Thought Starters: post carbon futures, social class and Brazil

Thought Starters provides me with a chance to review and highlight some of the more important or interesting research and opinions that I’ve read over the last week or so. This edition looks at venture capital, Uber’s valuation, mobile commerce, innovations in the telecom and the energy sector, social class and Brazil among other things.

Benedict Evans has written a valuable overview of the venture capital sector, pointing to the importance of winning big rather than winning often, with failure a necessary part of the equation for investors if they really want to get ahead:

There are no 10x deals

Uber has been one of the darlings of the startup sector with its position further strengthened by the sale of its Chinese subsidiary which was proving a drain on its finances. Steve LeVine has looked to pour some cold water on Uber’s current valuation suggesting that the brand is not necessarily the sure thing that some investors would have you believe:

With Uber, you have a singular brand with a credible story. The question is whether that brand and that credibility, plus the other assets on Uber’s balance sheet, add up to $62.5 billion. Here is a business under siege by rivals big and Lilliputian, in the midst of a cannibalistic pricing race to the bottom, bleeding cash and losing money while battling well-heeled, technologically savvy incumbents displaying every intention of owning the space themselves.

Ofcom released its annual Communications Market report, providing a whole host of benchmark statistics for the UK across television, online video, radio, telecoms and the internet. Well worth bookmarking:

Household take-up of digital communications/ AV devices: 2006-2016

Mobile commerce is definitely on the rise as we spend more and more time glued to our smartphone screens. What’s interesting is that for all the talk of the opportunities of mobile apps, browser based purchasing dominates with a lead that’s growing according to Andy Favell:

Access Method for Mobile Shoppers

Federic Filloux looks at how the traditional media players have been sidelined by the news aggregators (primarily Facebook and Google) and newer media outlets more attuned to the rapid fire news cycles of the current age:

For the news industry, this huge economic gap carries two likely consequences: internet giants and digital native news outlets will have tremendous financial firepower to do whatever it takes in terms of marketing or their ability to go further into the general information segment (cf. Snapchat); and the network effect will apply even further when advertising dollars keep drying up for what will be increasingly seen as niche media.

More broadly, except for the old, educated and affluent segment of the population, the vast majority will be informed by a rapid-fire of superficial and shallow contents spat by the social firehose. Expect more Brexit hurricanes and Trump floods in the future.

Self driving cars are reshape our relationship with the automobile but it’s not just the driver who will be impacted by these changes as Robin Chase explores:

We’re at a fork on that roadmap. One direction leads to a productive new century where cities are more sustainable, livable, equitable, and just.

But if we take the wrong turn, we’re at a dead end. Cities are already complex and chaotic places in which to live and work. If we allow the introduction of automated vehicles to be guided by existing regulations we’ll end up with more congestion, millions of unemployed drivers, and a huge deficit in how we fund our transportation infrastructure. We will also miss an opportunity to fix transportation’s hereto intractable reliance on liquid fossil fuels (and their associated pollution).

There’s no disputing the fact that mobile is reshaping the world we live in with data via hardwired, mobile and wifi networks fueling the growth in an ever expanding range of devices (smartphones, sports trackers etc) and services (mobile messaging Shazam etc). Our current infrastructure isn’t really built for these growing demandsJeff Hecht looks at what providers are doing to future proof our telecoms infrastructure:

Bottleneck Engineering

The energy sector is facing growing calls to switch away from fossil fuel based energy given the growing threat from climate change. Renewable energy has traditionally been handicapped by intermittent supply and the costs of energy storage whilst nuclear is costly and has a rather mixed safety record. Tim Harford points to the potentially valuable role of price signals in getting the energy market to travel in the right direction:

Overall, there is little prospect of running out of fossil fuels, and it seems unlikely that alternative energy sources will outcompete them. And yet we must make the shift, or risk catastrophic climate change. Our reserves of fossil fuels may be no constraint but the atmosphere’s capacity to safely absorb carbon dioxide is.

There is some space for optimism. Renewable energy sources are no longer impossibly costly. Nor is nuclear power, even though the costs have moved in the wrong direction. We cannot wait for the market to make the switch unaided — but the gap is no longer so wide that sensible policy cannot bridge it. The centrepiece of such a policy would be to raise the price of carbon dioxide emissions, using internationally co-ordinated taxes or their equivalent. Such a tax would make renewable energy sources more attractive — as well as encouraging energy efficient technologies and behaviour. Market forces can do the rest. Low carbon energy is not free — but it is worth paying for.

Ambrose Evans-Pritchard points to innovations in energy storage as giving more than a helping hand,  changing what is economically viable and potentially making Hinkley Point look like something of a white elephant:

This transforms the calculus of energy policy. The question for the British government as it designs a strategy fit for the 21st Century – and wrestles with an exorbitant commitment to Hinkley Point – is no longer whether this form of back-up power will ever be commercially viable, but whether the inflection point arrives in the early-2020s or in the late 2020s.

Simon Hattenstone  has taken a critical at meritocracy in the UK in light of Theresa May’s recent cabinet appointments which are less dominated by Etonians than her predecessor David Cameron. This raises the question will we see real change or more of the same?

Lee Elliot Major of the Sutton Trust, talks of an academic arms race. “Every time opportunities widen for those from less privileged backgrounds, the middle classes find some way of defining merit to their advantage again. Never underestimate the skills and the tenacity of the middle classes to reinforce their privileged position in society. So there was a university expansion, but if you look at the more prestigious universities, there’s still a stark gap in terms of those from more advantaged backgrounds versus those from disadvantaged backgrounds. And increasingly you’re seeing post-graduate degrees.”

The rise of Donald Trump has prompted much soul searching among political commentators in the US pointing to it as a symptom of the growing social inequality. Research from Gallup provides a more nuanced analysis as Max Ehrenfreund and Jeff Guo report:

According to this new analysis, those who view Trump favorably have not been disproportionately affected by foreign trade or immigration, compared with people with unfavorable views of the Republican presidential nominee. The results suggest that his supporters, on average, do not have lower incomes than other Americans, nor are they more likely to be unemployed.

Yet while Trump’s supporters might be comparatively well off themselves, they come from places where their neighbors endure other forms of hardship. In their communities, white residents are dying younger, and it is harder for young people who grow up poor to get ahead.

Alec MacGillis looks more broadly at the growth of a white underclass in the US which has  provided a fertile ground for Trump’s more xenophobic view of the world:

So why are white Americans in downwardly mobile areas feeling a despair that appears to be driving stark increases in substance abuse and suicide? In my own reporting in Vance’s home ground of southwestern Ohio and ancestral territory of eastern Kentucky, I have encountered racial anxiety and antagonism, for sure. But far more striking is the general aura of decline that hangs over towns in which medical-supply stores and pawn shops dominate decrepit main streets, and Victorians stand crumbling, unoccupied. Talk with those still sticking it out, the body-shop worker and the dollar-store clerk and the unemployed miner, and the fatalism is clear: Things were much better in an earlier time, and no future awaits in places that have been left behind by polished people in gleaming cities. The most painful comparison is not with supposedly ascendant minorities—it’s with the fortunes of one’s own parents or, by now, grandparents. The demoralizing effect of decay enveloping the place you live cannot be underestimated. And the bitterness—the “primal scorn”—that Donald Trump has tapped into among white Americans in struggling areas is aimed not just at those of foreign extraction. It is directed toward fellow countrymen who have become foreigners of a different sort, looking down on the natives, if they bother to look at all.

Reflecting the current race between Hillary Clinton and Donald Trump, The Economist suggests that politics will increasingly be about open versus closed models rather than the traditional battles between left and right:

Left, right, left, right

The Rio Olympics has put Brazil in the spotlight during a tumultuous period in its political history. Franklin Foer has a valuable piece that provides a valuable background to recent events:

But the public’s understandable despair isn’t wholly shared by the experts I spoke with. Stepping back, they saw unlikely causes for hope. Impeachment revealed the worst about Brazilian democracy—and the worst wasn’t so terrible. There’s no talk of returning to dictatorship, no real fear of a Hugo Chávez–like figure clouding the sky. Impeachment was a poor showing of democracy, but it was still democracy. Even with all the budgetary turmoil, Bolsa Família remains firmly ensconced. Austerity will whack the poor, yet Lula’s evolution of Brazilian social democracy won’t reverse course. Most important, the Petrobras scandal is so spectacular that its grasp on the popular imagination doesn’t seem to be slipping. Indeed, Temer’s impeachment gambit has yet to slow the Moro investigation. Brazil has a once-in-a-generation chance to untether its politics from its debilitating state of codependence with the big firms. Hosting the Olympics was never going to bring Brazil the national greatness Lula advertised. Freeing its democracy and economy from the plague of corruption could.

Saudi Arabia feels for many of us like a different world given the way that religion shapes everyone’s lives. Studio D’s research into the lives of young Saudi’s provides a valuable window of how people adjust and if that whets your appetite, it’s also worth reading Jessi Hempel’s coverage of the research process:
For Saudi female youth the smartphone is the great liberator
The featured image is a Gue mural photographed by Angelo Jaroszuk Bogasz at the Altrove Street Art Festival in Catanzaro, Italy and published in StreetArtNews.

Thought Starters: growth of mobile stickers, evolution of media and changes in energy use

Thought Starters provides me with a chance to review and highlight some of the more important or interesting research and opinions that I’ve read over the last week or so. This edition looks at growth of mobile stickers, evolution of media and its implications for business and consumers and a look at the energy sector’s attempts to address climate change among other things:

Stickers have become a staple of the Asian mobile sector and are beginning to make their presence felt elsewhere. Connie Chan looks at how it’s shaping new forms of communication and how WeChat and Line are looking to capitalise on their use:

And sometimes stickers can convey what words cannot! This form of visual communication has become so popular in Asia — especially in China’s WeChat and Japan’s LINE [Line] — that it is not uncommon to see a deep thread of multiple messages without a single word. They’re not just for those crazy young kids. More notably, stickers are commonly used in professional, not just personal, chats as well. Not so frivolous after all. In fact, stickers are so core to the success of Line, that its CEO actually credited them as the “turning point” for that app. He shared that it took Line Messenger almost four months to find its first two million users … but after stickers were launched, it took only two days to find the next million. The company now makes over $270M a year just from selling stickers.

The inexorable rise of social media can be seen in its growing importance as consumers’ main source of news (and the inevitable demise of television news and newspapers):

Growth of social media as a main source of news

GlobalWebIndex’s research points to markets where ecommerce is most popular among consumers with a mixture of developed and emerging markets holding sway:

Top 10 online commerce markets

Tal Shachar plots how the evolution of digital marketing has eroded FMCG companies’ hold on consumers purchasing and is beginning to open the way for new market entrants and expanding choice for consumers:

Since the dot com boom, the promise of the internet in fundamentally changing distribution, marketing, advertising and consumption has never fully lived up to the hype.  While the major web services sucked the air out of classifieds and newspaper advertising, digital seemed unable to truly slay the beast that is TV advertising. And although consumer choice became more plentiful, the process of shopping for, purchasing and receiving products did not change as much as many had hoped. We still lived in an age determined and defined by the limitations and inefficiencies of the marketing funnel. But the rise of new distribution and marketing channels, on-demand infrastructure and consumer tracking stands to dramatically reshape this funnel, collapsing it in on itself, opening up new battlegrounds for brand competition and ushering in significantly more consumer choice. Time to get shopping.

Media spend on television advertising has shown robust health despite the growth in alternative digital advertising formats. Matthew Ball warns that this is not the time for complacency among the television networks as advertisers are offered a growing array of alternatives to the 30 second television spot:

This is certainly impressive, but it can’t go on forever. Not only is digital’s share of total consumer media time spent already at 50%, you have to believe TV will cede share if digital and mobile continue to grow. And they will.

The television business may say that’s fine – the loss/cannibalization of share doesn’t mean the nominal loss of spend as long as total ad spend increases. Yet this defense, too, is somewhat off the mark. Contrary to common belief, advertising has never been a growth business. For the past hundred years, national ad spend has been confined to a stable 1.1-1.5% of GDP (excluding WW2).

One advertiser that’s vying for a share of the television advertising pie is Snapchat. Christopher Heine profiles the company’s ambitious moves into online advertising as it looks to justify its $20bn valuation:

That growth is essential if it is to hit its goals. According to recently leaked documents from inside the company, Snapchat, a $59 million business as of last year, aims to haul in $250 million to $350 million this year and $500 million to $1 billion by the end of 2017. To accomplish that, the company will have to convince a greater slice of the population that they need another social network on their mobile devices; it must persuade consumers that an app that opens as a camera—often confusing to first-time users—is a vital addition to their digital lives. And it is no small feat to go from more than 150 million daily users to, say, 300 million. Just ask Twitter.

Ethereum is arguably the brightest light in the rapidly emerging blockchain sector and the Decentralized Autonomous Organization (DAO) is one of the most interesting innovations to emerge from the platform. DAO offered an investment vehicle without the intermediaries traditionally associated with financial services taking advantage of the application of smart contracts. Unfortunately flaws in the DAOs code enabled hackers to siphon off funds. Whilst this doesn’t exactly make for a ringing endorsement of smart contracts and blockchain technology, it has made for an important learning exercise for the community and has raised some important questions as Matt Levine comments:

The most fascinating thing about the DAO hack may be the way it exposes these tensions. To true believers in smart contracts, there is no problem here. The system is fine; the failures — writing bad code and not anticipating this attack — were trivial, mere human error.Next time, write better smart contracts and you’ll be fine. To those true believers, changing the code after the fact — even to conform it to almost-everyone’s reasonable expectations about how the DAO would work — would be a betrayal of the smart-contract ideal.

On the other hand, to the humans who read the English descriptions of the DAO and invested their money based on their reasonable expectations, their losses probably do seem like a problem. You can’t really base the financial system of the future on computers rather than humans, on trusting to immutable code no matter what happens. Financial systems are supposed to work for humans. If the code rips off the humans, something has gone wrong.

An interesting counterpoint to the earlier Tal Shachar article is research which points to a decline in the number of startups launching in the US and James Surowiecki points to the damage this may do to the long term health of its economy:

But there is a catch. While Stern and Guzman show that high-growth firms are being formed as actively as ever, they also find that these companies are not succeeding as often as such companies once did. As the researchers put it, “Even as the number of new ideas and potential for innovation is increasing, there seems to be a reduction in the ability of companies to scale in a meaningful and systematic way.” As many seeds as ever are being planted. But fewer trees are growing to the sky.

Climate change is one issue the world cannot simply wish away. We are beginning to see growth in renewable energy aided by the falling price of solar energy. Unfortunately the transport sector has been less successful in switching to low carbon technologies. Tom Randall profiles a valuable look at key trends in the energy sector, highlighting some of the successes and the hurdles faced in the move toward a greener future:

The tragic death of Jo Cox has brought the issue of Britain’s  European Union referendum into sharp relief. John Oliver has some relevant and rather amusing words to say on the topic it and it should give you some idea of where I stand on the issue:

The featured image is an Ellen Rutt mural in Cleveland, Ohio and found on The Inspiration.

If you’ve got any thoughts or opinions on any of the above please let me know.

Thought Starters: the fallacy of maximising shareholder value, the impact of climate change on your wallet and our responses to ISIS

The following is a look through articles, research and opinion pieces highlighting interesting trends, developments and changes in the world you and I live in, with an emphasis on technology.

The following figures presented by DoubleLine Capital’s Jeffrey Gundlach point to the fact that the global economy isn’t out of the woods yet:

Global nominal GDP growth

Steve Denning uses Roger L. Martin’s analysis in Fixing the Game to point out how management’s focus on maximising shareholder value comes at the expense of long term value creation and ultimately society:

“In today’s paradoxical world of maximizing shareholder value, which Jack Welch himself has called “the dumbest idea in the world”, the situation is the reverse. CEOs and their top managers have massive incentives to focus most of their attentions on the expectations market, rather than the real job of running the company producing real products and services.”

Om Malik covers the release of the latest Ericsson Mobility Report, highlighting growing penetration of different technologies (smartphones, mobile internet etc) and the regions where we’re forecasted to see  particularly strong growth:

Connected devices forecast

We’re seeing technology have an increasingly significant role in the employment landscape as machine learning, robotics and a growing array of sensors expand the range of tasks we can automate. The Bank of England’s Chief Economist, Andrew G Haldane recently gave a speech where he explored these changes and their implications which can be found in an abbreviated form on re/code:

Average probability of automation by occupation

Chris Field and Katharine Mach profile the work of Marshall Burke, Solomon Hsiang, and Edward Miguel who have researched the economic impacts of climate change. With the Paris Climate Change Conference fast approaching, now is an important time to make your concerns known about global warming to your local government – not one to stand on the sidelines for:

“Their conclusion delivers two blockbusters. First, in contrast to past studies, they argue that 21st century warming could lead to huge global-scale macroeconomic impacts. The best estimate from Burke and colleagues is that business as usual emissions throughout the 21st century will decrease per capita GDP by 23% below what it would otherwise be, with the possibility of a much larger impact.

Secondly, they conclude that both the size and the direction of the temperature effect depend on the starting temperature. Countries with an average yearly temperature greater than 13°C (55°F) will see decreased economic growth as temperatures rise.”

Before you suggest the issue of climate change is too difficult, it’s worth reviewing research at the Atmosphere/Energy Program at Stanford University which points to the feasibility of a move to a society that doesn’t rely on fossil fuels: 

“In a few decades, the world could be powered by nothing but wind, water, and sunlight. That’s the conclusion of a new study released just before world leaders head to Paris to strike a climate deal.

“These are basically plans showing it’s technically and economically feasible to change the energy infrastructure of all of these different countries,” says Mark Z. Jacobson, director of the Atmosphere/Energy Program at Stanford University, who worked with University of California colleagues to analyze energy roadmaps for 139 countries.”

Chain founder Adam Ludwin is interviewed for Andreessen Horowitz’s podcast focusing on the growing world of blockchain innovation. Among the subjects covered are the merging cultures of finance and tech, the price of bitcoin, the importance of blockchain (rather than bitcoin) and a review of  private and permissioned blockchains and uses for colored coins and sidechains:

Michael Vakulenko looks at at how the movement to self driving cars is likely to unseat traditional manufacturers’ position in the car market. Among the particular technologies and innovations he points to as catalysing change are services and apps, transportation platforms, fleet routing and navigation:

“It’s still too early in the game to say which companies will dominate the future transportation market. One thing is a safe bet: The future transportation ecosystem will look very different from the existing automotive industry. It will resemble modern technology ecosystems with their platform business models, permissionless innovation by developers, and domination of software-centric companies.”

Technology based disruption hasn’t received the same level of media attention in education as it has in other sectors with the possible exceptions MOOCs reflecting a more constrained funding pool and the comparatively complex web of different stakeholders. The NMC Horizon Report: 2015 K-12 Edition provides a valuable review of emerging innovations in the primary and secondary education sector, with technologies typically augmenting rather than replacing current ways of working:

Edtech Trends

The New York Times‘ experiment with Google Cardboard has gained lots of plaudits for pushing the boundary for online journalism at scale. Whilst the experiment has catalysed interest in these new formats, Will Smith stresses the need for fully featured virtual reality platforms such as Oculus Rift to differentiate themselves from Google Cardboard:

“In the meantime, if you enjoyed your first taste of VR, courtesy of Cardboard and 360 video, that’s great! Welcome to the future! But if that first taste of VR turned your stomach, please know that it doesn’t have to be this way. The problems that affected you have been solved—you just need better hardware than comes free with the Sunday paper.”

Steve Albini wrote the essay The Problem with Music in 1994 critiquing the music industry and its ability to both give musicians money and then take it back with a litany of expenses. Albini gave an update of sorts last year at the Face the Music conference where he saw musicians as now being in a better position to take control of their own destiny:

The Socio-Economic Segregation in European Capital Cities project has been looking at levels of inequality and the proximity of the rich and poor in 12 different cities across Europe. Richard Florida’s summary of the research points to a general trend of increasing income inequality (measured by Gini coefficient) and residential segregation (measured by index of dissimilarity) across Europe, although Tallinn and Oslo make for interesting outliers:

European Cities Economic Segregation and Inequality

ISIS’ attack on Paris on the 13th of November was a tragedy which has led to some important discussions about how we deal with the threat of terrorism. The Economist’s look at global deaths from terrorism puts the deaths in perspective, pointing to how much the West has in many cases been spared the worst effects of terrorism:

Global deaths from terrorism

The attacks have led to renewed calls for backdoors in secure products and encryption software. Kim Zetter provides a valuable rebuttal starting with the lack of evidence to support the view that the terrorists used encryption technology.  She then goes on to point out that there will always be homebrewed encryption alternatives, encryption doesn’t hide metadata and weakening existing products ultimately makes everyone vulnerable:

“If Snowden has taught us anything, it’s that the intel agencies are drowning in data,” EFF Attorney Nate Cardozo says. “They have this ‘collect it all mentality’ and that has led to a ridiculous amount of data in their possession. It’s not about having enough data; it’s a matter of not knowing what to do with the data they already have. That’s been true since before 9/11, and it’s even more true now.”

Adam Shatz writing for the London Review of Books reports more broadly on ISIS’ aims with the terrorist attacks and the options the West has in reducing chances of future incidents:

“Now IS is unrivalled among jihadist groups, and no one knows quite what to do that won’t make the problem worse. Anything that can be done now risks being too little, too late. It’s true that IS is no match, militarily, for the West. The attacks of 13 November were in the anarchist tradition of the ‘propaganda of the deed’, and we shouldn’t fall for it: the social order of Europe isn’t in jeopardy. But it would also be a mistake to underestimate the problem. IS has managed to insert itself, with no small amount of cunning, and with acute sensitivity to feelings of humiliation, into two of the most intractable conflicts of our time: the relationship of European societies to their internal, Muslim ‘others’ and the sectarian power struggles that have engulfed the lands of Iraq and Syria since 2003.”

One of my real concerns is that the attacks could further marginalise Muslim populations already living in Western Europe and USA and lead to the closing of borders to refugees fleeing turmoil in places like Syria and Afghanistan. By doing this, the West would essentially be handing ISIS a victory of sorts as Adam Taylor reports:

“The very same refugees entering Europe are often the very same civilians who face the indiscriminate violence and cruel injustice in lands controlled by the Islamic State in Iraq and Syria (though, it should be noted, many in Syria are also threatened by the brutal actions of the Syrian government). Globally, studies have shown that Muslims tend to make up the largest proportion of terror victims, with countries such as Syria and Iraq registering the highest toll.

If Muslim refugees come to Europe and are welcomed, it deeply undercuts the Islamic State’s legitimacy. Aaron Zelin, a fellow at the Washington Institute for Near East Policy, has helpfully catalogued some of the Islamic State’s messages on the refugees pouring into Europe from the Middle East. The messages give the impression of deep discomfort and even jealousy that the Muslim population the Islamic State so covets for its self-proclaimed “caliphate” would rather live in “infidel” Western lands.”

The Economist’s analysis of health spending and life expectancy point to the fact that there’s a far from direct correlation between the two with the United States’s poor performance in particular standing out:

Health spending and life expectancy at birth

Raffi Khatchadourian has written a thought provoking profile of Nick Bostrom for the New Yorker profiling the latter’s research into whether developments in artificial intelligence and other technologies will lead to human extinction. His approach is definitely more thoughtful than your average Hollywood blockbuster.

The featured image is Phoenix by DALeast in Penang, Malaysia and published in StreetArtNews.