ARTIFICIAL intelligence (AI) has already changed some activities, including parts of finance like fraud prevention, but not yet fund management and stock-picking. That seems odd: machine learning, a subset of AI that excels at finding patterns and making predictions using reams of data, looks like an ideal tool for the business. Yet well-established “quant” hedge funds in London or New York are often sniffy about its potential. In San Francisco, however, where machine learning is so much part of the furniture the term features unexplained on roadside billboards, a cluster of upstart hedge funds has sprung up in order to exploit these techniques.
These new hedgies are modest enough to concede some of their competitors’ points. Babak Hodjat, co-founder of Sentient Technologies, an AI startup with a hedge-fund arm, says that, left to their own devices, machine-learning techniques are prone to “overfit”, ie, to finding peculiar patterns in the specific data they are trained on that...Continue reading
MCDONALD’S drew ridicule in China when it changed its registered name there to Jingongmen, or “Golden Arches”, in October, after it was sold to a Chinese consortium. Some on Weibo, a microblogging site, thought it sounded old-fashioned and awkward, others that it had connotations of furniture. The fast-food chain was quick to reassure customers that its restaurants would continue to go by Maidanglao, a rough transliteration that has, over the years, become a recognisable brand name. But for most companies now entering Chinese markets, transliterations are a thing of the past, says Amanda Liu, vice-president of Labbrand, a consultancy based in Shanghai that advises firms on brand names.
Companies are instead choosing Chinese names with meanings that capture people’s imagination. That often involves going beyond a direct translation. New entrants are taking inspiration from BMW, which is the evocative Baoma, or...Continue reading
A BOA constrictor swallowing capitalism. A cyclone dragging the economy into its vortex. If you look back at how people described Walmart a decade ago, it is eerily similar to how Amazon is viewed now. The supermarket chain has “a scale of economic power we haven’t encountered before”, warned “The Walmart Effect”, a best selling book in 2006. But capitalism never stands still. The world’s largest company by sales is now the perceived underdog in an escalating grocery war with Amazon to fill 320m American bellies. The struggle will probably end in a messy stalemate. That will mean mediocre returns for investors—and happy days for consumers.
Just when Walmart’s aura was at its most intimidating, in 2006, stagnation beckoned. Its reputation for bullying its suppliers and staff became toxic. Over the next decade it hit saturation point. About 95% of Americans shop at Walmart at least once a year. It has three square feet of shop space for every adult in the country and has sunk...Continue reading
A DECADE ago the idea of paying real money for virtual items was strange and exotic. These days many video-game publishers build their business models around it. Some of the world’s biggest games, such as “League of Legends”, cost nothing to buy. Instead they rely for their revenue on players buying things for use in the game, such as new characters to play with or costumes to put them in.
A new twist on that model has been attracting the attention of regulators in recent weeks. “Loot boxes” are yet another type of “in-game” item that gamers buy with currency. Unlike the usual sort of purchase, however, players do not know in advance what they are buying, for the contents of a loot box are generated randomly. Sometimes they might be desirable, and therefore valuable; prized items include new gestures or “emotes” for a character, or a pearl handle for an automatic weapon. If less alluring, well, players can pay a bit more money...Continue reading
FOR millennia, man has broken rocks. Whether with pickaxe or dynamite, their own or animal muscle, in a digger or a diesel truck, thick-necked miners have been at the centre of an industry that supplies the raw materials for almost all industrial activity. Making mining more profitable has long involved squeezing out more tonnes of metal per ounce of brawn. Now robots, not man, are settling themselves into the driving seat.
Rio Tinto, one of the world’s largest mining firms, is leading that transformation in its vast iron-ore operations in the Pilbara region of Western Australia. It is putting its faith in driverless trucks and unmanned drilling rigs and trains, overseeing them from the office equivalent of armchairs about 1,000km (625 miles) south, in Perth. Jean-Sébastien Jacques, Rio’s chief executive, says it is ten years ahead of mining rivals in autonomous technology. For him and for Simon Thompson, a new chairman appointed on December...Continue reading
“AFRICA must unite,” wrote Kwame Nkrumah, Ghana’s first president, in 1963, lamenting that African countries sold raw materials to their former colonisers rather than trading among themselves. His pan-African dream never became reality. Even today, African countries still trade twice as much with Europe as they do with each other (see chart). But that spirit of unity now animates a push for a Continental Free-Trade Area (CFTA), involving all 55 countries in the region. Negotiations began in 2015, aimed at forming the CFTA by the end of this year. In contrast to the WTO, African trade talks are making progress.
At a meeting on December 1st and 2nd in Niamey, the capital of Niger, African trade ministers agreed on final tweaks to the text. Heads of state will probably sign it in March, once an accompanying protocol on goods has been concluded (agreement on services has already been reached). But trade barriers will not tumble overnight. The CFTA will come into force only when 15 countries...Continue reading
ANOTHER week, another record. The repeated surge of share prices on Wall Street is getting monotonous. The Dow Jones Industrial Average has passed another milestone—24,000—and the more statistically robust S&P 500 index is up by 17% so far this year. Emerging markets have performed even better, as have European shares in dollar terms (see chart).
Political worries about trade disputes, the potential for war with North Korea and the repeated upheavals in President Donald Trump’s White House: all have caused only temporary setbacks to investors’ confidence. No wonder the latest quarterly report of the Bank for International Settlements asked whether markets are complacent, noting that “according to traditional valuation gauges that take a long-term view, some stockmarkets did look frothy”, and pointing out that “some froth was also present in corporate-credit markets”.
The authors of the BIS report are not the only ones to worry that markets look expensive. The...Continue reading
LIKE the ghosts that haunted Ebenezer Scrooge, the scandals of years past—summoned up by angry shareholders—will not let companies rest. In Britain this year, the Royal Bank of Scotland (RBS) paid £900m ($1.2bn) to settle a long-running investor lawsuit related to the bank’s behaviour at the time of the financial crisis of 2007-08. Also in Britain, Lloyds Banking Group faces litigation. And it is not just banks. Investors in Britain sued Tesco, a supermarket chain, for losses caused by an accounting scandal in 2014. In Germany and the Netherlands investors are seeking compensation from Volkswagen (VW), a carmaker, for failing to disclose its manipulation of diesel-emissions tests.
Securities litigation is on the rise in Europe for two main reasons. The first is that America is less hospitable than it was to such cases. Until 2010 harm suffered by foreign investors could be included in American lawsuits. That changed with a Supreme Court ruling on Morrison v...Continue reading
ON NOVEMBER 30th, as oil tsars from the Organisation of the Petroleum Exporting Countries (OPEC) and Russia met in Vienna, Venezuela’s former oil minister, Eulogio del Pino, once one of their number, was seized by armed guards at dawn in Caracas, and taken to jail. His arrest was not publicly acknowledged in Vienna. His replacement, Manuel Quevedo, a general in the national guard, attended OPEC and was received with the usual deference.
Also unmentioned was how Venezuela, embroiled in a massive, messy debt default, is doing plenty of OPEC’s dirty work. Since November 2016, when OPEC first agreed with Russia to cut output to push up oil prices, Venezuela’s has fallen by 203,000 barrels a day (b/d), to 1.86m b/d in October. That is more than twice the cut it agreed with OPEC of 95,000 b/d.
If its production continues to fall—some analysts say it could be down to 1.6m b/d in 2018—it could either drive up...Continue reading
“EVERYBODY meets in Buenos Aires,” said Cecilia Malmstrom, the European Union’s trade commissioner, days before heading there for the World Trade Organisation’s (WTO) biennial gathering of ministers, which opens on December 10th. Some non-governmental organisations have been blocked by the protest-averse Argentine authorities, but a meeting of people will indeed take place. One of minds is another matter.
Most participants can agree on one thing. The WTO, which codifies the multilateral rules-based trading system, needs help. President Donald Trump has railed against it and threatened to pull America out. Without American leadership, there is little hope of reaching new deals. And even as the WTO’s dealmaking arm is paralysed, the Trump administration is weakening its judicial one by starving it of judges.
Despite Mr Trump’s threats, America does not seem on the verge of crashing out of a system it helped to construct, to rely entirely on bilateral trade deals and...Continue reading
FOR many it is a reflex as unconscious as breathing. Hit a stumbling-block during an important task (like, say, writing a column)? The hand reaches for the phone and opens the social network of choice. A blur of time passes, and half an hour or more of what ought to have been productive effort is gone. A feeling of regret is quickly displaced by the urge to see what has happened on Twitter in the past 15 seconds. Some time after the deadline, the editor asks when exactly to expect the promised copy. Distraction is a constant these days; supplying it is the business model of some of the world’s most powerful firms. As economists search for explanations for sagging productivity, some are asking whether the inability to focus for longer than a minute is to blame.
FEW tasks in developing countries are as tricky—or as important—as convincing parents to keep their daughters in school longer. One way of doing so is to make contraceptives available, concludes a new working paper by Kimberly Singer Babiarz at Stanford University and four other researchers.
Conducted in Malaysia, the study used a happy coincidence of surveys going back decades and family-planning programmes rolled out in a way that made it possible to measure their effect. Starting in the 1960s, these programmes were introduced in some areas a few years earlier than in others. So researchers could compare what happened to girls in areas where contraceptives became available when they were very young with girls from the same cohorts in areas with no contraceptives.
The girls in places with contraceptives stayed in school six months longer, or about a year longer if they were born after the programmes began. Similar effects have...Continue reading
MANY marijuana growers in northern California, America’s biggest source of the stuff, had expected this autumn’s harvest to be the largest ever. After all, recreational marijuana becomes legal in the state in January. Instead, wildfires in October—spreading so fast they killed 43 people—burned up half the marijuana growing in the area’s tri-county “Emerald Triangle” alone. Some reckon the fires set a record not just for burnt pot, but also for the value of banknotes turned to ash.
Although 29 American states allow sales of marijuana for medical use (or medical and recreational use), federal law still classifies it as a “schedule 1” drug like heroin. Firms handling marijuana proceeds can be prosecuted for money laundering. Ned Fussell of CannaCraft, a maker of marijuana products, says that a few firms open a bank account under an alternative identity. But banks almost always find out. So cannabis businesses operate almost exclusively in cash. Many pot farmers...Continue reading
WHEN Gary Leff, a prominent travel blogger, took his first flight on one of the new “no legroom” planes operated by American Airlines, he found that the experience was not nearly as bad as he feared. American had drawn howls of protest from customers when it announced it was reducing the distance between rows of seats—“seat pitch”, in industry jargon—on its new Boeing 737 Max planes to 29 inches, compared with the 31-inch pitch on its existing 737-800s. So in June it capitulated, and settled on 30 inches. Mr Leff tried out these new seats last week and was pleasantly surprised to find that “the seats themselves are no worse than” in American’s current layout in economy. That may seem counterintuitive, but aircraft-interior designers had come to...Continue reading
THEY have been at this a long time. In 1994 Republicans, newly in charge of Congress, held hearings on what would come to be called “dynamic scoring”. Bills, they said, should be evaluated using the predictive power of macroeconomic models. If the model predicts more GDP growth, then it could be inferred that the growth would produce more tax revenue. During the hearings, however, came an awkward moment. Alan Greenspan, then in charge of the Federal Reserve, told Congress that macroeconomic models were “deficient”. That is, their predictive power, though interesting, was not good enough to rely on. Last year, after the election of Donald Trump, your blogger contacted Mr Greenspan to see whether the models were good enough yet. Mr Greenspan, his office responded, had not yet changed his opinion.
Neither have Republicans. Over the past two decades, in and out of control of Congress, the party has nudged dynamic scoring successively closer to the official policy process until we arrived, yesterday evening, at as dramatic a moment...Continue reading
GREAT expectations attended digital journalism outfits. Firms such as BuzzFeed and Mashable were the hip kids destined to conquer the internet with their younger, advertiser-friendly audience, smart manipulation of social media and affinity for technology. They seemed able to generate massive web traffic and, with it, ad revenues. They saw the promise of video, predicting that advertising dollars spent on television would migrate online. Their investors, including Comcast, Disney and General Atlantic, an investment firm, saw the same, pouring hundreds of millions of dollars each into Vice Media, BuzzFeed and Vox (giving them valuations of $5.7bn, $1.7bn and over $1bn, respectively).
They have had successes. Some became ninjas in “SEO” long before most print journalists knew it stood for “search engine optimisation”. They introduced “clickbait” to the lexicon. Some, like BuzzFeed and Vice, worked out that fortunes were to be made in brand-supported viral hits—or “native advertising” that looks similar to the sites’...Continue reading
MUSIC lovers do not typically go to the opera to buy a speaker. But at the Palais Garnier in Paris they now can: Devialet, a local maker of high-end speakers, on November 29th opened a store in the 19th-century music venue to sell its most sophisticated product, called Phantom. Looking like a dinosaur egg, this supercomputer for sound (priced at $3,000) is considered one of the best wireless speakers available. It also comes with a dedicated streaming service for live performances, including some at the Palais Garnier.
This Phantom at the opera is the latest example of how digital technology is transforming speakers, headsets and other audio devices. Once mostly tethered to hi-fi systems, they are now wireless, increasingly intelligent and capable of supporting other services. As a result, the industry’s economics are changing.
Only a few years ago the audio industry was highly fragmented, says Simon Bryant of Futuresource, a market-research firm. Hundreds of brands offered...Continue reading
THE “kapsalon” is a healthy mix of chips, melted Gouda cheese, shawarma, lettuce and garlic sauce and is a tried and tested hangover cure in the Netherlands. So naturally, a butcher’s shop on the Spui, in The Hague, put it on its takeaway menu, alongside burgers and sausage rolls. As two young women walk out, tucking into their steaming kapsalons, an elderly gentleman asks how to prepare the steak he has just bought. The scene would have most carnivores fooled. For this butcher deals only in meatless “meat”.
“We want to become the biggest butcher in the world without ever slaughtering an animal,” says Jaap Korteweg, a ninth-generation farmer and founder of The Vegetarian Butcher. Since opening its first shop in The Hague in 2010 the company has been developing plant-based products that look, smell and taste like meat. “This shouldn’t just taste like real chorizo, it should leave the same red stains on your fingers,” says Maarten...Continue reading
“WHAT does not kill me makes me stronger,” wrote Nietzsche in “Götzen-Dämmerung”, or “Twilight of the Idols”. Alternatively, it leaves the body dangerously weakened, as did the illnesses that plagued the German philosopher all his life. The euro area survived a hellish decade, and is now enjoying an unlikely boom. The OECD, a club of mostly rich countries, reckons that the euro zone will have grown faster in 2017 than America, Britain or Japan. But, sadly, although the currency bloc has undoubtedly proven more resilient than many economists expected, it is only a little better equipped to survive its next recession than it was the previous one.
Europe’s crisis was brutal. Euro-area GDP is roughly €1.4trn ($1.7trn)—an Italy, give or take—below the level it would have reached had it grown at 2% per year since 2007. Parts of the periphery have yet to regain the output levels they enjoyed a decade ago (see chart). The damage was exacerbated by deep flaws within Europe’s monetary union. Three shortcomings loomed particularly large. First, the union centralised money-creation but left national governments responsible for their own fiscal solvency. So markets came to understand that governments could no longer bail themselves out by printing money to pay off creditors. The risk of default made markets panic in response to bad news, pushing up...Continue reading
MOST money these days is electronic—a series of ones and zeros on a computer. So it is rather neat that bitcoin, a privately created electronic currency, has lurched from $1,000 to above $10,000 this year (see chart), an epic journey to add an extra zero.
On the way, the currency has been controversial. Jamie Dimon, the boss of JPMorgan Chase, has called it a fraud. Nouriel Roubini, an economist, plumped for “gigantic speculative bubble”. Ordinary investors are being tempted into bitcoin by its rapid rise—a phenomenon dubbed FOMO (fear of missing out). Both the Chicago Mercantile Exchange, America’s largest futures market, and the NASDAQ stock exchange have seemingly added their imprimaturs by planning to offer bitcoin-futures contracts.
It is easy to muddle two separate issues. One is whether the “blockchain” technology that underpins bitcoin becomes more widely adopted. Blockchains, distributed ledgers that record transactions securely, may prove very useful in...Continue reading