https3A2F2Fd1e00ek4ebabms.cloudfront.net2Fproduction2Fd711fada 23a8 41b8 8ce7 e93e9330819d captis executive search management consulting leadership board services

The end of the party looms for markets high on stimulus

The writer, Morgan Stanley Investment Management’s chief global strategist, is author of ‘Ten Rules of Successful Nations’

It was a jarring image. As deaths from the pandemic rose in 2020, financial markets high on government stimulus partied through a devastating global downturn. Most people expect the revelry to continue as economies recover. But now there are signs the recovery could turn into a boom — and an overheating economy could end the market party. This year could unfold as a mirror image of 2020, with markets going flat amid soaring economic growth.

To understand why, follow the money. After a brief crash last March, markets started rallying the day after the US Federal Reserve announced its first pandemic relief measures — and kept on rallying. Nearly 20 per cent of all dollars in circulation were printed in 2020 alone. Major central banks followed the Fed, and governments topped that up with stimulus spending. US disposable incomes rose at the fastest rate in decades, but much of that went unspent. Americans saved at the highest rate since the second world war, putting away an additional $1.7tn, or more than 16 per cent of their 2020 income.

With more money in the bank, and more time on their hands because of lockdowns, many workers turned to punting in the markets. Of 49m online brokerage accounts in the US, 13m opened in 2020, according to calculations by Scott Rubner of Goldman Sachs. The week after stimulus checks went out in April, trading by middle-class Americans soared.

US retail investors helped fuel flash manias for bankrupt companies like JC Penney, and more recently for another faltering retailer, GameStop. From South Korea to India, individuals bought stocks at a furious pace. The huge winners were large growth stocks, particularly in the US and China. Together they accounted for most of the 2020 market gains worldwide.

Where will all the money go when the virus fades? Epidemiologists say the pandemic could be contained by summer, perhaps even by spring in the US and UK, where vaccines are rapidly rolling out. As consumers emerge from lockdown, excess savings are likely to drop sharply. Even by conservative estimates, the release of pent-up demand could add two to three percentage points to gross domestic product growth in the US alone.

The consensus prediction for global GDP growth in 2021 is just over 5 per cent. But my team thinks growth could top 6 per cent worldwide, and reach 8 per cent in the US. I think other forecasters are underestimating the recovery, given the savings glut and the apparent eagerness of policymakers to err on the side of overstimulating. Ironically, a booming economy may not be good for markets. Savers will become shoppers again. Resurgent demand for leisure travel, fine dining and other services will strain the capacity of industries gutted by the pandemic.

The deflationary impact of business closures could give way to the potentially inflationary impact of supply shortages, which are already visible in sectors such as shipping, airlines and semiconductors. The prices of commodities from oil to soyabeans have also been surging of late.

The bond market is beginning to price in higher inflation, and the prospect of higher yields could suck money out of stocks, which are now much more vulnerable to interest rate swings. Last year stock valuations received an unusually large boost as rates plunged. A sharp rise would deliver a proportionately large shock. Further, the rally was driven mainly by growth stocks — the kind most sensitive to interest rate shifts — and they now dominate many stock market indices.

Higher long-term interest rates could end the extraordinary bull run for giant tech stocks in the US and China and move flows towards a new set of countries and industries. The buzzwords of last year — the virus, virtual, work from home, recession — are likely to make way for vaccines, the real world, back to the office and reflation. This transition may be more disruptive than imagined for financial markets, which have become hooked on last year’s themes and low long-term interest rates.

Markets often underestimate the impact of big shifts in the global economy. In the early 1980s, disinflation led to a sharp fall in interest rates, with much greater fallout for the markets than most investors had foreseen. Now the risk is that inflation resurfaces, and bond yields rise more sharply than anticipated, overwhelming the rise in earnings during a recovery. The impact could easily end the rally of 2020, leaving markets suffering withdrawal symptoms despite a global economic boom.

https3A2F2Fd6c748xw2pzm8.cloudfront.net2Fprod2F7ff87240 781f 11eb a712 736c114b19af standard captis executive search management consulting leadership board services

Shadowy militants in Iraq complicate US efforts to ease tensions

Few inside or outside Iraq had heard of the “Guardians of the Blood” before the militants claimed responsibility for firing a rocket barrage on the northern city of Erbil that targeted an Iraqi base hosting US troops.

The attack, which two weeks ago killed a civilian contractor and wounded an American soldier, provoked President Joe Biden’s first military act, as he ordered US fighter jets to launch strikes in Syria against Iranian-backed Iraqi militias last week.

It was an early test of how the Biden administration would respond to provocative acts by militants, while underscoring the challenges Washington faces as it seeks to re-engage with Iran over its nuclear deal and de-escalate tensions that soared during Donald Trump’s presidency.

One legacy of the hostilities between the Trump administration and Iran is the emergence of more than a dozen shadowy “resistance” groups in Iraq, such as “the Guardians of the Blood,” which have stepped up attacks against US personnel and assets over the past year.

Analysts say it is a trend that gathered momentum after the Trump administration assassinated Qassem Soleimani, Iran’s most powerful commander, and Abu Mahdi al-Muhandis, a senior Iraqi militia leader, in a US drone strike near Baghdad airport in January 2020. The declared aim of many of the groups is to avenge the deaths of Soleimani and Muhandis — heroes to Shia militias.

The groups have added a new layer of militancy that creates a more unpredictable environment in a fragile nation that hosts 2,500 US troops and where US and Iranian rivalries play out. They threaten to be a complicating factor as Biden seeks to depart from Trump’s maximum pressure campaign against Iran, reduce regional tensions and rejoin the 2015 nuclear deal with Tehran.

“It’s the raison d’être of these [Iraqi] groups to drag the US into a conflict,” said Sajad Jiyad, a Baghdad-based fellow with the Century Foundation.

Analysts suspect the Erbil attack was Tehran using its proxies to up the pressure on Washington ahead of any new diplomacy, despite the Pentagon saying it had found no evidence that Iran directed the assault.

“People assume that Biden can come and just completely change US policy in the region overnight, but he has inherited a very hot conflict and there are very different things in motion,” said Renad Mansour, an Iraqi analyst at Chatham House, which released a report on the militias last week.

He added that the emergence of shadowy groups with opaque leaderships makes it harder for the Biden administration to know who to engage with, and complicates the Iraqi government’s hopes of pursuing meaningful security reform.

The picture is muddied by the fact that the “resistance” groups are deemed to be fronts for more established Iranian-backed paramilitary forces that are deeply embedded in Iraq’s security and political structures, including the Badr Organisation, Asa’ib Ahl al-Haq and Kata’ib Hizbollah.

US defence officials said last week’s air strikes, which struck close to an Iraqi border area controlled by Iranian-aligned militias, were targeting Kata’ib Hizbollah and Kata’ib Sayyid al-Shuhada — not the group that claimed the Erbil attack.

Kata’ib Hizbollah — which Trump blamed for a rocket barrage against US forces in Iraq in December 2019 that prompted him to order the assassination of Soleimani — denied it was involved. But US defence officials said those that claim responsibility are “just front groups established to help deny attribution by the established groups”.

The established movements have grown in power since they and other militias were mobilised in 2014 to counter the advance of Isis. They capitalised on their role in the territorial defeat of the jihadis to boost their popular support and extend their political ambitions.

Protesters and militia fighters run away from tear gas thrown by US embassy security, during a protest to condemn air strikes on bases belonging to Hashd al-Shaabi, Baghdad, Iraq © Thaier al-Sudani/Reuters

On the security front, more than a dozen of the militias sit under the umbrella of the Popular Mobilisation Units, or Hashd al-Shaabi, a paramilitary force that has more than 100,000 personnel and received a $2.6bn budget from the government last year.

As well as attacks on US interests, the more shadowy militant groups are accused of killing and intimidating peaceful protesters, activists and critics.

Michael Knights, a fellow at the Washington Institute, said the establishment of “fronts” is a strategy developed by Soleimani, who headed Iran’s Quds Force, the overseas arm of the elite Revolutionary Guards. It gives the establishment groups “plausible deniability” so as not to damage their popular support.

“It’s a very logical part of a strategy to undermine the Iraqi state while building these groups politically,” Knights said. “These people want to have the payroll from the Hashd . . . but at the same time want to disobey the Iraqi chain of command and undertake terror attacks inside and outside of Iraq.”

The irony, Mansour said, was that Muhandis was working to bring greater control and centralisation over the militias before the Trump administration killed him.

“The killing of Muhandis shook the precarious centralisation process in Iraq,” he said. “While many argued that he was a major player in the Iraqi government’s crackdown on protesters in 2019 and as such should be removed, the strike, like previous military action in the country, has failed to either better protect protesters . . . or enhance Washington’s interests of reducing Iranian influence.”

He said he had spoken to fighters in “vanguard” groups, such as Kata’ib Hizbollah, which do not have a popular support base, who claimed not to know who their leaders were. 

The challenge for Washington, Mansour added, was “this revenge is going to take years”.

“These guys will not forget the killing of Muhandis.”

Additional reporting by Katrina Manson in Washington

https3A2F2Fd6c748xw2pzm8.cloudfront.net2Fprod2F23922930 7845 11eb b585 9710f9f89485 standard captis executive search management consulting leadership board services

Shareholders push SEC for tougher climate regime for US oil

Activist groups are calling on the US Securities and Exchange Commission to make it easier for shareholders to table climate resolutions at oil producer annual meetings in another early test of the Biden administration’s efforts to tackle climate change.

During Donald Trump’s presidency, campaigners say, the SEC made it easier for companies to throw out shareholder proposals on spurious grounds rather than put them to investor votes.

“In the last four years, there were a lot of surprising developments and I think it’s fair to say that many shareholders felt like it was an adverse decision-making environment for shareholder proposals,” said Sanford Lewis, a lawyer and director of the Shareholder Rights Group.

“It was broadly considered a corporate-friendly environment in the last administration.” 

The number of shareholder resolutions the SEC ruled as inadmissible jumped under the chairmanship of Jay Clayton, whom Trump appointed in 2017.

Companies were allowed to reject about 15 per cent of environmental and social proposals in 2018, compared with 9 per cent in 2016, according to Institutional Shareholder Services, an independent investor advisory group. That jump could have been higher had there not been a surge in shareholders withdrawing resolutions.

Joe Biden has promised to make tackling climate change a core pillar of his presidency. But a narrow majority in Congress will leave him depending on regulatory bodies such as the SEC, the Environmental Protection Agency and the Federal Energy Regulatory Commission to push his agenda.

The SEC is independent from the government but the president appoints its chairman and commissioners, who determine its direction. 

Activists’ biggest gripe is the broadening of the definition of “micromanagement” during Clayton’s chairmanship. Previously this rule allowed companies to reject proposals that delved too deeply into the day-to-day running of a company, but the expanded definition meant any proposals that prescribed particular outcomes could be excluded. 

In a letter to the SEC last month, the SRG — alongside fellow investor advocacy groups Ceres, the Forum for Sustainable and Responsible Investment and the Interfaith Center on Corporate Responsibility — asked the SEC to repeal the new interpretations “to re-enable shareholders to ask their investee companies to improve disclosure and performance on climate change”.

Shareholder proposals were responsible for sparking a shift in attitude by European oil groups in recent years, said Mark van Baal, director at Dutch shareholder group Follow This, which has submitted resolutions calling on oil groups Chevron, ConocoPhillips, Occidental and Phillips 66 to set targets for cutting carbon emitted by the burning of their products (so-called Scope 3 emissions).

“Oil majors have only promised to reduce product emissions after investors voted for shareholder proposals,” said van Baal. “We saw this first at Shell and then at BP and Equinor.”

Gary Gensler, the former Goldman Sachs banker Biden has picked for his SEC chairman, is widely anticipated to take a tougher line against companies on ESG matters. The number of resolutions rejected through “no-action” letters from the SEC will probably drop, analysts said. 

“The interpretations of the grounds for admission under the ‘no-action’ process tend to go in waves, up and down, depending on what administration is in place and the chair of the SEC,” said Patrick McGurn, head of strategic research and analysis at ISS.

With Gensler yet to be confirmed to the position, any change in policy will take time, and will probably be too late for the 2021 AGM season. Still, analysts said John Coates, a Harvard academic who has been installed as acting head of the commission’s corporate finance division, could already be exerting some influence. 

In a promising sign for campaigners, the SEC on Friday denied ExxonMobil’s request to block a shareholder proposal asking the company to report how its political lobbying activities align with climate change concerns. The proposal was filed by French bank BNP Paribas, which in 2020 filed a similar petition about climate change and lobbying at Chevron. The Chevron proposal won majority support from investors, including asset management giant BlackRock.

“Insufficient information is available to evaluate how ExxonMobil ensures that its lobbying activities, directly, in the company’s name, and indirectly, through trade associations, align with the Paris Agreement’s goals, and how misalignments are addressed,” BNP said.

The SEC did not respond to a request for comment.

Additional reporting by Patrick Temple-West in New York

Climate Capital

https3A2F2Fd1e00ek4ebabms.cloudfront.net2Fproduction2F8634607b 3b27 4b19 aa33 d58f9e846b26 captis executive search management consulting leadership board services

Where climate change meets business, markets and politics. Explore the FT’s coverage here 

https3A2F2Fd1e00ek4ebabms.cloudfront.net2Fproduction2F5852e1fc 1055 4373 85b8 ad00a9549a3d captis executive search management consulting leadership board services

Pandemic pressures push US banks towards consolidation

The pressures of the pandemic and a warm investor reception for recent acquisitions have increased the appetite of midsized US banks for more deals such as last week’s $7.6bn sale of People’s United Financial to M & T Bank, industry dealmakers and analysts say.

Likely buyers include such US regional lenders as US Bank and Citizens Financial, as well as Canada’s TD Bank and Bank of Montreal, they say. Smaller US banks and foreign lenders with weak returns and less reason to remain in the US, such as Spain’s Santander, are seen as more likely to sell.

“Everybody wants to do a deal,” said one veteran dealmaker who advises banks and other financial groups. “That’s the difference now from the past.”

Bankers warn that not all prospective deals will be easy to execute. HSBC, which confirmed this month that it was exploring a sale of its 150-branch US retail bank, might simply wind down the operation, said one company insider.

But the pandemic has highlighted the advantages of size in banking. With branches closed or customers wary of visiting them, digital banking has become more important, putting pressure on banks to invest.

At the same time, low interest rates and lacklustre demand for loans have made it more difficult for lenders to profit from their swollen deposit bases. Greater economies of scale represent a way to increase returns.

“Any bank that’s below the top four or five, especially in retail banking, has to be asking itself some very serious strategic questions,” said a senior figure at one midsized US bank. “It’s not foreign versus domestic, it’s all about scale.” 

The biggest US banks are JPMorgan Chase, with more than $3tn in assets, Bank of America at $2.3tn, Wells Fargo at $1.8tn and Citigroup at $1.7tn. PNC would become the fifth-biggest if it completes its $11.6bn announced takeover of BBVA’s US operations. Truist and US Bank come next.

The investor reaction to recent bank deals has increased their likelihood. North Carolina’s First Citizens’ share price has more than doubled since it announced its $2.2bn acquisition of CIT Group on October 16. PNC is up more than 40 per cent since its BBVA deal a month later, beating the 33.5 per cent rise in the KBW Nasdaq Bank Index over the same period. 

“With respect to bank deals, the market tends to be cyclical — they like deals or they don’t like deals,” Rodgin Cohen, the Wall Street lawyer and bank adviser. “Starting with the rapturous response to First Citizens, the market has been quite receptive.” 

Scott Siefers, an analyst at Piper Sandler, said that banks’ appetite for deals had also improved in the past six months because the “credit cycle is sort of melting away” and banks no longer fear unknowable Covid-related loan losses on their books or the books of rivals. 

One factor that could hold back bank deals is that several big players are digesting recent acquisitions — and regulators balk at simultaneous acquisitions because they carry operational risks. For that reason, PNC, M & T, and Huntington, which announced a $5.9bn deal to buy TCF Financial last year, are in effect out of the game for the next few years. 

“I don’t think we’re going to see a bonanza, but I don’t think it’s going to go back to the point where it’s one or two deals a year either,” said the veteran financial dealmaker.

Canada’s top banks, which have a sizeable presence in the US, are seen as more likely acquirers.

“They have the large balance sheet in Canada, and they have limited market share in the US, which is a secular growth opportunity,” said Ebrahim Poonawala, Canadian banks analyst for Bank of America.

TD Bank, which has just over $400bn in assets, is described by bankers as a potential acquirer of HSBC’s US network. HSBC has a strong presence in the eastern US and Florida, which compliments TD’s footprint. 

However, a person familiar with HSBC’s business said it could prove difficult to sell because of the way its costs are entangled with its parent, which makes it hard to value, and because it has no unique selling proposition once it is stripped out of HSBC’s global network. 

HSBC also has a smaller universe of potential buyers because foreign banks tend to favour cash deals, rather than receiving stock in the acquiring company, which they would have to retain for a lock-up period and whose value could fluctuate. 

PNC was able to pay cash for BBVA because it had built up a $17bn war chest by selling its stake in asset manager BlackRock last summer. M & T also paid cash for People’s. Such deals are rare, bankers say, since acquiring banks typically do not have much cash on their balance sheet. 

Shareholders in US banks would have no such qualms about accepting stock as payment and their managements could find it hard to turn down offers.

“The vaccine is out there, there’s a big fiscal stimulus plan, there’s massive monetary accommodation,” said a financial industry dealmaker. “A year ago, there were some pretty good excuses not to do something. Those exogenous factors have really disappeared.”

https3A2F2Fd1e00ek4ebabms.cloudfront.net2Fproduction2F91f4aa07 1fae 45ce b439 cd4401bff60e captis executive search management consulting leadership board services

Diagnostics company calls for national Covid testing guidelines

The chief executive of one of the largest diagnostics companies has called for governments to set clear testing guidelines for schools, employers and travel businesses so they can be ready for a return to normal life. 

Thomas Polen, BD’s chief executive, said there had been a lot of talk on how to roll out rapid testing from airports to stadiums but companies were holding back from making large orders of tests until they knew what the rules were. 

He said the world was at a “transition point” in testing, as the tests for symptomatic patients fall but orders for tests in “non-traditional” settings have yet to ramp up. He said these organisations needed to know how often to test and how they would be expected to report the data. 

“There’s an important role of governments to put out clear guidance in terms of getting back into sports, or for airlines, and to help schools,” he told the Financial Times. 

He added there was “wide variation” in how governments around the world viewed testing, with countries including the Netherlands and Canada taking the most aggressive approach. 

BD has dramatically expanded production for many essential items during the pandemic, from tests to syringes used for vaccines. 

The New Jersey-based company forecasts it will make more than 100m Covid-19 tests this year. It has already scaled up test manufacturing — including both molecular tests conducted in labs and rapid tests — from making 10m between July and September 2020 to expecting to hit 12m a month in March. 

BD’s rapid tests are already used by sports teams to diagnose their players, travellers crossing borders in some Asian countries, and universities and manufacturing plants. 

Even as vaccination begins to control the spread of Covid-19, testing may be required for more risky activities such as large events or travel. UK government officials have suggested that proof of a negative Covid test might be used as an alternative to a vaccine passport, amid concerns that people may resist vaccination.

Yet rapid tests have been controversial, as some scientists fear they show too many false negatives, telling people they are not infected when they are. Polen said that while PCR tests find more positive cases, BD’s rapid tests can be used to determine who is infectious.

“If your goal becomes not clinical diagnosis but understanding, are the people moving into this building contagious? . . . Rapid testing is a great tool,” he said. 

However, Jon Deeks, a professor of biostatistics at the University of Birmingham, believes a better strategy might be relying on symptomatic testing and then contact tracing around localised outbreaks. 

“If the level of disease is really low and the benefits of doing mass testing become smaller and smaller . . . the costs, and the harms, become disproportionate to the benefits,” he said. 

“We’ll be actually excluding people from school and we will be causing economic harm to families by forcing them to self-isolate.” 

https3A2F2Fd6c748xw2pzm8.cloudfront.net2Fprod2Fe79ac9b0 7767 11eb aaf2 e5eaba89afd4 standard captis executive search management consulting leadership board services

Chinese investors turn away from Australia after Canberra crackdown

The value of Chinese investment in Australia collapsed last year in the face of tougher scrutiny by Canberra, a breakdown in bilateral relations and a global downturn in foreign investment owing to the pandemic.

The dramatic drop in Chinese investment came as other members of the Five Eyes intelligence network, including the US and UK, rushed to tighten oversight of foreign investment on national security grounds.

New data show Chinese investment fell 61 per cent to A$1bn (US$780m) in 2020, down from A$2.6bn a year earlier and a peak in 2016 of A$16.5bn. The year 2016 was a high point in Sino-Australian ties that coincided with a free trade deal. In contrast, just 20 transactions were recorded last year.

Chinese investment in 2020 was limited to just three sectors — real estate, mining and manufacturing — a big shift compared with previous years when activity spanned all industries, according to a database tracking Chinese investment managed by Australian National University.

Shiro Armstrong, director of the East Asian Bureau of Economic Research at ANU, said the collapse in investment mainly reflected the impact of Covid-19 and tighter scrutiny of foreign funding by Canberra, particularly those from China.

Global foreign direct investment fell 42 per cent during the pandemic while foreign investment into Australia dropped 46 per cent, according to UN data, he added.

“This is quite a remarkable story when you think that Australia was the largest destination of Chinese investment globally during the height of the commodities boom. We received much more investment than the US, and that has just collapsed,” Armstrong told the Financial Times.

Australia-China relations have sunk to their lowest level in a generation, following Canberra’s call for an international probe into the origins of Covid-19 and its introduction of tough laws against foreign interference and stricter scrutiny of foreign investment.

Canberra introduced in March last year temporary changes to its investment framework, which subjected all overseas investments to scrutiny by its Foreign Investment Review Board. This led to lengthy delays, particularly for Chinese investors, according to bankers involved in transactions.

The government also forced the abandonment of two high-profile deals — China Mengniu’s A$600m bid for Japan-owned Lion Dairy and China State Construction Engineering Corp’s A$300m bid for Probuild, a South African-owned construction company — by privately signalling its disapproval.

“The message from the government is that Chinese investment is not welcome. It couldn’t be louder or clearer,” said Geoff Raby, an adviser to Chinese companies and a former Australian ambassador to China.

“The most egregious case was the blocking of the sale of Lion Dairy, which had no strategic or national security justification for this at all. Firb approved this but the treasurer blocked the investment.”

Canberra in January tightened its foreign investment framework, introducing extra national security tests and a “last resort power” to unwind transactions, even after they have been approved. This measure could lead to controversial acquisitions, including Chinese company Landsbridge’s purchase of Darwin port, being reconsidered by the government.

Beijing has accused Australia of “weaponising” the concept of national security to block Chinese investment, an allegation denied by Canberra. Beijing’s imposition of capital controls in 2017 has also reduced foreign investment flows out of China.

Josh Frydenberg, Australia’s treasurer, said the rules “strike a balance between maintaining Australia as an attractive destination for foreign investment, maintaining public confidence in the integrity of our investment framework, and protecting Australia’s national interest and national security”.

The collapse in investment has not yet been reflected in Sino-Australian trade, which continues to boom owing to surging iron ore prices despite Beijing’s imposition of tariffs and other trade barriers on selected produce.

However, analysts said the deteriorating investment climate would eventually flow through to trade.

“Over time, the fall in investment will also mean lower bilateral trade, an outcome which Beijing is actively seeking to punish Australia for its perceived political transgressions,” said Richard McGregor, a senior fellow at the Lowy Institute.

In November, the UK announced the biggest shake-up in foreign investment rules in two decades to prevent overseas companies buying up sensitive assets, amid concern about China’s influence. A month later, Congress passed a law forcing Chinese companies to delist from US exchanges unless they complied with domestic accounting rules.

Additional reporting by Sun Yu in Beijing

https3A2F2Fd1e00ek4ebabms.cloudfront.net2Fproduction2F48f75ae8 65ff 4439 b5a9 c66f2c444b2e captis executive search management consulting leadership board services

The scourge of work email is far worse than you think

Whenever I check my emails, a number appears in the top right-hand corner of my computer screen that used to fill me with a horrible sense of despair.

It shows how many emails are in my inbox and as I type, I can see there are many thousands of them. Another number on the top left-hand side shows something that once caused even more misery: the emails that are unread. There are thousands of them too.

For a while I did what people tell you to do to deal with a bloated inbox. Set up filters. File stuff to folders. Set aside time to mass delete. But the scale of the digital bilge was overwhelming. So then I did something far more effective. I gave up. 

I have never looked back from the liberating strategy of letting the mess wash in. Yet I was pleased to see one email arrive the other day with news that Cal Newport, a US academic, had written a new book called A World Without Email. It promised to free workers from the tyranny of the inbox and I immediately tracked down a copy.

Newport has become an authority on smarter ways to work. At 38, the computer science professor has knocked out seven books in the past 16 years, including a 2016 hit, Deep Work, whose title has become a catchphrase for achieving focus in a frantically distracted world.

He also has a podcast, a blog, a newsletter and three sons under the age of nine. He typically does not work past 5.30pm on weeknights and keeps most of his weekends free.

I am guessing he knows how to work productively. Whether he knows how to end the scourge of too much email is another thing.

What I like best about his book is that it shows the email problem is far worse than thought. What might have been a mild nuisance 10 years ago has turned into a serious productivity sap. 

The average worker now sends and receives about 126 business emails a day, Newport reports, and a lot of white-collar workers devote more than three hours a day to the Sisyphean task of dealing with them.

They do this knowing many messages are irrelevant and few require instant answers. Why? In part because our ancient brains are hard-wired to fret about ignoring social obligations. That made evolutionary sense when we lived in interdependent tribes. Today, it explains the distress that erupts at the sight of a screen of unanswered emails.

The trouble is, email is so cheap and easy that it has given rise to what Newport calls the “hyperactive hive mind” — a new way of office working that revolves around an ongoing conversation of unscheduled messages.

Email and its more fevered cousin, Slack, no longer simply interrupt important tasks. They fuel an endless, attention-draining digital discussion about those tasks that we have come to regard as both normal and unavoidable. 

In other words, the scourge of email is part of a wider, systemic problem that cannot be solved with one-off productivity “hacks”, such as writing better subject headings or using Gmail’s autocomplete function.

It requires a much bigger structural overhaul, akin to the way Henry Ford revolutionised carmaking with the assembly line.

This is, I think, a profound insight. I am less convinced by some of Newport’s ideas for what can be done about it. That is partly because organisations differ so much that there are few one-size-fits-all answers. Also, some of his suggested solutions require online project management tools such as Trello that drive more focused work on specific tasks. For a computer scientist like Newport they may be more familiar than they are to others.

Many firms would balk at testing some of his other ideas — set hours when a worker cannot be interrupted; hiring an “attention capital ombudsman”; supercharging” administrative support in workplaces. Such changes, Newport admits, can be “a pain in the short term”, though he is confident the long-term productivity gains are worth it. I think he is right. One day, a new Henry Ford will be rewarded for fixing the imperfect working world that was unwittingly forged through tech breakthroughs such as email. Meanwhile, Newport has defined the scale of a problem too few of us knew existed

[email protected]

Twitter: @pilitaclark

https3A2F2Fd1e00ek4ebabms.cloudfront.net2Fproduction2Fd5cafe56 01a7 4d8f 8a4c 689d0310df95 captis executive search management consulting leadership board services

Staying private: the booming market for shares in the hottest start-ups

In 2014, an Austrian entrepreneur offered investors a rare chance to purchase shares in Jumio, his fast-growing and profitable payments company. The deal was not a typical venture capital transaction. Instead of purchasing new shares, investors could buy out earlier shareholders, in what are known as private secondary transactions.

Daniel Mattes, who calls himself a “visionary” on his Instagram page and has been a judge on the Austrian version of Shark Tank, the American reality TV series for entrepreneurs, told at least one prospective buyer he had no plans to reduce his own stake in the business, according to a US Securities and Exchange Commission complaint filed in 2019. Mattes also signed off on documents that, according to the complaint, claimed Jumio made a small profit and revenues of more than $100m in 2013 — a significant sum for a three-year-old company.

Two years later, Jumio filed for bankruptcy, and the company’s shares became worthless. In reality, according to the SEC, Jumio had only made one-tenth of the revenues it claimed, and Mattes had bypassed his board of directors to sell about $14m of his own shares.

Jumio’s case highlighted the risks of an opaque but fast-growing corner of finance: the global market for shares in private start-ups such as TikTok owner ByteDance, Elon Musk’s SpaceX and payments company Stripe. In 2019, the market was estimated to host almost $40bn in lightly regulated trades, according to one participant, more than doubling its volume from 2014.

Attendees wear costumes at a TikTok Creator’s Lab hosted by ByteDance in Tokyo. The global market for shares in such private start-ups is an opaque but fast-growing corner of finance © Shiho Fukada/Bloomberg

Recently, the market has been hotter than ever. Though private companies have largely tried to restrict trading, brokers say hedge funds, mutual funds and other institutional investors have begun pouring in, buying large blocks of existing shares in start-ups that are nearing initial public offerings or big acquisitions. Often, the investors receive scant rights to information on financial performance.

Technology upstarts and financial institutions including big banks have rushed to capitalise on the interest by brokering deals and forming trading venues, setting up a battle that could fundamentally alter the market’s structure and potentially allow companies to stay private indefinitely.

The boom reflects how cash-flush investors are clamouring for stakes in fast-growing businesses, with low interest rates pushing non-traditional funds deeper into private markets. To meet the demand, brokers now face two key challenges: increasing the supply of shares in desirable companies while preventing fraud and manipulation in a competitive market.

Until recently, private secondary markets resembled “that guy with a trenchcoat that’s selling you watches in Times Square”, says Inderpal Singh, who leads a private secondary market project at the start-up marketplace AngelList. “In the last year, there’s been a big shift.”

chart showing the growing trading volume in private markets

In addition to AngelList, JPMorgan and the software start-up Carta have begun facilitating trades in private companies. They compete with established players like Nasdaq and Forge Global, which purchased the rival marketplace SharesPost in a $160m deal last year, as well as scores of smaller independent brokers.

Carta and some other intermediaries have advocated that the SEC relax restrictions on who can purchase shares in private companies, potentially opening up the market to a broader swath of investors.

But some observers remain sceptical that the growing market can protect investors against bad actors. Mattes, who paid $17m to settle the charges, did not admit or deny the SEC’s allegations, though he resigned from Jumio in 2015 following an internal investigation. The entrepreneur did not respond to questions sent to his personal website.

The rush to expand trading could lead to fraud and manipulation, says Stephen Diamond, a professor of law at Santa Clara University who has studied private secondary transactions.

“All too often in Silicon Valley, people want to basically ignore the consequences of unhealthy market structures,” Diamond says.

Facebook's initial public offer is displayed on a news ticker in New York in 2012. The IPO created a frenzied market where independent brokers facilitated thousands of trades with little oversight from the companyFacebook’s initial public offer is displayed on a news ticker in New York in 2012. The IPO created a frenzied market where independent brokers facilitated thousands of trades with little oversight from the company © Michael Nagle/Bloomberg

The Facebook episode

The debates reflect a decade-long shift in capital markets as companies grow larger than ever in private — securing billion-dollar valuations and “unicorn” status while pushing back their public debuts. As a consequence, start-ups, investors and employees have accumulated trillions of dollars’ worth of shares that cannot easily be bought and sold, barring a public listing or acquisition.

Private secondary markets grew in importance in the lead-up to Facebook’s initial public offering in 2012. Investors rushed to buy the social media company’s shares, creating a frenzied market where independent brokers facilitated thousands of trades with little oversight from the company.

The trades created headaches. One Facebook executive left the company after he reportedly purchased stock ahead of a big funding announcement. Facebook sometimes lost track of who owned its shares, complicating preparations for its IPO.

Facebook’s struggles caused many start-ups to adopt strict clauses in their legal documents that prevented employees from trading shares without company approval. Some companies have gone even further, requiring sellers to receive approval from boards of directors months in advance of any transaction.

Though the restrictions have made trading difficult, brokers say the market has been busier than ever in the past 12 months, with big investors such as Tiger Global Management hunting for shares in start-ups that look like sure bets for blockbuster public listings.

Tiger Global has used secondary sales to gain stakes in companies such as China’s ByteDance and the software group Snowflake, according to fund documents and people familiar with the trades. Other hedge funds and mutual funds routinely purchase new stakes in companies worth tens of millions of dollars, brokers say.

Conference-goers at a Stripe booth during a GeekWire summit in Washington. The boom in private secondary markets reflects how cash-flush investors are clamouring for stakes in fast-growing businessesConference-goers at a Stripe booth during a GeekWire summit in Washington. The boom in private secondary markets reflects how cash-flush investors are clamouring for stakes in fast-growing businesses © David Ryder/Bloomberg

On the other side of the trades, existing shareholders such as venture capitalists have sought to unload stakes in highly-valued companies as they delay public listings. The market can also be an important source of cash for start-up employees, who receive a large portion of their pay in stock options.

Several new entrants, such as Carta’s private stock exchange CartaX, now hope to formalise the market and capture trading fees that have been spread between dozens of independent brokers.

“There is now, in the past few years, not a push to go all the way back to the days of strict prohibitions on secondary trading, but a push to have more avenues for organised liquidity,” says Cameron Contizano, a partner at law firm Goodwin Procter who works on secondary transactions.

Meanwhile, investor demand has pushed up prices for companies such as ByteDance, SpaceX and Stripe. Barrett Cohn, chief executive of the private securities broker Scenic Advisement, says he advised companies on twice as many secondary transactions in 2020 compared with the previous year. Of the last dozen deals Scenic worked on in the past few quarters, only one resulted in shares being sold at a discount to a company’s most recent stock price, he says.

Competing for business

The rise in trading volumes and the rush to capture the market will shape the way private shares change hands. San Francisco-based Carta, a company best known for selling shareholder management software to start-ups, has become a lightning rod in debates about the market’s direction. Its 45-year-old chief executive, Henry Ward, has set out an ambitious goal to build the “private stock exchange” for tech start-ups.

Ward wants the CartaX marketplace to compete with the Nasdaq exchange, providing a listing venue where companies could potentially stay private indefinitely. The exchange uses an auction model that Ward says will result in superior prices for sellers.

But the project has already drawn strong responses from rivals and market participants. Some brokers and start-ups say CartaX amounted to an attempt to monopolise the market, and the company is naive to think it could unseat public exchanges. Scenic’s Cohn says Carta has made it increasingly difficult for its clients to export their shareholder data for use in other kinds of secondary transactions, such as tender offers.

Marc Andreessen, the Netscape co-founder and Carta board member. Platforms like CartaX may struggle to meet their targets if private companies remain selective about who owns their sharesMarc Andreessen, the Netscape co-founder and Carta board member. Platforms like CartaX may struggle to meet their targets if private companies remain selective about who owns their shares © David Paul Morris/Bloomberg

“We’re not trying to make the New York Stock Exchange go away,” says Kelly Rodrigues, chief executive of the brokerage Forge, which has begun offering software that companies can use to manage secondary transactions. Forge also bills itself as the “stock market for private companies”.

Others say the most desirable start-ups would not want to use CartaX because few private companies want to subject their shares to monthly or quarterly auctions marketed by the exchange.

Eric Folkemer, head of Nasdaq Private Markets, says it has already set up a similar marketplace with price discovery tools for companies such as the workplace collaboration company Asana that want to facilitate trading in their shares before going public.

“We have it,” says Folkemer. “The question is, does the market want it?”

JPMorgan has put its money behind Zanbato, a private share trading system that is taking a different approach from Carta, acting as a central matchmaker for more than 100 banks and brokers executing orders on behalf of clients.

Nico Sand, chief executive of Zanbato, says the exchange has made a conscious choice to focus on trades between large, qualified buyers with more than $100m in assets, who regulators assume have high amounts of financial expertise and require less oversight.

Zanbato has applied for a patent for a trading system with “firm orders”, a legal contract that forces buyers and sellers to transact shares in a private company after they have submitted orders with desired prices and quantities, says Sand.

He says the concept, which is standard in public markets, is necessary for creating efficient trading in private shares. “At the end of the day, it comes down to formalising the market structure in a way it’s not currently formalised.”

Chart showing trading activity on private stock trading platform Zanbato

‘The third configuration’

So far, Carta is the only company that is listed for trading on CartaX. This month, investors purchased almost $100m in shares following the company’s first auctions on the exchange, in trades that valued the company at $6.9bn — more than double the valuation it received from venture capitalists less than one year ago.

Marc Andreessen, the Netscape co-founder and Carta board member, said in a blog post that he would encourage start-ups backed by his venture capital firm Andreessen Horowitz to consider listing on the exchange. He also said the firm would buy shares in companies on the exchange.

“The third configuration — beyond the false binary of simply private or public — is here,” Andreessen wrote.

But Ward has set targets for the exchange that some people familiar with its workings described as overly ambitious.

A SpaceX rocket lifts off from Cape Canaveral, Florida. The company is one of the most active companies in secondary trading and hosts an internal marketplace where employees and venture capitalists can sell stock to invited investorsA SpaceX rocket lifts off from Cape Canaveral, Florida. The company is one of the most active companies in secondary trading and hosts an internal marketplace where employees and venture capitalists can sell stock to invited investors © Craig Bailey/USA TODAY NETWORK/Reuters

Ward told investors he expected CartaX to generate about $1.1bn in annual revenues by 2024, according to a presentation viewed by the Financial Times. Under the most optimistic scenario, the marketplace would bring in $3.9bn in revenues that year, the presentation said. Carta declined to comment for this article.

CartaX charges 1 per cent fees to both buyers and sellers, implying it would need to facilitate about $55bn in trades a year to reach Ward’s expectations.

Those volumes would require about 3 per cent of the shares in all billion-dollar start-ups to change hands every year, according to Financial Times analysis of data from CB Insights, which estimates that 546 “unicorns” hold a collective value of $1.8tn.

Platforms like CartaX may struggle to meet their targets if private companies remain selective about who owns their shares. SpaceX, one of the most active companies in secondary trading, already hosts an internal marketplace where employees and venture capitalists can sell stock to invited investors.

“They have a lot of demand from buyers,” says Hans Swildens, chief executive of Industry Ventures, which has invested in Carta. “The question, like all the other marketplaces, is supply.”

Venture capitalists say the new exchange could also face competition from an unlikely source — special purpose acquisition companies (Spacs), which have recently lured relatively young start-ups to public markets.

CartaX would force companies to share two years of financial statements prepared using generally accepted accounting principles, in order to comply with a securities exemption the exchange is using to allow participation from an unlimited number of accredited investors.

Lawyers and governance experts say the requirement could help solve inconsistencies in information disclosure in private markets. But others say it would be a burden for young companies, which often remain private to avoid sharing their financial information to a broad audience of investors, reflecting a central tension in the market as brokers and traders attempt to capitalise on the surge of interest in secondary transactions.

“The ‘move fast and break things’ culture of start-ups militates precisely against this,” says Diamond at Santa Clara University. “That, to me, is the fundamental paradox here.”

https3A2F2Fd1e00ek4ebabms.cloudfront.net2Fproduction2Fcd6b0f67 91d7 4b03 a77a 9bbc172721f5 captis executive search management consulting leadership board services

Norsk Hydro blamed for birth defects in Amazon forest pollution case

Maria do Socorro explains in graphic detail the spate of ailments affecting newborns in her remote community in the Amazon: her grandson died after being born with his intestines outside his body, while others were missing organs or had undeveloped bones.

For the 56-year-old community leader, there is little doubt about the cause of these illnesses. She said the rainforest town had for years suffered from toxic waste pollution from the local operations of Norwegian aluminium producer Norsk Hydro.

Long a simmering environmental scandal in Brazil, the allegations were brought on to the international stage this month when Socorro’s community sued the Norwegian giant in a Dutch court, seeking damages for claims that “the incorrect disposal of toxic waste” from operations in the area had caused a variety of health ailments, polluted the rainforest and destroyed economic opportunities.

“We cannot have future generations because the children are born and then die. Whole families are contaminated,” said Socorro from the Barcarena township in the northern state of Pará.

The case — filed just days before the UK’s top court ruled that Royal Dutch Shell could face legal action in London brought by thousands of Nigerian villagers over alleged pollution — is the latest international trial pitting large, resource-hungry companies against impoverished rural communities.

It also comes amid mounting pressure on companies to abide by strict environmental standards, a push being spearheaded visibly by Scandinavian investors.

One of the allegations in the lawsuit is that the pollution has caused birth defects © Alessandro Falco/Bloomberg

“If business can be global, why can’t justice? These companies have businesses everywhere, but then when they do something wrong they want to smother the possibility of people getting compensation,” said Pedro Martins, partner at law firm PGMBM, which is representing 40,000 alleged victims bringing the suit against Norsk Hydro.

“International corporations have different standards for how they do business in the northern and southern hemispheres as if life in the southern hemisphere does not have the same value.”

Through local entities, Norsk Hydro runs three facilities — a bauxite mine, a refinery and a smelter — in Pará, a vast Amazonian state that is a flashpoint for illegal deforestation, gold mining and land-grabbing.

The company said it would respond to the request before the court in the Netherlands, where its subsidiaries controlling the local entities at issue are headquartered. It denied that in 2018 pollutants from its facilities spilled over during heavy rains and polluted nearby rivers and earth. The company declined to comment further.

A source close to the company said, however, that it did “not see the [health] effects that have been claimed. The actual impact is hard to see and there aren’t any studies showing that.”

Map of Brazil

A combination of poor sanitary conditions and the tropical climate could be behind many of the health issues, he added: “There are a lot of feelings and not so many things relating to actual facts.”

Locals say bauxite, lead and aluminium pollution have turned the region’s rivers red. A study from the Evandro Chagas Institute, a Brazilian public health body, found in 2018 that the region’s waters were so polluted with industrial waste from the Norsk Hydro facilities that they “cannot be used for recreation, fishing, or human consumption”.

Like many Amazonian communities, much of the Barcarena township depends heavily on fishing and farming for survival, work that they now say is impossible.

“I invite these Norwegians to come and bathe in our waters. I challenge them. They have good water there in Norway. Our wealth just goes there,” said Socorro, who heads Cainquiama, a group representing mainly indigenous people and quilombolas — the descendants of runaway slaves.

Nearly all of the claimants in the suit have complained about chronic pain, hair loss and skin conditions. The suit also contains claims in relation to birth defects, such as those that have affected Socorro’s grandson, who was born with gastroschisis — a hole in the abdominal wall.

A pipe belonging to alumina refinery Alnorte, which is owned by Norsk Hydro, in Barcarena © Ricardo Moraes/Reuters

“Studies around the world have shown the effects [of toxic metals] on pregnant women, foetuses and children at birth,” said Marcelo de Oliveira Lima, a public health researcher at the Chagas institute. “But our studies so far did not go deep enough to show the [connection]. Other studies are still being done.”

The case is a sensitive one for Norwegian investors and the government, which owns a 34 per cent stake in Norsk Hydro. Oslo has long attempted to hold Brasília to account for the environmental destruction of the Amazon, even publishing its own data on deforestation in the world’s largest rainforest.

“There seem to be quite some dispute about the facts in this case and in particular about the actual harm of the spill to local environment and whether the company is somehow to blame by neglecting important safety measures,” said Jeanett Bergan, head of responsible investments at the KLP pension fund, Norway’s largest pension provider.

“We know Norsk Hydro as a responsible corporate actor when doing businesses abroad. I do not think [this case] will damage the credibility of Norwegian actors.”

Climate Capital

https3A2F2Fd1e00ek4ebabms.cloudfront.net2Fproduction2F8634607b 3b27 4b19 aa33 d58f9e846b26 captis executive search management consulting leadership board services

Where climate change meets business, markets and politics. Explore the FT’s coverage here 

Martins, the lawyer leading the group action, said they brought the case in the Netherlands because of the inertia of the Brazilian court system. He believes the case can reach a verdict in 18 or 24 months.

Brazil is no stranger to environmental disasters. This month, miner Vale agreed to a $7bn settlement with authorities over a dam breach in 2019 in the Brumadinho township that killed hundreds of people and polluted vast tracts of lands with industrial sludge.

BHP was sued in a British court over a dam failure in Brazil’s Mariana township in 2015 that left 19 dead. The case was thrown out because parallel proceedings were taking place in Brazil.

“The Hydro case draws attention for having caused significant environmental damage,” said Luiz Eduardo Rielli, director of sustainability consultancy Novi. “After three years, what I care most about is: What lessons have been learned? How can we ensure that new damages do not occur?”

Additional reporting by Richard Milne in Oslo and Carolina Pulice in São Paulo

https3A2F2Fd1e00ek4ebabms.cloudfront.net2Fproduction2F03c351d4 1123 4b68 992e db49d38af6c2 captis executive search management consulting leadership board services

Austria puts its faith in Covid testing above immunisations

As lockdowns across Europe drag on into spring, the Austrian government says it has a strategy to get life back to normal in weeks rather than months — not with vaccines, but tests.

The country of 8.8m people will from Monday make 3.5m Covid tests available free to its citizens each week. The plan could allow restaurants and bars to start welcoming customers back by mid-March. Non-essential shops and schools are already open and many Austrians have returned to their workplaces.

“We are on the way to becoming the testing world champion,” said chancellor Sebastian Kurz. “Our goal is to be able to control the incidence of infection, or at least mitigate any growth in infection numbers, as best we can, by testing as much as possible.”

As Covid cases climb, Austria has grown frustrated with the EU’s slow vaccine rollout. The bloc’s performance particularly rankles because last May — in deference to EU solidarity — Kurz turned down a tentative offer from Benjamin Netanyahu to partner with Israel in its vaccination drive with Pfizer, two Austrian officials told the Financial Times.

Kurz has a close working relationship with the Israeli leader and the two regularly discuss the pandemic.

The missed opportunity for the kind of swift vaccination programme pioneered by Israel underscored the importance for smaller countries such as Austria to be flexible in their approach to the virus, a political adviser close to the chancellor said. 

Austria’s faith in testing has put it at odds with other European countries where the Covid policy is almost solely focused on immunisation as a means of escaping another wave of the pandemic.

That has left much of the continent languishing under stricter lockdown conditions than those enforced when the pandemic first hit a year ago.

Britain is Europe’s vaccine leader, with more than 28 doses of vaccine delivered per 100 residents. Austria has managed just 6 — slightly less than the 6.3 EU average. But last week the UK government said it still expected to impose four more months of restrictions to control the virus.

For critics, Vienna is walking a tightrope: cases in Austria have ticked up from the low of 14.9 per 100,000 residents a fortnight ago to a rolling seven-day average of 19.2. The next two weeks will be crucial: if numbers continue to rise Austria’s strategy will unravel.

But the focus on testing will also be closely watched. Chancellor Angela Merkel told lawmakers in her party last week she believed mass testing would be a critical in helping Germany ease its way back to normality.

A hairdresser and her customer in Vienna wear FFP2 protective face masks. © Alex Halada/AFP/Getty

Thomas Czypionka, head of health policy at the Institute of Higher Studies in Vienna, said “a tight net of testing” would provide the opportunity to reopen businesses and schools by controlling transmission of the virus. “This is a different kind of strategy. It’s not perfect, but its worth a try.”

The Austrian initiative should in part be understood in the context of the government’s poor handling of the second wave, according to Czypionka.

Feted for his nimble handling of the crisis last spring, Kurz has since faced criticism as the number of cases soars. In November, Austria recorded the highest number of new infections per million inhabitants in western Europe.

Testing is crucial, according to Czypionka, because people’s willingness to tolerate restrictions and their disastrous economic consequences had reached its limit. “People have lost faith. This is the real reason the government is having to open up.”

© Ronald Zak/AP

He was nevertheless confident that the testing strategy was a good one: “It’s cheaper than keeping a country in lockdown.”

While Austria’s first experiment with mass-testing began in December, with limited success, the latest drive is markedly different. Testing will be linked to the phased emergence from lockdown itself — using reliable PCR tests for entry into venues, and quick result lateral flow tests for home use. Officials at the chancellery said they believed this “nudge” approach — where even small incentives can prove powerful motivators for social change — has been highly successful.

Hair salons have been open in Austria since February 8. But their use is conditional on testing: customers must present proof of a negative test no later than 48 hours before an appointment.

The idea is now being thrashed out for the hospitality sector. An announcement is expected to be made this week, but the government is hopeful that entry tests at restaurants, bars and cafés could allow for a reopening of some — with strict hygiene measures also in place — as early as March 14.

“My heart bleeds because tens of thousands of businesses have not been allowed to open for months. We will do everything we can to ensure that the catering and hotel industry can welcome guests again soon. I’m on the side of the industry,” tourism minister Elisabeth Köstinger said last week.

Capacity for tests has been increased dramatically. There are now 800 pharmacies across Austria offering tests, and a further 650 specialist testing stations. From Monday, the government hopes to make up to five postal tests — which can be ordered by telephone hotline or online — available to every Austrian each week.

Schools are testing pupils twice a week and workplaces have been brought onboard. The government is subsidising more than 1,000 Austrian companies — representing a workforce of just under 500,000 — to provide them with free regular tests for those who want to return to the workplace.

Testing was the best way to avoid an “indefinite lockdown”, Kurz declared last week, as he promised Austrians the government would do whatever it could to safely reopen public life.