Ten interesting things that we read this week

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 ‘How renewables are disrupting the old guard’, ‘The reason the Pareto principle works’ and ‘The underappreciated gender inequality pressures on men’.

Here are the ten most interesting pieces that we read this week, ended June 02, 2017.

1) The Big Green Bang: How renewable energy became unstoppable [Source: Financial Times]
Green energy is having a disruptive impact on companies and entire industries around the world causing leaders in the oil & gas sector to confront an existential question: will the 21st century be the last one for fossil fuels? It is early, but the evidence is mounting. Wind and solar parks are being built at unprecedented rates, threatening the business models of established power companies. Electric cars that were hard to even buy eight years ago are selling at an exponential rate, in the process driving down the price of batteries that hold the key to unleashing new levels of green growth. The shift has come as increased Government efforts to curb climate change and smog have driven down costs and spurred technical advances, creating a green energy industry that looks nothing like it did a decade ago: expensive, sluggish and German. Today, China and India have picked up the baton and are driving a sector that has spread to every continent. Using data this article presents evidence of how renewable are posing threat to the traditional forms of energy and how they have one undisputed advantage in their favor - unlike coal, oil or gas, every country has wind and sun.

2) The 1% rule explains why a few people end up with most of the rewards  [Source: Business Insider]
Sometime in the late 1800s, Vilfredo Pareto discovered the inequality in wealth and income distribution across nations. The majority of rewards always seemed to accrue to a small percentage of people. This idea that a small number of things account for the majority of the results became known as the Pareto Principle or, more commonly, the 80/20 Rule. Examples of the Pareto Principle exist in everything from real estate to income inequality to tech start-ups. In the 1950s, 3% of Guatemalans owned 70% of the land in Guatemala. In 2013, 8.4% of the world population controlled 83.3% of the world's wealth. In 2015, one search engine, Google, received 64% of search queries. Why does this happen? Why do a few people, teams, and organisations enjoy the bulk of the rewards in life? This piece attempts to answer this question by looking at an example from nature.

3) Driverless cars inspire a new gold rush in  California [Source: Financial Times]
Self-driving cars are the hottest thing in Silicon Valley and entrepreneurs and investors alike are rushing to cash in on a trend that has already made several fortunes. Investment in the sector reached an all-time high of $750mn in the first quarter of this year. But even enthusiasts are beginning to worry that the sector might be overhyped. Carl Bass, one of the Silicon Valley veteran says “There is such a crazy thing going on in the market right now around autonomous vehicles. It is kind of like if you can spell ‘self-driving’ you can sell it for a billion dollars.” Yet it is not just Silicon Valley money pouring in. The world’s top automakers such as Ford and General Motors have joined Google’s parent Alphabet, Uber and other tech companies in funding research for self-driving technology. However, as in past tech hype cycles, the business model for driverless cars is not clear, nor is the timeline for how long it could take the market to develop. At the moment, driverless cars have nearly mastered highway driving but still struggle in complex urban environments, and there are huge legal and regulatory questions to be worked out. But such details do little to diminish the promise of the technology, say entrepreneurs and investors in the sector. In the near term, one of the biggest challenges for the sector is a severe talent shortage. People with expertise are in high demand, giving them extraordinary leverage.

4) The curious case of the disappearing nuts [Source: outsideonline.com]
Petty thefts of walnuts are not uncommon in central California. Several counties even ban the sale of nuts before harvest is complete, to discourage black-market sales. But the recent instances of heists are different in the sense that they were committed by people who appeared to understand the trucking business, identity theft, and computer security. Rich Paloma, a police officer began tracking high-­value loads of nuts that had vanished. Paloma counted half a dozen heists, valued at more than $1 million, in the previous year. In the fall of 2013, he published an article speculating that the thefts were coordinated. “When you look at the logistics needed to complete this crime,” he said, all signs point toward an organized group. “You steal 370,000 pounds of almonds, you’re not going to sell it on the side of the road.” In recent years, nut theft has exploded into a statewide problem. More than 35 loads, worth at least $10 million, have gone missing since 2013. The number and style of the thefts—quick and professional, as if the characters from Ocean’s Eleven had descended on the Central Valley—have drawn the attention of federal organised-crime investigators and prompted the creation of a regional task force.

5) Smart insects put a fly in the gene-editing ointment [Source: Financial Times]
Genetic manipulation has long offered hope for controlling disease carriers, such as mosquitoes, by, for example, reducing the number of eggs a female can lay. Now that optimism has hit a roadblock. Research published last week suggests that gene editing, a revolutionary cut-and-paste technology that allows bespoke adjustments to an organism’s genome, might not be that effective in changing the long-term characteristics of an insect population. Michael Wade and Gabriel Zentner, from Indiana University, studied the flour beetle, a serious agricultural pest. They focused on three stretches of the beetle’s genome where so-called Crispr technology, sometimes compared to genetic tweezers, could potentially snip out or insert genes. Two targets were chosen because of their links to male and female fertility. The third location was selected because it mirrors a spot in a mosquito genome previously scouted as a potential anti-malarial target. The Indiana researchers, writing in the journal Science Advances, found there was sufficient natural genetic variation in the flour beetles to get rid of any Crispr tampering within just six generations. Not only that, but subsequent generations favored genes, even rare ones, that circumvented the Crispr intervention.

6) Why are millions of Indian women dropping out of work? [Source: BBC]
The numbers are stark - for the first time in India's recent history, not only was there a decline in the female labour participation rate, but also a shrinking of the total number of women in the workforce. Nearly 20 million Indian women quit work between 2004-05 to 2011-12. The labour force participation rate for women of working age declined from 42% in 1993-94 to 31% in 2011-12. Some 53% of the total drop - the largest chunk - happened among women aged 15-24 and living in villages. In rural areas, the female labour force participation rate dropped from 49% to 37.8% between 2004-05 and 2009-10. While more than 24 million men joined the workforce between 2004-05 to 2009-10, the number of women in the workforce dropped by 21.7 million. So what accounts for the unprecedented and puzzling drop in women's participation in the workforce at a time when India's economy has grown at a steady pace? Predictable social norms are attributed to women quitting work in India: marriage, motherhood, vexed gender relations and biases, and patriarchy. But they may not be the only reasons. The researchers believe that one plausible explanation for the drop in the participation rate among rural girls and women aged 15-24 is the recent expansion of secondary education and rapidly changing social norms leading to "more working age young females opting to continue their education rather than join the labour force early". There has been a "larger response to income changes among the poor, rather than the wealthy, by sending children to school". Also, casual workers - mainly women - drop out of the workforce when wages increased for regular earners - mainly men - leading to the stabilisation of family incomes.

7) The Man trap [The Economist]
Most conversations about gender inequities characterize men as part of the problem. Women around the world may be graduating from college at higher rates than men, but they have yet to achieve similar rates of success in their careers. The uneven burdens of parenthood appear to be to blame. Feminists have long argued that men see little need to help out more at home because they already enjoy all the benefits of marriage and fatherhood without having to put in the extra work. Marriage seems to make men more productive at work because it allows them to outsource much of the housekeeping to their wives. Women, however, see no such “marriage premium”, and their earnings tend to go down with every new child. In order for more mothers to flourish in paid employment thus, more fathers need to pick up some of the slack at home. However, as this article explains through a personal example it’s not as simple. Women may not be moving as fast into male-dominated worlds as feminists would like, but they have moved much faster than men have into female-dominated ones. This article aims to understand better this asymmetry by looking more closely at the relative value we place on masculinity and femininity.

8) Google now knows when its users go to the store and buy stuff [Washington Post]
Google has begun using billions of credit-card transaction records to prove that its online ads are prompting people to make purchases – even when they happen offline in brick-and-mortar stores. The advance allows Google to determine how many sales have been generated by digital ad campaigns, a goal that industry insiders have long described as “the holy grail” of online advertising. But the announcement also renewed long-standing privacy complaints about how the company uses personal information. To power its multibillion-dollar advertising juggernaut, Google already analyzes users’ Web browsing, search history and geographic locations, using data from popular Google-owned apps like YouTube, Gmail, Google Maps and the Google Play store. All that information is tied to the real identities of users when they log into Google’s services. The new credit-card data enables the tech giant to connect these digital trails to real-world purchase records in a far more extensive way than was possible before. But in doing so, Google is yet again treading in territory that consumers may consider too intimate and potentially sensitive.

9) Extramarital dating app Gleeden bets on ‘infidelity’ to make inroads in India [Source: Livemint]
In a country where marital infidelity is considered a sin, how difficult will it be for a company, which runs its entire business on the concept of adultery, to make a mark in India? Not much it seems. A premium dating website/application for married individuals called Gleeden is making inroads in India and already has over 100,000 subscribers. Run entirely by a team of 20 women, the website is free for female subscribers. For men, the site offers different subscription packages starting at Rs700. “Because Gleeden is run by women, we think that women should not be paying for the service. We want the website to be women-friendly. Extramarital dating is a natural thing. When you are married for a few years, you need some excitement which people are now finding online,” said Solène Paillet, head of communications and manager of the all women-team at Gleeden.

10) Shari’ah- compliant crypto gold: Could Islam be preparing for a  new world reserve currency [Source: Valuewalk]
In December 2016, after about 12 months of deliberations, the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) and the World Gold Council announced a new “Shari’ah Standard on Gold.” Under the new standard, Shari’ah-compliance is guaranteed as long as physical gold is the underlying asset for a financial instrument. We didn’t have long to wait for a brand-new financial product coming from the Islamic world that combines the popularity of Bitcoin with the timeless value of physical gold: OneGram, a gold-backed, fully Shari’ah-compliant crypto currency. The new currency was announced on May 4 at the Ritz Carlton, Dubai International Financial Center—with the official ICO (Initial Coin Offering) following only 17 days later. “In recent years, the Middle East has seen incredible growth in fintech innovations including digital tokens and smart contracts,” said Ibrahim Mohammed, the founder and CEO of OneGram. “With OneGram, we’re excited to provide an opportunity for investors who care about Islamic financial markets and the security of commodity-backed investments to benefit from rapid technological advances in the blockchain industry.” Each OneGram coin (OGC) is backed by one gram of gold and can be used for digital payments, just like Bitcoin. The total number of OGCs is fixed and won’t change after the ICO. Gold and crypto-currency experts are already speculating about the implications of the launch. A recent CoinDesk review stated: Bitcoin is often referred to as a “good” money because of its limited supply, relative fungibility and ease of exchange. If gold can also start to satisfy those requirements, a seismic shift from fiat to digital could be easier to “sell”—the public is predisposed to trust gold, certainly more so than cryptography. It could also open the door to the creation of a new global currency as an alternative to the dollar.

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