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 ‘Broking in cloud businesses’, ‘A State strategy for India’, and ‘viability of quantum computing’. Here are the ten most interesting pieces that we read this week, ended June 8, 2018.
1) Can blockchain reinvent dating? [Source: Financial Times] In Silicon Valley, “blockchain for x” is the new “Uber for y” as start-ups embrace the idea of digital ledgers. On Wall Street, the Securities and Exchange Commission has warned companies to stop “pivoting to blockchain” to boost their stock. So Luna- a dating app built on blockchain sounds like another gimmick. But it’s important to note that while more and more people now meet online, singles on dating apps are increasingly frustrated by a system that encourages a “swipe culture”. Many swipe through photographs, almost like sport. The process can be dispiriting, with people failing to reply to messages from matches and frequently failing to show up “in real life”.
New dating apps are trying different tactics to create more lasting connections. Facebook will ask people to choose events they want to go to before selecting dates from among a group of other participants. Waving has scrapped the photo altogether, replacing it with voice messages, in an effort to avoid fake profiles and inspire a more imaginative approach. Sweatt encourages the fitness-obsessed to make dates for workouts, with a profile that includes how often you work out and when. However, Luna turns out to be the most intriguing, despite the fact it hasn’t even launched yet. It does, however, have a “white paper”. This starts with a discussion of the development of rituals around exogamy (the custom of marrying outside your tribe). It argues that humans used to devote huge time and energy to finding the right partner. Now, we want it to be as easy as possible — yet this convenience does not seem to be making people happy.
Ultimately, Luna wants to “remake dating culture”. Using our online interactions, it would like to dive deep into the data to understand what makes a successful match. Also, by using blockchain technology, it hopes to make anonymised data open to researchers, who will be able to design algorithms to match couples. Andre Ornish, Luna’s founder, says he is already speaking to social psychologists about how they could use the data to spot patterns that could lead to “higher-fidelity matches”. Maybe the “time of omnipresent big data” can help us know ourselves better, he suggests.
It’s interesting to know that men significantly outnumber women on most dating sites and attractive women receive far more messages than anyone else. According to Luna’s white paper, if Tinder were an economy, with the proportion of right swipes (indicating you like someone) instead of money, it would have a higher Gini coefficient, the economists’ favoured measure of inequality, than 95% of countries in the world. To try to solve the imbalance in dating-app messaging, Luna has created the Star, a token that users will be able to purchase on cryptocurrency exchanges or earn by actions taken within the app, such as replying to messages within 36 hours. A user can limit the number of messages he or she receives in a day, but a wooer who is really keen on reaching them can add more stars to a message to bump him or herself to the top of the recipient’s queue. The stars can either be pocketed as cash or donated to charity within the app. If Luna’s algorithm thinks a pair is a great match, they get a discount to encourage them to message each other.
2) Turning Amazon’s cloud into a hot trade [Source: Bloomberg] This piece discusses how on-demand computing provided by the likes of Amazon.com Inc. has become a burgeoning market in its own right. Engineer.ai, is one of the top brokers of Amazon Web Services (AWS) in India. “You have to think of the cloud as a financial-service or a monetary instrument and not just as technology,” says Sachin Duggal, the co-founder. “It has capacity, different pricing based on commitments, and it’s becoming a commodity.” Ever since Seattle-based Amazon leveraged its titanic technology capabilities into a separate cloud-computing business 12 years ago, numerous players have been angling to trade those services in ways similar to how energy brokers buy and sell oil or electricity. They range from global giants, such as IBM and Accenture, to smaller players in specific markets, such as Duggal’s Indian venture.
As cloud computing has grown into a $160 billion global industry in little more than a decade, the so-called cloud-service brokerage market has soared as well. It’s projected to hit $9.5 billion by 2021, more than twice the $4.5 billion in 2016. Every day, traders in New York, London, Singapore, and beyond make a market in what they call “reserved instances,” that simply means blocks of cloud capacity. In 2017, AWS generated $4.3 billion in operating income on $17.5 billion in net sales, eclipsing the $2.8 billion in profit produced by Amazon’s core North American online retail division. Comcast, Netflix, and Unilever, as well as NASA and the CIA, all use AWS to handle some of their computing needs. So do countless start-ups. With a 34% market share in the fourth quarter, AWS dominates the so-called public cloud. Runner-up Microsoft Corp., with its Azure services, has 13%.
Duggal says something bigger is at stake than Amazon’s business fortunes: The advent of cloud computing is spurring entrepreneurship in India and other developing economies by making it far more affordable for small businesses to run software applications and store data. Still, making this happen in a nation as vast and complex as India is daunting. The government has been slow to build extensive digital infrastructure, roll out broadband, and address chronic corruption. Moreover, India remains so impoverished that its gross domestic product per capita ($1,709) is running far behind China’s ($8,123). “Whichever way you look, it’s a hard place to do business,” says Umang Bedi, a former managing director for Facebook Inc. in India and South Asia who now sits on Engineer.ai’s board. That appears to be changing amid recent digital breakthroughs in the country of 1.3 billion people. In 2016, the Jio mobile network, controlled by the conglomerate Reliance Industries Ltd., swept the market by offering consumers about six months of free fourth-generation internet access and underpricing rivals offering 2G bandwidth. That same year, AWS opened data centers in the country and immediately saw a 60% increase in customers.
Today, AWS has more than 75,000 clients in India, including satellite television business Tata Sky and Hotstar, an entertainment streaming service that draws hundreds of millions of viewers to cricket tournaments and other programming. Spending on all cloud services in the country is forecast to reach $2 billion by 2020, a pace that’s outstripping the rest of the world, according to the U.S. International Trade Administration. By reselling AWS to more than 500 customers, including Tata, Duggal has helped Engineer.ai sidestep the trouble and expense of managing myriad accounts. With about 140 employees, his company makes money through arbitrage—it buys future capacity from AWS in bulk and then, using artificial intelligence algorithms to manage the flow, parcels out blocks to clients for higher rates. Customers save an average of 7% of what they’d pay if they went to Amazon directly, Duggal says. In 2017, Engineer.ai recorded $22.5 million in sales. This year, he says, it’s on course to more than double that performance. It’s been profitable since 2015.
3) How 2 M.T.A. decisions pushed the subway into crisis [Source: NY Times] The New York commuters have now become familiar with the train delays. For years, the Metropolitan Transportation Authority (MTA) told that rising ridership and overcrowding were to blame. Yet ridership actually stayed mostly flat from 2013 to 2018 as delays rose, and the authority recently acknowledged that overcrowding was not at fault. Instead, two decisions made by the MTA years ago — one to slow down trains and another that tried to improve worker safety — appear to have pushed the subway system into its current crisis. And there’s no easy fix.
The author gives graphical examples to explain the flaws pertaining to the decision to slow down trains. In the past, the subway could recover more quickly from these cascading delays. But the changes by the MTA have hampered the system’s ability to bounce back. First, the agency decided to increase the amount of space required between trains. It installed or modified hundreds of signals, which regulate train spacing. In that process, signals throughout the system were misconfigured — set up in a way that slowed the trains down even more than officials intended. Second, the agency adopted new rules for track work that expanded safety zones and increased set-up times. An analysis of internal MTA documents and interviews with system managers and train operators suggest that these two changes removed extra capacity — the ability to run more trains than scheduled — from the subway system. This, on top of years of cost-cutting and deferred spending for maintenance in the 1990s and 2000s, is why the system is no longer able to rebound from disruptions as it once could.
Also, after a 1995 collision of two trains on the Williamsburg Bridge killed a train operator and injured more than 50 passengers, the MTA began installing and modifying hundreds of signals to prevent trains from going too fast. When a train passes over a signal’s switch, a timer starts. The MTA projected that the signal changes would not reduce the number of trains that could pass through a section of track each hour. But this assumed the signals would work properly and that trains would operate at the speed limit. In reality, many signals are poorly maintained and misconfigured, triggering emergency braking at speeds below the listed limit. The analysis stated that if the MTA had known the signal changes would reduce the number of trains able to run on congested lines, they would not have been made. But the damage was done. After the signal changes, two fewer trains could run on the southbound 4 and 5 lines hourly, forcing the thousands of passengers those trains would have carried to squeeze into already crowded cars.
Before the 1995 Williamsburg Bridge crash, the MTA had installed less expensive brakes with longer stopping distances without adjusting the signals to compensate. Afterward, the MTA not only increased the distance between trains but also reduced the speed of train cars and installed speed-limiting signals. Just 7% of the Subway Action Plan budget had been set aside for signal maintenance as of March 1. When asked in September how long it would take for riders to see the impact of the Subway Action Plan, Gov. Andrew M. Cuomo told reporters, “I would venture to say if you were looking very carefully, you would see improvement already.” But the subway kept slowing down. As of February, the number of delayed trains was up about 8% since last September. 4) Falling US birth rate imperils welfare programmes [Source: Financial Times] The US birth rate declined to a 30-year low in 2017, putting added strain on welfare programmes catering to an ageing population. Last year, American women gave birth to about 3.9mn babies, 2% decrease from 2016, according to the Centers for Disease Control and Prevention. The number is the lowest since 1987, posing a threat to government support programmes such as Medicaid, Medicare and social security, which rely on revenues from taxes on workers. The general fertility rate for women aged 15 to 44 was the lowest rate recorded in the history of the report. There were just 60.2 births per 1,000 women. That compares with a rate of 70 births per 1,000 women just before the 2008 recession. The CDC data suggest that 10 years on from the recession, a recovery in the birth rate could be expected. But as women pursue higher education and careers, the birth rate has continued to drop.
The decrease is likely to exacerbate government funding issues, especially for social security, which provides retirement, disability and survivors’ benefits. Funds for the programme are projected to be depleted by 2035, according to the Social Security Board of Trustees. With rising costs, it is forecast that taxes by then will be sufficient to pay for only 75% of scheduled benefits.
The full effect of the past year’s lower birth rate will not be felt for another 20 years. But if lower fertility rates persist, a shrinking population could mean fewer children in schools and less construction of new homes.
5) What night lights reveal about the Indian economy [Source: Livemint ] Every square kilometre of land in Delhi’s municipal area, which includes four different municipal bodies, generates a gross domestic output of at least $58 million per year, reveals an analysis of night lights data captured by satellites. But while neighbourhoods like Connaught Place in Delhi or Bandra in Mumbai generate an annual output in excess of $120 million, that figure plunges to less than $20 million in the fringes of even the leading cities. Delhi emerges as the country’s biggest sub-economy, but the use of night lights has several known limitations: informal activity which doesn’t generate much light doesn’t get counted; government buildings/activity might inflate the economic output of some regions; and what is measured may actually be consumption rather than the creation of productive assets.
The analysis also reveals that cities clearly evolve along transportation corridors, which most municipal governments have failed to adequately expand and improve. Also, south Indian states such as Kerala and Tamil Nadu have done a far better job at distributing the state’s total economic output across multiple hubs than their northern counterparts. The first such attempt to map India’s economic geography ties in neatly with the government’s own push to comprehensively rank the performance of India’s leading cities for the first time this year. “The livability index ranking of Indian cities will try to use city GDP as a component,” said a senior official in the ministry of housing and urban affairs, who did not wish to be named. “It’s a challenge to measure the GDP of a city. But it is an important measure of economic performance. Both the EU and China have developed frameworks to capture the performance of sub-national economies,” the official said.
While relying on GDP as a single yardstick of measure has its limitations, the need to rely on night lights to come up with an estimate shows how poorly the performance of India’s cities is currently measured, said Kshitij Batra, a former junior fellow at IDFC Institute. “The technique is more commonly used in east Africa where countries don’t have reliable national data. This is one way to track the health of a city’s economy. In India, some districts are bigger than many countries. But there is no reliable way of measuring basic economic activity,” he said. Since access to imagery from Indian satellites is heavily restricted, researchers had to rely on global open data sets.
While the current analysis is based on 2006 data, efforts are on to update it to 2014, which would allow for comparisons on how different city economies performed over the last decade. Such time-series trends of the ups and downs city economies experience may become increasingly relevant as India urbanises more, said P.K. Mohanty, chair professor of urban economics at the University of Hyderabad. “Nearly half of the world’s output comes from only 40 regions. The city of New York is the world’s 17th largest economy by size. A similar trend will play out in India, where 70% of the country’s future employment growth will come from cities. Until now, India’s ability to measure and track the economic performance of its cities has been abysmal. This needs to improve,” he said. 6) You don’t need an “India strategy” – You need a strategy for each state in India [Source: HBR] The Indian economy has long been an attractive investment destination for multinational corporations. However, it remains a difficult market for multinational firms to enter. India currently ranks 100 out of 190 countries in the World Bank’s Ease of Doing Business rankings, 22 places behind China, 39 places behind Indonesia, and just nine places above Papua New Guinea. The country’s ranking in dealing with construction permits (181) and enforcing contracts (164) is particularly bad. If multinationals want to succeed in India, they need to understand the country’s individual states and their business environments in a lot more detail. After all, what works in Gujarat will not necessarily work in West Bengal. India is a large, fragmented, and heterogeneous market.
Within the country, there are large, and often underestimated, regional differences in language, culture, talent, infrastructure, and wealth, all of which lead to wide variations in business landscapes. Indian states are often compared to individual countries. For instance, India’s most populous state, Uttar Pradesh, has a population equal to that of Brazil, and India’s most prosperous state, Maharashtra, has an economy roughly the size of Iraq’s. Also, South India is older, with higher spending capabilities and a more skilled population, while North India is younger and relatively poor. North Indians prefer speaking in Hindi, while South Indians prefer communicating in English or their respective state language. India’s federal structure also leaves certain key policy decisions to the states.
A four-step framework could help companies effectively prioritise markets in the country. These four steps are: 1) Measure risk-adjusted opportunity – by analysing leading indicators of the market’s size, growth, industry clusters, and stability; 2) Measure operating environment – by analysing indicators related to infrastructure, talent, finance, and the business and tax environment; 3) Evaluate results – If you plot the risk-adjusted opportunity and operating environment of the different states on a graph, you can clearly see which states offer the highest return on investment and represent the greatest opportunity for business; 4) Prioritise states – categorise the states into four groups in order of priority with multinationals focusing on best states for expanding their presence or exploring potential.
7) Obituary: Tom Wolfe, writer, 1930-2018 [Source: Financial Times] Tom Wolfe, the American literary lion who transformed the faces of both journalism and the novel, while simultaneously cutting a rare sartorial dash, has died in New York at the age of 88. His great talent was for exposing the pretentious. The Right Stuff, about the Mercury astronauts, stripped away some of the lustre painted on them for their exploits. The Bonfire of the Vanities wickedly dissected the Wall Street money-grubbing crowd who thought they were rulers of the universe. A Man in Full did the same for the American myth of the self-made mogul, as well as, perhaps, being a disguised story of himself. Yet, with presumably conscious irony, he espoused a lifestyle — the large apartment on the Upper East Side of Manhattan, the summer house in the Hamptons, a taste in clothes that ran to white suits, trilbies and boaters, spats and coloured pocket handkerchiefs — that he himself described as “neo-pretentious.”
Wolfe began his journalism career with a local newspaper in Massachusetts and the Washington Post, where he covered Latin America, and then for the old New York Herald Tribune, long a stable for promising writers where his buddies were the likes of Jimmy Breslin and Dick Schaap, already legends in the making. As he wrote in 1972 for New York magazine, this was the time when he began to think “it just might be possible to write journalism . . . would read like a novel,” then considered, through the works of John Updike, Saul Bellow and Philip Roth, to be in full flower. His proving grounds were the magazines, like Rolling Stone, Harpers, Esquire and New York, less obviously hidebound than newspapers. He quickly established his bona fides as a different voice. The Electric Kool-Aid Acid Test told of his travels with Ken Kesey, the apostle of LSD. The Kandy-Kolored Tangerine-Flake Streamline Baby, delved into the bizarre Californian world of those who customise hot cars.
What soon became known as the “new journalism” had other protagonists, not least the ‘gonzo’ Hunter S Thompson and Norman Mailer, but Tom Wolfe was the leading light of this movement which elevated the subjective and personal over the objective and fact-based. Nothing about the approach, including its techni-colour language and eccentric punctuation, conformed to prevailing journalistic norms, which he thought constituted “the great era of understatement.” But it surely grabbed the attention of readers as America lived through the turmoil of the 1960s and the excesses of the Reagan years.
A common thread throughout all his works, fiction and non-fiction, however, was exhaustive, indeed conventional, reporting of the milieu about which he was writing. That was true of The Right Stuff and Bonfire of the Vanities, his New York home turf, its high and low life, and his 2004 novel, I Am Charlotte Simmons, about sex on college campuses, which he researched from coast to coast (not that it was well received). Back to Blood, his final novel, out in 2012, and set in Miami, did not please the critics, suggesting the creative well had run a little dry. 8) Why is 1999 movie ‘Sooryavansham’ Sony Max’s favorite offering? [Source: Livemint ] In India, all are aware that once the IPL is over, one movie that Sony Max will keep on repeat is Sooryavansham. Nearly 20 years after its release, Sooryavansham that made less than Rs7 crore in total theatrical earnings, is topping television ratings on Sony Max that may air it as frequently as once a month. But it is not the only one. Senior executives from television channels name flops like dark fantasy action film Jaani Dushman- Ek Anokhi Kahani (Rs10 crore), Tarzan The Wonder Car (Rs6 crore), romantic comedy drama Ramaiya Vastavaiya (Rs26 crore), Akshay Kumar comedy Entertainment (Rs64 crore) and romantic drama Shaadi Mein Zaroor Aana (Rs15 crore) as examples of films that have emerged as blockbusters on television despite not setting the cash registers ringing on theatrical release.
Sooryavansham is a remake of Tamil film Suryavamsam (1997). This E.V.V. Satyanarayana directed film notched up 4.4 million BARC (Broadcast Audience Research Council) impressions on Sony Max compared to Baahubali’s 26 million on the same channel and 4.7 million impressions compared to Golmaal Again’s 16 million on Star Gold. Impressions refer to the number of individuals (in thousands) of a target audience who viewed an event, averaged across minutes. BARC India is the country’s TV viewership monitoring agency. Around 93% of the country exists in a one-television household reality. “Television viewing essentially is community viewing,” said Neeraj Vyas, senior vice-president and business head, Sony Max cluster, Sony Pictures Network. “So in a small town like Kanpur or Allahabad, I could go to the theatre to watch (a new-age film like) Queen with my friends, appreciate it in the darkness and privacy of a cinema hall and come out saying I’ve seen something nice, but the same film doesn’t work on TV because I’m watching it with my immediate and extended family.”
A family entertainer like Sooryavansham will always work on television because it not just allows for emotional peaks and curves every couple of minutes but can be watched in segments or its entirety with at least one other member of the family multiple times without discomfort. While there may not always be a direct correlation between box office flops going on to do well on television, Ashish Bhasin, chairman and chief executive, South Asia, Dentsu Aegis Network, said since the theatrical release of films is time-bound, very often there are films that don’t do well initially but are considered great later on. Clashing with a big film may have impacted collections, for instance, whereas on TV you don’t have to fight for an audience and viewing is free. Also nowadays, Bollywood doesn’t make television-friendly films.
According to the Ficci-EY media and entertainment industry report 2017, the number of single screens in India has come down from 9,710 in 2009 to 6,780 in 2017, multiplexes, on the other hand, have gone up from 925 to 2,750 during the same period. The audience used to watching single screen kind of mass entertainment films, is not getting the chance to watch them anymore because movies are made to reach out to multiplex audiences who are restricted to the metros and mini-metros. Older massy films like Sooryavansham, come to their rescue, in that scenario. “Films are not made primarily for TV audiences and producers first think in terms of recovery from theatres, so the larger ecosystem of TV audiences doesn’t get what it wants in terms of content supply,” pointed out Ruchir Tiwari, business head, Zee Hindi Movies Cluster.
9) Your brain on reading – why your brain needs you to read every day [Source: Medium.com] In this digital-friendly world, filled with numerous social media apps and websites, reading has lost its charm. According to the author, reading is necessary as it puts our brain to work. It is to the mind what exercise is to your body. It gives us freedom to roam the expanse of space, time, history, and offer a deeper view of ideas, concepts, emotions, and body of knowledge. Chilean novelist, Roberto Bolaño says, “Reading is like thinking, like praying, like talking to a friend, like expressing your ideas, like listening to other people’s ideas, like listening to music, like looking at the view, like taking a walk on the beach.” Our brain on books is active — growing, changing and making new connections and different patterns, depending on the type of material we are reading. The four benefits of reading are:
Reading heightens brain connectivity: Reading involves several brain functions, including visual and auditory processes, phonemic awareness, fluency, comprehension, and more. The same neurological regions of the brain are stimulated by reading about something as by experiencing it. Reading every day can slow down late-life cognitive decline and keeps the brains healthier.
Enhances fluid reasoning: Research shows that reading not only helps with fluid intelligence, but with reading comprehension and emotional intelligence as well. “Fluid intelligence” is that ability to solve problems, understand things and detect meaningful patterns. Reading can increase fluid intelligence, and increased fluid intelligence also improves reading comprehension. Research at Stanford showed a neurological difference between reading for pleasure and focused reading, as if for a test.
Reading makes you emotionally intelligent: The reading process plays an important social function. While reading fiction, you mentally imagine the event, the situation, the characters, and the details described by the author. It’s a total immersion process. Researchers at Emory University found that reading a novel heightens connections in the parts of the brain that deal with language reception. Improves concentration: In a single 30-minute span, the average person will divide their time between working on a task, checking email, talking to colleagues, keeping an eye on social media, and constantly reacting to notifications. Reading not only improves your brain’s connectivity, it also increases attention spans, focus and concentration. If you struggle to focus, reading can improve your attention span.
10) Time to invest in skills for quantum computing revolution [Source: Financial Times ] No wonder quantum computing has become the subject of such hype. While full-scale quantum machines are probably many years away, a “good enough” form of the technology — not revolutionary but promising significant advances for some applications — is on the horizon. The world will not change overnight, but development timetables already show practical quantum machines arriving much sooner than seemed likely only a short time ago. Computers made up of quantum bits (or qubits) that can be in two states at once, or “entangled” in ways that lead them to act in unison, could enable computers that are a million times or more faster than current machines. Operating on a large enough scale, they may crack the world’s hardest problems.
But the first, limited products of this technology have emerged from the research labs. Take the rudimentary quantum system that IBM has made available, free of charge, over the internet for the past two years. More than 80,000 people have now run experiments on the system — a huge number, particularly because trying out even the most basic routine means learning a new form of programming. Arvind Krishna, director of IBM Research, says the willingness of so many to dip their toe in the quantum water shows that programmers are “frustrated by the limitations of regular computing”. Perhaps — or maybe it just shows the high level of curiosity around a breakthrough technology.
Three factors are likely to determine whether this can become a practical technology in the near term, as its backers claim. First is the length of time a qubit can maintain a quantum state, known as its coherence time. The longer it can hold this state the more steps in a programme it can handle and, therefore, the more complex the calculation. Mr. Krishna predicts this time will reach a millisecond within five years, enough to support a computer that can take on problems beyond the reach of today’s “classical” machines. Second factor is the number of qubits that can be linked together in a quantum system. From seven in 2016, IBM lifted the number to 15 last year and expects to release a 50-qubit system to clients this year. The third factor is more of a wild card. Quantum systems are error prone: as qubits fall out of coherence, information is lost. Many experts expect that 1,000 or more extra qubits will be needed to correct for the errors of a single “logical qubit” that can be used to solve problems.
If progress on all three of these axes proceeds at the kind of pace it has in the past two to three years, then the next five years should bring “quantum advantage” — the point when it becomes commercially viable to invest in programming a quantum system to tackle some classes of problem. It is no surprise that banks are leading the charge, along with companies involved in various aspects of materials science. Using quantum systems to model molecules could reap early dividends in battery development or in discovering new alloys, says Mr. Krishna.- Saurabh Mukherjea is CEO, and Prashant Mittal is Strategist, at Ambit Capital. Views expressed are personal