Curated Insights 2018.06.17

What helps or hurts investment returns? Here’s a ranking

An unexpected challenge in performing this exercise is a tendency for some elements to offset others. For example, changes in profits could be offset by widening or contracting price-earnings ratios; sentiment might offset valuation; returns tend to vary inversely with risk. Why does this matter? Because in the real world, one hand giveth while the other taketh away. This concept of cancellation matters a great deal to total portfolio returns.

The overall cost of a portfolio, compounded over 20 or 30 years, can add up to (or subtract) a substantial amount of the returns. One Vanguard Group study noted that a 110 basis-point expense ratio can cost as much as 25 percent of total returns after 30 years. That does not take into consideration other costs such as trading expenses, capital-gains taxes or account location (i.e., using qualified or tax-deferred accounts). The rise of indexing during the past decade is a tacit acknowledgment that on average, cost matters more than stock-picking prowess.

Those people born in 1948 not only managed to have their peak earning and investing years (35-65) coincide with multiple bull markets and interest rates dropping from more than 15 percent to less than 1 percent. They also lucked into a market that tripled in the decade before retirement.

Behavior and discipline > Humility and learning > Longevity and starting early > Valuation and year of birth > Asset allocation > Costs and expenses > Security selection


The forging of a skeptic

I think another thing people have gotten confused about is the sustainable competitive advantage and the moat. Durable competitive advantage and moats are not the same thing as brands. People sometimes use these terms interchangeably. I have also seen people ascribe competitive advantages to brands that don’t have them. For example, retailers — retailers have brands. We all know what Macy’s is, but retailing is fundamentally a bad business.

In essence, the merits of a brand are not the brand itself; they are the qualities of the product that create the consumer loyalty. What attracted him, ultimately, to Coca-Cola is that Coca-Cola’s formula make you more, not less, thirsty, and supposedly has been tested to prove that it doesn’t wear out the palate, no matter how much is consumed. This implies infinite sales potential. The cute commercials and cheery red logo create an association in people’s minds with those qualities. They aren’t what makes it Coca-Cola.

While there are moats that include brands, a brand is not a moat. The moat is whatever qualities are innate to the business that make it difficult to compete with

Worried about big tech? Chinese giants make America’s look tame

They have both funded ventures that offer online education, make electric cars and rent out bicycles. For the giants, such initiatives represent new opportunities for people to use their digital wallets — Ant Financial’s Alipay and Tencent’s WeChat Pay — and new ways to collect data on consumer behavior. Analysts at Sanford C. Bernstein counted 247 investment deals by Tencent in recent years and 156 by Alibaba, though given the pace of the companies’ deal-making, they said their database was “likely to be perennially incomplete.”

In a report this week, Morgan Stanley predicted that by 2027, the total market in China in which Alibaba could be making money will be worth $19 trillion — more than Amazon’s potential market worldwide.

‘As long as they’re unfriendly, it’s a sign they have confidence’

Keyence keeps up compound sales growth of 14 per cent a year (1986-2016) even with sales in the billions of dollars. It takes seemingly simple products such as barcode readers and sells them for five times the cost of manufacture.

Keyence’s first secret is its production outsourcing. It buys raw materials in bulk and sends them to component suppliers; it collects the components and sends them to assemblers and performs the final inspection of goods itself.

The second secret is what Keyence really sells: not a product, but a way to make a factory more efficient. Graeme McDonald, machinery analyst at Citigroup in Tokyo, says the group’s sales engineers “can often provide an idea of how to improve your manufacturing set-up literally on the site with an idea of the payback time and return on investment”. It offers quick victories — such as a sensor to replace manual inspection, for example — not risky projects. “The products they sell are not capital expenditure, they’re cost to the factory manager,” says Mr Noguchi. If the manager can save a $40,000 salary with a $20,000 gadget, they will sign off quickly, without worrying how much Keyence earns.

The products are high quality, if not necessarily unique. Keyence has a modest research budget and less than a tenth of the US patents held by rival automation companies such as Fanuc.

Fanuc in trouble? Talk to the (robot) hand

Fair enough, it’s a tough world for all iPhone dependents. Here’s a wrinkle in the bear-case thesis, though: Overseas shipments of robots and Robodrills from Yokohama, while down elsewhere, are up sharply to Asia. The volume of robots shipped by the port – mostly Fanuc’s – remains close to its highest in decades, at about 5,000 units in April. The company’s backlog of orders is near to its highest in more than two years, according to Bernstein analysts.

How e-commerce with drone delivery is taking flight in China

It is still waiting to earn back its investment in drone-delivery infrastructure, although it says that making a delivery by drone costs a fifth of the price than by man-and-van, once the driver’s labour is taken into account. Liu Qiangdong, JD’s chief executive, says drone delivery will cut costs by 70% once it is scaled up across the country. Villagers tend to buy washing powder, accessories for their phones, maternity goods and fresh food. The firm has made 20,000 such deliveries to date.

JD may have added drones to daily Chinese village life, but whether they will make financial sense for the company over time remains to be seen. Current models of drone are pricey, although JD says the cost will gradually come down as it scales up the network and builds more drones (it plans to sell those it makes to other firms, as well as use them for its operations). The government approves of its operations in rural areas, and is planning to build a new train station in Suqian next to JD’s drone base. If JD can use drone delivery to cut its costs and attract rural shoppers, that will help the firm compete with its arch-rival in e-commerce, Alibaba, which has not, as yet, seen the value of drone delivery. JD hopes that will prove to be a mistake.


Internet lending is booming in China

The balance of online consumer loans in China has grown about fivefold between 2015 and 2017, reaching 350 billion yuan ($54.6 billion), according to Chinese research company Analysys. According to a survey conducted by research specialist Analysys in December 2017, people between the ages of 24 and 35 accounted for more than 70% of consumer borrowers in China.

Chinese consumers, especially people born in 1980 and later, are less squeamish than their older peers about buying on credit. But the total balance of consumer loans in China is still about 60% lower than that in the U.S. and is expected to continue growing. Analysys estimates that the balance of internet loans in China will more than double to 720 billion yuan in 2019, compared with 350 billion yuan in 2017. That flow of credit will likely give a lift to the Chinese consumer market.

The scooter economy

The mistake in Kalanick’s thinking is two-fold: First, up-and-until the point that self-driving cars are widely available — that is, not simply invented, but built-and-deployed at scale — Uber’s drivers are its biggest competitive advantage. Kalanick’s public statements on the matter hardly evinced understanding on this point. Second, bringing self-driving cars to market would entail huge amounts of capital investment. For one, this means it would be unlikely that Google, a company that rushes to reassure investors when it loses tens of basis points in margin, would do so by itself, and for another, whatever companies did make such an investment would be highly incentivized to maximize utilization of said investment as soon as possible. That means plugging into the dominant transportation-as-a-service network, which means partnering with Uber.

My contention is that Uber would have been best-served concentrating all of its resources on its driver-centric model, even as it built relationships with everyone in the self-driving space, positioning itself to be the best route to customers for whoever wins the self-driving technology battle.

Why you should read those boring 10-K filings

The vast majority of the text changes are concentrated in the Management Discussion and Analysis (MD&A) of the 10-K. These disclosures also tend to be more negative than positive, perhaps because the reports are typically drafted by lawyers who tilt toward disclosing negative trends more than positive ones. When the authors applied natural language text processing to evaluate the changes, they found that 86 percent reflected negative sentiment shifts and only 14 percent positive shifts. Furthermore, the text differences contain useful information for predicting future earnings: Changes in the 10-K written text today predict earnings surprises in the future.

Given this negative bias to the textual changes and their ability to predict future earnings, the study shows that companies with 10-K text modifications experience noticeably lower future stock returns than other firms. For example, the authors construct a portfolio that goes long on companies with no material textual changes and shorts firms that contain such changes. That portfolio earns an abnormal positive return of up to 7 percent per year above the market.

Curated Insights 2018.04.29

Amazon shareholder letter 2017

In the very first lesson, the coach gave her some wonderful advice. “Most people,” he said, “think that if they work hard, they should be able to master a handstand in about two weeks. The reality is that it takes about six months of daily practice. If you think you should be able to do it in two weeks, you’re just going to end up quitting.” Unrealistic beliefs on scope – often hidden and undiscussed – kill high standards. To achieve high standards yourself or as part of a team, you need to form and proactively communicate realistic beliefs about how hard something is going to be – something this coach understood well.

The football coach doesn’t need to be able to throw, and a film director doesn’t need to be able to act. But they both do need to recognize high standards for those things and teach realistic expectations on scope. Even in the example of writing a six-page memo, that’s teamwork. Someone on the team needs to have the skill, but it doesn’t have to be you. (As a side note, by tradition at Amazon, authors’ names never appear on the memos – the memo is from the whole team.)

How China is buying its way into Europe

We analyzed data for 678 completed or pending deals in 30 countries since 2008 for which financial terms were released, and found that Chinese state-backed and private companies have been involved in deals worth at least $255 billion across the European continent. Approximately 360 companies have been taken over, from Italian tire maker Pirelli & C. SpA to Irish aircraft leasing company Avolon Holdings Ltd., while Chinese entities also partially or wholly own at least four airports, six seaports, wind farms in at least nine countries and 13 professional soccer teams.

Importantly, the available figures underestimate the true size and scope of China’s ambitions in Europe. They notably exclude 355 mergers, investments and joint ventures—the primary types of deals examined here—for which terms were not disclosed. Bloomberg estimates or reporting on a dozen of the higher-profile deals among this group suggest an additional total value of $13.3 billion. Also not included: greenfield developments or stock-market operations totaling at least $40 billion, as compiled by researchers at the American Enterprise Institute and the European Council on Foreign Relations, plus a $9 billion stake in Mercedes-Benz parent company Daimler AG by Zhejiang Geely Holding Group Co. chairman Li Shufu reported by Bloomberg.

Is Google cheap?

According to Net Market Share, Google has around 82 per cent of the entire online search market. That figure includes China, where they are banned. Bing has around 5 per cent of the pie so, if the 3 trillion figure for Search holds true, Microsoft’s competitor processes 6,022 searches per second, versus Google’s 96,450.

Our readers may also point out Alphabet’s dependence on advertising revenues, a historically cyclical business which is an easy tap to turn off for many corporations in economic downturns. That being said, one could easily counter by mentioning the good ship Alphabet’s serene sail through the currently stormy waters of the wider advertising world. Or the fact that there are very few alternatives in terms of audience reach.

We have not even accounted for Google’s famed ‘Other Bets’ line — a collection of misfit, moonshot investments including self-driving software Waymo, health-data laboratory Verily Sciences and Alphaville favourite, smart-city planner SideWalk Labs.

Open, closed, and privacy

To focus on simply Google and Facebook, though, is to miss how much other data collection is going on: ad networks are tracking you on nearly every website you visit, your credit card company is tracking your purchases (and by extension your location), your grocery store is tracking your eating habit, the list goes on and on. Moreover, the further down you go down the data food chain, the more likely it is that data is bought and sold. That, of course, is as open as it gets.

First, it is even more unlikely that a challenger to either will arise without meaningful access to their proprietary data. This, to be fair, was already quite unlikely: the entire industry learned from Instagram’s piggy-backing on Twitter’s social graph that sharing data with a potential competitor was a bad idea from a business perspective.

Second, Google and Facebook will increasingly be the only source of innovations that leverage their data; it will be too politically risky for either to share anything with third parties. That means new features that rely on user data must be built by one of the two giants, or, as is always the case in a centrally-planned system relative to a market, not built at all.

Third, Google and Facebook’s advertising advantage, already massive, is going to become overwhelming. Both companies generate the majority of their user data on their own platforms, which is to say their data collection and advertising business are integrated. Most of their competitors for digital advertising, on the other hand, are modular: some companies collect data, and other collect ads; such a model, in a society demanding ever more privacy, will be increasingly untenable.


Facebook beats in Q1 and boosts daily user growth to 1.45B amidst backlash

Zuckerberg says one of his biggest regrets is that Facebook didn’t get to shape the mobile ecosystem because the company was still small when iOS and Android launched. That’s why Zuckerberg is adamant about Facebook having a major role in the future of virtual reality and augmented reality, which he sees as computing platforms of the future.

Global recorded music revenues grew by $1.4 billion in 2017

Global recorded music revenues reached $17.4 billion in 2017, up from $16 billion in 2016 — an annual growth rate of 8 percent. Streaming revenues in particular have contributed to this growth, and were up 39 percent year-over-year to reach $7.4 billion, or 43 percent of all revenues. But perhaps the biggest story of all is the growth of artists without labels. With 27.2% year-on-year growth this was the fastest growing segment in 2017.

Investing and business lessons from Aileen Lee (Cowboy Ventures)

Venture investors are looking for large addressable markets. How big is the market? What is the problem that you’re trying to solve? Who’s on your team? And how relevant is the team to that problem? What is the product that you’ve built, if you have built something? Or what do the wireframes look like? What kind of traction or feedback have you gotten from the market in terms of whether people are going to like the product, or whether they do like the product? What does the financial model and the economic model look like? What are you going to do with the money?” “What is the mission and vision of the company? Venture investors are looking for a big mission and vision that’s quite ambitious and that can be backed up by, ‘Here’s where we want to be and here’s how we’re going to get there over time. This is what we want to get done the next 12 months or the next 18 months.’

If you don’t attack a big market, it’s highly unlikely you’re ever going to build a big company. Great markets make great companies. We’re never interested in creating markets – it’s too expensive. We’re interested in exploiting markets early. I like opportunities that are addressing markets so big that even the management team can’t get in its way.

Why is China treating North Carolina like the developing world?

It’s about 50 percent cheaper to raise hogs in North Carolina than in China. This is due to less-expensive pig-feed prices and larger farms, but it’s also because of loose business and environmental regulations, especially in red states, which have made the U.S. an increasingly attractive place for foreign companies to offshore costly and harmful business practices.

How?

The market is all about discounting and expectations. It always has been and it always will be.

On January 31, 2006, Google Inc. announced its financial results for the fourth quarter of 2005: revenues up 97%, net profit up 82%. It’s hard to imagine how such phenomenal growth could be bad news. But Wall Street’s analysts had expected Google to do even better….Google’s stock fell 16% in a matter of seconds, and the market in the shares had to be officially halted. When trading resumed, Google, whose stock had been at $432.66 just minutes earlier, was hammered down to $366…Google earned about $65 million less than Wall Street had expected, and in response Wall Street bashed $20.3 billion off Google’s market value.

Basis—the “stable” cryptocurrency with $133 million invested—explained

Basis coins won’t be directly backed by dollars or any other asset. Instead, the Basis blockchain will attempt to adjust the supply of Basis coins over time to maintain a peg to the dollar, much as foreign central banks expand and contract their own money supplies to maintain a stable currency value.

The more consequential change is the addition of a third asset class called bonds. When the value of Basis coins falls, the system creates new bonds and sells them for Basis coins. Each bond has a face value of one Basis coin (and hence $1), but investors can acquire them at a market-determined discount.

Then, during a subsequent expansion, the system pays back these bondholders before paying anything out to shareholders. Bondholders get their money back in a first-in-first-out order, with the oldest bond being repaid first.

In effect, buying a bond amounts to making a bet that the demand for coins will rebound in a timely fashion. The less confident the market is that this will happen, the steeper the discount—a bond might sell for 0.8, 0.5, or even 0.2 Basis coins—and the greater the potential profit.

Kids worldwide spend less time outdoors, and then need glasses

Eyeglass sales are expected to double globally between 2012 and 2026, and the amount of time people are spending indoors may be a leading cause. By 2050, half of the global population, or almost 5 billion people, are projected to be nearsighted, up from a quarter, or 1.4 billion, in 2000.

Interestingly, however, while outdoor time helps to prevent nearsightedness, it doesn’t seem to affect its progression once it develops. The same recent summary suggests that the rapid rises in Asia are related in part to outdoor time: “The limited questionnaire data available suggests that the time that children spend outdoors is lower in the developed countries of East and Southeast Asia.”

Regional Notes 2018.04.20

China replaces U.S. as top export market in another Asian nation

“The center of trade for Asia has clearly shifted to China from the U.S.,” said Eugenia Victorino, an economist at Australia & New Zealand Banking Group in Singapore. “Trade protectionism isn’t helping and Asian nations will realize more and more that when it comes to trade, China now punches a heavier weight.”

China has displaced the U.S. over the past decade as the top export market for many Asian economies, including Japan, South Korea, Thailand, Indonesia, and the Philippines. India is one of the few countries in the region that still counts America as a bigger market for goods than China.

Vietnam’s exports to China surged about 15 times to $50.6 billion in the decade through 2017, compared with a fourfold increase to the U.S. to $46.5 billion, according to import data compiled by the IMF. With exports accounting for almost 100 percent of gross domestic product in 2017, being overly reliant on one market can pose risks for the economy. To counter that, Vietnam is pursuing free trade deals with Japan and other countries in Europe and has also joined 10 other nations in March in signing a Trans Pacific trade pact.

India may become surprise victim of trade war, Rabobank says

A tariff war will reduce exports and lead to imported inflation, which will hurt Indian purchasing power and investments, according to the Rabobank study. That could mean as much as 2.3 percent of missed GDP growth for India by 2022. This goes against the argument that India is relatively insulated from a trade war, given its low share of total world exports of just 1.7 percent.

Besides a possible trade war, a faster-than-expected tightening of U.S. monetary policy will lead to capital outflows. Rabobank’s models estimate India losing $22 billion in capital flows by 2022, with the scenario getting complicated further, in case political instability hits India. The South Asian nation heads into a national election early next year.

Singapore releases public consultation on Airbnb-style home-sharing

Condominium owners who want to rent out their property for short-term stays can do so if owners holding on to at least 80 per cent of the development’s share value agree to allow such rentals, the Urban Redevelopment Authority (URA) has proposed. In a statement, URA said the framework will look at how short-term stays can be applied to developments with common property, such as condominiums, fire safety requirements, the role of management committees and how to regulate the platform operators, among other things.


Cost of living not the problem, low income is — MIER

“Our labour market pays very little in nominal income, it is very slow-paced and the skill level of our labour market is not improving. This aggregate number [of 3.3%], it hides a lot of unpleasant things in the labour market; low pay, low productivity, low skill, and the high number of foreign workers.”

Malaysia’s labour productivity stands at US$54,400 (RM211,616) compared with Singapore’s US$125,400, according to the MIER. According to the Department of Statistics, Malaysia achieved labour productivity value of RM85,031 in the fourth quarter of 2017.

Zakariah pointed out that the minimum wage policy represents a significantly lower proportion of the median wage, so that means there is a lot of room for an increase in minimum wage. However, he also acknowledged that many small and medium enterprises could not afford to pay the living wage of RM2,700 prescribed by Bank Negara Malaysia.

PUC to invest RM90mil in 11Street

Assuming that PUC reached its investment target, it would end up with as much as 24% stake in 11Street Malaysia, with ADS holding 37% and SKP at 39%. The investment amount translates to an implied valuation of 100% equity interest in CPSB ranging from RM333.33mil to RM375mil. Post signing of the definitive agreements, PUC will have the right to nominate and appoint the chief executive officer and chief marketing officer at 11Street Malaysia.

From 2015 to 2017, 11Street Malaysia reported an achievement of more than 300% growth in gross merchandising value (GMV), 160% growth to over 13 million product listings, and 200% increase to 40,000 sellers registered on its platform. As of Dec 31, 2017 11Street Malaysia recorded a GMV of approximately RM427mil and total monthly unique visitors (UV) of 13.5 million for the month of December 2017.


JAKS Resources puts property ambition on hold

The group has no plans to acquire more land for development amid a soft property market that is favourable for big-scale developers. “When the market picks up and if the opportunity arises, we may re-enter the property market. For now, we will stay away from property development.”

In the next two years, JAKS sees the US$1.87 billion 2x600mw coal-fired thermal power plant in Hai Duong Province, Vietnam, driving the group’s profit growth. “Construction of the power plant is currently 22% complete and is targeted to reach 50% by the end of the year. There is a strong indication that work on the project will be expedited for full completion in 2020. As such, 2018 and 2019 are crucial years for us,” Lam Poah said.

In Malaysia, JAKS is eyeing to participate in public infrastructure projects involving road works, bridges, hospitals and sewerage treatment plants. “We are focused in terms of going into areas where we are strong and the chances of us winning the projects are high. We look at smaller, pocket projects such as water pipe replacement or sewerage plant instead of going after mega projects where we can’t compete with the big boys,” said Si Eeng.


Signature MD baffled by group’s stock slump

“If it’s overreaction to the slow property market, this one is a very long-winded overreaction. They compare our business to other fast-moving consumer products, where they expect the revenue or profit to be steady and consistent. Our business depends on projects and their timing. No doubt we’re down now [with the slow property market]; that’s our challenge and we have to look at how to mitigate that and improve our retail business. Also, last time our projects order book grew because we couldn’t recognise [revenue] yet as the project sites not ready, as new ones came in. That gave the impression we’re flourishing. But when projects kick off as we recognise revenue, the order book will be reduced. But that doesn’t mean we have no prospects. We still have our retail. Should I be worried about getting new projects? I think the developers should worry first. If they don’t launch, they have nothing to sell. So if they continue to have business, so will we.”

Started in 2015, the cash vouchers scheme has secured letters of award (LoAs) for about RM50 million worth of kitchen cabinetry from some 30 projects — of which about 90% are yet to be realised. Revenue realisation is slow because it will depend on completion of project, sale, and handover of units to home buyers. “It’s the opposite of our project business — where the awards are slow but realisation [of revenue] can be fast,” Tan said.


Chin Well to make Vietnam focal point for fastener ops

“In July, the Vietnam facility will start to manufacture a new range of fasteners for South-East Asian market. These new fasteners will be used to connect reinforced concrete bars used in high-rise buildings.”

“We have plans to tap into the European market with our DIY fasteners. Currently, the Vietnam facility produces about 60,000 tonnes of fasteners per year. We foresee the operations in Vietnam to contribute about 50% to Chin Well revenue in two years, compared to 30%-40% now.”

Penang residential overhang more than doubles in 2017

The residential overhang in Penang more than doubled to 3,916 units worth RM3.82 billion in 2017 from 1,896 units worth RM1.47 billion in 2016. Similarly, the unsold [units] under construction recorded a 13.9% increase with 9,249 units (2016: 8,119 units).

The primary market recorded fewer new launches with 3,879 units in 2017, down by 31.3% against 5,646 units in 2016. Sales performance for the new launches last year – of which condominiums and apartments accounted for 65% – was promising at 39%. As at end-2017, there were 497,396 existing residential units with another 44,046 units of incoming supply and 24,597 units in planned supply.


‘Repopulating’ George Town via co-working, co-living spaces

“We want to repopulate George Town, so we want to have co-living spaces on the first floor of these shophouses, while the ground floor is used for commercial activities, preferably traditional trades and artisans,” newly appointed MBPP mayor Yew Tung Seang told the news portal.

The report also revealed that MBPP has worked with George Town World Heritage Inc (GTWHI) and Think City to restore a row of council-owned shophouses on the famous Kimberley Street, as the pilot project for co-living and commercial spaces for artisans.

“Rental will be kept affordable so that people will want to come back to live in George Town,” Yew told the news portal. It is hoped that such efforts will make the inner city of George Town “a liveable space for all”.

Curated Insights 2018.03.25

What’s next for humanity: Automation, new morality and a ‘global useless class’

“Time is accelerating,” Mr. Harari said. The long term may no longer be defined in centuries or millenniums — but in terms of 20 years. “It’s the first time in history when we’ll have no idea how human society will be like in a couple of decades,” he said.

“We’re in an unprecedented situation in history in the sense that nobody knows what the basics about how the world will look like in 20 or 30 years. Not just the basics of geopolitics but what the job market would look like, what kind of skills people will need, what family structures will look like, what gender relations will look like. This means that for the first time in history we have no idea what to teach in schools.”

Leaders and political parties are still stuck in the 20th century, in the ideological battles pitting the right against the left, capitalism versus socialism. They don’t even have realistic ideas of what the job market looks like in a mere two decades, Mr. Harari said, “because they can’t see.” “Instead of formulating meaningful visions for where humankind will be in 2050, they repackage nostalgic fantasies about the past,” he said.

Investing is hard

On April 1st 1976, Steve Jobs, Steve Wozniak, and Ronald Wayne founded Apple. Wayne drew the first Apple logo, wrote the three men’s original partnership agreement, and wrote the Apple 1 manual. Jobs and Wozniak each owned 45% and Wayne 10%. Two weeks later, he sold his 10% interest for $800. This 10% interest would be worth $90 billion today. He was closer than anyone to the visionaries of Apple, and he still sold.

The Cambridge Analytica scandal, in 3 paragraphs

In June 2014, a researcher named Aleksandr Kogan developed a personality-quiz app for Facebook. It was heavily influenced by a similar personality-quiz app made by the Psychometrics Centre, a Cambridge University laboratory where Kogan worked. About 270,000 people installed Kogan’s app on their Facebook account. But as with any Facebook developer at the time, Kogan could access data about those users or their friends. And when Kogan’s app asked for that data, it saved that information into a private database instead of immediately deleting it. Kogan provided that private database, containing information about 50 million Facebook users, to the voter-profiling company Cambridge Analytica. Cambridge Analytica used it to make 30 million “psychographic” profiles about voters.

Cambridge Analytica has significant ties to some of President Trump’s most prominent supporters and advisers. Rebekah Mercer, a Republican donor and a co-owner of Breitbart News, sits on the board of Cambridge Analytica. Her father, Robert Mercer, invested $15 million in Cambridge Analytica on the recommendation of his political adviser, Steve Bannon, according to the Times. On Monday, hidden-camera footage appeared to show Alexander Nix, Cambridge Analytica’s CEO, offering to bribe and blackmail public officials around the world. If Nix did so, it would violate U.K. law. Cambridge Analytica suspended Nix on Tuesday.

Cambridge Analytica also used its “psychographic” tools to make targeted online ad buys for the Brexit “Leave” campaign, the 2016 presidential campaign of Ted Cruz, and the 2016 Trump campaign. If any British Cambridge Analytica employees without a green card worked on those two U.S. campaigns, they did so in violation of federal law.


Facebook and the endless string of worst-case scenarios

“I have more fear in my life that we aren’t going to maximize the opportunity that we have than that we mess something up” Zuckerberg said at a Facebook’s Social Good Forum event in November. Perhaps it’s time for that fear to shift more towards ‘what could go wrong’, not just for Zuck, but the leaders of all of today’s tech titans.

Most recently, Facebook has found its trust in app developers misplaced. For years it offered an API that allowed app makers to pull robust profile data on their users and somewhat limited info about their friends to make personalized products. But Facebook lacked strong enforcement mechanisms for its policy that prevented developers from sharing or selling that data to others. It’s quite likely that other developers have violated Facebook’s flimsy policies against storing, selling, or sharing user data they’ve collected, and more reports of misuse will emerge.


The Facebook brand

This episode is a perfect example: an unintended casualty of this weekend’s firestorm is the idea of data portability: I have argued that social networks like Facebook should make it trivial to export your network; it seems far more likely that most social networks will respond to this Cambridge Analytica scandal by locking down data even further. That may be good for privacy, but it’s not so good for competition. Everything is a trade-off.


Inside Apple’s secret plan to develop and build its own screens

Controlling MicroLED technology would help Apple stand out in a maturing smartphone market and outgun rivals like Samsung that have been able to tout superior screens. Ray Soneira, who runs screen tester DisplayMate Technologies, says bringing the design in-house is a “golden opportunity” for Apple. “Everyone can buy an OLED or LCD screen,” he says. “But Apple could own MicroLED.”

Creating MicroLED screens is extraordinarily complex. Depending on screen size, they can contain millions of individual pixels. Each has three sub-pixels: red, green and blue LEDs. Each of these tiny LEDs must be individually created and calibrated. Each piece comes from what is known as a “donor wafer” and then are mass-transferred to the MicroLED screen. Early in the process, Apple bought these wafers from third-party manufacturers like Epistar Corp. and Osram Licht AG but has since begun “growing” its own LEDs to make in-house donor wafers. The growing process is done inside a clean room at the Santa Clara facility.

The secretive company that pours America’s coffee

Keurig is offering distribution services to an increasingly broad network of outside brands through its Dr Pepper Snapple deal. It will also be able to sell its coffee, part of an armada of 125 beverage brands, to new customers. Peet’s distribution system is a regional one that doesn’t cover certain retailers such as convenience stores, popular stops for consumers who don’t want to wait in line at larger stores. Dr Pepper’s larger fleet will enable Peet’s ready-to-drink beverages to get into more stores.

Drake and Fortnite create a “crossing the chasm” moment for gaming

While the gaming market is large, generating $100 billion in revenue globally, it reaches relatively few people compared to the music market. Interestingly, music touches almost everyone on earth but generates only $16 billion in revenue per year.

Twitch is the other beneficiary, of course. Twitch is cementing its position as a modern-day ESPN with 15 million daily viewers who spend on average almost two hours per day on the platform.


Oasis hedge fund boss bets on Japan’s professional gaming scene

Strict anti-gambling laws had prevented paid competitions for years, but the industry’s move this month to issue professional gamer licenses is allowing them to sidestep the regulations. Fischer says that lays the groundwork for publishers to grow audiences, sell more games and begin generating new revenue from broadcasting rights and advertising.

Worldwide esports revenue, including media rights, advertising, ticket sales and merchandising, will reach about $5 billion annually by 2020, almost as much as the world’s biggest soccer league today, according to market researcher Activate. The total audience for competitive gaming will grow to 557 million people by 2021 from 380 million this year, according to researcher Newzoo.


Why watch other people play video games? What you need to know about esports

Competitive video game playing, more commonly known as esports, drew 258 million unique viewers globally last year, according to research firm SuperData. For perspective, the National Football League said 204 million unique viewers tuned into the 2016 NFL regular season in the U.S., based on Nielsen data. Just like “real” sports, esports makes money off of investments, branding, advertising and media deals, raking in $1.5 billion in revenue last year, said SuperData. The firm expects the esports industry to hit 299 million viewers this year and top $2 billion in revenue by 2021.

The two things we look for in a management team

As the slide mentions, Verisk decides on buybacks or M&A depending on the available opportunities. Even if they don’t always make the correct assessment in hindsight, we like that there’s a process in place. We were further impressed that Verisk followed the above slide with IRR results from their capital allocation decisions. Again, this level of transparency is rare, but we welcome it and would like more companies to follow suit.

Samsonite wants to spend up on handbags

Parker said Samsonite isn’t actively approaching potential buyers, and the company will likely spend the next year or two consolidating after its $1.8 billion acquisition of luxury bag maker Tumi Holdings Inc. in 2016 and the $105 million purchase of online retailer eBags Inc. last year. The non-travel products market could be a potential space for deals in the future, he said in a separate interview with Bloomberg TV on Thursday.


How one investor turned a bet on the Swiss Central Bank into millions

Still, the root of the gains for Mr. Siegert and the SNB’s other 2,191 private investors is a bit of a mystery. The SNB isn’t like other stocks and pays a tiny dividend. It is governed under laws for both public and private institutions, and owned primarily by individual Swiss states, known as cantons, and cantonal banks. Public-sector bodies own almost 80% of voting shares.

Shareholders have no say in the SNB’s monetary policy or how it manages its massive 790 billion franc war chest of foreign-currency stocks and bonds, built up through years of interventions to weaken the franc.

On the plus side, the SNB is ultrasafe. It prints its own currency—and the franc is among the world’s strongest—which it uses to buy assets. When the SNB loses money, it can always print more. Recently, its profit has been on a tear, aided by rising global stock markets, low bond yields and a weaker franc. The SNB earned a record 54 billion francs in profit last year.


Tencent’s 60,000% runup leads to one of the biggest VC payoffs ever

The stake Naspers bought for just $32 million in 2001 — when Tencent was an obscure Web firm in a nation where few people used the Internet — is now worth $175 billion.

The sale of 190 million shares, worth $10.6 billion based on Tencent’s closing price in Hong Kong on Thursday, will cut the stake held by Naspers to 31.2 percent from 33.2 percent. It’s the first time Naspers has reduced its holdings in Tencent since investing in the company. Naspers won’t sell more shares in the company for at least three years, it said.

Has China overtaken the U.S. in terms of innovation?

In 1996, China invested 0.56 percent of its GDP in R&D, while the U.S. invested 2.44 percent of its GDP. In 2015, China invested 2.06 percent of its GDP, whereas the U.S. invested 2.79 percent. That is, the R&D intensity in China increased by 1.5 percentage points and in the U.S. by only 0.3 percentage points.


Harvard’s nutty idea: Cracking into the almond market

Around 80% of the world’s almonds are currently produced in California, whose almond plantations in its Central Valley have generated strong returns for investors for many years. Volatile weather in recent months, including frost and storms, have hurt estimates for the state’s almond harvest this summer, helping to push wholesale export prices for U.S. almonds to near a two-year high of $6,807 a metric ton.

Consumption of almonds grew 15% from 2012 to 2017, according to estimates from Euromonitor International, which forecasts 4% annual growth through 2021.

In Australia, nuts generate gross revenue of 8,097 to 12,146 Australian dollars (US$6,314 to US$9,471) per acre, roughly 40 times that of grains for the same area, according to the Australian Nut Industry Council. At current wholesale prices of about US$7 per kilogram in Australia, almonds offer a gross margin of around 45% before overhead costs and other expenses, according to Tim McGavin, chief executive of Laguna Bay Pastoral Co., an agricultural asset manager in Brisbane.


Elderly in U.S. are projected to outnumber children for first time

The Census Bureau projects the country would grow to 355 million by 2030, five million fewer than it had estimated three years ago. That is an annual average growth rate of just 0.7%, in line with recent rates but well below historical levels.

Lower population growth could drag on economic growth. This year’s prime-age workforce—ages 25 to 54—is about 630,000 smaller than the Census Bureau projected it would be just three years ago. The bureau projects the prime-age workforce will grow 0.5% a year through 2030, down from a 2014 projected annual rate of 0.58% for the same period.

The share of Americans who are foreign-born, now about 13%, is expected to reach a record 14.9% by 2028, topping a mark set in 1890. That share would rise to 17.2% by 2060.

Does indexing threaten the market?

But from the above results and others, it does not appear that the current level of indexing is a significant problem. This assumes the 24.9% figure for index equity mutual funds and indexed ETFs as a fraction of all U.S. equity mutual funds. As mentioned above, there are no firm figures for institutional indexing or international markets, but it seems unlikely that overall indexed investments exceed the level of roughly 25%.

Along this line, we remain concerned about the fact that many new index ETFs might not be truly independent of the creation of the index, as mentioned above. Even more importantly, given that many of these ETFs and indices are designed via a process of computer exploration of many different component weightings, these ETFs are highly vulnerable to backtest overfitting. As mentioned above, a 2012 Vanguard report found that while 87% of newly published indexes outperformed the broad U.S. stock market over the time period used for the backtest, only 51% outperformed the broad market after inception of the ETF tied to the index.


“I hope for Goldman Sachs’ bankruptcy”: Nassim Nicholas Taleb on Skin in the Game

Our conversation concludes on an optimistic note: “We’ve survived 200,000 years as humans,” says Taleb. “Don’t you think there’s a reason why we survived? We’re good at risk management. And what’s our risk management? Paranoia. Optimism is not a good thing.” Is the paradox, I ask, that human pessimism offers grounds for optimism? “Exactly,” Taleb replies. “Provided psychologists don’t fuck with it.”


What your fund management job will look like in a decade

Asset managers are being squeezed as increased regulation drives up costs and investors shift more money into lower-cost investment products. The solution? The greater use of technology and data-mining to defend margins, reduce expenses and win more client business.

While alternatives still only account for about a tenth of assets, they contribute about 30 percent of revenue, and Oliver Wyman sees that growing to about 40 percent by 2025. That trend will continue to benefit the bigger players able to offer a wider range of investment strategies.

Asset managers that analyze their customer relationship information in conjunction with the asset allocation preferences of both existing and potential customers will gain an advantage. The bigger the firm, the more data it will have available and the more resources it can throw at improving its analytic capabilities.


NASA study: Astronaut’s DNA no longer identical to his identical twin’s after year in space

Though most of Kelly’s biological changes returned to baseline levels after returning to Earth, seven percent of his genes point to possible long-term changes, according to the study. NASA’s preliminary findings were validated this week, according to Space.com. “The Twins Study has benefited NASA by providing the first application of genomics to evaluate potential risks to the human body in space,” according to a release from the agency.

Curated Insights 2018.02.18

Amazon’s latest ambition: To be a major hospital supplier

The pilot is customized for the hospital system’s catalog of supplies, the official said, allowing employees to compare prices the system negotiates with its distributors against those in the Amazon Business marketplace. In response to questions about these efforts, Amazon said it is building technology to serve health-care customers, and seeking to sell hospitals on a “marketplace concept” that differs from typical hospital purchasing, which is conducted through contracts with distributors and manufacturers.

So far, some hospitals have been reluctant to buy supplies from Amazon Business, for reasons including lack of options and lack of control over purchases and shipping, which hospitals closely safeguard to ensure prompt arrival of goods.

Hospitals typically contract for assurances that products will be available and delivered securely, she said. “It’s a little different than being out of a size 6 dress. I can’t be out of a six French catheter,” said Ms. McCready, who oversees the hospital system’s $3 billion annual budget for supplies, contract services and pharmaceuticals. Ensuring continuity of product supply is also crucial, said Donna Drummond, Northwell’s senior vice president of consolidated business services. When doctors and nurses reach for a familiar product, they know its specifications. Jumping online to look for the best deal could disrupt that continuity, she said. Northwell is “not ready to move from our current model,” Ms. Drummond said, but added: “We are open to a competitive market.”

Fees and administration, marketing and shipping costs account for an estimated 20% to 30% of health-care supply costs, according to a November research report by Citigroup Global Markets Inc. “There’s a lot of people with fingers in the pie,” said Rob Austin, an associate director with Navigant Consulting Inc. and former hospital supply-chain executive. “There is a huge opportunity.”


Amazon threat has Maersk racing to stop clients becoming rivals

It’s not just a question of a smooth delivery, said Skou. Giant retailers like Amazon also want better information about shipments to manage supply chains as effectively as possible. Maersk is rolling out a new digitization strategy to modernize an industry in which bookings often still take place by phone. Last month, it formed a joint venture with IBM to develop the use of blockchain technology to manage and track cross-border trade.

“The ability of Maersk to understand the market and integrate with a big company like Amazon is very clever,” Benito said. “They realize that Amazon can be a disruptor, so it’s better to try and work together.”

How delivery apps like Seamless and Uber Eats may put your favorite restaurant out of business

In 2016, delivery transactions made up about seven per cent of total U.S. restaurant sales. In a research report published last June, analysts at Morgan Stanley predicted that that number could eventually reach forty per cent of all restaurant sales, and an even higher percentage in urban areas and among casual restaurants, where delivery is concentrated. Companies like GrubHub maintain that the revenue they bring restaurants is “incremental”—the cherry on top, so to speak, of whatever sales the place would have done on its own. They also argue that delivery orders are a form of marketing, exposing potential new customers who might convert to lucrative in-restaurant patrons. The problem is that as consumers use services like Uber Eats and Seamless for a greater share of their meals, delivery orders are beginning to replace some restaurants’ core business instead of complementing it. (In the Morgan Stanley survey, forty-three per cent of delivery patrons said that a meal they ordered in was replacing one they would have otherwise eaten at a restaurant.) And, as delivery orders replace profitable takeout or sit-down sales with less profitable ones—ostensibly giving restaurants business but effectively taking it away—the “incremental” argument no longer holds. “It’s total bullshit, and you can quote me on that,” Justin Rosenberg, the C.E.O. of the Philadelphia-based fast-casual chain Honeygrow, told me. “I’ve spoken to C.F.O.s of bigger fast-casuals, and they’ve said the same thing.”

It’s worth noting that, even while charging restaurants steep rates, most delivery platforms are not yet profitable, either. Their hope is that order volumes will one day become high enough—and couriers will deliver enough orders per hour—to push them into the black.


Airbnb reportedly built an internal hedge fund that makes $5 million per month

According to Bloomberg, Tosi “quietly built a hedge fund within the company’s finance department. He used a portion of capital from the balance sheet to buy stocks, currencies, and fixed-income securities, mimicking the treasury fund he ran at Blackstone. The side project represented 30 percent of the company’s cash flow last year and made about $5 million a month for Airbnb, the people said.”

New DNA nanorobots successfully target and kill off cancerous tumors

“Using tumor-bearing mouse models, we demonstrate that intravenously injected DNA nanorobots deliver thrombin specifically to tumor-associated blood vessels and induce intravascular thrombosis, resulting in tumor necrosis and inhibition of tumor growth,” the paper explains.

DNA nanorobots are a somewhat new concept for drug delivery. They work by getting programmed DNA to fold into itself like origami and then deploying it like a tiny machine, ready for action.

Saving for old age: the global story (part II)

This country for old men and women would have had 222m people in it, assuming it was launched at the end of 2015. Assume all Chinese move there on their 60th birthday, and by 2025 you would expect the population of Oldland to be 300m.

It is well known that savings rates in China are already high. If greater portions of these savings are shifted into a funded pensions infrastructure which looks anything like that of the US, this would boost demand for the kinds of assets pension funds usually buy: stocks and bonds.

It may already be happening. The Willis Towers Watson report states that China has the fastest compound annual growth rate of pension assets over the past five years, at 18 per cent. The second highest, at 13 per cent, is South Korea. The third is Hong Kong, at 10 per cent (HK also has the fastest 10 year growth rate — there is no such figure for China).

Audio boom: how podcasters make a living

The defining year for podcasting was perhaps 2014, when NPR launched Serial, a true-crime series that became a global phenomenon and the fastest podcast to reach 5m downloads on iTunes. It triggered a wave of wannabes. That year, Apple installed the podcast app into its operating system — suddenly iPhones had podcasts on the home screen. Today there are more than 500,000 active shows on iTunes, including content in more than 100 languages.

In 2006, only 22 per cent of Americans had heard the term “podcasting”, according to Edison Research and Triton Digital. Last year it was 60 per cent. Thirty-one per cent of 25- to 54-year-olds said they had listened to a podcast in the past month compared with 16 per cent four years earlier. Networks such as Gimlet, or the crowdfunded Radiotopia, have helped to professionalise podcasts by attracting large audiences and advertising revenues.


An ‘iceberg’ of unseen crimes: Many cyber offenses go unreported

To many criminologists, academics and law enforcement leaders, crimes like car theft are anachronisms in a modern era in which the internet’s virtual superhighways have supplanted brick-and-mortar streets as the scenes for muggings, prostitution rings or commercial burglaries. They see dips in traditional violence and larceny as offset by a twin phenomenon: A surge in the evolving crimes of the digital era, and the fact that they are not fully captured in law enforcement’s reporting systems.

The wealth of Sapiens

True wealth is not money. It’s the option to buy what you truly need. If money can’t buy what you need, you’re on even footing with the poorest person out there. Wealth is a society where you can trust complete strangers with your child’s life. Wealth is having friends, colleagues and family who support you. Who take care of the things you can’t, without hesitation. Wealthy is when strangers rent you cars for 1-way trips at 3am over the internet.

Curated Insights 2017.12.17

Disney and Fox

With an increasingly high-profile brand, large user base, and ever deeper pockets, Netflix moved into original programming that was orthogonal to traditional programming buyers: creators had full control and a guarantee that they could create entire seasons at a time Each of these intermediary steps was a necessary prerequisite to everything that followed, culminating in yesterday’s announcement: Netflix can credibly offer a service worth paying for in any country on Earth, thanks to all of the IP it itself owns. This is how a company accomplishes what, at the beginning, may seem impossible: a series of steps from here to there that build on each other. Moreover, it is not only an impressive accomplishment, it is also a powerful moat; whoever wishes to compete has to follow the same time-consuming process.

Another way to characterize Netflix’s increasing power is Aggregation Theory: Netflix started out by delivering a superior user experience of an existing product (DVDs) to a dedicated set of customers, leveraged that customer base to gain new kinds of supply (streaming content), gaining more customers and more supply, and ultimately leveraged those customers to modularize supply such that the streaming service now makes an increasing amount of its content directly. What Disney is seeking to prove, though, is that it can compete with Netflix directly by following a very different path.

The implication of Netflix’s shift to original programming, though, isn’t simply the fact that the streaming company is a full-on competitor for cable TV: it is a competitor for differentiated content as well. That gives Netflix far more leverage over content suppliers like Disney than the cable companies ever had.

Netflix isn’t simply adding customers, it is raising prices at the same time, the surest sign of market power. Therefore, the only way for Disney to avoid commoditization is to itself go vertical and connect directly with customers: thus the upcoming streaming service, the removal of its content from Netflix, and, presuming it is announced, this deal.

Whereas Netflix laddered-up to its vertical model and used its power as an aggregator of demand to gain power over supply, Disney is seeking to leverage — and augment — its supply to gain demand. The end result, though, would look awfully similar: a vertically integrated streaming offering that attracts and keeps customers with exclusive content, augmented with licensing deals.

In addition, Disney and 21st Century Fox combined for 40% of U.S. box office revenue in 2016; that probably isn’t enough to stop the deal, and as silly as it sounds, don’t underestimate the clamoring of fans for the unification of the Marvel Cinematic Universe in swaying popular opinion!

GM’s latest weapon in pickup truck wars: Carbon fiber

Pickup sales represent about 16% of the U.S. market, but delivered the bulk of the $25 billion in operating profit Detroit’s Big Three auto makers earned in North America last year, according to analysts. J.D. Power estimates GM’s large pickups fetch $43,220 on average, up about 30% from five years ago, but below the $45,000 transactions on Ford’s F-Series.

Trucks represent a unique challenge for Detroit. Buyers expect ample power to haul boats and construction gear, but regulators are demanding more efficient designs over the next seven years to reduce greenhouse-gas emissions and improve fuel economy. That thinking underpinned Ford’s use of aluminum for the market-leading F-Series, which Environmental Protection Agency officials have said they see as already nearly meeting 2025 fuel-economy standards.

Carbon fiber is at least 50-75% lighter than steel and 20-50% lighter than aluminum, depending on the type, according to Ducker Worldwide, a materials consultancy that works with auto makers. It would improve dent resistance and give GM a differentiating feature in the fierce realm of truck marketing, said Richard Schultz, a metals expert at Ducker.

Researchers train robots to see into the future

These robotic imaginations are still relatively simple for now – predictions made only several seconds into the future – but they are enough for the robot to figure out how to move objects around on a table without disturbing obstacles. Crucially, the robot can learn to perform these tasks without any help from humans or prior knowledge about physics, its environment or what the objects are. That’s because the visual imagination is learned entirely from scratch from unattended and unsupervised exploration, where the robot plays with objects on a table. After this play phase, the robot builds a predictive model of the world, and can use this model to manipulate new objects that it has not seen before.

The system uses convolutional recurrent video prediction to “predict how pixels in an image will move from one frame to the next based on the robot’s actions.” This means that it can play out scenarios before it begins touching or moving objects.

China has been building what it calls “the world’s biggest camera surveillance network”. Across the country, 170 million CCTV cameras are already in place and an estimated 400 million new ones will be installed in the next three years.

Many of the cameras are fitted with artificial intelligence, including facial recognition technology. The BBC’s John Sudworth has been given rare access to one of the new hi-tech police control rooms.

World’s largest water diversion plan won’t quench China’s thirst

It’s China’s age-old dilemma: a tug of war between the farms that help feed the nation, and the soaring demands of industry and city-dwellers in the parched northern plains.

Beijing, which gets about 70 percent of its water from the South-North diversion project, is expected to add another 2 million people before the government caps the city’s population at 23 million.

One way to stem the reduction in groundwater is taxes. Last month, the government expanded a water resource tax trial to cover nine municipalities and provinces, with duties ramping up if quotas are exceeded. Regular water tax rates were highest in Beijing and Tianjin, according to China’s finance ministry, and water from underground will be taxed at twice the rate or more than for surface water.

Another option is to import food that requires a lot of moisture to grow — nearly half of China’s farmland has no irrigation system. That’s not straightforward, as China also has a long-standing food-security policy that aims to be largely self-sufficient in staple grains.

Each ton of imported wheat saves China about 500 cubic meters of water and 0.4 acres of farmland, Fang said. The country is already the world’s largest importer of soybeans, but could buy more, as well as meat and dairy products, she said. But an increase in grain imports would put a further strain on global food markets. China’s soybean demand has prompted farmers in Brazil to turn over some 13 million hectares of farmland and forest to growing the crop in the past 10 years, an area about the size of Germany.

Still, in many cases there’s little incentive for farmers to save water. Agriculture uses 62 percent of China’s water, but crops have a relatively low marginal value. So the government bans the sale of agricultural water to industry, which pays 10 times the price, to ensure food supply.


A caution from the world’s biggest shipping line

Decade-old oversupply issues swamped demand for containerized sea trade in the third quarter, a senior official at Maersk Line Ltd. said in an interview last week. Over 90 percent of trade is routed through ships, making the industry a bellwether for the worldwide economy.

Drewry Shipping Consultants expects the container-shipping freight growth rate to drop to less than 10 percent in 2018 from around 15 percent in 2017 as a supply glut hits home. CMA CGM, the No. 3 container shipping company, recently signaled slightly lower rates for 2018 in early negotiations of Asia-Europe contracts, analysts at Credit Suisse Group AG wrote in a Nov. 29 note.

In contrast, the air-freight market is buoyant after years in the doldrums, International Air Transport Association said last week. The development of e-commerce should mean growth rates remain ahead of the pace of expansion in world trade.


The world produces more than 3.5 million tons of waste a day – and that figure is growing

The world generates at least 3.5 million tons of solid waste a day, 10 times the amount a century ago, according to World Bank researchers. If nothing is done, that figure will grow to 11 million tons by the end of the century, the researchers estimate. On average, Americans throw away their own body weight in trash every month. In Japan, meanwhile, the typical person produces only two-thirds as much. It’s difficult to find comparable figures for the trash produced by mega-cities. But clearly, New York generates by far the most waste of the cities I visited: People in the broader metropolitan area throw away 33 million tons per year, according to a report by a global group of academics published in 2015 in the journal of the National Academy of Sciences. That’s 15 times the Lagos metropolitan area, their study found.


Salmon open flood gates for human consumption of GM animals

Engineered to grow at twice the rate of regular salmon, it is also believed to be the first example of a genetically engineered animal bred and sold for human consumption.


The main advantage of the salmon’s shorter lifespan is that the fish can be grown in tanks inland, vastly reducing the cost of transportation and the burden on the environment. “Demand for global protein is increasing,” he says. “We have to do a better job and we have to do it efficiently.”

One area Professor Muir regards as promising is the creation of genetically modified goats’ milk by scientists at the University of California, Davis, which carries a protein found in human breast milk that could, for example, help protect children in the developing world from bacterial infection.

More moats, more profits

Some businesses, however, have structural advantages that enable a stronger defense against competition, enabling high profits over an extended period. As competitive advantages have improved for the leading firms, we believe the ability to shield profits from normal competition has increased, enabling higher overall profits. The high concentration of wide and narrow moats among the largest 100 firms suggests that their elevated profit margins partly reflect the successful defense of competitive positions. In analysis looking at the past 10 years, wide-moat firms have generated more than triple the operating margins of no-moat firms, while narrow-moat firms have posted more than double the returns of no-moat companies. As the moat rating improves, the margins expand, supporting the importance of moats in protecting profits.

Beyond the global growth, the current phase of industrialization also supports more moats. As industrialization has moved from mechanical and mass production to information technology, we have seen an expansion in moats, especially in intangible assets and switching costs. Further, as we move into the next phase of industrialization focused on networking and the exchange of data between machines and humans,3 we expect more growth in profits supported by network effects. Several of the largest companies, including wide-moat firms with strong network effects Alphabet, Facebook, Amazon.com, Alibaba, and Tencent, didn’t exist 30 years ago and now represent more than 10% of the market capitalization of the top 100 firms.

The blockchain economy: A beginner’s guide to institutional cryptoeconomics

But a database still relies on trust; a digitised ledger is only as reliable as the organisation that maintains it (and the individuals they employ). It is this problem that the blockchain solves. The blockchain is a distributed ledgers that does not rely on a trusted central authority to maintain and validate the ledger.

A better metaphor for the blockchain is the invention of mechanical time. “The effect of the reduction in the variance of time measurement was felt everywhere”, Allen writes. Mechanical time opened up entirely new categories of economic organisation that had until then been not just impossible, but unimaginable. Mechanical time allowed trade and exchange to be synchronised across great distances. It allowed for production and transport to be coordinated. It allowed for the day to be structured, for work to be compensated according to the amount of time worked — and for workers to know that they were being compensated fairly. Both employers and employees could look at a standard, independent instrument to verify that a contract had been performed.

Complete contracts are impossible to execute, while incomplete contracts are expensive. The blockchain, though smart contracts, lowers the information costs and transactions costs associated with many incomplete contracts and so expands the scale and scope of economic activity that can be undertaken. It allows markets to operate where before only large firms could operate, and it allows business and markets to operate where before only government could operate.

The blockchain and associated technological changes will massively disrupt current economic conditions. The industrial revolution ushered in a world where business models were predicated on hierarchy and financial capitalism. The blockchain revolution will see an economy dominated by human capitalism and greater individual autonomy.

Curated Insights 2017.12.10

The impossibility of intelligence explosion

The first issue I see with the intelligence explosion theory is a failure to recognize that intelligence is necessarily part of a broader system — a vision of intelligence as a “brain in jar” that can be made arbitrarily intelligent independently of its situation. A brain is just a piece of biological tissue, there is nothing intrinsically intelligent about it.

In particular, there is no such thing as “general” intelligence. On an abstract level, we know this for a fact via the “no free lunch” theorem — stating that no problem-solving algorithm can outperform random chance across all possible problems. If intelligence is a problem-solving algorithm, then it can only be understood with respect to a specific problem. In a more concrete way, we can observe this empirically in that all intelligent systems we know are highly specialized.

If intelligence is fundamentally linked to specific sensorimotor modalities, a specific environment, a specific upbringing, and a specific problem to solve, then you cannot hope to arbitrarily increase the intelligence of an agent merely by tuning its brain — no more than you can increase the throughput of a factory line by speeding up the conveyor belt. Intelligence expansion can only come from a co-evolution of the mind, its sensorimotor modalities, and its environment.

In Terman’s landmark “Genetic Studies of Genius”, he notes that most of his exceptionally gifted subjects would pursue occupations “as humble as those of policeman, seaman, typist and filing clerk”. There are currently about seven million people with IQs higher than 150 — better cognitive ability than 99.9% of humanity — and mostly, these are not the people you read about in the news. Of the people who have actually attempted to take over the world, hardly any seem to have had an exceptional intelligence; anecdotally, Hitler was a high-school dropout, who failed to get into the Vienna Academy of Art — twice.

People who do end up making breakthroughs on hard problems do so through a combination of circumstances, character, education, intelligence, and they make their breakthroughs through incremental improvement over the work of their predecessors. Success — expressed intelligence — is sufficient ability meeting a great problem at the right time. Most of these remarkable problem-solvers are not even that clever — their skills seem to be specialized in a given field and they typically do not display greater-than-average abilities outside of their own domain.

So, a person with an IQ of 130 is statistically far more likely to succeed in navigating the problem of life than a person with an IQ of 70 — although this is never guaranteed at the individual level — but here’s the thing: this correlation breaks down after a certain point. There is no evidence that a person with an IQ of 170 is in any way more likely to achieve a greater impact in their field than a person with an IQ of 130.

Why would the real-world utility of raw cognitive ability stall past a certain threshold? This points to a very intuitive fact: that high attainment requires sufficient cognitive ability, but that the current bottleneck to problem-solving, to expressed intelligence, is not latent cognitive ability itself. The bottleneck is our circumstances. Our environment, which determines how our intelligence manifests itself, puts a hard limit on what we can do with our brains — on how intelligent we can grow up to be, on how effectively we can leverage the intelligence that we develop, on what problems we can solve. All evidence points to the fact that our current environment, much like past environments over the previous 200,000 years of human history and prehistory, does not allow high-intelligence individuals to fully develop and utilize their cognitive potential.

And they are only able to succeed because they are standing on the shoulder of giants — their own work is but one last subroutine in a problem-solving process that spans decades and thousands of individuals. Their own individual cognitive work may not be much more significant to the whole process than the work of a single transistor on a chip.

It is civilization as a whole that will create superhuman AI, not you, nor me, nor any individual. A process involving countless humans, over timescales we can barely comprehend. A process involving far more externalized intelligence — books, computers, mathematics, science, the internet — than biological intelligence.

We don’t have to speculate about whether an “explosion” would happen the moment an intelligent system starts optimizing its own intelligence. As it happens, most systems are recursively self-improving. We’re surrounded with them. So we know exactly how such systems behave — in a variety of contexts and over a variety of timescales. You are, yourself, a recursively self-improving system: educating yourself makes you smarter, in turn allowing you to educate yourself more efficiently. Likewise, human civilization is recursively self-improving, over a much longer timescale.

Google’s AlphaZero destroys Stockfish in 100-game match

This would be akin to a robot being given access to thousands of metal bits and parts, but no knowledge of a combustion engine, then it experiments numerous times with every combination possible until it builds a Ferrari. That’s all in less time that it takes to watch the “Lord of the Rings” trilogy. The program had four hours to play itself many, many times, thereby becoming its own teacher.

“We have always assumed that chess required too much empirical knowledge for a machine to play so well from scratch, with no human knowledge added at all,” Kasparov said. “Of course I’ll be fascinated to see what we can learn about chess from AlphaZero, since that is the great promise of machine learning in general—machines figuring out rules that humans cannot detect. But obviously the implications are wonderful far beyond chess and other games. The ability of a machine to replicate and surpass centuries of human knowledge in complex closed systems is a world-changing tool.”


CVS’s $68 billion bid to bring one-stop shopping to health care

The buyout would combine the largest U.S. drugstore chain with the third-biggest health insurer. CVS also manages drug benefits plans for thousands of employers and insurers, a business that could help steer some of Aetna’s 22 million customers to CVS pharmacy counters when they fill a prescription. Already, CVS has 1,100 MinuteClinics in its pharmacies, where nurse practitioners and physician assistants provide routine care such as flu shots or wrapping sprained ankles. It’s also trying out hearing and vision centers in a handful of locations. If the merger goes through, CVS plans to build mini-health centers in many more of its 9,700 stores, turning them into places where Aetna members—and customers of rival insurers—get convenient low-level care for ailments and chronic diseases. And having a closer tie to where customers are treated could help Aetna better manage their ailments earlier, more efficiently—and less expensively.

The integration is part of a wide-ranging effort by health insurance companies and the federal government to shift care away from paying for each service and toward paying doctors and hospitals for taking better care of patients and keeping them healthier. The approach, known as value-based care, challenges the industry’s traditional reimbursement models.

CVS and Aetna say they’ll be able to reduce costs by directing some patients to lower-cost sites of care in CVS stores, keeping them out of emergency rooms and hospitals. About 70 percent of the U.S. population lives within 3 miles of a CVS location, according to David Larsen, an analyst at Leerink Partners. “This is going to be appealing to a huge number of people,” says Ingrid Lindberg, president of Kobie Marketing Inc. and a former chief customer experience officer at health insurer Cigna Corp. “There’s a large majority of people who are truly driven by ease and convenience when it comes to their care.”


This company is about to flood the U.S. with cheap HIV drugs

Laurus is one of the world’s biggest suppliers of ingredients used in anti-retrovirals, thanks to novel chemistry that delivers cheaper production costs than anyone else. Now, its chief executive officer, Satyanarayana Chava, wants to use the same strategy selling his own finished drugs in the U.S. and Europe. He predicts some generics that Laurus produces will eventually sell for 90 percent less than branded HIV drugs in the U.S., slashing expenditures for a disease that’s among the costliest for many insurers.

The patent expiries are starting this month when Bristol-Myers Squibb Co.’s Sustiva loses protection. Gilead Sciences Inc.’s Viread follows next month. Both companies didn’t respond to requests for comment.

Though Laurus doesn’t yet make the actual pills those patients take, it’s become a dominant supplier of the key ingredients that make them work. The best way to fight HIV is with a combination of different drugs, and because Viread and Sustiva form key parts of some of the most effective combinations, the inclusion of generic versions of these chemicals could bring down the cost of the whole treatment. One analysis cited by the Department of Health and Human Services found that replacing a three-medicine, branded combination with multiple pills, including a generic version of Sustiva, could save the U.S. $900 million its first year.

Laurus controls about 66 percent of the global market for efavirenz, the chemical name for Bristol-Myers Squibb’s Sustiva, and 33 percent for tenofovir, the chemical name for Gilead’s Viread, according to a report earlier this year by investment bank Jefferies Group LLC.

The hidden player spurring a wave of cheap consumer devices: Amazon

That future? We’re going to get better products for ludicrously low prices, and big brands across a range of categories — the Nests and Netgears of the world — are going to find it harder than ever to get us to shell out big money for their wares.

To hit the $20 price, Wyze licensed the camera’s hardware from a Chinese company, then created its own software. It also cut out just about every middleman, including most retailers. And it’s banking on long-run success. While Wyze is just breaking even on its first camera, its founders believe internet-connected home devices will be a growth category. They plan to establish a trusted brand with the first camera, then release a succession of products that they hope to sell in large numbers, at low prices.

…what was unique about Amazon was that its store encouraged low prices while heavily penalizing companies that made shoddy products. “It’s not a race to the bottom,” Mr. Fung said. “Sellers are forced to create better products at lower pricing, and sellers who aren’t able to do that just get weeded out.”

The classic worry about Amazon is that it puts local retailers out of business. Now another worry is that by exposing global brands to the harsh reality of low-priced competitors, it may put them out of business, too. Mr. Wingo said global brands across a variety of categories — electronics, apparel, home improvement — regularly approached his company looking for a way to compete with low-priced rivals on Amazon.

“There is this erosion of what it means to be a traditional consumer product brand,” Mr. Wingo said. “In a way, Amazon is providing all this information that replaces what you’d normally get from a brand, like reputation and trust. Amazon is becoming something like the umbrella brand, the only brand that matters.”


Proof Work aims to decentralize medical data by using the blockchain

The system, if successful, would be a big disruption to how health care data is handled today – where it’s often accessible only by the doctors and hospitals themselves, and where patients have to make special requests to have a copy of their own medical records. In the future, the goal is to allow patients to walk into a doctor’s office with all their medical records already on their phone.

This isn’t the first attempt to use technology to fix the problem with medical records; others have tried to centralize records for easier access, including Microsoft HealthVault, for example. One of the challenges getting prior systems to work was that healthcare companies aren’t necessarily interested in making it easier for patients to have access to their own medical records, says Suter. After all, the patients could go to another provider.

Pitney Bowes Parcel Shipping Index reveals 48 percent growth in parcel volume since 2014

China, a new addition to this year’s Index and by far the largest market examined, grew parcel volume by 52 percent in one year, increasing from 21 billion parcels in 2015 to 31 billion in 2016. But, even when excluding China’s prolific volumes, the Index forecasts a strong and accelerating pace of growth in parcels throughout the world. On average, the other 12 major markets studied have grown 4.3% annually since 2012 and are projected to grow 4.5% – 5.4% annually through 2021. The United States (at 13 billion) and Japan (at 9 billion) were also among the largest markets by parcel volume. In terms of investment, the United States ranked highest, spending $96 billion on parcel shipments, followed by China at $60 billion and Japan at $22 billion.

“The continued rise of ecommerce globally is keeping the parcel shipping market strong through 2021 as consumers are increasingly looking to online shopping for convenience, price and availability of products from around the world,” said Lila Snyder, executive vice president and president, Global Ecommerce, Pitney Bowes. “As consumer expectations continue to rise, shipping technology and service providers will need to help retailers and marketplaces meet those demands.”


China’s blow to recycling boosts U.S.’s $185 billion plastic bet

China is undoing decades of effort that built a massive scrap recycling industry — the cheapest way to produce plastic products for its growing economy. The country accounted for 51 percent of the world’s plastic scrap imports last year, with the biggest contribution coming from the U.S., according to the Institute of Scrap Recycling Industries, an international trade group. The China ban could shift about 2 percent of global polyethylene plastics supply from recycled to new material.

That’s because the U.S. has become the cheapest place in the world to make plastic, thanks to a fracking boom that’s created a glut of natural gas, the main feedstock for manufacturing. Taking advantage of low gas prices, chemical producers have invested an unprecedented $185 billion to build new capacity in the U.S., according to the American Chemistry Council, an industry group.

Exporting high-value resins to China instead of cheap scrap could help chip away at the U.S.’s $250 billion trade deficit with the nation. For producers, however, China’s ban on importing scrap will boost demand for new plastics by enough to nearly absorb all the new polyethylene output coming online next year in the U.S., Andrews said in the Morgan Stanley report. The effects can already be seen in China’s increased appetite for virgin polyethylene, with imports up 19 percent this year as scrap polyethylene imports dropped 11 percent, he said.

India ‘dream’ plan to cut freight times to 14 hours from 14 days

Japan, seeking to boost ties with India as a counterweight to China, is partly financing the DMIC project and holds a 26 percent stake. Indeed, Japan’s Tokyo-Osaka industrial corridor is an inspiration. NEC Corp. has invested in a joint-venture project with the Indian government that is already providing logistics support along the route.

The goal is to set up a “plug and play” environment for investors, says Jai Prakash Shivahare, managing director of the Dholera Industrial City Development. “We are looking to tie up with anchor investors so that they can also start their construction and in one-and-half-years, when our site is ready, their factories can also be ready.”

Work has now begun in four of the eight manufacturing destinations proposed in the first phase of the industrial corridor. But it has been far from smooth sailing to get to this point as red tape and budget constraints across six states and numerous sprawling ministries slowed progress, causing some to walk away altogether.


BlackRock and Vanguard are less than a decade away from managing $20 trillion

None other than Vanguard founder Jack Bogle, widely regarded as the father of the index fund, is raising the prospect that too much money is in too few hands, with BlackRock, Vanguard and State Street Corp. together owning significant stakes in the biggest U.S. companies. “That’s about 20 percent owned by this oligopoly of three,” Bogle said at a Nov. 28 appearance at the Council on Foreign Relations in New York. “It is too bad that there aren’t more people in the index-fund business.”

The argument goes like this: The number of indexes now outstrips U.S. stocks, with the eruption of passive funds driving demand for securities within these benchmarks, rather than for the broader universe of stocks and bonds. That could inflate or depress the price of these securities versus similar un-indexed assets, which may create bubbles and volatile price movements.

We’re not near a tipping point yet. Roughly 37 percent of assets in U.S.-domiciled equity funds are managed passively, up from 19 percent in 2009, according to Savita Subramanian at Bank of America Corp. By contrast, in Japan, nearly 70 percent of domestically focused equity funds are passively managed, suggesting the U.S. can stomach more indexing before market efficiency suffers. There’s even further to go if you look globally: Only 15 percent of world equity markets — including funds, separately managed accounts and holdings of individual securities — are passively managed, said Joe Brennan, global head of Vanguard’s equity index group, in an interview.


A growing number of young Americans are leaving desk jobs to farm

She joined a growing movement of highly educated, ex-urban, first-time farmers who are capitalizing on booming consumer demand for local and sustainable foods and who, experts say, could have a broad impact on the food system.

For only the second time in the last century, the number of farmers under 35 years old is increasing, according to the U.S. Department of Agriculture’s latest Census of Agriculture. Sixty-nine percent of the surveyed young farmers had college degrees — significantly higher than the general population.

Young farmers are also creating their own “food hubs,” allowing them to store, process and market food collectively, and supply grocery and restaurant chains at a price competitive with national suppliers.

Midsize farms are critical to rural economies, generating jobs, spending and tax revenue. And while they’re large enough to supply mainstream markets, they’re also small enough to respond to environmental changes and consumer demand.

Singapore’s aging ‘time bomb’ will tick louder in 2018

At this rate, seniors in Singapore’s population will make up more than double the share of the youngest residents in 2030. Tan uses a compounded annual growth rate rather than adjusting for potential policy changes or alteration of trends such as fertility rates, meaning officials could still help redraw those lines, or at least make them appear less menacing, over the next decade. With already the oldest population in the Association of Southeast Asian Nations, the Singapore of 2030 will probably look a lot like the demographics-embattled Japan of 2016.


The Louvre Abu Dhabi is getting the $450 million Da Vinci painting

The New York Times reported later Wednesday that Saudi Prince Bader bin Abdullah bin Mohammed bin Farhan al-Saud was the buyer, citing documents it reviewed. Christie’s declined to comment on the report.

The Louvre Abu Dhabi — a franchise of the Paris original — is a symbol of the oil-rich sheikhdom’s drive to boost its “soft power” credentials. To differentiate itself from neighboring Dubai, Abu Dhabi is targeting affluent tourists looking for culture and art and it has also built hotels, theme parks and malls. The organization behind the museum became one of the most aggressive buyers on the global art market over the last decade. It opened last month with more than 600 artworks for its permanent collection, including such Old Master paintings as Giovanni Bellini’s “Madonna and Child.” Da Vinci’s “La Belle Ferronnière” is on loan there from the Louvre in Paris.

Curated Insights 2017.11.05

This company’s robots are making everything and reshaping the world

Earlier this year, during one of Fanuc’s rare open houses, Vice President Kenji Yamaguchi told investors that about 80 percent of the company’s assembly work is automated. “Only the wiring is done by engineers,” he said. And when you have lots of efficient robots making your other robots, you can sell those robots more cheaply—about $25,500 for a new Robodrill. (You can find a well-used older model on EBay for $8,500.) Volkswagen Group, for instance, pays about 10 percent less for Fanuc robots than it paid for ones it previously purchased from Kuka AG, a German company.

Fanuc manages to offer these savings while maintaining 40 percent operating profit margins, a success that Yamaguchi also traced to the company’s centralized production in Japan, which is made possible, even though most of its products are sold outside the country, by the 243 global service centers that keep its robots operational. The company even profits from its competitors’ sales, because more than half of all industrial robots are directed by its numerical-control software. Between the almost 4 million CNC systems and half-million or so industrial robots it has installed around the world, Fanuc has captured about one-quarter of the global market, making it the industry leader over competitors such as Yaskawa Motoman and ABB Robotics in Germany, each of which has about 300,000 industrial robots installed globally. Fanuc’s Robodrills now command an 80 percent share of the market for smartphone manufacturing robots.

Orders from the U.S., though, are dwarfed by those from China—some 90,000 units, almost a third of the world’s total industrial robot orders last year. Sales to China amounted to about 55 percent of the $5 billion Fanuc’s automation unit generated in the fiscal year ended March 2017. The International Federation of Robotics estimates that, by 2019, China’s annual industrial robot orders will rise to 160,000 units, suggesting Fanuc will be insulated from any slowdown in the world’s second-largest economy. Yoshiharu told investors at his most recent Q&A session in April that the company expects demand in China to outstrip supply even after Fanuc opens a factory next August in Japan’s Ibaraki prefecture. The facility will be dedicated solely to keeping up with Chinese demand.

The result of Nishikawa’s insight was the Fanuc Intelligent Edge Link and Drive, or Field. The system, introduced in 2016, is an open, cloud-based platform that allows Fanuc to collect global manufacturing data in real time on a previously unimaginable scale and funnel it to self-teaching robots.


Apple should shrink its finance arm before it goes bananas

Apple does not organise its financial activities into one subsidiary, but Schumpeter has lumped them together. The result—call it “Apple Capital”—has $262bn of assets, $108bn of debt, and has traded $1.6trn of securities since 2011.

Since Jobs died, its assets have risen by 221%, twice as fast as the company’s sales, reflecting Apple’s huge build-up of profits. Its investments are worth 32% of Apple’s market value, and its profits (investment income, plus gains on derivatives, less interest costs) have been 7% of Apple’s pre-tax profits so far this year. It is also sizeable compared with other financial firms. Consider four measures: assets, debt, credit exposure and profits.

In 2011 a majority of its assets were “risk-free”: cash or government bonds. Today 68% are invested in other kinds of securities, mainly corporate bonds, which Apple says are generally investment grade. The shift may explain why Apple’s annual interest rate earned on its portfolio (2%) is now higher than that of the four other Silicon Valley firms with money mountains, Microsoft, Alphabet, Cisco and Oracle. In total, they still have 66% of their portfolios squirrelled away in risk-free assets.

Its foreign operation swims in cash while its domestic one drowns in debt. Profits made abroad are kept in foreign subsidiaries. That way Apple does not pay the 35% levy America charges when earnings are repatriated. Some 94% of Apple Capital’s assets are “offshore” and cannot be tapped for ordinary purposes. The domestic business must do the hard work of paying for dividends and buy-backs. Its profits are not big enough to cover these, so it borrows. Domestic net debts have risen to $92bn, or five times domestic gross operating profits. Each year Apple must issue $30bn of bonds (including refinancing), similar to the average of Wall Street’s five largest firms.


To understand the benefits of tax reform, start by understanding Apple’s taxes

Now we have the numbers that answer the basic question: What accounts for the difference between what Apple pays and the official 35% rate? Page 56 of its 10K shows the numbers. Once again, if Apple had faced the full 35% rate, it would have paid $21.46 billion in federal taxes (as well as another $990 million to the states). Instead, it paid $10.444 billion in cash, and accrued $5.241 billion in U.S. tax owed on foreign profits, but deferred to be paid later. That’s the total of $15.685 billion that it booked in tax expense on its income statement. The difference between that number and the approximately $21.5 billion it would have paid at the 35% rate is the almost $5.6 billion exclusion for “indefinitely invested foreign earnings.”

Surprisingly, companies such as Apple with an extremely large proportion of foreign sales, could actually pay more U.S. taxes in cash each year under the current proposals. That’s because elimination of deferrals and the exception for reinvested earnings would sent more money to the Treasury even at the far lower minimum rate.

 

Google’s profits are exploding because the web is massive

The bigger the web grows, the more valuable Google becomes. And, with more than one billion websites in the world and more than 4 billion people with regular access to the Internet, finding your needle in that haystack is the fundamental problem of Internet use. As the tech writer Ben Thompson wrote, “Google is the king of aggregators because, when information shifted from scarcity to abundance, discovery became the point of leverage, and Google was better at discovery than anyone.”

Second, the migration of attention from print and television to the internet—both desktop and mobile—has created a advertising duopoly for Google and Facebook. As these slides from the last Kleiner Perkins internet presentation show clearly, mobile is the future of media attention and Facebook and Google’s share of digital ad revenue is growing faster than the rest of the industry combined.


How Google’s quantum computer could change the world

Early next year, Google’s quantum computer will face its acid test in the form of an obscure computational problem that would take a classical computer billions of years to complete. Success would mark “quantum supremacy,” the tipping point where a quantum computer accomplishes something previously impossible. It’s a milestone computer scientists say will mark a new era of computing, and the end of what you might call the classical age.

That potential is a result of exponential growth. Adding one bit negligibly increases a classical chip’s computing power, but adding one qubit doubles the power of a quantum chip. A 300-bit classical chip could power (roughly) a basic calculator, but a 300-qubit chip has the computing power of two novemvigintillion bits—a two followed by 90 zeros—a number that exceeds the atoms in the universe.

Volkswagen AG is testing quantum computers made by Canadian firm D-Wave Systems Inc. In March, the companies said that, using GPS data from 10,000 taxis in Beijing, they created an algorithm to calculate the fastest routes to the airport while also minimizing traffic. A classical computer would have taken 45 minutes to complete that task, D-Wave said, but its quantum computer did it in a fraction of a second.

Such a complex and expensive setup means that Google and its peers will likely sell quantum computing via the cloud, possibly charging by the second.


Google has a new plan for China (and it’s not about search)

Rather than another splashy product launch, Google’s latest China strategy is a grassroots effort focused on getting developers in the country trained and hooked on its AI building blocks. It’s similar to the way business software startups get employees using their services before corporate IT departments notice. Once the tools become popular, companies often accept the technology and sign up for full service.

It’s hard to find a place as fertile for AI as China. The country has one of the fastest growing TensorFlow developer communities in Asia, despite the fact that Google’s cloud services are unavailable there. The Chinese government has made AI a national priority. Scores of Chinese companies are deploying machine-learning systems — AI software that automatically adjusts to data — to update banking services, identify faces in crowds and control drones.

Beijing-based Wang Xiaoyu said TensorFlow was a vital tool for her podcast startup CastBox.FM. Developing her own tools would’ve required a team of 20 expensive machine-learning specialists. Instead, she turned to TensorFlow and hired a single Chinese PhD graduate with TensorFlow experience capable of producing the same results. Her company is now worth about $60 million with more than 8 million users downloading her app.

Ricky Wong, an investor who often works in China, analyzed the location of the first 5,000 developers to access the tools and found more came from Beijing than all of Silicon Valley.


Tech goes to Washington

I still believe that, on balance, blaming tech companies for the last election is, more than anything, a convenient way to avoid larger questions about what drove the outcome. And, as I noted, the fact is that tech companies remain popular with the broader public.

What this hearing highlighted, though, is the degree to which the position of Facebook in particular has become more tenuous. The fact of the matter is that Facebook (and Google) is more powerful than any entity we have seen before. Magnifying the problem is that, over the last year, Facebook has decided to “take responsibility”, and what is that but a commitment to exercise their control over what people see?

More broadly, it is hard to escape the conclusion that tech companies have been unable to resist the ring of power: the end game of aggregation is unprecedented control over what people see; the only way to handle that power without risking the abuse of it is a commitment to true neutrality. That Facebook, Twitter, and Google — which, by the way, holds just as much if not more power than Facebook, but without the attendant media scrutiny — have committed to fixing the Russian problem is itself more problematic than those urging they do just that may realize.

Inside Fort Botox, where a deadly toxin yields $2.8 billion drug

Scientists differ over how much of the toxin would be required to inflict massive damage. Data on the topic is scarce, and that may be intentional. But a study published in 2001 in the Journal of the American Medical Association said that a single gram in crystallized form, “evenly dispersed and inhaled, would kill more than 1 million people.” Experts are divided over what it would take to effectively weaponize the toxin, but the mere possibility of a botulism bomb has the U.S. government on edge. That puts Allergan in a remarkable position. The government’s vigilance enhances the company’s own secrecy, and together they give Botox a near-monopoly that is almost unassailable. Allergan says Botox has more than 90 percent of the market for medical uses of neurotoxins and 75 percent of the market for cosmetic uses.


Gene therapy helped these children see. Can it transform medicine?

Spark’s product, named Luxturna, is designed to help a subset of LCA sufferers with a mutation in a gene known as RPE65 — who number about 6,000 in northern America, Europe and the other developed markets the company hopes to enter. But its approval would have much broader implications for the way we fight sickness and disease. 

Drugs are designed to fight illnesses by cajoling the body, opening up one biological pathway or closing down another. Gene therapy takes a different approach, replacing the faulty or missing DNA that is causing the disease in the first place and helping the body fix itself. Because it tackles the illness at its biological root, it could offer a one-time treatment for an array of genetically driven conditions that have either had poor options or none at all, from haemophilia and Parkinson’s to Huntington’s disease, cystic fibrosis and myriad rare diseases. It opens up the possibility of that thing still so elusive in modern medicine: a cure. 


Patient deaths show darker side of modernized Chinese medicine

Having struggled for decades to rein in the sector, regulators have recently begun pushing for an overhaul of Chinese medicine injections, seeking to weed out unsafe and ineffective products. But the process could take up to a decade, given the complexity of these intravenous pharmaceuticals.

Still, due to the history of lax regulation, many injectables based on Chinese medicine haven’t been evaluated in strict scientific clinical trials. That means the reactions they set off in the body aren’t fully known. Chinese medicine is based on centuries of practical experience. But it is traditionally taken orally, which gives the digestive system a chance to shield patients from harmful chemicals. Injecting the concoctions into the bloodstream can heighten side effects.


This budget airline is buying seaplanes to reach areas others can’t

SpiceJet Ltd. is in talks with Japan’s Setouchi Holdings Inc. to buy about 100 amphibious Kodiak planes that can land anywhere, including on water, gravel or in an open field. The deal, valued at about $400 million, would help SpiceJet capitalize on Prime Minister Narendra Modi’s ambitious plan to connect the vast nation by air without waiting for billions of dollars in upgrades to colonial-era infrastructure.

India’s airlines handled 100 million domestic passengers last year, making it the No. 3 market behind China and the U.S. To handle growth, India will need at least 2,100 new planes worth $290 billion in the next 20 years, Boeing Co. estimates.

“The basic logic for this is that in India, we need last-mile connectivity,” Singh said. “The amphibian plane opens up a lot of areas, creates a lot of flexibility.”

“High-end tourists use amphibious aircraft at exotic locations all over the world,” said Amber Dubey, a New Delhi-based partner and India head of aerospace and defense at KPMG. “There’s no reason why it can’t be successful in India.”


This doctor turned $15,000 into a $1.6 billion beauty empire

“We focus on mid-end customers because they’re the biggest group of people,” said Suwin, who trained as a doctor before becoming an entrepreneur. “The high-end segment is small and very competitive.”

In mainland China, Beauty Community sells through online channels including Alibaba Group Holding Ltd.’s Tmall platform. The country’s beauty market is forecast to grow at an average of 9 percent a year until 2020, outpacing the 5 percent expansion expected in Thailand, according to Euromonitor.

Beauty Community is the ninth biggest company in Thailand’s cosmetics industry, with a 3.1 percent share of a fragmented market, according to Euromonitor. L’Oreal leads, with 12 percent, followed by direct sales company Better Way (Thailand) Co. and Estee Lauder Cos. The firm aims to have 450 shops domestically in the next three years, under brands such as Beauty Cottage and Beauty Buffet.


Debating where tech is going to take finance

The point of most innovations in consumer finance has been precisely to reduce its presence in our lives: Instead of talking to a bank teller to get money, you use an ATM. Instead of physically walking into a broker’s office to talk about which stocks to buy, you buy index funds through a web page. Or, now, you click to enroll in an app and it does all of your asset-allocating and stock-picking and tax-harvesting and so forth for you. I think that a lot of financial technology is heading in the direction of perfecting that vanishing act, so that in 20 years you’ll just think about financial things less than you do now.

The EU’s definitive defeat: digital tax plans and a declaration of surrender to Silicon Valley

The EU has a huge competitiveness issue already, and due to the eurozone’s lack of innovation, especially in its Mediterranean member states, the sovereign-debt crisis is never going to be resolved. The European Central Bank is, in some ways unlawfully, keeping Europe’s south afloat and will do so for some more time, but at some point there will be a crisis of unprecedented proportions–either an acute and dramatic crisis or an extended depression from which the eurozone as an economic area won’t really recover.

By now the EU appears to have given up on its ambitions for the digital economy. Instead, its focus is on a new tax that could lead to a full-blown trade war with the U.S. and would definitely harm European companies and consumers in the end.

There are structural reasons for which the EU not only lacks major players like Apple and Google but why it’s highly unlikely that any of its startups will, as an independent company, ever reach that level.

Unfortunately, the Commission’s tax initiative has drawn support even from normally libertarian, free-market and fiscally conservative parties such as Germany’s FDP, whose secretary-general said last week that she wants to impose higher taxes on the likes of “Apple, Google, and Facebook.”


China’s critical role in technology and geopolitics

There are 214 private companies in the world valued at $1 billion or more, known as unicorns. Slightly more than half (108) are,as you would expect, based in the United States, but 55 are in China, with the remaining 51 located in other countries throughout the world. Of the top ten unicorns, China has four (including numbers two and three) and the U.S. has six. China’s innovation has been engineering-based rather than science-based and it is consumer-focused and efficiency-driven. Baidu, Alibaba and Tencent together represent 16% of world net digital advertising revenue and 20% of world net mobile Internet ad revenue. Google and Facebook are the leaders with a combined 43% of net digital and 51% net mobile ad revenue.

China’s investment in research goes beyond information technology. Prior to 2010, the country committed almost $10 billion to research with biotechnology a focal point. The Chinese biotech industry has been growing at 30% and is valued at over $10 billion today. There are more than 580 biopharma companies. Chinese scientists have transformed normal adult cells into embryonic stem cells and produced live mice from these lab-produced cells. There are two major state funding sources – the State High-Tech Development Program and the Basic Research Program. China is the third largest filer of patents, after the United States and Japan.

An issue of concern for many investors is the level of Chinese debt, which has risen from 149% to 269% of GDP over the past decade. Increasing debt has accounted for two percentage points of China’s 7.25% growth from 2012 to 2016. There is also the worry that there are a number of non-performing loans on the books of the banks and “shadow” banks, but the adverse effects of these has been deferred by the country’s growth.


The conventional view of China’s problems may be all wrong: Q&A

If migrants are allowed to live and settle in cities and they spend as much as normal Chinese, the savings rate would fall. Consumption would increase by 2 or 3 percentage points of GDP, which is the entirety of the trade surplus.

What’s unique in China and doesn’t happen anywhere else is this migrant worker phenomenon. In any other country, you don’t have a hukou policy. Hukou is a link to savings, and then links to global trade surpluses. That’s a real strange link. This never would have been a logical way of thinking about it in any other country.

If you liberalize hukou, it reduces pressure to save. It increases your incentive or opportunity to consume. This increases demand for resources. It doesn’t require credit expansion or generation or stimulus. Therefore, you have GDP growth without debt buildup, which is exactly what you need. It’s a simple reform with tremendous impact. Allow people to live in Beijing and Shanghai where jobs pay more, and productivity will be higher.


Backlash against Chinese products ramps up in India

Two-way trade statistics tell the tale. India’s deficit with China has ballooned nine-fold over a decade to $49 billion in 2016 as China’s manufacturing edge stacks the odds against Prime Minister Narendra Modi’s three-year-old ‘Make-in-India’ program. The result: India’s current account deficit is worsening again, threatening the outlook for an economy already straining under the fallout of a snap ban on high-value notes a year ago and a new sales tax.

“The imbalanced trade relationship reflects the fact that India’s manufacturing sector remains strongly underdeveloped. Unless it is able to develop its manufacturing sector so that it can produce a large share of the growing demand for goods in its economy, India’s economic growth will be constrained by rising current account deficits and/or inflation and their consequences.”

“No one is capable of competing with the Chinese.”


Abandoned land in Japan will be the size of Austria by 2040

A private research group headed by a former government minister today warned that the area (link in Japanese) of vacant land and homes could by 2040 be as big as Japan’s northernmost island of Hokkaido—about 83,000 sq km (32,000 sq miles), or the size of Austria. The area is currently about 41,000 sq km, slightly bigger than Japan’s southern island of Kyushu.

Hiroya Masuda, the former minister who chaired the group, warned in a 2014 book that about 900 cities, towns, and villages in Japan would be extinct by 2040.

Singapore is finding it harder to grow, literally

By filling the sea along its coasts with imported sand, the tiny island nation has expanded its physical size by about 24 percent since 1960, according to data from the Singapore Land Authority.

The government has plans to continue expanding its land size and said in a 2013 proposal that it expects to increase its land size to 296 square miles by 2030 to further support economic and population growth.

Supersized family farms are gobbling up American agriculture

Farms with $1 million or more in annual sales—only 4% of the total—now produce two-thirds of the country’s agricultural output, the largest portion since the U.S. Agriculture Department’s census began tracking the statistic in the ’80s.

Three-quarters of America’s farmed cropland is controlled by 12% of farms, USDA data show. The number of million-dollar-plus revenue farms more than doubled between 1992 and 2015, while the ranks of smaller farms, with revenue between $350,000 and $999,999, fell by 5%, as farmers get older and have a hard time making consistent profits. USDA researchers, in a December report, said consolidation is likely to continue.

An average farm household in the Colby area needs income of at least $50,000 annually to get by, said Mr. Wood, the agricultural economist, which has become harder to generate from a smaller farm. “The big guys can cover their costs and have money left over to grow,” Mr. Wood said. Smaller farms, he said, “are going to struggle.”

Curated Insights 2017.10.22

Tesla’s new car smell

As I watched Tesla’s messy, hiccuping line, with workers dashing in to fix faulty parts in place, my mind travelled back to the Honda plant I had visited years ago in Marysville, Ohio. Clean, calm, everything moved smoothly. I was so shocked by the contrast that I imprudently voiced my concern. That didn’t go over well with my fellow Tesla owners. I was a killjoy, I was calling their choice into question.

“Unknown to analysts, investors and the hundreds of thousands of customers who signed up to buy it, as recently as early September major portions of the Model 3 were still being banged out by hand, away from the automated production line, according to people familiar with the matter.”

Moving from fewer than 100K cars a year to 500K and up isn’t “more of the same”, it can’t be achieved through clever, conventional-wisdom-defying improvisation. That sort of growth is a bold jump in scale that requires a smooth, well-oiled and well-understood manufacturing process.


Millennials are helping Jack Ma’s financing firm become a debt giant

Securitized products that bundle such obligations are meant to spread the risks among different investors. The tech companies can’t take deposits like banks, so the ABS, which are generally sold in private placements to institutional investors, give them a way to raise funds. The latest ABS from Ant Financial that’s backed by loans through its Jiebei service pays a 5.5 percent coupon for the senior tranche, according to data compiled by Bloomberg.

“In the short term, default risks for consumer loan ABS are very low because the underlying assets are composed of a number of loans in small sizes,” said Zuo Fei, an executive director and head of the ABS group in the investment banking division of China Merchants Securities Co. in Shenzhen. “These ABS products will be safe, unless systemic risks emerge in the economy and cause widespread defaults in consumer loans.”

Shell buys NewMotion charging network in first electric vehicle deal

Demand for electric vehicles is expected to rise significantly in coming decades and Morgan Stanley estimates that 1-3 million public charging points could be needed in Western Europe by 2030. Currently, there are fewer than 100,000. Shell expects around a quarter of the world’s car fleet to be electric by 2040.

Oil companies are growing increasingly aware of the potential threat to parts of their downstream business from the electrification of transport.


Solar wants to help fix a power-grid problem it helped create

Solar panels have proliferated in the Golden State, flooding the grid with power supplies in the middle of the day when the sun’s out — and then quickly vanishing after sunset. This has created a sharp curve in California’s net-power demand that’s shaped like a duck. And the so-called duck curve is getting steeper every year, sending wholesale electricity prices plunging into negative territory, forcing generators offline and making it increasingly difficult to maintain the reliability of California’s transmission lines.

…change the way solar farms are paid. If the state’s utilities compensate them for shutting generation when the grid doesn’t need it and providing power later when it does, he said, farms could use increasingly sophisticated inverters and software controls to adjust.


How Amazon’s $13.7B purchase of Whole Foods is a ‘blessing in disguise’ for Instacart

“When Amazon bought Whole Foods, what they did was they sent the signal to the entire grocery/retail landscape that Amazon was coming,” Mehta said. “Now, for every single grocery retailer at this point in time, whether they believed it or not before, now they needed an e-commerce strategy. They needed to have same day delivery. The reality was, for the last five years, that’s what we have done. We have brought hundreds of grocery retailers online, and so we had the track record of being able to do this successfully.”

Instacart has been growing faster than expected this year, and it has expanded to 149, up from only 30 at the beginning of the year. Mehta said the company can now reach 63 million households as potential customers, up from about 11 million a year ago.


This little-known startup just hit a valuation of $30 billion

Travel is becoming the latest competitive ground. With the recent fundraising, Meituan plans to spend hundreds of millions of dollars over the next three to five years to become a leading travel booking site. It’s also exploring opportunities to collaborate with Priceline as part of the investment. That may present a challenge to China’s biggest online travel site, Ctrip.com International Ltd., which is backed by Baidu. Ctrip shares fell 8.2 percent in U.S. trading.

China’s internet crackdown isn’t going anywhere

“Xi Jinping has definitely been a turning point in terms of the degree of censorship that is happening in China,” said Charlie Smith, who founded Greatfire.org, an organization that finds ways around government restrictions. “He is the first Chinese leader to truly understand the power of the internet and hence, we are seeing an unprecedented crackdown on dissenting information,” said Smith, who uses a pseudonym for fear of government reprisals

In June, Weibo Corp., the Chinese equivalent to Twitter, was one of three firms fined and banned by regulators from broadcasting certain types of content without a license. In an August earnings call, its chief financial officer said current rules made it legally impossible to acquire a license without becoming “wholly state-owned or state-controlled”.

The tightening presents unique challenges to foreign firms navigating the legal landscape. Services that rely on free-flowing information, such as Google and Facebook, would struggle to exist in such a regime, though they remain intent on finding a way in given the size of the potential market.


Who has the world’s No. 1 economy? Not the U.S.

Gross domestic product is supposed to measure the amount of real stuff — cars, phones, financial services, back massages, etc. — that a country produces. If the same phone costs $400 in the U.S. but only $200 in China, China’s GDP is getting undercounted by 50 percent when we measure at market exchange rates. In general, less developed countries have lower prices, which means their GDP gets systematically undercounted.

Economists try to correct for this with an adjustment called purchasing power parity (PPP), which controls for relative prices. It’s not perfect, since it has to account for things like product quality, which can be hard to measure. But it probably gives a more accurate picture of how much a country really produces. And here, China has already surpassed the U.S.

China’s modest per-person income simply means that the country has plenty of room to grow. Whereas developed countries can only get richer by inventing new things or making their economies more efficient, poor countries can cheaply copy foreign technology or imitate foreign organizational practices. That doesn’t always happen, of course — many poor countries find themselves trapped by dysfunctional institutions, lack of human capital or other barriers to development.

In other words, not only is China already the world’s largest economy, the gap between it and the U.S. can be expected to grow even wider. This continues to be borne out in the growth statistics — though China has slowed in recent years, its economy continues to expand at a rate of more than 6 percent, while the U.S. is at just over 2 percent. If that disparity persists, China’s economy will be double that of the U.S. in less than two decades.


China to build giant facial recognition database to identify any citizen within seconds

The system can be connected to surveillance camera networks and will use cloud facilities to connect with data storage and processing centres distributed across the country, according to people familiar with the project.

Commercial application using information sourced from the database will not be allowed under current regulations. [But] a policy can change due to the development of the economy and increasing demand from society.”

“To download the whole data set is as difficult as launching a missile with a nuclear warhead. It requires several high-ranking officials to insert and turn their keys at the same time,” the vendor said.

The 1.3 billion-person facial recognition system is being developed by Isvision, a security company based in Shanghai.

They found that the accuracy of the photo that most closely matched the face being searched for was below 60 per cent. With the top 20 matches the accuracy rate remained below 70 per cent, Fan and collaborators reported in a paper published in the domestic journal Electronic Science and Technology in May. “It cannot solve problems with real-life applications,” they added.

The researcher warned that the cost of the convenience facial recognition could bring to everyday life was “sacrificing security”.


Warning signs are mounting for Sweden’s once-hot housing market

SEB AB’s monthly housing-price indicator shows households are becoming less optimistic about the market. The gauge, which measures the difference between those who see rising housing prices and those who believe in a decline, has dropped to its lowest level since August 2016. While 66 percent of Swedes still expect prices to rise, and only 16 percent believe in a decline, the indicator has dropped for four consecutive months.

Regulators have been tightening regulations to cool debt growth. Swedes are now subject to a mortgage cap, limiting loans to 85 percent of a property’s value, and an amortization requirement, which forces borrowers pay off the part of their new loans that exceeds 50 percent of the property’s value. The regulator now wants to introduce an additional amortization requirement for the most indebted households, and has also floated the idea of a cap on loans in relation to incomes.

Developers are taking action to prepare for a slowdown. Wallenstam AB said this month it would convert 90 apartments in a development in the Stockholm neighborhood of Solberga to rentals rather than trying to sell them. The situation is “a bit uncertain,” with the market for ownership apartments having “cooled down,” Wallenstam said on Oct. 9.


Indonesia set for trillion-dollar economy in bittersweet triumph

Size isn’t everything. Even after eight rate cuts since the beginning of last year, the economy is struggling to fire up: loan growth remains muted, while the central bank expects low inflation to linger for some time. The picture is made more complex by a wide divergence in growth across the archipelago of more than 17,000 islands, with rates ranging from negative to more than 7 percent.

Jokowi is ramping up spending on roads, rail and seaports as he targets economic growth of 5.4 percent in 2018, the fastest rate in five years. But a massive infrastructure deficit — estimated by the World Bank at $1.5 trillion — is frustrating his efforts. The global lender says another $500 billion in infrastructure spending is needed over the next five years.

Indonesia’s tax revenue as a portion of GDP remains one of the lowest in the region with the OECD estimating it at around 12 percent two years ago. It has since fallen to 10.3 percent, which Finance Minister Sri Mulyani Indrawati in July described as “low and unacceptable.” She’s aiming to boost that ratio to 16 percent by 2019.


Like Bali? Indonesia wants to create 10 of them to draw Chinese tourists

Jokowi’s plan, according to Yahya, will see the contribution of tourism to the economy climb to 7.5 percent by 2019 from 4.5 percent last year. Tourism receipts are forecast to grow more than 60 percent to $20.7 billion over the same period, with the number of jobs seen rising to 13 million from 11.8 million.

Even with that kind of growth, Indonesia is far behind neighboring countries in developing tourism and targeting Chinese visitors. Thailand’s industry makes up about 18 percent of gross domestic product, with the country’s famed beaches and nightlife attracting 26 million foreign visitors so far this year, 28 percent of them coming from China. Indonesia also trails Singapore and Malaysia in number of tourists.

Funding Jokowi’s 10 New Balis plan will be a big challenge. Yahya estimates the industry needs $20 billion of investment over five years, of which about $10 billion will come from the government. Given its vast infrastructure needs in everything from ports to roads, and a budget deficit cap of 3 percent of GDP, authorities are seeking more private-sector funds.


Silicon Valley Vs. Wall Street: Can the new Long-Term Stock Exchange disrupt capitalism?

If the LTSE succeeds, it could offer a new incentive for privately held tech giants such as Airbnb Inc. and Uber Technologies Inc. to go public, at a time when many market veterans and regulators fear the process of going public has lost its luster. But skeptics wonder whether the LTSE is just another way for tech founders and elite Silicon Valley investors to maintain control at the expense of other shareholders.

For instance, executives’ bonuses couldn’t be tied to financial-performance targets over periods of less than one year. If the executives are paid in company stock, the shares couldn’t fully vest for at least five years. LTSE-listed firms would still publish quarterly results—an SEC requirement—but they would be barred from releasing quarterly earnings guidance, a practice that some critics say fosters short-term thinking. Meanwhile, tenure voting would be available to any shareholder of an LTSE-listed company. If an investor opted into the system, the voting power of his or her shares would grow over time, capped at 10 times the power of ordinary common stock after a decade. If the shares were sold, the voting power would be reset for the new owner.

Mr. Ries disputes the idea that the LTSE is good for founders and bad for everyone else. In his view, tenure voting is better than the solution favored by some Silicon Valley firms: severely limiting the voting power of ordinary shareholders through two or more share classes.

Curated Insights 2017.10.15

86-year-old billionaire iPhone chipmaker retires just as his industry heats up

“Since we established ourselves, fabless companies began to mushroom worldwide. Most of the innovations in the semiconductor industry in the last 30 years came from those fabless companies. That’s probably my biggest pride, to have caused a lot of innovations in the industry.”

Liu and Wei inherit a company that is about 30 times larger than local rival United Microelectronics Corp. and commands 59 percent of the $50 billion global foundry market.

Growing chipset demand from China spells another opportunity for TSMC: the country spent $227 billion importing integrated circuits in 2016, according to data from Chinese customs authorities, the fourth consecutive year that chip imports have exceeded $200 billion.


Nvidia, Intel, Marvell: Look how they’ve slimmed down! Says Stifel

“The end markets of semiconductors have changed dramatically over the past 10 years,” he observes, given how much automotive and industrial, two industries with longer product cycles, and therefore more predictable revenue, have taken from more volatile industries.

Another reason for rising valuations is simply scarcity: “In 2007 there were roughly 118 publicly traded semiconductor companies. Today there are roughly 55.”


Shopify S-1 analysis – Smiling all the way to $10B

How are they able to sustain more efficient growth as they scale? The first reason is Shopify has been able to grow their contract value by 14% annually. The average subscription payment by merchant has remained flat over the past four years. Instead of growing subscription revenue on a per customer basis, Shopify is capturing more share of GMV. The chart above shows the merchant services revenue generated per billion dollars of gross merchandise value by Shopify. You can see that figure has quite nearly doubled in four years. In other words, as Shopify merchants sell more, Shopify benefits Proportionately from the growth in GMV, but also at an increasing slope because they capture almost twice as much in fees as they have been historically.

Consequently, merchant services now account for greater than 50% of revenue up from just above 20% four years ago. The gross margin on the software business has remained 78% over the past four years, while merchant services gross margin has fallen from 50% to 30%. Overall gross margin has fallen from 80% to 54%. But that is an advantageous trade considering the massive revenue growth.

Citron exposes the dark side of Shopify the FTC will take notice

Out of the claimed 500,000 websites, Shopify has about 2,500 “Plus” clients and maybe another 20,000 “Advanced”. So where are the other 450,000 + websites?

The majority of Shopify’s customers are not SMB merchants; rather, they are people who are buying a system and Shopify goes as far as to supply them a theme and inventory.


Ikea puts Latin America, Southeast Asian markets in its sights

Ikea has more than 400 stores in 49 markets across Europe, North America, the Middle East, Asia and Australia.

According to Ikea’s plans, it will have opened its first store in South America within the next five years, which is the same timeframe it has set for its expansion into Vietnam and the Philippines. As South America is a new region, it’s likely to enter two or three markets there around the same time in order to secure supply and production, Loof said.

Ikea plans to add 22 new stores this year, up from 14 new stores in 2017. In the future, Ikea will probably open some 25 new stores annually, Loof said. Ikea’s website attracted 2.3 billion visitors last year, while its stores got 936 million visits.


Singapore home-sharing quietly grows despite the rules

Airbnb said its travelers to Singapore typically stay 4.1 nights compared with 3.6 for the average tourist, and three-quarters of listings are outside of traditional hotel districts, allowing tourism spending to accrue in areas that don’t usually host outside visitors.

In a February debate in Parliament, Louis Ng Kok Kwang, a lawmaker for the ruling People’s Action Party, urged the government to regulate rather than ban home-sharing services, noting that the approach so far is inconsistent with how Singapore treated car-sharing businesses, such as Uber Technologies Inc. and Grab.


How we’re solving the LIDAR problem

Strobe’s new chip-scale LIDAR technology will significantly enhance the capabilities of our self-driving cars. But perhaps more importantly, by collapsing the entire sensor down to a single chip, we’ll reduce the cost of each LIDAR on our self-driving cars by 99%.

Strobe’s LIDAR sensors provide both accurate distance and velocity information, which can be checked against similar information from a RADAR sensor for redundancy. RADARs typically also provide distance and velocity information and operate under more challenging weather conditions, but they lack the angular resolution needed to make certain critical maneuvers at speed. When used together, cameras, LIDARs, and RADARs can complement each other to create a robust and fault-tolerant sensing suite that operates in a wide range of environmental and lighting conditions.

 


India stock market could triple in a decade

” … The sectors poised to benefit the most are consumer-oriented and financials. Total online shoppers in India are set to skyrocket from 60 million to 475 million in 2027, while online retail as a percentage of total retail will grow even faster, from 2.2% today to 12.1% in a decade. Unsurprisingly, Amazon.com, China’s Alibaba Group Holding and South Africa’s Naspers have been aggressively investing billions of dollars in India. Morgan Stanley figures Softbank alone has invested some $46 billion in local e-commerce and on-line payments, ride-hailing, and real estate platforms.

As for the financials, Morgan Stanley sees total loans increasing 11 percentage points to 78% of GDP by 2027; total mutual fund assets under management jumping more than ten-fold over the same period; and collected life and general insurance premiums spiking, as well. Fin-tech companies should see exponential growth …”


Bitcoin’s academic pedigree

Nakamoto’s genius, then, wasn’t any of the individual components of bitcoin, but rather the intricate way in which they fit together to breathe life into the system. The timestamping and Byzantine agreement researchers didn’t hit upon the idea of incentivizing nodes to be honest, nor, until 2005, of using proof of work to do away with identities. Conversely, the authors of hashcash, b-money, and bit gold didn’t incorporate the idea of a consensus algorithm to prevent double spending. In bitcoin, a secure ledger is necessary to prevent double spending and thus ensure that the currency has value. A valuable currency is necessary to reward miners. In turn, strength of mining power is necessary to secure the ledger. Without it, an adversary could amass more than 50 percent of the global mining power and thereby be able to generate blocks faster than the rest of the network, double-spend transactions, and effectively rewrite history, overrunning the system. Thus, bitcoin is bootstrapped, with a circular dependence among these three components. Nakamoto’s challenge was not just the design, but also convincing the initial community of users and miners to take a leap together into the unknown—back when a pizza cost 10,000 bitcoins and the network’s mining power was less than a trillionth of what it is today.

The history described here offers rich (and complementary) lessons for practitioners and academics. Practitioners should be skeptical of claims of revolutionary technology. As shown here, most of the ideas in bitcoin that have generated excitement in the enterprise, such as distributed ledgers and Byzantine agreement, actually date back 20 years or more. Recognize that your problem may not require any breakthroughs—there may be long-forgotten solutions in research papers.

Academia seems to have the opposite problem, at least in this instance: a resistance to radical, extrinsic ideas. The bitcoin white paper, despite the pedigree of many of its ideas, was more novel than most academic research. Moreover, Nakamoto didn’t care for academic peer review and didn’t fully connect it to its history. As a result, academics essentially ignored bitcoin for several years. Many academic communities informally argued that Bitcoin couldn’t work, based on theoretical models or experiences with past systems, despite the fact that it was working in practice.

The lessons of Leonardo: How to be a creative genius

Be curious about everything. Leonardo’s most distinctive trait was his passionate, playful and occasionally obsessive curiosity. He made lists in his notebooks of hundreds of subjects, both marvelous and mundane, that he wanted to explore…Some of his curiosity involved phenomena so commonplace that we rarely pause to wonder about them. “Why is the fish in the water swifter than the bird in the air when it ought to be the contrary, since the water is heavier and thicker than the air?”

Observe attentively. His curiosity was aided by the sharpness of his eye, which focused on things that the rest of us barely notice. One night he saw lightning flash behind some buildings and for that instant they looked smaller, so he launched a series of experiments to verify that objects look smaller when surrounded by light.

The best reason to learn from Leonardo, however, is not to get a better job but to live a better life. Having immersed myself in his world for several years, I have resolved to be more observant of phenomena that I used to ignore.