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 ‘the crisis in conglomerates?’, ‘The threat to QSRs’, and ‘environmental crisis from textile boom’
Here are the ten most interesting pieces that we read this week, ended July 6, 2018.
1) General Electric goes back to basics [Source: Financial Times] Though successive chief executives have declined to call GE a conglomerate, their devotion to diverse businesses — at one point ranging from aircraft engines to mortgages — bound together by superior leadership, and shared services and culture, seemed unshakeable. At its peak, GE was a bellwether for the stock market. In the late 1990s under Jack Welch, it was the most valuable listed company in the world, boasting unbroken membership of the Dow Jones Industrial Average since 1907. It also became a model of management development, elevating carefully cultivated insiders to the chief executive job and meticulously planning the training and succession of divisional heads. Recent events, though, seem to signal the end of an era. On June 26, GE was replaced in the Dow average. The same day, Mr. John Flannery, unravelling many of the purchases made by his immediate predecessor Jeffrey Immelt and by Mr. Welch, announced he would spin off operations that generated more than 30% of group revenue last year, including healthcare and a majority stake in Baker Hughes, its oil services company.
The long history of General Electric, descendant of Thomas Edison’s eponymous Edison Electric Light Company, founded in 1878, is full of growth crises, followed by periods of restructuring. By the end of the second world war, GE controlled 85% of the lightbulb industry, prompting an antitrust probe. But the group began to diversify rapidly from its electrical roots. By the 1960s, GE was making, among other things, nuclear reactors, hair dryers, jet turbines and computers. With the structure under strain, it was streamlined from more than 200 units to 43. In the 1980s, under Mr. Welch, GE began another long period of expansion, reshaping the company around the target that each operation — whether in broadcast entertainment (NBC) or fridge-freezers (GE Appliances) — should rank first or second in its field. Under Mr. Welch, GE began a relentless search to innovate not only in products but in management. He introduced Six Sigma, a quality improvement programme complete with “black belt” experts, and reinforced leadership training at a centre at leafy Crotonville, north of New York City. For decades, these were vital elements that helped justify the conglomerate’s existence — and they were copied elsewhere.
Just as Mr. Welch dismantled some of the legacy he inherited, Mr. Jeff Immelt reined back some of the excesses of the Welch era. He sold plastics and NBC, for instance. He also fought to reduce dependence on GE Capital, exposed by the 2008 financial crisis which prompted Mr. Welch belatedly to describe headlong pursuit of shareholder value as “the dumbest idea in the world”. In the face of these headwinds, Mr. Immelt continued the tradition of management innovation. In an effort to make the group more nimble, for example, he introduced “lean start-up” techniques from Silicon Valley, testing new products in the market as they are developed, and he made the US-centric group more international. For much of Mr. Immelt’s tenure, in fact, GE seemed to defy the cliché of conglomerates as lumbering bureaucracies. Like Mr. Welch, though, Mr. Immelt overstayed his time at the top. He also made some poor and poorly timed bets of his own, including buying Alstom’s energy operations in 2015 and expanding in oilfield services as crude oil prices slumped.
The long tradition of new GE chief executives hacking away at the overgrown parts of their predecessors’ legacies suggests Mr. Flannery would probably have taken an axe, irrespective of outside pressure. In a period when other diversified industrial groups, including Tyco, Alcoa, and Siemens of Germany, have split or streamlined their businesses, it is again tempting to call the end of the conglomerate age. But to do so would be to underestimate the persistence of diversified businesses around the world, such as India, where the likes of Tata, despite governance strains, show no sign of disintegrating, or South Korea, which still boasts powerful chaebol such as Samsung. Then there is a new generation of technology conglomerates, which share some characteristics of the old GE: Amazon, which has expanded from its dominant platform in online retail into food stores, web services, streaming video and music; or Alphabet, still largely dependent on the core Google search operation, but with vast ambitions, from driverless cars to healthcare.
What this means is that the death rites have been read many times before, yet nobody has ever quite buried the model. The FT wrote in 1970 that “the conglomerate mystique has gone, probably forever”, a full 14 years before Harold Geneen declared he and ITT had defeated the sceptics. GE may one day consider the time has come to branch out again. When Mr. Flannery took over from Mr. Immelt last year, analysts noted he was older than either of his two predecessors when they took charge. That suggests he will have a shorter term in office. Before too long, a successor could get a free hand to reinvent GE yet again.
2) With liquor out, Bihar splurges on saris [Source: The Hindu] Prohibition is making people of Bihar spend on good clothes and food with sale of expensive sarees rising by 1,751%, while consumption of honey by 380% and that of cheese by 200% in the first six months of the ban, according to latest studies on the measure. The studies, conducted by think tank Asian Development Research Institute (ADRI) and government-funded Development Management Institute (DMI), also pointed out that 19% of households acquired new assets from the money they earlier splurged on alcohol. Both studies were commissioned by the State to evaluate consequences of prohibition, which came into force in April, 2016 “mainly as a response to demands of rural women who suffered because of the widespread practice of drinking alcohol.”
The ADRI study took stock of purchasing behavior as recorded at retail outlets of COMFED (Bihar State Milk Co-operative Federation), better known by the brand name “Sudha.” It noted that an impressive rise in sale was also recorded for items like butter milk 40%, flavoured milk 28.4% and lassi 19.7%, the report said. The ADRI study collected data on purchase of a few other consumer items as well, based on sales tax revenues. The increase was substantial — the sale of expensive sarees rose by 1,751%, expensive dress materials by 910%, processed food by 46%, furniture by 20% and sports goods by 18%. The other study done by DMI also underscored the “substantial economic impact” of the ban on alcohol. The DMI study, based on primary data collected from 2,368 households in five districts of Nawada, Purnea, Samastipur, West Champaran and Kaimur, noted that families reported a weekly expenditure of Rs1,331 on food after prohibition, compared to Rs1,005 before the ban, implying an increase of 32%.
The study also observed that 58% women feel they were given more respect and played a better role in making household decisions. Going further, 22% of women said their opinion was now counted not just for household matters, but for village issues as well, the study added. On the crime front, the ADRI report noted there was a 66.6% dip in cases of kidnapping for ransom, followed by 28.3% dip in murder cases and 2.3% in dacoity.
3) Amazon: QSRs’ big threat or essential lifeline? [Source: pymnts.com] According to census data roughly 44% of what consumers spend on food comes from restaurants, rather than groceries for home. Yet NPD research reports that 49% of all dinners purchased from restaurants are now eaten at home. In 2017, the restaurant sector, overall, grew 4.3% over 2016 — its eighth consecutive year of growth. Experts predict that 2018 will be another year of growth. Yet, these same industry analysts report that foot traffic is down 2.5% across the board so far this year, and, with the exception of fast casual, so are same-store sales. Profits are reported down too. Some of that decline in foot traffic and profits is attributed to quick-service restaurants (QSRs) and fast-casual chains opening more stores, foot traffic being diverted to other locations and the costs related to expansion. But that’s not a reason to think that all is well in restaurant land.
What’s keeping the industry afloat is bigger restaurant checks, up nearly 3% over last year. But those bigger tickets aren’t because people are ordering more things when they eat out, it’s just more expensive to order from the menu. Restaurants are raising prices to cover rising costs, including labor and delivery aggregators. Analysts say that if not for the bigger tickets, the restaurant category overall would show no growth in the decade following the Great Recession. QSRs are the restaurant industry’s poster children for feeling the pinch from all sides and account for 57% of foot traffic across all restaurant segments. Convenience, price and food quality are the QSR’s main selling points. Consumers’ eating habits have changed. Consumers want to eat breakfast food at 12:30pm, not 8:30am; snacks or smoothies at 3:00pm instead of a more traditional lunch; bowls and smoothies instead of a sandwich or a salad during the typical lunch hour and dinner at 7:30pm or 8:00pm.
QSRs and fast casual restaurants recognize these shifts and are making an effort to respond. Taco Bell made news when it expanded its hours and menu options to meet the food cravings of the 3:00am to 4:00am crowd, with great success. Also, technology is playing a huge part in helping QSRs bridge the digital consumer expectation gap and remain competitive. The Restaurant Readiness Index examines a random selection of 178 QSRs and feeds more than 100 features available at those establishments online or via mobile apps into our statistical models to create an “innovation readiness” metric for each establishment and the sample overall. Particular attention to specific 15 features (account for 80% of the Index metric value) is given to hone in on what makes a QSR innovation-ready or not. That Index score serves as a benchmark across the establishments helps in identifying and analysing trends and patterns.
The latest report shows a few bright spots, a disturbing trend and another contradiction that could potentially spell trouble. The good news is that QSRs are doing more to make their in-store experiences more expedient and cost-effective. And the bad news is that the QSRs are putting in-store ahead of digital. The Index benchmark this quarter reflects this disconnect: a low score of 38.7 out of 100 across the entire sample, which reflects a slight, but only very slight, improvement over the 38.0 score witnessed last quarter. Top performers did better — but not a whole lot better — averaging 58.1. Bottom performers averaged 17 out of 100, and firms with fewer than 26 establishments were among the worst performers. Those with 26 to 50 performers were among the most improved but still sub-50, with an Index score of 44. That disconnect puts most QSRs out of step with how consumers define convenience today and expect the QSR establishment to respond.
So how to go digital in a way that preserves the customer relationship, their brand and their business? The default answer is often a mobile app, and, for larger players, that can make sense. But unless a QSR is one of the big brands with consumer scale, the prospects of a consumer downloading an app once, much less using it beyond that first interaction, is very likely slim and none. Then there are the delivery aggregators — Grubhub, Uber Eats, DoorDash, Postmates and others like them — that give these local QSRs a chance to be discovered by consumers looking for the convenience of delivery. This quarter, the study observed a more than 5% increase in the number of establishments that have opted into a third-party aggregator for that reason. The future of QSRs will rest with their ability to embrace digital and scale; even the largest players are too small to be in all of the channels and ecosystems that consumers will use increasingly to find and order from them.
Digital payments will be a key enabler to that experience but so will aggregators and ecosystems that can reach a critical mass of consumers — and manage the logistics associated with order, payment and fulfillment. There is one player, though, who checks all three boxes and even offers consumers a complete portfolio of convenient food options – Amazon. Today, consumers in the markets Amazon serves can order ahead for pickup from a local QSR, order ahead for delivery from some the largest QSRs and fast-casual chains and order ahead from a selection of prepared foods at Whole Foods (acquired by Amazon) and have it delivered to their front door or pick it up from Whole Foods on the way home. Even using Alexa. The question is whether Amazon can and will go local — really local — and create with QSRs the same kind of third-party marketplace for food services that it has created for other products that it sells on its platform. QSRs now face the same dilemma as other small retailers: work with Amazon or compete with Amazon.
4) Curiosity and what equality really means [Source: New Yorker] Atul Gawande, a renowned surgeon, public-health researcher and author of bestseller ‘The Checklist Manifesto’, in this piece narrates an incident pertaining to humanity and curiosity. During his third year of medical school, Mr. Gawande, on his surgery rotation, came across a prisoner who wouldn’t stop passing invective comments. While keeping his cool, the surgeon managed to calm down the prisoner and strike a conversation. As he was suturing the prisoner’s wound, Mr. Gawande remembered a lesson a professor had taught about brain function. When people speak, they aren’t just expressing their ideas; they are, even more, expressing their emotions. And it’s the emotions that they really want heard. So he stopped listening to the man’s words and tried to listen the emotions. “You seem really angry and like you feel disrespected,” Mr. Gawande said. “Yes,” he said. “I am. I am angry and disrespected.” That was just the start, the conversation went on for the next hour as the surgeon sewed and listened, trying to hear the feelings behind his words. Mr. Gawande didn’t understand him or like him. But all it took to see his humanity—to be able to treat him—was to supply that tiny bit of openness and curiosity.
According to him, hospitals are one of the very few places left where you encounter the whole span of society. Walking the halls, you begin to understand that the average American is someone who has a high-school education and thirty thousand dollars a year in per-capita earnings, out of which 30% goes to taxes and another 30% to housing and health-care costs. More people are incarcerated in the USA than any other economically developed country; 30% of adults carry a criminal arrest record; seven million people are currently incarcerated, on parole, or on probation; and a massive and troubling proportion of all of them are mentally ill or black. Most people don’t have this broad vantage. All occupy their own bubbles. Trust in others, even neighbors, is at an historic low. Also, insisting that people are equally worthy of respect is an especially challenging idea today.
Once we lose the desire to understand—to be surprised, to listen and bear witness—we lose our humanity. Among the most important capacities that we carry with us today is our curiosity. We must guard it, for curiosity is the beginning of empathy. When others say that someone is evil or crazy, or even a hero or an angel, they are usually trying to shut off curiosity. Don’t let them. Mr. Gawande says that we are all capable of heroic and of evil things. No one and nothing that you encounter in your life and career will be simply heroic or evil. Virtue is a capacity. It can always be lost or gained. That potential is why all of our lives are of equal worth. In medicine, doctors are asked to open their self to others’ lives and perspectives—to people as well as to circumstances you do not and perhaps will not understand. This is part of what Mr. Gawande loves most about this profession. It aims to sustain bedrock values that matter across all of society. But the work of preserving those values is hard.
Lastly, Mr. Gawande has a special advice for the graduates, who have studied for thousands of hours on end. “You will be licensed to make diagnoses and prescribe an armament of drugs and procedures. Most of all, you will be given trust to see human beings at their most vulnerable and serve them. That trust is earned because of your values, your commitment to serving all as equals, and your openness to people’s humanity. The renewal of these values is why we’re all so grateful to be here—and so grateful that you will carry those values on, beyond us.”
5) How traffic flow affects travel time in Delhi and Mumbai [Source: Livemint] The people of Mumbai and Delhi are well aware of the bustling traffic which increases their travel time. The average travel time, from the suburbs to the city centre in Mumbai and Delhi, during morning peak hour—from 7am to 10am—on a typical weekday is considerably higher than time taken during lean hours—midnight to 7am—along the same route. In case of Mumbai’s Western Express Highway (WEH), travelling from the suburb of Borivali to Parel, an important commercial hub, takes almost double the time during peak hours compared to lean hours. The metro construction work along the Western Express Highway may have exacerbated traffic congestion between January and March 2018. However, the situation was bad even a year ago, when the peak hour commute took 80% longer than travelling during the lean hour. In Delhi, the addition to travel time was 77% along the Gurgaon-Delhi highway.
The direction of travel also often makes a difference. In Mumbai, the traffic flow is overwhelmingly skewed in one direction from the suburbs to the city centre in morning and vice-versa in the evening. However, in the case of Delhi, this is more mixed, with marginally more traffic flowing from Connaught Place towards Gurgaon (city centre to suburb), rather than the other direction. This suggests that the concentration of economic activity in a few hubs is more acute in Mumbai compared to Delhi. There are also seasonal patterns at play. For instance, the monsoon months of July and August are particularly bad in both Mumbai and Delhi. May appears to be a traffic-light month in Mumbai, which is also the time when most schools close down for summer holidays. A similar effect is visible in Delhi in June, at least for the selected routes examined by Mint.
Analysis also suggests that average travel time in both the cities increased between January 2016 and March 2018, the entire period for which Uber provides data. However, the evidence is not conclusive as an increase was not witnessed along all the routes. Nevertheless, several other studies point towards a deteriorating situation of traffic in India’s major cities. A study by Neema Davis and other researchers from IIT Madras found that average speed of taxis in New Delhi reduced from 34.2 kilometres per hour (kmph) to 33.6 kmph over the course of 2013. Their research suggested that increased congestion was the culprit behind slowing speeds.
Similarly, Municipal Corporation of Greater Mumbai’s Comprehensive Mobility Plan (CMP) released in 2016, expressed concerns over the state of worsening traffic and attributed it mainly to an increase in the number of privately-owned vehicles. The report’s analysis, using Global Positioning System (GPS) showed that average journey speed along major routes in Mumbai is only 20kmph during morning peak hours, compared to off-peak period average of 27kmph. The spectre of deteriorating traffic congestion in cities should worry us, as the time spent by Indians in daily commute is already among the highest in the world, according to a recent survey by Dalia research. Thus, there is an urgent need to improve traffic management in India’s cities. Measures such as introducing dedicated bus corridors or encouraging ride-sharing among commuters can be some of the useful quick fixes for the situation. However, a more long-term solution is likely to involve greater investment in mass rapid transit systems or metro.
6) The madness of executives’ obsessive time management [Source: Financial Times] Lack of time is a theme all too familiar with high flying executives and academics. It is this theme that has prompted academics to devote at least part of recent years to working out how managers spend their time, because managers are increasingly obsessed with personal productivity. Twenty-seven chief executives categorised and monitored their activities over three months. Or rather, their executive assistants did. (A great EA — no surprise here — turns out to be indispensable.) From this data, Prof. Michael Porter and Prof. Nitin Nohria developed some alluring averages. The author expresses concern that other chief executives will now benchmark their own behaviour against their findings, and be busier and more stressed as a result.
Monitoring of managers has a long pedigree. Henry Mintzberg started observing them in the 1970s, after noticing academics theorised a lot about management, but had little evidence of what managers actually did. As a new manager, “you are supposed to figure it out for yourself, like sex,” he wrote, “with equivalently dire initial consequences”. More recently, Bain & Company consultants surveyed 300 executives and found, for instance, that about 15% of an organisation’s time is spent in meetings— and that percentage is increasing. The conclusions of recent research always smack of common sense. Schedule shorter meetings. Stay off email (electronic communications account for nearly a quarter of chief executives’ work time in the Porter/Nohria study). Meet your team members and customers in person. Exercise. Get a good night’s sleep. Schedule time for spontaneous encounters, paradoxical though that sounds.
The author talks about ills of benchmarking effect, partly because fashions change. The Harvard professors have been checking in on CEOs since 2006 and the sample size is growing, but for now only two of their cohorts are women. Any study starting now would aim for a more diverse group, and probably uncover some different habits. For example, he expects the current fad for extreme sport and exercise — from paragliding to Ironman challenges — to moderate. A consultant whose pastime of choice is triathlon, involving at least 15 hours of training a week, told him recently he had asked his coach how to rise to elite level. He was told he would need to put at least 10 more hours into working out. Those hours would have to come either from his work or, worse, time with his family.
Technology is also changing the way managers monitor themselves. Apple is rolling out software to help users tame their iPhone addiction, while other apps allow managers to track what they do as easily as they record steps, heart rate and calories. Jim Collins, the management writer, has been assessing his productivity for years, and trying to maintain a rolling average of 1,000 creative hours annually. Quality of time spent, as his approach suggests, is more important than quantity.
Time management is the ultimate zero-sum game. Even if executives organise themselves more efficiently, Prof Mintzberg concluded that they face many “inescapable conundrums” (how do you cope with change and maintain continuity? for example) that will never respond to prescriptions. Clearly, it makes sense for leaders to be aware of how they are spending, or wasting, their time, and occasionally to step back and look at whether they could handle their limited hours more productively. Fretting about which trade-offs are “better”, however, is one more way to add to the pressure of the 62.5-hour week worked, according to the Harvard study, by the average US chief executive.
7) China tightens party control of foreign university ventures [Source: Financial Times] The University of Nottingham Ningbo China, the first joint venture university in China, has removed a foreign academic from its management board for being critical of Communist party-backed initiatives. The management shuffle marks a setback for joint venture universities — legally independent institutions 49% held by a foreign university — which for years have operated in tenuous conditions as China’s Communist party seeks to exert more influence on educational institutions. The academic, Stephen Morgan, had served as Nottingham Ningbo’s associate provost since 2016. The party objected to the renewal of his contract with the university after he wrote an online essay critical of the 19th party congress, a top meeting of Communist party officials held every five years.
The post had been written for the University of Nottingham Asia Research Institute’s online magazine Asia Dialogue. It was not a site owned by Nottingham Ningbo, the Chinese branch campus in Zhejiang province, near Shanghai, which has an enrolment of 7,800 mostly domestic Chinese students. However, six months after publication of the essay, Communist party officials at Nottingham Ningbo sought to remove Mr. Morgan from his management positions, saying the essay embarrassed the university. Mr. Morgan had also been a vocal critic of broader party-backed initiatives, such as blocking the import of texts authorities deem sensitive. The removal of Mr. Morgan comes three years after Nottingham abruptly shut its School of Contemporary Chinese Studies in the UK, just as its students were preparing to sit exams. The decision, which came directly from the university’s executive board in April 2016, led to the departure of Steve Tsang, an outspoken professor who was head of the school.
In 2003, China’s education ministry approved new regulations allowing for Sino-foreign joint venture universities in an effort to import overseas educational know-how and promote reform. Nottingham was the first UK university to set up a campus in the country, opening its Ningbo joint venture in 2004. More than 2,000 such joint-venture programmes have been established since then. However, under President Xi Jinping, tightening ideological control has already swept up wholly Chinese universities, which have tightened controls over foreign textbooks and introduced greater number of party-backed courses and research institutes with subjects such as “Xi Jinping thought”.
Signs that this control has slowly extended to joint ventures are increasing. Two years ago, China put a moratorium on approvals for new, legally independent joint venture campuses. There are seven such campuses in China including Nottingham Ningbo and Xi’an Jiaotong-Liverpool University. Foreign universities are now able to receive approval only for new joint venture institutes or single-subject joint venture programmes housed within Chinese campuses. Last year, the education ministry and the party’s Organisation Committee, which oversees appointments to top posts, issued regulations requiring the installation of party units at foreign-funded universities and that party officials be given a seat on their management boards. However, joint venture administrators say the rules have not yet been formally implemented after they pushed back. In practice, however, most joint venture branch campuses have operated since their founding with a party secretary from their partner Chinese university on their management boards.
8) US and China must find ways to control their elites [Source: Financial Times] Tension between the US and China is driving much of what is happening in the markets today. The analysis has focused on tariffs, currency manipulation, strategic technologies and which country has the most to win or lose in a trade war. But there is a more important question to be asked when thinking about the future success and stability of each nation: which country will be better able to control its moneyed elites? In his 1982 work The Rise and Decline of Nations, the economist Mancur Olson argues that civilizations tend to decline when the moneyed interests take over politics. That has clearly happened in both countries, where the levels of wealth inequality are not dissimilar; the top 1% in China own about 30% of the economy; in the US, the figure is 42%.
For better or worse, China is tackling this head on via President Xi Jinping’s clampdown on the country’s princelings. Thoughtful people can disagree about whether a party that jails hundreds of thousands of people and executes some in the name of a corruption purge can maintain any sense of moral superiority or legitimacy. But Communist party elites would argue that this is all in service of the higher goal of economic development. Chinese leaders also believe that America’s inability to curb its own elites will be the country’s downfall. They have a point. Last week, several important Supreme Court decisions were made that favoured the few above the many. They included the American Express ruling, which weakened antitrust enforcement; the upholding of Donald Trump’s travel ban on immigrants mainly from Muslim nations; and the Janus decision that strips funding from much of the US union movement.
This all stems from the fact that moderate Republicans, including many in the business community, supported Mr. Trump despite misgivings because they knew he would appoint a friendly Supreme Court justice. But Mr. Trump was in some ways a reaction to the Democratic party’s decision over the past few decades to ally with elite interests — Wall Street under Bill Clinton, and Silicon Valley under Barack Obama. Many of the party’s top donors and power brokers in the party blend a “greed is good” 1980s ethos with a sense of liberal entitlement that is anathema to large numbers of Democratic voters. Witness last week’s congressional primary in New York City. A veteran representative — number four in the House leadership — was defeated by a 28-year-old who favours guaranteed jobs and universal healthcare.
America’s elite business class has, for decades now, sought to distract from rising oligopoly with hypocrisy. US companies complain vociferously about unfair Chinese trade practices and intellectual property theft. But faced with challenges in the Chinese market they usually caved in to maintain their access rather than seeking public help from the US administration to mount official challenges. “The thought of accessing 1.3bn consumers is simply too tempting,” says Michael Wessel, a trade expert and former Democratic staffer. “They are trading America’s long-term economic future for the prospects of returns that simply aren’t as robust as promised.”
As per the author, it’s surprising any western multinational thought they could win this bet. China has made it clear it intends to give more, not less, support and preferential access to its own companies both at home and in areas where China has significant geographical influence. With US not doing any better than China to curb the power of elites, the left has a choice to make between capital gains and moral certainty. The right must decide whether it still has a soul. The centre will not hold — and there will be big economic and political impact as it crumbles. The US may well be heading towards a choice between fascism driven by rural whites or socialism driven by urban millennials. 9) Looking good can be extremely bad for the planet [Source: The Economist] We all love to dress up every day and style is supposedly forever. But the garments needed to conjure up eternal chic are spending less time on shop racks and in homes than ever before. Global clothing production doubled between 2000 and 2014, as apparel firms’ operations became more efficient, their production cycles became quicker and fashionistas got more for their money. From just a few collections a year, fast-fashion brands such as Zara, owned by Spain’s Inditex, now offer more than 20; Sweden’s H&M manages up to 16. However, dressing to impress has an environmental cost as well as a financial one. From the pesticides poured on cotton fields to the washes in which denim is dunked, making 1kg of fabric generates 23kg of greenhouse gases on average. Because consumers keep almost every type of apparel only half as long as they did 15 years ago, these inputs quickly go to waste. The latest worry is shoppers in the developing world, who have yet to buy as many clothes as rich-world consumers but are fast catching up.
Most apparel companies know that sooner or later, consumers’ awareness of this subject will rise. That is a worry. Various furores in the 1990s and afterwards over the working conditions of people making goods for firms such as Nike, Walmart and Primark badly damaged brands. The clothing industry cannot afford to appear so ugly again. One obvious way in which firms can answer environmental concerns is to use renewable energy to power their facilities. Beyond that, they can cut back sharply on water and chemical use; and they can develop new materials and manufacturing processes that reduce inputs.
The record in this regard is mixed. H&M was the largest buyer in the world of “better cotton” last year—that is, cotton produced under a scheme to eliminate the nastiest pesticides and encourage strict water management. It grows in 24 countries and represents about 12% of the 25mn tonnes of cotton produced each year globally. Kirsten Brodde of Greenpeace also notes that H&M has eliminated toxic per- and polyfluorinated chemicals from its lines (which are used to make garments waterproof). Nike’s Flyknit method of weaving items, including trainers, reduces waste by 60% in comparison with cutting and sewing. Flyknit products have a large following: revenues from the line came to more than $1bn in the last fiscal year. But for many firms, research and development into new materials and methods is not a priority. Plenty do not measure their overall environmental impact. And introducing green collections can even carry a risk for brands. It is possible that a shopper will move on from wearing a consciously green T-shirt to viewing other kinds of clothing as the trappings of planetary destruction.
A few brands encourage customers to recycle old clothes by returning them to stores. But almost all apparel today is made of a mix of materials—very often including polyester. Separating them out is difficult and mechanical methods of recycling degrade fibres. Chemical methods are too expensive to be viable. Shipping second-hand clothes off to countries in Africa and Asia is also a bust. Even if local markets are large enough to absorb them, the poorer quality of polyester-mixed garbs means they do not survive long. More durable apparel could help. Tom Cridland, a British designer, creates men’s clothing that is designed to last three decades thanks to strong seams and special treatments to prevent shrinking. He expects revenues of $1mn this year, but admits that his model will be hard to scale.
Then there’s Patagonia, a maker of climbing and hiking gear, who sends vans to campuses to help students patch up jackets and trousers. It helps others with greenery, too. After discovering a type of material for wetsuits that, unlike neoprene, requires no oil to make, Patagonia shared the find with surfing brands such as Quiksilver. Such innovation is badly needed. Style may be forever but today’s model of clothing production is not.”
10) Ways to think about machine learning [Source: ben-evans.com] In this piece, the author explores the topic of “Machine Learning” and what it actually means. Machine learning lets us find patterns or structures in data that are implicit and probabilistic (hence ‘inferred’) rather than explicit, that previously only people and not computers could find. They address a class of questions that were previously ‘hard for computers and easy for people’, or, perhaps more usefully, ‘hard for people to describe to computers’. And we’ve seen some cool (or worrying, depending on your perspective) speech and vision demos. When it comes to machine learning, the more useful things to talk about are automation, enabling technology layers and relational databases.
Why relational databases? Because they were a new fundamental enabling layer that changed what computing could do. Before relational databases appeared in the late 1970s, if you wanted your database to show you, say, 'all customers who bought this product and live in this city', that would generally need a custom engineering project. Databases were not built with structure such that any arbitrary cross-referenced query was an easy, routine thing to do. If you wanted to ask a question, someone would have to build it. Databases were record-keeping systems; relational databases turned them into business intelligence systems. This changed what databases could be used for in important ways, and so created new use cases and new billion dollar companies. Relational databases gave us Oracle, but they also gave us SAP, and SAP and its peers gave us global just-in-time supply chains - they gave us Apple and Starbucks. So, this is a good grounding way to think about machine learning today - it’s a step change in what we can do with computers, and that will be part of many different products for many different companies.
The heart of the most common misconception that comes up in talking about machine learning – is that it is in some way a single, general purpose thing and that Google or Microsoft have each built *one*, or that Google 'has all the data', or that IBM has an actual thing called ‘Watson’. Really, this is always the mistake in looking at automation: with each wave of automation, we imagine we're creating something anthropomorphic or something with general intelligence. In the 1920s and 30s we imagined steel men walking around factories holding hammers, and in the 1950s we imagined humanoid robots walking around the kitchen doing the housework. We didn't get robot servants - we got washing machines. Washing machines are robots, but they're not ‘intelligent’. They don't know what water or clothes are. Machine learning lets us solve classes of problem that computers could not usefully address before, but each of those problems will require a different implementation, and different data, a different route to market, and often a different company.
Hence, one of the challenges in talking about machine learning is to find the middle ground between a mechanistic explanation of the mathematics on one hand and fantasies about general AI on the other. So, in what way does machine learning help us? It may well deliver better results for questions you're already asking about data you already have, simply as an analytic or optimization technique. It lets you ask new questions of the data you already have. It opens up new data types to analysis - computers could not really read audio, images or video before and now, increasingly, that will be possible.
-Prashant Mittal is Strategist, at Ambit Capital. Views expressed are personal