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Archive for the ‘Books’ Category

Working for a purpose

Posted by hkarner - 5. Dezember 2018

Date: 03-12-2018
Source: The Economist: Bartleby

An academic calls for an overhaul of the conventional company

The modern company has morphed into a “money monster” enslaved to the doctrine of shareholder value. That is the thesis of a new book* by Colin Mayer, a professor at the Saïd Business School in Oxford. It is the latest challenge to the principle enunciated by Milton Friedman, an economist: namely, that “there is one and only one social responsibility of business—to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game.” An influential paper** by Oliver Hart and Luigi Zingales last year argued that profitability is not the only criterion that should apply and that shareholders’ welfare is affected by a broad range of factors, including social and environmental conditions.

Mr Mayer takes a similar line, arguing that companies have relationships with many more people than just shareholders. As well as financial capital, they use several other types—human, intellectual, material (buildings and machinery), natural (the environment) and social (public goods like infrastructure).

He also notes that the original conception of a firm was quite different from now. The societas publicanorum were Roman bodies that performed public functions such as tax-collecting or maintaining buildings. They raised finance from shareholders and their shares were traded. The medieval idea of a company revolved around a family business. The founders were people who took bread together (hence the term cum panis). In the early-modern era, firms such as the Dutch and English East India Companies` were set up in order to pursue national trade objectives. Den Rest des Beitrags lesen »

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Seventh-Inning Debt Stretch

Posted by hkarner - 19. November 2018

November 16, 2018

Within the closed system called Earth, we are much better at creating debt than eliminating it. But when we have too much, we eventually eliminate it in painful and unpleasant ways via some kind of debt crisis. This has happened over and over again throughout history.

Today we’ll look at a new book by Ray Dalio called Principles for Navigating Big Debt Crises in which he examines those debt cycles and what we can do about them. I read it on my recent trip to Frankfurt and I highly recommend you do the same. That link is for Amazon but you can also get a free PDF copy here. I read it on my Kindle so I could highlight and save notes in the cloud for later reference. Worth every penny of the $14.99 I spent.

At a minimum, you should read the first 60 pages, which explain his principles and thoughts. The rest of the book dives deep in the weeds of 48 modern debt crises, sorting them into different types and then analyzing each type. Data wonks will love that part. Ray gives us a brilliant tour de force examination of how debt crises arise and what you can do when one strikes.

At first blush, you will think that Ray is more optimistic than I am about the next debt crisis and an eventual event which I called The Great Reset, which I’ve written about extensively this year. I see The Great Reset as a generation-scarring economic cataclysm. Debt crises, while painful, have a fundamentally different character.

Ray’s book has helped me refine what I mean by The Great Reset. We’ll explore this more in future letters but here is one very important, critical, point:

 It is possible we will have another debt crisis separate from The Great Reset I envision. Indeed, it may be quite likely. Den Rest des Beitrags lesen »

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Tech C.E.O.s Are in Love With Their Principal Doomsayer

Posted by hkarner - 12. November 2018

Date: 10-11-2018
Source: The New York Times By Nellie Bowles

The futurist philosopher Yuval Noah Harari thinks Silicon Valley is an engine of dystopian ruin. So why do the digital elite adore him so?

The futurist philosopher Yuval Noah Harari worries about a lot.

He worries that Silicon Valley is undermining democracy and ushering in a dystopian hellscape in which voting is obsolete.

He worries that by creating powerful influence machines to control billions of minds, the big tech companies are destroying the idea of a sovereign individual with free will.

He worries that because the technological revolution’s work requires so few laborers, Silicon Valley is creating a tiny ruling class and a teeming, furious “useless class.”

But lately, Mr. Harari is anxious about something much more personal. If this is his harrowing warning, then why do Silicon Valley C.E.O.s love him so?

“One possibility is that my message is not threatening to them, and so they embrace it?” a puzzled Mr. Harari said one afternoon in October. “For me, that’s more worrying. Maybe I’m missing something?” Den Rest des Beitrags lesen »

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A path out of the West’s malaise

Posted by hkarner - 3. November 2018

Date: 01-11-2018
Source: The Economist

Paul Collier advocates a return to pragmatism and a restrained form of patriotism

The Future of Capitalism: Facing the New Anxieties By Paul Collier. Harper; 256 pages; $29.99. Allen Lane; £20.

Gloomy books about the decline of the West are a booming mini-industry. After the crisis of 2008-09 a wave of writers revealed the rot at the heart of the financial system. In 2013 Thomas Piketty published his improbable blockbuster, “Capital in the Twenty-First Century”, which explored inequality. Populist election victories in America and Europe prompted another outpouring of pessimism. Paul Collier’s new book revisits this familiar territory, but stands out because it is pragmatic, blunt—and optimistic.

In “The Bottom Billion”, published in 2007, Mr Collier examined the plight of the world’s poorest. Now he turns to rich countries, which he believes are morally bankrupt and ruled by predatory elites. That has not always been so, he says. The patriotic legacy of the second world war allowed Western countries to combine the strengths of the market with a protective web of reciprocal obligations, most notably via the welfare state. By the 1980s, however, two toxic ideologies were ascendant. Den Rest des Beitrags lesen »

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Doomsday Delusions: The Case for Optimism in a Pessimistic Age

Posted by hkarner - 28. Oktober 2018

Date: 27-10-2018
Source: Foreign Affairs By Steven Radelet

Anyone glancing at a newspaper these days finds a litany of woes: war, crime, disease, terrorism, and environmental disasters, all sandwiched between predictions of the coming collapse of market capitalism and liberal democracy. U.S. politicians on both the right, such as President Donald Trump, and the left, such as Senator Bernie Sanders of Vermont, warn that the United States and the world are sliding toward calamity. Pessimism rules the day.

The world does indeed face challenges. Yet by almost any measure, life for most people has been getting better in almost every way. Levels of war and conflict are near historic lows. People are living longer and healthier lives and are better educated than ever before. Incomes for most families are higher than at any time in history. One billion people around the world have been lifted out of extreme poverty in the last two decades, and although income inequality has worsened within many Western countries, across the globe, income is more equal than it has been in centuries. Far fewer people than ever go hungry, and the world now grows more food than it needs. Women have more opportunities, democracy has expanded, and basic human rights are more widely respected than ever before. Electricity, automobiles, the Internet, modern medicines, and simple conveniences have made most people’s lives far easier than their great-grandparents could have imagined. And after centuries of being largely confined to the West, since the 1980s, such benefits have spread across the world—not just to China and India but also to Brazil, Chile, Costa Rica, Ghana, Indonesia, Malaysia, Mongolia, Mozambique, Peru, South Africa, South Korea, and dozens of other countries. Den Rest des Beitrags lesen »

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The Decline of the West, Again

Posted by hkarner - 27. Oktober 2018

Date: 26-10-2018
Source: Project Syndicate by Helmut K. Anheier

Helmut K. Anheier is Professor of Sociology at the Hertie School of Governance in Berlin.

In the last century, not a decade has gone by without some proclamation of the West’s demise. But one thing sets today’s warnings apart: in the economically successful countries of Asia, the world now has a clear alternative to Western-style liberal democracy.

Heinrich August Winkler, Zerbricht Der Westen?: Über die gegenwärtige Krise in Europa und Amerika, Munich, C.H. Beck, 2018
Joschka Fischer, Der Abstieg des Westens: Europa in der neuen Weltordnung des 21. Jahrhunderts, Cologne, Kiepenheuer & Witsch, 2018
Jonah Goldberg, Suicide of the West: How the Rebirth of Tribalism, Populism, Nationalism, and Identity Politics Is Destroying American Democracy, New York, Crown Forum, 2018
Kishore Mahbuhani, Has the West Lost It? A Provocation, London, Allen Lane, 2018

BERLIN – These are challenging and unsettling times for the West. The combination of resurgent nationalism and geopolitical uncertainty feels less like a temporary disruption and more like a fundamental transformation – one that may well spell the end of the era of Western global dominance.

As the sun sets in the West, many argue, it is rising in Asia. Indeed, the question no longer seems to be whether Asia will supplant the West as the world’s dominant region, but rather when that will happen – and how smoothly. Den Rest des Beitrags lesen »

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Self-Fulfilling Financial Crises

Posted by hkarner - 16. Oktober 2018

J. Bradford DeLong is Professor of Economics at the University of California at Berkeley and a research associate at the National Bureau of Economic Research. He was Deputy Assistant US Treasury Secretary during the Clinton Administration, where he was heavily involved in budget and trade negotiations. His role in designing the bailout of Mexico during the 1994 peso crisis placed him at the forefront of Latin America’s transformation into a region of open economies, and cemented his stature as a leading voice in economic-policy debates.

Many mistaken assumptions about the 2008 financial crisis remain in circulation. As long as policymakers believe the crisis was rooted in the housing bubble rather than human psychology, another crisis will be inevitable.

BERKELEY – The 2008 financial crisis and subsequent recession left the Global North 10% poorer than it otherwise would have been, based on 2005 forecasts. For those hoping to understand this episode better, I have long recommended four books, in particular: Manias, Panics, and Crashes, by the twentieth-century economist Charles P. Kindleberger; This Time Is Different, by Carmen M. Reinhart and Kenneth S. Rogoff of Harvard University; The Shifts and the Shocks, by the Financial Times economics commentator Martin Wolf; and Hall of Mirrors, by my University of California, Berkeley, colleague Barry Eichengreen.

Now, I want to add a fifth book to the list: A Crisis of Beliefs: Investor Psychology and Financial Fragility, by the economists Nicola Gennaioli and Andrei Shleifer. (Full disclosure: Shleifer was my roommate in college and graduate school; to this day, I credit him with whatever positive skills or reputation I may have.)

A Crisis of Beliefs is important for three reasons. First, it offers a welcome rejoinder to those who argue that the past decade was an unavoidable result of the housing bubble in the United States. Many experts still claim that the bubble’s deflation triggered the financial crisis. But the fact is that the bubble had already deflated substantially before the crisis erupted.

Recall that by mid-2008, home prices had returned to, or even fallen below, levels supported by their underlying fundamentals, and employment and production in the residential construction industry had declined to levels far below trend. The work of rebalancing asset valuations and reallocating economic resources across sectors had already been accomplished.

To be sure, there still would have been around $750 billion worth of financial-asset losses in the form of defaults on subprime mortgages and home-equity loans. But that is only one-quarter of what global equity markets lost in seven hours on October 19, 1987. In other words, it would not have been enough to sink the global financial system. Ben Bernanke, then Chair of the US Federal Reserve, seemed confident in the summer of 2008 that the correction in housing prices had not triggered any unmanageable financial crisis. At the time, he was mainly focused on the dangers of rising inflation.

And then the bottom fell out. The reason, Gennaioli and Shleifer show, is that beliefs changed. Investors came to believe that financial markets were saddled with highly elevated risk, owing to a number of factors. The interbank market had seized up, homeowners were defaulting on their mortgages, Bear Stearns had collapsed, the US Treasury had intervened to rein in Freddie Mac and Fannie Mae, and, above all, Lehman Brothers had declared bankruptcy.

All of this led to the sudden run on both the shadow and non-shadow banking systems, as investors scrambled to dump assets. The increased risk that they had imputed to the system became a reality. Like triage nurses in an emergency room, they quickly assessed the patient and then ran with their initial diagnosis as if there were no other option.

And yet nothing about the fallout from the crisis was inevitable. Had the Fed been in possession of contingency plans for putting too-big-to-fail institutions into receivership and becoming the risk-bearer of last resort, we would probably be living in a very different world today. Unlike those who look back and conclude that it was all an inevitable consequence of the housing bubble, Gennaioli and Shleifer recognize the central role that contingency played in the crisis and its aftermath.

Gennaioli and Shleifer’s second important contribution is to show that “crises of beliefs” like the one that precipitated the disaster of 2008-2009 are deeply rooted in human psychology, so much so that we will never be free of them. Thus, neither prudential policies nor crisis-response measures should treat these occurrences as flukes or one-off exceptions. Crises of belief are manifestations of a chronic condition that must be managed.

Thus, central banks and fiscal authorities should not use the end of a crisis as an excuse to step back or to take their hands off the wheel. When fundamental beliefs have shifted permanently, one should not expect the same policy mix that supported full employment, low inflation, and balanced growth before the crisis to do so afterwards. Moreover, the seeds of the next Kindlebergian sequence – displacement, optimism, enthusiasm, crash, panic, revulsion, discrediting – have already been sown by the very policies that were needed to address the last downturn.

The third reason why Gennaioli and Shleifer’s book is important is more technical, and applies directly to the field of economics. Economists have long recognized that requiring one’s representative agent to hold rational expectations of the future tends to produce models that are profoundly inapplicable to the real world. But, until now, no alternative approach has ever gained any traction. Gennaioli and Shleifer’s investors-as-triage-nurses framework shows great promise for being considered alongside other model-building strategies.

For a decade now, people have been looking for a silver lining to the disasters of 2008-2018, hoping that this period will bring about a more productive integration of finance, behavioral economics, and macroeconomic orthodoxy. So far, they have been searching in vain. But with the publication of A Crisis of Beliefs, there is hope yet.

 

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A Future Where Everything Becomes a Computer Is as Creepy as You Feared

Posted by hkarner - 12. Oktober 2018

Date: 12-10-2018
Source: The New York Times By Farhad Manjoo

More than 40 years ago, Bill Gates and Paul Allen founded Microsoft with a vision for putting a personal computer on every desk.

No one really believed them, so few tried to stop them. Then before anyone realized it, the deed was done: Just about everyone had a Windows machine, and governments were left scrambling to figure out how to put Microsoft’s monopoly back in the bottle.

This sort of thing happens again and again in the tech industry. Audacious founders set their sights on something hilariously out of reach — Mark Zuckerberg wants to connect everyone — and the very unlikeliness of their plans insulates them from scrutiny. By the time the rest of us catch up to their effects on society, it’s often too late to do much about them.

It is happening again now. In recent years, the tech industry’s largest powers set their sights on a new target for digital conquest. They promised wild conveniences and unimaginable benefits to our health and happiness. There’s just one catch, which often goes unstated: If their novelties take off without any intervention or supervision from the government, we could be inviting a nightmarish set of security and privacy vulnerabilities into the world. And guess what. No one is really doing much to stop it. Den Rest des Beitrags lesen »

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The Jungle Grows Back: America and Our Imperiled World

Posted by hkarner - 10. Oktober 2018

Date: 04-10-2018, The Economist
Source: Robert Kagan

We now live in a world:

„Where once people believed that the nation-state was a thing of the past in an increasingly cosmopolitan and interconnected age, we now see nationalism and tribalism reemerging, more than able to hold their own in the brave new world of the Internet.

Meanwhile, a profound and extended crisis of confidence besets the democratic world, even in the birthplace of modern democracy.

Liberal international institutions like the European Union, once considered the vanguard of a postmodern future, are now under assault from without and within.

In America, racial and tribal forces that have always been part of the “subterranean stream” of American history have reemerged to reshape politics and society.

Where thirty years ago the dreams of Enlightenment thinkers going back three centuries seemed to be on the cusp of fulfillment, today a Counter-Enlightenment of surprising potency stirs in Moscow, Budapest, Beijing, Tehran, and Cairo, in parts of Western Europe, and even in the nation that saved liberalism seventy-five years ago. Den Rest des Beitrags lesen »

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In the struggle for AI supremacy, China will prevail

Posted by hkarner - 30. September 2018

Date: 27-09-2018
Source: The Economist

Or so reckons Kai-Fu Lee, a tech insider, in “AI Superpowers”

AI Superpowers: China, Silicon Valley and the New World Order. By Kai-Fu Lee. Houghton Mifflin Harcourt; 272 pages; $28.

CHINA’S “Sputnik moment” came on May 27th 2017. On that day an algorithm thrashed Ke Jie, the world’s best player of Go, an ancient and demanding Chinese board game. Mr Ke’s defeat by AlphaGo, an artificial intelligence (AI) system developed by DeepMind, a British firm that had been bought by Google, was as much a blow to China’s psyche as the Soviet satellite was to America’s self-esteem in 1957. Within months, China announced ambitious plans to dominate AI by 2030.

Kai-Fu Lee thinks it will succeed. He is well placed to judge. He moved from Taiwan to America at 11, earned a PhD in AI in the 1980s and has been a senior manager at America’s mightiest tech firms, including Apple, Microsoft and Google. Now he runs a Chinese venture-capital fund, which gives him a ringside seat for the contest between what he calls the two “AI superpowers”, China and America.

He thinks China will win because it has the edge in the four determinants of AI success: brains, capital, regulation and data. His verdict on the last three criteria is largely persuasive. For example, China’s internet economy generates vastly more data than any other, particularly in the area of payments—many Chinese merchants eschew coins and currency in favour of digital money. Meanwhile, whereas American cities are restricting self-driving cars, the district of Xiong’an, 60 miles south of Beijing, is being built from scratch to accommodate them (along with 2.5m people). The mayors of Chinese cities are splashing cash on AI startups. Den Rest des Beitrags lesen »

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