EconAir

  INTRODUCTION   The English East India Company (EIC) might be a model for how a multinational corporation could survive and prosper in an increasingly chaotic and hostile geopolitical world.   HISTORIC BACKGROUND   The East India Company (EIC) was chartered in 1600 by Queen Elizabeth I to promote and monopolize English trade with Asia. England, a poor country in the 1600s but with colonial ambitions after defeating the Spanish Armada in 1588, outsourced its colonial ambitions to the EIC and other private companies.    The East India Company was privately funded by 218 merchants and other investors. It was the first modern multinational corporation. The EIC was a joint stock company, that is, a company with publicly traded stock bought and sold in a secondary stock market.  Like modern companies, the EIC issued financial reports, held annual meetings for stockholders, and had quarterly meetings of the Board of Directors.    The EIC was v...

It is a puzzlement why the stock market can go up while the economy is in a virus-caused depression. Much of the economy is in lockdown or closed because of decreased consumer demand. As many of one-third of workers and many small businesses are on federal life-support programs. Profits have disappeared. Large numbers of bankruptcies loom. Given the uncertainty, including recent record numbers of new virus cases, the usual stock evaluation metrics are worthless. With the economy tanking, how come the stock market has gone up dramatically? And continues to go up. THE STOCK MARKET Let’s decompose the stock market. When people talk about the stock market going up or down, they usually refer to an index such as the S&P 500 as the measurement. The S&P 500 is a market-value (cap, short for capitalization) weighted index. The ten most valuable companies account for over 20% of the total value of the index. There are over 3,000 actively traded stocks. But the 500 comp...

There are a number of forecasts of what the world will be like after the virus. Let’s take a look at some of them. Many long-term trends have been accelerated by the virus.  Probably the most cited example has been the accelerated move to digital-based transactions and behavior. This has occurred among both consumers and businesses. I think we have hit an inflection point. Before, there was a great deal of discussion about how one industry or market was becoming more dependent on digital platforms and automation based on artificial intelligence. The Internet of Things, online shopping and ordering, business conferencing, telemedicine. Or how a particular company was transforming an industry (Amazon, Uber). But now we see that the entire economy –  al l industries and markets – rely on digital. The technology and rapid adaptation are accelerating the shifts. Income inequality is bad and probably getting worse.  The usual reasons given are outsourcing in th...