Monthly Archives: October 2020

4 Steps to Sustainable Investing

Morgan Stanley – For institutional asset owners, the case for incorporating sustainable investing into portfolio management is only getting stronger. As the wide-ranging implications of sustainability issues, such as public health, climate change and social justice, become more apparent, so too have they become essential to effectively assessing investment risks and opportunities.

Helping to make the case is evidence showing that incorporating environmental, social and governance (ESG) factors in portfolios could aid investors in capturing above-market returns. While the coronavirus pandemic induced a global recession and market volatility in the first half of 2020, sustainable funds—across stocks and bonds—in general helped investors weather the period better than many of their traditional peers,* according to a recent study by the Morgan Stanley Institute for Sustainable Investing. During a longer time horizon, from 2004 to 2018, sustainable funds experienced 20% less downside risk compared with traditional funds,* according to another Institute report, and 4-in-5 asset owners agree that sustainable investing may be an effective risk-management strategy and lead to higher profitability. In addition to financial performance, asset owners see an opportunity to target positive social and environmental impact, avoid reputational risk and comply with regulations. more>

Testing a mysterious instrument

By Michael D. Allen – My first job after leaving school was that of an associate engineer. This meant that I was half technician and half engineer, and I would design something and then build and test it. Because of this position, I frequently got some odd and interesting jobs.

One day a cardboard box showed up on my bench with a test box, a bunch of blueprints, a test procedure, and an “angle of attack” aircraft instrument. Management told me to grab an inspector, perform a functional test on the instrument, and buy off on all of the steps. This was the first aircraft instrument that anyone had seen in our lab area.

There were no program identifiers on the blueprints, the test box, or the instrument itself. I had no way to compare the numbers on the blueprints to any program. If anyone knew what the associated program was, he wasn’t telling.

The instrument was connected to the test box and turned on. A given DC input was supposed to drive the needle to a certain location on the dial face. This worked to a certain extent; the needle would drive to the commanded location but overshoot, back up, and overshoot again. The needle would be a blur, oscillating around the commanded location.

The test box was checked and appeared to be working correctly. Because the instrument was not working correctly, I ask the inspector if it would be OK to open it up to see what was inside, and he agreed. The instrument had a can extending several inches beyond the back of the dial face. The can had a sealed connector and a purge port to refill it with nitrogen. The inside of the instrument looked like several pocket watches stacked together. more>

Updates from McKinsey

Reimagining the auto industry’s future: It’s now or never
Disruptions in the auto industry will result in billions lost, with recovery years away. Yet companies that reimagine their operations will perform best in the next normal.
By Thomas Hofstätter, Melanie Krawina, Bernhard Mühlreiter, Stefan Pöhler, and Andreas Tschiesner – Electric mobility, driverless cars, automated factories, and ridesharing—these are just a few of the major disruptions the auto industry faced even before the COVID-19 crisis. Now with travel deeply curtailed by the pandemic, and in the midst of worldwide factory closures, slumping car sales, and massive layoffs, it’s natural to wonder what the “next normal” for the auto sector will look like. Over the past few months, we’ve seen the first indicators of this automotive future becoming visible, with the biggest industry changes yet to come.

Many of the recent developments raise concern. For instance, the COVID-19 crisis has compelled about 95 percent of all German automotive-related companies to put their workforces on short-term work during the shutdown, a scheme whereby employees are temporarily laid off and receive a substantial amount of their pay through the government. Globally, the repercussions of the COVID-19 crisis are immense and unprecedented. In fact, many auto-retail stores have remained closed for a month or more. We estimate that the top 20 OEMs in the global auto sector will see profits decline by approximately $100 billion in 2020, a roughly six-percentage-point decrease from just two years ago. It might take years to recover from this plunge in profitability.

At the operational level, the pandemic has accelerated developments in the automotive industry that began several years ago. Many of these changes are largely positive, such as the growth of online traffic and the greater willingness of OEMs to cooperate with partners—automotive and otherwise—to address challenges. Others, however, can have negative effects, such as the tendency to focus on core activities, rather than exploring new areas. While OEMs may now be concentrating on the core to keep the lights on, the failure to investigate other opportunities could hurt them long term.

As they navigate this crisis, automotive leaders may gain an advantage by reimagining their organizational structures and operations. Five moves can help them during this process: radically focusing on digital channels, shifting to recurring revenue streams, optimizing asset deployment, embracing zero-based budgeting, and building a resilient supply chain. One guiding principle—the need to establish a strong decision-making cadence—will also help. We believe that the window of opportunity for making these changes will permanently close in a few months—and that means the time to act is now or never. more>

Updates from Ciena

Guarantee end-to-end 5G performance
Ciena – 5G makes a new world of applications and services possible for both consumers and enterprises, humans and machines. But this comes with challenges to address. Service providers are asking themselves how they will differentiate and grow profitability in the face of new 5G use-cases with such diverse requirements. Enhanced Mobile Broadband (eMBB) devours huge chunks of bandwidth, ultra-reliable Low-Latency Communications (urLLC) require a lightning-fast response time for mission-critical applications, and massive Machine-Type Communications (mMTC) stress the number of simultaneous mobile connections. To stand out from the crowd and differentiate their 5G services, mobile and wholesale network operators alike must optimize their transport infrastructure to provide guaranteed end-to-end 5G service performance. 5G network slicing not only allows them to meet the requirements of different applications but also to grow revenues by offering tiered performance and SLA-based pricing, all while constantly optimizing network resources.

5G Network Slicing empowers operators, mobile and wholesalers alike, to dynamically support multiple 5G use-cases and applications to unlock new revenue streams. It brings flexibility to offer private 5G services over a public RAN infrastructure, creating new market opportunities. It enables the delivery of customizable and guaranteed end-to-end performance across multiple physical and virtual domains in the wireless and wireline network segments, creating new possibilities for eMBB, urLLC, and mMTC use-cases with tiered pricing while continually optimizing shared network infrastructure. more>

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It’s the most important election in our lifetime, and it always will be

We never know how important an election really is until long after it’s over.
By Ezra Klein – “There’s just one month left before the most important election of our lifetime,” Democratic presidential nominee Joe Biden tweeted in early October.

Two days later, Sen. Bernie Sanders backed him up. “This is the most important election, not only in our lifetime but in the modern history of our country,” he said in Michigan.

In 2016, it was Donald Trump deploying the cliché. “This is by far the most important vote you’ve ever cast for anyone at any time,” he said.

I won’t be coy with my view: I think the most important election of my lifetime was 2000, and I’ll defend that view in this piece. But more interesting than the parlor game is the framework of this debate. What makes something the most important election of a lifetime? How would we know?

Before 2016, the campaign in which I heard the “most important election of our lifetime” talk most often was 2004, when George W. Bush ran for reelection against John Kerry. It certainly felt pivotal. It was a referendum on the Iraq War, which was built on lies and carried out by fools, and left Iraq soaked in blood. It was also a referendum on the hard right turn Bush had taken in office, away from “compassionate conservatism” and toward neoconservatism abroad, and a politics of patriotic paranoia at home.

Kerry lost that election. And yet, in retrospect, it clearly wasn’t the most important election of my lifetime, and it may even have been better that Kerry lost it. The ensuing four years forced Bush, and the Republican Party he led, to take responsibility for the disasters they’d created. The catastrophe of the Iraq War became clearer to the country, leading to a Democratic sweep in 2006. The financial crisis, which had been building for years, exploded, leading to Barack Obama’s election and the massive congressional majorities that passed the Affordable Care Act. more>

Updates from McKinsey

Global emergence of electrified small-format mobility
Electric two- and three-wheel vehicles are gaining in popularity. What does the future hold for the market?
By Patrick Hertzke, Jitesh Khanna, Bhavesh Mittal, and Felix Richter – Inventors patented the first electric bikes back in the 1890s, but their innovations never garnered the same attention as other early-transportation milestones, including the first subways and the Model T Ford. Today, however, several trends have converged to bring e-bikes out of obscurity. Sales of electric vehicles (EVs) are increasing as governments crack down on emissions. Meanwhile, innovators have introduced new technologies and business models that are breathing life into the market for small-format EVs (those with two or three wheels). Improbable as it may seem, e-bikes could finally be having their day.

To gain more insight into the burgeoning market, we examined worldwide trends for small-format EVs, looking at both geographic growth patterns and the forces shaping the industry. Our analysis shed some light on strategies that can help OEMs and other players succeed as small-format EVs gain traction.

The sales figures for small-format EVs may initially seem modest. The market for two-wheel EVs (E2Ws) and three-wheel EVs (E3Ws) was valued at around $97 billion, or 4 percent of global auto sales. The sector has momentum, however, and global sales of E2Ws and E3Ws are increasing by more than 14 percent annually. (That figure excludes sales in China, which was an early adopter of small-format EVs and is thus experiencing slower growth.) By 2022, global sales of E2Ws and E3Ws could reach $150 billion.

It’s impossible to generalize about global sales trends, since transportation patterns and preferences vary widely by location, but some country-specific developments are striking. Take China: the country now accounts for around 30 percent of the global market for small-format EVs. What’s more, more than 80 percent of 2Ws in China are electrified, making it the dominant market by far in that category. The story may soon change, however, since growth of E2Ws is plateauing in China and surging in the European Union, Latin America, the Middle East and North Africa, and Southeast Asia.

India sells the largest number of E3Ws by far, and they now account for about half of all rickshaws in the country. By 2026, around 80 percent of 3Ws in India will be electric. One caveat: if more light commercial vehicles become electrified, they could become the default option for cargo transport, provided that their performance and economics improve.

Globally, we expect electrification to accelerate most quickly in the scooter and light-motorcycle segments. Electrification of heavy motorcycles will follow, but it won’t reach the levels seen with smaller vehicles. more>

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Updates from ITU

On World Standards Day, let’s renew our resolve to protect the planet with standards
By Houlin Zhao – Today, ITU, together with the International Organization for Standardization (ISO) and the International Electrotechnical Commission (IEC) celebrate World Standards Day 2020, this year dedicated to international standards’ contribution to environmental sustainability.

Under the theme ‘Protecting the Planet with Standards’, today ITU, ISO and IEC pay tribute to the experts worldwide who contribute to the development of international standards.

This year’s theme demands global action. We reinforce that action by developing international standards.

Standards development is a fundamental pillar of ITU’s mission as the United Nations specialized agency for information and communication technologies (ICTs).

ITU standardization is driven by contributions from ITU members and consequent decisions are made by consensus. The ITU standardization process ensures that all voices are heard, that standards efforts do not favor particular commercial interests, and that resulting standards have the consensus-derived support of the diverse, globally representative ITU membership.

They help us to share in the ICT advances changing our world, advances that are key to addressing humanity’s most pressing challenges and accelerating progress towards all 17 of the UN Sustainable Development Goals. more>

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Updates from Chicago Booth

When giving feedback, focus on the future
By Sarah Kuta -When managers give performance-improvement feedback to employees, they presumably want the conversations to result in positive changes—not to inspire defensiveness, excuses for poor performance, or skepticism of the managers’ point of view.

Offering forward-looking feedback can help keep such conversations productive, suggests research by Humanly Possible’s Jackie Gnepp, Chicago Booth’s Joshua Klayman, Victoria University of Wellington’s Ian O. Williamson, and University of Chicago’s Sema Barlas.

Performance-improvement feedback often fails when managers spend too much time diagnosing or analyzing what went wrong in the past, according to the researchers. When managers and employees talk about possible next steps and solutions, however, employees tend to be more receptive to the feedback and more likely to intend to act on it, the researchers find.

Recipients respond just as well to predominately negative feedback as they do to positive feedback, so long as the conversation focuses primarily on how the recipient can best move forward, the research suggests. more>

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Reviving transatlantic relations after Trump

If Joe Biden were to win the White House, transatlantic relations could return to default or be transformed—with much depending on how Europe reacted.
By Max Bergmann – A political cliché is rehearsed every four years in the United States: ‘This is the most important election of our lifetime.’ Yet it is hard to think of a more important election in US history—rarely, if ever, has the country faced two such sharply divergent paths.

All its deep-seated divisions have been exposed in 2020. Covid-19 has foregrounded the jaw-dropping inequality, the frailty of a for-profit healthcare system and the impact of a generation-long, conservative effort to weaken the functioning of government. When Americans needed the state, the state couldn’t cope.

Economically, Wall Street hasn’t missed a beat but queues for food banks grow and ‘for lease’ signs populate vacant shop fronts. Socially, the murder of George Floyd in Minneapolis in May and the subsequent protests—believed to be the largest in US history—brought into the mainstream a conversation on systemic racism and exposed the abusive nature of law enforcement, militarized and immunized from public sensitivity after ‘9/11’.

Globally, as Covid-19 struck, the US withdrew from the world, failing to lead or even participate in a transnational response. Indeed, in the midst of a pandemic, the administration led by Donald Trump pulled out of the World Health Organization, its ineptness an international embarrassment.

This does make the coming election existential. If Trump were to be re-elected president, all these trends would worsen—with dire implications for the transatlantic alliance. If not, it might be thought an incoming Democratic administration, facing such domestic turmoil, would relegate foreign policy to the second tier. But that wouldn’t be the case if Joe Biden were to prevail.

The crises of the last year have been humbling for the US and there is broad recognition that it will need allies and partners as never before. Biden would be a foreign-policy president. During the administration of Barack Obama he was a central and active foreign-policy player. His experience as chair of the prestigious Senate Foreign Relations Committee was, after all, a major factor in Obama selecting him as running mate. For the last two decades, Biden has been consumed with international relations and his inner circle of trusted advisers are experienced professionals.

A new administration would therefore hit the ground running. The question is: where would they run to? more>

Trump took a sledgehammer to US-China relations. This won’t be an easy fix, even if Biden wins

By Hui Feng – Few would have thought a US-China relationship marked by relative stability for half a century would be upended in just four years.

But US President Donald Trump’s privileged tour of the Forbidden City in November 2017 by Chinese President Xi Jinping now looks like it happened in a bygone era, given the turbulence in the bilateral relationship since then.

The shift in the US’s China policy is no doubt one of the major legacies of the Trump administration’s foreign policy, alongside a renewed peace process in the Middle East.

When Trump’s daughter Ivanka said at the Republican National Convention that “Washington has not changed Donald Trump, Donald Trump has changed Washington”. This would certainly include its handling of China.

Although China’s rise had been a concern of the previous Bush and Obama administrations, it was the Trump administration that transformed the entire narrative on China from strategic partner to “strategic competitor”, starting with its National Defense Strategy report released just one month after Trump’s 2017 China visit.

This read, in part,

China and Russia want to shape a world antithetical to US values and interests. China seeks to displace the United States in the Indo-Pacific region, expand the reaches of its state-driven economic model and reorder the region in its favor.

This new way of thinking deemed the US’s decades-long engagement strategy, deployed since President Richard Nixon in the early 1970s, a failure.

Prior to Trump, the US had sought to encourage China to grow into a responsible stakeholder of a rules-based international order.

But the Trump administration believes such “goodwill” engagement has been exploited by China’s “all-of-nation long-term strategy” of asserting its power in the Indo-Pacific region.

According to the Trump administration, this is centered on “predatory economics” in trade and technology, political coercion of less-powerful democracies and Chinese military advancement in the region. more>