Crash Course

Pandemic bookworms keep buying ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌

June 16, 2022

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TOGETHER WITH

Good morning.

The Federal Reserve introduced the largest increase to its benchmark interest rate since 1994 on Wednesday. The 75-point rate hike could impact credit card rates, car loans, savings accounts, and other ways people borrow money.

If it does manage to rein in inflation, as the Fed intends, at least you can celebrate a stalemate the next time you order a pizza with your Visa.

Morning Brief

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Denmark, not Switzerland, is the world's most competitive economy, says a respected Swiss survey.

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The National Highway Traffic Safety Administration releases new data on self-driving crashes.

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Netflix subscriptions and Peloton purchases have taken a nosedive, but one pandemic indulgence — books — are still burning hot.

Global Economy

Denmark Tops Switzerland as Most Competitive Economy on Earth

Something is rotten in the state of… Switzerland?

Yes, because Denmark — Shakespeare's land of tumult and regicide — has overtaken the mountainous home of yodeling as the world's most competitive economy, according to an influential annual survey.

Copenhaves and Copenhave Nots

The IMD Business School — based in Swiss city Lausanne — has been publishing its World Competitiveness Ranking for 34 years. Denmark has been flirting with the top stop for the past five years, moving from 6th to 8th to 2nd to 3rd before this year's triumph. But, naturally, that begs the question: how does a country jump up a list for what seems like such a vague criteria, competitiveness? It's complicated.

The IMD takes 163 pieces of comparable data that cover the economic performance of 63 countries, and then combines that with a survey of senior executives. Arguing that "an economy's competitiveness cannot be reduced only to GDP and productivity because enterprises also have to cope with political, social and cultural dimensions," the school includes data and survey feedback on infrastructure and education, health and technology, government and tax policy, economic performance and trade, and labor markets and business productivity. So why did Denmark leapfrogged Switzerland? One word:

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Sustainability. The Danish government has one of the most ambitious climate change policies in the world, aimed at cutting emissions by 70% in 10 years. According to the OECD, the country directed 60% of its COVID-19 recovery spending to environmental goals, and the nascent wind industry has already become a key source of exports.

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Denmark's aggressiveness on the sustainability front has led to increases in investment flows, spurred infrastructure projects, and contained inflation relative to other countries by making supply chains more local. The government estimates the economy grew 3.8% in 2021, despite the pandemic, and the latest OECD Economic Survey of Denmark projects GDP growth to remain strong at 2.4% in 2022 and 1.7% in 2023.

The Others: Switzerland, last year's number one, will have to settle for being ranked as the second most competitive economy. Singapore, Sweden, and Hong Kong round out the top five. The five worst-ranked countries were Venezuela, Argentina, Mongolia, South Africa, and Brazil.

We're Number Ten: The world's largest and most important economy, the United States, ranked tenth this year. One wonders what all the executives who were surveyed had to say about Denmark's 52% top tax rate vs. America's 37%. Their Wall Street offices probably say all that needs to be said.

Automobiles

Tesla Headlines NHTSA Report on Autonomous Crashes

(The Model 3 Tesla driving on the freeway in San Francisco bay area; Photo by Sundry Photography)

Tesla may be the lead car in the great race to EV dominance, but here's one contest it didn't want to win.

On Wednesday, the US National Highway Traffic Safety Administration (NHTSA) released a report on crashes involving advanced driver-assist systems in the ten months between July 2021 and May 2022. Tesla, responsible for nearly 70% of almost 400 reported crashes, was far and away the biggest culprit. But don't cancel your Cybertruck pre-order just yet — the auto-safety agency says to tap the brakes before drawing conclusions.

Self-Driver's Ed

The first-of-its-kind survey sought to track crashes that happened when driver-assist and automated systems were in use (including lane-keep assistance and advanced cruise-control systems that regulate speeds based on maintaining follow-distance from a leading car), and comes amid lawmaker pressure to investigate and possibly regulate the new technologies proliferating across American roadways.

All data was company reported. Tesla, which has long claimed its Autopilot feature is safer than regular old human driving (a claim critics call dubious), is easily the group leader. Still, to the company's credit, the numbers are obscured without critical context:

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Teslas running on Autopilot were involved in 273 of the 392 crashes reviewed, but the sheer volume of drive-assisting cars the company has sold warps the data to its disadvantage. According to CNBC, one estimate counts roughly 830,000 Teslas equipped with driver assistance tech on American roads compared to just 34,000 from General Motors.

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Honda came in second with 90 disclosed crashes; Subaru reported 10, Ford five, Toyota four, BMW three, and GM two. Hyundai, Lucic, Volkswagen, Porsche, and Aptiv reported one each. In total, the NHTSA found six crashes resulting in serious injury, and five that ended in fatalities — though did not disclose the vehicles involved.

False Advertising? Critics have long drubbed Tesla for deceptively naming its driver-assist systems in a way that may dangerously boost driver's trust in them. While neither are fully autonomous, Tesla calls its baseline assist software "Autopilot," and offers the more advanced "Full-Self Driving" for a $12,000 update. We wonder why customers are so confused.

Unsafe Conditions: Autonomous or not, American roads grew far more dangerous last year. According to NHTSA data reported in May, 42,915 people died in motor vehicle crashes in 2021, a 10% increase from 2020, and the highest of any year since 2005. Better buckle-up.

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Books

The Covid Reading Surge is Here to Stay, Harry Potter's Publisher Says

Harry Potter's publisher is touting its latest financials like an open spellbook.

Bloomsbury reported record sales and profit Wednesday, and CEO Nigel Newton said the spell that books cast on readers during Covid lockdowns remains in full effect. A fortune teller's best guess says the "affordable luxury" of reading will hold up through an economic downturn, too.

Over the Cliffhanger

That print book sales rose more than 18% from the start of the pandemic in early 2020 to January 2022 was less surprising than the Happily Ever After ending of a fairy tale. But, after booksellers sold 826 million books in the US last year, up from 758 million in 2020 according to Publisher's Weekly, the industry faced a suspenseful cliffhanger: would readers, freed from lockdowns, keep reading?

Bloomsbury says its latest financials indicate the next chapter to the story is a resounding Y-E-S. That would set books apart from other businesses, like streaming and home exercise equipment, that have come back down to earth after a pandemic of storybook results:

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A huge increase in fiction sales — young adult fiction sales up 31% and adult fiction up 25% — pushed Bloomsbury's overall sales up 24% to £230 million ($277 million) in the year ending February, and pretax profits up 28% to £22 million. Sales of books by American fantasy author Sarah J Maas – known for her A Court of Thorns and Roses series – soared 86% in the year and sales of JK Rowling's Harry Potter books, the highest selling series of all time, rose 5%.

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"We saw a little moment in April — the month that Netflix warned on subscribers — when our own sales were light and thought: 'oh boy, here we go, the cost of living crisis'," Newton told the Financial Times. "But it turned out to be a mirage, and sales surged ahead in May."

The growth of online learning, which bolstered Bloomsbury's Digital Resources arm, hasn't abated either. The unit beat a target set six years ago of £15 million in sales and a £5 million profit, notching £18.6 million in sales (50% more than last year) and a profit of £6.8 million (more than double last year).

Team of Rivals: As it rakes in cash, Bloomsbury's stable of properties has grown Tolstoy-sized: last year alone, the company bought online academic publisher ABC-CLIO, textbook publisher Red Globe Press, and London-based fiction publisher Head of Zeus, the latter of which has contributed £9 million in sales in the nine months since the deal.

Extra Upside

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Prepare to feel old: Facebook is changing its algorithm to be more like TikTok.

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Not sure they'll listen: President Biden asked energy companies to produce more oil and make less money.

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