Monthly Archives: July 2019

Consumerism isn’t a sellout – if capitalism works for all

By Richard V. Reeves – The essential thinginess of capitalism has been one of its most-criticized features. Materialism, and specifically consumerism, are almost always used as pejorative terms. Nostalgic conservatives, egalitarian progressives and environmentalists loudly agree on at least one thing: we are just buying too much stuff.

They’re not wrong. The U.S. self-storage market is already worth $38 billion, and growing fast. Almost one in ten households are now renting extra space. One feature of late capitalism is that many of us have more things than we have space for things.

At its best, however, consumerism is a powerful, positive force. It allows for the expression of identity, it can hold sellers to public account, and it drives new thinking and development. But this is only the case when consumers are being served fairly in the market. Today, there is a pressing concern about whether the forces of “bigness” – a trend toward fewer larger companies – combined with a reluctance on the part of governments to intervene in consumer markets, is dampening innovation and narrowing choice.

Before worrying about whether the market is serving consumers, we need to agree that it should. Critiques of consumerism have to be taken seriously before examining whether contemporary capitalism is friendly to consumers. These critiques usually come in four types: moral, aesthetic, financial, or environmental.

The moral critique of consumerism is that the acquisition of things displaces more worthwhile activities or priorities. Instead of shopping, we should be spending time with friends and family, in places of worship, or in nature. more>

Updates from Chicago Booth

Free markets for free men
By Milton Friedman – Do free markets make free men, or do free men make the free markets?

That might seem like a play on words or a purely semantic question, but it is not. It is a very real and very important question, and I think it contributes a great deal to understanding the kind of world we live in, and might live in.

One’s offhand impression is to say, “Well it must be free men who make free markets.” There’s an element of truth in that, but I think to a far greater extent, free markets make free men and not the other way around.

It’s true that there have been free men who have made free markets. The founders of the United States were free men who believed in individual and personal freedom, and they set up a constitution that was designed to preserve free markets.

But many people who regarded themselves as free men have produced totalitarian societies. The intellectual creators of the Soviet Union would have called themselves free men and would have said that they believed in individual and personal freedom. Yet they created not free markets but controlled markets. more>

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Updates from Ciena

How coherent optics improve capacity, performance and competitiveness for cable MSOs

Cable Multiple System Operators (MSOs) will be using coherent optics in their access networks to help solve a vital business challenge: the need to improve scale and reduce costs while delivering high data rates to end customers.
By Fernando Villarruel – MSOs must build a foundation for their networks that provides the needed capacity, introduces significant operational and cost efficiencies, and positions their businesses for future growth. This growth includes symmetric bandwidth support for the evolution of packet cores to cloud and aggregation of multiple revenue streams including mobile, business services and IoT.

Coherent optics facilitates growth because it enables massive scalability and maximizes network performance while using far fewer components, reducing equipment costs as well as the time and effort it takes to manage the network. These cost and operational benefits allow MSOs to be more competitive as they can place greater attention on delivering a compelling and differentiating customer experience.

Coherent optics employ a technique well known in the cable RF community—QAM, but in optics! This technology uses sophisticated symbol-based modulation scheme with higher baud to efficiently use the optical spectrum available so MSOs can optimize capacity and reach for a given link. With Ciena’s recently announced WaveLogic 5, we will be able to support 800Gb/s in one wavelength, for transport, and up to 200Gb/s in one coherent pluggable wavelength, in access! more>

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Updates from Siemens

Digitalize battery manufacturing for a greener future with electric vehicles

By Vincent Guo – The electrification of automobiles is gaining momentum globally as many countries have laid out plans to prohibit the sales of internal combustion engine (ICE) cars. The closing deadline is 2025 for the Netherlands and Norway, with Germany and India to be the next down the line in 2030, followed by UK and France in 2040. Other major economies in the world provide aggressive initiatives to push the electric vehicle (EV) to the market. For example, USA, China, Norway, Denmark, and South Korea have been implementing cash subsidiaries to EV buyers over $10,000 per vehicle, with Denmark and South Korea paying the consumer almost 20,000 Euro for each car purchased.

These incentive plans, however, also indicate that the price of EV is still high comparing to traditional cars. Independent research shows that the cost of the electrical powertrain is roughly 50% of the EV while, while the cost of the powertrain for ICE cars is only 16%. While it is largely true that the components of a car, whether it is an EV or ICE car, are largely similar except for the powertrain, the source of the difference in total cost is obviously the powertrain. The most expensive component is the battery pack, which accounts for roughly half of the powertrain and a quarter of the entire car.

Fortunately, the cost of the battery is going down steadily in the past 10 years. It is about to hit the point that the total cost of an EV is competitive to an ICE car and the point is about 125-150 USD/kWh.

As a result, battery manufacturing capacity has been ramping up quickly. Tesla is leading the way by its Gigafacotry in Nevada with target annual capacity of 35 GWh. Yet the race is tight as the battery manufacturing in Asia is catching up. CATL of China had recently announced a plan to boost its capacity in Germany to 100 GWh. more>

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Nobel Economist Says Inequality is Destroying Democratic Capitalism

By Angus Deaton – As at no other time in my lifetime, people are troubled by inequality.

Across the rich world, not only in America, large groups of people are currently questioning whether their economies are working for them. The same can be said of politics. Two-thirds of Americans without a college degree believe that there is no point in voting, because elections are rigged in favor of big business and the rich. Britain is divided as never before and, once again, many believe that their voice doesn’t count either in Brussels or in Westminster. And one of the greatest miracles of the 20th century, the miracle of falling mortality and rising lifespans, is no longer delivering for everyone, and is now faltering or reversing.

At the risk of grandiosity, I think that today’s inequalities are signs that democratic capitalism is under threat, not only in the US, where the storm clouds are darkest, but in much of the rich world, where one or more of politics, economics, and health are changing in worrisome ways. I do not believe that democratic capitalism is beyond repair nor that it should be replaced; I am a great believer in what capitalism has done, not only to the oft-cited billions who have been pulled out of poverty in the last half-century, but to all the rest of us who have also escaped poverty and deprivation over the last two and a half centuries.

But we need to think about repairs for democratic capitalism, either by fixing what is broken, or by making changes to head off the threats; indeed, I believe that those of us who believe in social democratic capitalism should be leading the charge to make repairs. As it is, capitalism is not delivering to large fractions of the population; in the US, where the inequalities are clearest, real wages for men without a four-year college degree have fallen for half a century, even at a time when per capita GDP has robustly risen. more>

Giving Europe political substance

By Mary Kaldor – Many of us who live in Britain feel embarrassed and ashamed by the contortions of our politics and the meanness of our government, towards the poor, the foreign and, particularly, the European—which is only going to get worse with Boris Johnson as prime minister.

Yet, paradoxically, the continuing struggle over ‘Brexit’ is an expression of democracy: the fact that the UK has not yet left the European Union is due to debates and positions which have been taken in Parliament, based on a mix of tactical advantage, public pressure and moral conscience. ‘Britain is thinking,’ I remember the great English-European historian Edward Thompson saying during the 1980s—‘and it only thinks every 50 years or so.’

Yes, the rise of right-wing populism has unleashed the dangerous demons of racism, homophobia, misogyny and general human cruelty. But it has also galvanised a new engagement with progressive politics, which could help to make possible the reforms needed if the EU is to survive until 2025.

The problem today is the weakness of substantive democracy: we have ‘a vote but not a voice’, said the Spanish indignados. And this is the consequence of three decades of neoliberalism.

The Maastricht treaty of 1991 was a compromise between the new wave of Europeanism, constructed from below by the peace and human-rights movements which opposed the cold-war divide during the 1980s, and the then newly-fashionable (if retro) market fundamentalism pioneered in Britain by Margaret Thatcher.

Maastricht enshrined in law the requirement to reduce budget deficits and the imposition on debtor countries of the burden of deflationary adjustment of fiscal imbalances. Meanwhile, the freeing up of capital movements and the liberalization of markets associated with the establishment of the single market speeded up the process of globalization, facilitated by the emergent information and communication technologies.

In a world where democratic procedures remain focused on the national level but where the decisions that affect one’s life are taken in the headquarters of multinational companies, on the laptops of financial speculators or otherwise in Brussels, Washington or New York, substantive democracy is evidently weakened. more>

Updates from Siemens

BAR Technologies uses Siemens Digital Industries Software solutions to create a new class of sport yacht
Siemens – With an optimized hull and dynamically adjusting foils that enable greater efficiency over a wider range of speeds, it’s a boat designed for both performance and comfort. The Princess Yachts R35 was made possible by BAR Technologies, which uses highly specialized techniques and processes when designing an America’s Cup racing yacht. BAR Technologies is now offering its unique expertise to customers across the marine industry.

Princess Yachts first approached BAR Technologies with the aim of creating a completely new design that would attract people who had not previously considered buying a boat. The new design was to be an entry-level purchase: a day boat that was exciting yet easy to drive. Paul Mackenzie, director of product development at Princess Yachts, explains: “We have a very high percentage of return customers and once they are in the Princess family they tend to move up our range, so introductory boats have always been important. However, most people who buy a Princess are already boat enthusiasts. We were looking to expand our potential market, closing the gap between boat owner and car owner, with a product that could be positioned alongside a super car.”

Simon Schofield, chief technology officer at BAR Technologies, adds “Our brief was to devise a technically driven design with increased efficiency and accessible performance, yet retain the luxury and quality that Princess is known for. The digital modeling and simulation tools and techniques that we have established over several years were critical to the fulfillment of the brief.”

The integrated virtual environment at BAR Technologies uses solutions from Siemens Digital Industries Software. These include NX™ software for product design,Teamcenter® software for data management and the Simcenter™ software portfolio, which includes Simcenter™ Nastran® for engineering analysis and Simcenter STAR-CCM+® software for computational fluid dynamics (CFD) analysis. more>

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France’s Tech Tax: What to Know

By Andrew Chatzky – French lawmakers just voted for a digital services tax that takes aim at two dozen large tech companies, including several high-profile U.S. brands. The move caused bipartisan dismay in Washington, and the White House has threatened retaliatory tariffs. But more countries could soon follow France’s lead.

On July 11, France’s Senate passed what’s come to be known as the “GAFA tax”—so called because it is seemingly designed to target Google, Apple, Facebook, and Amazon. It slaps a 3 percent tax on revenues earned by digital services firms that have total yearly revenues of more than $845 million and yearly sales in France of more than $28 million.

Few such French companies exist, leading to U.S. complaints of unfair treatment.

U.S. leaders have long complained about the European Union targeting American tech champions. The EU counters that regulation is needed to protect consumers’ privacy, avoid monopolies, and make sure Silicon Valley giants pay their fair share of taxes.

However, the bloc has so far failed to agree to EU-wide rules for taxing them.

The problem is that tech companies can put their offices in low-tax jurisdictions, such as Ireland or Luxembourg, and pay little in taxes, even as their revenues have surged across the EU. Brussels says that these companies end up paying taxes at less than half the rate of traditional businesses. But opponents of an EU tax, including Denmark, Finland, and Sweden, say that taxes on revenues rather than profits are unfair and would make the EU economy less competitive. more>

What’s driving populism?

If authoritarian populism is rooted in economics, then the appropriate remedy is a populism of another kind—targeting economic injustice and inclusion, but pluralist in its politics and not necessarily damaging to democracy.
By Dani Rodrik – Is it culture or economics?

That question frames much of the debate about contemporary populism. Are Donald Trump’s presidency, Brexit and the rise of right-wing nativist political parties in continental Europe the consequence of a deepening rift in values between social conservatives and social liberals, with the former having thrown their support behind xenophobic, ethno-nationalist, authoritarian politicians?

Or do they reflect many voters’ economic anxiety and insecurity, fueled by financial crises, austerity and glottalization?

Much depends on the answer. If authoritarian populism is rooted in economics, then the appropriate remedy is a populism of another kind—targeting economic injustice and inclusion, but pluralist in its politics and not necessarily damaging to democracy. If it is rooted in culture and values, however, there are fewer options. Liberal democracy may be doomed by its own internal dynamics and contradictions.

Some versions of the cultural argument can be dismissed out of hand. For example, many commentators in the United States have focused on Trump’s appeals to racism. But racism in some form or another has been an enduring feature of US society and cannot tell us, on its own, why Trump’s manipulation of it has proved so popular. A constant cannot explain a change.

Other accounts are more sophisticated. The most thorough and ambitious version of the cultural backlash argument has been advanced by my Harvard Kennedy School colleague Pippa Norris and Ronald Inglehart of the University of Michigan. In a recent book, they argue that authoritarian populism is the consequence of a long-term generational shift in values.

As younger generations have become richer, more educated, and more secure, they have adopted ‘post-materialist’ values that emphasize secularism, personal autonomy and diversity at the expense of religiosity, traditional family structures and conformity. more>

Updates from Chicago Booth

How bookies can outwit smart bettors
By Michael Maiello – Sports-betting markets are based entirely on predictions. A bettor has to pick a winning contestant, and a market maker―a bookie―bets on the opponent. The predictions rely on available information about both sides as well as conditions that might affect the outcome. As bookies have to take the other side of every bet, they have to know what they’re doing. But a bookie can be manipulated by a skillful bettor.

Chicago Booth’s John R. Birge, Booth PhD candidate Yifan Feng, Duke’s N. Bora Keskin, and Uber’s Adam Schultz explore the dynamics of how a bookie can keep from being manipulated. Because the sports-betting market shares features with financial markets that rely on spreads―including credit default swaps and options―the implications of the research could apply far beyond the $4.9 billion-a-year Nevada sports-betting industry. The findings may interest sports bettors and hedge-fund managers alike.

The researchers identify a key problem for bookies and financial market makers: they are vulnerable to being bluffed by knowledgeable bettors or bettors with inside information, such as whether a star is able to play. The bets being placed are the bookie’s best source of information—by analyzing betting patterns, a bookie can effectively crowdsource information about the expected outcome of an event.

However, a clever bettor might place some phony bets to throw the bookie off. Through the application of a theoretical model, the researchers identify a set of policies, which they call inertial policies, that enable bookies to strike a balance between learning from market participants and bluff proofing their business. more>

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