Ten interesting things we read this week

While robots can do many things, none has yet mastered common sense. Today’s robots can’t match human hands either, said Chico Marks, a manufacturing engineering manager at Subaru’s auto plant in Lafayette, Indiana. In the moments when someone has to decide whose preferences ought to prevail, technology itself has no answers. However far they advance, there’s one task that robots won’t help us solve: Deciding how, when, and where to use them. So, no matter what, there will be humans controlling these robots.

2. Hong Kong security law sparks race for Asia's next financial capital [Source: asia.nikkei.com] 

Hong Kong has been Asia’s financial capital for many years now. But many businesses are planning to shift their offices to other Asian countries and cities like Singapore, Seoul, and Tokyo. Before the coronavirus pandemic broke out, driving protesters off the streets, Deutsche Bank's Hong Kong staff had grown used to arriving at work through the chaos of public transport delays. They wove around police barricades and streets strewn with discarded umbrellas, tear gas canisters and unearthed pavement blocks. Deutsche Bank is not leaving Hong Kong. But like many businesses and banks, a year of political turmoil has put a question mark over the island's centrality as Asia's premier financial hub.

Today, the former British colony is trapped in an escalating conflict between Washington and Beijing that threatens its position as Asia's premier international business center. How forcefully China implements the security law will have huge consequences for the city, which hosts 163 licensed banks and 2,135 asset managers. Hong Kong is the world's largest equity-raising hub, the third-largest dollar trading center and a primary gateway to the second-largest economy. "If the new law leads to further unrest and exodus of talent, then the question over its future as a financial hub becomes more serious," said Stephen Roach, the former Asia chairman of Morgan Stanley and now a senior fellow at Yale University's Jackson Institute for Global Affairs.

Meanwhile, other countries and cities are luring businesses based in Hong Kong. James Richman, chief executive of private asset management firm JJ Richman, told that two family offices his company is co-investing with have shifted out of Hong Kong to Singapore and Kuala Lumpur, Malaysia, for the moment. In July, The New York Times stunned the news industry by announcing plans to move to Seoul, one of the few democracies in contention. Also, Tokyo once ranked alongside New York and London as a global hub, connecting trades during the Asian hours. Japanese Prime Minister Shinzo Abe said in June that Japan could take in Hong Kong financial professionals. Whether Hong Kong remains Asia's premier finance hub or a second-tier port city whose luster has been appropriated by other rising stars is an open question. What is clear is that Hong Kong cannot carve its own destiny.

3. Inside the hidden world of legacy IT systems [Source: spectrum.ieee.org]

Many have been jobless for the past few months due to the ongoing pandemic. Many are still awaiting their unemployment benefit claims to be processed. Delays in processing unemployment claims in 19 US states are attributed to problems with antiquated and incompatible state and federal unemployment IT systems. Most of those systems date from the 1980s, and some go back even further. Things were so bad in New Jersey that Governor Phil Murphy pleaded in a press conference for volunteer COBOL programmers to step up to fix the state’s Disability Automated Benefits System.

As the legendary investor Warren Buffett once said, “It’s only when the tide goes out that you learn who’s been swimming naked.” The pandemic has acted as a powerful outgoing tide that has exposed government’s dependence on aging legacy IT systems. Since 2010, corporations and governments worldwide have spent an estimated $35 trillion on IT products and services. Of this amount, about three-quarters went toward operating and maintaining existing IT systems. And at least $2.5 trillion was spent on trying to replace legacy IT systems, of which some $720 billion was wasted on failed replacement efforts. There’s no formal definition of “legacy system,” but it’s commonly understood to mean a critical system that is out of date in some way. It may be unable to support future business operations. Poorly maintained legacy IT systems are also prone to cybersecurity breaches.

The COVID-19 pandemic has exposed the debilitating consequences of relying on antiquated IT systems for essential services. Unfortunately, that dependence, along with legacy IT’s enormous and increasing costs, will still be with us long after the pandemic has ended. The problems associated with legacy systems will only worsen as the Internet of Things, with its billions of interconnected computing devices, matures. These devices are already being connected to legacy IT, which will make it even more difficult to replace and modernize those systems. And eventually the IoT devices will become legacy.

4. Hunting the Phoenix [Source: aspi.org]

China’s goal has always been to dominate the world, by whatever way it can. The Chinese Communist Party (CCP) uses talent-recruitment programs to gain technology from abroad through illegal or non-transparent means. According to official statistics, China’s talent-recruitment programs drew in almost 60,000 overseas professionals between 2008 and 2016. These efforts lack transparency; are widely associated with misconduct, intellectual property theft or espionage; contribute to the People’s Liberation Army’s modernisation; and facilitate human rights abuses.

Chinese Government and Party agencies from the national to the district level have established hundreds of ‘overseas talent recruitment workstations’ in countries with high-quality talent, cutting-edge industries and advanced technology. The stations work on behalf of the Chinese Government to spot and pursue talent abroad. Their importance is reflected in the fact that research for this report has uncovered 600 stations spread across technologically advanced countries. The highest number of stations (146) was found in the United States. However, Germany, Australia, the United Kingdom, Canada, Japan, France and Singapore also each had many stations. This underscores the global reach of China’s talent-recruitment efforts and the high level of recruitment activity in those countries.

So what should other countries do? Governments should coordinate with like-minded partners, study CCP talent-recruitment activity, increase transparency on external funding in universities and establish research integrity offices that monitor such activities. They should introduce greater funding to support the retention of talent and technology. Research institutions should audit the extent of staff participation in foreign talent-recruitment programs. They should act on cases of misconduct, including undeclared external commitments, grant fraud and violations of intellectual property policies.

5. Why telemedicine needs an urgent fix [Source: Livemint] 

The current pandemic has been good for the e-health platforms in India. But there are a few gaps which need to filled, as per this article. A big area of concern is the integration of various health businesses under one roof. Because of the ease with which businesses can be built online, e-health platforms have set themselves up as comprehensive healthcare services providers that offer doctor consultations across specialisations, medicines, tests and health content. But this integration has happened without the recognition and disclosure of conflicts of interest that patients should be aware of.

Any firm involved in patient care or healthcare delivery needs to be registered as a healthcare company, said Dr. Shenoy Robinson, chairperson of the Confederation of Indian Industry’s technical committee on health. “And they need to be covered under all the relevant health laws, which can be updated. But you can’t say that ‘I’m a technology player and none of these laws apply to me,’" he said. Not only Practo, most e-health start-ups try to attract patients, or ‘users’, with similar hooks. But again, these tactics betray a lack of understanding, or disregard, of the difference between users and patients.

Despite India’s push to digitise healthcare, the regulatory framework hasn’t yet been made clear. In an interview earlier this month, Dr. Indu Bhushan, chief executive of the National Health Authority, said that it is using a combination of present laws like the IT Act, the draft Personal Data Protection Bill and various Supreme Court judgments on “data privacy and data security" to determine a data policy framework under the National Digital Health Mission.

6. In twenty years, exchanges have gone from clubby firms to huge conglomerates [Source: The Economist] 

On August 25th Ant Group, the fintech affiliate of Alibaba, a Chinese e-commerce giant, filed for a listing that may raise $30bn in Hong Kong and Shanghai. That would make it the largest initial public offering ever. But it is easy to forget that, in the two decades or so since they themselves listed, Hong Kong Stock Exchange (HKEX) and other exchanges have become big fish too, by exploiting the benefits of network effects, data and scale that Big Tech is best known for. The London Stock Exchange, which was worth less than $2bn when it went public in 2001, now has a market capitalisation of $41bn. The New York Stock Exchange (NYSE) is now part of Intercontinental Exchange (ICE) which is worth $57bn.

Stock exchanges used to be owned by their members, which were mostly banks and brokers. When the biggest went public in the 2000s, they earned their crust by charging fees on equity issuance and transactions. The exchanges sought to diversify by expanding abroad and becoming trading venues for other assets, like derivatives and currencies. Most moved into clearing and settlement facilities, too. Now the elite exchanges have turned their attention to data. On August 6th ICE said it had agreed to pay $11bn for Ellie Mae, which tracks the mortgage industry. London Stock Exchange (LSE) is awaiting approval of its $27bn bid for Refinitiv, a market-data firm.

Twenty years ago the fear was that new entrants would eventually topple the exchanges’ de facto monopolies. But the incumbents have kept the challengers at bay. On August 20th, Singapore Exchange said it would work with LSE’s benchmark business to develop index derivatives focused on Asian and emerging markets. Euronext has acquired Nord Pool, a power market. While exchanges remain lucrative businesses, how far can they go with expansions, only time will tell.

7. Big Oil is in trouble. Its plan: flood Africa with plastic. [Source: The Economic Times] 

Many markets are already awash with plastic, and few countries are willing to be dumping grounds for the world’s plastic waste. But the oil industry thinks that it has found a solution to both problems in Africa. An industry group representing the world’s largest chemical-makers and fossil fuel companies is lobbying to influence U.S. trade negotiations with Kenya, one of Africa’s biggest economies, to reverse its strict limits on plastics — including a tough plastic-bag ban. It is also pressing for Kenya to continue importing foreign plastic garbage, a practice it has pledged to limit.

Kenya, like many countries, has wrestled with the proliferation of plastic. It passed a stringent law against plastic bags in 2017, and last year it was one of many nations around the world that signed on to a global agreement to stop importing plastic waste — a pact strongly opposed by the chemical industry. Pivoting to plastics, the industry has spent more than $200 billion on chemical and manufacturing plants in the United States over the last decade. But the United States already consumes as much as 16 times more plastic than many poor nations, and a backlash against single-use plastics has made it tougher to sell more at home.

And after China closed its ports to most plastic trash in 2018, exporters have been looking for new dumping grounds. Exports to Africa more than quadrupled in 2019 from a year earlier. On the trade deal, Daniel Maina, founder of the Kisiwani Conservation Network in Mombasa, Kenya, said the trade talks were coming at a particularly vulnerable time, as Kenya was starting to feel the economic effects of the pandemic. “If they were to force this sort of trade agreement on us, I fear we will be easy prey,” he said. For plastics-makers, direct deals with countries like Kenya have become more important after the industry suffered a major setback on another issue of global dimensions: plastic waste exports.

8. Navneet Munot: Lessons from the pandemic [Source: YouTube; Cafemutual]

In this short and insightful talk, Navneet Munot, ED & CIO SBI MF, shares his experience and lessons that he learnt in this pandemic. He starts by saying that his belief of “necessity is the mother of invention” has been reaffirmed. He believes that by the end of this pandemic, there will be many stories about how the best in us came out, especially in the asset management industry. He also explains how we have to learn to live with the “known unknowns” and “unknown unknowns”.

Since the last one year, there have been many events. Mr. Munot says how anyone would have said that the market would have been ~20% or 30% down with the spread of the pandemic, locust attack in India, lockdowns, followed by recession, border issue with China, etc. almost a year back. But, today the markets are still high. Smallcap index is high, midcap index is high. He also says that whoever predicted this correctly was only lucky to do so.

To be a successful investor, it’s not important how much you know. It’s more important how you behave, how you react and how you control your biases. He also says that uncertainty and volatility is good for investors, because in such times the stocks fall. Also, he believes that the fundamental tenets of the market will never change, no matter what. He predicts that the current phase would bring the best in humanity.

9. Aakash Prakash: A global perspective on innovation [Source: Business Standard] 

The current pandemic has made everyone realise how important technology is. Technology has never been more important, be it in ecommerce, education or telemedicine. In fact, technology spend has decoupled from the global gross domestic product growth and is experiencing a V-shaped recovery as most companies are having to ramp up their spending on digitalisation and nextgen business models. Research and Development (R&D) has never been seen to be more important. But how do the countries and companies of the world stack up in terms of R&D?

Over the last decade, US R&D spending has risen by only 43% compared to 200% for China. In 2018, gross domestic spending on R&D in the US totalled $580 billion, across government, business and academia. China for the same year spent a total of $550 billion. In 2008, the numbers were about $400 billion for the US and $125 billion for China. Indian R&D spend languishes at 0.60.7% of GDP, and has unfortunately declined in percentage terms since 2008. India is also significantly below the global average of 1.7%. An interesting perspective is that 65% and 80% of the R&D spend by the US and China, respectively, is spent on development projects, not basic or applied research.

If you look at the top 20 global research spenders, all are from either technology, life sciences or Auto. India had only one company in the list of the top 100 R&D spenders, Tata Motors, which spent about $350 million (ex-JLR). In many areas, be it embedded software or chip design, Artificial Intelligence and analytics, serious capability has been developed in India. India has far greater importance in the global R&D chain, then the dismal numbers highlighted above would indicate. However, Indian companies have to raise their game.

10. Stories of distress, hope on LinkedIn [Source: LinkedIn] 

In the current pandemic, many people have lost their jobs. And in times of distress, LinkedIn has evolved from being a networking and hiring platform to an online place where those who have lost jobs seek a dose of hope and make desperate appeals for help. Like any social media platform, there’s a lot of anger too. Frustrated employees call out employers they have fallen out with or publicly shame recruiters when negotiations break down. Once upon a time, job hunting used to be discreet. The post-covid paradigm is about being loud and public. Recently, LinkedIn introduced an optional feature where job seekers could embed a #OpenToWork photo frame with their profile pictures to signal to recruiters and other users visually.

A report from the Asian Development Bank (ADB) and International Labour Organization (ILO) stated that the youth would bear the brunt. Over six million Indians in the age group of 15-24 could lose their jobs this year. However, this estimate cuts across all collars. Corporates are in a belt-tightening mode. “Because of work from home and everything happening electronically, a lot of middle management jobs may come under threat," Haresh Chawla, partner at True North, a private equity fund, said.

The new normal is characterised by stiff competition for work where at any given point in time, there are far higher numbers of applicants than jobs. Jyoti Bowen Nath, managing partner of Claricent Partners, an executive search firm, told Mint that her requests for connections on LinkedIn have gone up significantly from professionals who studied in India’s best institutes. “You accept an invite and they reach out to you asking for an opportunity. You can see the anguish in those messages," she said. “Unfortunately, we cannot help everyone. What we can do is respond to everybody with a certain amount of empathy. I always acknowledge the mails because that makes a difference. It is about being heard."