Yesterday’s unhappy inflation report cut the deal: “brief and shallow” was replaced by “higher and longer” – higher inflation and interest rates for a longer period of time. Investors and business leaders better get used to it.
For their part, investors reacted quickly to the news, sending the market into its deepest dive since June 2020. Even worse is to come, said Greg Jensen, chief investment officer at Bridgewater. “I think the biggest mistake right now is to think that we are going to go back, basically, to similar pre-COVID prices [era],” He said.
Business leaders face a similar adjustment. “It may take years to bring inflation back to the Fed’s target level,” says a recently released McKinsey paper. (Daily CEO take an early look). “Businesses need to rely on proven rules of the game to succeed in a world of slower growth, higher inflation and more expensive capital.”
What does this guide look like? The consulting firm offers four tips:
—Don’t hold back on growth projects. “Our research shows that leaders interested in growth react critically to short-term disruptions that can be turned into opportunities.”
Intelligently building talent. “Employers tend to overestimate ‘transactional’ factors such as pay and development and underestimate ‘relational’ elements — feeling valued by managers and the organization, teammates’ companionship, a sense of belonging, and a flexible work schedule — and that employees say they are very important.”
–Continue the course on sustainability. “In an economically constrained environment, a holistic view of sustainability can be a lever for companies to build resilience, reduce costs, and create value.”
—Rebuilding your supply chain for flexibility and efficiency. “We have found that careful assessment of supply chain vulnerabilities can reveal opportunities to cut spending with high-risk suppliers by 40 percent or more.”
It seems very simple, right?
Thanks to New York University’s Alison Taylor for sharing with members of the Fortune Impact Initiative yesterday, this clear insight into why companies’ focus on social and environmental goals is driven by business realities, not politics, and will thus continue despite political opposition:
“A very simple way of thinking about it is that we have seen a shift from tangible to intangible in terms of company valuation. In the past, company value came from factories, buildings, machinery and cash assets in the 20’s. Now it comes from brands, network influences, trust Stakeholders, research and development, intellectual property. All of this basically means that stakeholder perceptions, public perceptions, and employee perceptions are a much larger percentage of the company’s value than they were before. This is very much in the investor’s interest” in social and environmental metrics.
You can learn more about the Wealth Impact Initiative here. Other news below.
The German government is said to be considering nationalizing Uniper, the country’s largest importer of natural gas, which already took a 30% stake earlier this year to prevent it from collapsing and creating Lehman Brothers’ effects in energy markets. Uniper still needs help staying afloat. Meanwhile, the European Commission Now supports separation The effects of higher gas prices on overall electricity prices, to allow consumers to “reap the benefits of low-cost renewables” – and also insure that the EU will collect more than $140 billion in windfall taxes on power company profits. Bloomberg
Google is fine
The General Court of the European Union broadly upheld the massive antitrust fine imposed on Alphabet several years ago. This, the company’s first major European loss, was the case of Google abusing its position in the Android market. The court slightly lowered the standard penalty from $4.34 billion to $4.125 billion, because its reasoning differed slightly from the European Commission, but Alphabet’s only hope now is to appeal to the European Court of Justice on points of law. (Reading bonus: South Korea Just click on both Google and Meta with privacy fines.) Bloomberg
Xi Jinping traveled outside China for the first time in more than two and a half years, and visited Kazakhstan, with Uzbekistan – where he will meet with Russian President Putin and other regional leaders – next on the list. Xi’s diplomatic attack comes weeks before a pivotal meeting of the Communist Party, at which he is likely to win another five-year term as president. The New York Times
About the water cooler
Terraform Labs co-founder Do Kwon has an arrest warrant issued for Terra’s revelations behind the crypto defeat, by Bloomberg
Climate Change and Energy Crisis Brings Back 1970s Technology Now Installed in 40% of New American Homes, By David Meyer
Michael Saylor reveals a new bitcoin bet — and the weirdest part is that math can actually work for contributors, by Sean Tully
A DARPA grant inspired MIT scientists to build a bag-sized desalination device that turns seawater into drinking water, by Ian Mount.
Uber CEO thinks inflation may encourage more drivers to join the car-booking platform, as ‘Life gets more expensive’ by Nicholas Gordon
This edition of Daily CEO Edited by David Meyer.
This is the web version of daily CEO, A newsletter from Insights to read from luck CEO Alan Murray. Sign up to get it for free in your inbox.