221 (15 July 2015)

Welcome to week 221!  The articles below caught my attention this week.  Please note that what are intended to be relatively objective “briefs” are preceded by dashes (——–), whereas additional material or relatively subjective comments are preceded by asterisks (********).  The links to articles preceded by [SR] require a subscription to be read in their entirety, although complete articles may frequently be found by a title search.

You can find a pdf of this issue, a cumulative pdf for issues 1-208, and a cumulative pdf for issues 209-present at: https://sites.google.com/site/brucedeanlarson/the-invisible-forces.

(8 July 2015): “Satellite Images Show Economies Growing and Shrinking in Real Time” (http://www.bloomberg.com/news/features/2015-07-08/satellite-images-show-economies-growing-and-shrinking-in-real-time)

——–Planet Labs, “a San Francisco startup founded in a garage by former NASA engineers,” has more than 50 imaging satellites “each orbiting the globe every 90 minutes.  Together they can photograph most of the planet every day.  Embedded in the terabytes of photos the satellites beam to earth are clues to the global economy.  Big data software can now quickly extract economic indicators from photos of farms, factories, and ports.  Pictures of retailers’ parking lots can help estimate sales and customer traffic.”  According to Nicholas Colas, of the New York brokerage Convergex Group, the use of satellite images “is one of those really rare game changers that come along very infrequently but has the ability to remake the whole stock and economic research industry.”  Firms involved in transforming photos into data are: Spaceknow and Orbital Insight.  Orbital Insight’s founder James Crawford wants to “create the ‘macroscope’ that will alter the world as microscopes did centuries ago.”

********The article is accompanied by some stunning images.  Here are links to learn more about the companies mentioned: Planet Labs (https://www.planet.com/), Spaceknow (http://www.spaceknow.com/home), and Orbital Insight (http://orbitalinsight.com/).

(9 July 2015): “A Colorado Coal Mining Town Struggles to Define Its Future” (http://www.nytimes.com/2015/07/09/us/coal-mine-closed-colorado-town-struggles-to-define-future.html)

——–Since 1896 “the economy and identity” of the tiny community of Somerset, Colorado “have been defined by the coal heaps, railroad tracks and deep underground mines that filled train cars with coal and miners’ pockets with money. . . . Maybe no longer.”  The Elk Creek Mine, which once employed about 200 people, now employs just nine.  The mine is selling its equipment, handing off its water treatment plant to the residents, and weighing whether to close permanently.  “Tighter regulations, environmental lawsuits and a pivot toward cheaper and cleaner-burning natural gas have knocked coal towns on their heels across the country, raising questions from West Virginia to Wyoming about the future if mines and coal-fired power plants close and jobs evaporate.  That future might look something like Somerset.”  The population there “peaked at about 700 when the mines were pumping out coal during World War I” but has since “fallen to about 90 people, many of them retirees and part-time residents.”

(9 July 2015): “Butter on the Table in Trade Talks as Japan Faces Shortage” [SR](http://www.wsj.com/articles/butter-on-the-table-in-trade-talks-as-japan-faces-shortage-1436383894)

——–“In one of the world’s great food capitals, [Tokyo,] where almost every conceivable cuisine is available, a shortage of butter over the past two years has left supermarket shelves bare, while many bakers have been forced to resort to margarine.”  For some of Japan’s trading partners, the dairy industry is “a symbol of a market that needs to open more through trans-Pacific trade talks, which are set to ratchet up this month.”  But Prime Minister Shinzo Abe “has pledged to protect dairy products along with other ‘sacred’ items such as beef and pork in trade negotiations.”  Currently, Japanese tariffs “make it virtually impossible for private importers to bring in butter from big producers such as New Zealand and the U.S.”  Contributing to the decline in Japanese dairy and butter production is Japan’s “rapidly aging population.  As farmers retire, there is often no one to take their place.”  Although freer trade is one solution to the situation, Japanese “cooperatives and agriculture ministry officials say the solution is making more milk domestically.”  Additional imports “could threaten the livelihood of Japanese dairy producers.”

********Similar concerns are raised in the related article “U.S.-Canada Dairy Spat Sours Trade Talks” [SR](http://www.wsj.com/articles/u-s-canada-dairy-spat-sours-trade-talks-1436544890).  Canada’s concerns about its dairy industry are very much like those of Japan.  Looking at these two cases one begins to see why “dairy is emerging as the thorniest issue souring finals talks to conclude” the Trans-Pacific Partnership (TPP) “linking 12 countries around the Pacific.”  Canada, like many other countries, “instituted measures to protect dairy farmers that remain politically popular because of the large number of small farms.”  You can learn more about the TPP, the negotiations on which are ongoing, at: https://en.wikipedia.org/wiki/Trans-Pacific_Partnership.

(10 July 2015): “Pope Francis Inspires Catholic Investors to Press Environmental Concerns” [SR](http://www.wsj.com/articles/pope-inspires-catholic-investors-to-press-environmental-concerns-1436434201)

——–“The pope’s call to action on global warming is unleashing a new wave of shareholder activism by Roman Catholic investors.”  As early as this spring, when Pope Francis was preparing the 183-page encyclical “Laudato Si: On Care For Our Common Home,” “several Catholic institutions in the U.S., including universities and religious orders, began taking steps to dump stocks with heavy exposure to coal and other greenhouse-gas-emitting energy sources.  They also urged companies ranging from Bank of America Corp. and Kraft Foods Group Inc. to DuPont Co. to disclose more information about their carbon emissions and the environmental impact of their businesses.”  Environmental concerns have received more attention since the pope’s encyclical, but they are only one among many issues advanced by Catholic and other religious investors at shareholder meetings.  According to an analysis of shareholder resolutions submitted by them assembled by Proxymonitor.org, since 2015: 57% of proposals have been about the environment, 24% about lobbying, 9% about health care, 5% about human rights, and 5% about political spending.

********Proxymonitor.org is a website sponsored by the Manhattan Institute’s Center for Legal Policy.  Its purpose is “shedding light on the influence of shareholder proposals on corporations.”  You can learn more at: http://proxymonitor.org/.  It is possible, for example, to search on an array of Proposal Types by using the search facility in the upper-right-hand of the page.  For example a search under Social Policy (Environmental) yielded 394 results.  It is then possible to find the Company Name, the proposal Title, and a Web Link to the proposal.  This seems like a potentially useful tool for multiple purposes.

(10 July 2015): “Iron Ore Got You Down?  Try Nuclear Waste” [SR](http://www.wsj.com/articles/iron-ore-got-you-down-try-nuclear-waste-1436423066)

——–With falling iron ore prices across the world—down 80% since early 2011—companies like Australia’s Gindalbie Metals Ltd. are looking for other opportunities, that is why it and many others are seeking to “make the shortlist for a federal-government nuclear repository 27 million Australian dollars (US20 million) over the next four years—and likely hundreds of millions more once construction starts.  Gindalbie’s company secretary, Christopher Gerrard notes: “Last year we took a look at the whole industry of iron-ore and said we are going to write this investment off. . . . Like a lot of iron-ore companies, we are quite interested now to see what else we can do with the intellectual property and the capital that we have.”  Gindalbie’s bid involves land near Yalgoo, Western Australia, about 300 miles from the Perth.  European settlers referred to it as “the end of the earth” and its population density is 400 people in 10,000 square miles.  For years Australia, which has no nuclear power plants, has been piling up radioactive waste on site or shipping it abroad, but an international agreement countries holding Australia’s waste will begin shipping it back: France this year and England in 2020.

********I was struck by the reference Christopher Gerrard made to intellectual property.  I.e., we’ve got this property and we have this organization, what can we do with it other than mine iron ore?  Considering intellectual property, the recent Supreme Court decision on same-sex marriage is an interesting connection.  The relevant article is “Its Goal Met, Gay-Marriage Advocacy Group Will Shut Down” [SR](http://www.wsj.com/articles/its-goal-met-gay-marriage-advocacy-group-will-shut-down-1436952602).  In this case Freedom to Marry, a group founded by Evan Wolfson, decided to go out of business.  According to Wolfson, “We achieved the goal we set out to do.”  Scholars of social movements, such as Stanford’s Douglas McAdam, note that it is “unusual, if not unheard of, for activist groups to pull the plug when their mission is accomplished.  Far more typical is to find a new cause.”  All this provides an opportunity to reflect on the nature of goals and the best use of resources, in particular of intellectual property.  Some goals are very specific, while others are not.  Some intellectual properties are very specific, while others are not.  How to proceed in a changing environment will, presumably, take these factors into consideration.  Evidently, the March of Dimes is the classic study of an organization that “effectively put itself out of business by helping to end polio” and then took its “organizational wisdom and . . . tried-and-true methods [of fundraising] and reoriented them from polio to birth defects.”  You can learn more about the mission change of the March of Dimes at: http://www.ssireview.org/images/articles/2008SP_casestudy_baghdady_maddock.pdf.

(11 July 2015): “’The Simpsons’ Duff Beer Tries to Tap Markets Outside Springfield” (http://www.wsj.com/articles/duff-beer-tries-to-tap-markets-outside-springfield-1436553842)

——–[This is the A-Hed, quirky, article.]  Duff Beer is the fictional brew of “The Simpsons,” which is “longest-running scripted series in television history.”  But “real beer sellers from Australia to Germany to Colombia have been trying to capitalize on all this fake marketing by putting real versions of Duff Beer into the market—only to be shut down after hearing from lawyers for ‘Simpsons’ owner 21st Century Fox.”  These repeated attempts to create a real beer has, at last, led Fox to begin developing its own beer.  Notes Jeffrey Godsick, president of the company’s consumer products division, “Once you see enough piracy, you are faced with two choices . . . One is deciding to fight it, and the other is deciding to go out [into the market] with it.”  According to Ariel Casarin, an associate professor of strategy at the Universidad Adolfo Ibanez in Santiago, Chile, “Fox has been essentially forced into the beer business by intellectual property laws that don’t generally protect fictional products.”

********The issue of intellectual property as it relates to fictional products is interesting.  This is clearly a case of “life mimicking art.”  This quotation was dimly held, so I googled it and found a useful article at Wikipedia (https://en.wikipedia.org/wiki/Life_imitating_art).  The expression seems to derive from Oscar Wilde, who wrote: “Life imitates Art far more than Art imitates Life.”  A related article, to my mind, deals with the subject of “Simulacrum” (https://en.wikipedia.org/wiki/Simulacrum), which is “a representation or imitation of a person or a thing.”  Presumably fictional Duff Beer is “a thing” and the beer now being made in Chile is a representation of beer consumed by Homer Simpson.  I got to “Simulacrum” by way of the entry on French philosopher Jean Baudrillard (https://en.wikipedia.org/wiki/Jean_Baudrillard.

(11 July 2015): “Schumpeter: Calibrating Chinese creativity” (http://www.economist.com/news/business/21657376-sceptics-exaggerate-some-industries-chinese-firms-are-innovative-calibrating-chinese)

——–Before announcing her candidacy for the American presidency earlier this year, Carly Fiorina, the former CEO of Hewlett-Packard, said” “Yeah, the Chinese can take a test, but . . . they’re not terribly imaginative.  They’re not entrepreneurial.  They don’t innovate—that’s why they’re stealing our intellectual property.”  So, can China innovate?  Two recent publications, one by McKinsey Global Institute and another by management consultant Edward Tse, indicate that the answer is “Yes.”  According to McKinsey, although China “lags the West in creating world-class medicines, civil aircraft and cars. . . in many sectors, China is now taking a global lead in two areas of innovation: in improving consumer products and the business models used to sell them; and in making manufacturing processes cheaper, quicker and better.”  According to Mr. Tse, “Companies alone cannot make the massive long-term commitment of resources needed to drive innovation in many crucial areas” and in China the government has “lead the way” just as “American public spending on universities and defence research boosted Silicon Valley’s early starts like HP.”

********The McKinsey report is “The China Effect on Global Innovation,” which you can learn more about at: http://www.mckinsey.com/insights/strategy/chinas_innovation_imperative.  Edward Tse’s book is China’s Disruptors: How Alibaba, Xiaomi, Tencent, and Other Companies are Changing the Rules of Business.  You can learn more about it at: http://www.amazon.com/Chinas-Disruptors-Companies-Changing-Business/dp/1591847540/.

(11 July 2015): “Is lemonade legal?” (http://www.economist.com/news/united-states/21657409-testing-limits-silliness-east-texas-lemonade-legal)

——–In June Zoey and Andria Green of Overton, Texas operated their lemonade stand for about one hour before “local police shut the operation down.  Not only were they hawking without a $150 ‘peddler’s permit’, but also the state requires a formal kitchen inspection and a permit to sell anything that might spoil if stored at the wrong temperature.”  With the growth of interest in local foods, states are passing so-called “cottage-food laws” to allow people to sell “non-potentially hazardous” foods.  “But the rules are often odd or fussy, and no two states are alike.”  As it turns out, the cottage-food laws of Texas do not allow the sale of lemonade.  But Greens did discover that if they gave the lemonade away for free and “put a box on the table for tips, they could still make money because the ‘payments’ thus became donations.”

********An example where the law—the invisible foot—has adapted to changes in culture—the invisible handshake.  It was interesting to see how the public health issue seemed to disappear depending upon whether the item was purchased or free.

(15 July 2015): “Air Force Will Offer Bonuses To Lure Drone Pilots” [SR](http://www.wsj.com/articles/air-force-will-offer-bonuses-to-lure-drone-pilots-1436922312)

——–The U.S. Air Force has struggled to keep up with the demand for drone pilots, “largely due to the service’s inability to identify, train and retain enough drone pilots.  The service trains about 180 such pilots a year, but loses about 230.”  As a result, the Secretary of the Air Force, Deborah Lee James, is expected to release a plan “to give Air Force pilots thousands of dollars in bonus pay if they sign up to fly the remotely piloted craft for five years or more.  Ms. James also is directing that for the next year, some Air Force pilots graduating from flight school automatically be reassigned to drone duty to bolster its ranks.”  On average, “drone pilots fly up to 900 hours a year, compared with fighter pilots, who are in the cockpit an average of 250 hours a year,” leading to drone pilot complaints of overwork.  Currently drone pilots, like all other Air Force pilots, must be officers, but expanding the pool of potential pilots by opening the job to enlisted personnel has not been viewed favorably by Air Force officials.

********I do wonder how Air Force pilots feel about this.  No doubt their current behavior is a clear indication.  Is it really necessary for a drone pilot to meet the qualifications of a fighter pilot?

(15 July 2015): “Twitter Shares Hit by Takeover Hoax” [SR](http://www.wsj.com/articles/twitter-shares-hit-by-takeover-hoax-1436918683)

——–On Tuesday “Traders once again grappled—in real time—with the difference between what is real and what is fake.  What wasn’t real . . . : a $31billion bid for Twitter Inc.  Twitter’s stock jumped more than 8% after the online publication of a bogus article that claimed the social-media firm had received a takeover offer.”  The stock “traded up 2.5% early in the day and then spiked in the minutes after 11:36 a.m., the time stamp on the story.”  At 11:39 Twitter user Open Outcrier linked to the fake article in a tweet; the stock price peaked at 11:44.  At 11:45 Bloomberg spokesman Ty Trippet confirmed that the article was a fake, after which the Twitter stock fell back in subsequent minutes to its normal trading range for the day.  “The use of false rumors and news reports to manipulate stocks is a centuries-old ruse.  The difference today is that the sheer ubiquity and amount of information that courses through markets makes it difficult for traders operating at high speeds to avoid a well-crafted hoax.”

******** The Twitter account @OpenOutcrier is “closely followed by traders.”  You can learn more about the hoax at: http://www.businessinsider.com/bloomberg-twitter-report-hoax-2015-7.  What struck me about the article is how little time it took for the hoax to be identified and how quickly the market responded.

May you have a good week!

Bruce

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s