The Economist USA 03.21.2020

The EconomistMarch 21st 2020 Business 57

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1

Capitalist age

United States, biggest companies’ board members by age

March 16th 2020

Source:Bloomberg *126companieswheredataareavailable

JPMorgan Chase

Walmart

Visa

Johnson & Johnson

Berkshire Hathaway

Facebook

Alphabet

Amazon

Microsoft

Apple

30 40 50 60 70 80 90 100

CEO Others

Board average

Market

capitalisation

$trn

0.32

0.32

0.35

0.35

0.48

0.49

0.84

0.89

1.21

1.22

S&P 500 average*

On March 13th Bill Gates stepped down from the boards of Microsoft, the software giant

he founded, and Berkshire Hathaway, a company run by his plutocrat pal, Warren

Buffett. The 64-year-old Mr Gates’s replacement at Microsoft has not been named. At

Berkshire, he will be succeeded by Ken Chenault, a respected former boss of American

Express. Mr Chenault, who is four years older than Mr Gates, may not look like the fresh

blood the underperforming conglomerate needs, exactly. But relative to its ancient

boardroom, which includes three nonagenarians, he looks positively ephebic.

Very golden oldies

M

uch of thepanic-buying provoked

by the covid-19 pandemic seems over-

blown. Grocers insist they are not about to

run out of food. But in one category of pro-

duct, scarcity is all too real. Overwhelmed

health services are desperately short of me-

chanical ventilators to help the roughly

10% of sufferers with severe symptoms to

breathe. Political leaders are urging exist-

ing specialist producers to ramp up pro-

duction. Germany’s government ordered

16,000 new machines from two domestic

producers. Others, like Britain’s prime

minister, Boris Johnson, want manufactur-

ers of all stripes to retool and help out. That

is easier said than done.

It is hard to pin down how many venti-

lators health-care systems have on hand.

The last survey of ventilator capacity in

America was ten years ago. It tallied 62,000

sophisticated machines and 100,000 basic

ones. American health authorities are now

hastily counting anew. They are likely to

find fewer than 200,000, 80-90% of which

are typically used by non-covid patients. A

rough calculation by The Economist sug-

gests that, if the virus keeps spreading at

the current rate, America would run out of

spare devices in four weeks. The situation

is worse in other countries (see chart). 

In 2019 ventilator-makers had the ca-

pacity to churn out just 40,000 units suit-

able for intensive care, according to Get-

inge, a Swedish firm which makes one in

four such machines sold worldwide. Most

companies build kit, which costs any-

where between $10,000 and $60,000

apiece, to order rather than keep inven-

tories. Premier, a firm that bought 2,000

last year on behalf of 40% of America’s hos-

pitals, says that buyers must now wait 8-12

weeks for new ones to arrive, not a fort-

night as in normal times. Getinge’s order

Demand for breathing apparatus

greatly outstrips supply

Manufacturing

My iron lung

Too little breathing room

ICU* ventilators per 100,000 population aged 65+

2020 orlatestavailable

Sources: National statistics;

press reports; The Economist

*Intensive-care unit

†Assuming 50% increase

on reported number

New Zealand

France

China

Spain

Italy

Britain

Australia

Ireland

Canada

Austria

Germany

UnitedStates

1501209060300

Middle estimate High estimate†

6.7m in early March. A survey in Britain for

Barclaycard, a payments firm, points to

year-on-year growth of 12% in subscription

entertainment services like Netflix in the

four weeks to February 21st, and of nearly

9% growth in food takeaway and delivery

spending. Amazon is hiring 100,000 new

distribution workers in America to meet

demand for internet shopping.

Bricks-and-mortar firms that have in-

vested in online offerings are also cashing

in. A survey of American shoppers con-

ducted on March 13th by Gordon Haskett, a

research firm, found that one in three

bought food online in the previous week.

Among the 41% doing so for the first time,

over half chose Walmart, with its conve-

nient grocery pickup and delivery service.

In Britain Tesco and Sainsbury may be out-

pacing Aldi and Lidl, European discount

chains that have invested less online.

And, of course, any firm that comes up

with a vaccine or treatment for covid-19 can

expect a bonanza. Amid the market melt-

down the share price of Gilead, a biotech-

nology firm working on a coronavirus

drug, is up by 20% this year.

One lasting consequence of the pan-

demic will almost certainly be further con-

centration of corporate power in the hands

of a few superstar firms. The current airline

carnage may leave skies everywhere re-

sembling the uncompetitive ones above

North America. JPMorgan Chase, a bank,

observes that American carriers generate

two-thirds of global airline profits with

barely a fifth of worldwide capacity (not to

mention shabby service). Similar consoli-

dation now looks all too probable in Eu-

rope and Asia.

Companies with the most resilient

businesses, deepest pockets and longest

investment horizons may grow more super

still through cut-price acquisitions. Ru-

mours swirl that Apple, with a gross cash

pile of over $200bn and Tinseltown ambi-

tions, may swoop in to buy Disney, whose

share price has nearly halved since January.

Warren Buffett of Berkshire Hathaway, who

is sitting on $128bn and has long grumbled

about overpriced equities, may at last find a

bargain or two. Having raised a record

$888bn last year, private-equity firms are

on the prowl. Steve Schwartzman declared

earlier this month that the dislocation and

fear caused by the coronavirus has created

“a substantial opportunity” for Blackstone,

the buy-out powerhouse he leads.

The Depression wreaked economic hav-

oc but also produced radical new business

models from carmaking and entertain-

ment to beauty products. In time, today’s

crisis, too, may lead to some corporate res-

urrections—and plenty of new births.

Comparisons to that agonising time in

world history must not be made lightly.

That they look apt is a sign of just how bad

things are looking right now. 7