Portfolio | August 2015

Portfolio Exclusive to Emirates First Class and Business Class

CEO SALARIES Reaching New Heights BLACKOUT Africa’s Power Problem US RETAIL Feeling the Pinch

Rob

Dickinson The Man Behind Singer Vehicle Design

Issue 116 ■ August 2015

This issue AUGUST 2015

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Exclusive to Emirates First Class and Business Class

Cover Story 26 The Ultimate Transport Rob Dickinson, the man behind Singer Vehicle Design, is obsessed with the Porsche 911. So it should come as no surprise that after 4,000 man hours each air-cooled 911 he rebuilds is a unique work of art with the power to match.

Features 32 Weak Power Grids Stunt Growth

50 What Uber Can Learn From Airbnb

Sub-Saharan Africa’s power generating capacity is less than

Uber and Airbnb have a lot in common, but the latter has

that of South Korea, and that has a debilitating effect on

been far more successful in getting the support of regulators.

economic growth.

38 The CEO Pay Party Goes On Despite sustained efforts to restrict excessive executive compensation, last year was a profitable one for the 200 best-paid CEOs.

56 Gap’s Fashion-Backward Moment Iconic US clothing retailers are facing declining sales as nimbler international competitors take centre stage.

50

44 Medieval, Seeking Renaissance The near collapse of Banca Monte dei Paschi di Siena, the world’s oldest bank, has had powerful repercussions for the Italian city of Siena.

38

56

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Essentials

61

61 Scottish Cruising The Scottish coastline has more than 800 islands, the most famed of which are the Hebrides. There are numerous cruises to explore these unique islands that suit every wallet and taste.

66 Travel Patterns of the New Superrich Billionaires have their own circuit of ‘must attend’ events, and it is about business as much as pleasure.

66

72 124 Years Old and Counting The Thursday Afternoon Cooking Club in Wichita, Kansas, may be the world’s oldest, but it is about a lot more than food.

76 Sipping California Dry The lengthy drought has forced farmers to dig more wells to survive, but that is causing new problems.

80 A Sport Blooms in a Barren Land In Canada’s frozen north unique obstacles have to be overcome to play a soccer tournament.

84 Russians Tighten Their Belts Sanctions have caused a recession in Russia, and that is even affecting the spending habits of the wealthy.

88 Other Business

80

Portfolio takes a light-hearted look at the latest business news.

Departments 11 Notebook World business in a nutshell.

17 Observer Spotting and analysing business trends.

24 Column: Dino Grandoni Does Google Alter Search Results?

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Editor-in-Chief Obaid Humaid Al Tayer Managing Partner & Group Editor Ian Fairservice Editorial Director Gina Johnson Group Editor Guido Duken Deputy Editor Vishwas Kulkarni Junior Writer Mary Sophia Picture Researcher Hilda D’Souza Editorial Assistant Londresa Flores Senior Art Director Tarak Parekh Contributing Art Director Sharon Fernandes Senior Designer Charlie Banalo General Manager – Production S Sunil Kumar Production Manager Murali Krishnan Chief Commercial Officer Anthony Milne Email: anthony@motivate.ae Group Sales Director Craig Wagstaff Email: craig.wagstaff@motivate.ae International Sales Manager Martin Balmer Email: martin.balmer@motivate.ae Group Sales Manager Jaya Balakrishnan Email: jaya@motivate.ae Senior Sales Manager Michael Underdown Email: michael@motivate.ae INTERNATIONAL MEDIA REPRESENTATIVES AUSTRALIA/NEW ZEALAND Okeeffe Media; Tel + 61 412 080 600, licia@okm.com.au BENELUX M.P.S. Benelux; Tel +322 720 9799, francesco.sutton@mps-adv. com CHINA Publicitas Advertising; Tel +86 10 5879 5885 GERMANY IMV Internationale Medien Vermarktung GmbH; Tel +49 8151 550 8959, w.jaeger@imv-media. com HONG KONG/MALAYSIA/THAILAND Sonney Media Networks; Tel +852 2151 2351, hemant@sonneymedia.com INDIA Media Star; Tel +91 22 4220 2103, ravi@ mediastar.co.in ITALY & SPAIN IMM International; Tel +331 40 1300 30, n.devos@imm-international.com JAPAN Tandem Inc.; Tel + 81 3 3541 4166, all@tandem-inc. com NETHERLANDS GiO media; Tel +31 (0)6 22238420, Giovanni@giO-media.nl TURKEY Media Ltd.; Tel +90 212 275 51 52, mediamarketingtr@medialtd.com.tr UK Spafax Inflight Media; Tel +44 207 906 2001, nhopkins@spafax.com USA Totem Brand Stories; Tel +212 896 3846, faith.brillinger@totembrandstories.com

88 Emirates takes care to ensure that all facts published herein are correct. In the event of any inaccuracy, please contact The Editor. Any opinion expressed is the honest belief of the author based on all available facts. Comments and facts should not be relied upon by the reader in taking commercial, legal, financial or other decisions. Articles are by their nature general, and specialist advice should always be consulted before any actions are taken.

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Portfolio

F O R

S H O P P I N G

L O V E R S

CA S T E L L A N A

S TO R E

S TO R E

M A D R I D / D I AG O N A L

DEPARTMENT STORES SPAIN & PORTUGAL

BA R C E LO N A

Notebook B U S I N E S S

N EW S

Russian Debt Trap President Vladimir Putin needs

B R I E F

per cent. The premium investors demand

delayed a principal repayment on a bank

to hold Russian municipal bonds over

loan in the first quarter, it said.

sovereign securities is 103 basis points

Local administrations are running a

more than last year’s average, according to

625 billion-ruble deficit, up 42 per cent

UralSib Capital data.

from 2014, according to S&P. Seventy-five

Threats to municipal finances are

regions had a budget gap last year, the

to defuse a situation he set off in 2012

snowballing as sanctions over Ukraine

Higher School of Economics in Moscow

with decrees to raise social spending. That

choke access to capital markets, forcing

said in a May report.

contributed to a doubling in the debt load

local governments to fund social outlays

The authorities in Moscow want to ease

of Russia’s more than 80 regions to 2.4

with costlier bank loans. Moreover, risks

the crisis by helping regions replace bonds

trillion rubles ($42 billion) in the past five

of imbalances in regional budgets will

and commercial loans with subsidised loans

years. Strains on their finances will grow

probably grow this year as the economy

from the federal budget, offered at a 0.1 per

critical in two or three years, raising the risk

shrinks, the central bank said in June.

cent annual rate. Russia will allocate 310

of bailouts from a federal budget already

While regional debt sales are down 53 per

billion rubles to this in 2015, according to

running a deficit for the first time since

cent so far this year, Moody’s Investors Service

Prime Minister Dmitry Medvedev, who’s

2010, according to Standard & Poor’s.

estimates borrowing will grow as much as 25

backed converting some foreign-currency

per cent in 2015, driven by spending on health

debt into rubles.

The Chukotka region has racked up debt equal to 144 per cent of its revenue, the Photos: Getty Images

I N

care, education and utilities.

Even so, local governments continue to

highest in Russia, according to Standard &

The squeeze is putting regions in

rely on commercial loans, increasing bank

Poor’s. Regions from Belgorod near Ukraine

jeopardy. They’re facing “an increasing

debt by a quarter since the start of 2014 to

to three North Caucasus republics are also

likelihood of defaults,” S&P warned in June.

one trillion rubles on March 1, according to

prompting concern with ratios topping 100

At least one non-rated local government

central bank data.

August 2015

12

Notebook N u m b e r s

G a m e

The world in figures employ an estimated 5.5 million Americans ages 16 to 24 that are neither studying nor working.

20

per cent tax on sugary drinks has been demanded by doctors in the UK. With a third of the UK population projected to be obese by 2030, the British Medical Association says imposing the levy could reduce the number of obese people in the UK by around 180,000.

$12.5

$40

million Bahubali film has become the most expensive production in the history of Indian cinema. The film, likened to Avatar and Lord of the Rings, has crushed the previous box office record of $7.11 million by netting $7.89 million on its opening day.

100,000

Opportunities Initiative plan spearheaded by Starbucks together with America’s largest

companies including Microsoft, Target and Hilton pledge to hire 100,000 unemployed young Americans over the next three years. The initiative aims to

billion acquisition of Procter & Gamble’s makeup business by Coty Inc will be the biggest cosmetic merger in recent history. Doubling its size with combined sales of more than $10 billion the deal will place Coty as the No.1 perfume maker ahead of L’Oreal and the No.3 make-up provider behind Estee Lauder.

$23

billion bid is planned for US chipmaker Micron Technology by China’s state-owned Tsinghua

Unigroup says Dow Jones. If the deal goes through it could be the biggest Chinese takeover of a US Company and would dwarf the $7 billion takeover of Smithfield Foods by Shuanghui International in May 2013.

1.4

million square metres Abraj Kudai tower will become the world’s largest hotel when it opens in the Kingdom of Saudi Arabia in 2017. Designed by Dal Al Handasah, the opulent four/five star hotel will have 10,000 rooms in 12 separate towers and cost a whopping $3.5 billion.

$120

billion of locked-up oil revenues are due to return to Iran’s coffers and filter into consumer spending with the lifting of sanctions after Iran’s historic nuclear deal with world powers. Companies poised to benefit most are those that already have a presence in Iran but suffered as a result of sanction according to investors and analysts.

Aircraft Technicians Skill Shortage Commercial airlines will need to recruit and train 609,000 new aircraft maintenance technicians over the next 20 years to meet rising demand, according to a Boeing forecast.

The demand is similar for pilots: Boeing predicts there will be a need for 558,000 new pilots over the same time period.

The additional staff will be needed to run a projected 38,000 new aircraft added to the global fleet over the next 20

years, the US aerospace giant said. Boeing has 17 training campuses worldwide. Compared with the company’s 2014 outlook, demand for technicians rose about five per cent, and pilot demand, four per cent.

After Asia Pacific, North America was second as far as new technician staff needed with 113,000, followed by Europe (+101,000), Middle East (+66,000), Latin America (+47,000) and Africa and Russia/CIS (both +22,000).

Portfolio

M ESUR E ET D ÉMESUR E *

TONDA 1950

Rose gold Ultra-thin automatic movement Hermès alligator strap Made in Switzerland

www.parmigiani.ch

14

Notebook 12-year bull market in

the biggest precious-metals miners falling

the metal that stopped

to the lowest levels since 2001, when

dead in 2011. The

bullion was barely a quarter of its current

42 per cent slump

rate of $1,110 an ounce.

in prices since then

Debt held by 15 of the biggest producers

leaves them effectively

including Barrick Gold Corp and Goldcorp

servicing the debt with

Inc hit a record $31.5 billion at the end

devalued currency.

of the first quarter, up from less than $2

Output that might have fallen as gold sank has continued

billion in 2005, according to data compiled

by Bloomberg Intelligence.

That was spurred by the dash for growth

on to all-time highs

when prices were rising, including $8.5

as producers need to

billion for Barrick’s mine in the Andes

Gold Miners in a Bind

generate enough cash from sales at lower

mountains and C$8.2 billion ($6.3 billion)

prices to keep up payments on what they

for Kinross Gold Corp’s bet on Mauritania.

owe. Growth in output has exacerbated an

In the past decade, world output expanded

oversupply that makes a recovery in the

24 per cent to last year’s 3,114 metric tons.

Gold miners are servicing a mountain of

bullion price harder to achieve

debt. Mining companies built up record borrowings to boost gold output during a

That’s squeezed profitability and share prices, with a benchmark index of 30 of

This focus on production at the cost of profitability leaves very little to create value for shareholders.

China’s Shrinking Stock Market price fluctuation.

China may have the world’s second-

prices over a short period, which can

biggest stock market after the US, but at

happen as a result of rapid-fire trading

one point during the July roller-coaster

algorithms or human error. But in China,

cent had taken themselves off the market,

ride for investors only 93 of 2879 listed

the limit rule was impeding trading

according to the Journal’s analysis.

companies were freely tradeable.

of many companies at the same time

At the height of suspensions, 51 per

An additional 46 per cent were halted

investors were locked out of hundreds

because of limit rules. The reasons

bottom, just 3.2 per cent of Chinese-

more that used an exchange rule allowing

companies gave for suspending their

listed companies could be traded

them to apply for trading halts ahead of

own stocks ranged from a “major event

normally, according to an analysis by

major news that might cause a drastic

discussion” to “asset restructuring.”

On July 9, a day after the market hit

The Wall Street Journal. The rest of the shares on the Shenzhen and Shanghai stock exchanges either were suspended or hit their daily limit. China’s market rules prevent share prices from moving freely once they rise or fall by 10 per cent.

The daily-limit rule affected thousands of companies as the Shanghai market slid 32 per cent in less than four weeks through the July 8 bottom, then rebounded 15 per cent, while the smaller Shenzhen market slid 40 per cent and then rebounded 20.2 per cent.

Most markets, including the New York Stock Exchange, employ “circuit breakers” to prevent wild swings in share Portfolio

BO ODL E S.COM / BL OS SOM

Observer BUSINESS NEWS IN BRIEF

UAE Aims for Mars A UAE designed and built probe will set off in 2020 as part of a project aimed at inspiring a new generation within the region, reports Kareem Shaheen.

After a feasibility study that began in late 2013, the team had 90 days after the announcement to come up with a mission plan.

Built from aluminium and sporting a star tracker as well as an array of solar panels and thrusters, the probe will be the size of a small car. It will include imaging equipment and ultraviolet and infrared spectrometers

When asked if he was nervous,

reach Mars, all challenges for the nation

that will help scientists understand the

32-year-old Omran Sharaf was unequivocal.

should be doable.”

dynamics and climates of the different layers

“Of course,” he says. “The reputation of the

of the atmosphere of Mars, the proportion

Highness Sheikh Mohammed bin Rashid

of various elements and compounds in the

Al Maktoum, Vice President and Prime

atmosphere, and the mechanism by which

Emirates will have a space probe orbiting

Minister of the UAE and Ruler of Dubai, the

hydrogen and oxygen escape into space. The

Mars by 2021 – a first for the Arab world.

Emirates Mars Mission is expected to launch

mission is set to last for at least two years.

And, as the man leading the Emirates Mars

in July 2020 sending the probe hurtling on

Mission, Sharaf has a lot on his plate. “I

the 60-million-kilometre journey to the red

gathering will help provide a detailed insight

have to say, I think the team doesn’t sleep.

planet. It is expected to arrive seven months

into the planet’s evolution. Sarah Amiri, the

But it’s something we have to do if we want

later, half a century to the year since the

29-year-old head of the science team, says

to progress and move forward. If we can

founding of the country.

the aim of the Mars mission is to understand

nation depends on this.”

If all goes well, the United Arab © 2015 Guardian News & Media Ltd

Announced in July 2014 by His

August 2015

The team hopes the round-the-clock data

17

18

Observer The project also hopes to inject vitality into the local scientific community, allowing them free access to data from the probe and consulting with staff and students at six local universities on mission design. The UAE does not have scientists or researchers focusing specifically on Mars, so the space programme is trying to encourage local universities and science communities to focus on Mars and planetary science over the coming five years in order to the planet’s evolution from one that once

testing will all be carried out in facilities in

drive the research that can use the data from

had flowing water at the edge of the solar

Dubai, the teams are working with scientists

the mission. But the team also has a more

system’s habitable “Goldilocks zone” to the

and academics at the University of Colorado,

aspirational goal, one tied to the Middle

arid, dry world it is today.

Boulder, University of California, Berkeley

East’s history as the home of the House of

and Arizona State University in the United

Wisdom and the golden age of scientific

and veterans of the country’s nascent

States on designing the spacecraft, software

discovery, when the region was the world’s

space programme, having been involved

development and equipment requirements.

centre of learning and produced invaluable

Both Sharaf and Amiri are engineers

in the launches of DubaiSat 1 and 2,

The idea is for the team to learn from their

contributions to medicine, mathematics and

which were developed and launched

academic partners and bring the knowledge

astronomy. Amiri says that the UAE has

with South Korea. The first satellite was

back to the UAE for the spacecraft assembly.

agreed to allow some 200 institutions direct

primarily a Korean effort with the Emirati

Sharaf says reaching Mars was a means to

access to the mission data.

engineers and scientists learning from

a broader goal of increasing the number

their counterparts. The second satellite was

of scientists in the UAE, developing a

programme hope the first Arab mission

more of a collaborative effort, with the UAE

space sector and contributing to the span

to Mars could once again galvanise

team solely responsible for about half the

of human knowledge, which is why they

scientific inquiry and lend some measure of

project, and embedding engineers with the

are keen to engage local academics. “This

inspiration to millions of young Arabs, in the

Koreans to study their efforts. KhalifaSat,

mission is not about reaching Mars but

way Americans growing up in the era of the

the third satellite, scheduled for launch in

about inspiring a whole new generation and

Apollo programme craved the prospect of

early 2018, is being built in-house at the

transforming the way youth think within

space exploration.

UAE’s Mohammed Bin Rashid Space Centre

the region,” he says. “The goal here is hope,

entirely by local engineers, and is a final test

for humanity, for the region, for youth in

of Earth without any boundaries makes

before the launch of the Mars probe.

countries with lots of conflict.”

conflicts appear very small,” says Amiri. She

In fact, Sharaf says the project’s budget is

For now, the Emirates Mars Mission

Those in charge of the Emirati space

“Space is very humbling, and an image

and Sharaf recall the metaphor coined by

tight and the team is not allowed to purchase

team includes 75 people, with the aim

the renowned American scientist Carl Sagan,

parts from commercial manufacturers such

of bringing that up to 150, all of them

who described the Earth as a “pale blue dot

as Airbus, Boeing or Lockheed Martin. “We

Emirati, half of them women, and with an

suspended in a sunbeam” when observed

could have just procured and developed

average age of 27. They are broken down

from far away in the solar system, where the

the instruments but that’s not what the

in teams responsible for science, probe

boundaries of class, religion and ethnicity

government wanted, they wanted to have

design, operating the spacecraft after

disappear. “It makes you think more about

a proper contribution from the UAE team

launch, media and educational outreach,

putting our differences aside and treating

and Emirati engineers,” he says. While the

logistics and equipment standards, and a

each other as humans and one species,”

assembly of the probe, its integration and

ground station team.

Sharaf says.

Portfolio

JosĂŠphine Collection

chaumet.com

Aigrette ImpĂŠriale Ring

Observer

20

O N E

2

w a t c h

Text: Hilda D’Souza

revenues are expected to decline, and reiterated that operating profits for 2015 is likely to come in lower than it was last year.

Smith, 49, appears undeterred by this poor business forecast, “I’m very pleased and have a great feeling about this appointment. Smith’s is a very special company with high quality global businesses and an enviable heritage of

Andrew Reynolds Smith CEO, Smiths Group

quality engineering and innovation,” he said in a company statement announcing his appointment.

The company has also expressed their confidence in Smith “Andrew has almost 20 years’ experience running large, complex global industrial engineering operations with a track record of delivering turnarounds

Smiths Group, a British engineering

and above-market growth rates,” Smiths

conglomerate, has appointed Andrew

chairman Sir George Buckley said. Buckley

Reynolds Smith as its new chief executive

is positive that the company will greatly

officer. Smith is currently the chief executive

benefit from Smith’s insight and leadership

at GKN’s Automotive, a division of the

skills. “His career has equipped him to grow

engineering group. Smith will replace Philip

businesses through innovation and technical

Bowman on September 25, the company

excellence as well as through targeted

announced in a statement.

mergers and acquisition bids.”

Smiths Group has five divisions. Smiths

Smith plans to drive Smiths Group into

Detection is the world’s largest manufacturer

its next phase of growth and development,

of sensors for the detection of explosives,

“I look forward to joining the management

weapons, chemical agents, biohazards,

team of such an outstanding business

narcotics and contraband. John Crane is a

positioned strongly in markets around the

major manufacturer of seals and associated

world,” he said.

products for the process industries. Smiths

Engineering and at GKN Automotive he

devices and equipment. Smiths Interconnect

is credited with successfully driving its

is a major manufacturer of electronic and

automotive business. He joined GKN in 2002

radio frequency components, while Flex-Tek

and was appointed to the board in 2007

is a major supplier of components to heat

and became chief executive of the business

and move fluids and gases.

in 2011.

The company has been struggling to Photos: Getty Images

Smith holds a PhD in Mechanical

Medical is a major supplier of medical

Prior to GKN he held various senior

grow revenues over the past year as cuts

management roles in a number of

in government spending have hit its state

engineering businesses including Ingersoll

contracts. Smiths recently issued a trading

Rand, Siebe (now Invensys) and Delphi

update in which it warned that full year

Automotive Systems.

++++++++++++++++++ ++++++++++++++++++ New Brics Bank ++++++++++++++++++ ++++++++++++++++++ ++++++++++++++++++ Launched ++++++++++++++++++ ++++++++++++++++++ The Brics group of emerging economies ++++++++++++++++++ launched its New Development Bank ++++++++++++++++++ (NDB) in Shanghai on July 21. The bank is ++++++++++++++++++ ++++++++++++++++++ backed by Brazil, Russia, India, China and ++++++++++++++++++ South Africa – collectively known as Brics ++++++++++++++++++ ++++++++++++++++++ countries. The bank was first proposed ++++++++++++++++++ in 2012 but protracted negotiations over ++++++++++++++++++ ++++++++++++++++++ headquarters, management and funding ++++++++++++++++++ have long delayed the actual launch. ++++++++++++++++++ ++++++++++++++++++ The NDB will lend money to developing ++++++++++++++++++ countries to help finance infrastructure ++++++++++++++++++ projects. The bank is seen as an alternative ++++++++++++++++++ ++++++++++++++++++ to the World Bank and the International ++++++++++++++++++ Monetary Fund, although the group says ++++++++++++++++++ ++++++++++++++++++ it is not a rival. “Our objective is not to ++++++++++++++++++ challenge the existing system as it is but ++++++++++++++++++ ++++++++++++++++++ to improve and complement the system in ++++++++++++++++++ our own way,” NDB President Kundapur ++++++++++++++++++ ++++++++++++++++++ Vaman Kamath said. ++++++++++++++++++ The Brics nations have criticised the ++++++++++++++++++ World Bank and the IMF for not giving ++++++++++++++++++ developing nations enough voting rights. ++++++++++++++++++ The opening came two weeks after the ++++++++++++++++++ ++++++++++++++++++ last Brics summit in the Russian city Ufa, ++++++++++++++++++ where the final details were discussed. ++++++++++++++++++ ++++++++++++++++++ The bank is to start out with a capital ++++++++++++++++++ of $50 billion though the amount is to ++++++++++++++++++ ++++++++++++++++++ be doubled in the coming years. The ++++++++++++++++++ biggest contributor will be the world’s ++++++++++++++++++ second largest economy China, which ++++++++++++++++++ ++++++++++++++++++ also led the establishment of another new ++++++++++++++++++ international bank, the Beijing-based ++++++++++++++++++ ++++++++++++++++++ Asian Infrastructure Development Bank. ++++++++++++++++++ The bank is expected to issue its first ++++++++++++++++++ ++++++++++++++++++ loans early next year. ++++++++++++++++++ ++++++++++++++++++ ++++++++++++++++++ ++++++++++++++++++ ++++++++++++++++++ ++++++++++++++++++ ++++++++++++++++++ ++++++++++++++++++ ++++++++++++++++++ ++++++++++++++++++ ++++++++++++++++++ ++++++++++++++++++ Portfolio

Observer Social Media Boosts Vintage Car Values According to analysis by Black Book, the

– appreciated in value

prevalence of modern and classic luxury cars

five per cent annually.

on social media platforms like Instagram

Each year since 2008,

directly influences their resale value.

they’ve appreciated as

“A new, younger generation of collectors

much as 60 per cent.

has taken to this genre of exotic sports

That means if you

cars, and auction prices are going for a

bought a cherry-red

ride,” the report says. “Social networking

Ferrari 250 in 1977, it

has a lot to do with this activity.”

will likely fetch more than $1.8 million at

“Social media lets people brag without

Instagram effect.

What’s without question is that the

auction today.

Most old-money and ultrawealthy

combination of unprecedented youth of

director of specialty reports at Black Book.

collectors don’t use social media at all.

today’s buyers and the massive amount

“Affluent collectors have been exposed to

And Lawrence notes that the Black

of wealth currently circulated around the

the images posted by celebrity buyers on

Book study is based on trend forecasting

globe have prompted major production

social media sites, fuelling even higher

and opinion analysis by his team of

increases at luxury automakers such as

demand for certain exotic vehicles.”

experts, who track this market on a daily

Ferrari and Lamborghini.

bragging,” says Eric Lawrence, the

From 1977 through 2008, the Aston

basis. It’s really the second tier of the very

They form a growing new enthusiast

Martin DB5 coupe, the Ferrari 250 GTL,

rich – multimillionaires and the newly

and collector market filled with

and the Mercedes-Benz 300SL Gullwing –

minted industrialists – who he believes

millennials and Gen Xers who are able to

three of the most iconic cars on the planet

are most susceptible to the so-called

spend serious cash on a whim.

IMF Cuts 2015 Growth Forecast countries – the US, the UK, Japan and Canada – and said the risks to its forecast were skewed to the downside.

Growth in the US is now projected to be 2.5 per cent this year, opposed to the 3.1 per cent the IMF forecast in April. The UK’s growth forecasts have been cut from 2.7 per cent to 2.4 per cent in 2015 and from 2.3 to 2.2 per cent in 2016.

The updated WEO showed global growth at 3.3 per cent in 2015, slightly lower than the 3.4 per cent recorded in 2014. In 2016, growth is expected to strengthen to 3.8 per cent.

The IMF said it saw activity in the advanced economies picking up from 2.1 per cent this year to 2.4 per cent in 2016, but accepted The International Monetary Fund has cut its global growth forecast for 2015 after a harsh winter led to a weak start in the US. In an update to its World Economic Outlook (WEO), the

that the expected acceleration in growth had yet to materialise.

In advanced economies, the IMF advised central banks to keep bolstering activity and push up inflation. Countries with

Washington-based IMF said it now expected global output to

strong public finances should spend more on infrastructure

expand by 3.3 per cent, down from the 3.5 per cent it pencilled in

projects, it said.

three months ago.

It also shaved its forecasts for four of the G7 leading industrial August 2015

It added that the economic recovery in the Eurozone was broadly on track.

21

22

Observer T H E

W O R L D

toP Text: Hilda D’Souza

1o

can Iran bounce back?

WORLD’S MOST VALUABLE BRANDS RankInG

bRand

1.

Apple

Value ($ bIllIons)

2.

Microsoft

69.3

3.

Google

65.6

4.

Coca-Cola

56.0

5.

IBM

49.8

6.

McDonald’s

39.5

7.

Samsung

37.9

8.

Toyota

37.8

9.

General Electric

37.5

10

Facebook

36.5

145.3

Source: forbes.com

Iran could restore oil production halted by sanctions faster

WORLD’S FASTEST GROWING BRANDS GRowth Rate (%)

than anyone anticipates if the history of previous shutdowns is

RankInG

bRand

1.

Facebook

54

2.

Amazon.com

32

3.

Disney

26

4.

Toyota

21

5.

eBay

21

level prevailing before restrictions were imposed in 2012. Similar

6.

Starbucks

21

pessimistic assessments for supply disruptions at OPEC members

7.

Sony

21

Libya and Venezuela were confounded by quicker-than-expected

8.

Nike

19

9.

MasterCard

19

recoveries, according to data compiled by Bloomberg.

10

Apple

17

Source: latimes.com

Item

1.

Gigayacht

The consensus among analysts and traders is that Tehran needs at least a year after sanctions are lifted to raise output to the

Even after equipment was damaged during a 2003 shutdown, Venezuela was able to lift output by two million barrels a day in just four months. The recovery was “sharper than expected,” the

MOST EXPENSIVE EBAY AUCTIONS IN HISTORY RankInG

any guide.

PRIce ($ mIllIon) 168

Paris-based IEA said in April 2003.

Wrong-footing the pessimists and delivering an additional one

2.

Navy F/A-18A Hornet

10.05

million barrels a day by the middle of next year, as promised by

3.

Elvis and James Dean painting

7.0

Oil Minister Bijan Namdar Zanganeh, could add to the oil glut,

4.

Space Monkey Sam Photo

5.0

5.

Gulfstream II Private Jet

4.9

depressing prices further.

6.

Crypt above Marilyn Monroe’s

Advance preparations to restore output may see Iran reach as much as 3.7 million barrels a day within six months, according to

resting place

4.6

7.

Shane Butcher’s Life

3.5

8.

Action Comics #1

3.2

Meanwhile, European firms are racing to secure business

9.

Albert Einstein’s “God Letter”

3.0

opportunities in Iran after the UN security council adopted a

10

Lunch with Warren Buffet

Source: businessinsider.com

2.63

Boston Petroleum Research.

landmark nuclear deal, paving the way for sanctions to be lifted later this year.

Portfolio

Commentary

24

Dino Grandoni and demanding higher placement in search results, for the past five years. This latest study is based on a flawed methodology that focuses on results for just a handful of cherrypicked queries. At Google we focus on trying to provide the best results for our users.”

Some outside experts also questioned the findings. Lots of clicks can be a sign of irritation, they said, rather than satisfaction, like if users keep navigating from Google to Yelp and back again. It is also difficult to discern whether users were more engaged with Google during the test because the results were more relevant, or merely because the page had a different look.

“Overall, it comes across more to me as

Does Google Alter Search Results?

a public relations exercise rather than

GooGle entices people to search by

Europe who have accused the company of

search engine analyst and the founder

promising links to the best that the web has

antitrust violations.

of Search Engine Land, a site about the

to offer. But research released recently, led by

search industry. “However, I do think

top academics but paid for by one of Google’s

version of Google search engine pretty easily

Google could easily include links to other

rivals, suggests that Google sometimes alters

if you don’t exclude competitors to me was

review sites which would benefit both its

results to play up its own content despite

a pretty startling finding,” said Tim Wu, a

users and competitors.”

people’s preferences.

co-author on the study, who was paid by

In the study, researchers from Harvard and Columbia presented 2,690 web users

Yelp to conduct the study.

Yelp has become one of Google’s most

In April, European Union officials accused Google of unfairly manipulating search results, the first time the company has faced

with two versions of Google. One version

vocal competitors, and it promoted the

such charges. The company has been given

showed search results for local businesses

study with an accompanying website and

until mid-August to review documents and

as users usually see them, with links to the

YouTube video to explain the findings. But

make a defence. A loss could mean billions

businesses along with ratings as posted to a

Yelp’s biggest promotional asset may be Wu,

of dollars in fines for Google.

Google site. The other version showed links

a Columbia law professor known for coining

to businesses along with ratings from rival

the term “net neutrality,” the phrase widely

United States. In 2013, the FTC, the federal

sites like Yelp, the online review website,

used to describe internet service in which all

agency that regulates unfair business

which paid for the study.

data is treated equally.

practices, voted not to bring charges against

The people studied were 45 per cent

© 2015 New York Times News Service

“The idea that you can build a better

precise science,” said Danny Sullivan, a

Wu has defended Google’s competitive

Google avoided a similar fate in the

Google after an investigation, finding that

more likely to click on links if Yelp and

practices in the past but said he was swayed

the updates to the search engine were made

other competitors were included – a sign,

to do the study after speaking with a Yelp

to help users, rather than hurt rivals.

researchers say, that users prefer more

executive last autumn and looking at internal

diverse search results.

data Yelp collected on Google. Yelp also paid

antitrust audience,” according to Luther

his co-author, Michael Luca, to conduct the

Lowe, vice president for public policy at

government regulators – in particular, the

study, and the company flew Wu to present

Yelp, the company had no comment on

Federal Trade Commission – to reopen

the findings at Oxford recently in England.

whether the FTC should reopen the case

The study could renew calls for

an investigation into Google for unfairly

Google questioned the results. “This isn’t

promoting its own services. The results may

new,” Google said in a statement. “Yelp’s

also provide new ammunition to officials in

been making these arguments to regulators,

While Yelp published the study “for an

against the company.

“There are antitrust authorities around the world looking into Google,” Lowe said.

Portfolio

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Profile

26

T U T

H L R

E T I M A N S

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27

A P

T O

E R

T

ROB DICKINSON, THE MAN BEHIND SINGER VEHICLE DESIGN, IS OBSESSED WITH THE PORSCHE 911. SO IT SHOULD COME AS NO SURPRISE THAT AFTER 4,000 MAN HOURS EACH AIR-COOLED 911 HE REBUILDS IS A UNIQUE WORK OF ART WITH THE POWER TO MATCH, REPORTS KEVIN HACKETT. August 2015

Profile

28

A final polish, a final visual inspection,

of industrial design with everything

a final going over before a final sign

it deserves – which is the best in my

off. Months of loving devotion, world

opinion,” is how Dickinson describes the

class craftsmanship, honing, refining

Singer mantra. “If any car deserved the

and reimagining have gone into a single

more than 4,000 man hours that goes into

automobile that’s getting on for 25 years

one of our projects, it’s the Porsche 911.”

old. The shape is familiar to millions, its

Allow your eyes to drink in the details

profile the stuff of legend. It’s a Porsche

of a Singer modified-911 and you’ll

911 – old school, air-cooled, engineering

always find something new to fascinate

brilliance – but you’ve never before seen

over. From the quilted leather panelling

one like this.

that surrounds its engine and lifts the

Porsche has a well-deserved reputation

visuals of its luggage compartment, to the

for excellence but the quality of build

incredibly beautiful engine componentry,

on display here is more akin to Pagani

the deeply-dished alloy wheels and the

or Bugatti. Singer Vehicle Design, the

rubber that’s stretched around them,

Los Angeles outfit where old Porsches

the paint that’s so deeply lustrous you’d

are taken apart and restored by a small

swear you could sink your arm into it

team of dedicated artisans, led by a self-

and the impossibly thoughtful detailing

professed obsessive Englishman, is more

that abounds, no matter where you look,

of a dream factory for anyone with even a

you can see where the rather steep costs

passing interest in the automobile.

associated with tasking Singer to modify

If you know anything about cars you

your old 911 go. In fact, when you see one

will be aware of the Porsche 911. It’s the

up close, you’d be forgiven for thinking it’s

most successful sports car of all time,

a bargain, such is the breathtaking artistry

having been in continuous production

on display.

since 1963, and with each passing

From where did this all-consuming

generation it gets a bit better, a bit more

obsession originate? Dickinson recalls it

usable and a bit less challenging to

as though it were yesterday.

master. In the eyes of many, though, any

“From the age of five I was a car nut,”

911 will always be fundamentally flawed

he smiles as he reminisces, “and my father

as its engine sits squarely behind the rear

introduced me to the 911 on a French

wheels. To an equal number of obsessives

Autoroute in August, 1970. We were on

that’s what makes it so unique, though,

holiday in the South of France in our

and Rob Dickinson, the man behind

Volkswagen Beetle. I became obsessed

Singer, is every inch the 911 obsessive.

with it and, as a five-year old, what piqued

Dickinson has just turned 50 but looks

my interest in it was its ‘smiling face’ – it

a decade younger. He’s disarming, friendly

has a big, happy face – and the back of the

yet obviously full of intent – a man on a

car almost looks angry, it has this almost

mission. And he’s the most vocal exponent

cross-eyed appearance and it sounds

of what makes the Porsche 911 such a

angry at the back, too.”

special automobile – a die-hard enthusiast

He says that the stark contrast, between

with the means and the capabilities to

the look of the car as it approached his

turn a relatively humble sports car into a

family’s old Bug on the other side of the

rolling artwork.

road, and the view and sound of its rear

“Honouring and celebrating that icon

as it disappeared into the distance, had a profound influence. “And, of course,

Right: Rob Dickinson with a Porsche 911 transformed by Singer Vehicle Design. Each 911 is comprehensively disassembled, cleaned and strengthened.

I understood even then that it was something vaguely similar to the car I happened to be in at the time. They both had their engines in the back, I knew my Portfolio

29

father loved it but my family couldn’t afford it – everything was just a sensory overload for a five-year old.”

He bought his first 911 in 1996. “Rock ‘n’ roll allowed me to scratch my itch,” he says, in typically understated British style. Dickinson was, between 1990 and 2000, the singing, songwriting and guitar playing front man for Catherine Wheel, an ‘alternative’ rock band that achieved varying levels of success in the space of a decade. It originated in the UK but the group’s following was particularly strong in America and Dickinson moved to LA in 2003 “to make records”. He’s still there now, long after the group called it a day and, it took some time but eventually things came full circle. Dickinson’s undying love for the Porsche 911 became a credible foundation for a new business.

Could Singer, the company, have been formed anywhere other than in California? “Never,” he says matter-of-fact and full-on deadpan. “The car is utterly a product of California. It’s a product of the car culture, the optimism, the sunshine, the ‘can do’ spirit you find in California.

Los Angeles is the world’s single biggest market for Porsche and there’s a great deal of love for the earlier air-cooled models with lots of enthusiasts who support the 911 ‘culture’.”

He says that he had amassed a small collection of 911s while in the UK, which he sold and put the money into creating what he still refers to as a ‘hot rod’. It was, he claims, the ultimate 911 as he saw it then, and he still owns it. “That car,” he says, “was my daily driver in Hollywood when I was making records and I was regularly stopped by all sorts of entertainers, lawyers, actors and directors who wanted to buy it. Eventually I stopped telling them they couldn’t have it and started telling them that I could build them a similar one, perhaps.”

That car, affectionately known as the “Brown Bomber” and the huge amounts of attention it garnered, set the template for Singer Vehicle Design and the company August 2015

30

Above and right: Many parts of the 911, such as fenders, bonnet and roof are replaced with motorsport specification carbon fibre. The interior treatment can be personalised by the client.

started trading in 2009. It’s still in the same, whitewashed and nondescript stone-fronted workshops in Los Angeles, and is staffed by a steadily growing group of dedicated perfectionists for whom the motorcar begins and ends with the aircooled Porsche 911.

Essentially the business is perfectly straightforward. Singer takes examples of the penultimate generation of air-cooled 911s (known throughout the industry as the ‘964 generation’), supplied by – or for – paying customers, before stripping each one down and rebuilding it as ‘a Singer

advanced of the earlier models but it

modified car’ to the specifications dictated

was still massively compromised. Singer

by those paying customers. Why the 964

Vehicle Design, on the other hand, doesn’t

has gone ‘from zero to hero’ thanks

generation? Dickinson says it’s because

compromise on any level whatsoever.

to Dickinson’s obsessiveness and the

it has, overall, an unsullied shape yet still

“I was convinced, when we started in

wanted to be dealing with.”

In just six years, Singer Vehicle Design

otherworldly quality of the engineering

packs the most amount of contemporary

2009,” says Dickninson, “that if we lavished

that the company carries out. And,

engineering under its svelte body.

the right attention on the car and we filled

naturally, Singer’s reputation for turning

it with the content it deserved, if we were

what are essentially classic cars into

happens to be the least loved of the

patient and the car was beautiful and

contemporary giant slayers is steadily

‘early’ cars, with owners often unafraid of

properly screwed together, and it went

making an impact on media and buying

modifying them. Everything Dickinson

down the road like the best air-cooled 911

habits of the wealthy all around the

thinks could, or should be made better,

you’d ever driven, that we would have some

world. It didn’t take long for enthusiasts

is. The 964 might be the most technically

success in finding the kind of customers we

and collectors in the Gulf to catch on,

That model of 911 also, fortuitously,

Portfolio

Profile

31

and recently two separate launch events

company’s award-winning freight service,

held in Riyadh and Dubai, organised

has introduced a ‘white glove’ logistics

by specialist automotive agency WSF

service designed especially for people

Creative, officially started Singer’s

moving their prized automobiles from

presence in the region.

country-to-country, whether they’re

Left: The 270BHP 3.6L engine is comprehensively rebuilt and blueprinted for maximum efficiency. A 3.8-litre, 360BHP engine is available for off-road use only.

importing them, exporting them or simply

many of our customers have been flying

making their way into Dubai and the rest

transporting them to participate in a car

Business Class and First Class with our

of the GCC so, naturally, these precious

show or enjoy on foreign roads.

airline for years. All we’ve done is add a

Specially commissioned cars are now

vehicles need to be transported from LA

“We recognise that, for some people,

product on the cargo side that treats their

to wherever the paying client requests.

driving a hire car abroad is just not good

cars the same way we treat them, and

That’s where Emirates airline helps Singer,

enough,” says Nabil Sultan, Emirates

allows them the freedom to enjoy their

by sending its cars to an ever-widening

Divisional Senior Vice President for

own cars whilst they are on holiday.

customer base. Emirates SkyCargo, the

Cargo. “They want to drive their own and

“To transport personal luxury vehicles, Emirates SkyCargo offers a whole host of products and services, including door-todoor delivery, transport and road insurance, export and import customs clearance and complimentary protective car covers,” he continues. “Our team of highly qualified and licensed staff manages the acceptance, documentation, preparation, loading and handling procedures throughout the whole shipment process.”

The synergies between these two companies are remarkable, each doing its utmost to keep clients satisfied with services that are unique. Whether you’re interested in simply taking your car to Europe for the holidays or importing it as a permanent Gulf resident, with Emirates SkyCargo service you’re in safe hands.

Hands that are in white gloves.

August 2015

Energy

32

Weak Power Grids Stunt Growth

Photos: Getty Images

Sub-Saharan Africa’s power generating capacity is less than that of South Korea, and that has a debilitating effect on economic growth, reports Norimitsu Onishi.

I

n the darkened and chilly parking

dampened the economy, Africa’s second

The crippling effect was recently on

lot of a Johannesburg mall, a

biggest, and are expected to continue for

display in Nigeria, which overtook South

suburban family huddling around a

another two to three years.

Africa as the continent’s biggest economy

shopping cart shared a snack on a Friday

last year. Nigeria’s electrical grid churns

evening out. After finding their favourite

expansion, sub-Saharan Africa is still

out so little power that the country mostly

restaurant closed because of a blackout,

far behind in its ability to generate

runs on private generators. So when a fuel

Buhle Ngwenya, with her two sons and two

something fundamental to its future

shortage struck this spring, a national crisis

nephews, settled for meat pies from one of

– electricity – hampering growth and

quickly followed, disrupting cellphone

the few stores open in the mall.

frustrating its ambitions to catch up with

service, temporarily closing bank branches

the rest of the world.

and grounding airplanes.

“It’s like death, this load shedding,” Ngwenya, 45, said, referring to the © 2015 New York Times News Service

Despite a decade of strong economic

All of sub-Saharan Africa’s power

The power shortages and blackouts

blackouts imposed by South Africa’s state

generating capacity is less than South

have cast a harsh light on elected officials,

utility to prevent a collapse of the national

Korea’s, and a quarter of it is unproductive

causing rising anger among voters for

electricity grid.

at any given moment because of the

whom reliable electricity was supposed to

continent’s aging infrastructure. The World

be a dividend of democracy and economic

worst blackouts in years are plunging

Bank estimates that blackouts alone cut the

growth. Experts say that the appointment

residents into darkness in poor townships

gross domestic products of sub-Saharan

of politically connected officials with

and wealthy suburbs alike. The cutoffs have

countries by 2.1 per cent.

little industry expertise at the South

With winter here in South Africa, the

Portfolio

33

African state utility, Eskom, has led to mismanagement, just as it has at other state-owned enterprises.

“It’s not only a symbol of failure when the lights go off,” said Anton Eberhard, an energy expert and a professor of management at the University of Cape Town.

“It’s experienced directly by people. If you’re about to cook or if your child is studying for an exam the next day and your lights go off, people feel this very directly. There is a very concrete and dramatic expression of failure.”

In his inaugural address in June, Nigeria’s new president, Muhammadu Buhari, said that his nation’s attempts to overhaul its electricity sector had “only brought darkness, frustration, misery and resignation among Nigerians.” He singled August 2015

Above: A Johannesburg suburb is in darkness due to load shedding.

Below: African National Congress supporters demonstrate against South Africa’s electricity blackouts.

Energy

34

Clockwise: A failure at South Africa’s Grootvlei power station caused more load shedding; 85 per cent of South African households now have electricity; A worker disconnects illegal connections from a power utility pole; control centre at Eskom.

Most of the $20 billion spent to overhaul the power sector is believed to have gone into the pockets of corrupt officials, Ekpo said.

Portfolio

Energy

36

out unreliable power service as the biggest

power under white-minority rule. “It is

gas burners. They plan their days and

drag on the economy.

a problem of apartheid, which we are

evenings around blackouts scheduled by

resolving,” he said this year.

the utility. Dominating South Africa’s list

Nigeria’s leaders have promised a stable power supply since the end of military rule

But energy experts say that these

of popular app downloads are ones that

in 1999, spending about $20 billion and

households, many of them low-income,

alert smartphone users to the impending

dismantling the state National Electric

consume little electricity. Instead, they

start of a cutoff in their neighbourhood or

Power Authority, better known as NEPA –

said, the shortages result from frequent

the risk of one as load shedding across the

and widely derided as “Never Expect Power

breakdowns at aging plants and, most

nation increases.

Always.” Yet the country’s power generating

critically, the delayed construction of

capacity has remained virtually unchanged,

two new facilities. As far back as 1998, a

pies with her family in the mall parking

about six gigawatts for a country of 170

government report warned that without

lot, load shedding was not only about

million. The United States, with 320

new capacity, the country would face

electricity. She blamed the African

million people, has a capacity of more than

serious power shortages by 2007. A year

National Congress, the party that

1,000 gigawatts.

later, in 2008, South Africa suffered its

liberated South Africa and has steered its

first rolling blackouts.

course ever since.

“Most companies don’t have four hours of power a day from the national grid,” said

South Africa, which has the continent’s

To Ngwenya, who was sharing meat

“I always supported the ANC,” said

Akpan Ekpo, director general of the West

only nuclear power plant, has around half

Ngwenya, who grew up in Soweto, a black

African Institute for Financial and Economic

of sub-Saharan Africa’s power generating

township outside Johannesburg, but

Management in Lagos, Nigeria’s commercial

capacity, roughly 44 gigawatts. Still,

now lives in a wealthy suburb. “However,

capital. “If they do, they’re lucky.”

the power cuts contributed to a recent

when it comes to load shedding, I don’t

drop in economic growth and a spike in

know. It’s not normal coming to a mall

the power sector is believed to have gone into

unemployment to 26.4 per cent, the worst

and carrying a torch like this man here,”

the pockets of corrupt officials, Ekpo said.

level in a dozen years.

she said, pointing to another consumer

Most of the $20 billion spent to overhaul

“With the advent of democracy, we were

The blackouts have affected everyone

shrouded in darkness.

promised constant power, or at least improved

from giant gold mining companies and

power,” he added. “But much to our surprise,

manufacturers to small businesses and

ANC,” she added. “We even have a name

things have only gotten worse. In some

individuals. South Africans are buying

for it, load shedding. Why don’t they say

middle-class parts of Lagos, people are lucky if

up generators, rechargeable lights and

blackout once and for all?”

“For me, this is the biggest failure of the

they now get 30 minutes of power a day.”

South Africa’s recent history of electrification is more complicated, and it has been the subject of fierce debate as the

Below: The South African government is focusing on the rehabilitation and improvement of old power stations to ensure a stable supply of electricity.

current blackout crisis has dragged on for several months.

In the last years of apartheid, before a democratic government was elected in 1994, electricity reached only a third of South African households, few of them black. Under the African National Congress – whose leaders have governed ever since, often promising free electricity and other services as part of the nation’s democracy – 85 per cent of households now have electricity, a remarkable accomplishment by any standard.

President Jacob Zuma has forcefully rejected any blame for the energy crisis.

The strain on the grid, he said, resulted from the burden of bringing light to millions of black households that lacked Portfolio

Photos: Getty Images

Salaries 38

Portfolio

The CEO Pay Party Goes On Despite sustained efforts to restrict excessive executive compensation, last year was a profitable one for the 200 best paid CEO’s, reports David Gelles.

I

The billionaire who built a cable and communications empire

Interactive, a related company that owns stakes in home shopping networks, he received $32.4 million. Malone, the chairman of both companies, awarded his friend a total of $74 million last year, placing him sixth on the list.

Thomas Rutledge, another Malone confidant who oversees the regional cable operator Charter Communications, where Malone and Maffei are board members, was given a $16 million package last year, an increase of 259 per cent over 2013. Though Malone is not on executive pay, Maffei is.

Taken together, the four CEOs were awarded more than $350 million last year,

is 74, and no longer a chief executive

occupying three of the top six spots of the

himself. But Malone still exerts sway from

study conducted by Equilar, an executive

various boardrooms, and the CEOs at

compensation data firm.

“At John Malone’s companies, there’s

among the best compensated managers

still a great deal of inside baseball in

on the planet. Last year, the largess was

setting executive pay,” said Robert Jackson

particularly notable.

Jr., a professor of corporate governance at

Take Discovery Communications, the

Columbia Law School. “When you think

cable group behind Shark Week and shows

about $350 million among four men, it’s

like Cake Boss. Malone spun Discovery

hard to see how that’s what they need to

out of his media group and still sits on the

be paid competitively.”

board. His choice for chief executive, David

All five companies performed well last

Zaslav, received total compensation worth

year, though Discovery’s stock was down,

$156 million last year, making him the

and Zaslav and Fries both signed new

highest-paid chief of an American public

long-term contracts, accounting for their

company, according to the Equilar 200

especially big paydays. Malone and the four

Highest-Paid CEO Rankings, conducted

chief executives all declined to comment.

for The New York Times.

Just behind Zaslav on the list of the

© 2015 New York Times News Service

of $41.3 million. As chief of Liberty

the compensation committee that sets t pays to work for John C. Malone.

the companies he oversees are routinely

August 2015

SiriusXM, Maffei received compensation

Malone’s disciples were not alone in gorging on the pay equivalent of a

highest-paid chief executives is Michael

chocolate-covered cream-filled doughnut.

Fries of Liberty Global, an international

The leaders of technology companies,

cable and wireless group that Malone

financial groups and drug companies all

presides over as chairman. And while

profited handsomely last year, enjoying

Fries made considerably less than Zaslav

their seats at the endless feast of executive

– $44 million less – he still got a package

compensation.

worth $112 million.

Gregory Maffei, one of Malone’s closest

At public companies with market values of more than $1 billion and that had filed

lieutenants, was paid twice in 2014.

proxies by April 30, the average package

As chief of Liberty Media, which owns

for the top 200 best paid chief executives

the Atlanta Braves baseball team and a

was worth $22.6 million, trumping last

big stake in the satellite radio provider

year’s average of $20.7 million, and the

Salaries

39

Salaries

40

median was $17.6 million. Those are the highest amounts since Equilar began keeping track in 2006.

TODAY’S PAYDAYS arrive despite sustained efforts to restrict excessive executive compensation. Since the passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act in 2010, which made certain pay practices more onerous, compensation committees have mostly abandoned several controversial pay mechanisms. Employers are no longer footing the tax bills for departing CEOs who enjoy golden parachutes.

Employers are no longer footing the tax bills for departing CEOs who enjoy golden parachutes. The Supplemental pension plans are largely a thing of the past. Stock awards are mostly tied to performance, not simply awarded at regular intervals.

Leslie Moonves, boss of CBS, took home a $25 million cash bonus last year. Philippe Dauman, chief of Viacom, received a $20 million cash bonus. And Robert Iger, head of Walt Disney, enjoyed a cash bonus just shy of $23 million. In each case, the bonuses were awarded through a mix of performance-based metrics and discretionary measures and represented about half of the media moguls’ total annual compensation.

Yet some cash bonuses seemed to reward simply doing one’s job. In the case tied to the performance of the company,

a thing of the past. Stock awards are awarded at regular intervals.

performance.

of Moonves, $12 million of that bonus was

Supplemental pension plans are largely mostly tied to performance, not simply

that does little to incentivise long-term

Underpinning these efforts was a belief

while the remaining $13 million was doled

that more transparency would lead to

out by the compensation committee partly

some much needed budgeting. If only

in special recognition of his “leadership

programmes that were egregious,” Gerard

companies were forced to reveal just how

and direction in the creation of premium

Leider of Meridian Compensation

sweet their packages were, perhaps they

content”. In other words, the television

Partners said. “Today there is more

would reform. It hasn’t worked.

studio CEO got a big bonus for being a

“Fifteen years ago, there were some

sensitivity than there ever has been.”

And while much of the overall compensation came in the form of stock

Top: President and CEO of Discovery Communications, David Zaslav.

television studio CEO. CBS and Viacom declined to comment.

– some of which vests over several years

A Disney spokesman did not respond

– some chief executives received generous

directly to a question about Iger’s bonus.

cash bonuses, a form of compensation

Just one year ago, it seemed change Portfolio

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Salaries

42

Clockwise: Walt Disney Company chairman Robert Iger; Gregory Maffei, chief executive officer of Liberty Media Corp; Leslie ‘Les’ Moonves, president and chief executive officer of CBS Corp; CEO and president of Viacom Philippe Dauman.

might be afoot. French economist Thomas Piketty electrified economic circles with his surprise hit book, Capital in the TwentyFirst Century. A simmering debate about American inequality boiled over into the mainstream, and calls rang out to

hold stock with fewer rights.

narrow the income gap. Say-on-pay votes

“At John Malone’s companies, shareholders

chastened several companies, prompting

have very few rights,” Jackson said.

them to lower executive pay and tie

It’s a common story. Chummy

packages more closely to performance.

boardrooms, easily achieved performance IN RECENT months, some companies

targets and large discretionary bonuses

have made efforts to help lower-paid

salaries comes down to the idea that

– these are the hallmarks of executive

workers. A national movement is urging

the executives, like celebrities, ought

compensation today. They persist despite

fast-food chains to raise the minimum

to be rewarded for their indispensable

decades of attempted reform, the best

wage. But as the data makes clear, the

contributions. “Movie stars and sports

efforts of shareholder advocates and

compensation committees setting pay

stars get paid a lot for a very unique skill

concern about rising inequality. And as

for the 0.01 per cent are anything but

set,” Leider said. “Some of these CEOs

long as compensation is determined by

humbled. While a couple of chiefs – at Key

have very unique skill sets.”

insular groups of board members, there

Energy Services and Park Electrochemical

What’s more, the companies say that

– took voluntary pay cuts in solidarity with

many pay packages are largely tied to

workers who also faced wage reductions,

performance, aligning the interests of the

there was no broad movement among

chief executive with those of shareholders.

executives to leave money on the table.

Sustained lavishness is enabled, in

is little chance that the feeding frenzy will end anytime soon.

“The inside, clubby mentality of being in the right group at the right time is still the way to get paid at big American

Instead, as companies continued their

part, by the closely controlled structure of

companies,” Jackson said. “Even after say-

sustained recovery after the financial crisis,

Malone’s companies. In each case, Malone

on-pay, even after disclosure rules, even

CEOs were paid better than ever before.

and his allies heavily influence voting

after the financial crisis, it shows how

shares, while ordinary investors typically

much work we still have to do.”

The defence of these supersize

Portfolio

Š 2015 New York Times News Service

Photos: Getty Images

Finance

44

Monte dei Paschi di Siena, the world’s oldest bank is located inside the medieval fortress of Palazzo Salimbeni in Siena, Italy.

Portfolio

45

Medieval, Seeking Renaissance The near collapse of Banca Monte dei Paschi di Siena, the world’s oldest bank, has had powerful repercussions for the city of Siena, report Jack Ewing and Gaia Pianigiani.

O

perators of kindergartens and ambulance services had to find new sources of funds. A

biotech company filed for bankruptcy.

The local professional soccer team slipped into the minor leagues after it could no longer afford the salaries of its top players.

And twice a year, when it is time for the Palio, Siena’s famed bareback horse race, neighbourhood clans must pay for their own costumes.

Siena, a city in central Tuscany, is scrambling to fill the financial hole caused by the near collapse of Banca Monte dei Paschi di Siena, the world’s oldest bank.

The foundation that owned the bank bankrolled a broad range of social services and cultural events, showering ¤150 million a year ($170 million) on Siena and the surrounding region. The bank was the city’s largest private sector employer.

Now, Siena is trying to attract outside investments and show that, contrary to Italy’s reputation for being unfriendly to businesses, it can foster entrepreneurship and create jobs. It is the same challenge facing all of Italy, which has barely grown since the 1990s and has weighed on the broader European economy.

“Everyone is aware that a new growth engine is needed,” said Angelo Riccaboni, head of the University of Siena. “In Siena, people have to change their mentality.

August 2015

Finance

46

Now you need to be a risk-taker.”

Since its founding in 1472, Monte dei Paschi and its wealth have been at the centre of life in Siena. The bank survived plagues, panics and wars. Its headquarters are still located inside a medieval fortress.

But modern financial hubris felled the centuries-old bank. In 2008, Monte dei Paschi acquired a rival to become Italy’s third-largest bank. The ¤9 billion price tag was considered too high, even at the time, and bank management compounded the blunder by engaging in a series of derivatives transactions that later produced huge losses.

Recently, Monte dei Paschi completed a sale of shares valued at ¤3 billion and replenished its capital. But the bank is gasping under a pile of bad loans and has

“Had we survived only with the foundation’s money, we’d have gone belly up,” said Mario Marzucchi, president of the Misericordia, which has been operating for more than seven centuries.

operating for more than seven centuries.

Other activities financed by the foundation were less essential, like a club for the spouses of doctors, and the colourful costumes that members of the Top: Marcello Clarich, president of the Monte dei Paschi Foundation in Siena.

Above: The Palio, a bareback horse race held twice a year, is a major tourist attraction in Siena.

city’s Contrada, ancient neighbourhood associations, wore in processions that preceded the Palio races.

“There was too much money.

effectively put itself up for sale, which

Some of the changes have been

Everything was easy,” Marcello Clarich,

could mean moving its headquarters away

small. The Misericordia di Siena, which

the president of the Monte dei Paschi

from Siena.

provides ambulance service and other

Foundation, said in his office overlooking

health care services, is making up the

the Piazza del Campo. “Now we are going

executive, said that Monte dei Paschi

lost funds by renting out real estate and

back to normality.”

will continue to support Siena as a bank,

collecting more money from members

though not as a benefactor. “We are ready

and other private sources.

Fabrizio Viola, the bank’s chief

to support the economy with good credit at the right price,” he said.

Siena is slowly adjusting to life with a greatly diminished Monte dei Paschi.

“Had we survived only with the

A broader economic overhaul will take longer.

As Siena looks to reinvent itself, the

foundation’s money, we’d have gone belly

city, in part, is looking to that past. With a

up,” said Mario Marzucchi, president

large and well-preserved medieval centre,

of the Misericordia, which has been

Siena is crowded with tourists in the Portfolio

Finance

48

“The only way to save the city is to renew it,” said Bruno Valentini, the mayor of Siena.

“This is critical for companies,” said Luigi Marroni, the regional minister of health. “If it takes six months to get an approval in Tuscany and two months in New Jersey, they’ll go to New Jersey.”

The local government, too, is adopting a new attitude. In January, the University of Pittsburgh Medical Centre, a non-profit health care provider, decided to open a centre to diagnose liver and digestive ailments in Chianciano Terme, a town near Siena known for its healing waters.

Officials in Siena helped accelerate the approval process, and the centre opened in June.

“Our impression is that the local government is really pushing hard,” said Bruno Gridelli, the executive vice president of UPMC International. “They understand that if they want to improve the economy, particularly after the Top: Siena Biotech had to file for bankruptcy after losing funding from Banco Monte dei Pashi.

Above: Alessandro Profumo, chairman of Banco Monte dei Pashi, has stepped down after 11 straight quarterly losses.

problems of Monte dei Paschi, they need to attract investment.”

The city of Siena is also trying to become more efficient. The city government cut its municipal debt by more than 25 per

summer but is often underbooked the rest

research and production operation in

cent to ¤74 million, sold city real estate

of the year. Work has long been underway

Siena. But the effort – along with the rest

and stopped using an outside contractor

to improve the highway that connects

of the economic overhaul – also requires a

to collect taxes, in order to save costs.

Siena with Florence, and local officials

government rethink.

Officials are also working on centralising

have staged offseason running and

Investors won’t come to Tuscany

procedures like building permits, a process

cycling events to attract sports tourists.

“just because it’s more beautiful and

that can take years. “The only way to

Such events helped increase tourism by

has better wine,” said Andrea Paolini,

save the city is to renew it,” said Bruno

an estimated 10 per cent last year. But

director general of Toscana Life Sciences.

Valentini, the mayor of Siena.

tourism will not replace the high-paying

Entrepreneurs here, as with much of

jobs Monte dei Paschi once provided.

Italy, face a mountain of red tape and a

Throughout Italy, attempts to streamline

slow-moving justice system that make it

government still face huge resistance from

difficult to resolve business disputes.

civil servants who fear for their jobs. And

province of Tuscany into “Pharma Valley,”

So officials are trying to reduce the

remaking Siena is not any easier without

an international centre for drug research

bureaucracy. For example, the regional

and development. (The region has a long

government has consolidated the number

history of vaccine research.) The British

of committees it needs to approve a

ended up with a wooden raft,” Paolini said.

drugmaker GlaxoSmithKline has a large

clinical trial to one, from 16.

“I can’t say I’m pleased.”

To fill that gap, local and regional officials are trying to turn Siena and the surrounding

Still, Siena is at the start of the process.

the riches once bestowed by the bank.

“We started out with a cruise liner and

Portfolio

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W www.villaoasisbouznika.com

Technology

50

What Uber Can Learn From Airbnb Uber and Airbnb have a lot in common, but the latter has been far more successful in getting the support of regulators, reports Mark Scott.

© 2015 New York Times News Service

R

ecently, the home-sharing service

company’s low-cost service that’s similar

Airbnb had more than 40,000

to UberX in the United States. French

listings in Paris, making the

politicians denounced the company for

French capital the company’s most popular

defying the country’s transport laws. And

destination for travellers looking to rent a

two of Uber’s top executives in France

room or an entire apartment. Paris officials

were detained by the police and accused

hail it for bringing innovation to the city’s

of operating an illegal taxi business. Then,

hotel industry.

the company suspended UberPop across

The ride-hailing company Uber is having a much more difficult time.

the country.

Uber and Airbnb are similar in many

Recently, thousands of Parisian taxi drivers

ways. Both born in San Francisco, the

took to the streets to protest UberPop, the

companies are now two of the largest

entrants in the so-called on-demand economy, in which services are available at the touch of a smartphone button. They are both flush with investor money – with valuations in the tens of billions of dollars – and are using the cash to expand rapidly around the world.

But the starkly different paths in France Photos: Getty Images

for these companies lay bare contrasting strategies as they encounter the world of global regulators. Since it began in 2009, Uber has entered city after city, in Europe and elsewhere, with a largely catch-me-ifPortfolio

51

you-can attitude. Airbnb, which offers more

“A lot of these startups initially don’t

rooms than traditional hotel groups like

think much about regulation,” said Thilo

Hilton and InterContinental, has instead

Koslowski, head of the automotive practice

tilted toward courting local politicians in

at Gartner, a technology research company

many of its most popular markets.

in California. “It’s all about having a punch

So far, Uber’s approach has not

Above: Spanish flags fly from a taxi cab painted with graffiti reading ‘RIP Uber Taxi G$$gle’ as it leads demonstrators against Uber Technologies in central Madrid.

Opposite page: Airbnb has fared better than Uber by engaging with authorities.

strategy. They do things first, then ask

significantly slowed it down. The company

questions later. As they mature, that starts

the amount of long-term housing in the

operates in more than 300 cities in almost

to change.”

city. And last year, Airbnb was fined in

60 countries and is valued by investors

Airbnb has not gone unscathed by

Europe for the first time for violating

at more than $40 billion. But Uber’s

regulators. It has faced significant

a law in the Catalonia region of Spain

aggressive attitude has put it at odds with

clampdowns in American cities like New

that forbids renting individual rooms for

regulators in many of the cities that are

York, where some local policymakers have

tourism purposes. Airbnb is appealing the

crucial to the company’s global ambitions.

argued that Airbnb rentals could reduce

roughly $33,000 fine.

August 2015

Technology

52

Right: Travis Kalanick, the CEO of Uber.

Below: Supporters and drivers for the ridesharing company Uber demonstrate in front of City Hall in New York.

But by and large, Airbnb’s approach has been to work with regulators, not against them.

In France, local Airbnb rentals started popping up a few months after the company was founded in 2008. Initially, the startup had limited contact with local regulators, finding few who understood its business. But by 2012, shortly after the Paris listings began growing quickly, Airbnb opened an office in the city and started speaking regularly with local

of up to $28,000 for people who break

This approach with regulators is “about

authorities. They continued to do so in

the law, a rule that Airbnb supports. In

finding partners within governments that

2013, when new housing legislation was

addition, by early 2016, the company will

understand the sharing economy,” said

being debated.

start collecting a tourist tax from its users

Patrick Robinson, head of public policy in

on behalf of Paris authorities, making the

Europe for Airbnb. “We want to explain

rentals, a team of investigators in Paris

French capital the second city in Europe

what is happening out there because at

regularly conducts inspections, with fines

after Amsterdam to offer that service.

some point, they will want to regulate this.”

Now, to clamp down on illegal vacation

Portfolio

Technology

54

Right: London taxis protested on The Mall against Uber in 2014.

Below: Critics say that tenants are being evicted from apartments around the world to create Airbnb rentals.

Uber began operating in France in late 2011, and the company says it initially found it difficult to set up meetings with French officials. Two years later, lawmakers were trying to put limits on the service, proposing new rules that would force any ride-booking service like Uber to wait at least 15 minutes before drivers could pick up new passengers, giving traditional taxi drivers a head start.

Last year, executives from the company began holding increasingly regular meetings with French lawmakers, part of a larger effort by the company to better engage regulators. By then, though, the pressure that had been applied by well-connected taxi groups had mostly won in France.

A new transport law, which went into force this year, requires all chauffeurs to have a professional license and restricts drivers from using geolocation software to show the whereabouts of their cars, rules that essentially prevent UberPop drivers from working legally. Authorities in Germany, Spain and the Netherlands also have banned Uber’s low-cost offering, saying it amounts to unfair competition for traditional taxis.

Uber continued to operate UberPop in France, arguing in local courts that the transport law is unconstitutional. French police officers, however, have started

further on its dealings with regulators.

“Modernity is innovation, the quality of

Union. By allowing Uber to operate, Kalanick argued, the company could create up to 50,000 new jobs for drivers.

issuing fines to some UberPop drivers, and

service, the sharing economy,” said Bernard

the company’s offices were raided in March

Cazeneuve, France’s interior minister,

during investigations that remain open.

after the anti-Uber demonstrations spread

shown, the company sometimes remains

In response to the latest protests, Uber

across the country. “It is not black-market

willing to push ahead regardless of the

suspended its low-cost service.

jobs and clandestine work organised

opinions of lawmakers.

“We’re providing an additional option for moving around cities,” Antoine Aubert,

against the rule of law by Uber.”

In recent months, Uber has appeared

But as recent events in France have

“Any government can shut you down, so you have to be willing to play the

a director of public policy at Uber, told

more willing to engage with lawmakers.

regulatory game,” said Gerald Faulhaber,

European politicians last week. “We’re facing

At a conference in January attended by

professor emeritus of business economics

restrictions with outdated regulation in

many European officials in Munich, Travis

and public policy at the Wharton School at

countries like France, Spain and Germany.”

Kalanick, the company’s chief executive, said

the University of Pennsylvania. “You need

Uber wanted to find ways to operate within

to work with regulators. There’s no way

the law across the 28-member European

around that.”

A company spokesman declined to comment

Portfolio

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56

Gap’s FashionBackward Moment

Iconic US clothing retailers are facing declining sales as nimbler international competitors take centre stage, report Hiroko Tabuchi and Hilary Stout.

A

t 8:50 on a Wednesday morning, nearly two dozen shoppers hovered in front of H&M’s new

global flagship store on the corner of West 34th Street and Avenue of the Americas in Manhattan, eager to get inside as soon as the doors were unlocked at nine.

Directly across the street, a Gap store was also preparing to open. A lone woman stood in front. She was handing out fliers for a Cuban restaurant as pedestrians hurried by.

The contrast summed up the state of US retailing. One by one, iconic brands like Gap, J. Crew, American Apparel and Abercrombie & Fitch have reported slumping sales, while chic and cheap foreign fast-fashion brands like H&M, Uniqlo and Zara are opening bustling stores and luring away customers once devoted to a more basic US style.

US midmarket fashion has lost its way, and no other company epitomises that as much as Gap. The company recently

© 2015 New York Times News Service

announced that it would close a quarter of its 675 North American stores over the next few years. But the closures represent just the latest in a decade of stumbles for a brand that was once so cool, actress Sharon Stone wore one of its turtlenecks, with a Valentino skirt, to the 1996 Oscars.

In 1998, its “Khaki Swing” television Portfolio

commercial, all smiles and US optimism,

Primark, based in Dublin, plans to open 20

aired to 76 million viewers during the

locations and will sell items for even less

final episode of Seinfeld. The brand also

than H&M: Its latest catalogue features $8

became seared in popular consciousness

halter neck dresses and $10 bikinis.

that year as the maker of Monica Lewinsky’s infamous blue dress.

In a recent presentation to investors,

US retailers still outnumber the upstarts, but they are locked into outdated formulas.

“Back in the ’80s and ’90s, there wasn’t

Art Peck, Gap’s chief executive, spoke

real access to higher-level fashion,” said

somewhat poignantly about the brand’s

Kate Davidson Hudson, co-founder and

downward trajectory. When Gap’s latest

chief executive of Editorialist, an online

round of store closures is done, its

fashion magazine. “It was the heyday of

footprint in the United States will fall to

business casual, and stores did well selling

just two-fifths of its peak in 2000.

core staples.”

“We had our moments of glory, but

“But now, everybody sees what’s on the

they’re not followed with consistent

runways on social media and on blogs,

moments of glory,” Peck told investors

and everybody’s a critic, and shoppers

at Gap’s corporate headquarters in San

want it as soon as they see it,” she said.

Francisco. “None of us are happy with our

“Brands like Gap just feel very dated.”

performance now.”

Once the master of casual, supplying

SALES AT GAP stores open for at least a

Americans with staple khakis, denims and

year, a closely watched figure in the retail

button-down shirts, the company is finding

industry, have fallen for 13 straight months.

that its once-stable US customer base has

The company’s upmarket brand, Banana

splintered. Luxury is booming; at the other

Republic, has also stumbled, although Gap’s

end of the market, discount retailers like

cheaper Old Navy label has done well.

T.J. Maxx and Burlington Stores are seeing

sales have fallen for three straight years,

peers are stuck in the middle.

and the brand is in the midst of an

But they have also faltered at a game

Photos: Getty Images

overhaul, which includes covering up

they once dominated: being the go-to

the hunky shirtless male models who

destination for the legions of teenagers and

functioned as something of a corporate

young adults with money in their pockets

logo. Even J. Crew has suffered from an

and time on their hands. That role has

increasingly stale formula of print, sequins

fallen to juggernauts like H&M, based in

and basics. J. Crew recently announced

Sweden, and Zara, owned by the Spanish

that it would eliminate 175 jobs and

company Inditex, which turn out cheaper

replace the head of women’s design at its

versions of runway trends in weeks.

namesake brand.

H&M’s 368 stores in the United States,

August 2015

At Abercrombie & Fitch, comparable

robust gains. Gap, Abercrombie and their

But in reality, it will be difficult for Gap

set to grow by 65 this year, get a fresh

and other US brands to catch up to the

shipment of styles daily. Uniqlo, owned

likes of Zara, for example, which owns

by the Japanese giant Fast Retailing, is

garment factories around the world, giving

most like Gap in that it sells basics. But

it a measure of control that permits a

Uniqlo markets basics at cheaper price

quick response to emerging trends. That

points, in dozens of colours in high-tech

“vertically integrated” setup lets fast-

fabrics, and offers midprice collections by

fashion brands constantly deliver new

designers and celebrities. The company’s

styles to stores, often in small batches.

US footprint has grown to 42 stores in

Fast-fashion retailers have come under

four years, and more are planned.

increased scrutiny, however, for their heavy

In September, yet another foreign fastfashion brand is set to land on US shores.

reliance on low-wage factory workers, many of whom labour in dangerous,

Retail

57

58

gruelling conditions, as well as for the environmental toll of throwaway fashion.

Nevertheless, it takes far longer for Gap, which does not own any factories, to source new designs and get fresh styles on its racks. The company hired new design chiefs this year, but in a telling sign of just how much it lags in speed and flexibility, Peck said that their new products would not show up until next spring, because the brand had already bought the bulk of its stock for the rest of this year.

US brands are also saddled with the remnants of a shopping mall culture that is fast vanishing. Many of Gap’s coming store closures are expected to be at malls that have suffered from declining foot traffic and slumping sales. The national retailers that once anchored those malls, like J.C. Penney and Sears, also are floundering, at the same time as e-commerce is picking up steam.

BY CONTRAST, THE foreign labels setting up shop in the United States are Portfolio

Retail

59

Clockwise: Shoppers walk past the entrance to the UNIQLO store on Fifth Avenue in Midtown Manhattan; A model walks the runway during the Paris H&M show; H&M President Daniel Kulle attends the launch of David Beckham’s new Bodywear at H&M Times Square; Banana Republic Flatiron Flagship Store in New York City; Novak Djokovic of Serbia attends Uniqlo promotional event at Uniqlo Shanghai Global Flagship store.

jeans: true skinny, slim straight, girlfriend, authentic boyfriend, sexy boyfriend, always skinny, curvy skinny, real straight, perfect boot, long & lean and legging.

“There’s no creative direction, there’s no creative identity, and the shopper can perceive that,” said Davidson Hudson, of the Editorialist. “Gap needs to say: Here are the two silhouettes that we think are important this season. These are the two we’re standing behind. Here’s your perfect pair.”

getting their pick of the best real estate, said William Susman, managing director

United States, had similar advice for his

at Threadstone Partners, a New York

US rivals. He said that H&M still saw “a

consumer and retail advisory firm. And

huge opportunity to grow for the next

overseas retailers, from the start, are used

couple of years” in the United States.

to operating all of their locations as hightraffic, high-grossing flagship stores, he said.

But most pressing for declining brands,

“If you don’t keep constantly updating your fleet, if you don’t have the right trends and collections season after season, your

retail specialists say, is bringing a dose of

customers are just going to go somewhere

inspiration to an outdated assortment of

else,” Kulle said in an interview.

clothing. That hasn’t happened yet. Gap

August 2015

Daniel Kulle, president of H&M in the

“You have to keep your customers

appears to be sticking to its basics strategy,

curious,” he said. “Then they have to keep

albeit in a dizzying array of choices. Gap

coming into your stores to see what’s

offers at least 11 categories of women’s

new today.”

61

Essentials

THE BEST OF LEISURE AND LIFESTYLE

Scottish Cruising

Š 2015 New York Times News Service

Photos: Getty Images

The Scottish coastline has more than 800 islands, the most famed of which are the Hebrides. There are numerous cruises to explore these islands that suit every wallet and taste, reports Robin McKelvie.

62

Essentials

Travel

A

s a travel writer I’ve been lucky enough to embark on a multitude of cruises around the

world. As a Scot I’m proud to say that the most dramatic and beguiling coastline I have ever sailed is in my native land. I’m in good company as the British Royal Family regularly charter one of the cruise ships that open up the epic scenery of the Hebrides, an epic land of mountains, isles and big skies. Composer Mendelssohn was so enchanted he penned a symphony in their honour. Join me now as I show you how you can embark on your very own Hebridean odyssey.

Few Scots even realise that their coastline is home to over 800 islands or that even without those islands it is three times larger than that of England’s coast and twice the size of the Spanish and French littorals. The ‘Hebrides’ is the Scottish Gaelic word for the isles that lie west of the Kintyre Peninsula on the country’s wild western coast. There are the less remote, smaller isles of the Inner Hebrides, the largest of which is Skye.

Beyond the Minch (an often tumultuous stretch of water) lies the otherworldly

Above: Majestic Lines operates the Glen Massan and Glen Tarsan, with the Glen Etive coming on stream next year.

Right: Port Ilein is one of numerous small harbours scattered across the Hebrides.

Outer Hebrides, a 210km long archipelago where the locals cut peat to heat their homes and man plays second fiddle to the

palatial of ships later. There has never

vagaries of nature.

been a greater number of options to

The Hebrides are alive with wildlife.

The mineral rich waters – which are warmed by the Gulf Stream – are home to

explore as operators realise just what the Hebrides offer.

Family-run Majestic Line operates

everything from porpoises and dolphins,

two wooden ships. I’ve been on both

through to massive basking sharks and

the Glen Massan and her sister ship the

all manner of whales, including killer

Glen Tarsan, elegantly converted former

whales. The waters and skies are also full

fishing boats that sleep a maximum of 12

of a multitude of seabirds, with one rock

passengers in some luxury. With so few

stac in St Kilda housing a quarter of the

passengers everyone bonds quickly over

world’s gannet population. The Hebrides

the communal meals and you get to know

is one of the few places in the world where

the crew of four very quickly. Passengers

you can see sea eagles in the wild, an

are always welcome to pop up to the

impressive sight from the decks of a ship.

bridge to chat to the captain. I spent many

The trick to cruising the Hebrides is to find both a vessel that suits you as well as the right itinerary. For utter luxury it has

hours up there poring over the charts and learning how to plot a course.

Their cruises are supremely relaxed

to be the Queen’s choice, the Hebridean

with a couple of shore visits a day. A

Princess, but we will come to that most

highlight of my Inner Hebridean trip was Portfolio

63

can handle the big seas with stabilisers allowing a smoother passage for guests prone to seasickness.

Barlow is a qualified diver and on our trip his skills were pressed into action when he plunged into the waters to free up a tangled anchor. One passenger joked that he should dive down again to pick up king scallops and he duly obliged! Rob’s skipper skills got us into St Kilda for two full nights and days and also out to a flurry of tiny isles like the Monachs you just cannot normally reach in larger ships.

Rob is also adept at making sure guests have as much time ashore as they need.

Argyll Cruises are a new operator this year. Their 20m long Splendour is another converted fishing vessel that sleeps only seven guests. Unusually she offers

Below: Lagavulin is a single malt distillery on the island of Islay.

Bottom: The seafood on Majestic Lines is as fresh as it can get.

landing on Port Ellen on Islay to spend a morning exploring a trio of whisky distilleries, before returning to a lunch laden with local prawns and langoustines.

The itineraries are flexible with guests very much having an input. There will be even more choice next year when their new purpose-built vessel, the Glen Etive, comes on stream to offer 10-day cruises to Islay, the Outer Hebrides and St Kilda, as well as six-day cruises to Skye.

Last year a new operator, Hebrides Cruises, started plying Hebridean waters.

I went out on one of their first cruises to the epic archipelago of St Kilda, which was the first place in the world to be recognised twice on UNESCO’s World Heritage list, both for its human and its natural heritage. St Kilda is the sort of truly unique destination that you just cannot get to spend proper time on any other way. Their sturdy rather than comfortable Elizabeth G is an old Norwegian rescue vessel captained by Rob Barlow that sleeps a dozen guests. She August 2015

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Travel

Their sturdy rather than comfortable Elizabeth G is an old Norwegian rescue vessel captained by Rob Barlow that sleeps a dozen guests.

itineraries on the waters of the Firth of

Kilda. Their adventures come themed around the likes of wildlife or villages and gardens. The small size of this vessel

Above: The Elizabeth G is a converted Norwegian rescue vessel captained by Rob Barlow.

makes her an attractive charter option if you have a family group. As a family-run

Their Columba Restaurant is one of the

operation they understand the needs of

finest restaurants I’ve come across on any

families too and can tailor menus towards

ship. Superb wines are accompanied by boat

dietary preferences and itineraries.

fresh local lobster, lamb from the Scottish

All of the vessels I’ve been on offer

Borders and the best of Scotch beef. After

Clyde, with the short cruising distances

superb local produce and a warm Scottish

the decadent lunches and dinners the

allowing plenty of shore stops. Our cruise

welcome, but the Hebridean Princess

Tiree Lounge awaits with its champagne

circled around the fertile, scenic isles

takes things to another level completely.

and premium single malt whiskies, best

of Arran, Bute and Cumbrae, before

This former ferry is more a grand floating

enjoyed with another lingering Hebridean

rounding Ailsa Craig, a dramatic rock

country house hotel than a ship, with

sunset. Or to accompany a ceilidh. On

stac laden with seabirds that lies halfway

a level of luxury fit for royalty, perhaps

my last cruise with them this raucous

between Scotland’s largest city of Glasgow

why the British Royal Family charter

traditional celebration erupted across

and Belfast in Northern Ireland.

her for their Hebridean escapes. For

the lounge much to the delight of the

Pushing further afield Argyll Cruises

them she plays the role the former Royal

international guests who had never done

skipper Iain Duncan (an ex-Majestic Line

Yacht Britannia used to. You literally get

any Scottish dancing before.

man) is offering trips around the Inner

the chance to see what it is like to be a

and Outer Hebrides, as well as out to St

cruising royal.

Quality is key with the Hebridean Princess even with the shore landings.

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From top to bottom, right: St Kilda houses a quarter of the world’s gannet population; The harbour town of Tobermory is the largest settlement on the Isle of Mull; A stormy sky over the iconic Eilean Donan Castle on the road to the Isle of Skye.

One day we bashed ashore on to a rough pebbly beach in the ultra remote Shiant Isles. We returned from a ramble around the rocky coastline to find a drinks tent had been set up in the wilds complete with warming drinks. In the Outer Hebrides they surprised us again on a sweeping Atlantic beach at the end of a walk with a champagne picnic with Scottish stew, followed by strawberries and cream.

Cruising the Scottish isles does not end there. Next year I’m embarking on the National Trust for Scotland’s ‘Isles of my Heart’ cruise, with Captain Alistair McLundie sailing guests around his Hebridean ‘backyard' on this cultural cruise aboard the Pearl II. Also in the diary is a cruise on the Lord of the Glens.

This unique vessel is able to tackle Scotland’s historic canal network, but can also head out into the Hebrides, the mystical isles that are so beloved of the British Royal Family, that so inspired Mendelssohn and that you can enjoy on your very own Hebridean odyssey whichever ship you choose.

August 2015

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66

Photos: Getty Images

Lifestyle

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67

Travel Patterns of the New Superrich Billionaires have their own circuit of ‘must attend’ events, and it is about business as much as pleasure, reports Robert Frank.

August 2015

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Lifestyle

business and media titans in attendance, and performances by bands like the Red Hot Chili Peppers. After that, it’s on to the World Economic Forum in Davos, then the Milken Institute Global Conference in Beverly Hills, where this year politicians like Tony Blair and Wesley Clark, along with billionaire hedge fund and private equity chiefs like Ken Griffin and Leon Black, chatted about the global economy.

The art auctions in New York in May kick off the spring. Then it’s back to Europe for the Cannes International Film Festival, the Monaco Grand Prix, Art Basel and the Royal Ascot horse race in Britain. In the summer, the wealthy

J

almost monthly in search of access,

the South of France and other resorts. A

and art collector, was lounging

entertainment and intellectual status.

conga line of megayachts rolls through

by the pool at his villa in Cap

Travelling in flocks of private G5 and

the Mediterranean from France to Italy,

d’Antibes in early June, enjoying a rare

Citation jets, they have created a new

including David Geffen’s Rising Sun and

break from what he calls “the circuit.”

social calendar of economic conferences,

vodka magnate Yuri Shefler’s Serene.

After attending the World Economic

entertainment events, exclusive parties

In late August, the car-loving rich

Forum in Davos in January, he flew to

and art auctions. And in the separate

head to Pebble Beach for the Concours

the TED ideas conference in Vancouver,

nation of the rich, citizens no longer speak

d’Elegance auto show and auctions, where

mingling with the likes of Yuri Milner, the

in terms of countries. They simply say,

last year a vintage Ferrari sold for $38

tech investor, and Larry Page of Google at

“We’ll see you at Art Basel.”

million. Then it’s back to New York for the

the “billionaires’ dinner.” Next came the

An analysis using data from NetJets,

Clinton Global Initiative for philanthropy

art auctions in New York and the Cannes

the private-jet company, and studies

mixed with hobnobbing, with swings back

Film Festival, where he threw a pool party

from Wealth-X, the wealth research

and forth across the Atlantic for the Frieze

attended by Woody Allen, Uma Thurman

firm, offers a look

and billionaire Paul Allen.

at the annual flight

Then it was time for the Art Basel

path of this elite

fair, the Wimbledon tennis tournament

travelling circus. It

and “the Mediterranean milk run” – the

starts in January

summer megayacht procession leading

in St. Bart’s, with

from St-Tropez to Portofino and Capri.

the New Year’s Eve

“We go all around the world to see some

© 2015 New York Times News Service

disperse to the Hamptons, Nantucket,

ean Pigozzi, the venture capitalist

party thrown by oil

of the same people,” Pigozzi said. “It’s a

billionaire Roman

circuit. There are a lot of parties, sure. But

Abramovich on

you’d be surprised at how much business

his estate, with

gets done.”

top celebrities and

The new rich have developed their own annual migration pattern. While the wealthy of the past travelled mainly for leisure and climate – the ocean breezes of New England in the summer and the sunny golf greens of Palm Beach in winter – today’s rich crisscross the globe

Above: Visitors look at a model of a superyacht on display at the Nobiskrug GmbH booth during the Singapore Yacht Show.

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Essentials

Lifestyle

London art fair, the autumn auctions in New York and Art Basel Miami Beach.

David Friedman, the president of Wealth-X, said that many of today’s rich were self-made entrepreneurs who prize business connections and making deals over spending time on the beach. Being able to say you chatted about self-driving cars over drinks in Sun Valley with Sergey Brin of Google conveys far more status than a winter tan from skiing in Gstaad.

Just as they want a return on their investment and philanthropy, rich people now want a return on their leisure time.

“When they travel or socialise, there has to be some redeeming business value,” Friedman said. “They want a transaction, even from their social calendar.”

The calendar is a closed loop of access

Co conference in Sun Valley in July, while

In fact, so many rich people have been

because the rich want to be seen, he said,

fashion devotees go to Fashion Week in

joining the circuit that Pigozzi said a

but only by one another. With outrage

New York and the couture shows in Paris.

new “supercircuit” is emerging, one that

over inequality driving more wealth

The foodies head to the Aspen Food &

has VIP events within the VIP events.

underground, flashy spending and public

Wine Classic in June and to Italy in white-

At the TED conference, the aptly named

hedonism have become less fashionable in

truffle season.

“billionaires’ dinner” held nearby has

very wealthy circles. Yet the competition

“It’s the ‘birds of a feather’

become the most sought-after ticket. And

for status among newly minted

phenomenon,” said Patrick Gallagher,

true media moguls now attend the Cannes

billionaires has never been stronger.

head of sales for NetJets. “These events

Lions International Festival of Creativity, a

give them a sense of security and of

few weeks after the Cannes Film Festival.

“They can be a schizophrenic group,” Friedman said. “They want to be private

belonging. It’s people of similar tastes and

and they don’t want to be public targets.

similar interests.”

“Lions is now the important one,” he said.

“Cannes has become too mainstream.”

But they want a community. These selective events over the course of the year give them that community of likeminded people, without having to deal with the public.”

Granted, some of the superrich attend only one or two events on the calendar.

And the circuit has offshoots depending on interests. Art collectors will be heavy on the art fairs and auctions but may attend little else. The equestrian crowd flocks to the Kentucky Derby in the spring and the Keeneland yearling auction in September; media titans go to the Allen &

From top: Texas billionaire Robert Bass stands with a model of a planned supersonic business jet; Roman Abramovich is famed for his annual New Year’s party.

Portfolio

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Essentials

72

Cuisine

T

exas cattle, Turkey red wheat and Pizza Hut all helped build Wichita on the Kansas Plains. And

in its own quiet way, so has the Thursday Afternoon Cooking Club.

For the past 124 years, its members have cooked through generations of culinary trends both excellent and unfortunate, holding together what is said to be the oldest continuously operating club devoted to what its founders called the exchange of ideas in cooking and domestic science.

The club should “stand for the higher and better things in life,” its founder

124 Years Old and Counting The Thursday Afternoon Cooking Club in Wichita may be the world’s oldest, but it is about a lot more than food, reports Kim Severson.

wrote, but always honour practical cooking.

with curry powder, or orange-scented muffins baked in extra-small tins – might have debuted in a traditional women’s magazine or a mass-market cookbook, but they had enough appeal to be made over and over again.

The weight of all that history hovers over every luncheon. Sure, the members know a ladies’ cooking club is anachronistic, but they feel like members of a baseball team on a historic winning streak. No one wants to mess it up. So they follow the rules as they were written in 1891.

Cooking club meetings have priority over

“What you are talking about is a live

all other engagements. New members can

version of a community cookbook,” said © 2015 New York Times News Service

chicken Florentine phyllo pie seasoned

come in only through nomination and a

journalist Laura Shapiro, who wrote about

may best be categorised as an aspirational

vote. Three members host each luncheon

women who cooked at the turn of the last

version of the middle-class culinary

and must cook and present the food

century in her book Perfection Salad. “The

canon. It is food that fed a specific slice of

themselves, serving plates from the left

fundamental thing going on there,” she

America, reflecting not only the nation’s

and removing them from the right. Older

said, “is very personal cooking with huge

penchant for fads and shortcuts but also

women who can’t host luncheons anymore

emotional value.”

the delicious power of a roast made by

become treasured honorary members. And

someone who cares. The recipes – like

when a member dies, the cooking club is to

The recipes the cooking club codified

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73

deliver a meat-and-cheese tray to the family.

“Structure is really the reason it survives,” said the departing president, Melody Moore, who is the kind of cook who will have warm muffins and homemade sand plum jelly waiting for guests who stop by for coffee.

The food can seem quaint in a world of ramen burgers and sous-vide machines.

The club’s 1922 cookbook holds excellent takes on stalwarts like date-nut bread and stewed chicken with hand-rolled noodles.

Modern menus are kind of a mash-up between James Beard and the Pioneer Woman, with a little Barefoot Contessa thrown in.

A recent lunch menu at the ranch home The cooking club began as part of

of Barbara Mohney, 70, a retired high school principal whose great-grandmother was a founding member, featured cold yoghurt soup studded with avocado and chopped cucumbers and a crisp green “fiesta” salad with cold chicken tossed in lime-cilantro vinaigrette. Dessert, served in covered dishes donated by a member who died, was a strawberry pot de crème whose secret ingredient was a box of lemon Jell-O. Gracious entertaining is a key component.

“Today, so many people want to go out to eat, you can’t find people who really want to entertain,” said Jodie Louis, a sevenyear cooking club veteran, who at 83 is the oldest member.

But a certain degree of culinary exploration also matters. Members share the name of a new butcher or tips on finding ingredients they may not have heard of before, like soba noodles or Arborio rice. When raw kale first showed up on the menu six years ago, it was news to several members.

Opposite page: A photo of members from 1957 among other memorabilia of the Thursday Afternoon Cooking Club.

Above: Members of the 124-year-old Thursday Afternoon Cooking Club share a meal.

Right: Nancy Brammer carries sugar and cream to the table during a monthly luncheon.

August 2015

The weight of all that history hovers over every luncheon. Sure, the members know a ladies’ cooking club is anachronistic, but they feel like members of a baseball team on a historic winning streak. No one wants to mess it up. So they follow the rules as they were written in 1891.

the country’s larger women’s club movement, which rose up after the Civil War and gained speed as kitchen mechanisation started to make life a little easier, the Gilded Age was starting to fade, and middle-and upper-middleclass women searched for ways to expand their intellectual and social lives. The era produced the Junior League and other groups dedicated to civic efforts like building libraries and helping refugees, along with the League of Women Voters and the Daughters of the American Revolution.

The cooking club was much more

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Cuisine

pilot examiner for the Federal Aviation Administration. She has moved on to honorary status and lives in an assistedliving centre, where several other members live. “We are not about needlepoint and bird-watching,” she said.

In the early years, the club sponsored essay contests in which young women were encouraged to ponder questions like, “Can systematical and economical housekeeping singular in focus. Its founders feared that

“We had all these bankers and lawyers

be carried on in conjunction with keeping

cooking was a dying art and that people

coming to town, and the only people

up your intellectual pursuits?” Members

who relied on servants couldn’t cook at

around here for them to marry were

knitted sweaters for soldiers in World War

all. In the minutes of the first meeting,

ranchers’ daughters,” she said. “Those girls

I and rolled bandages during World War

which featured lessons on homemade

were farm girls, and they could do a lot of

II. Lunches then reflected food rationing,

mayonnaise, oyster patties and angel food

things, but they didn’t know which fork to

with honey instead of sugar on the baked

cake, there was much hand-wringing.

pick up.”

apples, and tea substituting for coffee.

“The accomplishment of cooking is in

At the luncheon in April, questions

The lunches were educational as well.

nine times out of 10 sadly neglected among

about the historical and social importance

Members who travelled to New York at

our young ladies,” the secretary wrote, “and,

of the Thursday Afternoon Cooking Club

the turn of the century came back and

I might truthfully add, with many of the

were given polite consideration. But really,

demonstrated omelettes, which were all

ladies who depend entirely upon servants

one can overthink these things. “We are

the rage. There were debates over whether

for all their good recipes and dainty dishes

really just a small group of intelligent

commercial baking powder, new on the

if perchance they happen to have any.”

women with a shared history and an

market, would hurt their buckwheat cakes.

interest in cooking,” said Mary Ellen

It did not. A salesman showed off his

Jodie Mason, 86, an honorary

Randall, 69, who has been a member for

beaten biscuit machine in 1917. In 1934,

member, explains the reason behind the

about 15 years.

Mrs. Hex instructed members on how to

club’s birth more plainly. At the time,

Cooking club members are usually

bone a duck.

Wichita had a wave of new, wealthy

retired. Their children are mostly grown.

Although it is called a cooking club,

residents who wanted to help move the city

As a result, the youngest member is in her

its value lies beyond what the members

forward. To do that, it was going to need

early 50s. But this is not a frivolous group,

present on their best china once a month,

some young women who knew how to set a

said Mary Aikins, 89, who specialised

the women say. Over the generations,

proper table and cook a proper dish.

in aerobatic flying and worked as a

cooking club members have stood witness to births and deaths and marriage troubles.

They have looked out for one another and for their shared history.

“There just comes a time in life,” said Margaret Houston, 64 and a member for 18 years, “when your grandmother’s recipes start to matter and you realise it is your job to protect them.”

Above from left: Avocado cucumber soup, “fiesta” chicken salad and mini orange muffins, served at a gathering of the Thursday Afternoon Cooking Club; Date-nut bread, a recipe published in 1922 by the Thursday Afternoon Cooking Club and still served occasionally at the group’s meetings.

Left: Members of the Thursday Afternoon Cooking Club go over recipes during a meeting.

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Essentials

Environment

E

Sipping California Dry The lengthy drought has forced farmers to dig more wells to survive, but that is causing problems, reports Matt Richtel.

© 2015 New York Times News Service

76

arly one morning in late April,

turned yellow, and the almond husks

Parvinder Hundal stood beside

appeared smaller than usual. In February,

a hole in the ground at the edge

Hundal received emails from various water

of his almond farm near Tulare in the

districts, informing him that because of

Central Valley of California. The hole, which

a historic drought that has left reservoirs

was about the size of a volleyball and was

nearly dry he would most likely get no

encased in a shallow block of concrete,

surface water to irrigate his 1,619 hectares of

was the opening of a well, one that went

crops this summer. Not one drop.

hundreds of metres into the earth. He had

Hundal watched as his nephew, his right-

paid $100,000 to have it drilled, but it

hand man, prepared to lower pipe into the

wasn’t producing water. Hundal was hoping

hole. “We’ll have water by the end of the day,

that if he cleaned out the well, the water

I hope,” Hundal said.

would start flowing again.

On the nearby trees, some leaves had

Hundal is an optimist. An immigrant from Punjab in northwest India, he arrived Portfolio

77

There’s a well-drilling boom in the

“Nobody is bothered,” he added. “The

Central Valley, and it’s a water grab as

neighbours aren’t bothered. Everybody is

intense as any land grab before it. Drilling

doing what they’ve got to do.”

contractors are so swamped with requests

It turns out, though, that some people are

that there is a wait of four to six months for

bothered – very bothered – and are growing

a new well. Drilling permits are soaring. In

hostile. That’s because the drilling has

Tulare County, home to several of Hundal’s

serious side effects. Rampant drilling causes

almond farms, 660 permits for new

underground water levels to fall. When

irrigation wells were taken out by the end

shallow farm and domestic wells that serve

of this April, up from 383 during the same

residences dry up, the underground bounty

period last year and just 60 five years ago –

goes to those who can afford to dig deeper.

a figure rising “exponentially,” said Tammie Weyker, spokeswoman for Tulare County

When it comes to drilling for water,

Health and Human Services Agency.

there are few rules and no boundaries.

The new drill that Hundal ordered from

Generally, farmers who follow a set of modest

Texas should be up and running in a few

regulations can drill on their own land.

weeks. He says it can push 762 metres

California passed stronger regulations last

into the ground, tapping new aquifers and

year that are intended to govern underground

making way for wells that can produce

drilling. Details of the rules are still being

thousands of litres of water a minute. He

worked out. But even then, the rules won’t

plans to drill at least six wells on his various

have any real effect for 25 years or more,

farms across the Central Valley: four of

says Jay Famiglietti, senior water scientist at

them are in Tulare, and two are on property

the NASA Jet Propulsion Laboratory. “You

161 kilometres north.

drill a well on your property; you draw it

“It’s about survival,” he said. “Everybody is pulling water out of the ground.”

out, even if it means you draw from under your neighbour’s property,” he says. “You’re drawing water from every direction.”

Left: A farm served by the San Luis Canal Company, which manages the water supply for about 45,000 acres in California, in Dos Palos.

Below: Those who can afford to are drilling deeper, hoping to tap new aquifers, but those new wells threaten to arouse longdormant water disputes in the state.

in California in 1986 with little money and, through a combination of borrowing and shrewdness, he managed to make a small fortune through farming. But he’s also a pragmatist. Since he can’t count on the virtually unlimited surface water he’s been allotted in the past, he’s been looking for water underground. This year, Hundal spent $300,000 to hire a contractor to dig three wells, including the one in Tulare.

Those didn’t pan out. So he wired $670,000 to a broker in Texas to buy his own used drill. No water, no problem. Hundal will drill when he wants.

August 2015

Underground water supply isn’t fenced or restricted; it is moisture held in the soil, rocks and clay and drawn through wells like soda through a straw. The draining of the aquifers creates another hazard aboveground. As water is pulled from the spongy layers below, the ground

78

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Environment

Above: Drilling equipment on an almond farm in Earlimart, California.

above collapses, creating what is known

The value of water has become acutely

as subsidence. Where subsidence is the

real to Miller’s great-great-great-grandson

worst, the land can sink as much as 30

Cannon Michael, who is the president of the

centimetres each year.

Bowles Farming Co.

Before the California Aqueduct system

After 15 years working at Bowles he

was built in 1963, farmers had relied

became president of the family enterprise

on wells for their water, which led to

just last year. It wasn’t the easiest time to

the land collapsing. The surface water

take charge.

irrigation meant less pumping and led to

Sitting at a conference table in his office,

“widespread groundwater recoveries, and

Michael displayed a Google Earth map on

subsidence essentially ceased in many

a large monitor. The map showed the area

areas,” notes Michelle Sneed, a senior

in and around his 4,249-hectare farm. On

scientist at the US Geological Survey.

the map, some areas were yellow, others red.

Scarcity of water has always been an

Yellow areas, he said, had suffered moderate

issue in the Central Valley; this part of the valley gets only about 25 centimetres of rain a year. A German immigrant named Henry Miller, who was a pioneer in the region in the latter half of the 1800s, developed a system of canals and founded

subsidence. Red meant real trouble.

Near the bottom of the map was a spot swirling with yellow and red: Sack Dam. “That’s our diversion point,” Michael told me.

Sack Dam is the place on the San Joaquin

surface water. That is particularly important now because, in times of scarcity, these

the region’s first irrigation company for

River where surface water finishes its long

senior water rights holders get their water

farmers. He “realised early on that water

journey from the north and is diverted onto

allotment before farms with lower-priority

was ultimately of higher value than gold in

the farms of Michael and his neighbours.

rights, like those owned by Hundal.

California,” according to a biography edited

Because Michael’s farm is a parcel from the

by the German Historical Institute.

Miller farm, he has high-priority access to

But now there’s a problem for all the farmers, no matter what rights they have Portfolio

79

has to do to survive.” But his tone hardened when he talked about what could amount to a $10 million bill to install a pump to push the water uphill at Sack Dam if the subsidence worsens. “We could make a legal case that these folks are causing the issue,” he said of the farmers who are drilling near the dam.

That sentiment is shared by a number of the senior water rights holders, says Chase Hurley, the manager of the San Luis Canal Co., which manages water for about 18,210 hectares, including Michael’s land. Hurley says the farmers with senior rights have been rumbling about a way to “get this thing straightened out” or else go after the other farmers in court. They are focused on drillers within about eight kilometres of Above: Parvinder Hundal next to a canal adjacent to his almond orchards, water to which he has no rights at the moment, in Earlimart, California.

Below: Cannon Michael of the Bowles Farming Company with his sons in Dos Palos, California.

the dam.

But geology isn’t neat, and the underground aquifer is like a giant earthy sponge, explains Sneed of the US Geological Survey. And not all the holes in

“Water traditionally flowed with

one well might drain a hole at a distance

run uphill.”

and not affect one nearby. There is no

Michael doesn’t rebuke Hundal or others

to surface water: heavy drilling by farmers near Sack Dam is causing the land to cave in so much that the water is having trouble taking its normal path. Further subsidence will make it hard for water to get through Sack Dam to Michael’s farm and those of his neighbours.

August 2015

the sponge connect; sometimes, drilling in

gravity,” as Michael put it. “It isn’t going to

simple way, she says, to trace a crater

for drilling. “You take away a guy’s surface

to the particular well that sucked the

water,” he said, “and he’s going to do what he

groundwater out of it.

Essentials

80

Sport

A Sport Blooms in a Barren Land In Canada’s frozen north unique obstacles have to be overcome to play a soccer tournament, reports Jere Longman.

T

he boys’ soccer team from Clyde River arrived hours before the most important tournament of the

year in the Canadian Arctic. At the airport, the players climbed into taxis and pickup

community. “You know how much a can of

in-a-lifetime trip,” Iqaqrialu said. “Some

soda costs at home? Seven dollars.”

told me they were so excited, they hadn’t

Since the school year ended in Clyde River and the gym closed, the team had

surrounding tundra.

been training outside on a dirt road and a

resonated as another step toward personal

For Iqaqrialu, 33, the tournament

concrete basketball court, Iqaqrialu said.

renewal. He had coached a girls’ team

indoor territorial tournament in Iqaluit

Lacking fancy soccer gear, the players

from Clyde River at the Arctic Winter

recently, in one of the world’s coldest and

would wear orange-and-white basketball

Games in 2002, at age 19. It had been a

most remote soccer hotbeds. Nine boys and

uniforms in the Nunavut tournament. For

proud moment for the Inuit hamlet on

nine girls would be selected to represent

some, this would be their first time playing

the north-eastern coast of Baffin Island.

the northern territory of Nunavut in the

on artificial turf or participating in a

Only two years earlier, according to a

under-16 division at the Arctic Winter

tournament away from home. “It’s a once-

newspaper account at the time, there had

Seventeen teams were scheduled for the

been no team and only one soccer ball for

Games in Greenland next March.

“This is their World Cup,” said Gabriel Assis, the chief referee for the Nunavut tournament.

The players from Clyde River were shy and quiet beneath their ball caps and sunglasses. If not for this summer © 2015 New York Times News Service

slept all night.”

trucks, their luggage piled like rocks on the

tournament, said Martin Iqaqrialu, the coach, his players would be hunting seals, fishing for char or hanging around home above the Arctic Circle.

“It’s too expensive for some to hunt,” Iqaqrialu (pronounced ee-kha-kree-AH-loo) said of the cost of living in such a detached

Lacking fancy soccer gear, the players would wear orange-and-white basketball uniforms in the Nunavut tournament. For some, this would be their first time playing on artificial turf or participating in a tournament away from home.

the entire community of about 950 people.

“The youngest coach ever!” Iqaqrialu said, pumping his arms.

But amid the magnificent fjords and glaciers of Clyde River, where artists are celebrated for their whalebone carvings, Iqaqrialu said that by then his life had already turned to despair after a younger brother hanged himself. A stepbrother would also take his own life.

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the 1970s and ’80s. The suicide rate in Canada’s far north is about 10 times the national average.

For more than a dozen years, Iqaqrialu said, he sniffed propane gas, once setting a sombre personal record of emptying 21 hand-held canisters in 24 hours. His teeth have been ravaged. “I didn’t know who I was or where I was,” he said.

In 2013, Iqaqrialu, a small, thin man who favours a moustache and an Ottawa Senators cap, began to emerge from his propane haze, he said. “I took a look at myself,” he said. “What I saw was a useless guy.” He entered rehab in Ottawa and

Opposite page: The Amaruit team huddles after winning a soccer match at a tournament in Iqaluit, Nunavut, Canada.

Above: A soccer ball lies abandoned on the iced-over shores of Frobisher Bay. Right: Boys play soccer on a dirt lot.

appeared in a documentary called Tony, Back From the Brink. The title referred to a friend, Tony Kalluk, who led a troubled,

about five years when Norman Natanine,

Assis, the chief referee, stood at the

violent life before becoming a counsellor to

14, the team captain, approached him

front desk of the Frobisher Inn, using a

Iqaqrialu and others.

two months ago. The boys had no one to

pair of scissors to make yellow cards and

guide them, and the Nunavut territorial

red cards from construction paper. “Think

said of Iqaqrialu in the documentary. “I

tournament was approaching. A chance

FIFA does this for the World Cup?” he

believe in him. Maybe that’s all he needs to

to play in the Arctic Winter Games was

said, smiling.

make him believe in himself again.”

on the line. Iqaqrialu could not say no. “I

“Martin needs me; I know that,” Kalluk

Iqaqrialu supervised the gym in Clyde River, but he had not coached soccer in August 2015

There are about 600 registered players for

looked at his face,” he said of his captain.

soccer in Nunavut, more than there are for

“It was a serious face.”

hockey, and perhaps 1,000 total participants,

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Sport

officials said. Soccer required less expensive gear and fewer players than hockey. It helped provide a year-round activity, a sense of community, a connection to the outside world and a distraction from social problems like alcoholism, domestic violence, abuse and the alarming suicide rate.

“Soccer is more than a sport,” said Kim Walton, a teacher who will coach Nunavut’s under-16 girls’ team at the 2016 Arctic

costs and geographic paradox. Soccer is

Winter Games. “It can be a lifesaver for

best played on plush grass, but nearly all

some of these kids.”

of Nunavut is tundra. So the sport has

Sports, like everything in the Arctic,

adapted. Soccer is played mostly inside

demand constant, patient improvisation.

on basketball courts. Iqaluit (pronounced

Nunavut makes up about 20 per cent of

i-HAL-oo-it or i-KAL-oo-it) is one of only

Canada’s land mass and is more than twice

three villages in the territory with artificial

the size of Texas, but it has only an estimated

turf. The selection tournament for the

36,000 inhabitants, predominantly Inuit.

Arctic Winter Games would be played on

There are no roads connecting the 25

a synthetic surface fitted to the floor of a

communities in this vast territory. Every trip

hockey rink.

requires a snowmobile, a dogsled, an allterrain vehicle, a boat or an airplane.

Adjustments must be made for immense distance, mercurial weather, extravagant

“Around here, you’ve got to be flexible

a recent Friday, but other communities remained shrouded. Half of the teams

with a capital F,” said Dawn Currie, the

had not arrived before the scheduled

tournament coordinator.

opening match. “Weather will make or

The early fog began to lift in Iqaluit on

break this tournament,” said Joselyn Morrison, president of the Nunavut Soccer Association, a volunteer organisation.

The schedule was shuffled on the fly. The Iqaluit Huskies, a local girls’ team, opened against Arctic Bay, the northernmost team, and the home side quickly established its comfort and familiarity with the turf. The playing surface conformed to the rink here, where turf is installed from May to October.

Top Left: (clockwise) Tactical diagrams in a notebook left behind after an indoor soccer tournament; A girls’ team from Coral Harbour warms up before a soccer tournament; Girls take a break between matches; A boy makes his way down a slope overlooking Iqaluit, the capital of Nunavut, Canada.

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83

Futsal rules applied for the soccer tournament: five players on a side, no use of the hockey boards for passing. The ball was smaller than a standard soccer ball, and less bouncy. Arctic Bay tied the score before

Top Left: (clockwise) A team of boys from Clyde River celebrates a victory; Children play in a puddle; Medals await the first- and second-placed girls and boys teams; The lower jawbones of a bowhead whale form a 20-foot-tall arch.

The roster for the Arctic Winter Games was announced. Two of Clyde River’s players were selected. They joined the others to take passport photos. Iqaqrialu became choked up with gratitude. “My dream came true,” he said.

halftime, 1-1, but Iqaluit possessed more

As Iqaqrialu prepared to fly back to Clyde

depth and skill and pulled away to win, 5-1. opener, 4-2, using speed and muscularity.

River, he filled his backpack with ginger

tournament, every team had arrived. On

The team made the semi-finals but

ale, expensive but cheaper in Iqaluit than

short notice, the soccer association spent

lost, 3-0, to Rankin Inlet, the eventual

at home. He planned to spend part of the

$9,000 chartering a plane for the boys’ and

champion. In the dressing room, Jenna

summer kayaking with distressed youths,

girls’ teams from Cape Dorset. They had

Palituq, a college student, congratulated

assuring them that there were alternatives

been stranded at home by fog, and without

the players and Iqaqrialu, the coach. “He’s

to destroying themselves.

scheduled weekend flights, they were in

helped out a lot,” Palituq said. “Most of the

danger of missing their only opportunity in

time, we don’t have anybody to attend the

that you can turn your life around,”

nine months to play against other villages.

tournaments. Finally, we’ve got someone to

Iqaqrialu said. “I’m proud of my team.

represent the community.”

I’m proud of myself.”

For the second day of the Nunavut

In the boys’ bracket, Clyde River won its August 2015

“I’m trying to show the community

Essentials

84

Culture

Russians Tighten Their Belts

Š 2015 New York Times News Service

Photos: Getty Images. Reuters

Sanctions have caused a recession in Russia, and that is even affecting the spending habits of the wealthy, reports Neil MacFarquhar.

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F

or sale: Nine-bedroom, 15-bathroom, 7,804-squaremetre family home with singular

amenities: a 16-car garage, indooroutdoor swimming pool, movie theatre, wine cellar, dining table that seats 22, private dental suite and ambient heat throughout the 1.4-hectare property to vaporise snow.

Asking price: ¤100 million, or about $110 million, though a real estate agent says that if you catch the owner on the right day, he might let the one-storey behemoth go for a mere ¤80 million, given the lacklustre interest seen during its year on the market.

Billboard-size pictures of children scattered throughout are not included, by the way; life-size female torso forged from small bullet casings is negotiable.

Sounds steep, but you can’t beat the location. With President Vladimir Putin and Prime Minister Dmitri Medvedev living a few kilometres down the forested road, the area is crawling with undercover FSB agents and zero reported burglars.

Kremlin security will most likely remove the dial telephone that is part of its closed network, however.

The area, Rublovka, has long housed Russia’s elite: Soviet leaders like Leonid Brezhnev, celebrity writers, actors and filmmakers. On days when the police do not seal the leafy two-lane road to Moscow for hours so Putin can speed to the Kremlin unimpeded, it is only about a 40-minute drive to downtown.

A mixture of Greenwich, Connecticut, and Beverly Hills, California, Rublovka is a patchwork of gated communities combining vast wealth with often dubious taste – the roofs of faux French chateaus

Top: People walk past a Louis Vuitton pavilion shaped like a giant suitcase in central Moscow. The pavilion was erected to house a travel-themed exhibition. St. Basil’s Cathedral (L) and Kremlim’s Spasskaya Tower are pictured in the background.

Above: Models present dresses from Podium Concept during the opening night of the Millionaire Fair in Moscow.

and Italian palazzos peek out amid high walls and even higher trees.

But Russia is slouching through a

economy reeling from the oil-price crash

Putin and his Kremlin cohorts have

and Western economic sanctions over

tried their best to minimise the downturn,

recession, and Barvikha Luxury Village –

Ukraine, the ruble has sunk precipitously,

yet autonomous analysts present a darker

a neatly groomed shopping mall housing

inflation is up sharply and real wages

picture, with only a halting recovery, if

brands like Prada and Gucci as well as

are shrinking for the first time in years,

any, expected next year.

two car dealerships, Bentley and Ferrari/

forcing Russians – even the wealthiest – to

Maserati – is deserted most days. With the

make do with less.

August 2015

While Putin told Russians recently, “We have stabilised the situation, absorbed the

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Essentials

Culture

negative short-term fluctuations and are now making our way forward confidently through this difficult patch.” Rublovka’s sluggish real estate market tells a different story. Experts, including economists and real estate agents, said sellers are either desperate for cash or fleeing abroad, taking their money with them, while buyers are shunning the Rococo-style castles that are something of an area trademark.

“People do not think that they will make the same type of money in the future, so they don’t want to spend what they have now,” said Leonid Krongauz, a founder of Kalinka Realty, which has been trying to sell the ¤100-million villa. “The political and economic instability prevents everyone from buying real estate.”

Top: A real estate agent in the living room of a house for sale in Rublovka, a patchwork of gated communities combining vast wealth with often dubious taste, outside Moscow.

Though just a short drive from Moscow, the elaborate home has yet to sell.

Above: A woman tries on a coat in the luxurious World of Fur and Leather store in Moscow.

There are exceptions, he and others noted. Political and business barons from distant Russian regions still covet

to have taken up residence in town.)

Various real estate agents said no

uncertainty convinces many that their savings will be safer abroad.

a prestigious Moscow address, as do

Rublovka clients wanted to speak publicly

Ukrainian tycoons seeking to escape the

about emigrating lest they be labelled

income people, who are trying to invest

simmering war. (The deposed Ukrainian

part of the “fifth column” supposedly

money abroad – in Bulgaria, the Baltics,

president, Viktor Yanukovych, is rumoured

undermining Russia’s interests. Yet the

Montenegro,” said Evgeny Gontmakher,

“I know a lot of people, even middle-

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87

a prominent economist often critical of government policy. “In this situation it is safer to sell in Rublovka, to take the money abroad and to live somewhere else.”

Of course, many people remain perfectly happy in Rublovka, support Putin and have no intention of leaving.

A brick turret marks the entrance to Tagankovo, the gated community where Alexander Kulikov, 53, has lived since 1994. He has founded a half-dozen businesses, including an optic lens manufacturer, a popular fashion website and a wholesale housewares company that distributes Ace Hardware here.

Last fall, after the ruble crashed and the sanctions raised the cost of capital, businessmen borrowed money at 40 per cent, he said, accepting zero profit or worse just to survive. The rate has since dropped

Above: President Vladimir Putin is confident that the Russian economy has been through the worst and will now start growing again.

Below: Visitors attend the opening night of the Millionaire Fair in Moscow.

to about 25 per cent, and he renegotiates his financing monthly, he said.

“People do not think that they will make the same type of money in the future, so they don’t want to spend what they have now,” said Leonid Krongauz, a founder of Kalinka Realty He said the tone of conversation on Tagankovo’s tennis court has changed of late. “We used to talk only about how bad the situation was,” said Kulikov, speaking in the secret den of an American

“There used to be feta cheese from Greece.

Russians say that they are willing to live

neighbour that was hidden behind a

Now Belarus makes it, but it is not the

under hardship rather than to accede to

concrete wall in his basement movie

same. Am I going to die from that? Of

American pressure.”

theatre. “Lately, the volume of such

course not. I don’t know anyone whom the

discussions has gone down. We have

sanctions are killing.”

started to talk about women again.”

Another neighbour, Boris Chirkov, 77, led the team that once helped install the

Putin has wrapped the need to endure

All kinds of spending habits have changed. Kulikov used to seek out imports like American meat, now banned under

economic hardship in fervent nationalism.

Russian sanctions, but he said he and

“Optimistic words are used to describe

his Rublovka neighbours buy Russian

hotline linking the White House to the

a sinking economy,” said Konstantin

these days, even when it comes to wine.

Kremlin. After the Soviet Union collapsed,

Remchukov, editor of The Nezavisimaya,

“It might not be the same as the French

he founded a telecommunications

a daily newspaper in Russia. “All this

or Italian wine that we are used to,” he

company and moved to Rublovka. “This is

propaganda and patriotism casts a huge

conceded, “but the wines have a very

what makes me uncomfortable,” he said.

shadow on the situation. Seven out of 10

patriotic nose.”

August 2015

Essentials

88

Other Business

Bolivar Boats Origami-like boats made from Venezuela’s rapidly depreciating bolivar bills sit on the cash register of a small fruit and vegetable store in Caracas.

Cashier Marisol Garcia makes the bolivar boats to illustrate roaring inflation and the currency’s tumble on the black market, where even the country's biggest bill is worth just 16 US cents.

A debilitating recession and a drop in oil prices have harmed the OPEC nation’s ability to provide dollars through its complex three-tiered currency control system, pushing up the black market rate at a dizzying speed. The bolivar sank past 600 per US dollar, compared with 73 a year ago, according to the website DolarToday.

Garcia has to empty her cash register more than 20 times a day and stores notes in shoe boxes in a locked cabinet.

World Santa Congress Copenhagen residents thought Xmas had come early when dozens of Santas

The World Santa Claus Congress dates

brought some Christmas cheer to the

back from 1957 when its founder, Bakken

Copenhagen summer as they began their

entertainer Professor Tribini, decided to

annual World Santa Claus Congress.

bring Santas together for some summer

Drawing Santas from around the world, the three-day event in

festive fun.

“Santas come from all over the world to

the Danish capital hosts a range of

enjoy beautiful Copenhagen and to share

activities including parades, a Santa

and exchange information and ideas

Obstacle Course and shows at the

about how to make the world a better

Bakken amusement park. It also

place to live for everyone,” Santa Stan

allows participants – this year 125

Miller from Alabama said. “That is what

Santas from 15 countries – to discuss

being Santa Claus is all about.”

Origami Wedding Dresses Photos: Reuters

professional issues.

finale of the annual Cheap Chic Weddings Toilet Paper Wedding Dress Contest in New York. Ten designers vying for a $10,000 prize painstakingly put them together from the most basic materials.

The winner was a tuxedo-style

The wedding dresses have it all – long

halterneck dress with a removable

trains, full layered skirts, floral appliqués,

jacket, accessorised with a top hat and

ruffles and sparkling bodices. Their

bow tie, by Donna Pope Vincler. She

detailing is the kind you see on designer

said it took her about three months,

gowns made of silk and lace. But they’re

22 rolls and lots of tape and glue to

not. They’re all made out of toilet paper.

make. The winning dress will be turned

The gowns were showcased at the

into a ready-to-wear gown.

Portfolio

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