Valuing employee tenure

Ageing employees bring two types of experience to an organisation. The first is “general human capital” and it consists of such things as knowledge, skills, learned capabilities, and patterns of behaviour acquired through a lifetime of work. The second is “firm-specific human capital,” consisting of knowledge, social networks, mastery, and know-how generated through the experience of working in one organisation for years. Researchers examined the business impact of general human capital, measured by age, and firm-specific human capital, measured by tenure, in 23 organisations operating across of variety of industries. Performance was studied for extended periods, tracked monthly or annually. The analyses showed that, after statistically accounting for the correlation between age and tenure, age has no statistically significant effect on performance, but tenure does. The positive effects of tenure vary in size from organisation to organisation — implying that well-managed tenure can return greater-than-average value to the employer.

(Adapted from “Don’t Underestimate The Value of Employee Tenure,” by Richard A. Guzzo et al., published on January 24, 2023, by the Harvard Business Review)

Falling behind the AI boom

In 2016, a few months after becoming CEO of Google, Sundar Pichai made a sweeping proclamation: Google, whose name had become synonymous with search, would now be an “AI-first” company.

What AI-first meant, exactly, was murky, but the stakes were not. Two years earlier, Amazon had blindsided Google by releasing its voice assistant Alexa. Now a household name, it was a coup that particularly aggrieved Google. Seven years later, Google finds itself in a similar position, again beaten to market in a field it should have dominated. But this time it’s worse: The usurper is OpenAI, a comparatively small San Francisco startup, and not a deep-pocketed giant like Amazon. “It is very clear that Google was on a path where it could have potentially dominated the kinds of conversations we are having now with ChatGPT,” says Margaret Mitchell, former ethical AI lead at Google.

(Adapted from “’AI First’ To Last: How Google Fell Behind In The AI Boom,” by Richard Nieva, Alex Konrad and Kenrick Cai, published on February 8, 2023, by Forbes)

Dominance of Chinese cars

As China’s auto brands woo more and more foreign customers, the nation is poised to become the world’s No. 2 exporter of passenger vehicles, a milestone that could reshape the global auto industry and spark new tensions with trading partners and rivals. Overseas shipments of cars made in China have tripled since 2020 to reach more than 2.5 million last year, according to data from the China Passenger Car Association. That’s only a whisker behind Germany. The trend underscores that China has moved beyond being the “world’s factory” for low-cost consumer electronic devices, appliances and Christmas toys. By shifting to more complex and sophisticated products for competitive, highly regulated markets, Chinese companies are moving up the value chain in manufacturing.

(Adapted from “The US Hasn’t Noticed That China-Made Cars Are Taking Over the World,” by Tom Hancock, published on January 26, 2022, by Bloomberg Businessweek)

A rolling recession

You’ve heard about a hard landing of the economy. That’s a full-blown recession where millions of jobs are lost. And you’ve heard about a soft landing. That’s where the economy slows to a nice, steady pace without decimating the labor market as inflation comes down. Now there’s a new economic meme making the rounds. It’s called a rolling recession, and it’s a bit of a hybrid. One industry suffers a contraction, then another, but the economy as a whole never swoons, and the job market largely holds up. That framework doesn’t explain everything that’s going on with this puzzling post-pandemic economy, but it’s as good a description as any of what the US has been going through since the Federal Reserve began lifting interest rates from zero in March of last year. And it holds out at least the possibility that the economy will survive its worst bout of inflation since the 1970s without having to endure a contraction.

(Adapted from “Forget Hard Or Soft Landing: Meet the Rolling Recession,” by Rich Miller, published on February 9, 2023, by Bloomberg)

Published in Dawn, The Business and Finance Weekly, February 20th, 2023