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Chinese Fertility, Missing Indian Salaried Workers, Where Ex-Pats Should Live

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We apologize for not delivering key international information and data to your digital doorstep last week. Our knee, which was recently replaced, was in need of additional medical procedures, as pain and stiffness broke through established term limits like a Chinese president. Combine that with our brother’s wedding (congrats Joe and Linda!), and we found ourselves unable to make our usual weekly delivery. But we are still more reliable than the person who delivers, or rather doesn’t deliver, our daily local newspaper. It is a rare morning when the paper is at our house on time and too often it is not delivered at all. We have often reported these delivery mishaps but nothing seems to change. You are probably asking yourself why we still take the physical paper. We can offer no particular good reason other than old habits die hard and we like to read the physical paper while we eat our morning Cheerios (we are receiving no payments from General Mills for that statement though would gladly accept their sponsorship since we are even more addicted to Cheerios than we are to the physical newspaper). We figure our habit will forcibly end sometime in the next ten years when the delivery of physical newspapers will go the way of VCRs, cassette tapes and DJ Khaled (okay, this last is aspirational–please, please make this annoying man go away). While our newspaper delivery person starts looking for other positions where she doesn’t do her job, we spill the beans on Chinese fertility, solve the case of the missing salaried worker and determine where expats should live. It’s this week’s International Need to Know…

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

China Fertility

We admit to being a bit obsessed with demographics. Although almost all events and phenomena have a complicated set of causes, we think demographics is often not given a large enough slice of the explanatory pie (delicious when served with rationalization ice cream). So we read with interest a Bloomberg article detailing the continued fall in China’s fertility rate. After a brief spike following the relaxation of the one-child policy in 2015, the number of births in China fell 3.5 percent last year. That trend is likely to continue and China’s working age population—currently 902 million—will continue to decrease. In fact, China’s working age population has been decreasing since 2012. That means China’s GDP will stop increasing at such a high rate (remember GDP increases only through larger working age populations and increases in productivity), whether official statistics reveal this or not. And, as the Bloomberg article points out, China’s aging demographics could lead to a slow down in innovation. “Not only will there be fewer young people, who tend to have a higher appetite for risk than their elders, but they’ll be a minority in the work world.” Analysts will examine President Xi’s policies, U.S. trade policy and a host of other factors, as they should, but we wonder if China’s demographics will be more important than any of these other factors to the long-term trajectory of its economy.

The Case of the Missing Indian Salaried Worker

We are more dubious than some regarding the rise of the relative importance of large companies. Nonetheless, we do believe they should be a healthy part of the mix and in economies where rules, regulations and culture make life too difficult for the formation and growth of formal companies, people suffer. The India business publication LiveMint points out this is a problem for India where among developing countries, salaried employment, i.e., those working for companies rather than self-employed, is very low. In fact, India salaried employment is below 20 percent as you see in the graph below. At the other end, China has the highest percentage of salaried jobs, followed by South Africa, Malaysia and Brazil, all countries which have climbed up to the World Bank’s “middle income” category from “low middle income,” where India continues to reside. Many of the other countries with low levels of salaried employment are also struggling to achieve the middle income category. Self-starters are great, but companies are necessary for a successful economy.

Where Expats Should Live

It’s common nowadays to hear people threaten to leave their country if one political outcome or another occurs. But where should they move? The ability to make money is certainly one factor. So in what cities do expats command the greatest salary? HSBC Expat provides the answer as reported by Bloomberg, and surprisingly, to us at least, it is Mumbai. Foreigners living in the Indian mega city earned on average $217,165, “more than double the global expat average of $99,903.” Why do expat jobs command such a high salary there? According to Dan Blackburn, head of HSBC Expat, the answer is high employment and experience levels and because a large percentage of the jobs are in engineering. We’re not sure we’re satisfied with that answer. The top four cities after Mumbai, as you see in the list below, are all high cost cities. In fact, other than Jakarta, all the cities near the top of the list have high costs of living. While we puzzle this out we suggest you request a transfer to Mumbai on the double.

Great Leaders, Smartphones Calling Trade and Venezuelan Origami

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We’ve noted our worries about automation displacing human jobs before, but it’s also possible that at least in the mid-term, the worries are overblown as we were reminded when reading an article recently that asserted truck drivers’ jobs would change, not be eliminated, with the advent of self-driving trucks. Of course, some jobs we may welcome the elimination of, perhaps because they are too dangerous or risky. Or in the case of the job we read about being at risk this week, too smarmy. Yes, it turns out lobbyist jobs are at risk to automation. According to Politico, the company FiscalNote has developed a software platform that is superior to humans at predicting what Senators and Representatives will do on an issue, who best to work with to form an alliance on a policy and how to get your bill through Congress, or alternatively, stop it from getting through the sausage making machine. The article notes that the “system analyzes interests, not just people, and quickly summarizes everything knowable about who is trying to pass what kind of rules about the most obscure topic…” FiscalNote is essentially bringing sabermetrics to politics. Of course, defense, corporate, environmental, human rights and all other lobbyists are likely to become the strangest bedfellows ever as they join together to lobby against the implementation of such technology. In the meantime, we manually inform you of a title change in China, the impact of smartphones on international trade and Venezuelan origami. It’s this week’s International Need to Know, telling different stories of import each week while the White House changes their story every day.

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

Great Leaders?

Titles are important to some people. I’ve known a number of people with PhDs who insist on being called doctor which is understandable given all the time and effort they put into earning the PhD. Chinese leaders can be very particular about titles because a title signifies much of importance. So we read with interest in Bill Bishop’s invaluable Sinocism newsletter the latest on President Xi Jinping’s title elevating efforts. Bishop reports that Xi now officially appears to be dubbed lingxiu, or “leader,” the first to receive that moniker since Deng Xiaoping and Mao. High level company indeed (and in Mao’s case, worrisome company). This moniker elevation first occurred in a January 14th article in the Global Times so we’re a bit late to the title party, but it doesn’t appear to be getting as much notice as say, Kim Jong-Un’s sister so we raise it here. As was noted in the article, “The word lingxiu means more than just a leader. It is often bestowed to a leader who enjoys the highest prestige, who is the most capable and who is widely recognized by the entire Party.“ That was January. Earlier this week the People’s Daily and CCTV published a video cementing Xi’s title which you can watch below. Over two years ago we noted that Xi is the most impactful Chinese president since Deng. Now he’s got the title to prove it.

人民领袖：习近平
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Smartphones Calling Trade

A while back smartphones replaced computers as humans’ device of choice for distracting themselves from existential questions, bothersome family issues and having to engage in time-consuming human interactions, as you can see in the first chart below. The International Monetary Fund (IMF) has been quantifying how important smartphone production is to a variety of countries exports. For example, smartphones account for 5 percent of China’s exports, about $107 billion in 2016. In South Korea, smartphone component production accounts for an astonishing 17 percent of that country’s exports. For Taiwan, those germ incubators account for a third of its exports. Other countries heavily reliant on smartphones for their exports include Singapore (15%) and Malaysia (11%). The IMF study also notes that Apple iPhone release dates have a huge impact on these countries’ tech cycles. But the study also notes the smartphone market may be becoming saturated, perhaps peaking in late 2015. “China’s domestic smartphone market declined in 2017 for the first time, and Apple recorded a year-on-year decrease in iPhone sales in the fourth quarter of 2017.” This has led to smartphone exports from China peaking towards the end of 2015, at least so far. And, of course, some of that could be due to more components and assembly happening outside of China—Korea and Taiwan semiconductor exports continue to increase. We’ll keep you updated by looking up the latest data six months from now, on our smartphone, of course.

 

Venezuelan Origami

A few weeks ago we pondered whether Bitcoin is a legitimate currency or even a long-term viable form of payment. But now comes news that certain sovereign currencies are worth more by being used for other purposes than as money. In Venezuela, where the economy has shrunk 33 percent over the last five years and where this year’s inflation rate is currently 13,000 percent (that is not a typo!) lower denomination paper bills are essentially worthless. Well, as money at least. But one enterprising Venezuelan has been taking two, five and ten-Bolivar notes and using them to create handbags which he then sells for much more than the worth of the currency itself. As the Taipei Times tells us, “Enter Wilmer Rojas, 25, who scoops them up off the street, uses an origami-like folding technique, a needle and thread to make handbags with an eye to selling them — maybe even abroad, where people have real money.” Rojas says Venezuelans throw away such bills because inflation has made them worthless. He collects them, makes his handbags, sells them and provides for his family. “You can use magazine paper or newspaper pulp, but currency notes are better because they are not worth anything, they are all the same size and you don’t have to waste time cutting them,” Rojas said. International customers are paying him $20 per bag. If you find yourself in Venezuela, we highly encourage you to buy one. Maybe cat cryptocurrencies aren’t as crazy as we thought.

A Lost Generation, Are all Unicorns the Same Color, & Self-Driving Slippers: The Sequel

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For reasons we won’t go into here, we’ve been researching the TV show, This is Us, which led us down a tangential rabbit hole researching the song, Blues Run the Game, which led to reading up on Jackson C Frank, who wrote the song, and who has the seventh saddest Wikipedia write-up ever. If you are ever despairing of your life, whatever you have to mourn—and we all have something—just remember yours is unlikely to be as dire, tragic or painful as Frank’s. Born in Buffalo, NY (tragic enough in itself, Ron Armitage), at age 11 a fire broke out at his school killing 15 students, including Franks’s then girlfriend, Marlene, who he later wrote a song about. Frank himself suffered burns on 50 percent of his body. Frank recorded his only album as a young man while living in England. The album was not a popular success and things went from bad to worse for Frank personally. Frank lost a son to cystic fibrosis and later  suffered severe mental health issues that led to his being institutionalized and later to becoming homeless. Years later one of his fans found him and hoped to help him to begin recording again. But before this happened, Frank, sitting on a park bench in Queens, NY, was shot through the eye by a pellet gun a kid was shooting indiscriminately in the neighborhood. Eventually Frank died of pneumonia and cardiac arrest at the age of 56 in 1999, unknown, broke and alone. His music did not save him but continues to stir millions, including viewers of This is Us. It is of no solace to Frank, of course, but even the most tragic life can have hopeful impact. We hope to move you about Europe’s lost generation, sing the blues about unicorns, and provide a sequel to self-driving slippers. It’s this week’s International Need to Know, attempting to be the Jack of international news and data.

Blues Run The Game–Jackson C. Frank (From Vi…
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Without further ado, here’s what you need to know.

A Lost Generation?

We noted a number of months ago that Europe’s economy has been recovering after a long, dark economic night resulting from the financial crisis. But for Europe’s youth, no dawn looms. At the height of the great recession, in some EU countries the unemployment rate for youth hovered around 50 percent. For the EU as a whole, a quarter of young people were unemployed. That is no longer the case but even today, nearly a fifth of young people in Europe are unemployed. As you see in the chart below, the difference between youth unemployment and employment for older people is stark. Young Europeans are starting from behind with little hope of ever catching up to previous generations. Like the lost generation of World War I, this will have long and worrisome impacts. As the IMF writes, “after long spells of unemployment and with limited experience, the young are less likely to find work. If they do find it, it will likely be at lower wages. Wages not earned and savings not put aside can be extremely difficult, if not impossible, to recover later in a person’s career” Old policy makers have run the youths’ blues long enough and need to make rescuing the lost generation a higher priority.

Are all Unicorns the Same Color?

I hate the term, “unicorns,” especially as it’s now being adapted to NBA players. But, even in its traditional finance definition (a privately held start-up company with a valuation of $1 billion* or more) it grates on our senses. So I somehow type this post while covering my ears with my hands. But we were intrigued, when researching which countries are home to the most unicorn companies, by how two countries utterly dominate. Three-quarters of all unicorns graze in only two countries, China and the U.S. Remarkably, in 2017, as Ian Bremmer recently pointed out, only four unicorns came out of Europe and those were all in the UK. But in 2017 the U.S. saw 32 leap up and China witnessed 18. China is just behind the U.S. in total unicorns, not just ones born in 2017, as you see in the chart below. India is a distant third. Chile is the only South American country with a unicorn. There are lots of forests in our world but only a few are producing these creatures.

*We question how many of China’s unicorns are truly “privately”  held.

 last week’s story on self-driving slippers.  After starting this week with a rumination on tragedy and two not entirely uplifting stories, we are grateful to eagle-eyed reader, Dave Billings, for pointing out this video of Nissan’s self-driving chairs he stumbled across inspired by the self-driving slippers. The technology. The music. It is clearly destined to be one of our favorite videos of the year although we are a bit worried should Tesla start applying self-driving technology to inanimate objects. We do not trust Elon Musk. And when chairs become intelligent, all bets are off.  Nonetheless, though blues do indeed run the game, they cannot make anyone entirely sad when they know self-driving chairs exist in the world. See you next week with happier international news.

【TECH for LIFE】INTELLIGENT PARKING CHAIR | In…
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Innovation Index, Satellite Love, Unemployed Dogs

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In what we don’t believe will serve as a useful metaphor of our world’s strange times, when we were filling our tank the other day at a gas station, a large white truck started to back into the pump position next to ours. But the driver of the Ford F150 kept backing and backing up and clearly did not see my car parked there. I began waving my hands and yelling “stop,” but she kept coming. I stepped towards her truck trying to get in her line of sight and kept up my shouting until finally she saw me and threw on her brakes, but not in time to stop her big truck from nudging into the rear-end of my car. She quickly pulled forward, and then leaped out of her car apologizing. I said it was okay, accidents happen, and we investigated the back end of my car, which fortunately showed no signs of damage. She continued to apology so profusely that I found myself trying to calm her down she was so upset at her carelessness. So come to think of it, this is definitely not a metaphor for our times. But it does remind us of our fondness for the coming age of self-driving cars, which leads us to examining the Innovation Index, contemplating who has the most satellites and heralding the most amazing autonomous technological breakthrough yet. It’s this week’s International Need to Know, navigating the world of international news and data with nary a bent fender or broken side mirror.

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

Is the Innovation Index Innovative?

Tis better to have loved and lost than never to have loved at all wrote ole Tennyson after losing his close friend Aaron Henry. Similarly modern economists and psychologists say it is better to take risks and fail than to be completely complacent, though none express it nearly as elegantly as a 19th Century poet. We kept this in mind when analyzing Bloomberg’s 2018 Innovation Index where once again South Korea takes the top spot, followed by Sweden, Singapore, Germany and Switzerland. Prinn Panitchpakdi, head of an Asian brokerage firm in Thailand, notes that “Innovation lags in countries where the culture emphasizes risk avoidance and where R&D is seen purely as an expense, not as an investment. That’s the mindset in Thailand.” Consequently you won’t find Thailand until 45th place in the rankings. They are so worried about losing, they aren’t loving. The U.S., for the first time, has fallen out of the top ten, though apparently not for lack of willing to fail but because our education system is not producing as many science and engineering graduates for the workforce as it once did. The index ranks countries in their innovativeness by scoring them on seven categories, including research and development spending, patent activity and high-tech density. We are not entirely convinced the index is an accurate ranking of the most innovative countries, but it’s an interesting benchmark to contemplate. As Tennyson wrote, “knowledge comes, but wisdom lingers.”


Satellite of Love

The Union of Concerned Scientists, who have no shortage of things to be concerned about nowadays, tracks the number of satellites currently in orbit around earth, of which there are more than 1000 total. You should not be surprised that the United States is by far the leader with 803, followed by China (204) and Russia (142). Of America’s satellites, 19.8 percent of them are for military use. For China, it’s hard to tell for sure from the data but conservatively at least 31 percent are military-oriented. And those crazy Russians?  At least 60 percent of their satellites are for military use. How many satellites each country has twenty years from now and what percentage of them are military will say a lot about these countries’ economies and the state of world technology. BTW, Direct TV, which has 10 satellites, has more satellites than most countries. TV!

Unemployed Dogs

In a week when many in America considered the state of the union, perhaps it is an appropriate time to step back and look at the big picture. And by that we mean the amazing breakthrough of self-driving slippers. Long time readers know of our affinity for self-driving cars, but who can doubt that an even bigger advance for humankind is autonomous nighttime footwear? It is, of course, no surprise that this kind of a technological breakthrough took place in Japan (number 6 on Bloomberg’s Innovation Index!) where a hotel offers slippers that roll on tiny wheels directly to wherever your feet are. No, really, check out the video below. Strangely, we take this as more evidence that autonomous cars will first be deployed outside the United States, probably in Asia. Developed by Nissan, the slippers are being used at an inn southwest of Tokyo with views of Mt. Fuji. We are, even as we type, working to make reservations there. So put your feet up, clad easily in your self-driving slippers, and enjoy our little world.

News Techcology – Nissan releases self-parki…
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Age(ing) of China

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Ignorance is bliss, they say. Apparently this adage is from a 1747 poem by Thomas Gray. Who is Thomas Gray you ask? Well, refer back to the first sentence. At any rate we’re reminded of this old saying by the multitude of data and insights that are used in sports nowadays. Baseball strategy has been transformed the last decade by teams finally adopting sabermetrics and by new uses of spatial data information. The result is that there is less base running, balls in play, less risk taking and nearly all teams are using the same in-game strategies. In other words, it has dulled some aspects of what made the game great and interesting. So too in basketball. Teams increasingly understand a three-point shot is intrinsically more valuable than a two-point shot. Consequently, basketball games are increasingly a series of three point shots rather than a multitude of different types of plays, again dulling and destroying some aspects of what make the game great. This is increasingly true of many sports and many endeavors of life. We love data and we were into sabermetrics 30 years ago before it was cool. But perhaps it turns out that understanding things too well can in the end destroy them. The mystery of life is not something to take lightly. Ahh, but not international news and data. No, there ignorance is not bliss and so we bring you the Age(ing) of China, examine CEO’s worst fears and embrace the Department of Loneliness. It’s this week’s International Need to Know, stealing bases and posting up on our world’s diamonds and courts.

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

The Age(ing) of China

It cannot be said often enough in a world that believes otherwise, that things are not binary. It is not A or B, black or white, one thing is wrong and the other is right. Our world is more complicated than that. Two things can be true at the same time (or false). China is a great example of this. People want to pigeon hole it as either a catastrophe waiting to happen or as inevitably marching to greatness. The truth is, like almost any country, China has its assets and opportunities as well as liabilities and challenges. So even as we remind you today of its aging demographics, that does not mean we discount its continuing innovation and other assets. But China is getting old—it’s demographics currently are almost as old as the United States and if trends hold its demographics will shortly be older than the U.S. The latest figures show that China’s working age population (ages 15 – 64) has topped out at just under 72% of the population. Of course, given China’s size, that still means they have nearly a billion working age people. But, GDP only grows with increases in productivity and increases in working age population. If China’s working age population is no longer increasing, unless they buck the worldwide trend of weak productivity, China’s GDP growth will start to slow (whether official figures reflect this or not). In addition, the World Health Organization classifies a country’s population as “aging” when the percentage of people over 65 reaches 7 percent. Currently, 11.4 percent of China’s population is over the age of 65. China is still doing amazing things, but it also has some challenges, including its aging demographics.

What are you Scared of?

Every year the powerhouse accounting firm PWC (who accidentally brought us the craziest moment in Oscar history last year), conducts a survey of CEOs around the world asking them a variety of questions about business conditions in their countries and other markets. This year CEOs are more anxious than in the past. The whole survey is worth perusing but we will concentrate on the question of which threats CEOs are most concerned about. It varies tremendously by region. In North America, CEOs are most concerned about cyber threats and over regulation. Asia-Pacific CEOs, on the other hand, are most concerned about availability of key skills, the speed of technological change and terrorism. Both Western Europe and Latin American CEOs top concern is populism, which says a lot about both places. In the Middle East, the top concern is geopolitical uncertainty. In Africa, it’s social instability. We feel some of these answers are different words for the same thing. But, nonetheless it is an interesting insight into different region’s CEO’s mindsets. We end by noting that humans are notoriously poor at assessing risk, so take the CEO’s opinions with a grain of salt like La LA Land producers should have at the announcement of their victory.

Department of Loneliness

One of the modern day technophobia fears is that we are all alone too much. People don’t go out to the movies, the grocery store, the CD or book store. It can all be downloaded or delivered to your house, apartment or condo.  It is quite possible to never have to leave the four walls and a ceiling of your humble or expensive abode. Perhaps this is another reason why the U.K. felt the need to appoint a Minister of Loneliness. According to U.K. government figures, 9 million people in the UK are “always or often feel lonely.” That’s 15 percent of the population. In addition, “around 200,000 older people have not had a conversation with a friend or relative in more than a month.” It would be easy to mock the creation of a Minister of Loneliness—indeed it was our first instinct. But as our world increasingly resembles a Black Mirror episode, we refrain from such easy punches.

Wilco -The Lonely 1 (Solid Sound 2017)
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Keep an Eye on Djibouti, Paying Immigrants to Leave, a Good Day

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During our knee surgery convalescence, we caught up on a fair amount of television, especially when we were on pain killers which dulled our ability to read. Pain killers also prevented us from creating a spreadsheet tracking the number of sexual harassers involved in the shows we were watching. We think and hope the number was small but certainly not zero. For instance, we caught up on the last two seasons of the masterful show, Silicon Valley (only one accused…so far)–to our mind the funniest, most spot on satire of recent years. In episode 7 of season 4, the legal rights of the song Walking on Sunshine by Katrina and the Waves plays an important role, with the allegation that Katrina–or perhaps it was the Waves, we’re not sure–ripped off the melody from an old Mexican song. Masterfully, at the end of the episode, a Mariachi version of Walking on Sunshine plays over the credits. And while we’d consider walking in front of oncoming traffic when the Katrina and the Waves song is played, this cover enchants us, which says something more bad about us than Katrina and the Waves. But we have nothing bad (yet) to say about surprising information out of Djibouti, remind ourselves about paying immigrants to go home and ask sincerely, “who is having a good day?”  It’s this week’s International Need to Know, providing, in the lingo of present day politics, a s***load of important information about our world, wherever and however we find it.

Walking On Sunshine – Mariachi La Estrella fe…
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Without further ado, here’s what you need to know.

Keep an Eye on Djibouti

We begin this week with a question: which country is host to more countries’ foreign military bases than any other. The perhaps surprising answer is Djibouti, which like a moth to light, a Kardashian to a camera, has attracted military bases from eight different, diverse countries. The U.S., of course, has one there, as it does in over 70 countries around the world. Old time European power France has a base there and Italy is building one. But so too does China, placing its first foreign military base in a country that is strategically located near shipping lanes and bridging north Africa and the Middle East. Japan also has its only foreign military base in Djibouti. India is interested in building one and allegedly Djibouti is wooing Turkey to build one. The country is both hedging their bets and using the bases as an economic development play. China, always interested and active in Africa nowadays, has built a new electric rail line from neighboring Ethiopia to Djibouti—Ethiopian trade accounts for 70% of activity through Djibouti’s port, a significant portion involving China. It’s a tiny place and I bet you haven’t thought about Djibouti lately or perhaps at all. But the world’s powers are congregated there which could lead to mischief, fun and amusement, perhaps all at the same time.  A place to keep an eye on.

    

Paying the Immigrants to Leave

Fear is a powerful emotion. Immigration has sparked fears across the Western World, including in Europe. A week after our racist U.S. president continued to say racist things about immigrants, we came upon data comparing how much European nations are paying immigrants to return to their home countries.  Yes, perhaps like us you’ve forgotten that a variety of European nations have been offering moola for their recent immigrants to go home, or in some cases to help them pay the costs to return home. Sweden is offering the fattest checks, up to 3050 Euros to head out of their country and back to their countries of origin. Spain and the UK are tied for second at 2000 Euros each, with Finland and Germany rounding out the top five. The full list is below for your perusal, especially if you’re an immigrant yourself and examining where you can get the best deal.  However, not all European countries were offering such monetary assistance. The Czech Republic, for instance, offers no financial incentives.

A Good Day

How is your day going so far? Well, we hope. If you are living in sub-Saharan Africa, Latin America or the United States, “you are more likely than people in other regions of the world to say you’re having a particularly good day,” according to a new survey conducted by Pew Global. Last year, Pew asked 42,000 people in 38 countries around the world, “How would you describe your day today – has it been a typical day, a particularly good day or a particularly bad day?” Nigerians were most likely to respond positively with 73 percent saying it was a good day. Colombians, Ghanaians and Brazilians were also particularly cheerful. Americans and Canadians are more likely to be having a good day than Europeans. Australians rate pretty low on good day responses, perhaps because they’re too busy saying “g’day.”

   

In the Long Run, Shenzhen’s Electric Kool Aid Buses, & the Tallest Buildings

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We return to you this week, if not triumphantly, then with a limp and a cane, from knee replacement surgery. We’ve learned many things over the last few weeks. Nurses tend to be angels, and physical therapists aren’t far behind, even when inflicting pain in you (all for a good cause, of course). Our tolerance for pain is not what it once was. Binge watching the British TV show Black Mirror while on pain killers can cause bad side effects. Los Angeles (we had the surgery at Cedar Sinai in that fair city) is definitely an industry town. We shared an Uber with an aspiring actress, eavesdropped on a conversation where someone said they’d been on the red carpet but aspired to get on someone’s private jet, and heard gossip about William Shatner from one of our nurses (you are right to like Spock better than Captain Kirk). But as some were and are distracted by celebrities, we shake the stardust from our eyes and look at the Long Run, analyze innovative Shenzhen and gaze up at where the tallest buildings are. It’s this week’s International Need to Know, providing full range of motion to the world of ideas even as we can still only bend our knee 65 degrees.

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

In the Long Run

Everything we know is wrong, or at least some days it seems that way. We’d always been told that over the long run, housing prices increase at the rate of inflation. Sure there are housing booms (our town of Seattle is currently in an epic one) but over 20, 30, 40 years, there is a regression to the inflation mean. But now a new study comes along that not only asserts this is not true but that in the long run housing is the investment with the highest rate of return, including over stocks. And by long term, we mean dating back to 1870, the first year analyzed in the study from economists at UC Davis, the University of Bonn and Deutsche Bundesbank. The research paper analyzed the rate of returns of “treasury bills, treasury bonds, equities (what? no pork belly futures?) and residential housing from 1870 – 2015 for 16 now rich countries such as the U.S., Germany, and Japan. Housing’s annual average rate of return for that period is 7.05 percent while equities was 6.89 percent. This was not true for each of the 16 countries which in some cases saw equities have a higher rate of return than housing, but overall it was, leading the paper’s authors to conclude that investors should “hold an internationally diversified portfolio of real estate holdings, even more so than equities.” Sell your bitcoins and buy another house.

  

Shenzhen’s Electric Kool Aid Buses

Shenzhen is one of our favorite cities in China and as we have noted before, one of China’s hubs of innovation. This week brings two more pieces of evidence of the latter. First, is the report that by the end of last year, Shenzhen had electrified all of its buses. And being a Chinese city, Shenzhen is huge, which means they had a lot of buses to electrify; in fact, more than 16,000 buses which is more than America’s top five bus fleets combined. They did this, of course, to lessen pollution problems in the city. How Shenzhen is generating electricity to power those buses we’re not sure but we’re guessing coal plays a large role. Even so, it’s an impressive feat and another sign of the city’s forward thinking and innovative nature. So too is the fact that of the 4600 companies attending this week’s CES consumer electronics show conference in Las Vegas, 10% of them will be companies with the word “Shenzhen” in their name. We assume that means those 450 companies are based in Shenzhen. It’s yet another sign of the technological innovation taking place in Shenzhen, and in China.

The Tallest Buildings

Ambition and ego go hand in hand and when mixed together well, they can create great things, just as the right combination of chocolate and peanut butter, gin and tonic and Andre 3000 and Big Boi lead to great cookies, drinks and music. Building super tall buildings is evidence of both ambition and ego and countries where they are being built are often dynamic ones, where things are happening and people are thriving. The United States in the early and mid 20th Century is a great example. China today is another. As you see in the chart below, China dominates in the number of super tall buildings being built. Of the 120 super tall buildings under construction, 69 of them are in China. The UAE and USA are distant seconds and thirds. Gaze upon the height of ego and ambition below and draw your own conclusions about the correlation between a country’s economic dynamism and the size of their buildings.

  

  

Trickling Down to Authoritarians, Out Like Flynn, Virtual Singer Killed the Video Star

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We had just returned to campus from the Christmas holiday during our sophomore year of college when it happened. We were playing in a pick-up basketball game in the university’s main gym and our team kept winning so we kept playing, taking on all comers on the court. We were getting tired and a little post holiday celebration the night before surely did not help. We went up for a rebound and landed on one of our opponent’s two left feet. And this was when our kneecap dislocated. Now it was certainly painful but the thing we most remember is two guys sitting on the sideline screaming, “Look at his $#%ing knee, look at his $#%ing knee.” Even granting that a knee sticking out an unnatural angle would surely trigger their alarm, we were scared enough without their added hysterics. The kneecap soon moved back into the correct position, which was nice, our knee swelled up and we commenced to having a “bad knee” for the rest of our life, which for many years didn’t stop us from playing lots more basketball and other high impact sports. But it does mean even at our tenderly young age, next week we are getting knee replacement surgery. Earlier this week, our surgeon emailed to inform us to “expect extreme pain for two to three weeks.” We equate such a message to the one screamed by the two guys on the sidelines those many years ago, though we will not inform the surgeon of our judgment ’til after the surgery. So, this will be the last INTN of 2017 as we’re guessing opioid-fueled international stories may not be the best ones. But we hope to return on January 4th (or the 11th at the latest) with everything you need to know about the world. Still, this week we bring a dose of authoritarian economies, check up on the reverse Flynn Effect and do an MRI on China’s virtual singing sensation. It’s this week’s International Need to Know, wishing you and yours a healthy and happy holidays.

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

Trickling Down to Authoritarians

As we have noted before, democracy is not as popular around the world as it once was. And as people such as Tyler Cowen point out, this is partly because of the economic success of China and other authoritarian regimes. The Philippines is another example. President Duterte is a less than savory character with a waterboard load of human rights problems. But the Philippine economy is doing as well as it has in the last 30 years. The country is on pace to have the 10th-fastest growing economy in the world, according to the World Bank, with GDP growth of around 7 percent. Its debt to GDP level is decreasing, non-performing loans down to 1.8% and its inflation rate at a reasonable 3.3%. The World Bank notes that fiscal expansion has “boosted capital formation and private consumption.” Unlike many Asian economies, currently the Philippines’ economic growth is being built on domestic demand even as its exports grow. The world is cyclical and as long as authoritarian governments are in an economic up cycle, liberal democracies’ brand will suffer. But someday, perhaps sooner than their rulers think, their economies will spin into less favorable waters, washing ashore challenging political flotsam and jetsam.

Out Like Flynn?

If you watch the news, scan through Facebook or read your Twitter feed, it would be very easy to come to the conclusion that we humans are becoming dumber. And, there is indeed evidence this is so! At least in some places, where there is an anti-Flynn Effect taking place. You may remember that the “Flynn Effect” is a phenomenon where IQ scores have been rising with each successive generation, at least since 1930, when such standardized testing began. There may actually be a reason that children think their parents are idiots. Comparatively, they are. But, now a new paper asserts the Flynn Effect is in reverse in a number of countries, including all the Scandinavian countries, Britain and Germany (Germans are actually better at verbal parts of these tests but are doing worse on spatial). But if you are about to say, “Aha, this explains politics in America,” actually U.S. IQ test scores continue to increase. Korea is not going in reverse either. In fact, the study states South Korea “is gaining at twice the historic U.S. rate.” The beginning of the reversal appears, according to the study, to date to 1995. Hmm, what really started to take off around the world in 1995?

Virtual Singer Killed the Video Star…

It has come to our attention, much later than one would hope, that there is a virtual music star in China named Luo Tianyi. Such a creature, we learned, is called a “vocaloid”, i.e. a “singing voice synthesizer.” It is unsurprising that such a digital creature was created by a Japanese company, the place of origin of so much kawaii (lovable, cute) culture, but it is both a bit surprising and hope inducing that Japan and China collaborated on this pop culture project. An article in The Global Times–the People’s Daily’s tabloid–notes that Luo Tianyi has come to “special attention from the Communist Youth League of China (CYLC) and other governmental organizations, who try to instill correct thinking into the younger generation with her singing.”  Nothing speaks to young people like governmental organizations promoting the right way to think. As CYLC states in an article on the mobile platform WeChat, “Although CYLC is 95-years-old, our heart is always with you, the young people.” And we can’t think of a better way to leave 2017 than with Luo Tianyi, singing “In the Center of the Peculiar Storm.” See you next year.

【洛天依】Luo Tianyi – 在異樣的風暴中心 In the Centre of t…
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Chinese Wages, State of Carbon & is Life Better or Worse?

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We’ve long wondered how cats planned to subvert humankind and complete their take over of the world. They’ve made a good start by conning us into feeding them, massaging them and playing with them with fake mice and feathers attached to sticks at their whim. But now they are fully implementing their devious and cruel plan with the game, CryptoKitties, which was released on November 28th on one of the more popular blockchain cryptocurrencies, Ethereum (second largest after Bitcoin). The game, which involves the trading and breeding of virtual cats, has seen $6.6 million spent on these felines since its launch. The average cat costs $130. However, the most expensive virtual feline went for $117,712. The Engineering and Technology website reports that the creation of new virtual cats will cease–the spaying and neutering of the cryptocurrency–next November to “prevent runaway inflation.” The inevitable backlash has begun, however, leading to perhaps the greatest headline of the year: “Service dog causes chaos at ‘Cats’ performance.” Yes, a service dog escaped its owner during the performance, rushed the stage and attacked one of the performers pretending to be a cat. A spokesperson for the musical told the New York Post that “in the storied history of ‘Cats’, this is the first time one of the actual cats was involved in an incident with a dog.” We are unsurprised that 2017, this year that has seen so much chaos and nonsense, would mark the beginning of the great cat uprising, and a rebellion against it. Meanwhile, as we attempt to monetize our two cats before November 2018, we examine the complexities that are China, look at the state of CO2 emissions and ask who thinks the world is better than fifty years ago. It’s this week’s International Need to Know, loyally like a dog bringing international news and data to you right to  your lap.

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

Chinese Wages, SOEs & Translation

The tyranny of narrative is strong with China. Too many analysts want to tell one story–China is either an economy prepared to fall apart or an unstoppable machine. It is a land of copycats (ah, even in China the felines rise) or a hive of innovation. It is working to fill the leadership gap left by the U.S. vacuum or is an authoritarian state setting a bad example for international trade and investment norms. If we were more accurate and honest in our test giving on any issue, including China, “All of the above” should be the most frequent answer. So we turn to a few different aspects of China as we head to towards the end of the year. First, is an interesting article in the South China Morning Post claiming that wages are falling in China save for a few professions: “monthly salaries dropped 16 per cent to 4,014 yuan this year, according to the recruitment website Zhaopin.com.” The article also notes that nearly 8 million students will graduate university this summer (the population of Switzerland), and these students continue to be attracted to first tier cities such as Beijing and Shanghai (where housing costs continue to increase). At the same time, one of the professions where wages continue to increase in China is in artificial intelligence, a sector we have noted previously China is betting big on. The UK website The Register notes how important real time translation, powered by progress in AI, is to China. “While it looks to foreigners like a monolithic language and culture, Chinese encompasses a range of generally-not-mutually-intelligible dialects.” The article asserts that AI-powered language translation is thus even more important to China. China’s complexity will drive its innovation, but its political system and regulation of the Internet may retard that innovation, its GDP may grow, but its society struggles with inequality. It’s a complex place.

State of Carbon

We have talked in this space about the possibility of peak oil usage and expressed some optimism, despite challenging U.S. politics around the issue, that progress will continue to be made in reducing climate change emissions. So in the interest of full disclosure we feel obligated to report that after three years of remaining flat, CO2 emissions will likely increase 2 percent by the end of this year over 2016, according to the Global Carbon Project. The developing world is the main reason for the increase, especially China’s increased use of coal in the last year. But there is still reason for hope. For example, as you see in the second chart below, the UK has decreased its carbon intensity (the amount of carbon released per energy generated) by 56% since 2013 (Carbexit is better than Brexit). On a larger scale, solar energy, as we first noted nearly two years ago, is on a Moore’s Law path with the amount of solar generation nearly doubling every two years (see third chart below). Pessimists note that even though the amount of solar energy generated is increasing, so too is the amount of energy consumption. But neither consumption, nor emissions, are increasing at anywhere close to the rate of the increase of clean energy generation. We expect within fifteen years that C02 emissions will have indeed peaked. This is likely too late to avoid very challenging effects from climate change but still better than what could have been.

 

Is Life Better or Worse?

Is life better or worse in your country than it was fifty years ago? An intriguing question that the folks at Pew Global asked of “nearly 43,000 people in 38 countries” this year. Somewhat depressingly, barely over half of the countries populations reported life is better than it was fifty years ago with 20 countries saying it is better, 18 that it is worse. Of those 18 claiming life is worse today, we would estimate that perhaps only four can legitimately have that view. But it’s good to see through the dark tinted glasses that many view the world through. It is important to recognize the despair many feel. On the other side, Vietnamese top the list of those who think life is better today than 50 years ago with 88% of the population believing so. They are followed by India, South Korea, Japan and Germany, all of whom are very right to think things are better now. For example, in 1967, real GDP per capita in South Korea was about the same as North Korea’s. Let’s hope in 2067, when the world is ruled by machines,  most people will think life is better than today.

    

Automation’s Effect, Social Media and Good News

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Last year for a client we interviewed a variety of small companies regarding their challenges and opportunities in doing business. It was remarkable how many of them commented on the difficulties they faced in competing with large companies. And not natural differences stemming from economies of scale but rather from rent seeking that has been unfairly built into our regulatory and legal systems. So we recently read with interest and focus the most important book of 2017, The Captured Economy: How the powerful enrich themselves, slow down growth and increase inequality* by the libertarian leaning economist Brink Lindsey and the politically liberal Steve Teles (theirs is not a partisan treatise, both parties are guilty in not addressing the central problems outlined in the book). The Captured Economy details–using data, case studies and anecdotes–how rent seeking is out of control in the United States, at all levels of government–federal, state and local. It explains how and why the finance industry has become too large a part of our economy, why doctors, lawyers and dentists are so expensive and why it costs too much to buy a house or rent an apartment. It explains how rent seeking is a large reason for the increasing income inequality in our country. One hopes political leaders of all stripes, at all levels of government, will read the book, absorb its lessons and apply them. We hope you, dear readers (some of whom are political leaders yourselves) will too. The issues and solutions outlined in this book are among the top four most important facing our country. So even as we work to become part of the one percent without the benefit of rent seeking, we present more information on automations effect around the world, examine restrictions on social media globally and continue our efforts to remind people of good news. It’s this week’s International Need to Know, switching the channel from CBS Morning News to the Today Show–er, uh, turning on the radio to NPR–oh crap, we give up.

*Our PhD thesis is an examination of the steady lengthening of book’s subtitles.**

**The subtitle of our thesis is too long to print here.

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

Automations Effect Around the World

Last week we linked to a report predicting that in 40 years all jobs will be taken over by robots. Perhaps, but even if this does not occur, continued automation of certain jobs will take place over the coming years. Which countries will be most effected? McKinsey attempts to quantify this in an update to an earlier report on automation. It states that China is at risk for the most people losing jobs to automation between now and 2030 with 102 million Chinese workers predicted to lose jobs to automation during that time period. But that’s partly a function of China’s size. When looking at percentage of workforce, Japan sees the largest job loss, followed by Germany and the U.S. Japan is at risk of 46% of their workforce losing jobs to automation. This is a startling number but salved somewhat by the fact that Japan’s overall workforce is shrinking due to aging demographics. McKinsey speculates that with new job category creations, Japan may not suffer as badly as that 46% figure indicates. Nonetheless, unless automation creates huge increases in productivity (GDP, as we have noted before, increases only through growth of working age population and increases in productivity), Japan is likely to continue to have slow GDP growth. And most countries will face economic adjustments due to automation over the next decade.

The Freedom of Social Media

So we confess: We miss the golden age of blogs and mourn the advent of social media. We are no Luddite but we wonder if social media, so far, is a net negative for humanity. Nonetheless, we also take note of where social media is free and where it is heavily governed, via a new report from Freedom House.  According to the freedom monitoring organization, “Online content manipulation contributed to a seventh consecutive year of overall decline in internet freedom, along with a rise in disruptions to mobile internet service and increases in physical and technical attacks on human rights defenders and independent media.” Freedom House notes, of course, Russia’s efforts at information manipulation, including in the U.S. election, but also reports that the number of governments attempting to manipulate information online has steadily increased since they began monitoring the phenomenon in 2009. “Venezuela, the Philippines, and Turkey were among 30 countries where governments were found to employ armies of ‘opinion shapers’ to spread government views, drive particular agendas, and counter government critics on social media.” The attacks are not all virtual: “The number of countries that featured physical reprisals for online speech increased by 50 percent over the past year–from 20 to 30 of the countries assessed.”There’s a reason why free speech is the first amendment.

Good News Corner

In our continuing attempts to remind ourselves that the world is on the whole continuing to get better (despite the news in the two previous stories!), we point to the latest data on child mortality estimates from the World Bank released earlier this week. This data shows that “between 1990 and 2016, the global under-five mortality rate dropped by 56 percent.” Not too shabby. In fact, the last decade has seen more progress in decreasing child mortality than the previous decade. We are doing better and better. Of course, there is more work to do as still even now 15,000 children die every day. And some places are doing better than others. More than 80 percent of global under-five deaths occur in just two regions–Sub-Saharan Africa and South Asia. The second chart below shows the countries with the highest child mortality rates–Somalia tops the dubious list–and those with the lowest–Iceland!  But even admitting there is more work to do, we should note our darn good progress.

 
   

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