Economist 4/17/2015

  1. Family companies are ideally suited to the early stages of capitalism. They provided two of the most important ingredients of growth, trust and loyalty.Family businesses make up more than 90% of the world’s companies. Many of them are small corner shops.Defining these larger family companies is tricky.Boston Consulting Group has produced a reasonable definition made up of two elements: a family must own a significant share of the company concerned and be able to influence important decisions, particularly the choice of chairman or CEO; and there must have either been a transition from one generation to the next, or, in the case of a founder-owned firm, plans for such a transition. On that definition, family companies represent 33% of American companies and 40% of French and German companies with revenues of more than $1 billion a year. The Agnelli family controls 10.4% of the Italian stockmarket. In Hong Kong the top 15 families control assets worth 84% of GDP, in Malaysia 76%, in Singapore 48% and in the Philippines 47%.The majority of the world’s most successful medium-sized companies are also family firms. Hermann Simon, chairman of Simon-Kucher & Partners, a consultancy, calculates that they account for two-thirds of Germany’s mighty Mittelstand.The best thing about family companies is their sense of ownership.The worst thing about family companies is succession.According to the Family Business Institute, an American consultancy, only 30% of family businesses survive into the second generation and 12% into the third. A mere 3% make it into the fourth and beyond.
  2. The annualAirline Quality Rating (AQR), jointly produced by Embry-Riddle Aeronautical University and Wichita State University, was released yesterday. It found that airline performance in the country got worse last year. The study tracks four areas: customer complaints, baggage handling, punctuality and “involuntary denied boarding”—the number of passengers airlines bump from flights. In 2014, based on these metrics, only three American airlines out of the 12 studied—Hawaiian, Alaska and Virgin America—improved their performance.What is most depressing about the findings is that the decline in service has coincided with airlines finally realising some healthy profits.  . Virgin America, which was rated as the country’s best for the third year in a row, has also, finally, started to show a profit. Its passenger numbers are rising, too.
  3. Nobody doubts that Omar al-Bashir, in power since he led a military coup in 1989, will remain president for another five-year term in Sudan. He is ostensibly running against 14 other candidates, but none is a threat, or particularly independent. The real opposition united last year under the label “Sudan Call”, hopeful of gaining a greater say.. Security forces cracked down; copies of 14 newspapers were confiscated on a single day last February. With the deck stacked against it, the opposition boycotted the poll.That is awkward for the West. It has long ostracised Mr Bashir. But its friends in the region are asking if it is time to start dealing with him.Since late March Mr Bashir has backed Saudi Arabia’s armed campaign against Iranian-backed Houthi rebels in Yemen.He has also drawn closer to Egypt and several Gulf states, supporting a military push against Islamist militias in Libya that had once been provisioned by Sudan.Yet Western diplomats question whether Mr Bashir has really changed his spots. His regime has long been close to radical causes. It has cosied up to the Saudis over Yemen only after angering them by apparently helping Iran supply the Houthis.The UN panel of experts on Sudan says that more than 3,000 villages in Darfur, the country’s troubled western region, were burned in 2014 by militias linked to Mr Bashir.
  4. Wine lovers who scraped together £300 (£1028 in today’s money) for a case in 1982, and have resisted the urge to drink it, are now sitting on a £28,000 nest-egg.In the hope of replicating such heady returns, investors have been pouring money into fine wine, now thought to be a $5 billion-$10 billion market.Limited supply is part of the appeal: the very best wines are grown in tiny batches. Petrus, a much lauded winery, produces only 2,500 cases a year. The most feted producers are often prevented from expanding by law and geography, and it is impossible to replicate the weather that produced the 1982 Lafite. At the same time, demand has soared thanks to the growing ranks of the mega-rich.Brokers flogging wine as an investment offer impressive indices showing average annual growth rates as high as ten percent. Yet that is misleading.Worse, the market remains small and, ironically, illiquid.Although online trading platforms, such as WineOwners, and price-comparison sites such as Wine-Searcher are making investing more transparent, the market favours the well informed.

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