Image: ShutterstockAt Ambit, we spend a lot of time reading articles that cover a wide gamut of topics, ranging from zeitgeist to futuristic, and encapsulate them in our weekly ‘Ten Interesting Things’ product. Some of the most fascinating topics covered this week are: Biology (“The Final Plague”), Leadership (True leader emerges in crisis), Business (Business plan for life after lockdown; Highs and lows of a New York skyscraper king) and Parenting (All you got to know about raising a kid). Here are the ten most interesting pieces that we read this week, ended April 24, 2020: 1) Waiting for "The Final Plague" [Source: edge.org] In this eleven-year-old conversation, Nathan Wolfe, the Lorry Lokey Visiting Professor of Human Biology at Stanford University talks about various organisms, parasites and how he discovers novel viruses. He says that there is much diversity of viruses: most of them are probably neutral, many of them are ecologically important, some of them are actually mutualistic with their hosts. There is a huge fascination with negative viruses, and negative microorganisms, that can spread like the 1918 influenza and HIV—SARS had the potential to do this. He knew that a covid-like pandemic would one day create havoc world over as most of the viruses have animal origins. He also gives an example of HIV/AIDS and how it spread. A range of organizations have spent billions of dollars on research to come up with an HIV vaccine. The benefits of this investment have been questionable. To make a long story short, it is really hard to create vaccines. The easy vaccines are actually the ones that aren't really created by humans. They are the ones that are discovered. Vaccinia, smallpox vaccine: it's not like we did anything technical to it. He says, “The reason we think of viruses as negative entities is that physicians are the drunks looking under the lamppost for their keys. If you're just looking for negative viruses, that is all you're going to find. I think physicians have a lot to offer, but generally in a specific context. We're looking at biological phenomena and so it should be biologists who study them.” 2) What good leadership looks like during this pandemic [Source: HBR]
Leaders are meant to lead by example. And that’s what Adam Silver, the commissioner of the National Basketball Association (NBA), and New Zealand’s Prime Minister Jacinda Ardern have done. They acted well before others and were well-prepared to tackle the ongoing pandemic. So what differentiates between a good and a bad leader in such a time of crisis? The author of this piece has jot down a few pointers. i) Act with urgency: With such a pandemic looming large, the more you wait the more destruction it will cause. Hence, it is imperative to act quickly. Against the natural tendency toward delay, acting with urgency means leaders jump into the fray without all the information they would dearly like. ii) Communicate with transparency: Communicating bad news is a thankless task. Leaders who get out ahead risk demoralizing employees, customers, or citizens, threatening their popularity. It takes wisdom and some courage to understand that communicating with transparency is a vital antidote to this risk. iii) Respond productively to missteps: Because of the novelty and complexity of a pandemic — or any other large system failure — problems will arise regardless of how well a leader acts. How leaders respond to the inevitable missteps and unexpected challenges is just as important as how they first address the crisis. iv) Engage in constant updating: Certainly, steadiness is required in these times. But given the novelty and rapid evolution of the pandemic, it is wrong to think that the work of a leader is to set a course and stick to it. Leaders must constantly update their understanding of prior probabilities, even daily, deliberately using strategies to elicit new information and learn rapidly as events unfold and new information comes to light. Doing this means relying on expert advisors and energetically seeking diverse opinions. Most people in positions of authority have seen great suffering or experienced loss — or at least their advisors have — and yet far too many failed to decisively take potentially unpopular action in the critical days as the virus gained momentum. Leadership is strengthened by continually referring to the big picture as an anchor for meaning, resisting the temptation to compartmentalize or to consider human life in statistics alone.
3) Identifying management’s capital misallocation [Source: drvijaymalik.com]
People invest in companies for the sole motive of making profits. No one wants to make a loss. But, rarely people read company annual reports word-by-word to understand the business and its risks. This blog throws light on how you can study a company’s annual report to see what the company is hiding. Investors need to be very cautious before putting money in companies that have a history of losing shareholders’ money. In business language, it is called as poor capital allocation.
This article also highlights a few cases where companies could not utilize shareholders’ money efficiently. These examples also aim to highlight the sections in the annual report from where investors can get the relevant information to assess the capital allocation decisions of the companies. It’s not only the small companies, you can use these analyses to study blue-chip companies as well. This blog briefly touches upon 5 points.
1) Companies that could not generate returns for their shareholders even in their main business of operations. 2) Companies that ventured into unrelated business areas and then lost money. 3) Companies that entered into derivative transactions where the management did not understand the true risk and as a result, lost huge money of shareholders. 4) Companies that generated surplus cash from their main business but invested it in financial instruments where they lost money. 5) Companies that made acquisitions when the main business was doing good and then these acquired divisions consumed significant cash without giving any profits.
4) The Consumer in the Age of Coronavirus [Source: The Sarasota Institute]
Consumer behavior has changed over time. And this piece by the father of marketing, Philip Kotler, shows how consumers’ behavior is bound to change with Covid-19. After the industrial revolution, world’s population had greater access to products and services. The steam engine, railroads, new machinery and factories, and improved agriculture greatly increased the economy’s productive capacity. More production inevitably led to more consumption. More consumption led to more investment. More investment increased production in an ever expanding world of goods. But today, there are signs of a growing anti-consuming movement. We can distinguish at least five types of anti-consumerists.
1) Life simplifiers: These are people who want to eat less and buy less. They are reacting to the clutter of “stuff”. They want to downsize their possessions, many of which lie around unused and unnecessary. 2) Degrowth activists: They feel that too much time and effort are going into consuming. Degrowth activists worry that consumption will outpace the carrying capacity of the earth. They worry about the people in the emerging poor nations aspiring to achieve the same standard of living found in advanced countries, something that is not possible. 3) Climate activists: They worry about the harm and risk that high buying consumers are doing to our planet through generating so much carbon footprints that pollute our air and water. Climate activists carry a strong respect for nature and science and have genuine concerns about the future of our planet. 4) Sane food choosers: They have turned vegetarians and vegans. They are upset with how we kill animals to get our food. Everyone could eat well and nutritiously on a plant, vegetable and fruit diet. 5) Conservation activists:They plead not to destroy existing goods but to reuse, repair, redecorate them or give them to needy people. Conservationists want companies to develop better and fewer goods that last longer. Many are environmentalists and anti-globalists. Anti-Consumerism will also change capitalism. If more consumers decide to be anti-consumerists, they will spend less. Their spending has traditionally supported 70% of our economy. If this goes down, our economy contracts in size. A slowdown in economic growth will lead to more unemployment. Add the fact that more jobs are being lost to AI and robots. This will require Capitalism to spend more on unemployment insurance, Social Security, food stamps, food kitchens, and social assistance.5) Michael Stern: The highs and lows of a New York skyscraper king [Source: Financial Times]
Michael Stern is one of the famous developers in New York. He has made a name for himself by building some of the classiest and tallest buildings in the city. But the crisis has also got him worried a bit. When Mr. Stern and his partners broke ground on their tower in 2014, the market for “luxury apartments” in New York City had become so overheated that the term had ceased to have much meaning for units that ranged in price from a few million dollars to tens of millions. Demand was such that Stern would sell out a building based on a plan and a showroom. That is no longer the case — even before the coronavirus pandemic.
111 West 57th, Mr. Stern’s ambitious project is now close to completion after years of delays and legal bloodletting among its backers. Its units are priced from $17m to more than $50m apiece. Sales have been slow. Mr. Stern, who never attended university, prides himself on his “nuts and bolts” knowledge of construction. Yet he also has a taste and sensibility that can make an architect’s pulse quicken. “He’s commissioned some very good architecture,” says Daniel Kaplan, the senior partner at FXCollaborative, the New York architecture firm. “The thing that’s really interesting about him is that all the things people say you can’t do — or you can’t do for the money — he says, ‘Forget it!’”
It wasn’t all easy when he started by buying a plot in order to develop it and sell. There were people who couldn’t trust this 29-year-old back then. But things worked for him and he was able achieve what he dreamt of. Ultimately, the success of 111 West 57th, and so much New York real estate, may depend on how long the city remains shuttered, and what sort of world is there to greet it when it eventually reopens. After surviving a pandemic, will the world’s billionaires still desire impossibly slender trophy flats in the Manhattan sky? Will they still be billionaires?
6) Peaceful Parenting with Dr. Laura Markham [Source: Farnam Street]
In this podcast, Dr. Laura Markham, three-time best-selling author and the founding editor of Aha! Parenting blog, talks about how to use her Peaceful Parenting method to forge lifelong connections of love and trust with our children, the importance of observable modeling, and the surprising role nature plays in effective parenting. On being perfect she says that we won’t be perfect and our goal can be to function from a place that is not about who’s right and wrong, but is more about the level of the heart, where we’re the leader, and we’re leading from our heart. And what matters is not only compassion towards our child, but also protecting and supporting our child to be their best self.
Kids need love, compassion and attention. They all need the same thing from their parents. 1) They all need to know that they are acceptable exactly as they are with all of their inconvenient feelings. 2) No matter what, their parent will be there to help them, to take care of them, to protect them, to give them food and shelter and emotional love, physical love.
Kids will grow resilience if we allow them to have those negative feelings, and they learn the world doesn’t end — that they can do these things and come out fine in the end, and everything will be okay, right? If we stop our child from growing resilience, it doesn’t help them at all. Then, we have unknowingly, unwittingly raised a child who doesn’t have the grit to go after what they want in life and get it. That’s a recipe for unhappiness.7) The business plan for life after lockdown [Source: Livemint]
In India, the scale of the covid-19 infection has ballooned multifold in the past two weeks. Segregating the working stations on the shop floor is now a must, so is fumigating the plant every few hours. The number of workers seated in a bus— those that ferry them from the villages to factories—must be capped. Managing the shifts, the lunch hours and even the sort of cutlery that can be used in the canteens now need a rethink. “One of the interventions we are working on is how a single person can manage multiple machines," Vinnie Mehta, director general of Automotive Component Manufacturers Association of India (ACMA) said. “Going forward, the industry would need systems that enable remote monitoring of processes and machines. You will have more automated vehicles moving inside the plants."
Nearly all companies are in the middle of what they describe as “scenario planning". More automation is on the cards but that’s a long-term goal. Depending on the sector, the companies said that demand could take anywhere between a quarter or more to revive. Also, some industrialists have made a case for a more humane approach in dealing with suppliers and employees. M.S. Unnikrishnan, managing director and CEO of engineering company Thermax is one of them. “People first, economy second—this is what I believe in," he told when asked about the economic consequences of under-utilized factories, post the lockdown. “We can start with 30% capacity, go 40-50% over the next few months," he said.
An executive from an electronics hardware manufacturer, which employs over 20,000 people in India, summed up the post covid-19 scenario, poignantly. “We have an economic storm, a health storm, a security storm. All of them have converged into the perfect storm". According to Johns Hopkins Medicine, staying at least six feet away from one another reduces the chances of catching covid-19. This implies factory-floor modifications with lifting and shifting of machinery. It is easier said than done when the lockdown is still in force. In the post-covid world, many more companies would need to re-look at their product strategy. Perhaps, drop non-essentials.8) Will the worst downturn since the Great Depression last as long? [Source: vox.com]
The most important economic question right now is: How long will the bad times last? After all, what made the Great Depression so great was not just the severity of the slump but its extraordinary length — beginning in the United States in the second half of 1929 and not really ending until almost 10 years later. A prolonged collapse akin to the Great Depression is by no means inevitable, but it’s not impossible either. The fate of the American economy will rest not just on the course of the virus but on economic policy choices. The most striking thing about the American economy in the 1930s is that the Depression went on and on and on. Will this too continue?
The recurrence of the phrase “opening up the economy” in contemporary politics reflects the view that current economic problems are caused by top-down closure orders. When restrictions are lifted, the hope is the economy will come roaring back. With this view, you might see the economy as sort of like a spring. It’s been compressed, for now, for the sake of flattening the curve. But when pressure abates — whether because of policy shifts or medical breakthroughs — it’ll bounce right back
But, the recent Great Recession is an unfortunate example of the problem. Jobs came back, but at a much slower pace than they’d disappeared, giving the recession a prolonged and asymmetrical character. A financial breakdown caused the job losses, but fixing the financial breakdown didn’t cause a rapid bounce-back. Most Americans are going to exit this crisis poorer than they were at the beginning, thanks to some combination of job loss, reduced hours, pay cuts, investment losses, lost tips, or reduced sales. To normalize the economy, it won’t be good enough to lift restrictions and address the underlying public health emergency, people are going to need sources of income. The federal government, which is uniquely positioned to spend much more than it takes in, can serve as that source of income.9) Covid capitalism is flirting with socialism [Source: Livemint]
Covid-19 would have been contained had the Chinese authorities informed the World Health Organisation (WHO) well in time. It worsened because they tried to suppress the outbreak. Would the virus have spread unchecked if the US, UK, Spain, Italy and India had been proactive early on? These countries were slow to enforce testing or quarantine strategies and travel bans, and therefore failed to control the outbreak. Blurring the lines between the public and the private, right-wing governments are even directly subsidizing private sector wages in rich countries. Countries are spending like never before—not even during the wars had governments blown budgets to the skies as they are today. But how far can they do this?
These are temporary distress mitigation policies with a short shelf-life. They will survive only until coronavirus is brought under control by a vaccine. They won’t be a lasting legacy of the crisis. Fact is, governments even in the largest economies cannot afford to keep such large spending programmes in perpetuity. Even distress relief bears tell-tale signs of the state’s weakness. The most vulnerable are to receive the least. A large number of Italians—informal contract workers, care providers, cleaners, construction workers, waiters, couriers, drivers and farm workers—have no refuge in wage protection or the one-time handouts offered by the country’s relief package of 1.4% of gross domestic product (GDP).
India is rationing bailouts just as it is rationing testing kits, masks and personal protective equipments (PPEs). Economic history of other countries with large welfare programmes shows that growth slows down after the fiscal burden of the government is increased. Poor countries subsist hand-to-mouth from budget to budget, but it is hard to see even rich countries returning to large, permanent welfare programmes. The covid-19 crisis follows a decade of difficulties. Will the crisis change the role of the state significantly and irreversibly? Given the scale of intervention, government balance sheets will have to be re-designed. The laws of public finance and monetary policy will have to be rewritten. Once the crisis ends, which it will once a vaccine is ready, the state will pull back. The question is: by how much?10) How China sees the world and how we should see China [Source: The Atlantic]
China’s goal of world domination known by all. In this piece, H. R. McMaster, former United States National Security Advisor elaborates on China’s plan. Since the heady days of Deng Xiaoping, in the late 1970s, the assumptions that had governed the American approach to our relationship with China were these: After being welcomed into the international political and economic order, China would play by the rules, open its markets, and privatize its economy. As the country became more prosperous, the Chinese government would respect the rights of its people and liberalize politically. But those assumptions were proving to be wrong.
As China pursues its strategy of co-option, coercion, and concealment, its authoritarian interventions have become ubiquitous. Inside China, the party’s tolerance for free expression and dissent is minimal, to put it mildly. The repressive and manipulative policies in Tibet, with its Buddhist majority, are well known. In Xinjiang, in northwestern China, where ethnic Uighurs mainly practice Islam, the party has forced at least 1 million people into concentration camps. The government denies this, but last year The New York Times uncovered a cache of incriminating documents, including accounts of closed-door speeches by Xi directing officials to show “absolutely no mercy.”
Also, China is playing the debt trap game. For developing countries with fragile economies, Belt and Road sets a ruthless debt trap. When some countries are unable to service their loans, China trades debt for equity to gain control of their ports, airports, dams, power plants, and communications networks. As of 2018, the risk of debt distress was growing in 23 countries with Belt and Road financing. Eight poor countries with Belt and Road financing—Pakistan, Djibouti, the Maldives, Laos, Mongolia, Montenegro, Tajikistan, and Kyrgyzstan—already have unsustainable levels of debt. Without effective pushback from the United States and like-minded nations, China will become even more aggressive in promoting its statist economy and authoritarian political model.
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