Daily Archives: February 13, 2020

Limited liability is causing unlimited harm

The purpose of limited-liability protection was to encourage investment in corporations, yet it has evolved into a source of systemic market failure.
By Katharina Pistor – In a recent tweetOlivier Blanchard, a former chief economist of the International Monetary Fund, wondered how we can ‘have so much political and geopolitical uncertainty and so little economic uncertainty’. Markets are supposed to measure and allocate risk, yet shares in companies that pollute, peddle addictive painkillers, and build unsafe airplanes are doing just fine. The same goes for corporations that openly enrich shareholders, directors and officers at the expense of their employees, many of whom are struggling to make a living and protect their pension plans. Are markets wrong, or are the red flags about climate change, social tensions, and political discontent actually red herrings?

Closer inspection reveals that the problem lies with markets. Under current conditions, markets simply cannot price risk adequately, because market participants are shielded from the harms that corporations inflict on others. This pathology goes by the name of ‘limited liability’, but when it comes to the risk borne by shareholders, it would be more accurate to call it ‘no liability’.

Under the prevailing legal dispensation, shareholders are protected from liability when the corporations whose shares they own harm consumers, workers and the environment. Shareholders can lose money on their holdings, but they also profit when (or even because) companies have caused untold damage by polluting oceans and aquifers, hiding the harms of the products they sell or pumping greenhouse-gas emissions into the atmosphere. The corporate entity itself might face liability, perhaps even bankruptcy, but the shareholders can walk away from the wreckage, profits in hand.

The stated justification for limited liability is that it encourages investment in—and risk-taking by—corporations, leading to economically beneficial innovations. But we should recognize that sparing owners from the harms their companies cause amounts to a hefty legal subsidy. As with all subsidies, the costs and benefits should be reassessed from time to time. And in the case of limited liability, the fact that markets fail to price the risk of activities that are known to cause substantial harm should give us pause. more>

Updates from McKinsey

Climate risk and decarbonization: What every mining CEO needs to know
Building a climate strategy won’t be quick or easy—but waiting is not an option.
By Lindsay Delevingne, Will Glazener, Liesbet Grégoir, and Kimberly Henderson – In the mining industry, the impact of climate change and how the industry can respond to it has increasingly been a topic of discussion over the past decade.

Mining is no stranger to harsh climates; much of the industry already operates in inhospitable conditions. But forecasts of hazards such as heavy precipitation, drought, and heat indicate these effects will get more frequent and intense, increasing the physical challenges to mining operations.

Under the 2015 Paris Agreement, 195 countries pledged to limit global warming to well below 2.0°C, and ideally not more than 1.5°C above preindustrial levels. That target, if pursued, would manifest in decarbonization across industries, creating major shifts in commodity demand for the mining industry and likely resulting in declining global mining revenue pools. Mining-portfolio evaluation must now account for potential decarbonization of other sectors.

The mining sector itself will also face pressure from governments, investors, and society to reduce emissions. Mining is currently responsible for 4 to 7 percent of greenhouse-gas (GHG) emissions globally. Scope 1 and Scope 2 CO2 emissions from the sector (those incurred through mining operations and power consumption, respectively) amount to 1 percent, and fugitive-methane emissions from coal mining are estimated at 3 to 6 percent. 1 A significant share of global emissions—28 percent—would be considered Scope 3 (indirect) emissions, including the combustion of coal.

The mining industry has only just begun to set emission-reduction goals. Current targets published by mining companies range from 0 to 30 percent by 2030, far below the Paris Agreement goals. Mines theoretically can fully decarbonize (excluding fugitive methane) through operational efficiency, electrification, and renewable-energy use. Capital investments are required to achieve most of the decarbonization potential, but certain measures, such as the adoption of renewables, electrification, and operational efficiency, are economical today for many mines. more>

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Updates from Ciena

8 top technologies for modern DCI networks
As the number of data centers has grown and the DCI market has evolved, network operators have had to deploy new capacity rapidly to keep up with the growing demand. Learn how the industry has responded to these challenges with new, highly scalable technologies and products.
By Kent Jordan – Connections. Content. Efficiency. Three simple reasons for the wide-scale adoption of social media, streaming video, and enterprise cloud services.  1.59 billion active users on Facebook connect with friends and make new ones daily.  151 million people stream popular content on Netflix and 9.7 million daily users watch livestreams of e-gaming on Twitch – consuming content when they want, on any device they prefer.  As businesses move applications and processes to the cloud, the public cloud services market is forecast to grow to over $330 billion by 2022 according to Gartner.  And it’s not just content and cloud.  Internet of Things and 5G, connected cars, telemedicine and e-learning are all poised to add more demand to interconnect networks.

There are many, varied market drivers for high-capacity interconnect, and they’re all experiencing massive growth.  Whether you post a selfie on the beach or a photo of the best dessert you’ve ever had, the content and information is stored in data centers and transported across the networks that interconnect them.  This is driving interconnect bandwidth to grow at double digit rates across a variety of industry segments to over 8,200 Tbps by 2021 according to the Equinix Global Interconnection Index.

But how can network operators keep up with growing demand? more>

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Updates from ITU

How Mexico seeks to connect its rural citizens better: Arturo Robles
ITU News – In Mexico, 95.23 per cent of the population have a mobile-cellular subscription and 65.77 per cent of the population use the internet, according to ITU statistics.

Connecting the remaining population to the power of the internet, however, has been a challenge as many of the people who remain offline live in very isolated rural areas.

But thanks to successful connections with K-band satellites, commercial satellite operators are now finding profitable and feasible opportunities to provide connectivity in these remote villages, says Arturo Robles, Commissioner of Mexico’s Federal Institute of Telecommunications (IFT).

During an interview with ITU at the World Radiocommunication Conference 2019 (WRC-19) in Sharm El-Sheikh, Egypt, Mr. Robles also shared his hope that innovative services could help provide affordable rural connectivity solutions. more>

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