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Welcome to Trinance

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I am delighted to welcome you all to a new segment at Trinity Business Review, Trinance. This segment aims to introduce you to global markets and the general world of finance. Whether it is your first time reading about finance or you are a more seasoned reader, I am sure you will gain new insights you had not known previously.

Trinance will explore recent market trends and career opportunities as well as including student, alumni, and recruiter commentary. Finance is a bit odd in the sense that it tends to have a lot of acronyms and many words for the same thing, but you will soon come to tell which ones are the same. To make matters easier, I have compiled a list of five financial terms you should know and additional resources to help you keep up with the markets.

1. Time Value of Money

This concept means that a lump sum amount of money is worth more now than at a later point in the future. This is because said money has the opportunity to grow until you reach that point later in the future, as opposed to receiving the same lump sum later.

Of course, money can only grow through investing which will compound over time, which leads us to our next term.

2. Compounding

This process occurs when an investment’s appreciation (increase in price) is reinvested again. This appreciation can occur through interest accumulation (say interest earned on a savings account in a bank or other financial instruments). This process can repeat itself an unlimited number of times so it can lead to exponential growth over a sustained period.

Albert Einstein is reported to have said that compound interest is “the eighth wonder of the world”. The idea with compounding is to ensure your investment outpaces inflation which again leads us to our next term quite nicely.

3. Inflation

A very topical macroeconomic indicator right now, inflation is the increase in prices observed across the economy; this decreases the purchasing power of local currency at a specific moment in time. Most developed countries’ central banks set an inflation target of 2% per annum, including the European Central Bank, the Federal Reserve (U.S. Central Bank), the Bank of England and the Bank of Japan.

However, inflation is not as bad as it sounds and is actually healthy for the economic growth. Very low or negative inflation (deflation) would lead to consumers buying less because they anticipate falling prices, which make businesses earn less, which in turn may end up dismissing employees or cutting salaries to make up for these losses. All of this can lead to an alarming series of events very quickly as seen in the Great Depression of the 1930s and most recently in the Global Financial Crisis of 2008-09. A small but steady increase in inflation causes the opposite of the deflationary effects mentioned above and keeps the economy ticking.

4. Debt

A sum of borrowed capital due to be repaid before a specific point in time. Regular interest repayments are also expected to be paid before the principal (lump sum borrowed) is paid back. Debt can be taken out by people, businesses and countries so these types of debt differ greatly. 

Many companies like to take out debt because it is tax-deductible. This means that it can ask the relevant tax authority for a tax deduction for that fiscal year because it has been responsible in repaying the interest on that debt. However, too much debt can also quickly spiral out of control; for example, Hertz, a car rental company, filed for bankruptcy in 2020 due to their inability to pay back debt worth $19 billion. It has managed to restructure its debt since then, but not every company who goes bankrupt due to excessive debt is that lucky.

5. Equity

Equity is the capital that belongs to the company’s owners and would be given to them if all the assets and debts were sold and repaid, respectively. This would occur if the company went into bankruptcy and had to be liquidated to be sold off to its debtors and creditors.

In accounting, this is equal to total assets minus total liabilities on the balance sheet. This capital is used for financing activities such as investing in a new research and development (R&D) project or purchasing new assets. Retained earnings (profits kept back from the previous accounting period) is another component of equity that may be used for future operations or to pay dividends to shareholders (company owners).

Resources for Further Learning

There are many fantastic resources to keep up with finance and as a Trinity student you get access to some of the world’s best financial journalism. The Financial Times and The Economist are free to read for Trinity students so you can log on to Stella Search to read The Economist and sign up to TCD’s FT license here.

Podcasts

  • FT News Briefing: fantastic summary of business news (10 minutes at most)
  • Numbers by Barrons: interesting markets recap by numbers (5 minutes at most)
  • The Economist Morning Briefing: current affairs round up (5 minutes at most)
  • Trinity SMF Podcast: great interviews with business leaders organised by Trinity’s very own SMF (1 hour at most)

Newsletters

  • Bloomberg Five Things You Need to Know to Start Your Day: daily morning setup
  • Bloomberg The Weekly Fix: the bond market
  • FT Unhedged: recent market trends
  • FT Due Diligence: mergers and acquisitions
  • FT Moral Money: sustainable investing

2022 FTxBocconi Talent Challenge

I would also recommend applying for the 2022 FTxBocconi Talent Challenge. I took part in the 2021 edition and found it brilliant. It is a fantastic competition that allows you to meet some of the FT’s best journalists and Bocconi’s leading business academics in the FT HQ that I recently had the chance to visit! You can apply here before the 24th November and feel free to get in touch with me with any questions.

Levelling Up the Labour Market and the Impact on Firms

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Britain’s recent fuel crisis, owing more to a shortage of lorry drivers rather than fuel itself, symbolises the wedge between supply and demand for labour within the economy. While the fact that the number job vacancies in Britain between July and September rose to above one million for the first time could be due to a fall in migration since Brexit, a walk around Dublin – with vacancy signs in almost every shop or restaurant window – shows that this labour market shortfall might not be nation-specific.

Supply Shortages

While Ireland’s job vacancy rate is not as high as in other European countries like Belgium (4.2%) or the Netherlands (3.8%), it rose nonetheless in Q2 of 2021 to 1.1% (from 0.7% in Q2 of 2020). However, perhaps most concerning is the OECD’s recent report which suggests Ireland will not recover to pre-Covid unemployment levels until the middle of 2024, putting its labour market rebound among the worst in Europe. This is likely due to labour market tightness alongside a fall in the job finding rate, with those unemployed prior to Covid only returning to their job search now. Meanwhile, this is aggravated by a reshuffle of the employed, as many have reevaluated their career paths, or find out their jobs no longer exist. In fact, in Ireland, almost 30% of the hospitality sector have moved into other job roles since the pandemic began. Ultimately, the current shortage of workers, most acute in hospitality, healthcare and agriculture, is likely to have a large impact on firms and businesses. To solve this mismatch between supply and demand, it is helpful to further explore the causes of this situation.

Why So? 

Covid-19 gave workers a chance to re-evaluate their job roles and career paths. Despite the fall in Scotland and Northern Ireland, the rise in nursing applicants in England this year illustrates a re-evaluation of career prospects and perhaps a wish for some to enter more rewarding job roles since the pandemic began. Higher expectations of worker satisfaction has caused a huge shift in the labour market as people move away from jobs which do not suit their lifestyle. The fact that the catering industry is particularly vulnerable to shortages is not surprising given the unsociable hours that bar staff and chefs work alongside the heated and stressful kitchen environment for minimal pay. Similarly, despite the evident shortage of truck drivers plaguing Britain, the UK has 600,000 people with an HGV licence who do not drive for a living. This is largely due to the poor working conditions, the negative health impacts of lonely work away from home, and poor pay that truckers face; all these factors are pushing many out of the industry.

The roles that people are shifting out of were arguably always unpopular. However, only now after the pandemic – in an economic environment of rising inflation – has the bargaining power shifted towards the supply of labour within these struggling industries. This suggests that those working in these industries have been under-remunerated for their work; only now can they bargain for higher wages as supply becomes scarce.

The pandemic has also uprooted the housing market, with house prices in rural areas increasing as people sought more green space during the various lockdowns. This means that commuting times for workers are rising, adding another factor to account for when applying for and accepting jobs; this also affects their willingness to work in certain job roles. Indeed, jobs in industries such as catering often require late nights, which, in the absence of nighttime public transport to rural areas, becomes an issue for those living outside urban districts.

Finally, the transition to a high-skilled economy is also a factor impacting the supply shortages. The ability for individuals to shift from a low to a high skilled job role can be challenging, particularly if firms begin asking for too much from candidates. For example, in Ireland the requirement that a waiter have their HACCP qualification, alongside 1+ years of experience is often seen, which is a huge barrier to entry for new workers. The mismatch between workers who think they have the right skills for a job and employer expectations means that firms are oftentimes inadvertently worsening their own supply shortages.

What Does This Mean for Firms?

These barriers to entry for roles which are facing particularly acute shortages are only furthering the labour supply crisis. This means that firms could be more proactive in filling the shortages. This would be through accepting unskilled or newer workers into the industry and train them with the necessary skills for a role. Therefore, firms could work to improve training programmes and lower their own barriers to entry to reduce the shortage.

Perhaps the most obvious way to address this shortage would be to increase wages and add additional benefits, such as a scheme rewarding/providing bonuses to non-salaried workers who work over-time for a firm. However, this rise in costs for firms is likely to exacerbate the current period of rising inflation. While consumers are likely to feel the pinch of this cost-push inflation, a rise in general cost of inputs for firms, many of whom’s balance books are already struggling post-Pandemic, is likely to bring additional accounting challenges.

While increasing pay for workers will help to bring the labour market to a new, temporary equilibrium level, whether through seeking capital replacements for labour, using their staff more productively and efficiently (while also maintaining staff health and welfare), being willing to implement new training schemes or changing their business structure, firms need to use innovation and knowledge of their business environment and industry in order to react to this changing labour market.

The ever growing power of SpaceX in today’s space race

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The space race has one clear dominator: SpaceX. Elon Musk’s competitor, Jeff Bezos, makes the claim that they “could end up with monopolistic control of US deep space exploration.” It is impressive how quickly the company has risen to the top, launching its own rocket into orbit only 13 years ago. Elon Musk has the ultimate goal of giving humans the means to live on other planets, with the current focus being Mars. The soaring cost of such a venture is what led Musk to found SpaceX and develop a “low-cost, reusable rocket capable of making multiple trips.” Falcon 9 now regularly commutes to the International Space Station, transporting both people and cargo. The focus now lies on developing and gaining clearance for Starship, the rocket that will be used to fulfil Musk’s goal of one day “establishing a human colony on Mars.”

How did SpaceX reach its Current Position?

The company’s financial plan, along with the reusable Falcon 9 rocket, have both been key to the success of SpaceX and its Starship venture. 

The intensive prioritisation of the low-cost and reusable criteria are the foundation of Falcon 9’s success. One of the most expensive parts of the rocket, its engine, is efficiently designed and created using 3-D printing and its boosts are made to be reused – which are both critical cost saving factors. It is estimated that SpaceX was able to decrease its costs tenfold by taking an alternative route from traditional government contracting. Instead, the company designed and manufactured its own rocket components, rather than outsourcing from suppliers, and took on testing risks itself, rather than relying on payments from NASA. SpaceX’s finance plan, in conjunction with Tesla, of having access to cheap capital has allowed the company to raise over $6.5bn from the private equity market due to the high valuation investors have given to Musk’s business.

SpaceX against Blue Origin

This funding advantage has become the source of some competitors’ complaints; they lack access to similar financial benefits, which they claim has stifled scaling and pushed them out of the market. One of SpaceX’s main competitors is Jeff Bezos’ Blue Origin. In 2012 – around the same time that Musk was still solving issues with his Tesla launch, and before he could concentrate on SpaceX- Bezos had grand plans for Blue Origin.

So how has SpaceX so quickly and indubitably outperformed Blue Origin? 

The most obvious and widely discussed answer to this question is SpaceX’s strict cost minimising objective. Any company purchase exceeding $10,000 has to be personally approved by Musk, whereas Blue Origin is “riddled with poor cost estimating.” Management consultants discovered that the two companies had very differing cultures and leadership styles. SpaceX has a highly motivated workforce with “relentless 24/7 operation with 80-hour workweeks.” The engineers do not complain about these conditions, but rather are inspired and result-focused. They may earn lower salaries than those at Blue Origin, but are rewarded with stock options for top performance. In contrast, Blue Origin is a “ghost town on weekends,” and engineers complain about the “rigid hierarchy,” which does not favour innovative ideas. There is also an unsustainable focus on speed, which prevents the company from properly addressing problems and finding the best solutions. The high involvement of Musk with his engineers and openness to unorthodox ideas has been a catalyst to the firm’s success.

There is clear rivalry between Bezos and Musk. In the race to bring Internet connection from space to Earth, Blue Origin recently challenged SpaceX’s application to modify its plan. SpaceX responded to this challenge by stating that the competitor’s track record “amply demonstrates that as it falls behind competitors, it is more than willing to use regulatory and legal processes to create obstacles designed to delay those competitors from leaving Amazon even further behind.” Amazon condemned Musk’s attitude towards regulations, asserting their perspective as: “rules are for other people, and those who insist upon or even simply request compliance are deserving of derision and ad hominem attacks.” 

The race to extend life on and explore space continues to advance, but also appears to be developing into a personal competition between two billionaires.

The Doyle Twins: Sustainable and Affordable Fashion

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Over 30 million people around the world are registered on Depop; a ‘community-powered fashion ecosystem’ where users can buy and sell pre-loved clothing. 90% of these active users are under the age of 26, reflecting Generation Z’s interest in sustainable style and vintage fashion. Most Irish users will be familiar with The Doyle Twins, who pride themselves on being ‘sustainable as well as affordable’. In 2020, the account became one of the first verified Depop sellers in Ireland and has continued to grow in popularity with 39 thousand followers as of October 2021. Speaking with Isabel and Emily-Jane, Trinity Business Review gains insight into the story, success, and future of The Doyle Twins.

The Team

The Doyle Twins is managed by twins, Isabel and Emily-Jane, who became interested in vintage fashion in their teens. In 2018, the twins decided to clear out their wardrobe and sold some old items on their account. Within a few months, they found themselves regularly selling clothes on Depop and by 2019, the twins were buying with the ‘exclusive aim of promoting sustainable vintage fashion and selling for a profit on Depop’. It was initially the look of vintage clothes which sparked the twins’ interest in pre-loved fashion. However, as they became aware of the negative impact the fast-fashion industry is having on the environment, the twins committed to buying only second-hand clothes. Although they did not set out to build a business, Isabel and Emily-Jane soon recognised the business opportunity before them and began to consciously build their brand: The Doyle Twins. 

When asked about the popularity of Depop amongst young adults and students, the twins attribute the growth of the platform to a few things. Firstly, an increased awareness of the adverse impact the fast-fashion industry is having on the environment. Secondly, Isabel comments that there has been ‘a societal shift towards second-hand and vintage clothing being embraced as trendier’. Although people may have veered away from wearing charity shop buys ten years ago, now it is considered ‘the epitome of cool’. Isabella Vrana is a big style icon for the twins, and people often joke that they dress like Mary-Kate and Ashley Olsen (which they take as a compliment!). Thirdly, the Covid-19 pandemic and prolonged periods of lockdown have driven consumers towards online shopping platforms, especially Depop. Although these factors have contributed to the ‘natural development’ of the business, the key driver behind the success of The Doyle Twins is the team’s constant ambition and innovation.   

Where They Are Now

The Doyle Twins is currently based between the twins’ family home in Rathmines and their student accommodation on campus (which is conveniently located just around the corner from the post office). As both twins are in final year, Isabel in law and business and Emily-Jane in physiotherapy, they ‘try not to let the work build up’ by spreading it out evenly across the week. The divvying up of tasks depends on how busy the twins are; this flexibility highlights the brilliant teamwork which exists between the pair. When Isabel is working, Emily-Jane can fill in; and when Emily-Jane is on placement, Isabel can step up.  

In the start, they thrifted all their stock in Ireland. However, the restrictions to in-person shopping brought about last year forced the twins to alter their supply chain and now the business sources approximately 50% of its stock from the UK. The Doyle Twins has a structured system in place. All newly purchased and unlogged stock is stored in specific boxes on arrival. Most days the twins photograph new items together for the account. Once photographed and logged, these items are then moved to a separate box or rail. Once an item is sold, it is moved to the “to be posted” box before being sent off to its new wardrobe. Twice a week, one or both of the twins package and post the items of clothing. Usually, Isabel takes on the biweekly post office trips, whilst Emily-Jane manages the online activity of the business. However, the work often does not exceed an hour a day and the twins make sure to take the odd day off!

When asked about the impact Working From Home and Covid-19 has had on the business, the twins are of the view that the pandemic definitely had a positive impact on The Doyle Twins. Emily-Jane comments that the growth of the business can be directly related to people being forced to buy online as in-person retail closed. Nonetheless, when the economy began to re-open, the twins retained business and customers due to the strong brand they had established.

However, the business journey has not been without its challenges. Over summer 2021, the business faced ‘a period of tension’ when both twins moved out of home and away from the office. Emily-Jane was living full-time in Cavan and on placement in Monaghan; Isabel was living on the other side of the city working over 40 hours a week in an office job and ‘madly training’ for the national rowing championships (which her team won!). Despite the difficulties faced running the business during this period, the twins got through it and are now back together living on campus.

In light of the busy year ahead, the twins emphasise the importance of ‘having a routine’ and ‘good time-management’. When asked about the key factors to The Doyle Twins’ success, Isabel is of the view that their price point resonates strongly with buyers, especially students. They recognise that people may be dissuaded from buying sustainable fashion pieces by hefty price-tags, opting for cheaper and poor quality fast-fashion items. However, The Doyle Twins make sure to offer sustainable and high-quality clothing at a relatively low price point. Isabel also notes that their brand name, The Doyle Twins, is ‘very strong and quite recognisable’.  

Plans for the Future

When asked about the future of the business, Isabel comments that they are ‘taking it one day at a time’. Emily-Jane is considering a career as a chartered physiotherapist, whilst Isabel may pursue a career as a solicitor. However, the twins have also discussed taking time out after college to focus on the business. The aim would be to organically scale the shop and bring the account as close as possible to larger sellers, based in the US and UK. When asked about other Depop accounts, Emily-Jane says that ‘the top sellers on Depop have an amazing community’ and frequently ask each other questions or give advice. The Depop market would appear to be relatively uncompetitive compared with other business environments. However, the twins have yet to see where the business takes them. Emily-Jane comments that the only thing they know for certain is that they cannot predict what the future has in store. Nonetheless, they are unlikely to see business slow down any time soon as sustainable and vintage style continues to stay in fashion. 

Get In Touch 

For further information (or fashion inspiration), get in touch with The Doyle Twins on Instagram or Depop.

The Sweet Success Story of The Rolling Donut

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The glaze of The Rolling Donut’s glory is attributable to the power of a strong brand narrative and the consistent delivery of a memorable donut experience to consumers. In 1978, Lisa Quinlan’s father, Michael, spotted a gap in the Irish donut market. He began his venture by travelling to “festivals, concerts and garden shows” selling hot-pressed ring donuts. The iconic ‘Rolling Donut’ kiosk on O’Connell Street soon followed. Over forty years later, Lisa has six additional stores across the country. Although business is booming, the CEO does not sugar-coat the path to success.

The entrepreneur describes the period between 2014 and 2017 as “Dublin’s donut wars”. The “highly photogenic qualities of donuts” combined with social media platforms such as Instagram & Twitter, contributed to Ireland’s donut trend leading to steep competition in the industry. The Rolling Donut’s competitive edge lies in Lisa’s drive to bring creative flavours and unique designs to the market. By investing in quality ingredients and innovative talent, Lisa has differentiated her brand in a crowded and competitive marketplace. When launching new ranges like vegan and sourdough donuts, The Rolling Donut showcases the family’s early roots in the donut industry. As it has since its origins, all donuts are made from scratch everyday using high quality ingredients. Fresh lemons are essential for The Rolling Donut lemon curd product while the chocolate ganache and caramel toppings and fillings are also made in-store. Although using fresh ingredients can “be challenging for the sheer quantity of donuts,” it is a unique selling point that resonates with the loyal customer base.

Lisa mentions how “the business is feeling the on-going effects of the Covid-19 pandemic” such as staffing shortages. However, the entrepreneur has managed to seek out opportunity by focusing on building an online presence as well as catering to delivery and collection options. This has been highly successful and the company has seen online orders “double since the pandemic”. Lisa has had to pivot and remain adaptable with the business model as the industry grows and the target market matures. This has encouraged The Rolling Donut to innovate and streamline new products, such as “DIY Donut Boxes”. Creating diverse themes varying from the DIY Unicorn Magic Box to the DIY Choco Caramel Box has strengthened the growth of a diversified range of target markets “from children to corporate clients”.

Describing the expansion of The Rolling Donut as the “hardest thing” she has ever done, Lisa advises young entrepreneurs “not to give up”. The most important lessons she has learned as an entrepreneur is to “always use a business plan and spend money where it counts in areas such as equipment”. Lisa advises young entrepreneurs to “not sweat the small stuff” as “things often have a natural way of working out”. Following the launch of Very Berry, a new business specialising in chocolate strawberries, Lisa remains motivated by her entrepreneurial passion to grow her enterprise, innovate products and, no doubt, the sweet taste of success.

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