Afternoon:
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How they must have giggled as they worked in their modest Cheshunt HQ, reading the stories that Fresh & Easy was starting to look Stale and Difficult. Except that they don't do giggling at Tesco; they are far too focused for that.
Tesco is that all-too-rare phenonenon, a grocery business which is succeeding in more than one country. The roll-call of British retailers who have ventured abroad and retired hurt is a long one, but it's not just Britons who find foreigners hard to win over - there are very few genuinely successful multi-national shopkeepers.
It's clear from the growing levels of hostility to new openings that Tesco may be approaching the limits of its share of the grocery market in Britain, where it accounts for £1 in every £8 we spend in the shops.
Its results this week showed that it can still wring further efficiencies, and further space, from what it has, but to maintain the growth that has outpaced its British rivals, it must look overseas, and America is the world's biggest market. The result is Fresh & Easy, a chain of convenience stores built from scratch in California, and chief executive Sir Terry Leahy has staked his bonus on making them work.
Last month, a casual remark on the company's website caused the analysts to start talking about Far from Easy, but the results have reassured the doubters. As always, there's not quite enough information to keep the analysts happy, but it's clear that Leahy's bonus is not under threat.
Three-quarters of the sales still come from the UK, but profit growth in Asia, Hungary and Poland is three times as fast as at home. Even Tesco's internet venture, selling non-food goods, is growing its share of the market, although like most other online businesses, it's losing money.
We have a schizophrenic relationship with this extraordinary company. The shops thrive and the Clubcard provides intimate and detailed information about its members beyond the dreams of the most Orwellian government. At the same time, and whenever a small shop disappears, Tesco gets the blame.
Its dominance makes us nervous, but we shop there because the whole organ-isation is acutely sensitive to what we want, and makes sure the stores deliver it. Nobody is forced to go there, but as long as Tesco's top management don't start believing that retailing is fresh and easy, we should recognise a British world leader in one of the toughest markets on the planet.
No gain in this home loan pain
It was hardly necessary to be a fly on the wall of the grandstanding breakfast between the Prime Minister and a phalanx of bankers from the City, since the leaks of the discussion have been comprehensive and universal. If anything got Gordon Brown's attention, it was surely the warning of the threat to small building societies. The political cost of their demise is obvious.
Quite the most dangerous proposal is for the Bank of England to buy mortgage portfolios, rather than (as now) taking them as collateral for cash advances. This is asking for trouble, even if the price appears to be in the basement.
Ron Sandler is trying to get the state out of the home loans business, by encouraging Northern Rock's borrowers to find mortgages elsewhere. If the Bank becomes a buyer, the taxpayer is right back on the line. The Bank has no expertise here, and when defaults and repossessions are rising strongly is no time to learn. The pain of this crisis must be shared between the borrowers and the bank shareholders, and the sooner both sides face reality, the sooner it will be over.
Lawson wants to put a tax on hot air
Nigel Lawson knows a thing or two about taxes; as Chancellor, he scrapped one in each of his six Budgets. Now he's advocating a new one, an across-the-board carbon tax.
This might be the only sentence in his new book* that the serried ranks of climate change doomsters, green activists and those who make a living trying to scare us to death could agree with - and then only up to a point.
So averse to excessive taxation is Lord Lawson that he insists the proceeds of such a tax be matched by cuts elsewhere, and when it comes to other socalled green taxes, he's scathing. The European Union's Emissions Trading Scheme, with its cap-and-trade, is "arbitrary and distortionary...anti-competitive...and lends itself to lobbying, corruption and abuse".
The first version was such a farce that it's already on Mk2. To those who can remember the dollar premium, a thriving market which disappeared at a stroke of Lawson's predecessor's pen, the ETS looks similarly ephemeral.
This cogently-argued book has provoked the usual quasi-religious bile reserved for those who dare question the conventional wisdom on climate change, but perhaps the most shameful aspect is its failure to find a British publisher prepared to risk the wrath of the new eco-fascists. The American owner of Duckworth stepped in.
As Lawson points out, green is the new red, and science takes second place to emotion. A good slogan for the activists might well be: Don't give me the facts, I've already made up my mind.
• An Appeal to Reason: a cool look at global warming (Duckworth £9.99)
The £12m bet that Next execs just couldn't win
An executive incentive scheme that has cost the participants £1.48 million hardly sounds like a success, so it might seem perverse for the company to repeat it. Yet Simon Wolfson's cunning plan for his colleagues on the board of Next is more than a triumph of hope over experience.
Launched in 2004, when the shares were £15, the scheme invited the top executives to bet their own money; if the price averages more than £24.50 over the three months to this July, they share £12 million, tax-free. If it averages less than £20, they lose the entire £1.48 million.
With the shares at £11, they've already lost, despite Next's desperate attempts to support the price by buying in its own shares. Now Wolfson is offering a new bet which would pay out 13 times each executive's stake if the price returns to £20 in four years' time. His schemes force the executives to take a risk, and cost the shareholders only the bonus that helps buy the bet.
Unlike most such schemes, no new shares are created, while the conditions for paying out cannot be fiddled. The contrast between the disasters at the banks and the rewards to those managing them show that many incentive schemes are just a sham.
Next itself is not immune, since it also wants shareholders to approve a bigger potential payout under its separate long-term incentive plan, but the fact that nobody has followed Wolfson's lead rather gives the game away. After its executives lost on their first accumulator, it's probably necessary to offer them better terms for the next one or risk seeking them go somewhere less demanding. It may even be in shareholders' interests, too.
