The one about aspirations
What does your firm want to be when it grows up?
Friends,
I hope that all is well with you and yours, and that this e-mail finds you on a boat with shoddy connection, in the tropics, three months after I sent it.
In today’s newsletter, we discuss company aspirations and the link between adaptive strategy and Prussian mission-type tactics.
Also, as ever, a few personal notes and the market vitals, including substandard evidence in economics discourse, restaurants in Austin, a monumental AI joint venture, Trump vs the Fed, and anti-DEI activists vs Wall Street.
Now accepting keynotes for 25Q2-25Q4
Every year for the last decade or so, I have created three main presentation decks. For 2025, however, I have (for the first time) added a fourth due to popular demand. They are:
What to Do When You Don’t Know What to Do: How to turn change into a competitive advantage. (Based on the new book by the same name.)
Leadership in a Time of Change: How to steer an organization through a sea of uncertainty.
Resilient Retail: How to build a profitable retail business in the modern marketplace. (Based on the 2025 follow-up to the highly praised 2022 white paper The Gravity of e-Commerce.)
Artificial Intelligence Beyond the Fantasy: How to establish the real-world relevance of a new technology.
If you want to book me for your event, corporate speaking slot, or workshop, merely send me an email. To make sure I am available, please do so at your earliest convenience; my availability is limited and the schedule tends to fill up fast. More information may be found here.
A couple of updates before we go-go
A rather exhausting week. For some reason, the eldest has regressed in her sleeping habits. She used to have zero issues falling asleep, but it now varies between running a metaphorical marathon and performing a fucking exorcism. As one might expect, there all kinds of second order effects, not least one’s own sleep (as someone who works late evenings anyway).
Perhaps it is my subsequent mood that makes me particularly easy to annoy at the moment, but I feel like I am about to reach a boiling point when it comes to analyzing neoclassical economic theory. It is like unpacking a Russian doll; each layer is a slight exaggeration of the previous, but beneath it all is nothing.
Recently, I was asked whether my findings were enough to rebuke the theories. After all, the person argued, previously unproven theories are proven all the time. Ignoring the fact that all theories should be substantiated - that is what separates a theory from a hypothesis in science - there is a point to the question. A couple of Albert Einstein’s theories relating to black holes, for example, were not proven until much later. Could not the same be true in economics?
Admittedly, it is not out of the realm of imagination, but I hold it as exceedingly unlikely at this point. The reason is that pretty much every attempt to prove the theories of old has brought a new set of caveats. For instance, Arrow and Debreu’s Nobel prize winning theory of general competitive equilibrium, which “proves” the works of Walras and Samuelson, only holds if one ignores stock trades, asymmetric information, the possibility that firms might go bankrupt, and the inherently unpredictable nature of the adjacent possible. Similarly, Samuelson’s Nobel prize winning work only “proves” the work of Walras if one ignores the fact that human beings neither are perfectly rational nor enjoy perfect information. As for Walras, he only “proves” how economies behave if one ignores, well, pretty much all available evidence of how economies actually behave.
If my grandmother had wheels, she would have been a bike. “Proving” previous economic theories by ignoring the fundamental reality of markets is like “proving” one of Einstein’s theories by ignoring the fundamental reality of the universe. By that line of reasoning, one can “prove” that human beings ought to be able to fly by simply ignoring the law of gravity. Ultimately, it is a futile exercise; jumping off a cliff will still kill you.
Strategic management theory, by the way, is even worse.
On a completely unrelated (and much more joyous note), I will be looking to visit some great steakhouses during my visit to Austin in March. I have a couple of restaurants in mind, but if anyone has any recommendations that they feel like sharing, they would be more than welcomed.
Moving on to the markets.
The market vitals
Trump, together with OpenAI CEO Sam Altman, SoftBank CEO Masayoshi Son, and Oracle Chairman and CTO Larry Ellison, recently announced a new joint venture called “Stargate” that would invest “up to” $500B in AI infrastructure. The first step would be to set up a data center in Texas.
Interestingly, Elon Musk immediately criticized the move and questioned whether the investors actually had anywhere near that kind of money to spend. Although the has obvious incentives to do so, WSJ estimates, to his credit, indicate that the group collectively would indeed struggle to provide the promised figures (though it is unclear what the US government would bring to the table).
One might also note that although the sack of silver is monumental in absolute terms, it is not that bonkers in AI terms (which tells you a bit about how bonkers AI capex requirements are, but that is a different story). Microsoft, for example, plans to spend $80B on data centers in 2025, and they have already invested plenty before that. $100B to start from scratch is thus not quite as earth shattering as the involved parties would have us believe.
Speaking of The Orange Man, the feud with the Fed that we predicted would follow his election is now officially a thing. In a virtual address before the WEF currently underway in Davos, he demanded that “interest rates drop immediately”. Powell & Co. have of course publicly stated that they are taking a wait-and-see approach. A lack of progress on reducing inflation paired with what appears to be a resilient economy gives little reason for near-term cuts.
As a reminder, Trump’s populist fiscal policies, including the much discussed tariffs, are likely to lead to higher inflation. In normal times, higher inflation lead to higher interest rates. But these are not normal times. Serious presidents would listen to their central bank. Trump is different. And so, the battle begins.
For whatever it may be worth, both business and academic economists seem to be sharing my view. A recent WSJ survey revealed that they have lifted their forecasts for inflation and interest rates over the coming years.
Anti-DEI activists are now targeting Wall Street; both Goldman Sachs and JPMorgan Chase are apparently in the crosshairs. As usual, the argument goes something along the lines of “left unchanged, the banks’ policies put them at risk of costly litigation”.
The claim relies on the conclusion that white employees who feel discriminated against may sue. That is, of course, true. In late 2023, a white former employee sued Starbucks and was awarded $25M, for example. But one may also note that Starbucks have been sued for all sorts of reasons, including discrimination against hearing-impaired customers, discrimination against hearing-impaired employees, ageism, discrimination against little people, discrimination against physically disabled people, discrimination against dyslectics, and much more. Such is the reality of any large corporation, particularly in the US.
In other words, the argument is quite icky. For all sorts of reasons.
Moving therefore swiftly on.
The one about aspirations
What does your firm want to be when it grows up?
A long, long time ago, in a newsletter just like this one, I introduced the concept of aspiration - the A in the ABCDE framework. For reasons related to the new book, however, I kept the discussion largely theoretical.
Today, the situation is different. The book is nearing completion, and I believe that we can finally afford to start looking at the pragmatics. And so, over the next couple of weeks, we will.