Philippa Kaur

KAVAK, A MEXICAN startup, provides an elegant solution to a glaring problem: how to buy a used vehicle in a market that is both one of the world’s biggest and its most informal second-hand car markets. Few buyers trust a seller’s assessment of the good’s quality. Few sellers trust the buyer to cough up the money. Transactions often involve “meeting someone at a corner store and seeing how it goes”, says Alejandro Guerra, Kavak’s general manager in Mexico. On Kavak’s app people can buy and sell cars with the company acting as a trusted middleman.Listen to this storyYour browser does not support the element.Enjoy more audio and podcasts on More

ROLF BUCH has no time to rest on his laurels. On October 4th the chief executive of Vonovia, Germany’s biggest residential-property firm, managed after a long ordeal to seal the creation of Europe’s biggest such company through a merger with Deutsche Wohnen (DW), its main rival. But DW comes with a new headache. In a non-binding referendum last month Berliners backed a proposal obliging all private firms that own more than 3,000 flats to sell them to the city, which could rent them out more cheaply. DW owns more than 110,000 flats in Berlin. Vonovia has another 43,000. A quarter of the combined firm’s properties are in the German capital (see chart).Listen to this storyYour browser does not support the element.Enjoy more audio and podcasts on More

“I WILL BE back in the office [in two weeks] and have limited Wi-Fi connection in the meantime.” It is safe to assume that readers of this column are familiar with something like this message (which, like all the others cited below, comes from real life). As with all aspects of office culture, the autoreply has evolved over time—and more quickly in the past 18 plague months. Good etiquette has not always kept up.The precursor of the electronic “out of office” is sometimes found in Mediterranean countries, where a handwritten note taped to a shop front announces to the world: “Closed for August, back in September”. The digital autoreply was initially a quirk of Microsoft, a software giant, dating back to the company’s Xenix email system of the late 1980s, before bleeding into the mainstream in the following two decades.In those early days responses tended to be terse and to the point. That style persists to this day, especially in the higher echelons of corporate hierarchies. C-suite executives’ autoreplies seldom feature jokes or emojis—if, that is, they are set up in the first place. A chief executive does not have to explain her or his absence or lack of prompt response, except possibly to the board (which will invariably have been informed of the boss’s movements).Lower down the pecking order, however, people increasingly try to put their personal mark on their autoreplies. And if this stand-in Bartleby’s inbox is a guide, creativity has burgeoned in the age of lockdowns and remote work. Some try to be witty (“I will have limited enthusiasm for access to email”). Others share (“I am out of the office getting married!”). Others still plump for exoticism (“Please note that I am out travelling in a remote area in Greenland and will have no internet or phone connection for the majority of the period”).Often, the autoreply involves people beyond the sender and recipient. Your columnist has on numerous occasions been named as the person to whom addressees of her colleagues’ autoreplies ought to direct queries. That can have long-running consequences. Public-relations types still refuse to remove her email address from their mailing lists even though she has patiently, and repeatedly, explained that climate change is not her beat so there is no point in sending her daily press releases about agroforestry in Kenya. Occasionally autoreplies turn into a cyberspace version of a treasure hunt. During the summer Bartleby’s email address was given out while she herself was on holiday so the recipient ended up being redirected again.Such foibles notwithstanding, most office workers have no problem with the “out of office”. A survey of 1,000 people conducted in 2015 by Microsoft found that most respondents liked the practice. That is partly because setting it can mark the beginning of a holiday (which it did for 77% of the surveyed). But 60% also confessed to enjoying a jolly reply received from others.Still, clear dos and don’ts exist. As an “out of office” connoisseur (and victim), Bartleby recommends being straightforward and informative. State the dates when you are away. If the period of absence is longer than a typical holiday, a word of explanation may be in order (jury duty, parental leave, sabbatical).The message itself does not have to be a labour of love. Oversharing is awkward. “I’m on PTO” (paid time off) has been common in the corona-era despite the inelegance of reminding strangers that you received compensation for being unavailable. Humble-brags or an air of self-importance strike a false note.Trying to be funny often falls flat on its face. Including suggestions to follow you on Twitter or emojis of an umbrella on a beach are best avoided. Three in ten respondents to Microsoft’s survey reported succumbing to sentiments of envy and fear of missing out upon being notified that others enjoyed tropical vacations. Veering off-topic, whether by including personal confessions or quotes from Muhammad Ali, shows not erudition or finesse but a distracted mind given to rambling. It is like having water on the knee—the best things found in the wrong places.Being aware people want your attention before you return to your post can be instrumental in the management of any other large organisation. But if you are surfing in Maui, attending a conference, running an ultra-marathon in the Mojave desert, writing a novel, or taking time off to paint your mother’s garage, no one really needs to know the details.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 “Out-of-office experience” More

VOLVOS SPORT subtle reminders of their Swedish heritage, from tiny blue-and-yellow flags adorning some models to the “hammer of Thor” headlights that provide illumination for all its vehicles. A brand coupling Scandi-cool design with concern for safety and the environment has in recent years helped Volvo expand its footprint beyond its European heartland to China and America. It hopes to keep going. An initial public offering (IPO), announced on October 4th will make it both “more Swedish and more global”, says Hakan Samuelsson, Volvo’s boss.At the Swedish end, listing in Stockholm will reinforce Volvo’s Norse identity. Globally, the IPO is a chance to draw on a more diverse pool of investors as it broadens its worldwide reach, while remaining small and nimble enough to navigate the fast-changing automotive business. And Mr Samuelsson stresses that not much would change in its relationship with Geely, the Chinese firm that has owned Volvo since acquiring it from Ford in 2010 for $1.8bn. Geely intends to remain the largest shareholder and the two firms will continue to share costs and technology.When Geely abandoned an IPO of Volvo in 2018, the ostensible reason was a looming trade war between China and the West. In reality, the decision probably had more to do with no one else thinking the firm was worth $30bn. That valuation now looks more reasonable. Volvo has gone from suffering losses under Ford, and turning out 374,000 cars in the last year of American ownership, to making 773,000 in the 12 months to June at a healthy profit. Its aim of making 1.2m cars a year by 2025 looks attainable. It is also leading the way in selling its cars on subscription or directly to consumers at a fixed price, rather than through dealerships.More important, Volvo is ahead of most rivals in sating the growing appetite for electric vehicles (EVs) among motorists and investors alike. It has pledged to go all electric by 2030, long before most rivals; spun off its internal-combustion-engine business into a stand-alone operation in order to focus on EVs; and joined forces with Northvolt, a Swedish battery firm, to build a gigafactory and ensure supply. It also half-owns Polestar, a pure-EV marque that last month announced plans to go public next year in a reverse merger with a special-purpose acquisition company (and hopes to fetch a valuation of $20bn). Leaning on Volvo for manufacturing capacity and retail and service networks puts Polestar in a better position than most rival EV startups, which lack either.Geely will pocket a handy profit after a decade or so of owning Volvo outright. The Chinese firm will retain a dominant stake but the flotation will also let it concentrate on its reorganisation from a holding company owning various carmakers into a transport-technology group which also makes the smartphones and satellites that enable the provision of transport services and, eventually, autonomous vehicles. Volvo, for its part, expects to raise nearly $3bn in the IPO, cash Mr Samuelsson says the carmaker needs if it is to keep up its electric momentum. If it does, rivals will have even more catching up to do. ■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 “Electric blue and yellow” More

MANY QUESTIONS are on the minds of business leaders in the run up to the UN’s COP26 climate summit from October 31st to November 12th. For CEOs making the trip to Glasgow, they range from the mundane (travel by train? eat only plant-based food?) to the profound (why am I going in the first place?). The most important question, though, is barely asked: what would happen if governments agreed, sooner or later, to commitments serious enough to limit global warming to 1.5-2.0°C above pre-industrial levels, as stipulated in the Paris climate agreement of 2015? This question has an answer most multinationals shy away from. It would send shock waves through their entire business models.Businesses, as a rule, do not like being forced to do anything. They prefer to make voluntary gestures—just enough to keep governments off their backs. Right now they are throwing around promises to cut carbon emissions to “net zero” like confetti, on the grounds that such vows attract investors, employees and customers. It is a step in the right direction. And yet some of those pledges are paper-thin. Of more than 4,200 firms in the G20 club of big economies that have disclosed their climate ambitions, only a fifth have committed to so-called science-based targets that would keep the world on track to meet the Paris agreement’s goal. That requires firms to start slashing emissions within years, not decades. For big emitters this poses an instant threat to profitability. It strains credulity to think that altruism is enough to convince firms to act. Governments will have to apply the thumbscrews.Even business folk realise that the best way to apply pressure is by imposing a global system of carbon taxes, with some form of redistribution to ease the pain on the poorest thumbs. The trouble is that only about one-fifth of global emissions is covered by a price on carbon. As a result the global average price is just $3 per tonne of carbon dioxide. To meet the ambitions of the Paris agreement, the IMF says the global carbon price needs to rise to $75. Others believe it should be almost double that. For some heavy emitters covered by the European Union’s emissions-trading system, it is already above €60 ($69). In China’s new (limited) scheme, by contrast, it is a pittance. America has no federal scheme of any kind.A higher global price would affect all businesses—albeit unevenly. For now, it is treated as too much of a long shot to take seriously. But assume for the moment it actually happened.The first important thing would be to separate out the heavy emitters from the rest. Early adopters of bold emissions targets come from industries such as retail, where abating is relatively easy. In countries like Britain, where the grid is decarbonising fast anyway, that may require no independent effort on the part of energy users. A small number of sectors responsible for the bulk of listed companies’ emissions—power utilities, oil and gas firms, steel- and cement-makers—have a much harder challenge. As demand for carbon-intensive stuff collapses, they would have to find new ways to generate cashflows. Some are dabbling in renewables. Some see a future in low-carbon plastics and materials. But if they cannot turn these swiftly into huge sources of income, they would be better shutting down operations and returning cash to shareholders. Western firms may hope they can sell off their dirtiest assets to state-owned companies in the developing world. Yet these, too, would be subject to a truly global carbon tax. For some, the sooner they start lightening their carbon load, the better.For a broader set of businesses, supply chains would be the main issue. Standard Chartered, a bank, says almost three-quarters of multinationals’ emissions come from their suppliers. Tackling those is an immense task. Take coal-addled China, where many of them are based. Guido Giacconi of the EU Chamber of Commerce in China says that though the country is investing heavily in renewables, it is “difficult if not impossible” to guarantee that a firm’s energy use is free from coal, because of the opacity of the electricity grid. That makes it hard for firms like Apple to certify that their supply chains in China (where iPhones are made) are carbon-neutral. If its Chinese suppliers were consequently subject to a carbon tax, it might have to raise prices of iGadgets.Moving supply chains out of China would bring costs, too. In some Asian alternatives, such as Vietnam or Indonesia, fossil fuels are more prevalent than in China. In emerging markets with a lot of clean energy, such as Brazil, the costs of bad infrastructure and red tape are unappealing. Reshoring is unpalatable for many Western firms; the costs of rich-world labour are just too high.This feeds into a third problem: consumption. A high carbon tax is bound to push up prices, which will change consumer behaviour, especially among lower earners. The tourism industry, for instance, would have to rely less on customers arriving by cheap flights. Supermarkets would need to provide more local foods. People might start tracking the carbon trail of some things they buy, creating headaches for retailers like Amazon.The flip side would be more innovation. The International Energy Agency, which represents energy-consuming countries, said last year that investments in low-carbon research and development had barely budged since 2012, and was a fifth of what was spent on health and defence. This is pitiful. A carbon tax would change that. Think of hyperloops for long-distant transport; eating bugs, seaweed and lab-grown meat; an endless stream of virtual-reality entertainment as people stay at home rather than consume goods that become less affordable owing to the carbon bill.Extinction rebellionInevitably, some firms which fail to see the writing on the wall will die. But others will swiftly realise that the future is “adapt or perish”. This is not a mantra CEOs will chant at COP26. It should be. When it comes to action on the climate, they are all-too-keen to show off their halos. The thumbscrew is a less appealing accoutrement—but a far more necessary one. ■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 carbon-tax crackdown” More

IT LOOKS LIKE the perfect time to be a chipmaker. The market for semiconductors continues to grow rapidly. By the end of the decade it will exceed $1trn globally, up from $500bn this year, forecasts VLSI Research, a firm of analysts. Demand keeps outstripping supply; the chip shortage is now expected to last well into 2023, paralysing factories of everything that needs processors—which in this day and age is basically everything. Western governments have earmarked billions to build chipmaking capacity within their borders in order to become less dependent on Asian suppliers. America alone is planning to spend $52bn over the next five years.In this context the initial public offering (IPO) of GlobalFoundries, a contract manufacturer which makes chips for other firms, seems a safe bet. The firm, which unveiled its prospectus on October 4th and is expected to list soon, is the world’s fourth-biggest chip foundry by revenues. The typical characteristics of an IPO—a lowish offering price and a small proportion of shares available to public investors, both of which have yet to be decided—should ensure a healthy “pop” in the share price in the early days of trading. But GloFo, as semiconductor aficionados endearingly call the firm, is also an example of how tough the chip business has become, notwithstanding the favourable climate.GloFo is a product of consolidation, caused by the industry’s unforgiving economics that demand ever-tinier silicon furrows and hence ever-costlier fabrication plants (or “fabs”). The most advanced of these now cost more than $20bn apiece. After a spin-off in 2009 from AMD, which designs processors for personal computers and servers in data centres, GloFo later acquired Chartered Semiconductor, another foundry, and the chip-manufacturing business of IBM, a purveyor of assorted information-technology wares.With billions from Mubadala Investment Company, a sovereign-wealth fund from the United Arab Emirates, which currently owns all of GloFo, the firm tried to keep up with rivals in the race to forge cutting-edge electronic circuitry. In 2018 it gave up and started catering to the lower end of the market. These are semiconductors which go into products such as cars and machine tools, and therefore do not need the highest-performing processors, rather than data centres or smartphones. This niche is still a $54bn market, according to Gartner, another market-researcher.Today GloFo operates a handful of fabs across the world, employs around 15,000 people and has a market share of 7% in the chip-manufacturing business. Most of its customers, which include AMD, Broadcom, another American chip designer, and NXP, a Dutch one, are “single sourced”. That means their chips cannot be made by other foundries, such as Samsung of South Korea and in particular Taiwan Semiconductor Manufacturing Company (TSMC), the world’s mightiest chip manufacturer, which controls more than half the market.The difference in size goes a long way to explaining why TSMC is hugely profitable whereas GloFo struggles to generate cash. In the first six months of this year the Taiwanese giant boasted sales of $26bn and profits of $9.8bn. Although GloFo’s revenues rose to $3bn in the same period, up by nearly 13% on a year ago, and its accounting losses have been narrowing, it still lost $300m between January and June.Investing in GloFo will therefore be a wager that the company can ride the current tailwinds in its industry and start making serious money. But it may also be a bet that another firm snaps up GloFo for itself. In July it emerged that Intel, the world’s largest chipmaker by revenues, was in takeover talks with the firm. These did not go anywhere because the parties could not agree on a price. Once GloFo is listed it should be clearer how much it is worth. Negotiations could restart. Then again, with GloFo’s numbers now public, Intel may have a hard time convincing its shareholders that it needs to pay the $25bn that GloFo is expected to fetch. ■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 “A golden-ish age” More

AMANCIO ORTEGA, founder of the Zara fast-fashion empire, got his start selling bathrobes in northern Spain. Erling Persson of H&M peddled women’s clothing in a small-town shop in Sweden for decades before going global. Xu Yangtian had none of their tailoring experience when he founded Shein (pronounced she-in) in 2008. Instead, the creator of the fashion world’s latest sensation was a specialist in search-engine optimisation.This expertise helped Mr Xu gain an understanding of how to draw shoppers’ attention in the digital world. And he has understood this very well indeed, bringing to an audience of rapt Western fashionistas a Chinese style of “social commerce”, which combines social media with online shopping. Add in a revolutionary approach to manufacturing and the results have been spectacular. In 2019 Shein’s gross merchandise volume (GMV), e-commerce groups’ preferred measure of total sales on their platforms, was $2.3bn, estimates to Zheshang Securities, a Chinese broker. This year it is forecast to surpass $20bn. By 2022 analysts expect Shein’s GMV to overtake Zara’s revenues. In May Shein was the most downloaded shopping app in America, overtaking Amazon.Mr Xu has also grasped how to navigate the growing commercial and geopolitical tensions between China and the West. It is hard to say for sure, given how secretive his privately held company remains, but Shein has probably had more success selling directly to Western consumers than any other Chinese firm in history. America is its biggest market, accounting for 35-40% of GMV. Another 30-35% comes from western and southern Europe. It has won the backing of both American venture capitalists (like Sequoia Capital) and Chinese ones (such as IDG Capital, a Beijing-based group). Stitch all this together and you get a new model of a successful Chinese multinational company.Threading the needleShein’s global success rests on three pillars. The first is a turbocharged version of the fast-fashion formula of offering a constantly updated range of garments at bargain-basement prices. Whereas Zara launches about 10,000 new products a year, Shein releases 6,000 new “stock-keeping units” (which includes old designs in new colours) every day. Though some of these are quickly discontinued, its permanent virtual wardrobe already numbers 600,000 individual items. And with a typical price tag of between $8 and $30, Shein’s garments cost roughly as much as those of Primark, a resolutely offline British retailer, and 30-50% less than similar ones from Zara or H&M, according to Douglas Kim of Smartkarma, a research firm.Shein has managed to pull this off by combining a mastery of fashion supply chains with the sort of on-demand manufacturing originally enabled by Chinese e-commerce giants like Alibaba. It starts with design. A Shein team trawls the internet for the latest trends using algorithms to determine what is grabbing the most attention on any particular day. One member of this team told Chinese media last year that he visits thousands of websites to come up with ideas. These concepts are sent to another group that draws up designs, which are then manufactured in batches as small as 100 items, compared with a typical order of thousands.Next, learning from Alibaba, Shein tests these countless new products simultaneously on its app. With all sales happening digitally, managers have a real-time view of the performance of each item. If a new design is popular the company quickly orders more. If consumers shrug at the new style, no more orders are placed. By centralising inventory in a small number of large warehouses and then shipping directly to customers, Shein has pushed inventory turnover down to just 30 days, compared with an industry average of 150 days, according to a consultant who works with the company.To streamline the entire process Shein has moved from the eastern Chinese city of Nanjing to Guangzhou, a huge southern manufacturing hub. It has also been offering factory bosses better terms than most fast-fashion rivals. The company guarantees it will purchase the entire batch and pay within 14 days, compared with 90-day delays common in the industry, in exchange for guaranteed supply. Around 400 of Shein’s 3,000 or so suppliers in China have signed up to this deal, says Chen Tengxi of Zheshang Securities. A bespoke software interface lets them know when production needs to be stepped up.Shein has deployed digital savvy not just in its procurement but also in sales and marketing—the second pillar of its success. Besides handing out products free of charge to thousands of influencers, a common practice these days, it has also recruited hundreds of local designers in America and several other countries. As well as dreaming up new clothes, they market its products and backstories on social media. The company plans to hire another 3,000 such third-party designers in 2022.The strategy has helped Shein amass 250m followers across Instagram, TikTok and other social-media platforms. About 70% of them shop on Shein’s mobile phone app, which boasts 24m daily active users. On any day, one in two of the world’s shoppers who buy apparel online do so using its app. This approach has been so effective that other companies are trying to copy it. Gabby Lewis, a designer in Los Angeles who works with Shein, reports that as soon as the Chinese firm began featuring videos of her promoting her products on social media, other fashion groups got in touch to see if she would do the same for them.The third ingredient in Mr Xu’s winning formula is deft avoidance of geopolitical controversy. Shein wears its Chineseness lightly. Unlike other Chinese brands that have tried to conquer the world, such as Huawei, a telecoms-equipment giant, or Xiaomi, which makes smartphones, it sells next to nothing domestically. That weakens its already loose association with China in Western eyes. Western consumers already assume, correctly, that like most of their clothing, including Western brands, Shein clothes are made somewhere in Asia. Few realise (or care) that the label is Chinese. Helpfully, most shipments to individual customers in America are small enough to dodge tariffs on Chinese exports imposed as part of a continuing trade war between the two countries.Shein has also evaded scrutiny from the Chinese Communist Party. In part that is because selling frocks is not as contentious an industry as making semiconductors or writing artificial-intelligence software. Its tiny presence at home has also spared it the sort of headaches that have afflicted Alibaba and other consumer-internet groups with large domestic operations as President Xi Jinping intensifies his campaign to right the perceived wrongs of Chinese capitalism.For all its stupendous success, Mr Xu’s formula is not without risks. Some of these relate to its industry. Like others in the fast-fashion business, Shein has come under fire for waste and a heavy impact on the environment. Many fast-fashion brands are facing questions over whether they source cotton from the Xinjiang region in far-west China, where the government is accused of using forced labour. And its products’ low price sometimes goes hand in glove with shabby quality. Pictures comparing Shein garments received by customers with the catalogue images have turned into internet memes, hurting its reputation in Europe, notes one consultant.Other dangers may be more specific to Shein’s heavily digital business model. Although venture-capital funding rounds have valued the company at $15bn and it has reportedly approached investment banks about an initial public offering, no one outside the firm seems to know whether it makes any money. In recent years Shein executives have given few media interviews, and none to Western journalists. Chinese media have consistently dubbed it China’s “most mysterious unicorn”. Analysts are left scratching their heads over its profitability and margins.That may not be a problem, at least in the short term. Investors’ appetite for tech-adjacent startups, even loss-making ones, appears undiminished. Another Shein-specific risk may prove harder to manage in the long run. The company relies on collecting lots of data from American shoppers. As a result, it may face the same problems that befell TikTok, another hit Chinese export to America. Last year the short-video app’s Chinese owner, ByteDance, barely averted a forced sale of its prize asset to American investors over fears that Americans’ data could fall into the hands of China’s Communist rulers (an accusation that TikTok has always vociferously denied).As with TikTok’s social-media rivals in America, Shein’s Western competitors may invoke national security as a reason to curb its relentless rise. That would be a compliment—after a fashion. More

EVERY LARGE business has a boss and minions, who do most of the work. What comes between the corner office and the shop floor is a matter of managerial preference. Some firms’ organisational charts are towering mille-feuilles, with staff piled into rigid hierarchies stuffed with assorted supervisors. More fashionable of late has been the pancake organigram: fewer layers of workers reporting to a smaller cadre of chieftains. As appealing as such “flat” organisations might seem, the thinning of managerial ranks comes at great cost.Vice-presidents, area supervisors and other department heads were once the corporate machine’s central cogs. Now such middle managers are derided as pound-shop CEOs, there largely to organise and attend pointless meetings. A few modish startups bill themselves as having no administrative tiers at all, leaving independent employees flitting between tasks as they see fit. Such holacracy, as it is dubbed, clearly won’t do for a Unilever or Goldman Sachs. But even big firms now ritually boast about “delayering” their ranks.Flat organisations are meant to reflect the modern workplace. Businesses in generations past used to be steeply hierarchical to mimic the armed forces, remembered by bosses of yesteryear as a place where missions were accomplished. Starting off at the bottom of a pyramid, perhaps six or seven rungs below the top brass, wasn’t so bad if you intended to progress at the same firm for your entire career. Millennials and later Gen-Z recruits had other ideas. Reporting to an overbearing boss crimped their ability to make an immediate mark.Several factors contributed to the “flattening” trend. Businesses discovered that having lots of mini-barons could lead to stultifying silos. New ways of working—starting with modern technology—mean that executives can manage more subordinates, including some far away. Add enough direct reports to each supervisor, and the number of rungs between the chief executive and the graduate trainee shrinks accordingly.Proponents of flat organisations say they give each employee added responsibility: bosses with dozens of flunkeys can hardly be expected to micromanage them. Uncluttered organigrams make companies more agile, enable faster decision-making and trim costs to boot. Business titans like Elon Musk of Tesla, a car firm, have painted delayering as a way of improving communication and shedding corporate deadweight.Clearly there are limits to how far one can go. Not every Tesla factory hand is going to seek their annual appraisal from Mr Musk. In fact any amount of delayering hacks away at what it means for an employee to be part of a company. The key corollary—indeed the enabling factor—of flat organisations is for each employee to have less boss. That will sound appealing to some workers.Such bosslessness, however, is a false Utopia. Companies that went furthest in scrapping management tiers discovered that getting rid of a formal pecking order resulted in informal hierarchies taking hold instead. A leadership vacuum risks being filled by petty tyranny. It is inevitable when large groups of people spend time together, in the office or elsewhere, that someone ends up in charge (and often lots of people end up in charge of different little tasks). That can be layers of managers put in place formally according to their competence and track record. Or, if everyone is on paper holacratically equal, it might be whoever talks loudest at meetings.Fewer tiers mean fewer people with day-to-day experience of corralling employees. Yet managing others is not an ancillary task which companies do to reach other aims. It is the precondition for any of their aims to be reached. Sometimes skimping on the degree to which each human resource is supervised doesn’t matter much. But there inevitably comes a time—for the employee or the company—when it matters a great deal. Having lots of organisational tiers means that those in charge of managing lots of people have had experience managing fewer people before.Covid-19 has already upended many individuals’ working lives. Gone are the days of sitting every day in the same office as your co-workers. Plenty will be adapting to the new managerial normal for a while yet. That makes keeping employees in the loop and engaged more important than ever. Layers of bosses provide structure. For all the joy of belittling them, middle managers are part of the solution.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 “Better not squash” More