Philippa Kaur

TAKE OUR cash, or at least our shares. That appears to be Microsoft’s mantra these days. After failing to acquire the American operations of TikTok, a short-video app, last year, the software giant was recently rumoured to be in takeover talks with Pinterest, a virtual pin-board, and Discord, an online-chat service. And on April 12th the firm announced that it would acquire Nuance, a speech-recognition specialist, for nearly $20bn in cash—its second-biggest acquisition ever.Listen to this storyYour browser does not support the element.Enjoy more audio and podcasts on More

IF YOU ARE an emblem of American harmony like Coca-Cola, you play your politics carefully, especially on issues as divisive as race and voting. The soft-drinks company did so brilliantly in 1964 when the elite of Atlanta—home to both Coca-Cola and Martin Luther King—threatened to snub the civil-rights leader on his return from winning the Nobel peace prize. Appalled at the potential embarrassment, Coca-Cola’s current and former executives worked quietly behind the scenes to persuade other industrialists to attend a dinner in King’s honour. They even sang “We Shall Overcome”.Coca-Cola has weighed in this year, too, before and after Brian Kemp, Georgia’s Republican governor, signed a new law on March 31st that critics said would supress black voters. The firm’s discreet efforts to soften aspects of the bill before its passage backfired twice over. First civil-rights groups accused it of pusillanimity. When its boss, James Quincey, subsequently joined other Atlanta natives such as Delta Air Lines in expressing disappointment at the outcome, Republicans branded Coke and the others “woke” hypocrites.On April 14th hundreds of firms, including giants like Amazon and Google, and prominent businesspeople, among them Warren Buffett, published a letter opposing “any discriminatory legislation” making it harder to vote. One prominent signatory, Kenneth Frazier of Merck, a drugmaker, told the New York Times it was meant to be non-partisan. In the words of William George of Harvard Business School, himself a former CEO, voter suppression “puts democracy at risk, and that puts capitalism at risk”.Republicans, who have been pushing the bills in response to Donald Trump’s big lie that he was denied a second presidential firm by widespread fraud, call the corporate finger-wagging nakedly political. That so many household brands and boardroom grandees nevertheless increasingly wag their fingers at the traditionally business-friendly Republican Party shows that they are prepared to break a code of political silence that has served corporations well since the dawn of American capitalism. Why? And what effect will it ultimately have on their business?America Inc was built on top of an innovation—the joint-stock company—that allowed businesses to put politics at arm’s length. Before the widespread introduction of this corporate structure in the first half of the 19th century, companies needed to secure a government charter to operate, which often involved greasing plenty of official palms. Afterwards they needed only a business plan and willing investors. The result was the most fecund business environment of all time.In the early 20th century many bosses used their companies’ wealth to buy cronies in government, as well as political favours. In the aftermath of the second world war, the door between industry and political office was not so much revolving as wide open. “Electric Charlie” Wilson, boss of General Electric, and “Engine Charlie” Wilson, boss of General Motors, worked for several administrations in the 1940s and 50s. The period until the 1960s was a time of what John Kenneth Galbraith, a gadfly economist, called “countervailing power”. Big business was in a well-balanced scrum with big government and big labour. Some CEOs behaved like industrial statesmen, offering jobs for life to workers, building villages and golf courses, and presenting themselves as guardians of society.That equilibrium was shaken in 1970 by Milton Friedman, a Nobel-prizewinning champion of laissez-faire economics. He argued that executives’ sole responsibility was to shareholders. So long as markets were free and competition fierce, maximising shareholder value would help society, by ensuring better products for customers and better conditions for workers. Firms that failed on either count would see buyers and employees defect to rival firms. Republicans like Ronald Reagan embraced Friedman through shrinking government and deregulating the economy. This gave rise to superstar firms and the cult of the celebrity CEO in the 1980s and 90s.Even so, businessmen held their tongues on political matters. Instead, they put their faith in paid lobbyists and used industry groups like the Business Roundtable to campaign on their behalf. The lobbying concerned almost exclusively matters of direct concern to their bottom lines, such as taxes, regulations or immigration policies that might affect their employees. They studiously kept out of the broader political hurly-burly.Corporate cash continues to flow into politics. But in recent years it is accompanied by a parallel stream of CEO activism. Weber Shandwick, a public-relations firm, dates this phenomenon back to 2004 when Marilyn Carlson Nelson, boss of Carlson Companies, a travel business, took a stand against sex trafficking. Her fellow travel bosses thought such pronouncements would hurt the industry’s neutral image. Instead, she was treated as a heroine by customers. CEOs in other industries took note. Gingerly at first and more conspicuously in the past five years or so, they began weighing in on subjects from the #MeToo and Black Lives Matter (BLM) movements to religious-freedom laws, gun control, gay rights and transgender-bathroom bills. Mr Trump’s divisive actions, such as a temporary ban on visitors from some Muslim countries, withdrawal from the Paris climate agreement or reaction to racist protests in Charlottesville, caused outrage across corporate America (even as it lapped up his tax cuts).Mr Trump’s tenure also coincided with a period when public trust in government was already in decline, while that in business was rising. Despite companies’ and bosses’ image as handmaidens of heartless capitalism, Americans trust business a bit more than they do government or NGOs. Edelman, another PR firm, finds that 63% of Americans think CEOs should step in when governments do not fix societies’ problems. Heeding the call, in August 2019 members of the Business Roundtable, including bosses of 150 blue chips in the S&P 500 index, pledged to consider not just shareholders but also workers, suppliers, customers, the environment and other “stakeholders” in corporate decisions.The trouble with such CEO advocacy is a lack of clarity about its motivations and impact—on the issues themselves, as well on the businesses in whose name it is undertaken. Although a lot of it is probably well-meaning, it is muddied by suspicions of hypocrisy and grandstanding. Before Christmas The North Face rejected an order from a Texas oil company for 400 of its pricey outdoor jackets because it did not want its brand associated with fossil fuels. This month an oil-industry group in Colorado awarded the company a tongue-in-cheek “extraordinary customer award”. It noted that many of its clothing products are made with products of petroleum—including its jackets.In terms of its impact on hot-button issues, corporate activism can backfire if it causes the party against which it is directed to dig in its heels. Jeffrey Sonnenfeld of the Yale School of Management, who organised a gathering of CEOs on April 10th to discuss voter laws, acknowledges partisanship is involved. He believes both business and Mr Biden share a common interest in the centre ground. In the face of opposition from seemingly sanctimonious companies, the Republicans may be even more emboldened to press on with restrictive voter laws—just to rub it in.Chief executives claim that they simply have no choice but to tackle societal concerns because in the age of social media their customers, employees and shareholders demand it. The evidence for such assertions is mixed.Start with consumers. Some polls show that supporters of each party would buy more goods from companies that lean either right or left. But other research has found that consumers were more likely to remember a product they stopped using in protest at what a CEO said rather than one they started using in support. After a shooting spree in one of its superstores in 2019 Walmart banned some sales of gun ammunition. A subsequent study found that footfall in Walmart stores in Republican districts fell more sharply as a result than they rose in Democratic ones.The impact on employees is also inconclusive. Many tech firms in the knowledge economy are happy to wear their leftie leanings on their sleeves, believing this will attract bright millennial workers who tend to share such views. But it can go too far. Lincoln Network, a conservative-leaning consultancy, found that firms promoting a political agenda can have an oppressive internal monoculture, which stifles creativity rather than fostering it. Then there are the shareholders. Bosses rarely consult them before making political statements. Lucian Bebchuk of Harvard Law School found that among signatories of the Business Roundtable’s stakeholder pledge only one of 48 for whom data were available had consulted their board beforehand. That suggests a lot of the pro-social rhetoric is lip service.Investors seem to see it that way. The share prices of S&P 500 companies whose bosses signed that declaration—which, if taken at face value, would mean that shareholders would have to share the spoils with other stakeholders—performed almost identically to those of companies whose CEOs were not among the signatories. That implies that markets did not consider the rhetoric to be of material importance. The fact that some of the loudest proponents of stakeholder capitalism, such as Salesforce, laid off workers amid the pandemic despite record revenues suggests that investors may be onto something.In time, shareholders themselves may become more political. The rise of investment funds that consider environmental, social and governance (ESG) factors suggests an appetite for certain forms of social stance-taking when allocating capital. ESG investors are often willing to accept somewhat lower yields for corporate bonds tied to some do-gooding metrics. After studying ten years’ worth of public-interest proposals at S&P 500 companies, on everything from economic inequality to animal welfare, Roberto Tallarita, also of Harvard Law School, found that virtually no such proposals pass. But support for them is on the rise. In 2010 18% of shareholders voted for them, on average. By 2019 this had risen to 28%. One day the boardroom may become as political as the corner office. In the meantime, CEO pontificating is likely only to get louder. More

IN THE decades after the second world war carmakers were the undisputed champions of the personal-transport economy. Competition and economies of scale made cars affordable to millions of motorists in industrialised countries. In the 1980s and 1990s the likes of General Motors (GM) and Toyota boasted some of the world’s richest market capitalisations. When it came to getting around town, nothing beat the automobile.Today the picture looks different. Of the five most valuable firms in the moving-people-around business only two, Toyota of Japan and Volkswagen of Germany, are established carmakers. Ahead of everyone by a country mile is Tesla, an American company that has disrupted the car industry by turning electric vehicles (EVS) from an unsightly curiosity (remember the G-wiz?) into a serious challenger to the internal combustion engine. Rounding off the top five are not carmakers at all but Uber, an American ride-hailing giant worth over $100bn, and Didi Chuxing, a Chinese one that on April 10th reportedly filed confidentially to go public in New York and hopes for a similar valuation.After being slow to react to the threat from Tesla legacy carmakers are—just about—getting to grips with electrification. Now another disruption lurks around the corner. Changing habits and technology are forcing car companies to rethink how their products are sold, used and owned. In a sign of the times, the boss of Volkswagen, Herbert Diess, concedes that “ownership is not necessarily what you want. You want a car when you need a car.” Competitors are elbowing in; Didi is expected to be the star turn at the Shanghai Motor Show later this month. The private car is not obsolete. But the future business of “mobility”—as the industry has rebranded getting from A to B—will involve much more besides.The market could be enormous. In 2019, ahead of its flotation, Uber put it at $5.7trn, based on the 20trn or so kilometres that passengers travel each year in 175 countries using road vehicles, including public transport. Consultancies’ estimates are more subdued, and vary considerably. But all point to rich potential. IHS Markit reckons that what it calls “new transport” will be worth $400bn in revenues by 2030. KPMG puts the figure at $1trn. Accenture calculates that revenues from mobility, including car sales, will hit $6.6trn by 2050. New transport will make up 40% of the total.Individually owned cars will remain a big part of the new ecosystem. They are still the world’s preferred means of transport. For every ten miles travelled Americans use the car for eight, Europeans for seven and Chinese for six. Even in Europe, which is friendlier to public transport than America or China, only one in six miles took place on buses, trains and coaches in 2017. Uber accounts for just 1.5% of total miles driven in its home market.Indeed, in some ways the pandemic has cemented the car’s pole position. Many people have shunned shared vehicles, be they cabs or buses, for fear of infection. A survey of American travelling habits by LEK, a consultancy, showed that car journeys declined by just 9% last year, compared with 55-65% for public transport and ride hailing. Although today’s teenagers are less interested in getting behind the wheel than their parents were, that changes when they turn 20. Between 2010 and 2018 America lost 800,000 drivers under 19 but gained 1.8m aged 20-29, estimates Bernstein, a broker. Appetite for cars in China, the biggest market, remains strong. In the first three months of the year Chinese car sales rebounded close to their pre-pandemic peak.The automobile’s appeal endures on the outskirts of cities and beyond. Bernstein reckons that most driving takes place away from congested urban cores. Nearly nine-tenths of car miles in America are driven in the suburbs, small towns and rural locations, where a private car is often the only choice.Instead it is in the city centres where a revolution beckons. There the classic ownership model is endangered, new modes of transport are emerging and there is building competition from upstart mobility providers that connect customers with a mesh of different services.Didi, Uber and others provide rides on demand. Having lost money for years, Uber and Lyft, its smaller American rival, should become profitable in 2022, thinks Morgan Stanley, an investment bank. Companies like Zipcar enable people to rent cars by the hour, or even minute. Turo, a Californian firm, is one of several to provide longer-term peer-to-peer car-sharing. BlaBlaCar, a French company that has signed up 90m drivers in 22 countries, connects drivers with spare seats to travellers heading in the same direction.Bike-sharing schemes jostle in new dedicated lanes with electric scooters for hire. Before the pandemic consultants at McKinsey reckoned that renting e-scooters might generate revenues of $500bn worldwide by 2030. Even flying taxis may at last be about to take off; some of their developers, such as Joby, have earned multibillion-dollar valuations.All these modes of transport are being stitched together into seamless trips by specialist journey-planning apps. These let travellers take a scooter to the underground station, take the metro, then jump in an Uber for the last mile—or pick whatever other combination of price and travel time is most suitable. They charge the individual service providers a commission for including them in a journey. Some are experimenting with subscription plans. Some makers of aggregator apps are startups. Whim of Finland gives access to public transport, taxis, bikes and cars for a single subscription in several European locations. Others are stalwarts of the transport business. Deutsche Bahn, Germany’s state-own railway company, has an app that also lets passengers use a variety of travel options. Frost & Sullivan, a consultancy, forecasts that such aggregator apps will generate revenues of $35bn with a decade.Small wonder carmakers want in. Many have done so by investing in the newcomers. In 2016 GM ploughed $500m into Lyft and Volkswagen put $300m in Gett, a European taxi-hailing app. Toyota has invested in Uber, Didi and Grab, a Singaporean ride-hailing firm that could go public soon in a reverse merger valuing it at $35bn. GM has since sold its stake (at a healthy profit) but Toyota and Volkswagen have held on to theirs.The car companies have also been competing with the challengers head on. It helps that many car firms are familiar with the principle of charging for use rather than ownership. In Britain more than 90% of cars use some for of financing. Arrangements where the customer pays a monthly sum over two to four years to offset depreciation are a lot like a long-term rental. It is not a huge jump from that to a subscription service. Hakan Samuelsson, boss of Volvo, thinks the shift from ownership to “usership” could be rapid.Five years ago, in a bid to convince investors that it was a “mobility” firm, not an irrelevant behemoth, GM launched Maven, a brand offering both car-sharing and a peer-to-peer rental. The same year Ford, GM’s Detroit rival, acquired Chariot, a shared minibus service, and Volkswagen launched MOIA, which employs 1,300 people developing on-demand transport. In 2019 BMW and Daimler, two German makers of luxury cars, combined their mobility businesses into a joint venture called Free Now, and Toyota launched its car-sharing and travel-planning platform, Kinto, which has since expanded to several European countries.Some upmarket carmakers, including Volvo (a Swedish marque owned by Geely of China), Audi (part of Volkswagen) and Lexus (Toyota’s premium brand), have tried to woo back younger city-dwellers with subscription services. For a monthly fee starting at between $600 (for a Volvo) and $1,000 (for an Audi or a Lexus), which excludes only fuel, users get access to a vehicle whenever they need one. Lynk & Co charges users €500 ($595) per month for its cars. Its boss, Allan Visser, calls his marque (also owned by Geely) the “Netflix of cars”.As the relationship between car brands and customers gets more continuous, replacing some one-off sales, it is also becoming more direct. Tesla pioneered selling cars in its own salons, as Apple does with its gadgets. Other carmakers are beginning to follow suit. Lynk & Co sells its cars online. Volvo said in February that it will start doing the same. The trend has been accelerated by the pandemic, which has pushed more car buyers away from dealers’ forecourts and onto the internet. Selling vehicles directly forges a bond with buyers that may help flog services in the future.Not all of these ventures will succeed. Some have already fallen by the wayside. Ford pulled the plug on Chariot in 2019. Maven was put to rest a year later, as was the foldable-bike venture. A few months ago Free Now quietly wrote off its Hive e-scooter business and in March sold ParkNow, an app that allows drivers to find and pay for a parking space. As Ashish Khanna of LEK observes, ride-hailing will always struggle in outer suburbs where passengers are far less thick on the ground. Assaf Biderman, boss of Superpedestrian, which operates shared e-scooters, notes that city peripheries in particular are still “built for cars”.But legacy carmakers are not taking anything for granted as they face up to the reality that a few decades from now they may be selling fewer cars in the time-honoured way. If Tesla taught them anything it is that being caught asleep at the wheel can be awfully costly. More

“THE IMPOSSIBLE can many times become possible,” reflects Albert Bourla, boss of Pfizer. He is talking about the giant American drugmaker’s speedy development (with BioNTech of Germany) of a vaccine against covid-19. The sentiment also applies to the turnaround in the fortunes of the pharmaceutical industry.Listen to this storyYour browser does not support the element.Enjoy more audio and podcasts on More

ONE OF SILICON VALLEY’S most successful inventions is hype. It usually disappoints. In 2015 live-streaming from smartphones became all the rage. But Meerkat, an app which pioneered it, shut down the following year. On April 1st Periscope, its more successful rival, did too (no joke). Will Clubhouse, a buzzy app that hosts live audio gabfests, suffer the same fate?Listen to this storyYour browser does not support the element.Enjoy more audio and podcasts on More

IN 1993 FOX, a nascent cable network owned by Rupert Murdoch, an Australian-born tycoon, paid a fortune to scoop the rights to National Football League (NFL) games from under the nose of CBS, a veteran broadcaster. It caused a tremor in American television history. As one CBS reporter put it, “The NFL was ingrained in the walls of CBS like Edward R. Murrow and Walter Cronkite.” With cable, the cost of sports rights took off. So did the cash cow of modern broadcasting—the TV “bundle” of sports and other stuff, most of it barely watchable. At the peak in 2012, almost 90% of American homes subscribed to one pay-TV bundle or another.Listen to this storyYour browser does not support the element.Enjoy more audio and podcasts on More

FACED WITH recalcitrant sovereign counterparties, foreign investors and companies occasionally take drastic action. A picaresque example of the genre occurred in 2012, when Elliott Management, a buccaneering American hedge fund which held distressed Argentine bonds, seized a handsome tall ship belonging to Argentina’s navy. Elliott’s aggressive tactics ultimately paid off, and others have followed suit. In December a court in the British Virgin Islands ordered hotels in New York and Paris owned by Pakistan International Airlines to be used to settle a claim against Pakistan’s government by a Canadian-Chilean copper company. French courts have recently ruled that a stiffed creditor could seize a business jet belonging to the government of Congo-Brazzaville while it was being serviced at a French airport, as well as $30m from a bank account of the country’s state oil company.Listen to this storyYour browser does not support the element.Enjoy more audio and podcasts on More

DEAR COLLEAGUES,This is my first memo as the newly appointed chief impact officer at Global United Financial Firms (GUFF) and I would like to thank everyone for welcoming me to the group. Some of you will be unfamiliar with the role of chief impact officer, but you may have seen headlines about Prince Harry taking on the role at a Silicon Valley firm. Of course, I don’t have the prince’s star quality but I hope I can do the same job in enhancing the reputation of GUFF that Harry has done for Britain’s royal family.Listen to this storyYour browser does not support the element.Enjoy more audio and podcasts on More