What business leaders need to do if inflation persists, McKinsey says

Good morning.

Yesterday’s unpleasant inflation report sealed the deal: “brief and shallow” has been replaced by “higher and higher” – higher inflation and longer interest rates. Investors and business leaders better get used to it.

As far as investors are concerned, the news reacted quickly, sending the market into its biggest drop since June 2020. Greg Jensen, co-chief investment officer at Bridgewater, said it could be worse. “I think the biggest mistake right now is believing that we’re going to get back to similar prices as we were before Covid-19. [era]” He says.

Business leaders are facing a similar adjustment. “It may take years to bring inflation down to the Fed’s target,” says a McKinsey paper soon published (President Daily see it sooner). “Companies need to draw on a proven playbook to succeed in a world of slowing growth, rising inflation and more expensive capital.”

What was the script like? The consulting firm offers four recommendations:

– Don’t withdraw growth projects“Our research shows that growth-oriented leaders respond decisively to short-term disruptions that can translate into opportunities.”

——Intelligently cultivate talents. “Employers tend to overestimate ‘transactional’ factors such as compensation and development, and underestimate ‘relational’ factors – a feeling of being valued by managers and the organization, trust in the company of teammates, belonging, flexible work schedules – employees Say what’s most important.”

Adhere to sustainable development. “In an economically constrained environment, a full-cycle view of sustainability can be a lever for companies to build resilience, reduce costs and create value. “

— Rebuild your supply chain to increase resiliency and efficiency. “We found that a careful assessment of supply chain vulnerabilities can reveal opportunities to reduce spending by high-risk suppliers by 40% or more. “

Sounds easy, doesn’t it?

Thanks to Alison Taylor of NYU for sharing this clear view with members of the Wealth Impact Initiative yesterday on why business focus on social and environmental goals is driven by business realities rather than politics, so despite political resistance , but will still continue:

“A very simple way to think about it is that we have seen a shift in business valuation from tangible to intangible value. In the past, in the 20th continuation, business value came from plant, buildings, machinery, cash assets. Now it comes from Brand, network effects, stakeholder trust, R&D, IP. So it all basically means that stakeholder perception, public perception, employee perception is a much larger percentage of company value than it used to be. largely explains investor interest” in social and environmental indicators.

You can learn more about the Wealth Impact Program here. Other news is as follows.

Alan Murray


headline News

energy market

The German government is reportedly considering nationalizing Uniper, the country’s largest gas importer, which earlier this year held a 30 percent stake in the country, to prevent it from collapsing and creating a Lehman Brothers effect in the energy market. Uniper still needs help to make ends meet. Meanwhile, the European Commission now supports decoupling the impact of high gas prices on overall electricity prices to allow consumers to “reap the benefits of low-cost renewables” – and estimates the EU will raise more than $140 billion’ profit.Bloomberg

google fine

A few years ago, the European Union’s ordinary courts generally sided with antitrust enforcers in imposing huge fines on Alphabet. It was the first of several major losses for the company in Europe, a case of Google abusing its position in the Android market. The court lowered the record fine slightly from $4.34 billion to $4.125 billion because its reasoning differed slightly from that of the European Commission, but Alphabet’s only hope now is to appeal the legal issue to the EU Court of Justice. (Bonus reading: South Korea just slapped Google and Meta with privacy fines.) Bloomberg

Xi appears

Xi’s first trip to China in two-and-a-half years, visiting Kazakhstan, will be followed by a meeting with Russian President Vladimir Putin and other regional leaders in Uzbekistan. Xi’s diplomatic offensive comes just weeks before a key Communist Party meeting in which he is likely to win another five-year term as president. New York Times

around the water dispenser

Terraform Labs co-founder Do Kwon arrested on warrant related to Terra’s breakup behind crypto rout, Bloomberg

Climate change and the energy crisis are driving a comeback of 1970s technology now installed in 40% of new U.S. homes, David Meyer

Michael Saylor unveils a new bitcoin bet — and the weirdest thing is that math can actually work for shareholders by Shawn Tully

DARPA funding inspired MIT scientists to build a briefcase-sized desalinator that can turn seawater into drinking water, by Ian Mount

Uber CEO thinks inflation may encourage more drivers to join ride-hailing platforms as ‘life is getting more expensive’, Nicholas Gordon

This period President Daily Edited by David Meyer.

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