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How can businesses ensure our recovery from Covid is green?

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How can businesses ensure our recovery from Covid is green?

The pandemic and the resulting recession have led to widespread calls to recognise that we now have a once in a generation opportunity to re-think how we put the economy back together again. Research shows we can help our economy flourish again by prioritising spending on environmentally friendly initiatives. From electric bikes, to eco-friendly cement, to a new type of plastic that could heat our homes, fill our mattresses and cushion our running trainers, Adam Shaw meets the businesses that could benefit from this type of recovery plan and could help us build back better.

Producer: Phoebe Keane

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BBC Radio 4 - In Business, Building Back Better

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How can businesses ensure our recovery from Covid is green? The pandemic and the resulting recession have led to widespread calls to recognise that we now have a once in a generation opportunity to re-think how we put the economy back together again.

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BBC Radio 4 - In Business, Can fashion ever be ethical and cheap?

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Fast fashion: Can it ever be ethical and cheap?

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Source: Trading Hours.

Over-the-Counter Exchanges

There also exist several loosely regulated over-the-counter (OTC) exchanges, which may also be referred to as bulletin boards (OTCBB). These shares tend to be riskier since they list companies that fail to meet the more strict listing criteria of bigger exchanges. Larger exchanges may require that a company has been in operation for a certain amount of time before being listed and that it meets certain conditions regarding company value and profitability.

In most developed countries, stock exchanges are self-regulatory organizations (SROs), non-governmental organizations that have the power to create and enforce industry regulations and standards.

The priority for stock exchanges is to protect investors through the establishment of rules that promote ethics and equality. Examples of such SROs in the U.S. include individual stock exchanges, as well as the National Association of Securities Dealers (NASD) and the Financial Industry Regulatory Authority (FINRA).

Stock Market Indexes

Indices represent aggregated prices of several different stocks, and the movement of an index is the net effect of the movements of each component. Major stock market indexes include the Dow Jones Industrial Average (DJIA) and the S&P 500.

The DJIA is a price-weighted index of 30 large American corporations. Because of its weighting scheme and the fact that it only consists of 30 stocks (when there are many thousands to choose from), it is not a good indicator of how the stock market is doing. The S&P 500 is a market-cap-weighted index of the 500 largest companies in the U.S. and is a much more valid indicator.

Indices can be broad such as the Dow Jones or S&P 500, or they can be specific to a certain industry or market sector. Investors can trade indices indirectly via futures markets, or via exchange-traded funds (ETFs), which act just like stocks on stock exchanges.

A market index is a popular measure of stock market performance. Most market indices are market-cap weighted, which means that the weight of each index constituent is proportional to its market capitalization. Keep in mind, though, that a few of them are price-weighted, such as the DJIA. In addition to the DJIA, other widely watched indices in the U.S. and internationally include the:

S&P 500

Nasdaq Composite

Russell Indices ( Russell 1000, Russell 2000)

TSX Composite (Canada)

FTSE Index (UK)

Nikkei 225 (Japan)

Dax Index (Germany)

CAC 40 Index (France)

CSI 300 Index (China)

Sensex (India)

Why Companies Issue Shares

To make the transition from an idea germinating in an entrepreneur's brain to an operating company, they need to lease an office or factory, hire employees, buy equipment and raw materials, and put in place a sales and distribution network, among other things. These resources require significant amounts of capital, depending on the scale and scope of the business.

Raising Capital

Many corporate giants started as small private entities launched by visionary founders like Jack Ma of Alibaba ( BABA) or Mark Zuckerberg of Meta.

A startup can raise capital either by selling shares through equity financing or borrowing money through debt financing. Debt financing can be a problem for a startup because it may have few assets to pledge for a loan.

Equity financing is the preferred route for most startups that need capital. The entrepreneur may initially source funds from personal savings, as well as friends and family, to get the business off the ground. As the business expands and its capital requirements become more substantial, the entrepreneur may turn to angel investors and venture capital firms.

Listing Shares

Companies can access larger amounts of capital than they can get from ongoing operations or a traditional bank loan by selling shares to the public through an initial public offering (IPO).

This changes the status of the company from a private firm whose shares are held by a few shareholders to a publicly-traded company whose shares will be held by numerous members of the general public. The IPO also offers early investors in the company an opportunity to cash out part of their stake, often reaping very handsome rewards in the process.

Once the company's shares are listed on a stock exchange and trading on the market, the price of these shares fluctuates as investors and traders assess and reassess their intrinsic value. There are many different ratios and metrics that can be used to value stocks, of which the single-most popular measure is probably the price-to-earnings (PE) ratio. Stock analysis tends to fall into one of two camps- fundamental analysis, or technical analysis.

How Share Prices Are Set

The prices of shares on a stock market can be set in several ways. The most common way is through an auction process where buyers and sellers place bids and offer to buy or sell. A bid is a price at which somebody wishes to buy, and an offer, or ask, is the price at which somebody wishes to sell. When the bid and ask coincide, a trade is made.

Stock Market Supply and Demand

The stock market also offers a fascinating example of the laws of supply and demand at work in real time. For every stock transaction, there must be a buyer and a seller. Because of the immutable laws of supply and demand, if there are more buyers for a specific stock than there are sellers of it, the stock price will trend up. Conversely, if there are more sellers of the stock than buyers, the price will trend down.

The bid-ask or bid-offer spread, the difference between the bid price for a stock and its ask or offer price, represents the difference between the highest price that a buyer is willing to pay or bid for a stock and the lowest price at which a seller is offering the stock.

A trade transaction occurs either when a buyer accepts the asking price or a seller takes the bid price. If buyers outnumber sellers, they may be willing to raise their bids to acquire the stock. Sellers will, therefore, ask higher prices for it, ratcheting the price up. If sellers outnumber buyers, they may be willing to accept lower offers for the stock, while buyers will also lower their bids, effectively forcing the price down.

Matching Buyers to Sellers

Some stock markets rely on professional traders to maintain continuous bids and offers since a motivated buyer or seller may not find each other at any given moment. These are known as specialists or market makers.

A two-sided market consists of the bid and the offer, and the spread is the difference in price between the bid and the offer. The more narrow the price spread and the larger size of the bids and offers, the greater the liquidity of the stock. If there are many buyers and sellers at sequentially higher and lower prices, the market is said to have good depth.

The original manual method of trading was based on a system known as the open outcry system, where traders used verbal and hand signal communications to buy and sell large blocks of stocks in the trading pit or the exchange floor.

However, the open outcry system has been superseded by electronic trading systems at most exchanges. These systems can match buyers and sellers far more efficiently and rapidly, resulting in significant benefits such as lower trading costs and faster trade execution.

Advantages of Stock Exchange Listing

An exchange listing means ready liquidity for shares held by the company's shareholders.

It enables the company to raise additional funds by issuing more shares.

Having publicly tradable shares makes it easier to set up stock options plans that can attract talented employees.

Listed companies have greater visibility in the marketplace; analyst coverage and demand from institutional investors can drive up the share price.

Listed shares can be used as currency by the company to make acquisitions in which part or all of the consideration is paid in stock.

Disadvantages of Stock Exchange Listing

Significant costs associated with listing on an exchange, such as listing fees and higher costs associated with compliance and reporting.

Burdensome regulations may constrict a company's ability to do business.

The short-term focus of most investors forces companies to try and beat their quarterly earnings estimates than take a long-term approach to their corporate strategy.

Many giant startups choose to get listed on an exchange at a much later stage than startups from a decade or two ago.

While this delayed listing may partly be attributable to the drawbacks listed above, the main reason could be that well-managed startups with a compelling business proposition have access to unprecedented amounts of capital from sovereign wealth funds, private equity, and venture capitalists. Such access to seemingly unlimited amounts of capital would make an IPO and exchange listing much less of a pressing issue for a startup.

Investing in Stocks

Numerous studies have shown that, over long periods, stocks generate investment returns that are superior to those from every other asset class. Stock returns arise from capital gains and dividends.

A capital gain occurs when you sell a stock at a higher price than the price at which you purchased it. A dividend is the share of profit that a company distributes to its shareholders. Dividends are an important component of stock returns. They have contributed nearly one-third of total equity return since 1956, while capital gains have contributed two-thirds.

While the allure of buying a stock similar to one of the fabled FAANG quintet-Meta, Apple ( AAPL), Amazon ( AMZN), Netflix ( NFLX), and Google parent Alphabet ( GOOGL)-at a very early stage is one of the more tantalizing prospects of stock investing, in reality, such home runs are few and far between.

Investment often depends on an individual's tolerance for risk. Risky investors may generate most of their returns from capital gains rather than dividends. On the other hand, investors who are conservative and require income from their portfolios may opt for stocks that have a long history of paying substantial dividends.

Market Cap and Sector

While stocks can be classified in several ways, two of the most common are by market capitalization and by sector. Market cap refers to the total market value of a company's outstanding shares and is calculated by multiplying these shares by the current market price of one share.

Large-cap companies are generally regarded as those with a market capitalization of $10 billion or more, while mid-cap companies are those with a market capitalization of between $2 billion and $10 billion, and small-cap companies fall between $250 million and $2 billion.

The industry standard for stock classification by sector is the Global Industry Classification Standard (GICS), which was developed by MSCI and S&P Dow Jones Indices in 1999 as an efficient tool to capture the breadth, depth, and evolution of industry sectors. GICS is a four-tiered industry classification system that consists of 11 sectors and 24 industry groups. The 11 sectors are:

Energy

Materials

Industrials

Consumer Discretionary

Consumer Staples

Health Care

Financials

Information Technology

Communication Services

Utilities

Real Estate

This sector classification makes it easy for investors to tailor their portfolios according to their risk tolerance and investment preference. Conservative investors with income needs may weigh their portfolios toward sectors whose constituent stocks have better price stability and offer attractive dividends through so-called defensive sectors such as consumer staples, health care, and utilities. Aggressive investors may prefer more volatile sectors such as information technology, financials, and energy.

How Does Inflation Affect the Stock Market?

How Much Does the Stock Market Grow Every Year?

How Do People Lose Money in the Stock Market?

The Bottom Line

Stock markets represent the heartbeat of the market, and experts often use stock prices as a barometer of economic health. But the importance of stock markets goes beyond mere speculation. By allowing companies to sell their shares to thousands or millions of retail investors, stock markets also represent an important source of capital for public companies.

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Learn how the stock market works, why companies issue stock, what happens when you buy a stock, and what happens when you sell a stock.

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Finding ways to uncover and combat implicit biases is the only way to build a diverse, inclusive, and successful organization in today's business world. By Cassandra Morrison | Fall 2020

Evolution has left the human body with parts that no longer serve it-like the appendix, embryonic tails, and tonsils. Some of these features evolve out of existence over time; others are removed with a minor surgery. Similarly, evolution has also left the human brain with instincts that were necessary for survival for centuries but are no longer useful and can often be harmful-like bias.

Quickly categorizing things, people, and situations was vital to early humans. They relied on their ability to make near-instant decisions about what was safe and unsafe-to distinguish the footstep of a friend from a foe in the blink of an eye, faster than they could logically respond. And today, we still have that instinct for knee-jerk judgment. Our brains can only consciously process around 40 items per second, but as many as 11 million unconsciously. To cope with this overload of information, we sort through these millions of factors using shortcuts our brains have developed over time. Additionally, research has found that we're more likely to make biased decisions when we make those decisions quickly-findings that have serious implications for today's rapidly evolving business world.

By unknowingly allowing our unconscious biases to influence our fast-paced decision-making, we end up excluding certain groups, perpetuating certain stereotypes, and relying on faulty reasoning to make important choices. It's only by committing to uncovering and combating our unconscious biases, personally and in the workplace, that we can interrupt these mental shortcuts and make better, more equitable decisions.

"If You Have a Brain, You Have a Bias"

Implicit biases are different from explicit biases in that we know our explicit biases exist, but our subconscious holds many biases that we may not be aware of, spanning race, gender, appearance, age, wealth, and much more. Implicit biases can be more damaging than explicit biases because they often influence our decisions without our knowledge. These insidious attitudes impact the workplace in many ways: From job listings to performance reviews to promotions, implicit bias pervades the decision-making process.

"If you have a brain, you have a bias. It's human. Our brains are hardwired to take shortcuts and bias is a form of helping us make those shortcuts. Bias is a threat protector," explains Michele Meyer-Shipp, Esq., principal and chief diversity and inclusion officer at KPMG. "It's real and we have to take steps to interrupt it."

To interrupt and unlearn these biases, first we must acknowledge they exist and can impact anyone. Defensiveness often creeps into conversations about ageism, sexism, or racism, but many who don't consciously hold those views can still be influenced by them. When it comes to unconscious bias, it's important to lead the conversation to a place that acknowledges that everyone has biases-implicit and explicit-and it's what we do about this fact that matters.

Diversity and inclusion expert Gregory Tall, MBA, leads workshops and conferences to encourage this openness and communication. "The hard part is no one ever wants to be called out-no organization wants to be accused of being biased against anyone," he explains. "So, it starts with asking how we get everyone feeling comfortable enough to engage in an uncomfortable conversation, how we get them to the table, and how we get to the real action."

Biases That Block the Door

Most experts agree that recruitment offers the most transparent accounts of bias in the workplace, from the wording in job descriptions to the filtering of resumes based on names. Tall saw this a lot during his time in human resources. "A job posting encouraging 'recent grads' to apply might be coded language suggesting younger candidates are preferred. Bias tends to operate covertly. One study showed that job applicants with traditionally White-sounding names were 50 percent more likely to be contacted for an interview than applicants with traditionally African-American-sounding names," Tall adds.

Learning more about the types of biases helps identify and interrupt them. A 2019 study by Korn Ferry found the financial market has the highest percentage of women in C-suite positions with 31 percent. When almost 70 percent of leadership in the financial sector is made up of men, the affinity bias can explain why it's difficult for women to reach the C-suite in this sector and others: Those who are in charge of these decisions are drawn to those most similar to them.

Meyer-Shipp says that affinity bias is one of the most pervasive forms of bias that she sees show up on a day-to-day basis. "It shows up all of the time and it's not just the type of bias that happens around race or gender," she says. "For example, in a job interview, you form these points of affinity, points that you find you have in common with an interviewee, so that before you know it you're halfway through the interview and you're like, wait a minute, we haven't even talked about the job."

Besides affinity bias, research has uncovered many biases women face in the workplace, making it more difficult for them to enter organizations and ascend at the same rates as their male peers. Joan Williams, JD, a 40-year veteran researcher and founding director of the Center for WorkLife Law at the University of California Hastings College of the Law, has spent her career exploring the interplay between work, class, and gender.

"Many claim that the wage gap between men and women stems not from discrimination, but from the fact that men negotiate their salaries whereas women don't," Williams writes in " Double Jeopardy? An Empirical Study With Implications for the Debates Over Implicit Bias and Intersectionality," published in 2014 in the Harvard Journal of Law and Gender. "But a deeper look at the 'women don't ask' literature reveals a study that finds that when women do negotiate their starting salaries, they are seen as less likable and they are less likely to be hired. I suggest that the reason women do not ask is that they correctly sense that they will be penalized if they do."

Williams calls this bias, where women are punished for behavior that men are rewarded for, "the Tightrope." She also notes that women face a bias she calls "Prove-It-Again!" where women must show more evidence of competence than men to be seen as equally competent. Black women face the Prove-It-Again! bias to an even greater degree.

With such barriers to entry for women and other minorities, unconscious biases can effectively block the door at any organization. For a workplace hoping to overcome unconscious bias, identifying types of bias and being able to recognize their impact is a good way to start correcting course.

Uncovering Unconscious Bias

Addressing the systemic issues behind biases is not easy. Historical examples and research have shown that systems that hold minorities down do not disappear without deep, complex work and long-term commitment.

"A one-shot bias training is a good start, but it is not a solution. Systemic biases are built on unfair systems and cultures. You can't change culture by doing something once, right? That's not how cultural change works," Williams says.

This is why Williams has developed the open source website biasinterrupters.org, which offers free toolkits to help organizations evaluate their systems and implement small changes. "Bias interrupters" are tweaks to basic business practices, like hiring, performance evaluations, assignments, promotions, and compensation, that combat implicit bias in the workplace.

"If a business had a problem with sales, leaders would not just have these deep conversations about how much they care about sales, they would look at the evidence," Williams says. "They would see where things are going wrong and why sales are falling off and try everything until they met their goals. Why don't we do the same with our bias problems?"

There are a multitude of evidence-based actions organizations that are serious about overcoming implicit bias can take. In addition to using the bias interrupter tools that Williams has built, or hosting the kinds of workshops that Tall leads, many organizations are hiring diversity and inclusion officers, like Meyer-Shipp. In 2019 alone, diversity and inclusion roles posted on Glassdoor rose 30 percent over the previous year.

Having a diversity and inclusion officer is a great idea, but again, it can't end there. "If an organization is going to hire a diversity and inclusion leader, they should ensure they're giving that person both a seat at the table where decisions are being made and power to make real change, including the budget and the staff they need," Meyer- Shipp says. "Without those things the diversity and inclusion leader is just sharing ideas that leadership may or may not put into place."

Williams has seen this issue time and again in large organizations: "If you hire a chief diversity officer and give that person no ownership over the systems that create systemic bias, you should not be surprised that that person does not achieve your goals. You have structured that position to be unable to achieve the systemic change that's needed."

Hope for a Bias-Free World

Biases in the workplace can have far-reaching effects. If employees don't feel accepted, valued, and understood, then productivity, retention, and organizational culture suffer. This is supported by data: A 2018 McKinsey report on 366 public companies found that those in the top quartile for ethnic and racial diversity in management were 35 percent more likely to have financial returns above the industry mean, and those in the top quartile for gender diversity were 15 percent more likely to have returns above the industry mean.

Organizations that have successfully interrupted their biases also enjoy other benefits that their competitors may not. Meyer-Shipp shares that at a recent global Pride conference KPMG hosted, LGBTQIA+ employees noted how far the business had come, with some finding it hard to imagine even coming out in their workplace not that long ago.

Besides the benefit of a happy team, Meyer-Shipp notes that a diverse workforce can open doors to a diverse client base and exciting new ideas, but after 40 years of studying these issues, Williams is not convinced that making the business case makes an impact: "People always find a reason why they're different, why it wouldn't apply to their business. It comes down to fixing a systemic issue."

An Unbiased View

Williams writes in the Harvard Journal of Law and Gender, "Disrupting these automatic associations-this implicit bias-may well be very difficult. But the issue on the ground is not whether automatic associations occur but whether, once made, the stereotyping that results can be overridden. Stereotypes are reversed all the time."

Throughout history, different biases protected our ancestors from a variety of predators and dangerous situations. As society has matured, these biases no longer serve humanity. But because of how deeply and precisely they're rooted, they're incredibly difficult to dismantle. It is not hopeless, though. With many conscious steps and conversations, organizations-and the CPA profession- can continue the long climb to becoming truly diverse and inclusive.

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Finding ways to uncover and combat implicit biases is the only way to build a diverse, inclusive, and successful organization in today's business world. By Cassandra Morrison | Fall 2020 Evolution has left the human body with parts that no longer serve it-like the appendix, embryonic tails, and tonsils.

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One of the strange factors to rent increase:

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One of the strange factors to rent increase:

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When remote workers fled big cities during the COVID-19 pandemic's initial wave, the country's priciest places suddenly found themselves reeling from a dramatic increase in the number of empty apartments. From New York to San Francisco, rents were in free fall. Deals that might have been unthinkable just a few months prior - $1,000-plus discounts on luxury apartments, for example - became reality. Moving companies were slammed with clients looking to abandon crowded urban centers. While some landlords slashed rents by more than half, others glumly hung on to vacant units.

Almost as quickly as rents fell, though, they began soaring again. Tenants who got a taste of the good life watched their rents double the next year, lines to view apartments swelled up to 80 people, at least one snaking around a city block, and landlords once again had the upper hand. Though rent growth has slowed in recent months, renters in large cities are still feeling the effects of the 2021-22 rent boom. In Manhattan, the median rent just hit an all-time high, and rent for New York City in general remains nearly 19% above its 2019 level, according to data from Zillow. Rents are up 17% in Chicago, 13% in Seattle, and 10% in Washington, DC, over that same period. Even in San Francisco, one of the cities hit hardest by mass move-outs, prices have been remarkably resilient, down only 2% from before the pandemic. Residents of these places are now asking the question: If so many people left, why is my rent still so expensive?

The answer isn't that more people are moving back to big cities. While places like New York City have seen a rebound from pandemic lows, there hasn't been a flood of people returning to urban centers. And the idea of landlords conspiring to keep rents elevated, while partly true, doesn't offer a complete explanation. Instead, new research suggests one driving factor: People got sick of living with each other.

Unsurprisingly, when people are forced to convert their homes into home-office-gym-bars, they feel a striking urge for more space. The widespread adoption of remote work gave many people the chance to abandon expensive, dense places for cheaper locations in the suburbs or other parts of the country. But this shift also led to stark changes within big cities: People struck out on their own or broke into smaller units. Recent college grads decided to move out of their parents' houses, roommates ditched their cramped quarters for places of their own, and couples broke up and got separate places. In aggregate, these kinds of decisions created thousands of home hunters, all jostling for a relatively fixed number of units.

The significant increase in household formation provided a counterbalance to the pandemic exodus, a new analysis from the bipartisan Economic Innovation Group found, and kept housing demand in big cities such as New York or San Francisco from falling off a cliff. It also underscored the need for more construction in these areas: With more people elbowing each other for places to live, the only way for cities to continue growing and lower the cost of living is to find somewhere to put everyone.

But it takes awhile for cranes to give rise to new towers. In the meantime, if you're wondering why your rent is still so damn high, you may simply need to look at all the people who now have spacious one-bedroom dwellings all to themselves.

The competing forces in big-city housing markets

When millions of workers went remote earlier in the pandemic, it opened up a world of possibilities - and life-changing decisions. Many people who lived in big cities decided it was their chance to move to cheaper, less crowded markets where they could get more bang for their buck. Others decided to remain in the city but split up from roommates and started hunting for a studio. Still others used their stimulus checks and pandemic savings to upgrade from a one-bedroom to a two-bed. When millions of people around the country weigh these kinds of options, a shock to the housing market is inevitable.

"Every time I write a remote-work paper, I say, 'All right, that's the last one. It's time to move on to other topics,'" Adam Ozimek, the chief economist at the Economic Innovation Group and a coauthor of the latest paper, told me. "And then every time I do it, I think of something new."

In this case, Ozimek and his coauthor, Eric Carlson, used heaps of 2021 census data to illustrate how housing markets in large cities were caught between two powerful, competing forces. The first was outbound migration, which led to weaker housing demand in city centers. Previous work by Stanford researchers Arjun Ramani and Nicholas Bloom found there was a " donut effect" earlier on in the pandemic, in which housing demand fell in dense urban areas as people moved to the surrounding residential areas and suburbs. Between July 2021 and June 2022, New York City lost a net 194,000 residents to migration, while Los Angeles lost 109,000, Chicago lost 88,000, and San Francisco shed about 20,000, an analysis of census data by John Burns Research and Consulting found. In the case of New York City, EIG's latest analysis of data from the US Postal Service confirmed there hadn't been a subsequent surge in people moving back to the city.

Instead, the sudden flight to the burbs was counteracted, Ozimek and Carlson said, by an equally startling surge in household formation. A household refers to any group of people living together in one unit - a family of five in a suburban home counts as one household, as does a group of three roommates living in an urban apartment. If those three roommates move out and each gets a one-bedroom unit, the net effect is two additional households. Before the pandemic, US household formation was on the decline. Between 2010 and 2020, the increase in the number of households was the lowest on record, an analysis by Pew Research Center found. Slow population growth and an increase in the number of adults living with their parents, perhaps as a result of the economy's choppy recovery, meant there were fewer people striking out on their own. That changed shortly after the pandemic hit - household formation jumped by 2.5% nationally in 2021, more than double the fastest rate since the Great Recession.

With more people elbowing each other for places to live, the only way for cities to continue growing and lower the cost of living is to find somewhere to put everyone

This surge in household formation caused an increase in the "extensive margin of demand" - essentially, the total number of housing units that a given population desires. But EIG's latest paper goes one step further, saying there was also an increase in the "intensive margin," or the size and quality of units that people demand. Put another way, remote work led to an increase in the number of people wanting not only places of their own but also bigger homes. A couple might seek to upgrade from a one-bedroom to a two-bed, or they might look for a one-bedroom with more square footage. This desire to trade up is evident in the rent payments of people who shifted to remote work: Becoming a remote-work household in 2021 was associated with a 20% increase in rent payments, or about a $500 increase each month, the EIG researchers found.

Of course, those effects weren't felt equally everywhere. To return to the "donut" analogy, the hole in the center - the most densely populated, expensive part of a metropolitan area - was likely to lose population as a result of more people working remotely. But it was also more likely to see a greater increase in household formation.

"Part of that is probably because housing markets become relatively more affordable in those areas," Ozimek told me. "People leave and so you have vacancies, and people take that opportunity created by the vacancies to form new households. So it's one of the ways in which the housing market is reacting to the opportunity created by population loss."

While people were able to snag some early pandemic deals due to the outbound migration, the surge in household formation meant rents in many of these center city areas quickly snapped back. Consider San Francisco, where the median rent within city limits in September had rebounded to a little more than $3,500, down just 2% from the same point in 2019, according to Zillow's data. Or look at New York City, which, as Ozimek and Carlson point out, lost 2.9% of its population between 2019 and 2021 but has seen real rents increase since the start of 2021. Washington, DC, lost 20,000 people, or nearly 3% of its population, between April 2020 and July 2021, according to census data. But by the third quarter of 2021, the apartment-vacancy rate, excluding newly built units, had fallen below pre-pandemic figures, according to data from Delta Associates.

The next phase for the rental market

The rental market is now in the middle of another shift as higher interest rates squeeze consumers at every turn. Demand for apartments has been sluggish this spring, the latest report from Apartment List said, and an influx of newly constructed units is keeping rent growth in check. In 40 of the nation's 100 biggest cities, including Austin, Texas, and Washington, DC, the median rent in April was down from the previous year.

"High house prices, high rents, and rising interest rates are probably pushing back against household formation," Ozimek told me. A recent report from Redfin acknowledged as much, pointing to slowing household formation as one of the reasons that the median asking rent hit its lowest point in 13 months. Unlike the early months of the pandemic, roommates may now eye the rental market and decide it's more financially prudent to stick together rather than test the waters on their own.

But even if more people start bunking up again, that doesn't change the fact that we'll need more housing units to catch up with growing demand. More than 971,000 apartment units were under construction across the US at the end of 2022, the second-largest number on record. Roughly 575,000 are scheduled to be completed this year, according to RealPage, a real-estate-software company. That's encouraging, but it won't be enough. Households, EIG's research found, are likely to demand more space per person as remote work becomes entrenched or even expands. If more employees keep adopting remote work - which, I'll admit, is a big "if" - that indicates housing demand is bound to increase.

In this case, though, Ozimek is optimistic. The immediate shocks we've seen over the past few years are bound to smooth out, he told me, once supply has time to catch up to these rapid changes in demand.

"In the short run, we're dealing with a lot of imbalance between supply and demand," Ozimek told me. "Household formation is one of the things that's increasing demand. But in the long run, we should have supply help bring things back into balance."
James Rodriguez is a senior reporter for Insider.

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Everyone fled big cities during the pandemic. So why is your rent still so damn high?

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When remote workers fled big cities during the COVID-19 pandemic's initial wave, the country's priciest places suddenly found themselves reeling from a dramatic increase in the number of empty apartments. From New York to San Francisco, rents were in free fall.

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8 Core Business Concepts You Need To Know (10min MBA)

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If you have big plans for a career in business, you'll find the UK one of the best possible places to get the preparation you need.

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Jeff Bezos: The Inspirational Success Story Of Amazon’s Founder

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Jeff Bezos: The Inspirational Success Story Of Amazon’s Founder

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https://www.ceotodaymagazine.com/2022/07/jeff-bezos-the-inspirational-success-story-of-amazons-founder/

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According to Forbes, Jeff Bezos has an estimated net worth of $136.1 billion at the time of writing, making him one of the richest people on the planet. Most of Bezos' wealth stems from his shares in Amazon, which he founded in 1994 from his garage in near Seattle, Washington. Behind the success of Amazon and, in turn, its founder, is innovation, creativity, and hard work. Let's take a deep dive into how the e-commerce giant and its founder made it to the top.

Early Life: Bezos Before Amazon

Jeff Bezos was born in Mexico to teenage parents Jacklyn and Ted Jorgensen. Not long after his birth, Bezos' parents separated and his mother married Miguel Bezos. As he grew up, Bezos developed a sharp interest in computer science, though spent much of his early years working on his maternal grandparents' ranch in Texas.

In the mid-80s, Bezos graduated summa cum laude from Princeton University, with degrees in computer science and electrical engineering, and went on to join startup Fitel after declining job offers from both Intel and Bell Labs.

By the age of 30, Bezos was on a six-figure salary, but his realisation that the world of web was then growing at 2300% pushed him to start his own company - Amazon.

"We are stubborn on vision. We are flexible on details" - Jeff Bezos

How Bezos Founded Amazon

Once Bezos had realised the expansive possibilities of the web, he created a list of 20 potential products he believed could sell well online. He realised that even the largest bookstores could stock just a few hundred thousand books at one time - only a fraction of the almost infinite number of titles truly available. Books were Bezos' winner.

In 1994, Bezos took his idea to Seattle, home to a huge pool of high-tech talent and within close proximity to Ingram Book Group's Oregon warehouse. With $1 million raised from friends and family, Bezos rented a house in the city and established his new online book business from his garage.

For almost a year, Bezos and a team of five employees worked from the Seattle garage, learning how to source books and creating a computer system that would make Amazon.com easy to navigate. It called itself "Earth's Biggest Bookstore" with over 1 million titles for customers to choose from. By September 1996, Amazon.com had over 100 employees and had made over $15.7 million in sales.

Following Amazon.com's launch, Barnes & Nobles was quick to launch its own online presence and a marketing campaign claiming it offered twice as many books as Amazon. However, Bezos had already expanded Amazon's product line and changed the e-commerce's tagline to "Books, Music and More".

Thanks to its relentless expansion strategy, in 2019, Amazon was believed to control 37% of all online retail sales. And, as of July 2022, Amazon has a market cap of $1.105 trillion, making it the world's 5th most valuable company by market cap according to companiesmarketcap.com.

Why Is Amazon So Successful?

There are many reasons why Amazon is one of the most successful businesses in the world, though the primary reason is generally considered to be its devotion to customer experience. Amazon makes shopping quick and easy. Its every move comes back to its customer-centric philosophy. Its goal is to be the most customer-centric company in the world.

"Our vision is to be the world's most consumer-centric company, where customers can come to find anything they want to buy online" - Jeff Bezos

Other reasons for Amazon's success include its:

Huge product range

Quick and easy delivery

Release of innovative technology, such as the Kindle, Amazon Alexa, and Amazon Fire TV

Its 14 leadership principles

While Jeff Bezos stepped down as Amazon's CEO , his name will always go hand-in-hand with the e-commerce giant's status as one of the globe's top companies.

According to Bezos , one of the key lessons he learnt while building Amazon was "that success can come through iteration: invent, launch, reinvent, relaunch, start over, rinse, repeat, again and again," he said, adding that "the path to success is anything but straight."

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Jeff Bezos: The Inspirational Success Story Of Amazon's Founder

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According to Forbes, Jeff Bezos has an estimated net worth of $136.1 billion at the time of writing, making him one of the richest people on the planet. Most of Bezos' wealth stems from his shares in Amazon, which he founded in 1994 from his garage i

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Inflation is an increase in the prices of goods and services. The most well-known indicator of inflation is the Consumer Price Index (CPI), which measures the percentage change in the price of a basket of goods and services consumed by households (see Explainer: Inflation and its Measurement). The CPI is the measure of inflation used by the Reserve Bank of Australia in its inflation target, where it aims to keep annual consumer price inflation between 2 and 3 per cent, on average, over time (see Explainer: Australia's Inflation Target). Other measures of inflation are also analysed, but most measures of inflation move in similar ways over the longer term.

This Explainer describes the main causes of changes in the inflation rate.

Causes of inflation

The main causes of inflation can be grouped into three broad categories:

1. demand-pull,

2. cost-push, and

3. inflation expectations.

As their names suggest, 'demand-pull inflation' is caused by developments on the demand side of the economy, while 'cost-push inflation' is caused by the effect of higher input costs on the supply side of the economy. Inflation can also result from 'inflation expectations' - that is, what households and businesses think will happen to prices in the future can influence actual prices in the future. These different causes of inflation are considered by the Reserve Bank when it analyses and forecasts inflation.

Demand-pull inflation

Demand-pull inflation arises when the total demand for goods and services (i.e. 'aggregate demand') increases to exceed the supply of goods and services (i.e. 'aggregate supply') that can be sustainably produced. The excess demand puts upward pressure on prices across a broad range of goods and services and ultimately leads to an increase in inflation - that is, it 'pulls' inflation higher.

Aggregate demand might increase because there is an increase in spending by consumers, businesses or government, or an increase in net exports. As a result, demand for goods and services will increase relative to their supply, providing scope for firms to increase prices (and their margins - which is their mark-up on costs). At the same time, firms will seek to employ more workers to meet this extra demand. With increased demand for labour, firms may have to offer higher wages to attract new staff and retain their existing employees. Firms may also increase the prices of their goods and services to cover their higher labour costs. More jobs and higher wages increase household incomes and lead to a rise in consumer spending, further increasing aggregate demand and the scope for firms to increase the prices of their goods and services. When this happens across a large number of businesses and sectors, this leads to an increase in inflation.

The opposite will happen when aggregate demand decreases; firms facing lower demand will either pause hiring or make staff redundant which means that fewer staff are required. This puts upward pressure on the unemployment rate. More workers searching for jobs means that firms can offer lower wages, putting downward pressure on household incomes, consumer spending and the prices of their goods and services. As a result, inflation will decrease.

The supply of goods and services that can be sustainably produced is also known as the economy's potential output or full capacity. At this level of output, factors of production, such as labour and capital (which includes the machines and equipment firms use to produce their goods and services) are being used as intensively as possible without putting upward pressure on inflation. When aggregate demand exceeds the economy's potential output, this will put upward pressure on prices. When aggregate demand is below potential output, this will put downward pressure on prices.

So how can we measure how far the economy is from its potential output (or full capacity) and what does this mean for inflation? While we can fairly accurately measure aggregate demand on a quarter to quarter basis using gross domestic product (GDP) data from the national accounts (see Explainer: Economic Growth), potential output is not directly observable − that is, we have to infer it from other evidence about the behaviour of the economy. For instance, just as there is a level of output where inflation is stable, there is also a level of the unemployment rate that is consistent with stable inflation. It is known as the Non-Accelerating Inflation Rate of Unemployment or NAIRU for short (see Explainer: The Non-Accelerating Inflation Rate of Unemployment (NAIRU)). When unemployment is below the NAIRU, inflation will increase and when it is above the NAIRU inflation will decrease.

Cost-push inflation

Cost-push inflation occurs when the total supply of goods and services in the economy which can be produced (aggregate supply) falls. A fall in aggregate supply is often caused by an increase in the cost of production. If aggregate supply falls but aggregate demand remains unchanged, there is upward pressure on prices and inflation - that is, inflation is 'pushed' higher.

An increase in the price of domestic or imported inputs (such as oil or raw materials) pushes up production costs. As firms are faced with higher costs of producing each unit of output they tend to produce a lower level of output and raise the prices of their goods and services. This can have flow-on effects by pushing up the prices of other goods and services. For example, an increase in the price of oil, which is a major input in many sectors of the economy, will initially lead to higher petrol prices. However, higher petrol prices will also make it more expensive to transport goods from one location to another which, in turn, will result in increased prices for items like groceries.

Cost-push inflation can also arise due to supply disruptions in specific industries - for example, due to unusual weather or natural disasters. Periodically, there are major cyclones and floods that damage large volumes of agricultural produce and result in significant increases in the price of processed food and both takeaway and restaurant meals, resulting in temporary periods of higher inflation.

Imported inflation and the exchange rate

Exchange rate movements can also affect prices and influence inflation outcomes. A decrease in the value of the domestic currency − that is, a depreciation − will increase inflation in two ways. First, the prices of goods and services produced overseas rise relative to those produced domestically. Consequently, consumers pay more to buy the same imported products and firms that rely on imported materials in their production processes pay more to buy these inputs. The price increases of imported goods and services contribute directly to inflation through the cost-push channel.

Second, a depreciation of the currency stimulates aggregate demand. This occurs because exports become relatively cheaper for foreigners to buy, leading to an increase in demand for exports and higher aggregate demand. At the same time, domestic consumers and firms reduce their consumption of relatively more expensive imports and shift their purchases towards domestically produced goods and services, again leading to an increase in aggregate demand. This increase in aggregate demand puts pressure on domestic production capacity, and increases the scope for domestic firms to raise their prices. These price increases contribute indirectly to inflation through the demand-pull channel.

In terms of imported inflation, the exchange rate has a greater influence on inflation through its effect on the prices of goods and services that are exported and imported (known as tradable goods and services), while prices of non-tradable goods and services depend more on domestic developments.

Inflation expectations

Inflation expectations are the beliefs that households and firms have about future price increases. They are important because expectations about future price increases can affect current economic decisions that can influence actual inflation outcomes. For example, if firms expect future inflation to be higher and act on those beliefs, they may raise the prices of their goods and services at a faster rate. Similarly, if workers expect future inflation to be higher, they may demand higher wages to make up for the expected loss of their purchasing power. These behaviours, sometimes called 'inflation psychology', can contribute to a higher rate of actual inflation so that expectations about inflation become self-fulfilling.

Given that inflation expectations can influence actual price and wage setting, the extent to which inflation expectations are 'anchored' has implications for future inflation outcomes. For example, if households' and firms' expect that inflation will return to the central bank's inflation target at some point in the future, regardless of what current inflation is, we describe their expectations as being 'anchored' to the inflation target. When expectations are anchored, a period of higher inflation - perhaps resulting from a cost‑push event - will not cause households and firms to change their behaviour and, as a result, inflation is likely to eventually return to its target. But if the inflation psychology of households and firms shifts and inflation expectations move away from the central bank's inflation target (i.e. they become 'unanchored'), a period of higher inflation will become persistent because households and firms will expect inflation to be higher in the future and adjust their behaviour accordingly. Consequently, it is much easier for a central bank to manage inflation if inflation expectations are anchored rather than unanchored.

Illustrative Example of Anchored and
Unanchored Inflation Expectations

'Anchored' inflation expectations

'Unanchored' inflation expectations

While inflation expectations have an important influence on actual inflation outcomes, they are not directly observable. Instead, policymakers such as the Reserve Bank have to rely on measures of expected inflation that are based on surveys (where people are asked their views about the inflation outlook directly) or financial assets like government bonds (where the price of the asset reflects assumptions made about the future path of inflation, see Explainer: Bonds and the Yield Curve).

Box: Supply Shocks and Stagflation

If a supply shock is sufficiently large or persistent, it not only causes cost‑push inflation, but can noticeably reduce both the current and potential level of output in an economy. In this case, there can be the unusual combination of a period of 'stagnation' as output declines at the same time that prices are rising. This combination of stagnant growth - with high or rising unemployment - and high inflation is referred to as stagflation. Stagflation can become entrenched when inflation expectations are not well anchored.

The 1970s were a period of stagflation that featured two oil price shocks. In October 1973, the members of OPEC (the Organization of Petroleum Exporting Countries), as well as Egypt and Syria, imposed an oil embargo on industrial nations that had supported Israel in the Yom Kippur War of the same period. The embargo resulted in a quadrupling of oil prices and energy rationing, culminating in a global recession in which unemployment and inflation surged simultaneously. Central banks did not target inflation at this time, and this was the start of a prolonged period of high inflation in many economies.

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Causes of Inflation | Explainer | Education

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This series provides short, concise explanations for various economics topics.

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