It’s Friday, so time for some feedback.
EK, a self-described data geek, read the PwC report on R&D spending I cited yesterday with great care, and took issue with the authors’ conclusion that there is “no statistically significant relationship between how much you spend on R&D and how well you perform.” He noted that six out of ten companies on PwC’s top R&D spenders list—Amazon, Alphabet, Samsung, Intel, Microsoft and Apple—were also on its top innovators list.
PWC’s Barry Jaruzelski responded to EK: “You make a fair observation on the degree of overlap in the most recent year of the most innovative companies and the top 10 R&D spenders. I would note that this is a recent development and was not the case in earlier years of the study, and this divergence in performance has been present in all nine years that we have performed this comparison.”
BW took some exception to my description of Paul Volcker as one of the “Great Men” in history. He cites Bill Greider’s epic book Secrets of the Temple, which argues Volcker’s hard money policy is what shipped America’s industrial might overseas and hammered the middle class. I’ve read the book, but disagree with the analysis. Inflation was destroying the American economy—and the middle class—and Volcker’s victory set the stage for an extraordinary period of growth.
But I’m more sympathetic with JK, who objected to my “Great Men” reference. “Maybe we can’t find the leaders we need because we are looking for Great Men and ignoring half the population… food for thought!”
Point taken, JK; I will henceforth call it the Great People theory of history.
President Trump said he had a “long and very good” phone call with President Xi and has now reportedly asked his U.S. officials to draw up potential terms for a trade deal with China. Shares rose in China and Europe, but some analysts remain skeptical. Rabobank’s Michael Every: “I don’t buy the story for a second…This seems a perfect way to ensure equities rally into election day, put Xi into a box in terms of what is expected of him and then have someone to blame when the deal then falls through.” Bloomberg
Meanwhile, the Americans have unsealed charges against the state-owned Fujian Jinhua and its Taiwanese partner, United Microelectronics Corp., for allegedly stealing trade secrets from U.S. memory chip maker Micron Technology. The Justice Department alleges that a former Micron employee organized the theft of the company’s secrets when he moved to UMC. Attorney General Jeff Sessions accused China of violating a cybersecurity accord. Wall Street Journal
Apple will no longer report a breakdown of unit sales for iPhones, iPads and Macs, starting with the December quarter. When the company informed investors of this, its stock fell by as much as 7% in aftermarket trading. The rationale? CFO Luca Maestri: “A unit of sale is less relevant for us today than it was in the past, given our breadth of our portfolio and the wider sales price dispersion within any given product line.” Fortune
Bayer CEO Werner Baumann says his company may consider settling lawsuits over glyphosate-based weedkillers, depending on how costly the court cases get. However, he said the Monsanto owner was focused on defending against claims that products such as Roundup cause cancer. Baumann: “If we can settle nuisances at some point where the defense costs in preparing cases are higher than potential settlement amounts, we will of course consider it from an economic standpoint.” Reuters
Around the Water Cooler
The DOJ has filed its first criminal charges over the 1MDB scandal, with the defendants including two former Goldman Sachs investment bankers. As the Financial Times notes, the charges implicate more Goldman “employees and agents” in being aware of the bribes and kickbacks, but prioritizing the closure of deals over compliance with the law. FT
China and Microsoft
Former Microsoft CEO Steve Ballmer claims 90% of Chinese companies are using Windows but only 1% are paying for it. Ballmer: “I’m a free trader, by nature. I went to the school of economics–it’s the best thing for the world…This one’s a tricky issue because it’s absolutely clear that the rules don’t apply in China, and the U.S. government needs to do something.” Fox Business
A Japan Airlines pilot was arrested at Heathrow Airport for being drunk—more than nine times over the legal limit for pilots. Katsutoshi Jitsukawa failed a breathalyzer test 50 minutes before he was due to be part of a crew flying to Tokyo. The airline apologized and said it would “implement immediate actions to prevent any future occurrence.” BBC
In the legacy of the Pittsburgh synagogue massacre, Holocaust survivor Elly Gotz writes for Fortune that the killer’s hate may be incomprehensible to most, but not to him. Once imprisoned in a concentration camp, Gotz harbored hate for all Germans, but one day that changed. “Suddenly a veil was lifted from my eyes,” he writes. “I became aware that this hate was damaging me! I felt that I must free myself from this fog of hate.” Fortune