Philippa Kaur

Since the launch in November of ChatGPT, an artificially intelligent conversationalist, AI is seemingly all anyone can talk about. Corporate bosses, too, cannot shut up about it. So far in the latest quarterly results season, executives at a record 110 companies in the S&P 500 index have brought up AI in their earnings calls. ■To stay on top of the biggest stories in business and technology, sign up to the Bottom Line, our weekly subscriber-only newsletter. More

IF AUSTRALIA AND Canada were one economy, this “Ozanada” would be the world’s fifth-largest, bigger than India and just behind Germany. Considering the two in tandem is not as nutty as it seems. Weather aside, they have a remarkable amount in common. Both are vast land masses populated by comparatively few people and dangerous wildlife. Both are (mostly) English-speaking realms of King Charles III. Both export their rich natural resources around the planet. And both are magnets for immigration.Their worlds of business, too, are near-identical. Macquarie, an Australian financial group, is the world’s largest infrastructure-investment manager. Brookfield, a Canadian peer, is the runner-up. Fittingly, Australia has produced a number of top surf-clothing labels, just as Canada has developed a niche in parkas and other winterwear. And, of course, both are home to commodities giants. But the main thread that connects Ozanada Inc is less fetching. As Rod Sims, former head of Australia’s competition watchdog puts it, his country’s firms have “forgotten how to compete”. So have their Canadian counterparts.Many hands have been wrung in recent years over oligopolies in America. Yet next to Ozanada, the world’s largest economy looks like a paragon of perfect competition. Coles and Woolworths, Australia’s biggest supermarkets, sell 59% of its groceries, according to GlobalData, a research firm. Loblaws and Sobeys peddle 34% of Canada’s—more than the combined share of the top four grocers in America. In both Australia and Canada the four biggest banks hold three-quarters of domestic deposits, compared with less than half in America. In both countries domestic aviation is a duopoly and telecoms a triopoly. The list goes on.Part of the explanation for Ozanada’s oligopolistic tendencies is benign. If companies need to be of a certain scale to be economically viable—to afford the necessary investments in computer systems, for example—then a small economy may be unable to support more than a few players in many industries. Ozanadian national champions, notably its grocers and lenders, are, however, meaningfully more profitable than their American counterparts. That points to other, less innocent causes. Toothless antitrust regimes in both countries set a high bar for blocking mergers, permitting consolidation. A lack of openness to foreign investment doesn’t help. Of the 38 members of the OECD, only three—Iceland, Mexico and New Zealand—are less open to foreign investment. Stringent screening, ownership caps and various other hurdles make setting up shop in Ozanada a hassle for foreigners. In 2013 Naguib Sawiris, an Egyptian telecoms tycoon, swore he would never again invest in Canada after his bid to acquire the fibre-optic network of Manitoba Telecom Services (MTS), a Canadian carrier, was rejected by the government with little explanation. Four years later MTS was purchased in its entirety by Bell Canada, a local rival.All this may reflect a unique Ozanadian spin on the “resource curse” that has brought political instability and underdevelopment to commodity-rich countries in Africa and South America. Ozanada’s natural bounty has weakened its incentive to build globally competitive industries in other areas. That may explain why, beyond commodities and outdoor apparel, the list of successful Ozanadian multinationals is so short. Canada’s banks have dipped a toe in America, but remain small fry. Its life insurers have fared only a bit better south of the border, mostly thanks to big acquisitions. Vegemite, a divisive Australian spread, has yet to win over foreign sandwich-eaters.Ozanada Inc’s limitations are particularly acute at the cutting edge of technology. Products deemed “high-tech” by the World Bank, such as computers and drugs, represent more than 7% of the combined exports of OECD members, but only 4% for Canada and less than 2% for Australia. Patents granted per 10,000 people are a mere 5.9 in Canada and 6.7 in Australia, compared with 9.9 in America and 28.2 in South Korea. This is not for want of well-nourished brains; Ozanada is home to world-class universities and boasts some of the highest rates of tertiary education in the OECD. Rather, the problem is an underfed innovation system. Spending on research and development comes to just 1.7% and 1.8% of GDP in Canada and Australia, respectively, against an OECD average of 2.7%. Total venture-capital investment in Ozanada was a mere $16bn in 2022, roughly half the level in Britain. Atlassian and Canva, two Australian technology successes, and Shopify, a Canadian one, have not prompted a lot of fresh prospecting for the next generation of tech winners.Dormant animal spiritsTo Ozanadians, this may all seem academic. After all, among citizens of countries with at least 20m inhabitants, only America’s are richer. But they used to be better off than Americans: after soaring in the first decade of the 2000s thanks to rising commodity prices, their GDP per person briefly surpassed America’s in the early 2010s in dollar terms. And a fate tethered to demand for commodities may prove particularly volatile in the decades to come. Canada, with its reliance on oil and gas exports, could be dragged down by decarbonisation. Australia will be somewhat insulated by its vast deposits of copper and other minerals needed for the green transition. But it could suffer from its dependence on shipping commodities to China. In 2020 China began introducing restrictions on Australian coal, timber and other products, seemingly in retaliation for calls by Australia’s then government for an inquiry into the origins of covid-19. Australia weathered those restrictions, which have since been loosened, surprisingly well. A long-term slowdown in China’s economic growth, though, which many economists now expect, would weigh heavily on the country. Ozanada’s economic model is not about to collapse. In time, though, its corporate weaknesses may come back to bite it. ■Read more from Schumpeter, our columnist on global business:Why tech giants want to strangle AI with red tape (May 25th)America’s culture wars threaten its single market (May 18th)Writers on strike beware: Hollywood has changed for ever (May 10th)Also: If you want to write directly to Schumpeter, email him at [email protected]. And here is an explanation of how the Schumpeter column got its name. More

IN THE MARKET for corporate counsel, building is more common than buying. Shelling out for a bullpen of bankers or lawyers is often more costly than poaching a rival’s star performers. So if mergers are, like second marriages, a triumph of hope over experience, then the advisers who put them together really should know better when it comes to their own family. Though their clients are announcing tie-ups at the slowest pace in a decade, in recent weeks the corporate consiglieri have struck a flurry of deals among themselves. Three big transactions illustrate how they may be fooling themselves.On May 21st Allen & Overy, one of London’s elite “magic circle” of law firms, announced a tie-up with Shearman & Sterling, a prestigious Wall Street “white shoe” practice. The merger will create a transatlantic giant with annual revenues exceeding $3bn. Especially for the British partner, though, it may end in heartache. Shearman has struggled to keep up with competitors and has haemorrhaged partners in recent years; in March it abandoned a tie-up with Hogan Lovells, another big firm. As well as staving off the threats of dealmakers departing amid a period of thin corporate activity, the joint firm’s bosses must prove that the marriage is one of convenience rather than desperation. The second deal looks no less fraught. On May 22nd Mizuho, a Japanese banking giant, said it was acquiring Greenhill for $550m. The sale concludes a stagnant decade at the boutique American investment bank, founded in 1996 by Robert Greenhill, a former Morgan Stanley banker. With its share price down by more than 90% from its peak in 2009, the house of Greenhill is in a shoddy shape. That does not necessarily make trying to repair it a good idea.This is not the first Japanese foray onto Wall Street. During the global financial crisis of 2007-09, Mitsubishi UFJ purchased its 22% stake in Morgan Stanley and Nomura acquired Lehman Brothers’ European investment-banking operations. In April this year Sumitomo Mitsui, another big Japanese bank, announced that it would increase its stake in Jefferies, a medium-sized investment bank it first put money into two years ago, from 5% to 15%. The results have been mixed: Mitsubishi’s bet paid off handsomely; Nomura’s did not. For Sumitomo, the jury is out.Mizuho’s first task will be to avert an exodus. Unlike machines in a factory, white-collar workers are not nailed to the floor. Bankers are not usually given to pangs of loyalty when they receive offers of more money elsewhere. Boutiques, which typically lure star dealmakers with the promise of a bigger slice of their fees, are particularly sensitive to well-connected dealmakers leaving, especially if they take their clients with them—Greenhill’s ten highest-paying customers made up 38% of revenues in 2022. There is little reason to think Mizuho, a firm with little presence on Wall Street, can resuscitate Greenhill’s powers.The third transaction heaps another challenge on top of employee retention. After pruning its investment bank in recent years, on April 28th Deutsche Bank announced a deal to buy Numis, a British investment-banking firm, for £410m ($515m). The German lender has bought the ear of British bosses before—in 1989 it acquired Morgan Grenfell, one of London’s most illustrious merchant banks. Numis is less grand, but acts as corporate broker to around one in five large listed British firms, a service which involves offering regular market-facing advice to bosses in the hope of landing better-paid dealmaking contracts down the line.Deutsche Bank’s move looks like a contrarian bet on British listings—possibly too contrarian. The received wisdom today is that London’s stockmarket is in decline. British bosses regularly moan that they could achieve higher valuations elsewhere. Arm, Britain’s most important chipmaker, is expected to list its shares in America. Maybe Deutsche Bank is counting on a wave of buy-outs by foreign firms to turn it into the auctioneer of Britain’s corporate silver. But that business would at best be transient, and Numis looks dear. The German buyer is paying the equivalent of £1.7m for each of Numis’s front-office staff, more than twice the annual revenue each employee has generated since 2020. If only it could demand a prenup. ■To stay on top of the biggest stories in business and technology, sign up to the Bottom Line, our weekly subscriber-only newsletter. More

A recent piece of research revealed that as many as one in five people in Britain suffers from “misophonia”, a condition in which certain sounds cause them disproportionate distress. If you can listen to your spouse eating an apple and don’t immediately want a divorce, you are not a sufferer of misophonia. But you may have another, similar condition for which the workplace is the perfect breeding-ground. “Misergonia” (colloquial shorthand: desk rage) is the name hereby bestowed on the eye-gougingly deep irritation triggered by certain aspects of office life. Like misophonia, sounds are often the trigger for misergonia. The routine fire-alarm test is a case in point. “Attention please, attention please,” shouts a voice that is literally impossible to ignore. “This is a test,” it roars, making it clear that your attention is not in fact required. More shouting and eardrum-piercing noises follow. Then, most galling of all, a message of thanks for your attention, the aural equivalent of a prison thanking you for choosing them for a stay. By the end of it all, a conflagration would be sweet release. Other noises are less obviously intrusive but just as annoying. The noise of clicking keys is the soundtrack of cubicles everywhere. But every office has its share of keyboard thumpers, people whose goal seems to be not producing a document but destroying the equipment before one can be created. Verbal tics are another tripwire for misergonia sufferers. “This is a point that has already been made,” is how weirdly large numbers of people start to make a point that has already been made. Why not just say “I don’t value your time” and have done with it? Small IT failures are a fact of office life, but they can still be soul-destroying. The printer which jams repeatedly. The design requirement in said printer that demands every flap and tray must be opened once before things can restart. The headphones that never work. Or the mouse that gives up at just the wrong moment. Your cursor is two centimetres from the unmute button on a Zoom call; you move your mouse towards it when it is your turn to speak, and nothing happens. You rattle it around more vigorously, and still no response. Either your cursor is in a coma or the battery has run out. “You’re still on mute,” offers up a colleague helpfully. Someone else fills the gap. “This is a point that has already been made…,” they begin. And then there is the reply-all email. It starts innocently enough, with someone asking for help with a problem. In come one or two replies, and with a sickening lurch of the stomach you realise that the entire company has been copied in on this request. Suddenly, an avalanche. It is as if nothing else matters other than weighing in on this one question. Deadlines are deferred. Milk goes off in the fridge. Visitors in reception are left to forage for food while members of staff devote themselves to the matter at hand. There are replies to replies, and replies to replies to replies. This isn’t a thread, it’s a hawser. Everyone seems to be enjoying themselves hugely. But there is a silent, suffering group for whom every new message lands as a hammer blow to their composure. How many minutes can one organisation fritter away on this nonsense? Why isn’t it stopping? And when the initial round of answers has died down, can you be certain that it is really over? It is always possible that someone who has been away from their desk will pile in and start the whole farrago up again. Individual workers will have their own triggers, ostensibly tiny things to which they are extremely sensitive. It might be the person who still doesn’t understand you have to tag someone in Slack to notify them of a message. It might be the doors closing on a crowded lift, only for an arm to snake in and a voice to ask “room for one more?” (If you were the size of a marmot, yes.) It might be a particularly heavy tread or an even heavier perfume. It might be the way someone insists on using the word “pivot”. It might be anything, frankly—which means that for some of your colleagues it might also be you. There is no cure for misergonia. The workplace is a collection of people in enforced and repeated proximity, their habits, noises and idiosyncrasies turning into something familiar for some colleagues and disproportionately grating for others. The only release is to go home, close the front door behind you and find your significant other tucking into an apple.■Read more from Bartleby, our columnist on management and work:Why are corporate retreats so extravagant? (May 25th)Businesses’ bottleneck bane (May 18th)How to recruit with softer skills in mind (May 11th)Also: How the Bartleby column got its name More

Hermès is a byword for exclusivity. Its signature Birkin bag, one of which sold for $450,000 last year, cannot be bought from the luxury firm’s website or by simply walking into a store. There are neither ads in fashion magazines nor glossy campaigns on Instagram. For the not-so-famous, owning a Birkin can involve a years-long waiting list.Part of the reason for the wait is constrained supply, which Hermès manages with the precision worthy of its stitching. But another part is booming demand for all manner of luxury goodies. Last year net profits of Kering, which owns fashion labels such as Gucci and Balenciaga, rose by 14%. Those at LVMH, owner of Tiffany and Louis Vuitton, among other brands, grew by nearly a quarter. Hermès and Richemont, which owns Cartier, among other baubles, each saw theirs surge by more than a third. Together, the four groups raked in over €33bn ($35bn) in profits, on combined revenues of around $130bn.That, though, was before persistent inflation and rising interest rates to combat it fanned fears of a global recession. Now, as those fears intensify, luxury brands are losing their shine, at least in the eyes of investors. Luxury bosses’ unease More

A GREY RECTANGULAR building on the outskirts of San Jose houses rows upon rows of blinking machines. Tangles of colourful wires connect high-end servers, networking gear and data-storage systems. Bulky air-conditioning units whirr overhead. The noise forces visitors to shout. The building belongs to Equinix, a company which leases data-centre space. The equipment inside belongs to companies from corporate giants to startups, which are increasingly using it to run their artificial-intelligence (AI) systems. The AI gold rush, spurred by the astounding sophistication of “generative” systems such as ChatGPT, a hit virtual conversationalist, promises to generate rich profits for those who harness the technology’s potential. As in the early days of any gold rush, though, it is already minting fortunes for the sellers of the requisite picks and shovels.On May 24th Nvidia, which designs the semiconductors of choice for many AI servers, beat analysts’ revenue and profit forecasts for the three months to April. It expects sales of $11bn in its current quarter, half as much again as what Wall Street was predicting. As its share price leapt by 30% the next day, the company’s market value flirted with $1trn. Nvidia’s chief executive, Jensen Huang, declared on May 29th that the world is at “the tipping point of a new computing era”.Other chip firms, from fellow designers like AMD to manufacturers such as TSMC of Taiwan, have been swept up in the AI excitement. So have providers of other computing infrastructure—which includes everything from those colourful cables, noisy air-conditioning units and data-centre floor space to the software that helps run the AI models and marshal the data. An equally weighted index of 30-odd such companies has risen by 40% since ChatGPT’s launch in November, compared with 13% for the tech-heavy NASDAQ index (see chart). “A new tech stack is emerging,” sums up Daniel Jeffries of the AI Infrastructure Alliance, a lobby group. On the face of it, the AI gubbins seems far less exciting than the clever “large language models” behind ChatGPT and its fast-expanding array of rivals. But as the model-builders and makers of applications that piggyback on those models vie for a slice of the future AI pie, they all need computing power in the here and now—and lots of it. The latest AI systems, including the generative sort, are much more computing-intensive than older ones, let alone non-AI applications. Amin Vahdat, head of AI infrastructure at Google Cloud Platform, the internet giant’s cloud-computing arm, observes that model sizes have grown ten-fold each year for the past six years. GPT-4, the latest version of the one which powers ChatGPT, analyses data using perhaps 1trn parameters, more than five times as many as its predecessor. As the models grow in complexity, the computational needs for training them increase correspondingly. Once trained, AIs require less number-crunching capacity to be used in a process called inference. But given the range of applications on offer, inference will, cumulatively, also demand plenty of processing oomph. Microsoft has more than 2,500 customers for a service that uses technology from OpenAI, ChatGPT’s creator, of which the software giant owns nearly half. That is up ten-fold since the previous quarter. Google’s parent company, Alphabet, has six products with 2bn or more users globally—and plans to turbocharge them with generative AI. The most obvious winners from surging demand for computing power are the chipmakers. Companies like Nvidia and AMD get a licence fee every time their blueprints are etched onto silicon by manufacturers such as TSMC on behalf of end-customers, notably the big providers of cloud computing that powers most AI applications. AI is thus a boon to the chip designers, since it benefits from more powerful chips (which tend to generate higher margins), and more of them. UBS, a bank, reckons that in the next one or two years AI will increase demand for specialist chips known as graphics-processing units (GPUs) by $10bn-15bn. As a result, Nvidia’s annual data-centre revenue, which accounts for 56% of its sales, could double. AMD is bringing out a new GPU later this year. Although it is a much smaller player in the GPU-design game than Nvidia, the scale of the AI boom means that the firm is poised to benefit “even if it just gets the dregs” of the market, says Stacy Rasgon of Bernstein, a broker. Chip-design startups focused on AI, such as Cerebras and Graphcore, are trying to make a name for themselves. PitchBook, a data provider, counts about 300 such firms. Naturally, some of the windfall will also accrue to the manufacturers. In April TSMC’s boss, C.C. Wei, talked cautiously of “incremental upside in AI-related demand”. Investors have been rather more enthusiastic. The company’s share price rose by 10% after Nvidia’s latest earnings, adding around $20bn to its market capitalisation. Less obvious beneficiaries also include companies that allow more chips to be packaged into a single processing unit. Besi, a Dutch firm, makes the tools that help bond chips together. According to Pierre Ferragu of New Street Research, another firm of analysts, the Dutch company controls three-quarters of the market for high-precision bonding. Its share price has jumped by more than half this year. UBS estimates that gpus make up about half the cost of specialised AI servers, compared with a tenth for standard servers. But they are not the only necessary gear. To work as a single computer, a data centre’s GPUs also need to talk to each other. That, in turn, requires increasingly advanced networking equipment, such as switches, routers and specialist chips. The market for such kit is expected to grow by 40% annually in the next few years, to nearly $9bn by 2027, according to 650 Group, a research firm. Nvidia, which also licenses such kit, accounts for 78% of global sales. But competitors like Arista Networks, a Californian firm, are getting a look-in from investors, too: its share price is up by nearly 70% in the past year. Broadcom, which sells specialist chips that help networks operate, said that its annual sales of such semiconductors would quadruple in 2023, to $800m.The AI boom is also good news for companies that assemble the servers that go into data centres, notes Peter Rutten of IDC, another research firm. Dell’Oro Group, one more firm of analysts, predicts that data centres across the world will increase the share of servers dedicated to AI from less than 10% today to about 20% within five years, and that kit’s share of data centres’ capital spending on servers will rise from about 20% today to 45%. This will benefit server manufacturers like Wistron and Inventec, both from Taiwan, which produce custom-built servers chiefly for giant cloud providers such as Amazon Web Services (AWS) and Microsoft’s Azure. Smaller manufacturers should do well, too. The bosses of Wiwynn, another Taiwanese server-maker, recently said that AI-related projects account for more than half of their current order book. Super Micro, an American firm, said that in the three months to April AI products accounted for 29% of its sales, up from an average of 20% in the previous 12 months.All this AI hardware requires specialist software to operate. Some of these programs come from the hardware firms; Nvidia’s software platform, called CUDA, allows customers to make the most of its GPUs, for example. Other firms create applications that let AI firms manage data (Datagen, Pinecone, Scale AI) More

ICE BATHS, infrared saunas, white-water rafting, fly-fishing, archery workshops, whisky tastings, yoga at sunrise, shooting clay pigeons, go-kart races, mountain-biking in Norway, falconry in Ireland, climbing up a glacier in Alberta, singing “Kumbaya” around a campfire. These seemingly disparate activities have one thing in common: all of them are real examples of the contemporary corporate off-site.Your columnist, a guest Bartleby, cringes at the idea of PowerPoint presentations followed by role-playing exercises and mandatory games. She prefers to let the ties with her colleagues deepen in organic ways. Still, the executive retreat has become an annual business tradition. The idea is that, by disconnecting employees from their day-to-day routine, companies can build camaraderie and foster creativity. And it has grown in importance.A splashy, exciting getaway once a year may help retain executives in a tight labour market (and is cheaper than fatter monthly pay cheques). In the era of remote work—without the thousands of micro-interactions that happen in the office—team-building trips have also gained a structural role. Suddenly, off-sites are no longer an afterthought but lodged near the heart of corporate HR strategy. Not participating is not an option; so what if co-workers end up meeting in person for the first time wearing flip-flops?It used to be barbecues and softball games. Retreats moved things a notch higher in style and expense. Just three months after Steve Jobs left Apple and started another company in 1985, he whisked his employees to Pebble Beach for their first off-site. As corporate psychology boomed in the 1990s, team-building retreats became entrenched. By 2015 Uber was reportedly offering Beyoncé $6m to perform for its employees (no, not the drivers) at a corporate event in Las Vegas (the pop star was apparently paid in the then-hot startup’s stock rather than cash). WeWork, an office-rental firm with tech pretensions, used to host raucous summer retreats around the world; employees were encouraged to dance the night away to electronic music. Given Uber’s lacklustre ride since its initial public offering in 2019, current management has gone easy on A-listers. WeWork revised its staff-entertainment policies after its party-loving founder and CEO, Adam Neumann, was forced out in the wake of its abortive IPO later that year. But the trend for the corporate getaway has, if anything, intensified. To stand out, companies try to make their retreats as bespoke and exotic as possible. Those firms that cannot afford pop stars can have an astronaut regale executives with tales of life in space—not Queen Bey, exactly, but potentially enthralling to the nerdier elements of the workforce. Many organisers opt for the great outdoors, perhaps in the belief that the sublime will unleash authenticity. Wineries around the world are now expanding to accommodate retreats featuring winemaking lessons; employees stomp grapes. A Montana ranch offers corporate clients paintball, flag-capturing and dummy-cattle-roping. Butchershop, a brand-strategy agency, held its second summit in Costa Rica; activities included zip-lining, horseback riding through the jungle and jumping off a cliff into the water. A sure-fire way for a business to make its retreat memorable is to thrust participants into adversity. Battling the elements together is supposed to foster team spirit, but zealous organisers have occasionally been known to overdo it. One large European company sent executives to the Arctic Circle in midwinter. They endured frigid temperatures for days, without a fresh change of clothes. Walking on hot coals—an ancient ritual recast as a team-building exercise—led to the injury of 25 employees of a Swiss ad agency in Zurich. It is unclear what many days away achieves, except for straining the expense budget and consuming valuable time. Returning to your desk with frostbite or burnt feet is unlikely to boost your productivity. Even if you escape injury you may have lost esteem for the co-worker who drank too much and delivered a maudlin monologue. Walking on fire with colleagues may be meant to encourage spiritual healing and to put employees and bosses on equal—and equally uncomfortable—footing. Yet it is walking through metaphorical fire which actually causes teams to bond. That happens not at a corporate retreat but after years of working together.■Read more from Bartleby, our columnist on management and work:Businesses’ bottleneck bane (May 18th)How to recruit with softer skills in mind (May 11th)A short guide to corporate rituals (May 4th)Also: How the Bartleby column got its name More

IN MID-MAY GERMANS were bracing for the third, and longest, national rail strike this year. Deutsche Bahn (DB) was locked in a dispute over pay with EVG, the union representing most German railway workers, including 180,000 at the state-run behemoth. At the last minute union leaders called off a 50-hour stoppage that was going to begin on the evening of May 14th. German travellers breathed a sigh of relief—and then gasped as DB failed to reinstate all of the 50,000 cancelled services. The next day roads were clogged by commuters who, worried about getting stuck at a train station, took the car instead.On May 23rd DB and the union met for a fourth round of wage talks, with no long-term resolution in sight. And labour unrest is only one of many fronts on which DB is fighting. Once a source of national pride, it has become the butt of bad jokes (“We have one about DB but we don’t know whether it will work”). In April just 70% of its long-distance trains were on time. And even that was an improvement on the whole of last year, when only 60% were punctual; the company’s (unambitious) goal is at least 80%. DB services are “too crowded, too old and too kaputt”, Berthold Huber, who sits on DB’s board, told the Süddeutsche Zeitung, a daily, this month.DB’s woes are the result of poor management, a bloated bureaucracy, political interference and years of underinvestment. In 2004 DB’s annual budget for the construction and upgrading of railway lines was cut from €4bn ($5bn) a year to €1.5bn, notes Christian Böttger of the University of Applied Sciences in Berlin. It has edged up since but last year was still only €1.9bn. This year it will be €2bn. The railway business has been bleeding money for years; in 2022 it made an operating loss of €500m. DB’s overall operating profit of €1.3bn, on revenues of €56bn, was all down to its logistics arm, DB Schenker, which has benefited from the uptick in e-commerce and now contributes nearly half of sales. Vowing to make up for the failings of its predecessors, Olaf Scholz’s newish cabinet has ambitious plans for DB. It wants to pump an extra €45bn into the network, hoping almost to double the number of passenger journeys by 2030 to around 4bn, and to increase freight volumes by 25%. This year DB is beginning to renovate and modernise 650 train stations, as well as upgrading 2,000km of tracks, 1,800 switch points and 200 bridges. It will also add another 500 people to its 4,300-strong team of security personnel, who are tasked with protecting train tracks against mischief-makers (last October DB was hit by suspected sabotage, causing the suspension of all services in northern Germany). And it is accelerating the digitisation of railway traffic, from signals and switches to digital “twins” of wagons ferrying goods.In time this may improve passengers’ lot. But not soon. This year carriages may get more packed: since May 1st Germans can buy a monthly Deutschland ticket, valid on all regional and local trains, for just €49. Delays and missed connections are forecast to be worse than in 2022, in part owing to all those upgrade works. And DB may slip into the red. It is forecasting a loss of €1bn from operations in 2023, because of the investments, as well as high cost inflation that is politically tough to pass on to travellers (who, in a further drain on DB cash, can demand compensation for all the delays). “The pretence of running an economically viable business was abandoned …long ago,” says Mr Böttger. It is all about getting more cash from the state. ■To stay on top of the biggest stories in business and technology, sign up to the Bottom Line, our weekly subscriber-only newsletter. More