Economy
Why aren’t companies speeding up investment? A new theory offers an answer to an economic paradox
David Ikenberry discusses the paradox of slow corporate investment despite record profits and cash reserves. He attributes this to excess capacity and structural economic rigidities, challenging traditional assessments like Tobin’s Q and highlighting the need for understanding demand issues in economic policy.
David Ikenberry, University of Colorado Boulder
For years, I’ve puzzled over a question that seems to defy common sense: If stock markets are hitting records and tech innovation seems endless, why aren’t companies pouring money back into new projects?
Yes, they’re still investing – but the pace of business spending is slower than you’d expect, especially outside of AI.
And if you’ve noticed headlines about sluggish business spending even as corporate profits soar, you’re not alone. It’s a puzzle that’s confounded economists, policymakers and investors for decades. Back in 1975, U.S. public companies reinvested an average of 25 cents for every dollar on their balance sheets. Today, that figure is closer to 12 cents.
In other words, corporate America is flush with cash, but it’s surprisingly stingy about reinvesting in its own future. What happened?
I’m an economist, and my colleague Gustavo Grullon and I recently published a study in the Journal of Finance that turns the field’s conventional wisdom on its head. Our research suggests the issue isn’t cautious executives or jittery markets – it’s about how economists have historically measured companies’ incentives to invest in the first place.
Asking the wrong Q
For decades, economists have relied on a simple but appealing ratio – Tobin’s Q, named after the famous economist James Tobin – to gauge whether companies should ramp up investment.
They calculate this by dividing a company’s market value – what it would take to purchase the firm outright with cash – by its replacement value, or how much it would cost to rebuild the company from scratch. The result is called “Q.” The higher the Q, the theory goes, the more incentive executives have to invest.
But reality hasn’t conformed to fit the theory. Over the past half-century, Tobin’s Q has gone up, yet investment rates have gone down sharply.
Why the disconnect? Our research points to one key culprit: excess capacity. Many U.S. companies already have more factories, machines or service capability than they can use. By not correcting for this issue, the traditional Tobin’s Q will overstate the incentive that companies have to grow.
To see this, consider a commercial real estate company that owns a portfolio of office buildings. In recent years, with the rise of e-commerce and remote work, many of their properties have been running well below capacity. Now suppose a few new tenants start paying rent and begin absorbing a portion of that empty space. Stock prices will rise in response to seeing these new cash flows, which in turn will lead Q to rise.
Traditionally, this increase in Q would suggest that it’s a good time to invest in new buildings – but the reality is quite different with idle capacity still in the system. Why pour money into building another office tower if existing ones still have empty floors?
This key idea is that what matters isn’t the average value of all assets – it’s the marginal value of adding one more dollar of investment. And because capacity utilization has been steadily eroding over the past half-century, many firms see little reason to invest.
That last point may come as a surprise, but the U.S. economy, with all its factories and offices, isn’t nearly as abuzz with activity as it was after, say, World War II. Today, many sectors operate well below full throttle. This growing slack in the system over time helps explain why companies have pulled back on their rate of investment, even as profits and market values climb.
Why has capacity utilization fallen so much over the past half-century? It’s not entirely clear, but what economists call “structural economic rigidities” – things such as regulatory hurdles, labor market frictions or shifts in cost structure – seem to be part of the answer. These factors can drag businesses into a state of chronic underuse, especially after recessions.
Why it matters
This isn’t just an academic debate. The implications are profound, whether you closely follow Wall Street or just enjoy armchair economic policy debates. For one thing, this dynamic might help explain why tax cuts haven’t spurred investment the way supporters have hoped.
Take the 2017 Tax Cuts and Jobs Act, which slashed the top corporate tax rate from 35% to 21% and introduced full expensing for equipment investments. Supporters promised a wave of new investment.
But when my colleague and I looked at the numbers, we found the opposite. In the four years before the tax cuts, publicly traded U.S. firms had an aggregate investment rate, including intangibles, of 13.9%. In the four years after the tax cut, the average investment rate fell to 12.4% – in other words, no evidence of a bump.
Where did those liberated cash flows go? Instead of plowing this newfound cash after the tax cuts into new projects, many companies funneled it into stock buybacks and dividends.
In retrospect, this makes sense. If a company has excess capacity, the incentive to invest should be more muted, even if new machines are suddenly cheaper thanks to tax breaks. If the demand isn’t there, why buy them?
Even with the most generous tax incentives, the core challenge remains: You can’t force-feed investment into an economy already swimming in excess capacity. If companies don’t see real, scalable demand, tax breaks alone aren’t likely to unlock a new era of business spending.
That doesn’t mean tax policy doesn’t matter – it does, especially for smaller firms with real growth prospects. But for the large, well-established firms that make up the lion’s share of the economy, the bigger challenge is demand. Rather than trying to stimulate even more investment, policymakers should prioritize understanding why demand is sagging relative to supply and reducing economic rigidities where they can. That way, the capacity generated by new investment has somewhere useful to go.
David Ikenberry, Professor of Finance, Leeds School of Business, University of Colorado Boulder
This article is republished from The Conversation under a Creative Commons license. Read the original article.
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McDonald’s First Job Confessional Turns Career Stories Into Free Meal Opportunity
McDonald’s is launching First Job Confessional, a campaign inviting fans to share first job stories for a chance to receive a $15 gift card in select cities.
First Job Confessional
McDonald’s is putting first jobs in the spotlight with a new campaign that asks fans to share the real-world skills they gained early in their working lives. Launched on National Employee Appreciation Day, the brand’s First Job Confessional invites people to reflect on how those first roles helped shape their careers — and, in some cases, earn a free meal in the process.
The campaign is built around a simple idea: first jobs often teach lasting skills that deserve more recognition. Whether someone learned problem-solving while babysitting, communication during a lunch rush, or teamwork behind a counter, McDonald’s is framing those experiences as valuable career foundations. The company says those are the same kinds of skills employers continue to prioritize as workplace demands evolve.
How the First Job Confessional Works
In select cities, McDonald’s is setting up confessional booths designed to look like ordering kiosks. But instead of placing a meal order, participants can record a story about their first job and the skills they picked up along the way. Those who take part in person will have the opportunity to receive a $15 McDonald’s gift card, while supplies last.
Fans who cannot attend in person can still join online by posting their stories using #FirstJobConfessional. McDonald’s says selected videos may also be featured on its YouTube channel, extending the campaign beyond the live events.
External Related Links
- McDonald’s corporate article: McDonald’s is Asking Fans to Get Real About Their First Job Skills in Exchange for Free Meals
- McDonald’s 1 in 8: First Job Confessional
- McDonald’s 1 in 8 home page
- Marketing Dive coverage of the campaign
- Parade coverage of the First Job Confessional tour
Source Links
- Original PRNewswire press release from McDonald’s USA, LLC
- McDonald’s official corporate story
- McDonald’s 1 in 8 First Job Confessional page
- McDonald’s 1 in 8 official website
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Jay Leno Test Drives the Slate Truck as Startup Pushes Toward 2026 Launch
The affordable electric pickup from Slate Auto is gaining attention after Jay Leno test drove the prototype on Jay Leno’s Garage. Here’s the latest update on pricing, features, reservations, and the planned 2026 production launch.
Testing the Slate Truck
The affordable electric pickup from Slate Auto is continuing to gain attention as the startup moves closer to production. One of the most visible recent developments came when legendary car collector and TV host Jay Leno featured the truck on his popular YouTube series Jay Leno’s Garage.
The episode offered one of the most detailed looks yet at the upcoming Slate Truck, including a real-world test drive, design insights, and a closer look at the company’s philosophy behind building what could become one of America’s most affordable electric vehicles.
Watch the Jay Leno Test Drive
What Jay Leno Revealed About the Slate Truck
During the episode, Leno drove a pre-production prototype of the truck while engineers from Slate Auto explained the design approach.
Unlike many modern EVs packed with luxury features, the Slate Truck is intentionally simple.
Key highlights from the test drive include:
A Focus on Simplicity and Repairability
One of the most notable ideas behind the truck is that it is designed to be easy to repair and modify. Instead of relying on proprietary parts or complex electronics, the vehicle uses a more straightforward architecture that could allow owners or independent mechanics to work on it.
This approach contrasts with many EVs that require dealership service or specialized tools.
Modular Body Panels and Customization
The Slate Truck is built around a modular platform with removable exterior panels and optional accessory kits.
According to the company, owners will be able to customize the vehicle with:
Different body panel styles Accessory racks and cargo options A potential conversion kit that can transform the pickup into a small SUV
The idea is to allow the vehicle to evolve with the owner’s needs over time.
Minimalist Interior
Inside the prototype shown to Leno, the truck features a very basic interior layout.
Instead of a large infotainment system, the vehicle relies heavily on smartphone integration and simpler controls to keep costs down. This minimalist philosophy is part of the company’s effort to build a lower-cost EV.
Pricing and the “Affordable EV” Promise
When the truck was first revealed in 2025, Slate Auto suggested the vehicle could cost under $20,000 after incentives.
However, with changes to federal EV incentives and updated pricing expectations, analysts now estimate the truck will likely start around the mid-$20,000 range.
Even at that price, the vehicle could still become one of the most affordable electric trucks available in the United States.
Production Plans in Indiana
The company plans to manufacture the truck in Warsaw, Indiana, where a large former industrial facility is being converted into an EV factory.
Production targets include:
Production start: Late 2026 Early deliveries: Possibly 2027 Potential capacity: Up to about 150,000 vehicles per year once fully ramped
Strong early interest has also been reported, with more than 100,000 reservations placed for the truck shortly after its reveal.
A Different Kind of Electric Truck
The Slate Truck is entering a market where most electric pickups—such as the Ford F-150 Lightning and Rivian R1T—sit at much higher price points.
Rather than competing on luxury or performance, the Slate Truck is aiming to fill a different niche: a practical, customizable, and relatively affordable electric work vehicle.
If the company can deliver on its promises, it could open the door to a new category of budget-friendly EVs.
For now, the test drive on Jay Leno’s Garage provides one of the clearest glimpses yet at how the truck might perform in the real world.
Related Coverage on STM Daily News
- Automotive News and Innovation – STM Daily News
- Boom Supersonic and the Overture: The Return of Commercial Supersonic Travel
- The Evolution of Public Transportation in Los Angeles
- Technology News and Emerging Innovations
Further Reading and Information
- Slate Auto Official Website
- Watch the Slate Truck Test Drive on Jay Leno’s Garage
- Car and Driver: First Look at the Slate Truck
- TechCrunch: Slate Auto Leadership Changes Ahead of Launch
- InsideEVs: Latest Electric Vehicle News
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Economy
US Consumer Confidence Fell Sharply in January: What the Latest Conference Board Data Signals
In January 2026, U.S. consumer confidence plummeted to its lowest level since 2014, as the Consumer Confidence Index fell by 9.7 points to 84.5. Concerns about inflation, employment, and economic stability led to decreased optimism across all demographics and a cautious approach to major purchases, signaling potential recession ahead.
US consumers started 2026 on a noticeably more cautious note. New data from The Conference Board shows its Consumer Confidence Index® fell sharply in January, wiping out a brief December rebound and pushing overall sentiment to its weakest level in more than a decade.
Confidence drops to the lowest level since 2014
The Conference Board Consumer Confidence Index® fell 9.7 points in January to 84.5 (1985=100), down from an upwardly revised 94.2 in December. The organization noted that December’s figure was revised up by 5.1 points, meaning what initially looked like a decline last month was actually a small uptick—before January’s slide reasserted the broader downward trend.
The cutoff for the preliminary January results was January 16, 2026.
Both “right now” and “what’s next” got worse
The decline wasn’t isolated to one part of the survey. Both consumers’ views of current conditions and their expectations for the months ahead weakened.
- Present Situation Index: down 9.9 points to 113.7
- Expectations Index: down 9.5 points to 65.1
That Expectations reading matters because it’s well below 80, a level The Conference Board says “usually signals a recession ahead.”
Dana M. Peterson, Chief Economist at The Conference Board, summed it up bluntly: confidence “collapsed” in January, with all five components deteriorating. The overall Index hit its lowest level since May 2014.
What consumers are worried about (and what’s showing up in write-ins)
The Conference Board said consumers’ write-in responses continued to skew pessimistic. The biggest themes weren’t hard to guess:
- Prices and inflation
- Oil and gas prices
- Food and grocery prices
Mentions of tariffs and trade, politics, and the labor market also rose in January. References to health/insuranceand war edged higher.
In other words: consumers aren’t just feeling uneasy—they’re pointing to specific pressure points that affect day-to-day costs and long-term stability.
Labor market perceptions softened
Consumers’ views of employment conditions weakened, with fewer respondents saying jobs are plentiful and more saying jobs are hard to get.
- 23.9% said jobs were “plentiful,” down from 27.5% in December
- 20.8% said jobs were “hard to get,” up from 19.1%
That shift matters because consumer confidence often follows the labor market. When people feel less secure about job availability, they tend to pull back on big purchases and discretionary spending.
Expectations for business conditions and jobs turned more negative
Looking six months out, pessimism increased:
- 15.6% expected business conditions to improve (down from 18.7%)
- 22.9% expected business conditions to worsen (up from 21.3%)
On jobs:
- 13.9% expected more jobs to be available (down from 17.4%)
- 28.5% anticipated fewer jobs (up from 26.0%)
Income expectations cooled too:
- 15.7% expected incomes to increase (down from 18.8%)
- 12.6% expected incomes to decline (down slightly from 13.0%)
So while fewer people expected their income to fall, the bigger story is that optimism about income growth faded.
Who’s feeling it most: age, income, and politics
On a six-month moving average basis, confidence dipped across:
- All age groups (though under 35 remained more confident than older consumers)
- All generations (with Gen Z still the most optimistic)
- All income brackets (with those earning under $15K the least optimistic)
- All political affiliations (with the sharpest decline among Independents)
This broad-based decline suggests the shift isn’t confined to one demographic pocket—it’s spreading.
Big-ticket buying plans: more “maybe,” less “yes”
The survey also pointed to increased caution around major purchases.
Consumers saying “yes” to buying big-ticket items declined in January, while “maybe” responses rose and “no” edged higher.
- Auto buying plans were flat overall, though expectations for new cars continued to falter and plans to buy used cars climbed.
- Homebuying expectations continued to retreat.
- Plans to purchase appliances, furniture, and TVs decreased.
- Electronics purchase intentions dipped in most categories—except smartphones, which continued trending upward on a six-month moving average basis.
Services spending softened—but restaurants and travel stayed interesting
Planned spending on services over the next six months weakened in January, with fewer consumers saying “yes” and more shifting into “maybe.”
Still, a few categories stood out:
- Restaurants, bars, and take-out remained the top planned services spending category and continued to rise.
- Consumers also intended to spend more on hotels/motels for personal travel, airfare/trains, and motor vehicle services.
The Conference Board noted this was surprising given the plunge in vacation plans—especially for domestic travel—also recorded in the survey.
What to watch next
January’s report paints a clear picture: consumers are feeling squeezed by costs, less confident about the labor market, and more hesitant about major purchases. The Expectations Index dropping deeper below the “recession signal” threshold will likely keep economists, businesses, and policymakers watching the next few releases closely.
The Conference Board publishes the Consumer Confidence Index® at 10 a.m. ET on the last Tuesday of every month.
Source: The Conference Board, January 2026 Consumer Confidence Survey® (PRNewswire release, Jan. 27, 2026).
