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Video Games | Learning by Proxy

The first patent for Video Games was filed in Jan 1947. The Cathode Ray Tubes that had been invented to render the radar was to be used as an amusement device! There were a lot of experimental games that were launched in that era. Most remained in the lab for the purposes of demonstration. Either way, they cost so much that using them for “amusement” would have been criminal.

It was not until the 1970s that video games made a splash in the real world, in the form of arcade games. One had to go to specific arcades to play these games. Then companies like Atari, Sega, Nintendo and the likes introduced the world to console gaming. This brought gaming into the homes of people. Suddenly it was possible to sell to a much larger audience and gaming became big business.

The advent of computers in the early 90s and the widespread adoption of computers in the new millennium infused an entirely different energy and life into the gaming business. Game production studios such as Electronic Arts emerged. Games were still pursued for leisure, mostly by youngsters.

As the internet grew and its speed increased, multiplayer gaming took on a life of its own. It was possible for one player to play against another in a whole different part of the world.

There were specific things that found a lot of interest.

Open World Games – Open World is a format where you are allowed to free roam a world and find different missions or goals to pursue and different groups/people to interact with.

FPS – First Person Shooters (called FPS) for short are games where you are playing a soldier or a mercenary on a mission and have to achieve certain goals.

Strategy Games – Typically set in an open world, these games have a complex story and in that context, you need to figure out the strategy you need to pursue to win the game.

A mix of all this is Multiplayer Online Battle Arena (MOBA) – You are in an open world (arena) where you get to battle in teams with other players. This is all taking place online and a moment’s hesitation can mean death!

As these games grew more sophisticated and drove much greater interest with more and more people, one of the biggest problems was data latency.

Building-out a proprietary network is a bold move for a company like Riot Games. Though fairly large by game company standards—they have over 2,000 employees—it is tiny compared to the few internet giants, such as Google or Amazon. Those companies have become known for building their own infrastructure. Google, for instance, started working with the Unity bandwidth consortium in 2008. It invested $300 million in the FASTER undersea cable network, which took two years to complete and went live this June (2016). Facebook and Microsoft have to partnered to build MAREA across the Atlantic with a 160 terabytes per second capacity, and Amazon made its first investment in a submarine cable project May 2106.

Source: Quartz

Companies have been building out dedicated internet infrastructure to reduce latency. This has spawned an entire category of gaming called e-Sports. The people who used to play video games were treated like idiot nerds once upon a time. Today they are celebrated like Olympic athletes. Thousands converge on stadiums to watch these players compete with each other in strategy games such as the league of legends that Riot Games produces. Here is what it looks like.

This is an event that took place in Paris in 2017. This movement has been slowly growing and for those who are not in the loop, it might seem completely alien.

Two teams of 5 players each, playing on stage while their gameplay is shown on a large screen to the audience. And there is a lot of money to be won.

Source: Verge

This is the prize pool for DOTA, which stands for Defence of the Ancients, a popular MOBA. The winners could potentially walk away with 10s of millions. Just for reference, the Wimbledon awards 2.35 Million pounds to the winner.

Safe to say that gaming has changed completely and is no longer the innocent Mario and Contra that we grew up with.

Gaming has become a big business that nobody has been paying attention to. The CEO of Netflix famously said that his greatest competitor was sleep. But the truth is gaming is taking a lot of the screen time and hence…

One month after its vague announcement of a new gaming-centric strategy, Netflix has explained how it will “publish” video games in the foreseeable future: as downloadable smartphone apps, available exclusively for paying video-streaming subscribers.

The news coincides with the company’s public launch of Netflix Gaming on Thursday as part of the service’s smartphone app… but only in Poland—and only on Android. The company’s American Twitter translated Thursday’s Polish announcement, which explains how the service works.

Source: Ars Technica

The recent lawsuit with Epic Games that Apple was forced to settle was also around gaming. The truth is that most of the in-app purchase (IAP) income that Apple derives comes from gaming. The services segment generates about $20 Billion in revenue for Apple and they just take between 15% and 30% as commission.

Amazon has also been making a splash in gaming. They already bought Twitch, a game streaming platform for $1 Billion a few years ago. They are leveraging that acquisition and now they want a bigger chunk of the pie,

Amazon.com Inc. is diving into the new and hotly contested market for streaming video games, the company said during a press event Thursday that also revealed a refreshed lineup of Echo smart speakers and a flying home video camera.

Luna, a service that lets gamers play without shelling out for expensive game consoles or games, is Amazon’s biggest foray yet into the fast-growing $150 billion video gaming market. A subscription to the Luna+ channel costs $5.99 a month during an introductory period and will include games such as Resident Evil 7, Control and Panzer Dragoon.

Source: Business Standard

In the meantime, fitness company Peloton which makes exercise cycles is looking to enter the gaming market. Games that can merge with their cycles and provide another layer of immersion.

Peloton is about to enter the video game business.

The cycle maker is getting ready to debut an in-app video game called Lanebreak, a spokesperson confirmed to CNBC.

The game, which Peloton cautioned is still subject to a new name, involves riders changing up their cadence and resistance levels to meet various goals and score rewards.

Lanebreak is expected to open up to a members-only beta test later this year, according to a fact sheet, and it will officially launch in early 2022. Players will be able to choose a difficulty level and the type of music they want to hear during the game. There are different ways to win points, be rewarded and challenge other members.

Source: CNBC

In this current context, you have technologies like VR and AR making a break into gaming and trying to create a niche for themselves. Apart from Microsoft, Facebook has made a huge investment in VR. They went and bought Oculus Rift for $1 Billion. The company was still to release its final product.

Facebook has been experimenting with a lot of VR experiences and none of them has succeeded. Their recent announcement to have a VR meeting where you interact with your colleagues’ avatar as a part of their “metaverse” has also not been received well. They hope that they would be able to use the gaming market and make a break!

Facebook is the latest tech giant to get into the world of cloud gaming — but the company’s offering is quite a bit different than the competition. Unlike Amazon or Google, which both offer standalone cloud gaming services for a fee, Facebook is introducing cloud games to its existing app — several of which are playable right now.

“We’re doing free-to-play games, we’re doing games that are latency-tolerant, at least to start,” says Jason Rubin, Facebook’s vice president of play. “We’re not promising 4K, 60fps, so you pay us $6.99 per month. We’re not trying to get you to buy a piece of hardware, like a controller.”

Source: Verge

While they are targeting casual gaming, their ultimate goal would be to meld VR into this somehow.

Just as smartphones introduced us to simpler games that capitalized on unique features of phones like gyroscopes and on-the-go internet connections, many newer games blur the lines between video games and other types of social activities. Pokémon Go, Fortnite and Among Us are video games, but they are also hangouts for friends, pop culture moments, opportunities for political organizing and more.

What’s thrilling about many of the newer game experiments is that they signal a move beyond a phase in which online and smartphone media often mirrored what came before — many podcasts were like talk radio, Netflix was like TV and online news outlets were like newspapers.

I know that games aren’t all stimulating paragons of human social connection, but it feels as if something exciting is happening. There’s more mushing together to arrive at new digital forms that emphasize interaction rather than passive reading, watching or listening.

Source: New York Times

What is gaming? What are video games? The answer to the question was straightforward 50 years ago. Today it does not seem to be as simple. What would it look like in 20 more years? There is a lot of money waiting to be made if you know the right answer to that question.

The Capitalistic Paradigm

Video games such as second life have attempted to make a place in your life in a manner where they imagine you living another life online. Pair that with technologies like VR, you could potentially end up living a life that is completely online. This is the kind of world that Facebook would like to envisage people living in.

And also, one which China does not want in its country.

Under the new regulations unveiled by China’s National Press and Publication Administration Aug. 30, children under 18 will not be allowed to play video games from Monday through Thursday and only between 8pm and 9pm on Friday, Saturday, and Sunday: A maximum of three hours a week. The policy only applies to online games and users will need to register using their real names and government identification.

The government has limited video game use previously, like in 2019, when it banned children from playing after 10pm and for more than 90 minutes a day. At that time, it also limited in-game spending from minors to around $57 a month. Last month, a state-run media outlet called video games “spiritual opium,” causing gaming leader Tencent and its competitors’ stock prices to fall.

Source: Quartz

Capitalists would like to keep you in an online prison from which they can continue to monetise you. Show you ads, sell you virtual goods that cost nothing and keep you slipping further into that rabbit hole. They might even go to the extent of touting this as a possible solution to global warming.

Consume virtual not real goods!

That hope has not borne fruit as yet. But the attempt to make it work continues. I hope it fails.

More importantly, we are at a juncture where games are no longer games and we should stop calling them that. They have ceased to be just a mere form of entertainment. They are thriving businesses and have the capacity to manipulate and force financial decisions. We need a new term to talk about it.

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Space Wars | Learning by Proxy

Space was the ambition of the Nazis. Hitler had some really wild theories but the central amongst them was the Wunderwaffe. A wonder weapon, so powerful that it would put an end to all his enemies. From the Holy Grail to Incan treasures and spells, no theory was left to chance. Of the many real-world manifestations of the entire exercise, the most well known, was a weapon called the Vergeltungswaffe; also known as the V-weapon. The literal translation of the word means Retribution Weapon. Before retribution could be delivered, the world war came to an end.

In the psyche of people, the acronym for Vergeltungwaffe 2 would remain embedded as the V2 rocket.

The man who worked on the V2 rockets, Werner Von Braun was smuggled out of Germany, as a part of Operation Paperclip. He would have otherwise face trial at Nuremberg and would have most likely been hanged.

His first few years in the US were unpleasant. He was locked away with a few other fellow German scientists at a castle and the Americans were too suspicious to give him any real work. It was not until the mid-1950s when news of the Russian program came to America that Von Braun finally got his chance to work on the American rocket program.

His work culminated in the fateful launch in July 1970 that put a man on the moon.

During the second world war, America was only working on bombers and they had created the National Advisory Committee for Aeronautics (NACA). In 1958, this organisation was rebranded as NASA as space became a mandate.

Funding for NASA since 1959

Source: The Planetary Society

After the massive financing of the 1960s when John Kennedy committed to putting a man on the moon, NASA has had a stable budget of about USD 20 billion each year since the mid-1970s. Today NASA spends almost half that money on human spaceflight.

Allocation of NASA funds to various activities

Source: The Planetary Society

Companies like Boeing, Lockheed Martin, Northrop Grumman and others have built fortunes taking slices of that $10 Billion pie that NASA spends on human spaceflight. While NASA does the science, it depends on outside suppliers to manufacture and deliver the necessary parts. This has been true since the beginning. None of you would have ever heard of the factories that NASA has, because they do not.

The companies mentioned above are part of what is known as the Military-Industrial Complex in the US. Not only NASA but also the Department of Defence and others are customers to these companies and source planes, fighters, helicopters, etc. from them.

SpaceX was a new entrant into the space business in 2010 and Elon Musk had hoped that he would provide some cost-benefit calculations and walk away with the contract. He walked in with his Silicon Valley millionaire swag only to be completely turned down. This is a report from 2014.

In a no-bid process, United Launch Alliance (ULA), a joint venture of Lockheed Martin and Boeing, received a bulk contract worth billions of dollars for 36 rocket launches earlier this year, despite plans to introduce more competition and other cost-saving measures.

Musk’s tweets yesterday focused on what happened next: The man who awarded ULA the contract, defense official Roger “Scott” Correll, was hired soon after his retirement to handle government relations at Aerojet Rocketdyne, a company that builds rocket engines for ULA. Musk didn’t mince words online when offering his interpretation of events:

Source: Quartz

Elon Musk was at the receiving end of it. He needed the NASA contracts desperately to keep SpaceX from sinking. At the time, he had managed to fly and land a few rockets but there was no revenue. His ONLY revenue model was NASA.

Source: Wikipedia

He had already received several hundreds of Millions in grants and funding from NASA since 2012, but in the absence of proven technology, they were unwilling to award contracts. There was certainly some lobbying and wrangling involved as well.

And then the 2016 elections swept around. This guy called Peter Thiel, with whom Elon Musk had run PayPal; who also happened to be a major investor in SpaceX, openly supported Donald Trump. Not only that, the company that Peter Thiel runs, Palantir, was responsible for the data crunching that delivered Trump his victory.

But the company that brought the idea of commercial space travel to fore was once struggling to even stay afloat. Elon Musk-led SpaceX was almost broke, with no way to turn around. The helping hand that pulled the pioneering company from this debacle came from US space agency NASA in the form of a $1.5 billion contract.

Source: Mint

The change in Musk and SpaceX’s fortunes are obvious to see from 2017. He just doubled the number of launches and money flowed like wine at a French party. NASA broke rank with their old trusted partners and SpaceX became part of the new Space Industrial Complex.

But Elon Musk – “look my whole body is a huge brain” – was not happy with sharing any of the money going to any other provider.

On August 7, the US Space Force announced two winners of a coveted agreement to launch dozens of spy satellites and other classified payloads into orbit.

United Launch Alliance won a 60% share of the future missions, planned for 2022 through 2027, while SpaceX scooped up the remaining 40%. Both companies beat out rivals Blue Origin, founded by Jeff Bezos, and Northrop Grumman for the multibillion-dollar spoils of the agreement, called National Security Space Launch Phase 2.

But in series of tweets by Elon Musk on Thursday, and following days of silence, the SpaceX founder appeared to be remarkably unhappy with how things turned out.

Source: Business Insider

Also, perhaps because by the end of 2020, he knew that Trump was not going to be re-elected.

Throughout 2020, Elon Musk and Jeff Bezos have been trading the title of the “richest person in the world”. Since the beginning of this millennium, both of them have been working on space companies. Unlike Elon Musk, Jeff Bezos has complained that he has so much money that there is no other way that he can blow it away.

Even so, as Blue Origins continues to gobble USD 1 Billion each year, there is only so much charity that Jeff wants to make. He wants those NASA contracts as well. So he sued NASA.

Well, Bezos is now frustrated by NASA. Last week, Blue sued the space agency in federal court, arguing that it inappropriately awarded a multi-billion dollar contract for a lunar lander to Blue’s chief rival, Elon Musk’s SpaceX. Blue’s initial challenge to that decision was rejected by the Government Accountability Office, which found that NASA had not played favorites in choosing just one contractor due to lack of funding for two. The other members of its consortium, the companies Lockheed Martin, Northrop Grumman and Draper, declined to comment on the lawsuit their partner has brought.

Lawsuits between contractors and the government aren’t uncommon. In a way, they’ve helped define the rise of commercial space companies and SpaceX itself. But it’s worth looking at how this challenge diverges from others that arguably opened up low-earth orbit for business.

SpaceX sued NASA in 2005, before it even launched its first rocket. At the time, another nascent rocket maker, Kistler Aerospace, was on the verge of bankruptcy. It suddenly received a $227 million NASA contract to share its test data with the government. SpaceX challenged the case, arguing that if the government wants commercial rocket test data, it should accept competitive bids, not hand a contract to a company led by a former high-ranking NASA official. NASA withdrew the contract with Kistler.

Nine years later, in 2014, SpaceX sued the government again; this time challenging the US Air Force’s decision to award a multi-launch contract to United Launch Alliance (ULA), the Boeing and Lockheed Martin joint venture that held a monopoly on US government spaceflight. (SpaceX had also challenged the creation of that monopoly in 2006.)

Source: Quartz

Obviously, this is a well-worn tactic that seems to have been used very effectively especially in the opaque world of the Industrial complex. A person like Jeff Bezos is not used to hearing “No” and he is getting tired of hearing it over and over from NASA.

So which Billionaire is going to get to blow away public money in their pursuit of space?

This is playing out as we continue to take this planet – the only habitable one we know for our form of life – hurtling towards the point of no return in terms of climate. It is a shame that this is what the richest on the planet feel, is the appropriate utilisation of money.

Much like the theme of GDP that I had mentioned last time, the trouble is that these people are so rich because all they have ever learnt is the accumulation of wealth and believe that is the only purpose of life. They feel Space is the most virgin area to exploit to continue to accumulate wealth. Hence they are slugging it out for a piece of it.

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IPCC | Learning by Proxy

In 1988, the World Meteorological Organisation (WMO) and the United Nations Environment Program (UNEP) came together to create a body to which membership was open to all countries of the UN. The body was mandated to provide objective scientific information relevant to understanding human-induced climate change. This body was called the Intergovernmental Panel on Climate Change (IPCC).


In 1988

The GDP of America was 8.87 Trillion dollars that of China was USD 406 Billion.

By the end of this year, more than half of all industrial emissions of carbon dioxide since the dawn of the Industrial Revolution will have been released since 1988 — the year it became widely known that these emissions are warming the climate.

Source: Union of Concerned Scientists


They released their first report in 1990 and based on that report, the United Nations Framework Convention on Climate Change was created. This in turn resulted in the meeting in Kyoto and the Kyoto Protocol.

They knew back then that the ‘Business as usual’ approach was not going to be okay. That global greenhouse emissions would increase temperatures by 0.3 Degrees per decade over the new century.

In the meantime

Emissions from the United States

Source: Climate Action Tracker

Emissions from China

Source: Climate Action Tracker

Emissions from India

Source: Climate Action Tracker

The US seems to have arrested the growth of greenhouse emissions since 2000 and has even started bringing it down since 2008 when Obama took over as president. One must keep in mind that this was enabled by a one-word miracle “Outsourcing”.

America outsourced almost all of its production and industrial activities to China. So the Chinese growth in emissions is in a big was an American consumption story. Nevertheless, Chinese emissions were half that of America in 1990 and how they are almost double that of America.

In the meantime, India’s emissions have grown 3 fold as well. We are at the level at which China was in 1990.


The problem with Climate Action

Often the assumption is that climate change is something regarding which governments are not willing to take action because they do not want to hurt their businesses and slow down growth. This could not be further than the truth.

If today, the entire world decided that by 2025 every single Watt of electricity on this planet was to come from renewable sources, what do you think would happen? Business would go down? Or would solar panel factories be opened in every state of every country?

The problem with taking climate action comes down to this thing called EGO.

The precipitous rise you see in the chart above from 1945 (just after the second world war) to 1998 was perpetrated by the USA and Western Europe in huge parts – perhaps a good 80% of it. Their economies were able to grow while they polluted with total disregard for the environment and used the cheapest source of fuel (Coal) to do this. London used to suffer from smog regularly in the post-war years. [Watch The Crown on Netflix]

All that production and productivity (read pollution) made them some of the richest nations in the world. Banking on old-world colonialism (UK) and neo-colonialism (USA), they were able to extract preferential trade agreements often at the point of a gun.

As the cold war came to an end in 1989 with the fall of the USSR, the power of the nation was no longer measured by the number of phallic nuclear missiles they possessed but by a number called the Gross Domestic Product (GDP).

The Race

In the 1990s both China and India joined the race and undertook “liberalisation”.

Now.

India soon joined in and there has been this race to get to the top and be the country with the largest GDP. China has made great strides towards achieving it but the cost has been tremendous as well.

India, China and many other nations in the world willingly got sucked into this ego race of achieving a large GDP number often at the cost of the environment. The westerners managed to set the rules and make everyone play by them. But now, the consequences are apparent.

As IPCC realised that there were terrible consequences to pursuing this GDP war, India and China were only getting started and they did not want to be disallowed from increasing their GDP effortlessly by “Climate Regulations”. This ego war has entirely defined the last 30 years of our climate response or the lack thereof.

So what now?

The first scientist to measure carbon dioxide’s potential to absorb heat was an American woman, Eunice Foote, in 1856. She filled one glass cylinder with carbon dioxide, and another with air, and set them out in the sunshine. Her scientific brief, published in the American Journal of Science and Arts, recorded the temperature in the carbon dioxide-filled cylinder as rising much higher than in the one with air.

Ever since, scientists have been steadily building confidence in the idea that humans are changing the climate by dumping billions of tons of greenhouse gases into the atmosphere. The advent of supercomputers has given researchers massive computer simulations of the climate system, recreating the interactions between oceans, land, and the atmosphere to detect humanity’s role in global warming. The science has been right most of the time. After analyzing 17 climate models designed between 1970 and 2007, researchers found the majority of the predictions were “indistinguishable from what actually occurred.”

[…]

In the IPCC’s latest assessment report (AR6), the first section of which was published on Aug. 9, scientists sent a clear signal of growing confidence in their findings. Comparing the text with that of the first piece of the group’s previous assessment report (AR5), from 2013, “low confidence” statements fell from about 20% to 6% of the total number of confidence statements, while the portion of statements expressing “high confidence” rose from 36% to 56%.

Source:

Quartz

After years of saying that climate change is “most likely” man-made and pussyfooting around the evidence, the IPCC is finally in a place where it is saying that this link is unquestionably real. This report is not just about science, it is about politics. Since it is an intergovernmental panel, all of them need to sign off on it.

For this to happen – we had to have two states in America suffer fires and floods at the same time; 14 others continue to burn and 4 others continue to be pummeled by cyclones. We also needed the most catastrophic floods that Western Europe has seen in a long time and for China itself to be hit by floods.

What did they finally say?

It concludes with “high confidence” that the plans countries so far have put forward to reduce emissions are “insufficient” to keep warming well below 2°C, the goal enshrined in the 2015 Paris Agreement. While unsurprising on its own, it is surprising for a document that had to be signed off on by the same government representatives it condemns.

The last time global temperatures were comparable to today was 125,000 years ago, the concentration of atmospheric carbon dioxide is higher than anytime in the last 2 million years, and greenhouse gas emissions are rising faster than anytime in the last 800,000 years.

“It is unequivocal that human influence has warmed the global climate system since pre-industrial times” (the last IPCC report said human influence was “clear”). Specifically, the report blames humanity for nearly all of the 1.1°C increase in global temperatures observed since the Industrial Revolution.

Climate change is happening faster than previously understood, and the likelihood that the global temperature increase can stay within the Paris Agreement goal of 1.5°C is extremely slim.

The more emissions increase, the less they can be offset by natural sinks—and in a high-emissions scenario, the loss of forests from wildfires becomes so severe that land-based ecosystems become a net source of emissions, rather than a sink

Methane, particulate matter, aerosols, hydrofluorocarbons, and other non-CO2 gases that don’t linger very long in the atmosphere (just a few hours, in some cases) but exert a tremendous influence on the climate while they do.

Climate sensitivity is a measure of how much the Earth responds to changes in greenhouse gas concentrations. For every doubling of atmospheric CO2, temperatures go up by about 3°C, this chapter concludes.

Although instances of drought are expected to become more common and more severe, wet parts of the world will get wetter as the warmer atmosphere is able to carry more water. Total net precipitation will increase, yet the thirstier atmosphere will make dry places drier.

Warmer water expands, contributing significantly to sea level rise, and the slow, deep circulation of ocean water is a key reason why global temperatures don’t turn on a dime in relation to atmospheric CO2. Marine animals are feeling this heat, as scientists have documented that the frequency of marine heatwaves has doubled since the 1980s.

Cities, in particular, will warm faster as a result of urbanization. Global warming extremes in urban areas will be even more pronounced, especially during heatwaves. Although global models largely agree, it is more difficult to consistently predict regional climate impacts across models.

Our climate is already different compared to the early or mid-20th century and we’re seeing big changes to mean temperatures, growing season, extreme heat, ocean acidification, and deoxygenation, and Arctic sea ice loss. Expect more changes by mid-century: more rain in the northern hemisphere, less rain in a few regions (the Mediterranean and South Africa), as well as sea-level rise along all coasts.

Source:

Quartz

We have contributed to this crisis and there is little hope of escape if we continue down the path we are on – even if that involves cutting back by paltry amounts as promised in Paris. In a couple of decades – no more seafood! Mediterranean desert and rich people in America prepare to swim in your cities. You can read the full report here.

Source: IPCC

Here is the thing. The people in the tropics have had to suffer wild temperature swings, as it is, for decades now. In Delhi, it is normal to have a 15-degree difference between high and low in a day and up to a 35-degree difference between summer highs and winter lows. This is not true of the countries closer to the poles – Today.

They will get a taste of what it is like if the temperatures keep rising. This is already evidenced by the events unfolding at this moment. They are not infra-structurally or physically adapted to deal with these wild swings. They will DIE.

The days of climate consequences hurting only the poor are over; It is coming for the rich countries. It is time for the ostrich to get its head out of the soil or die as the water washes in and suffocates it to death.

Weather Jujitsu

Jujitsu is a form of martial art where you use the power of the opponent against them. For a century man has had the arrogance to think that man could control nature. The most physical expression of this is Dams. China has 98,000 dams. Yeah, that is not a typo!

While’s it’s difficult to link any one extreme event to global warming, the new report from the Intergovernmental Panel on Climate Change published Monday (Aug. 9) says that rainfall and floods seen as “once in a decade” events are going to become increasingly more frequent. In east Asia, the IPCC predicts with high confidence that heavy rainfall will increase in frequency and intensity.

[…]

According to a report commissioned by the National Climate Center, part of China Meteorological Administration, mean temperatures in the country were above normal in every season in 2020. Meanwhile, the annual rainfall for the whole country in 2020 ranked as the fourth-highest since 1951. The heavy rainfall caused extreme floods across southern, central, and eastern China. As a result, water levels at the Three Gorges Dam, the world’s largest hydroelectric plant, located in central China and completed in 2009, rose 6.5 feet above its flood-prevention level.

One of the dams that collapsed this year, the Xinfa dam in Inner Mongolia, was “well constructed and prepared very well (for floods)” said Mohammad Heiderzahad, an associate professor of civil engineering at Brunel University in London. Heiderzahad, who is a dam engineer himself, explained that even so the dam collapsed quickly despite having two spillways and an emergency bottom outlet, which allows for water to be released safely when a dam is in danger of overflowing.

Source: Quartz

The tools that we employed to control nature are going to be used against us by nature. This is not going to be pretty to watch. There is one thing that all of us can be certain of; we will be having hotter summers, colder winters and more and more flooding events across the world.

Growing trees and plants have taken up about a quarter of all fossil fuel emissions since 1960, with the Amazon playing a major role as the largest tropical forest. Losing the Amazon’s power to capture CO2 is a stark warning that slashing emissions from fossil fuels is more urgent than ever, scientists said.

The research used small planes to measure CO2 levels up to 4,500m above the forest over the last decade, showing how the whole Amazon is changing. Previous studies indicating the Amazon was becoming a source of CO2 were based on satellite data, which can be hampered by cloud cover, or ground measurements of trees, which can cover only a tiny part of the vast region.

The scientists said the discovery that part of the Amazon was emitting carbon even without fires was particularly worrying. They said it was most likely the result of each year’s deforestation and fires making adjacent forests more susceptible the next year. The trees produce much of the region’s rain, so fewer trees means more severe droughts and heatwaves and more tree deaths and fires.

Source: The Guardian

The shareholder value that was created by burning fossil fuel will be spent repairing cities and attempting to keep people alive. All of this is because we can measure our success only in terms of GDP.

As George Carlin put it – “The planet was there for Billions of years before we humans showed up, and it would probably be here for Billions more after us. The planet is not dying, WE ARE.” I think it is high time we start talking about climate in those terms. The planet will not suffer, we will.

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Telecom Bankruptcy | Learning by Proxy

Telecom was the ticket to great wealth for governments around the world. Governments were hiring game theorists to determine how to sell air – quite literally. In the case of India, things did not really turn out the way the government had imagined. This hot potato was a creation of the previous BJP government and the current one is left to deal with its consequences.

Surviving Odds

About a decade ago, if you had wanted a mobile connection, you had almost a dozen operators to choose from. The Indian telecom landscape resembled the Indian political landscape with several regional operators such as Aircel and the competition was good for the customer. Tata Docomo brought the prices down to 60p per minute billed every second at 1p per second.

Then followed the 2G scam which saw the withdrawal of 2G licenses to some of the players. Along with that, the prices had fallen so low that it was no longer possible for many of the players to sustain their operations.

Normally when a company caters to B2B as well as B2C customers; the former is meant to bring in the top line (increase revenue figures) and the latter is meant to bolster the bottom line (profits). An individual has little in the form of negotiation power to bring the price down. Curiously, the telecom industry in India was operating in reverse. The consumer business was barely breakeven.

Several mergers followed and Reliance Communications went into bankruptcy.

When the 2G licenses were being auctioned, the government had agreed to defer the cost of the license by taking a percentage of the income that was generated by the companies to whom the licenses were being issued. This was back in 2000 under the Vajpayee government. That became an issue in 2008 when the government decided that it had claims on all kinds of revenue that a telecom company generated including rent and interest. This resulted in ballooning costs. Further, as the case dragged on through the courts for a decade, the amount kept rising and finally, the supreme court sided with the government.

Vodafone was born in India in 2007 through the acquisition of Essar’s Hutch. It was billed as one of the biggest deals in its times. Priced at $19 Billion (greater than WhatsApp) it really was! The Indian government slapped Vodafone with a $1.2 Billion tax for the acquisition retrospectively.

Vodafone grew in India and as the consolidation continued, it eventually became Vodafone-Idea. Two loss-making companies merged into one enormously loss-making company.

The loss at the Supreme Court meant that this new enormously loss-making company owed close to 96,000 Crores ($12 Billion) to the government. While the company wants this figure to be looked at again by the Supreme Court, the court has refused. When a company which is valued at $3 Billion is expected to pay $12 Billion in fees, what do they do?

Vodafone Plc, which owns a 45% stake in the debt-laden Vodafone Idea Limited (VIL), has proposed to offer its stake for free to lenders/financial institutions or to the state-run Bharat Sanchar Nigam Limited (BSNL), on the condition that they take over the ailing telco, Business Standard reported citing banking sources familiar with the matter.

Lenders told the publication if BSNL takes over the company, the dues paid by the merged BSNL-Vi entity would be a book entry.

The development comes less than two months after Aditya Birla Group (ABG) chairman Kumar Mangalam Birla offered to hand over the group’s 27.66% stake in Vi to any public sector or domestic financial institution that can keep the cash-strapped telco afloat.

Source: Economic Times

For the Birlas as well as for Vodafone, this pursuit is starting to resemble a bonfire made out of money. Both have refused to infuse any further capital into Vi which is the name of the combined entity. Even if they infuse money, there is no hope for the entity for the next 20 years. They are offering to give the company away for free to anyone who wants to take it. FREE! FREE! FREE!

It is worth noting that lenders have an exposure of Rs 25,000 crore to Vi. Besides this, the beleaguered telco owes the government Rs 96,270 crore in spectrum payment dues and Rs 58,254 crore in AGR liabilities, of which Rs 7,854 crore has been paid.

Source: Economic Times

Who are the lenders? The very same banks that lent to Kingfisher Airlines and Jet Airways. In my post two weeks ago, I had explained how big the haircut was which the lenders had to take in the Bankruptcy proceedings of Jet Airways. Over 90%. One can expect more of the same if Vodafone and Birla were to step away. The lenders, the government and quite possibly the employees – all of them would be screwed.

To drive the point home, Kumaramangalam Birla resigned from the Board of the company last week.

For the Government

The state-run company, BSNL has one foot in the grave. Reliance has managed to take away most of the rural market from BSNL. If Vi fails, it would turn the telecom sector in India into a duopoly. Airtel and Reliance will be the only two left (apart from BSNL). This would be hugely devastating for customers who are bound to see prices rise. This is easy to pull off when there are only two players.

It will be even more devastating for the government. If Vi were to go into bankruptcy, the government might be able to recover only a very small percentage of the 1.5 Lac Crores that it has piled on as AGR on the company. They would be thankful if they get 10% of it.

But there is a bigger problem. 5G Auction.

The government auctions access to airwaves and they charge companies a fee to access the bandwidth. If there are more players, the value of those airwaves go up and so the government stands to benefit.

If the industry has only 2 players left, they can expect a precipitous drop in pricing of 5G airwaves and this would hurt them a lot in the long run.

Ultimately, the government has managed to land itself in an unenviable position in this case. There would be much to lose in every case. Write off AGR and fees to let Vi survive; Take the free equity and merge it with BSNL; Let the company go into bankruptcy; all options are bad options. Which is the least bad?

Bending

Cairn Energy was a poster child of the energy business in India 15 years ago. Today, they have sued India internationally and won a case.

India had made retrospective tax changes and slapped Cairn energy with a Billion dollar tax bill. Vodafone was also slapped with a similar tax bill retrospectively. Cairn Energy had not completely sold its shares in the Indian business to Vedanta so they were forced to cough up $1.2 Billion. Cairn sued, won and the contours of the judgement said,

Cairn Energy started the process of filing applications in various countries to enforce its award even as it held talks with the Indian government to come up with an amicable resolution.

In May, it filed an application in a US court seeking seizure of Air India’s assets, claiming it is the alter ego of the Indian government. It has filed similar applications in Singapore, Canada, Mauritius and the Netherlands.

However, earlier this month, it successfully managed to freeze residential real estate owned by the Indian government in Paris, impacting around 20 centrally located properties valued at more than $20 million. It was the first step in taking ownership of the properties and ensured that the proceeds of any sales would go to Cairn.

In a statement, Cairn Energy reiterated that it prefers an amicable settlement with the Indian government and has submitted a detailed series of proposals to the government since February 2021. “However, in the absence of such a settlement, Cairn must take all necessary legal actions to protect the interests of its international shareholders,” it said.

Source: The Print

Faced with the prospect of public shaming internationally, the government has woken up and decided to make some changes. Changes in legislation will allow it to settle these disputes.

The Indian government on Thursday proposed refunding companies involved in disputes over past tax payments, aiming to settle long-running litigation over sums totaling billions of dollars with companies including Vodafone (VOD.L) and Cairn Energy (CNE.L).

The amendment to the tax law, applicable after approval from both houses of parliament and president, could help settle at least 17 disputes over tax payments amounting to 500 billion rupees ($6.7 billion) or more, analysts said.

Source: Reuters

For a government that claimed to be making ‘doing business in India’ easier, its obstinate adherence to a bad decision made by the previous government and following through on the same to this point seems perplexing at best.

As they say, do not attribute to malice what can be easily explained by incompetence.

Fascism

Umberto Eco was a novelist who also wrote on many other topics. He wrote about fascism as well. Here are the 14 elements he said any fascist regime has –

  1. The cult of tradition.
  2. The rejection of modernism.
  3. The cult of action for action’s sake.
  4. Dissent is treason.
  5. Fear of diversity.
  6. Stoking the social reservoirs of frustration.
  7. The obsession with conspiracies.
  8. The enemy is both strong and weak.
  9. Life is a permanent state of war.
  10. Elitism in the reverse, or popular elitism.
  11. Everyone is a hero, and death is his reward.
  12. Machismo and misogyny.
  13. Selective populism.
  14. Newspeak is the new lingua franca.

Source: The Wire

Can you think of leaders who adhere to many of these elements?

Also

You just have to listen to this. And you can think of which roles in the list of 14 this adheres to.

Categories
Learning by Proxy

Afghanistan | Learning by Proxy

When the Romans used to build their arches, they would start the foundation from both sides and finish up at the top. The final stone to be placed would provide compression to both sides and hence hold the arch in position. It was a wedge-shaped piece called the Keystone. If the keystone was to be removed, the entire arch would fall.

Source: Pixabay

Afghanistan has turned into a keystone for Eurasian peace!

Afghanistan

For a long time now, across the world, the rich have been getting richer and the poor poorer. This has become unavoidably obvious in the post-pandemic world which has minted out hundreds of new billionaires while also delivering 100s of Millions BACK into the laps of poverty.

In January 2021, Biden moved into the White House. His agenda was clear. He wanted to reduce the expenditures on frivolous things and focus more on the poor in America. They can benefit a great deal from the investment that the government can make in raising their standards. The one thing Billionaires hate doing is pay taxes in order to improve the lives of others. They would much rather pretend to be improving the lives of others through their foundations. Read my post on Philanthropy.

Biden needed to redirect government spending and the easiest thing to go after was the defence spending in Afghanistan. George Bush started the war in 2001 ostensibly to find Osama Bin Laden, who was comfortably lodged in Pakistan. In the intervening 20 years, over $2.4 Trillion have been poured into maintaining a troop presence in Afghanistan. Over 2,300 soldiers dead.

It helped the companies that George Bush held shares in (Haliburton) get very very rich. Selling the idea of an Afghan withdrawal where several American soldiers have died and continue to die unnecessarily, was not hard.

Biden decided to end the occupation in Afghanistan and bring the troops home by September 11, 2021.

In the intervening 20 years,

  • In 2001, China was just a manufacturer known for the poor quality but low priced products. They make most of the things we consume today. Further, a lot of that growth has also been driven by the detention camps that China runs in the Xinjiang region which is populated by Uighur Muslims. Muslims whom the CCP hates.
  • Pakistan has gone through a lot of tumults. It is extremely dependent on China for its continued existence. It is also a part of the Belt Road Initiative under which China has made a lot of investment into the country.
  • India has made a lot of investment in Afghanistan in the interim to secure its interest to counter-balance Pakistan; much like China uses Pakistan as a counter-balance in the case of India. The Indian government has left no stone unturned so far as drawing the ire of the people of J&K is concerned.
  • Russia had its teeth broken in Afghanistan due to US intervention in the 80s. They don’t want to revisit the place. But Russia also has a whole host of Muslim nations on its southern border; all of the ‘-stans’. Tajikistan, Turkmenistan, Uzbekistan, Kazakhstan, and Kyrgyzstan. The last thing they need, given their history, is for factions from Afghanistan to foment any trouble in any of these regions.

As soon as the US Army started its withdrawal, city after city, started falling into the hands of the Taliban. The Afghan army straight out surrendered and handed over their weapons.

India unilaterally changed article 370. Imprisoned all the politicians in J&K and cut the internet across the valley for almost a year. Little wonder, that under pressure from the US, all those same politicians were invited to New Delhi for “talks”.

The people from Xinjiang can find support from the Taliban. The people of J&K can find support from the Taliban. The people of Balochistan can find support from the Taliban. Most importantly Afghanistan can become a safe haven to sit and plan terrorist activities.

As the Taliban push ahead with military offensives across Afghanistan, preparing to take over after the exit of US and NATO forces, India faces a situation in which it may have no role to play in that country, and in the worst case scenario, not even a diplomatic presence.

[…]

Speaking at the Afghanistan Conference in Geneva in November 2020, External Affairs Minister S Jaishankar said “no part of Afghanistan today is untouched by the 400-plus projects that India has undertaken in all 34 of Afghanistan’s provinces”. The fate of these projects is now up in the air.

Source: Indian Express

Across these projects, India has invested over $3 Billion. So not only the possibility of adverse support to J&K separatists, India is looking at potentially writing off a lot of money invested in the country.

For President Xi Jinping and the Chinese Communist Party, Afghanistan is of geopolitical importance. It offers a portal through which the Chinese military might access the Arabian Sea, via Iran or Pakistan. The war-torn country could also provide access to Iran and the Middle East, and a route to the Indian Ocean and on to Africa, reported Fox News.

“Because the Chinese are more vicious, yes, I think they’ll have a better chance of achieving their goals in Afghanistan than us,” author and CCP expert Gordon Chang said in an interview with Fox News. “But having a better chance doesn’t mean they’ll succeed. I think they will just take longer to fail.”

[…]

Beijing will expect the Taliban to ignore the “genocidal” oppression of their fellow Muslims, the 12 million Uyghurs in China’s Xinjiang province, which sits close to the Afghan and Pakistani borders.

Source: Mint

Russia has announced it will hold joint air drills with Uzbekistan along the Central Asian nation’s border with Afghanistan but has dismissed the notion that real airstrikes were being planned.

The Russian Defense Ministry stated Thursday that Su-25SM attack aircraft of the Central Military District’s aviation fleet based in allied Kyrgyzstan were set to take part in joint Russian-Uzbek aerial exercises from July 30 to August 20. The ministry said that the “practical part of the training event will take place at the Termez training ground in the area bordering Afghanistan.”

Source: Newsweek

Everyone is sweating it. The fate of Afghanistan is unknown at the moment. The only thing that is certain is that the sitting government is sure to fall and with that, the Taliban is most likely to move into power. Are they going to seek nation-building, in whatever capacity, or move back to their old ways is not known.

If they do go back to their old ways, all of the bordering nations will have something to lose.

IPO

The past 12 months have provided us with a flurry of IPOs. There is so much capital floating around that everyone seems to be getting listed. Last week Zomato, one of the early breed of startups that got the ball rolling in India, got listed.

Zomato was a company that raised $319.5 Million at a valuation of $3.4 Billion (Rs. 24,000 Crores) across 2020.

Zomato witnessed a stellar listing on Friday as the stock jumped over 53% over its IPO price of Rs 76 on debut to quote at Rs 115. After hitting an intra-day high of Rs 138 on the BSE, the stock finally closed at Rs 126, giving the company a market valuation of Rs 98,732 crore, ahead of traditional giants like Tata Motors, M&M and Coal India.

Zomato’s strong debut also proved a lot of Dalal Street pundits and doubters wrong who had questioned the new-age company’s pre-IPO valuation of Rs 60,000 crore. Even those who believed in the loss-making company’s valuation then, were expecting its listing gain to be limited at 25%-30%. On July 16, the company had closed its IPO bidding process with an over 38 times oversubscription and advanced its listing date by at least four days to Friday.

Source: Times of India

After being listed at a valuation of over $8 Billion the company closed its first day at a valuation of $13.3 Billion. This, for a company that eked out revenues of $394 Million in 2020 and has never been profitable.

For stable businesses, the market usually values companies at 10x to 30x profits but since there are no profits to talk of here let us look at revenues. 3x to 5x revenue multiple is given to businesses that are stable and have a steady growth. The current valuation seems to show that investors expect Zomato to continue to at least double its revenue every year for the coming 3 – 5 years.

There is the only way that any market learns, by making mistakes.

The press has been quick to declare the Zomato founder, a Billionaire. The truth for a CEO of a billion dollar company that has just been listed is that those shares are a crown of thorns. He cannot be seen selling them, the price of those shares will crash immediately. So while he might be able to liquidate a small amount of shareholding to make himself more than comfortable, all that value is really not accessible to him.

Further, this IPO will spur a series of tech IPOs in India. The market seems primed to take the risk and companies such as Paytm, Policybazaar, Nykaa and maybe even Flipkart might see what may be possible if they were to go to market. Paytm has already filed their Draft Red Herring Prospectus with SEBI to issue an IPO and they are seeking an even more ambitious valuation of $30 Billion.

The interesting thing would be to see how these businesses fare over the long arc of time.

Having said that the US is also seeing a raft of IPOs. In their case especially Tech IPOs have been many. Not just US companies but Chinese and others as well.

Reminds me of a line I read in a book recently –

“In other words, there seems to have been a profound contradiction between the political imperative of establishing capitalism as the only possible way to manage anything, and capitalism’s own unacknowl­edged need to limit its future horizons lest speculation, predictably, go haywire. Once it did, and the whole machine imploded, we were left in the strange situation of not being able to even imagine any other way that things might be arranged. About the only thing we can imagine is catastrophe.”

~ Debt – The First 5000 years by David Graeber

Capitalism is only stable when people feel things can implode at any moment. The second they feel too secure about its long term future, speculation runs amok and the system does implode.

In 1998, one of the first Social media companies called theGlobe.com listed on the NYSE at $9 per share. Within a matter of days, it was being traded at $97 per share. In 2001, the shares of the company were trading at 10 cents to a share.

Tale of Two Airlines

In April 2019, I was stranded in the Bangalore airport. The flight I was to take to Pune was cancelled.

A Jet Airways flight.

I had somehow managed to pick exactly the day on which the airliner imploded. For the next 24 hours, I had to work out several flight changes to be able to complete my trip.

Jet Airways had been running up losses since the rise of Indigo and its failed sale to Etihad did it in.

Lenders had dragged the company to the insolvency court over unpaid dues to the tune of ₹8,500 crore

The Mumbai bench of NCLT has concluded Jet Airways’ hearings for the approval of the resolution plan submitted by a consortium of Kalrock Capital and Murari Lal Jalan. The Bench has reserved the order.

During the hearing held on Monday, the two-judge Bench heard the clarifications on the resolution plan from the lawyers on behalf of the resolution applicant, Jalan and Kalrock.

Source: Hindu Business Line

There was a resolution that was worked out which involved creditors taking more than a 90% cut on their outstanding amount. Yes. More than 90%.

While Jet has admitted claims of over Rs 15,000 crore, the consortium proposed to pay nearly Rs 1,200 crore to creditors over the next five years and re-establish Jet Airways as a full service airline with 25 aircraft fleet. According to the resolution plan, banks will get a 9.5 per cent stake in the airline while public shareholding will reduce to 0.21 per cent. The consortium would hold 89.79 per cent in the airline. Employees will also get 0.5 per cent stake in the airline.

Source: Business Standard

The shares of Jet Airways are still traded on the stock exchange and jumped to a 52 week high on news of the restructuring. But actually…

The resolution professional had received claims of over Rs 44,000 crore from financial creditors and employees of which claims to the tune of Rs 15,400 crore were admitted. Financial creditors such as State Bank of India, Yes Bank and others claimed Rs 11,344 crore but only Rs 7,453 crore worth of claims were admitted.

Source: Business Standard

That is Rs. 44,000 Crores! And I did not get a refund for my Pune ticket.

Naresh Goyal, the former promoter of the now-defunct Jet Airways, might be facing investigations from several central and state agencies, but the high-flying businessman remains scot-free for now.

Weighed down by a debt burden of around Rs 8,400 crore, the carrier had to suspend operations in mid-April 2019 after it ran out of funds to remain afloat.

The cash-strapped Jet Airways grappled with fund misappropriation and legal problems before it went defunct. In August 2018, the western regional director of the Ministry of Corporate Affairs had initiated a preliminary enquiry against the airline and its promoters over suspicions that the promoters siphoned off funds. On the basis of this probe report, the ministry on July 4, 2019, asked Serious Fraud Investigation Office (SFIO) to initiate a detailed enquiry.

Source: Moneycontrol

I went down this rabbit hole because I saw this…

A British court on Monday granted a bankruptcy order against Vijay Mallya, paving the way for a consortium of Indian banks led by the State Bank of India (SBI) to pursue a worldwide freezing order to seek repayment of debt owed by the now-defunct Kingfisher Airlines.

“As at 15.42 [UK time], I adjudicate Dr. Mallya bankrupt,” Chief Insolvencies and Companies Court (ICC) Judge Michael Briggs said in his ruling during a virtual hearing of the Chancery Division of the High Court here.

Source: The Wire

Back in the day…

Flamboyant business tycoon Vijay Mallya-promoted, Kingfisher Airlines, whose properties in Mumbai, Panaji and Bengaluru were raided by the Central Bureau of Investigation (CBI) on Saturday, had borrowed around Rs.7,000 crore from 17 financial lenders.

A consortium of 17-state-owned financial lenders led by India’s largest lender State Bank of India was formed to recover the money from the airline company.

Source: Business Standard

Similar debt burden; such different outcomes. Vijay Mallya fell on an axe of his own making. Having said that, quite clearly the problem is definitely not the money that he owes. Obviously, it seems to be quite easy to make that go away. The exact same banks that went after Jet, went after Kingfisher Airlines. They took a 90% haircut with Jet, with Kingfisher, they just keep revising the figures with Compound Interest.

Why such different standards? I think the question we should be asking is…

Who did Vijay Mallya rub the wrong way?

Also

A Microsoft engineer was driving through the Sonoma Valley and he just stopped and took a picture in 1996. It went on to become the most famous picture on earth. Look what we have done.

Why you should know when to say no

(I know it is photoshopped)

Amazon…

Categories
Learning by Proxy

Whether we can weather the Weather | Learning by Proxy

Usually, weather updates are for the end but I guess we need to start this one with some updates. If we had left it to our forefathers they would have just thought that the gods are angry with us. Unfortunately, we cannot brush this one away that easily.

Climate Change is real and it is finally knocking on the doors of rich people.

Weather

Studying in Agra in 2001, I was used to sweltering heat and freezing cold. Summers would reach up to 50 degrees Celsius. I have watched students collapse while walking from the hostel to the college which was about half a kilometre away. We usually had to deal with that in the absence of electricity given that the campus was located 20 km from the city and the electricity supply was not great. Winters used to be equally hard with temperatures plummeting to low single digits. This weather was a result of climate change.

I just used to think Agra sucked!

The countries in the tropics have been experiencing some of the worst impacts of climate change already. People from Guatemala have been migrating to the USA, not because of jobs – it’s because they want to live. People from Syria are going to Europe not for jobs – for life.

Put yourself in that position. Imagine leaving everything, all your possession, your identity, your life, your relatives and deciding to go to a foreign land undertaking a perilous journey that is half likely to kill you. Would you do that just to get a job??

The march of climate change has progressed to a point where the rich countries can now experience the same. Temperature fluctuations that range 20 degrees within a day, flash flooding, hurricanes, etc. The days of outsourcing pollution and calling it a day are over.

And used to pass Verviers often on the way to work

Germans are also required to go swimming in the mountains

In the meantime, as usual, Eastern US is underwater and the Western US is on fire.

Tropical storm Elsa put New York underwater.

https://www.usatoday.com/videos/news/nation/2021/07/09/new-york-city-subway-flooded/7909855002/

220,000 Acres have been burnt by the biggest of the 53 wildfires that are burning in the west. Temperatures have soared to 52 degrees Celsius in Oregon, a place that is under snow most of winter. That is like Shimla having 50-degree temperature. Unprecedented drought, it is so dry and so hot…

Firefighters battling the many wildfires in the region say the air is so dry that much of the water dropped by aircraft to quell the flames evaporates before it reaches the ground.

Source: BBC

People are also starting to realise that weather is a system and one change can affect others. The forest fires are starting to affect the weather in Toronto. Toronto looks like Delhi in Winter now.

Source: CBC

In China,

The subway train in Zhengzhou, a city of five million in central China, was approaching its next station when the floodwaters began to rise ominously on the tracks. The passengers crowded forward as the water rose, submerging the cars at the rear first because they were deeper in the tunnel.

As the water reached their waists, then chests, finally their necks, the passengers called emergency services or relatives. One gave her parents the details for accessing her bank account. Some cried. Others retched or fainted. After two hours, it became difficult to breathe in the congested air that remained in the cars.

Source: New York Times

There was flooding in a city of 5 Million people and the degree of flooding has been unprecedented.

Further west in Iran,

Iran is struggling with a fifth wave of the coronavirus pandemic, an economy strained by American sanctions and stalled talks on rescuing a nuclear agreement that was once seen as an economic salvation.

Now the country is contending with a different but easily foreseen crisis: a severe water shortage.

A prolonged drought and rising temperatures from climate change, combined with decades of government mismanagement of natural resources and lack of planning, have turned the water crisis into a volatile incubator of protests and violent unrest.

Source: New York Times

Iran is a classic case, where you can see how migrations begin. People desperate for water will be forced to move to another country. This will be projected by western media as a political failure and spun to try and extract a nuclear deal out of the country rather than take ownership of the climate catastrophe that they have perpetrated.

So now that climate has come beckoning to their doorsteps, EU legislators are willing to take action on it. They unveiled a new plan,

In what may be a seminal moment in the global effort to fight climate change, Europe on Wednesday challenged the rest of the world by laying out an ambitious blueprint to pivot away from fossil fuels over the next nine years, a plan that also has the potential to set off global trade disputes.

The most radical, and possibly contentious, proposal would impose tariffs on certain imports from countries with less stringent climate protection rules. The proposals also include eliminating the sales of new gas- and diesel-powered cars in just 14 years, and raising the price of using fossil fuels.

Source: New York Times

This proposal need not have waited till 2021. You did not need a flood to wash away two countries to decided to do something about it. Also, now that the troubles at your doorstep, moving too quickly on policy moves of this nature will hurt the developing countries.

Come to think of it, given that they have outsourced most things to other countries, implementing a tariff of this nature would be hard on them. Production and supply chains cannot be changed overnight. Eventually, the cost will be passed on to European consumers and the only solution is for their consumption to come down. In the interim, inflation will increase. How the EU will deal with the economic repercussions of this move will be worth watching.

Chinese Carbon Trade

I had explained the formulation, formation and challenges surrounding the carbon markets in the post I had written 2 months ago. In case, you have not read it, I would recommend it. Last week, China announced their very own carbon trading system. This system will apply to the 2200 power plants in the country, which account for 40% of the carbon footprint.

China has set up the trading platform of the national ETS on the Shanghai Environment and Energy Exchange.

As in other carbon markets, emission permits are allocated to participating firms, which they can use to cover their own emissions or sell on the exchange.

It is part of China’s plans to use market mechanisms to help bring emissions to a peak before 2030 and to net zero by 2060.

Source: Reuters

Carbon trading and emission restriction is an important first step in controlling climate change. It will make a huge difference to how the industries decide to regulate themselves.

Under the scheme, power plants will have a free permit to cover their verified emissions. But even if it exceeded its verified emissions by 100% it would be needed to buy only 20% of the surplus emission on the market. This entirely defeats the scheme on its own. If the power plant were causing 100% more pollution, even then, they would be needed to buy the 20% mandatory amount.

Further, there are deeper problems,

The biggest difference between China’s carbon market and Europe’s has to do with the total number of permits allocated. In Europe’s system (and in theoretical cap-and-trade markets that have been proposed by US policymakers, economists, and others), there is a cap on the total number of permits, which falls over time. This drives up the carbon price (Europe’s surged to record highs this year), and drives down emissions.

But China’s system doesn’t have a cap at all. Instead, permits are allocated to each plant based on a formula that accounts for how efficiently the plant runs compared to a benchmark for its class, and on how much electricity it produces relative to its maximum capacity. More efficient plants receive more permits, as do plants that run less often. These forces should push plants toward maximum efficiency, and favor newer facilities.

Source: Quartz

Also, the pricing of the carbon credits is far too low at 40 ($6.18) Yuan per tonne. Compare this with the European pricing of almost 50 Euros per tonne. The price needs to be set much higher considering that the maximum that any plant is needed to pay is also capped. Not to mention the fine is also fixed at a measly $4600.

China aims to expand the ETS to cover eight high-emission industries, including petrochemicals, chemicals, building materials, non-ferrous metals, papermaking, steel, power generation and aviation, though the timescale is not yet known.

Financial institutions or individual investors will not be allowed to participate in trading in the early stage of the national ETS, but institutional investors will be included once the trading mechanism matures.

Source: Reuters

This policy can be only credited as ‘something is better than nothing.’

HR Tech

For every company out there which loves all of its profits, the one thing they do not like to deal with is people. Unlike machines or code, people cannot be standardised. Each one needs to be recruited separately, each one needs to be led uniquely and each has to be evaluated separately. This is painful, time-consuming and most importantly needs a lot of manpower to undertake.

So you need to recruit to be able to recruit.

Companies that purported were founded to make this process easier have all been clubbed under the banner of HR-Tech companies. They all play a role in automating all of the HR processes, starting with recruitment going right up to evaluation.

Today, there are a lot of companies that will teach you how to build a resume so that you can game the algorithms that would evaluate your resume. Two can play this game. But what when an algorithm sends you home?

Stephen Normandin spent almost four years racing around Phoenix delivering packages as a contract driver for Amazon.com Inc. Then one day, he received an automated email. The algorithms tracking him had decided he wasn’t doing his job properly.

The 63-year-old Army veteran was stunned. He’d been fired by a machine.

Source: Bloomberg

MIT Technology Review went after the whole thing, conducting a detailed analysis of all of the different programs that companies have been using to screen candidates. They found software that evaluates you on the basis of your personality or the tone of your voice!!

Performance on AI-powered interviews is often not the only metric prospective employers use to evaluate a candidate. And these systems may actually reduce bias and find better candidates than human interviewers do. But many of these tools aren’t independently tested, and the companies that built them are reluctant to share details of how they work, making it difficult for either candidates or employers to know whether the algorithms are accurate or what influence they should have on hiring decisions.

Source: MIT Tech Review

All these algorithms are built with the biases that the programmers who were writing the algorithm had. To make matters worse there is no evaluation of it, it is just accepted for what it is.

We would never allow a drug to be sold in the market without having gone through rigorous testing — not even in the context of a health crisis like the coronavirus pandemic. Then why do we allow algorithms that can be just as damaging as a potent drug to be let loose into the world without having undergone similarly rigorous testing? At the moment, anyone can design an algorithm and use it to make important decisions about people — whether they get a loan, or a job, or an apartment, or a prison sentence — without any oversight or any kind of evidence-based requirement. The general population is being used as guinea pigs.

Source: Harvard Business Review

Algorithms are having an outsized impact on the lives of people. When your life can start depending on some stupid input that an algorithm got without context it will results in drastic consequences. We are still at a stage where we can stop this but the window is closing.

Also

Why train compartments are divided

Categories
Learning by Proxy

Chinese Suicide | Learning by Proxy

Every great empire that has ever existed in the world has eventually fallen prey to the ego of one man who was handed a fully formed country. The one thing that we can be certain of is that history repeats itself. China earned its place in the world through the sacrifice of billions. That sacrifice is going to squandered to sate the ego of one man.

pixabay.com

Chinese Suicide

Mao Zedong oversaw the Cultural Revolution during his 33-year reign in China. It was a complete disaster. After his death, Deng Xiaoping took over as the Chairman of the Chinese Communist Party (CCP). He was the one who insisted on ensuring that every Chairman has a 3 year limit as the Chairman of CCP. China does not have elections, they do not follow democracy. But the CCP used to follow a system through which people were promoted from within the party to rise up to Chairman.

That was until in 2018,

The decision announced on February 25th to scrap term limits for China’s president, Xi Jinping, pierces the veil of Chinese politics. It reveals that, at a time when the ruling Communist Party is presenting China to the world as a modern, reliable and responsible state, capable of defending globalisation, the internal political system that the party monopolises is premodern, treacherous, inward-looking and brutal. It also shows that Chinese leaders’ own attempts to make the party otherwise have not got far.

Source: Economist

When you have the ultimate power within an organisation or a country, you start to feel unshakeable. This in turn results in very poor decisions being made and that results in something akin to the Cultural Resolution cited above.

The clampdown on Hong Kong over the past few years is a classic example of a poor decision by someone who cannot believe that his power is being questioned.

One of the things that supported the rapid rise of China over the last 20 years was the free run of capitalism and the promotion of businesses at all costs. As a result, there were businessmen who grew more and more powerful and that does not portend well for an authoritarian. Last year, Alibaba’s financial arm was on the verge of being listed in Hong Kong, when the Chinese government went after them and killed their IPO. Jack Ma has all but disappeared from the scene in the meantime.

Now, the qualifying factor for a company to be pulled up seems to be a listing on stock markets overseas.

Chinese regulators have gained a reputation for aggressive action, but even hardened investors were shocked by the announcement of a probe into ride-hailing firm Didi (DIDI.N) just two days after its $4.4 billion New York stock market debut.

While Didi’s initial public offering (IPO) prospectus did mention some of the regulatory risks to its operations, there was no indication that the Cyberspace Administration of China (CAC) would begin investigating the company and ban it from accepting new users during the review. read more

Source: Reuters

Didi is the Uber of China and a ban from accepting new users can be crippling to their business. China has been a place that was always hostile to international companies. They chased Google and Facebook out of the country. It is indeed surprising that they are going after their own!

In the year 2000, China was not a very affluent economy but as the years progressed their wealth has grown. It is projected that in the next 10 years, China might even surpass the USA to become the largest economy in the world. Having said that, they do not exist in a void and shunning international capital is not going to do them a lot of good.

The measures could have far-reaching implications for a raft of China’s tech giants that are planning IPOs offshore, and for the global investment firms that hold stakes in them. Many investors bought into fast-growing Chinese startups expecting to cash out after the companies list on global exchanges.

In the U.S., IPO bankers scrambled over the holiday weekend and into Tuesday to understand the directives coming out of China, according to people familiar with the matter. Some fielded calls from furious fund managers who had purchased shares of Didi in its IPO last week, only to watch the company lose a huge chunk of its value—as of midday Tuesday, Didi’s stock was 12% below its IPO price.

A big question on those investors’ minds: Who knew what, when? Didi has said it wasn’t aware of Chinese regulators’ plans to put it under cybersecurity review and ban new downloads of its app ahead of its IPO.

Source: WSJ

The investors in the US are going to get vary of investing in any future IPO given how arbitrary and sudden decisions in China can be. Many of these companies have invested in other startups overseas and that might also come under question with several of these startups wanting the Chinese investors out. They would want their structure and ownership to be clear rather than hanging by a thread once such actions are taken.

On Monday, China’s cybersecurity watchdog announced probes into truck-hailing platforms Yunmanman and Huochebang, as well as job listing site Boss Zhipin. New users cannot register for these three apps during the investigation.

Yunmanman and Huochebang are China’s two major truck-hailing apps and label themselves as “Uber for trucks.” They merged in 2017 to create a new firm — Full Truck Alliance, which listed on the New York Stock Exchange last month, and is currently valued at $21 billion.

Source: CNN Philippines

Didi is in focus because it is one of the better-known companies but it is not the only one in trouble with the Chinese authorities.

You don’t want foreigners to own your company, you don’t want foreigners to invest. But you want them to take loans from you and keep buying from you. How long will that party last?

Xi Jinping is probably going to remain, chairman, till he dies. He is bound to make missteps and his ego will ensure that he puts more resources behind those mistakes.

Shorting is a term used in the stock market where you sell a share when it is high and then buy it later after it falls. How do we ‘short’ China?

Transportation

Transportation is one of the biggest contributors to global emissions and therefore global warming. While industry contributes just as much, transportation also happens to be the most visible. This augured well for Elon Musk and helped him turn a bad investment in a high-speed electric car company into at least a legitimate one.

The one thing perhaps the entire industry and the world agrees on is that oil HAS to go. Countries in Europe were the first to take steps towards it, but Belgium has taken by far the boldest step.

The regional Brussels government announced on June 25 a new ban on fossil fuel-powered cars in region that will come into effect over the next 14 years. New sales of diesel cars will be prohibited 2030, and new gasoline car sales will be illegal in 2035. The move is in accordance with existing efforts in Brussels to reduce pollution, and the EU goal of achieving net-zero carbon emissions 2050.

In order to meet these timelines, government leaders have rolled out a broader plan called the “Low Emission Mobility Brussels” roadmap that encourages use of public transportation and will build infrastructure for electric vehicles. Under the plan there will be 22,000 charging stations in the region by 2035. The hopes to reduce total transport emissions by around 70% by 2030.

Source: Quartz

Not too far from the continent, London has decided to take a slightly different approach from that of the rest of the world towards cleaning up with public transport. Hydrogen Fuel Cell powered buses.

London’s iconic red double-decker buses are getting a bit greener. London mayor Sadiq Khan announced city will add to its fleet hydrogen fuel-cell double-decker buses that produce no pollution.

The 20 new buses join the 500 electric and 3800 hybrid buses already in service as part of efforts to improve the city’s air quality, as well as to make all of London buses zero emission by 2030.

Source: Quartz

There is a philosophical battle when it comes to clean transportation. Battery based transportation requires batteries to be charged, often involves chemicals that are harmful to the environment and a very difficult recycling process for the batteries once they are exhausted. Hydrogen Fuel Cells by comparison just combine hydrogen and oxygen to produce water and some energy. You refuel the vehicle with hydrogen instead of petrol.

The main argument against hydrogen fuel cells has been safety which Elon Musk is the first to point out. He does not tell you that he straps on the same hydrogen to his rockets and sends them to space, then it magically becomes safer! He has set the research in Hydrogen fuel cells back by decades single-handedly.

I am glad to see countries adopting it nevertheless. Reminds me of Edison (D.C.) versus Tesla (A.C.). Edison did everything in his power to bring down alternating current and his argument against it was that it was not safe! All of us use AC and not DC today. It is ironic that Elon Musk who is the modern-day Edison is running a company called Tesla.

Meanwhile, on the other side of the pond, Americans are still struggling to figure out how to get heavy-duty vehicles to run on electricity (battery).

While some trucks cover over a thousand miles in a day, others operate at short range. These vehicles are more feasible for electrification in the near term, according to Brennan Borlaug, a researcher at the US National Renewable Energy Laboratory and the lead author of a recent Nature Energy study on electric-truck charging infrastructure.“We see this as being probably the first step on the path to heavy-duty-truck electrification,” Borlaug says. Because these trucks usually drive relatively short distances and return to the same place every day, they don’t need high-capacity batteries and ultra-fast public charging infrastructure—requirements that manufacturers are still working to meet for long-range vehicles.

However, the researchers weren’t sure if the grid could handle many electric trucks simultaneously charging in one place. Unlike electric cars, which have relatively low power requirements and would be distributed through neighborhoods, fleets of electric trucks might strain electricity distribution systems.

Source: MIT Technology Review

Throwing more money and research behind a bad technology. That is the greatest achievement of Elon Musk.

Playing with Fire

In 10 days from that tweet, cases have doubled in America. In the meantime, across the English speaking world in the Northern Hemisphere there is an incredible experiment underway!

Baseball and Basketball seasons are in full swing in America with full capacity crowds. Across the country, people have gotten rid of masks. Especially those who are not vaccinated. Cases numbers are shooting up in middle America which is a predominantly right-wing bastion where there is a lot of vaccine hesitancy. The sporting events are the oil needed to catalyse the spread of the virus.

Across the pond, the blond mop (read Boris Johnson) has decided that all restrictions are to come off on the 19th of July. In the meantime, COVID went from the May lows of 1000 cases a day to 34000 cases a day in Britain.

Source: Worldmeters

To make Indian leaders look like novices, England went ahead with Cricket at Lords, Tennis at Wimbledon and Football at the Wembly – all with full capacity crowds. And now, the restrictions will be removed.

Roughly 60,000 fans packed Wembley Stadium on Sunday to watch Italy defeat England in the final of the Euro 2020 football tournament. The same weekend, Wimbledon’s Centre Court was full: 15,000 people witnessed Novak Djokovic and Ashleigh Barty win their singles titles. And on Saturday, 23,000 spectators filled Lord’s Cricket Ground, where England played Pakistan.

Now England waits, with anxious anticipation, to see how many of these sports devotees fall ill with Covid-19.

All three events were part of England’s move towards July 19, when the economy reopens completely following the coronavirus pandemic. At Lord’s and Wimbledon, there were no limits on attendance; Wembley was two-thirds full, as it was during the Euro semi-finals earlier in the week. As the first major sporting contests permitted to play to such massive crowds since the pandemic began, they were also trials. The goal: to help the government understand not only if such fixtures are safe, but also the kinds of protocols that full-capacity events will need in the near future.

Source: Quartz

This August will be interesting to watch. I think the people who should be most worried are not the ones who might get infected by COVID and perhaps even die. The people who should be worried are the ones in leadership positions at Pfizer, Moderna and AstraZeneca. The impatience amongst leaders to make it seem like they have moved mountains has resulted in these events.

By August we will know how well these vaccines really work in the real world where new strains are being born by the week!

In the meantime – Japan – “Hold my beer! Watch me put together the Olympics”.

Also

When you are the RICHEST person in the world but also petty!

That is not a phoenix, it’s Mount Etna erupting!

Categories
Learning by Proxy

US Jobs | Learning by Proxy

Life is filled with dichotomies. One of the dichotomies facing American businesses right now is the high unemployment rate coupled with the inability to find workers. One would assume that if there were jobs on offer, people would come out looking for work. That has not happened.

US Jobs

Donald Trump had presided over the best jobs market in a long long time. George Bush the last republican president handed an absolute shit-show to Obama before he departed. The 2008 recession was just getting started when Obama stepped into office in Jan 2008.

Obama handed over an economy that was in great shape to Trump and thankfully Trump was only focused on building the wall and female reproductive rights (read supreme court). As a result, the tailwinds carried the economy all the way till COVID, that is.

The lockdown precipitated huge job losses and also furloughs (Unpaid leave). Restaurants, Cafes, Hotels, Amusement Parks, all businesses that had a physical interface with the customer laid of people like crazy. Then, the COVID situation got worse because nobody would listen to the president and drink bottles full of Clorox. His wisdom fell on deaf ears.

Biden moved in – pushed the vaccine agenda and America is open to business again.

But…

The number of corporate calls with at least one mention of “labor shortage” is surging, according to transcripts collected by Sentieo, a financial research company. Up until 2021, there had been fewer than 60 mentions per quarter of the phrase “labor shortage.” In the second quarter of 2021, “labor shortage” was referenced 136 times.

“You certainly can’t have a conversation with any business person across America, certainly, [and] I think fast coming across the globe, without labor shortages and tightness in markets coming up,” said Marie Robinson, executive vice president and chief supply chain officer of food-distributing giant Sysco, on a May 20 analyst call.

Source: Quartz

There are a few things at play over here. There has been a huge push to try and raise minimum wages in the United States to $15 per hour. Currently, it is stuck at $7.25 per hour.

Source: Wikipedia

The green line represents the actual minimum wage as advertised. Which seems to have gone from $1 per hour to $7.25 per hour. The blue one represents the inflation-adjusted purchasing power as per 2020 dollars. It is obvious, being part of the labour force in 1970 was far more rewarding than in 2020.

This is precisely what makes those obnoxious CEO salaries possible. They are pinching 10 dollars each hour from those serving at the frontline and putting it in their pockets. That is how Jeff Bezos earns $149,353 a minute.

At $7.25 an hour, working 10 hours a day, 25 days a month (Sunday off), one would make $1812.5.

The Republicans have been quick to place the blame at the Democrats’ doorstep. The $2 Trillion aid package sent out a $1400 cheque to the poor, which Biden enacted as soon as becoming President. First of all, if $1400 is keep people away from jobs, you really need to consider how much you are paying them. In large cities in America, rent alone can be $500 – $1000 in poorer neighbourhoods.

But there is more than that!

Three million Americans retired during the first six months of the coronavirus pandemic in the US, and that could make returning to full employment in the US more challenging.

The US labor market is like a complicated, sophisticated house party: It’s not just one-in, one-out at the main entrance. People are switching rooms, popping in the side-door, falling out the windows and sneaking in again through the back. Americans have been quitting at the highest rate in decades as the pandemic recession spurred them reevaluate what they want from their employers, even as record-high job openings entice them with new opportunities.

If more workers are demonstrating the leverage they now hold by quitting, many are also showing their independence from the labor market by retiring. During the pandemic, the share of Americans in retirement jumped from about 18.5% to 19.5%:

Source: Quartz

America is ageing. The median age was 30 in 1980, it has slowly crept up to 39 by 2021. Youngsters are unwilling to start families because it is very expensive and the disparities they have inherited make it harder and harder for them to cover the costs.

Several immigrants, especially the undocumented ones who would have worked the seven dollar jobs most probably left the country during the lockdown, unable to cover costs in the US.

Most importantly, these people who work low wages were the first ones to be exposed to COVID and also died by the hoards. They also were in no position to afford care for themselves. There is bound to be fear about exposing themselves once more.

Also, irrespective, if the businesses are desperately looking for people, this is the time to ask for more. This is when they can hope to get ahead. So many are probably just playing hardball.

As a result,

“As you know, we are experiencing one of the greatest hiring challenges in the history of DFW Airport,” wrote Ken Buchanan, executive vice president of revenue management and customer experience at DFW airport, in a May 27 letter to concessionaires. “As we prepare for a busy summer, please continue to practice DFW Airport’s high standards of hiring operations and refrain from soliciting employees from other DFW operations (‘poaching’).”

Source: Quartz

Anti-poaching agreements are illegal. Apple and Google settled their case by paying $415 Million back in 2015.

Space Race

The term Space Race was coined during the cold was to describe the competition that was unleashed between Russia and the US to reach space. The fear at the time was that whoever had control of space, would be able to look into another country and control them just by having the capability to attack them at will.

Russia armed some German documents built their rockets. At the same time, Americans ran ‘Operation Paperclip‘ and smuggled all of the German scientists waiting to go to trial at Nuremberg to America to build their rockets.

Today, capitalists who have squeezed so much money out of people, as cited above, are taking that money to engage in some ego wars by going to space.

Jeff Bezos announced at the end of last month that he was going to go to space on July 20th with his brother on the Blue Origin spacecraft.

Richard Branson who has been working on Virgin Galactic since 2003 announced that he would be going to space on 11th July using a craft that is first flow under a plane to the upper reaches of the atmosphere before being released to launch to about 60 km above the earth.

Not only are they waving it at each other, but they are also trying to turn it into a mission to habilitate their image and get as much PR as they can.

Sirisha Bandla, a Telugu-origin woman, is all set to realise her childhood dream of going to space. With Virgin Galactic launching its crewed test spaceflight on July 11, Bandla will be the backbone of this operation and accompany company’s founder Richard Branson to space.

Source: New Indian Express

and

An 82-year-old woman who has spent six decades trying to reach space will join Jeff Bezos on the first human flight by his space company later this month.

Wally Funk, who underwent training in the 1960s, will become the oldest person to ever fly to space.

Mr Bezos has invited Ms Funk as an “honoured guest” and shared video on Instagram of him telling her the news.

She will join the Amazon founder, his brother Mark and a mystery person who paid $28m (£20m) at auction for a seat.

Source: BBC

Rich people. 🤦🏽‍♂️

Corporate Tax

Three issues back, I had explained the tax deal being entered into by the G7 and what that meant for the rest of the countries. I had ended that piece by saying – let the intimidations begin.

Turns out 130 countries have already fallen in line.

Officials from 130 countries, including G20 nations and OECD members, agreed on Thursday in Germany’s business hub of Frankfurt to the broad outlines for an overhaul of rules for taxing international companies.

“The principles underlying the solution vindicate India‘s stand,” the government said in a statement.

It listed advantages such as a greater share of profits for the markets, consideration of demand-side factors in profit allocation and tax rules to stop treaty shopping.

Source: The Wire

Given that India is not a tax haven and we “try” to tax corporations at a rate that is double what this agreement requires, I do not even know what this means for India. Also, given that the Prime Minister was casually joking about India’s commitment to “defending democracy, freedom of thought and liberty”, I don’t even know how serious they really are.

Also

The American oil & gas industry delivers one thing without fail – Catastrophe.

Categories
Learning by Proxy

Philanthropy | Learning by Proxy

When you hear the word Philanthropy, you conjure up images of generous people with buckets full of money hurling their money at hoards of poor people. The truth is far from that. Often they are giving away little to nothing and what they do give is more than recovered through the access that they are able to secure to the corridors of power.

I think the word needs to undergo redefinition.

Philanthropy

In the last edition, I dove into the antitrust cases and the laws that are being put together against the tech titans of America. The original antitrust case which resulted in the creation of the FTC in the first place was a case against Standard Oil.

A company founded in 1870 by John D Rockefeller became an oil monopoly making him immensely rich. The company unsurprisingly grew through the acquisition of smaller competitors. In many cases, they were acquired and shut down because they were inefficient. What it did was eliminate one more competitor for the company.

Standard’s actions and secret transport deals helped its kerosene price to drop from 58 to 26 cents from 1865 to 1870. Rockefeller used the Erie Canal as a cheap alternative form of transportation—in the summer months when it was not frozen—to ship his refined oil from Cleveland to New York City. In the winter months, his only options were the three trunk lines—the Erie Railroad and the New York Central Railroad to New York City, and the Pennsylvania Railroad to Philadelphia. Competitors disliked the company’s business practices, but consumers liked the lower prices. Standard Oil, being formed well before the discovery of the Spindletop oil field (in Texas, far from Standard Oil’s base in the Midwest) and a demand for oil other than for heat and light, was well placed to control the growth of the oil business. The company was perceived to own and control all aspects of the trade.

Source: Wikipedia

There is an uncanny resemblance in the business practices of Standard Oil, to that of another company we know today.

By 1890, the American government got fed up and passed the Sherman Act which became the basis for anti-monopoly proceedings.

Even so, it was only in 1911 that the Supreme Court finally ordered the breakup of Standard Oil into 34 companies which gave birth to Exxon, Chevron, Mobil, Amoco and several others.

Between 1890 and 1911, as his name became associated with notoriety, in order to bolster his image, John D Rockefeller started the Rockefeller Foundation. At the time, it immensely helped rehabilitate his image, enough to keep Standard Oil together for 15 more years!

As of 2016, Rockefeller Foundation has 4.1 billion dollars under management. In 2019, the foundation gave away 103.8 million for development.

In the dictionary, the word Philanthropy means “Goodwill to fellow members of the human race.” A secondary meaning is “An act or gift done or made for humanitarian purposes.”

Obviously, this is rather broad and all-encompassing.

As it would turn out, Mr John D Rockefeller had provided American businessmen, who would come after him with a template. Not just for image rehabilitation but also for tax evasion.

Establishing a private foundation may make it possible for you to:

Reduce your income tax for every year in which you make a contribution;

Avoid capital gains taxes, depending on the characteristics of assets contributed;

Increase the foundation’s assets through tax-advantaged growth and compounding;

Reduce or eliminate potential estate taxes.

Source: Forbes

The article above explains each aspect in detail in case you are interested.

So in his footsteps followed the likes of John Koch, Julia Koch and family, Henry Ford, Julian Robertson, Ted Turner, Amos Hostetter, Phil Knight, George Kaiser, Donald Bren, Leonard Lauder, Denny Sanford, Charles Schusterman, Eli Broad, Jim Simons, David Hewlett, Gordon Moore, and then came Bill Gates.

Bill Gates started the Bill and Melinda Gates Foundations in 2000. Just 15 months before that, Bill Gates was sitting in a deposition on an Antitrust case against Microsoft. His ego as well as his image had taken a major bruising. He needed to desperately rehabilitate it. Also, he had amassed a lot of wealth from Microsoft and he needed to sell his shares and get the money out. There was no way that he could do it while still at the helm of affairs. Much like the Jeff Bezos conundrum today.

Now, the Foundation also happens to be the largest landholder in the United States of America and also one of the big stakeholders in Four Seasons. He even set up an incubator to work on potential vaccines in Feb 2020. One of the candidates incubated was by a group of scientists from Oxford. When they came up with it, they just wanted to release all the data online for free.

When the director of Oxford’s Jenner Institute had funny ideas about placing the rights to its COVAX-supported vaccine candidate in the public domain, Gates intervened. As reported by Kaiser Health News, “A few weeks later, Oxford—urged on by the Bill & Melinda Gates Foundation—reversed course [and] signed an exclusive vaccine deal with AstraZeneca that gave the pharmaceutical giant sole rights and no guarantee of low prices.”

Source: New Republic

I have no idea how that is justified as philanthropy, sure sounds like an investment to me.

The foundation claims to have given away USD 48 Billion dollars. What they do not tell you is that a lot of it is pledged and not really given away yet; also, this is the aggregate over 21 years! Take your calculators out and divide. On USD 100 Billion if you are getting a 10% return year on year and giving away USD 2 Billion each year, the ‘giving’ is a smokescreen to get away with anything.

Not to be singled out, he launched the Giving Pledge in 2010 through which he brought hoards of tech and non-tech Billionaires from across the world into the Foundation business. This included everyone from 80-year-old Warren Buffet to then 27-year-old Mark Zuckerberg. Mark may have fired this shot too early to benefit from any goodwill.

The divorce was a kick in the shin for Bill Gates. His carefully crafted image took a hit and too many inside stories “leaked” out further decimating his image in the public eye. Much like Mark Zuckerberg, the foundation card is going to be hard to use any longer.

Hence.

Warren Buffett has resigned from his trustee position at the Bill and Melinda Gates Foundation, the 90-year-old investor announced Wednesday.

In a statement, Buffett didn’t specify why he’s leaving the foundation, but noted he has already resigned from all corporate boards other than Berkshire Hathaway’s. Buffett added that the foundation’s new CEO, Mark Suzman, is an “outstanding” selection and has his “full support.”

Source: CNN

Solar Energy

There are few things that are achieved ahead of time; even fewer when it is a government endeavour. India had set itself the goal of reaching 20 GW by 2022. This target was met 4 years ahead of time. Further, the total solar deployment in India today stands at 40 GW as of March 2021.

The rapid growth in deployment of Solar Energy was thanks in part to the huge impetus from the government, low priced solar panels from China flooding the Indian market and costs declining rapidly in the face of huge scale. And then we ourselves threw a spanner in the works.

A bunch of Indian Solar panel manufacturers went to the government and lobbied for a reduction of imports. Much like the government is fixated on killing the e-commerce industry, the Indian government to its own detriment promptly levied a tariff on imported solar panels. To add to this several states wanted to re-negotiate the cost of electricity being supplied and reneged on their agreements.

Imagine, you build a projection to build a solar plant for Rs. 4000 Crores. The central government tells you, your solar panels will cost 40% more and the state government tells you they will pay you 50% of what was agreed. What do you do?

Imports dropped and so did new solar capacity added. Further,

The dysfunction also shows in how poorly India’s solar markets are designed. Apart from rooftop solar, ground-based solar is the other big part of India’s solar sector. Its growth, however, entirely depends on tenders from government bodies like NTPC and SECI.

Let that sink in. The rate at which India adds fresh solar capacity is determined not by demand (DISCOMs’ demand for solar power) or supply (investors wanting to put money into solar projects), but the rate at which NTPC and SECI produce tenders. “We need a SECI that is 10 times larger,” said a senior financial officer at Mumbai-headquartered conglomerate Shapoorji Pallonji. Or, better yet, a liberalised solar market.

Source: The Wire

India has also had an erratic energy policy. Last year as the country went into lockdown due to the CAA protests (it’s clear now, COVID was not even part of the decision matrix, just an excuse), the government pushed through a policy to promote more fossil fuel-based electric production!

In this context,

After running one of the world’s largest petroleum businesses for more than two decades, India’s richest man Mukesh Ambani today (June 24) announced he’s steering his company, Reliance Industries (RIL), towards renewable energy with an investment of 75,000 crore Indian rupees ($10 billion) over the next three years.

[…]

The RIL chairman said that his company plans to build four gigafactories to manufacture and integrate all critical components of the New Energy ecosystem.

The four factories will make or use:

Solar photovoltaic modules, for the production of solar energy.

Energy storage batteries, for intermittent energy.

Electrolysers, for the production of green hydrogen.

Fuel cells, for converting hydrogen into mobile and stationary power.

“Reliance will thus create and offer a fully integrated, end-to-end renewables energy eco-system,” Ambani added.

Source: Quartz

All said and done, Reliance is a petroleum company and there is no doubt that across the world there are serious questions that are being posed about the long term sustainability of oil. 3 issues back, I had written about Engine One which had pulled off a coup with ExxonMobil.

With Indian manufacturers not being in a position to compete on price or scale and with the Chinese manufacturers being pushed out thanks to the duty imposed on them, the deck is clear for Reliance to move in; if they can deliver.

COVID

Pfizer and Moderna are being distributed only in the western world. The vaccine manufactured by these companies uses new technology. Quite frankly, nobody including themselves knows what the long term effect of the vaccine would be. The world has never had an mRNA based vaccine and it literally instructs the body to do something (product proteins) that it did not know how to. What will it do thereafter? In theory nothing. In practice, nobody knows.

The issue is that there is a non-zero probability that there are some long-term side effects that only surface 5 or 10 years from now.

Since the companies see themselves as rising up to a humanitarian crisis, they want to be indemnified from any legal challenge that arises out of side effects or such issues in the future.

Countries like the US have provided them with indemnity. Also, given that a country like the US can print a few Trillion dollars at will and distribute, the companies have little reason to worry that the indemnity would be lived up to.

But what about countries that do not have high credit ratings? What about those who have defaulted on their bonds?

Officials from Argentina and the other Latin American country, which cannot be named as it has signed a confidentiality agreement with Pfizer, said the company’s negotiators demanded additional indemnity against any civil claims citizens might file if they experienced adverse effects after being inoculated. In Argentina and Brazil, Pfizer asked for sovereign assets to be put up as collateral for any future legal costs.

One official who was present in the unnamed country’s negotiations described Pfizer’s demands as “high-level bullying” and said the government felt like it was being “held to ransom” in order to access life-saving vaccines.

[…]

Pfizer asked for additional indemnity from civil cases, meaning that the company would not be held liable for rare adverse effects or for its own acts of negligence, fraud or malice. This includes those linked to company practices – say, if Pfizer sent the wrong vaccine or made errors during manufacturing.

Source: The Wire

The East India Company came to India as traders and then appropriated a lot of the wealth of the land. This a nouveau imperialism – let us call it vaccine imperialism.

Just because you are uncertain about your product, the country is supposed to pledge its sovereign assets to cover your ass?!! Sovereign assets belong to the country. The people of the country. So you will be taking more from the people and giving it back to them!

Jair Bolsanaro might be an idiot, but he would be an even greater idiot if he gave into this nonsense.


Delta Variant

In my last post from April – Mutation Vs Mute Nation – I had explained how a virus mutates and why the widespread transmission of COVID is a problem. We spawned a new devil now branded the delta variant. Turns out…

The Delta variant has certain significant mutations in the spike protein of the virus—the pointy elements that give it the shape of a crown (which is why it’s called the coronavirus). These spikes are like hooks that have to find the receptors in a human cell to link with. Studies have shown that these spikes hook onto receptors called ACE-2. Once these spike proteins can unlock the cells, the infection spreads by replicating the genetic code of the virus.

Some key mutations in the Delta variant—such as the E484Q, L452R, and P614R—make it easier for the spikes in the virus to attach to ACE-2 receptors. This means it can infect and replicate faster, and even evade the body’s natural disease-fighting immunity more efficiently.

The spike protein mutations make the Delta variant the “fastest and fittest” variant yet, according to the WHO. The disease caused by this variant might also exhibit different symptoms than other viral mutations. Those with the Delta variant often complain of headaches, sore throat, and a runny nose, replacing cough and loss of taste of smell as the most common symptoms.

Source: Quartz

The mutation is faster and stronger. Now, in the UK they have also found the Delta + Variant, which is also taking hold in India across 10 states. They have also found the Gamma and Lambda variants which are further mutation on the delta variant.

An analysis by the Gupta Lab at Cambridge University, a team of infectious diseases specialists led by Ravindra K. Gupta, has found that the AstraZeneca vaccine (called Covishield in India) is significantly less effective against infections from the Delta variant. This study was conducted in a lab using samples from vaccinated individuals and testing them against the wild type of the coronavirus (first detected in Wuhan), Alpha variants (first found in the UK), and Delta variants, first seen in India.

Source: Quartz

This explains why those who had been given both doses of the AZ vaccine in India still ended up getting infected and in many cases died. Pfizer and Moderna have not published data from their end.

Just when we thought it was all coming to an end.

On that note.

Also

You just need to stand your ground

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Learning by Proxy

Techocalypse | Learning by Proxy

Learning by Proxy is a weekly newsletter that covers things happening around the world, along with some context that helps you understand it better.
This is the 65th edition of the newsletter.

Technology regulation is becoming a minefield of complications. While the internet started out in America but its regulation started in Europe. Finally, the American legislation is catching up and how?

They are going for the jugular! While it might be hard to bell the cat; they have created the bell.

Techocalypse

In 1997, Apple was hanging on to dear life. When Michael Dell was asked what his one advice to Steve Jobs would be, he said, “Take the cash and return it to the shareholders and shut down the company”.

Both Jeff Bezos and Elon Musk were balding. Jeff went one way (shave) and Elon another(implants).

Mark Zuckerberg was probably being a prick to someone in High School and Bill Gates was the worst human to walk the planet, a title he is proud to holds to this day!

Lisa Khan was in primary school.

As the years passed, all of the companies mentioned above grew and as they grew, they made it their business to dominate their respective field. Often this involved buying out any of the up and coming competitors OR intimidating them and their investors to drop the gauntlet. They grew so much that today each of the companies is valued at figures that are comparable to the GDP of various nations. Not small ones – Apple is 70% of the GDP of India.

Between the incredible management of COVID over the past few months and the misreporting of numbers, it might as well be 100%.

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Lisa Khan grew up and went to Yale. Don’t get impressed yet, George Bush also went there. But then she wrote an article while at Yale.

Amazon is the titan of twenty-first century commerce. In addition to being a retailer, it is now a marketing platform, a delivery and logistics network, a payment service, a credit lender, an auction house, a major book publisher, a producer of television and films, a fashion designer, a hardware manufacturer, and a leading host of cloud server space. Although Amazon has clocked staggering growth, it generates meager profits, choosing to price below-cost and expand widely instead. Through this strategy, the company has positioned itself at the center of e-commerce and now serves as essential infrastructure for a host of other businesses that depend upon it. Elements of the firm’s structure and conduct pose anticompetitive concerns—yet it has escaped antitrust scrutiny.

Source: Yale Law Journal

The Federal Trade Commission (FTC) is a body that adjudicates ‘fair play awards’ for businesses. But instead of using carrots, they like to use sticks. They enforce Anti-Trust laws and are responsible for consumer protection. Under the Trump administration, all of the agencies were skewed towards the businesses. Their staffing reduced by half in many cases and headed by complete jokers. He even dismantled the Consumer Financial Protection Bureau which was Elizabeth Warren’s brainchild under Obama – to rein in banks, you know, who caused 2008.

Biden is making amends and he appointed Lisa Khan the head of the FTC.

Four years ago, Lina Khan was a month out of law school, where she had published a groundbreaking article arguing that the prevailing legal doctrine was allowing Amazon to get away with anticompetitive behavior. Antitrust law was not yet a high-profile issue, and Khan’s suggestion that it might apply to tech companies whose core consumer offerings were free or famously cheap was considered bizarre by much of the legal establishment. This week, Khan, at all of 32 years old, was appointed chair of the Federal Trade Commission, one of the two agencies with the most power to enforce competition law.

[…]

The introduction of the five House antitrust bills and the elevation of Khan to FTC chair, for example, look like two separate stories. But they’re really two parts of the same story: Khan was herself the key investigator behind the House antitrust subcommittee’s investigation of Apple, Amazon, Facebook, and Google, begun in 2019. The bills introduced last week are the fruits of that investigation.

Source: Wired

Lobbyist in Washington DC and lawyers in San Francisco had a busy week and signed several retainers!

Now there are 5 laws that are being pushed through Congress to rein in the Tech Companies. I had written about this piece-meal in my previous editions. Here, here, and here.

The 5 bills that are currently on the floor are –

  1. Merger Filing Fee Modernization Act of 2021 – Essentially supposed to make it a little more costly to acquire.
  2. Access Act – Meant to protect and ensure support for senior citizens – trains its guns on data portability. No more platform lock-in.
  3. American Choice and Innovation Online Act – Self-preferencing of services.
  4. Ending Platform Monopolies Act – Platform companies competing with services on their platform. Apple Music Vs Spotify or Amazon selling the same products that sellers sell on Amazon.
  5. Platform Competition and Opportunity Act of 2021Banning M&A, especially for the Big 4.

Barring the first law, which is a mandatory fee meant to make M&A more expensive, it would certainly not act as a deterrent. A few million dollars are not going to stop Billion dollar deals.

The next four are meant to be applied to companies that are considered “Covered Platforms”

This is defined as:

(i) at the time of the Commission’s or the Department of Justice’s designation under section 2(d), or any of the twelve months preceding that time, or in any of the 12 months preceding the filing of a complaint for an alleged violation of this Act –

(I) Has at least 50,000,000 United States-based monthly active users on the online platform; or

(II) has at least 100,000 United States-based monthly active business users on the platform;

(ii) is owned or controlled by a person with net annual sales, or a market capitalization greater than $600,000,000,000, adjusted for inflation on the basis of the Consumer Price Index, at the time of the Commission’s or the Department of Justice’s designation under section 2(d) or anyof the two years preceding that time, or at any time in the 2 years preceding the filing of a complaint for an alleged violation of this Act; and

(iii) is a critical trading partner for the sale or provision of any product or service offered on or directly related to the online platform.

Source: US Congress

The hope is that with the teeth that these laws provide, the FTC will be able to go after very specific companies. How many companies have a valuation greater than USD 600 billion?

In its current form, the bill would not even be pass because it is too tightly defined. This becomes a problem because…

A bill of attainder (also known as an act of attainder or writ of attainder or bill of penalties) is an act of a legislature declaring a person, or a group of persons, guilty of some crime, and punishing them, often without a trial. As with attainder resulting from the normal judicial process, the effect of such a bill is to nullify the targeted person’s civil rights, most notably the right to own property (and thus pass it on to heirs), the right to a title of nobility, and, in at least the original usage, the right to life itself. Bills of attainder passed in Parliament by Henry VIII on 29 January 1542 resulted in the executions of a number of notable historical figures.

[…]

The United States Constitution forbids legislative bills of attainder: in federal law under Article I, Section 9, Clause 3 (“No Bill of Attainder or ex post facto Law shall be passed”), and in state law under Article I, Section 10. The fact that they were banned even under state law reflects the importance that the Framers attached to this issue.

Source: Wikipedia

A law that targets a very small number of companies only will be treated the same way, a law only meant for the blacks would be treated. It is discriminative. The legal experts who get paid tens of millions by the top tech companies would know this. So this language would have to be tweaked. It remains to be seen if it has any teeth left when they are done with it.

The one thing that is clear, is that the anti-trust case against tech companies has bi-partisan support in the US, for vastly different reasons, but they support it nevertheless. With an FTC that is helmed by someone with strong opinions and with lawmakers who are willing to make the required laws, it won’t be too long before the axe starts swinging.

Now you can see why Jeff Bezos could not wait a day longer to quit his role as CEO of Amazon and start dumping Amazon shares. By the time this investigation start delivering blows, the newly retired Jeff Bezos would have formed a “foundation” and “Donated” all of his shares to it which would then have sold it to engage in “Philanthropy”.

Facebook bought Instagram for USD 1 billion and WhatsApp for USD 19 billion. Do you want to know what happens if the company is not allowed to buy another on the cheap like that?

and then,

The United Nations Special Rapporteurs have written to the Government of India expressing concerns about the newly notified IT Rules, 2021, and asked it carry out a detailed review, and consult with all relevant stakeholders.

Source: Inc42

Instead, if these guys could just get the world leaders around a table just like for the climate summit and debate and agree to a single law for the Internet globally, there would not be an IT Rules, 2021.

If we can agree on protocols such as Bluetooth and IEEE 802.11 (WiFi for short); why on earth can’t we agree on a set of protocols for how the internet functions and how things work within it globally?

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The leg that kicked the axe

The leg of course belongs to Britain. And the result – Brexit.

Britain left the EU in the midst of the Covid lockdown and went into stricter lockdown in Jan 2021. As a result of it, consumption declined and the hits that the county has been taking have generally been macro-economic. The fund movement by large banks to the mainland, and such.

Now as Britain emerges from the lockdown (sort of), the real effects are being left.

Agnieszka Bleka has had to work hard in past years to find companies that need workers, spending much of her day reaching out to local businesses in the northern English city of Preston where she is based.

But now, Ms. Bleka, who owns Workforce Consultants, a company that finds jobs in Britain for mostly Eastern and Central Europeans, said that she was fielding several calls a day from companies looking for temporary staff, and that she can’t keep up with the demand.

“The fish pond is getting smaller,” she said. “And people are picking and choosing the jobs, or leaving as well, going to their home countries.”

Source: New York Times

Brexit was supported in Britain because there was a perception that the migrants were stealing local jobs and causing unemployment amongst the British. To say the least, Brexit has been immensely successful. It has chased all those migrants who were doing the hard work, away.

Jack Kennedy, an economist at Indeed, a job search site, said the demand for hospitality workers was outpacing the number of available workers across the sector.

“The job postings have been rising so fast and the supply of candidates just really hasn’t been able to keep up with that,” he said, adding that a reliance by some industries on foreign-born workers who may have left during the pandemic had probably been part of the problem.

But the dearth of employees is also driving up pay, he said, with hourly wages advertised for hospitality roles across the country increasing. That raises the question of whether other industries struggling to fill roles will follow suit, and how big of an impact on the economy the shortages will have.

Source: New York Times

It seems like there is a solution to this problem – Immigrants!

Rebellion

In the show Mosquito Coast, Allie a character played by Justin Theroux walks into a poor neighbourhood. There are several homeless people who are making good with any shelter they can find. He says – you know what their crime is, they don’t consume.

Capitalism stands on the bedrock of consumption and if people don’t consume; capitalism fails. This is also the reason we will never successfully fight climate change till we hang around in this capitalistic paradigm.

China is an authoritarian state but it operates in a capitalistic paradigm. If the Chinese Communist Party is going to clamp down on free speech, the millennials have found a novel way to protest.

During its seven decades of ruling in China, the Chinese Communist Party has become increasingly skilled at crushing street protests such as the 1989 Tiananmen Square student demonstrations. But the government is now facing a new form of resistance that may be a little harder to put down—“Tang Ping” (躺平) or lying flat, a passive approach to life that subtly thwarts the government’s desire to foster a hardworking and productive populace.

The concept advocates an almost monastic outlook, including not getting married, not having children, not having a job, not owning property, and consuming as little as possible. For many, this is almost the only way in an authoritarian country to fight against the growing pressures from long work hours, skyrocketing housing prices, and the ever higher cost of raising children. Lifestyle philosophies based on rejecting ambition, and being a cog in China’s capitalist machine have been spreading in recent years, and “lying flat” is the latest culmination of such trends, explained Wu Qiang, an independent political analyst in Beijing.

Source: Quartz

The Chinese government has treated people like machines. They restricted reproduction to one child when they wanted and now want to turn that knob to 2 since it suits them. They seem to have found the extent to which humans – living in how much ever ignorance – would allow the government to push them around.

What can you do when the rebellion involves doing nothing? Can you really punish them?

“You can’t stand up, but you don’t want to kneel down. Then you can only lie flat,” one Weibo user recently put it.

Source: Quartz

Also

Last week Zoom was a sponsor at the F1 race at Paul Ricard.


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Originally published on https://blog.viveksrinivasan.com