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G100 Network Notebook | June 2017

The Fed’s Lone Dissenter

For the second time this year, Minneapolis Federal Reserve Bank President Neel Kashkari voted against raising interest rates, sounding a more optimistic tone about the economy than Fed Chair Janet Yellen. Kashkari, the lone dissenter on the Federal Open Market Committee, asked recently:

Why are we trying to cool down the economy, when there may still be some slack in the job market, and there is still some room to run on the inflation front?

Kashkari, who previously oversaw the TARP under Presidents Bush and Obama, has become increasingly vocal since his initial objection, which he details here.

 

Game-Changing M&A

Whole Foods CEO John Mackey, a past speaker at G100, underestimated Amazon as a direct threat. That was before this month, when CEO Jeff Bezos left many slack-jawed with his $13.7 billion deal to buy the grocer. Ben Thompson’s latest blog analyzes the acquisition to reveal what Mackey misunderstood about Amazon’s goals, tactics, and strategy, predicting how the companies will integrate:

Today, all the logistics that go into a Whole Foods store are for stocking physical shelves: the entire operation is integrated. What I expect Amazon to do over the next few years is transform the Whole Foods supply chain into a service architecture based on primitives: meat, fruit, vegetables, baked goods, non-perishables. What will make this massive investment worth it, though, is that there will be a guaranteed customer: Whole Foods Markets.

Last year, Marriott inked a similarly large deal with Starwood Hotels that cements its position as the dominant industry player. Nevertheless, Marriott is building new hotels and expanding in China, an aggressive growth agenda driven by CEO Arne Sorenson, who views online travel agencies (OTAs) as more disruptive than Airbnb, recently valued at $31 billion. He says in this Fortune profile:

We see Airbnb as mainly lower-priced leisure travel, where people make trips they otherwise wouldn’t make because it’s suddenly become so affordable.

 

The Bulwark Banks Built

Venmo. Apple Pay. Square Cash. Faced with a growing list of upstarts in digital payments, big banks have partnered to create Zelle, a secure network for peer-to-peer money transfers. The group started building the technology six years ago with the aim to charge customers a fee, but rivals soon flooded the landscape and set the new standard: Free P2P transfers between checking accounts. From The New York Times:

Participating banks are incorporating Zelle’s transfer system into their mobile apps, sparing customers from having to download a separate app. About 86 million people will soon have access, according to Early Warning Services, the bank-owned consortium that runs the network.

Another digital payment startup putting pressure on banks is Stripe, the $9 billion company that emerged from the Silicon Valley incubator Y Combinator. In this long interview, Stripe COO Claire Hughes Johnson outlines how the company thinks intentionally about rapid growth, especially as it doubles in size. Part of the secret, says Johnson, is decentralized decision making:

If you don’t consistently teach more and more people how to make the decisions or find resolutions consistent with your company’s goals, you’re going to stall out. Trust saves a huge amount of time.

 

How Google Sets Stretch Goals

At our G100 Silicon Valley meeting, we heard from Google’s senior team about a system, dubbed Objectives and Key Results, that aligns individuals, teams, and organizations around stretch goals. Lucid Software co-founder Karl Sun, a former Google executive, is a firm believer. In this Forbes column, Sun details how and why the OKR system is so successful:

At Google, we made all our OKRs public. … Doing so promotes accountability and transparency and makes that line in the sand even more pronounced. It’s easy to forget about goals that only you know about—it’s a game-changer when there are others (sometimes hundreds to thousands of others) also holding you accountable.

 

The Truth About HR and Big Data

It is more hype than reality, Wharton School management professor Peter Cappelli argues in Harvard Business Review piece that identifies the real problem facing HR departments – cleaning and merging data, tasks that do not require data scientists. Even the realm of HR analytics, observes Cappelli, bears luckluster if not obvious explanations to important questions answered long ago. He adds:

As a literal definition, HR does not actually have big data, or more precisely, almost never does. Most companies have thousands of employees, not millions, and the observations on those employees are still for the most part annual. In a company of this size, there is almost no reason for HR to use the special software and tools associated with big data.

 

Can Business Motivate By Modem?

Despite more companies taking a stance against remote work, the number of people doing so continues to rise. Why? “Nearly every company that employs knowledge workers is still learning which jobs can best be done remotely, as the tools to accomplish remote work become increasingly powerful,” says Wall Street Journal report that examines how companies best collaborate in and out of the office. Steve Price, CHRO of Dell Inc., which now has 58% of its people working remotely, found:

Engineering, leadership, R&D, sales and customer support—those are roles that don’t lend themselves very well to remote work. … Roles where it does work include HR, legal, marketing, analytics, data science and other support functions, he adds.