Ten interesting things we read this week
Some of the most interesting topics covered in this week's iteration are related to 'Barbell returns in investing', 'Millenials' Sleepcations' and 'the death of liberal democracy'
Image: Shutterstock At Ambit, we spend a lot of time reading articles that cover a wide gamut of topics, including investment analysis, psychology, science, technology, philosophy, etc. We have been sharing our favourite reads with clients under our weekly ‘Ten Interesting Things’ product. Some of the most interesting topics covered in this week’s iteration are related to ‘Barbell returns in investing’, ‘Millenials’ Sleepcations’ and ‘the death of liberal democracy’.
Here are the ten most interesting pieces that we read this week, ended August 3, 2018.
Here are the ten most interesting pieces that we read this week, ended August 3, 2018.
1) The lopsided march of active and passive investors [Source: Financial Times]
Few debates become as heated in investment circles as those between the advocates of active and passive investing. But focusing on this fight alone risks missing trends which are starting to appear elsewhere in the investment world. Three new reports on my summer reading list illustrate them well. The author, Huw Van Steenis believes investor flows would polarize into a barbell shape, weighted at both ends. At one extreme, investors would flock to passive funds and exchange-traded funds in order to access benchmark returns cheaply and conveniently. At the other, investors seeking higher returns would increasingly allocate to specialist fund managers investing in private equity, hedge funds, real estate and the like. The conventional fund managers, caught in the middle, would be pressured to up their game, become more specialized or merge for scale.
He says that fifteen years after he first aired this hypothesis, it is striking how lopsided this barbell has become. Although investors have moved almost $3tn into ETFs and index funds globally, the real money is being made at the other end. Forty-three percent of all the management fees in the investment industry went to alternative asset managers in 2017, up from 29% in 2003. But even this understates the purple patch firms have enjoyed from low rates and changes in bank regulation. If you include an estimate of performance fees, then the alternative strategies now represent over half of the fees paid by investors for the first time. It’s striking that investors are still paying almost the same level of fees, on average, as they were 15 years ago. Even though technology has enabled investors to save billions via ETFs, index funds and cheaper mutual funds, large investors have upped their risk and fee budgets on high margin private equity, hedge funds and other specialist managers instead.
At the other end of the barbell, the march of passive investing has been one of the defining themes of asset management over the past decade. ETFs have grown 17-fold since 2003, and may double again over the next four to eight years, according to BlackRock. ETFs have democratized access to investing. Individuals can now save for their retirement in ways only previously available to sophisticated institutional managers. But the good news for investors hasn’t translated into the same degree of success for the firms. As the benefits of technological innovation and industrial scale have been passed on, ETFs represent just 3% of industry fees paid.
Intriguingly, firms at either end of the investment barbell are starting to work in tandem. The managers of ETFs and index funds are starting to vote far more frequently with activist and engaged investors. Indexers are starting to recognize that as stewards of stocks they have no option but to engage, hiring the same proxy voting services as traditional firms, or beefing up their governance teams. Research shows that a high passive share has materially increased the odds of activist success, both in proxy fights and getting board representation. Not all activist ideas are good, by any means. But markets do need a diverse range of engaged investors. Companies should be on alert for this potentially symbiotic relationship.
Investors have become much fussier in the middle of the barbell, meanwhile, challenging fund managers to adapt. Expectations for traditional fund managers’ future growth have fallen so much that outside crisis periods US firms are now trading on their lowest multiple of future earnings ever.
2) Holiday fever grips millennials looking for some shut-eye [Source: Economic Times]
With increasing office hours and stress level, people are not finding quality sleep. And to have some good siesta time, many are willing to pay hard cash to sleep their vacation away – just to get some precious shut eye. Most prefer short, quick weekend getaways but sensing an opportunity the travel industry and hotels are waking up to the sleep-deprived tourist. Some packages can be as high as Rs14,000 a night. Nifty start-ups like Sunday Rest, a Bengaluru-based sleep start-up which sells mattresses online, too are cashing on the siesta shortfall. The shuteye fad that was imported from the Silicon Valley is now the universal shortcut to “repay sleep debt.” FCM Travel Solutions, which curates such packages, has seen a 30% spike in queries. Nearly 7% of revenue comes from ‘staycations’ or vacations in the home city coupled with sleepcations. “These itineraries are exclusively designed for sleep-deprived millennial vacation-seekers who often end up driving to mountains or beaches to take the edge off high-pressured jobs,” said Rakshit Desai, MD, FCM Travel Solutions.
Similar is the case of a hotel in Mumbai. Based on a Japanese-style pod hotel, Urban Pod in Andheri is hard-selling its Nap Package to millennials, who make up half its clientele. The package includes several hours of ‘pod time’ and major meals. Urban Pod's cofounder Hiren Gandhi said millennials want their own space and like to define time for social interaction. “They want to be cocooned but also social at the same time. Pods let them have their ‘me time’ and also be in charge of their sleep and when they want to come out,” he said. Also, Sunday Rest said 70% of its clients are millennials. “We see a lot of people between 25-45 asking us how they can get a mattress that gives them comfort like that of a five-star hotel,” said Alphonse Reddy, the company's founder. Luxury Delhi hotel The Imperial is selling bespoke packages primarily booked by domestic travellers for weekends too. It has noticed the growing trend and is pushing out such packages and summer wellness retreats to attract guests looking for a weekend break. Packages begin at Rs12,500 a night with early check-ins, late checkouts, discounts on food and spa.
A Fitbit study from last year, which takes into account data across 18 countries, said Indians rank second worst in terms of sleep quality, only 20 minutes more than the Japanese at 6.55 hours. On the other hand, residents of the UK and New Zealand sleep over seven hours a night. “Increasingly, the pace of life in urban metros is getting to corporate employees up to the age of 40 and all some of them want to do on their holiday is to relax. In Europe they follow a similar style of holiday,” said Romil Pant, senior vice president, holidays, leisure travel, outbound and domestic at Thomas Cook. Seema Hingorrany, a leading clinical psychologist, said insomnia patients are rising about 30-40% annually. “This is on the rise because people start to believe that the city they live in is not giving them sleep and so why not take a break,” she said. “Going away makes them feel better psychologically and also gives them a feeling of being away from work.”
“A sleepcation works best for corporate burnouts, and that what is driving up the demand,” said Yatra chief operating officer Sharat Dhall. Similarly, at travel marketplace Ixigo, there has been a 10-12% increase in leisure staycations year on year, of which a sizeable portion is sleepcations. The average age group of people opting for these vacations, based on the queries they receive, is 24 -38 years.
3) Indian smartphone industry finds it’s what’s inside that matters [Source: Financial Times]
In early 2016 a cluster of fast-growing homegrown companies were flying high in the smartphone sector, with domestic names such as Micromax accounting for four of the country’s five top-selling smartphone brands and 45% of total sales. Today, it’s a dramatically different picture. Apart from South Korea’s Samsung, the top five smartphone brands in India are all Chinese, with domestic groups not even making to the top 10. Yet the plight of these local brands masks a more encouraging picture for this important area of India’s still sub-scale manufacturing sector.
Industry experts had long dismissed the homegrown brands as “glorified traders”, doing little more than assembling Chinese-made kits with even the product design mostly outsourced. Such “screwdriver technology” did little to help drive the broader development of India’s electronics sector. However, just as the decline of the local phone groups is not as bad for India as it looks, the rise of the Chinese ones is far from representing a hollowing out of Indian industry. Xiaomi, by far the top-selling Chinese smartphone brand in India, started having handsets assembled in the country by Taiwan’s Foxconn in 2015, and now says 95% of those sold in India are put together there. Increasingly, this amounts to more than simply slotting together imported kits. In April, Xiaomi said it had started local production of the printed circuit boards that are the heart of every smartphone.
Xiaomi’s actions are more than just a foreign company’s attempt to score local praise. Onshore phone assembly has boomed since the 2015 introduction of stiff tariffs on imported handsets. Crucially, the government has also taken steps to encourage domestic manufacturing of the parts inside phones. Xiaomi timed the start of printed circuit board production in India to coincide with the April introduction of an import duty on the item — part of a multiyear programme to gradually introduce tariffs on smartphone components, starting with basic accessories such as chargers in 2016 and working up to touch panels next year. By clearly spelling out a tariff plan and sticking to it, New Delhi has given companies such as Xiaomi the advance warning needed to make investments aligned with its policy priorities.
About 124mn smartphones were sold in India last year, according to IDC, making it the world’s third-biggest market. Sales were galvanised by disruptive new entrant Reliance Jio, with a mobile data price war making smartphones more appealing than ever. And Jio has made its own contribution to onshore manufacturing, selling more than 40mn units of the $20 JioPhone — a basic “feature phone” targeted at lower-income Indians. At the opposite end of the value spectrum, Apple has been gradually increasing production of older-model iPhones — more popular among cost-conscious Indian buyers — by contract manufacturer Wistron at a plant near Bangalore. The government hopes these investments catering to the domestic market will be a prelude to an export boom, with India gaining share as Chinese labour costs rise.
However, an all-out assault on the global electronics market looks challenging for India. China remains formidable in the field, with mobile phone shipments alone worth $127bn last year, while the likes of Vietnam have stolen a huge march on India. The electronics sector remains subject to many of the problems that have hobbled Indian manufacturing as a whole, from inflexible labour laws to oppressive bureaucracy.
4) Python has brought computer programming to a vast new audience [Source: The Economist]
In December 1989, Guido van Rossum, a Dutch computer scientist, set himself a Christmas project. Irked by shortcomings in other programming languages, he wanted to build his own. His principles were simple: 1) Should be easy to read 2) Should let users create their own packages of special-purpose coding modules, which could then be made available to others to form the basis of new programs. 3) A “short, unique and slightly mysterious” name: He therefore called it after Monty Python, a British comedy group. Nearly 30 years after his Christmas invention, Mr. Van Rossum explains, “I certainly didn’t set out to create a language that was intended for mass consumption”. But in the past 12 months Google users in America have searched for Python more often than for Kim Kardashian, a reality-TV star. The rate of queries has trebled since 2010, while inquiries after other programming languages have been flat or declining.
The language’s popularity has grown not merely among professional developers—nearly 40% of whom use it, with a further 25% wishing to do so, according to Stack Overflow, a programming forum—but also with ordinary folk. According to Codecademy, a website that has taught 45mn novices how to use various languages, the biggest increase in demand is from those wishing to learn Python. It is thus bringing coding to the fingertips of those once baffled by the subject. Pythonistas, as aficionados are known, have helped by adding more than 145,000 packages to the Cheese Shop, covering everything from astronomy to game development.
Python is not perfect. Other languages have more processing efficiency and specialized capabilities. C and C++ are “lower-level” options which give the user more control over what is happening within a computer’s processor. Java is popular for building large, complex applications. JavaScript is the language of choice for applications accessed via a web browser. Countless others have evolved for various purposes. But Python’s killer features—simple syntax that makes its code easy to learn and share, and its huge array of third-party packages—make it a good general-purpose language. Its versatility is shown by its range of users and uses. The CIA has employed it for hacking, Pixar for producing films, Google for crawling web pages and Spotify for recommending songs. Some of the most alluring packages that Pythonistas can find in the Cheese Shop harness artificial intelligence (AI). Users can create neural networks, which mimic the connections in a brain, to pick out patterns in large quantities of data.
For professions that have long relied on trawling through spreadsheets, Python is especially valuable. Citigroup, an American bank, has introduced a crash course in Python for its trainee analysts. A jobs website, eFinancialCareers, reports a near-fourfold increase in listings mentioning Python between the first quarters of 2015 and 2018. However, the thirst for these skills is not without risk. Cesar Brea, a partner at Bain & Company, a consultancy, warns that the scariest thing in his trade is “someone who has learned a tool but doesn’t know what is going on under the hood”. Without proper oversight, a novice playing with AI libraries could reach dodgy conclusions. Bernd Ziegler, a partner at Boston Consulting Group, says that his firm reserves such analysis to members of its data team.
One solution to the problem of semi-educated tinkerers is to educate them properly in the language’s arcana. Python was already the most popular introductory language at American universities in 2014, but the teaching of it is generally limited to those studying science, technology, engineering and mathematics. A more radical proposal is to catch them young by offering computer science to all, and in primary schools. Hadi Partovi, the boss of Code.org, a charity, notes that 40% of American schools now offer such lessons, up from 10% in 2013. Around two-thirds of 10- to 12-year-olds have an account on Code.org’s website. Perhaps unnerved by a future filled with automated jobs, 90% of American parents want their children to study computer science.
How much longer Python’s rise will continue is anybody’s guess. There have been dominant computer languages in the past that, while not exactly “one with Nineveh and Tyre”, now skulk in the background. In the 1960s, Fortran bestrode the world. As teaching languages for neophytes, both Basic and Pascal had their moments in the sun. And Mr. Partovi himself plumped for JavaScript as the language for Code.org’s core syllabus, since it remains the standard choice for animating web pages. No computing language can ever be truly general purpose. Specialization will necessarily remain important. It is nevertheless true that, in that long-past Yuletide, Mr. Van Rossum started something memorable.
5) George Soros bet big on liberal democracy – Now he fears he is losing [Source: NY Times]
The author of this long read, Michael Steinberger, talks about George Soros’ journey from running a hedge fund to being a full-time philanthropist, political activist and freelance statesman. After the fall of the Berlin Wall, in 1989, George Soros poured hundreds of millions of dollars into the former Soviet-bloc countries to promote civil society and liberal democracy. It was a one-man Marshall Plan for Eastern Europe, a private initiative without historical precedent. It was also a gamble that a part of the world that had mostly known tyranny would embrace ideas like government accountability and ethnic tolerance. But how had Soros got into this? In London in the 1950s, Soros was a student of the expatriated Austrian philosopher Karl Popper, who championed the notion of an “open society,” in which individual liberty, pluralism and free inquiry prevailed. Popper’s concept became Soros’s cause.
In 1969, Soros formed what would become the Quantum Fund. It was one of a new breed of investment vehicles known as hedge funds, which catered to institutional investors and wealthy individuals and which used leverage, borrowed money, to make huge bets on stocks, bonds, currencies and commodities. By the late 1970s, Soros had become a very wealthy man. Now he had the means to make himself an agent of history. He decided that his goal would be opening closed societies. He created a philanthropic organisation, then called the Open Society Fund (OSF), in 1979 and began sponsoring college scholarships for black South African students. But he soon turned his attention to Eastern Europe, where he started financing dissident groups. He funneled money to the Solidarity strikers in Poland in 1981 and to Charter 77 in Czechoslovakia. In one especially ingenious move, he sent hundreds of Xerox copiers to Hungary (Soros was born in Hungary) to make it easier for underground publications to disseminate their newsletters.
In the meantime, Quantum grew into a multibillion-dollar colossus. Soros made his most famous trade in 1992, when he bet against the British pound. The currency was vulnerable because it had been pegged at what seemed an unsustainably high rate against the German mark; with Britain in recession, Soros reasoned, the British government would ultimately choose to see the pound devalued rather than maintain the high interest rates needed to defend it from speculative investors. The trade made $1.5 billion for Quantum, and Soros, whom the British tabloids dubbed “the man who broke the Bank of England,” became a household name. By then, the Soviet empire had collapsed, and Soros was devoting huge sums of his own money to try to smooth its transition from Communist rule. For example, he donated $100 million to support Russian scientists and keep them from selling their services to countries hostile to the West; he spent $250 million on a program to revise Russian textbooks and train teachers to promote critical thinking.
During the late 1980s and early 1990s, Soros also cultivated a number of young activists he believed could advance his dream of remaking Hungary as a place he would never again feel compelled to leave. Among them was Viktor Orban, a bright, charismatic student who was ardently pro-democracy, or so it seemed. In addition to providing Orban with a scholarship at Oxford, Soros donated money to Fidesz (the Alliance of Young Democrats), a student organisation that Orban helped found and that evolved into his political party. But during the 1990s, Orban drifted to the right. Elected prime minister in 1998, he governed as a mainstream conservative, emphasizing patriotism and traditional values. Outwardly, he remained pro-Western. Under his leadership, Hungary entered NATO, and he also laid the groundwork for its admission to the European Union. When he reclaimed the prime minister’s office in 2010, he began ruthlessly consolidating power. Groups that received financial support from the OSF were providing assistance to the refugees massed along Hungary’s border, and this became a pretext for Orban’s war on Soros. In recent years, governments throughout Eastern Europe have attacked Soros.
With politics becoming his primary focus rather than finance in recent times, Soros believes democracy was in trouble because in many countries it had become sclerotic, insufficiently responsive to the public’s needs. “It’s losing out,” he said. It had become clear to him that his mentor and inspiration, Karl Popper, had been wrong in one critical respect. In a democratic society, politics wasn’t ultimately a quest to arrive at the truth; it was about gaining and holding power and manipulating public sentiment in order to do that. “He was a philosopher of science, and science is a search for reality,” Soros said. “He did not understand politics. In politics, you are spinning the truth, not discovering it.”
6) CeramicSpeed's ultra-efficient Driven bicycle works without a chain [Source: Dezeen]
Danish company CeramicSpeed has developed what could be the world's most efficient bicycle drivetrain and has built a prototype to prove it. The bike part manufacturer is one of the winners of this year's Eurobike Award with Driven, a drivetrain concept it developed together with the mechanical engineering department at the University of Colorado. The Driven drivetrain has no chain or derailleurs, making it more than 99% efficient. This means almost none of the power generated by a rider's legs is lost. The prior drivetrain to beat was a Shimano Dura-Ace at 97.8% efficiency, or 98.37% when upgraded with CeramicSpeed parts. The Shimano Dura-Ace, like the drivetrains on most bikes, is driven by a chain. While there are many advantages to chains, they can also become stretched and worn, particularly when the cyclist switches to extreme gears. In contrast, CeramicSpeed's system is connected by a carbon-fibre shaft, which turns 90 degrees from the rear wheel and pedals.
On either end of the shaft are 21 low-friction ceramic bearings, which transfer torque from the rider's pedalling through the drive shaft and onto the rear cog. "CeramicSpeed has proudly accomplished what many have said couldn't be done," said CeramicSpeed CTO Jason Smith. "We've achieved a 99% efficient multi-speed drivetrain while eliminating the chain and complex rear derailleur." "Advancements in drivetrain technology have been evolutionary since the 1920s. Driven is truly revolutionary given its unique rolling element power transfer and unmatched efficiency," he continued. "The Driven concept has the ability to change the way the cycling industry views drivetrain design and drivetrain efficiency." Shaft-driven bicycles have been around since the 19th century, but the concept is being revisited in light of new technologies.
Driven is at the prototype phase. CeramicSpeed exhibited the invention at the Eurobike fair in Germany from 8 to 10 July. The company has submitted a patent application while it conducts more testing. It has currently only tested Driven at 100 watts, with the efficiency figures extrapolated out to higher rider output, where it should reach 99% efficiency. While this small improvement in efficiency is of most significance to racers, CeramicSpeed says it foresees a wide range of applications, including track, triathlon, electric bikes and commuter models. As well as being ultra-efficient, Driven is lighter than a conventional drivetrain. The prototype contains 13 speeds but CeramicSpeed says more gears could be easily added.
7) Papers stolen in a daring Israeli raid on Tehran archive reveal the extent of Iran’s past weapons research [Source: Washington Post]
New details from a trove of Iranian nuclear documents stolen by Israeli spies early this year show that Tehran obtained explicit weapons-design information from a foreign source and was on the cusp of mastering key bomb-making technologies when the research was ordered halted 15 years ago. While Iranian officials halted much of the work on “Project Amad”, the code name for Iran’s nuclear project, in 2003, internal memos show senior scientists making extensive plans to continue several projects in secret, hidden within existing military research programs. “The work would be divided in two: covert (secret structure and goals) and overt,” an Iranian scientist writes in one memo, part of a 100,000-document archive seized in a daring raid on a storage facility in Tehran by Israel’s Mossad intelligence agency in January.
A large team of Israeli experts has continued to mine the document trove for new revelations while simultaneously sharing the material with U.S. and European intelligence agencies as well as with the International Atomic Energy Agency, or IAEA, the U.N. watchdog in charge of monitoring Iran’s nuclear activity. Officials shared recent discoveries with a small group of Western news outlets last week, arguing that the newly uncovered evidence of Tehran’s advanced nuclear weapons research — along with its elaborate efforts to conceal the activity while preserving the technical know-how for possible future use — shows that Iran cannot be trusted. Iran, in a statement released by its U.N. mission in New York, challenged the authenticity of the documents.
The stolen documents shown to journalists are part of the same batch that Netanyahu heralded on April 30 in a dramatic televised presentation to make the case that “Iran lied,” as the prime minister repeatedly proclaimed that night. How they were obtained from a hidden storage facility in the middle of Tehran is only beginning to come to light. Israeli intelligence officials said they learned in early 2017 that Iran had begun systematically gathering its records on past nuclear weapons research and relocating them to a single repository in southern Tehran’s Shorabad district. The building, in which the documents were stored, in a row of industrial warehouses, had no visible security presence or other features that might have tipped off an observer that it contained something unusual. Mossad agents studied the building’s security features and prepared a plan. Eventually they settled on a date, Jan. 31, and a time window of exactly six hours, 29 minutes, in which they believed they could breach the facility, open the safes and remove half a ton of documents without being detected.
Among the records the Israelis said they were not able to share were documents containing design information for a nuclear bomb. Israeli officials said the documents were provided to the Iranians by a foreign source, but they would not specify whether the original provider was a government or a foreign national operating independently. Iran is known to have acquired information on building centrifuges for uranium enrichment from Pakistani scientist Abdul Qadeer Khan, an admitted peddler of sensitive nuclear information, in the late 1980s. U.S. intelligence officials believe that Khan passed partial blueprints for a Chinese nuclear device to at least one of his international customers. The IAEA also assessed that Iran obtained weapons design information, but proof was elusive, and Iranian officials denied the claim.
But, “Why did Iran store such information?” asked Olli Heinonen, a Finnish nuclear expert who led IAEA inspection teams into Iran in the mid-2000s. Heinonen noted that other countries, such as Iraq and Libya, were required by the IAEA to destroy equipment and technical databases related to their past nuclear research. At minimum, he said, the Israeli disclosures should require an amending of the Joint Comprehensive Plan of Action (JCPOA), the agreement, so that none of the caps on uranium production are lifted until inspectors verify that all of Iran’s weapons research was shut down. “Until the international community has received credible assurances that nuclear-weapons-related work has been terminated — and all single-use, weapons-related capabilities have been dismantled and documentation destroyed in a verifiable manner — Iran should refrain in expanding its uranium enrichment capabilities,” Heinonen said.
8) Indians sound alarm over ‘Orwellian’ data collection system [Source: Financial Times]
According to Amy Kazmin, the author of this piece, India’s prime minister, Narendra Modi, is one of the world’s shrewdest political leaders when it comes to using social media to mobilise his supporters and forge the sense of a personal connection. His NaMo app disseminates his personal ruminations along with cheery infographics showing India flourishing under his leadership. His Bharatiya Janata Party also has a hyper-active social media cell, which is frequently accused of trolling government critics. Yet, as Mr. Modi gears up to fight for a second five-year-term in national elections next year, he appears to be seeking new weapons for his social media arsenal. The government recently put out a tender for developing a “real time new media command room”, which would operate 24/7 to “collect all digital media chatter” and “analyse trends” from social media platforms such as Facebook, Twitter and Instagram, and scrape data from news websites, blogs, forums and emails.
Staffed initially by at least 20 social media analytics professionals, the hub will “gauge the sentiments among netizens” and advise on “how nationalistic feelings could be inculcated into the masses”. It would also map “people who are creating a buzz across various topics”, categorise social media conversations as “positive, negative or neutral” to the government’s perspective, and store content about people and their conversations in a vast, searchable database. The hub should improve “the perception management” of India, and advise how “the media blitzkrieg of India’s adversaries be replied/neutralised,” the tender says. The government has offered little rationale for the operation, for which $6m has been initially budgeted.
But Apar Gupta, co-founder of India’s non-profit Internet Freedom Foundation, says such an Orwellian system would violate Indians’ constitutional rights to free expression, and privacy. “It’s a mass surveillance system and it also has capacity for disinformation and propaganda,” he says. “It’s exactly like the two-way screen in 1984.” Mr. Gupta believes the initiative is inspired by China, which closely monitors its citizens’ online activity. But in India, Mr. Modi’s government could face a legal battle, as critics try to stop the project in its tracks. On Friday, the Supreme Court will hear a legal challenge filed by an investment banker turned opposition politician, Mahua Moitra, who calls the hub a “a brazen attempt” to spy on Indians, profile people who are critical of the government and “cut them to size in order to compel them to toe the government’s line”. Concerns have been already echoed by Supreme Court judges, who this month expressed worries that the project was a step towards turning a constitutional democracy into a “surveillance state”.
Indians are already engaged in a vigorous debate about their online privacy, and the lack of a modern data projection law. Many are challenging the drive to require citizens to use the government’s biometric identification card, Aadhaar, for a wide range of consumer activities, including buying mobile phone sim cards, opening bank accounts, or even purchasing domestic flight tickets. The government’s new quest to track online expressions of political and social opinions — and the activity of social media influencers — will only fan fears about its ultimate intent.
9) West begins to close door on Chinese investment [Source: Financial Times]
Large Chinese state-owned funds and companies are feeling the freeze as the US, the UK and Germany signal a cooler attitude towards Chinese acquisitions of vital corporate assets. So far, Chinese investors perceive the US as much more restrictive than Europe. The West’s toughening stance on China marks a sea-change in Beijing’s 40-year-old contract with the world. Starting in December 1978, Deng Xiaoping, the then-leader, initiated an era of “reform and opening up” under which Beijing welcomed foreign investment and introduced free market reforms. The essential corollary was that the west would ensure its markets remained open to China. Now the West’s doors are starting to close.
Chinese investment into North America plunged to a seven-year low in the first half of 2018. Total Chinese investments in the US and Canada reached just $2bn, down 92 per cent from the first half of last year. Europe, by contrast, absorbed some $12bn in completed Chinese investments — six times the North American inflows. In addition, Europe received $20bn in announced Chinese M&A deals, vastly exceeding the $2.5bn in announced M&A in North America during the first half. But chill winds are also starting to blow in some European capitals. The UK unveiled a 120-page policy this month to enhance government powers to prevent foreign purchases of security-sensitive British assets. In Germany, the government last week directed KFW, a state development bank, to take a 20% stake in 50 Hertz, a high-voltage power network operator so as to pre-empt the company’s acquisition by a Chinese state investor. This week, Berlin is expected to block a Chinese takeover of Leifeld Metal Spinning, a small machine tool manufacturer that specializes in materials for the aerospace and nuclear industries. It is unprecedented for German ministers to intervene in such a way.
Protectionist sentiment has been growing in Germany ever since the Euro 4.5bn acquisition of Kuka, a leading industrial robotics company, by Chinese appliance maker Midea in 2016. The government subsequently toughened up Germany’s foreign investment law, expanding its scope to cover all “critical industries”. Ministers can now block any deal that “endangers public order or security” when 25% or more of a German company is for sale. In the US, Donald Trump is expected soon to sign into law measures to expand the powers of the Committee on Foreign Investment in the US, the secretive inter-agency panel that reviews foreign investments for national security threats. The legislation is a product of a bipartisan consensus in Washington that China’s state-driven strategy to buy up technology and US companies represents a profound threat to the US economy.
Such proposals could represent a hammer blow to China’s ambitions, particularly because its “Made in China 2025” blueprint — an industrial initiative that has unnerved policymakers in both the US and Europe — requires overseas acquisitions to catapult the county to the forefront of global technological prowess. According to the author, the investment efforts are part of a bigger fight by the Trump administration against Beijing’s efforts to lead the world in technologies such as artificial intelligence and robotics.
10) Will the umbrella never evolve? [Source: Livemint]
In this piece, the author, Manu Joseph, discusses the reasons why umbrella hasn’t been able to evolve in almost 5000 years. Is the umbrella, a perfect technology that cannot be improved? About nine monsoons ago, Mr. Joseph wrote a column on the same topic, but chiefly about how in a world where the lifespan of most technology is brief, the umbrella reminds us that an obsolete thing can still endure.
Hundreds of innovators have applied for umbrella patents to the US Patent and Trademark office. There was even an application for a flying umbrella. But these innovations have failed to hit the market. The author thinks the US patent office register has applications for “a privacy umbrella” whose canopy will use “a one-way material”; a “mister umbrella” that will cool the user’s head with mist; an umbrella with gills that will ensure the canopy will not fold in strong winds; and “an advertisement umbrella” that will transmit ads on the canopy. As one can see, even if these umbrellas enter social life, they will not constitute an evolution of the umbrella. The fact is that the most respectable, popular, mainstream umbrellas are still conceptually close to the one our ancestors knew, thousands of years ago. So what qualities must the perfect futuristic umbrella possess?
We can argue that the umbrella has in fact evolved and changed a lot. Isn’t it true after all that the phone diary, business-card holders and even the camera have evolved—and they are all inside the phone? So, what if the umbrella has evolved and it is actually a car? There might be substance in this argument in, say, Delhi, where the moment people can afford a vehicle they do not walk any more to reach a place. But in regions like Kerala, and Mumbai, where walking is a smart form of transportation, the argument that the modern vehicle is the new umbrella fails. When we say “evolution”, we borrow an idea from biological life, but our instinctive understanding of evolution is very different from life’s method. When we talk about evolution, we mean something that is better, but that is not how life evolves. Life evolves chiefly through accidents that align with other accidents of environment and a transformation thrives. A life form can evolve into something physical or intellectually inferior if the conditions help.
The reason why the umbrella has failed to “evolve” in machine terms is very simply that we have not been able to make it “better” for the mass market. The author used to think books are such a perfect technology that they could not be improved on. But then the e-book is a serious evolution which has transformed not only the way we read but also the way we buy books. For now, the physical book and its mutant coexist, and the author thinks they will for decades. The physical book is such a formidable technology that it will endure. The umbrella, too, even if its mutant rises, will coexist with the avatar.
Few debates become as heated in investment circles as those between the advocates of active and passive investing. But focusing on this fight alone risks missing trends which are starting to appear elsewhere in the investment world. Three new reports on my summer reading list illustrate them well. The author, Huw Van Steenis believes investor flows would polarize into a barbell shape, weighted at both ends. At one extreme, investors would flock to passive funds and exchange-traded funds in order to access benchmark returns cheaply and conveniently. At the other, investors seeking higher returns would increasingly allocate to specialist fund managers investing in private equity, hedge funds, real estate and the like. The conventional fund managers, caught in the middle, would be pressured to up their game, become more specialized or merge for scale.
He says that fifteen years after he first aired this hypothesis, it is striking how lopsided this barbell has become. Although investors have moved almost $3tn into ETFs and index funds globally, the real money is being made at the other end. Forty-three percent of all the management fees in the investment industry went to alternative asset managers in 2017, up from 29% in 2003. But even this understates the purple patch firms have enjoyed from low rates and changes in bank regulation. If you include an estimate of performance fees, then the alternative strategies now represent over half of the fees paid by investors for the first time. It’s striking that investors are still paying almost the same level of fees, on average, as they were 15 years ago. Even though technology has enabled investors to save billions via ETFs, index funds and cheaper mutual funds, large investors have upped their risk and fee budgets on high margin private equity, hedge funds and other specialist managers instead.
At the other end of the barbell, the march of passive investing has been one of the defining themes of asset management over the past decade. ETFs have grown 17-fold since 2003, and may double again over the next four to eight years, according to BlackRock. ETFs have democratized access to investing. Individuals can now save for their retirement in ways only previously available to sophisticated institutional managers. But the good news for investors hasn’t translated into the same degree of success for the firms. As the benefits of technological innovation and industrial scale have been passed on, ETFs represent just 3% of industry fees paid.
Intriguingly, firms at either end of the investment barbell are starting to work in tandem. The managers of ETFs and index funds are starting to vote far more frequently with activist and engaged investors. Indexers are starting to recognize that as stewards of stocks they have no option but to engage, hiring the same proxy voting services as traditional firms, or beefing up their governance teams. Research shows that a high passive share has materially increased the odds of activist success, both in proxy fights and getting board representation. Not all activist ideas are good, by any means. But markets do need a diverse range of engaged investors. Companies should be on alert for this potentially symbiotic relationship.
Investors have become much fussier in the middle of the barbell, meanwhile, challenging fund managers to adapt. Expectations for traditional fund managers’ future growth have fallen so much that outside crisis periods US firms are now trading on their lowest multiple of future earnings ever.
2) Holiday fever grips millennials looking for some shut-eye [Source: Economic Times]
With increasing office hours and stress level, people are not finding quality sleep. And to have some good siesta time, many are willing to pay hard cash to sleep their vacation away – just to get some precious shut eye. Most prefer short, quick weekend getaways but sensing an opportunity the travel industry and hotels are waking up to the sleep-deprived tourist. Some packages can be as high as Rs14,000 a night. Nifty start-ups like Sunday Rest, a Bengaluru-based sleep start-up which sells mattresses online, too are cashing on the siesta shortfall. The shuteye fad that was imported from the Silicon Valley is now the universal shortcut to “repay sleep debt.” FCM Travel Solutions, which curates such packages, has seen a 30% spike in queries. Nearly 7% of revenue comes from ‘staycations’ or vacations in the home city coupled with sleepcations. “These itineraries are exclusively designed for sleep-deprived millennial vacation-seekers who often end up driving to mountains or beaches to take the edge off high-pressured jobs,” said Rakshit Desai, MD, FCM Travel Solutions.
Similar is the case of a hotel in Mumbai. Based on a Japanese-style pod hotel, Urban Pod in Andheri is hard-selling its Nap Package to millennials, who make up half its clientele. The package includes several hours of ‘pod time’ and major meals. Urban Pod's cofounder Hiren Gandhi said millennials want their own space and like to define time for social interaction. “They want to be cocooned but also social at the same time. Pods let them have their ‘me time’ and also be in charge of their sleep and when they want to come out,” he said. Also, Sunday Rest said 70% of its clients are millennials. “We see a lot of people between 25-45 asking us how they can get a mattress that gives them comfort like that of a five-star hotel,” said Alphonse Reddy, the company's founder. Luxury Delhi hotel The Imperial is selling bespoke packages primarily booked by domestic travellers for weekends too. It has noticed the growing trend and is pushing out such packages and summer wellness retreats to attract guests looking for a weekend break. Packages begin at Rs12,500 a night with early check-ins, late checkouts, discounts on food and spa.
A Fitbit study from last year, which takes into account data across 18 countries, said Indians rank second worst in terms of sleep quality, only 20 minutes more than the Japanese at 6.55 hours. On the other hand, residents of the UK and New Zealand sleep over seven hours a night. “Increasingly, the pace of life in urban metros is getting to corporate employees up to the age of 40 and all some of them want to do on their holiday is to relax. In Europe they follow a similar style of holiday,” said Romil Pant, senior vice president, holidays, leisure travel, outbound and domestic at Thomas Cook. Seema Hingorrany, a leading clinical psychologist, said insomnia patients are rising about 30-40% annually. “This is on the rise because people start to believe that the city they live in is not giving them sleep and so why not take a break,” she said. “Going away makes them feel better psychologically and also gives them a feeling of being away from work.”
“A sleepcation works best for corporate burnouts, and that what is driving up the demand,” said Yatra chief operating officer Sharat Dhall. Similarly, at travel marketplace Ixigo, there has been a 10-12% increase in leisure staycations year on year, of which a sizeable portion is sleepcations. The average age group of people opting for these vacations, based on the queries they receive, is 24 -38 years.
3) Indian smartphone industry finds it’s what’s inside that matters [Source: Financial Times]
In early 2016 a cluster of fast-growing homegrown companies were flying high in the smartphone sector, with domestic names such as Micromax accounting for four of the country’s five top-selling smartphone brands and 45% of total sales. Today, it’s a dramatically different picture. Apart from South Korea’s Samsung, the top five smartphone brands in India are all Chinese, with domestic groups not even making to the top 10. Yet the plight of these local brands masks a more encouraging picture for this important area of India’s still sub-scale manufacturing sector.
Industry experts had long dismissed the homegrown brands as “glorified traders”, doing little more than assembling Chinese-made kits with even the product design mostly outsourced. Such “screwdriver technology” did little to help drive the broader development of India’s electronics sector. However, just as the decline of the local phone groups is not as bad for India as it looks, the rise of the Chinese ones is far from representing a hollowing out of Indian industry. Xiaomi, by far the top-selling Chinese smartphone brand in India, started having handsets assembled in the country by Taiwan’s Foxconn in 2015, and now says 95% of those sold in India are put together there. Increasingly, this amounts to more than simply slotting together imported kits. In April, Xiaomi said it had started local production of the printed circuit boards that are the heart of every smartphone.
Xiaomi’s actions are more than just a foreign company’s attempt to score local praise. Onshore phone assembly has boomed since the 2015 introduction of stiff tariffs on imported handsets. Crucially, the government has also taken steps to encourage domestic manufacturing of the parts inside phones. Xiaomi timed the start of printed circuit board production in India to coincide with the April introduction of an import duty on the item — part of a multiyear programme to gradually introduce tariffs on smartphone components, starting with basic accessories such as chargers in 2016 and working up to touch panels next year. By clearly spelling out a tariff plan and sticking to it, New Delhi has given companies such as Xiaomi the advance warning needed to make investments aligned with its policy priorities.
About 124mn smartphones were sold in India last year, according to IDC, making it the world’s third-biggest market. Sales were galvanised by disruptive new entrant Reliance Jio, with a mobile data price war making smartphones more appealing than ever. And Jio has made its own contribution to onshore manufacturing, selling more than 40mn units of the $20 JioPhone — a basic “feature phone” targeted at lower-income Indians. At the opposite end of the value spectrum, Apple has been gradually increasing production of older-model iPhones — more popular among cost-conscious Indian buyers — by contract manufacturer Wistron at a plant near Bangalore. The government hopes these investments catering to the domestic market will be a prelude to an export boom, with India gaining share as Chinese labour costs rise.
However, an all-out assault on the global electronics market looks challenging for India. China remains formidable in the field, with mobile phone shipments alone worth $127bn last year, while the likes of Vietnam have stolen a huge march on India. The electronics sector remains subject to many of the problems that have hobbled Indian manufacturing as a whole, from inflexible labour laws to oppressive bureaucracy.
4) Python has brought computer programming to a vast new audience [Source: The Economist]
In December 1989, Guido van Rossum, a Dutch computer scientist, set himself a Christmas project. Irked by shortcomings in other programming languages, he wanted to build his own. His principles were simple: 1) Should be easy to read 2) Should let users create their own packages of special-purpose coding modules, which could then be made available to others to form the basis of new programs. 3) A “short, unique and slightly mysterious” name: He therefore called it after Monty Python, a British comedy group. Nearly 30 years after his Christmas invention, Mr. Van Rossum explains, “I certainly didn’t set out to create a language that was intended for mass consumption”. But in the past 12 months Google users in America have searched for Python more often than for Kim Kardashian, a reality-TV star. The rate of queries has trebled since 2010, while inquiries after other programming languages have been flat or declining.
The language’s popularity has grown not merely among professional developers—nearly 40% of whom use it, with a further 25% wishing to do so, according to Stack Overflow, a programming forum—but also with ordinary folk. According to Codecademy, a website that has taught 45mn novices how to use various languages, the biggest increase in demand is from those wishing to learn Python. It is thus bringing coding to the fingertips of those once baffled by the subject. Pythonistas, as aficionados are known, have helped by adding more than 145,000 packages to the Cheese Shop, covering everything from astronomy to game development.
Python is not perfect. Other languages have more processing efficiency and specialized capabilities. C and C++ are “lower-level” options which give the user more control over what is happening within a computer’s processor. Java is popular for building large, complex applications. JavaScript is the language of choice for applications accessed via a web browser. Countless others have evolved for various purposes. But Python’s killer features—simple syntax that makes its code easy to learn and share, and its huge array of third-party packages—make it a good general-purpose language. Its versatility is shown by its range of users and uses. The CIA has employed it for hacking, Pixar for producing films, Google for crawling web pages and Spotify for recommending songs. Some of the most alluring packages that Pythonistas can find in the Cheese Shop harness artificial intelligence (AI). Users can create neural networks, which mimic the connections in a brain, to pick out patterns in large quantities of data.
For professions that have long relied on trawling through spreadsheets, Python is especially valuable. Citigroup, an American bank, has introduced a crash course in Python for its trainee analysts. A jobs website, eFinancialCareers, reports a near-fourfold increase in listings mentioning Python between the first quarters of 2015 and 2018. However, the thirst for these skills is not without risk. Cesar Brea, a partner at Bain & Company, a consultancy, warns that the scariest thing in his trade is “someone who has learned a tool but doesn’t know what is going on under the hood”. Without proper oversight, a novice playing with AI libraries could reach dodgy conclusions. Bernd Ziegler, a partner at Boston Consulting Group, says that his firm reserves such analysis to members of its data team.
One solution to the problem of semi-educated tinkerers is to educate them properly in the language’s arcana. Python was already the most popular introductory language at American universities in 2014, but the teaching of it is generally limited to those studying science, technology, engineering and mathematics. A more radical proposal is to catch them young by offering computer science to all, and in primary schools. Hadi Partovi, the boss of Code.org, a charity, notes that 40% of American schools now offer such lessons, up from 10% in 2013. Around two-thirds of 10- to 12-year-olds have an account on Code.org’s website. Perhaps unnerved by a future filled with automated jobs, 90% of American parents want their children to study computer science.
How much longer Python’s rise will continue is anybody’s guess. There have been dominant computer languages in the past that, while not exactly “one with Nineveh and Tyre”, now skulk in the background. In the 1960s, Fortran bestrode the world. As teaching languages for neophytes, both Basic and Pascal had their moments in the sun. And Mr. Partovi himself plumped for JavaScript as the language for Code.org’s core syllabus, since it remains the standard choice for animating web pages. No computing language can ever be truly general purpose. Specialization will necessarily remain important. It is nevertheless true that, in that long-past Yuletide, Mr. Van Rossum started something memorable.
5) George Soros bet big on liberal democracy – Now he fears he is losing [Source: NY Times]
The author of this long read, Michael Steinberger, talks about George Soros’ journey from running a hedge fund to being a full-time philanthropist, political activist and freelance statesman. After the fall of the Berlin Wall, in 1989, George Soros poured hundreds of millions of dollars into the former Soviet-bloc countries to promote civil society and liberal democracy. It was a one-man Marshall Plan for Eastern Europe, a private initiative without historical precedent. It was also a gamble that a part of the world that had mostly known tyranny would embrace ideas like government accountability and ethnic tolerance. But how had Soros got into this? In London in the 1950s, Soros was a student of the expatriated Austrian philosopher Karl Popper, who championed the notion of an “open society,” in which individual liberty, pluralism and free inquiry prevailed. Popper’s concept became Soros’s cause.
In 1969, Soros formed what would become the Quantum Fund. It was one of a new breed of investment vehicles known as hedge funds, which catered to institutional investors and wealthy individuals and which used leverage, borrowed money, to make huge bets on stocks, bonds, currencies and commodities. By the late 1970s, Soros had become a very wealthy man. Now he had the means to make himself an agent of history. He decided that his goal would be opening closed societies. He created a philanthropic organisation, then called the Open Society Fund (OSF), in 1979 and began sponsoring college scholarships for black South African students. But he soon turned his attention to Eastern Europe, where he started financing dissident groups. He funneled money to the Solidarity strikers in Poland in 1981 and to Charter 77 in Czechoslovakia. In one especially ingenious move, he sent hundreds of Xerox copiers to Hungary (Soros was born in Hungary) to make it easier for underground publications to disseminate their newsletters.
In the meantime, Quantum grew into a multibillion-dollar colossus. Soros made his most famous trade in 1992, when he bet against the British pound. The currency was vulnerable because it had been pegged at what seemed an unsustainably high rate against the German mark; with Britain in recession, Soros reasoned, the British government would ultimately choose to see the pound devalued rather than maintain the high interest rates needed to defend it from speculative investors. The trade made $1.5 billion for Quantum, and Soros, whom the British tabloids dubbed “the man who broke the Bank of England,” became a household name. By then, the Soviet empire had collapsed, and Soros was devoting huge sums of his own money to try to smooth its transition from Communist rule. For example, he donated $100 million to support Russian scientists and keep them from selling their services to countries hostile to the West; he spent $250 million on a program to revise Russian textbooks and train teachers to promote critical thinking.
During the late 1980s and early 1990s, Soros also cultivated a number of young activists he believed could advance his dream of remaking Hungary as a place he would never again feel compelled to leave. Among them was Viktor Orban, a bright, charismatic student who was ardently pro-democracy, or so it seemed. In addition to providing Orban with a scholarship at Oxford, Soros donated money to Fidesz (the Alliance of Young Democrats), a student organisation that Orban helped found and that evolved into his political party. But during the 1990s, Orban drifted to the right. Elected prime minister in 1998, he governed as a mainstream conservative, emphasizing patriotism and traditional values. Outwardly, he remained pro-Western. Under his leadership, Hungary entered NATO, and he also laid the groundwork for its admission to the European Union. When he reclaimed the prime minister’s office in 2010, he began ruthlessly consolidating power. Groups that received financial support from the OSF were providing assistance to the refugees massed along Hungary’s border, and this became a pretext for Orban’s war on Soros. In recent years, governments throughout Eastern Europe have attacked Soros.
With politics becoming his primary focus rather than finance in recent times, Soros believes democracy was in trouble because in many countries it had become sclerotic, insufficiently responsive to the public’s needs. “It’s losing out,” he said. It had become clear to him that his mentor and inspiration, Karl Popper, had been wrong in one critical respect. In a democratic society, politics wasn’t ultimately a quest to arrive at the truth; it was about gaining and holding power and manipulating public sentiment in order to do that. “He was a philosopher of science, and science is a search for reality,” Soros said. “He did not understand politics. In politics, you are spinning the truth, not discovering it.”
6) CeramicSpeed's ultra-efficient Driven bicycle works without a chain [Source: Dezeen]
Danish company CeramicSpeed has developed what could be the world's most efficient bicycle drivetrain and has built a prototype to prove it. The bike part manufacturer is one of the winners of this year's Eurobike Award with Driven, a drivetrain concept it developed together with the mechanical engineering department at the University of Colorado. The Driven drivetrain has no chain or derailleurs, making it more than 99% efficient. This means almost none of the power generated by a rider's legs is lost. The prior drivetrain to beat was a Shimano Dura-Ace at 97.8% efficiency, or 98.37% when upgraded with CeramicSpeed parts. The Shimano Dura-Ace, like the drivetrains on most bikes, is driven by a chain. While there are many advantages to chains, they can also become stretched and worn, particularly when the cyclist switches to extreme gears. In contrast, CeramicSpeed's system is connected by a carbon-fibre shaft, which turns 90 degrees from the rear wheel and pedals.
On either end of the shaft are 21 low-friction ceramic bearings, which transfer torque from the rider's pedalling through the drive shaft and onto the rear cog. "CeramicSpeed has proudly accomplished what many have said couldn't be done," said CeramicSpeed CTO Jason Smith. "We've achieved a 99% efficient multi-speed drivetrain while eliminating the chain and complex rear derailleur." "Advancements in drivetrain technology have been evolutionary since the 1920s. Driven is truly revolutionary given its unique rolling element power transfer and unmatched efficiency," he continued. "The Driven concept has the ability to change the way the cycling industry views drivetrain design and drivetrain efficiency." Shaft-driven bicycles have been around since the 19th century, but the concept is being revisited in light of new technologies.
Driven is at the prototype phase. CeramicSpeed exhibited the invention at the Eurobike fair in Germany from 8 to 10 July. The company has submitted a patent application while it conducts more testing. It has currently only tested Driven at 100 watts, with the efficiency figures extrapolated out to higher rider output, where it should reach 99% efficiency. While this small improvement in efficiency is of most significance to racers, CeramicSpeed says it foresees a wide range of applications, including track, triathlon, electric bikes and commuter models. As well as being ultra-efficient, Driven is lighter than a conventional drivetrain. The prototype contains 13 speeds but CeramicSpeed says more gears could be easily added.
7) Papers stolen in a daring Israeli raid on Tehran archive reveal the extent of Iran’s past weapons research [Source: Washington Post]
New details from a trove of Iranian nuclear documents stolen by Israeli spies early this year show that Tehran obtained explicit weapons-design information from a foreign source and was on the cusp of mastering key bomb-making technologies when the research was ordered halted 15 years ago. While Iranian officials halted much of the work on “Project Amad”, the code name for Iran’s nuclear project, in 2003, internal memos show senior scientists making extensive plans to continue several projects in secret, hidden within existing military research programs. “The work would be divided in two: covert (secret structure and goals) and overt,” an Iranian scientist writes in one memo, part of a 100,000-document archive seized in a daring raid on a storage facility in Tehran by Israel’s Mossad intelligence agency in January.
A large team of Israeli experts has continued to mine the document trove for new revelations while simultaneously sharing the material with U.S. and European intelligence agencies as well as with the International Atomic Energy Agency, or IAEA, the U.N. watchdog in charge of monitoring Iran’s nuclear activity. Officials shared recent discoveries with a small group of Western news outlets last week, arguing that the newly uncovered evidence of Tehran’s advanced nuclear weapons research — along with its elaborate efforts to conceal the activity while preserving the technical know-how for possible future use — shows that Iran cannot be trusted. Iran, in a statement released by its U.N. mission in New York, challenged the authenticity of the documents.
The stolen documents shown to journalists are part of the same batch that Netanyahu heralded on April 30 in a dramatic televised presentation to make the case that “Iran lied,” as the prime minister repeatedly proclaimed that night. How they were obtained from a hidden storage facility in the middle of Tehran is only beginning to come to light. Israeli intelligence officials said they learned in early 2017 that Iran had begun systematically gathering its records on past nuclear weapons research and relocating them to a single repository in southern Tehran’s Shorabad district. The building, in which the documents were stored, in a row of industrial warehouses, had no visible security presence or other features that might have tipped off an observer that it contained something unusual. Mossad agents studied the building’s security features and prepared a plan. Eventually they settled on a date, Jan. 31, and a time window of exactly six hours, 29 minutes, in which they believed they could breach the facility, open the safes and remove half a ton of documents without being detected.
Among the records the Israelis said they were not able to share were documents containing design information for a nuclear bomb. Israeli officials said the documents were provided to the Iranians by a foreign source, but they would not specify whether the original provider was a government or a foreign national operating independently. Iran is known to have acquired information on building centrifuges for uranium enrichment from Pakistani scientist Abdul Qadeer Khan, an admitted peddler of sensitive nuclear information, in the late 1980s. U.S. intelligence officials believe that Khan passed partial blueprints for a Chinese nuclear device to at least one of his international customers. The IAEA also assessed that Iran obtained weapons design information, but proof was elusive, and Iranian officials denied the claim.
But, “Why did Iran store such information?” asked Olli Heinonen, a Finnish nuclear expert who led IAEA inspection teams into Iran in the mid-2000s. Heinonen noted that other countries, such as Iraq and Libya, were required by the IAEA to destroy equipment and technical databases related to their past nuclear research. At minimum, he said, the Israeli disclosures should require an amending of the Joint Comprehensive Plan of Action (JCPOA), the agreement, so that none of the caps on uranium production are lifted until inspectors verify that all of Iran’s weapons research was shut down. “Until the international community has received credible assurances that nuclear-weapons-related work has been terminated — and all single-use, weapons-related capabilities have been dismantled and documentation destroyed in a verifiable manner — Iran should refrain in expanding its uranium enrichment capabilities,” Heinonen said.
8) Indians sound alarm over ‘Orwellian’ data collection system [Source: Financial Times]
According to Amy Kazmin, the author of this piece, India’s prime minister, Narendra Modi, is one of the world’s shrewdest political leaders when it comes to using social media to mobilise his supporters and forge the sense of a personal connection. His NaMo app disseminates his personal ruminations along with cheery infographics showing India flourishing under his leadership. His Bharatiya Janata Party also has a hyper-active social media cell, which is frequently accused of trolling government critics. Yet, as Mr. Modi gears up to fight for a second five-year-term in national elections next year, he appears to be seeking new weapons for his social media arsenal. The government recently put out a tender for developing a “real time new media command room”, which would operate 24/7 to “collect all digital media chatter” and “analyse trends” from social media platforms such as Facebook, Twitter and Instagram, and scrape data from news websites, blogs, forums and emails.
Staffed initially by at least 20 social media analytics professionals, the hub will “gauge the sentiments among netizens” and advise on “how nationalistic feelings could be inculcated into the masses”. It would also map “people who are creating a buzz across various topics”, categorise social media conversations as “positive, negative or neutral” to the government’s perspective, and store content about people and their conversations in a vast, searchable database. The hub should improve “the perception management” of India, and advise how “the media blitzkrieg of India’s adversaries be replied/neutralised,” the tender says. The government has offered little rationale for the operation, for which $6m has been initially budgeted.
But Apar Gupta, co-founder of India’s non-profit Internet Freedom Foundation, says such an Orwellian system would violate Indians’ constitutional rights to free expression, and privacy. “It’s a mass surveillance system and it also has capacity for disinformation and propaganda,” he says. “It’s exactly like the two-way screen in 1984.” Mr. Gupta believes the initiative is inspired by China, which closely monitors its citizens’ online activity. But in India, Mr. Modi’s government could face a legal battle, as critics try to stop the project in its tracks. On Friday, the Supreme Court will hear a legal challenge filed by an investment banker turned opposition politician, Mahua Moitra, who calls the hub a “a brazen attempt” to spy on Indians, profile people who are critical of the government and “cut them to size in order to compel them to toe the government’s line”. Concerns have been already echoed by Supreme Court judges, who this month expressed worries that the project was a step towards turning a constitutional democracy into a “surveillance state”.
Indians are already engaged in a vigorous debate about their online privacy, and the lack of a modern data projection law. Many are challenging the drive to require citizens to use the government’s biometric identification card, Aadhaar, for a wide range of consumer activities, including buying mobile phone sim cards, opening bank accounts, or even purchasing domestic flight tickets. The government’s new quest to track online expressions of political and social opinions — and the activity of social media influencers — will only fan fears about its ultimate intent.
9) West begins to close door on Chinese investment [Source: Financial Times]
Large Chinese state-owned funds and companies are feeling the freeze as the US, the UK and Germany signal a cooler attitude towards Chinese acquisitions of vital corporate assets. So far, Chinese investors perceive the US as much more restrictive than Europe. The West’s toughening stance on China marks a sea-change in Beijing’s 40-year-old contract with the world. Starting in December 1978, Deng Xiaoping, the then-leader, initiated an era of “reform and opening up” under which Beijing welcomed foreign investment and introduced free market reforms. The essential corollary was that the west would ensure its markets remained open to China. Now the West’s doors are starting to close.
Chinese investment into North America plunged to a seven-year low in the first half of 2018. Total Chinese investments in the US and Canada reached just $2bn, down 92 per cent from the first half of last year. Europe, by contrast, absorbed some $12bn in completed Chinese investments — six times the North American inflows. In addition, Europe received $20bn in announced Chinese M&A deals, vastly exceeding the $2.5bn in announced M&A in North America during the first half. But chill winds are also starting to blow in some European capitals. The UK unveiled a 120-page policy this month to enhance government powers to prevent foreign purchases of security-sensitive British assets. In Germany, the government last week directed KFW, a state development bank, to take a 20% stake in 50 Hertz, a high-voltage power network operator so as to pre-empt the company’s acquisition by a Chinese state investor. This week, Berlin is expected to block a Chinese takeover of Leifeld Metal Spinning, a small machine tool manufacturer that specializes in materials for the aerospace and nuclear industries. It is unprecedented for German ministers to intervene in such a way.
Protectionist sentiment has been growing in Germany ever since the Euro 4.5bn acquisition of Kuka, a leading industrial robotics company, by Chinese appliance maker Midea in 2016. The government subsequently toughened up Germany’s foreign investment law, expanding its scope to cover all “critical industries”. Ministers can now block any deal that “endangers public order or security” when 25% or more of a German company is for sale. In the US, Donald Trump is expected soon to sign into law measures to expand the powers of the Committee on Foreign Investment in the US, the secretive inter-agency panel that reviews foreign investments for national security threats. The legislation is a product of a bipartisan consensus in Washington that China’s state-driven strategy to buy up technology and US companies represents a profound threat to the US economy.
Such proposals could represent a hammer blow to China’s ambitions, particularly because its “Made in China 2025” blueprint — an industrial initiative that has unnerved policymakers in both the US and Europe — requires overseas acquisitions to catapult the county to the forefront of global technological prowess. According to the author, the investment efforts are part of a bigger fight by the Trump administration against Beijing’s efforts to lead the world in technologies such as artificial intelligence and robotics.
10) Will the umbrella never evolve? [Source: Livemint]
In this piece, the author, Manu Joseph, discusses the reasons why umbrella hasn’t been able to evolve in almost 5000 years. Is the umbrella, a perfect technology that cannot be improved? About nine monsoons ago, Mr. Joseph wrote a column on the same topic, but chiefly about how in a world where the lifespan of most technology is brief, the umbrella reminds us that an obsolete thing can still endure.
Hundreds of innovators have applied for umbrella patents to the US Patent and Trademark office. There was even an application for a flying umbrella. But these innovations have failed to hit the market. The author thinks the US patent office register has applications for “a privacy umbrella” whose canopy will use “a one-way material”; a “mister umbrella” that will cool the user’s head with mist; an umbrella with gills that will ensure the canopy will not fold in strong winds; and “an advertisement umbrella” that will transmit ads on the canopy. As one can see, even if these umbrellas enter social life, they will not constitute an evolution of the umbrella. The fact is that the most respectable, popular, mainstream umbrellas are still conceptually close to the one our ancestors knew, thousands of years ago. So what qualities must the perfect futuristic umbrella possess?
We can argue that the umbrella has in fact evolved and changed a lot. Isn’t it true after all that the phone diary, business-card holders and even the camera have evolved—and they are all inside the phone? So, what if the umbrella has evolved and it is actually a car? There might be substance in this argument in, say, Delhi, where the moment people can afford a vehicle they do not walk any more to reach a place. But in regions like Kerala, and Mumbai, where walking is a smart form of transportation, the argument that the modern vehicle is the new umbrella fails. When we say “evolution”, we borrow an idea from biological life, but our instinctive understanding of evolution is very different from life’s method. When we talk about evolution, we mean something that is better, but that is not how life evolves. Life evolves chiefly through accidents that align with other accidents of environment and a transformation thrives. A life form can evolve into something physical or intellectually inferior if the conditions help.
The reason why the umbrella has failed to “evolve” in machine terms is very simply that we have not been able to make it “better” for the mass market. The author used to think books are such a perfect technology that they could not be improved on. But then the e-book is a serious evolution which has transformed not only the way we read but also the way we buy books. For now, the physical book and its mutant coexist, and the author thinks they will for decades. The physical book is such a formidable technology that it will endure. The umbrella, too, even if its mutant rises, will coexist with the avatar.
-Prashant Mittal is Strategist, at Ambit Capital. Views expressed are personal
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