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Ten interesting things that we read this week

About the disruptive innovation in the beer industry, fish farming, the dawn of bioelectronics medicine - and many more

Published: Jun 11, 2017 04:24:27 AM IST
Updated: Jun 9, 2017 07:08:06 PM IST

Ten interesting things that we read this weekImage: Shutterstock (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 ‘Disruptive innovation in beer industry, ‘Death of big oil’ and ‘A brain without fear’.

Here are the ten most interesting pieces that we read this week, ended June 09, 2017.

1) The strange brain of the world’s greatest solo climber [Source:]
Alex Honnold is the history’s greatest climber in the free solo style, meaning he ascends without a rope or protective equipment of any kind. This article talks about how this is able to achieve such a feat and why he doesn’t get cold feet from the fear that engulfs an average Joe. Ana analysis of his brain reveals that his amygdala – the fear stimulator shows zero activation when exposed to overwhelming images.  However, contrary to the signals, Honnold has always rejected the idea that he is fearless. Instead, Honnold assigns his fearlessness to what he calls “mental armor” developed by crossing threshold of fear again and again. Research has shown that every time we recall a memory, it undergoes reconsolidation, meaning we are able to add new information or a different interpretation to our remembrance, even turning fearful memories into fearless ones. Visualization, a practice Honnold follows, can be thought of as pre-consolidation, whereby a person pictures a future event rather than a past one—functions in much the same way. Such a step leads to an increased sense of competence which in turn, has been shown to reduce anxiety. This helps to explain why, for example, people who are fearful of public speaking feel less anxious about it as they do it more often and develop their skills.

2) What’s wrong with the cultural elite? [Source: Financial Times]
Elizabeth Currid-Halkett, professor of public policy at the University of Southern California, in her book ‘The Sum of Small Things’ anatomises the “aspirational class” using American consumption data. She explain why the cultural elite is so despised as to have generated a global political movement against it. According to her, what defines the cultural elite is education not he riches. Most of its members went to brand-name universities, and consider themselves deserving rather than entitled. Their political utopia is high tax, egalitarian, feminist and green. They aim to be “better humans” rather than simply rich, writes Currid-Halkett. Though often too busy to be happy, they feel good about themselves. The inequality they see everywhere is never their fault. When it comes to consumption, the cultural elite’s core belief is a scorn for stuff. Branded goods no longer convey status now that any old oaf can buy them. The cultural elite spends relatively little on beauty products, but splurges on exercise, because it thinks that bodies (like food) should look natural. The thin, toned body expresses this class’s worldview: even leisure must be productive. These people maximise what Currid-Halkett calls “inconspicuous consumption”: things you cannot see. This is where the cultural elite’s self-image diverges from the view held by its critics. Trump voters see a class that talks equality while living a life of privilege and exuding contempt. Here are Greenpeace members who are always on planes, proclaiming their goodness instead of improving the world. Maybe if everyone shopped at Whole Foods the world would improve, suggests Currid-Halkett.

3) Can you imagine a world without Budweiser? [Source:]
Budweiser, the so-called King of Beers, may be on its last kegs. They are a victim of “disruptive innovation” – a term coined by the HBS Professor Clayton Christensen and the disruptors are the growing ranks of craft brewers that are collectively changing the industry and beer consumption habits. “Disruptive innovation” describes how a new product or service initially takes root at the bottom of a market and then relentlessly moves upmarket, eventually displacing established competitors. In case of the beer industry, the three criteria visible for disruption to happen were: a) Product - Repeal of alcohol prohibition and legalisation of home brewing in 1970s; b) Latent demand - Regulations on craft beer distribution meant that there was a large population without easy access to well-crafted beer and a system that centralised production and tightly controlled distribution; and c) Distribution -  the brewpub business model that brought the new product to consumers after laws began to change in the 1980s. The advent of microbreweries coincided with other industry trends that made it easier to make a profit from small production. There was also growing ideological opposition to the incumbent sector.

4) Farmed fish on course to overtake wild catch in 2019 [Source: Financial Times]
Global seafood will lose its status as the only remaining food sector supplied chiefly by nature as businesses pour investment into fish farming. Farmed fish production is expanding by 4-5% per annum, putting it on course to eclipse the output of wild fishing as soon as 2019, according to the UN Food and Agricultural Organization. Appetite for fish in both developed and emerging markets is rising as more consumers choose it for health benefits. However volumes of fish caught in the wild have been stagnant since the early 1990s. Experts believe the impact would be similar to what was seen in agriculture centuries ago. The trend has prompted a range of companies to muscle in to the farmed fish industry. Cargill, the leading US agricultural trader which handles everything from wheat to poultry, bought Norwegian fish feed supplier Ewos for €1.35bn two years ago, while Japanese conglomerate Mitsubishi paid $1.4bn for Cermaq, a Norwegian salmon producer.

5) This is how big oil will die [Source:]
Big Oil is perhaps the most feared industry in history. However, oil’s use will be cut down in the next decade by a combination of smartphone apps, long-life batteries, and simpler gearing. To understand why Big Oil is in a far weaker position than anyone realizes, this article focuses on the lynchpin of oil’s grip on our lives: the internal combustion engine, and the modern vehicle drivetrain. Citing the recent work by Tony Seba, a Stanford professor, he points to the main factor – the sheer number of moving parts which are lower in an electric vehicle by a factor of 1/100. All other things being equal, a system with fewer moving parts will be more reliable than a system with more moving parts. While an internal combustion engine-based car is expected to last 150,000 miles, an electric vehicle’s lifetime is expected to be over 500,000 miles. Further, here’s the problem with electric vehicle economics: A dollar today, invested into the stock market at a 7% average annual rate of return, will be worth $15 in 40 years. Another way of saying this is the value, today, of that 40th year of vehicle use is approximately 1/15th that of the first. The consumer simply has little incentive to care whether or not a vehicle lasts 40 years. By that point the car will have outmoded technology, inefficient operation, and probably a layer of rust. But that investment logic looks very different if you are driving a vehicle for a living. A New York City cab driver puts in, on average, 180 miles per shift or perhaps 50,000 miles per work year. At that usage rate, the same vehicle will last roughly 10 years. And if the vehicle was owned by a cab company, and shared by drivers, the miles per year can perhaps double again. Now the capital is depreciated in 5 years, not 10. This is, from a company’s perspective, a perfectly normal investment horizon. The most significant cost of driving now is the driver. But that, too, is about to change with self-driving taxis.

6) Hunt for earnings growth reshapes the chemicals sector [Source: Financial Times]
Deals to buy chemicals groups that were either announced or completed in 2016 had an aggregate value of $264bn including debt, compared with $177bn in 2015. This slew of deal-making is reshaping a hugely diverse sector that has struggled with weak demand due to the lacklustre economic recovery seen since 2008. With limited prospects for revenue growth, chemicals companies are looking to boost earnings by buying rivals and stripping out costs. The enlarged groups are also seeking increased market power that would enable them to strike better contracts with suppliers and customers. This drive to reduce expenses and gain economies of scale has rippled out to other parts of the chemicals industry. In March 2016, Sherwin-Williams, a leading US paint maker, agreed to pay $11.3bn for domestic rival Valspar, and highlighted opportunities to trim overheads. One year later, PPG Industries, the US manufacturer of coatings and sealants for aircraft and cars, made the first of three offers for Akzo Nobel, the Dutch paint-maker that owns the Dulux brand. The rise of rivals in China is another factor leading to consolidation in the chemicals sector. Another deal driver appears to be the tricky position that chemicals companies occupy in industrial supply chains. Hemmed in between gargantuan suppliers of natural resources — often oil and gas groups — on one side, and large customers in sectors such as automotive, consumer goods and pharmaceuticals on the other, chemicals producers can find themselves squeezed.

7) Japan embodies a global mystery: Where are the raises? [Source: WSJ]
Japanese companies are struggling to find employees in an era of 2.8% unemployment, the lowest in 23 years, suggesting that workers have more clout. So how much of a real raise are they getting? Exactly zero. Official data released shows that the average Japanese worker made ¥275,321, or about $2,500, in April. Adjusted for inflation, that is the same as they made a year earlier. It is the latest evidence pointing to an odd phenomenon seen around the world. Even as workers’ services are highly sought, wages have been stagnant. Economists in Japan have a few clues. For one, the country’s long battle to overcome deflation, or falling prices, and its sluggish growth make workers cautious about demanding raises. Recently, economists have been focusing on an additional factor in Japan—the changing composition of the workforce. Especially since Mr. Abe took office in December 2012, new workers in Japan, such as the elderly, women and foreigners, have taken lower-paid, part-time or irregular jobs. Those leaving the workforce, by contrast, tend to be highly paid full-time employees who have reached retirement age of 60 or 65 after decades of receiving annual raises for seniority. These people are unlikely to match their income even if they want to keep working into their late 60s and 70s. The exit of costlier workers helps keep a lid on the average wage, some economists say, even when the tight job market is nudging up wages at the lower end.

8) Block chain could help musicians make money again [HBR]
A major pain point for creatives in the music industry — such as songwriters, producers and musicians — is that they are the first to put in any of the work, and the last to ever see any profit. They have little to no information about how their royalty payments are calculated, and don’t get access to valuable aggregate data about how and where people are listening to their music. But a rising tide of musicians and bands are pushing toward transparency and fairness and blockchain technology has the potential to get the music industry’s messy house in order. One of the biggest problems in the industry right now is that there’s no verified global registry of music creatives and their works. Attempts to build one have failed to the tune of millions of dollars over the years. The inter-organizational cooperation that blockchain is providing for the fintech sector should inspire the use of technology to create an open (or partially open) global registry, which would help organize the immense amounts of new music being uploaded every day. Music creatives could build upon such a registry to directly upload new works and metadata via blockchain-verified profiles.

9) The dawn of bioelectronics medicine [Forbes]
Discovery by researchers at Northwell Health that brain has the capability to turn off TNF (a cell who's primary role is to regulate immune cells) led them to studying the molecular and genetic make of the Vagus nerve (the nerve that runs from neck and chest to other parts of body) and how it controls inflammation in body parts. They discovered it’s possible to build a chip that uses electrons to replace medical drugs because the electrons can control the Vagus nerve to block the TNF so you don’t have to take the drugs. The drugs that patients currently take have limitations – they are expensive, they don’t work on everybody and can have significant side effects. The researchers successfully tested their bioelectronics medicine idea on patients with rheumatoid arthritis who had no other alternative. They implanted a nerve stimulator and directed electrons into the Vagus nerve putting many of them into remission. They plan to make the device (that can enable this procedure) as small as a pill. It will get implanted in the neck of the patient and will send precise electrical signals in a way that will allow the electrons generated by the computer chip in the device to replace the drugs they may have been taking.

10) Why it was easier to be skinny in the 1980s [Source: The Atlantic]
A study published recently in the journal Obesity Research & Clinical Practice found that it’s harder for adults today to maintain the same weight as those 20 to 30 years ago did, even at the same levels of food intake and exercise. The authors examined the dietary data of 36,400 Americans between 1971 and 2008 and the physical activity data of 14,419 people between 1988 and 2006. They grouped the data sets together by the amount of food and activity, age, and BMI. They found a very surprising correlation: A given person, in 2006, eating the same amount of calories, taking in the same quantities of macronutrients like protein and fat, and exercising the same amount as a person of the same age did in 1988 would have a BMI that was about 2.3 points higher. In other words, people today are about 10% heavier than people in the 1980s, even if they follow the exact same diet and exercise plans. The reasons for these changes are threefold. First, people are exposed to more chemicals that might be weight-gain inducing. Second, the use of prescription drugs has risen dramatically since the ‘70s and ‘80s. Antidepressants are now one of the most commonly prescribed drugs in the USA, and many of them have been linked to weight gain. Finally, study authors think that the microbiomes of Americans might have somehow changed between the 1980s and now.

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