Philippa Kaur

THERE COMES a time in every great bull market where the dreams of investors collide with changing facts on the ground. In the subprime boom it was the moment when mortgage default rates started to rise in 2006; in the dotcom bubble of 2000-01 it was when the dinosaurs of the telecoms sector confessed that technological disruption would destroy their profits, not increase them. There was a glimmer of a similar moment when Meta (the parent company of Facebook) reported poor results on February 2nd, sending its share price down by 26% the next day and wiping out well over $200bn of market value. That prompted a further sell-off in technology stocks. Along with low interest rates, a driver of America’s epic bull run of the past decade has been the view that big tech firms are natural monopolies that can increase profits for decades to come with little serious threat from competition. This belief explains why the five largest tech firms now comprise over 20% of the S&P 500 index. Now it faces a big test.Since listing in 2012 Meta has exemplified big tech’s prowess and pitfalls. For a glimpse of the caricature, consider the American government’s antitrust case against it first launched in 2020. It describes an invincible company in a world where technology is perpetually frozen in the 2010s: “this unmatched position has provided Facebook with staggering profits,” America’s Federal Trade Commission wrote in its lawsuit. Examine the firm’s fourth-quarter results, though, and its position seems rather vulnerable and its profits somewhat less staggering. It comes across as a business with decelerating growth, a stale core product and a cost-control problem. The number of users of all of Meta’s products, which include Facebook, Instagram and WhatsApp, is barely growing. Those of the core social network fell slightly in the fourth quarter compared with the third. Net income dropped by 8% year on year and the firm suggested that revenue would grow by just 3-11% in the first quarter of 2022, the slowest rate since it went public and far below the average rate of 29% over the past three years—and below the growth rate necessary to justify its valuation.Meta’s troubles reflect two kinds of competition. The first is within social media, where TikTok has become a formidable competitor. More than 1bn people use the Chinese-owned app each month (compared with Meta’s 3.6bn), a less toxic brand that is popular among young people and superior technology. Despite attempts by Donald Trump to ban it on national-security grounds while he was president, TikTok has shown geopolitical and commercial staying power. Just as the boss of Time Warner, a media behemoth, once dismissed Netflix as “the Albanian army”—an inconsequential irritant—Silicon Valley and America’s trustbusters have never taken TikTok entirely seriously. Big mistake. The second kind of competition hurting Facebook is the intensifying contest between tech platforms as they diversify into new services and vie to control access to the customer. In Facebook’s case the problem is Apple’s new privacy rules, which allow users to opt out of ad-tracking, in turn rendering Facebook’s proposition less valuable for advertisers. So are Meta’s problems a one-off or a sign of deeper ructions within the tech industry? Strong results from Apple, Alphabet, Amazon and Microsoft in the past two weeks may lead some to conclude there is little to worry about. Apple’s pre-eminence in handsets in America and Alphabet’s command of search remain unquestionable. Yet there are grounds for doubt.The competition between the big platforms is already intensifying. The share of the five big firms’ sales in markets that overlap has risen from 20% to 40% since 2015. Total investment (capital spending plus research and development) for the quintet has soared to $300bn a year, as they search for new vistas such as virtual-reality metaverses or autonomous cars. These promise growth but will also lead to more overlap, disrupt existing products and depress short-term returns. Meanwhile, venture-capital funds invested $600bn last year. Some of this will go up in smoke, but some will finance competitors who will eventually pose a threat.And, if you look closely, pockets of strain are emerging beyond social media. Video-streaming has turned into a bloodbath as half a dozen firms throw huge sums at a cash-hungry business that has few barriers to entry. According to the Wall Street Journal, customer churn has exceeded 50% for some streaming services in just six months, one reason why Netflix’s share price has dropped by 33% so far this year. Some other aspiring tech platforms are showing signs of stress: Spotify said this week that subscriber growth would slow down and PayPal walked away from its goal to have 750m users by 2025. Even in e-commerce, where Amazon remains pre-eminent, serious challengers such as the supermarket giants (Walmart and Target) or rival online platforms (Shopify) are making their presence felt. In any case, Amazon’s thin margins and vast investment levels that suggest consumers may be getting a better deal than investors. Although a strong showing from the cloud division divulged on February 3rd may buoy the e-empire’s market value by more than half as much as Meta lost, the cloud business is unlikely to stay as lucrative for ever. Alphabet, Microsoft and Oracle are already trying to compete away some of Amazon’s lofty cloud margins.Meta’s mishaps signal that two changes need to happen, although only one will. One relates to Mark Zuckerberg, its leader and pantomime villain. He is pushing for a leap into the metaverse in which the firm is now investing $10bn a year. His reputation with shareholders rests on successfully completing similarly bold moves in the past: the acquisitions of Instagram and WhatsApp in 2012-14 and a shift from desktop to mobile around the same time. The trouble is that Mr Zuckerberg’s and his firm’s toxic reputation will impede its expansion into new terrain: its plan for a digital currency flopped because governments objected (this week the venture announced that it was winding down). Mr Zuckerberg is a liability, but controls Meta’s voting rights, enjoys a pliant board and so is probably going nowhere. The second change involves how investors and governments think about big tech, and indeed the stockmarket. The narrative of the 2010s—of a series of natural monopolies with an almost effortless dominance over the economy and investment portfolios—no longer neatly reflects reality. Technology shifts and an investment surge are altering the products that tech firms sell and may lead to a different alignment of winners and losers. And, as in previous booms, from emerging markets to mortgages, high returns have attracted a vast flood of capital, which in turn may lead to overall profitability being competed down. Given the enormous weight of the technology industry in today’s stockmarkets, this matters a great deal. And the mayhem at Meta shows it is no longer just an abstract idea. More

HOYERSWERDA, BAUTZEN, Kamenz More

IN MUCH OF the world the business of running ski slopes has, like most of tourism, been crippled by lockdowns and travel restrictions. China is no exception. Visits to Chinese ski areas slumped by 38% in 2020—steeper than a global decline of 14% after covid-19 hit. Two in five winter-sports businesses lost more than half their revenue as a result of anti-virus measures, according to the Beijing Olympic City Development Association, an official group set up to champion sport. One in 14 ski areas, especially small ones, gave up the ghost in 2020. As China prepares to host the Winter Olympics, which open in Beijing on February 4th, its ski-industrial complex is hoping that this celebration of all pursuits below freezing will mark the end of a short-lived icy patch.Unlike Europe and America, where the winter-sports sector’s downhill slide predates the pandemic, Chinese skiers were taking to the slopes in record numbers. The Beijing Ski Association says that people paid more than 20m visits to China’s ski venues in 2019, twice as many as in 2014. Eileen Gu, a teenager raised in San Francisco who has chosen to represent China, where her mother was born, in freestyle skiing, has recalled that just a few years ago she knew virtually all the freestyle skiers in the country. Now the gold-medal contender suggests they are like snowflakes in a blizzard.Investors have been swept up, too. China had nearly 800 ski areas before the pandemic, four times the number in 2008 and not a world away from around 1,100 in the Alps, where they began popping up around 1900. Though the Chinese areas still have many fewer lifts than Western ones, they are getting more sophisticated. Some now offer summer pastimes like mountain-biking, hiking and rafting. China’s 36 indoor ski centres—it has more of these than any other country—accounted for a fifth of all ski visits in the country in 2020. Sunac China is the world’s largest operator of such venues. Indoor ski slopes contributed to the success of the developer’s culture-and-tourism business (which also includes malls, water-sports venues and hotels), where revenues grew by 166% year on year in the first half of 2021.Even so, Chinese ski-resort operators are vulnerable to two industry-wide uncertainties. The first is climate change. Since milder temperatures mean less snow, ski resorts everywhere are hostage to global warming. Doubts over sufficient snowfall have prompted Olympic organisers this year to rely entirely on artificial snow for the first time. But making the white stuff artificially uses an awful lot of water—a scarce resource in China’s drought-prone north, home to half its population and most of its resorts. The Olympic games alone may need 2m cubic metres—enough to fill 800 Olympic-size swimming pools—to produce sufficient snow cover, according to Carmen de Jong, a hydrologist at the University of Strasbourg. Officials reckon the event will use up to a tenth of all water consumed during the ski events in the Chongli district, which will host them. Indoor slopes, for their part, need less snow but all of it is artificial.The second uncertainty has to do with future demand. China still has room to catch up with big skiing nations. Chinese skiers hit the slopes once a year in the winter of 2020-21, on average, compared with half a dozen times for those in Austria or Switzerland. Optimists also point out that many Chinese skiers are young, and so in principle have plenty of skiing left in their legs; whereas in America more than one-fifth of skiers are over 55, about 80% of China’s are under 40 years old, according to Laurent Vanat, a consultant on the global ski industry.However, precisely because China lacks a strong tradition of skiing, absolute beginners are exceptionally common on its pistes. Around 80% of skiers in China are first-timers this season, up from 72% in 2019, according to Mr Vanat. In Europe and America the share is less than 20%. China’s ski industry is counting on a strong showing from Ms Gu and the rest of the national team to convert such neophytes into regulars. Like her, though, resort owners face tough terrain ahead. ■This article appeared in the Business section of the print edition under the headline “Avalanche risk” More

FOR THE uninitiated, which includes your columnist, there are two things to know about video gaming. The first is that some things never change. For all the virtual worlds they can create, gamers, a mostly male bunch, like nothing better than to blow their on-screen opponents to smithereens. The second is that everything else is in flux. Gaming is moving from consoles, PCs and smartphones to streaming and the metaverse. It is not just avatars that are being shot to shreds. Business models are, too.Bear both points in mind when making sense of recent deals involving the two biggest rivals in the console wars, Microsoft, maker of the Xbox, and Sony, producer of the PlayStation (Nintendo is in its own orbit). To cater to those itchy trigger-fingers, both want to expand their bestselling “first-person shooter” rosters. Microsoft’s $69bn acquisition of Activision Blizzard, a publisher, would give the tech giant ownership of “Call of Duty”, one of the most successful shoot-’em-up franchises of all time. Sony’s $3.6bn takeover of Bungie brings it “Destiny 2”, another popular shooter.The large sums of money changing hands highlight the second point: that everything is up in the air, even the relative strength of each firm. For years Sony has had the advantage. Its latest consoles, PlayStations 4 and 5, have far outsold equivalent Xboxes. It has more exclusive games, which draw in fiercely loyal players. Yet Microsoft’s acquisition of Activision, if it fends off antitrust concerns, could alter the balance of power. According to Newzoo, a data-gatherer, it could put Microsoft’s game-software revenue ahead of Sony’s, even combined with Bungie. It underscores Micro soft’s commitment to a subscription and streaming service, funded by a mountain of cash and supported by its Azure cloud business. It reflects a willingness to be open to a range of devices and business models, including free-to-play games and ad-supported ones. It could, literally, be a game-changer.Like Netflix in video, Microsoft hankers after vast subscriber growth. That fits with the current zeitgeist that everything in business, from media to Microsoft’s Office 365 programs, should be based on subscriptions, rather than one-time sales—and reliant on the cloud. But while it is tempting to think Sony should chase after Microsoft, it has neither the money to outspend it on content nor, despite a foray into streaming called PS Now, the infrastructure to compete with it in the cloud. The Bungie deal, which is big for Sony, makes the gap between the two companies’ financial firepower starkly clear. Thomas Aouad of Drawbridge Research, an analysis firm, likens it to taking a spoon to a gunfight rather than a knife. To outmanoeuvre Microsoft, Sony must do something different—and uncharacteristically bold.For starters, it could make the case that streaming and subscription services are no guaranteed road to riches. Yes, streaming dispenses with the need for a costly console, which could draw in casual gamers. But unlike Netflix viewers, players interact with streamed material, often at speeds measured in the milliseconds when their fingers are on the trigger. Low latency, or lag, over an internet connection is a life-and-death matter for a player’s avatar.The business model is unproven, too. Sony and Microsoft have long used consoles as loss-leaders to sell high-margin games to which they often hold exclusive rights (think Gillette razors and razor blades). The approach has benefited their overall gaming businesses, as well as independent game developers. In contrast, selling blockbuster content via monthly subscriptions involves vast outlays and fewer barriers to entry. It may attract lots of new users. Microsoft’s Game Pass service, which grants access to a library of games to run on consoles for up to $14.99 a month, has 25m subscribers; Netflix is getting into games. But such services could face brutal competition and need constant replenishing with blockbuster titles to reduce customer churn. Indeed, Sony, with a deep catalogue of music and films, has profited from being the source of such replenishment for video- and music-streamers.As an alternative gaming strategy, on February 2nd it outlined plans to double down on “live service” games such as “Destiny 2”, which are regularly upgraded and hence easy to monetise. That is not enough, though. It also needs to outline a strategy that draws on its efforts to break down the silos between its gaming, music, film, electronics and image-sensor businesses. As Kato Mio, who publishes on Smartkarma, an investment-research site, puts it, while other firms, such as Meta, talk of building the metaverse, Sony already has many of the ingredients for immersive entertainment (including virtual reality) at its fingertips. It needs to turn its conglomerate structure into a virtue.That means cross-fertilising its entertainment business, by releasing games as films, for instance. More ambitiously, it should put its cutting-edge technologies in better service of the future of entertainment. Here, its small stake in Epic, a maker of hit games such as “Fortnite”, and gamemaking technology such as Unreal Engine, could be a building block. If Tencent, a Chinese tech giant, were ever minded to sell its 40% stake in Epic, Sony should consider raising its investment. With Epic as a partner, Sony could hold its own much better against Microsoft.Mutually assured destructionIn the near term, Sony needs a strong enough slate of content to retaliate if Microsoft tries to deprive the PlayStation of Activision titles (Microsoft says it won’t). It has other problems to confront, such as a slowdown in PlayStation 5 sales due to the supply-chain crunch, and game developers’ demands that console-makers cut the commissions they charge. In the longer run, Sony’s strength is that gaming, which accounts for over a quarter of its revenues, is crucial to its future. For Microsoft, it is less existential. That is an incentive to think big—and laterally. Sony has a panoply of entertainment and technology businesses to turn to, as well as a potential partner in Epic. To safeguard its future, it should do so. ■This article appeared in the Business section of the print edition under the headline “Epic battle” More

COMMUNICATION IS AN essential part of leadership. And body language is an essential part of communication. On these slim pillars rests a mini-industry of research and advice into how executives can influence, encourage and ascend without needing to say a word. The pandemic has made much of it redundant.Plenty of studies have looked into the non-verbal behaviour that marks out “emergent leaders”, people who do not have a specified role in the hierarchy but naturally assume a position of authority in groups. They are a bag of tics. They nod; they touch others but not themselves; they gesture; they furrow their brows; they hold themselves erect; their facial expressions are more animated.Other research suggests that, to win votes in an election, candidates should deliver speeches with their feet planted apart. The second-most popular TED talk claims that two minutes of private, hands-on-hips “power posing” can infuse a job candidate with confidence and improve others’ perceptions of them.Gazing can foster a sense of psychological safety as well as confer authority: in a recent paper, a trio of researchers from Harvard Business School found that receiving more eye contact from a bigwig led to greater participation in group interactions. Leaders who adopt open body positions, with arms and legs uncrossed, are also more likely to encourage contributions.There are three problems with this body of research on non-verbal communication. One is that so much of it is blindingly obvious. Nodding at someone rather than shaking your head in incredulity when they are speaking to you—this does indeed send a powerful signal. But so does punching someone in the face, and no one thinks that requires a journal publication.A second problem is that people look for different things from their bosses. Frowning is seen as a mark of emergent leaders but not of supportive ones; the reverse is true of smiling. (The effect of smiling with lowered eyebrows cries out for study.) A recent paper found that male recipients regarded bosses who used emojis, a form of not-quite-verbal communication, in an email as more effective, but that female recipients perceived them as less effective.The third problem is newer. Almost all of the research on body language dates from a time of in-person interactions. Even when the pandemic wanes and offices in the West refill, most buildings will not return to full capacity. Employees will keep working remotely for at least part of the week; Zoom will remain integral to white-collar working lives. And if there is one thing for which online interactions are not suited, it is body language.That is partly because bodies themselves are largely hidden from view: whatever language they are speaking, it is hard to hear them. You will know the partners, pets and home-decor choices of new colleagues before you will know how tall they are. And although faces fill the video-conferencing screen, meaningful eye contact is impossible.Once past a basic threshold of attentiveness—not looking down at your mobile phone, say—most people have the same glassy-eyed stare. If several faces appear on screen, these participants have no way of knowing that you are gazing specifically at them. (Anyway, admit it: the face you are looking at with most interest is your own.) If your camera is in the wrong place, you may think you are looking meaningfully at your team but you are actually just giving them a view of your nostrils. Animated expressions are hard to spot, particularly when people attending hybrid meetings in the office are Lowry-like figures seated metres away.There are no good ways to compensate for these problems. One tactic is to go all in on expressiveness, nodding furiously and gesturing dementedly—a small tile of caged energy somewhere in the bottom left-hand corner of the screen. Another is to do a “Zoom loom”, placing yourself so close to the camera that you will give everyone nightmares.The simpler option is not to think too hard about body language. At a few specific moments, like job interviews and set-piece speeches, first impressions matter and a bit of self-conscious posing pays off. But posture is not leadership. If you want to give people a break from staring at a screen, turning off your camera is a good way to do it. If you want to waggle your eyebrows, up or down, let them loose. And if you need to be told that looking at someone makes them feel valued, you have bigger issues.This article appeared in the Business section of the print edition under the headline “Body of research” More

NEIL YOUNG was five years old when, in 1951, he was partially paralysed by polio. Joni Mitchell was nine when she was hospitalised by the same illness around the same time. Both grew up to become famous singers—and, now, prominent campaigners against anti-vaccine misinformation. The two musicians, followed by a handful of others, have withdrawn their music from the world’s biggest streaming service in protest at a podcast that gave airtime to anti-vaxxers.“The Joe Rogan Experience”, to which Spotify bought exclusive rights in 2020 for a reported $100m, hosted vaccine sceptics and promoted dubious remedies such as ivermectin, which Mr Rogan himself tried out when he caught covid last year. At the time of writing Mr Rogan, Spotify’s most popular podcaster, had promised to “balance things out” in future interviews, but was still on air, to the irritation of his critics (including some Spotify staff, who in the past have accused him of sins including transphobia). Mr Young, Ms Mitchell and a few others were holding out.The bust-up looks like a gift to Spotify’s rivals. Yet it has raised questions about content moderation which could prove tricky—and rather expensive—for all audio-streaming platforms.As the biggest streamer, with 172m paid subscribers, Spotify has power over its artists. Mr Young says that he gets about 60% of his streaming income from the platform. A rough calculation by Will Page, a former Spotify chief economist, based on figures from MRC, a data company, suggests the musician stands to lose about $300,000 this year if he continues his boycott (though it seems that, for now at least, streaming of his songs is up by about 50%, owing to more plays on other platforms amid publicity from the spat). But Spotify, too, is vulnerable. Its main rivals, Apple and Amazon, have market values more than 70 and nearly 40 times its own $39bn, respectively, and bundle audio along with TV, gaming and more. Mr Young and Ms Mitchell are no longer A-list stars, but their departure undermines Spotify’s claim to offer “all the music you’ll ever need”. Apple and Amazon wasted no time in promoting the pair on their social-media feeds.Nonetheless, the Rogan affair touches on a sensitive subject for all streamers. Unlike “The Joe Rogan Experience”, which is professionally produced and owned by Spotify, most of the tens of thousands of new podcasts and songs uploaded to the platforms every day are user-generated. Services like Spotify thus increasingly resemble social networks like YouTube. A big difference is that their oversight of what is uploaded seems primitive by comparison.Spotify, a 16-year-old company, published its “platform rules” only after the Rogan controversy erupted. Apple has content guidelines for podcasts, but for music only a style guide that asks artists to flag explicit lyrics and to keep album artwork clean. Amazon seems to have published even less by way of rules for audio content.And whereas most social networks publish regular reports on what content they have removed, the audio platforms are mute on the subject. Amid Rogan-gate, Spotify revealed that it had deleted 20,000 podcast episodes over covid-19 misinformation. The rest is guesswork. Facebook employs 15,000 content moderators. How many work for the audio streamers? None will say. (Insiders suggest that the answer is not many.)“It’s always been baffling to me how podcasts have flown under the content-moderation radar,” says Evelyn Douek of Harvard Law School. “It’s a massive blind-spot.” It could also prove to be a pricey one. As audio platforms host more user-generated content, the moderation task will expand. It will probably involve lots of human moderators; automating the process with artificial intelligence, as Facebook and others are doing, is even harder for audio than it is for text, images or video. Software firms’ valuations “have long been driven by the notion that there’s no marginal cost”, says Mr Page. “Content moderation might be their first.”For more expert analysis of the biggest stories in economics, business and markets, sign up to Money Talks, our weekly newsletter. More

DCL LOGISTICS, like so many American companies, had a problem last year. Its business, fulfilling orders of goods sold online, faced surging demand. But competition for warehouse workers was fierce, wages were rising and staff turnover was high. So DCL made two changes. It bought new robots to pick items off shelves and place them in boxes. And it reduced its reliance on part-time workers and hired more full-time staff. “What we save in having temp employees, we lose in productivity,” says Dave Tu, DCL’s president. The company’s full-time payroll has doubled in the past year, to 280.As American firms enter another year of uncertainty, the workforce has become bosses’ principal concern. Chief executives cite worker shortages as the greatest threat to their businesses in 2022, according to a recent survey by the Conference Board, a research organisation. On January 28th the Labour Department reported that companies had spent 4% more on wages and benefits in the fourth quarter, year on year, a rise not seen in 20 years. Labour costs go some way to explaining why profit margins in the S&P 500 index of large firms, which have defied gravity during the pandemic, are starting to decline. In January companies from fast food to finance reported swelling wage bills, as paycheques of everyone from McDonald’s burger-flippers to Citigroup bankers grew fatter. At the same time, firms of all sizes and sectors are testing new ways to recruit, train and deploy staff. Some of these strategies will be temporary. Others may reshape American business.The current jobs market looks extraordinary by historical standards. There were 10.6m job openings in November, up by nearly 50% from January 2020. In the last months of 2021 just seven workers were available for every ten open jobs (see chart 1). Predictably, employees seem unusually comfortable abandoning their old positions and seeking better ones. This is evident among those who clean bedsheets and stock shelves, as well as those building spreadsheets and selling stocks. In November 4.5m workers quit their jobs, a record. Even if rising wages and an ebbing pandemic lure some of them back to work, the fight for staff may endure.For decades American firms slurped from a deepening pool of labour, as more women entered the workforce and globalisation and offshoring greatly expanded the ranks of potential hires. That expansion has now run its course, notes Andrew Schwedel of Bain, a consultancy. Simultaneously, other trends have conspired to make the labour pool more shallow than it might have been. Men continue to slump out of the workforce: the share of men either working or looking for work was just 68% in November, compared with more than 80% in the 1950s. Immigration, which plunged during Donald Trump’s nativist presidency, has sunk further, to less than a quarter of the level in 2016. And the pandemic may have prompted more than 2.4m baby boomers into early retirement, according to analysis by the Federal Reserve Bank of St Louis.These trends will not reverse quickly. Boomers will not sprint back to work en masse. With Republicans hostile to immigrants and Democrats squabbling over visas for skilled foreigners, immigration reform looks doomed. Some men have returned to the workforce since the depths of the covid recession in 2020, but the male participation rate has plateaued below pre-pandemic levels. As a result, a tight labour market may be less an anomaly than the new normal. Both workers and employers are adapting. For the most part, they are doing so outside the construct of collective bargaining. Despite a surge of activity—Starbucks baristas in Buffalo and Amazon workers in Alabama will hold union votes in February—total unionisation rates remain paltry. Last year 10.3% of American workers were unionised, matching the record low of 2019. Within the private sector, the unionisation rate is just 6.1%. Strikes and pickets will be a headache for some bosses. But it is quits that could cause them sleepless nights.Pay as they goCompanies’ most straightforward tactic to deal with worker shortages is to raise pay. If firms are to part with cash, they prefer the inducements to be one-off rather than recurring and sticky, as with higher wages. That explains a proliferation of fat bonuses. Before the Christmas rush Amazon began offering workers a $3,000 sign-on bonus. Compensation for lawyers at America’s top 50 firms rose by 16.5% last year, in part thanks to bonuses, according to a survey by Citigroup and Hildebrandt, a consultancy. In January Bank of America said it would give staff $1bn in restricted stock, which vests over time.But base pay is rising, too. Bank of America says it will raise its minimum wage to $25 by 2025. In September Walmart, America’s largest private employer, set its minimum wage at $12 an hour, below many states’ requirement of $13-14 an hour but well above the federal minimum wage of $7.25. Amazon has lifted average wages in its warehouses to $18. The average hourly wage for production and nonsupervisory employees in December was 5.8% above the level a year earlier; compared with a 4.7% jump for all private-sector workers. Companies face pressure to lift them higher still. High inflation ensured that only workers in leisure and hospitality saw a real increase in hourly pay last year (see chart 2).Raising compensation may not, on its own, be enough for firms to overcome the labour squeeze, however. This is where the other strategies come in, starting with changes to recruitment. To deal with the fact that, for some types of job, there simply are not enough qualified candidates to fill vacancies, many firms are loosening hiring criteria previously deemed a prerequisite. The share of job postings that list “no experience required” more than doubled from January 2020 to September 2021, according to Burning Glass, an analytics firm. Easing rigid criteria may be sensible, even without a labour shortage. A four-year degree, argues Joseph Fuller of Harvard Business School, is an unreliable guarantor of a worker’s worth. The Business Roundtable and the US Chamber of Commerce, two business groups, have urged companies to ease requirements that job applicants have a four-year university degree, advising them to value workers’ skills instead. Another way to deal with a shortage of qualified staff is for the companies to impart the qualifications themselves. In September, the most recent month for which Burning Glass has data, the share of job postings that offer training was more than 30% higher than in January 2020. New providers of training are proliferating, too, from university-run “bootcamps” to short-term programmes by specialised providers, such as General Assembly, and by big employers themselves. Companies in Buffalo have hired General Assembly to run data training programmes for local workers who are broadly able but who lack specific tech skills. Google, a technology giant, says it will consider workers who earn its online certificate in data analytics, for example, to be equivalent to a worker with a four-year degree. Besides revamping recruitment and training, companies are modifying how their workers work. Some positions are objectively bad, with low pay, unpredictable scheduling and little opportunity for growth. Zeynep Ton of the mit Sloan School of Management contends that making low-wage jobs more appealing improves retention and productivity, which supports profits in the long term. As interesting as Walmart’s pay increases, she argues, are the retail behemoth’s management changes. Last year it said that two-thirds of the more than 565,000 hourly workers in its stores would work full time, up from about half in 2016. They would have predictable schedules week to week and more structured mentorship. Other companies may take note. Many of the complaints raised by organisers at Starbucks and Amazon have as much to do with safety and stress on the job as they do wages or benefits.New-model armouryAs a last resort, companies that cannot find enough workers are trying to do with fewer of them. Sometimes that means trimming services. Many hotels, including Hilton, have made daily housekeeping optional. Increasingly, it also involves investments in automation. Orders of robots in the third quarter surpassed their prepandemic high, by both volume and value, according to the Association for Advancing Automation. New business models are pushing things along. Consider McEntire Produce, in Columbia, South Carolina. Each year more than 45,000 tonnes of sliced lettuce, tomatoes and onions move through its factory. Workers pack vegetables in bags, place bags in boxes and stack boxes on pallets destined for fast-food restaurants. McEntire has raised wages, but staff turnover remains high. Even as worker costs have climbed, the upfront expense of automation has sunk. So the firm plans to install new robots to box and stack. It will lease these from a new company called Formic, which offers robots at an hourly rate that is less than half the cost of a McIntire worker doing the same job. By 2025, McEntire intends to automate about 60% of its volume, with robots handling the back-breaking work and workers performing tasks that require more skill. One new position, introduced in the past year, looks permanent: a manager whose sole job is to listen to and support staff so that they do not quit. More

IN 2018 A field technician working for Telstra, an Australian telecoms firm, built an app that unified 70 messaging systems for reporting phone-line problems. The technician did this despite having no coding experience. The interface may look cluttered: the landing page jams in 150 buttons and a local-news ticker—the app equivalent of an airplane cockpit, quips Charles Lamanna of Microsoft, who oversees the software titan’s Power Apps platform that made it possible. But it has been a hit. Some 1,300 other Telstra technicians employ it, saving the firm an annual $12m.Professional developers (pro devs) might poke fun at the technician’s DIY app. But the trend it exemplifies is no joke. Since well before 2017, when Chris Wanstrath, co-founder of GitHub, a coding-collaboration site, declared that “the future of coding is no coding at all”, so-called low code/no code (LC/NC) tools have burgeoned. They allow anyone to write software using drag-and-drop visual interfaces alone (no code) or with a bit of code creeping in (low code). Under the hood, this is translated into pre-written or automatically generated code, which then whirs away.Such tools are in hot demand. Just 25m people around the world are fluent in standard programming languages, reckons Evans Data Corporation, a research firm—one for every 125 people in the global workforce and 1.4m fewer than needed. That shortfall will rise to 4m by 2025, says IDC, a research firm. LC/NC products expand the pool of coders to “line-of-business” employees who seldom speak C++, Java or Python. And beyond. Cheryl Feldman went from a junior position in a hair salon to a technical career at Salesforce, a software firm, thanks to LC/NC. Samit Saini changed jobs after 13 years as a security guard at Heathrow to become an “ IT solution specialist” at the airport after making software on Microsoft’s Power Apps.Overcoming language barriersIDC reckons the low/no coders numbered 2.6m globally in 2021. It expects their ranks to swell by an average of 40% a year until 2025, three times as fast as the total developer population. The number of organisations using Power Apps more than doubled in 2021. It now has 10m monthly users. BASF, a chemicals firm, uses it to let 122,000 workers write software. A study last year by Aite-Novarica Group, a consultancy, found that over half of American insurers have deployed or plan to deploy LC/NC. Unqork, a no-code startup valued at over $2bn and backed by Goldman Sachs, is convincing other financial firms to take the plunge. Mr Lamanna envisages a global population of a billion low/no coders.The dream of codelessness is not new. Tony Wasserman of Carnegie Mellon University’s branch in Silicon Valley dates it back to the concept of “automatic programming” in the 1960s. Since then successive waves of simplification and abstraction have made life easier for programmers by distancing coding languages further from the machine code understood by computer hardware. In the early 1990s Microsoft tried to simplify things further by launching Visual Basic, an early stab at LC/NC. In the next decade firms like Appian, Caspio, Mendix and Salesforce began offering products aimed expressly at line-of-business types.Recently LC/NC’s potential has been unlocked by the cloud, which lets people connect to data easily and collaborate in real time, says Ryan Ellis, who leads LC/NC products at Salesforce. Last year Amazon Web Services (AWS), the online giant’s cloud-computing arm, introduced Amazon SageMaker Canvas, a set of tools that lets people deploy machine-learning models without writing code. It also offers Honeycode, a no-code app builder, in beta version.LC/NC used to be chiefly about making pro devs more efficient. Now it is also about pulling more humans into creating applications, says Adam Seligman of AWS. In terms of impact, he says, the latest wave “will race higher up the beach”. For one thing, firms in a hurry to digitise appreciate that when line-of-business people design software, it speeds things up. “A field worker making something for other field workers is hugely valuable as the feedback loop is faster,” says Adam Barr, a former Microsoft pro dev and author of “The Problem with Software: Why Smart Engineers Write Bad Code”. As digital natives enter the workforce they are also demanding automation of repetitive or manual data-entry tasks, often on pain of walking out.In addition, LC/NC is fast becoming the secret sauce in modern software development, notably in machine learning, says Arnal Dayaratna of IDC. The mastery of Python or Java required for this type of artificial-intelligence (AI) software is daunting even for pro devs. Bratin Saha, who oversees AWS’s machine-learning services, wants SageMaker Canvas to empower regular business analysts—from marketing or finance, say—to deploy machine learning. That could increase the number of AI specialists available to businesses by an order of magnitude, he predicts.Some scepticism is warranted. Just because non-programmers are able to build an application with LC/NC tools does not mean it will be any good, says Mr Wasserman, just as bug-ridden spreadsheets yield faulty results. They could also become a headache for corporate IT departments if citizen developers collect customer data that are worthless or, worse, that violate privacy. Especially with no code, businesses can find that the functionality they need does not yet exist. No-code platforms make the first 90% of delivering a useful application easy, and the last 5% often impossible, says Tim Bray, a pro dev formerly of AWS. And many pro devs remain resistant. Although they turn to LC/NC to simplify some tasks, plenty of pros see it as the programming cousin of pin-it-on neckties, in the words of one commentator. Some worry that specialising in LC/NC makes them look like dilettantes, reports Mr Barr.LC/NC will not displace “full” coding altogether, as its evangelists insist. Pro devs will continue writing their firms’ core products and mission-critical enterprise systems. But they will increasingly be complemented by legions of enterprising line-of-business workers with a software-development string to their bow. For employers, this means greater productivity. For employees, it could be life-changing. In 2019 the Telstra technician became senior business specialist for field digitisation and has since been promoted again. ■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 “Going codeless” More