Philippa Kaur

Gandalf from “The Lord of the Rings”, Yoda in “Star Wars” or M in Ian Fleming’s early James Bond novels all act as mentors, providing sage advice and guidance to the less worldly-wise. In real life, as in fiction, the value of imparting wisdom gained through experience and age (Yoda is 900 years old, Gandalf is in his 1,000s) is becoming ever more important. It is in a company’s interest to keep its employees happy and loyal even if the jobs-market upheavals of the pandemic-induced “great resignation” are fizzling out. A good mentoring scheme can serve this purpose.Workplace mentoring has long been an informal affair, disguised as a chat by the coffee machine or a trip to a bar with a longer-serving and more senior colleague. Even the most successful find having a receptive ear a useful addition to the corporate armoury. For over 30 years Bill Gates has turned to another billionaire, Warren Buffett, for advice. Peter Thiel, another tech baron, credits René Girard, a French polymath and part-time philosopher, as one of his greatest inspirations.In recent years businesses have sought to formalise an arrangement with the obvious rewards of nurturing a sense of connection and loyalty, and helping the transfer and development of skills. The aim is to support staff and boost their confidence by sharing knowledge and experience. At their best, when there is genuine rapport between mentor and mentored, such arrangements can help the latter to come up with new ideas and help them cope with problems.So how do firms build the best mentoring schemes? For them to work, some degree of chemistry is essential, as is a high regard for the person whose advice is being sought, irrespective of age gaps and backgrounds. Maurizio Orlacchio, a former manager for Four Seasons, a hotels chain, credited his career to his relationship with his mentor, an older executive who taught him how to motivate his employees—and himself.Schemes should be self-managed with the junior party taking the lead in arranging discussions which are always confidential. It is best to let employees choose the person with whom they would most like to discuss their career trajectory, no matter their position on the corporate ladder. Requested mentors can be flattered but still decline.If you want to become a valued mentor, do not start by offering unsolicited advice. If you’re being mentored, do not look for solutions to personal problems (failing romantic relationships, dandruff) or ask for bail money. But anything else work-related should be open for discussion. “I’m feeling wobbly, this is all too much to take in” is as legitimate as chatting about your long-term career prospects.Firms are increasingly recognising the importance of face time with helpful colleagues. Nicholas Bloom at Stanford University, using data from hundreds of organisations since the onset of the pandemic, found that the mentoring of recent hires was a key reason to bring employees into the workplace two or three days a week. David Solomon, ceo of Goldman Sachs, has echoed this in his push for a full return to the office.Despite Goldman’s efforts, working from home has become a post-pandemic fixture. So virtual mentoring also still has a role. As with any online relationship, trust and rapport take longer to build. No matter how clearly boundaries are set, there are inevitable glimpses of personal spaces when sessions take place on Zoom with cameras on. Bartleby recommends looking reasonably smart and refraining from getting a beer from the fridge. What seems natural when meeting face-to-face does not always translate well online.Reverse mentoring is also in fashion. Matching a junior employee with an executive whose understanding of diversity and other generational divides may need a refresher course could have benefits. There is room to debate how much a seasoned chief financial officer will learn from a millennial but the best mentoring relationships are always a two-way street.Whether it is lunch, drinks or a chat in the car park, mentoring’s benefits are undeniable if it fosters a friendlier culture, staff retention and development of talented employees. Think of Yoda’s serene demeanour and galactic wisdom rather than his enigmatic speech patterns. The idea is to find, if not a Jedi master, then at least someone to talk to whenever you feel stuck in your job. Sometimes sharing a coffee can be just as powerful as wielding a lightsabre.■Read more from Bartleby, our columnist on management and work:A retiring consultant’s advice on consultants (Jul 17th)A refresher on business air-travel etiquette (Aug 4th)The dark and bright sides of power (Jul 27th)Also: How the Bartleby column got its name More

No matter how wild the party, it is a rare hangover that lingers into its second year. Yet after a record-smashing rave in 2021, investors in initial public offerings (ipos) are still nursing sore heads. Over the course of a year-long binge, they ploughed some $600bn into stockmarket listings around the world in 2021, according to Dealogic, a data firm. That is more than double the figure for 2007, in the mad gallop preceding the financial crisis, and nearly triple that for 2000, as the dotcom bubble swelled. But then soaring inflation, the end of cheap money and cratering markets put paid to the celebrations. In some places flotations all but disappeared: proceeds from American ipos in 2022 fell by more than 90% compared with the previous year. So far in 2023, the sombre mood has continued (see chart).The music may soon start up again. On August 21st Arm, a British chip designer, at last filed a preliminary prospectus for a hotly awaited listing on the Nasdaq exchange, expected to take place in the first half of September. A likely valuation of between $60bn and $70bn would mark the biggest American float in nearly two years.It is not just Arm. Notwithstanding an August wobble, stockmarkets have been rising for almost a year: the s&p 500 index of large American firms is up by 24% from a trough in October. msci’s broadest index of global stocks has also risen by 24%. Such a bull run offers inevitable temptations to the bosses of private firms. With prices having risen so much, perhaps now is the time to sell a chunk of the company’s shares to public investors and get a healthy slug of capital in return.Importantly, says James Palmer of Bank of America, volatility has also been subdued for months. That lowers the likelihood of would-be floaters kicking off a weeks-long listing process only to see the market plunge and the value of their soon-to-be minted shares fall with it. Aloke Gupte of JPMorgan Chase, another bank, is more bullish still. The pace of work at firms using his team’s help to go public, he says, has “gone from second gear to fifth” in recent weeks.Meanwhile, the listings that have already taken place suggest a market that is hungry for more. Oddity Tech, a beauty outfit that perhaps inevitably uses artificial intelligence (ai) to develop its products, listed on the Nasdaq on July 19th. It saw demand for its offering vastly outstrip supply. The firm sold $424m-worth of its shares, while investors placed orders for over $10bn. After Arm’s ipo, Instacart, a grocery-delivery group, Databricks, a software firm, and Socure, an identity-verification company, are all likely to follow up with their own flotations.If this steady drip is to become a rush, it will require three developments in its favour. The first is a clearer picture of where interest rates are heading. One senior banker cites confusion over this as the main reason that listings, as well as other deals such as mergers and acquisitions, were so slow to return in the first half of 2023. With the Federal Reserve’s fastest tightening cycle in decades still under way and a clutch of American regional banks teetering close to collapse, guessing where long-term rates would end up felt like taking a shot in the dark, she argues. As well as determining firms’ funding costs, this is the ultimate benchmark against which ipo investors measure their potential returns. And so without much idea of where the “risk-free rate” will settle, pricing a new tranche of shares with any confidence becomes impossible.There is now a growing sense, both in markets and among economists, that the Fed’s rate rises are at or near an end. Yet uncertainty over how long rates will stay high persists, largely due to the surprising resilience of America’s economy. Mostly as a result of this, the yield on ten-year Treasuries—possibly the most important benchmark for investors—has risen by 0.8 percentage points since early May, to 4.2%. Until this measure begins to settle, ipos will remain hard to price and, as a result, sparse.A second factor required for listings to resume in earnest is for firms themselves to grow in confidence. “I’ve thought for some time that market readiness would come before company readiness,” says Bank of America’s Mr Palmer. A successful flotation, he says, involves the businesses making a series of reassurances: to regulators, investors and research analysts. The firm will offer guidance on its financial performance not just over the next quarter, but probably over the coming year.For as long as geopolitical tensions, especially between America and China, are running high, companies that rely heavily on cross-border trade will find such reassurances fiendishly hard to offer. Virtually all, meanwhile, are hampered by uncertainty over where inflation will settle and whether the world’s big economies have avoided, rather than merely delayed, recessions. Some firms, such as those owned by private-equity funds with limited lifespans, may have few options but to make the jump and list despite the fog of uncertainty. But those with the freedom to choose are more likely to wait until it lifts.A final, if obvious, requirement for a new ipo boom is that the firms now preparing to float manage to do so successfully. Crucially, says Rachel Gerring of ey, a consultancy, that means their shares end up being sold at around the price investors have been led to expect and then rise from there. That the opposite happened for many of 2021’s floaters was the death knell of the previous boom: few ipo investors want to open their chequebooks without benefiting from the share-price “pop” associated with new listings. In this sense, Arm’s flotation has acquired totemic importance. Should its share price leap, others will be quick to follow; should it flop, they may not.Whenever it materialises, the next cohort of ipos is likely to look substantially different to the class of 2021. With the heady days of rock-bottom interest rates firmly in the past, investors will prize “safer” prospects. This means big firms over small, profits over revenue growth, seasoned executives over newbies, and easy-to-model business plans over more speculative ventures. JPMorgan’s Mr Gupte sees these preferences reflected in a much more diverse group of companies now preparing to go public than did in 2021. Whereas the last wave was dominated by tech firms, he says, the next will involve many more industrial, energy-transition, consumer-focused and health-care outfits.All agree that a return to the breakneck pace of dealmaking that preceded the current drought is unlikely. Central banks are no longer flooding markets with liquidity, the rate rises of the past 18 months could yet tip many economies into recession, and an American stockmarket that is at its most expensive in decades could yet crash. But “if nothing upsets the apple cart”, says Mr Gupte, then a reasonable number of firms should be looking to go public in 2024. All eyes on Arm, then, to see if the apple cart can stay on the road. ■For more expert analysis of the biggest stories in economics, finance and markets, sign up to Money Talks, our weekly subscriber-only newsletter. More

On August 21st Arm, a chipmaker whose designs power most of the world’s smartphones, filed for an initial public offering (ipo) that could turn out to be the largest of the year. The route taken by the British firm, which is owned by SoftBank Group, a Japanese technology conglomerate, has not been straightforward. In 2016 SoftBank acquired Arm, then listed on the London Stock Exchange, for $31bn. Four years later a proposed $40bn sale to Nvidia, another chipmaker, was squashed by competition authorities. Now a blockbuster listing is in prospect that would also signal a revival of an ipo market that has been largely dormant since 2022.Arm will now be listed on America’s tech-heavy Nasdaq as soon as early September, ending a period of uncertainty for the company. SoftBank will retain majority control and pocket all the proceeds from the listing. The ipo filing does not specify how much Arm intends to raise or the chipmaker’s worth, though in August SoftBank paid $16bn for a 25% stake which was held by the group’s Vision Fund, a tech investment vehicle, putting Arm’s value at around $64bn. The speculation is that it will seek around $60bn-70bn, or around 21-25 times annual sales. That would place it closer to the lofty multiples of Nvidia, the leader of the artificial-intelligence gold rush, than the chasing pack (see chart).The ubiquity of Arm’s chip designs may seem to justify a juicy valuation. Unlike its competitors, which design, manufacture and sell chips, Arm deals only in intellectual property. It makes money by licensing its designs, which customers can modify if required, and takes a small cut from every chip built. Using Arm’s off-the-shelf designs allows companies to build a processor at a fraction of the cost of designing it themselves. As a result, its chips are everywhere.Its technology sits within 99% of the world’s smartphones. In devices from industrial sensors to smart toasters or anything else that now connects to the internet, its designs feature in 65% of their processors. In the automotive sector Arm has a 41% market share and even in the lucrative cloud-computing market, long dominated by Intel, Arm-based processors account for 10% of the chips sold.The ai boom brightens Arm’s prospects. Earlier in August Nvidia unveiled Grace Hopper, a new chip that combines an Arm-based central processing unit (cpu) with its graphics-processing unit (gpu). The fully integrated chip promises to run bigger and faster versions of the language models that are trained on text from the internet to produce human-like output. And as Sara Russo of Bernstein, a broker, points out, as ai moves from data centres to consumer apps, devices capable of running ai functions using less energy will be needed. Arm, with its expertise in low-power, high-performance chip design, should be in a good position to meet the demand.ai hype is one thing. But other tech trends look less encouraging. Begin with sluggish demand. The majority of Arm’s sales come from processors for smartphones, cars and other connected devices. Sales of these chips have lately been weaker than expected. In August Qualcomm, an American chipmaker that specialises in smartphone processors, reported a 23% drop in sales in the most recent quarter compared with a year earlier. It expects the downturn to drag on until at least the end of the year. The forecast for automotive chips is similarly gloomy. Expanding demand from ai will not be enough to offset a drop-off in Arm’s core products.Arm’s position as the only supplier of easy-to-use chip designs is also in question, from risc-v, an open-source alternative developed at the University of California, Berkeley. risc-v designs are available to anyone without a licence or fee. Alan Priestley of Gartner, a market-research firm, believes it is a “growing threat” to Arm. For now risc-v serves the lower end of the market—sensors, connected devices and automotive chips. But as the technology improves, the promise of licence- and royalty-free designs for expensive smartphone and data-centre processors could prove a problem for Arm. In the year to March 2023 all its revenues came from licensing ($1bn) and royalties ($1.6bn).The company’s reliance on Arm China—a separate entity—for a quarter of its revenues is another cause for concern for investors. In its filings the company admits that it is “particularly susceptible” to tensions between China and America. In December Arm chose not to license its designs for a high-end cpu to Alibaba, a Chinese e-commerce giant, for fear that it would fall foul of a ban imposed by America last year on selling certain cutting-edge chips in China.The question is whether the hype around ai means that investors pay less attention to such worries. When the deal to sell Arm to Nvidia fell through in 2022, Son Masayoshi, the founder of SoftBank, vowed to take Arm public in the “the largest ipo in semiconductor history”. ai exuberance in a market starved of blockbuster ipos may make his wish come true. ■ More

Attend any business conference or open any management book and an encounter with some variation of the same message is almost guaranteed: the pace of change in business is accelerating, and no one is safe from disruption. Recent breakthroughs in artificial intelligence (ai) have left many corporate Goliaths nervously anticipating David’s sling, fearing that they might meet the same fate as firms such as Kodak and Blockbuster, two giants that were felled by the digital revolution.“The Innovator’s Dilemma”, a seminal book written in 1997 by Clayton Christensen, a management guru, observed that incumbents hesitate to pursue radical innovations that would make their products or services cheaper or more convenient, for fear of denting the profitability of their existing businesses. In the midst of technological upheaval, that creates an opening for upstarts unencumbered by such considerations. Yet the reality is that America Inc has experienced surprisingly little competitive disruption during the age of the internet. Incumbents appear to have become more secure, not less. And there is good reason to believe they will remain atop their perches. Consider the Fortune 500, America’s largest companies by revenue, ranging from Walmart to Wells Fargo. Accounting for roughly a fifth of employment, half of sales and two-thirds of profits, they form the backbone of corporate America. The Economist has examined the age of each firm, taking into account the mergers and spin-offs that paint an artificially youthful picture of the group.We found that only 52 of the 500 were born after 1990, our yardstick for the internet era. That includes Alphabet, Amazon and Meta, but misses Apple and Microsoft, middle-aged tech titans. Merely seven of the 500 were created after Apple unveiled the first iPhone in 2007, while 280 predate America’s entry into the second world war (see chart 1). In fact, the rate at which new corporate behemoths arise has been slowing. In 1990 just 66 firms in the Fortune 500 were 30 years old or younger and since then the average age has crept up from 75 to 90.One explanation is that the digital revolution has not been all that revolutionary in some parts of the economy, notes Julian Birkinshaw of the London Business School. Communications, entertainment and shopping have been turned on their heads. But extracting oil from the ground or sending electricity down wires look mostly the same. High-profile flops like WeWork, a much-hyped office-sharing firm now at risk of collapse, and Katerra, a failed one-time unicorn that tried to redefine the construction business by using prefabricated building components and fewer middlemen, have discouraged others from trying to disrupt their respective industries.Another reason is that inertia has slowed the pace of competitive upheaval in many industries, buying time for incumbents to adapt to digital technologies. Although 65% of Americans now bank online, nearly all the banks they use are ancient—the average age of those in the Fortune 500, including JPMorgan Chase and Bank of America, is 138. Fewer than 10% of Americans switched banks last year, according to Kearney, a consultancy. That stickiness has made it difficult for would-be disrupters to build scale before incumbents imitate their innovations. A labyrinthine regulatory system that favours big institutions with well-staffed compliance departments also contributes. The insurance industry, also dominated by geriatric giants like aig and MetLife, is much the same.The pattern is not unique to financial services. Walmart, America’s mightiest retailer, almost missed the rise of e-commerce. David Glass, its chief executive in the 1990s, predicted that online sales would never exceed those of its single largest retail warehouse, according to a recently published book, “Winner Sells All”, by Jason Del Rey, a journalist. Nonetheless, Walmart’s financial heft and enormous customer base gave it the chance to change course later. Only Amazon now sells more online in America. The recent growth of electric vehicles from Ford and General Motors, America’s two largest carmakers, offers another example. Their bulky balance-sheets have allowed them to pour vast amounts of money into reinventing their businesses at a time when raising capital is becoming more difficult for newcomers.A third explanation for the endurance of America’s incumbents is that their scale creates a momentum of its own around innovation. Joseph Schumpeter, the economist who coined the phrase “creative destruction”, first argued that economic progress was propelled mostly by new entrants, noting in “The Theory of Economic Development”, a book published in 1911, that “in general it is not the owner of stage-coaches who builds railways”. By the time Schumpeter published “Capitalism, Socialism and Democracy”, his magnum opus of 1942, he had changed his mind. It was, in fact, large firms—monopolies, even—that drove innovation, thanks to their ability to splash cash on research and development (r&d) and quickly monetise breakthroughs through existing customers and operations, spurred on by an ever-present fear of being toppled.America’s tech titans offer the quintessential illustration. Alphabet, Amazon, Apple, Meta and Microsoft invested a combined $200bn in r&d last year, equivalent to 80% of their combined profits and 30% of all r&d spending by listed American firms. Less obvious examples abound, too. John Deere, America’s largest agricultural-equipment business, founded in 1837, leads the way on recent innovations like driverless tractors and clever sprayers that use machine learning to spot and target weeds. Its ambition is to make farming fully autonomous by 2030, says Deanna Kovar, an executive at the firm. It has been snatching laid-off techies from Silicon Valley and now employs more software engineers than mechanical ones.Incumbents and newcomers also often play complementary roles in innovation. William Baumol, an economist, wrote in 2002 of a “David-Goliath symbiosis” in which radical breakthroughs are generated by independent innovators and then enhanced by established firms. A paper in 2020 by Annette Becker of the Technical University of Munich and co-authors split the r&d spending of a sample of firms into its two components—the more exploratory “research” and the more commercially-oriented “development”—and found that the relative weight of research declined with firm size. Likewise, a 2018 paper by Ufuk Akcigit of the University of Chicago and William Kerr of Harvard Business School found that the patents generated by large firms were less radical and more focused on incremental improvements to existing products and processes.That division of labour may help explain why many startups are bought by established firms. John Deere’s acquisition in 2017 of Blue River, a startup, gave it the technology behind its clever weed sprayer, which it was then able to sell through its vast network of distributors. Over the past decade 74% of venture-capital “exits” in America were via such acquisitions, according to PitchBook, a data provider (see chart 2). That is up from next to none in the 1980s, leading to warnings of a plague of “killer acquisitions”, with big firms eating their potential future rivals. Such nefarious cases do occur, but are rare. A study in 2021 by Colleen Cunningham, then at the London Business School, and co-authors found that 5-7% of acquisitions by pharmaceutical companies, which rely heavily on startups to top up drug pipelines, looked suspect. Most of the time, folding into an established giant is simply the most efficient way for an innovative new firm to bring its breakthroughs to the world.A final explanation for the lack of competitive disruption in corporate America relates to demographics. “Young firms are generally built by young people”, notes John Van Reenen of the London School of Economics. Between 1980 and 2020 the share of the American population aged between 20 and 35 fell from 26% to 20%. The rate of new business formation fell from 12% to 8% over the same period (see chart 3). In a 2019 study comparing variations in population growth and new business formation across states in America, Fatih Karahan of the Federal Reserve Bank of New York and co-authors concluded that falling population growth accounted for 60% of the decline in the business entry rate over the past four decades. Application rates to start new businesses in America surged in late 2020 after plummeting in the early months of the covid-19 pandemic, and have since remained well above pre-pandemic levels. That entrepreneurial burst has largely focused on hospitality and retailing, which were hammered by the pandemic, and over time may peak, especially as household savings, puffed up by the pandemic, dwindle. Optimists will hope that the recent flurry of investment in ai startups can sustain the momentum. Even if it does, the corporate giants of the past may well remain on top. ■To stay on top of the biggest stories in business and technology, sign up to the Bottom Line, our weekly subscriber-only newsletter. More

“WE ARE WORKING flat-out,” says Armin Papperger, chief executive of Rheinmetall, Germany’s biggest arms-maker. Ever since Russia invaded Ukraine in February last year, the Düsseldorf-based maker of tanks, ammunition and other military kit has been inundated with orders. On August 10th the firm reported that sales of its military ware in the first half of the year had risen by 12% compared with the same period in 2022, and Mr Papperger expects growth to hit 20-30% for the year as a whole. A few days later the company said it had secured an order from the Ukrainian army for drones, and on August 18th it is due to inaugurate a large new factory in Hungary. Its share price has roughly tripled since the start of last year.Listen to this story. Enjoy more audio and podcasts on More

Paris has long been at the heart of the history of flight. It is where the Montgolfier brothers ascended in the first hot-air balloon in 1783, and where Charles Lindbergh completed the first solo transatlantic aeroplane journey in 1927. Next year, if all goes to plan, Paris will be the site of another industry first when Volocopter, a German maker of electric aircraft, launches a flying-taxi service during the Olympic Games. At the Paris Airshow in June the company, and some of its rivals, paraded a new generation of battery-powered flying machines designed for urban transport.Listen to this story. Enjoy more audio and podcasts on More

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The long-running legal battle over America’s opioid epidemic was reignited when, on August 10th, the country’s Supreme Court said it would review an earlier settlement secured by Purdue Pharma, a main character in the saga. Back in 2021 a federal judge had approved a bankruptcy plan for Purdue—the maker of OxyContin, a highly addictive painkiller—under which the business was to be restructured as a public-benefit company with all future profits going towards settling claims from victims and funding addiction-treatment programs. Members of the Sackler family, which owns the drugmaker, were to contribute $4.5bn (later increased to $6bn) towards the settlement.Listen to this story. Enjoy more audio and podcasts on More