Ten interesting things that we read last week

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At Ambit we spend a lot of time reading articles that are not directly relevant to Indian stocks. However, since the Indian economy is now umbilically linked to its global counterparts, the articles that we come across have relevance for Indian stocks and the Indian economy. In that context, this report contains the ten most interesting pieces that we read this week.

Here are the ten most interesting pieces that we read this week, ended March 10, 2017.

1)    More than six in ten asset managers are bored at work  [Source: Financial Times ] 
A survey has found that more than six in ten asset management staff find their jobs uninteresting. Fund industry employees are far more bored at work compared with those working in education (50%), technology (56%) and research and development (45%). Peter Sleep, a fund manager at 7IM, the UK wealth manager, said the high level of boredom reported by asset management staff could be linked to “self-esteem or the regard the public have for their jobs”. “Working in education or IT is regarded relatively highly, whereas financial services are generally regarded lowly. This may come through in how people react to these services,” he says. Workers in middle- and back-office jobs at investment houses, which include fund administration and support functions, are the most bored, with 91% saying they were fed up. Portfolio managers were the second-most bored workers in the fund industry, at 68%. The least bored staff were fund professionals working in institutional sales, as well as relationship management, the survey found.

2)    Death can bring your career back to life  [Source: Financial Times ]
Citing the success of her newly founded organisation, Now Teach, Lucy Kellaway describes how she’s received overwhelming number of applications to join her in her new endeavour to teach at a tough London school. She says that while sifting through them, she found a similar pattern - the charms of the corporate world dwindle with time, while the desire to do something more useful gets stronger. The one thing that surprised her however is the part played by death. Mostly, the death in question is that of a parent, and often the last remaining one. Becoming an orphan in your fifties seems to encourage all sorts of people to stop doing something comfortable (like being a partner in an accountancy firm) and apply to do something exhausting and possibly very uncomfortable indeed (like being a physics teacher). So what it is about death that is quite so galvanising? Most obviously, it forces you to ask yourself if you are doing what you really want to do. Second, death tears into your routine. Part of the reason people trundle along in the same jobs is because it is easier to keep doing them than to stop. The final point she says is about mortality. Everyone says the death of both parents forces you to think: it is my turn soon. The other side of this argument could be that if your parent lived long, you might actually outdo them, thus allowing you ample time to do what you always wanted.

3)    Building trade walls [Source: NY Times ]
An excellent infographic presents how President Trump’s advisers and allies are pushing an ambitious idea: Remake American trade. They are considering sweeping aside decades of policy and rethinking how the United States of America looks at trade with every country. Using charts, this article describes how the USA and other countries currently treat trade. The most visible layer is tariffs, or taxes on imports. China and most other countries, but not the USA, also charge a steep value-added tax, which is a kind of national sales tax on imports and home-produced goods alike. Exports are exempt from value-added taxes, giving companies an incentive to sell overseas. Once value-added taxes and sales taxes are included in an international comparison, America’s trade barriers are much lower than those of almost every other country. China’s average tariffs are in fact about three times as high as those in the USA — and its tariffs on manufactured goods, which involve a lot of jobs to produce them, are far higher still. Now, some of Mr. Trump’s advisers and Republicans in the House of Representatives want to replace America’s current taxes on corporate profits with a system that raises the costs of imports while helping exports. Companies currently deduct practically all of their costs, including imports, from their sales revenue, and then pay taxes on the profits that are left. The new idea, sometimes called a border-adjusted tax, essentially involves ending the deductibility of imports so that they would be taxed. At the same time, profits on exports would no longer be taxed, and the overall tax rate would be cut.
 
4)    $10,000 for a single phone call with a bank analyst [Source: Financial Times ]
Asset managers and banks in Europe are locked in fierce negotiations over how much fund companies should pay for investment research, with some lenders demanding $10,000 for a single phone call with their most senior analysts. Banks have put forward quotes of as much as $10 million a year to provide fund companies with complete access to their research, according to several asset managers and consultants that are involved in the negotiations. Fund managers who want additional services, such as face-to-face meetings with analysts or invitations to events with companies, are being asked to pay more on top of the annual subscription fee to access banks’ research platforms. The tense discussions over how much analyst research is worth have intensified since the start of the year as the investment industry readies itself for the introduction of new European rules, known as Mifid II, in 2018. The rules will force fund companies to explain clearly to investors how much of their money is spent on research. Previously research was sent to fund managers for free in return for the business asset managers provided to banks and brokerages when they placed trades.

5)    How Uber deceives the authorities worldwide [Source: NY Times ] 
As per this piece, Uber has for years engaged in a worldwide program to deceive the authorities in markets where its low-cost ride-hailing service was resisted by law enforcement or, in some instances, had been banned. The program, involving a tool called Greyball, uses data collected from the Uber app and other techniques to identify and circumvent officials who were trying to clamp down on the ride-hailing service. Uber used these methods to evade the authorities in cities like Boston, Paris and Las Vegas, and in countries like Australia, China and South Korea. The program began as early as 2014 and remains in use, predominantly outside the USA. The company has long flouted laws and regulations to gain an edge against entrenched transportation providers, a modus operandi that has helped propel it into more than 70 countries and to a valuation close to $70 billion. Yet using its app to identify and sidestep the authorities where regulators said Uber was breaking the law goes further toward skirting ethical lines — and, potentially, legal ones. Uber’s problems are mainly related to its lower cost offering - UberX which essentially lets people who have passed a background check and vehicle inspection to become Uber drivers quickly. In the past, many cities have banned the service and declared it illegal. That is because the ability to summon a non-commercial driver — which is how UberX drivers using private vehicles are typically categorised — was often unregulated. In barrelling into new markets, Uber capitalised on this lack of regulation to quickly enlist UberX drivers and put them to work before local regulators could stop them. After the authorities caught on to what was happening, Uber and local officials often clashed.

6)    When America was most innovative and why [Source: HBR ] 
While the competitiveness of the U.S. economy depends on technological progress, recent data has suggested that innovation is getting harder and the pace of growth is slowing down. A major challenge in business and policy spheres is to understand the environments that are most conducive to innovation. This research focusses on the golden age of invention: the late 19th and early 20th centuries, when America became the world’s pre-eminent industrial nation. The authors say that the context for technological development was very different a century ago. For instance, in 1880 most inventive activity was the result of inventors operating outside the boundaries of firms. Research laboratories, such as the famous one opened, in 1876, by Thomas Edison in Menlo Park, New Jersey, were rare. The article highlights a chart that illustrates a strong relationship between patenting activity and GDP per capita at the state level. It also shows that innovation was more prevalent in some areas than others. Innovation flourished in densely populated areas where people could interact with one another, where capital markets to finance innovation were strong, and where inventors had access to well-connected markets. States with a legacy of slavery were considerably less innovative, and religion had a negative effect too. Places that were economically and socially open to disruptive new ideas tended to be more innovative, and they subsequently grew faster. Inventors in the U.S. history have tended to be highly educated, in contrast to the common portrait of the uneducated amateur. They typically invented in pursuit of profit, and the financial returns to innovation were large.

7)    “Positive thinking” has turned happiness into a duty and a burden [Source: qz.com ] 
According to Svend Brinkmann, a psychology professor at Denmark’s Aalborg University, the culture of positivity has a dark side. Happiness is simply not the appropriate response to many situations in life, says Brinkmann. Even worse, faking it can leave us emotionally stunted. “Life is wonderful from time to time, but it’s also tragic. People die in our lives, we lose them, if we have only been accustomed to being allowed to have positive thoughts, then these realities can strike us even more intensely when they happen—and they will happen” he says. There’s nothing wrong with those who have a naturally sunny disposition or who enjoy the odd self-help book, says Brinkmann. The problem is when happiness becomes a requisite. Tied up in the pressure to be happy is, of course, the self-help craze. Self-help books that purport to teach people how to find happiness could encourage a harmful perspective on emotions, says Brinkmann. The underlying idea that anyone can make herself feel happy implies that unhappy people are to blame for their own misfortune. Ultimately, negative emotions play an important and healthy role in how we understand and react to the world. Guilt and shame are essential to a sense of morality. Anger is a legitimate response to injustice. Sadness helps us process tragedy. And happiness is great too. Just not all the time.

8)    Planetary discoveries remind humans of their cosmic place [Source: Financial Times ] 
Last month, it was revealed that astronomers had detected seven Earth-sized planets orbiting a star 40 light years away, setting a record for the number of planets found in a solar system beyond our own. Three of the seven circle at a distance that might allow liquid water to exist at the surface. Such a possibility is a prerequisite of life as we know it: no organism on our own planet, even the extremophiles that colonise the driest deserts, can exist without it. Trappist-1, the parent star to these seven celestial sisters, is nose-pressingly close to us in astronomical terms. It is classified as an ultra-cool dwarf star and therefore dim, meaning that any planetary atmospheres can be observed with relative ease. When it comes to searching for extra-terrestrial life, this carries the whiff of a jackpot. If the serendipitous rolls of the dice were to continue and scientists were to glimpse the signatures of such gases as oxygen, methane, carbon dioxide and water vapour, we are very likely to have located life elsewhere in the universe.

9)    When breath becomes air [Source: Linkedin ] 
All lives have equal value. But some deaths seem particularly cruel. Bill Gates in this moving piece talks about how reading Dr. Paul Kalanithi’s autobiography ‘When Breath becomes air’ moved him immensely. Dr. Paul Kalanithi was diagnosed with terminal cancer in 2013, he was a 36-year-old man on the verge of making big contributions to the world with his mind and hands. He was a gifted doctor—a chief resident in neurosurgery at Stanford just months away from completing the most gruelling training of any clinical field. He was also a brilliant scientist. His postdoctoral research on gene therapy won him his field’s highest research award. To add to all this, he was also a great writer. Before attending medical school, he earned two degrees in English literature from Stanford and gave serious consideration to pursuing writing as a full-time career. As Bill Gates aptly says of his untimely death ‘What a talent. What a loss.’

Mr. Gates considers this to be the best non-fiction story he’s read in a long time. Mr. Gates’ emotional investment got particularly strong after Kalanithi and his wife, Lucy, decide to have a child despite (or maybe even because of) Kalanithi’s diagnosis. However, he says that don’t be put off by the sadness of it all. He emphasizes the other things that drew him to this book. For one thing, he thoroughly enjoyed Kalanithi’s stories about his surgical training. Lastly, he says, this short book has so many layers of meaning and so many interesting juxtapositions—life and death, patient and doctor, son and father, work and family, faith and reason— that he knows he’ll pick up more insights when he reads it again.

10)    Kenneth Arrow and the age of empires  [Source: Livemint ] 
The most powerful nations of the world, including those that are democracies, are increasingly being controlled by leaders with overweening power. The work of the Nobel Prize winner Kenneth Arrow offers some fascinating insights into this phenomenon. By applying his remarkable Impossibility Theorem, on the mother of all elections — Uttar Pradesh - the article aims to describe this phenomenon.

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