Welcome to Professor Pick. Business school teachers will provide weekly curated FT article selections to connect classrooms to current events and develop critical thinking for students.
Read all submissions at www.ft.com/bschoolpicks. Save this link in Maft and receive an email alerting you with each new edition. Search for tags for related topics to describe educational points. Encourage students to participate in the discussion in the comments section below the article.
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The professor’s pick will be on leave until late August.
strategy
Elon Musk prioritizes Tesla over the role of the White House as a profit slump
Tags: Corporate Strategy, Competitive Interaction, Strategy and Technology, Business Ecosystem, Sustainable Benefits
Summary: Tesla experienced a major setback in the first quarter of 2025, with delivery down 13%, revenue down 9% and operating profit margin down 5.5-2.1%. These set-offs stemmed from Elon Musk’s attention to Tesla and his involvement in politics that led to protests at Tesla’s showrooms. Musk aims to turn his attention to Tesla after leaving the Trump administration, and plans to run wild with the “Cybercab” that will reduce Tesla’s reliance on supplies from China, promote the recently upgraded Model Y, and drive the “Cybercab” that will significantly improve Tesla’s future performance.
Classroom Application: This article highlights the tension between politics and strategy and the CEO’s activities as corporate resources and potential responsibility.
question:
How can Tesla and Elon Musk balance political activity with market strategies to achieve long-term, sustainable competitive advantage?
Given that Tesla focuses on autonomous driving technology that is different from its competitors (emphasizing cameras and AI while avoiding expensive equipment), how do you rate the prospect of self-driving “cybercabs” making them a successful runaway?
Tesla has a history of over-reaching future products, which has created a buzz among the market and shareholders. Will this approach continue to be successful in the future?
Tesla has a long-standing vision to be a one-stop shop for clean energy. How do trade disputes and tariffs affect this vision and corresponding strategies?
Tesla, like Apple, is deeply involved in both supply and demand sides, China and the US. Under these conditions, how should the company develop an ecosystem strategy?
Hossam Zeitoun, Leader, Warwick Business School
Risk Management
The Federal Reserve announces plans to cut capital rules imposed after the 2008 crisis
Tags: Regulation, Basel, Bank Reform, Bank Failure, Leverage Ratio
Summary: The rewrite of the Supplementary Leverage Ratio (SLR) rules marks the first major victory for US banks under Trump’s deregulation agenda. Banks are poised to regain leverage capacity. How much is the question?
The Basel Committee on Banking Supervision has set the leverage ratio at a minimum of 3%. The numerator is the bank’s tier-one capital, and the denominator is essentially the total assets of the bank. If this number looks embarrassing and low, that’s because.
So far, eight “systematically important banks” in the US have been subject to SLR enhancements of 5%, rather than 3%, which applies to other large banks. The June 25 proposal would discard a fixed 2% buffer and replace it with a variable add-on equal to half the bank’s surcharge based on Basel’s Method 1 framework. It will match it with Europe’s largest banks, Canada and Japan.
Classroom Application: Discussion can focus on why and how regulators have long wanted to limit the reckless use of bank leverage by requiring them to maintain the lowest levels of their own equity capital. They follow two main approaches. A “risk-weighted” approach with a variety of capital requirements based on the “perceived” risk of various assets. “Leverage ratio” is a comprehensive constraint on the use of borrowed money.
A broad understanding of how these twin measures work, and the recent downgrade of Moody’s US sovereign debt (which shows that it is growing large and financially and shows the appeal of the dollar as a reserve asset), provides a reasonable scenario of future disruptions in timely payments to US bonds.
question:
What are the drawbacks of the “risk-based” approach? How do banks misuse it?
Is leverage ratio better than the “risk-weighted” approach? How does that “dampness” prevent the bank from “gaming”?
Is banks right when complaining that leverage ratios require more equity capital than risk-based rules and become binding constraints?
Is leverage ratio counterproductive because it “punishes” banks for holding zero and low-risk assets like the US Treasury Department?
Will the proposed rules achieve the desired goal of strengthening the resilience of the US Treasury market?
Is the US Treasury really “zero risk”? They fear that new rules will redirect capital from the private sector to public funding, directing banks to banks and either move assets to T-building or silly maintain their Fed accounts offering simple profits rather than stimulating credit to support economic growth. do you agree?
Will the proposed central settlement of the Ministry of Finance improve the resilience of the Ministry of Finance market?
Krishnan Ranganathan, guest faculty of Indian business schools
Do you have any feedback on the professor’s pick or are you willing to contribute? Please contact bschool@ft.com or add your selected article or question to the comments below.
