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Ten interesting things that we read this week

Including 'Crowd sourcing algorithms in hedge funds', 'Home hijacks in the UK', 'Mongols' technological breakthrough' - and many more

By Saurabh Mukherjea
Published: May 20, 2017

mg_96399_shutterstock_359878661bg_280x210.jpgImage: (For illustrative purposes only)

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 'Crowd sourcing algorithms in hedge funds', 'Home hijacks in the UK' and 'Mongols technological breakthrough'.

Here are the ten most interesting pieces that we read this week, ended May 19, 2017.

1) China’s bicycle sharing boom poses hazards for manufacturers [Source: Financial Times]
Executives from traditional Chinese bicycle factories say the spectacular growth of bike-sharing apps, such as Mobike and Ofo has disrupted their supply chain and is putting the brakes on their business model. Yu Yuefeng, Managing Director at Phoenix, China’s oldest bicycle maker, said that domestic sales dropped last year when these apps, which allow consumers to pick up and drop off their bikes anywhere, started to gain favour. He said “Some factories are switching to produce shared bikes and this is driving up the price of components and causing problems in the supply chain.” Over the economic boom of the past 30 years, many Chinese consumers traded up to motorbikes, electric scooters and cars or started using the vast metro and bus systems that have been built in many cities. The proportion of commuters cycling to work in Beijing fell from more than 60% in 1980 to 12% in 2014. The rapid rise of bike-sharing companies, which have raised hundreds of millions of dollars in venture capital and put millions of bicycles on to China’s streets in just a year, seems to have reversed that trend.

2) A new sort of hedge fund relies on crowd sourcing [Source: The Economist]
“QUANT” hedge funds have long been seen as the nerdy vanguard of finance. Firms, such as Renaissance Technologies, Two Sigma and Man AHL, each of which manages tens of billions of dollars, hire talented mathematicians and physicists to sit in their airy offices and develop trading algorithms. But what if such talent could be harnessed without the hassle of an expensive and time-consuming recruitment process? That is the proposition Quantopian, a hedge fund and online crowd-sourcing platform founded in 2011, is testing. Anyone can learn to build trading algorithms on its platform. The most successful are then picked to manage money. Quantopian would appear to have one striking advantage over its competitors: sheer weight of numbers. The difficulty of hiring and a desire for secrecy limit even big quant funds to a full-time research staff in the low hundreds (Man AHL, for instance, has 120). Quantopian boasts 120,000 members on its platform. Quantopian-like models have the potential to bring the gig economy to high finance.

3) 'Home hijacking' goes through the roof as bogus tenants con more buyers [Source: Financial Times]
So-called “property hijacking” — where fraudsters pose as legitimate owners of a property and sell it on without the real owner’s knowledge — is a growth industry for criminals in the UK. Figures from Land Registry, the official register of property ownership in England and Wales, show the value of the fraud has more than tripled since 2013 when it was £7.2mn, hitting £24.9mn in the year to April 2017. Home hijacking takes place when fraudsters steal a property, most commonly by assuming the homeowner’s identity and selling or mortgaging the property without their knowledge. They then disappear with the money, leaving the true owner to deal with the consequences.

4) To be resilient, don’t  be too virtuous [Source: Linkedin]
In Wharton Professor Adam Grant’s commencement speech at Utah State University, he tells everyone what he thinks is missing from the most graduation speeches. He says that it turns out that almost every commencement speech is about virtues. Living by a set of worthy principles. It’s easy to be virtuous when things are going well. It’s when you’re down that your virtues get tested. In graduation speeches, three of the most popular virtues are generosity, authenticity, and grit. If you want to live by these virtues you need resilience. But if you’re too obsessed with any of these virtues, you might undermine your own resilience. He discusses each of the virtues in and detail and using his own life examples showcases how an extreme on either side is harmful and we need to find a balance.

5) Amazon trounces rivals in battle of the shopping ‘bots’ [Source: Reuters]
Earlier this year, engineers at Wal-Mart Stores Inc who track rivals' prices online got a rude surprise: the technology they were using to check several million times a day suddenly stopped working. Losing access to Inc's data was no small matter. Like most big retailers, Wal-Mart relies on computer programs that scan prices on competitors' websites so it can adjust its listings accordingly. A difference of even 50 cents can mean losing a sale. But a new tactic by Amazon to block these programs - known commonly as robots or bots - thwarted the Bentonville, Arkansas-based retailer. This incident offers a case study in how Amazon's technological prowess is helping it dominate the retail competition. Amazon is best known by consumers for its fast delivery, huge product catalog and ambitious moves into areas like original TV programming. But its mastery of the complex, behind-the-scenes technologies that power modern e-commerce is just as important to its success. Dexterity with bots allows Amazon not only to see what its rivals are doing, but increasingly to keep them in the dark when it undercuts them on price or is quietly charging more. The company's technological edge has been good for its profit margin, and it's proving a winning formula for investors.

6) The Mongols built an empire with one technological breakthrough [Source:]
The Mongols claimed the largest consolidated land empire in history. Seemingly, the only way to keep them out was to put the Himalayas between you and them. And many historians believe their power stemmed from an incredibly simple technological innovation: the stirrup. No one knows when the stirrup was first invented, but it was a boon to any military that used it. Even the simplest of stirrups, a leather loop, let mounted soldiers ride longer distances and stay mounted on their horses during battle. The stirrups were meant to keep the rider centered and upright in even the most tumultuous situation. The rider could maintain hands-free balance on the horse while the horse twisted and turned and while the rider himself turned in the saddle. A fluidly mobile rider could then use his hands to fire arrows in any direction as he rode. At a time when most armies won by driving ineluctably forward, the Mongols advanced and retreated while never letting up on their assault.

7) Socialism’s true legacy is immortality [Source: Swarajya Magazine]
According to this piece, the greatest harm that socialism caused was not economic. It was spiritual. Many of the countries that abandoned socialism rebuilt their economies and became prosperous – but could do little about their institutions and the behaviour of their citizens. While in theory many great men historically promoted the idea of a socialist society, applying socialist ideas in practice turned out to be much more problematic. One of the most obvious shortcomings of socialism in real life is its tendency to lead toward dictatorship. Growing state interference in the economy leads to massive inefficiencies and long queues outside empty shops. A state of perpetual economic crisis then leads to calls for more planning. But economic planning is inimical to freedom. As there can be no agreement on a single plan in a free society, the centralisation of economic decision-making has to be accompanied by centralisation of political power in the hands of a small elite. When, in the end, the failure of central planning becomes undeniable, totalitarian regimes tend to silence the dissenters—sometimes through mass murder. Political dissent under socialism is difficult, because the state is the only employer. Also under socialism, bribes are ubiquitous. Socialism, in other words, is not only underpinned by force, but it is also morally corrupting.

8) Why do so many incompetent men become leaders? [HBR]
There are three popular explanations for the clear under-representation of women in management, namely: (1) they are not capable; (2) they are not interested; (3) they are both interested and capable but unable to break the glass-ceiling: an invisible career barrier, based on prejudiced stereotypes that prevents women from accessing the ranks of power. Conservatives and chauvinists tend to endorse the first; liberals and feminists prefer the third; and those somewhere in the middle are usually drawn to the second. But what if they all missed the big picture? In the author’s view, the main reason for the uneven management sex ratio is our inability to discern between confidence and competence. That is, because we (people in general) commonly misinterpret displays of confidence as a sign of competence, we are fooled into believing that men are better leaders than women. In other words, when it comes to leadership, the only advantage that men have over women is the fact that manifestations of hubris — often masked as charisma or charm — are commonly mistaken for leadership potential, and that these occur much more frequently in men than in women.

9) Hackers use tools stolen from NSA in worldwide cyber attack [Financial Times]
Hackers used cyber weapons stolen from the US National Security Agency to strike organisations across the globe last Friday. A tool known as Eternal Blue developed by US spies was used by the hackers to supercharge an existing form of criminal malware, three senior cyber security analysts said, leading to one of the fastest-spreading and potentially damaging cyber attacks seen till date. Their analysis was confirmed by western security officials who were scrambling to contain an attack that initially hit hospitals and doctors’ practices across the UK. The same or similar virus was used in a large-scale attack in Spain that hit Telefónica, the country’s main telecom provider. There were reports of similar attacks in dozens of other countries, including Portugal, Taiwan, Germany and Vietnam. MegaFon, one of Russia’s largest telecom operators, confirmed it had been hacked.

10) In sex shy India, flavored condoms are way more popular than regular rubbers [Source:]
In a country where talking about sex remains a taboo, and the act of buying contraception is often shrouded in secrecy, flavoured condoms are having a moment. From chocolate and cherry to coffee and jasmine, condom makers are doing brisk business with an array of flavours. These flavoured condoms account for anywhere between 50% and 70% of India’s Rs1,000-1,300 crore condom market. And that’s an interesting twist for a business that has struggled with sluggish growth in a conservative and patriarchal environment. Research by the National Family Health Survey shows that between 2005 and 2015, the proportion of Indians using condoms grew from a measly 5.2% to 5.6%; the most popular method of contraception is still female sterilisation. And that has meant that condom makers have had to work extra hard to sell their products. Today, with a growing population of progressive young Indians, companies have realised that excitement sells, and that’s where flavoured condoms come in.

- Saurabh Mukherjea is CEO (Institutional Equities) and Prashant Mittal is Analyst (Strategy and Derivatives) at Ambit Capital Pvt Ltd. Views expressed are personal.

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