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 December 23, 2016.
1) Why Americans are so impressed by busyness
As per this piece, unlike in the past, today’s America is characterised by ‘busyness’ being linked to status symbol. An analysis of holiday letters indicates that references to “crazy schedules” have dramatically increased since the 1960s. Busyness and lack of leisure are also being more celebrated in the media. Advertising, often a barometer of social norms, used to feature wealthy people relaxing by the pool or on a yacht (e.g., Cadillac’s “The Only Way to Travel” campaign in the 90s). Today, those ads are being replaced with ads featuring busy individuals who work long hours and have very limited leisure time. According to the authors, these status attributions are heavily influenced by our own beliefs about social mobility. In other words, the more we believe that one has the opportunity for success based on hard work, the more we tend to think that people who skip leisure and work all the time are of higher standing. The shift from leisure-as-status to busyness-as-status may be linked to the development of knowledge-intensive economies. In such economies, individuals who possess the human capital characteristics that employers or clients value (e.g., competence and ambition) are expected to be in high demand and short supply on the job market. Thus, by telling others that we are busy and working all the time, we are implicitly suggesting that we are sought after, which enhances our perceived status.
2) The strange story of America’s life expectancy
[Source: Financial Times
Life expectancy in America has unexpectedly dipped. Statistics released recently showed that, in 2015, the average American could expect to reach the age of 78.8 years. The year before, it was 78.9. The loss of little more than a month does not sound like much, but a decline has not happened since 1993, when HIV/Aids and influenza combined to knock the country off track for a year. The dip in the US statistics has not surprised everyone. More than a decade ago, some academics warned that obesity, which affects a third of American adults, had the potential to cancel out the advances made in public health due to, for example, smoking cessation. In 2005, a team led by Professor Stephen Jay Olshansky, of the University of Illinois, wrote in the New England Journal of Medicine that obesity was “a threatening storm. . . that will, if unchecked, have a negative effect on life expectancy”. The paper proved controversial at the time, especially for its prediction that obese children might live shorter lives than their parents. While obesity does not appear on death certificates, its health complications do: heart disease, cancers, type-2 diabetes, stroke and kidney disease. There is a growing evidence of a link with dementia too: researchers at the National Institute of Ageing in the US found that being obese at 50 might raise the risk of early onset of Alzheimer’s disease.
3) The Undoing Project review – ‘psychology’s Lennon and McCartney’
[Source: The Guardian
Michael Lewis’ latest book, ‘The Undoing Project’, discusses the camaraderie between Amos Tversky and Daniel Kahneman whose deep friendship and intellectual collaboration led to the invention of “behavioural economics” and established cognitive rules for human irrationality. One of the Israeli duo’s observations was that “no one ever made a decision because of a number – they needed a story”. Kahneman and Tversky argued and proved that in the main humans decided things emotionally, not rationally – the trick was to recognise those habits, and not confuse one for the other. Lewis presents the pair of academics partly, like all the greatest double acts, as star-crossed lovers – in their formative years, each of them seems, in retrospect, to have been waiting for the other to arrive in order to find out exactly what he was capable of. Tversky and Kahneman saw something in each other that they lacked. Kahneman had moved in his academic career from one idea to the next, never focusing. In a world of specialism, he distrusted narrowness. Tversky was a brilliant shaper of ideas, not an instigator of them, and he recognised in Kahneman’s scattershot mind exactly the raw material he needed. They were, in this sense, the Lennon and McCartney of behavioural psychology: they understood each other better than they understood themselves. 4) Too big, too Leninist - a China crisis is a matter of time
[Source: Financial Times
Xi Jinping, recently granted the title of “core leader” of China, is a man with two missions. The first is to purge the Chinese Communist party of corruption. The second is to reform the economy. However, according to Martin Wolf, the author, these goals will prove incompatible if he continues to focus his main efforts on purifying and strengthening the corrupted Leninist party-state. Wolf says that as Minxin Pei notes in a brilliant book, China’s Crony Capitalism, it is all too easy for a would-be strongman to use the charge of corruption as a cudgel against rivals. Yet it is so effective precisely because it is plausible. While he believes that corruption is indeed a cancer, it did not strike by accident. The explosion of corruption since the early 1990s is the downside of successful reform. Going forward, the question is whether much can be done beyond putting a vast number of people in prison. Xi’s answers seem to be more Leninism and more markets. Yet this is a highly problematic combination. The complexity of the economy makes centralised political control unworkable. It is, in practice, impossible for the centre to control the activities of all its agents. Yet it cannot make them accountable to the people either, since that would destroy the party’s monopoly of power. The Leninist party-state cannot give a solution to the problem of governance and also it can’t offer solution to the economic problem. If a market economy is to be combined with reasonably non-corrupt government, economic agents need legal rights protected by independent courts. But that is precisely what a Leninist party-state cannot provide, since it is, by definition, above the law. As a result, if Xi’s effort to combine restoration of Leninist discipline with market liberalisation proves unworkable, the regime will confront a deeper crisis.5) The Chinese stratagems
[Source: The Ken
If you thought Chinese investors and Internet giants are finally beginning to turn their attention to India, you would only be a couple of years late. Over the last 36 months, a number of Chinese mobile internet companies, both start-ups and tech giants, have been making aggressive inroads into India. From Alibaba Group which has made high-profile investments in Paytm and Snapdeal, to Tencent, which has a presence in India with its instant messaging product WeChat, and had made investments in Hike messenger and healthcare start-up Practo, the Chinese groups have been betting big on Indian start-ups. India has evolved from being just another market for Chinese internet companies a few years ago, to now emerging as their “second headquarter”. That said, unlike their American counterparts, Chinese are focusing on tapping the average Indian smartphone user who has smaller needs and purposes, which American tech giants may be unable or unwilling to fulfill. They see this as a golden opportunity, thanks to gaps in certain categories, especially utility apps, creating needs like the ability to browse the internet at faster speeds in low-bandwidth areas or save battery life. The beauty about utility apps is that they require a whole lot of privacy permissions from users in order to run well. Thus, the same utility app that cleans up the junk from your phone or helps you save battery can also do a great deal of data mining, which can be used to target and sell ads.6) China tech groups look in-house for deal advice
[Source: Financial Times
Homegrown investment banks are taking root within China’s tech groups, which are fostering in-house M&A groups to carry out their multi-billion dollar shopping sprees. Baidu, Alibaba, and Tencent, China’s internet trinity collectively known as BAT, are among the country’s biggest dealmakers, spending a combined $64bn on acquisitions in the past 18 months. The trio are home to alumni from Goldman Sachs and other Wall Street banks and now boast in-house banking units of 40 to 70 people apiece. The function reflects expanding portfolios of strategic and venture capital investments alongside a belief that investment banks increasingly lack the wherewithal to keep pace in the fast-changing world of tech. While bankers in Oil & Gas or Financial Services know these industries “as well as the industry guy running the business”, tech bankers know “maybe 1% of what we know about our business”, said one in-house player. 7) The forgotten life of Einstein’s first wife
[Source: Scientific American
19 December marked the 141th anniversary of the birth of Mileva Marić Einstein. But who remembers this brilliant scientist? While her husband, Albert Einstein is celebrated as perhaps the best physicist of the 20th century, one question about his career remains: How much did his first wife contribute to his groundbreaking science? This piece tries to put together various facets of their life that highlight how Mileva was not only crucial but in fact was the very reason that Einstein reached his fame. 8) Why business history matters
Kautilya’s Arthashastra, compiled over 1,800 years ago, is considered a classic treatise on statecraft and economy. Oddly, the document itself was not available in the modern era until Dr. R. Shamasastry of Mysore stumbled upon a manuscript in 1904. Such dependence on chance discoveries as opposed to systematic documentation has been a major obstacle for constructing historical narratives in India, especially in the world of business. Firms do not document their histories, losing memories of generations of workers, managers and owners. There are thousands of firms in India that have a history of over 50 years and yet, the number of professional corporate archives is in single-digits: Godrej Archives (Mumbai), TATA (Pune and Jamshedpur), State Bank of India, Dr. Reddy’s, and Cipla, to name some. History is virtually absent in teaching and research programmes in the Indian business schools, and students are unaware about the origins of firms, industries and economies before 1991, let alone 1947. Instead, what passes as business history today is an endless series of biographies or autobiographies that uncritically celebrate the achievements of a few individuals. 9) How student loan debt causes a chain reaction in the housing market
[Source: Boston Globe
] America’s student loan debt has reached $1.3 trillion, surpassing every type of consumer debt except mortgages with the burden weighing most heavily on millennials. In a 2015 survey of borrowers, 1 in 5 reported postponing marriage because of student debt, while more than half said loans had delayed their decision to buy a home. With the home ownership rate in the United States of America at a 50-year low, it’s that last finding that has economists and realtors worried. A joint report by the National Association of Realtors and ASA found that 71% of the student-loan borrowers who didn’t own a home cited their college loans as the main prohibitive factor, and more than half said they expect their student debt to delay their home purchase by five years or more. Record high home prices here certainly don’t help either.10) When diamond batteries are made out of nuclear waste
Nuclear energy is carbon free, which makes it an attractive and practical alternative to fossil fuels, as it doesn’t contribute to global warming. It’s the nuclear waste that makes fission bad for the environment. And it lasts for long - some isotopes last for thousands of years. The typical nuclear power plant creates about 2,300 tonnes of waste annually. 99 reactors are currently employed in the USA. That’s a lot of waste per year. The USA is currently stockpiling 75,000 tonnes of nuclear waste. It is carefully stored and maintained. However, just like anything else, it is vulnerable to natural disasters, human error and even terrorism. Storage is also costly. American taxpayers are on the hook for tens of millions of dollars. As a remedy, researchers at the University of Bristol in the UK have developed a solution. Geochemist Tom Scott and colleagues have invented a method to encapsulate nuclear waste within diamonds, which as a battery, can provide a clean energy supply lasting in some cases, thousands of years. Scott said there were no emissions, no moving parts, no maintenance, and zero concerns about safety. That said, currently the diamond batteries only put out a small amount of current. They can’t replace contemporary ones quite yet. However, once the hurdles of cost and efficiency are overcome, possible applications include powering spacecraft, satellites, high-flying drones, and medical devices, such as pacemakers—anything really where batteries are difficult or impossible to charge or change. One might even be able to power interstellar probes that could operate even in the darkest reaches of space, where solar power is no longer feasible.