Rick Andrade – Helping Business Leaders Make Better Decisions

Check your J-Curve

As published by CEOWORLD Magazine – Rick Andrade

It’s the answer to the question CEOs and business leaders everywhere are asking:

Where’s my AI ROI?

It’s been four years this November when ChatGPT (2022) released its first Large Language Model igniting a tech tidal wave of new investment in Artificial Intelligence not seen since the roll-out of fiber cable lines to accommodate the fledgling Internet 26 years ago.

In fact, the adoption story and promised evolutionary business case have seduced nearly every senior executive across every industry.

The original claim was that AI, now Agentic AI would replace vast hordes of real human jobs from accountants to zoologists. But the AI ROI isn’t showing up on the financial statements, and companies still need the same workers. What’s going on?

Investors are getting nervous. I warned about this ROI thing back in February in my CEOWorld article It’s 2026, Can Your AI Spell RIO?

Seven months later investors still need a magnifying glass to find material AI cost savings. And they’re asking point blank…What’s the problem?

According to Goldman Sachs Research, global AI-related investment is forecast to exceed $1 trillion in 2026, including about $581 billion in the US. That implies AI capex of roughly 1.8% of US GDP in 2026, rising to 2.5% in 2027 and 2.8% in 2028.

Most of the spend is driven by large “hyperscalers,” such as Amazon Web Services, Microsoft Azure, Google Cloud, Meta, and Alibaba Cloud all building out data centers to quench the unquenchable thirst for “token compute.”

Smaller private companies, meanwhile, are themselves expected to spend $35 billion on AI investment this year and if “tokens” are the new AI currency:

“We blew through our AI budget in a quarter, for the whole year,” said Dara Khosrowshahi, CEO of Uber in June 2026. In a recent interview on CNBC, Alex Karp, CEO of data analytics software company Palantir said his customer CEOs are livid, “they’re paying [millions] for tokens that create no value.”

And they’re not alone.

CEOs everywhere are begging for some relief. Because it’s ‘show me the money’ time from AI investors, or else.

This is when it starts to feel like dumping buckets of cash down an AI black hole and waiting for something good to happen.

Of course, unalarmed by the growing spending binge, tech professionals point to a familiar friend to explain it.

They call it the J-Curve.

And if you’re reading this your company is likely among millions stuck in the belly of it, and sweating your own leadership tenure.

As you know, the J-curve describes a pattern in which results initially worsen due to the massive upfront investment before leveling off and rising upward, forming a J shaped curve.

But after 4 years of constant AI spend, most companies have yet to turn that AI ROI corner enterprise-wide. And unless you can dig your way out soon, proving you’re on the right side of the curve, you’re likely to die there, begging the question:

Can I dig my way out before it’s too late?

“The key is to use the right token for the right use case.” Antonio Neri, HPE CEO, CNBC Sep 3

And that is indeed one way to save big money. But that’s not going to dig you out.

What we now know is that AI is NOT going to kill off jobs by the millions as expected, at least not yet. Some functions do see staff reductions like finance, marketing and customer service. Those are low hanging fruit.

But widespread staff cuts aren’t happening. Instead, roles are changing. AI is shifting the focus of knowledge workers from task performance to multi-task agentic AI management. And there’s no going back.

I’ve seen advanced Agentic-AI systems build new websites in a single prompt, set up entirely new product development processes and supply chain efficiencies in minutes. Which is what CEOs want to see. But will that increase ROI?

The pros say we’re jumping the gun. They say we need to focus on “conversion” as the precursor to financial ROI.

Conversion is the act of recognizing AI efficiency gains (time saved) and then channeling those gains toward a distinct measurable financial outcome.

This means more sales, but also adding the ability to measure the intangible values like higher quality products, customer service ratings and faster throughput workflows.

In other words, it’s not that your AI ROI has vanished into the abyss, rather it’s about converting localized task improvement speeds into firm-level financial performance your investors will reward you for.

That makes sitting in the trough highly actionable, and not simply a money-pit agony CEOs must endure. It is where you must decide whether AI becomes a costly targeted function token expense or a new operating model refresh, aka the Promised Land of AI.

McKinsey’s 2026 survey finds 80% of respondents report personal productivity gains from AI, but only 37% see any EBIT impact, and just 6% qualify as AI high performers.

Here’s a quick assessment test. Ask yourself yes or no:

1. Is AI making our measured workflow faster or better?
2. Is the saved capacity visible at the team or business-unit level?
3. Has leadership deliberately redeployed that capacity?
4. Has the firm tied the redeployment to a financial or operating metric?
5. Have downstream constraints, approvals, data access, policies, compliance, handoffs, customer demand been redesigned?

If the answer is ‘yes’ to the first question only, Yikes! You’re in the muck.

Time to right-size the ship.

1. Diagnose why your company is stuck

Research shows us that most companies see AI as automating tasks, not transforming the business. And there’s a stuck-in-a-hole documented reason for that. According insiders including a recent McKinsey analysis: The State of AI in 2026: On the Road to ROI, you’re underwater if —

• Your AI is measured by token usage. The executive dashboard celebrates tokens purchased, active users, prompts, or model usage, rather than customer outcomes or financial performance.
• Your teams save time but don’t redeploy that value. People finish work faster, but no leader has decided how that capacity should create additional sales coverage, product releases, innovation, customer service, or cost removal.
• Your AI speeds up one step but not the full workflow cycle. A proposal takes 20 minutes to draft but still takes two weeks to review. A support agent answers faster but still waits on a technical escalation. A sales team creates more outreach but has the same lead-qualification bottleneck.
• Your operating model remains unchanged. Roles, decision rights, incentives, performance measures, and approval rules were designed for pre-AI work.
• Your Pilots are everywhere and accountability is nowhere. Innovation teams run proofs of concept, but business-unit leaders do not own a baseline, a benefit target, or a date for “Conversion.”

2. Determine your high-level value-capture metrics

Before approving an AI use case, require the sponsoring executive to state how the firm will capture value from it: For example:

• More throughput: more proposals, product/services sold, customer conversations
• Higher quality: fewer defects, errors, returns, escalations, or compliance failures
• Faster cycle times: shorter quote-to-cash, design-to-launch, close, service, approval cycles
• Lower cost-to-serve: fewer hours per unit or service sold, less rework, less headcount
• Revenue growth: more customers, repeats, retentions, cross-selling, dynamic pricing, and new offerings

3.  Use Agentic AI solutions to redesign and remap workflows

This is where Agentic AI shines brightly. Automating tasks that once took hours now can take only minutes. Once you’ve mapped your old workflows from the triggering event (order) to the post sale customer satisfaction (delivery) score, you can identify each new time-sucking task and remove it.

If your AI produces a pricing recommendation in five minutes but it still takes two weeks for final review, the productivity constraint (bottleneck) has simply shifted, not disappeared.

In MBA school we had to read The Goal (pub.1984). The key to profit is eliminating constraints aka bottlenecks at each step along the workflow process. Done right, your AI will identify these bottlenecks for you.

The point is to take executive action and redesign your approval process, and only introduce a human into the mix when key data security and quality control checks require it.

4. Explicitly measure and redeploy saved capacity

Here’s the real ROI. This is how you pivot from the bottom of the curve on upward.

Many CEOs wait, expecting AI investment to miraculously turn additional productivity capacity into revenue generating growth or cost savings. But now that we realize job cuts alone are NOT going to pay for AI investments you have to redeploy that accumulated time efficiency in its place.

For each team using pricey frontier models, ask them to adopt one primary, lower‑cost, pre‑approved open‑source model for in‑house work. Then ask them to target one or more value-creating destination targets to measure. Hold them accountable to it, ask each specific unit/division team lead to track and report the following:

• More Sales: more prospects closed, more customer meetings, more sales coverage, more product demos, more backlog.
• More Service: shorter response times, more proactive outreach, improved first-contact resolution, fewer escalations.
• Better Quality and Risk Management: faster testing, better controls, fewer errors, stronger compliance, tighter security protocols.
• Less Cost: fewer task hours, more throughput per worker, less operating expenses.
• More Innovation: more new product development, added features, competitive functionalities, automation ideas, customer utility capabilities.

Not that every hour saved must immediately translate into higher productivity or sales, however, no major efficiency gain (from token expense) should remain ownerless and unaccountable to the P&L.

That’s my key takeaway.

The J-curve is not a promise that every AI investment will automatically pay off. It is an explanation for why AI-ROI can be delayed when a company adopts a general-purpose technology without a plan.

The role of the CEO is therefore the key linchpin to AI success, to actively manage workflow redesigns, workforce transitions, and to roll-out strategies that guide AI investments from the bottom of the pit to sustainable, revenue-producing new highs.

Remember, the bottom of the AI J-curve is not where companies’ AI fails because models are too expensive or hallucinate or jeopardize data security. It’s where companies fail because management treats a general-purpose technology as a plugin-play task helper, instead of an enterprise-wide agentic game changer.

Firms that turn up the curve do three things differently: they redesign the workflow, redeploy earned capacity, and hold business unit leaders accountable for measurable value-creating outcomes.

Boom! Drop the AI mic.

The Grudge Match

What is your real value as a chief executive or any business leader in the age of AI? Have you asked yourself — can you be replaced? Or rather, will you be replaced? How would you know if it’s not too late?

Here’s what I found.

Like never before in history, a new technology has emerged that is not only the killer app of all time, promising ever greater efficiencies and insights, but is also a deadly ‘Iron Mike’ right hook to the face of your chief executive career, if you disrespect it. Which makes perfect sense.

As AI makes its way up the ladder of white-collar job functions, reducing the number of staffers needed each month, level by level it’s only logical it reaches the C-suite too, aggressively challenging the wisdom of the wise old owl perched high atop the ivory tower.

With AI agents and large language models consuming every functional discipline end-to-end, the era of executive wisdom and experience has forced that old bird out onto a slippery wet ledge.

At first glance most business leaders disregard the criticism. They argue their role is far more encompassing than any new know-it-all tech tool on the market.

But is that still true?

Partly. But once AI is given access to all your company data, industry data and macro-economic data, and can create a plausible path forward on paper, your relevance and guidance as a leader just may have red-shifted a few light-years behind the curve in my view.

So how does the role of the CEO hold up?

“A good CEO is someone who can see the big picture, but doesn’t get lost in the details.”

— Jack Welch, former CEO of General Electric

“A CEO needs to be able to make tough decisions, even when they are unpopular.”
— Indra Nooyi, former CEO of PepsiCo

“The best CEOs are the ones who can build a company that is greater than the sum of its parts.”
— Elon Musk, CEO of Tesla and SpaceX

“The best CEOs are the ones who can see the world through the eyes of their customers.”
— Tim Cook, CEO of Apple

“Lots of companies don’t succeed over time. What do they fundamentally do wrong? They usually miss the future.”
— Larry Page, co-founder and former CEO of Google

Notice a pattern? Fortune’s recent article AI is changing the CEO’s role puts it bluntly: in the age of AI, “traditional CEO credentials” like tenure and institutional knowledge are becoming less convincing, and boards are starting to ask harder questions about agility, learning speed, and real AI fluency rather than polished narratives.

If you think like me, then you think former Google CEO Larry Page nailed a big piece of the puzzle. It begs the question about the future. Why does this role still require a human at this cost?

As AI and its big brother Agentic AI open new doors with far wider and deeper insights across the business landscape, these same AI systems are quickly stripping away all the core mechanical repetitive tasks traditionally part of the Chief Executive’s job. The new CEO is the AI-CEO, one who welcomes and embraces the technology as a frame-braking paradigm shift.

This consequently leaves the harder job of judgment, building trust, communicating goals, managing governance and motivating staff to embrace AI.

If you ask consulting giant Cap Gemini on the front lines of executive advisory what remains hardest for AI to automate is that very legitimacy. That is setting direction, resolving conflicts, taking moral responsibility, and uniting people around the campfire. Things AI still can’t do just yet.

Meanwhile, those of us who appreciate AI but still find ourselves mired in day-to-day firefighting, unable to look up and execute on a coherent, long-term, forward-looking AI strategy at the same time, are most at risk.

Forbes contributor Larry English says it best: Future AI-embracing “CEOs must understand not only how AI affects their own operations, but also how it’s reshaping their customers’ industries. For long-tenured CEOs, the biggest risk isn’t ignorance but rather outdated mental models.”

In other words, pretending AI is just another efficiency tool to manage the as-is business better is tantamount to corner office suicide. The new AI-CEO must be urgently more self-aware and bold enough to reinvent themselves and the business, he argues.

At the same time, Meta CEO Mark Zuckerberg completely agrees. If AI can do a better job, let’s find out.

Meta’s “CEO AI Agent” is that first step. The AI is essentially a personalized info brain and omnipresent assistant to Mr. Zuckerberg which helps him pull together hoards of information on the fly, cut through layers of internal bureaucracy, compress time, and help engage with executives and staffers more responsively and effectively. Exactly what pre-AI CEOs spend endless hours on.

The hope is the Meta CEO AI Agent becomes the genesis of a new form of leadership, a 24/7 AI executive advisor, specifically designed for a more dynamic future. A digital right-hand man and a wise old owl put together that will elevate the effectiveness of the corner office, not replace it.

But who are we kidding?

In my view if AI becomes the right-hand man, the wise old owl, and the strategic guru behind the glass doors, there’s going to be far less need for a contemporary Chief Executive with Ivy League sheepskins on the wall. Am I wrong?

Still, less need does not mean no need. And most experts say I’m way too far out in front of my skis here. CEOs aren’t going anywhere fast, they say — not as long as they can keep their heads above the rising AI waterline. Which means learning to swim like a kid all over again.

The pros say the best way for CEOs to avoid being drowned or knocked out in this grudge match is to become the person who designs the human-AI operating model in the first place, not merely someone who uses AI tools occasionally or pawns off an AI rollout to consultants and managers to make it look like you’re still “the man.” Taking full charge is the only best practice.

An IBM study suggests you start with a complete top-to-bottom AI-guided business review. Essentially to rethink the C-suite for speed and clarity, create an AI-agent flywheel, customize an AI roll-out across multiple functions, orchestrate the human and AI datasets cohesively, and finally, prepare for unpredictable futures. I think that’s a bullseye plan!

On the same page, Capgemini’s AI research similarly says CEOs should strengthen governance, evaluate which decisions are “AI-ready, need human-AI chemistry, and can build robust data, security, and upskilling programs.”

Both of these robust approaches are useful engagements. But I also think many top dogs are at the crossroads of human vs. artificial intelligence leadership, and may not be up to the job. And if you’re not getting retrained for the fight, you will go down hard, as an AI Luddite.

The question is no longer whether AI will assist the CEO—it’s whether it will expose which CEOs are no longer needed.

So. Take the first step. Benchmark yourself.

Go deeper into your own current state of preparedness like a member of the Board would do in an interview. Ask your favorite AI to render proof of your relevance to your organization.

See if what you know, and what you think can stand up center ring, face-to-face with AI Iron Mike Tyson. You don’t have to defeat the champ, you just have to survive the fight.

Copy and paste this PROMPT into your AI text box: See if you’re on track or on your way to the mat.

It’s worth the insight.

[“Act as a ruthless but fair organizational strategist. First, interview me with 10 concise questions about my role, company, workflow, stakeholders, decision rights, and the outcomes I am measured on. Then use my answers to evaluate: what parts of my job are automatable now, what parts are AI-assisted, what parts are still human-defensible, and where my value moat is weak. Assess my role in my company and tell me whether I am becoming replaceable by AI if I do not change. Evaluate my relevance across these dimensions: decision-making, strategic judgment, relationship capital, domain expertise, communication, adaptability, and ability to create value that AI cannot easily replicate. Identify which parts of my role are automatable, which parts are defensible, and which skills I must develop to remain indispensable. Then give me a blunt risk rating from 1 to 10, explain why, and recommend the top 5 changes I should make in the next 90 days to increase my value to the organization.”]

Try it. You’ll be surprised.

Finally. There’s a reason we don’t hear much from those who thought the Internet was just a fad. The future of the CEO role is the AI-CEO. Don’t let the AI part punch the lights out of your career accomplishments.

Rick

A Business Leader’s Guide

Have you seen social media posts like these recently?  

• “$200 to fill my truck with Diesel ⛽ it’s ridiculous,” (Threads)
• “Nearly $200 to fill my Denali” (Facebook)
• “Wow! $92 dollars to fill my SUV, I used to pay $55” (Facebook)

These are the unintended consequences of what was to be a short kinetic military affair to free the northern hemisphere of a nuclear-armed Iran.

Instead, we’re now facing a lengthy global supply chain quagmire with no end in sight.

Since the start of the U.S.-Israeli-Iran conflict on Feb. 28^th 2026 the goal of “Mission Accomplished” has morphed into “mission disaster,” economically speaking.

As such, the unanticipated fallout of the assault is the complete closure of the Strait of Hormuz, a waterway so important to global trade, it’s flipping many of the world’s economies upside down.

And as a business leader, you had best prepare now for the train headed ‘Strait’ at you.

—-

Did you know that about 20 million barrels of oil, roughly 20% of global supply once passed through the Strait of Hormuz each day? Another 20% of natural gas and 30% of global helium supply also floated through that narrow passageway.

What if all of a sudden, it all went away, choked off from global markets, instantly?

Well. It happened, and that was not the goal.  

So, how did this “special military operation” get so far out of control?

What was once all about fewer nukes is now all about the higher cost and scarcity of oil, natural gas, helium, fertilizer, and a dozen other key commodity exports from the Gulf.  

Which means higher prices for Gulf-dependent economies that have for decades relied on cheap and steady Persian Gulf resources.

But this is not what President Trump had counted on.

Many of the consequential ripple effects will take years to play out according to Harvard Economist Ken Rogoff in a recent interview with Charlie Rose, especially in Asia given the existential reliance on Gulf exports.

Meanwhile, here at home, U.S. analysts are calling this the ‘delayed shock effect.’ But it’s coming, nonetheless.

Tankers and container vessels shipped from the Gulf before Feb. 28^th have since arrived and unloaded their precious cargoes at distant ports.

However, the subsequent closure of Hormuz has since stranded the next wave of goods, which means inventory and critical material reserves will run out in a matter of weeks if nothing changes.

Downstream users of industrial gases like helium for semiconductor manufacturing in Taiwan, fertilizers for farmers in America, and metal commodities including 9% of global aluminum for autos, all sit like hostages awaiting reprieve aboard giant cargo flotillas stranded in Gulf waters.

The Center for Strategic and International Studies perfectly details the 187 stranded container-ships and cargoes choked off by the closure. Click the link and see for yourself the order of magnitude at risk, just sitting there.

In the meantime, here in the U.S., while $4+ per gallon average gas prices at the pump are a costly nuisance making headlines on social media, for manufacturing stalwarts in Asia including China, Taiwan, Japan, South Korea and the Philippines, without these cargoes it’s an existential slow motion economic train wreck in the making.

Unfortunately, there’s nowhere to hide.

Products from petroleum to plastics all come from refined oil processes amazing as it sounds. Most of human physical product innovation relies on Earth’s fundamental goo and gas stashed underground.

Adding together all commodities from the Persian Gulf, from oil to fertilizer, the world is expected to lose an estimated $4.6 trillion in global GDP, reaching $39 billion per day by this summer.

Yikes!

Who could have guessed the widespread impact of shutting down the Persian Gulf trade would have on global economies? The Trump administration certainly did not…

Energy analyst Reid I’Anson at Kpler, a global commodity research company, puts it perfectly:

“Regardless of when the Strait reopens, the energy security calculus for every major importing nation has changed permanently. Investment in pipeline diversification, strategic storage capacity, and supply chain resilience will define the commodity infrastructure agenda for the next decade.”

And despite our energy independence with eyes wide open, the U.S. is not entirely immune.  

In the last 3 years post-COVID, economists and I were predicting a recession as supply chains and inflation gripped the nation. But it never happened. The strong job market and consumer spending kept the plates spinning well enough above the waterline to avoid drowning.

But this time it’s different.

Today, with oil prices escalating and sustained prices per barrel topping $115, the R word has once again resurfaced on a global scale. The IMF says if the Strait stays closed global GDP will likely fall into recession this year.

In the U.S., analysts at J.P. Morgan and Goldman Sachs have warned that the Strait of Hormuz closure is “derailing the soft-landing narrative.”

They argue that the surge in oil prices is acting as a tax on the U.S. consumer, reducing discretionary spending and increasing the likelihood of a technical recession in the second half of 2026.

This time, however, a recession would be a self-inflicted supply-side gunshot wound to the gut.

So. What are business leaders doing about it?

For the first time in modern history, trade and logistics are being completely reconfigured, according to industry tracker FleetPoint. This reconfiguration is not merely a temporary detour; companies are actively reducing their reliance on the Strait as a single transit point.

And you can be certain that wave of change will increase the cost of goods for thousands of businesses and millions of consumers.

Airlines, like Spirit, which cited the high cost of jet fuel in its recent shut down of operations is a prime casualty example of the fallout.

Agriculture too, where dozens of farmers have filed bankruptcy as a consequence of skyrocketing fertilizer expense, are also reeling from the conflict.

More broadly, take a look at Taiwan Semiconductor (TSMC), the world’s leading manufacturer of computer chips designed by Nvidia, the world’s leading AI infrastructure company. Together they stand atop a super fragile $1.5 trillion in AI investment in the U.S. alone. (Read my article: It’s 2026. Can Your AI spell ROI? at CEOWorld Magazine)

If TSMC fails to import enough helium from Qatar in the Gulf, they may need to idle chip production soon. That will effectively crash U.S. tech stocks and take much of the high-flying S&P with it, as AI investment capex is the only thing holding our GDP above water this year.

So. If the writing is on the wall and prices are headed higher in your industry space, it’s time for an all-hands on deck meeting before you get idled. Communicate the situation to every employee and what they can do about it.

If you suspect trouble ahead, roll up your sleeves and play the role of your suppliers. Dig into the numbers and respond aggressively.

If they source from the Persian Gulf side of nations in the Middle East, call and chat with them directly. Ask them if their input costs are creeping up and which ones from raw materials and energy to packaging and transport are most affected, and if/when they expect to raise prices.

Finally, prepare your team to squirrel away business-critical inventory and components before price pressures and scarcity disrupt your efficient supply chain and production throughput.

This time survivors will need to stay two moves ahead, not like we did during the global COVID shutdown debacle, remember?

That’s just the name of the game we’re playing this year, unfortunately.

—–

In summary, the crisis in the Middle East and shutdown of the Strait of Hormuz notwithstanding has added oil to the embers of a smoldering global recession. And it’s a far more widespread conflagration than just prices at the pump for Americans in the weeks ahead to be aware of.

If the Strait doesn’t reopen soon, the damage will continue to compound and could destabilize the economies of the world’s key manufacturing and exporting countries, aka your suppliers, which to me is a glaring red alert call to action.

The bottom-line Best Practice approach for business leaders impacted at this point is knowledge, stay informed, and add a hyper-concentrated ground level production and operations work-plan to navigate the balance of 2026.

Stay frosty and stay in front of this. Let’s not get blind-sided again.

Make sense?

Rick

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About the author: Rick Andrade is an investment banker and market advisor in Los Angeles, Ca, where he helps CEOs and business owners buy, sell, and finance middle-market companies. Rick earned his BA and MBA from UCLA, along with his Series 7, 63, & 79 FINRA securities licenses. He is also a CA Real Estate Broker and blogs at www.RickAndrade.com on issues important to business owners. He can be reached at rickandrade.com.

Rick Andrade as published at CEO World Magazine

A quick note if you use gasoline, oil, fertilizer, tires, or anything plastic, the roughly 20 million barrels of crude oil that normally squeeze through the Strait of Hormuz each day (20% of global oil) along with 20% natural gas may come knocking on your wallet or P&L this month.

So pay close attention.

Since President Trump gave the nod to strike Iran on Feb. 28th, the country has retaliated.

Among its responses are serious drone attacks and missile strikes that have rattled and shocked regional neighbors, including Kuwait, Bahrain, Saudi Arabia, Oman, the UAE, Qatar, Jordan, Syria and of course, Israel.

The result is a de facto blockade of the strait halting tanker traffic volume to near zero, and idling more than 250 tankers, 5x the normal throughput, costing us all billions!

Why?

Iran wants to disrupt global energy supply, drive oil prices sharply higher, and push energy costs toward a breaking point for American consumers and key U.S. allies, hoping to force Trump to back down. And it just might work.

In normal times, roughly 20% of global oil and a fifth of global liquefied natural gas (LNG) flows through the Strait of Hormuz. With traffic now stuck, billions in trade sit idle, tightening the noose around the neck of global economic markets.

In the US, the impact is most acute at the pump.

For every one‑dollar increase in a barrel of oil, U.S. gasoline prices increase by two to three cents per gallon.

West Texas Intermediate (WTI) which currently tops 80 dollars per barrel, up from the low 60s just two months ago, could easily lift gas prices between 50 to 70 cents/gal or more every day the strait remains closed.

But the pain is far from evenly distributed.

China, the world’s biggest manufacturer, relies heavily on Gulf crude: close to 40% of its oil imports come from the Persian Gulf.

That makes Hormuz a petrochemical maelstrom for China, and it is sure to be l’ordre du jour when Trump sits with Chinese Premier Xi later this month.

Meanwhile, India finds itself in the same boat, sourcing roughly 40% of its crude from the Gulf. And for Japan and South Korea the situation is even worse. These countries import 75% to 90% of their oil from this region. For these economies, Hormuz isn’t just a risk factor; it’s a total economic catastrophe in the making!

But it’s not just about burning crude for energy.

Did you know that 50% of global oil is not burned directly as fuel for transportation and power?

Rather, it’s used to feed petrochemicals, plastics, and rubber production for products made and sold worldwide.

So, while spiking gas prices make headlines, the ripple effects show up in places most people never hear about until they see higher price tags (aka inflation).​

These ripples are already popping up as evidenced by increasing input costs reflected in the recent January pop in the Producer Price Index (PPI) data.

If you then layer on the costs of higher tariffs, the stage is set for higher inflation which feeds straight into consumer cost‑of‑living angst.

A closer look at where higher WTI prices will show up on your radar includes:

• Airlines (jet fuel, insurance, and route‑change costs)
• Transportation (rail, trucking, shipping)
• Autos (energy, rubber, plastics, metals, logistics)
• Cruise lines (fuel, supply inputs)
• Naphtha‑based petrochemicals and plastics
• Agricultural fertilizers
• Industrial manufacturing
• Electronics manufacturing – most notably in China, India, and South Korea

My point is “Strait” forward.

The Strait of Hormuz isn’t just a distant waterway on a Middle East map, folks; it’s a critical artery that feeds global energy demand and is the petrochemical lifeblood to the world’s largest economies.

As long as tankers are stalled in between, risk premiums and prices will stay elevated. And that translates to higher energy prices, tighter margins, and renewed inflation, or worse a global recession.

So stay on your toes, stay informed, and plan ahead, if you can. And let’s all hope the Spice flows again soon, before the Dune gets even worse.  

Rick

As published at CEO World Magazine Feb 2026

Take the pulse of American business leaders at the start of 2026 and you’ll find a common chronic obsession: getting the expected ROI from the country’s unquenchable spending on AI.

But this year, Boards and investors are no longer taking a back seat; it’s time to put up the numbers or let someone else take the wheel.

It all started in late 2022 when Sam Altman, CEO of OpenAI, released the now-legendary chatbot ChatGPT. Like Netscape did for early internet browsing, ChatGPT triggered a fateful wave of artificial intelligence capabilities far beyond human ability. It’s like witnessing the birth of a great innovation before its time, like meeting Thomas Edison as a toddler. You know his future, but he doesn’t. So here we are.

Today, given the rapid advance in LLMs, the Nvidia chips that run them, and the promise of giant leaps in human productivity and creativity, we find ourselves myopically focused on what AI technologies can do as we feverishly throw money at them for fear of being left behind.

AI is “the largest infrastructure build-out in human history,” Nvidia CEO Jensen Huang said recently. He should know, as the world’s leading AI semiconductor supplier.

But is it worth it? That’s what everybody wants to know.

Nearly every day a new AI application hits the pavement running, like dot-com sock puppets 30 years ago. As AI dazzles the public with online “experts” and deepfake imposter videos, it also promises to fundamentally transform every business process, top to bottom. You can’t avoid it or hope it goes away.

In fact, total AI spend in the U.S. is mind-blowing and not seen since the dot-com and Y2K remedial systems spend of 2000. In the last few years since OpenAI launched ChatGPT, experts at RBC and Bloomberg calculate that total U.S. AI spending will top an aggregate $1.5 trillion from 2022–2026 and add as much as 1% to U.S. GDP growth in 2026 alone.

Several economists argue this level of spend is propping up the U.S. economy despite lower employment forecasts. And therein lies the rub: it looks like a bubble ready to pop.

Big Tech says AI isn’t a fad and that the spending is well justified. It’s transforming how computers work and how we work, says Nvidia’s CEO. Hence the bubble concern. With all this money targeted to improve profitability and customer experience, the list of skeptics is growing too.

According to Gartner, a $6 billion global IT services research and consulting firm:

“Organizations that strategically deploy AI achieve up to 30% faster process automation, 25% reduction in operational costs and a 20% increase in customer satisfaction.”

Sounds great. But how does that translate to the bottom line?

How should we really measure AI ROI?

Let’s think:

AI ROI % = Net AI benefits (increased sales and cost reduction) / AI technology investment spend × 100

Simple, right?

For every dollar invested in AI technologies, there must be a profitable payback. Who would disagree? But measuring that payback in financial terms is a moving target for Wall Street analysts.

It’s too easy for executives to fudge the figures or to confuse traditional ML (machine learning) model improvements (the old way) with today’s AI LLMs. And given the level of investment on the line, it’s your company’s AI ROI results that investors are dissecting to separate facts from fakes. If you’re a CEO or business leader navigating AI implementation projects, your company and your career are under the microscope.

So, how much AI ROI is a good ROI?

Keep in mind that soft-dollar improvements from time saved, errors reduced, efficiencies gained, and risk lowered must be translated into hard dollars. Any sales increases must be distinctly connected to AI implementation.

No longer are soft metrics like improved customer engagement and happier employees being accepted on their own. We’re looking for the hard stuff: bottom-line cash ROI.

According to several AI implementation experts, a good AI ROI target is 30%: spend $1 million, make an additional $300,000. But according to IBM, a 55% ROI is even better. And zero could put your job on the line.

So how do you get the most out of your AI budget?

First of all, size matters.

Small companies tend to adopt AI in smaller bite-size pieces, focusing on narrower business use cases. This takes longer but is less risky.

Larger businesses with more than 250 staffers are the dominant force adopting AI more broadly across the enterprise, often through long-term IT relationships with Microsoft, SAP, Oracle, and others. That makes the yardstick for measuring AI ROI more complex.

Small businesses are adopting AI foremost in HR, marketing, content creation, sales lead generation, bookkeeping, and workflow automation from customer service to inventory management, mostly from single-product (SaaS) providers offsite. The upfront AI investment is thus much lower than for large companies; the ROI hurdle is easier to clear.

The ROI shows up in fewer employees and more productivity—such as one person now able to create and supervise an entire new product launch.

The payback window, according to IT experts ranges from 9–18 months for small jobs, and 18–24 months for complex, larger-company implementations. This is why 2026 is the year of dead reckoning for AI ROI.

Measuring ROI explicitly is more than tracking cash flow or sales increases. You can find detailed AI ROI spreadsheets online that help identify reduced cycle times, fewer errors, and fewer hours needed to complete a task. This is where the birth and ascendancy of Agentic AI comes into play.

Agentic AIs are quickly improving their ability to design and complete multi-step tasks without human oversight—for example, dynamically repricing products based on demand or rerouting perishable warehouse inventory faster and more efficiently than people.

Larger businesses with dozens of products, services, and locations take small-business AI ROI and put it on steroids because these corporations have far more internal bottlenecks and workflow inefficiencies to attack. They’re learning it’s far better to outsource AI compute than to build your own data center in the desert. But it’s still expensive.

So, if your company is looking to spend big on Agentic AI to keep pace with competitors, your AI ROI hurdle is a big part of justifying that considerable cost.

Enter the Chief AI Officer

The advice I’m hearing as best practice is to create a dedicated Chief AI Officer.

This person, with the help of AI, will sift, sort, and redesign legacy processes with AI as the new benchmark. This is not running the hamster wheel faster; this is redesigning the wheel.

I saw the same pattern when I was selling enterprise ERP systems integration post–Y2K. It was a rare chance to toss out old legacy systems and processes and start over. Then, as now, executives put their careers on the line for payback.

As a result, in the biggest spotlight of their careers, CEOs and business leaders today are understandably cautious about publicizing actual AI investment returns. But that won’t hold.

If the proof isn’t baked into your financial pie by Q2 (June 2026), you can bet your corner-office view you’ll be replaced by a CEO who can allocate AI dollars where they pay off.

This is where your new Chief AI Officer steps up—a competent Agentic AI strategist and visionary who can rethink your company’s throughput processes and systems end-to-end, create AI ROI targets and KPIs, and document hard versus soft AI ROI improvements.

Remember: the goal is to make money, which means capturing the value you create.

If you need help, check out real-world AI ROI case studies from leading research firms like Gartner. There you’ll find detailed use-cases and performance metrics, offering a tested path to positive AI ROI in 2026.

Because by 2027, AI success will be the only true measure of comparative advantage and performance. And you don’t want to be left holding the bag.

Rick

—-

About the author: Rick Andrade is an investment banker and market advisor in Los Angeles, Ca, where he helps CEOs and business owners buy, sell, and finance middle-market companies. Rick earned his BA and MBA from UCLA, along with his Series 7, 63, & 79 FINRA securities licenses. He is also a CA Real Estate Broker and blogs at www.RickAndrade.com on issues important to business owners. He can be reached at rickandrade.com.

Published by CEOWorld.biz

You’ve heard all the hype and fear. Artificial Intelligence (AI) is the most productive technology ever invented to solve all our problems – and it’s coming for your job. That’s the incessant media headline.

But hang on! A recent AI research paper written by the non-profit Center for AI Safety (CAIS) in San Francisco has calmed me down a bit.

I suggest you review it, especially if you’re a CEO or business owner looking to write a big fat check to implement AI-driven solutions, here’s why:

It’s an unbiased eye-opening reality check on AI expectations versus AI spending – and how much seems never enough to add to next year’s operating budget.

It all started soon after Sam Altman at OpenAI released the first LLM model we all know as ChatGPT back in late 2022, when expectations of job-snatching computer overlords predicted a precipitous replacement cycle and declining need for us, ignorant humans, on the job.

Large Language Models promised to lead us to the new promised land of Generative AI where an all-knowing technology could essentially do anything a human could do exponentially faster.

AND I BELIEVED IT — a life-changing new technology with capabilities that rival genius, passing nearly every professional exam from medical to legal with flying colors.

Fast forward to today, AI functionality has ascended from learning to doing, experts say.

And they call it Agentic AI.

Agentic AI is like it sounds, a step-by-step taskmaster like a travel agent that can navigate the multi-step mangled online process of a task, like booking flights, rooms, transport, and amenities, all at the push of a button.

But, can an unassisted computer complete all that better, faster and cheaper?

Let’s find out.

The team at CAIS tested 240 freelance remote work projects as posted on freelance platforms like Upwork across 23 diverse categories, including game development, product design, architecture design, video content, writing, data analysis, and more.

The goal of the Agents was to reproduce the remote-work job deliverables and compare them to the actual results paid for by the original job posters, hence the baseline to compare the AI agents’ results.

Researchers input each project’s description and tested all the leading AI models you may recognize including:

Manus, Grok 4, Sonnet 4.5, GPT-5, ChatGPT Agent, and Gemini 2.5 Pro

However, when they put these genius-born, job-killing Agentic AIs to the test, something went terribly wrong. They all failed miserably, not by a little, but by a lot.

They call it “AI Slop.”

In fact, when comparing the results to the actuals, there was a 97.5% AI failure rate to produce “client-acceptable” work product as compared to the actual results!

“This demonstrates that contemporary AI systems fail to complete the vast majority of projects at a quality level that would be accepted as commissioned work,” according to the researchers.

Despite the billions of capital expenditure cash being spent by companies worldwide in hopes of replacing workers, the LLMs weren’t even close to delivering a polished final product.

This means more than 3 years after the first ChatGPT debut the study concluded that LLMs are not going to take away millions of real-world jobs anytime soon, maybe never.  

AI thus far has gone far, yes, but given their inability to perform real and economically valuable work as self-operating autonomous digital workers, Agentic AI is still a distant target in a foggy Generative AI landscape.

The AI agents in this case wildly misinterpreted the project descriptions or couldn’t find what they needed, or couldn’t initiate substitutes or workarounds, or correct mistakes, or check their own output, for starters. And if an agent can’t check its work along the way, minor errors can be rolled forward and compounded into incomprehensibly useless slop.

And that’s exactly what happened.

This proved to me how functionally dynamic and useful our human brains still are by comparison, and how far from that Agentic AI tech utopia AI still is.

For now, this means a narrowing arena of real-world use-cases for AI in the workplace, mostly benefitting humans as a superior productivity companion tool across multiple job categories, not a replacement. And I’m all in favor of that as long as humans get time and training to adapt.

Because it could have been much worse.

The Agentic AI results could have thrown us a real knock-out punch, but instead by hook or crook we dodged it, followed by a collective sigh of relief from most freelance professionals who feared the AI grim reaper that way.

Nevertheless, have a look at the CAIS study, it’s a comprehensive analysis that will inform and potentially save you a bundle if you’re thinking about how AI can or can’t fully automate jobs at your company.  

The good news is, these results may have saved thousands of jobs from over-hyped AI expectations and layoffs this year. The bad news is there’s always next year.

Until then, Happy Holidays.

Rick

The research may surprise you.

Scientists say early humans died young. Fossil records say average life expectancy was 38 years for Neanderthals, and 40 for Homo Sapiens. But this is a massive misconception of the consequences of calculating averages. If two humans, one dies at birth while the other is eaten by a Mammoth at age 70, the average age of death is 35.

Surviving birth was the first goal. And if you lived to 30 you could live into your 60s… that was 40,000 years ago.

But it wasn’t as much about their genes. Despite the constant struggle and stress to survive, our early ancestors’ actual lifespan was a surprising (60-70 years), only a couple decades less than modern humans live today. Which got me thinking.

Given the contemporary absence of lions, tigers, bears, hungry wolves and bone-crushing Mammoths, why has our life expectancy today only increased at a snail’s pace?

The answer is not medical science. It’s your job! And it may be killing you.

Add up the stats and we can now predict your life expectancy simply based on your job and where you live. Actuaries do it for a living, which then begs the obvious question:

“How long have I got, Doc?”

White-Collar vs. Blue-Collar — Choosing wisely

Did you know that the U.S. government has been tracking worker occupation deaths for decades? And they’re hiding a secret in plain sight?

According to a 2020 research study on life expectancy of working Americans by the National Institutes of Health from 1997-2014 by occupation, mortality rates among white-collar professionals from accountants to engineers, managers and CEOs has outpaced blue-collar workers’ by a decade.

As I show below, someone in a managerial or professional role can expect to live 82 years, while laborers and machine operators will clock out permanently around 71.

Once again. the difference is due more to environment than genetics. Gaps in lifespan today relate specifically to access to healthcare (and using it), workplace hazards (physical dangers), your degree of control over your own schedule, amount of travel (remote work vs RTO), and stress. The more of these, the shorter your lifespan.

If we summarize these characteristics by occupation, we get this list from the NIH data:

What surprised me wasn’t the occupation lifespan gaps. It was that after thousands of years modern laborers’ average lifespan isn’t much longer than our cave-dwelling ancestors’.

And it gets worse.

Apparently where you live really matters among the contributing factors to one’s life expectancy in America, and the data speaks for itself.

According to the Institute of Health Metrics & Evaluation, if you live in the red, you die in the red.

So, don’t head south?

Let’s put it this way. CDC researcher Dr. Mary Bassett sums it up, “Where you start in life—and which job you land—can be the difference between a long life or an early grave.”

The CDC reports 50% of early deaths in the South are attributable to poor diet and lack of healthcare both leading to catastrophic levels of heart disease and cancer.

And it’s not only lifestyle choices and poverty doing the damage. According to research by Johns Hopkins, jobs that involve high physical exertion, repetitive stress, and safety risks—from construction to long-haul trucking—contribute to faster biological wear and tear on your body and to more chronic illnesses. And from the looks of it much of the Blue-Collar South fits that bill with a list of killers that looks a lot like a Neanderthal’s list to me.

• Physical strain and injury
• Lack of access to preventative care
• Greater exposure to hazards and toxic substances
• Less schedule flexibility and decision-making power
• Workplace stress and psycho-social risk
• (Being crushed by a Mammoth – not part of the modern study)

Then there’s the other end of the spectrum.

Our wealthy, well-educated, more modern white-collar business owners and CEOs.

This group has abundant access to better diet, exercise and healthcare. Their jobs are more brain than brawn and they do live longer than many blue-collar workers.

But, while blue-collar workers cut out after a laborious 8-hour shift, white-collar executives can only watch them leave. If you’re in management you know the drill, crippling late night hours and layers of added stress at work can take their toll.

While blue-collar workers die younger from higher exposure to physical strain and fatality risks, CEOs and senior executives face other vulnerabilities—most notably, chronic psychological stress and higher rates of cardiovascular and immune-related diseases.

So. Is the tradeoff worth the money? Let’s ask.

If I offered to pay you $1 million dollars for every year I cut from your lifespan, would you take the deal?

——-

If you said yes, you’re likely a young go-getter with time to burn. But if you’re older, the answer is more likely, Hell No!

But let’s let the before and after pics speak for themselves.

But let’s let the before and after pics speak for themselves.

Jim Donald, CEO of Starbucks, from 2005 to 2008, smack in the middle of the historical Financial Crisis reveals firsthand it’s not just U.S. Presidents who age like milk in the sun.

In those few sleepless years Jim visually took it on the chin.

Or how about Apple CEO Tim Cook, who took over the reins as CEO when Steve Jobs resigned in 2011. He’s living proof that managing any company during tough times can seriously age you.  And the bigger the gig, the faster you’ll age.

Hence the trade-off… your health… for cash.

Still. Make no mistake these men are true heroes in my book. At the time both Starbucks and Apple were facing strong headwinds. Starbucks saw declining foot traffic and the stock tanked. Meanwhile, Tim Cook was asked to fill the shoes of an industry titan on the brink, famous founder Steve Jobs at Apple. God himself could not avoid the cost of life in that role.

Both men faced enormous obstacles, odds stacked against them at every turn. And yet both men managed to right-size their ship, and were paid handsomely for it.

The trade-off paid off, I suppose. Had these men known the high cost of success is time, would they go back and ‘just say no’?

I was not surprised to read a 2020 UC Berkeley study of 1600 public company CEOs which found that when a company is under great stress, leadership health suffers as well.

CEOs in high-pressure environments died, on average, two years sooner than insulated peers—an accelerated direct consequence of economic stress.

“You might think that’s not a lot, but actually it’s huge. It’s comparable to significant health hazards like smoking,” says Professor Ulrike Malmendier, Berkeley Haas School of Business who co-authored the 2020 study.

These are cumulative and lasting consequences.

Meanwhile, NIH and the National Bureau of Economic Research confirm that industry downturns, hostile takeovers, and volatile stock prices accelerate executive aging, with the mortality risk for CEOs increasing relative to how exposed the firm is to market shocks, sales downturns and angry shareholders.

Which means Life is great at the top – until you suddenly look in the mirror and your admin says your doctor left a message to call him.

In other words, reap great rewards building an empire, but business owners and CEOs like the rest of us, must ‘pay the piper’ either way.

Chronic stress means higher rates of cardiovascular and immune-system illnesses, leading to shorter lifespans and fruitlessly burning out our late-night, corner office captains of industry one after another, like flares off the Titanic.

“What we’re beginning to understand is that life at the top isn’t that easy,” and top managers face health problems too, says Prof. Tom Nicholas at Harvard Business School.

And if you’ve been at the helm or in the corner office for more than 5-years, odds are you can already feel it. Look at your palm.

The hidden cost of leadership lingering inside you is quietly snipping away at the edges of your lifeline. An unwelcome reminder that daily job stress and worry climbing the corporate ladder or running a business can erase the longer-life advantages white-collar workers were fortunate to accrue in advance.

Is there anything you can do to beat the odds?

A 2021 study by JAMA (Journal of the American Medical Association) found that autonomy and job satisfaction—features more common in white-collar work—are powerful predictors of a longer life. So, if you hate your stressful job, a healthy choice would be to find a new one.

Similarly, socioeconomic results published by the National Bureau of Economic Research suggests higher income and educational achievement do directly link to longer life, both through access to better healthcare and reduced exposure to dangerous physical conditions.

We simply need to better appreciate the cost of work. Overall, on the bright side we do live longer than our ancestral cave painting clans, 40,000 years ago. But in the U.S., according to Healthdata.org by 2050 life expectancy will only increase by two years, dropping us from 49^th to 66^th in global lifespan. Two steps forward, three steps back.

Lastly, if your job is killing you and you can’t quit to save your life – target your elevated stress levels. Give nature a chance to help.

Get outside for 15 minutes each day, a lunch walk in the park calms our restless biology experts say. It’s called “eco-therapy,” like meditation, a little goes a long way.

The real trick as we age is to appreciate a modern human body over 50 years is like a fine-tuned bio-mechanical machine, a collective dynamic organism that responds to your genetics, lifestyle choices and occupational hazards every day. Take charge of it! You only get one.

So, here’s the bottom line: Whether you’re swinging a hammer or running a boardroom, the reaper takes his cut. The good news is the more you understand this and adapt, blue-collar or white… the longer you’ll outlive your inner caveman.

 And who doesn’t want that, right?

[Author: Rick Andrade – as published at CEO World Magazine]

“What more sacred, what more strongly guarded by every ‘holy feeling,’ than a man’s own home?”
— Cicero, Roman philosopher, 44 BC

2,000 years later it’s much the same feeling in America. It’s part of the American Dream. And in times like these our country must do more – go deeper to help home buyers embrace that ‘holy feeling’ again. But how?

We all hear the endless sticker shock stories online from younger home buyers trying to get into their first house, all to no avail given the high price of homes these days.

Experts argue that the reason homes are unreachable for many middle-class new buyers is largely because our federal, state and local leaders have imposed far too many building and zoning restrictions which limit housing developers’ ability to keep pace with market demand.

But the most-cited reason first-time buyers get priced out of the home market is the cost of financing their mortgages.

Most first-time buyers are looking for a 30-yr mortgage with monthly payments they can afford.

Right now, and for some time, 30-yr mortgage rates in America have fluctuated between 6%-7%, which seems high. And it may not make you feel any better to know that over the last 50 years, between 1971-2025, the average 30-yr fixed rate mortgage was 7.7% according to Freddie Mac data, and topped 16% in 1981. Can you imagine that?

Still, this starkly contrasts with many lucky homeowners sitting on mortgage rates under 3% — like mine, which is a jaw-dropping 2.8%. But the lower the mortgage rate, the tighter the “golden handcuffs” according to real estate experts. Low rates tend to trap homeowners in their homes, unwilling or unable to let go of the super low-rate paper, which in turn limits the number of homes available for sale, and drives up prices.

These below market rates at the time were only possible if you lived through a crisis like a recession or a global pandemic such as Covid in 2021, when the 30-yr fixed mortgage rate dropped to 2% and the benchmark 10-yr note was near zero. That’s when millions of home buyers and owners struck gold with rock-bottom rates.

The unaffordability conundrum we see today is a rate snap-back, which first started in January 2022 when the average 30-yr mortgage rate leaped from 3.2% to 7.08% by October 2022 and never looked back.

What’s my point?

In the blink of an eye, the skyrocketing mortgage rates left nearly every first-time home buyer in the lurch, frozen in step and priced out of the market, their dream of home ownership a distant hope.

And the feeling is widespread. Just ask any real estate agent across the country.

Colorado Real Estate Agent, Adrienne Herzog for example expresses her current state of despair:

“My clients are frustrated because the rates are stuck near 7%, and it’s pricing them out of homes they could have afforded a few years ago.”

Indiana Real Estate Agent Chuck Vander Stelt is frustrated:

“I hear from buyers all the time that these rates—over 7%—are crushing their dreams of owning a home. They’re having to scale back or look at riskier options like adjustable-rate mortgages just to get in the door.”

President Trump meanwhile is taking notice.

This past month he demanded Chairman Powell of the Federal Reserve Bank lower interest rates immediately to reduce the cost of home financing. Home ownership has plummeted in the last 5 years from 68% in 2020 to 65% in 2025 and it’s still trending down as existing home purchase contracts continue to fall year over year.

But to stem the tide, rates need to come down.

According to the National Association of Realtors (NAR) chief economist Lawrence Yun,  his data shows that 5.5 million more households could afford a home if rates drop to 6%, boosting home sales this year and next.

And it’s the Existing Home Sales revenues that drive economic growth across our economy. For each home sold, the NAR calculates $60,000/unit in new economic activity, and one new job for every 2 homes sold. That’s how important lower rates are.

Yet, it’s been 4 years since rates were low enough to stimulate sales. And while elevated home values are a big roadblock, affordability is the key. Trump’s pressuring the Federal Reserve to lower the Fed Funds rate is like talking to a wall. It’s obvious we need to do something more, and the answer is right in front of us.

Stop using the 10-yr treasury note to benchmark 30-yr mortgage rates.

Did you know – ?

The reason most consumer debts are based off of the 10-yr US treasury note is because lenders (aka banks) prefer longer term interest-bearing loans to earn the interest income while enduring the duration, credit risks and servicing costs.

Lending is not risk-free. Make no mistake, lenders typically face a series of potential profit-killing risks for any given loan, such as prepayments, defaults, bankruptcies, late payments, and 10-yr note market price swings that require banks to implement sophisticated hedging programs to manage. None of which most borrowers understand or care about.

And for those reasons historically, the 10-yr treasury note fits the bill and is the de facto market benchmark. It’s a measure of what investors who buy mortgages expect to earn from a risk-free government note with inflation baked in for 10 years.

In fact, most loans for cars, boats, buildings, land, machinery, and our homes are all 5+ year longer-term loans. Hence the 10-yr treasury plus a risk-premium sets a ballpark rate for most consumer and small business debt.

Historically, pre-Covid, lenders in general sold 30-yr fixed rate mortgages by adding to the 10-yr a meager 1%-2% (aka the spread) for risk and expenses. For example, if the 10-yr rate was 3.50% you could expect mortgage rates to be between 4.5% – 5.5%. But since the pandemic, all that’s changed.

Today the spread is not 1-2% but rather as high as an eye-popping 3.0% since 2023, according to the Consumer Financial Protection Bureau (CFPB), and consumers are not happy about it!

Unfortunately, these elevated rates have stuck around since 2021 and remain high experts say due to the elevated economic and geopolitical uncertainties and market risks being absorbed by the 10-yr benchmark, whose rate fluctuates with global demand and risks, including global trade tariffs, inflation, unemployment and economic growth.

So then why –

Why continue to benchmark our 30-yr mortgage rates against the 10-yr if we can use a shorter-term treasury note and that doesn’t completely compromise bank interest earnings over time?

Home ownership is not the same as a car loan, boat loan, or commercial real estate purchase. It’s a fundamental construct of the American Dream – and we can do better. 

What if we replaced the 10-yr treasury benchmark with the 5-yr? Can it be done in a market-driven price discovery market?

The short answer is yes!

American financial institutions and federal agencies could redesign the home loan mortgage market to base its benchmark off the 5-yr rate, let’s say instead of a 10-yr rate of 4.5% we use the 5-yr at 4.0%.

Reducing mortgage rates by 0.5% from 6.5% to 6% on the median-priced home ($435,000) looks small but will save borrowers more than $50,000 over the term of the loan, and more importantly opens the front door for millions more dreamers.

Meanwhile, lenders can hedge the shorter-term duration risk using 5-yr futures price hedging, a common practice today. Other risks which include prepayments, underwriting and secondary market sales can all be mitigated with a 2.0% loan spread added to the 5-yr rate (4%).

And here’s a real kick starter.

If we add to this another 0.5% of Fed interest rate cuts expected by year end, we could see a 30-yr fixed rate mortgage drop below 5.5%, and particularly more likely if mortgage rates are tied to a shorter-term treasury note, which responds more directly to interest rate cuts.

This will save homebuyers as much as $400 per month and $150,000 in interest expense savings over the life of the loan. That’s powerful stuff.

The point here is we don’t need to be locked into the status quo.

We can do more to knock down the prohibitively high cost of home financing — and tackling the old-school practice of how our home mortgages are calculated is the fastest route to get some relief.

As of 2025, it’s estimated that roughly 70%–75% of new 30-year mortgages are purchased or guaranteed by our federal agencies Fannie Mae, Freddie Mac, and Ginnie Mae.

That’s a lot of public influence. Let’s use it!

Luckily the Trump administration is on our side. With a single executive order Trump can instruct Congress and federal housing agencies to compel lenders to reconfigure mortgage rate pricing, which has not changed since the late 1970s according to Fannie Mae.

Trump can also take the lead to pressure state and local governments to reduce residential zoning and building restrictions, and incentivize home builders to increase unit supply to help keep inventories up and prices down.

Basically, if more Americans can get the word out to Congress and the administration to review and create alternatives to mortgage pricing, and get the House Committee on Financial Services to take steps to incentivize lenders to re-think long-term mortgage pricing it will instantly help millions more Americans get back to that “holy feeling” again.

Make sense?

[For more info on how 30-yr mortgages are priced this Fannie Mae article.]

Rick

About the author: Rick Andrade is an investment banker and market advisor in Los Angeles, Ca, where he helps CEOs and business owners buy, sell, and finance middle-market companies. Rick earned his BA and MBA from UCLA, along with his Series 7, 63, & 79 FINRA securities licenses. He is also a CA Real Estate Broker and blogs at www.RickAndrade.com on issues important to business owners. He can be reached at rickandrade.com.

As published by Rick Andrade at CEO World Magazine

Have you seen it, the vastly vacant U.S. ports of entry on the West Coast as trade with China and other Asian nations grinds to a skidding halt like a derailed locomotive?

According to Gene Seroka, Port of Los Angeles executive director, China shipments in May will be down again between 25% to 30% for all west coast ports since Trump’s sweeping tariff declarations last month.

On April 2^nd 2025, in a White House Rose Garden ceremony, President Trump announced America’s Day of Liberation: A massive across-the-board tariff scheme that “will forever be remembered as the day American industry was reborn,” the president said. And reborn it was, but not the way he intended.

In the past few weeks, the escalating U.S.-China trade war has put the brakes on trade.

America imported $462 billion in products from China, 13% of our total imports in 2024, and carries a huge $295 billion trade imbalance built up over decades of U.S. manufacturing outsourcing.

After President Trump first announced the 145% tariff on Chinese imports, and China responded with a 125% tariff on American imports, the stakes and risks of economic catastrophe scared the daylights out of most U.S. importers who immediately shouted foul play.

As a result, Trump sent Treasury Secretary Scott Bessent to meet with high-level trade reps from China in Geneva recently and offered to lower U.S. tariffs from 145% to just 30%; a welcomed development.

China in turn dropped its tariffs to 10% and removed its export restrictions of vital Rare Earth Elements in a sign of détente, at least for 90 days. So how is it all playing out?

Back here at home, I call the move a shot across the bow for U.S. importers; a warning that despite the 90-day hiatus should compel CEOs and business owners who rely on China to take counter measures, and fast.

What was C+1 (China plus one other supplier) is now C+2 or C+3, says former World Bank President Dr. Mohamed El-Erian, President of Queens’ College, Cambridge about the tariff wars.

“CEOs [who source from China] are just waiting. They don’t want to make any major decision that has longer term consequences,” he warns. And who wants to import anything if the tariff fee at U.S. ports of entry can substantially flip up or down on any given day?

In 1930 no fewer than 1,000 economists warned then President Hoover not to enact the Smoot-Hawley Tariff Act to protect nascent American industries. Tariffs don’t work they argued. But he did it anyway, and the results triggered a global trade war against the U.S. which then saw a 66% decline in imports and exports over the next 2 years exacerbating and deepening the burdensome toll of the Great Depression. FDR quickly reversed the tariffs in 1932.

Still. Ninety-five years after Smoot-Hawley, much the same is happening today. As it turns out of all our global trading partners, America’s reliance on #1 China has since become a vital resource to millions of Americans who like inexpensive products.

Did you know 80% of U.S. toys imported are made in China?  Did you know that 30% of U.S. apparel and nearly all game consoles, PCs, laptops, smartphones and batteries we buy are made there?

This means that by August 2025 (90 days from now), without more concrete and definitive trade agreements with China, thousands of small and medium-sized U.S. businesses that rely on China for products and supplies to earn a living and pay wages will face layoffs, price increases or worse – extinction.

So what should you do about it?

Attempts to stave off the tariff Sword of Damocles are in fact well underway. Suzanne Clark, President of the U.S. Chamber of Commerce, penned an urgent letter to Trump’s tariff trade team recently begging for injunctive relief. This likely compelled Trump to sit upright and take note.

In the letter she warns with each passing day U.S. small businesses face unsustainably “higher costs and interrupted supply chains that will cause irreparable harm” if nothing is done.

She seeks an immediate written carve-out exemption for all small business importers before it’s too late. And I completely agree.

Trump must not let the sword of death fall upon small businesses in 90 days, in a one-shot attempt to rebalance trade with China.

And he must not further kick the can down the road, as he has repeatedly done with the TikTok social media platform, officially banned in the U.S. by Congress months ago. This management style only creates investment uncertainty and market chaos – both bad for business – and the president should know better.

So I too sent a letter advocating for a fixed 1-year tariff pause or exemption window to give vulnerable U.S. businesses a fighting chance to scrounge up new suppliers, C+3. It’s the only way, in my view, to save small businesses short of eliminating tariffs altogether.

At the same time, to cushion the blow many small companies that are able to absorb the 30% tariff are advancing their inventory purchases from China during the 90-day tariff window to desperately try to preserve sales and profits for the upcoming 2025 holiday season.

However, as it stands despite China and Trump indicating a willingness to negotiate a longer-term more permanent reduction to the existing tariff schemes, post-Christmas the party is over.

After 50+ changes to tariff policy in the last 100 days, there’s a growing sense the level of uncertainty in the corner office will only grow worse under Trump. And it’s time to play defense.

Here’s the plan:

• Get your goods on shore asap: Verify Transit Status: Confirm with your shipping broker and freight forwarder that your goods are or will be loaded at least 30-days before arriving in the U.S., and will arrive at the Port of Los Angeles/Long Beach, Oakland or Seattle no later than July 30^th 2025 to avoid the deadline rush. Be sure to double check Certificates of Origin and Bills of Lading documents to prove country of origin, value and sign-off dates. Keep in mind shipping rates may be higher as a rush of new orders refills vessel capacity.

• Accelerate Delivery: If arrival is scheduled close to or after July 30, work with your logistics provider to change carriers to expedite shipping, potentially rerouting cargo to faster vessels or prioritized loading. Contact your freight forwarder to explore all your options.

• Explore Bonded Warehouses: If goods cannot arrive before July 30th, consider redirecting them to a U.S. bonded warehouse, bypassing U.S. Customs, where they can be stored without immediate tariff payment until you can identify better tariff options.

Meanwhile, cover your flanks:

• Advocate for Exemptions: Partner with trade groups like the Consumer Brands Association for consumer-packaged goods, which successfully lobbied for exemptions. Or contact the National Association of Manufacturers (NAM) to join advocacy efforts for fair trade.

• Demonstrate Economic Harm: Compile data showing how tariffs threaten sales, profits, jobs and supply chains. Raising prices to offset a 145% or 30% tariff is not a reliable competitive strategy, and will result in economic loss or bankruptcy. Make the case.

• Leverage Political Connections: Reach out to local news-makers, law-makers or Trump trade-team members directly, like Commerce Secretary Howard Lutnick via public channels. And sign on to the U.S. Chamber of Commerce’s efforts to call on the president for immediate tariff relief.

Now is also the time to review your business model, pricing, customer loyalty and sales channels. This is what I meant by heeding the warning shot across the bow. For small businesses that rely on Chinese products and supplies, 30% tariffs may be the new norm. If that makes your products un-competitive look for alternative sources, like Made in America.

If you can’t find cost-effective suppliers here on American soil, just follow your manufacturer. Many Chinese producers are setting up shop outside China to avoid high tariffs.

• Build Strategic Alliances: Partner with competitors or suppliers to share tariff-related costs, such as joint volume purchasing from non-Chinese markets.

• Mitigate Chinese Supplier Dependency: This means to embrace the USMCA agreement with duty free products from Canada and Mexico if at all possible. Or if cheaper products are super important to your customers, expand your import horizons to lower-tariff “friend-shoring” countries like India (27%), Thailand (7.5%) and Malaysia (6.1%) among others. We all know that shifting long entrenched supply chains is not easy. That’s where the U.S. Chamber of Commerce (ITA) can assist you in finding and vetting new suppliers. Call them.

Finally, listen up! These crazy ever-changing tariffs on goods from China are more than a mere nuisance. They could be the new norm.

So stock up now or find new lower-cost suppliers in places like Mexico or India. And better still, don’t overlook Made in America options. Many Americans will pay more for them. After all, that’s the key point Trump is trying to make. But either way, if you don’t prepare before August 2025, you could face skyrocketing import prices, which could easily put you out of business for good.

So what are you going to do?

You’re going to get your goods in, push for exemptions, and start looking beyond China for answers! That’s my “do it now” advice.

Make sense?

Rick

Do you remember your first elementary school Report Card? I do. I still have an old one, faded blue cardboard with hand-written Cs and Ds. I was a difficult child.

But did you ever wish you could give your teacher a report card instead?

This is my take on doing exactly that. A post-election review and assessment of our 47^th president from the people, politics and markets worldwide he’s rocked to the core inside the first 30 days of his new administration.

They say you get what you voted for. And while the ground shaking agenda Trump has embarked on lends confidence for business leaders early on, it’s the president’s base that tallies the real grades.

Here’s what I mean.

As of this writing, what started with a loud bang has faded. Trump’s popularity is slipping. As markets once flirted with all-time highs, Trump’s handling of the US economy in a recent Reuters poll shows more Americans disapprove of his approach leaping 10 points from 36% to 47% disapproval rate since his Jan 20^th 2025, inaugural day.

One the other hand, the recent Conference Board CEO Survey shows CEOs “were substantially more optimistic about current economic conditions as well as about future economic conditions” in 2025 and have moved from Cautious Optimism to Confident about the outlook this year.

More than 70% plan to raise wages by 3% which explains in part why the stock market is reaching past the mixed news to new highs.

But there is a growing sense of caution. A drop in Services PMI (Purchasing Managers’ mid-month Flash Index) in February from 52.9 to 49.7 marks the lowest since 2023. Any figure below 50 indicates contraction. Meanwhile, “uncertainty levels” are spiking  across the economy and consumer confidence as tracked by the Michigan Consumer Sentiment survey just released has flipped to a 15-month low. Which begs the question: Is Trump dragging the economy into Recession, or worse, Stagflation?

The short answer is Maybe. One key indicator is the declining Housing Starts figures down 10% in January. Did you know Housing permit-drops preceded a recession in 8 out of last 9 recessions since World War II? Yikes!

So what’s going on?

It seems as if American business leaders either have their collective heads in the ground or have their lips on the Kool-Aid glass, punch drunk on the outlook of longer-term wins, and willing to accept the short-term chaos to get them.

Still, 55% of CEOs do acknowledge “geopolitical instability” as their #1 high-impact risk to business conditions this year. But for now, if you ask Captain John Smith of the RMS Titanic about the economy, it’s… ‘What iceberg? Full steam ahead’!

All this oscillating up and down is enough to make me sea-sick trying to follow it but does have a common square root denominator sitting in the oval office, pulling levers and pushing buttons behind a curtain like the Great Oz.  

Some say issuing a Trump report card at this early stage is absurd, like judging a race before the starting gun. And I agree. But, I did it anyway.

Let’s see if you agree:

In his first 30+ days on the job, Trump has signed more than 70 executive orders on his way to the 220 he signed in his first term. As a consequence, the administration has already issued more than 30,000 ‘Your Fired’ pink slips to federal employees, cut fed-funding for dozens of domestic and international programs, rolled back more than 1200 regulations, put reciprocal tariffs on all countries that tariff US imports, closed the border to undocumented migrants and made friends with Putin. That’s a lot!

Like no administration in decades the Trump team has left no stone unturned. And so given his progress on several key issues here’s my assessment of his handling of these subjects thus far.

You be the judge.

DOGE – Don’t Overlook Getting Eliminated

B+

 I gave him a B+ here because the Department of Government Efficiency (DOGE), led by Elon, is claiming it’s identified more than $55 billion in savings. While supporters applaud the efforts to streamline government and reduce spending, critics worry about disrupted services and hasty disruptive decision-making.

Key departments like Health and Human Services, Veterans Affairs, and the IRS have seen significant workforce reductions. But the initiative’s long-term impact remains uncertain, with legal challenges mounting and concerns about essential services growing. Americans are divided, weighing potential efficiency gains against the human cost and service disruptions of these sweeping overhauls.

Only time will tell if DOGE will hit the mark. Midterm elections will be the first big test in 2026 in my view. In the meanwhile, it’s buckle-up time America – this roller-coaster is just getting started.

Trade Tariffs & Inflation

C-

This grade comes in mixed on the downside. Before the elections Trump promised several things to get the US back on track and among them was reducing inflation. Americans want prices to go down, not up. But that’s easier said than done given the current state of uncertainty. Trump is insisting on a 20% tariff on China, a 25% tariff on Canada and Mexico and a “reciprocal” tariff on everybody else, which is fair in my view, but potentially inflationary as prices will increase on key imports like autos and raw material commodities.

At this time with a 2.9% year over year inflation rate the U.S. Federal Reserve refuses to lower its benchmark Fed Funds rate any further as I had hoped for in my article2025: The Good, the Bad and the Ugly Year Ahead published by CEO World where citing the last mile down to 2% target is going to be a tough haul. That said, this leaves us at the mercy of market pricing dynamics whereby we are unlikely to see inflation fall much further this year experts say.

Immigration Crackdown

C+

“It’s the most difficult problem,” Trump said in a recent White House governors’ luncheon. Millions of people have crossed the southern border, many with criminal, gang, and drug cartel backgrounds. Enough is enough in so many words, regardless of right or wrong Trump has in his first month authorized ICE to pursue and deport the bad apples asap. This is a tough call. Some like the aggressive stance others are taking hits to their bottom line.

He deployed 1,000 troops to the southern border, re-instated his “Remain in Mexico” policy, and broadened the scope of deports for undocumented immigrants. The sudden crackdown is sending shockwaves across Mexican communities and industries like agriculture and construction that employ migrant labor but also including a big reduction in the number of street vendors who see themselves as easy targets for ICE in many US cities: exactly what voters wanted.

Russia/Ukraine war

D

Personally, I would prefer to give Trump an F for failure as American witnessed a stunning line of reasoning by Trump recently when he called Ukrainian President Volodymyr Zelensky a dictator for not holding elections, and the one who started the war. Needless to say, these remarks set the internet on fire appealing to Zelensky’s defense, and flipping the EU and NATO on its side, giving notice that Americans are done funding Europe’s defense, end of story.

Meanwhile Trump is dead set on ending the war despite his offer to help Ukraine if Zelensky agrees to repay the American people with Ukraine’s abundant natural rare-earth minerals used in electronics, batteries and computers in a deal that would reduce our reliance on China. I like that idea.

But Zelensky said the deal didn’t go far enough yet to secure Ukraine from a future attack he firmly believes will come from a re-armed Putin in time.

The bottom-line Trumps says is getting a return on the billions Americans spent on defending Ukraine, but the bull in the China shop approach has ruffled the feathers of America’s allies in NATO and given pause to America’s leadership and logic on the global stage. This approach in my view is completely wrong, and I anticipate Trump will need to back off the unproductive rhetoric before Ukraine can agree to any ceasefire deal.

Trumps Overall Summary Assessment

C-

This is my overall grade for Trump at this early stage. And from the look of things when you add it all up, Trump’s report card is likely to get him grounded from playing golf on weekends by mom and dad, or other hobbies until he gets his grades up, as I had to do back in the day.

Still. The economy looks resilient despite Trump’s inaugural era of uncertainty. Unemployment rate at 4.0% is the lowest since 2019 and among the lowest in decades. That’s a welcome support beam.

When people have jobs the US economy grows, which means if you can navigate the shifting landscape your business and our GDP will grow as well, which may explain the intoxicated CEO confidence.

On the other hand, if consumer confidence continues to slide and Americans get spooked, as I see is occurring now, more employers will lay-off workers as customers pull back spending and wait for calmer seas. And that could portend a recession later this year if we’re not careful.

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In conclusion, the way I see it, Trump’s second term has started off with a flurry of activity and controversy. His aggressive approach to right-sizing government efficiency, trade, immigration, and foreign policy has yielded mixed results, and divided reactions. While business leaders express optimism, public opinion and economic indicators are flashing signs of caution.

As we move forward, it’s crucial to monitor how these early decisions impact long-term economic stability, global partnerships, and social cohesion within the United States.

The coming months will be critical in determining whether Trump’s bold strategies will lead to sustainable growth and improved conditions for Americans, or if they will result in increased uncertainty and a potential economic downturn.

Ultimately, the true measure of the President’s second term will depend on how well his administration can balance its ambitious agenda with the complex realities of governance and the diverse needs of the American people. And despite my tough grades, I’m still hopeful and optimistic.

What say you? How would you grade Trump’s performance at this point?

Rick.

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About the author: Rick Andrade is an investment banker and market advisor in Los Angeles, Ca, where he helps CEOs and business owners buy, sell, and finance middle-market companies. Rick earned his BA and MBA from UCLA, along with his Series 7, 63, & 79 FINRA securities licenses. He is also a CA Real Estate Broker and blogs at www.RickAndrade.com on issues important to business owners. He can be reached at rickandrade.com.