Geo-economic fragmentation does impact firms’ financial results. Connected and cheap weapons could pose an existential threat to the sophisticated US defence system. How to give away a fortune. Frictionless payments make it too easy to spend too much. MAGA conspiracists – crazy but dangerous and potentially decisive.
QUOTE OF THE WEEK
ARTICLE OF THE WEEK
Alessandro d’Orazio, Fabrizio Ferriani, Andrea Gazzani, Geoeconomic fragmentation and firms’ financial performance
(VoxEU / CEPR, 18 March 2024)
Geoeconomic fragmentation (often discounted by the financial markets) does matter for financial results. The three central bank economists introduce their novel firm-level revenue-weighted geopolitical risk index (which integrates corporate revenue distribution with geopolitical risk across countries). It shows that firms with greater exposure to geopolitical risk experience (1) an increased probability of default, (2) reduced market valuations, and (3) higher financing costs. As threats of geoeconomic fragmentation accelerate, the real-financial feedback loop gains in intensity (free access, reads in 7-9 min).
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Noah Bressner, Pentagon stares down “drone swarm” threat
(Axios, 15 March 2024)
On how tech is revolutionizing war and the power of asymmetry. Future wars will be fought with a connected mix of cheap weapons rather than sophisticated weapons systems that only superpowers can afford. The reason is tech innovation and AI – evolving so fast that sooner than we realize, swarms of AI-powered low-cost drones (possibly hundreds of them at the same time) could pose “an existential threat to America’s hulking war machinery” (metered paywall, reads in 4-5 min).
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Sophie Alexander, Austrian Heiress to Let 50 Strangers Decide Fate of Her Fortune
(Bloomberg, 15 March 2024)
What to do with big money when you receive it? This is an extreme example of the ways in which heirs of dynastic wealth may choose a different path than previous generations. When Marlene Engelhorn got €25 millions of family money, she decided to let 50 strangers decide for her how to give it away. Her idea is to promote citizens’ assemblies (a democratic tool that’s gaining popularity in Europe) and to spark conversations on wealth inequality (gifted article, reads in 6-7 min).
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Alana Samuels, Why We’re Spending So Much Money
(Time, 14 March 2024)
On the tricks of “mental accounting” (i.e.: the way people organize and spend their money). Frictionless transactions are so common in today’s economy that they make spending easier than ever before. But there is a “but”: the growing evidence that they’re making us shell out more than we realize. “With so many different accounts to keep track of and so many merchants smoothly debiting what we owe every month, we just keep on spending, whether we can afford it or not.” Research now shows that the more frictionless the payment method, the more money people spend (metered paywall, reads in 8-10 min).
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Frederick Kaufman, Jacob’s Dream – MAGA meets the Age of Aquarius
(Harpers’ Magazine, April 2024)
A conversation over lunch with Jacob Angeli-Chansley, the man the media has dubbed the QAnon Shaman. A few weeks ago, he was released from federal custody for his role in the insurrection at the Capitol on January 6, 2021. His world is founded upon conspiracy theories – most notably Operation Mockingbird: an alleged CIA-sponsored effort to use mass media to influence public opinion, in which the ‘deep state’, international bankers, pharmaceutical cartels, and corporate monarchies endeavor to control the world. People like Jacob are pivotal elements of the Trump coalition. Their ramblings would be a laughing matter if this crowd were not likely to play a significant (possibly decisive) role in the upcoming US elections (metered paywall, reads in 10 min or so).
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