WHEN Ken Frazier, chief executive of Merck, an American pharmaceutical giant, started his job in 2011, he had a hard decision to make. The firm had promising new drugs—such as Januvia, for diabetes, and Gardasil, a vaccine against cervical cancer. But the pharma industry was struggling with dismal returns on R&D and investors were questioning if companies were overspending on science. Some surrendered and started buying in drugs instead. But Mr Frazier opted to carry on backing his labs and promised publicly to spend on R&D for the long term, not for the stockmarket’s immediate gratification.An opportunity to implement the pledge soon arrived. Merck’s merger with another pharma firm, Schering-Plough, in 2009, had brought it an obscure new cancer drug. At first Merck’s scientists were unimp
The coffee’s on usWHEN Maria Veikhman, founder of SCORISTA, a Russian credit-scoring startup, was considering expansion abroad, China immediately came to mind. She believes the scope there is vast, for two-fifths of Chinese have no credit records. Ms Veikhman settled in Tianfu Software Park, a state-owned incubator in Chengdu, capital of Sichuan province where city authorities “offer almost everything for free”. Complementary facilities range from office space, basic furniture and logistics services to detailed guidance on entrepreneurial methods.Chengdu aims to catch up with Beijing, Shanghai, and Shenzhen, which at present are in a different entrepreneurial league—together they have over a hundred unicorns, or private startups worth over $1bn. The south-western city allocated 200m yuan (
IN THE Russian business community Sergei Galitsky served as a rare example of a self-made billionaire who rose with relatively little state help and outside the natural-resources trade. He built his retail company, Magnit, from scratch into Russia’s largest network; it has more than 16,000 stores. Rather than moving to Moscow, he kept his headquarters in his hometown of Krasnodar, where he also founded a football club. On February 16th he made a telling exit, announcing he would sell nearly all of his shares in Magnit—29.1%—to VTB, a state bank.That Mr Galitsky (pictured, above) decided to sell is the result of a tough business cycle and some strategic mistakes. More remarkable is that he found a buyer not on the domestic private markets, or from among foreign investors. Selling to a pubic
“IT’S always a lot of fun when you win,” President Donald Trump enthused after his tax package was approved by Congress in December. Company bosses nodded along. The centrepiece of the reform is a drastic cut to the corporate-tax rate, from 35% to 21%, taking it below the rich-country average. Although its impact is partly offset by some revenue-raising measures, the congressional Joint Committee on Taxation estimates that American business will gain around $330bn from the reform over the next ten years. Yet within that are sizeable variations in terms of which firms and industries benefit most.The biggest winners are more domestically oriented companies. These typically face higher effective tax rates than American companies with a big presence overseas, which do business in lower-tax cou
Spirit and fleshCAN religion make people wealthier? In 1905 Max Weber, a German sociologist, argued that it had happened in Europe. Protestants did not invent capitalism in the 16th century, he suggested. But, by discarding monastic asceticism and embracing the notion that diligence and self-improvement are pleasing to God, they became particularly good at it.Weber’s idea is unfashionable these days, partly because so many non-Protestant countries have become rich and partly because of a cause-and-effect problem. Were Protestants truly better at business, or were ambitious, business-minded people drawn to Protestantism? One way of settling that question is through a randomised controlled trial of religion. A National Bureau of Economic Research working paper released on February 19th repor
YOU spend 38 years at a mighty global bank, the last seven as chief executive. As boss you clean up a stinking mess, the legacy of ill-conceived acquisitions and shoddy practice. You shell out billions in fines and legal costs. You shed businesses and cut jobs by a quarter. You build a solid capital base. You maintain dividends. On your last day, you announce decent results, with revenue growing after five years of shrinkage and profits up nicely. The market’s parting gift to you? The share price falls by 3%.Analysts had expected better from Stuart Gulliver’s final report as boss of Britain’s HSBC, the world’s seventh-biggest bank by assets, on February 20th. They were surprised by charges for impaired loans to two companies, thought to be Carillion, a failed British contractor, and Steinh
GOVERNORS of the Bank of Japan (BoJ) tend not to linger long in their post. Twenty-two people have headed the institution since 1914, compared with 16 at the Federal Reserve and 12 at the Bank of England. The last time a BoJ governor won a second term was 1961, when Japan’s economy was growing by over 11% and inflation was over 5%. As Richard Werner, the author of “Princes of the Yen”, a history of the central bank’s failures, points out, by tradition the job alternates every five years between a candidate backed by the finance ministry and a “true-born” BoJ insider.This tradition will be broken by the reappointment of Haruhiko Kuroda, who was nominated for a second term on February 16th. If he completes it, he will become the longest-serving governor in the BoJ’s history.With luck that mi
TEN months ago the Trump administration took aim at steel and aluminium imports, giving itself a year to decide whether they threatened national security and, if so, what to do about it. On February 16th it concluded that America is indeed under threat. The president has until mid-April to choose whether to respond.The reports handed to Donald Trump by the Department of Commerce, which led the investigations, describe America as effectively under siege. Its steel industry might struggle to respond to a crisis similar to the second world war, they fret, as foreigners are filling a third of American demand for steel, even as 28% of national capacity lies idle. The share of primary aluminium (the kind smelted from ore, rather than recycled metal) that is imported is 91%, and 61% of local smel...
OIL bears beware. On February 20thSuhail al-Mazrouei, OPEC’s rotating president and energy minister of the United Arab Emirates, said the 14-member producers’ group is working on a plan for a formal alliance with ten other petrostates, including Russia, aimed at propping up oil prices for the foreseeable future. If it comes to anything, it could be OPEC’s most ambitious venture in decades.The result will not be, he insists, a “supergroup”. The notion of Saudi Arabia and Russia joining forces as the Traveling Wilburys of the oil world may be a bit jarring. It remains an idea in “draft” form. But whatever its chances, it attempts to shift a belief widely held by participants in oil markets: that non-American oil producers are helpless against the shale revolution.That belief has strengthened
BONDS, shares and Treasury bills are all very well, but in the end they are just pieces of paper. They are not assets you can hang on the wall or display to admiring neighbours. Many rich people like to invest their wealth in more tangible form; property, of course, but also collectibles such as art, fine wine and classic cars.Is that wise? Elroy Dimson, Paul Marsh and Mike Staunton of the London Business School (LBS) have run the numbers for their annual analysis of the financial markets in the Credit Suisse global investment-returns yearbook. Some of these assets have done rather better than others (see chart). Fine wine delivered the best returns; surprising to cynics who might assume that, in the long run, the value of wine vanishes as it turns into vinegar. Really old wine often has h...