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 ‘Mifid enables new business models’, ‘The curse of Big Sugar’, and ‘Complacency over Chinese tech’.Here are the ten most interesting pieces that we read this week, ended May 4, 2018. 1) MiFID II is live and its already changing the research business
On January 3, the world of investment research entered a new era. A new European Union law — the Markets in Financial Instruments Directive, or MiFID II, required sell-side institutions to explicitly charge for research instead of bundling it into brokerage costs. The aim is to institute a system in which the buy-side places trades with brokers on the basis of best execution, rather than in exchange for freebies and inducements like research and corporate access.
Sell-side institutions are now trying to figure out the right price and asset class coverage. Buy-side firms, long drowning in a never-ending stream of research notes are facing the question of how much outside information (and what kind) they really need to generate market-beating returns. And into the confusion has rushed an opportunistic new host of independent analysts and tech-savvy content aggregators, buoyed by the belief that finance is about to undergo a disruption every bit as meaningful and industry-redefining as those seen in recent decades in music, media, and television. With this backdrop three things seem certain. First, independent analysts put the size of the global investment research industry, once it is broken out, at anywhere from $16 billion to $20 billion per year. Second, when the effects of MiFID II are felt, the buy-side's annual spend on research will likely be much smaller than that, although the market for research will remain inefficiently priced for months, perhaps years, to come. And third, amid the inefficiency — of both pricing and coverage — pockets of opportunity will open up for investors in a way that did not exist under the old regime.
Only 2-5% of research emails are opened by clients, according to industry insiders. Buy-side firms have no incentive to pay attention when they're receiving information for free, but analysts do little to help their own cause. User experience is limited in the PDF technology used by the analysts for their reports. Duplication of coverage across investment houses is rampant too. Also, analysts don't just cover the same things; they often say the same things. Most buy-side firms have announced they will absorb the cost of sell-side research themselves rather than pass it on to their customers. The response from the sell-side has been both swift and predictable: a good old-fashioned price war wherein "The big banks bet that they'll gain market share and squeeze out smaller competitors. They’ll then gradually raise prices once the field has been cleared. While some analysts have drawn analogy of expected revenue phase with music industry, their structure is very different. Research is considerably more difficult to price in a consistent way and the idea that the economics of financial content will be worked out quickly seems like so much sell-side wishful thinking.
Sell-side research teams will be cut or decommissioned altogether; coverage in equities will concentrate on the most liquid, popular stocks; and analysts will be forced to become more original. Also, for analysts, going independent is now a far more viable path than it was in the pre-MiFID II era. Going independent allows clients to just pay for analysts they like and provides space to be more creative in the way analysts generate and present insights. Such independent analysts have also benefited from the recent blossoming of tech-driven, exchange like research marketplaces that connect research producers and consumers. Smartkarma and RSRCHXchange, two of the most popular platforms, report a noticeable uptick in interest since MiFID II came into effect. The business model varies from a percentage of sales cut or flat fee. The best analysts can expect to make about $10,000 a month on Smartkarma, but according to Jon Foster, the company's chairman, "the pool that we're paying out to analysts is increasing 11% month-on-month.”
Small, innovative fintech shops also think the winds of change are in their favour. Simudyne, the London-based start-up evaluates the performance of companies and sectors in dynamic, artificial intelligence-driven simulations — a far cry from the static, linear models most equity analysts use to generate their projections today. As MiFID II begins to bite in earnest, the nature of what counts as interesting insights, or what types of people should be providing them, will also change. “Old-school, press-the-flesh sales and information-gathering skills might come back into vogue," notes Northern Trust's Gerard Walsh. Tech can then play an important role in connecting insight providers previously locked out of financial analysis to investors. All said, the financial industry today is stuck between two worlds; the old regime is giving way, but the Netflixified future of investment research, in which content is made available as a streaming service and the universe of insight production is opened up to a whole new category of analysts, has not yet arrived. 2) Value should do better – but when is anybody’s guess
Over the past 10 years, the S&P 500 Value Index of companies selling at low prices relative to their earnings, revenues and net worth has returned an average of 7.1% annually. The S&P 500 Growth Index, stocks selling at high prices, has gained an average of 10.7%. The longer-term picture is brighter for value-hunters. Over the course of many decades, cheap stocks have tended to do better, as you would expect from investments bought as bargains: From 1926 through the end of last year, value out-earned growth stocks by an average of 3.1 percentage points annually. With interest rates rising and stocks volatile, the market appears to be at a crossroads. Could this be the moment that value reasserts itself and catches up to the rest of the market? Maybe, but you would be foolhardy to believe anyone who claims to be able to predict precisely when it will happen.
Since 1962, on average, value stocks have outperformed growth stocks by 6.1 percentage points over the 12 months following an increase in yield on 10-year Treasuries. However, average numbers conceal almost as much as they reveal. In 1999, value stocks fell badly behind growth stocks even as interest rates rose; they also sporadically lagged in 1979, 1980, 1990, 1994 and other periods of rising rates. The signal is full of noise. Overall, “there is little relationship between interest-rate movements and a value premium,” or excess return on cheap stocks, says Andrew Ang, head of factor-based strategies at BlackRock, which manages about $190 billion using such techniques. “Value performs best during economic recovery from the worst periods of recessions,” he says. For example, from 2009 to 2011, as the economy recovered from the financial crisis, value stocks earned an average of 18.6% annually, including dividends, while growth stocks gained 6.6%. That sort of bounceback is highly unlikely nowadays, with the economy already performing well by most measures. Interestingly, there’s not a significant correlation of value premium with inflation either.
Another factor that could try investors’ patience: Although value stocks are less pricey than growth stocks by definition, they aren’t particularly cheap in the light of long-term history. As of the end of 2017, according to data from Dimensional, growth stocks were about 72% above their average valuation since 1970; value stocks were roughly 39% more expensive than their historical average. So then are there no trustworthy cues as to when value stocks might finally break out of their long slump? Unfortunately not. One can look back and assign some sort of story for each historical period when value outperformed growth, but then you need a new story for the next period. Over the long run, “the value factor is not very correlated to macro stuff but works on average. But there’s a lot of variation in that average, and the long run can be longer than many investors imagine. Along the way, the returns to value investing look fairly random and unconnected to other things.
Ultimately, then, the higher long-run return from investing in cheaper stocks is a righteous form of payback for the pain of sitting around for years watching all those growth stocks with piddling profits go straight up. If you don’t have a vast reservoir of patience and you can’t ignore the better short-term fortune of other investors, you won’t be able to stomach value investing long enough to benefit from it. Assuming you do possess the necessary patience and composure, you should tilt your money toward value-oriented investments with low annual expenses that can capture the extra return the strategy is likely to achieve — eventually. What you shouldn’t do is believe anyone who claims to be able to predict exactly when value investing is about to pay off. 3) Wall Street still has lessons to learn about overworked staff
[Source: Financial Times
Boutique investment bank Moelis & Co has been on a roll. It is advising Saudi Aramco on its plans for a huge flotation; it helped Broadcom on its blocked bid for Qualcomm; and ranked fourth among boutique banks in the first quarter with $85mn in fees. But now it is in the news for all of the wrong reasons. Last week a mid-level banker sent a 12:30am email to the boutique’s junior professionals, known as analysts, complaining he had just walked around the New York office and found only 11 of them at their desks. “I know that you are ALL working very hard and are stretched thin across multiple projects,” he wrote. “Given that new [projects needing] staffings continue to flow in and you are all very near capacity, the only way I can think of to differentiate among you is to see who is in the office in the wee hours of the morning.”
Moelis declined to comment on the email, but a spokeswoman said: “We put a lot of trust in our people, including our junior staff, knowing they can complete their work effectively whether or not they are directly supervised or physically sitting at their desks.”
The email seems particularly heartless given Moelis’ own tragic history. In 2015, junior banker Thomas Hughes jumped to his death from a ledge outside his apartment. According to a medical examiner’s report and emails shared by his family with The New York Times, Hughes, 29, was high on cocaine and a designer drug known as “bath salts”. He had just returned from a business trip and gone straight to the office, where he worked from roughly 6pm to 1am. After going home he continued to respond to work emails until 9:45am. At about 10am, he jumped. No one knows why he died, but his family said they believe work stress played a role.
Since the deaths of Hughes and several other young bankers at Goldman Sachs and Bank of America, many Wall Street banks have made efforts to improve the lot of their junior staff by trying to limit weekend work and de-emphasise the need to be in the office. These “lifestyle” changes also reflect the fact that banks have to compete with Silicon Valley for top talent and are faced with growing concerns about the rate at which young women and minorities drop out of the industry.
The author says that interestingly, there is also no evidence that sleep deprived people who live in the office do a better job. In fact, 2014 research by Alexandra Michel found that exhausted bankers often developed tics, such as nail biting or hair twirling, and described their bodies “fighting back” against overwork. Yet rank-and-file Wall Street repeatedly fails to absorb this lesson, despite efforts to change things for the better. The Moelis email is particularly depressing because it specifically pooh-poohs the firm’s effort to empower flexible working, saying that “when you are truly jammed with no end in sight, you should stay in the office”.4) How to take on ‘Big sugar’ and win
[Source: Financial Times
There was a brief moment, four years ago, when America seemed to have reached peak obesity. Sadly, that hope was dashed. Almost four in 10 American adults now qualify as obese and the people putting on weight fastest are teenagers. The awful truth is that it is now normal to be fat. People of average weight are in the minority. The UK is not far behind, and in terms of addiction, sugar industry is rapidly becoming the 21st-century equivalent of Big Tobacco. In Britain, one in 10 children is already obese when they arrive at primary school at the age of five. That doubles to one in five when they leave primary school, aged 10 or 11. And the most vulnerable are the poor — those living in areas that, according to a new study by the University of Arkansas, already have an “ecology of disadvantage”.
For decades, we were warned off saturated fat. A profitable industry grew up selling “low-fat” processed foods. But these are a con. To make them tasty, manufacturers stuff them with carbohydrates and sugar. These create spikes in blood sugar levels, which lead to addictive cravings when blood sugar falls. The health consequences are dire: insulin resistance, type 2 diabetes, heart disease and obesity. Big Food offering low-fat cakes is the equivalent of Big Tobacco offering low-tar cigarettes. The tragedy is that some scientists have known about the pernicious effects of sugar for 40 years. In 1972, when health experts were wondering how to explain an explosion in heart disease, the leading British nutritionist John Yudkin argued that sugar was the main culprit, as it increased blood levels of triglycerides. But Yudkin’s research was so successfully rubbished by food manufacturers that many of his papers were not even accepted for publication.
What we now know is that sugar is as addictive as cigarettes. And Michael Bloomberg understood this intuitively. As mayor of New York he tried to ban jumbo-size sodas in 2011. The soft drinks industry could have looked at itself, and at the dire effect it was having on citizens, and agreed to row back a little. Instead, it took him to court and won, on the grounds that the Mayor had over-reached himself in attempting to interfere with the “personal autonomy” of New Yorkers. The author however did succeed in getting her boss David Cameron, UK’s prime minister to launch the sugar tax. While the author knew that the tax could never be enough on its own, she hoped that it would reduce purchasing — especially by the teenagers who were getting, unbelievably, a third of their daily calories from fizzy drinks. She’d also hoped companies would respond by taking sugar out of their products. By designing a tax with two bands, Chancellor George Osborne created exactly the right incentive for companies to reformulate. Responsible brands and companies such as Suntory-owned Lucozade and Tesco have done so. Coca-Cola has held out, not wanting to dilute its legendary taste.
While the Big Food is fair in its argument that they are simply selling what people like, the problem is that they don’t deal with the reality of a public health crisis brought on by our inability to resist junk. There is considerable evidence that children are deeply influenced by advertising, and a number of countries, including Canada, are making strides to curb it. Although England already has restrictions on advertising of unhealthy food to children, these don’t cover online marketing, or some of the most popular early evening family shows. As a result, many children are assaulted with ads for junk before the 9pm watershed. When the author started talking to people about tightening these rules, the reaction was uncompromising. And what shocked her was not business lobbying, but the hostility from the relevant Whitehall department, the Department for Digital, Culture, Media and Sport. Officials recited the same out-of-date statistics as industry. They saw health as an issue for a different department, and enjoyed their relationship with broadcasters too much to want to rock the boat.
She adds that given we humans are terrible at digesting health advice, it would be far better if responsible companies could remove temptation from us at source, rather than try and convince millions of us to change. There is already a model. In the 2000s, a UK government-business partnership reduced salt in many processed foods by 15 per cent. The same could be done for sugar. Progress stalled on salt when ministers weakened the oversight — but the right combination of goodwill and political will could make a big difference. As for now, she recommends to start treating sugar like nicotine. That means putting a health warning on the packet, not complex labels in small print that few of us can make sense of when we’re rushing down a supermarket aisle. It could be simply showing consumers the number of teaspoons of sugar each product contains.
5) Blackrock co-founder warns on complacency over Chinese tech
[Source: Financial Times
BlackRock co-founder Robert Kapito has warned that the Western financial services industry is risking complacency over the disruptive threat posed by large Asian tech companies, such as Ant Financial, which is expected to be valued at $150bn in its latest fundraising. The president of BlackRock, the world’s largest asset manager, said he was “shocked” at the potential valuation of Ant Financial, which is the payments affiliate of ecommerce group Alibaba and has captured just over 50% of the $16tn Chinese mobile payments market. Chinese tech companies are moving to compete with established financial services providers, who are likely to struggle to match the new entrants’ financial muscle and technological firepower, Mr. Kapito said.
“This is a story that I do not think ends very well,” for established western financial companies, added Mr. Kapito, who was speaking on Friday at an event for UBS wealth advisers in Davos, Switzerland. “Apple was not in the music industry, Google was not in the mobile phone industry and Amazon was not in the groceries business — until they were,” he said. “Tech companies are going to enter the financial services market in a very, very aggressive way.”
Ant Financial’s sprawling portfolio of businesses includes one of the world’s biggest credit scoring systems, a bank, an insurer and a lending platform for small businesses. The firm is seeking to raise at least $9bn in its latest private fundraising ahead of an initial public offering. Its $150bn valuation would be more than double the $60bn Ant Financial secured in its last fundraising in April 2016, underlining how the company has grown as China moves at pace to a cashless economy. Investors are valuing Ant Financial, and its domestic rival Tencent, so highly in part because of their potential to disrupt more of the financial services industry, Mr. Kapito said.
Mr. Kapito’s concern was echoed by Andrew Formica, co-chief executive of Janus Henderson, the fund management group with $370bn of assets. “You have to expect there will be a threat from [Chinese] technology companies to financial services,” Mr. Formica, who was also at the Davos event, said. “But I would say Amazon is equally a threat to doing that”.6) Cars are ruining our cities
[Source: NY Time
While most of us would say that cars reduce our travel time and are good for us, at the same time they are increasing pollution and congestion on roads. This article throws light on how various governments are trying to strike a balance or limit usage of cars. Last month, Los Angeles decided against adding lanes to a freeway, an unexpected move in a city that has mistakenly thought for years that more lanes mean fewer traffic jams. Shortly before that, Germany’s highest court ruled that diesel cars could be banned from city centers to clean up the air. Building more roads does not really cure congestion and can even make it worse. The problem, as experts realised starting in the 1930s, is that as soon as you build a highway or add lanes to a freeway, cars show up to fill the available capacity. The phenomenon is so well understood that it has a name: induced traffic demand.
Inrix, a company that collects sophisticated highway data, analysed two relatively recent American freeway projects: the $1.6 billion expansion of Interstate 405 in Los Angeles and the $2.8 billion expansion that made the Katy Freeway in Houston, a section of Interstate 10, the widest in the world, at 26 lanes across. After the I-405 expansion, the data shows, travel times worsened in both morning and evening rush hours. The Katy Freeway expansion yielded slightly better results, with the evening commute improving, though the effect was small in the westbound lanes. The morning commute got worse in both directions. The people in charge of these projects will no doubt argue that with traffic growing overall, the freeways would be in even worse shape had they not been expanded. Still, these results are not much to show for such huge sums of public money. The billions going to these kinds of projects could be better spent maintaining the roads and bridges which already exist.
The good news is that more and more cities are deciding to wrest control of their streets back from the tyranny of the automobile. London now has 15 years of experience with a stiff “congestion charge” that discourages many drivers from entering the city center. In a virtuous cycle, the money goes to better public transit and more bike lanes. In the crowded cities of Asia, people are not allowed to get a car just because they want one. Shanghai residents must buy licence plates that have gone for up to $13,000 at auction, and Beijing residents have to enter a lottery for a plate. Such measures might seem extreme, but they are sensible in a country that endured a 60-mile traffic jam in 2010 requiring 11 days to unsnarl.
The bottom line is that the decision to turn our public streets so completely over to the automobile, as sensible as it might have seemed decades ago, nearly wrecked the quality of life in our cities. What we might be seeing, at last, is a shift in the public mood, a rising awareness that simply building more lanes is not the answer. This interest in new ideas is an opening for mayors and governors. The smart ones are shaking off their obeisance to the automobile and thinking about how to create city streets and transport systems that work for everyone. 7) Why MRF is Indian stock market’s peacock tai
l [Source: moneylife.in
In this article, Sanjay Bakshi, an adjunct professor at Management Development Institute, Gurgaon, compares the long tail of a peacock with the MRF stock. While growing a big tail is costly terms of energy expenditure and also vivid colour attracts attention of predators, peahens are attracted to peacocks with a long tail. In 1975, Israeli zoologist Amotz Zahavi proposed a theory to explain the evolution of the peacock’s tail. The basic idea behind that theory called “the handicap principle” was explained in 1976 by evolutionary biologist Richard Dawkins in his masterpiece “The Selfish Gene.” Also, in 1997, ecologist Jared Diamond explained the idea in his book “Why Is Sex Fun?: The Evolution of Human Sexuality.” He explains, “Many structures functioning as body sexual signals are so big or conspicuous that they must indeed be detrimental to their owner’s survival… Any male that manages to survive despite such a costly handicap is in effect advertising to females that he must have terrific genes in other respects.”
While comparing MRF stock and a peacock’s tail, there’s one question that fascinates Sanjay Bakshi: Are high absolute stock prices, especially over the long term, the functional equivalent of peacock’s tails? Is the persistence of high absolute stock price in the long term, say 5 years, a signal of a high quality? For him, it might be. For a number of psychological reasons, people perceive high absolute stock prices as “expensive” as if they were a boulder being pushed up on a hill. Pushing up such a large boulder will cost too much energy. Just as carrying a large tail will take too much energy for a peacock. And while peahens are naturally attracted towards large tails, many investors are naturally repelled by large stock prices. And so they stay away. This often costs them a bundle in terms of lost opportunities. Take the case of MRF, India’s largest tyre manufacturer and retailer. Today, the company’s stock price hit Rs80,570 per share. That’s a huge boulder. But, MRF’s stock was a huge boulder 5 years ago (Rs33,787). It was a huge boulder 10 years ago (Rs4,593) and it was a pretty big boulder even 15 years ago (Rs1,106). But none of that prevented that boulder from being pushed up a very steep hill.
Why did this happen? Two reasons: 1) excellent fundamental performance; and 2) no issuance of new shares — for cash, in mergers, as bonus, or for stock splits. MRF has had 4,241,143 shares outstanding for a long time. And when outstanding shares do not change, and the business grows over time, its market value also grows over time and stock price keeps going up. But is the reverse true? Are investors who are reluctant towards buying “high-priced” stocks naturally attracted towards buying “low-priced” stocks (selling at say less than Rs10 per share)? According to Sanjay Bakshi, yes. He further explains that Benjamin Graham felt the same and wrote about it extensively in his books. He even had a value investing theme titled “low-priced common stocks” in which he distinguished between low-priced stocks of the genuine type and those that were just “pseudo low-priced common stocks.” Most of the low-priced stocks quoting for less than Rs10 per share are definitely not bargains but belong to Graham’s “pseudo low-priced” category and investors should stay away from them. However, the reverse is not true. Many, though not all, high-priced common stocks will signify high quality just as large tails do in the case of peacocks.8) The robot assault on Fukushima
The 2011 earthquake and tsunami that killed 16,000 people in Japan triggered a devastating catastrophe in the Fukushima Daiichi nuclear power plant, one of the country’s largest. More than six years had passed since the devastation, which reduced the facility to ruins. No one had been able to locate the hundreds of tons of fuel inside the three reactors that had suffered core meltdowns. The uranium fuel had overheated, turned into lava, and burned through its steel container. What happened after that was the big question. Every day, as much as 165 tonne of groundwater seeps into the reactors, becoming contaminated with radiation. And there’s always the possibility that another earthquake or some other disaster could rupture the reactors again, sending radiation spilling out into the air, sea, or both. Human beings couldn’t go into the heart of Fukushima’s reactors to find the missing fuel and the job would have to be done by robots. But no robot had ever carried out such a mission before. Many had already tried and failed.
Kenji Matsuzaki, a shy-eyed , 41-year-old senior scientist with Toshiba’s nuclear technology branch, had a task to create a robot, which he name the Little Sunfish, that would survive and not end up as another one of the robot corpses already littering the reactors. Four separate teams took turns setting up the control panel, cable drum, and other equipment the robot would need to function. Even in full protective bodysuits, each group of workers could spend only a few minutes inside the structure. When one team absorbed its maximum permitted daily dose of radiation, it was replaced by another group. Matsuzaki himself made two forays inside to put the final touches on the Sunfish, sweating inside his face mask and bodysuit in the summer heat, his nerves jumping each time his portable monitor dinged to indicate he’d received another increment of his allowable radiation dose. The plan was for the Sunfish to spend three days mapping the debris and searching for signs of the missing fuel. Matsuzaki would monitor its progress from a control room about 500 yards away.
The Fukushima clean-up is a project far bigger and more complex than those of even the world’s worst previous nuclear catastrophes. Government officials originally estimated it would take about 40 years and $50 billion to clean up the plant, decontaminate the surrounding area, and compensate the disaster’s victims. In December 2016, they more than tripled that estimate to $188 billion. In the first chaotic weeks after the meltdown, with radiation levels far too intense for anyone to work inside the reactors, Tokyo Electric Power Company (Tepco) scrambled to deploy robots to assess and contain the damage. Tractor-treaded bots from iRobot, drones from Honeywell, and a prototype disaster-response mech from Tohoku University scouted the rubble-strewn facility and tried to measure the intensity of the radiation. A remote-controlled concrete pumping truck was adapted so that its extendable spout could pour water into the reactors, cooling and stabilizing the overheated chambers. But even with the massive government investment, many of the new robots still couldn’t hack it inside the reactors.
It took months of research, experimentation, and testing in Toshiba’s labs and in an enormous simulation tank at the government-run Port and Airport Research Institute to balance all these capabilities inside the little machine. Matsuzaki’s team had to try different configurations of propellers, cameras, and sensors, boost the power of the propeller motors, develop a new type of coating to make the cable move more smoothly, and ensure the whole package could withstand a blistering level of radiation. While it was bad luck on the first day, after the Sunfish was spun into action, on the second day, what they saw on the screens was astounding. They’d found the first signs of the missing fuel: murky glimpses of what appeared to be stalactites of something dripping like candle wax from the bottom of the reactor pressure vessel. They maneuvered the Sunfish around the area, documenting as much as possible, before pulling the bot out, when Matsuzaki declared the mission complete.
Ultimately, there is no technology that can simply fix what happened at Fukushima. The only certainty is that it will be a slow, incremental, frustrating process that may not even be completed in Kenji Matsuzaki’s lifetime. For now, all the scientists, engineers, and their allies can do is keep the radioactivity under control, track down its source, and try to capture it. But first, they need to create the robots to do it.9) The deep seated problems with common core and college readiness
In this article, Ted Dintersmith, author and education activist, explains how the Common Core and standardised tests are failing to prepare children for the future. When the Common Core was implemented, it set a country-wide standard for students in math, languages, science, and history in the USA. But, do most parents and teachers believe that standardised testing and the SAT are predictors of intelligence? We don’t know. So parents and teachers are often stuck in a system, one they don’t quite believe in, but one that they have to game in order to help their kids succeed. Ted Dintersmith was one of those parents.
One day, he started to really think about what his kids were learning. He wondered how these lessons were preparing them for an increasingly uncertain economic future, and adulthood in general. He transformed his wonder into two things: a 2015 critically-acclaimed documentary called “Most Likely to Succeed,” and his new book, What Schools Could Be
, which is the result of interviewing hundreds of teachers in all 50 states and thousands of schools. The book discusses, at length, the issues with the Common Core: “college-ready” education, so-called “achievement gaps,” the parent dilemma, and a lack of culturally responsive education.
On being “machine intelligent,” Ted Dintersmith feels that the model was probably quite appropriate when he was coming out of school. Most of the economy then was still largely bureaucratic, hierarchical large hiring organisations. People would work for a company, often, for a lifetime. If you are entering a world with precise job descriptions and labour grades, that’s a world very much aligned to hoop-jumping in school. But now, in its place are two things: the creative economy that the people need to educate all kids for, and then the Taskrabbit, Uber economy, where people are just trying to get by. In 10 to 15 years, there will be no Taskrabbit economy. So what happens when that’s gone? By the time a kindergartener today gets out of school, there will not be a routine job in the economy.
Also, Ted Dintersmith thinks that it is important to distinguish between a failed model and failing teachers. Blaming the teacher is a wrong thing to do. They desperately want good things for their kids. But when you hold them accountable to these horribly designed state-mandated tests, there’s something wrong. The model went wrong when some elite set of academics came together and defined what every kid in America needs to learn. Then they immediately tied it to assessments that they use to measure the success of the teacher and the kid. It’s the same arrogant top-down bullshit that’s driven the school systems into the ground for 20 years. Kids should be good critical analysts. The whole question is: how do you get there?10) Panpsychism: The idea that everything from spoons to stones is conscious is gaining academic credibility
Consciousness permeates reality. Rather than being just a unique feature of human subjective experience, it’s the foundation of the universe, present in every particle and all physical matter. Philip Goff, a philosophy professor at Central European University in Budapest, Hungary, says, “Why should we think common sense is a good guide to what the universe is like? Einstein tells us weird things about the nature of time that counters common sense; quantum mechanics runs counter to common sense. Our intuitive reaction isn’t necessarily a good guide to the nature of reality.” Also, David Chalmers, a philosophy of mind professor at New York University, laid out the “hard problem of consciousness” in 1995, demonstrating that there was still no answer to the question of what causes consciousness. Traditionally, two dominant perspectives, materialism and dualism, have provided a framework for solving this problem. Both lead to seemingly intractable complications.
While the materialist viewpoint states that consciousness is derived entirely from physical matter, dualism holds that consciousness is separate and distinct from physical matter. But that then raises the question of how consciousness interacts and has an effect on the physical world. Panpsychism offers an attractive alternative solution: Consciousness is a fundamental feature of physical matter; every single particle in existence has an “unimaginably simple” form of consciousness, says Goff. Panpsychism doesn’t necessarily imply that every inanimate object is conscious. But, then again, panpsychism could very well imply that conscious tables exist. One interpretation of the theory holds that “any system is conscious,” says Chalmers. “Rocks will be conscious, spoons will be conscious, the Earth will be conscious. Any kind of aggregation gives you consciousness.”
One of the most popular and credible contemporary neuroscience theories on consciousness, Giulio Tononi’s Integrated Information Theory, further lends credence to panpsychism. Tononi argues that something will have a form of “consciousness” if the information contained within the structure is sufficiently “integrated,” or unified, and so the whole is more than the sum of its parts. Because it applies to all structures—not just the human brain—Integrated Information Theory shares the panpsychist view that physical matter has innate conscious experience. The biggest problem caused by panpsychism is known as the “combination problem”: Precisely how do small particles of consciousness collectively form more complex consciousness?
An alternative panpsychist perspective holds that, rather than individual particles holding consciousness and coming together, the universe as a whole is conscious. It reflects a perspective that the world is a top-down creation, where every individual thing is derived from the universe, rather than a bottom-up version where objects are built from the smallest particles. Such theories sound incredible, and perhaps they are. But then again, so is every other possible theory that explains consciousness. “The more I think about [any theory], the less plausible it becomes,” says Chalmers. “One starts as a materialist, then turns into a dualist, then a panpsychist, then an idealist,” he adds, echoing his paper on the subject. Idealism holds that physical matter does not exist at all and conscious experience is the only thing there is. From that perspective, panpsychism is quite moderate. Chalmers quotes his colleague, the philosopher John Perry, who says: “If you think about consciousness long enough, you either become a panpsychist or you go into administration.”- Saurabh Mukherjea is CEO, and Prashant Mittal is Strategist, at Ambit Capital. Views expressed are personal