Business

Summer is in the air. People in the northern hemisphere are starting to discuss holiday plans and making some bold wardrobe choices. Recommendations for beach reads are coming out left, right and centre. The oddest of such lists are those aimed at the relaxed executive. Each summer JPMorgan Chase’s wealth managers release a reading list. Their recommendations for 2022 include a book by a bunch of McKinsey consultants on ceo excellence and a comprehensive guide to non-fungible tokens. You can almost smell the sun-tan lotion. This year’s reading list is also available to explore in the metaverse, because nothing says the azure waters of the Mediterranean like choosing an avatar.In its pick of summer business books, the Financial Times has chosen titles that range from hybrid work to the pitfalls of strategy. hr Exchange Network, a news site, encourages its readers to lounge on the beach with a copy of the “Essential hr Handbook”—and appears not to be joking. It is only a matter of time before The Economist does something similar.People should read whatever they want. The books on the list may well be useful: no mosquito would survive contact with the “Essential hr Handbook”. But anything that contains the words “blockchain” or “McKinsey” is missing the point. Plenty of people spend the majority of their waking hours either working or thinking about work. The idea of a summer read is that it should provide an escape from the office, not yet another way to think about it. In an ideal world people would pack several P.G. Wodehouses and switch off entirely. But publishers could also do their bit and release titles that really are meant to be beach reads on business. These books would be aimed at the off-duty person behind the Zoom screen. They would contain precisely no tips on productivity gains and extol inactivity over frenzy. Instead of showing you “how you too can model yourself on the very best”, as the book on successful chief executives allegedly will, summer titles should give you permission to fall asleep in a pool of your own dribble. Here, then, are a few suggestions to get the industry thinking.In 2005 two insead professors, W. Chan Kim and Renée Mauborgne, wrote a book called “Blue Ocean Strategy”, which divided marketplaces into uncontested areas (the “blue ocean”) and those infested by predatory competitors (the “red ocean”). But what if you don’t really fancy getting in the water at all? “Yellow Sand Strategy” makes the case that sometimes the best thing to do is remain entirely inactive and hope that nothing bad happens. (“Yellow Ocean Strategy” is a different book entirely, for executives who do things so incompetently that no one gives them any extra work.) The United States Marine Corps has a practice of having senior officers serve up meals to junior members of the unit as a way of cementing bonds. That habit lay behind the title of a management bestseller published by Simon Sinek called “Leaders Eat Last”. On holiday, though, you don’t have to build morale or worry about your team. Read “Leaders Eat Three Club Sandwiches In a Row and Need to Have a Short Lie-Down”, and feel better about yourself. In “The Innovator’s Dilemma” Clayton Christensen describes how leaders of established firms often fail to take advantage of new technologies and risk letting scrappy startups turn into formidable rivals as a result. But the summer break is no time to be thinking about disruption of any kind. Instead, turn your mind to more prosaic problems. “The Procrastinator’s Dilemma” looks at the difficult choice people face between letting work pile up until it really has to be done or letting work pile up until it really, really has to be done. The closer you look, the more you realise that underachievers and rank amateurs are badly served by business publishers. There is a market for laziness: the success of “The 4-Hour Work Week”, by Tim Ferriss, was no accident. With just a few tweaks here and there, many entries in the back catalogue of business bestsellers become ripe for the beach. From “Seven Habits of Highly Ineffective People” to “Start with Why Should I” and “What Colour is Your Sun Lounger?”, the possibilities are endless.These are not the sort of titles anyone wants to be seen reading at work or posting about on LinkedIn. There are no bragging rights associated with them. But the beach is a place to unwind. If ever there is a time for reading lists to indulge the unmotivated and celebrate indolence, the summer is it. Read more from Bartleby, our columnist on management and work:Why managers deserve more understanding (Jul 25th)Work, the wasted years (Jun 16th)Corporate jets: emblem of greed or a boon to business? (Jun 9th)For exclusive insight and reading recommendations from our correspondents in America, sign up to Checks and Balance, our weekly newsletter. More

The spiritual home of Mars Inc is Slough, an unprepossessing town somewhere under the flight path to London’s Heathrow Airport. It is not a place that sweet dreams are made of. It serves as the British backdrop for Ricky Gervais’s “The Office”. It is also the place where Forrest Mars, in the Depression of the 1930s, came up with two business ideas and a management philosophy that are still quietly shaping the world today.The creation story of the Mars Bar is well known. In 1920s Chicago, Forrest Sr, as he is now remembered, met his estranged father, a struggling chocolatier, over a malted milk, and came up with the brainwave of pouring malted milk chocolate as filling into a candy bar. Thus was the Milky Way born. But Forrest Sr, as irascible as he was enterprising, fell out with his father, left America and ended up in Slough. There, he rechristened the Milky Way as the Mars Bar. At a time when people needed calories at low cost, it took off. With brands like m&ms, Mars, based since 1974 in McLean, Virginia, is now the world’s biggest confectioner. Less familiar is the origin of the dark horse of the Mars empire, pet food. In Slough, Forrest Sr noticed the Brits’ obsession with dogs. He did not like the way they ate scraps off the table. So in 1935 he bought a company that made Chappie, a tinned dog food. Today Mars reckons it caters to half the world’s pets. Royal Canin, maker of a fancy dog chow, is its biggest brand. It is one of the largest providers of veterinary care. On June 22nd the company announced that Poul Weihrauch, head of pet care, would take over from Grant Reid, its retiring ceo. Mr Weihrauch’s elevation partly reflects the growing importance of the pet business, which now generates 58% of sales, overtaking snacks (38%). Food accounts for the rest. The family-owned company, though fiercely private about its finances, also updated its sales figures. They showed that since Mr Reid took office in 2014, revenues have increased by more than 50%, to $45bn. That makes them bigger than Coca-Cola’s. The firm gives credit for its success to the austere business practices Forrest Sr honed in Slough, now known internally as the Five Principles: quality, responsibility, mutuality, efficiency and freedom. They may sound like managerial guff. But they strike the right balance between making money and doing good. Many more showy corporations aim for that under the trendy slogan of “stakeholder capitalism”. Few carry it off as convincingly as Mars.To understand why, first consider the relationship between the company and its only shareholders, the family—a dynasty worth about $96bn, according to Forbes magazine. The fourth generation, known as g4, runs the board. Like shareholders everywhere, they have varying priorities, ranging from sustainability to the welfare of “associates” (Martian for employees). Yet their mandate for steering the firm puts top-tier financial performance and long-term growth on a par with positive social impact and trust. The shareholders reap less than a tenth of profits as dividends. That frees Mars to plough the rest back into its business, letting it keep a strong balance-sheet and a staunchly independent streak. They lead low-key lives. That fits with Mars’s egalitarian ethos and preference for privacy. They also retain some of Forrest Sr’s eccentricities. A former board member recalls factory visits with family members where everyone tried mouthfuls of canned dog food in order to check its quality. “It’s like pâté. You get used to it,” he says. The practice continues—though “we don’t come into work every day and chomp away,” a current executive insists. Next there is the firm itself. It has been professionally run since 2001. People who know Mars say the clan does not meddle much, provided managers do not threaten to blow up the firm’s—and hence the family’s—reputation. Delegation of responsibility runs deep. Mars has a relatively flat management structure, in which bosses have no cushy perks such as personal parking spaces. Associates are given responsibility, even at a young age, to make big decisions. If they take a calculated business risk that goes wrong, so be it. If they behave unethically there is zero tolerance.In business, the firm is competitive but not cut-throat, rivals say. It used to be notable mostly for a strong factory culture, operational efficiencies and returns measured in relation to its physical assets. But this is changing as the veterinary-services business has grown. Now it plays up the more intangible parts of the business. “If you meet a Mars guy, they will talk about brands and people all the time,” a rival executive says admiringly, noting its high pay and good employee-retention rates. As for stakeholderism, or what Mars calls mutuality, it says it puts the interests of customers, workers, suppliers, communities and the environment alongside those of the family shareholders. That comes with some big investments, such as $1bn to support sustainable initiatives such as renewable energy, and a policy of paying its taxes in full. But when it talks about these publicly, it is mostly because they are germane to its business. It does not wade into political debates, nor does it pontificate on every social issue.What about the future? With low debt, lots of cash and products resilient to economic turbulence, Mars is in a strong position to expand further. Some of its competitors, such as Kellogg, a food company, are flogging parts of their business. Mars bought Wrigley, a maker of chewing gum, during the financial crisis in 2008—not its finest acquisition, to be sure, but one it has stuck with. It may snap up more during today’s inflationary turmoil. Willy Wonka moment It won’t discuss strategy, however. Though the family is more open about its commitments to society, it keeps business matters tightly under wraps. That legacy, which also dates back to Forrest Sr, may start to change. In 2020 Mars opened the Slough factory to tv cameras for the first time. Its chocolate-makers were, anticlimactically, locals in hairnets, not Oompa Loompas. But at least some of the secrets of Snickers’ nougat filling were revealed. ■Read more from Schumpeter, our columnist on global business:In EY’s split, fortune may favour the dull (Jul 25th)Amazon has a rest-of-the-world problem (Jun 16th)What’s gone wrong with the Committee to Save the Planet? (Jun 9th)For exclusive insight and reading recommendations from our correspondents in America, sign up to Checks and Balance, our weekly newsletter. More

The island of Sakhalin, pinned between Japan and Russia just north of Hokkaido and to the west of the Kamchatka Peninsula, has historically been the site of conflict between the two north Asian neighbours. Today, as the home of two massive fossil-fuel projects, it symbolises an uneasy Russo-Japanese peace—and, ever since Russia invaded Ukraine in February, a sore point in relations between Japan and its Western allies. The two projects, Sakhalin-I and Sakhalin-II, lured energy firms from America, Britain and India, as well as Japan and Russia. Shortly after Vladimir Putin’s tanks rolled into Ukraine, however, ExxonMobil, an American giant, pledged to divest its 30% stake in Sakhalin-I and Shell, a British rival, said it would offload its 27.5% stake in Sakhalin-II.Not the Japanese. Sakhalin Oil and Gas Development Company, a public-private partnership, will hold on to 30% of the oil-producing Sakhalin-I; two big trading houses, Mitsui and Mitsubishi, will keep their 12.5% and 10%, respectively, of Sakhalin-II, which pumps out liquefied natural gas (lng). The government in Tokyo has no problem with that. In May the economy minister, Hagiuda Koichi, declared that the Japanese shareholders wouldn’t leave even if asked to by the Russian government. Japan’s approach seems out of character. In other instances the country’s position with respect to Russia has mirrored those of America and Europe. In June the Japan Bank for International Co-operation, a state-owned lender, extended its freeze, introduced in March, on project financing of Russian natural-gas projects in the Arctic. Private-sector financial firms have cut links with their Russian counterparties. Exports to Russia of high-performance machine tools, quantum computers, 3d printers and other items have been blocked by Japanese sanctions.Why, then, stay in Sakhalin? For one thing, this avoids the pickle that the projects’ Western partners now find themselves in. Selling their stakes is easier said than done. ExxonMobil took a $3.4bn write-down related to the project in the first quarter and Shell took a $1.6bn charge. The war limits the number of potential buyers, mostly to state-run firms from countries which are neutral or friendly towards Russia, such as Sinopec, China’s state energy giant, or ongc Videsh, the international arm of India’s Oil and Natural Gas Corporation (which already owns 20% of Sakhalin-I). As forced sellers, ExxonMobil and Shell have a weak negotiating hand, which the Chinese and the Indians would be only too happy to exploit.Japan’s government dislikes the prospect of disposing of the Japanese assets in such a fire sale. It is particularly loth to hand one of the world’s largest and most advanced gas projects over to a Chinese competitor for a song. And unlike ExxonMobil’s and Shell’s investments, which followed a purely commercial logic that Western sanctions and the reputational risk of remaining in Russia have severely undercut, it worries about energy security. Archipelagic Japan has no pipelines or electricity grids linking it to other countries. It is the world’s second-biggest importer of lng. Around 9% of its supply comes from Russia, and the bulk of that is produced in Sakhalin. This year between 50% and 69% of Sakhalin-II’s monthly gas output has headed for Japan, according to Kpler, a data firm. “When the cold light of day sets in you have to think about what impact you are having on Russia versus what impact you are having on yourself,” sums up Yuriy Humber of Japan nrg, an energy-research firm in Tokyo.Similar considerations are being aired in Germany, which gets more than half its gas from Russia. But the German government does want to reduce its reliance on Russian oil and gas, the sale of which is bankrolling the campaign against Ukraine. Japan’s prime minister, Kishida Fumio, has talked faintly about joining a Western embargo on Russian oil and has been silent on Russian gas. To Western ears, that silence sounds increasingly deafening. ■For more expert analysis of the biggest stories in economics, business and markets, sign up to Money Talks, our weekly newsletter. More

An economic downturn is a bad time to get sick, especially in poor countries. As conventional medicines become scarce and pricey, desperate patients turn to cheaper herbal remedies to treat even serious illnesses like diabetes, cancer and, these days, covid-19. Many doctors, of the scrub-wearing variety, doubt those treatments’ effectiveness. But the business of peddling them is in rude health.In 2021 sales of Yiling Pharmaceutical, a big maker of traditional Chinese medicines including lianhua qingwen, used against covid, among various other ailments, exceeded 10bn yuan ($1.6bn), nearly double the figure in pre-pandemic 2019. Amid recent Chinese covid outbreaks in March and April Yiling’s market capitalisation surpassed $11bn. It has since come down but remains three times what it was before the pandemic. Beijing Tongrentang, another large manufacturer, has doubled in value since the start of 2020, also to $11bn. Both companies have outperformed Pfizer and AstraZeneca, two Western producers of indisputably effective covid-19 vaccines (see chart).They have a powerful champion in President Xi Jinping. His government has praised traditional Chinese medicine’s “positive impact on the progress of human civilisation”. Between 2012 and 2019 alternative treatments’ share of medicine sales in China increased from 31% to 40%. The figure is probably higher today, given their widespread use against covid. As Hong Kong grappled with outbreaks this year, 1m packets of lianhua qingwen were sent to the territory from the mainland. Since 2020 China has also promoted the supposed benefits of lianhua qingwen in places struggling to procure covid jabs and treatments. Nearly 30 countries have approved the formulation for import, and some, including Kuwait and Laos, to treat covid. Belarus has signed an agreement with China to build a factory to churn out traditional Chinese medicine in Minsk.Regulators in America and Singapore have warned against using lianhua qingwen to treat covid. That has not put off investors. As earnings go, makers of traditional medicines have a big advantage: their reliance on ancient wisdom saves them billions in research-and-development costs. Pfizer and AstraZeneca funnel a fifth of their revenues, give or take, into r&d, More

Spirit Airlines is delaying a shareholder vote on its proposed merger with Frontier Airlines scheduled for tomorrow until July 8.
The postponement extends a heated battle for Spirit.

A Spirit Airlines plane on the tarmac at the Fort Lauderdale-Hollywood International Airport on February 07, 2022 in Fort Lauderdale, Florida.
Joe Raedle | Getty Images

Spirit Airlines on Wednesday delayed shareholder vote on its proposed merger with Frontier Airlines until July 8, hours before a meeting scheduled for Thursday so it can further discuss options with Frontier and rival suitor JetBlue Airways.
It is the second time Spirit has delayed a vote on its planned combination with Frontier and extends the most contentious battle for a U.S. airline in years.

Spirit originally scheduled Thursday’s vote for June 10 but had delayed that for the same reasons.
Both Frontier and JetBlue have upped their offers in the week before the scheduled vote approached.
“Spirit would not have postponed tomorrow’s meeting if they felt they had the votes,” said Henry Harteveldt, a travel industry consultant and president of Atmosphere Research Group. Spirit didn’t comment on whether that is the case. “This is like the end of a soap opera episode.”
Frontier and Spirit first announced their intent to merge in February. In April, JetBlue made an all-cash, surprise bid for Spirit, but Spirit’s board has repeatedly rejected JetBlue’s offers, arguing a JetBlue takeover wouldn’t pass muster with regulators.
Either combination would create the United States’ fifth-largest carrier.

JetBlue has fired back at Spirit, saying it did not negotiate in good faith, setting off a war of words between the airlines as they competed for shareholder support ahead of the vote.
Frontier and JetBlue didn’t immediately comment about the postponed vote.
Spirit shares were up about 2% in afterhours trading, while Frontier was up more than 1% and JetBlue was down 1%.

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CNBC’s Jim Cramer on Wednesday told investors that despite what might be happening in the market, they shouldn’t judge a stock based on its industry peers’ performance.
“I want to remind you that no two stocks are truly alike and, more important, the sector analysis everyone lives by these days is often a travesty of a mockery of a sham,” the “Mad Money” host said.

CNBC’s Jim Cramer on Wednesday told investors that despite what might be happening in the market, they shouldn’t judge a stock based on its industry peers’ performance.
“These days, it feels like up to 90% of a stock’s performance on a given day comes from its sector, something on down days that feels like a heavy gravitational pull,” he said.

“I want to remind you that no two stocks are truly alike and, more important, the sector analysis everyone lives by these days is often a travesty of a mockery of a sham,” he added.
The “Mad Money” host’s comments come after the Dow Jones Industrial Average rose on Wednesday, while the S&P 500 and the tech-heavy Nasdaq Composite both fell slightly.
The market, which has been roiled by a vicious cycle of sell-offs as investors fear a recession is coming, saw several sectors tumble. Chipmakers took a hit after Bank of America downgraded several semiconductor stocks. Cruise stocks declined after Morgan Stanley made a hefty cut to its price target for Carnival.
Cramer said that there are several stocks that shouldn’t be downgraded due to their competitors’ poor performance, naming Disney, Meta, AMD and Nvidia specifically.
“Look, I’m not guaranteeing the bottom in Disney, or Meta, or AMD or Nvidia,”  he said. “But the bottom line is … stocks are all different.”

Disclosure: Cramer’s Charitable Trust owns shares of Disney, Meta AMD and Nvidia.

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It’s that time again! “Mad Money” host Jim Cramer rings the lightning round bell, which means he’s giving his answers to callers’ stock questions at rapid speed.

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Uranium Energy Corp: “There will not be a nuclear power plant built in this country. … It ain’t going to happen.”

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CNBC’s Jim Cramer on Wednesday said that while the commodities market could see a short-term upside, it will ultimately come down in the long term.
“The charts, as interpreted by Carley Garner, suggest that the recent commodities boom is not long for the world,” the “Mad Money” host said.

CNBC’s Jim Cramer on Wednesday said that while the commodities market could see a short-term upside, it will ultimately come down in the long term.
“The charts, as interpreted by Carley Garner, suggest that the recent commodities boom is not long for the world. She says we could still see some short-term upside … but longer-term, she thinks this bull is about to get slaughtered,” the “Mad Money” host said.

“And when commodities turn against you, it tends to get real ugly, real fast,” he added.
Before getting into Garner’s analysis, Cramer gave investors some insights into the commodity market that are important to know:

History shows that commodity rallies are temporary. This is because commodities don’t have dividends or buybacks as a share of a company does, he said. “That makes them very unattractive to longer-term investors — instead, they’re a magnet for shorter-term traders.”
For the same reason as above, commodity markets tend to be extremely volatile.
Every commodity rally is “basically a commodity collapse waiting to happen. “This is because commodity producers like farmers and miners tend to increase production when commodity prices go up, according to Cramer. Prices come back down again as more supply enters the market — especially if the Federal Reserve slows down the economy to control inflation, he added.

Getting into individual commodities, Cramer started his discussion with oil. He examined the monthly chart of the West Texas Intermediate crude futures going back three decades. 

Arrows pointing outwards

Cramer said that oil wasn’t performing well for years, and would likely still be down if not for the Covid pandemic and Russia’s invasion of Ukraine, according to Garner. 
Garner expects oil prices will be closer to the long-run equilibrium — between the two black horizontal lines on the chart — once the current supply shock wears off, he added.

“Of course, that’s long-term. She’s not saying it will happen immediately. … It’s possible oil could have one more burst upside. She just needs you to understand that commodities can go down as swiftly as they go up,” Cramer said.
For more analysis, watch the video of Cramer’s full explanation below.

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