powers its steam crackers. Green hydrogen and heat pumps will be added to the mix in Ludwigshafen and at five similar sites that basf operates around the world. As for the gas it needs as a feedstock, much will arrive in ships as pricey liquefied natural gas.The second part of Mr Brudermüller’s strategy is more surprising. The economic repercussions of the war in Ukraine are pushing his firm eastwards. Higher energy costs and stricter environmental regulations in Europe make China look ever more attractive, he says. Having lived in Hong Kong for a decade, he has long admired what he describes as the country’s pragmatic authorities and dedicated workers. The firm’s future looks less firmly planted in Ludwigshafen than in Zhanjiang in southern China, where it is investing $10bn in a state-of-the-art site. The German titan has no alternative to continuing to expand in China if it wants to remain the world’s biggest chemicals-maker. Greater China already represents about half the world market for chemicals and will account for more than three-quarters of its global growth in the next few years, he reckons. “Everything we know about how to make things with less CO2 will be applied there,” says Mr Brudermüller, adding that “the money we will make in China will be needed to pay for the green transformation in Ludwigshafen.”Chemistry lessonsThe risks of such a strategy are clear. Although basf has, in Mr Brudermüller’s words, “never seen a theft of technology” since it started production in China in the late 1960s, few would be surprised to see the firm’s know-how trickle into the Chinese chemicals industry. More importantly, the economic decoupling between China and the West may yet go beyond some elements of high tech, such as semiconductors, and reach areas in which basf specialises. The danger is that, in trying to wean itself off one kind of dependency—on Russian energy—basf may simply strengthen another. Relying on China might not pose such an obvious danger as a Russian finger on a gas pipeline’s off switch, but banking on it for a big chunk of profits still leaves the firm vulnerable.Mr Brudermüller looks like the most energetic of Germany’s big bosses in his drive towards China. But many others are said to be tempted to turn more decisively towards the east. They should think twice before embracing a greater reliance on China and instead try to rekindle the spirit of Teutonic thrift and inventiveness that made possible the industrial wonder that is Ludwigshafen. basf has done it before, albeit for a more dubious purpose. When the British navy blockaded Germany during the first world war, the firm built a new plant to make nitric acid without imported ammonia, thus ensuring the resupply of explosives. Necessity, after all, is the mother of invention.■Read more from Schumpeter, our columnist on global business:Why America’s clean-energy industry is stuck (May 21st)Activist investors are becoming tamer (May 14th)Facebook’s retirement plan (May 7th)For more expert analysis of the biggest stories in economics, business and markets, sign up to Money Talks, our weekly newsletter. More

When labour markets are tight, the perks tend to get better. Spotify is rolling out a new corporate-subscription package, enabling firms to offer the streaming service to their employees. If you are sufficiently high up at Goldman Sachs, you are now entitled to take as much holiday as you want (this is a nominal perk; no one who cherishes work-life balance gets to climb the ladder at Goldman in the first place). Salesforce has a ranch in California to which it can send workers for in-person get-togethers. If you work long enough for Blue Origin, you might get blasted into space. For firms that don’t own rockets or ranches, it can seem hard to compete. The good news is that small gestures of appreciation can have an outsized effect on employee satisfaction and loyalty. The bad news is that they are not meant to be scaled up. Several pieces of research look at the effect that acts of thoughtfulness can have on staff. In one recent study by academics at King’s College London and Harvard Business School, a group of social workers was randomly divided in two: members of one group got a letter of thanks for their work from their line manager, and members of the other got nothing. A month later, recipients of the letter reported feeling much more valued than their counterparts. In similar vein, a study in 2010 found that university fundraisers who were personally thanked for their work by a senior member of staff made many more calls to ask alumni for donations in the week following this small act of recognition than they had in the week before. There was no statistically significant change for an unthanked control group. Another study involved workers at a Coca-Cola facility in Madrid, some of whom had secretly been told to perform acts of kindness to a subset of their colleagues (bringing someone a drink, say, or emailing them a note of thanks). Both givers and receivers of these acts reported feeling higher levels of job satisfaction; and the receivers ended up doing other colleagues more favours, too. Such studies carry two lessons for employers. One is that recognition can have a meaningful impact on workers. The other is that this impact is amplified if shows of appreciation are personal and unexpected. In their haste to act on the first lesson, plenty of companies completely forget the second. Many firms now run formal employee-recognition initiatives, from rewards programmes to award schemes. Vendors offer clients a variety of services, including internal noticeboards on which colleagues can publicly thank each other for their work and bestow points that can be redeemed for gifts and experiences. The website of one vendor offers managers advice on what to say to employees to make them feel recognised, because absolutely nothing says “authenticity” like a script. (Sample quote: “Congratulations on your great victory! Only you could have pulled it off!”, which sounds like a Hallmark card for Napoleon.) Industrialising appreciation misses the point completely. Automated birthday and work-anniversary congratulations are about as personal as an invoice. Platforms on which peers publicly recognise the hard work of others are liable to encourage performative displays of praise. That is especially likely if every compliment shows up on an analytics dashboard for the boss; one employee-engagement firm tracks shows of gratitude and breaks these “recognition occasions” into a series of ghastly categories like “Owning the Results” and “Building Trust Like a Family”. Award schemes also require careful handling. They are great if you win and somewhat less motivating if you don’t stand a chance. In one study from 2014, academics looked at the effect of an award programme on Zambian health-care trainees; they found that comparison with others worsened performance, especially for less able workers. The secret to showing appreciation is that scarcity matters. It should involve effort: a handwritten note is better than an email, which is better than an algorithm. It should feel personal, not part of a scheme cooked up by the human-resources department. And it should be sufficiently rare to register as meaningful; thanking everyone for everything turns gratitude into a commodity. In other words, appreciation is not a big-data project. Individual managers can harness the power of small gestures to make a real difference to their teams. The best thing firms can do is to hire the sort of people who recognise as much.Read more from Bartleby, our columnist on management and work:Making brainstorming better (May 21st)The woolliest words in business (May 14th)Why working from anywhere isn’t realistic (May 7th) More

A good vegan milk needs to look like milk and taste like milk, whether its a fatty version, preferred by bakers, or a skimmed one, favoured by the health-conscious. And, for coffee-drinkers, it should ideally foam like the stuff from a cow. For years manufacturers have had trouble hacking this delicate imitation game. Rapidly rising revenues suggest that they are getting much better at it. In America alone, $2.6bn of plant-based milk was sold in 2021, up from $2bn in 2018. Pseudo-milks are only one category in the growing assortment of passable plant-based alternatives to animal products. There are now convincing versions not just of meat but of cheese, eggs and even prawns. Burger King and McDonald’s sell vegan patties; Chipotle has made a plant-based chorizo. Last year the world’s largest producer of canned tuna, Thai Union, launched a plant-based line. Growing sales show the growing taste for this type of foodstuff (see chart). bcg, a consultancy, reckons that global revenues from alternative proteins could reach $290bn by 2035—and that is a cautious estimate.Eager investors have poured into the business like oatmilk into a latte. Alternative-protein companies lapped up $5bn in investments in 2021, 60% more than in 2020. Oatly, a Swedish firm that makes plant-based milk, raised $1.4bn on its Nasdaq debut last year. Impossible Foods, which makes meatless burgers, raised $500m in November, valuing the firm at $7bn. In February Nestlé, a packaged-goods giant, acquired Orgain, which makes plant-based protein powder, for an undisclosed sum rumoured to be around $2bn. Can the feast last?One reason to be hopeful is that alternative proteins have come a long way since the 1980s, when Quorn, a fungus-based meat alternative, first hit supermarket shelves. Silk, an early soya milk, followed in the 1990s. Unlike those early products, which were neither terribly tasty nor particularly nutritious, the latest crop are often both. Clever processing improves texture, additives boost taste and a pinch of specially engineered peas and beans adds nutrients. Firms are experimenting with ever more novel ingredients in search of meat- and dairy-like properties that will attract ever more shoppers. Terviva, an American startup, is using the oil of pongamia, an Asian tree, to mimic butter. . ChickP, an Israeli firm, is using chickpea extracts to mimic the texture and nutritional value of eggs in mayonnaise. Firms are also getting better at turning such bounty into consumer products. There are now ways of using corn protein to make plant-based cheese alternatives melt and stretch. Better products and lower prices—the result of both improved manufacturing techniques and scale—have coincided with the rise of “flexitarians”, who forgo meat but not always. Some are trying to cut saturated fat for health reasons—a trend fuelled by the pandemic. Fitness fanatics on faddish diets want to develop bulging muscles without building up cholesterol. Concerns about animal welfare and greenhouse-gas emissions from rearing livestock are driving the climate-conscious to limit their animal-derived intake; producing a gram of beef generates 25 times as much carbon as producing a gram of tofu. For all these advantages, making a plant not taste like a plant requires work, and ultra-processed substitutes seldom match animal proteins in nutritional value. Plant-based junk food is still junk. Soya is a common allergen and can have a disruptive effect on hormones. Green-minded consumers are realising that plant-based does not necessarily mean sustainable. Farming almonds to make a milk-like drink, for example, uses huge quantities of water. As inflation rises, even diehard flexitarians may turn into plain old omnivores, and pick either the real deal (which is cheaper than faux animal proteins) or veg (which is cheaper still). Plant-based proteins are also a tough sell in giant markets like India, where diets are already plant-rich, or Nigeria, where meat eating is a sign of wealth. That limits their global appeal. And animal products, including milk, are better for children’s bone development and nurturing gut bacteria, though lab-grown versions of meat and dairy are becoming more nutritious.All this suggests that alternative proteins have far to go to replace the animal kind. The limitations may be weighing on the firms involved. Oatly’s market value has fallen by over 80% since its listing, partly because of production difficulties. That of Beyond Meat, whose burgers feature in McDonald’s McPlant sandwich, is down by a similar amount from its peak in 2019. Sales growth slowed in 2021 and losses widened to $100m in the first quarter of 2022, compared with $27m a year earlier. Plant-based foods may no longer a side dish in diets, but their makers remain one in the food business. ■ More

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The word “brainstorming” conjures up a vision of hell. It is someone saying, “Fire up the brainwaves barbecue.” It is trying desperately to work out where everyone else’s cursors have gone on a digital whiteboard. It is hearing the line “there are no bad ideas” and thinking “how did this get scheduled then?” Yet brainstorming persists, and for decent reasons. Normal routines afford employees precious little time to think. Getting a group of people together is an opportunity to harness disparate viewpoints. Producing, filtering and selecting new ideas in an efficient way is an appealing proposition. So why is brainstorming often so painful? The problem is that brainstorming must strike a balance between a series of competing imperatives. One tension is between creativity and feasibility. A brainstorm is meant to be freeing, a chance to ask out-of-the-box questions (like, “Wouldn’t it be great if people had prosthetic tails?”). But it is also meant to produce suggestions that can actually be translated into reality, which calls for a more pragmatic style of thinking (like, “What are you talking about? We work at a salad chain.”). Research carried out in 2017 found that different types of ideas emerge at different stages of a brainstorm. The most feasible suggestions were generated at the start of brainstorming sessions, presumably because they were also more obvious, and the most original ones came later. Both types risk producing a “what’s the point?” reaction from participants: incrementalism is unexciting, wild schemes are not going anywhere. A second tension is between managers and non-managers. By its nature brainstorming is insiderish. Someone has to arrange the session, and that person is often the manager of a team. If decision-makers are not in the room, then the suspicion will grow that time is being wasted. If they are, then hierarchies easily assert themselves: good ideas can wither with a frown from the boss, and bad ones can survive with a nod. A related issue concerns the presence of outsiders. There is a natural temptation to keep drawing on the same senior people within an organisation to generate ideas: these are the ones who get things done, who understand a company’s strategy. Yet reams of research suggest that outsiders bring a fresh perspective. That might be people from related industries: in an experiment carried out in 2013, carpenters, roofers and rollerbladers were asked how to improve safety gear in all of their fields and the most novel ideas came from people who were not in the area in question. But it might also be middle managers or front-line employees who have direct contact with customers. A third balance to strike is between different personalities and different styles of thinking. A new paper from researchers at Columbia Business School and Stanford Graduate School of Business finds that brainstorming on Zoom comes at a cost to creativity: as people’s visual focus narrows on the screen in front of them, their cognitive range also seems to become more limited. But if in-person gatherings are better, they also do not work equally well for everyone. Some personalities are immediately comfortable saying what they think; others need to be coaxed to share their opinions. These are known problems, and there are plenty of ideas out there to solve them. The trouble is that lots of them feel like they are themselves the product of a bad brainstorming session. “Figure-storming” is a way for people to combat groupthink by pretending to be a famous person (“how would the queen improve cloud computing?”). “Step-laddering” involves people joining a brainstorm one by one, for reasons that are not entirely clear. Breaking the ice by throwing a word-association ball at each other is a brilliant idea, if you are throwing a birthday party for ten-year-olds.Some simpler rules are much more likely to help. Define the parameters of a brainstorming session upfront. Try to make a specific thing work better rather than to shoot for the Moon. Involve people you don’t know, as well as those you do. Start by getting people to write their ideas down in silence, so extroverts and bosses have less chance to dominate. And be clear about the next steps after the session is over; the attraction of holding a “design sprint”, a week-long, clear-the-diary way for a team to develop and test product prototypes, is that the thread connecting ideas to outcomes is taut. All of which would make brainstorming a little more thought-provoking and a tad less heart-sinking.Read more from Bartleby, our columnist on management and work:The woolliest words in business (May 14th)Why working from anywhere isn’t realistic (May 7th)The case for Easter eggs and other treats (Apr 30th) More

American capitalism has a special reverence for large numbers. They can frighten as debt or reassure as backstops. The $260bn raised by special-purpose acquisition companies (spacs) since the start of 2020 lacks the multitrillion-dollar aura of federal debt or America’s pandemic stimulus. It is nevertheless big enough to have become a defining symbol of recent market mania. spacs used to be a curious capital-markets sideshow: complex, obscure, hardly novel. A conventional initial public offering underwritten by investment banks was the marker of corporate maturity; merging with a pile of cash and entering the stockmarket by the backdoor was not. This changed when stockmarkets rallied from their covid-induced lows: more than 800 spacs raised capital between May 2020 and December 2021. Underwriting fees were collected; questionable incentives and complexity remained. This year investors appear to have remembered why some disliked spacs in the first place. Few new blank-cheque vehicles are being listed. Rising interest rates are chipping away at the present value of speculative firms’ future profits and investment banks are pulling back from this kind of faddish financial engineering in expectation of tough new due-diligence rules. At the same time, many existing spacs are having trouble finding merger targets. The big-shots (or “sponsors”) who erect the empty shells are typically given 24 months to find a business to acquire (or to de-spac, in Wall Street lingo). They are struggling: 27 such transactions were announced in the first three months of 2022, compared with 77 during the same period in 2021. Of the 298 spacs listed in the go-go first quarter of 2021, raising $97bn, 196 have yet to announce a de-spacing. In all, more than 600 American-listed spacs are still searching for a target. That is a lot of clocks counting down, and a lot of unspent cash. Where is it all now? Ironically, much of this money, once chasing some of the riskiest tech bets out there, has been parked in finance’s dullest quarter. Approximately $160bn currently sits in trust accounts, invested in risk-free Treasuries. It could be ploughed into the next white-hot tech stocks in early 2023, when the countdowns end and investors’ cash is returned. Until then, being locked up in a spac without the prospect of a merger resembles investing in a money-market fund. Investors profit from the difference between its trading price and the money returned upon its liquidation. At present, the average yield-to-maturity on these blank cheques is above 3%.Astute investors know better than to hang around for the blank cheque to blossom into a real business. After a spac announces a merger, investors are given the chance to redeem their shares and have their investment returned. Average redemptions are running at more than 50%. Excluding additional funding and deals hanging in limbo between announcement and completion, The Economist calculates that less than $40bn of capital invested in spacs since 2020 has found its way onto the balance-sheet of an operating company. That is roughly the valuation at which Grab, a South-East Asian super-app, tied up with a spac in December 2021.Investors in de-spaced firms have fared far worse than those in spacs wanting for a target. One recent study finds that barely more than a third hit their revenue projections. Many are short of cash. Almost half of the companies included in the de-spac index are currently burning through cash fast enough to empty their coffers within two years. This month Canoo, an electric-vehicle maker whose investor presentation benchmarked its valuation to Netflix and Tesla, expressed “substantial doubt” about its future as a going concern. An index tracking 25 large companies which went public through de-spac transactions is down by 52% this year, compared with a 27% fall for the tech-heavy nasdaq (see chart 2). Grab is now worth $10bn. The dilution caused by free shares designed to compensate a spac’s sponsor magnifies the sector’s losses. Unsurprisingly, then, spacs are once again paraded as symbols of market excess, where moonshot assets were pursued at otherwordly valuations. In practice, a stockmarket correction and increased regulatory scrutiny means the majority of spac investors will never see their cash put to work. They are the lucky ones. ■For more expert analysis of the biggest stories in economics, business and markets, sign up to Money Talks, our weekly newsletter. More