Philippa Kaur

BARROW ISLAND, off the coast of Western Australia, is an unlikely place to find what will with luck become the high-water mark of the hubris of the West’s international oil companies (IOCs). It is a nature reserve dotted with termite mounds. Since it was severed from the mainland about 8,000 years ago, its local species, including golden bandicoots and spectacled hare-wallabies, have lived free from predators. Some call it Australia’s Galapagos. Yet a sliver of it is also home to one of the world’s biggest liquefied natural gas (LNG) developments, mostly owned by Chevron (47%), ExxonMobil (25%) and Royal Dutch Shell (25%).Gorgon, as it is called, has a pockmarked history. It cost $54bn to build, a whopping $20bn over budget. That was partly because the cost of manpower and material soared amid a $200bn Australian LNG investment binge during the past decade. To respect the sanctity of the island’s wildlife, Chevron enforced covid-like quarantining. On arrival, thousands of construction staff had to be inspected at the airport for stray seeds; bulldozers, diggers and trucks were fumigated and shrink-wrapped before shipment. Since production started in 2016, Gorgon has been dogged by unplanned outages. Tax filings suggest it has yet to make a profit. And its failure so far to sequester four-fifths of the carbon dioxide produced from its gas reservoirs has shredded the credibility of its environmental commitments. Carbon capture is considered crucial for the future of LNG on Barrow Island and elsewhere.For all that, it is emblematic of the belief among IOCs that even if oil demand peaks as the world shifts to cleaner fuels, consumption of LNG will continue to grow for decades to come, especially in Asia. Gorgon alone hopes to produce and ship natural gas until the mid-2050s, one day for considerable profits. A sharp rise in LNG prices in recent months amid a surge in demand from China has fanned those hopes. Yet even as the majors double down on the fuel, they are running up against the reality that it is becoming harder to take controlling stakes in new megaprojects, and even those they can develop have rising risks. LNG is nothing like the relatively safe bet the oil industry portrays it as.The immediate problem the majors face is a shift in the balance of power. The deep pockets and risk appetite of giants like ExxonMobil, Shell and TotalEnergies used to be essential for coping with the challenges of building frozen gas factories in inhospitable places. Now national champions in Qatar and Russia, home to the most promising resources, say they can largely make do without them. Qatar Energy, a gas giant, has taken the lead in developing the biggest LNG complex in history, a $30bn extension to its North Field site. The IOCs have been relegated to bidding for minority stakes in the project, mostly giving them the right to market a surge of Qatari gas that is expected to hit the market by mid-decade. Chinese oil companies may invest, too. The majors are squeezed, says Giles Farrer of Wood Mackenzie, a consultancy.Other opportunities have turned into nightmares. A jihadi conflict on the north-eastern coast of Mozambique has at least temporarily halted a $20bn offshore LNG project by Total, which declared force majeure in April. Neil Beveridge of Bernstein, an investment firm, quips that it is “the only LNG project to hit force majeure before it’s even started.” For the same reason, ExxonMobil’s $30bn LNG plan in Mozambique is in limbo. The firm has also been bogged down for years trying to strike a deal with the government of Papua New Guinea on a $13bn expansion. That leaves America’s Gulf Coast as the most likely domain outside Qatar and Russia’s Arctic to supply more LNG in the next five years. But operators there can secure gas to liquefy from producers across America, and engineering skills from domestic construction companies. That leaves the oil majors twiddling their thumbs.They still have scope to build some projects. But for those a structural change in the LNG market poses a further challenge. As Alastair Syme of Citi, a bank, explains, for decades the majors reduced the risk of long-term investments by striking 20-year-plus contracts with big customers, such as Japanese utilities. However, a slide in the spot price of LNG in the second half of the 2010s caused a rethink. Buyers have shifted to shorter-term contracts (say ten years) or the spot market.The recent spike in spot prices may change the mood once again. Nonetheless some buyers face such uncertainty about the future of natural gas because of the growth of renewables that they will remain loth to sign long-term contracts. For IOCs, the corollary is that shorter contracts increase the risk of LNG investments with long paybacks. This adds to the arguments for them to focus on short-cycle projects to reduce the danger that, as the world economy decarbonises, they will be left with stranded assets.Trading placesThere is a way out of the bind. The majors, particularly European ones, are turning from megaprojects towards trading cargoes of other producers’ fuel. It reduces the amount of capital they have tied up in heavy assets and dirty fuels. It also helps them keep their promises to become portfolio companies trading all sorts of energy sources in an era of mass electrification. But it’s a different business. The barriers to entry are lower. There is competition from trading houses such as Trafigura, Vitol, Gunvor and Glencore. And Chinese firms like Sinopec, which last month signed two long-term contracts with Venture Global LNG, an American exporter, are emerging as potential rivals.It all adds up to uncertainty. The big investments, complex engineering and generation-spanning paybacks of projects such as Gorgon have long made the LNG business one of boom and bust. In an era of shorter-term contracts, amid all the question-marks associated with climate change, the future may be no less volatile. The world has changed since Gorgon was conceived. For the IOCs, the big bet on Barrow Island may soon belong to a bygone era. ■For more expert analysis of the biggest stories in economics, business and markets, sign up to Money Talks, our weekly newsletter.This article appeared in the Business section of the print edition under the headline “The Gorgon knot” More

“WE ARE A different company now. We are no longer focused just on mobile. And we have the numbers to back it up.” Cristiano Amon, the boss of Qualcomm, which makes chips mostly for smartphones, is emphatic when he describes what he will tell Wall Street at the firm’s investor day on November 16th. He is in good company. Over the past few weeks, some of the other famous members of a previous generation of big-tech firms (Cisco, Dell Technologies, Hewlett Packard Enterprise and IBM) have met investors to explain how they intend to stay relevant in the age of cloud computing and artificial intelligence (AI).There is plenty of action as well as words. On November 1st Dell spun off VMware, a big software-maker; later in the week IBM will float much of its globe-spanning professional-services business. The tech old guard hope to reinvent themselves, much as Microsoft has done in recent years in spectacular fashion.Although dwarfed by the current big-tech generation (see chart 1), this handful of IT veterans still has clout. There is hardly any business that does not use some of their products and services. In the past 12 months they cranked out a huge $284bn in revenues collectively and $56bn in gross operating profits. And they employ nearly 700,000 people worldwide—about as many as today’s big-tech leading lights, if Amazon’s army of delivery workers are excluded.Each firm has its own specialisms. Qualcomm designs its chips, but outsources manufacturing. Both Cisco and IBM, though mainly regarded as makers of hardware, have in large part become mainly software firms. As for Dell and Hewlett Packard Enterprise (HPE), their reputation is rooted in personal computers (PCs), even though they now sell other hardware, from storage devices to supercomputers (the PC business stayed with HP’s other branch when the company split in 2015).Yet all face similar challenges. For a start, they mostly used to sell wares, be they hard or soft. In recent years, however, delivering IT in big distinct chunks has moved to providing it “as-a-service”, or “AAS,” in the parlance—a business that is now dominated by startups and big cloud-computing providers such as Amazon Web Services (AWS) and Google Cloud Platform (GCP). The internet allowed the centralisation of such things as number-crunching and data storage in football-field-sized data centres to be served up online. AI is part of this story, too: the more data are collected in the cloud, the more they can be mined and turned into algorithms, which then become the engines of new services, from detecting hacking attacks to interpreting the sound of a car engine which may need a new part.The quest to escape commoditisation is pushing the industry towards services. IT has always been a lumpy business, with customers paying large sums of money for new wares once every few years. At the same time hardware and even some software have become low-margin businesses. Subscriptions to services, by contrast, bring more predictable revenues and higher profits. Services are good for buyers, too, argues Pierre Ferragu of New Street, an equity-research firm. In the past a customer might have had to buy an oversized network switch for $10,000. Now it can be had for $3,000, plus $2,000 a year for services. “Everybody is happier,” he explains.That means taking on cloud operators that offer similar subscriptions, such as AWS and GCP. The pandemic has accelerated the cloud’s rise but it has become apparent that not all number-crunching can be done in big data centres. Companies have many reasons to keep some of their computing in-house, including regulations that do not allow others to process their data and the risk of becoming dependent on a big cloud provider. Then there are “edge” devices, from smartphones to intelligent sensors, which connect to the cloud and extend it, generating ever more data. It is often more efficient to bring computing to the data than the other way around.The tech veterans want to help firms manage this world of many clouds (“hybrid” or “multi” in the lingo). Red Hat Hybrid Cloud Platform, now at the centre of IBM’s software offerings, is an uber-cloud of sorts that runs on top of many systems, including IBM’s own machines, public clouds and edge ones—which is supposed to allow customers to stay independent of any one system. HPE offers something similar called GreenLake. Cisco boasts several more specialised platforms, including one to optimise a firm’s many applications.Dell and Qualcomm are different. By floating VMware, which sells software similar to IBM’s platform, Dell appears to be moving against the stream. But the spin-off mainly serves to get rid of a conglomerate discount. Dell has negotiated a detailed agreement to continue to benefit from VMware’s products. It has also launched an as-a-service effort of its own, called APEX, which is supposed to offer cloud computing in Dell’s trademark “pragmatic and predictable way”, in the words of Allison Dew, the firm’s chief marketing officer, who is also in charge of APEX.As for Qualcomm, it sees the cloud not as a threat but an opportunity. As growth slow in its main market, smartphones, it hopes that the cloud will create new demand for its chips from makers of other devices, from connected cars to intelligent sensors. “If you believe in the cloud, you have to believe in the edge,” says Mr Amon. “You can’t have one without the other.”As well as developing new lines of business, deals large and small have been part of the metamorphosis. IBM’s hybrid cloud platform owes its name and underlying technology to Red Hat, an open-source software maker it acquired for $34bn in 2019. Kyndryl, the name given to the business that IBM is spinning off, will allow IBM to hive off its army of IT workers and consultants in favour of mainly selling tools and digital services to automate customers’ businesses rather than renting out as many bodies as possible. “We are a technology firm again,” declares Rob Thomas, a senior executive.What are the results so far of the tech incumbents’ transformation dreams? Cisco was the first to react, promising in 2017 that more than half of its revenue would come from software and subscriptions within three years. HPE announced an even more ambitious goal in 2019, saying that it will offer its entire portfolio of products as a service by 2022. IBM, mainly thanks to its mainframe business, has always had a healthy stream of subscription revenues, but wants to grow these further. Taken at face value, the numbers provided to investors are impressive. Cisco announced that it had reached its targets set in 2017: software and services now generate 53% of revenue. HPE boasted services revenues of $1.2bn and after the Kyndryl spin-off IBM’s software sales will leap to 65% of revenues. Mr Amon will hammer home the point that Qualcomm’s non-handset businesses, such as cars and the internet of things, already amount to $10bn, more than a third of revenue, and are growing 1.6 times faster than its handset ones.But so far, investors do not seem to be convinced that old IT’s new clothes are a good fit: the group’s collective market capitalisation, now amounting to about $600bn, has only barely budged from where it was before the charm offensive aimed at Wall Street. Much will depend on whether they will be able to attract top technical talent. Without it, they will have a hard time competing with both the big cloud providers and hot startups. Antonio Neri, HPE’s chief executive, says he recently moved the firm’s headquarters from Silicon Valley to Houston, Texas, in part because recruitment is easier there.Do these firms still have what it takes? Most have new ranks of hungry executives but even the veterans still have fire in the belly. Michael Dell has remained at the wheel of the firm he founded in 1984, except for a hiatus in 2004-07. Asked about his future, he replies: “I love what we do: It’s fun, it’s interesting, it’s exciting. I have no plans to change my involvement.” More

THE PROFITS cranked out by American businesses make them look indestructible. Despite a pandemic and savage slump in 2020, the net income of large American firms for the third quarter of this year is expected to exceed $400bn. Yet as the earnings season gets into full swing three worries are circulating: supply-chain tangles, inflation and wages, and concerns that competition is intensifying in some industries.Listen to this storyYour browser does not support the element.Enjoy more audio and podcasts on More

“THERE IS PERHAPS no bigger ESG opportunity than in ‘Big Oil’, and specifically, at Royal Dutch Shell.” Regarding Shell as an environmental, social and governance investment is the hyper-green explanation offered by Dan Loeb for his move against one of the fossil-fuel industry’s biggest firms. Third Point, an activist hedge fund run by Mr Loeb, revealed on October 27th that it has taken a stake (thought to be worth $750m) in the Anglo-Dutch oil firm. His aim, Mr Loeb declared, is to unleash trapped shareholder value by forcing the breakup of the energy supermajor.Listen to this storyYour browser does not support the element.Enjoy more audio and podcasts on More

TRADE COFFEE shifted under 1m bags of whole and ground beans between beginning operations in April 2018 and the start of the pandemic in March 2020. By the start of 2022 it will have sold another 4m or so, says its boss, Mike Lackman. It has benefited from a covid-era craze for subscriptions. Confined at home, consumers round the world hit “subscribe” on all manner of boxes delivered to their doorsteps, from drinks and meal kits to scented candles, razors and underwear. Sales in America surged by over 40% during 2020 to $23bn according to eMarketer, a research firm. But hanging on to those customers as lockdowns start to ease will be hard.Listen to this storyYour browser does not support the element.Enjoy more audio and podcasts on More

THE TECH industry recently appeared to be sitting on cloud nine. One record after another fell when quarterly results were reported three months ago. Revenues had grown by 40% on average compared with the same period a year ago and profits by 90% for the five Western technology titans—Alphabet (Google’s parent company), Amazon, Facebook, Apple and Microsoft, collectively known as GAFAM. Indices of tech shares, such as the S&P 500 Information Technology benchmark, climbed to stratospheric heights.If the latest round of quarterly earnings are any guide—three of the digital giants have already reported and results from Amazon and Apple are due to after The Economist goes to press—the tech industry is coming back down to earth. Assuming that the pair meet analysts’ expectations, GAFAM’s revenues and profits will both have increased but by a more modest 30%. Share prices are languishing. The slowdown—or breather, if you will—provides additional evidence of the degree to which the pandemic has changed the tech industry. The question now is whether the sector is on a new trajectory or will revert to type over the next few years.For starters, one of the first predictions when covid-19 hit in early 2020 was that it would make big tech even bigger. Those firms, ran the theory, would be best placed to benefit from an increased demand for digital offerings, whereas smaller firms, having fewer resources to get through the pandemic, would suffer most from its downsides. The first half of this prediction has come true: as the growth of the five firms’ market capitalisation shows. In January 2020 their combined value accounted for 17.5% of the S&P 500.Today their share hovers around 22%.That said, many smaller companies have also grown in size and value. The pandemic has given rise to a group which could be called “tier-two tech”, the weight of which, measured by market capitalisation, has grown notably relative to the titans. In May we defined this group to include 42 firms with a market value then of no less than $20bn that were incorporated in 2000 or later. In February 2020 these had a joint market capitalisation of 22% of GAFAM’s. Today the figure stands at 31%The reasons for this new strength are multiple. One is the large number of listings of late, particularly of tech startups: more than 100 since the start of the year, says Renaissance Capital, a data provider. Despite some high-value deals, a backlash against big tech’s acquisitiveness has slowed the pace of mergers and takeovers this year. Most importantly, the pandemic has shown that there are big digital markets that are not dominated by GAFAM. The group of tier-two firms, for instance, is led by PayPal, a payments provider, that boasts a market capitalisation of $276bn.Yet the most intriguing shifts are qualitative. The first is that the tech industry has become far cloudier than previously. “We saw two years of digital transformation in two months,” said Satya Nadella, the boss of Microsoft, early in the pandemic, referring mostly to the growth of its cloud. Taken together, revenues of the three biggest clouds—Microsoft’s cloud business, Amazon’s AWS and Google Cloud Platform, which between them provide more than 60% of online-infrastructure services—have surged by more than a third from $27bn in the fourth quarter of 2019 to nearly $37bn in the second quarter of this year.The gathering cloud’s bigger beneficiaries seem to be smaller firms, however. Taking a panel of 50-odd second-tier tech firms today, about fourth-fifths are providers of cloud services. Some are now forces to be reckoned with: Snowflake, a cloud-based data platform, is worth $104bn; Twilio, which provides corporate-communication services, some $61bn; and Okta, which manages employees’ digital identities, some $39bn.Older tech firms are now also more firmly anchored in the cloud. Salesforce, a software giant, was one of its pioneers. Adobe, another software titan, has successfully reinvented itself for this new form of computing. Even the cloud’s laggards, Oracle and SAP, the world’s largest vendors of conventional corporate software, are at last making use of it. The biggest hardware-makers—Cisco, Dell and IBM—are also increasingly selling their wares “as-a-service”, accessed remotely through the cloud on a pay-per-use basis rather than installed on office computers.The industry’s second shift is that lowly hardware has also made a comeback of sorts during the pandemic, despite the migration up into the computing skies. Most surprisingly, personal computers staged a revival as remote workers required better gear. In 2020 PCs saw their biggest growth in a decade, with more than 300m devices shipped, 13% more than in 2019, according to IDC, a market-research firm. Growth has since slowed, but mainly because shortages of chips and other components are holding back production. Dell, the world’s third-largest maker of PCs after Lenovo and HP, has done best, increasing shipments in the third quarter by nearly 27% compared with last year, according to IDC—almost guaranteeing good results when Dell reports on November 23rd.Chipmakers give an even stronger signal of the return of hardware to the industry’s core. Although Intel disappointed investors when it released its quarterly results on October 21st, sending its share price down, sales were up by 5% to $19.2bn and profits by 60% to $6.8bn. Samsung Electronics, the world’s largest memory-chipmaker, which will also reported results on October 27th, saw its profits jump to the highest level in three years. And TSMC, the top contract manufacturer of semiconductors, for its part said on October 14th that sales had continued to grow at a rapid clip, reaching $14.9bn with net income coming in at $5.6bn, an increase of 16.3% and 13.8% respectively.The big question is whether the three companies can profitably follow through on their record-breaking investment plans. These are meant to satisfy growing demand for chips not just from cloud providers, but from firms making gear for what is called the “edge”: devices connecting to the cloud or extending it, from smartphones to intelligent sensors. Intel, for instance, has said that it will invest up to $28bn in 2022. TSMC plans to spend $100bn over the next three years to expand its chip-fabrication capacity.The third big change to the tech industry during the pandemic may be the most consequential: increased competition. Although members of GAFAM have yet to attack each other’s main franchises, such as online search in the case of Google and ecommerce for Amazon, rivalries have heated up. So far, vigorously competing clouds and changes in Apple’s privacy policies on the iPhone—which hurt Facebook’s ad revenues according to results released on October 25th—are the main examples. But on October 21st Google announced that it would lower the fee it charges providers of subscriptions in its app store to 15%, putting pressure on Apple to do the same. And with so many people now working remotely and probably continuing to do so, a platform battle has broken out between Google, Microsoft, Salesforce and Zoom, a popular videoconferencing service, over which will dominate the virtual office.Other firms are also picking more fights with GAFAM. Facebook’s social-media fortress looks a lot less safe now that it has at least two serious rivals: America’s Snapchat, a social network owned by Snap, and TikTok, the short-video app operated by ByteDance, a Chinese internet giant. According to data divulged in a recent wave of leaks, Facebook’s teenage users in America now spend two to three times longer on TikTok than on Instagram, which belongs to the American social-media conglomerate. Amazon also faces more competition, both in the form of incumbents that have at last embraced the digital world, including Walmart, and newcomers, such as Shopify, which helps merchants sell online and fulfil orders. PayPal’s attempt to buy Pinterest, another social network, now seems to have been abandoned, but it would have helped PayPal to move deeper into ecommerce.After nearly two years of covid-19 the tech industry is cloudier, more tied to hardware and more turbulent. Of these trends, the first two are unlikely to last for ever, at least in their current form. Digital meteorologists argue that the cloud has already reached “peak centralisation”, meaning that it will henceforth grow not so much through football-pitch-sized data centres, but at the “edge”, where its digital services touch the physical world. And given the economics of the semiconductor industry—fabrication plants often cost over $10bn and take years to build—the chip shortage could eventually turn into a glut.A more open question is how long the new phase of competition will last. Optimists argue that, after a long period of ossification, the pandemic has helped push the industry into a more dynamic period, in which the giants compete with each other as well as with smaller firms. Pessimists say that this phase will not last long—and that the industry’s leaders will sooner or later shore up their fortresses and buy out competitors. And that is why, more than ever before, trustbusters should not let down their guard.■For more expert analysis of the biggest stories in economics, business and markets, sign up to Money Talks, our weekly newsletter.This article appeared in the Business section of the print edition under the headline “Cloudy with a dearth of chips” More

AS WELL AS a louche mystique, there has always been something murky about advertising. From P.T. Barnum’s “Mammoth Fat Infant: only three years old and weighing 196 POUNDS” to three-martini lunches at the dawn of the TV era, it was never quite clear whether the adman was artist, scientist, strong-livered schmoozer or con man. For all the wit and wiliness on Madison Avenue, the economic cycle had a much more direct impact on ad spending. And it was a wonder companies embraced the medium at all. As far back as 1904, the Atlantic, an American magazine, wrote that an estimated 75% of advertisements did not pay; yet the other 25% paid so well “there is scarcely a businessman who is prepared to stand idly by.”In the digital age the guesswork should have become a thing of the past. User IDs, device-tracking technology and electronic marketplaces handling billions of transactions a day have turned the targeting of individuals into a drone strike rather than a hit-or-miss barrage. Costs have come down, so millions of online businesses, instead of renting premises, have turned digital ads into the Yellow Pages on steroids. People are spending more time glued to screens, giving advertisers more scope to seduce them. The result has been stunning growth. MoffettNathanson, a research firm, says digital ads have grown from 27% of all dollars spent on advertising in America in 2015 to 52% (TV, the second-biggest category, has dropped from 42% to 33%). Until recently, the main question asked on Wall Street was not whether the feast would continue but how soon the digital share would reach 80%?For the first time, the past week has dented those convictions. On October 21st Snap, a photo-sharing platform, revealed that it had been caught flat-footed in the third quarter by new privacy measures introduced by Apple to enable users of iPhones and its other devices to stop advertisers tracking them across the web. Though revenues of $1.07bn were only just shy of expectations, it lost a quarter of its value in a day. Facebook, a social-media giant, recorded $28.3bn in ad revenues, a third higher than the prior year, but that was lower than expected. It is having to increase spending next year partly to improve its targeting and measurement techniques to counteract Apple’s restrictions. Alphabet, which owns Google, bucked the trend, recording its highest sales growth in more than a decade in the third quarter; its search engine, source of almost all of its ad revenue, seems immune to Apple’s changes.For all of them, the underlying digital-ad market still looked vibrant. But their divergent performances raise three big questions about the future of advertising. For all its aura of precision, it’s an industry still full of unknowns.The first one concerns the correlation between advertising and economic growth. Sir Martin Sorrell, chairman of S4 Capital, an advertising agency, notes that digital ads easily outperformed their analogue counterparts during the pandemic, indicating a break in the age-old link with GDP because of a structural shift as the economy moves online. But whether that shift continues is a matter of faith, not fact. Economic factors may already be re-emerging. Both Facebook and Snap said tangled supply chains would diminish the incentives to advertise in the lucrative holiday period because of fewer goods on shelves. Moreover, even if the link with GDP has frayed, online ads appear to correlate closely with growth in e-commerce, which Facebook says is slowing as the pandemic fades. In America, there is growing evidence that consumer confidence is on the wane, which could affect one of the biggest factors believed to be fuelling the ad boom—the explosion of new businesses, many of them small-time online retailers.The second unknown is the extent to which consumers will continue to tolerate advertisers stalking them. According to Flurry, an app-analytics firm, only about one in five app users have opted in to being tracked since Apple’s iOS 14.5 launch in April gave them the option to choose. That suggests a keen embrace of privacy, which vindicates Apple’s hunch. That said, Apple may be benefiting at its rivals’ expense. The opt-in only applies to third-party apps. Meanwhile Apple’s advertising business is booming, especially in relation to searches on its App Store, according to Bernstein, an investment firm. Moreover, its privacy push is provoking rivals, such as Facebook, to make counter-moves into virtual-reality headsets and 3D digital worlds it calls the metaverse, in order to create a parallel universe to that dominated by Apple. Bernstein’s Mark Shmulik calls such domains “walled gardens”. If consumers discover they are just a way of better bombarding them with ads, the gardens will soon feel more like prisons.The third unknown is the firms paying for all the ads. The tech giants provide little detail about where they come from, what size of firms they are, and on what they are spending their money. The result is a lot of frustrating sleuthing and guesswork. Brian Wieser of GroupM, the world’s largest media buyer, estimates from Facebook’s billing-address data that Chinese manufacturers selling abroad account for approaching $10bn of advertising on the social network this year. He points to third-party data suggesting that more than 40% of Amazon’s marketplace sellers are from China, but Amazon does not disclose such information. There is scant reporting quantifying the number of small versus large advertisers, and whether they are paying for brand-related advertising or for direct sales. The industry remains as murky as ever.From grey-flannel suits to just flannelThe platforms promise precision to their advertisers based on consumers’ data. But they fail to reveal anything like enough information to enable outsiders to gauge the robustness of the digital-ad craze. The result, shared by many in the industry, is blithe optimism that the market will continue to grow like Topsy. The past few days have provided a welcome opportunity to re-examine that thought. ■For more expert analysis of the biggest stories in economics, business and markets, sign up to Money Talks, our weekly newsletter.This article appeared in the Business section of the print edition under the headline “Mad Men v machines” More

ONE OF THE all-time-great corporate emails was sent several years ago, by a manager at Shell to pep up a team of oil engineers on a project in the far east of Russia. “Personally, I, like most others, love winning,” he raved. “I despise cowards and play to win all of the time.”The language was bizarre in other ways, too. “When everyone of you were kids, I am sure that you all admired the champion marble player” struck a chord with precisely no one in 2007. The anachronism was because the writer borrowed liberally from a stirring speech by General George Patton to American troops in 1944. Patton’s “all real Americans love the sting and clash of battle” became “all real engineers love the sting and clash of challenge.” And so on.Copying from the army is seldom so cack-handed, but the idea that managers have lessons to learn from uniformed types persists. A cottage industry rests on the conceit that soldiers have insights into leadership that can be of use in the boardroom. Two new books based on the premise have come out this month—”Risk: A User’s Guide” co-written by Stanley McChrystal, a retired four-star general in the US Army, and “The Habit of Excellence” by Lieutenant-Colonel Langley Sharp, a British officer.General McChrystal’s book is a pot-pourri of anecdotes and case studies on how to manage risk. The general’s idea of creating “fusion cells” to bring together a network of intelligence teams in the fight against al-Qaeda has spread to other areas: the state of Missouri did something similar to connect different agencies to combat covid-19.Lieutenant-Colonel Sharp has written the more distinctive book, a detailed account of how the British army goes about developing its leaders. Much of the thinking will be surprisingly familiar to managers. The army’s concept of “mission command”, in which the overall intent of a mission is set at the centre and the decision-making that brings it to fruition is delegated to people on the ground, is akin to the ethos of agile software development. “Serve to Lead”, the motto of the army’s academy at Sandhurst, came decades before the now-modish management theory of “servant-leadership”.Yet these echoes are only that. The differences between leading in the armed forces and leading a business come through more strongly from both books than the similarities. Most obviously, the use of lethal force tends not to be a big feature of corporate life. The stakes are much lower, and the calculus of risk is therefore just different.Leaders in the armed forces can draw on deeper motivations among soldiers than bosses can with their employees. History offers a shared narrative to those in service. Patriotism provides a ready-made sense of purpose. And nationality operates like a permanent non-compete clause: soldiers do not change their allegiances to countries in the same way that workers can switch companies. “England expects that every man will do his duty,” was the message that Admiral Nelson sent his sailors before the battle of Trafalgar in 1805. Swap in the name of your employer and see how it sounds.The contrasts do not end there. Leaders in the armed forces play a much more familial role than the average boss. They will have been in the forces themselves for years. The people below them are often very young. Many live and work in close proximity.The armed forces also emphasise intensive training in preparation for moments of extreme stress, when there is no time for senior figures to be consulted. When pivotal decisions need to be made at companies, the bigwigs schedule a meeting weeks in advance. The closest analogues of army leadership lie in elite sports rather than in firms.It is interesting for civilians to read about army life, but largely because it is so alien. It may make sense to hire veterans, but as part of the mix rather than as a template. A research paper from 2014 found that bosses who had been in the armed forces were more conservative than those who had not donned uniform. They invested less; they were less likely to commit fraud; and their firms performed better in times of crisis.Patton’s speech in 1944 ended by imagining what his soldiers would say to their grandchildren after the war was long over: “Son, your Granddaddy rode with the Great Third Army and a Son-of-a-Goddamned-Bitch named Georgie Patton!” The Shell executive’s missive finished thus: “Details of the team are summarised in the enclosed email.” War and work are not the same.For more expert analysis of the biggest stories in economics, business and markets, sign up to Money Talks, our weekly newsletter.This article appeared in the Business section of the print edition under the headline “Into battle they don’t go” More