Archive for month: June, 2019

Honest to Goodness, AI vs. the UN and Arab Views

Summer is our favorite season. We bask in the warmer weather, luxuriate in the longer days and enjoy the greater variety of fruit at our local produce stand. So there should be an extra bounce in our step this week as the calendar turned to a more friendly page. And yet twice in the last week, we were so alarmed and angered by the news that our step plodded rather than sprung and we turned off all media to avoid the anger-inducing distractions. This, of course, is a selfish thing to do. If we are moved so emotionally by what is going on in our world, the proper step is to try to change the world for the better. But occasionally one throws up their hands in dismay and apparent powerlessness, search the fridge for Rainier cherries and distract oneself with loud music. But the world and its problems remain. And so an idea we had not too long ago germinated as we spit out a cherry pit and turned up the music just a bit louder yet. The idea is not quite ready for prime time, alas. Most of our ideas are quarter baked, half baked at best. But we hope soon to present this one after it has broiled in the oven a bit longer. And even as we toil in the kitchen, we serve up a dish of the state of honesty in the world, spice things up with some UN AI, and throw onto the grill what the Arab world thinks.  It’s this week’s International Need to Know, a bit calmer now while listening to our favorite Frank Sinatra song.

Summer Wind (Remastered 2008)

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Without further ado, here’s what you need to know.

Honest to Goodness

If we ever find a wallet with money in it, we like to think we would work to return it to the owner. Three researchers, who weren’t about to take our word for it, conducted experiments in 40 countries to determine which people are most honest and “whether people act more dishonestly when they have a greater incentive to do so” by leaving wallets with varying amounts of money in them in public places. Honestly, we were surprised by the results and we bet you will be too. It turns out the more money in the found wallets the more likely a person will turn in the wallet. Most people, including economists, according to the research, predicted it would be the opposite. We were all wrong. There are differences in rates of honesty by country. The northern European countries were most likely to return wallets. China was least likely. What causes this difference in honesty among countries? The researchers suggest “that economically favorable geographic conditions, inclusive political institutions, national education, and cultural values that emphasize moral norms extending beyond one’s in-group are also positively associated with rates of civic honesty.” The researchers plan on conducting more studies to delve into population differences—so if you see a wallet lying on a park bench…you are being tested, one way or another.

Is that Boutros Boutros-Ghali or a Computer?

In news that we found completely believable, researchers have created an AI program that can create UN speeches indistinguishable from the real thing (or maybe we are living in a software simulation and these speeches have always been AI generated?). Researchers “used a readily available language model that had been trained on text from Wikipedia and fine-tuned it on all the speeches given by political leaders at the UN General Assembly from 1970 to 2015. Thirteen hours and $7.80 later (spent on cloud computing resources), their model was spitting out realistic speeches on a wide variety of sensitive and high-stakes topics from nuclear disarmament to refugees.”   AI created speeches on general topics such as climate change that were almost impossible to differentiate from the real thing. Speeches on “inflammatory” topics only produced realistic speeches 60 percent of the time. Articles in INTN are impossible to replicate using AI.

The Warm and Cold Waters of the Arabian Sea

The waters we swim in affect who we are. The arguments in America, for example, as polarized as they may be, are constrained within a certain spectrum*. That spectrum is different in various parts of the world as a recent survey shows. The poll conducted by a partnership of BBC News and the Arab Barometer finds that in certain countries the number of non-religious has risen significantly, including in Tunisia, Libya Morocco and Egypt. But note that the number of non-religious is far fewer than in Europe and the U.S. There is a Persian Gulf sized difference between the Arabian Sea and the Atlantic and Pacific. Strikingly, in most Arab countries, honor killings are more acceptable than being gay, though honor killings are not particularly popular which means being gay is really unpopular. And finally, Turkey’s weak strong man Recep Erdogan is more popular in the Arab world than either strong weak man Trump or silly strong man Putin. In fact, given the recent election, it’s safe to say that Erdogan is more popular in Algeria than Istanbul which means he’s likely to be unpopular there soon too.

*The spectrum has been widening in recent years

Chinese Tariffs, Closed China Market and Renewables Vs Coal

For reasons that may become apparent in the future, we’ve been listening to lots of 1970s New York City Puerto Rican salsa music. Essentially Puerto Ricans living in the Big Apple adopted and adapted Cuban Salsa music, popularizing it to the world even as they made it their own. Tino Puentes is perhaps the most famous example from this era but there are plenty of others including Ray Barretto, Willie Colón and Eddie Palmieri. New York was an amazing incubator of creativity and innovation in that day and age–from disco to punk to rap in music, to Keith Haring, Tseng Kwong Chi and others in art, to gay rights and other social causes. Since the late 1980s, New York has ceased to be an interesting place with the West Coast becoming the incubator of innovation and now at the end of the first fifth of the 21st century, other countries are beginning to pick up the American cultural and innovation slack. But that NYC Puerto Rican salsa still moves the hips and pounds the hearts of listeners. For New Orleans music aficionados like ourselves, you’ll note the Caribbean rhythms that helped jelly-roll the Crescent City beat. So even as we tickle the keys to China’s lowering tariffs, shake the marimbas of China’s closed market and blow the horn on increased use of coal, we turn up a little Che Che Colé by Willie Colón. It’s this week’s International Need to Know, grooving to the many tunes of this complex world.

Willie Colón – Che che colé

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Without further ado, here’s what you need to know.

We See Your Ace and Lower You Three Kings

We are reading Bruno Macaes book, Belt and Road, A Chinese World Order, that describes how and why China is becoming assertive in the world, or as Macaes puts it, “China is transforming from a participant to a shaper of globalization.” This is true and the U.S. – China trade war is accelerating this phenomenon like two teenagers drag racing on the city strip, t-shirt short sleeves rolled up above their biceps, a cigarette dangling from each of their lips (wait, is tobacco on the tariff list?). The Peterson Institute documents that as China has raised tariffs from 8% to 20.7% on U.S. goods, it has slightly reduced tariffs on non-U.S. goods from 8% to 6.7%. That’s not a huge reduction, but on a host of goods the difference is greater than that as you see in the chart below. In other words, China is working to help other countries compete against America. The rest of the world may become more tied to Chinese trade as the U.S. and China decouple with all the consequences, intended and unintended on both sides, that will bring. Of course, the most challenging barriers to doing business with and in China are non-tariff barriers. Read on!

You’re Not Allowed in the Game

Count us among the many who think the way the current U.S. Administration is countering China is wrong-headed. But there are reasons to challenge China. The country continues to be a very closed market as the graphic below from Visual Capitalist shows. There are certainly examples of successful U.S. companies in China (hello Starbucks), as well as other countries’ companies, but in any strategic industry it is well-nigh impossible for a foreign company to succeed in China. Analysts will note that many countries protected their industries when developing, including the U.S., but China has done so on a larger scale and more deeply than most.

Coal Races Renewables

Renewable energy, led by solar and wind, saw the largest increases in electricity generation in 2018. Unfortunately, just behind was coal. In fact, coal-based electric generation increased by 3 percent last year to a new record total of 19,000 TWh (TerraWatt Hours). Electricity generated by coal actually decreased in the developed world last year, primarily because of large reductions in the U.S. and Europe. But in Asia, coal-generated electricity is increasing, led by the two most populous countries in the world, China and India. That coal-generated electricity decreased in the U.S., even as overall U.S. electricity usage increased, is a great sign for the future. It’s further evidence that any effective Green New Deal must be one that finds ways to develop, export and spread new clean technologies throughout the world.

Trade Waits for No One, India’s False GDP, and Japanese Chair Racing

While drinking and eating from a bar and grill based on the back of a pick-up truck (only in New Orleans), as we waited for the Mardi Gras Indians on St. Joseph’s Day a few years ago, we felt a stir in the crowd. And there was Mac Rebbenack, otherwise known as Dr. John, rambling, a little unsteady on his ornately carved walking stick, through the neighborhood. The locals greeted him like an old friend, which of course, he was. We said hello too. It feels as if we’ve known Mac Rebbenack our entire life. First probably through Dr. Teeth on Sesame Street and The Muppet Show but then through the man’s music itself. But it wasn’t until later in life that we saw him perform live. We were front row in a small club, seated at the foot of his piano–we could practically touch the voodoo skull sitting atop it–and grooved to one of the tightest bands we’ve ever had the honor and pleasure to listen to. We have a thing for voices, and Mac had one of the most unique talking voices in the world. It was as if it was baptized out of the canals, saloons and dirty back streets of New Orleans on a full-moon night. And, of course, it was. As The Times-Picayune obituary wrote, “Mr. Rebennack was a man whose style and outlook were shaped, too, by voodoo, that mysterious and mystical spiritualism that developed from the city’s Afro-Caribbean roots. And in New Orleans, that meant he stood out so much he fit right in.” The word “legendary” was invented in some bayou swamp thousands of years ago just so we would have a way to describe him. Rest in peace Mac, and the rest of us will continue to groove because of you. And we groove to a new troubling world order beat, listen to the funky sounds of inflated Indian GDP growth and totally get down to Japanese office chair racing. It’s this week’s International Need to Know, carrying an umbrella even on a sunny day.

Dr. John – Goodnight Irene

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Without further ado, here’s what you need to know.

Trade Waits for No One

As China rises and the U.S. is run by a short-sighted, transactional presidency, the world is shifting and twisting like an alligator breaking into a Floridian’s kitchen. When we were in Vietnam a few weeks ago, we met with someone the U.S. government hired to examine how goods were being smuggled into China so as to avoid U.S. tariffs. Business people don’t sit idly watching leaders drunkenly move their chess pieces—they act. Meanwhile, Huawei, the controversial Chinese IT company, acted recently by buying one of Russia’s leading face recognition technology companies. As the world splits into divided Internet spheres, it would be short-sighted to believe our globe will remain static. In fact, just last week, reported that “For more than two hours on Thursday, one of China’s largest internet providers forced a huge chunk of European mobile traffic to be rerouted through its own servers.” This included U.S. military traffic, data to and from companies such as Microsoft, and almost all traffic to and from France and other European countries. All of this activity, illicit and otherwise, occurs in an era when most large challenges are transnational—climate change, refugees, health (see China’s under-covered swine flu epidemic which is now an Asian epidemic) and others. Alas, our world’s short-sighted leaders have not made appointments at Warby Parker’s.

India Goes All “China” On Us

In March, we noted a new study that quantified how much China was inflating its official GDP statistics (1.7% per year from 2008 to 2016) and compared China’s revised GDP with India’s higher GDP growth rates during that same period. But what if India was also inflating its official GDP growth figures? Well, a paper published in Harvard’s Center for International Development by Arvind Subramanian, a former economic advisor to the Indian government, claims, “A change in the method used to calculate India’s GDP led to a significant overestimation of growth.” How much? The report claims instead of an average of 7% growth from 2011 to 2017, the average was actually 4.5%. This changes the chart we presented in March considerably (see below). Who else has been inflating GDP growth? And how much grade inflation is there at Harvard? We await answers.

Japan Chair Racing Grand Prix–the Greatest Grand Prix

In a week where memorials and second lines were held for two New Orleans icons—Leah Chase and Dr. John—and should have been held for Kevin Durant’s Achilles’ tendon and perhaps for democratic hopes in Hong Kong, we feel we must end on a lighter note. And so we present the Japan Office Chair Grand Prix. This is a race held in Hanyu, Japan in which “teams of three battle it out on ordinary office furniture across two grueling hours to see who can complete the most laps of the 200 meter course.” We are ashamed to admit that this race was first started in 2009 and we have yet to watch it. Or even better, we are searching for two teammates to join us in the 2020 race. Send us your credentials and applications immediately.

Office Chair Grand Prix Sees Racers Scooch, Slide and Glide

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The Coming Robot War in China, African Manufacturing, and No Coal in U.K.

Over the weekend we were headed to a baseball game and got stuck behind a large pick-up truck driving very slowly. As we grumbled at its lack of speed we noticed two stickers on its back window. One read “Redneck” and the other read “White Pride.” We are sure many people feel such thoughts but it appears that now that there is a president who gives loud and obnoxious voice to such emotions that people are emboldened to slap them on their vehicles for all to see their racism. It’s a bit scary. After the baseball game, we went to a comedy show (when you are a fan of the Seattle Mariners such antidotes are necessary) to see Helen Hong of Wait Wait Don’t Tell Me and Netflix comedy fame. We short-sightedly sat in the front row and at one point Ms. Hong, who continually involved and engaged with her audience, looked at us and said we were the “whitest person she had ever seen.” It was a joke, of course–and we even laughed at the time. But, later we wondered what she meant when she said we were the “whitest.” Surely she’s seen whiter skinned people than us–she lives in Brooklyn after all. Was it the way we were dressed? She had no way of knowing our cultural tastes or ideas or inner thoughts. Of course, it was all a set up for her to tell jokes, but we wonder if her joke was a sticker on the back of her pick-up truck full of gags. But whatever our level of whiteness or any other color, we note China’s robot war, Africa’s manufacturing gains and Britain’s lack of coal.  It’s this week’s International Need to Know, vowing to fight institutional racism while misjudging the content of people’s character (we are a bad judge of character) of people all over this complex, diverse world.

Without further ado, here’s what you need to know.

The Coming Robot War in China?

The great robot phobia began approximately four years and seven months ago. Humanity is increasingly scared robots will take over, kill us and take our jobs. Two years ago we reported that automation and robots may harm developing countries by eliminating manufacturing jobs before these countries leverage these jobs to develop into mid-income countries. Now comes a study focusing on how automation and robots are affecting China. Remember China is gung-ho for AI and robots with, as the report notes, President Xi himself calling for a robot revolution to boost productivity (though no robots will be allowed to be members of the Chinese Communist Party and definitely are not allowed to be General Secretary). China is the largest user of industrial robots in the world (per capita South Korea is the largest) and recent studies have found that 77 percent of Chinese jobs are susceptible to automation. This study, by the Institute of Labor Economics, finds that increases in industrial robots in a Chinese city reduces employment in those cities, and “reduces annual wages by 7.7 percent.” The study also claims that social unrest increased dramatically in places in China where there were large increases in robots. This is probably one of the reasons for Xi’s clampdown on society–the worry over social unrest, some of which will be caused by automation. All countries are likely to face a reckoning with automation and robots—China’s may be more challenging than most.

Never Mind the Robots–African Manufacturing

Last month we told you about the great book, The Next Factory of the World, which details how Chinese investors are helping African countries become the next manufacturing hubs. Now that you’ve read the book (you have, right?), we’re here to tell you via a Noah Smith Twitter thread that the African manufacturing revolution continues (even with the threat of robots and automation) with Indian, Japanese and Korean investors playing a part. Smith points to an article describing Isuzu Motors opening a vehicle assembly plant in Ethiopia (our world’s most underrated country—please someone start an Ethiopian ETF we can invest in), as well as Hyundai opening an assembly plant. And Nissan has opened a plant in Ghana. Can Africa develop before the robots take over? Also, if a significant percentage of manufacturing shifts to Africa from Asia, what will this mean for U.S. West Coast ports? We await answers.

Bad Kids Breathe Easier in Britain

The world continues to change quickly and despite what people may tell you, some of these changes are for the better. Take the U.K. for example—it’s not all about Brexit and political upheaval. For the last two weeks, “Britain has not used coal to generate electricity—the longest period since the 1880s,” according to the BBC. Yes, Britain will still burn lots of coal this year but it is on pace to eliminate all coal usage by 2025 as it continues to bring renewable energy online and relies on natural gas and nuclear power. Below is a snapshot of Gridwatch’s real-time energy usage in the U.K. Notice the coal gauge is on zero. New technologies will continue to improve clean energy generation, in the U.K. and elsewhere. But what will Santa do in the future? Kids will be able to act as badly as they want by 2030.