Some of the most fascinating topics covered this week are: Friendship (It's more than what you think it is), Business (Will the IPO bonanza last?; Decency pays off in business as well as in life), Sports (Can Sports recover in 2021?), Education (Rural schooling is going into the dark), and Podcast (Can Substack CEO Chris Best build a model for journalism).
At 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: Friendship (It’s more than what you think it is), Business (Will the IPO bonanza last?; Decency pays off in business as well as in life), Sports (Can Sports recover in 2021?), Education (Rural schooling is going into the dark), and Podcast (Can Substack CEO Chris Best build a model for journalism).
Here are the ten most interesting pieces that we read this week, ended December 18, 2020.
1) The fruits of friendship [Source: perell.com] The author of this blog talks about the importance of friendship and how you got to nurture it. Like a marriage, the best friendships require investment, compromise, and sacrifice. By creating shared alignment, trust, and companionship, strong friendships nourish the soul and sharpen the mind. In a book called Bowling Alone, sociologist Robert Putnam studied the decline of social interactions in America through the lens of declining participation in labor unions, fraternal organizations, and religious groups. Mr. Putnam contrasts the struggles of building friendships in urban communities with “The Sprawl Civil Penalty,” which states that urban sprawl and suburbia lowers community involvement by roughly 20%. As a result, American communities have lower trust, reciprocity, information, and cooperation than they once did.
Friendship is vital to your whole spirit — your being, your character, your mind, and your health. And yet, all too often, humans don’t realize what’s essential until they are in trouble, so they dismiss the power of friendship when things are going well. If you want a deep conversation, you need time. Instead of spending two or three hours with somebody, the author prefers to spend two or three days with them. More, if possible. The benefits of friendship compound. Friends who act with grace and sincerity over a series of repeated interactions will be gifted with selfless generosity and loving kindness.
Peers are the engine of career success. Together, the ones you’re closest to comprise your “10 Club.” The 10 Club is a group of 10 people you want to work with later in life, and every member should be kind, ambitious, and generous. Travel together, meet their families, and attend their weddings. Get to know them. Then, team up and support each other. As the world changes faster and faster, the utility of friendship will increase. The people in your “10 Club” will help you navigate the future and point your career in a productive direction.
2) Will the IPO bonanza last? [Source: The Economist] This year has been one of the worst years for many, but not for the companies raising equity. In the past few days, Tesla has said it will sell $5bn of new shares, while DoorDash, a food-delivery company, raised $3.4bn in an IPO. In Hong Kong, shares of JD Health, a digital-medicine star, rose by over 50% on their first day of trading after its $3.5bn IPO. Worldwide, some $800bn of equity has been raised in 2020 by non-financial firms, the highest sum on record.
Raising equity is back in fashion for several reasons. Some firms need to repair the damage from the pandemic, for example Rolls-Royce, an aircraft-engine maker, and Carnival Cruises. There are other factors, too. More Chinese firms are coming of age. This year Nongfu Spring, China’s answer to Evian, floated, making its founder the country’s richest man. Investors are experimenting with legal structures that they think are more efficient than IPOs, including SPACS (special purpose acquisition companies). Investors are euphoric but they face several risks. One is that prices are too high. Another is that it is not yet clear whether overall corporate indebtedness will fall, partly because the damage from lockdowns is still mounting.
Governments should welcome the equity boom. For years libertarians have argued that the only way to revive IPOs is by watering down corporate-governance rules. They have been proved wrong. Many politicians long to ban buybacks, which they accuse of all sorts of evils. If politicians really want to sustain healthy equity markets, they should instead reform tax codes, which almost everywhere favour debt by making interest costs tax-deductible. Removing the tax break for debt and putting equity on a level playing field should be the priority.
3) Unbundling Bank Of America: How the traditional bank is being disrupted [Source: CB Insights] This report shows how tech companies are unbundling Bank of America’s front office, from consumer deposits and payments to equity research and business credit cards. The banking industry has not been spared from the impact of Covid-19. Bank of America, for one, saw profits drop 16% year-over-year (YoY) in Q3’20 to $4.9B. The pandemic has also accelerated recent trends in banking, especially among the millennial demographic, which tends to favor digital banking and online brands over traditional banks. Tech companies are chipping away at the traditional bank’s market share. For example, stock trading app Robinhood’s commission-free approach to investing has forced incumbents to follow suit, while products like Venmo and Cash App have disrupted peer-to-peer payments.
Startups are using consumer payments products like money transfers and peer-to-peer payments to chip away at banks’ payments market share. International money transfers and remittances are expensive to complete, and they make up a massive market: Remittances are worth an estimated $743B, according to CB Insights’ Industry Analyst Consensus. Investment banking services are more difficult to unbundle, given significant regulatory restrictions for the industry. However, some startups are enabling the digitization of traditional banks or are providing auxiliary services directly to banking clients like institutional investors.
Consumer deposits and savings are the bread and butter of any traditional bank, and Bank of America is no exception. The company is the second-largest lender in the US based on assets, and it made $3.3B in net income on deposits in the first 3 quarters of 2020. This makes the sector an attractive target for fintech companies. Companies like Chime, Monzo, N26, Revolut, Varo Money, Current, and Dave all offer digital banking services to consumers. Banks are losing their edge in investing and wealth management as consumers flock to trade brokerages, personal finance management tools, and robo-advisors. Fintechs are catering to millennials and Gen Z consumers through digital, self-directed investment platforms that forgo the traditional financial advisor.
4) A new book argues that decency pays off in business as well as in life [Source: The Economist] Decency is one of the attributes that leaders should possess. The core message in David Bodanis’ book, “The Art of Fairness”, can be found in the subtitle: “The power of decency in a world turned mean”. The Empire State Building was constructed in just 13 months, and that included the dismantling of the Waldorf-Astoria hotel that sat on the site. Paul Starrett, the builder, treated his workers rather well by the standards of the time, paying much attention to safety and paying employees on days when it was too windy to work. Daily wages were more than double the usual rate and hot meals were provided on site. The concept is known as “efficiency wages”. Companies that compensate workers well and treat them fairly can attract better, more motivated staff.
The author also gives other examples of how decency pays off. When Danny Boyle, a film director, was asked to organise the opening ceremony of the 2012 London Olympics, he faced the tough task of keeping the details secret when the project required thousands of volunteers. The conventional approach would have been to make the volunteers sign a non-disclosure agreement. Instead, he asked them to keep the surprise—and trusted them to do so. They did, thanks to the grown-up way he treated them. He listened to their ideas for improving parts of the ceremony and ensured (by threatening to resign) that the volunteers did not have to pay for their costumes.
Mr. Boyle demonstrated one of the most important traits of good leadership, the author argues, which is a willingness to listen. Individuals can become fixated on a particular approach to resolving a problem and ignore any advice that suggests a different tack, especially if it comes from a junior colleague. “When your underlings aren’t terrified of you, and you’re modest enough to know you’re fallible, you can set up the channels that will help you avoid fixation,” Mr. Bodanis writes. It is a wise lesson. Ruling by fear may work for a while, but it is doomed to fail in the long run.
5) How civilization broke our brains [Source: The Atlantic] What can hunter-gatherer societies teach us about work, time, and happiness? This question is answered by anthropologist James Suzman’s Work: A Deep History, From the Stone Age to the Age of Robots. Mr. Suzman has devoted almost 30 years to studying the Ju/’hoansi “Bushmen,” a tribe whose members lived an isolated existence in Namibia and Botswana until the late 20th century, when incursions by local governments destroyed their way of life. Mr. Suzman describes the Ju/’hoansi of yore as healthy and cheerful, perfectly content to work as little as possible and—not coincidentally—ingenious at designing customs that discourage competition and status-seeking.
Work, Mr. Suzman observes, is what distinguishes animate organisms, humans above all, from inert matter: “Only living things actively seek out and capture energy specifically to live, to grow and to reproduce.” Yet it is the million-year history of labor’s counterpoint, leisure, that holds the key to humanity’s exceptionalism—its record of remarkable progress, and the discontent that seems to have accompanied those strides. The Ju/’hoansi spent an average of 17 hours a week finding food—2,140 calories daily—and devoted another 20 to chores, as Suzman gleaned from other ethnographies and firsthand research. This left them with considerably more downtime than the typical full-time employee in the U.S., who spends about 44 hours a week doing work—and that doesn’t include domestic labor and child care.
Even the present-oriented hunter-gatherers, it turns out, had to develop communal strategies to quash the drivers of overwork—status envy, inequality, deprivation. When a Ju/’hoan hunter returned with a big kill, the tribe perceived a danger that he might think his prowess elevated him above others. “We can’t accept this,” one tribesman said. “So we always speak of his meat as worthless. This way we cool his heart and make him gentle.” This practice became known among researchers as “insulting the hunter’s meat.” The tribe also “insisted that the actual owner of the meat, the individual charged with its distribution, was not the hunter, but the person who owned the arrow that killed the animal,” Suzman writes. By rewarding the semi-random contributor of the arrow, the Ju/’hoansi kept their most talented hunters in check, in order to defend the group’s egalitarianism.
6) 5 ways to improve your self-awareness to be successful [Source: Fast Company] Self-awareness is key to effective communications. There are countless examples of poor communication from leaders who lack the self-awareness to realize they are failing to get their messages across and it results in missed deadlines, failed projects, and frustrated employees. Now, with so many people working remotely, communication is even more challenging. It is critical that leaders develop self-awareness to ensure their communications are effective, not only maintain productivity but also to engage, inspire, and retain their people. To ensure that as a leader, you are as self-aware as you think you are, here are some things to put into practice.
1) Get feedback: Regular, anonymized 360-feedback keeps us from seeing ourselves only through our own eyes. It becomes increasingly important, as we move up in leadership, to get feedback not just from those above but from the people we lead, so that our view doesn’t get clouded by only what we perceive to be true. 2) Review your successes and failures: Take stock of the times you were successful, as well as those you weren’t. What happened in each situation? What was different? If you were to do it again, what would you change? Learn from these. 3) Strive for continuous improvement (in yourself): Don’t stop your own development. Whether it is related to your job or something you enjoy outside of work, it is important to keep learning. Learning keeps us agile and reminds us that we aren’t experts at everything. 4) Practice mindfulness: Mindfulness meditation, done for even 10 minutes a day, has been shown to increase focus and enable people to pay better attention to what is happening in the moment. This training of the brain enables leaders to be better listeners by allowing them to eliminate the distractions going on around them, such as the next meeting they need to prepare for. 5) Take an assessment: There are many assessments out there that will help you identify what you don’t know or can’t see in yourself: your blind spots. These measure you on the critical components of emotional intelligence, including self-awareness, and recommend specific actions you can take to address areas that need more development. As a leader, self-awareness is crucial for motivating your people, communicating your strategy, and building the relationships that fuel your business.
7) Layoffs and Losses: Can Sports recover in 2021? [Source: Forbes India] Coronavirus has hit the sports industry very hard. In Wisconsin, ticket agents and hot dog vendors and bartenders and janitors lost their livelihoods this year. Combined, more than 2,200 people who worked at Packers, Bucks and Brewers games were furloughed. It is an economic toll being felt across every major professional sports town in the country. In 2020, the sports industry in North America was projected to generate $75.7 billion, according to PwC, an accounting firm. Instead, it lost more than one-third of its value as leagues suspended play before returning with stripped-down seasons.
While the coming vaccine in the United States raises hope that fans will be able to return to stadiums by late spring or early summer, the spread of the virus this winter will deepen an already cratered sports economy. By one estimate, the cancellation or postponement of every sports event from mid-March to May alone meant that 1.3 million jobs, and $12.3 billion in earnings, were at risk of being eliminated. That figure grew to $28.6 billion through the end of November, according to Emsi, an economic modeling firm that focuses on the labor market.
To assess the effect of losses so far on the industry’s bottom line and workers, The New York Times zoomed in on one place — Wisconsin — that had been slated to host numerous college and pro games on the first weekend of October. Instead of getting to celebrate its sports culture, Wisconsin got canceled events and an estimated $46 million loss of anticipated revenue, the Times found. Over the summer, the players union and the NFL’s team owners anticipated a shortfall in league revenues and set the salary cap at a minimum of $175 million next season. It meant that players would take an 11.6% pay cut for the 2021 season and allowed for the salary cap to shrink even more through the 2023 season.
8) How rural schooling is going into the dark [Source: Livemint] When stringent lockdown was imposed by the government, schools were shut down. Or rather, the schools went online. That’s okay for those who have a computer, laptop or smartphone, but what about the poor? Out of school and with no access to online lessons, children in India’s unnoticed rural corners are forgetting what they learnt. Many are at risk of dropping out. “We tried creating a WhatsApp group to share lessons online, but of the 152 enrolled students, only 10 joined. They too dropped out of the group within a few days," said Pooja Rani, a teacher from the government primary school in Mirapur village.
There was a sharp increase in the number of children in the 6-10 age group who were not enrolled in a school—from 1.8% in 2018 to 5.3% in 2020—found the Annual Status Of Education Report, released by the non-profit Pratham in October. The survey recorded a spike in smartphone ownership among rural households, from 37% in 2018 to 62% in 2020. But in poorer states like Uttar Pradesh, Rajasthan and Bihar, where digital access is anyway poor, it found that less than a quarter of the enrolled children received any learning material. Inequities in education along class, caste and gender lines have always existed, but the pandemic has worsened it tremendously, said Sandeep Chachra, executive director at the not-for-profit ActionAid India.
What steps can governments and civil society take to salvage the situation? Chachra from ActionAid suggests that India needs a country-wide survey to identify children from vulnerable families who have dropped out of school in order to bring them back. Additionally, it needs to strengthen public education facilities as more students are likely to join government schools due to financial duress.
9) Atmanirbhar Internet: Winners and losers in India’s quest for the middle in the era of splinternet [Source: ET Prime] The Internet is dark in North Korea, and considerably less dark, but controlled with an iron fist in China. Russia has its own version of everything, from social networking to search. The countries of West Asia have sought to control the free flow of information, as have some regimes in Africa. Long gone are the open ideals that romanticised how the Internet would make the world into a smaller place. The phenomenon even has a name — splinternet. The question is simple. Where does India want to be in the splinternet era? India has certainly been trying to create a different Internet, one where the country’s clout, heft and richness in data shines through. But this doesn’t mean it is trying to create a whole different beast, the way China did.
India has also been debating the need for data-protection legislation, but there are many who believe that this is just not enough, and India needs to go one step further and evolve its own model of technology. An essay by the influential Nandan Nilekani, a central figure on India’s technology landscape and a proponent of an India-first approach to technology, in Foreign Affairs magazine pitches the Indian model for the Internet as built around public goods. “Instead of seeking to exert tighter control over the Internet within its borders, the country has created open digital platforms from scratch and tailored them to the Indian context. And instead of leaving them in the hands of a few private technology companies, the Indian government has built these systems as public goods.”
Mr. Nilekani is of course referring to the headline technology projects undertaken by government-controlled institutions in India, who then open these projects to a wider world to unlock value. Aadhaar and UPI (Unified Payments Interface) are the prime examples. While India has been making some good progress, there are some negatives too. India is already a country that shuts down the Internet more than any other, a worrying trend that puts it far ahead of nations like Pakistan, Yemen, Ethiopia, and Iraq. Critical thinking and dissent are important for a functioning democracy.
10) Podcast: Can Substack CEO Chris Best build a model for journalism [Source: The Verge] In this podcast, Nilay Patel talks to Chris Best about the way forward for the business of publishing news and more. They talk of everything about running a media company: how Substack makes money; how it’s going to make more money; how he plans to manage costs as Substack offers more and more services like editors and legal protection to writers; and how he’s thinking about content moderation, which every platform that works with independent creators has to deal with eventually. And, of course, how many newsletters anyone can really read in a day?
Talking about their competition, Mr. Best says one of their competitors is do-it-yourself. He says, “Like when we started, we looked at Ben Thompson, who already had a great paid newsletter blog and what he’d done, he had WordPress and Memberful and Stripe and MailChimp, and you tie a bunch of services together and build it yourself. And that’s, I think, always a compelling option for people that have the desire and ability to do that. And if you’re someone that really wants to tinker with every part of your setup and be able to have ultimate customizability, that’s pretty compelling.”
When asked whether they are going to do bundles, he says, “I think it’s very likely that we do bundles. If we do bundles, it will be bottom-up and not top-down. So, it’ll be writers choosing to bundle themselves rather than us coming and somehow forcing a bundle on people.” Talking about managing the tension with creators, he says that they are setting up business model in a way that aligns readers, and writers, and Substack, that will help with that a great deal. By the time that you’re paying Substack a lot of money, it’s because you’re making 10 times that much money.