Facebook Exec Co-Founded And Then Got Fired From Pets.com

Facebook’s Vice President of Global Marketing Solutions, Carolyn Everson, sat down with Business Insider’s Sara Silverstein at the Cannes Lions Festival. Everson talks about a hurdle from her past that she was completely embarrassed by but now is an important part of her story.

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Facebook Exec Co-Founded And Then Got Fired From Pets.com

Insights From The CMO Of The Biggest Beer Company In The World

Anheuser-Busch InBev CMO Pedro Earp sat down with Business Insider’s Sara Silverstein to talk about marketing risks that paid off and where the firm has made mistakes in executing its strategy.

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Burger King CMO Fernando Machado Shares His Secrets To Success

Detroit’s Sacrifice For Economic Recovery

What It’s Like On The Longest Flight In The World On Singapore Airlines

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#Brands #Marketing #BusinessInsider

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Insights From The CMO Of The Biggest Beer Company In The World

Burger King CMO Fernando Machado Shares His Secrets To Success

Burger King’s Fernando Machado was named the most innovative CMO in the world by Business Insider for 2019. He sat down with Business Insider’s Sara Silverstein to talk about what drives his decisions and how the marketing industry is changing.

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Detroit’s Sacrifice For Economic Recovery

What It’s Like On The Longest Flight In The World On Singapore Airlines

How Method Keeps Its Soap Factory Eco-Friendly

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Burger King CMO Fernando Machado Shares His Secrets To Success

Executive Says Business Leaders Are Optimistic About The Future | Davos 2019

Kelly Grier is the US Chairman and Managing Partner at accounting and advisory firm EY. Through access to businesses in all sectors through the services they provide, she has access to insights into what business leaders are thinking and planning. She sits down with Business Insider’s Sara Silverstein at the World Economic Forum in Davos, Switzerland.

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A Billionaire Investor Says The Economy Is Headed For ’20 Years Of Ugliness’ | Davos 2019

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Executive Says Business Leaders Are Optimistic About The Future | Davos 2019

Western Union CEO On Migration, Diversity & The Future Of Payments | Davos 2019

Hikmet Ersek is the CEO of Western Union. Ersek, a citizen of Austria and Turkey, draws on his international background to speak out publicly for the rights of migrants and refugees. Ersek sat down with Business Insider’s Sara Silverstein at the World Economic Forum in Davos, Switzerland to discuss the future of payments.

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Western Union CEO On Migration, Diversity & The Future Of Payments | Davos 2019

An EVP At Microsoft Explains How Tech Is Changing Industries Like Farming | Davos 2019

Jean Philippe Courtois, Executive VP at Microsoft sat down with Business Insider’s Sara Silverstein at the World Economic Forum in Davos, Switzerland. He explains how tech is changing industries like farming.

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A Billionaire Investor Says The Economy Is Headed For ’20 Years Of Ugliness’ | Davos 2019

A $265 Billion Investment Chief Expects A Recession In About 18 Months | Davos 2019

Investment Banker Ken Moelis On Taxes, Regulation & Attracting Top Talent | Davos 2019

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An EVP At Microsoft Explains How Tech Is Changing Industries Like Farming | Davos 2019

Adam Grant Reveals What Most Leaders Get Wrong & Simple Things All Execs Should Try | Davos 2019

Adam Grant is an organizational psychologist, a Wharton professor, and the best-selling author. Grant sat down with Business Insider editor-at-large Sara Silverstein at the World Economic Forum in Davos, Switzerland to discuss how people get power, how they keep it, and what they do with it.

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A $265 Billion Investment Chief Expects A Recession In About 18 Months | Davos 2019

Investment Banker Ken Moelis On Taxes, Regulation & Attracting Top Talent | Davos 2019

$20 Billion Alternative Investor Shares His Favorite Long-Term Themes | Davos 2019

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#Power #Davos #BusinessInsider

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Adam Grant Reveals What Most Leaders Get Wrong & Simple Things All Execs Should Try | Davos 2019

A $265 Billion Investment Chief Expects A Recession In About 18 Months | Davos 2019

Scott Minerd oversees $265 billion in assets as global CIO of Guggenheim Partners. He sat down with Business Insider’s Sara Silverstein at the World Economic Forum in Davos, Switzerland to discuss why he expects a recession in about 18 months.

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Wall Street Weighs In On AOC’s Proposed 70% Marginal Tax Hike | Davos 2019

Business Leaders Discuss Technology’s Role In Better Capitalism | Davos 2019

Henry Blodget Leads A Panel On Facial Recognition Technology | Davos 2019

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A $265 Billion Investment Chief Expects A Recession In About 18 Months | Davos 2019

Investment Banker Ken Moelis On Taxes, Regulation & Attracting Top Talent | Davos 2019

Ken Moelis has been in the investment banking industry for over 30 years and is the founder and CEO of investment bank Moelis & Company. Moelis sat down with Business Insider’s Sara Silverstein at the annual meeting of the World Economic Forum in Davos, Switzerland to discuss taxes, regulation, and how to attract top talent.

MORE DAVOS 2019 CONTENT:
Business Leaders Discuss Technology’s Role In Better Capitalism | Davos 2019

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Wall Street Weighs In On AOC’s Proposed 70% Marginal Tax Hike | Davos 2019

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Investment Banker Ken Moelis On Taxes, Regulation & Attracting Top Talent | Davos 2019

$20 Billion Alternative Investor Shares His Favorite Long-Term Themes | Davos 2019

Investcorp is a Bahrain-based alternative investment firm with over $20 billion under management. Investcorp CEO Rishi Kapoor sat down with Business Insider’s Sara Silverstein at the World Economic Forum in Davos, Switzerland. Kapoor reveals where Investcorp is seeing investment opportunities and risks.

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$20 Billion Alternative Investor Shares His Favorite Long-Term Themes | Davos 2019

A $736 Billion Investor Says The Market Is Predicting An Economic Slowdown | Davos 2019

Martin Gilbert is Co-CEO of Aberdeen Standard Investments which oversees $736 billion in assets and is the UK’s largest active manager. Gilbert sat down with Business Insider’s Sara Silverstein at the World Economic Forum in Davos, Switzerland.

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#Economy #Davos #BusinessInsider

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A $736 Billion Investor Says The Market Is Predicting An Economic Slowdown | Davos 2019

Cigna CEO Explains The Problem With Healthcare In America

The CEO of health insurer Cigna, David Cordani, says the problem with America’s healthcare system is that most of the money is being spent on intervention after people already are sick. Cordani believes we need to spend more money and resources keeping people healthy in the first place.

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Following is a transcript of the video:
Sara Silverstein: And do you think it makes sense at all for healthcare to be tied to employers anymore given how much our workforce has changed?

David Cordani: Yeah so in the United States greater than 50% of Americans today get their health services support through an employer. That, that is a manifestation from a long time ago post World War II wage controls that existed, but, but we are where we are. Answer to your question is yes, I do. And the reason why is: an employer actually has a vested interest in helping to keep their employees healthy, and productive, and present from a work standpoint. Two, the worksite and the culture of an employer create some mechanisms to engage an individual, ways to communicate, ways to provide on-site care, ways to provide peer support, program support, etc. So there’s incentive alignment, there’s culture you could pull against and support it, and then there’s delivery mechanism. So we think the answer is yes, and we have a ton of bright spots where we could point to employers that have innovated with us and we’ve innovated with them. And their employees and therefore their business is better off and those employees family members are better off because they’re getting better, more comprehensive healthcare.

Silverstein: And what do you think makes America different? Why are we spending so much on healthcare? Can you point to one thing that like our policies, or something in America that is a problem?

Cordani: Yeah, so our system is quite different, right? We’re a global company, we do business all over the world. So we’re able to see systems in the most developed OECD countries and developing countries around the world. There’s multiple differences. First and foremost, the United States is the largest sick care interventionist system in the world. We spend the majority of our money and resources addressing people once they’re sick. We need to spend some more of our resources keeping people healthy in the first case, and identifying people who are at risk of health events and lowering those health risks. Some other countries do that better through social service support, poor community based health support, etc. Secondly, we have more specialists and more hospitals per capita than any other OECD countries and less primary care, be it OBGYN, pediatrician, family practitioners, and, and we need to moderate that a little bit, to, again, help coordinate the whole person on the front end. There’s trade-offs in the way we’ve built our system. As a company we’ve had great success partnering with physicians through what we c–all, “Collaborative Accountable Care” relationships, we have 375 of which that are up and running with physicians, and another 125 with hospitals, and working more comprehensively. But in a nutshell, we wait too long in terms of trying to fix somebody once they’re sick, as opposed to engage on the front-end and keep people healthy in the first place, that’s where Cigna expends a lot of resources. Secondly, we spend a lot more money on the high cost intervention, as opposed to enabling the primary care physician, the geriatrician, the pediatrician, to have more resources to help to coordinate care for individuals. And we have a different pricing scheme relative to some of our services, be they pharmaceutical or otherwise, versus other parts of the world.

A Strategist Reveals What Can Keep The Market Soaring

David Kelly, Chief Global Strategist of JPMorgan Asset Management, says there is only one god of the stock market and that is future earnings growth. He believes this year’s strong earnings growth will push the market higher in 2018. The biggest threat he sees to equities is a substantially worse trade conflict.

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Following is a transcript of the video:
Sara Silverstein: And what’s your outlook for the markets? Do you think that the US stock market is expensive right now?

David Kelly: No, I think the US market is okay. I mean, it’s had a sort of rocky kind of year, and I think the reason for that is people have a hard time appreciating just the earnings we’re receiving right now. The problem is, I think stock market investing is kind of a monotheistic religion; there’s only one god, and that is future earnings growth. And the thing is, you cannot see much future earnings growth from here. Next year it’s going to be tougher than this year. But look how good it’s this year. I mean, this year we think we’re going to do about 26% year-over-year growth in operating earnings per share for the S&P 500. That’s extraordinary in the tenth year of a bull market in equities. And it’s like you’re getting five years’ of earnings growth packed into this year. So I think we should appreciate, and I think investors eventually will appreciate, just how good these earnings are right now, the ability of companies to earn this cash, to distribute this cash, that should push the market up. And I think the market, barring some worse trade conflict, I think the market will probably move up between now and the end of the year.

Silverstein: And that’s my next question. What would it take for the market to dive? Is trade the biggest —

Kelly: I think there is a risk there, if we keep on doubling down on a trade conflict. Remember, people like Xi Jinping, they’re not going to capitulate here, because they are politicians, in a broader sense, in China. They cannot be seen to lose face over this. And they think that — you know, there’s no midterm elections in China. And because of that, they’re not going to give in easy, and so the danger is, the trade war gets prolonged.

Now, honestly, I think we may see sort of a trade war ceasefire before the midterm elections, because I think the pushback on Washington about this trade war is getting bigger and bigger and bigger, and eventually I think that’s going to have an impact on the administration. But there is a risk.

One of the biggest risks facing this economy is that we keep on pushing up tariffs, because tariffs are such a bad idea. It is an idea twice-cursed. It curses the person inflicting the tariffs and it curses the one upon whom the tariffs are inflicted. It’s just going to slow down global growth. It slows down economic growth in the United States, so it is a big risk, but hopefully it’s one that we sort of back away from before the end of the year.

Silverstein: And where else are you seeing opportunities for investors?

Kelly: Well, I think there’s a lot of opportunities in equities overall, particularly outside the United States. And remember, we’re going to slow down eventually to about 2% growth. We don’t have the population growth, we don’t have the workforce growth, honestly, to do more than that. But if you look overseas, Europe’s still got a lot of unemployment, that unemployment rate’s coming down, they can grow faster. Emerging markets, there’s always something going wrong in emerging markets, but overall they’ve got much better long-term growth prospects. And then if you look at valuations, the US is fairly valued, but Europe is cheaper than average, and emerging markets are cheaper than average. So I honestly think that if the US can give you about 5% total return per year over the next five years, I think Europe and emerging markets can give you about 10%. I think that’s where the opportunity is.

What People Get Wrong About The Market’s Favorite Recession Signal

David Kelly, Chief Global Strategist of JPMorgan Asset Management, expects the yield curve to be almost completely flat a year from now. But he says not to worry if it ends up inverted. Kelly calls the inverted yield curve a broken barometer that can no longer be trusted to predict economic trouble. He goes on to explain how an inverted yield curve can create income for consumers.

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Following is a transcript of the video:

Sara Silverstein: What’s your outlook for the Fed?

David Kelly: I think the Fed will keep on tightening. I mean, the economy’s doing very well. We’ve met all their targets in terms of growth, in terms of unemployment, in terms of inflation. I think they are worried, frankly, about all this fiscal stimulus. We’re at full employment. You don’t normally put this much stimulus into an economy at full employment. It’s kind of like bringing an extra keg to a frat party at 2 a.m. It’s going to make the party louder but it’ll make the hangover worse. So they’ve got to counteract this fiscal stimulus. I think that’s what they’re going to do. So I think another four rate hikes in September, December, March, and June, that’ll bring us up to two and three-quarters to 3% on the federal funds rate. I think and I hope they’ll stop there, because you’re talking about risks. The other risk to the economy is the Fed overtightens the rate. Just as the economy slows down in the second half of next year — and we think it will — if they raise rates too much at that point, that could cause problems.

Silverstein: And what will the yield curve look like a year from now after they raise rates?

Kelly: If they stop at four, I think it’ll be almost exactly flat. In other words, I think the yield on a two-year treasury note will be the same as the yield on a 10-year bond. If they go more than four rate hikes, I think it might get inverted, but — people worry too much about an inverted yield curve. It is a broken barometer. It used to be the yield curve was a very good predictor of what the economy was going to do, because why would you buy a long-term bond with a lower yield than a short-term bond? It’s because you think the Fed’s going to cut rates. Why’s the Fed going to cut rates? Because the economy’s in trouble. But you can’t trust the long end any more.

Silverstein: Why?

Kelly: Well, because central banks have been buying long-term bonds like never before, and they’re basically sitting at the long end of the yield curve, and that’s distorting it. It’s kind of like, I don’t believe in torture, because torture is immoral, but also, a tortured prisoner is going to lie to you. The yield curve is being tortured by central banks, and is going to tell us lies. Now, it doesn’t mean there couldn’t be problems in the future, but we’re going to need a better measure of what’s going on than the yield curve.

Silverstein: And how does an inverted yield curve affect consumers or borrowers?

Kelly: That’s a funny thing. It is a symptom without being a disease. Because, as I said, an inverted yield curve has usually been a problem, or has suggested a problem is coming, because it means the Fed’s worried about something. But if you think about it, American households have got about three dollars in financial, interest-bearing assets for every one dollar they have in debt. And most of those interest-bearing assets are short-term, things like CDs, and most of that data are long-term, things like mortgages, so if you got an inverted yield curve if short rates go up more than long rates, guess what, you’re giving more income to consumers, and you’re not pushing up their expenses. It actually stimulates the economy. And that’s one of the funny things, people worry about it, but it’s harmless as of itself, and if it doesn’t work as a barometer of where the economy is going, there are lots of things to worry about, think about. I wouldn’t worry too much about the yield curve.

Why The Chase Cards CEO Is Not Worried About The Hundreds Of Millions Lost Last Quarter

Jennifer Piepszak, CEO of Chase Card Services, sat down with Business Insider’s Sara Silverstein to discuss the credit card business and how it is changing.

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A Wall Street Strategist Explains His Trade Deficit With Costco

David Kelly, Chief Global Strategist of JPMorgan Asset Management, explains why the US trade deficit with China doesn’t matter. Kelly explains that he runs a trade deficit with Costco and many other retailers. What does matter is whether you run a trade deficit overall. He says the cause for the US trade deficit is the country’s budget deficit.

Watch the full interview: https://www.businessinsider.com/david-kelly-on-trade-deficit-market-outlook-and-inverted-yield-curve-2018-7

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Following is a transcript of the video:

Sara Silverstein: So everybody’s talking about trade wars and trade deficits. What do people get wrong about trade deficits?

David Kelly: I wrote a piece actually, on my LinkedIn blog a few weeks ago called “My Trade Deficit with Costco” and I think it’s a good way of looking at this. I run a trade deficit with Costco. I buy a lot of their stuff, they don’t seem to want to buy what I have to sell, which is basically investment insight, but I run a trade deficit with almost everybody. I run a trade deficit with Whole Foods. I run a trade deficit with CVS. The only people that I run a trade surplus with are JPMorgan Chase, my employer, but that’s actually okay because overall, I run a trade surplus, and I don’t really care who I run the trade deficit with. So I think that’s the first thing.

We focus on, “We’ve got a real problem with China,” or “We’ve got a problem with Germany.” It doesn’t matter, so long as, overall, we run a trade surplus, we wouldn’t have a problem. But of course, we don’t. But then that gets to the second point. Why do I run a trade deficit with Costco? Or why do people get into problems in which they’re buying a lot of things from one group and not selling them? It’s because I overspent. And as a nation, we overspend.

The reason we have a trade deficit is actually because we have a budget deficit. If you think about it this way, you’ve got the private sector, you’ve got the public sector, you got trade. If the private sector more or less pays its way, if we fund our investment through our savings, but if the government runs a big budget deficit, if it spends a whole pile more than it’s taking in taxes, then we, as a nation, will live beyond our means. I think this is so important. It’s not a matter of tariffs, it’s not a matter of the dollar. If we run a big budget deficit, if we continue to buy more stuff — the government does and it takes it in taxes — we will run a trade deficit. So if we want to fix our trade problem, we got to start by fixing the budget deficit.

Silverstein: And to take your analogy further, when is it okay to run a budget deficit or a trade deficit as an individual, or a nation?

Kelly: It’s actually a very good point, because now, I suppose, I do overall run a trade surplus, and that’s good. But 20 or 30 years ago when I was a younger man I actually ran a trade deficit. I was borrowing money every year just to fund my expeditions to Costco, because I wasn’t getting paid enough. But that’s okay, because I knew that over time, I’d get paid more. And that’s actually true for — for example, emerging market economies. It’s okay for them to borrow a whole pile of money to grow their economies because they’re young, they’ve got plenty of room to grow. We are an old, mature economy. Our economic growth is going to be about 2% in the long run. In this kind of economy, and with so many people retiring, we actually should be running a budget surplus and a trade surplus. We should be storing up money to pay for our retirement, and of course, we’re doing exactly the opposite.

‘Non Competes’ Are Keeping Wages Down For All Workers

Sir Angus Deaton won the Nobel Memorial Prize in Economic Sciences in 2015 for his analysis of consumption, poverty, and welfare. Deaton says low income workers are being asked to sign non-competes, which is limiting their options and forcing them to accept wages that aren’t competitive.

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Following is a transcript of the video:

Sir Angus Deaton: Another issue that’s going on all the time is … you know, non-compete agreements. So, a lot of people sign a non-compete agreement and when most people think of it, if you think of it, you probably think of someone in a hedge fund or something. 

Sara Silverstein: Well I did work at a hedge fund. I did sign a non-compete, but my lawyer told me not to worry about it, because they’re not enforceable.

Deaton: Well they’re not enforceable in some states. But, now fast food workers are signing non-competes, and something like 56% of franchises like H&R Block, Jiffy Lube, McDonalds and so on are asking their workers to sign non-competes of one sort or another. That’s probably illegal, but what chance your lawyer advises you not to sign this? How many hamburger flippers have lawyers? How many lawyers would take a case from a hamburger flipper? So, this is sort of intimidation, and again people are saying, “Well, that’s illegal, you know, we shouldn’t be able to do this.” And there was one of them involving a sandwich-making chain, I’ve forgotten what it was called, and it had a very vicious one. I mean, that you couldn’t work for any other sandwich manufacturer within four miles of their franchise, which ruled out the whole city of Chicago, for instance. And so, you know, these things help keep wages down.

Why It’s A Good Sign No One Is Spending Their Crypto

Jeffrey Wernick is a hard money advocate and an independent investor. His angel investment portfolio includes early holdings in Uber and Airbnb. Wernick started buying bitcoin in 2009. He believes that people aren’t spending their bitcoin because they value it more than the dollars it can be traded for.

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Following is a transcript of the video:

Sara Silverstein: You’ve been buying since 2009, have you been spending any of it?

Jeffrey Wernick: I’ve never spent one. I’ve never — I’ve converted fiat into crypto. I’ve never converted — I’ve converted crypto into fiat.

Silverstein: And what’s your argument for people that say that that’s proof that you can’t spend it? That people aren’t spending it?

Wernick: Well, I think there’s something called Gresham’s law that says, “Bad money forces good money out of circulation.” So as long as there’s bad money circulating, you want to hold onto good money and you spend bad money. So eventually there might be less bad money — eventually bad money might become useless money, and when it becomes useless money, then people will begin circulating alternative forms of value, independent of how it’s taxed.

So, I mean that’s what happened in — whenever we had hyperinflations, people bartered goods. So those goods were not officially designed as currency, and basically you’d have said every time somebody barter goods, that created taxable event, but at the end of the day, people didn’t care, it was the only way they could have exchange in something that they had with some value.

As you see in Venezuela right now people don’t value the national currency very much, and the government has to discourage use of crypto by how most governments typically do things — is force. They have to threaten to kill you, put you in jail, all the things governments do when you don’t behave the way government wants you to behave.

Nobel Prize-Winning Economist Shares His Thoughts On Smart Contracts

Oliver Hart won the Nobel Memorial Prize in Economic Sciences in 2016 for his work in contract theory, the study of how contracts and incentives influence decision-making and business relationships.

Hart sat down with Business Insider’s Sara Silverstein at UBS’s Nobel Perspectives Live event in Brooklyn. Hart talks about the rise of blockchain-based smart contracts. He explains that smart contracts don’t solve the problems of incomplete contracts that his work is focused on.

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Following is a transcript of the video:

Sara Silverstein: You won the Nobel Prize for your work in contract theory. Can you tell me at all about what you think about smart contracts that we’re seeing now? Are they gonna revolutionize everything? Do they solve all the problems that you were working on?

Oliver Hart: That’s right, they’re gonna take the prize away. It’s all gonna be irrelevant.

I must admit — first, that I know little about smart contracts. I’m trying to understand more about them as I am about bitcoin, blockchain, all the rest. It’s all a bit mysterious. I’m doubtful that it’s going to be a cure-all. I mean, it seems that for some things it could be quite useful ’cause it can automate certain things. And so, you know, if I have some sort of insurance contract which says that if a certain event happens then I’m gonna get paid something, then we can sort of make that automatic so it just comes right into my account. I don’t have to check on anything or call up the insurance company. So, things like that can certainly help but they’re not going to solve — unfortunately the problems I’ve been particularly concerned with are contracts that are written for the long-term and where people are in long-term relationships and economic relationships and they’re trying to anticipate what might happen in the future which is very difficult to do, and write a contract which takes into account these eventualities. They can’t do it because the future’s very uncertain, many things can happen that we don’t really expect, or are able to predict. I don’t see how smart contracts are gonna solve that problem. Or to be more concrete, I mean, if we have a long-term economic relationship I think it’s important that we’re on the same page, we understand each other, if something unexpected comes up we have some reasonable way of dealing with it that makes us both comfortable, happy. I don’t — that’s much more about communication between us I think, at the time we write the contract than it is about any sort of automated device.

Silverstein: And last question can you give an example of the types of incomplete contracts and the bad incentives that those create?

Hart: I use the example of a power plant that locates next to a coal mine and wants to use the coal to burn to make electricity. And this is a real example — I mean there’s empirical work on things like this and the thing is once you’ve located next to the mine, you really want that relationship to work out, because it’s very costly to now ship the coal in from somewhere else. But many things can happen during the course of this relationship so just deciding ahead of time, you know, exactly what kind of coal, how much, how much I should pay you, and all that. Very difficult given that the world’s going to be changing. New sources of energy, solar power gonna come along and that’s gonna affect the industry but we probably can’t anticipate that and write that into the contract. And so later on we may get into some argument about: “I want a different kind of coal,” and the question is how much should I pay for it and this can be costly, this kind of argument and distort incentives and, you know … I don’t think a smart — you know — I’d love to see a computer solve that problem, but I think we’re some way away from that.

Shareholders Care About More Than Just Profits

Oliver Hart is a professor of economics at Harvard University. Hart won the Nobel Prize in economics in 2016 for his work in contract theory and is the author of “Firms, Contracts, and Financial Structure.” Hart sat down with Business Insider’s Sara Silverstein at UBS’s Nobel Perspectives Live event in Brooklyn.

In this interview, Hart discusses his most recent paper “Companies Should Maximize Shareholder Welfare Not Market Value.” He says that profit maximization is important to shareholders, but it’s not the only thing they care about. 

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Following is a transcript of the video:

Sara Silverstein: Can you tell me about your paper and the premise of it?

Oliver Hart: The basic idea – it starts from something that Milton Friedman said in an article in The New York Times Sunday Magazine. Surprisingly enough. Back in 1970 I think it was — he argued that companies should just devote themselves to the bottom line because he was particularly concerned with the issue — the question whether they should give money to charity. So I think it was a time when CEOs were talking a lot about the broader social purpose of companies and trying to justify charitable contributions. And Friedman said, “This is completely wrong, the only business of business was to make money.” And what they should — a company rather than giving money to charity, should simply give that money to shareholders as a dividend, and then they could decide individually if they wanted to give to charity. So he wasn’t saying that charity wasn’t important, he just said companies don’t have a comparative advantage in giving to charity.

I think it’s quite a compelling argument when it comes to charities. But I think people have taken this argument too far. So what we do in this paper is we say, let’s consider other cases. For example we use … take the case of a company like Walmart — or actually this has been very much in the news, Dick’s Sporting Goods I think, changed their policy on selling guns. So suppose the question is, you know, you can make money by selling assault rifles. The Friedman argument would be, I mean — maybe some of the shareholders care about gun control. His argument would have to be if it’s a profitable strategy to sell high-powered guns, then the company should do it, pay shareholders an extra dividend, and then shareholders individually if they want to give that money to gun control organizations can do so. But when you think about that, it just — the argument sort of falls away. It obviously doesn’t make sense. Because it could be much more efficient if the shareholders want gun control it would be maybe much more efficient for Dick’s simply not to — or Walmart, to sell the weapons in the first place.

Or to take another example, think of a company polluting a lake. Maybe they can make some extra money by doing so. And maybe it’s not illegal because we don’t have very strong regulations. Whatever — so, the Friedman argument would be, make the money by polluting the lake, give the money to the shareholders, and then let them, if they want, clean up the lake. But it could be much more costly to clean up the lake after you’ve polluted it than not to pollute it in the first place. So we argue, given that situations like that are going to arise. Shareholders are companies who have pro-social concerns and we think shareholders do because they are just ordinary individuals and individuals in their own private lives seem to be not just interested in the bottom line. So if that’s the case, then they are going to want the companies they invest in also not to be just interested in the bottom line. So the conclusion is that this idea, which seems to have taken hold that companies should be all about making money and that indeed managers, the CEO, they have a fiduciary duty to their shareholders to be concerned only with the bottom line. We think this is wrong — a serious mistake. Actually if they want to act — be loyal to their shareholders — which is what fiduciary duty means. They should actually ask them what they want. That’s the loyal thing to do. Rather than just assume that it’s making money at the expense of all else.

Here’s What Is Keeping Stocks From Completely Crashing

Yields on 10-year Treasury notes broke through 3% on Tuesday for the first time since 2014. The rise in the 10-year yield has the potential to dampen spending as consumers and companies spend more to service their debt. Stock prices dropped Tuesday as this closely watched 3% threshold was breached. 

According to Fidelity Investment director of global macro Jurrien Timmer, the market’s reaction could have been a lot worse if earnings growth wasn’t booming. 

Read the full note: https://www.fidelity.com/viewpoints/market-and-economic-insights/stock-market-analysis-stocks-go-sideways

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Jurrien Timmer sat down with Business Insider’s Sara Silverstein two weeks ago to talk about his outlook for equities. Timmer sees a lot of pressures on valuations ahead including tightening financial conditions. He has said that there is a sweet spot where valuations can compress and stock prices still rise if earnings growth is strong enough. During that interview here’s what he said he would be watching for this earnings season.

“It’s interesting because generally the earnings estimates, if you look at the aggregated consensus numbers, they tend to start high and drift lower. I mean, that’s sort of been a hallmark of earnings season. But this time around, this will be the first quarter since the corporate tax cut and the estimate is for a 17% year-over-year growth, and that estimate has been rock-solid now for probably at least four or five weeks. So it’s really interesting how it has not drifted down, and the same thing is true for Q2, which is pegged at 19% right now. So what I’m looking at for earnings season, which is of course starting now, is A: to see whether the companies will deliver that 17%, and my guess is that they are, because generally if they’re not going to, they will guide lower — you know, nobody likes surprises. But more importantly, will they guide towards the next quarter lower, the same, or higher? And again, the tax cuts were a really monumental event, a onetime event that a lot of companies weren’t even really expecting, and this will be the first quarter, post that tax cut. So it will be an important barometer to see where companies think they’re going, not so much in Q1 but moving forward. And if earnings growth stays up, you know, in the 17, 19, 20%, you can have what I would call a benign valuation reset. But if the numbers turn out to be either too high or they’re where they need to be but they will come down, then that maybe is a different story, cause then you lose that tailwind.”

And now, well into the earnings season we are seeing companies deliver on those high year-over-year earnings growth estimates. In this chart posted by Timmer you can see the EPS growth estimates for the past four quarters drifted lower in the weeks before the companies start reporting. The estimates for the first and second quarter this year have drifted higher and then have been solidly in the very high teens.

The Market Is About To Reach An Inflection Point

Fidelity director of global macro Jurrien Timmer says the Goldilock days are over and we are transitioning to the late cycle of the economic phase.

Timmer stopped by Business Insider’s offices to talk to Sara Silverstein about his economic and market outlook. 

Timmer says valuations will continue to compress due to pressures from anti-trade policies and where we are in the economic cycle.

If earnings growth stays in the 17-20% range moving forward, you can have what Timmer calls a “benign valuation reset” where valuations compress and stock prices go up.

This is an important earnings season to watch as it is the first quarter since the corporate tax cuts. Timmer will be looking for companies to deliver the 17% earnings growth that is currently estimted. He will also be looking to see if companies guide higher or lower for the next quarter.

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For a transcript of the video: https://read.bi/2JG9UCS

A $163 Billion Investment Chief Explains His Biggest Market Fear

Larry Hatheway is the chief economist and head of investment solutions at GAM. In this interview with Business Insider’s Sara Silverstein, Hatheway explains his biggest market fear.

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Following is a transcript of the video:

Sara Silverstein: And that’s exactly what you do. So what opportunities are you seeing in alternatives, in long-short pairing. Where are you finding good offsetting positions?

Larry Hatheway: Alright, so to be sure, in the period of recent market turbulence in January and February, a lot of those strategies didn’t quite deliver on that promise. There are some that do, and there will always be a few that do, but that means that it has to be a lot of skill and manager selection. And certainly, we spend an awful lot of time and a lot of our portfolios reviewing managers, reviewing their approaches, and trying to select amongst those that we think are gonna be best positioned to carry out that task that I have just outlined. In our own particular strategies, we do think it’s non-directional. That is, we are taking positions that try to remove the direction of equity markets, and for the most part, the direction of bond markets from returns. What we’re seeing is, is that the dispersion, or the difference in performance amongst stocks in the same industry group, in the same sector, sometimes in the same style, is beginning to diverge. That’s a good thing. That gives us opportunities to try to pick those winners, and offset it by some of the weaker performers to generate these sort of uncorrelated strategies. It’s an ongoing effort, there is no magic bullet, but it does seem to me it’s an appropriate way to take some of your portfolio and re-allocate it.

Silverstein: And when you’re looking at stocks overall, what are you most worried about? Is it impending trade war? Is it inflation? Is it valuation levels?

Hatheway: So at the moment, I think it sort of is the change in policy sentiment. Last year was an unambiguously good policy environment for stocks. We had tax reforms, tax cuts in the United States. We had fairly sweeping measures of deregulation that were announced, in many cases implemented, through executive order. Those were very business-friendly policies. But in 2018, politics in the United States is becoming more partisan. Unsurprisingly, we have midterm elections in the fall. That partisanship means that there’s no real possibility of legislative action to continue that positive agenda. But it also means that there is going to be more of an appeal to what got this president elected, which is populism. And populism is about anger in some parts of the world, in some parts of the United States, I should say, about what’s going on in terms of economic livelihood. And populism is almost always an anti-business message, and we’re seeing that in the discussions around Amazon coming out of The White House. We’re seeing it in the trade measures that have been implemented this year, and that is unsettling markets. So I would say, in the near term, over the next few months, it is probably about this shift in policy from being business-friendly to being business-unfriendly that is of greatest concern to market participants.

What Will Save Tech Companies

Larry Hatheway is the chief economist and head of investment solutions at GAM. In this interview with Business Insider’s Sara Silverstein, Hatheway talks about what’s going on with tech right now and what it will take for things to turn around.

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Following is a transcript of the video:

Sara Silverstein: What do you think it will take for tech investors to regain the optimism that they had before all this uncertainty around privacy and Tesla, and what’s going on right now?

Larry Hatheway: So, I think, first of all, the upcoming earnings season, it kicks off this month. We’ll see all of these big companies report earnings. And many, not all of them, will probably report very, very strong earnings. And if it’s not earnings, then at least it’s growth, that is revenues. The likes of Amazon would fit in that latter category. There are, of course, some that face a specific company-related risk. So, Facebook obviously, around data privacy and data protection, and Tesla, around some of the issues with autonomous driving and several other issues that are specific to that company. So that tide may not lift all the boats, as it were, but I do think most of them will end up surprising now, lowered earnings expectations for the first quarter, and that’s gonna help stabilize their share prices.

Silverstein: And what do you think the outlook is for Amazon, now that Trump has come off and is attacking them?

Hatheway: Well, I think for Amazon, it probably doesn’t really change much about that business model. It is a model that is based on capturing market share in the largest and most important market in the world, which is the consumer’s wallet. They’re well on their way to being able to do that. They are paying state taxes, it’s not really an issue that revolves around taxation. And there’s actually very little that the federal government, and in particular, that The White House, can do about those aspects of it. So my sense is that this is a sort of a sound and fury that will probably abate, and be replaced by some other issue going forward. And that although Amazon will obviously have to be cognizant of events in Washington, has to obviously watch its steps there, and certainly has to watch at some point in the future around antitrust types of activity. In general, I think its business model looks intact.

Why Giving Advice To Friends Is Easier Than To Ourselves

Adam Grant is a professor at Wharton and author of “Give and Take: A Revolutionary Approach to Success” and “Originals: How Non-Conformists Move the World.” He explains why we are more likely to give better advice to our friends than to ourselves. Grant also outlines the shortcuts we use to make better and faster decisions and how they sometimes backfire.

Watch Adam Grant and Business Insider’s Sara Silverstein in “Why Are We All So Stupid?” on Facebook: https://www.facebook.com/whyareweallsostupid/

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Business Insider is the fastest growing business news site in the US. Our mission: to tell you all you need to know about the big world around you. The BI Video team focuses on technology, strategy and science with an emphasis on unique storytelling and data that appeals to the next generation of leaders – the digital generation.

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Following is a transcript of the video:

Adam Grant: Have you ever given advice to a friend where you just felt like, “I just gave the best advice ever,” and then you found yourself in the same situation a few days later, and you made a horrible decision?

Sara Silverstein: Absolutely, I do it all the time. I’m a very good advice giver, very bad life-decision maker.

Grant: Yeah, what’s that about? Because they’re the same skills, right? Giving people advice on what to do and then making your own decisions. It’s the exact same thing. Except it’s not. It’s called Solomon’s Paradox.

Solomon’s paradox: we can see solutions to other people’s problems more clearly than our own

Grant: And the idea is that when you give other people advice, you look at the problem through a telescope, and you see the big picture, you focus on the two or three criteria that are really important. Whereas when you’re making your own decisions, you tend to look at it through a microscope, which is how we end up with these Excel spreadsheets that have 19 different columns, and then you’re adjusting the weights, how important is each factor in order to get the decision that you want.

And I think that this illustrates: it’s one thing to know what a good decision is; it’s another thing to be able to make that decision yourself. And because it’s so difficult, if you were to actually sit down and analyze every decision in your life, you could spend hours deciding, “Well, what time should I wake up? Should I wake up at 6:01 or 6:02? I mean, my whole life could be different because of that. What should I order to eat? Who should I call first this morning? Which way should I take to work?” These decisions, we could spend all day just making these potentially paralyzing decisions. We don’t want to do that. We don’t want to waste our time. So what we do is we develop what are called heuristics, which are sort of mental shortcuts.

Heuristics: mental shortcuts that help us make decisions but can be flawed and lead to cognitive bias

Grant: If I can say to myself, “Well, experts are usually correct.” I don’t have to analyze a bunch of decisions where there’s already expert opinion. And a lot of times those heuristics make us smart, and they make us much more efficient decision makers. The problem is we overapply them. And so we might end up in a situation where the heuristic was good the last nine times we tried it, but you know what, now the expert is wrong, and we haven’t really stopped to think about whether we can trust that expert in that situation.