That is the global engagement number in Gallup’s 2026 survey.

One hundred and fifty thousand people. One hundred and sixty countries. Probably the most disciplined long-term measurement of workforce attention, energy, and withdrawal we have.

Twenty percent engaged.

The rest are either dragging themselves through the system or have already left emotionally. They still have a badge. They no longer have a stake.

The lowest reading in years.

At the same time, one of the largest coordinated capital reallocations in corporate history is moving toward AI. BCG and the World Federation of People Management Associations spoke with more than 7,000 leaders across 115 markets this March. Strategic workforce planning moved to number two. Digital HR automation jumped 13 places in three years, the largest move in the history of the survey. Every AI-adjacent topic moved upward.

Two readings of the same institution.

One says the human layer is detaching.

The other says the machine layer is about to be loaded with more ambition, more capital, and more board attention.

The AI program sits on top of engagement.

Right now, that floor is cracking.

/////

The BCG report does not say engagement no longer matters. That would be an unfair charge. It says engagement and employee experience have become “foundational rather than differentiating.”

Reasonable on the surface.

Also the perfect description of what gets eaten first when capital is reallocated.

Foundational things don’t win quarterly comparisons. Differentiating things do. If you say “both matter” without deciding which one carries the other, the system will decide for you.

It always does.

Who benefits from the current arrangement?

Executives running AI programs have a clean timetable. By the next board meeting, they need to show ROI. Adoption rates. Automation savings. Integration milestones. They can produce a number this quarter.

Engagement does not behave like that.

Nobody loses his job because engagement drops three points in Q2. Plenty of people get shouted at because an AI milestone is missed in Q3.

In BCG’s ranking, engagement and wellbeing fell seven places between 2023 and 2026. Rewards and recognition fell six. Once a new board-legible category enters the room, the machinery knows where to look.

This time the category is called AI.

/////

For many years I thought transformation programs failed for the standard consultant reasons.

Wrong tool. Wrong sequencing. Insufficient sponsorship.

Then three years would pass, and I would find myself in another room, with the same logos, listening to the third version of the same transformation. The post-mortem always blamed the tools.

The tools were usually not the problem.

The missing piece was simpler and more brutal. The people responsible for execution had mentally resigned before the change arrived.

Gallup’s data makes the pattern visible. Manager engagement fell from 31 percent to 22 percent in three years. Gallup attributes most of the variance in team engagement to the manager. The broader literature is more cautious, usually somewhere in the 30 to 50 percent range.

Choose your number. The message does not change.

The line manager is the closest lever the organization has to the actual work. That lever has been quietly bending. The standard institutional response has been to put more weight on it.

This collapse has at least three readings.

The first is the one I act on. The manager role has been overloaded by decades of administrative sediment, and AI programs have landed on top of an already saturated function. Clean the role, and the rest has a chance.

The second is harder for the manager class to hear. Some managerial work really is substitutable by AI. Capital allocators may be sensing this before the substitution is complete. Restoring capacity does not remove the underlying signal.

The third is macro. AI-related job anxiety, post-pandemic stress, political instability across continents, climate anxiety sitting underneath the whole thing. If this is the dominant force, a role audit may move the line a little, but it will not reverse the trend.

I act on the first reading because there is a lever there.

Not because I am sure it is the whole truth.

The honest position is less comfortable: all three may be partly true at the same time.

/////

The manager role has accumulated sediment.

Compliance files. Escalation chains. Performance documentation nobody reads. Meetings nobody has the authority to cancel. Dashboards created because one senior person once asked one nervous question in one bad quarter.

The late Ottoman bureaucracy worked with a similar logic. Every reform added a layer. Almost no reform removed one. By the late nineteenth century, the Tanzimat reformers had to use the very institution that made reform difficult.

We built measurement architecture that made engagement invisible at board level, and then we called this prioritization.

Board packs rarely show three-year manager engagement decline with a named owner attached. Executive compensation rarely punishes consecutive engagement deterioration. The system was not designed as negligence. That would be too flattering. Negligence at least implies somebody noticed.

We inherited a governance structure built before engagement became a serious category, then never asked whether we would build the same structure today.

We are not outside this.

We built it.

We maintain it.

Most of us benefit from it, most of the time.

/////

The loop is clean.

AI programs land on managers who are already overloaded. Execution quality drops. Senior leadership tightens deadlines. The manager’s cognitive margin shrinks. Team engagement falls. Pressure increases.

Then the same system asks the same manager to carry more transformation.

Cheap cheese sits in an expensive mousetrap. In this case the cheese is called productivity.

MIT’s Project NANDA reported that 95 percent of organizations deploying generative AI saw no measurable return. The thresholds and time windows deserve scrutiny. Some criticism is fair. But no serious adjacent reading says, “Actually, everything is going beautifully.”

The direction is the direction.

If manager capacity is collapsing this badly, why don’t strong managers simply leave for organizations that have designed the role better?

Some do.

Most don’t, because the same overload has spread almost everywhere at once.

This is mainly a large-company disease. In BCG’s data, smaller firms still place culture, rewards, and skills closer to the center. The argument here applies most directly to multinationals, listed companies, and private equity portfolio businesses.

Partner-led firms, founder-led companies, and family businesses suffer from the same world through different pathologies.

Their ghosts have different surnames.

/////

The prescription is not pleasant.

The manager role needs a zero-based audit.

Not a wellness program.

Not another leadership module.

An audit.

What is inside the role today? If we designed the role from scratch, what would we never put there? Which reports exist only because nobody had the courage to kill them? Which approvals are fake control? Which meetings are theatre? Which staff functions have outsourced their friction to the manager and called it process discipline?

Some of this work has been automatable for years.

Some of it exists because a function needs to justify headcount.

Some of it is compliance theatre for a regulator who may not read what we produce.

This is not a new idea. It exists in the consultant playbook. BCG’s “Four Power Moves” points in broadly the same direction. My disagreement is not with the components. It is with the order.

Restore capacity first.

Then add.

Most large organizations are doing the opposite. This is why every round produces the same exhaustion with a better slide deck.

Who should run the audit?

Not a committee.

Committees don’t eliminate their own inputs.

It has to be led by an executive whose performance review does not depend on preserving the current architecture. On paper, the obvious candidate is the CHRO. In practice, that is exactly why it usually fails. I have watched CHROs enter boardrooms with the right diagnosis and leave outvoted by colleagues whose KPIs are quarterly and whose patience is shorter than the problem.

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Late-cycle institutions rarely redesign themselves under strategy.

They redesign under crisis.

I am working on this more deeply in my forthcoming book.

Ibn Khaldun, writing in the fourteenth century about the life cycle of civilizations, would have recognized the pattern. He called the binding force asabiyyah. Institutions start with shared purpose and end with process compliance. The first generation has a mission. The fourth generation has a template.

We are not far from that.

Twenty percent engagement is not necessarily a warning before the threshold. For many organizations it may already be the steady state. The remaining eighty percent have made a calculation. Discretionary effort costs more than the system returns.

This is not laziness.

It is arithmetic.

That calculation changes only when something forces it to change.

A talent shock. A competitor that solves the constraint and takes three points of market share. A board that misses AI ROI for two consecutive quarters and finally asks why the same technology works elsewhere but not here.

Organizations treating manager capacity as a background variable while loading it with AI requirements are not executing a strategy.

They are placing a bet.

The bet is simple: the floor will hold long enough for the AI investment to pay back before the cracks reach the beams.

Some floors hold longer than you expect.

Some collapse without giving a speech.

I wrote this article in Turkish too. They share a skeleton. They don’t share skin, muscle, or voice.

You can read it here.

https://hguvenal.substack.com/publish/post/196406388?r=nslov&utm_campaign=post&utm_medium=web&showWelcomeOnShare=true

In early 2026, the floor moved. Software now trades at or below the S&P 500. J.P. Morgan counted the damage. Two trillion dollars in twelve months. The biggest rerating in thirty years, with no recession to blame. This isn’t a correction. Corrections reverse. A rerating doesn’t. Every model built on the old premium is now running on a dead input.

/////

The clearest example first. The company that spent thirty years telling the world which software to buy lost seventy-three percent of its value.

That’s Gartner. A research firm that sold category intelligence to corporate technology buyers and built a six-billion-dollar revenue line doing it. The Michelin Guide for enterprise software. The stock went from $551 in late 2024 to under $150. A company selling maps met a technology that redraws any map in thirty seconds. The mapmaker died first. Nobody needed the map to stay necessary more than the mapmaker did.

That’s the visible story. The more interesting part is what the visible story is hiding.

/////

AI isn’t killing all software the same way. The market is already sorting. The reporting systems aren’t.

Narrow tools are the first casualties. Expense management. Basic project tracking. First-pass contract review. These were selling convenience. AI sells the same convenience without the annual subscription. Monday.com, the project management platform, is down sixty percent. That’s this category.

Complex systems die more slowly. An enterprise platform managing pharmaceutical inventory across a hundred regulatory jurisdictions doesn’t get replaced because a language model can discuss inventory. It gets replaced when a model can guarantee zero compliance failures across all hundred simultaneously. That guarantee doesn’t yet exist.

Cybersecurity runs the opposite direction entirely. More AI means more attacks, so defense budgets grow. CrowdStrike, one of the largest security firms, is down twenty-one percent. But that’s a different kind of down. The market is repricing risk appetite, not writing the category’s obituary.

All three sit under the same label. Software. The market is already pricing the distinction. The reports can’t see it.

/////

The second layer works through people, and it moves more quietly.

Software companies retained their best engineers with equity. Four-year vesting RSUs (restricted stock units), options struck at 2021 valuations. The logic was simple. Leave before your stock vests and you lose money no cash offer can match. The logic required the stock to hold its value.

It didn’t.

Companies moved first. Atlassian, which makes developer tools, cut ten percent of its workforce. Block, the payments company, cut about eight. This wasn’t quiet attrition. It was active. Unvested equity disappears from the P&L when the employee does, so every layoff improved earnings. The market rewarded the discipline.

The survivors are sitting on options struck at prices the company hasn’t seen in two years. AI firms (better funded, sharper pitch, real equity) are hunting exactly that group. The mechanism that preserved the premium is now dissolving the team that would have rebuilt it.

/////

This is where private credit enters the picture. Private credit funds are neither banks nor public markets. They are pools of money that lend directly to mid-size businesses, and they grew sharply after 2008 when banks pulled back from corporate lending. The capital inside belongs largely to pension funds and university endowments. Ordinary savings, delivered through two intermediaries.

These funds made very large loans to software companies for years. The reason is uncomfortably simple. Software looked like the ideal credit asset. No inventory, no plant to depreciate, high margins, predictable cash flow from subscriptions. Recurring revenue recurs. On that assumption, capital poured into software lending for a decade. AI is now quietly erasing the assumption.

There’s a second complication worth mentioning briefly. The funds don’t report most of these loans as “software” to their investors. They file them under whatever industry the borrower sells into. A company selling to hospitals shows up as “healthcare.” A logistics platform shows up as “transportation.” From the outside, the real software concentration inside the portfolio isn’t visible. A separate problem, running in the same direction.

/////

In the first quarter of 2026, five major funds received twenty billion dollars in redemption requests. They returned half. The ones that couldn’t sold loans at a discount. Discounted sales marked down everything else. Lower marks triggered more requests. The cycle feeds itself. Risk you cannot see is risk you cannot manage.

/////

The two-trillion-dollar rerating happened in twelve months. Public markets priced the pain. Private credit books lag public markets by six to eighteen months. The window for orderly adjustment is open.

It isn’t wide.

The premium is gone. The models that assumed it haven’t been updated. And somewhere in a portfolio presentation reading thirty percent healthcare, eighteen percent financial services, eleven percent technology, the software is still sitting there, exactly where it was. The fact that it isn’t visible from where the investor sits is a separate matter entirely.

I wrote this article in Turkish as well. Same skeleton, different voice.

https://open.substack.com/pub/hguvenal/p/yazlmn-karizmas-bir-crpda-silindi?r=nslov&utm_campaign=post&utm_medium=web&showWelcomeOnShare=true

Companies work the same way. You just have to know where to look.

/ / / / /

Last week, I published a piece on the components of my second book, Kuartet. The questions came fast. “You say the other components can be read from outside. Fine. But how do you read culture?”

Behind that question sits a frustration. People have tried. They’ve read the website, scrolled through the values statement, and dug into Glassdoor. They still don’t know. They’re right to be frustrated. They’re looking in the wrong place.

Culture doesn’t speak when spoken to. It leaks. It shows itself in how people sit and stand, in what makes them angry, and in how they talk about others when those others aren’t in the room.

/ / / / /

For years, whenever I walked into a company, I asked earnest questions. How do you make decisions? How do you treat your people? Is the customer really at the center?

Every company was transparent. Every company was people-first. Every company was innovative. I couldn’t tell them apart. I was asking everybody the same questions, and people—just like patients sitting across from a doctor—were giving me the right answers. Not what was happening. What was supposed to be happening?

Then Dennis Campbell, a professor at Harvard Business School, spent a week inside our asset management company. Meetings, presentations, the full ritual. After the last session, everyone had filed out. He was standing near the door. He turned around.

“Look at the legal collection costs,” he said. “Look at how aggressively the company pursues its customers through litigation. That number will tell you more about the real customer culture than anything anyone said in that room.”

He was right. Legal collection costs are nobody’s shop window. No one adjusts their litigation budget so culture looks good. That number is produced without intent. Things produced without intent don’t lie.

That day, I stopped asking questions. I started following traces.

/ / / / /

Who got promoted in the last three to five years? Were they people who came up through operations and delivered results in difficult conditions? Or people who sat close to the center, maintained the right relationships, but couldn’t find the shop floor with a map?

A promotion is a company’s confession. A hand goes up in a board meeting, a name is chosen, and that choice sends a signal through the entire organization with the clarity of a foghorn. If that signal has been consistent for a decade, you’re looking at a culture.

Then look at what happens when things get tight. When revenue falls off a cliff, how is the sacrifice distributed? Did senior management take a pay cut, or did the factory close while the executive team collected its bonus on schedule? Every company calls itself a family. The boundary of the family becomes visible only when someone has to go hungry.

The Venetian Republic called itself a republic of equals. But when grain shortages hit, the patrician families ate, and the arsenalotti the shipyard workers who built the fleet starved. The constitutional architecture that was supposed to bind them turned out to contain fine print nobody had read aloud. The same mechanism operates in every company that preaches solidarity in good times and practices triage in bad.

Which behaviors went unpunished? The sales target was met, but the ethics violation was ignored. We have a Turkish saying for this: the fish rots from the head. Every tolerance at the top becomes a permission slip at the bottom.

/ / / / /

Call the customer service line. Describe a small, real problem. Does the person on the other end own the problem, or redirect you? Do they have authority, or are they reading a script? At the moment of complaint, a company defends or fixes. That reflex is the product of a decade’s accumulation. Training doesn’t change it.

When we redefined the debtor as a customer in our asset management firm, the industry thought we’d lost our minds. “Debtors aren’t customers. We call them, we collect, that’s the business.” But the moment you use the word “customer,” the way you listen to complaints changes. The way you pursue collection changes. The tone changes. We weren’t inventing a new technique. We were trying to rewire the reflex itself.

Pricing tells you something, too. If the salesperson offers a discount before the customer asks the price, there’s a sentence living in that salesperson’s head: “This product only moves with a discount.” That sentence is the accumulated product of years of management pressure and target systems. Japanese retail operates on the opposite assumption. The price is the price it earned, and the entire service architecture exists to justify the ask rather than apologize for it.

How much authority does the front line carry? A call center agent or a branch manager. How many approvals to solve a simple problem? A company that doesn’t trust its customer representative (and I’ve sat through enough quarterly reviews where the conversation was entirely about controlling the person at the counter rather than serving the person on the other side) doesn’t trust its employees either. Every decision that must travel upstairs for a signature is a confession.

/ / / / /

Good people don’t usually make a conscious calculation when they decide to leave. Something accumulates. “I’m growing here” or “I’m being consumed.” That feeling quietly converts into a decision, often surprising the person making it.

Lower-level departures are noise. But when the CFO, the head of sales, and the deputy CEO leave in succession, that’s not a coincidence. People at that level follow a recognizable arc. They arrive with optimism. They learn whose word actually counts. They see what gets rewarded. They pack their bags quietly.

LinkedIn tells a lot. If the average tenure is systematically below two years, something is wrong. If it’s far above, almost no movement at all, that’s a different signal. Calcification.

Then ask where the good people went. If those alumni built remarkable careers, the company was a forge. If they scattered into lateral moves, the company wasn’t developing people. It was consuming them. McKinsey produces alumni who go on to run large organizations. The alumni record is a company’s longest-running and least falsifiable performance review.

You won’t get everything from the outside. The founder’s personality won’t be fully visible. Neither will the scar tissue left by historical crises. But for a decision partnership, career, or investment, what you can see is enough to say “go” or “stop.”

/ / / / /

Culture problems are almost always read as awareness problems. Better training, a values workshop, a transformation program. Most executives know these don’t work. The programs continue anyway. Because the real question never gets asked. Who benefits from leaving things exactly as they are?

The senior executive who controls promotions feeds on the current system. He builds his own team, rewards those who defer to him, pulls up people who resemble him. Not by conspiracy. By the gravitational logic of self-interest operating inside institutional walls. These people attend the values workshop. They sign every document. Tomorrow they do exactly the same thing.

The cycle locks itself. Those who hold power promote people who preserve the reward structure. Good people leave, because staying means accepting rules they didn’t write and can’t change. Every departure makes the remaining structure a little more self-reinforcing, a little more sealed against its own critique. A decade passes. Nobody made a deliberate decision. But there’s a culture.

Culture is the compound interest of accumulated promotion decisions.

Change rarely comes from inside. It takes a new leader, a deep crisis, or a market force that makes the old equilibrium untenable. Sometimes all three. The Ottoman military reforms of the nineteenth century had all three. Institutional resistance still delayed meaningful change by two generations. Companies are smaller than empires. The mechanism is identical.

/ / / / /

If you’re on the inside, the question changes. Think about who got promoted in the last year. Remember how sacrifice was distributed the last time things got difficult. Count the last three good people who left and ask yourself why they went. If the answers make you uncomfortable, you’ve read the traces correctly.

Am I benefiting from leaving this unchanged?

The answer is sometimes yes. And that yes tells you more about the culture than any values poster ever could.

I wrote this article in Turkish too. They share a skeleton. They don’t share skin, muscle, or voice.
You can read it here.

https://open.substack.com/pub/hguvenal/p/kultur-ack-ack-konusmaz?r=nslov&utm_campaign=post&utm_medium=web&showWelcomeOnShare=true

I served on the board of directors for years during Nestlé’s partnership with Mis Süt, and I advised the parent company on its growth in the Turkish water market. If there was Nestlé, the kids had to eat it. Pure Nestlé blood runs through my veins. Those around me know this; whenever a product collect call comes from Nestlé (which happens once in a blue moon) they immediately give me a mocking look. “Look at your lot…”

When I read the divestiture announcement, I looked for the weakness in the business. There wasn’t one. The business is fine. That’s what makes the sale worth thinking about.

/////

The logic that built Nestlé was empire logic. Accumulate categories, share the back office, extract scale. Coffee, water, pet food, chocolate, frozen meals. Diversification was the insurance policy, and for forty years the model paid. At a specific cost of capital, in a specific inflation environment, with a specific kind of investor patience.

All three are gone.

Capital markets now ask a ruder question: in which categories are you undisputedly top-two globally? Everything outside that answer is negotiable. Nestlé’s CEO Philipp Navratil, a career Nestlé man who rose through coffee and Nespresso, reorganised the company around four pillars: coffee, pet care, nutrition, and packaged food. Water didn’t make the cut. Not because it failed any absolute test, but because coffee and pet care can generate higher returns on the same capital.

That logic is internally consistent. Whether internal consistency is the same as being right is the question Nestlé’s shareholders are now betting on. Coffee faces commodity price pressure that Nestlé can influence but not control. Pet care faces private-label erosion in every market where a recession bites. The four pillars are not self-evidently superior to what’s being sold. They’re different.

Unilever, the Anglo-Dutch consumer goods giant, ran a similar calculation and separated ice cream. Two companies with different portfolios reaching the same conclusion in the same window is not coincidence. It’s a signal that the pressure is systemic. But systemic pressure doesn’t validate the response. It makes the response difficult to resist, which is not the same thing. P&G hasn’t followed. Mars hasn’t. Danone held on to water. The consensus may be wrong, or right for some and wrong for others. We won’t know for a decade.

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I believed in empire logic. Not theoretically. Practically. Every expansion I advised, every capacity addition I endorsed, ran on the assumption that scale under one roof was the natural structure for a category this large. The assumption was inherited. It had worked for so long that testing it felt unnecessary, the way you don’t test the floor before stepping on it.

Every advisory firm in the world sold that assumption for two decades (the pitch decks wrote themselves: synergy, diversification, shared infrastructure, usually with a hockey-stick chart). The same firms now sell focus with identical conviction. The weather changed, so the forecast changed. The forecasters didn’t. I include myself in that group.

The cycle is older than any of us. Ottoman provincial administration ran a version of it: consolidate regions under central tax farming, extract efficiency, watch the periphery decay from inattention, then lose or sell the periphery to whoever will govern it locally. The Venetian republic did the same with its eastern Mediterranean holdings. An empire that holds everything governs nothing particularly well. But empires that shed their periphery sometimes discover they’ve sold the thing that made the centre cohere. The discipline of divestiture and the wisdom of divestiture are not always the same act.

/////

The water asset carries a dimension the standard portfolio narrative ignores.

You are not buying bottles. You are buying rights to water sources that governments are already under pressure to regulate more tightly. Perrier’s concession in Vergèze, a small commune in southern France. San Pellegrino’s aquifer near Bergamo in northern Italy. Acqua Panna’s source in Tuscany. These are natural, non-reproducible assets. They don’t scale. And they are politically exposed in ways that brand management cannot resolve. Nestlé Waters admitted to using banned filtration methods on its French mineral water sources, triggering a French Senate inquiry and a consumer fraud lawsuit. Extraction controversies, packaging regulation, and the growing question of whether multinationals should profit from local groundwater haven’t gone away. They’ve intensified.

The tension is genuine. The more the world worries about water scarcity, the more economically valuable certain source rights become. And the more politically complicated they are to hold. A diversified parent that wants to be judged on coffee and pet nutrition finds the combination increasingly costly to carry (not costly in cash — costly in board hours, in ESG scrutiny, in reputational surface area that distracts from the story you’re trying to tell investors). A specialised owner with a single narrative absorbs the same pressure more efficiently.

But efficiency has a shadow. A standalone water company valued at €5 billion has nowhere to hide when the next extraction scandal arrives. Nestlé, for all its baggage, could absorb a water controversy because it had eighty other businesses to show the market. The diversification premium works in both directions, and the current consensus is pricing only one.

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The unit being carved out doesn’t contain only global premium brands. Vittel, Contrex, and Hépar are regional French brands sitting inside the same package. They carry the heaviest regulatory scars from the filtration affair. They compete in a lower-margin segment. A private equity co-owner paying premium multiples for San Pellegrino’s brand equity will not have equal enthusiasm for Contrex’s market position.

What happens to non-premium brands inside a structure optimised for premium? In the old Nestlé, they survived because the empire carried everyone. In a focused entity run by a financial partner with a five-to-seven year horizon, every brand earns its place against the capital it consumes or it doesn’t survive. The regional brands may become the orphans inside the orphan. Nestlé solved its portfolio problem by creating a smaller version of the same problem one level down.

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For investors in public consumer goods companies: the perimeter of these groups is no longer stable. The next decade will separate companies that chose their core sharply and held it from companies that shrank without becoming any sharper. Nestlé is betting that four pillars can compound faster than the full portfolio did. The bet is not yet proven, and the track record of companies that divested premium assets to concentrate on ‘core’ categories is uneven at best.

For private capital: assets like Perrier rarely came to market in the old regime. They will come more often now, bundled with complexity. Carve-outs, co-ownership periods, regulatory strings, non-premium brands packaged alongside premium ones. Funds that require clean, full-control structures will watch the best assets go to those comfortable with ambiguity.

For any board sitting on a profitable business that no longer fits: Nestlé is exercising a discipline most organisations avoid. Exiting something not because it’s failing but because it no longer earns its place relative to where you’ve decided to go. That takes a board with a genuine view on direction (most boards have a view on risk, which is not the same thing). But discipline and correctness are not synonyms. I’ve watched enough Turkish family holdings sell the ‘non-core’ business that later turned out to be the most valuable thing they owned.

Here’s a test worth running in your own head. Name one large consumer company that divested a premium brand in the last twenty years and didn’t regret it within fifteen. If the list is short, that tells you something about the confidence Nestlé is bringing to this table.

The asset didn’t change. The cost of holding it did. Whether that cost was real or a story capital markets told themselves is the question nobody will answer for another decade.

I wrote this article in Turkish too. They share a skeleton. They don't share skin, muscle, or voice.
You can read it here.

https://hguvenal.substack.com/publish/post/193859598?r=nslov&utm_campaign=post&utm_medium=web&showWelcomeOnShare=true

Hans Rosling’s Factfulness. The first time I read it, I thought it was a public health book. A Swedish doctor with beautiful bubble charts showing child mortality dropping in sub-Saharan Africa. The second time, I saw something else. By the third reading, I wasn’t reading the book anymore. I was reading the inside of my own skull.

Rosling surveyed 12,000 people across 14 countries. Twelve questions about the state of the world. Three choices each. Not trick questions. What percentage of the world’s one-year-olds have been vaccinated against some disease? Has extreme poverty doubled, stayed the same, or halved in the last twenty years? How many of the world’s girls finish primary school? The average score: 2.2 out of 12.

Now picture a chimpanzee. Picking bananas marked A, B, and C at random. No education, no CNN, no Davos panel experience, no mental model of anything. Average score: 4.

Humans do worse than the chimpanzee.

Slow down on that sentence. Doctors scored worse than random. Journalists. Nobel laureates. Investment bankers who price sovereign risk for a living couldn’t tell you whether extreme poverty went up or down. A creature with no access to information outperforms creatures drowning in it.

/////

Rosling spent years chasing the explanation. His first hypothesis was simple: people don’t know. Information deficit. The media covers catastrophe, so the public draws a catastrophic picture.

But this explanation has a hole in it large enough to drive the entire development economics literature through. Someone who doesn’t know guesses randomly. Random guessing produces 4 out of 12. If humans score 2.2, they aren’t guessing. They’re selecting the wrong answer with conviction. Systematically. The problem isn’t the absence of knowledge. It’s the presence of wrong knowledge.

Rosling traced the pattern. People’s mental maps of the world were 20 to 30 years out of date. The 1990s world. Developed countries over here, developing countries over there. Rich and poor. Two blocks, a chasm between them. That map was roughly accurate in 1995. But the world moved on and the map carriers didn’t. Today 75 percent of humanity lives in middle-income countries. The chasm closed while we were looking at our phones.

Here’s what makes this more than a trivia problem. An old map isn’t a blank page. An old map is an active filter. New information passes through it. Data that fits the map gets absorbed. Data that contradicts it gets classified as an exception, an outlier, noise. The map confirms itself daily. It feeds on its own outputs. It gets stronger with every piece of evidence it misreads.

/////

For a long time I treated Factfulness as a global health curiosity. Interesting that people don’t know vaccination rates in Bangladesh. But my work is companies, boards, markets. Different domain entirely.

Then one afternoon in a strategy meeting, five of us around the table, I watched the mechanism play out in real time. We were evaluating a manufacturing investment in southeastern Turkey. Someone said: “Labor is cheap there but the quality is low.” Everyone nodded. I nodded. That sentence had been true in 2003. But the calendar on the wall said 2019, and in the intervening sixteen years three universities had opened in the region, technical high school graduates had doubled, the experienced manufacturing workforce had been rebuilt from the ground up. None of us had checked. We hadn’t checked because we hadn’t asked. We hadn’t asked because we already knew the answer.

I was the chimpanzee in that room.

No. I was worse than the chimpanzee. The chimpanzee would have picked at random and had a decent chance of stumbling onto the right answer. I read from a map that was sixteen years old and never considered the possibility that the territory had changed.

/////

The part of Factfulness that genuinely disturbed me wasn’t the chimpanzee. The chimpanzee is the attention-grabber. The real architecture of the problem sits one level deeper.

Rosling identifies ten “dramatic instincts” that distort our perception: the gap instinct, the negativity instinct, the fear instinct, the destiny instinct, the blame instinct, the urgency instinct. Each one is a cognitive filter that makes the world look worse than it is. Rosling says they’re evolutionary. Our ancestors on the savanna survived by overestimating threats. The software still runs but the operating environment has changed.

Fine. But incomplete.

Rosling talks about individual instincts and proposes individual corrections. Control your fear instinct. Compare the numbers. Watch out for straight-line assumptions. All true, all useful. But he misses something: these instincts don’t stay individual. They institutionalize.

Think about a board of directors. Twelve people. All intelligent, all experienced, all well-intentioned. But they attend the same conferences, hire the same consultants, read the same reports, cite the same case studies. They carry similar maps. Over the years those maps have confirmed each other. The confirmed maps became the company’s strategic questions. The strategic questions became KPIs. The KPIs determined which data got collected. And the collected data — naturally — confirmed the questions.

Nobody lied. Nobody was lazy. Everyone said “we’re data-driven” and they were right. They were collecting data. But the questions that directed the data collection were a generation old.

This isn’t them. This is us. This is me. For decades I asked “what does the data say” and counted it as a virtue. But what the data says depends entirely on what you asked it. A correct answer to the wrong question is more dangerous than a wrong answer to the right one. Because it carries certainty.

/////

Follow the loop.

A company is founded. The founder carries a mental model of the world. That model roughly matches the reality of that era. The founder designs questions based on that model. Data is collected according to those questions. The data confirms the model. The model produces successful outcomes. Success makes the model untouchable.

Years pass. The world changes. The questions don’t.

Because changing the questions means questioning the model. Questioning the model means questioning past successes. Questioning past successes means questioning the people who produced them. Those people now sit on the board.

The loop closes here. New arrivals inherit the old questions. They don’t know why the questions were designed the way they were, but nobody challenges them because they “work.” They appear to work because they produce answers that fit the old model. They produce fitting answers because they were designed to find exactly those answers.

Rosling’s students in Stockholm were walking around in 2019 with a 1990 world map in their heads. They’d inherited it from school, from media, from their parents. Identical mechanism. The difference: at a university, a thirteen-question test reveals the problem. In companies, there’s no such test. Nobody sits down at a board meeting and asks: how old are our strategic questions?

We don’t ask. Because the questions themselves are invisible infrastructure. Like electrical wiring. Inside the walls. If the lights come on, nobody inspects the cables.

/////

I owe a debt of honesty here.

Factfulness is a powerful book, but it carries the disease it diagnoses. The book contains dozens of graphs. All pointing the same direction: improving trends. Poverty declining, vaccination rising, education spreading, natural disaster deaths falling. The improvements are real, the data is sound. But there isn’t a single graph showing a worsening trend. No ocean plastic accumulation. No obesity epidemic. No total carbon emissions. Christian Berggren, a Swedish professor of industrial management, pointed this out with some force: the book selected positive data and excluded negative data.

Berggren is right. And this doesn’t diminish Rosling. It deepens him. Rosling himself, in his own book about systematic bias, was systematically biased. Unconsciously. Because he too carried a model: “people see the world as worse than it is.” The model was correct but incomplete. And an incomplete model generates incomplete questions. Incomplete questions collect incomplete answers.

Factfulness itself needs Factfulness.

/////

There are multiple problems in this system. Cognitive biases, media incentives, educational curricula that update at glacial speed, institutional memory that calcifies. But behind all of them sits a single binding constraint: question architecture.

By question architecture I mean something specific: the set of foundational questions that steer an institution’s strategic decisions. “Which market should we enter?” “What does the customer want?” “Who is the competitor?” “Where is the risk?” These questions were formulated by someone, at some point, for the world as it existed on that day. And they haven’t been revised since.

Changing the data is easy. Dashboards update in real time. Analytics are sophisticated. But changing the questions themselves means interrogating the foundation. Interrogating the foundation takes courage. And institutions don’t reward courage. Institutions reward confirmation.

Next Monday, write down the three foundational questions that drive your organization’s strategic planning. Try to remember when those questions were first formulated. If the birth date is older than five years, look at how much the world has changed since that day. Then ask yourself: if I were starting from zero today, would I ask these same questions?

The answer is almost certainly no. But here’s what will be more interesting: when you investigate why the questions haven’t changed, you’ll find a structure protecting them. A person, a process, a habit, a set of KPIs. The structure that protects the question also protects the answer. The structure that protects the answer also protects the model. And the model describes a world that no longer exists.

This experiment will give you something more valuable than Rosling’s thirteen-question quiz. Rosling measured your illusions about the state of the world. This measures the illusion infrastructure inside your own institution.

/////

The chimpanzee wins because it has no old map to defend.

We do. And the more successful our maps have been, the harder they are to surrender. Every confirmation accumulated over a forty-year career — every “I told you so,” every prediction that landed — thickened the walls. The map stopped being a tool. The map became you.

I go back to this book twice a year. Not to understand the world better. To remind myself that my map has gotten a little more obsolete since the last reading. There are sentences I underlined two years ago that I wouldn’t underline today. Some I’d cross out. That doesn’t mean the book changed.

It means I did. And every time I notice that, I’m one step closer to the chimpanzee.

I hope.

I wrote this article in Turkish too. They share a skeleton. They don't share skin, muscle, or voice.
You can read it here.

https://open.substack.com/pub/hguvenal/p/sempanze-neden-kazanyor?r=nslov&utm_campaign=post&utm_medium=web&showWelcomeOnShare=true

When I read Koji Sato’s speech to his suppliers, I had to read it twice. The CEO of Toyota, standing in front of 484 companies, telling them: “If we do nothing, we will not survive.”

Then the engineer in me woke up and started underlining.

/////

For thirty years Toyota hasn’t been another car company. It has been the reference. If you wanted to sound serious about operations, you quoted the Toyota Production System. You sprinkled “kaizen” into your slides. The cottage industry of lean consulting (an entire profession built on selling other people’s discipline back to them at a markup) put Toyota’s name on every cover. The pattern was simple. Toyota writes the rulebook. Everyone else tries to catch up.

In that context, this speech is a category event. The referee of industrial discipline is stepping up and saying “the way we applied our own rules is now putting us at risk.” Not the philosophy. The implementation. The threat isn’t a broken engine. The threat is a broken cost structure, attacked by competitors who never accumulated fifty years of well-intentioned over-engineering on their backs.

Sato names the enemy in one word, speed. Not EVs, not software, not “disruption” in the LinkedIn sense. Speed. The speed gap becomes a cost gap. The cost gap becomes a technology gap. The technology gap becomes a product gap. “We will not survive.” It’s very hard to imagine any Toyota leader of the 1990s saying this out loud.

Most commentary stops here. “Even Toyota is afraid of Chinese competition.” True but shallow. What Sato is really doing is more dangerous for the rest of us. He’s performing live surgery on his own sacred cow.

/////

Listen to the middle of his message. He says Toyota will not sacrifice quality to increase volume. Then, same breath, he demands the “courage to stop” certain activities. That sounds abstract until you put numbers on it.

Inside Toyota and its suppliers, a program called Smart Standard Activity has been running since 2017. Its central question is brutal. Of all the specifications imposed on parts and processes, which ones does the customer actually experience as value? Which failures does a human being ever see, feel, or suffer?

Once they started looking, the absurdities surfaced. Roughly ten thousand wire harnesses a month, bundles of cables, thrown away because the color tone was slightly off. The harnesses worked perfectly. Roof panels rejected for faint specks in areas no customer would ever see. Steering wheels failing inspection for surface irregularities you’d only find under factory light with a magnifying glass.

From the standpoint of a quality department, this is dedication. From the standpoint of the customer, it is waste wearing a costume.

I recognized the architecture. In the imperial porcelain kilns of Jingdezhen, the Chinese workshops that supplied the Ming and Qing courts for six centuries, inspectors smashed any piece with the slightest flaw. Sometimes eighty or ninety percent of a firing was destroyed. The standard existed to honor the emperor. Over time, the standard existed to honor the standard. The original purpose had been consumed by its own instrument. Toyota’s ten thousand rejected harnesses and Jingdezhen’s mountains of smashed porcelain are the same disease in different centuries. Quality standards that outlive their reason and survive because nobody asks.

Sato is quietly moving the line. He says Toyota will protect “more than ever” the standards that touch function, safety, durability. And rationalize the over-quality the customer will never notice. In plain language: stop sacrificing real competitiveness on the altar of invisible perfection.

As someone who loves Toyota precisely for its monastic quality culture, this is the sentence that made me sit back. If even Toyota admits it has been over-doing quality in the wrong places, what does that say about the rest of us? We copied the vocabulary but never had the discipline.

/////

The second half of the speech shifts from technical to relational. Sato turns to those 484 suppliers and asks them to kill a sentence, “We will do exactly what Toyota tells us to do.” In Japanese business culture, that phrase is almost a love letter. Humility, obedience, alignment. He wants it gone.

He’s asking suppliers to stop hiding behind Toyota’s authority. Stop treating the manufacturer as a god whose will you simply execute. Instead, take responsibility for defining value. “We, together, have thought about what matters to the customer, and this is our proposal.” In a culture where the supplier-client hierarchy has the weight of a feudal bond (the phrase Sato wants killed, “Toyota-san no ossharu toori ni,” translates roughly as “exactly as Toyota commands”), that isn’t a soft cultural tweak. It’s a structural rewiring.

Think about what that implies. For decades, Toyota trained its supply chain into its own way of thinking. Now the same Toyota is saying, “the one-way pipeline has become the constraint”. Obedience has turned into friction. The fear of contradicting the customer has created an environment where nobody dares say “this specification is irrational, it wastes money, the buyer will never notice.”

We created the worship, he’s saying. Now the worship is killing our speed.

Anyone who has worked with large corporations in Bursa, Stuttgart, or Detroit recognizes this instantly. The big client’s “standards” become scripture. Suppliers climb over each other to say “yes, sir.” Ecosystems of over-specification, over-documentation, and over-inspection emerge. Everyone feels safe. Costs quietly suffocate competitiveness.

/////

Strip away the Toyota logos and the cycle is universal. A company builds a reputation on quality. To protect that reputation, it adds controls, checks, specifications. Each addition is reasonable in isolation. Together, they become a system nobody can see end-to-end. Challenging a spec becomes dangerous. Adding one is always safe. “Quality” becomes the shield behind which waste hides comfortably.

Then a competitor arrives without that history, without that accumulated bureaucracy. Faster and cheaper. The incumbent looks at the competitor’s speed and concludes they must be cutting corners. One day the incumbent’s own CEO stands up and says: no. We were the ones cutting. We cut speed. We cut initiative. We preserved the wrong kind of perfection.

That’s what this speech is. Toyota moving from “they must be cutting corners” to “we were cutting in the wrong place,” live, in front of its suppliers.

The cycle reproduces itself. The more you succeed, the more best practices you accumulate. The more you accumulate, the harder it becomes to challenge any of them. The harder it is to challenge, the more power shifts to people who defend the past rather than design the future. Eventually the only actor left who can question the whole structure is the outgoing CEO with nothing to lose. Most companies never get that speech. They just get the surprise.

/////

The binding constraint isn’t capital. It isn’t ideas. It isn’t digital talent. It’s the ability to stop. Sato names it explicitly: the courage to abandon work that no longer creates value.

For Toyota, the concrete form is Smart Standard Activity. Years of work with suppliers to identify excessive quality demands and remove them without touching safety or function. For the rest of us, it might be less visible: reports nobody reads, meetings that exist because they existed last year, product features kept alive for sentimental reasons, management reviews designed around technology that was retired a decade ago.

We love addition. We promote the manager who launches a new initiative, not the one who quietly kills three. We give awards for innovation, not for deletion. The system is addicted to addition. Nobody sponsors subtraction.

/////

Pick one system in your organization. One approval chain, one set of quality specifications, one reporting cycle. Ask what happens if you trace it from the requirement that created it to the customer who supposedly benefits from it. If the customer wouldn’t recognize the activity as something they’re paying for, you’ve found your harness. Your invisible rejection. Your mountain of smashed porcelain.

Then ask the harder question: who in your system is allowed to say “this requirement no longer makes sense” without career risk? If the only safe sentence is some version of “we will do exactly what the company wants,” you have the same disease Toyota is treating. You just haven’t had your “we will not survive” moment on stage.

Sato is doing something rare. He’s using his final stretch in the role to tell his own ecosystem: stop treating us like gods, start treating us like partners in a very hard game.

/////

This isn’t a story about Toyota’s decline. It’s a story about a company trying, late but still in time, to realign quality with value and loyalty with initiative.

If the house that wrote the rulebook is now editing its own rules under competitive fire, what gives you the confidence that your inherited rules are still fit for the game you’re playing?

I wrote this article in Turkish too. Two versions share a spine. They don’t share skin, muscle, or voice.
You can read it here.

https://hguvenal.substack.com/publish/post/192964807?r=nslov&utm_campaign=post&utm_medium=web&showWelcomeOnShare=true

Into this room walked Cevdet Akçay, Deputy Governor of the Central Bank of Turkey, two weeks from stepping down, and produced three sentences that detonated along three separate fault lines.

First: “If we had not taken these steps, inflation could have reached the 150–200 percent range.” Second: “Saying ‘let me raise the minimum wage high so that at least the worker is saved’ is the worst idea in the world.” Third, to reporters the following day: “Election periods are of zero interest to me. If fiscal policy loosens, I tighten more.”

Each sentence is defensible on its own terms. Together, they blew the roof off.

/////

To make sense of the explosion, you need the scar tissue. Turkey has run this experiment three times in thirty years, and the results are not ambiguous.

In 1994, the government decided interest rates were “too high” and turned the central bank into a cheap financing window. Within months the lira lost more than 160 percent of its value against the dollar and inflation crossed 250 percent. People who went to bed solvent woke up poor.

In 2001, a political fight blew up the institutional framework while it was still under construction. Overnight rates spiked above 6,000 percent, the lira fell by half in forty-eight hours, banks failed in sequence. The Central Bank’s legal independence was rebuilt from that wreckage. Not a theoretical commitment to best practice. A bandage on a wound that was still bleeding.

In 2018, a new doctrine arrived. Governors were removed, rate decisions became a political spectacle, the lira crashed, and real wages hit lows not seen since 1994. This one bled slowly, which is worse, because people adjust to slow bleeds and begin to mistake the bleeding for normal.

Three decades, one pattern. Every time politics overrode the central bank’s operational space, the sequence repeated. Currency shock and inflation, then the impoverishment that follows both and outlasts both.

Akçay’s “150–200 percent” sits inside that memory. He was pointing at the historical record and saying “you’ve seen this film. I prevented the sequel.”

/////

Cevdet is my friend. I’ve known him for over fifty years. He was a year ahead of me at Robert Kolej and again at Boğaziçi. We played football in the same team, though his game was really basketball (quicker spatial read, the kind of player who saw the open lane two passes before anyone else and got irritated when you didn’t).

That quality survived graduation intact. In economics, he’s always been three moves ahead of the room and visibly impatient with people stuck two moves behind.

My first instinct was to defend him.

The counterfactual is legitimate. The wage-indexation argument is standard in monetary economics; if you lock wages to past inflation, you build yesterday’s failure into tomorrow’s prices. And telling politicians that elections don’t dictate monetary policy is not insubordination. It is, by the 2001 law and by institutional design, exactly what he was hired to do.

But something kept catching.

It wasn’t what he said. It was what sat next to what he said. In the same years that Akçay was talking about wage discipline, the share of wages in total business turnover fell into the single digits. Profit margins expanded.

Rental inflation ran well ahead of CPI. A tax reform that might have pressed high-income groups never arrived. The phrase “the worst idea in the world” was reserved for the minimum wage. Not once for any of those other channels.

I know the textbook answer, and I’ve given it myself in boardrooms (usually to people who nodded along and then did nothing about the fiscal side).

A central bank’s mandate is price stability, not income distribution. But a central bank that can see only the wage channel of inflation, while remaining silent on profits and rents, is not neutral. It’s selectively rigorous. And selective rigor, in a country where the sense of fairness has been hemorrhaging for a decade, reads as class bias in a lab coat.

I should be precise about the evidentiary status here. The wage-inflation link has thick empirical support. The profit-margin link in Turkey’s specific current cycle is asserted more than documented. ECB researchers have done serious work on “sellers’ inflation” in the eurozone. Comparable firm-level analysis for Turkey is thin.

The distributional critique is partly a fairness argument and partly an economic one. The fairness part is solid. The economic part needs more data than anyone has produced.

The silence was the tell. And the silence comes from somewhere I recognize, because I was trained in the same corridors and lecture halls, inside the same intellectual culture that makes you technically precise and never forces you to hear what your precision sounds like to someone at the neighborhood food markets whose money buys less every week.

We learned to be right. Nobody taught us who pays for our righteousness.

/////

Şamil Tayyar, a former AKP MP, fired first: “Know your place. Don’t try to lecture politics.” The phrase “bureaucratic oligarchy” did its work.

On the other flank, the labor press grabbed the wage sentence: “He put the bill on workers.”

Everybody got their preferred fragment. Nobody had to discuss fiscal reform or social transfers. The things that would actually change the distributional picture. A government with its own answer wouldn’t need to attack a central banker’s vocabulary. The attack substitutes for the program.

The technocrat speaks accurately and tone-deafly. The politician attacks the tone, because tone is free and fiscal reform costs votes. The public watches and concludes nobody is on their side. Trust erodes, and the erosion feeds the next round. The central bank’s next honest statement sounds more arrogant to an audience that has stopped believing institutions mean well, which makes the next political attack even cheaper to land.

/////

Turkey loaded its disinflation almost entirely onto monetary policy. Not because monetary policy is the right tool for the whole job. Because it’s the only tool that doesn’t require a vote. You don’t need parliament to raise interest rates. You don’t need to pick a fight with the construction lobby or the rent economy. You outsource the pain to a technocratic body, let them do the unpopular thing, and when the public gets angry, you point at the technocrat.

That is a political plan dressed as economic policy.

If you were building Turkey’s stabilization from scratch, knowing what we know, having buried what we’ve buried, would you hand the central bank the entire weight and tell the treasury to do whatever feels politically convenient?

The question answers itself. But that is the architecture Akçay was working inside, and all three of his sentences are the sound of a load-bearing wall cracking.

I keep thinking about a different counterfactual. Not Akçay’s. The one nobody in Ankara will touch.

What if the government had stood up alongside the central bank and said “We’re going to tax the windfall profits that certain sectors racked up while the rest of the country was getting poorer?”

Actual transfers (visible, funded, large enough to matter) aimed at the people eating the worst of the adjustment. Someone going after the rental market not with price caps that landlords laugh at but with supply reform that takes three years and requires political nerve nobody currently has.

In that world, a central banker talking about forward-looking wage indexation is one instrument in a coherent orchestra. Without the rest of the orchestra, the same man is a soloist playing to a crowd that can’t afford the ticket.

Is any of that politically achievable in a system gearing up for elections? I don’t know. Is it economically necessary? That’s not a question.

Cevdet leaves in weeks. Whoever sits in that chair next inherits the same broken arithmetic, tell the truth and get called heartless, or hedge and watch the credibility drain out of the policy in real time. The person is beside the point. The chair was built wrong.

Three crises in thirty years. Each time the lesson lasted exactly as long as the wound stayed open. Then the old reflexes came back, not because anyone truly forgot, but because remembering means reform. Forgetting costs nothing.

I wrote this article in Turkish too. Two versions share a spine. They don’t share skin, muscle, or voice.
You can read it here.

https://hguvenal.substack.com/publish/post/192893668?r=nslov&utm_campaign=post&utm_medium=web&showWelcomeOnShare=true

Kimse dört ekrana birden bakmıyor.

Kendini döviz kuruyla teşhis eden bir ülke, saatte bir ateşini ölçüp buna “check-up” diyen hastaya benzer.

/////

Yoğun bakım ünitelerinde hasta başına günde 350 alarm çalıyormuş. Hesabını yapın. Her iki buçuk dakikada bir. Hemşire koşacak, bakacak, değerlendirecek, karar verecek. İki buçuk dakika sonra bir daha. Yüzde 99’u gereksizmiş. ABD Gıda ve İlaç Dairesi üç yılda 566 ölüm saymış. Hemşireler uyumamış. Beyinleri teslim olmuş. Tıpta buna alarm yorgunluğu diyorlarmış. Beyin bir noktadan sonra her alarmı “ya gene yalan” diye süzüyormuş. Gerçek alarm geldiğinde aynı süzgeçten geçiyormuş.

Kurda birkaç kuruşluk hareket, ertesi sabah manşet. Manşet panik, panik döviz alımı, alım kuru oynatıyor, yeni başlık doğuyor. Gerçek tehlike geldiğinde sistem ya uyuşmuş ya da sürekli alarm modunda kilitlenmiş. İkisi de aynı kapıya çıkıyor.

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2018’in Ağustos’unu hatırlıyorum. Kur 6’yı geçmişti. Her sabah gözümü açtığımda ilk baktığım şey telefondaki dolar/TL’ydi. Kahvaltıdan önce. Bazen kahvaltı yerine. Kur oynadı mı endişelendim, duruldu mu gevşedim. Çocuğunun alnına elini koyan anne refleksi. Ateş var mı yok mu. Başka bir şey sormuyordum.

Ateş sana vücudun bir şey yaptığını söyler. Ne yaptığını söylemez.

Bunu anlamam birkaç gerçek kriz geçirmemi gerektirdi. Kurun fırladığı değil, telefonların susmaya başladığı türden krizler. Arayacak insanlar çoktan karar vermişlerdi. Senin görüşüne ihtiyaçları kalmamıştı. O sessizlik, hiçbir kur tablosunun gösteremeyeceği şeyi gösterir.

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Yazının başında andığım analistler bunları biliyor. Termometreye değil, kan değerlerine bakıyorlar. Cari açık trendi, çevirme oranları, rezerv yapısı, politika çerçevesinin siyasi dayanıklılığı. Doğru aletleri var. Her birini doğru okuyorlar.

Aferin onlara. Ama bu teşhis değil.

Dört ayrı odada dört ayrı doğru okuma yapılıyor, kimse bir araya gelip ayırıcı tanı koymuyor. Körlerin fil tarifi. Biri hortumu tutuyor, biri kulağını, biri bacağını. Herkes haklı. Kimse fili görmüyor. Tek değişkenli yorum sanayisi, her göstergeye bir köşe yazarı, her veri noktasına bir alarmlı başlık, etkileyici miktarda doğru okuma üretiyor. Bütünleşik teşhis sıfır.

Tıp bunu yüzyıllar önce çözmüş. On altıncı yüzyılda İstanbul’daki Haseki Askeri Hastanesi’nde hekimler hastayı ayrı ayrı muayene eder, bulgularını başhekime sunarlarmış. Sentez o masada olurmuş. Yapı, birleştirmeyi zorlarmış.

Çin’de Song Hanedanlığı benzer bir şeyi sansür kurullarıyla yapmış. Farklı vilayetlerden gelen istihbarat tek bir masada buluşur, çelişkiler saklanmazmış. Bizde okumalar var. Masa yok.

/////

Termometre ekonomisini biz kurduk. Sen, ben, gazete, televizyon, karar alıcı. Hepimiz.

Medya dört değişkenli bir tabloyu tek rakama sıkıştırıyor. “Dolar fırladı” manşet olur. “Cari açık yüzde 1,8 ama çevirme oranları tutarlı, rezervler tartışmalı” tweet’e sığmaz. Biz ne yapıyoruz? Alarmlı manşete tıklıyoruz. Dengeli analizi geçiyoruz. Tıklama sıkıştırmayı fonluyor. Fonlama sıkıştırmayı ödüllendiriyor.

Karar alıcılar da bizimle aynı bilgi ortamında yaşıyor. Bu kısmı düşünmek istemiyoruz ama öyle. Piyasa baskısı altında teşhisten algı yönetimine kayıyorlar. Algı yönetimi bu ay rakamı tutar. Altı ayda kurumsal güveni eritir. Güven azaldıkça her sinyal daha yüksek çalıyor. Gerçek alarmı sahte alarmdan ayırma kapasitesi her turda biraz daha aşınıyor.

Hilmi Abi’niz de bu döngünün içinde oturuyor, farklıyım diye iddia etmiyorum. Köşe yazarı bilir 800 kelime yetmez. Televizyoncu bilir 90 saniye yetmez. Okuyucu bilir alarmlı başlığa tıklar. Karar alıcı bilir rakamı yönetmek ekonomiyi yönetmek değildir. Herkes biliyor. Kimsenin kısıtı değişmedi. Yapısal sorunun imzası budur. Cehalet gerektirmez. Teşvik yeter.

/////

Gerçek krizler tek bir rakamın patlamasıyla gelmez. 2001 hafızamızdaki arketiptir. Teşhis sisteminin kendisi çöktüğünde gelir. Piyasa, Merkez Bankası’nın kendi sinyallerine inanıp inanmadığını ayırt edemez hale geldiğinde. Basın toplantısıyla veri arasındaki mesafe, insanların uzlaştırmayı bırakıp korkuyla hareket ettiği genişliğe ulaştığında.

Döviz kuru kostümü giymiş bir güven krizi.

Güven ne zaman gider herkes bilir. Ne zaman döner kimse bilmez. Babam böyle derdi borç verdiği akrabalar için.

/////

Andığım her rakam kamuya açık. Cari açık, çevirme oranları, rezervler. Hepsi bulunabilir. Sorun veri değil. Sorun, dört değişkeni uzmanın masasından vatandaşın ekranına tek rakama ezmeden taşıyacak ortak bir dilin olmaması.

Ve bu sorun herkes için aynı yerde değil. Bilgili yatırımcı için kalibrasyon meselesi, sinyalleri nasıl tartacak, gürültüyü nasıl süzecek. Bakırköy’deki kumaşçı, İstanbul’un esnaf semtlerinden birinde, Reuters terminali açmıyor. Birinin ona “bu ay tedirgin ol, sonrakinde gevşe” demesi lazım. O birisi yok. Karar alıcı için güvenilirlik meselesi. Gerçeklik yerine rakamı yöneten her hamle bir sonraki alarmı daha az duyulur kılıyor.

Bugünkü tablo şöyle. Cari açık 25 milyar dolar civarında, GSYİH’nin yüzde 1,8’i. 2011’deki yüzde 8,9’la kıyaslanırsa mesafe açık. Ama bir yılda ikiye katlandı. Borçlar çevriliyor, pahalıya. 2023 sonrası ortodoks çerçeveye dönülmüş ama ciddi bir siyasi baskı testi henüz yaşanmamış. Dört okuma bu. Tek başına hiçbiri fazla bir şey söylemiyor.

Bir sonraki kur başlığı geldiğinde sakın refleksle hareket etme. Önce cari açık trendine bak, yanına çevirme oranlarını koy. Yabancı sermaye kapıyı kapatıyorsa iki sinyal birden kararıyor demektir. O zaman teşhis yapıyorsun, termometreye bakmıyorsun. Rezerv yeterliliğini ve politika çerçevesinin siyasi dayanıklılığını da eklersen kaba bir dört ekran resmin oluşur. Dördü birden kararmışsa gerçek acildir. Biri ikisi bozuksa izlersin. Hiçbiri kararmamışken için rahat etmiyorsa, kaynağı ekonomi değil, son okuduğun başlıktır.

Siyasi baskıya dayanıklılığını kanıtlamamış bir politika çerçevesi “her şey yolunda” diyemez. Tek ekrana bakmış bir vatandaş “kriz” diyemez.

/////

Başlık ekonomisi değişmeyecek. Onu üreten format kısıtları yapısal, ahlaki değil. Medyayı suçlamak termometreye kızmaya benzer. Ama kendi ekranında dört pencere açmak kişisel bir karar. Kimsenin iznine ihtiyaç duymaz.

Bir tanesine bakıp bağırma. Dördüne de bakıp gevşeme.

Bu makaleyi İngilizce olarak da yazdım. İkisi de aynı omurgaya sahip ama sesleri farklı. Buradan okuyabilirsiniz.

https://hguvenal.substack.com/publish/post/192681037?r=nslov&utm_campaign=post&utm_medium=web&showWelcomeOnShare=true

Results came back in about three minutes per conference. Twelve minutes total. Sixteen speakers, four panels, two fireside chats. I read the previews on my phone while waiting for coffee.

I didn’t attend any of them. One was in London, another in New York, a third in Paris. The fourth was across Istanbul, and when the sky opened and traffic hit ninety-five percent congestion, I couldn’t face that one either.

That night I asked myself honestly what I’d missed.

The answer should worry an industry worth more than thirty-five billion dollars.

/////

The AI previews weren’t brilliant. Of course not. But they were adequate. I knew each keynote’s thrust. I knew which panel would argue for regulation and which would insist the industry sort itself out. I knew the CEO on the fireside chat would tell the founding story she tells everywhere (the AI had seen enough of her previous appearances to reconstruct the arc without attending either). Adequate is the word that should terrify.

If you work in this industry, you’re going to be angry with me. I sat in those halls for forty years. Not saying what I see would be the greater unkindness.

/////

The global exhibition, convention, and meeting market sits at roughly thirty-five billion dollars and is growing. These are not the numbers of a dying industry. But they don’t show you what has died inside it. A person can stand, walk, even run. An organ inside them may have already failed.

The architecture is simple. An organizer books a venue, assembles speakers, sells tickets to attendees, sells visibility to sponsors. Revenue requires scale. The platinum sponsor needs a branded backdrop, a logo on the lanyard, a booth in the exhibition hall. All of it rests on one premise: the people in the room are there because they can’t get what’s on stage anywhere else.

That premise is dead.

/////

I believed the brochure for most of those forty years. I was there to learn. The learning was real, occasionally. A talk in Zurich in 2007 changed how I thought about succession planning. A panel in Dubai in 2014 handed me a risk framework I still use. It wasn’t the content. It was the accidental humanity around the content. But those moments were scarce. Maybe one per conference, if the conference was good.

The real returns were in the lobby. The corridor. The unscheduled lunch with someone from a completely different industry. The drink after the closing session where someone said something they’d never say on a recorded stage. The stage got me into the building. The building gave me the corridor. We all maintained this arrangement together. Paid professional speakers delivered talks they’d given before, because the fee was good. Sponsors measured success in impressions rather than attention. A survey by the Partnership Professionals Network, a U.S.-based sponsorship research group, found only twenty-one percent of sponsors considered traditional conference recognition their primary value driver. The other seventy-nine percent were already telling us something. We weren’t listening.

Our companies sent people to conferences as rewards disguised as professional development. Saying “you’ve earned a trip to Barcelona” is harder to expense than “there’s a fintech summit in Barcelona and we should have a presence.” You know this. We all knew.

The conference industry didn’t sell information. It sold a socially acceptable excuse for proximity. That corridor can’t stand without the stage. And the stage is now something an AI can liquidate in twelve minutes on a phone screen.

/////

The cycle is self-reinforcing. Speakers come for the audience, sponsors pay for the speakers, attendees register for the name list, organizers convert revenue into bigger venues. Nothing in this loop rewards originality on stage. The organizer’s incentive is a smooth event, not intellectual risk. The speaker’s incentive is repeat invitations, not brilliance. The sponsor wants a controlled environment, not a challenging one. Content gets optimized for safety.

Content optimized for safety is, by definition, content an AI can predict.

I’ve seen this pattern before, in a different century and a different industry. The Ottoman guild system (the lonca, which regulated urban trades from the fifteenth century onward) reached a point where master craftsmen’s incentive was stability, not innovation. The guild’s structure rewarded repetition. Prices were fixed, methods were prescribed, entry was restricted. When industrial production arrived from outside the system, the guilds didn’t lose because the new methods were inherently superior. They lost because the guild structure had already eliminated the capacity for internal adaptation. The conferences aren’t guilds. But the incentive architecture is the same: a closed loop that rewards predictability until something from outside the loop makes predictability fatal.

AI didn’t kill the information layer. The industry killed it by making the information layer predictable enough to automate. AI is the auditor. The industry wrote the audit result.

/////

Some of you have been working on exactly this problem for years. You cut panel counts, added roundtables, built community platforms. Your satisfaction scores went up. You’re not asleep. I know that.

But look at your sponsor contracts. Your platinum sponsor still pays for a branded backdrop, a lanyard logo, a booth. Your income still arrives through a door marked “audience headcount times sponsor visibility.” The product changed. The business model didn’t. A product redesign without a business model redesign is renovation on a building that’s been condemned.

Watch how organizers describe their innovations. They tell you what they’ve added. Roundtables. Workshops. Networking lounges. Ask them what they’ve subtracted and the room goes quiet. Nobody has removed the main stage. Nobody has rebuilt the P&L from the corridor outward. The subtraction is the story.

/////

Not everyone faces the same problem. CES, the Las Vegas consumer electronics mega-show, is a marketplace, not an information product. This diagnosis doesn’t apply there.

It applies to mid-tier professional association events. Don’t reflexively say “we’re different.” These conferences justify their existence through continuing education and best-practice sharing. If an AI delivers the same content in twelve minutes on a phone, the case for a three-day trip collapses. For many associations, the conference is the primary annual revenue event. Lose the conference, lose the association. The transformation is from annual gathering to year-round community. I’m not saying there’s no alternative. I’m saying this is the alternative.

Boutique convenings get stronger, paradoxically. Thirty people under Chatham House rules (the convention, named for a London policy institute, where nothing said in the room may be attributed outside it), no previewable content because nothing is scripted. The challenge is curation. Being able to say “no” requires a very different kind of courage than filling seats.

/////

Take your next event’s speaker lineup. Feed it to any competent AI. If the AI correctly predicts more than half of what gets said, your information layer is already dead. Sponsors haven’t figured this out yet because they’re measured on presence, not on whether anyone was intellectually changed. They will. They always do, about eighteen months after the audience does.

Second test. Take your most recent P&L. Circle every revenue line that depends on audience headcount. If the total exceeds sixty percent, you’ve upgraded the engine in a car that’s driving toward a wall. The car needs to turn.

/////

The corridor is still worth the trip. Nobody has automated the moment when someone you’ve never met says something you’d never have thought of, in a conversation that wouldn’t have happened if you hadn’t both been standing near the coffee station at 10:15 on a Wednesday morning. That’s the product. It always was.

The industry buried it under a stage it didn’t need. Buried doesn’t mean dead. The ones who rebuild the revenue model from the corridor outward will survive.

Your Hilmi Abi can’t decide when you’ll make the move. But he wants you to know how much time you have left.

I wrote this article in Turkish too. Two versions share a spine. They don't share skin, muscle, or voice.
You can read it here.

https://hguvenal.substack.com/publish/post/192671129?r=nslov&utm_campaign=post&utm_medium=web&showWelcomeOnShare=true

Independent member asks a simple question about a very generous new business partner. Background is thin, margin is fat, timeline is rushed. The room shifts. The owner checks his watch. CFO stares at the laptop. Someone says “we already discussed this in the committee”.

The question dies on the table.

Nine months later, that partner is all over the news in another country. Your company is not guilty of anything, but your name is in the same paragraph. You lose a tender. You lose a weekend. You lose some sleep.

This is not every board. But in the boards I have seen over forty years, it is not a rare exception either.

//////

First, one clarification before the lawyers jump.

Under Turkish law, every joint stock company has a board of directors. It can even be a single person. Limited companies have managers with similar powers. On paper, there is always someone at the top with legal responsibility.

What I am talking about here is not the legal minimum board.

I am talking about the bigger, multi‑member, committee‑heavy structure that we usually imagine when we say “proper board” – with independent members, regular meetings, thick packs, and a public face.

In listed companies, banks, energy, telecom and other regulated sectors, this kind of board is mandatory or at least heavily shaped by the rule book. If you want to play in capital markets, raise bonds, attract institutional investors, the governance template is more or less set for you.

In many private, family‑controlled companies, nobody forces that template. The law says you must have a board, yes. But nobody says it must look like a bank’s board. That is where things become interesting.

//////

If you look only at the paperwork, Turkish corporate governance today looks much better than twenty years ago.

The Capital Markets Board, the main regulator for listed companies, pushed hard on independent directors, committees, disclosure rules. Family groups wrote family constitutions. Many mid‑to‑large companies now have all the usual pieces: audit, risk, ethics, nomination, remuneration committees. There are charters, matrices, self‑evaluations.

And still, in many rooms, the pattern is familiar.

When a big decision later goes wrong, the company pays through lost contracts, legal bills, maybe regulatory action. Employees pay with stress or job loss. Creditors and minority shareholders pay with delayed cash and destroyed value.

The people who were in the room and said yes or stayed silent feel some discomfort, maybe some embarrassment. But in formal terms most of them land on their feet.

Let me say clearly what this text is.

This is my reading of patterns I saw in boards I sat on, advised, or heard about from people I trust. It is not a statistical study. It is not a legal opinion. It is one experienced manager’s view of a problem that keeps repeating.

/////

There are two honest stories board members tell themselves.

One story is the “I did my duty” story. Many directors sincerely believe this. They attend meetings, they prepare, they ask questions, they read what legal and internal audit send them.

They do not run daily operations.

They see their role as checking process, not re‑doing management’s job. From this angle, expecting them to carry heavy financial or legal downside for every failed decision looks unfair and unrealistic.

The second story is “this is safe theatre”.

Some people, often executives who sit in the boardroom, see a different picture. They see two or three big, borderline decisions pass with minimal challenge. They see the same names move from one board to another after serious issues. They see independent seats filled from a small, familiar circle.

They come away thinking the system cares more about the image of control than about real friction in the room.

Both stories have some truth.

My problem is not with individuals choosing the story that lets them sleep. My problem is with how we set up the game, not with the players.

//////

Let me put three elements on the table.

First, the payoff structure.

In many Turkish companies, especially with a dominant shareholder or family, board fees are steady and not strongly linked to long‑term outcomes. Whether the company has three great years or two terrible years, director income does not move much.

Re‑election is often a matter of relationship, not track record. There are exceptions, especially where foreign investors sit at the table. But the baseline pattern I observe is still “fee for presence”, not “fee for quality of judgment”.

Second, the social position.

In a family‑controlled company, an independent director is rarely a pure referee. They are also a guest. You sit at the family table, you are respected, often genuinely liked.

You also know the real power sits with the controlling shareholder and their close circle. In that environment, raising your hand to block a project championed by the owner or their child is not a small act.

It costs social capital.

You risk being labelled “difficult”, “negative”, “not commercial enough”. The pressure is quiet but constant. Do not embarrass the host.

Third, the comfort of process.

We built ethics committees, risk committees, compliance functions. All of them useful. They catch some problems early.

But if, at the end of that chain, nobody at the top has to return money, lose a seat, or publicly stand behind a vote when things go wrong, these tools can slide into box‑ticking. They help you prove you had a process.

They cannot, on their own, guarantee that anyone was ready to say “stop”.

I know there are boards in Turkey where challenge is real and independent directors are not decoration. I sat with some of them. Especially banks have great “proper” boards.

Still, if we are honest, we also know boards where everyone prefers the peace of harmony to the discomfort of a real “no”.

//////

Let me make it less abstract with a blended, anonymised case.

Think of an industrial company part of a contracting group, listed, family still in control, export focused. The board approves a joint venture with a foreign partner. Due diligence is done, but mostly on commercial numbers. Integrity checks are basic. Everyone is in a hurry to close before year‑end.

Eighteen months later, that partner is investigated abroad for bribery or money laundering, in unrelated deals. No accusation against your company.

Still, a major buyer here quietly drops you from a tender shortlist. A bank becomes slower in its credit decisions. Two large customers call your sales team and ask nervous questions. Market cap takes a hit.

Inside the company, there is stress, extra work, time lost.

Now look at the board. One director has already rotated off to “focus on other mandates”. The rest stay. Minutes show unanimous approval at the time.

No clawback. No public record of who asked what. No structured “what did we miss” conversation linked to their own future roles.

Informally, some of them feel bad. Formally, not much happens.

Is this a crime? No.
Is it evil? No.

Is it real skin in the game at the top? For me, it does not look like it.

I sat in rooms where I stayed silent and regretted it later. That bill comes late, but it comes.

//////

Under Turkish Commercial Code, board members, including independent directors, already have legal duties. They can be held liable for negligence and, in some situations, share liability together.

On paper, downside exists.

In practice, those mechanisms are slow and uncertain. Most failures sit in a grey zone. Not criminal. Not clearly negligent. But clearly careless or convenient.

That grey zone is what I am really worried about.

This is the area where the law does not fully solve the problem, and where culture and design of incentives have to carry more weight.

//////

Now, let us connect this to a simple question owners often ask me:
“Do I even need a ‘real’ board?”

By law, yes, you need at least a basic board structure. But in spirit, it depends what you want.

If you are listed, heavily regulated, or very active in capital markets, the choice is almost made for you. You must live with a proper fiduciary board. You have regulators, investors, and rating agencies looking over your shoulder.

If you are a private, concentrated‑ownership company, nobody forces you to copy that model.

In that case, if what you want is more brains and perspective, but you are not ready to share real responsibility, an advisory board or board advisors can be a better first step. They can speak more freely because they do not carry legal duty. They help you think, they do not sign.

If what you want is shared responsibility and succession discipline, at some point you cannot avoid a serious board. Advisory structures are great for ideas, weak for accountability. You should not confuse the two.

What is truly dangerous is the in‑between: a “fancy” board on paper, copied from a listed company, used as decoration, while everybody behaves as if it is still a one‑man show. Better a clear, honest advisory board than a fake fiduciary board.

//////

What I see, after too many meetings like the one I opened with, is simple.

If you want better decisions on the top floor, you need some real, visible skin in the game on that floor, beyond the legal baseline.

I am not arguing that directors should carry the same risk as entrepreneurs. Their role is different.

I am arguing that the current level of personal consequence for bad governance decisions, in the companies I know, is often too low to change behaviour.

How could this move, in practice?

One idea is fee mechanisms with clear triggers.

Imagine a rule in the board charter that says: if the regulator, an external investigation, or a formal internal review concludes that a major loss was linked to a governance failure at board level – for example, approving without required information or ignoring documented red flags – a defined portion of board fees for that period is subject to clawback.

Design would need care to avoid witch hunts and hindsight bias. I may be underestimating the legal complexity. But the direction is that upside and downside are not completely decoupled.

Another idea is more granular transparency of votes on big items.

Today, minutes usually say “unanimous” or “by majority” without names. For truly material deals, one could imagine a practice where the company discloses vote breakdown in the annual report or to the regulator.

I know the downside here.

If we publish every vote, some directors will become overly cautious. Or they will vote politically, not honestly. Boards might turn into theatre in a different way, where everyone protects their own record rather than serving the company.

That is a real risk.

If that happens too much, then we adjust the scope. Maybe disclosure applies only to the top five or ten decisions per year by size, not to every minor approval. Maybe we phase it in for two years as an experiment and then review.

The fear of one new problem should not blind us to the bigger problem we already have, which is decisions with nobody’s name attached.

Third, we can use existing tools to create a memory.

Directors and officers insurance exists, but in many conversations it is treated like a safety blanket, not a live price signal.

There might be ways, together with insurers and investors, to connect repeated governance incidents with higher personal insurance cost or tougher questions in nomination committees. Other markets are not perfect either, but some have a stronger culture of asking, “you were on the board when X happened, what did you do about it?”

None of these ideas is a silver bullet. Each can create new problems if implemented mechanically.

I may be wrong on which tools are realistic. But without some movement in this direction, I do not see why behaviour would change meaningfully.

//////

In this picture, the weakest parties still pay first.

Employees who did not approve anything. Minority shareholders who never see the board pack. Small suppliers who are very sensitive to late payments. Customers who bought a story and then feel betrayed.

If somebody has to carry more pain when governance fails, my instinct is that it should tilt a bit more towards the people who were actually in the room, with the slides in front of them and the power to say “no”, “not yet”, or “I do not buy this partner”.

You may say, “If we do this, nobody will want to sit on boards.”

Maybe the answer is that board seats should go more to people who are willing to carry at least some real risk with the company, not just with their calendar.

//////

I do not think this is the final word. I may be wrong on the exact tools. Legal frameworks, investor expectations, and company cultures are different in each case.

But there is one small question you can test next week without changing any law.

Next time you sit in a board or leadership meeting and a decision comes that makes you slightly uncomfortable, do a private calculation.

If this goes badly in the way I secretly fear, what will I personally lose?

If the honest answer is “not much” or “almost nothing”, then the real governance gap may not be in your risk committee charter.

It may be in that quiet, private answer you give yourself and never write in the minutes.

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First, let’s agree on the words

Very quickly:

• Innovation lab / hub/ R&D center: A separate team or space set up to experiment with new products, services or technologies, usually with its own budget and “startup” atmosphere.

• Core Engine: The main profit‑and‑loss of the existing business. Where the real money and bonuses come from.

• Innovation theatre: When a company runs hackathons, pilots and showcases, but almost nothing reaches scale or moves core KPIs.

• Founder Mode: When senior leaders behave more like startup founders – owning a few real bets, staying close to customers and teams, taking visible personal risk – instead of being distant administrators.

• Plumbing: The boring but decisive stuff underneath: metrics, capital allocation, and decision rights. If these don’t change, nothing changes.

Keep these five in mind. Everything else is detail.

The quiet deal behind most labs

The story is familiar.

A big company feels pressure to “do innovation”.
It creates a lab, hires smart people, decorates the space.

At the same time, an unspoken agreement forms:

• The lab will “own the future”.

• The line business will “own this year’s numbers”.

On paper, this sounds efficient.
In reality, it creates two separate worlds.

The lab is measured on activity: pilots, workshops, partnerships.
The core is measured on performance: revenue, margin, risk, compliance.

When an idea tries to move from the lab into the core, the conflict is built‑in.
Line managers are rational: they say no to anything that risks their current targets.

That is why so many labs become innovation theatre.
Not because the people are bad, but because the structure makes impact optional.

Studies and industry reports regularly estimate that a large majority of labs and corporate innovation programs fail to create material business value. The exact percentage is less important than the pattern: lots of motion, little change in the main P&L.

The part that really hurts

Here is the sentence many leaders don’t enjoy hearing.

Most innovation labs are built so top management can say “we are working on the future” without changing how they allocate money, how they make decisions, or what they are personally willing to risk.

I include myself in the guilty group.
I have sat in rooms proud of “our innovation story”, knowing most of the real power still sat in the old committees.

It is comfortable.
It calms boards and media.
But it leaves the real system untouched.

Because innovation is not a room.
It is a repeated decision to let uncomfortable things touch the core numbers.

And that decision cannot be permanently outsourced.

Sooner or later, someone high enough has to feel that discomfort in their own body.

Founder Mode: the useful 10%, not the myth

The fashionable answer to all this is “leaders should act like founders”.

If we strip away the mythology, there is a small part of that advice that actually works inside big companies.

In a corporate context, Founder Mode boils down to three behaviours:

• The leader personally owns a few specific bets, not just in words but with time and reputation.

• The leader spends regular, direct time with the teams and customers around those bets, not just reading reports.

• The leader protects these bets long enough to learn something real, taking heat from peers, finance and risk.

When this happens, decisions get faster and excuses shrink.
The “lab vs core” wall starts to crack.

But if nothing changes in the plumbing underneath, this quickly turns into another performance.

Leaders give speeches in the lab, post photos about “entrepreneurial culture”, then kill funding at the first tough quarter.

That is Founder Mode theatre.
More energy on the surface, same structure underneath.

So the question becomes very simple:

What minimum plumbing has to change so even a modest dose of Founder Mode actually works?

The three pipes you cannot avoid

To keep this short, let’s focus on only three.

1. Metrics

As long as the lab and the line are judged on separate, conflicting numbers, they will pull in opposite directions.

At least one core metric must be shared. For example:

• “Share of revenue from products launched in the last three years.”

• “Percentage of customers using at least one new service.”

If an idea from the lab helps that metric, both the lab and the line have reason to suffer through integration.

2. Capital

Experiments cannot survive the same slow annual budgeting cycle as a core IT upgrade.

You need a small fast lane:

• A modest pool of money dedicated to experiments.

• Clear size limits, time limits, and kill rules.

• Approval by one or two people, not a committee of ten.

If you ask people to “be agile” and then make them wait nine months for a decision, they will quietly stop trying.

3. Authority

Someone below the C‑suite must be allowed to say:

“We will test this with 1% of customers in the next 60 days.”

If every test requires a full tower of approvals, nothing will reach a real customer.

Without these three pipes, Founder Mode is just nicer language for the same system.
With them, even non‑heroic leaders can get a few bets through.

One short conversation worth having

Imagine your company has an innovation lab.
Many pilots, many presentations, no major impact.

You don’t need a 60‑page strategy to start. You need three honest answers.

• “Name one initiative from the lab that changed a number on the core profit engine”

• “Who can put real money into a new idea in under four weeks – and who feels the risk if it fails?”

• “On which two or three bets are you, personally, willing to be visibly wrong?”

If those questions land badly, the issue is not the creativity in the lab.
It is the design of power and fear.

If you are working inside this

Maybe you run the lab.
Maybe you own a piece of this engine.
Maybe you are just tired.

You probably cannot rewrite the whole plumbing.
But you can stop playing along with the illusion.

Instead of reporting “We ran 12 pilots”, try:

“This one initiative can move this metric for your business. Here is what we need from you to test and integrate it.”

Instead of asking “We need more innovation budget”, try:

“We need a small, fast lane with clear rules, otherwise we are pretending to be agile while staying slow.”

Instead of blaming “culture”, point to what actually blocks you: metrics, capital, authority.

It is less glamorous, but more actionable.

The line to keep

I have seen beautiful labs that became museums of ideas.
I have also seen very ordinary rooms where two or three people quietly changed a business.

The difference was not talent or decor.
It was whether someone senior stopped outsourcing the discomfort.

You can delegate projects.
You can delegate a lab.
You can delegate a slide called “innovation update”.

You cannot delegate your courage.

If that feels unfair, it might also be the most useful sentence in this whole piece.

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A few months ago two different CFOs told me the same thing in the same week.

“We’re rolling out AI in finance.”

Same country, similar tools, same consulting logos. On paper, identical. But when they spoke to their own teams, it was like watching two different movies.

In the first company, people heard: “We’ll automate reconciliations and reduce five roles. Everyone else, carry on.” No villain, no big speech. Just a quiet understanding that the pie stays the same and there will be fewer chairs.

In the second, the message was: “We’ll automate reconciliations. Everyone will learn the tool. The goal is to move more of your time into planning, risk and business partnering. Promotions will depend on how well you use this.” Here the signal was, “If you grow, your job grows with you.”

Same software. One used as a knife. The other as a ladder.

What is actually happening under the “AI transformation” banners?

First, companies are using AI to chew through repetitive cognitive work: copy‑paste, boilerplate emails, basic analysis, routine reports. Surveys of large firms show that automating these tasks is still the number one use case.

Second, the tools give extra horsepower to people who can wrap them around real business problems. In one MIT study, consultants using a generative AI assistant completed tasks 25% faster and produced work rated 40% higher quality on average. Similar results show up in other white‑collar roles: high‑skill workers with AI get a bigger boost than others.

That combination is dangerous if you don’t think about the design. Grind‑heavy roles get thinner. Decision‑adjacent roles become more valuable. If you let it run on autopilot, you wake up with a thin “with‑AI” layer and a thicker “left‑behind” layer.

Global work by the IMF and others is already seeing this pattern: AI adoption is associated with higher overall productivity but also with wider wage inequality unless training and access reach beyond managers and specialists. One IMF paper bluntly warns of “a small group of AI‑savvy workers pulling away from the rest.”

That’s the macro version of the knife‑versus‑ladder story.

Let me admit something that still makes me wince a bit.

The first time I saw a slide promising “35–40% productivity improvement” from a new system, my brain did not jump to “Fantastic, we can redesign jobs.” It jumped to “That is roughly X heads.” The saving was concrete. The better work was fuzzy. If you’ve ever thought the same, you are not alone.

AI amplifies that reflex. Boards, lenders, owners keep hearing about the trillion‑dollar opportunity, so they ask the obvious question: where is my share? Leaders are more afraid of missing an easy saving than of quietly damaging the talent pipeline. Loss aversion in a suit.

When AI is framed mainly as a savings machine, managers learn one lesson: use it to cut people. They’re not villains; they’re reading the room. Short term, the numbers improve. At the same time, the apprenticeship ladder gets shorter. The mid‑career bench thins out. Three years later everyone is surprised that “we don’t have internal candidates” for key roles.

The teams see this well before you do. They’re not reading IMF working papers in the evenings. They’re watching who gets access to tools and training, who gets more time to think, who quietly leaves.

If every AI project they see ends with fewer colleagues and more pressure on the survivors, they file “AI” under “threat.” They’ll tick the boxes, but they won’t put their heart into making it work.

If, just sometimes, they see the opposite—less mindless work, more judgment, more client exposure—the story shifts. “Maybe this can actually help me.” That internal story is invisible on dashboards but it is the real adoption curve.

Now, real life is not a lab. In some sectors the constraints are brutal. Banks breathing down your neck, commodity margins, public‑sector rules. Saying “we will treat pure cost‑cutting as bad design” can sound like a luxury.

So I won’t pretend there is a clean model. But three moves still make sense even when money and time are tight.

First, pick a concrete process, not an abstract ambition. Claims, credit, collections, customer service, maintenance, scheduling. Somewhere you really feel the work.

Second, say one slightly uncomfortable sentence to the people in that process: “We’re bringing AI into this area. Yes, we need efficiency. But if, a year from now, all we’ve done is cut heads and make the rest of you run faster, then we’ve designed this badly.”

You may not hit that ideal, but naming it gives people permission to challenge “knife‑only” thinking in meetings.

Third, quietly redraw a few roles on paper. Before AI: what did this person actually do all week? After AI: what should most of their time go to? If the new version is just “watch what the model spits out and forward it”, then nothing important has changed.

The hardest part is the middle of the organisation. The work that trained today’s managers is exactly the work AI is eating first. Studies are already picking up fewer graduate‑level “starter” roles in some sectors, and more pressure on mid‑skill jobs. If you don’t create new ways for people to build judgment—shadowing more complex calls, owning small parts of bigger decisions, rotating through teams—you are pulling the rung away and hoping they learn to fly.

I’ve seen this personally. In one project years ago, we automated a big chunk of back‑office work. Cost target hit, applause all around. Two years later we realised we had no one who really understood the edge cases, because the juniors who used to wrestle with them were gone. We saved the budget and paid it back with interest in operational headaches. That one is on me.

To be fair, there is another side to the story.

There are cases where AI lifts the bottom half of a role more than the top. In some customer‑support experiments, less experienced agents using AI suggestions closed much of the gap with senior agents. There are financial‑services firms that consciously reskilled thousands of staff for AI‑adjacent work instead of just hiring new “AI talent”, and they now have deeper internal benches and lower attrition.

So AI doesn’t only create knives. It can be a ladder too. The difference is not the tool, it is what the adults in the room decide to do with it.

Meanwhile, outside your building, economists will keep arguing about whether AI will lift productivity by 1% or 3% a year, what happens to inflation, how wealth inequality evolves. Important debates. But they won’t answer the question that decides how AI feels inside your firm.

That question is much simpler:

Who, exactly, is capturing the gains?

If the honest answer is “mostly the margin and a handful of people at the top”, then for most of your staff AI will smell like a slow debasement of their labour, even if your earnings calls sound great. If, over time, some of those gains show up as better roles, better learning, and yes, sometimes better pay for more than a tiny circle, then AI becomes something people can lean into instead of brace against.

I’m not entirely sure there is a perfect balance point. Every company has its own politics and pressures. But this much I know: pretending the two‑tier risk isn’t there is a choice too. And usually the wrong one.

So let me ask you the one question that matters more than any AI strategy slide:

If someone stopped you in the corridor tomorrow and asked, “Can you name one specific place in this company where AI has clearly made the work better for the people doing it—not just cheaper for the company?”, would you have an answer?

If not, then the two‑tier firm is not a future scenario. The concrete is already drying.

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As a businessman and author, I am crazy curious to learn the decision process of these globally significant decisions. Immediately, I start to think “what would I do if I were in their shoes?“

You sit in that situation room in DC, many screens, many logos.

WHO, ILO, something on climate, something on migration. Then one slide that makes everyone quiet: “66 organizations. Big money. Foggy value.”

If I am in their chair, I don’t start with ideology. I start with one simple, boring thing: “Where does this still make sense, and where are we on autopilot?”

I would first ask three questions:

First, what problem does each organization really help us solve today, not in 1975?

Second, in this room, do we really move decisions, or are we just an expensive audience member?

Third, if we leave, who takes the seat: a friend, a rival, or nobody at all?

Only after I see these answers in front of me, I touch the “exit” word.

Then I would split the list. I cannot treat 66 as one blob. If I do that, it becomes politics, not management.

Some will be clearly low‑impact, low‑regret. Duplicated small bodies, sleeping committees, things that eat time and money and give almost nothing back. Here, I can be fast. But still, I explain the numbers. I show at least a rough before/after.

Some will be sensitive. Climate tables, labor standards, migration, certain human‑rights spaces. These are places where Washington sees ideology and constraint; many others see global public goods. I cannot pretend it is only efficiency. Here I would say: “Topic is important, but how it is handled is not acceptable for us. So we step back now, and here is what has to change for us to step in again.”

And some are anchors of the operating system. Global health coordination. Core climate science and negotiation. Security and nuclear structures. Parts of the financial plumbing. If I walk away fully, I weaken not only the system, I weaken my own position in any big crisis.

On these, I would be almost paranoid. Cut some money, change my level of engagement, push hard on reform, yes. But full exit, I would keep as my last card.

If I am serious, I also worry about how this looks, not only what it is. Legitimacy comes from 3 places: Home, allies, and competitors.

Inside, people want to feel this is not just one man’s frustration. So I would show a bit of the homework. Maybe not every detail, but enough to say: “We looked, we measured, we did not just shout.” And I would be honest where we still pay because it buys us something big: security, markets, early warning.

Allies want no surprise. If I plan to leave a climate or population forum they rely on, I would call them early. “Look, we have domestic limits. We will do A, B, C. We know this hurts you in parts, let’s see what we can build together instead.”

Rivals are watching for a vacuum. Here I would be very clear in my own mind: “Where we leave this table, which other table do we reinforce?” It can be a regional bloc, a tech alliance, a standards club. But it cannot be nothing. Otherwise, they read it as a retreat.

What would keep me awake? Two red lights.

One is China and others stepping in faster than my system can react. Today I cut. Tomorrow they place their people, their money, their narrative into those organizations. It doesn’t explode in my face next week. It slowly changes the rules that my own companies and soldiers and diplomats live under.

The other is my own political pendulum. If this whole big move looks like one administration’s mood, the next one will be under pressure to flip it. Then the world learns a simple lesson: “U.S. membership is a four‑year product.” That is not good for anybody.

So if I were them, I would quietly try to make at least the method durable. “This is how we evaluate. This is how we group. This is how we revisit in two, three years.” Not a fixed list, but a fixed discipline.

And there is one more thing I would not enjoy but I would force myself to do. I would write the way back before I walk out.

For each exit, even the easy ones, one line: “Under which conditions do we seriously consider coming back?” For the critical ones, I would add: “In which emergencies – pandemic, big war, climate shock, financial crisis – do we re‑engage fast, whatever our frustration is?”

Because leaving is a strong feeling in the moment. Coming back later, through a door you yourself locked, is a very weak feeling.

Maybe I am too risk‑averse here. But when a state pulls out from 66 tables in one season, I don’t only ask “how much we save”. I ask, “Ten years from now, will we say we cleaned up a messy portfolio, or will we say we enjoyed the applause and forgot to think about the next crisis?”

You know this pattern from business life. Cutting is easy. Building something better in the empty space, and keeping your options open, that is the hard part.

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Last week I watched that last “Video Killed the Radio Star” clip on the shutting‑down music channels. It felt emotional for a second, then a very dry question came to mind: “If a company that defined youth culture for 20 years can lose its power this quietly, what does that say about the rest of us?”

When one slide told you everything

Think about being a label executive in 1985. Monday morning, 9:00, you sit down, coffee in hand. Someone puts up a simple slide:

“MTV plays last week, by artist.”

You look at that, you already know: which tour will sell out, which album will move, which artist you will fight for in the next budget round. If MTV loved your video, you could almost see the cash coming. If they ignored it, you needed a miracle.

That is what real power looks like. Not a fancy slogan. Just one table in a meeting that everyone silently fears.

The pivot that made sense… and hurt them

Later, MTV did something very logical. It turned away from pure music videos and filled the day with reality shows. Why.

Because a three‑minute clip is weak TV economics: people zap, you don’t own the song, you don’t control the artist. A reality show gives you long episodes, recurring characters, formats you own, and better ad prices. It made total business sense to push The Real World, Jersey Shore, Teen Mom.

If we are honest, most of us would have done the same in that chair. “Higher ratings, more control, better margin? Yes, please.”

But every step they took in that direction chipped away at the sentence “If you care about music, you must come through us.” They were still famous. They were just slightly less necessary.

The day discovery moved out

Then the real punch came from outside.

Teenagers stopped waiting for a VJ. They went to YouTube. Then Spotify. Then TikTok. Today, when you look at the data, most young listeners say they find new music via social platforms and streaming, while TV barely appears on the chart.

So that Monday slide moved. It stopped saying “MTV rotation” and started saying “TikTok trend”, “YouTube views”, “playlist adds”.

From that moment on, MTV could keep the logo, the events, the red carpets. But they no longer had their hand on the tap. The chokepoint—the place where decisions concentrate—was now in someone else’s building.

This is not just a media story

Before you relax and say “we are different”, do a small thought experiment.

In your business, where is the MTV slide.

Maybe it’s branch footfall. Maybe it’s distributor orders. Maybe it’s how many dealers signed your yearly targets. Maybe it’s “how many doctors we visited”, “how many retailers we reached”, “how many passengers we carried”.

Now imagine a quiet shift where the real decision moves somewhere else: an app, a marketplace, a comparison site, a private WhatsApp group, a TikTok page. On your slide, the numbers still look decent for a while. But the real slide, in some other company’s system, is where customers actually choose.

That is exactly what happened to MTV. The ratings told them they were still “relevant”. The negotiation tables told a different story: labels and advertisers were already optimising for platforms that gave more data, more control, and more on‑demand access.

What this means for you

I am not saying “you will be the next MTV.” I am saying there are three questions worth asking before it’s too late:

First, be honest: what is the one place today where people must pass through you. Not where they “like” you, not where you are “well known”. Where are you actually unavoidable.

Second, if that place lost half its power in five years, what would still make you hard to replace. Would customers still choose you voluntarily, or would you quietly turn into a content supplier inside someone else’s platform.

Third, who already owns the TikTok‑equivalent in your industry. The place where people really discover, compare, complain, and decide. Are you shaping that layer, or just occasionally advertising on it.

To be honest, in stories like this I worry less about logos and more about the smaller players around them. When the chokepoint moves, the big brand usually survives in some form. The pain hits the small suppliers, the mid‑level managers, the people who only hear about the shift once it has already hit their bonus.

So the next time you look at your own “MTV slide” in a meeting, ask yourself quietly:

“Is this still where the decision lives, or are we just comforting ourselves with an old picture of the game?”

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Saks Global did not suddenly trip into bankruptcy.
What really snapped was a balance sheet that had been stretched too tight for too long, and then met a very ordinary retail slowdown.

I keep thinking about how un‑dramatic that sounds. Tight balance sheet, slow season, then lawyers. Yet that is usually how it goes.

The week everyone looked surprised

End of December 2025.
News alerts start buzzing. Saks might file for Chapter 11 after missing an interest payment north of 100 million dollars. Headlines talk about weak luxury demand, holiday traffic, maybe some CEO missteps.

If that is all you saw, it looks like a bad Christmas that tipped a grand old name over the edge.

But if you scroll back just one year and watch the public signals in order, the story stops feeling like a sudden accident. It looks more like something that has been sliding toward the guardrail for months while most people glanced away.

A deal that only works in good weather

The starting point is the 2024 deal.

HBC, which owned Saks, bought Neiman Marcus in a roughly 2.7‑billion‑dollar transaction and merged everything into Saks Global. To fund this, they stacked about 4.7 billion dollars of debt on the combined company.

Now, retail is not software.
A luxury department store celebrates if it gets operating margins in the mid single digits. By mid 2025, Saks’s revenue had fallen 16 percent to around 1.6 billion dollars and the net loss had blown out to about 232 million.

So you have high leverage, falling sales, and a low margin business that just swallowed a large peer. You do not need a PhD in finance to see how little room that leaves. One or two things can go wrong and you are already asking, “Who is going to carry the pain?”

To be honest, if you drew this as a simple back‑of‑the‑envelope model on a whiteboard, most people would say, “Looks tight, but maybe it works if the cycle is kind.” The cycle was not kind.

When your suppliers quietly become your lenders

The first big wobble showed up with vendors.

In February 2025, CEO Marc Metrick sent a memo to suppliers that, if you have ever sat on the other side of the table, you can almost feel in your stomach. Saks:

• acknowledged roughly 275 million dollars in past‑due invoices

• promised to pay that down in twelve instalments starting in July

• and reset standard payment terms to 90 days from receipt of inventory for Saks, Neiman Marcus and Bergdorf Goodman

Translated from corporate to human.
“You will keep shipping. We will pay later. Much later. And for a while you will be financing not just new deliveries, but a backlog of old ones.”

Some brands told reporters their own cash flow was under strain and they had paused shipments. Trade press pointed out that, yes, payment terms across luxury retail had been drifting longer, but jumping to 90 days at this scale was a clear sign of stress, not just hard bargaining.

If you have ever been in a cash‑flow meeting in a retailer, you know that moment when the payables list goes up on the screen and the room goes very quiet. That February memo felt like that moment, made public.

The “rescue” that spoke a different language to credit people

Then June arrived.

Saks announced an agreement with bondholders that would bring in about 600 million dollars of fresh financing and reshape the debt. Officially, this was a show of confidence and extra runway.

On the credit side of the table it looked different.
The new money came with claims that sat at the very front of the repayment line. Bondholders who did not join the deal found themselves pushed lower in the capital structure and with weaker protections. S&P called the exchange “tantamount to a default”.

Here is where the market started talking in numbers.
As the year went on and another big coupon loomed, junior Saks notes changed hands for single‑digit cents on the dollar, while a more senior tranche drifted around half of face value. Earlier paper had already dropped below par shortly after issuance.

Do those prices guarantee bankruptcy? No. Distressed credits bounce back sometimes.
But investors do not accept seven or eight cents on the dollar because they believe in a clean turnaround. At that point they are arguing about recovery in bad scenarios, not upside in good ones.

I am not entirely sure there was still a painless path out after that June deal, but it is the moment where the capital structure and the operating reality clearly stopped matching.

Selling Beverly Hills to buy time

Next, real estate.

In the second half of 2025, Saks Global sold the land under Neiman Marcus’s Beverly Hills flagship to Ashkenazy Acquisition, which already owns a lot of that Golden Triangle block. Saks stayed on as a tenant, paying rent on space it used to own.

Company statements and local reporting made it clear that the cash was there to help reduce debt and support liquidity as the big year end interest bill approached.

Sale and leaseback deals can be perfectly rational. Healthy retailers use them to free up capital for growth. What makes this one feel different is timing and context.

By the time Beverly Hills changed hands, we already had:

• an eighteen month vendor backlog and 90‑day terms,

• a restructuring that ratings agencies treated as near default,

• and bonds trading in distressed territory.

In that sequence, selling one of your crown‑jewel sites is less “smart portfolio move” and more “we need a little more air before the next wave hits”.

When the lawyers step into the frame

By late December, public language started to soften and widen.

Reuters and Bloomberg wrote that Saks was reviewing all strategic options and treating bankruptcy as something to be used only if other paths failed. At the same time, reporting mentioned talks about debtor in possession financing, the special lifeline you arrange when you think you might soon be operating under court protection.

Restructuring advisers and law firms began to appear more frequently around the name. That does not prove anyone had a fixed plan or a chosen date. It does tell you that, for serious creditors, a Chapter 11 process was no longer a remote tail event. It was one of the central scenarios on the table.

Meanwhile, nothing fundamental had healed. Vendors were still tense, some payments were still behind, and the business had not suddenly become a high margin machine that could shrug off 4.7 billion dollars of leverage.

At that point, the set of realistic moves was small.

Not fate, but a very low ceiling

So what actually brought Saks Global to this point?

It is tempting to pick one villain.
“Private equity pushed too far.”
“Management dropped the ball.”

The less dramatic answer is more useful.

The company took on a large, complex acquisition and financed it with a level of debt that a cyclical, low margin business can only carry in good weather. Then the weather turned. Customers spent less. Inventory did not move fast enough. Vendors pushed back on being used as a bank.

The first cushion was supplier patience.
The second was bondholder flexibility.
The third was prime real estate.

Once those cushions were used, the remaining options were big new equity, more asset sales, or a formal restructuring in court. The equity did not show up at the scale needed. The court did.

Capital structure did not make bankruptcy inevitable on day one. It did set a ceiling that turned a normal downturn into something the business could not absorb.

What a pragmatic leader can learn from this

If you run, finance, or supply a leveraged business, the Saks story is not a curiosity about luxury malls. It is a checklist you can quietly apply at home.

You do not need inside information. You can watch very public, very boring things:

• Payment behaviour. Are standard terms stretching from 30 or 45 days toward 60 or 90, and are days‑beyond‑terms creeping into the 30s and 40s?

• So‑called rescue deals. Do new financings come with higher ranking claims and rating‑agency language that sounds like default dressed as “exchange”?

• Bond prices. Are recent issues already trading well below par, on thin volume, with anxious commentary in the footnotes?

• Asset sales. Which properties or divisions are going on the block, and are those sales tied to specific near term payments rather than a clear long term plan?

• Adviser rosters. When do restructuring specialists and new legal names start to appear around the company and around creditor groups?

Each of these can be explained away on its own. Together, and especially when they cluster inside one calendar year, they are telling you that the old structure and the current business reality no longer match.

To be honest, I feel more for the small and midsize suppliers in this story than for any of the marquee names. They are the ones who woke up one day and realised their working capital had quietly been pledged to a deal they never signed.

The uncomfortable but necessary question for any board or lender is simple.

Given our margins, our volatility and our dependence on partners, how much debt can we really carry before a very normal downturn forces us into the Saks sequence?

If you can answer that honestly while times are still good, you are already ahead of where Saks Global found itself when that Valentine’s Day memo went out and the room finally went quiet.

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I renewed the assessment I made and shared with you at the end of September.  

When we set aside the shares of banks, insurance, non-bank finance, holding companies and investment trusts, the number of companies decreases from 480 to 347, which fall into the categories of industry, construction, trade, etc. 

Everyone has their own filter, but my 7 filters consist of 3 levels.

Of these, 33 (9.5%) are at the top of all 7 filters.

There are 3 filters in the category of coping with inflation (I accepted the inflation rate as 100%).

1. Increasing turnover by more than 100% (347>209) 60%

2. Increased earnings before interest and tax by more than 100% (209>142) 41%

3. Increased Net Profit by more than 100% (142>103) 30%

I also have 3 filters in the efficiency and effectiveness category.

1. Can increase gross margin (103>74) 21

2. Can increase earnings before interest and tax margin (74>69) 20

3. Able to increase Net Profit margin (69>61) 17.5%

Last but not least, a company that can satisfy Equity investors

Able to increase the rate of return on equity (ROE) (61>33) 9.5%  

….

I repeated these filters for companies in the famous BIST30 index. 

When we set aside banks and holdings, we are left with 23 companies to screen. 

Only 2 of them (9%) were above all 7 filters. 

….

I did not do it for BIST 100 companies, but I repeated the same calculation for the 100 companies with the highest turnover among the companies traded on the stock exchange. These 100 companies consisted of companies that made more than 4 billion TL in 2022. 54 of these companies are included in the index designated as BIST 100. 

Only 8 of them remain at the top in all 7 filters. When we evaluate them in the same categories

Category of coping with inflation:

• Increased turnover by more than 100% (100>70). 70% vs. 60% (first large sample)

• 47% vs. 41% (first large sample) who increased their earnings before interest and tax by more than 100% (70>47)

• More than 100% increase in Net Profit (47>34) 34% vs 30% (first large sample)

Efficiency and effectiveness category:

• Able to increase gross margin (34>22) 22% vs 21% (first large sample)

• Able to increase earnings before interest and tax margin (22>19) 19% vs 20% (first large sample)

• Able to increase Net Profit margin (19>17) 17% vs 17.5% (first large sample)

Last but not least, a company that is able to satisfy its equity investors

Able to increase the rate of return on equity (ROE) (17>8) 8% vs 9.5% (first large sample)

What is striking is that in the first category, coping with inflation, the top 100 companies outperformed the broader sample, while in the second category, effectiveness and efficiency, the gap closed.

….

I repeated the same calculation by listening to those who say official inflation is 65%.  

In the large sample of 347 companies, the number of companies above 7 filters increased from 33 to 42.

In the sample of 100 companies with a turnover of over 4 billion TL, the number of companies above 7 filters increased from 8 to 12.

….

"What did you do, the inflation we feel is higher, even the revaluation rate is 122%," I repeated the same calculation.  

In the large sample of 347 companies, the number of companies above 7 filters dropped from 33 to 25.

In the sample of 100 companies with a turnover of over TL 4 billion, the number of companies above the 7 filter dropped from 8 to 6.

In other words, only 6 out of 100 large companies remained above the 7 filters. 

….

Assuming that the 100 companies with a turnover of more than 4 billion TL are relatively mature and stagnant companies, and therefore eliminated from the efficiency and effectiveness filters, I looked at the second 100 companies. 

The second 100 consisted of 100 companies with turnover between 850 million TL and the previous sample's starting point of 4 billion. That's a pretty wide range (16 of these second 100 companies are included in the index designated as BIST 100).

• Here, assuming 100% inflation, I found 14 companies. I could only find 8 companies in the first 100.   

• With the 65% inflation assumption, I identified 17 companies. I could only find 12 companies in the top 100.   

• With a 122% revaluation rate inflation assumption, I found 12 companies. I could only find 6 companies in the top 100.   

We can assume that the companies in the second 100 are better managed in a high inflation environment than those in the first 100. 

Of course, it can be said that there is a base effect, but I think that those in the first 100 did not do justice to their height and age.

….

The ratios of 6% (in the top 100 companies with 122% revaluation rate inflation assumption) and 17% (in the second 100 companies with 65% official inflation assumption), which managed to stay above the 7 filters I used, were well managed and used their chances well, show that our companies have difficulties in coping with inflation, and those that were successful could not increase their efficiency and effectiveness. 

Those who have done it have done it, albeit in small numbers. What will those who cannot do so?

We will see who will take responsibility in companies that fail to stay above these filters, and who will make excuses for forces beyond their control.

We will be curious to see how the boards of directors will evaluate and what decisions they will take. 

When you evaluate the financial performance of your company or the company you invest in, I think you can now compare it with this data and have a clearer idea.