2019 review: dealing with geopolitics and anti-capitalism

THE BUSINESS LOT is never easy. It must juggle the demands of shareholders, employees, customers, politicians and regulators. In 2019, the juggling act may have gotten a little more difficult. In addition to bracing for the next inevitable downturn – and, particularly in the United States, declining profits – over the past year, the corporate world has had to deal with two new, or new, challenges. highlights.

The first relates to the rebirth of geopolitics. In the decades following World War II, the world became largely globalized within the two warring ideological camps. Supply chains have spread across the Democratic West or the Communist East, but rarely straddling both. That started to change when China opened up in the late 1970s and accelerated when communism collapsed in Europe a decade later. The divisions of the Cold War being a thing of the past, multinationals let themselves be guided by the logic of maximizing profit from trade.

Not anymore. From trade wars to Brexit, geopolitical barriers are rising again, cutting supply chains around the world. Tech companies, which source critical components from a surprisingly small number of manufacturers, many of which are located in vulnerable Taiwan, are particularly at risk. Western companies like Apple continue to rely heavily on Chinese manufacturers. Even though Westerners increasingly covet Chinese technology, many Chinese companies still rely on Western know-how. When the U.S. government banned its companies from doing business with Huawei on national security grounds in May, some predicted the Chinese telecommunications equipment maker could collapse. This is not the case. But foreign suspicions of Huawei are choking the global rise of China Inc. Perhaps in an attempt to appease them, the Huawei boss told The Economist in September that he would consider selling his foreign operations to a western buyer. Expect geopolitical concerns to weigh heavily on meeting rooms in 2020.

The second set of problems for business leaders stems from a backlash against capitalism – or at least the version of it practiced so far in this century. There is a growing incentive for companies to find a goal beyond maximizing profits. They are expected to be more diverse, greener and generally nicer. Internet companies in particular are being harassed by authorities on both sides of the Atlantic for playing hastily with user data and fueling political polarization. The calls to break Big Tech are getting louder. This has yet to affect their juicy profits. But that led Mark Zuckerberg to consider a new business model for Facebook less reliant on online advertising (even though Facebook’s nascent cryptocurrency didn’t go anywhere quickly). It may also have prompted Google founders Sergey Brin and Larry Page to formally hand over the management of its parent company to Sundar Pichai, boss of its core search business.

It’s not just about businesses. In America as in Asia, business schools are also reinventing themselves for the new era. Billionaires are in the sights of millennial socialists. Even reclusive German business barons are having a harder time keeping a low profile, and the high priests of management consulting at McKinsey are rethinking their role.

Yet 2019 also saw many examples of capitalism’s capacity for self-correction. Companies are increasingly aware of the risks of climate change, both to their reputation and to their operations (although too few are doing anything about it yet). Granted, a lot of money is still chasing carbon-blocking industries, as Saudi Aramco’s initial public offering of $ 25.6 billion in December attests. But a handful of climate moguls are also investing a lot of money in investments for the healing of the planet, in the hope of a healthy return.

The stock markets may be sparkling, but throughout the year they have shown less patience with loss-making unicorns like Uber and Lyft than enthusiastic venture capitalists have. WeWork, an office rental company masquerading as a tech company, imploded after investors raised questions about its billions in losses and lousy corporate governance before its failed IPO (giving an eye to the black butter to its main funder, Masayoshi Son, and to VCs more generally). As long as competition and capital markets are functioning properly, as in the thriving entertainment industry, capitalism can, 2019 showed, serve consumers and shareholders.

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Estelle D. Eden

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