Ten interesting things we read this week

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At Ambit, we spend a lot of time reading articles that cover a wide gamut of topics, ranging from zeitgeist to futuristic, and encapsulate them in our weekly ‘Ten Interesting Things’ product. Some of the most fascinating topics covered this week are: Business (Lesson from 2002 Dravid option; Edison and Tesla's cutthroat 'Current War' ushered in the electric age), Environment (Oceans and ice are absorbing the brunt of climate change), Neuroscience (The consciousness illusion), and Technology (Robots are coming for India’s shop floors).

Here are the ten most interesting pieces that we read this week, ended October 04, 2019.

1) The Nutgraf: The Dravid option [Source: The Ken]
This piece talks about the recently announced corporate tax cut in India, with an intriguing example from the world of cricket. The author of this piece says that the Indian men’s cricket team faced a problem in 2002. Back then, they didn’t have a wicketkeeper who could bat. And they were the only ones with this problem. Australia had Gilchrist. New Zealand found McCullum. Pakistan had Moin. South Africa had Boucher. Sri Lanka had Sangakkara. So in 2002, a year before the World Cup, Sourav Ganguly, the Indian captain, did the unthinkable. He asked his vice-captain, Rahul Dravid, arguably the best batsman in the world at the time, to keep wickets. By choosing to make Rahul Dravid keep wickets, it gave India the ‘option’ to accommodate another batsman in the side.

Now talking about the corporate tax cut, the Domestic companies in India will have a new tax rate of 22%. This used to be 30%. Also, new manufacturing firms incorporated after October will be taxed at 15% instead of 25%. That’s a difference of eight percentage points. But, what you really need to compare are effective tax rates. This is the tax that corporates actually pay, after claiming exemptions, and adding surcharges, cess, etc. For the year 2018-19, the effective tax rate paid by corporates was about 29%. The new effective tax rate is about to 25%. So, it’s a gain of 4%, but if you are a corporate, there’s one condition you need to meet to claim the new tax rate. You need to drop all the exemptions you are claiming right now that bring your effective tax rate down.

If you are a large company, making a lot of money, and not claiming exemptions, the new rate is good for you. But, if you are a smaller company, making less money, and claiming exemptions, the effect is…marginal. Around 99.3% of all companies in India have a turnover of less than Rs400 crore (~$60mn). Nearly 94% of them are already paying an effective tax rate of 26%. Vivek Kaul, an economist, instead argues that if cutting taxes was the way to go, income taxes would have been a better option. Consumers would have more money to spend in their hands. So coming back to cricket, if you can’t find a wicketkeeper who can bat, you take a batsman and make him into a wicketkeeper. So you can accommodate another batsman. The Rahul Dravid option has been known to work.  

2) Neither, and New: Lessons from Uber and Vision Fund [Source: Stratechery]
The functionality of businesses has become so tech-centered that distinguishing them has become a task. This piece throws light on a new category, by giving examples of Uber and Vision Fund. The author of this piece was right to mention Uber’s costs, and wrong to dismiss them and call Uber a tech company in his earlier blog. At the same time, Uber clearly has no analog in the physical world. It is neither, and new — and Uber’s drivers help explain why. Uber drivers are not employees, nor are they contractors; they are neither, and new.

Similarly, Masayoshi Son’s Vision Fund is not a venture capital firm, nor is it a public market-focused hedge fund: it is neither, and new, but it very much remains to be seen if “new” is valuable. Almost everything falls in the “Neither and New” category defined by Uber: entire categories like real estate and logistics are defined by their interaction with the physical world, almost everything in the consumer category uses technology to enable real-world services, and the other major category, fintech, by definition needs huge amounts of capital.

This is good news for the tech ecosystem: there is clearly still tremendous opportunity to build “tech companies”, primarily for the enterprise. This is also good news for public market investors: despite all of the press about Uber and WeWork, more companies are up post-IPO than down — and the gains are much larger in percentage terms than are the losses. The tech company formula still works.  
 
3) Three decades ago, America lost its religion. Why? [Source: The Atlantic]
No rich country prays nearly as much as the U.S, and no country that prays as much as the U.S. is nearly as rich. In the late 19th century, an array of celebrity philosophers—the likes of Friedrich Nietzsche, Karl Marx, and Sigmund Freud—proclaimed the death of God, and predicted that atheism would follow scientific discovery and modernity in the West, sure as smoke follows fire. Deep into the 20th century, more than nine in 10 Americans said they believed in God and belonged to an organized religion, with the great majority of them calling themselves Christian. That number held steady—through the sexual-revolution ’60s, through the rootless and anxious ’70s, and through the “greed is good” ’80s.

According to Christian Smith, a sociology and religion professor at the University of Notre Dame, America’s nonreligious lurch has mostly been the result of three historical events: the association of the Republican Party with the Christian right, the end of the Cold War, and 9/11. The marriage between the religious and political right delivered Reagan, Bush, and countless state and local victories. But it disgusted liberal Democrats, especially those with weak connections to the Church. It also shocked the conscience of moderates, who preferred a wide berth between their faith and their politics.

Religion has lost its halo effect in the past three decades, not because science drove God from the public square, but rather because politics did. In the 21st century, “not religious” has become a specific American identity. The Church is just one of many social institutions—including banks, Congress, and the police—that have lost public trust in an age of elite failure. But scandals in the Catholic Church have accelerated its particularly rapid loss of moral stature. According to Pew research, 13 percent of Americans today self-identify as “former Catholics,” and many of them leave organized religion altogether. American nones may well build successful secular systems of belief, purpose, and community. But imagine what a devout believer might think: Millions of Americans have abandoned religion, only to re-create it everywhere they look.

4) The consciousness illusion [Source: aeon.co]
The author of this piece tries to convince us that our own consciousness is a sort of illusion, a fiction created by our brain to help us keep track of its activities. This view, which he calls illusionism, is widely considered absurd, but it has able defenders (pre-eminently Daniel Dennett), and the author wants to persuade us that it isn’t absurd and might well be true. The term ‘consciousness’ is used in different ways, and when he claims that consciousness is illusory, he means it only in one specific sense. Suppose you are focusing on a red apple directly in front of you in good lighting. You are now in a certain mental state, which we can call having a conscious visual experience of the apple. You wouldn’t be in this state if you were unconscious/asleep. Our lives are filled with such experiences, and no one suggests that they are not real. The question is what is involved in having such experiences, and whether it involves consciousness in a more specific sense.

Neuroscientists are beginning to understand the brain processes underlying all this. To put it simply, light reflected from the apple stimulates light-sensitive cells in the retina, sending trains of electrochemical impulses along the optic nerve to the lateral geniculate nucleus and then on to the visual cortex at the back of the brain. The point is not restricted to vision, of course. We also have conscious experiences involving our other senses. It is phenomenal consciousness that the author believes is illusory. For science finds nothing qualitative in our brains, any more than in the world outside. The atoms in our brain aren’t coloured and they don’t compose a colourful inner image. Nor do they have any other qualitative properties. There are no inner sounds, smells, tastes and pains, and no inner observer to experience them if there were.

Phenomenal states, such as the sensation of red, the smell of a rose or the pain of stubbed toe are nothing more than brain states, which could in principle be observed by other people. Illusionists agree with other physicalists that our sense of having a rich phenomenal consciousness is due to introspective mechanisms. The subjective world of phenomenal consciousness is a fiction written by our brains in order to help us track the impact that the world makes on us. To call it a fiction is not to disparage it. Fictions can be wonderful, life-enhancing things that reveal deep truths about the world and can be more compelling than reality.

5) A shadowy global industry group is deciding food standards for you [Source: Economic Times]
When the Indian government bowed to powerful food companies last year and postponed its decision to put red warning labels on unhealthy packaged food, officials also sought to placate critics of the delay by creating an expert panel to review the proposed labeling system, which would have gone far beyond what other countries have done in the battle to combat soaring obesity rates. But the man chosen to head the three-person committee, Dr. Boindala Sesikeran, a veteran nutritionist and former adviser to Nestle, only further enraged health advocates. That’s because Sesikeran is a trustee of the International Life Sciences Institute (ILSI), a U.S. nonprofit with an innocuous sounding name that has been quietly infiltrating government health and nutrition bodies around the world.

Created four decades ago by a top Coca-Cola executive, the institute now has branches in 18 countries. It is almost entirely funded by Goliaths of the agribusiness, food and pharmaceutical industries. In India, Sesikeran’s leadership role on the food labeling committee has raised questions about whether regulators will ultimately be swayed by processed food manufacturers who say the red warning labels would hurt sales. After decades largely operating under the radar, ILSI is coming under increasing scrutiny by health advocates in the United States and abroad who say it is little more than a front group advancing the interests of the 400 corporate members that provide its $17 million budget, among them Coca-Cola, DuPont, PepsiCo, General Mills and Danone.

Even as its influence in the developing world grows, ILSI has faced occasional pushback. An ILSI-funded research project on childhood obesity in Argentina was canceled three years ago after parents whose children were enrolled in the study learned more about the organization. And in 2015, ILSI officials in Washington shuttered ILSI-Mexico after the news media there wrote unfavourably about a conference it organized on sweeteners. Many of the speakers, it turned out, were well-known advocates for the beverage industry, and at the time, the Mexican government was considering modifications to a newly enacted tax on sugary drinks. It did not help that the head of ILSI-Mexico was Raul Portillo, a former Coca-Cola executive in charge of regulatory and scientific affairs. If there’s conflict of interest, then surely the results would be biased. Independent experts need to be at the helm of such institutions.

6) Which is more fundamental: processes or things? [Source: aeon.co] 
Metaphysics is not only an arcane branch of philosophy; human beings use metaphysical assumptions to navigate the world. Assumptions about what exists and what is fundamental exert a powerful influence on our lives. Indeed, the less aware we are of our metaphysical assumptions, the more we are subject to them. Western metaphysics tends to rely on the paradigm of substances. We often see the world as a world of things, composed of atomic molecules, natural kinds, galaxies. Process philosophers, meanwhile, think we should go beyond looking at the world as a set of static unrelated items, and instead examine the processes that make up the world. Processes, not objects, are fundamental.

The pre-Socratic Greek philosopher Heraclitus provides the most famous image of process metaphysics. ‘It is not possible,’ he says, ‘to step twice into the same river’ – because existence depends on change; the river you step into a second time is changed from the river you stepped into originally. Process metaphysics leads to a re-evaluation of other important philosophical notions. Consider identity. To explain why things change without losing their identity, substance philosophers need to posit some underlying core – an essence –that remains the same throughout change.

Processes are not the mere intervals between two different states of affairs or two objects, as the paradox of the heap exemplifies: take a heap of sand and remove one grain. It remains a heap; one grain doesn’t make a difference. But if you repeat the subtraction enough times, eventually there will be just one grain. Clearly, this isn’t a heap. Where did it become a non-heap? Looking at the world as a manifold of interconnected processes has scientific and philosophical advantages, but there are more prosaic benefits too. Process philosophy invites us to look at longer stretches of time, blurred boundaries and connected relations. Identity as a programmatic – but not deterministic – process welcomes innovation through small, recurring changes. Under these metaphysical assumptions, a meaningful life is less about finding your ‘real’ self than expanding its boundaries.

7) Robots are coming for India’s shop floors [Source: Livemint]
Artificial intelligence and Internet of Things (IoT), along with robotics have changed look and productivity of many companies in India. And this seems to be just the start. Mahindra and Mahindra Ltd has a “robotic weld line" at its factory in Nashik, which now caters to many of its products including the Marazzo and the XUV300. Tata Motors, too, uses robots in its Pune factory, while Godrej and Welspun run their shop floors with the help of an Intelligent Plant Framework, which enables tracking of machinery and productivity on the floor in real time. Maruti Suzuki India Ltd has numerous robots employed at its Manesar and Gurugram car factories, with more than 2,000 robots working at the weld shop in its Manesar facility alone.

Automation has not only taken many jobs, but has made companies/shops much smarter. Many factories all over the world and India have been using computer numerical control (CNC) machines for years. These machines allow operators to feed a program of instructions directly into a mini-computer via a small board, similar to a traditional keyboard. After loading the required tools in the machine, the rest is done automatically by the CNC machines, which use these instructions to control machinery such as the grinder, milling machine, and lathe. But, the oncoming changes will leave long-lasting impacts on India’s labour force, particularly in some sectors—automotive, textile, and banking and financial services, apart from information technology.

The number of robots in use worldwide multiplied threefold over the past two decades to 2.25 million, according to a June 2019 report by Oxford Economics. Trends suggest the global stock of robots will multiply even faster in the next 20 years, reaching as many as 20 million by 2030—with 14 million in China alone, the report adds. India is way behind at the moment. But things can change very quickly. While robotics will change the face of the Indian companies, final piece of the puzzle remains; the ability to hire these intelligent machines on contract, like workers. As a precursor for what may become commonplace soon, US-based Hirebotics allows firms to hire cloud-connected robots. The hourly wage starts at $15 per hour and they can work a minimum of 80 hours a week—and, they neither tire nor need bathroom breaks.
 
8) Edison and Tesla's cutthroat 'Current War' ushered in the electric age [Source: National Geographic]
Everybody knows about the feud between Nikola Tesla and Thomas Edison. But, this piece takes a deep dive into the history of both these personalities and their companies. While Mr. Edison is known for inventing direct current (DC), Mr. Tesla is credited for inventing alternating current (AC). The common belief that Thomas Edison singlehandedly invented electric lighting in 1879 isn’t true. The first electric light was the arc light, invented by Sir Humphry Davy in 1807. Inspired by the electric battery invented by Alessandro Volta in 1800, Davy had built a huge electric battery in the basement of the Royal Institution in London. Arc lighting was great for illuminating streets and large buildings.

But arc lighting was not useful if one wanted a smaller, softer electric light. Recognizing that customers would buy an electric light similar to existing gas lights, Edison decided in 1878 to drop his work at Menlo Park on the telephone and phonograph and plunge into a field he knew nothing about—electric lighting. In October 1879 Edison and his staff succeeded in their experiment. Soon George Westinghouse, an American entrepreneur and engineer, decided to develop an alternating current (AC) lighting system. In Edison’s DC system, the voltage was constant (typically 110 V), which was relatively safe for consumers. But, in the new Westinghouse AC system, the voltage on the transmission lines would alternate between a maximum of a positive 1,000 and negative 1,000 volts, meaning that there was greater danger of electrocution for linemen stringing the new power lines.

At this critical juncture in 1887, Nikola Tesla turned up with just the right invention, an AC motor. Later, George Westinghouse purchased Tesla’s patents for $200,000 to take on his major rival, the Edison Electric Light Company. In today’s dollars, this deal would be worth $5 million. Determined to catch up with Edison, Westinghouse frequently offered to build new power stations below cost. For much of the 20th century, AC power has been generated and distributed on a massive scale by investor-owned utilities for use by businesses and residential customers. Because the capital costs of building new plants is so high and the marginal profits in selling power is so low, utilities have generally sought to build ever larger networks—first across cities, then entire states, and eventually regions covering multiple states. In doing so, they continue to rely on the multiphase AC technology pioneered by Tesla and Westinghouse.

9) A business success story built on treating people well [Source: The Economist]
This article speaks of how a businessman treated his company, employees and customers. Julian Richer is a typical market-trader-made-good. He was wheeling and dealing as a schoolboy, even selling candles during the miners’ strike of 1974. Then he discovered the market for hi-fi equipment, initially managing other people’s stores, before opening his own shop at the tender age of 19. He opted for the trappings of wealth, buying his first Rolls-Royce at 23. After a difficult period when he admits that he confused revenue growth for profit, he built up a successful high-street chain of 52 stores, which he named Richer Sounds.

Mr. Richer says that the penny initially dropped for him when he read “In Search of Excellence”, a business bestseller by Tom Peters and Robert Waterman which came out in 1982. The top-performing companies described in the book had two common features, Mr. Richer noticed: they treated both customers and their employees well. In “The Ethical Capitalist”, one of his two books on management, Mr. Richer writes that “organisations that create a culture based on fairness, honesty and respect reap the rewards.” They attract motivated staff “who are there for the long haul”.

How does he keep staff loyal? One way is to survey morale every week. Employees rate it, anonymously, on a ten-point scale. Store managers report the average and the lowest score. If there is a two, the company will investigate. Mr. Richer regularly visits his stores to talk to staff. Mr. Richer is also not a fan of the long hours culture; if an employee has to take a telephone call on their day off, they get a £20 hassle bonus. Mr. Richer believes this cuddly approach results in happier customers. It is tempting to think that such benign ways can only work at a relatively small company. However, Mr. Richer is a consultant to larger retailers and says that some of his suggestions worked well at Asda, a supermarket chain, in the 1990s. Last year, he started advising Marks & Spencer, a British retail group, through its continued troubles suggest there is a lot more work to do.

10) Oceans and ice are absorbing the brunt of climate change [Source: National Geographic]
Climate change has been one of the major reasons for the risings floods, and other disasters all over the world. And if not contained, soon the world will be under waters. This can be gauged from the UN’s Intergovernmental Panel on Climate Change (IPCC) latest report. The 900-page report, which compiles the findings from thousands of scientific studies, outlines the damage climate change has already done to the planet’s vast oceans and fragile ice sheets and forecasts the future for these crucial parts of the climate system. The oceans, polar ice caps, and high mountain glaciers have already absorbed so much extra heat from human-caused global warming that the very systems human existence depends on are already at stake.

This will only get worse unless countries make lightning-fast moves to eliminate greenhouse gas emissions, the report says. "The oceans and cryosphere have been taking the heat of climate change for decades,” says Ko Barrett, the vice chair of the IPCC. “The report highlights the urgency of timely, ambitious, coordinated, and enduring actions. What’s at stake is the health of ecosystems, wildlife, and importantly, the world we leave our children." Recently, an estimated four million people worldwide marched in a global climate strike, demanding that world leaders take action to address climate change.

This report summarizes decades of research from scientists worldwide and focuses on two crucial parts of the climate system: oceans and ice. Climate change has already reshaped both. The ocean has borne the brunt of the impacts, absorbing over 90% of the extra heat trapped in the atmosphere by excess greenhouse gases since the 1970s and somewhere over 20-30% of the carbon dioxide. Also, some impacts of melting ice are felt very directly by communities that live nearby. In the high mountains, like the Andes or the Himalaya, glaciers are retreating at unprecedented rates some 30% higher than a few decades ago, the report says. “Our future depends on who we are and what we can do together,” says Heidi Steltzer, a lead author of the report and a mountain scientist at Fort Lewis College. “It’s a time when we must collaborate on solutions.”