1 HSBC to axe 25,000 jobs (Jill Treanor in The Guardian) HSBC is to cut up to 25,000 jobs around the world – including as many as 8,000 in the UK – as its chief executive, Stuart Gulliver, embarks on a fresh strategy to reduce costs and bolster returns to shareholders.
Gulliver – who took the helm in 2011 – has already cut the total head count to 257,000 from 296,000 but has signalled another wave of reductions as he turns the bank’s focus towards Asian markets. Branches will be closed in seven major markets including the UK, where the bank employs 48,000 in total.
Unions in Britain reacted angrily as the news broke. In a detailed presentation to shareholders Gulliver is also setting out the criteria the bank will use to decide whether to keep its headquarters in the UK, where it has been based since 1992 when it moved from Hong Kong to facilitate the takeover of Midland bank.
The job cuts are not part of that review, which will kick-start a debate about the government’s tax policy and attitude to financial services companies – two of the 11 factors HSBC will use to determine whether to stay based in London. The UK bank levy costs HSBC £700m a year.
Gulliver has already pulled back from a presence in 87 countries or territories to 73. Gulliver, who has spent his career at HSBC, in 2011 introduced the motto of “courageous integrity” before the bank was slapped with a £1.2bn fine the following year by authorities in the US for laundering money for Mexican drug barons. Since then it has been embroiled in the Libor rigging debacle and more recently a tax avoidance scandal.
2 How disruptive startups coexist with derivative startups (Sohin Shah in San Francisco Chronicle) When a startup succeeds in creating a new market or industry, there’s often a ‘gold rush’ phenomenon of others trying to grab a piece. But not all of these spin-offs are copycats.
Once the space is saturated, hustling entrepreneurs identify the need to offer support services, and that’s how derivative startups are born. Typically, startups have one or more needs that are unmet internally. For example, most startups can’t afford a full-time attorney to perform legal and compliance work. This creates an opportunity for another startup to serve as outsourced compliance and due-diligence professionals. Other new companies might spring up to help with logistics, infrastructure, payment mechanisms, data aggregation or customer service.
Just as fungi help plants thrive (and vice versa), derivative businesses form a symbiotic relationship with disruptors. As the second wave of innovation, they allow emerging sectors to flourish. Disruptors arise to meet an unmet need, but they often generate their own gap in the market. Derivative startups can provide the missing puzzle piece.
For example, when Airbnb disrupted the hotel industry, its business created an unmet need for property management services. After their experience as hosts for Airbnb, Guesty’s founders developed a system to fill this need and take the pain out of the sharing economy for hundreds of thousands of hosts.
Consider ride-sharing services such as Lyft and Uber. They revolutionized the transportation services industry, but the limited number of car owners hampered their potential to scale up. Derivative startups Breeze and HyreCar arose and began leasing vehicles to Uber and Lyft drivers throughout the US, thereby solving the new industry’s bottleneck.
Disruptive startup leaders should encourage this growth rather than look at disruptors as challengers. By nurturing support services companies, a disruptor can foster his own company’s growth and allow his industry to mature and evolve.
3 What it means to miss an IMF payment (Robert Peston on BBC) If you had asked me even a few months ago what event could cause devastating shock waves to roll over financial markets, and seriously set back the global economic rival, well Greece missing a payment to the IMF would have been one of them. But here we are: Greece has announced it is missing its payment, and the world feels pretty much as it did before.
So why is Greece’s refusal to stump up 300m euros an apparent non-event? Well the first thing to say is that it is not a non-event. The symbolism of Greece’s request to defer the payment – the first such deferral since the 1980s and probably the first ever deferral by a developed economy – is incredibly powerful.
Whether they like it or not, it represents a massive humiliation both for Greece’s Syriza government and for its creditors, eurozone governments, the European Central Bank and the IMF itself – in the sense that they have been working day and night to avoid this impasse, and they have failed. Greece has asked to defer the payment, and indeed a series of payments due during the course of this month, into a single sum of 1.5bn euros, to be handed over to the IMF at the end of June.
There are three things to say. First is that even if there is a deal, that may not be the happy-ever-after – because Tsipras may be obliged to put the deal to the Greek people, either in a referendum or a general election, given that it would be a million miles from the platform of no-more-austerity on which he was elected.
Second, if there is no deal that inevitably means the imposition of painful capital controls in Greece, to prevent every last euro in the country being taken offshore by panicked investors. As a minimum, that would tip the country into yet another deep and dark recession, because all access to credit would vanish.
Third, Greece in default would not necessarily mean Greece leaving the euro. There would be a possibility of its debt being reconstructed, and of its banks being recapitalised by imposing hideous losses on their creditors, as a precursor to some kind of financial rehabilitation while remaining inside the euro. The prospect of default and Grexit are two sides of the same coin – namely Greece’s madly excessive debts.