Talent, timber and toilets

Integrated challenges  As Mark Carney noted in a recent speech at the Jackson Hole Symposium, in the context of significant global headwinds, the UK economy hasn’t been doing so badly.  Until the start of this year, buoyed by a strong labour market the UK has been growing at its trend rate. However, in the past few weeks the US-China trade war has escalated, creating significant movements in the US bond markets; whereas Germany (which recently issued a negative yielding, 30-year, zero coupon bond) now seems set for recession.  So, where does the UK stand? Carney states that for the UK Brexit trumps these global headwinds in terms of potential impact. Particularly, in the wake of recent rhetoric around a no-deal Brexit (now 6/5 odds, vs 4/7), the UK now has ‘the highest FX implied volatility, the highest equity risk premium, and the lowest real yields of any advanced economy’. Whilst the medium-term economic impacts of a no-deal Brexit are still shrouded, in Carney’s view the likely monetary policy response would be to ease. However, in making this statement, he acknowledged the diminishing usefulness of monetary policy as tool to stabilise the economy, in a globalised environment where economies act in unison and where the US (and the dollar) remains dominant. If the US tightens when we want to ease, then the system becomes strained.  In the long-term Carney’s solution to this rests in a shift to a truly multi-polar economy, perhaps using the Renminbi as a global reserve currency. In the shorter-term countries ‘must play the hand they are dealt’.

 

Google Home  Various economists and politicians have proposed ways of resolving the housing crisis. Many of these come across as ideologically motivated and involve robbing Peter to pay Paul. For many obvious, practical reasons, this is not the solution. The solution must surely come through innovation in the housebuilding process which creates more economic surplus that can then be shared between the actors and the community. When tech start-ups propose industry solutions, a healthy degree of scepticism is usually justifiable. But when Google produces a solution it’s probably worth listening. Their proposal for offsite factory fabrication of timber structures, contained in their Toronto Tomorrow vision is remarkably well thought through. By shifting to timber design, Google’s sister company, Sidewalk Labs, anticipates being able to create a predictable and low-cost supply chain that is not subject to the fluctuations of the construction industry’s existing steel sourcing. High volume construction of modular design elements creates economies of scale, and the supply chain will be coordinated by a digital BIM system, the combination of which will reduce waste (by 75%), increase construction speed (by 35%), reduce the number of deliveries to site (by 85%) and reduce overall project costs by a posited 20%. Aside from the environmental benefits of building with timber, offsite fabrication will increase project safety and reduce commuting time for workers (due to having a fixed work location). Having created a project surplus through these mechanisms, Sidewalk Labs proposes that the city shares in the benefit through higher land prices (for public land), land value uplift capture (for private land) and planning gain in the form of more affordable housing. Applicability to UK urban projects? Timber can be built up to 30 stories; however, at present we may lack the ready supply that exists in Canada.

 

Flexible Workplace  A recent workplace study in the US carried out by Capital One gives further evidence of the correlation between well designed workplaces and employee productivity. 90% of respondents considered there to be a link, with younger respondents expressing the strongest sentiment. But what factors of design are important? In respect of design features, access to natural daylight was considered to be the most important. However, a pervasive theme of the study was the subject of flexibility and adaptability. Flexible working policies came out top of the factors which drive talent retention, but this flexibility also crossed over into design features. 73% of respondents stated that they have their best ideas when they use flexible workspace options, which included the ability to adapt furniture settings to the task at hand. In part this might be because the workplace needs are increasingly dichotomous; 77% stated that they work better in collaboration spaces; whereas 88% felt that their best performance comes when they sit at settings that facilitate focussed, head-down work. This is unlikely to represent two mutually exclusive groups; rather it is indicative of the conflicting work methods of a single group. More than half of those surveyed felt that their workplace didn’t respond well to their needs. Clearly there’s work to be done. So, how do you please everyone all the time? Either you budget for much more space which allows the workforce to move around between settings (fine if money is no object). Or you create a truly flexible, adaptable office that can mould itself around the dynamic needs of its users.

 

BOPUS  The retail landscape used to be segmented by the type of shopping activity: convenience vs comparison. However, as the landscape evolves, the better conceptual division might come in the purpose of the store: convenience remains on one side of the equation, but experience now sits on the other.  For an example of the latter, see Target’s recently announced strategic partnership with Disney in the US to bring some excitement into its stores. For convenience read: pretty much everything else. Convenience will be a driving factor in selling all goods moving forwards, including the ones that you need to compare. Increasingly this comes through integration with the online channel, especially among younger shoppers.  A US study reported by eMarketer this week states that two thirds of Gen Zers had used ‘buy online, pick up in-store’ (‘BOPUS’, aka click and collect) in the past month. Why? …Convenience. More specifically: (1) it is quicker than online delivery, 59%, (2) to make sure that the product was available, 44%, and from a different survey, (3) to avoid shipping charges, 47%, and (4) to save time in store, 44%. These young people will grow into the main consumer group of tomorrow, and there is no reason to suspect that their habits will change.  The division of new retail hence comes in whether the product browsing and selection takes place in the store, or remotely. If the former, then you need to offer the consumer a reason to do so despite the inconvenience (i.e. an experience that they can’t get at home). If the latter, then you need to offer a really slick in-store fulfilment service that is more convenience than online delivery.

 

The toilet of England  Some of you may have picked up on my occasional and subtle support for my home town of Hull. This week there is yet further cause for the former City of Culture to celebrate. Alongside less deserving destinations, such as Stonehenge and the British Museum, this week the Lonely Planet has awarded a Hull landmark with a place on its ‘Ultimate UK Travel List’. The Deep? William Wilberforce’s House? No. The accolade instead goes to the public toilet on Victoria Pier. Having personally inspected the premises, I can attest that these might be some of the most attractively decorated public toilets in the UK. Located close to Hull’s former ferry terminal, they feature original Edwardian art nouveau features, a set of scales and various flora. If you’re in the area and need to spend a penny, they come highly recommended. If you’re visiting with other intentions in mind, however, beware. The Welsh town of Porthcawl has recently announced that it will be implementing a new form of smart toilets that pick up and respond to various nefarious activities. Drug users and smokers will for instance be treated to a soaking from a series of water jets. Meanwhile, a weight sensing floor mechanism detects if there is more than one occupant in the cubicle, sounds an alarm and ejects any canoodlers onto the street; doubtless to their embarrassment. Not such an issue in Hull, where last week an amorous couple were discovered expressing their explicit affection for each other on an unlandscaped traffic island in the city centre. It’s never dull in Hull.