Monthly Archives: March 2021

Green markets won’t save us

Markets are an unreliable guide for navigating a problem as large and complex as climate change.
By Katharina Pistor – How can one make wise decisions about a perpetually unknowable future? This question is as old as humankind, but it has become existential in light of climate change. Although there is sufficient evidence that anthropogenic climate change is already here, we cannot possibly know all the ways that it will ramify in the coming decades. All we know is that we must either reduce our environmental footprint or risk another global crisis on the scale of the ‘little ice age’ in the 17th century, when climatic changes led to widespread disease, rebellion, war and mass starvation, cutting short the lives of two-thirds of the global population.

The British economist John Maynard Keynes famously argued that investors are driven ultimately by ‘animal spirits’. In the face of uncertainty, people act on gut feelings, not ‘a weighted average of quantitative benefits multiplied by quantitative probabilities’, and it is these instinct-driven bets that may (or may not) pay off after the dust settles. And yet policy-makers would have us trust animal spirits to help us overcome the uncertainty associated with climate change.

Humanity has long sought to reduce uncertainty by making the natural world more legible, and thus subject to its control. For centuries, natural scientists have mapped the world, created taxonomies of plants and animals, and (more recently) sequenced the genomes of many species in the hope of discovering treatments against all imaginable maladies.

What maps, taxonomies and sequences are to chemists and biologists, numbers and indicators are to social scientists. Prices, for example, signal the market value of goods and services, and the expected future value of financial assets. If investors have largely ignored certain assets, the reason might be that they were improperly measured or priced. more>

Updates from McKinsey

Building a cloud-ready operating model for agility and resiliency
Four operating-model changes can help companies accelerate the journey to cloud.
By Santiago Comella-Dorda, Mishal Desai, Arun Gundurao, Krish Krishnakanthan, and Selim Sulos – With customer expectations and technology evolving at an unprecedented clip, moving to cloud is increasingly becoming a strategic priority for businesses. Capturing the $1 trillion value up for grabs in the cloud, however, has proven frustratingly difficult for many companies. One of the main reasons for this difficulty is that IT’s operating model remains stuck in a quagmire of legacy processes, methodologies, and technologies.

Overcoming this problem requires business and IT to take a step back and think holistically about their cloud operating model. And they need to move now. IT has become integral to driving value and a crucial enabler in meeting business and customer expectations of speed, flexibility, cost, and reliability. At the same time, the risk of failure is increasing because of the growth in complexities and demands around new architectures, agile application development, on-demand access to infrastructure through self-service, cloud migration, and distributed computing, to name a few.

While most organizations will need to adopt a hybrid-cloud approach for the foreseeable future, it will be hard to capture much of cloud’s value without reimagining the IT infrastructure that is ground zero of the cloud operating model. Set up correctly, infrastructure can quickly expand access to new services and products, accelerate time to market for application teams, and cut operating costs at the same time—all of which unleash businesses’ innovation potential.

To capture these benefits, companies must undertake a holistic transformation of infrastructure grounded on four mutually reinforcing shifts: adopt a site-reliability-engineer (SRE) model, 1 design infrastructure services as products, manage outcomes versus activities, and build an engineering-focused talent model. The benefits of these shifts can accrue to infrastructure and operations (I&O) even if they remain completely on-premises. more>

Updates from ITU

Wireless carriers face FOMO vs. FOBFA test
By Roger Lanctot – Something peculiar is unfolding in the wireless industry. While wireless carriers enthusiastically report new fibre and smartphone connections to their networks along with correspondingly robust revenue streams, there is little or no mention of automotive connectivity.

Even Verizon, in the United States, with its budding commercial fleet portfolio comprised of the vehicle connectivity assets of Telogis and Fleetmatics, acquired years ago and combined, merits nary a mention on the earnings call with analysts. AT&T, too, the big dog in embedded vehicle connections in the United States, relegates its automotive activities to the shadows – presumably immaterial to the broader financial prospects of the organization.

The same phenomenon is playing out in Europe, where the likes of Orange, Vodafone, and Deutsche Telekom are operating 5G test sites for connected cars but barely making a peep regarding long-term plans in their public statements. In Asia, as well, Docomo, SK Telecom, KDDI and others are heavily engaged with car makers, but with little revenue yet to show from years of connecting cars.

What is behind the great hush that has descended over car connectivity?

Where is the excitement?

The great hush

Ten years ago, wireless carriers were thrilled about connecting cars because the focus was increasingly on so-called value-added services such as vehicle diagnostics and service scheduling. Usage-based insurance also contributed to the rising interest and awareness. more>

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Is the Value Trade Here to Stay?

At long last, value stocks are back—but for how long? Morgan Stanley’s Quantitative Equity Research team looks at whether the trend has staying power.
Morgan Stanley – The former wallflowers of the market—value stocks—are suddenly the belles of the ball. After more than a decade of underperformance, both the Russell 2000 Value Index and the Russell 1000 Value Index were recently beating their respective growth indexes by more than 10 percentage points this year.

Chalk it up to increased optimism that some of the hardest-hit parts of the economy are poised for recovery, along with expectations for higher inflation and rising yields, which make pricier growth stocks less appealing.

The question now is whether the value trade has staying power. A recent analysis by Morgan Stanley’s Quantitative Equity Research team suggests that there’s more to the story than the usual value vs growth debate—and that different factors, sectors and securities within value haven’t reached their full potential.

“We think these moves are indicative of a broader growth-to-value rotation and expect more upside for value factors in the near term,” says Boris Lerner, Global Head of Quantitative Equity Research. “The value trade is here to stay, at least for the time being.” more>

Bad stimulus: Government payments to individuals are a terrible way to solve America’s structural economic problems

By Albena Azmanova and Marshall Auerback – The new Democratic administration is poised to make its first proud step in delivering on its electoral promise to build back (America) better: the successful adoption of a $1.9 trillion stimulus package, the main components of which are a third round of stimulus checks, a renewal of federal unemployment benefits, and a boost to the child tax credit, as well as funding for school reopenings and vaccinations. It will probably not include a federal minimum wage hike.

Biden’s stimulus is not the stuff of economic revolution—it’s a mix of common sense and keeping the lights on. And the fundamental thinking behind the stimulus approach reflects a continuation of neoliberal policies of the past 40 years; instead of advancing broader social programs that could uplift the population, the solutions are predicated on improving individual purchasing power and family circumstances.

Such a vision of society as a collection of enterprising individuals is a hallmark of the neoliberal policy formula—which, as the stimulus bill is about to make clear, is still prevalent within the Democratic and the Republican parties. This attention to individual purchasing power promises to be the basis for bipartisan agreement over the next four years.

The reality is that social programs on health care and education, and a new era of labor and banking regulation, would put the wider society on sounder feet than a check for $1,400.

There are very few federally elected officials who behave as though they understand that economic insecurity can breed political instability and governing paralysis.

Globalization, deindustrialization, the contraction of the public sector, and the rise of contract labor via the gig economy have made individuals feel insecure in their private circumstances. This has contributed to the appeal of populist politicians, whose tenures generally are corrosive to liberal democracies. Moreover, these tendencies have together undermined our social contract as a whole, depriving governments of the means and resources to tend to the public interest. more>

To Tackle Inequality, We Need to Start Talking About Where Wealth Comes From

Thatcherite narrative on wealth creation has gone unchallenged for decades.
By Laurie Macfarlane – Do people in Britain resent the rich? According to two new studies published this week, the answer to this question is: not really.

The studies, one commissioned by Trust for London and another by Tax Justice UK, explore public attitudes towards wealth based on focus groups held across England. Both found that most people are relatively content with people getting rich, and that attacks on the wealthy are often viewed negatively.

This presents a dilemma for progressives. In recent years left-wing leaders on both sides of the Atlantic have taken a more confrontational approach towards the super-rich. In Britain, the Labour Party’s war cry under the leadership of Jeremy Corbyn has been ‘For the many, not the few’, while in the US Bernie Sanders has made no secret of his contempt for billionaires.

But what if it turns out that ordinary people don’t agree? One response to this dilemma, as outlined by Sonia Sodha in the Observer, is to accept that “the belief that Britain is a meritocracy is ingrained in our collective psyche”, and adjust policies and narratives accordingly. This would mean ditching the class-war rhetoric and instead putting forward solutions designed to appeal to a meritocratic worldview. This might include, for example, closing tax loopholes and increasing particular taxes on grounds of fairness and efficiency.

Sodha is right to point out that this strategy is more likely to chime with people’s existing attitudes towards wealth. As the authors of the Tax Justice UK report note: “The participants in our focus groups largely believe in meritocracy. Those with wealth were seen as having acquired it through hard work.” Participants in the Trust for London research expressed similar views.

But does this mean that progressives should accept the way things are and move on? Not necessarily. As a well-known philosopher once said: “The philosophers have only interpreted the world in various ways; the point, however, is to change it.”

People’s views aren’t formed in a vacuum: they are shaped by social and political forces that evolve over time. Margaret Thatcher’s neoliberal revolution wasn’t just successful because it reorganized the economy – it was successful because it embedded a particular narrative about how wealth is created and distributed in society. This is a world where, so long as there is sufficient competition and free markets, every individual will receive their just rewards in relation to their true contribution to society. There is, in Milton Friedman’s famous terms, “no such thing as a free lunch”. It’s a world where businesses are the “wealth creators” who create jobs and drive innovation, and business owners are entitled to the financial rewards of success – regardless of how enormous they are.

The problem, of course, is that it bears little resemblance to how the economy actually works. While it is true that working hard will generally help you earn more money, this causality doesn’t hold in reverse: not all wealth has been attained through hard work. In practice, the distribution of wealth has little to do with contribution, and everything to do with politics and power. more>

How to Build a Better Automotive Radar System

By John Blyler – Advanced driver assistance systems (ADAS) rely heavily on modern radar technology. And why not? Radar uses electromagnetic waves to sense the environment. It can operate over a long distance in poor visibility or inclement weather conditions. Designing automotive RF that accurately captures diverse traffic situations will be essential in making autonomous operations safe.

Radar systems are no newcomer to the automotive space. In the past, automotive radar was used in vehicles for basic operations such as automatic emergency braking (AEB) and adaptive cruise control (ACC), where the radar sensor only had to provide the vehicle with information relating to the distance and speed of the target in front of it.

However, recent trends to deploy a fully autonomous vehicle have increased the amount of information that a vehicle demands from the radar sensor. Specifically, after detecting a target, the host vehicle must determine several things, such as the distance to a target – be it another car, a person, a stationary object, or the like. The radar must also calculate how fast the target is approaching or departing; whether it is to the right, left, or straight ahead of the vehicle; on the road or above the ground; and the nature of the target, i.e., pedestrian or vehicle, for example.

Automotive radar technology can provide essential, real-time information to the vehicle’s onboard embedded computers and software algorithms to answer these questions by providing five-dimensional datasets: Range, Doppler, Azimuthal direction of arrival (DoA), Elevation direction of arrival (DoA), and Micro-Doppler.

As vehicles migrate from SAE level 1 to level 5 full autonomy, automotive radar technology will be used for far more than emergency braking and adaptive cruise control with ever-increasing reliability and accuracy demands. more>

Updates from Chicago Booth

India’s economic recovery from its COVID-19 lockdown
By Chuck Burke – In response to COVID-19’s rise, India ordered most of the country’s 1.3 billion residents to stop working and remain indoors starting in March 2020—the world’s largest lockdown. The government began relaxing restrictions in June, and research finds that while India’s economy improved rapidly in the following months, the outlook for a return to prelockdown levels remained unclear.

In a report for Chicago Booth’s Rustandy Center for Social Sector Innovation, Booth’s Marianne Bertrand and Rebecca Dizon-Ross, Centre for Monitoring Indian Economy’s Kaushik Krishnan, and University of Pennsylvania’s Heather Schofield examined household-level survey data to establish a more comprehensive view of India’s initial recovery than national economic indicators could provide. These charts and maps highlight a selection of their main findings. more>

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Disinformation Is Among the Greatest Threats to Our Democracy. Here Are Three Key Ways to Fight It

By Daniel J. Rogers – In October 2019, the late Supreme Court Justice Ruth Bader Ginsberg was asked what she thought historians would see when they looked back on the Trump era in United States history. Justice Ginsberg, known for her colorful and often blistering legal opinions, replied tersely, “An aberration.”

As President Biden’s administration settles in, many feel an enormous sense of relief, an awareness that the United States dodged a proverbial bullet. But how do we ensure that Justice Ginsberg’s prediction becomes reality? This is not an academic question; Trump’s recent speech at CPAC all but announced his desire to return in 2024. Only by recognizing the underlying reason he succeeded in the first place and by making the structural changes necessary to prevent someone like him from succeeding again can we head off this eventuality.

First, to understand what we must do to prevent the return of someone like Trump or even Trump himself, we first need to define what Trumpism really is and how it came to be. The seeds of Trumpism in America have been analyzed to exhaustion, but something specific emerged in 2016 that holds the key to Trump’s rise to power: Online disinformation.

Modern online disinformation exploits the attention-driven business model that powers most of the internet as we currently know it. Platforms like Google and Facebook make staggering amounts of money grabbing and capturing our attention so they can show us paid advertisements. That attention is gamed using algorithms that measure what content we engage with and automatically show us more content like it.

The problem, of course, emerges when these algorithms automatically recommend and amplify our worst tendencies. As humans, we evolved to respond more strongly to negative stimuli than positive ones. These algorithms detect that and reinforce it, selecting content that sends us down increasingly negative rabbit holes. Resentful about losing your job? Here’s a video someone made about how immigrants stole that job from you! Hesitant about the COVID-19 vaccine? Here’s a post from another user stoking a baseless anti-vaccine conspiracy theory. Notice, of course, that truth is nowhere in this calculus—the only metric the algorithm rewards is engagement, and it turns out that disinformation and conspiracy theory make the perfect fodder for this algorithmic amplification. more>

Updates from McKinsey

The emerging resilients: Achieving ‘escape velocity’
The experience of the fast movers out of the last recession teaches leaders emerging from this one to take thoughtful actions to balance growth, margins, and optionality.
By Cindy Levy, Mihir Mysore, Kevin Sneader, and Bob Sternfels – In 2019, McKinsey asked companies to prepare for the possibility of a recession. Of course, we had no idea then that the COVID-19 pandemic would be the trigger, nor that the recession would cut as deeply as it has. But it was clear then that the foregoing growth cycle was already of unusual duration. The pace was slowing, furthermore, and the potential for shocks was greater than for renewed growth. In the same article, we discussed what top-performing companies had done in the previous downcycle, the financial crisis of 2008–09. We looked at 1,500 public companies in Europe and the United States, analyzing performance on a sector-by-sector basis. Companies in the top quintile of their peers through that crisis were dubbed the “resilients.”

Once economic and business results of the second quarter of 2020 became known, we began to hunt for the clues that were contained in nearly 1,500 earnings releases across Europe and the United States. This article seeks to understand whether the shape of the next class of resilients is visible in the data, and what lessons this would hold for companies within each sector.

The present downcycle: Six times faster than the previous one

Today, we are in the middle of the deepest recession in living memory. As pandemic-triggered lockdowns took hold around the world in early 2020, economies contracted quickly. The International Monetary Fund and World Bank foresee a global contraction in economic output in 2020 of around –5 percent; the Organization of Economic Cooperation and Development estimates an even worse result, at –7.6 percent. At any rate, the drop will far exceed the last global contraction, which was –1.7 percent in 2009.

The distress has hit all industry sectors, some harder than others. Yet even in the relatively protected sectors of healthcare, pharmaceuticals, and technology, companies are seeing moderate declines in revenue. Heavily affected sectors have experienced revenue declines of between 25 percent and 45 percent. These include transportation and tourism, automotive, and oil and gas—sectors containing some of the largest employers in Europe and the United States. more>