This is the published version of Forbes’ CEO newsletter, which offers the latest news for today’s and tomorrow’s business leaders and decision makers. Click here to get it delivered to your inbox every week.
Many large corporations are watching tomorrow’s election closely. After all, the next occupant of the White House could significantly impact the next four years and beyond of their business. Tax rates, tariffs, control over interest rates, trade agreements and market sentiment are vital to their margins and investors.
But small businesses—which represent 99.9% of all firms, nearly 46% of all American workers, and 43.5% of U.S. GDP—have less at stake when it comes to their business. Forbes’ Brandon Kochkodin writes that both former President Donald Trump and Vice President Kamala Harris have put small businesses at the center of their economic plans. And although uncertainty is at historically high levels, according to the most recent poll numbers from the National Federation of Independent Business, both candidates have significant proposals on the table to help small businesses out. Trump is looking to cut corporate taxes and regulations. Harris wants to make it easier for small businesses to get started, and will likely continue some of the small-business-friendly policies President Biden put in place through the SBA.
For small businesses and people who aspire to start them, it’s good to be one thing both candidates say is important. But, of course, each candidate’s policies will impact the wider world. Issues of tariffs, immigration, women’s rights and government priorities will affect every business, no matter its size. Those who own and work for small businesses may vote with those wider issues in mind, and how they will impact both their business and everyday lives.
CEOs should be good leaders, but their level of confidence is a different thing altogether. In its most recent CEO survey, EY looked at how CEO confidence factors into a leader’s ability to embrace change and make bold decisions, which has been a critical part of the job in the last few years of global uncertainty. I talked to EY Global Vice Chair—Strategy and Transactions Andrea Guerzoni about the study and how to be more confident. An excerpt from our conversation is later in this newsletter.
ECONOMIC INDICATORS
After tough years of runaway inflation, the rate has finally deflated to a level that the Federal Reserve sees as normal. According to figures released by the Commerce Department last week, inflation was 2.1% last month, meeting economists’ estimates and bringing inflation to the lowest level since February 2021. Core inflation, which excludes more volatile energy and food costs, was a bit higher—2.7%, above analyst estimates of 2.6%.
However, these numbers are likely an accurate data point, unlike employment figures released by the Bureau of Labor Statistics on Friday. According to the data, the U.S. added just 12,000 jobs last month, far fewer than expected. However, the rate was skewed by work stoppages caused by Hurricanes Helene and Milton, as well as the still-continuing strike of more than 30,000 West Coast Boeing plant workers. The unemployment rate is still 4.1%, unchanged from September and in line with economists’ predictions.
The gross domestic product for the third quarter was also down a bit, according to data from the Bureau of Economic Analysis. GDP grew at 2.8%, slightly less than economists’ estimate of 3%. However, consumer spending grew at a 3.7% clip, leading analysts to tell the New York Times that the economy is healthy and firing on all cylinders.
While these numbers are always significant, they take on outsized importance this week. Not only could they influence who voters choose in Tuesday’s election, but they’re likely to be at the center of the Federal Reserve’s Open Market Committee meeting later this week. The policymaking committee may use the information to lower interest rates. According to CME FedWatch, 98.3% of economists currently expect a 0.25% rate cut to come from this week’s meeting. Forbes contributor Jason Schenker writes that the weak job report makes the rate cut highly likely.
NOTABLE EARNINGS
It’s earnings season for several of the biggest tech companies, which reported quarterly results last week. The big players all beat expectations, but market reactions were decidedly mixed. E-commerce behemoth Amazon had a successful quarter, posting $158.9 billion in net sales in its last quarter—an 11% increase from a year before. Online store and third-party seller services brought in the bulk of the revenues, but its AWS service platform represented the third largest chunk, with nearly $27.5 billion in sales, representing 19% year-over-year growth.
Apple, which also reported its earnings after markets closed on Thursday, got a much more tepid response from investors. The tech company exceeded expectations, reporting an all-time high of $94.9 billion in sales—estimates were $94.5 billion—and $46.2 billion in iPhone sales—$1 billion over estimates. But share prices fell as the company revealed its net income declined 36% based on an EU ruling about a tax issue, and Chinese sales missed expectations.
Microsoft reported its best-ever quarter in the tech company’s history, smashing expectations—making $24.7 billion net income, over $23.2 billion predicted by analysts and 11% up year-over-year. One of the biggest growth drivers was Microsoft Cloud, which saw $38.9 billion of total revenue, up 22% from a year ago. Google also saw a lift in its cloud business. Its $88.3 billion in quarterly revenue was the company’s best. And although $65.9 billion of that was from advertising, nearly $11.4 billion came from Google Cloud. Google CEO Sundar Pichai attributed Google’s success in Cloud to the company’s AI offerings.
Even though each company delivered good results, investors were unhappy with spending plans and revenue outlooks. By late Thursday morning, Microsoft’s stock was down more than 4%, with investors likely unsatisfied with the company’s revenue guidance for the next quarter. Its stock has not measurably picked up since. Microsoft said that some suppliers are behind schedule, which impacts its outlook, but CEO Satya Nadella expects the supply and demand to match up within the second half of the fiscal year. Amazon’s stock rallied on its earnings report, boosting founder Jeff Bezos to be the world’s second richest person, behind Elon Musk.
NOTABLE NEWS
Oat milk is no longer extra. Starbucks announced last week that it will scrap extra charges for non-dairy milks in its drinks starting this Thursday. The non-dairy milk surcharge varied from market to market, but a statement from the coffee chain said this Thursday, when the surcharge is officially retired, almost half of the customers who get beverage modifications will see prices down more than 10%. The price reduction, which has been called a “vegan tax,” was announced as the company presented disappointing earnings from the most recent quarter. Same-store sales were down 6% in North America.
“It is clear we need to fundamentally change our strategy to win back customers,” CEO Brian Niccol said in the earnings release. Niccol has only led the coffee chain since September 9, when he was brought in to replace Laxman Narasimhan. Niccol, who saw growth surge as the CEO of Chipotle, was brought in to turn the tide at Starbucks. The surcharge elimination is part of his new strategy, which includes quicker service, streamlining menu options, bringing back condiment bars, and making Starbucks stores a place to sit and enjoy coffee again.
TOMORROW’S TRENDS
EY Report Shows How Confidence Sets CEOs Apart
Confidence makes a huge difference in how a CEO does their job. In its most recent CEO survey, EY took a close look at how confident CEOs are. The report found the ones who are most optimistic about their abilities are best prepared to take bold actions and embrace transformation—two things that have been necessary in the turbulent times of the last few years. I spoke with Andrea Guerzoni, EY global vice chair—strategy and transactions, about the report. This interview has been edited for length, clarity and continuity.
Would you say a confident CEO is one who embraces chaos?
Guerzoni: Exactly. And is capable of communicating that the opportunities may be bigger than the threats for the business, and can see a path forward that can enable value creation well above the competition and market. They’re capable of generating alpha: extra value, extra growth, extra.
This is backed by a very discreet number of behaviors that build this confidence. Taking a very proactive approach regarding risks. Looking at much more thorough portfolio reviews to understand whether the capital allocation and assets are future proven or not. Being able to embed geopolitical risk in strategic decision-making, not leaving this to things beyond your control, so you should not consider [them]. There are methodologies that would allow [businesses] to mitigate the risk and exploit the opportunities. And adding a much more proactive and agile approach to the disruptive technologies that are coming and can really change the shape of your company’s operations and customer experience. Instead of an approach that is passive, wait until you have certainty regarding the validity of certain assumptions and the concreteness of certain technologies.
The passenger seat approach doesn’t build confidence because you don’t explore the art of the possible. You don’t join forces with some of the protagonists that are developing these technologies. It’s a completely different mindset. The path forward is differentiating the market: those who have this kind of leadership and mindset and those who perceive the future and consider complexity as a big risk, a big threat.
The survey showed more confident CEOs have plans to pursue more M&A, and less confident CEOs have more plans to pursue divestment. What is the relationship between confidence and strategy to grow or shrink your company?
M&A is the fastest and riskiest way of acquiring resources: market shares and technological and human resources. It’s the riskiest thing to do and you need to be extremely confident. You need to have that kind of planning, methodology and foresight that allows you to take calculated risks in this extremely uncertain environment.
No doubt that where confidence is lacking is the most unnatural path for a company because it’s the highest risk type of decision, in terms of capital allocation. In just one transaction, one deal, you put a lot of capital. These transactions tend to be fraught with a lot of complexities including post-deal integration, value creation and stakeholder management. With low confidence it’s very unlikely you do something so risky.
Regardless of the quality of your portfolio, it’s obvious that in the last couple of years, every company with a medium-high level of complexities—variety of assets, business units, geographies, product lines—has been exposed to this disruption. So the cockpits of CEOs have started showing more lights flashing amber and red because of the sheer number of events over the last couple of years. It’s obvious that in certain situations, restructuring, injecting new capital and spreading the resources thinly to keep the same perimeter is a no-go decision. You need to be more focused and allocate resources where you think you can still have a competitive advantage, and let some of the other business go to somebody else who may have better chances to extract value.
What advice would you give to CEOs to become more confident in the next several months?
There is an increased need to join the dots. Decisions tend to be so complex today that CEOs and boards that make the best use of their talents—coming from different perspectives, being able to look at the issues or the opportunities from a multitude of different dimensions—that’s the kind of approach that today is the winning one. The possibility to have diverse teams that can encompass technologists, people with legal backgrounds, people with tax backgrounds operations and human resources and people who understand geopolitical aspects. You need to broaden the sources of information that would allow the CEO and the board to take an informed decision in such a scenario.
Number two is really the data-driven approach. Data today is available. You can really build fantastic databases, data sets that would allow you to improve your decision making and see things that are not obvious, even [to] the most expert pair of eyes. If you combine these two things, you have the possibility to build confidence to make better decisions.
FACTS + COMMENTS
Eli Lilly’s share price plunged last week after reporting worse-than-expected Q3 earnings, especially in weight loss drugs.
$11.4 billion: Quarterly sales for the drug company, well below forecasts of $12.1 billion
20%: How much sales of weight loss drugs Mounjaro and Zepbound missed expectations by
‘Not a function of supply’: CEO David Ricks’ explanation of the less-than-expected sales of weight loss drugs in a CNBC interview. He said the company had increased supply, and wholesalers used their stock instead of buying more
STRATEGIES + ADVICE
Boards and executives should get along with each other, but should not be friends. Here are reasons why that relationship needs to stay professional.
Repeat business is vital to a company’s long-term success. Here are three ways to boost customer loyalty.
VIDEO
QUIZ
Baseball’s A’s, which are moving to Las Vegas, unveiled the financing details for their new $1.5 billion ballpark in Sin City. According to the proposal, if baseball doesn’t hit the jackpot in Las Vegas, what would become of the park in 30 years?
A. It will become a sports-themed casino
B. The A’s will be responsible for demolishing it
C. The stadium will officially become part of the University of Nevada, Las Vegas campus
D. It will become the centerpiece of a sports-themed hotel
See if you got the answer right here.