Weekend Box: Framework for Diplomacy, D-Sol Spins to Shareholders & more
Welcome to the Weekend Box, Audley’s weekly round-up of interesting or obscure political, business and cultural news from around the world.
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A FRAMEWORK FOR DIPLOMACY
CEO Chris Wilkins writes:
Rishi Sunak’s new Brexit deal for Northern Ireland – the so-called Windsor Framework – has squared a circle that’s been plaguing UK politics ever since the referendum in 2016. The plan, which will see reduced checks on goods at ports and airports, a reduction in paperwork relating to goods destined for Northern Ireland, and the right of the UK government to set some VAT rates there as Unionists had demanded, is an example of good policy and fine statecraft.
It's emblematic of what can be achieved by something the British always regarded as their stock in trade: good old-fashioned diplomacy. That has been missing from the Brexit process for too long.
I well remember sitting in the prime minister’s office when the strategy for the Brexit negotiations was being set. It became clear immediately just how weak the UK’s position was. Far from “holding all the cards” as the British people had been promised, the UK was in a difficult situation. Some money and a bit of security cooperation were all we had to work with. The “easiest deal in history” would depend on building good diplomatic relations with the other side.
That is what Theresa May did. The result was a deal that few thought she would be able to achieve. After it was repeatedly voted down by MPs, the UK’s eventual departure was delivered only once her successor gave away the very concessions she had secured. The boastful talk of ‘standing up to Europe’ and being ‘prepared to walk away’ took over. It merely made the EU harden its stance and the UK was left in a worse position as a result.
Sunak has now replaced the boastful swagger with the difficult detail of diplomacy – and he too has delivered a better deal than people expected. In doing so, he has shone a light on the shortcomings of the populists. Maybe diplomacy isn’t dead after all.
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MOLDOVA: RUSSIAN THREAT IN THE AIR
Moldova, a small, landlocked, and little-known republic on the edge of Eastern Europe risks becoming a good deal more famous – and not for good reasons.
Like Ukraine, Moldova was a constituent of the USSR, is applying to join the European Union, and has struggled to break away from the Russian yoke ever since it declared independence in 1991. It also, like Ukraine, faces increasingly vicious Russian interference.
On Tuesday, Moldova hit the headlines in the UK after European low-cost airline Wizz Air announced it is suspending all flights to the capital, Chisinau, over concerns about the safety of the country’s airspace. Russian aerial attacks on Ukraine have resulted in missiles entering Moldovan skies, leading Wizz Air to put safety first.
Meanwhile, thousands of anti-government protestors have taken to the streets of Chisinau, supported by Moldova's Russia-friendly Shor Party. The country’s president, Maia Sandu, is struggling to deal with an acute domestic energy crisis caused by a significant cut in Russian gas supply.
A sense of instability in Moldova has become ever more acute since the Ukrainian government said it had uncovered a Russian coup plot, designed to topple Sandu and install a puppet regime controlled by Moscow.
NATO no longer takes Russian activity to destabilise eastern European nations lightly, and so is watching developments closely. This week, Finland’s MPs approved legislation that will pave the way for the country to join the alliance, which means Russia could soon share more of a border with an alliance member.
With a bolstered NATO inching closer, Russia may not up its intervention in Moldova, but the danger is undoubtedly clear and present.
GOLDMAN: D-SOL SPINS TO SHAREHOLDERS
Seven years on from launching its consumer lending business and three years after its first-ever investor day, Goldman Sachs faced a challenge this week: convincing shareholders at its second investor day that it could recover from the failure of its retail bank Marcus. It fell to CEO and sometime DJ David Solomon to perform this feat on Tuesday. The question on everyone’s lips was, how would Solomon AKA DJ D-Sol spin this?
Acknowledging that mistakes were made would be wise, though perhaps unavoidable, and Solomon admitted to investors that Goldman had tried to do “too much too fast” in areas where it “did not have a competitive advantage.” The bank’s foray into retail banking, part of its platform solutions business, initially attracted a wave of excitement, drawing in “$50 billion in valuable deposits” within three years of its US launch in 2016.
Yet as quickly as it sparked into life, the roaring flame that was Marcus soon guttered. While it is possible to point to the competitive market as one reason why, as Solomon has done, others within Goldman have pointed to misguided decisions by the CEO including hasty investment of 2021 earnings into the retail bank which ultimately set it back when the Fed raised interest rates the next year.
After Marcus was forecasted internally to lose the bank a cumulative $4bn+, Goldman elected to sideline the retail bank last year. At the investor day Tuesday, Solomon attempted to placate investors with claims that Goldman are exploring “strategic alternatives”; analysts suggest the bank could sell a $4.5bn loan portfolio that was part of Marcus. It appears Goldman were also convincing investors to pin their hopes on the possibility of its platform solutions business breaking even in 2025. Yet, when Solomon was asked what plans were, he flatly responded: “I can’t answer that question.”
Share prices in Goldman subsequently fell by 4%. Like Solomon, if you asked us how the bank recovers from this, we would say that we can’t answer that question.
WORDS OF WISDOM FOR MANAGERS
A Spanish academic has recently introduced a new take on management philosophy by suggesting that the great philosophers can provide business leaders with inspiration to form the basis of better decision-making. In his book ‘Philosophy Inc.: Applying Wisdom to Everyday Management’ (Palgrave 2023), President of Madrid’s IE University Santiago Íñiguez argues that “management is philosophy in action” and suggests that the wisdom of Aristotle or Socrates, or more recent philosophers such as Locke or Wittgenstein, might offer better guidance than a business degree.
President Íñiguez is a professor of strategic management, with a degree in law and a Ph.D. in moral philosophy. He writes that “philosophy does not provide categorical, one-size-fits-all solutions to the problems we face as managers, but it can help us articulate our thoughts better, make sense of our intuitions and find better arguments to justify our decisions.” While many business leaders may feel that they must make decisions quickly, with little time for reflection, Íñiguez claims an understanding of philosophy can lend meaning to many management practices and to business in general, while enhancing self-satisfaction and happiness at work. The book’s topics include how to gain respect at work, how to cultivate an optimistic outlook, and how to shrug off failure, offering timeless advice for managers’ personal and professional development.
One example is from 17th-century Enlightenment thinker John Locke, who argued that when trying to influence children, public praise and private criticism, perhaps through just a look, were more effective than a simple ‘carrot and stick’ approach. “I have found this approach works well with adults over the course of my career,” Íñiguez comments.
Recently the number of UK students opting for humanities degrees like English Literature has dropped sharply, while business degrees have gained in popularity. Íñiguez believes this reflects concerns about the cost of living and student debt, with many believing that business degrees will lead to better-paid jobs. In his view, this is a mistake, with “solid bases in the humanities” providing the foundations for developing good managers and leaders.
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YOUNG V&A: MUSEUM OF FUN ARTS
This week, the V&A has announced its museum dedicated to children and young people will reopen this summer as the ‘Young V&A’ following a £13 million-plus redevelopment. The project, which has been three years in the making, is a welcome boost at a time when funding for arts and arts education in the UK is under pressure.
The site in Bethnal Green, which dates back to 1872, was formerly called the V&A Childhood Museum and celebrated its 150th anniversary last year. It closed in 2020, but on June 1st when it opens its doors again, the museum will no longer, in the words of V&A Director Tristram Hunt, be a place for adults to revel “in nostalgia with objects in glass cases.” Designed with and for children under the age of 14, the museum’s three galleries – Imagine, Play, and Design - will look to inspire Britain’s next generation of artists, designers, thinkers, and performers. It will incorporate over 2,000 words from V&A’s collection of art and design, with experiences such as sensory playscapes for toddlers, a finger skateboard park, an ‘Imagination Playground’ construction zone, and story-telling and performance stages. All of this is with childhood development theories and practice at front of mind.
With its future focus, the museum has built an interactive Minecraft installation for children to create their own version of a town square and will showcase innovative creations from young people. It will also draw attention to the issue of climate change and its impact on the next generation, with works from Greta Thunberg. In October the museum’s first temporary exhibition ‘Japan: Myths to Manga’ will open, and will no doubt be a treat for fans of Studio Ghibli and Pokémon. With its move from nostalgia to the future, we are excited to see whether the Young V&A will achieve its brief to be the ‘most joyful museum in the world.’
And that’s it for this week. I hope you found something of interest that you might want to delve into further. If so, please get in touch at cwilkins@audley.uk.com.
For now, that’s the weekend box officially closed.