Tuesday, September 27, 2016

Electric car boom raises pollution fears

A boom in electric cars means Europe would have to look at building the equivalent of nearly 50 power stations the size of the UK’s planned Hinkley Point nuclear plant, EU experts have warned.
And if big fleets of plug-in cars are charged with electricity from power plants burning coal, the dirtiest fossil fuel, overall levels of sulphur dioxide air pollution are likely to rise, a study from the government-funded European Environment Agency shows.
Cars that run on batteries are widely regarded as an unalloyed environmental blessing compared with dirtier, smellier petrol or diesel vehicles and the new research confirms that a big shift to plug-in transport offers many benefits.
On average, there would be a noticeable fall in emissions of some types of air pollution, such as nitrogen oxides and particulate matter, as well as planet-warming carbon dioxide, the main greenhouse gas produced by human activities.
However, in countries such as Poland, where most electricity comes from coal power plants, the benefits of shifting to electric cars could be “questionable”, said Magdalena Jóźwicka, project manager of the research at the European Environment Agency.
“There are clear local benefits and opportunities but there are also some risks,” she told the Financial Times.
Electric passenger car sales have grown sharply across Europe over the past six years, boosted by hefty subsidies launched by governments trying to curb climate change. But they still accounted for only 0.15 per cent of all passenger vehicles on Europe’s roads last year.
If the vehicles reach an 80 per cent share by 2050, the EEA study found this would require an extra 150 gigawatts of electricity for charging. The Hinkley Point nuclear plant due to be built in the UK will have a 3.2GW capacity, making it one of the country’s largest power plants.
The need for so much new power for electric cars “may put stress on electricity infrastructure”, the EEA report warns, especially in countries with plenty of renewable energy.  
“In countries with highly fluctuating renewable energy supplies, co-ordinating the energy demand from electric vehicles may become a major challenge,” the study said.
The amount of electricity generated by clean renewable power plants has risen significantly across the EU since 1990, according to EU data that show wind, solar and hydropower accounted for 25 per cent of the bloc’s electricity in 2014.
Nuclear power plants contributed 27 per cent but nearly 48 per cent still came from coal, natural gas and oil.
The EEA study builds on work by the agency showing that if coal power alone were used to charge electric cars, the vehicles’ lifetime carbon emissions would be higher than that of petrol or diesel counterparts.
Air pollution experts said the agency’s findings underlined the need for countries to consider carefully how to generate greener electricity as plug-in car numbers grow.
Dr Annette Pruss-Ustun of the World Health Organisation said: “It has to come from cleaner sources of energy so that it really makes a huge impact, otherwise you just change the location of the pollution from cars to power plants.”

Monday, September 26, 2016

Globalization for Everyone: Hernondo de Soto

Nowadays, globalization’s opponents seem increasingly to be drowning out its defenders. If they get their way, the post-World War II international order – which aimed, often successfully, to advance peace and prosperity through exchange and connection – could well collapse. Can globalization be saved?
At first glance, the outlook appears grim. Every aspect of globalization – free trade, free movement of capital, and international migration – is under attack. Leading the charge are antagonistic forces – from populist political parties to separatist groups to terrorist organizations – whose actions tend to focus more on what they oppose than on what they support.

Whither Turkey?

Sinan Ülgen engages the views of Carl Bildt, Dani Rodrik, Marietje Schaake, and others on the future of one of the world’s most strategically important countries in the aftermath of July’s failed coup.

In Russia and Asia, anti-Western groups are at the forefront of the campaign against globalization. In Europe, populist parties have tended to emphasize their aversion to European integration, with those on the right often also condemning immigration, while the left denounces rising economic inequality. In Latin America, the enemy seems to be foreign interference of any kind. In Africa, tribal separatists oppose anyone standing in the way of independence. And in the Middle East, the Islamic State (ISIS) virulently rejects modernity – and targets societies that embrace it.
Despite their differences, these groups have one thing in common: a deep hostility toward international structures and interconnectedness (though, of course, a murderous group like ISIS is in a different category from, say, European populists). They do not care that the international order they want to tear down enabled the rapid post-1945 economic growth that liberated billions of developing-country citizens from poverty. All they see are massive, unbending institutions and intolerable inequalities in wealth and income, and they blame globalization.
There is some truth to these arguments. The world is a very unequal place, and inequality within societies has widened considerably in recent decades. But this is not because of international trade or movements of people; after all, cross-border trade and migration have been happening for thousands of years.
The anti-globalization movements’ proposed solution – closing national borders to trade, people, or anything else – thus makes little sense. In fact, such an approach would hurt virtually everyone, not just the wealthy elites who have benefited most from globalized markets.
So what is fueling inequality? To answer that question, we must consider what about globalization is generating returns for the wealthy.
A central aspect of globalization is the careful documentation of the knowledge and legal tools needed to combine the property rights of seemingly useless single assets (electronic parts, legal rights to production, and so on) into complex wholes (an iPhone), and appropriate the surplus value they generate. Clear and accessible ledgers that faithfully describe not only who controls what and where, but also the rules governing potential combinations – of, say, collateral, components, producers, entrepreneurs, and legal and property rights – are vital for the system to function.
The problem is that five billion people around the world are not documented in national ledgers in anything approaching an organized manner. Instead, their entrepreneurial talents and legal rights to assets are recorded in hundreds of scattered records and rules systems throughout their countries, making them internationally inaccessible.
Under these conditions, it is impossible for the majority of humanity to participate effectively in their national economies, much less the global one. Without any means of participating in the process of producing high-value combinations, people have no chance of seizing some of the surplus value created.
So it is a lack of consolidated, documented knowledge – not free trade – that is fueling inequality worldwide. But addressing this problem will not be easy. Just determining how many people are left out took my organization, the Institute for Liberty and Democracy (ILD), two decades of fieldwork, conducted by more than 1,000 researchers in some 20 countries.
The main problem is legal lag. The lawyers and corporate elites who draft and enact the legislation and regulations that govern globalization are disconnected from those who are supposed to implement the policies at the local level. In other words, the legal chain is missing a few crucial links.
Experience in Japan, the United States, and Europe shows that a straightforward legal approach to ensuring equal rights and opportunities can take a century or more. But there is a faster way: treating the missing links as a break not in a legal chain, but in a knowledge chain.
We at the ILD know something about knowledge chains. We spent 15 years adding millions of people to the globalized legal system, by bringing the knowledge contained in marginal ledgers into the legal mainstream – all without the help of computers. But we do not have decades more to spend on this process; we need to bring in billions more people, and fast. That will require automation.
Last year, ILD began, with pro bono support from Silicon Valley firms, to determine whether information technology, and specifically blockchain (the transparent, secure, and decentralized online ledger that underpins Bitcoin), could enable more of the world’s population to get in on globalization. The answer is a resounding yes. 


By translating the language of the legal chain into a digital language – an achievement that required us to develop a set of 21 typologies – we have created a system that could locate and capture any ledger in the world and make it public. Moreover, we have been able to compress into 34 binary indicators the questions that computers have to ask captured ledgers to determine which provisions should be inserted in blockchain smart contracts between globalized firms and non-globalized collectives.
Information technology has democratized so many elements of our lives. By democratizing the law, perhaps it can save globalization – and the international order.

Sunday, September 25, 2016

Treasury Market’s Biggest Buyers Are Selling as Never Before

They’ve long been one of the most reliable sources of demand for U.S. government debt.
But these days, foreign central banks have become yet another worry for investors in the world’s most important bond market.
Holders like China and Japan have culled their stakes in Treasuries for three consecutive quarters, the most sustained pullback on record, based on the Federal Reserve’s official custodial holdings. The decline has accelerated in the past three months, coinciding with the recent backup in U.S. bond yields.
For Jim Leaviss at M&G Investments in London, that’s cause for concern. A continued retreat could lead to painful losses in a market that some say is already too expensive. But perhaps more important are the consequences for America’s finances. With the U.S. facing deficits that are poised to swell the public debt burden by $10 trillion over the next decade, foreign demand will be crucial in keeping a lid on borrowing costs, especially as the Fed continues to suggest higher interest rates are on the horizon.
The selling pressure from central banks is “something you have to bear in mind,” said Leaviss, whose firm oversees about $374 billion. “This, as well as the Fed, all means we are nearer to the end of the low-yield environment.”
To shield his clients from higher yields, Leaviss said M&G has scaled back on longer-term Treasuries and favors shorter-maturity securities.
Overseas creditors have played a key role in financing America’s debt as the U.S. borrowed heavily in the aftermath of the financial crisis to revive the economy. Since 2008, foreigners have more than doubled their investments in Treasuries and now own about $6.25 trillion.
Central banks have led the way. China, the biggest foreign holder of Treasuries, funneled hundreds of billions of dollars back into the U.S. as its export-based economy boomed.
Now, that’s all starting to change. The amount of U.S. government debt held in custody at the Fed has decreased by $78 billion this quarter, following a decline of almost $100 billion over the first six months of the year. The drop is the biggest on a year-to-date basis since at least 2002 and quadruple the amount of any full year on record, Fed data show.
The custodial data add to evidence that the retreat isn’t simply a one-off. Separate figures from the Treasury Department showed that China pared its stake to $1.22 trillion in July, the lowest level in more than three years. Others, like Japan and Saudi Arabia, have also reduced their holdings this year.
Big holders of Treasuries are selling for a variety of reasons, but they’re all tied to each country’s economic woes. In China, the central bank has been selling U.S. government debt to defend the yuan as slumping growth leads to more capital outflows. Japan, the second-biggest foreign holder, has swapped Treasuries for cash and T-bills as prolonged negative rates in the Asian nation pushed up dollar demand at local banks.
Oil-producing countries like Saudi Arabia have been liquidating Treasuries to plug their budget deficits following the collapse of crude prices. Saudi Arabia’s holdings have declined for six straight months to $96.5 billion -- the lowest since November 2014.
“Their trade position is markedly worse” because of the slump in oil, said Peter Jolly, the head of market research at National Australia Bank Ltd. That means “their need to purchase Treasuries is greatly reduced.”
The decline in central bank demand -- which some models show has cut 10-year Treasury yields by an extra 0.4 percentage point -- points to one reason that U.S. borrowing costs may finally be on the upswing after they fell to a record-low 1.318 percent in July.
What’s more, some measures suggest Treasuries aren’t providing any margin of safety.
While 10-year notes yielded 1.62 percent as of 12:10 p.m. in Tokyo, that’s still leaves many overseas investors vulnerable. For yen- and euro-based buyers who hedge out the dollar’s fluctuations -- a common practice among insurers and pension funds -- yields are effectively negative. Meanwhile, a valuation tool called the term premium stands at minus 0.58 percentage point for 10-year notes. In the previous 50 years, it has almost always been positive.
Despite those warnings, the bulls say things like tepid U.S. growth and $10 trillion of negative-yielding government debt will keep Treasuries in demand.
“It’s still attractive of course,” said Hideo Shimomura, the chief fund investor at Mitsubishi UFJ Kokusai Asset Management, which oversees about $118 billion. “People might begin to chase yields again.”
Homegrown demand has helped pick up the slack. Excluding short-term bills, U.S. money managers have snapped up 45 percent of the $1.1 trillion in Treasuries sold at government auctions this year, the highest share since the Treasury began breaking out the data six years ago. In 2011, it was as low as 18 percent. U.S. commercial banks, for their part, have also added to their investments of government debt, boosting stakes to a record $2.38 trillion at the end of August. 

Nevertheless, some of the most influential players say in the market it’s time to get defensive. Last week, DoubleLine Capital’s Jeffrey Gundlach predicted that benchmark Treasury yields will exceed 2 percent before year-end, echoing his earlier call that the bond market had finally reached a tipping point. At the same time, the Fed signaled at its September meeting that it’s likely to lift rates by December.

For central banks, “why wouldn’t they reduce their Treasury holdings?” said Mark Holman, the chief executive officer at Twentyfour Asset Management, which oversees $9.8 billion. “There is yield available there, but you have a Fed that’s been reasonably clear in what it wants to do -- it’s looking to hike.”
Whatever the case, there’s little doubt that America’s borrowing needs will only grow with time -- and that could add up to hundreds of billions of dollars in additional interest if foreign demand doesn’t hold up.
The Congressional Budget Office forecasts the U.S. deficit will rise to $590 billion in the fiscal year ending Sept. 30, the first annual increase since 2011. Over the next decade, successive shortfalls to cover costs for Medicare and Social Security will cause the public debt burden to balloon to $23 trillion.
“It’s just the beginning,” said Park Sung-jin, the head of principal investment at Mirae Asset Securities Co., which oversees $8 billion.

China deal to create world’s second-largest steelmaker

Two Chinese steel groups have taken the first step in a long-awaited takeover to create the world’s second-largest steelmaker — a move that Beijing hopes will spark a wave of consolidation and improve efficiency in the bloated industry.
However, analysts said that the deal between Baoshan Iron and Steel and Wuhan Iron and Steel is only part of what is likely to be a long and complex process to consolidate China’s fragmented steel industry.
On Tuesday Baoshan, the listed arm of China’s second-largest steel producer Baosteel Group, said it would issue new shares in order to absorb the listed arm of Wuhan Iron and Steel Group, China’s fifth-largest steel producer by volume.
The subsuming of Wisco’s traded entity by Baosteel’s listed unit is a preliminary step in the merging of the two parent groups, and is subject to Chinese regulatory approval, according to a filings by both companies.
The merger does not mean success of this “test case”, according to Xu Zhongbo, analyst at Beijing Metals Consulting. “The most important thing is that steel production comes together quickly,” he said.
“In the two groups there many small companies and it will take a long time to decide which businesses will be sold or closed — this could be a costly process,” he said.
The creation of Baowu Steel Group — as China’s press has dubbed the merged entity — is considered the starting point for Beijing’s plans to improve Chinese efficiency by pushing zombie companies out of operation.
China’s steel’s overcapacity helped plunge the global industry into crisis last year, when surging cheap Chinese exports dragged down global prices.
The looming plan to merge the entirety of Wisco and Baosteel Groups into a single entity — with assets of Rmb700bn ($104.9bn) and 60m tonnes of annual capacity — has already been approved by the State-owned Assets Supervision and Administration Commission, according to respected financial magazine Caixin.  
The finalisation of the deal is a poster child for a recently released plan from the State Council, China’s cabinet, to whittle Chinese steel companies down to a handful of groups responsible for the majority of production by 2025. Small private companies currently account for half the country’s output.
However, such plans have previously been touted — in 2005, Beijing said it hoped its top 10 steel producers would account for 70 per cent of production by 2020.
A flurry of hook-ups from the past government push failed to materialise as companies each fought to individually reap the benefits of a stimulus-aided construction boom and steel demand spike in the late 2000s.
Beijing is hoping that tough market conditions will allow them to push through mergers with greater speed.
On Tuesday, two smaller state-owned steel companies, Angang Steel and Bengang Steel Plates, halted trading and the Chinese press reported that a potential merge of the two listed companies was on the cards. A merger between the two companies’ parent groups was originally announced in 2005.

Saturday, September 24, 2016

Red tape and infrastructure: Brazil, India, Nigeria and Russia’s real roadblocks to tourism

Tourists steer clear of Brazil, Russia, India and Nigeria because of onerous visa requirements, EM Squared reported last week. But even with easy tourist visas in place, these emerging market giants won’t reach their full potential. The real key lies in enhancing the ease of doing business and developing adequate infrastructure.
Visa policies are certainly a real barrier to tourist arrivals. No matter how beautiful or intriguing your country is as a tourist destination, if you make it too complicated for tourists to visit, they will stay away. That problem is not limited to emerging markets. A few years ago, US Travel Association estimated that the US lost the equivalent of 467,000 jobs due to the difficulty for citizens of primarily Brazil, India and China to obtain a visa.
Still, visa policies are only a piece of the puzzle. In the World Economic Forum’s recent Travel and Tourism Competitiveness Report, “International Openness” – a measure of how easy it is for tourists to visit a country – was one of 14 studied pillars. A country’s enabling environment for doing business, price competitiveness, infrastructure and natural and cultural resources are others factors that were weighted and which mattered.
In the 2015 edition of the report, Brazil came in 28th place globally, followed by Russia (45th), India (52nd) and Nigeria (131st). The significant disparities in these countries rankings make it clear that reforming stringent visa policies is unlikely to be a panacea but rather a key component of a wider set of policy shifts needed. What are they?
Brazil, for starters, should work on its business environment. Despite its vast array of tourism hotspots, the country of carnival, the Amazon rainforest and Copacabana only welcomed 6.3m international tourists in 2014, while Mexico’s arrivals amounted to 32m. In the past, one reason for that may have been the lack of adequate infrastructure. However, in recent years, in preparation for the football World Cup and Olympics, significant progress and investment has been made on air transport infrastructure and connectivity.
The real challenges hindering Brazil’s travel and tourism industry today thus lies in its restrictive business environment. Its red tape in the construction sector and high taxation rates make it hard for the tourism sector to develop adequate infrastructure. A second issue it needs to address is safety and security. Both its crime rates and currently the fear of the spread of the Zika virus remain issues that scare tourists away even if a visa is within reach.
Like Brazil, India’s international arrivals fall short of its potential, with only 8m international tourists visiting the country in 2015, compared to China’s 55m. In addition to its incredible scenery and unique heritage and monuments, India is extremely price competitive compared to other destinations. In the past years, under Prime Minister Narendra Modi’s leadership, India has made significant changes in its visa policies which are starting to bear fruit.
Yet, anyone who has visited India will agree, that infrastructure gaps are a real challenge, ranging from accommodation availability to the quality of roads. The issue of environmental sustainability must also be addressed to ensure the preservation of India’s natural heritage. Tourists and business leaders alike will also speak to the need to tackle health and hygiene issues, including pollution, information and communications technology readiness, and safety and security.
Unlike Brazil and India, Russia welcomed more than 31m international visitors in 2015, a solid performance. The nation’s strong cultural resources and price competitiveness have attracted tourists despite the stringent visa restrictions and lack of prioritisation of the sector. Russia should continue building on its strengths, notably in air transport infrastructure and health and hygiene. Still, key challenges relating to safety and security, environmental sustainability and the overall environment for doing business need to be addressed.
Nigeria’s travel and tourism industry, finally, has been a real missed opportunity to date. In 2013, Nigeria welcomed 600,000 international visitors, with the industry only accounting for 1.5 per cent of gross domestic product. Yet, significant challenges constrain the potential development of the sector in Nigeria, starting with safety and security, which arguably remain the highest priority.
Nigerian business leaders consider the lack of infrastructure as the most problematic factor for doing business. While specific issues relating to travel and tourism remain, including the prioritisation of the sector, visa policies and price competitiveness; addressing the complex issues of security and infrastructure should be prioritised not only for the industry’s competitiveness but also to ensure Nigeria’s development path.
While visa restrictions are barriers to the travel and tourism industry’s potential in these four nations, it is the overall business environment and infrastructure gaps which are truly hindering the sector’s development and these nations overall competitiveness.
These issues may superficially not seem related to the tourism industry but have a significant impact on its development. There is a clear need for a systemic and coordinated approach to achieve competitiveness for the sector and beyond.

Friday, September 23, 2016

Yuval Noah Harari on big data, Google and the end of free will

For thousands of years humans believed that authority came from the gods. Then, during the modern era, humanism gradually shifted authority from deities to people. Jean-Jacques Rousseau summed up this revolution in Emile, his 1762 treatise on education. When looking for the rules of conduct in life, Rousseau found them “in the depths of my heart, traced by nature in characters which nothing can efface. I need only consult myself with regard to what I wish to do; what I feel to be good is good, what I feel to be bad is bad.” Humanist thinkers such as Rousseau convinced us that our own feelings and desires were the ultimate source of meaning, and that our free will was, therefore, the highest authority of all.
Now, a fresh shift is taking place. Just as divine authority was legitimised by religious mythologies, and human authority was legitimised by humanist ideologies, so high-tech gurus and Silicon Valley prophets are creating a new universal narrative that legitimises the authority of algorithms and Big Data. This novel creed may be called “Dataism”. In its extreme form, proponents of the Dataist worldview perceive the entire universe as a flow of data, see organisms as little more than biochemical algorithms and believe that humanity’s cosmic vocation is to create an all-encompassing data-processing system — and then merge into it.
We are already becoming tiny chips inside a giant system that nobody really understands. Every day I absorb countless data bits through emails, phone calls and articles; process the data; and transmit back new bits through more emails, phone calls and articles. I don’t really know where I fit into the great scheme of things, and how my bits of data connect with the bits produced by billions of other humans and computers. I don’t have time to find out, because I am too busy answering emails. This relentless dataflow sparks new inventions and disruptions that nobody plans, controls or comprehends. 
But no one needs to understand. All you need to do is answer your emails faster. Just as free-market capitalists believe in the invisible hand of the market, so Dataists believe in the invisible hand of the dataflow. As the global data-processing system becomes all-knowing and all-powerful, so connecting to the system becomes the source of all meaning. The new motto says: “If you experience something — record it. If you record something — upload it. If you upload something — share it.”
Dataists further believe that given enough biometric data and computing power, this all-encompassing system could understand humans much better than we understand ourselves. Once that happens, humans will lose their authority, and humanist practices such as democratic elections will become as obsolete as rain dances and flint knives.
When Michael Gove announced his shortlived candidacy to become Britain’s prime minister in the wake of June’s Brexit vote, he explained: “In every step in my political life I have asked myself one question, ‘What is the right thing to do? What does your heart tell you?’” That’s why, according to Gove, he had fought so hard for Brexit, and that’s why he felt compelled to backstab his erstwhile ally Boris Johnson and bid for the alpha-dog position himself — because his heart told him to do it.
Gove is not alone in listening to his heart in critical moments. For the past few centuries humanism has seen the human heart as the supreme source of authority not merely in politics but in every other field of activity. From infancy we are bombarded with a barrage of humanist slogans counselling us: “Listen to yourself, be true to yourself, trust yourself, follow your heart, do what feels good.”

In politics, we believe that authority depends on the free choices of ordinary voters. In market economics, we maintain that the customer is always right. Humanist art thinks that beauty is in the eye of the beholder; humanist education teaches us to think for ourselves; and humanist ethics advise us that if it feels good, we should go ahead and do it.
Of course, humanist ethics often run into difficulties in situations when something that makes me feel good makes you feel bad. For example, every year for the past decade the Israeli LGBT community has held a gay parade in the streets of Jerusalem. It is a unique day of harmony in this conflict-riven city, because it is the one occasion when religious Jews, Muslims and Christians suddenly find a common cause — they all fume in accord against the gay parade. What’s really interesting, though, is the argument the religious fanatics use. They don’t say: “You shouldn’t hold a gay parade because God forbids homosexuality.” Rather, they explain to every available microphone and TV camera that “seeing a gay parade passing through the holy city of Jerusalem hurts our feelings. Just as gay people want us to respect their feelings, they should respect ours.” It doesn’t matter what you think about this particular conundrum; it is far more important to understand that in a humanist society, ethical and political debates are conducted in the name of conflicting human feelings, rather than in the name of divine commandments.
Yet humanism is now facing an existential challenge and the idea of “free will” is under threat. Scientific insights into the way our brains and bodies work suggest that our feelings are not some uniquely human spiritual quality. Rather, they are biochemical mechanisms that all mammals and birds use in order to make decisions by quickly calculating probabilities of survival and reproduction.
Contrary to popular opinion, feelings aren’t the opposite of rationality; they are evolutionary rationality made flesh. When a baboon, giraffe or human sees a lion, fear arises because a biochemical algorithm calculates the relevant data and concludes that the probability of death is high. Similarly, feelings of sexual attraction arise when other biochemical algorithms calculate that a nearby individual offers a high probability for successful mating. These biochemical algorithms have evolved and improved through millions of years of evolution. If the feelings of some ancient ancestor made a mistake, the genes shaping these feelings did not pass on to the next generation. 
Even though humanists were wrong to think that our feelings reflected some mysterious “free will”, up until now humanism still made very good practical sense. For although there was nothing magical about our feelings, they were nevertheless the best method in the universe for making decisions — and no outside system could hope to understand my feelings better than me. Even if the Catholic Church or the Soviet KGB spied on me every minute of every day, they lacked the biological knowledge and the computing power necessary to calculate the biochemical processes shaping my desires and choices. Hence, humanism was correct in telling people to follow their own heart. If you had to choose between listening to the Bible and listening to your feelings, it was much better to listen to your feelings. The Bible represented the opinions and biases of a few priests in ancient Jerusalem. Your feelings, in contrast, represented the accumulated wisdom of millions of years of evolution that have passed the most rigorous quality-control tests of natural selection.

However, as the Church and the KGB give way to Google and Facebook, humanism loses its practical advantages. For we are now at the confluence of two scientific tidal waves. On the one hand, biologists are deciphering the mysteries of the human body and, in particular, of the brain and of human feelings. At the same time, computer scientists are giving us unprecedented data-processing power. When you put the two together, you get external systems that can monitor and understand my feelings much better than I can. Once Big Data systems know me better than I know myself, authority will shift from humans to algorithms. Big Data could then empower Big Brother.
This has already happened in the field of medicine. The most important medical decisions in your life are increasingly based not on your feelings of illness or wellness, or even on the informed predictions of your doctor — but on the calculations of computers who know you better than you know yourself. A recent example of this process is the case of the actress Angelina Jolie. In 2013, Jolie took a genetic test that proved she was carrying a dangerous mutation of the BRCA1 gene. According to statistical databases, women carrying this mutation have an 87 per cent probability of developing breast cancer. Although at the time Jolie did not have cancer, she decided to pre-empt the disease and undergo a double mastectomy. She didn’t feel ill but she wisely decided to listen to the computer algorithms. “You may not feel anything is wrong,” said the algorithms, “but there is a time bomb ticking in your DNA. Do something about it — now!”

What is already happening in medicine is likely to take place in more and more fields. It starts with simple things, like which book to buy and read. How do humanists choose a book? They go to a bookstore, wander between the aisles, flip through one book and read the first few sentences of another, until some gut feeling connects them to a particular tome. Dataists use Amazon. As I enter the Amazon virtual store, a message pops up and tells me: “I know which books you liked in the past. People with similar tastes also tend to love this or that new book.”
This is just the beginning. Devices such as Amazon’s Kindle are able constantly to collect data on their users while they are reading books. Your Kindle can monitor which parts of a book you read quickly, and which slowly; on which page you took a break, and on which sentence you abandoned the book, never to pick it up again. If Kindle was to be upgraded with face recognition software and biometric sensors, it would know how each sentence influenced your heart rate and blood pressure. It would know what made you laugh, what made you sad, what made you angry. Soon, books will read you while you are reading them. And whereas you quickly forget most of what you read, computer programs need never forget. Such data should eventually enable Amazon to choose books for you with uncanny precision. It will also allow Amazon to know exactly who you are, and how to press your emotional buttons.
Take this to its logical conclusion, and eventually people may give algorithms the authority to make the most important decisions in their lives, such as who to marry. In medieval Europe, priests and parents had the authority to choose your mate for you. In humanist societies we give this authority to our feelings. In a Dataist society I will ask Google to choose. “Listen, Google,” I will say, “both John and Paul are courting me. I like both of them, but in a different way, and it’s so hard to make up my mind. Given everything you know, what do you advise me to do?”

And Google will answer: “Well, I know you from the day you were born. I have read all your emails, recorded all your phone calls, and know your favourite films, your DNA and the entire biometric history of your heart. I have exact data about each date you went on, and I can show you second-by-second graphs of your heart rate, blood pressure and sugar levels whenever you went on a date with John or Paul. And, naturally enough, I know them as well as I know you. Based on all this information, on my superb algorithms and on decades’ worth of statistics about millions of relationships — I advise you to go with John, with an 87 per cent probability of being more satisfied with him in the long run.
“Indeed, I know you so well that I even know you don’t like this answer. Paul is much more handsome than John and, because you give external appearances too much weight, you secretly wanted me to say ‘Paul’. Looks matter, of course, but not as much as you think. Your biochemical algorithms — which evolved tens of thousands of years ago in the African savannah — give external beauty a weight of 35 per cent in their overall rating of potential mates. My algorithms — which are based on the most up-to-date studies and statistics — say that looks have only a 14 per cent impact on the long-term success of romantic relationships. So, even though I took Paul’s beauty into account, I still tell you that you would be better off with John.”
Google won’t have to be perfect. It won’t have to be correct all the time. It will just have to be better on average than me
Google won’t have to be perfect. It won’t have to be correct all the time. It will just have to be better on average than me. And that is not so difficult, because most people don’t know themselves very well, and most people often make terrible mistakes in the most important decisions of their lives.
The Dataist worldview is very attractive to politicians, business people and ordinary consumers because it offers groundbreaking technologies and immense new powers. For all the fear of missing our privacy and our free choice, when consumers have to choose between keeping their privacy and having access to far superior healthcare — most will choose health.
For scholars and intellectuals, Dataism promises to provide the scientific Holy Grail that has eluded us for centuries: a single overarching theory that unifies all the scientific disciplines from musicology through economics, all the way to biology. According to Dataism, Beethoven’s Fifth Symphony, a stock-exchange bubble and the flu virus are just three patterns of dataflow that can be analysed using the same basic concepts and tools. This idea is extremely attractive. It gives all scientists a common language, builds bridges over academic rifts and easily exports insights across disciplinary borders.

Of course, like previous all-encompassing dogmas, Dataism, too, may be founded on a misunderstanding of life. In particular, Dataism has no answer to the notorious “hard problem of consciousness”. At present we are very far from explaining consciousness in terms of data-processing. Why is it that when billions of neurons in the brain fire particular signals to one another, a subjective feeling of love or fear or anger appears? We don’t have a clue.
But even if Dataism is wrong about life, it may still conquer the world. Many previous creeds gained enormous popularity and power despite their factual mistakes. If Christianity and communism could do it, why not Dataism? Dataism has especially good prospects, because it is currently spreading across all scientific disciplines. A unified scientific paradigm may easily become an unassailable dogma.
If you don’t like this, and you want to stay beyond the reach of the algorithms, there is probably just one piece of advice to give you, the oldest in the book: know thyself. In the end, it’s a simple empirical question. As long as you have greater insight and self-knowledge than the algorithms, your choices will still be superior and you will keep at least some authority in your hands. If the algorithms nevertheless seem poised to take over, it is mainly because most human beings hardly know themselves at all.

Thursday, September 22, 2016

Mothballing the World's Fanciest Oil Rigs Is a Massive Gamble

In a far corner of the Caribbean Sea, one of those idyllic spots touched most days by little more than a fisherman chasing blue marlin, billions of dollars worth of the world’s finest oil equipment bobs quietly in the water.
They are high-tech, deepwater drillships -- big, hulking things with giant rigs that tower high above the deck. They’re packed tight in a cluster, nine of them in all. The engines are off. The 20-ton anchors are down. The crews are gone. For months now, they’ve been parked here, 12 miles off the coast of Trinidad & Tobago, waiting for the global oil market to recover
The ships are owned by a company called Transocean Ltd., the biggest offshore-rig operator in the world. And while the decision to idle a chunk of its fleet would seem logical enough given the collapse in oil drilling activity, Transocean is in truth taking an enormous, and unprecedented, risk. No one, it turns out, had ever shut off these ships before. In the two decades since the newest models hit the market, there never had really been a need to. And no one can tell you, with any certainty or precision, what will happen when they flip the switch back on.
It’s a gamble that Transocean, and a couple smaller rig operators, felt compelled to take after having shelled out millions of dollars to keep the motors running on ships not in use. That technique is called warm-stacking. Parked in a safe harbor and manned by a skeleton crew, it typically costs about $40,000 a day. Cold-stacking -- when the engines are cut -- costs as little as $15,000 a day. Huge savings, yes, but the angst runs high.
“These drillships were not designed to sit idle,” said Willard Duffey Jr., an electrician who spent two decades with Transocean. The Deepwater Pathfinder, a ship he had served on for four years, was among the first to be parked off the Trinidad coast. The ship made the voyage there from the Gulf of Mexico about a year ago. Duffey was one of the last men aboard before the engines were turned off. He fretted constantly -- “did I do everything I could?” -- as he flew back home to Ore City, Texas. “To get the Pathfinder back up would be very difficult to guess actually,” he said.
Once famously labeled the “new Ferraris” of the oil world, these are no ordinary ships. Carrying a price tag of about $500 million a piece, they are loaded bow to stern with sophisticated, and very heavy, gadgetry.
Below the water line sit a half-dozen Rolls-Royce thrusters, coordinated by satellite to push against each other and keep the rig hovering on top of wells lying as much as two miles underwater. Up on deck, there’s a robot that can be launched to work a screwdriver or a wrench under water pressures on the seabed that no human could survive. And the 220-foot-tall, dual-activity oil-drilling derrick is capable of simultaneously lifting and lowering gear down to the seafloor, including a diamond-studded drill bit, a five-story-tall blowout preventer and a heavy-drill pipe. The derrick can handle as much as 5 million pounds of gear -- equal to the weight of some 20 adult blue whales -- going up and down at one time.
All of these fancy elements, though, are what make turning the ships back on so daunting. Chip Keener, whose rig-storage consulting firm advises Transocean, compares it to what would happen if you left a high-tech new car parked in the garage for months. The battery would be dead, sure, but then there’d also be a slew of pre-sets to reprogram. On a drillship, there are thousands and thousands of pre-sets. And unlike your car, those on a ship are essential to its proper functioning. “It’s a big deal,” says Keener.
For now, cold-stacking has been a huge success for Transocean, a long-time Texas powerhouse that’s based today in Switzerland. (It owned the offshore rig that BP Plc was operating in the 2010 Gulf of Mexico disaster.) The company reported a profit of $77 million in the second quarter, surprising investors who had been bracing for a loss. Within minutes the next morning, its stock price had jumped 8.5 percent in New York trading.
"I don’t think a simple congrats on this quarter’s cost beat is really sufficient," one stunned analyst, Scott Gruber at Citigroup Inc., told Transocean executives on a conference call. “A big kudos to all of you.”
Still, there are any number of deepwater rig operators unwilling to turn the engines off: Noble Corp., Rowan Cos. and Pacific Drilling, to name a few. They’re paying anywhere from $30,000 to $50,000 a day to store their out-of-work ships. Chris Beckett, the CEO of Pacific Drilling, said the unknowns of cold-stacking are just too great and the cost to keep the ships running too manageable -- about $10 million a year -- to turn them off. He likes the peace of mind that comes with his approach. “We don’t worry about how you start them again,” Beckett said in an interview at the company’s Houston headquarters.
The cold-stack versus warm-stack dilemma doesn’t figure to go away anytime soon.
Nearly half of the world’s available floating rigs are out of work today, and most observers expect that number will climb further. Not only are the drillship operators’ customers -- the likes of ConocoPhillips and Total SA -- slashing spending in high-cost offshore areas and canceling work contracts early, but new rigs that were ordered in recent years keep rolling out of shipyards. Bloomberg Intelligence estimates as much as $56 billion worth of offshore rigs, capable of drilling in everything from shallow water to oceans more than two miles deep, are still under construction. 
It’s a far different mood from a couple years ago, when crude was hovering around $100 a barrel and just about every single deepwater rig on the planet was in use. Transocean’s Pathfinder was in many ways the symbol of those go-go days. In mid-2014, just as oil prices were peaking, Eni SpA agreed to pay Transocean $681,000 a day to lease the ship. It was one of the richest drilling contracts ever, an amount that’s about triple the rate a deal signed today would fetch. By the end of that year, with oil in freefall, Eni canceled the contract four months before it was due to expire.  
Things are quiet on the Pathfinder these days. The water is calm off Trinidad, one of the top global destinations for drillship storage. A handful of seamen recruited locally make the rounds, in part to ward off criminal elements. They’re joined every once in a while by Transocean mechanics sent in to monitor the ships. The company’s chief operating officer, John Stobart, recently dropped in to check them out himself. CEO Jeremy Thigpen said Stobart came away encouraged.
"He was really impressed with the preservation of all the critical components," Thigpen said at an energy conference in New York this month. "His belief is, ‘Listen, we’re going to be able to reactivate these rigs in a timely and low-cost manner.’"
Stobart’s going to have to wait for his chance. Oil, after having briefly rebounded above $50 in June, is slumping again. And Transocean seems prepared to be in Trinidad for a while. The contract to lease out seabed space that the company’s negotiating, island officials say, could extend through October of 2020.

Monday, September 19, 2016

Demand for rail services set to jump by fifth in next five years

Demand for rail equipment and services around the world is set to jump by almost a fifth in the next five years to €185bn a year, driven by major infrastructure projects in western Europe and the Middle East.
Rail groups such as AlstomBombardierThales and Siemens all have the potential to benefit from this rise in global spending, although in some areas such as China foreign investment in rail is becoming more difficult.
The findings are part of a biennial report produced for Unife, the European rail makers’ association. The report will be presented this week in Berlin at InnoTrans, the world’s largest rail manufacturing show.
“Europe is the biggest growth region for rail equipment and services thanks to a number of mega-projects,” said Andreas Schwilling, partner at Roland Berger, the consultancy that conducted the study.
Growth in Europe was being driven by projects such as the HS2 high-speed rail line in the UK between London and Birmingham, as well as larger spending for infrastructure in Germany and Switzerland, he said.
In the Middle East, the low oil price has led to the cancellation of some projects but growth is still significant due to mass transit systems being built in cities such as Dubai, Jedda and Mecca as well as projects in Iran.
The global rail equipment and services market will grow by 2.6 per cent annually over the next five years, according to the study. Western Europe will see the strongest growth at 3.1 per cent, followed by the Middle East and Africa region at 3 per cent.
The predicted growth in the Middle East and Africa follows a decline in recent years. The return to growth will be driven by large urban projects, for example the modernisation of the Cairo metro as well as the purchase of 450 train cars by Israel Railways.
Philippe Citroën, the director-general of Unife, said that while there was growth in rail infrastructure spending in sub-Saharan Africa, this was of little benefit to European suppliers “as the market is dominated by Chinese groups”.
Accessibility had also been falling for European suppliers on the Chinese rail market as well, said Mr Citroën, although “it is still possible for some of our members to do business here”.
Over the coming years there is expected to be a range of large projects in Asia, for example 550 new vehicles for the Beijing metro system. Outside of China, there is a high-speed train line between Kuala Lumpur and Singapore as well as upgrade of several freight lines in India.
Recent years have seen sharp growth in spending in Latin America, driven by Brazil as it upgraded its transport infrastructure ahead of the World Cup and the Olympics. But this spending has now slowed, and Latin America is expected to grow a more modest 2.3 per cent a year until 2021.