Portfolio | August 2014 by Motivate Media Group

Portfolio Exclusive to Emirates First Class and Business Class

DOWNWARD SPIRAL Europe’s Deflationary Pressure JAPAN’S MICRO-CARS A Small Motoring Problem HIGHER EDUCATION Brazil’s University Boom

Tim

Cook

Making Apple His Own

Issue 104 ■ August 2014

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This issue AUGUST 2014

Portfolio

Exclusive to Emirates First Class and Business Class

Cover Story 28 Tim Cook, Making Apple His Own Critique has been levelled at the Apple CEO for a lack of innovative products and a slowdown in growth. But Cook is not Steve Jobs and he’s doing things his own way.

Features 34 For-Profit Universities Fill the Gap

50 Big Problems for Micro-cars

Brazil’s pledge to get more students into higher education

The Japanese love their cheap and fuel-efficient micro-cars,

has led to a boom for private sector educational institutions.

but now the government is targeting them with higher taxes.

40 The Everything Boom

54 Indie Music’s Digital Drag

Currently, nearly every asset class is expensive by historical

Independent music labels are claiming that they are

standards. This means relatively low returns for investors

vulnerable to strong-arm tactics by internet giants such as

who are now targeting increasingly risky investments.

YouTube and Amazon.

46 The Dangers of Deflation

60 Diesel Challenges Oil Refiners

European inflation figures have slumped to the point where

Diesel-powered cars are now the biggest sellers in Europe.

deflation is close to becoming a reality, which could derail

That is a problem for refineries that are geared towards petrol

the economic recovery.

production.

Portfolio

Exclusive to Emirates First Class and Business Class

Essentials 63 Isle of Wonder Crete, the legendary birthplace of Zeus and originator of the oldest civilisation in Europe, is the most visited of all the Greek Islands.

68 Ode to the Classic Bistro Finding a “real” bistro that serves authentic French food is becoming more difficult in Paris, but there are still some

gems.

72 Watching Over Vietnam’s Ecosystem Vietnam has established a nationwide incentive programme that pays villagers to act as freelance park rangers to deter illegal logging.

76 Master of the Iron Throne Author George R.R. Martin has reached pop-culture stardom thanks to HBO’s hit Games of Thrones TV series.

80 Shaping Frail Clients Martin Addo, a former Mr Ghana, is helping frail senior citizens improve their quality of life.

84 A Plot Twist Worthy of Dickens Margate, one of Kent’s coastal towns, is experiencing a regeneration thanks to the Turner Contemporary gallery and a new high-speed rail link with London.

88 Other Business 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.

26 Column: John Naughton Amazon’s ‘book streaming’ service

Published for Emirates by

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84 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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getty images

BUSINESS NEWS IN BRIEF

CO2 Boost for Old Oil Wells Coal plants may beCome a lot

of its kind to supply C02 for oil exploration

less polluting as demand rises for carbon

from coal-powered utilities. Oil companies

half the C02 remains in the reservoir, and

dioxide, which is used to revive old oil wells.

have long relied on natural sources of

the remainder is reused.

In one of the first projects to harness the

underground carbon to boost output with

wells where it can be pumped out. About

Around 80 per cent of the carbon used

C02 waste of a coal plant for oil drilling,

a technique called carbon flooding. As

in oilfields today comes from naturally-

power generator NRG Energy announced

demand has risen, drillers have snatched

occurring deposits of the gas, but man-

last month that itâ&#x20AC;&#x2122;s beginning construction

up those supplies, causing a shortage of

made supplies are expected to expand as

on a $1 billion retrofit of its East Texas

natural carbon and creating a market

the technology is improved for capturing

coal plant. NRG will pump carbon dioxide

for recycled C02 from coal plants. In this

C02 from power plant smokestacks and

pollution from the plant deep into a nearby

manner a pollutant is being turned into a

other industrial sources, according to the

oil field that it partially owns. This should

marketable commodity.

US Energy Department.

loosen trapped crude deposits, making

It is estimated that there are 160 billion

Crude prices averaging more than $90

old wells flow like new while burying the

barrels of crude in the US sitting under

a barrel for half a decade are spurring

harmful greenhouse gas. Cash from the

what were once considered depleted wells.

investment in carbon flooding and raising

increased oil production will help pay for

Virtually all of that oil could be tapped

demand for the gas needed to refresh the

the project, NRG said in a statement.

with C02, estimates Chirag Rathi, a

ageing fields.

When finished in late 2016, NRGâ&#x20AC;&#x2122;s facility

principal at consulting firm Frost &

At the oilfield receiving C02 from

will remove carbon equivalent to the exhaust

Sullivan. That would be a $17 trillion

NRG, injecting carbon is expected to lift

of 336,000 cars annually and spur a 30-fold

haul at current prices.

production to 15,000 barrels a day from

increase in crude output from the West Ranch oilfield about 129 kilometres away. The East Texas plant will be the largest August 2014

The liquefied C02 is injected into the

about 500 now. At current prices, the

reservoir to mix with the remaining crude,

annual output of the field would have a

allowing the oil to flow more easily into

value of more than $550 million. n

Notebook Numbers Game

69%

European Manufacturing Remains Weak

of Facebook’s global staffers

are male, and so are 85 per cent of the company’s tech workers and 77 per cent of its management team, according

The European manufacturing

to the company’s workforce

industry is struggling to

diversity report. The ratio is

gather steam, held back by

roughly the same as rivals such

subdued demand in areas

as Google and Yahoo, which

such as factory equipment and

highlights the gender imbalance

automotive parts. A Purchasing Managers’

in the industry.

$11.6

billion invested into the

Reliance Jio telecoms venture in India is expected to kick off

Index for the manufacturing

$467

billion in 2013 revenues crowned Wallmart the world’s largest company. The US retail giant topped the Fortune magazine Global 500 ranking after missing out to Shell for two years. Shell fell to second spot and Chinese firm Sinopec Group came third.

industry in the euro area fell to 51.8 in June. While the manufacturing gauge held above the 50 mark, which separates growth from

a new era of competition with rivals Bharti airtel and Vodafone. Reliance plans to offer superfast fourth generation broadband connectivity over mobile devices

The World In Figures

by next year.

£5.1

-kilometres of roads

buses and enforcing new

contraction, for a 12th month,

standards for taxis and

the pace of expansion was

construction equipment.

the weakest since November. Factory activity slowed in

$91,376

GDP

Germany and Italy, and

per

contracted for the first time in

person makes Macau the

three months in Greece, the

dioxide limits are expected to

world’s richest country, and it

PMI Index showed.

keep causing London to fail

has overtaken Switzerland in

the European air quality test

the wealth stakes according

the euro area unexpectedly

until at least 2030 according to

to the World Bank. Macau

declined in June, led by

reports by the UK department

made a staggering $45 billion

industry, as tensions in

of environment, food and rural

in gambling revenues, which

Ukraine and the single

affairs. London’s mayor is trying

is nearly seven times the $6.5

currency’s strength hindered

billion in fines

to tackle the problem through

billion that Las Vegas casinos

efforts by the European

has been

policies including retiring old

made last year.

Central Bank to boost lending

breaching nitrogen

Economic confidence in

and growth.

slapped on BNP Paribas by the US authorities for allegedly having violated sanctions by

£5

note will have the face of Winston Churchill,

funnelling billions of dollars from

and Jane austen will grace the

blacklisted countries, including

£10 note by 2016 as the Bank of

Iran and Sudan, through its US

England converts traditional notes

operations. The French bank will

to a plastic form. The switch from

be forced to slash its dividends

paper to polymer notes will help

and issue billions of bonds to

make the currency more durable,

pay out the penalty sum said the

hard to forge and cheaper in the

Financial Times.

long run.

GETTY IMaGES

Portfolio

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Notebook

lending rules toward that goal, steps that Fitch Ratings said may spur long-term capital investment. Modi must now ensure implementation of his agenda following a landslide election victory in May, after gridlock under the previous government stalled about $255 billion of projects. Modi’s Bharatiya Janata Party has promised reliable electricity for all households by 2022, 100 new so-called “smart cities” and bullet trains, among other getty images

pledges. The budget allocated an initial 70.6 billion rupees for the cities project. The proposed cargo route on the Ganges

Modi tackles india’s congested transport

will snake from the eastern coast at Haldia

Indian Prime Minister Narendra Modi is

catching projects in Modi’s first budget on

minister said.

pledging $25 billion to unclog India’s choked

July 10. Others included 523 billion rupees

transport links, spur power output and build

for roads and 500 billion rupees for urban

initiatives are implemented as bureaucrats

cities. His plans include ferrying cargo on

infrastructure funding, part of 1.48 trillion

unnerved by past graft scandals involving

the Ganges and expanding gas pipelines.

rupees for everything from highways and

government contracts delay approvals. A

ports to housing.

slow land-buying process, environmental

The 42 billion-rupee ($700 million), 1,620-kilometre freight route on India’s best-known river was among the most eye-

The budget cleared the way for dedicated investment trusts and eased infrastructure-

in West Bengal inland to Allahabad in Uttar Pradesh, India’s most populous state, and take six years to complete, the finance A key challenge is to ensure such

objections and elevated interest rates are among the other impediments.

Singapore GDP Declines

stepped up efforts to lure new industries,

Singapore’s economy unexpectedly

on cheap overseas workers.

contracted in the second quarter as higher

trade ministry said in a statement. Manufacturers have moved operations to

such as research and development as it reshapes the economy while cutting reliance Singapore Prime Minister Lee Hsien

labour costs and company moves to shift

other countries in recent years, as employers

Loong’s government has tightened

production overseas hurt manufacturing.

on the island grappled with tighter rules for

rules to curb the hiring of foreigners in

foreign labour that have pushed up costs

recent years after an influx led to voter

annualised 0.8 per cent in the three months

and crimped some companies’ ability to

discontent over infrastructure strains and

through June from the previous quarter,

meet a recovery in demand from the US

increased competition for jobs, property

when it expanded a revised 1.6 per cent, the

and Europe. Singapore’s government has

and education.

Gross domestic product fell an

About 25 per cent of US companies plan to move operations out of Singapore, rising from 12 per cent last year, the Singapore Business Review reported in February, citing the 2013 Manpower Survey Results of the American Chamber of Commerce. Manufacturing fell 19.4 per cent in the

getty images

second quarter from the previous three months, Singapore’s data showed. Services rose 5.2 per cent in the same period, while construction gained 2.6 per cent. Portfolio

Observer

Getty imaGes

BUSINESS NEWS IN BRIEF

Cloud Privacy as a Sales Pitch

the revelations by Edward Snowden, the

European cloud services providers are touting the continent’s stringent privacy laws to drum up new business, reports Mark Scott.

British intelligence agencies.

former National Security Agency contractor, about surveillance activities by US and To lure customers, the companies are pointing out that their data centres are in the European Union, whose privacy laws are more stringent than those in the United States. Large companies like Deutsche Telekom, Germany’s former state telephone monopoly,

Timo Laaksonen wanTs To

in secure servers in Finland, which has some

as well as smaller startups, are trying to win

look after your online data. As the head of

of the toughest privacy laws in the world.

market share from US rivals like Amazon that

cloud computing at F-Secure, a European

“When it comes to cloud services, it’s

National governments and the EU are also

online security company, Laaksonen has

very much about trust,” said Laaksonen,

a simple sales pitch for F-Secure’s cloud

a 53-year-old Finn. He added that

providing financial incentives and long-term

storage application.

telecommunications companies like

contracts to domestic cloud providers in a

AT&T and BT of Britain have offered

bid to jump-start an industry that remains a

introduced late last year, allows people to

F-Secure’s cloud service to their customers.

relative minnow compared with US whales

access their photos, documents and video

“As a Finnish security company, we can

like Google.

files from anywhere in the world, much like

differentiate ourselves, particularly against

services from the US companies Dropbox

US companies,” Laaksonen said.

The company’s product, which was

dominate the global cloud market.

and Google, among others.

F-Secure is just one of many European

In Germany, for example, that includes the creation of a “Made in Germany” label by local cloud computing companies to

cloud companies hoping to take advantage of

highlight domestic providers that comply

it never shares an individual’s data with

people’s growing appetite for online privacy.

with the country’s data protection rules.

other companies or governments. And, his

These European cloud operators have turned

The goal is to win more privacy-conscious

company says, all of the information is stored

a particular focus on their local roots after

German customers.

But unlike its US rivals, F-Secure says

August 2014

Observer NSA were reported last year, the company has received an increasing wave of questions about data security, according to Axel Haentjens, vice president of cloud computing at the Orange division that provides information technology services to companies. In the face of continuing concern about who has access to online data, Orange is now hoping it can make inroads against US

Timo Laaksonen is head of cloud computing at F-Secure, an online security company based in Finland.

competitors with global companies looking for cloud providers that are perceived to be more secure. “The Snowden story has shifted the pendulum away from US companies,”

“We have to match the quality of American companies, but with the additional benefit of extra security,” said Oliver Dehning, a

contracts that would otherwise have gone to

Haentjens said. “There’s a lot of appetite

domestic competitors.

from Europe to sign deals with European

And by often focusing solely on Europe,

cloud providers.” While the rise of online privacy has played

co-founder of the German email cloud

many European cloud companies have

company AntiSpamEurope, whose three data

yet to reach the size of companies like

into the hands of Europe’s cloud companies,

centres are all based in the country. “Being

Dropbox, which has almost 300 million users

some say that tougher data protection

a German company is a major plus when

worldwide. In contrast, F-Secure, the Finnish

rules will not be enough to outmuscle the

talking to customers.”

online security company, says it has signed up

dominance of US companies.

European cloud providers may promote their privacy pedigree, but they still have

just over one million customers for its rival product since its release in October.

When Quentin Adam co-founded his cloud business, CleverCloud, in 2010, he

“For European companies to be successful,

was taking on Heroku, a division of the

While Europe has been slow to embrace

they have to look to grow outside of Europe,”

San Francisco tech company Salesforce.

cloud services, US companies like Amazon,

said Gregor Petri, research director for cloud

com. Adam and his 10-person team – based

Microsoft and Google have invested billions

computing at the technology company

in Nantes, France – offer data servers and

of dollars in cloud-based infrastructure like

Gartner in Eindhoven, the Netherlands.

online software to developers, and they have

data centres and online software over the

“They need to become global.”

landed a number of large clients, including

an uphill climb to challenge US tech giants.

last five years. That investment, analysts say,

Despite the difficulties, some of Europe’s

will be difficult for European companies to

large telecommunications companies are

match, particularly as spending by Europe’s

trying to break into cloud computing.

technology industry remains meagre

Over the past two years, Orange, the

the French bank BNP Paribas. Though the company has roots in France, roughly 60 per cent of CleverCloud’s customers are based outside the country, and

French telecommunications company, has

the United States is one of the company’s

“It’s all about the money,” said René Büst,

noted a growing demand for cloud services

largest markets. The company also is

a senior analyst at the technology consulting

from European companies looking to share

planning to open a data centre in North

firm Crisp Research in Kassel, Germany. “No

data across their international operations.

America in the near future.

European provider can compete with the

In response, Orange now offers cloud

likes of Amazon.”

computing through a network of 30 data

on his local connections but to compete with

centres worldwide, including two in the

international players in creating the most

people’s growing privacy fears. Many allow

United States. It also has checks in place so

reliable service for his customers.

European customers to store online data

that companies can restrict where their data

in servers across the continent, and

is stored to comply with specific domestic

use us just because we’re European,” Adam

companies like Microsoft now comply with

privacy rules.

said. “We have a French legacy, but we’re

compared with its American counterpart.

US companies also are responding to

Europe’s data protection rules to win local

And since the revelations about the

For Adam, the goal has been not to rely

“It has to be about the product. No one will

becoming global.” n Portfolio

Observer O N E 2 W AT C H TExT: HildA d’sOuzA

Dr Vishal Sikka Infosys, India’s second-largest software exporter, has chosen Dr Vishal Sikka – a former chief technological officer of German software giant SAP AG – as its chief executive officer and managing director. Co-founder and chief executive, S.D. Shibulal will hand over the reins of his $8.25 billon empire to Sikka on August 1. This is the first time in its 33 years that the Bangalore-based company has picked a non-founder and an outsider as its chief executive. With this appointment, Infosys looks to usher in change that would restore investor’s confidence, boost sales in its high-margin services segment like cloud computing, and hold on to its professionals. The company has in the past year lost nearly a fifth of its workforce of more than 160,000, including some of its top executives. Sikka’s appointment comes at a crucial juncture as the Bangalore-based company is reeling under a 12-months drop in revenues. Infosys expects revenues to grow at 6-10 per cent this year, which is considerably lower than the 12-14 per cent projections set by the Indian IT industry body Nasscom. Shibulal, the outgoing CEO, admits the company has faced a slowdown in its market segments and suffered cancellations in some of its business divisions lately. Sikka, with a doctoral degree in computer science from Standford University, has hinted at transforming the company. “I am looking forward to a great transition that must follow my little transition. A great transition and its set of challenges and opportunities that await my new company, as well as every company in our industry, and indeed as software reshapes the world around us and every company in the world.” The 47-year-old’s experience at SAP, where he joined in 2002, has been largely related to IT products. At SAP he oversaw product development and was responsible for the company’s breakthrough in SAP HANA, the in-memory computing platform that is seen as a foundational platform for SAP’s entire portfolio. “Vishal brings valuable experience as a leader of a large, global corporation. His illustrious track record and value system makes him an ideal choice to lead Infosys,” said Narayana Murthy, Executive Chairman of Infosys. Sikka is a US citizen although he was born in India. According to an Infosys spokesperson, he will still be based in San Francisco, reflecting the views of analysts that Infosys – which gets most of its revenue from North America – should have a CEO based in the US.

Microsoft Job Cuts Microsoft is embarking on the deepest cuts to its workforce in its 39-year history, axing 18,000 jobs over the next year, as it absorbs its newly acquired Nokia phone business and takes out layers of management. The new boss of the US company is cutting one in seven of the tech giant’s 127,000 global workforce as it attempts to integrate the Finnish business it acquired in April for $7.2 billion. Satya Nadella, the firm’s chief executive for just five months, first hinted at job cuts in July when he outlined plans for a leaner business. That led to speculation about sweeping job cuts, but expectations underestimated the 18,000 job losses announced on July 17, which propelled the tech giant’s shares to their highest level since the dotcom boom in 2000, gaining 1.5 per cent to $44.84. The cuts will mostly come from Nokia, which added 25 per cent more staff to the Microsoft workforce. Until now, the largest round of redundancies in Microsoft history was in 2009, when it cut 5,800 employees. It was not clear where in the world the axe will fall, but the cuts could begin with 1,350 redundancies in Seattle. When Nokia was acquired by Microsoft, the Finnish phonemaker operated 130 sites in 50 countries. Including those, Microsoft runs 717 sites across 114 countries. Nadella said the cuts were caused by the absorption of Nokia into the larger organisation and because he intended to embark on what is described as “work simplification”. The exercise will cost between $1.1 billion and $1.6 billion over the coming 12 months.

getty imAges

Portfolio

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Observer

Trade Association (STA), the total UK installed solar capacity generated from homes, buildings and solar farms is now about 4.7 gigawatts compared to 2.7GW in July last year. Europe added 10.9GW of PV capacity in 2013, said the European photovoltaic industry association (Epia), bringing the total installed capacity to over 81GW on the continent. “This represents a 16 per cent increase compared to the year before and about 59 per cent of the world’s cumulative photovoltaic capacity,” said a spokesman. getty iMageS

“2013 was a record year for the UK, with 1.5GW installed last year. Germany installed 3.3GW, Italy 1.4GW, Romania 1.1GW and

Solar Power Records Broken

Greece 1.04GW.” But new figures from the Washingtonbased Earth Policy Institute suggest Europe

June, with its sunny skies, was a good

weather of summer during the longest days

is no longer the biggest market for solar

month for solar power. According to

of the year, nearly doubled its 2013 peak solar

power. In 2013, says the EPI report, China

industry figures, Britain and Germany broke

power output at the solstice weekend.

added “at least” 11.3GW and is now the

records for generating solar electricity. Germany generated over half its electricity demand from solar for the first time ever on June 9, and the UK, basking in the sunniest

France, Italy, Denmark and other

second largest generator of solar power after

countries are also believed to have generated

Germany, and the US added some 4.8GW,

record amounts in June.

increasing its total capacity by 65 per cent

According to UK trade body the Solar

to 12GW.

Europe’s $1 Billion ‘Unicorn’ Firms Europe has produced 30 technology companies worth more than

The UK has been most successful in creating European

$1 billion since the millennium, according to research by boutique

technology millionaires – producing 11 unicorns since January

investment bank GP Bullhound, which explodes the myth that

2000. Russia is in second place with five unicorns, Sweden is third

European internet entrepreneurs lack vision and sell up too early.

with four, Finland and France have produced two, and Germany,

Clothing retailer Asos, games studio King Digital, property portal

Spain, Ireland, Italy and Luxembourg one each.

Zoopla and the music service Spotify are amongst Europe’s most valuable technology companies, most of which remain independent. The research shows Europe compares well with the US, which produced 39 billion-dollar companies between 2003 and 2013. These valuable startups, which the researchers refer to as “unicorns”, are few and far between. The 30 produced in Europe account for just 0.27 per cent of comparable tech firms founded in In the US, a comparable study by startup fund Cowboy Ventures found 0.07 per cent of venture backed groups started since 2003 had reached billion-dollar valuations.

getty iMageS

the past 14 years.

Portfolio

Observer The World

CompIled by Hilda d’souza

Top 10

Better Farming Could Feed Three Billion

CouNTRiEs WiTH HiGH-sPEEd iNTERNET rank

CountrIES

Hong Kong

SpEEd (mEgabItS pEr SECond) 65.4

South Korea

63.6

Japan

52.0

Singapore

50.1

Israel

47.7

Romania

45.4

latvia

43.1

Taiwan

42.7

Netherlands

39.6

10.

belgium

38.5

geTTy ImAgeS

The world’s existing cropland could feed at least three billion extra people if it were used more efficiently, a new study has found, showing that the large increases in population expected in the next three decades need not result in widespread hunger.

SoURCe: bloombeRg.Com

CouNTRiEs WiTH HiGHEsT QualiTY iN iNTERNET CoNNECTioN* QualIty IndEx

More than half of the fertiliser currently poured on to crops in many countries is wasted, according to the study. About 60 per

rank

CountrIES

South Korea

89.34

cent of the nitrogen applied to crops worldwide is not needed, as

Russia

88.49

Ukraine

87.80

well as about half of the phosphorus, an element whose readily

denmark

87.82

bulgaria

87.67

available sources are dwindling. Cutting waste even by modest amounts would also feed

United Kingdom

87.66

millions, the authors found: between one-third and a half of the

Czech Republic

87.65

viable crops and food produced from them around the world

New Zealand

87.56

are wasted, in the developing world usually because of a lack

Singapore

87.31

10.

Vietnam

87.28

of infrastructure such as refrigerated transport, and in the rich

*meASURed IN R-FACToR; SoURCe: ooKlA.Com

world because of wasteful habits. The study, published in the peer-review journal Science and

CouNTRiEs MosT aFFECTEd BY oNliNE BaNKiNG MalWaRE

led by scientists at the University of Minnesota in the US,

rank

CountrIES

SharE (pEr CEnt)

United States

Japan

India

suggested that a focus on staple crops such as wheat and rice in key countries, including China, India, the US, Brazil, Indonesia, Pakistan and Europe, would pay off in terms of producing more

brazil

food for the world’s growing population. Most forecasts are that

Turkey

the world will number more than nine billion people by 2050, up

France

from about seven billion people today.

malaysia

mexico

Vietnam

10.

Australia

SoURCe: TReNdmICRo.Com

The research also found that at least four billion people could be fed with the crops we currently devote to fattening livestock, fuelling the argument that the over-reliance on meat in the West and among the growing middle classes in the developing world is an increasing problem when it comes to feeding the world. Portfolio

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Commentary

John NaughtoN

Amazon’s ‘book streaming’ service Twelve years ago, DaviD Bowie

why we now have services such as Spotify

The analogy between the Kindle and

said something very perceptive. “Music

into which subscribers can tap whenever

the iPod is also instructive in other ways.

itself is going to become like running water

they please.

Amazon’s device came with networking

or electricity,” he told a New York Times

Kindle Unlimited is based on exactly the same logic. Indeed, it’s extraordinary

iPod relied initially on a physical connection

these last few years because none of this is

how closely it adheres to the original

to a laptop or desktop machine for its

ever going to happen again. You’d better be

Apple template: the Kindle e-reader is

connection to the online store. And the

prepared for doing a lot of touring because

the equivalent of the iPod; and the Kindle

connectivity of the Kindle has led to some

that’s really the only unique situation that’s

store is the counterpart of the iTunes one.

interesting side-effects. Obviously, users

going to be left. It’s terribly exciting. But

The difference is that Amazon is already

can highlight and annotate passages as

on the other hand it doesn’t matter if you

working on the next move – making the

they read; but if they so choose they can

think it’s exciting or not; it’s what’s going

transition from selling discrete units to

also opt to see what passages other readers

to happen.”

streaming – with which Apple has struggled

have highlighted, which means that one has

(and which explains why Apple bought

the strange sensation of seeing what other

last week, when – in a rare piece of

Beats – not for its daft headphones but for

people regard as interesting or important in

corporate carelessness – Amazon

its streaming music service).

the book one is reading.

I thought of Bowie and his perceptiveness

That’s not necessarily great news. Your

inadvertently provided a fleeting glimpse of what it has in store for the publishing

amazon’s move will be as

networked Kindle tells Amazon where

industry. A new page appeared on its

discombobulating for the book publishing

you’ve got to in each book. This is so that if

website only to be very quickly withdrawn,

industry as the advent of Spotify was for

you switch to, say, the Kindle app on your

but not before it had been cached by Google

the music industry. Stand by, therefore,

smartphone, you can pick up exactly where

and spotted by a hacker website.

for howls of protest from publishers and

you left off.

What was on this elusive page? Why,

authors on how streaming produces

But this also means that Amazon knows

nothing more or less than an introduction

infinitesimal royalties compared with

not only what you’re reading, but even where

to a new service called “Kindle Unlimited”.

the old publishing paradigm. All true,

you’ve got to. So anonymous reading goes

Subscribers will be invited to “enjoy

and a reminder of Joseph Schumpeter’s

out of the window. n

unlimited access to over 600,000 titles and

conception of the waves of “creative

thousands of audiobooks on any device for

destruction” with which

just $9.99 a month”. One commentator

capitalism renews itself.

described it as “Netflix for books”.

Each wave has two

Bowie was perceptive as he understood

built-in from the beginning, whereas the

reporter. “So it’s like, just take advantage of

dimensions: a creative

early the implications of ubiquitous

one in which new

connectivity. When Apple first cracked the

possibilities, industries

problem of selling music tracks online,

and business models

people collected the tracks in little electronic

emerge; and a

containers called iPods and carried them

destructive one in

around, much as tourists in undeveloped

which old ways

countries carried personal supplies of clean

of doing things

water in bottles. But once safe piped water

(including things

became readily available, the importance of

that were genuinely

having one’s own bottle declined. The same

valuable) are

thing happened with online music, which is

destroyed. Portfolio

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Profile

Tim Cook, Making Apple His Own Critique has been levelled at the Apple CEO for a lack of innovative products and a slowdown in growth. But Cook is not Steve Jobs and heâ&#x20AC;&#x2122;s doing things his own way, report Matt Richtel and Brian Chen.

Portfolio

GETTY IMAGES

August 2014

Tim Cook, Apple’s Chief

executive, was an adolescent boy in a

small Alabama town in the early 1970s

when he saw something he couldn’t forget. Bicycling home on a new 10-speed, he passed a large cross in flames in front of a house – one that he knew belonged to a black family. Around the cross were Klansmen, dressed in white cloaks and hoods, chanting racial slurs. Cook heard glass break, maybe someone He yelled, “Stop!”

In 2013, Cook unveiled the new iPad Air and a new iPad mini with Retina display.

One of the men lifted his conical hood, and Cook recognised a deacon from a local church (not Cook’s). Startled,

he pedalled away. “This image was permanently imprinted in my brain, and it would change my life forever,” Cook

dignity are values that need to be acted

death of Steve Jobs, the company’s

said of the burning cross, during a speech

upon. And then came the segue: His

revered founder. Like Walt Disney

he gave last December.

company, Apple, is one that believed

and Henry Ford, Jobs was intertwined

deeply in “advancing humanity.”

with his company. Jobs was Apple and

In the speech, he said his new awareness made him feel that no matter what you do in life, human rights and

Cook, who is 53, took over leadership of Apple nearly three years ago, after the

Apple was Jobs. At the time, Cook was well regarded as a behind-the-scenes operations guy, but he was a relatively unknown

His new awareness made Him feel tHat no matter wHat you do in life, Human rigHts and dignity are values tHat need to be acted upon.

quantity outside the company. He can be intensely private; for instance, the details of the cross-burning episode, like his reaction and the appearance of the deacon, he has shared with friends but not publicly. Even offering the outlines of that story in front of an audience, however, indicates how he is slowly beginning to reveal his own Portfolio

geTTY images

throwing something through a window.

Profile

personality and style, and to define Apple

$15 billion. Yes, those percentages are

also broadened Apple’s brand, taking

leadership in his own image.

smaller compared to a year earlier and

to Twitter and other public venues to

two years earlier and so forth. But that

express support for environmentalism

not only in the limelight but also under

doesn’t mean that you’re not a growth

and human rights (and for Auburn

scrutiny. Of late, the company has hit a

company. We were in hyper-growth, or

University football); early in his tenure,

snag that was years in the making: Its

whatever is above growth. We went from

he established a charity programme,

sales now are so large that many investors

$65 billion to over $100 billion to $150

matching employee contributions, and

worry that it can’t continue to match

billion to $170 billion. These are historic,

has emphasised the use of sustainable

the growth that brought it from $65

unprecedented numbers. I don’t know

products. And he has upped the

billion in sales in the 2010 fiscal year to

any companies adding growth at that

company’s own giving.

$171 billion in 2013. In fiscal 2013, sales

level. So when you say $14 billion to $15

Jonathan Ive, the head of design at

grew a mere nine per cent, far below an

billion compared to those numbers, it’s

Apple and a name nearly as adored by

average just shy of 40 per cent a year

clearly smaller and a smaller percentage,

its followers as Steve Jobs, says Cook

from 2004 to 2013. Profits slimmed. And

but, to put it in some context, that’s like

has not neglected the company’s central

the stock price fell nearly in half from its

adding three Fortune 500 companies in a

mission: innovation. “Honestly, I don’t

2012 peak to the middle of 2013, vastly

year. I think that’s hard to say that’s not a

think anything’s changed,” he said. And

underperforming the market.

growth company.”

that includes the clamour for some

This is happening as Cook finds himself

Investors have clamoured for Apple

Reflecting his personal views, Cook has

exciting new thing. “People felt exactly

wizardry – a much-anticipated iWatch or iTV, perhaps. To these critics, Cook is uninspiring, his social views window dressing, when what they want is magic. “Where is the grand design?” asks Laurence Balter, chief market strategist at Oracle Investment Research. Balter credits Cook as having great skills in operations and in managing the supply chain, which entails getting the raw materials and machinery in place to

To shore up shareholder faiTh, Cook spliT The sToCk, inCreased The dividend and engineered a $90 billion buybaCk – sTeps ThaT helped shares rebound almosT enTirely.

build things – but not with having the vision to design them. “All we hear from Cook,” Balter says, “is there are some great products coming down the pike.” To shore up shareholder faith, Cook split the stock, increased the dividend and engineered a $90 billion buyback – steps that helped shares rebound almost entirely. He has taken other steps to strengthen the company, like pushing Apple products into China, a potentially huge market, and acquiring talent, most recently spending $3 billion to buy Beats, a music company that brings Apple two major music-industry shakers and dealmakers, Dr. Dre and Jimmy Iovine. In an interview with the Wall Street Journal, Cook countered the critique levelled at Apples’ growth. “Last year, we grew (revenue) by $14 billion to August 2014

Craig Federighi, Apple’s head of software engineering, speaks to guests at the company’s World Wide Developer Conference in San Francisco.

Profile

Cook, who succeeded Steve Jobs as chief executive of Apple, is committed to social causes.

the same way when we were working on

simple-to-use business apps, and sell

They point to the development of the

the iPhone,” Ive added. “It is hard for all

iPhones and iPads to IBM’s corporate

so-called iWatch – the “smartwatch” that

of us to be patient. It was hard for Steve.

customers. Cook says he does 80 per cent

Apple observers are eagerly awaiting as

It is hard for Tim.”

of the work of running the world’s most

the next world-beating gadget. Cook is

valuable company on an iPad. “There’s

less involved in the minutiae of product

Cook projects “quiet consideration,” Ive

no reason why everyone shouldn’t be like

engineering for the watch and has instead

said. Cook digests things carefully, with

that,” Cook said in an interview, explaining

delegated those duties to members

time, which Ive said “testifies to the fact

why Apple struck a partnership with IBM.

of his executive Cabinet, including

If Jobs was maniacal about design,

Ive, according to people involved in

he knows it’s important.” Lower-LeveL empLoyees praise

the project, who spoke on condition

was the announcement that Apple and

Cook’s approachability and intellect.

of anonymity because they were not

IBM, formerly fierce competitors, would

But some say he is less hands-on in

authorised to speak to the press. Apple

work together. The aim is to create

developing products than his predecessor.

declined to comment.

One surprise that Cook recently pulled

Michael Cusumano, a professor in the Sloan School of Management at MIT,

One surprise that COOk reCently pulled was the annOunCement that apple and iBm, fOrmerly fierCe COmpetitOrs, wOuld wOrk tOgether.

said he thought Apple no longer had the juice to create the world-beating product it needs. Cusumano, who is working on a book about innovation, visited Apple’s headquarters in Cupertino, California, last autumn and has talked to a half-dozen current and former employees about the company culture. He concluded that Apple without Jobs lacks a visionary to synthesise Portfolio

Profile

disparate ideas into a magical whole. “I think it’s going to be very difficult for them to come up with the next big thing,” he said. “They’ve lost their heart and soul.”

To tell the developers about it, Cook said, “I’d like to invite my colleague, Superman, back to the stage.” Of course, for years, the only Apple

If the rest of the world yawned, the developers stood and whooped. Afterward, devotees like Jordan Brown, 25, and three of his colleagues,

If Jobs was the heart and soul of the

superhero was Jobs. As Cook walked toward

roamed the convention centre. Brown

company, Cook seems to be trying to cast

the darkness, stage left, there was a moment

said he viewed Cook “as someone making

himself as a different sort of leader. His

of mystery. Then out sprang Craig Federighi,

sure everything is clicking, but he’s not

Twitter feed is a mashup of Apple hoopla

head of Apple’s software engineering. He

inspiring.” Federighi, on the other hand,

and cheerful promotion of human rights

passed Cook and headed into the limelight

“resembles Steve,” he said.

and environmentalism. He wrote an

to describe the new release. It was not a new

Brown’s colleague Chad Zeluff, 27, who

opinion piece in The Wall Street Journal

consumer product but a set of software tools

saw Jobs deliver the keynote in 2007, put

in support of proposed federal legislation

called a developer’s kit, which would help

it this way: “Jobs is to Lennon what Cook

protecting gay workers.

developers build better apps.

is to Ringo.” n

Ryan Scott, the chief executive of Causecast, a non-profit that helps companies create volunteer and donation programmes, called Cook’s charitable initiatives a “great start.” But Scott added that its programmes are “not as significant as what other companies are doing.” Apple’s ambitions “could be much higher,” he said, given its money and talent. Cook’s public emphasis on social issues nonetheless puts him “on the cutting edge of an emerging new mindset in corporate leadership about values and value creation,” said James Austin, an emeritus professor at Harvard Business School. At a shareholder meeting on Apple’s campus in February, one shareholder – who later described himself as having free-market values – asked Cook whether Apple should avoid embracing environmental causes that lacked a clear profit motive. Cook did not respond by saying, as many executives would, that environmentalism is pragmatic and good for the bottom line. His reasoning was moral. “We do things because they’re just and right,” he said. Recently, Cook stood on stage at the company’s annual developer’s conference in San Francisco in front of 5,000 GETTY IMAGES

enthralled software developers. These are the makers of apps for the iPhone and other gadgets, and Cook promised them something he called “the biggest release since the launch of the App Store.” August 2014

Steve Jobs, who built Apple into the world’s most valuable company, resigned in 2011 and passed away on 5 October 2011.

Education

For-ProFit Universities Fill the GaP Brazilâ&#x20AC;&#x2122;s pledge to get more students into higher education has led to a boom for private sector educational institutions, reports Dan Horch. Portfolio

The campus of Anhembi Morumbi, an American-owned private university in Sáo Paulo.

HigHer education in Brazil

Liberty Partners and LLR Partners, has

is increasingly in the hands of profit-

announced plans to open campuses in

seeking entrepreneurs. Although for-profit

São Paulo and Rio de Janeiro. Over the

universities have faced scrutiny in the

past five years, mergers and acquisitions

United States, the industry is finding a

have made some of the biggest chains

warm welcome here as the government

bigger, concentrating power in giant for-

tries to meet the demand for affordable

profit groups. The 10 largest chains of

higher education.

universities in Brazil now educate nearly

From 2002 to 2012, the number of students attending university in Brazil

education institutions – Kroton

only 17 per cent of Brazilians aged 18

Educacional and Anhanguera Educacional

to 24 in university, there is a gap that

– received approval from antitrust

needs to be served. The government has

authorities in May for a merger. Both

pledged to raise that percentage to 33 per

companies trade on the São Paulo stock

cent by 2020.

exchange, and the merger will create the

To serve that lucrative and growing

world’s largest publicly traded for-profit

market, American and Brazilian private

higher education company, worth more

equity funds, corporations and investment

than $8 billion.

institutions at a rapid pace. Education experts caution that the

The universities of the merged company will have more than a million students. Among those is Claudinei Mota, a

emphasis on the business aspect of

mathematics student at Uniban, part

education does not always put students

of the Anhanguera group, who got a

first. Despite such concerns, the for-

government-sponsored loan to help pay

profit system has proved appealing for a

his tuition of 400 reais ($180) a month.

government with limited resources.

“I wouldn’t be able to study without it,”

“The government has had no choice but to work with the private sector. It cannot

he said. He hopes to find a job as a math teacher,

meet the demand on its own,” Fernando

which would let him repay his loan and

Iunes, global head of investment banking

continue studying to become a university

for Brazil’s Itaú BBA, said.

professor. Mota’s university debt will total

Brazil’s public universities are still

about 16,200 reais, including interest, if he

considered the country’s best for their

takes nine years to repay his loans (public

prestige and quality of research. And

schoolteachers make about 3,000 reais a

tuition is free at public universities.

month in São Paulo).

But its students come disproportionally

“I would have preferred a public

from the country’s upper class, and

university, but the entrance exams are

generous research budgets and unionised workforces make the cost per student 3½

very competitive. Most spots go to private

times as much as at private universities.

Mota said.

Private sector investment in technical,

Brazil’s two largest chains of higher

doubled to seven million. Still, with

banks are buying and merging educational

August 2014

35 per cent of the country’s students.

school graduates, who are better prepared,” Since 2003, the left-leaning Workers’

primary and high school education in

Party has governed Brazil. Despite

Brazil is also growing. The British firm

occasionally antagonistic relations with the

Pearson last December bought Multi,

business sector, the government receives

a chain of foreign-language schools, in

only praise from education entrepreneurs.

a deal worth more than $880 million

In 2004, then-President Luiz Inácio Lula

in cash and debt assumption. Avenues,

da Silva began a programme called Prouni,

a New York private school whose

which offers scholarships for low-income

investors include the private equity firms

students to attend private universities.

Education

gETTy imagES

Brazilian President Dilma Rousseff has quadrupled the budget for subsidised student loans.

Since taking office in 2011, President

REUTERS

Manoel Amorim, former CEO of Abril Educacao SA, was replaced after a $250 million investment by buyout firm Tarpon Investimentos SA.

About 5.3 million of Brazil’s seven

investment bank BTG Pactual, said the big

Dilma Rousseff has expanded the

million university students were in

companies worked with the government

programme and more than quadrupled the

private institutions in 2013. Some 31 per

to expand the subsidised student loans.

budget for subsidised student loans under

cent of them received aid from Prouni

“That gave them an additional advantage

a programme called Fies.

scholarships or Fies student loans or both.

over smaller groups, which couldn’t

The subsidised loans carry an annual

As the big wave of student loans began

influence the process, and it accelerated

interest rate of 3.4 per cent – an

only in 2011, and those students have

extraordinary bargain in a country where

until 2016 to start making payments, it is

inflation is more than six per cent and

not yet clear whether Brazilian university

This governmenT support has

banks often charge over 40 per cent

graduates will have the same problems

helped financiers reap handsome

interest on personal loans – and students

with debt that many Americans have.

returns on their investments in for-profit

can wait until 18 months after graduation to begin repayment.

João Carlos Santos, senior education sector analyst with the Brazilian

consolidation in the sector,” Santos said.

education. The US private equity firm Advent International bought a 28 per cent

REUTERS

As the big wave of student loans began only in 2011, and those students have until 2016 to start making payments, it is not yet clear whether Brazilian university graduates will have the same problems with debt that many Americans have. The Brazilian government has prioritised education at all levels. Portfolio

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Education

stake in Kroton in 2009, enough to give it

deals, Loureiro said, and other mergers are

joint control alongside Kroton’s founders.

“It is hard to find another country in

It installed a new chief executive, guided

which the government is working so hard,

the firm through seven acquisitions and

in cooperation with the private sector,

universities could not compete with

multiplied its student body 11-fold before

to expand access to higher education,”

Brazil’s public universities with their

selling its shares last year. The Brazilian

said José Roberto Loureiro, president of

“endless budgets,” but he insisted that they

private equity firm Pátria Investments

Laureate’s Brazil operations.

improved the quality of education at the

performed a similar role in the country’s

International Finance Corporation, a

happening at a rapid clip. Loureiro acknowledged that for-profit

colleges that they acquired.

second-largest chain, Anhanguera, and GP

branch of the World Bank that invests in

Investments did so for the third-largest

projects that reduce poverty and encourage

that Brazil’s Ministry of Education

chain of colleges, Estácio.

development, is also backing the industry.

measured from 2009 to 2012 improved

IFC is invested in Laureate and several

their rankings on national standardised

other for-profit college chains in Brazil.

tests after Laureate bought them.

Advent bought its stake in Kroton for $141 million in 2009. When Advent sold it last year, that stake was worth about $1 billion.

Patrick Leahy, an IFC senior manager

Eight out of the nine Laureate universities

But Nelson Cardoso Amaral, a professor

for Latin America, said that even if these

of education at the Federal University of

chains did not always offer the most

Goiás in midwestern Brazil, cautioned that

Education, a privately held US education

prestigious degrees, they did give students

the test measures might not tell the whole

company whose owners include the

skills and qualifications at an affordable

story. Amaral said the big for-profit chains

private equity giant Kohlberg Kravis

price that permits them to move up the

had merely proved that they knew how

Roberts, the investor George Soros, Paul

employment ladder. University graduates

to “teach to the tests,” not that they were

G. Allen’s Vulcan Capital and the hedge

in Brazil earn on average 2.6 times as

necessarily educating their students well.

fund SAC Capital Advisors (now renamed

much as high school graduates.

Another large player is Laureate

Point72 Asset Management). Laureate has made 12 acquisitions since it entered Brazil in 2005. It now has more than

getty images

200,000 students in the country.

“The system is not perfect, but it is unquestionably a success,” Leahy said. Laureate is still looking to make more

“Government supervision of private universities is very weak,” he said. “We don’t have enough data to accurately judge the education they are offering.” n

Approximately 23,000 students attend the public State University of Rio de Janeiro.

Portfolio

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Economy

The everyThing Boom Currently, nearly every asset class is expensive by historical standards. This means relatively low returns for investors who are now targeting increasingly risky investments, reports Neil Irwin.

In SpaIn, where there waS a debt Numericable was able to borrow $11 billion with an interest rate as low as 4.875 per cent.

crisis just two years ago, investors are so eager to buy the government’s bonds that they recently accepted the lowest interest rates since 1789. In New York, the art deco office tower at One Wall Street sold in May for $585 million, only three months after the going wisdom in the real estate industry was that it would sell for more like $466 million, the estimate in one industry tip sheet. In France, a cable-television company called Numericable was recently able to borrow nearly $11 billion, the largest junk bond deal on record – and despite the risk usually associated with junk bonds, the Welcome to the Everything Boom – and, quite possibly, the Everything Bubble. Around the world, nearly every asset class is expensive by historical standards. Stocks and bonds; emerging markets and advanced economies; urban office towers and US farmland; you name it, and it is trading at

getty images

interest rate was a low 4.875 per cent.

Portfolio

relative to fundamentals. The inverse of that is relatively low returns for investors. The phenomenon is rooted in two interrelated forces. Worldwide, more money is piling into savings than businesses believe they can use to make productive investments. At the same time, the world’s major central banks have been on a six-year campaign of holding down interest rates and creating more money from thin air to try to stimulate stronger growth after the financial crisis. “We’re in a world where there are very

In New York, the art deco office tower at One Wall Street sold in May for $585 million, only three months after the going wisdom in the real estate industry was that it would sell for more like $466 million, the estimate in one industry tip sheet.

I’m not sure there is one.” But frustrating as the situation can be for investors hoping for better returns, the bigger question for the global economy is what happens next? How long will this lowreturn environment last? And what risks are being created that might be realised only if and when the Everything Boom ends? Safe assets, like US Treasury bonds, have been offering investors paltry returns for years, ever since the global financial crisis. What has changed in the last two years is that risky assets, like stocks, junk bonds, real estate and emerging market bonds, have also joined the party.

few unambiguously cheap assets,” said Russ

Want to buy shares of US companies? At

Koesterich, chief investment strategist at BlackRock, one of the world’s biggest asset

investors to get a better return relative to

the current level of the Standard & Poor’s

managers, who spends his days scouring

the risks they are taking on. “If you ask me

500 index, every dollar invested in stocks

the earth for potential opportunities for

to give you the one big bargain out there,

buys about 5.5 cents of corporate earnings,

Stocks are overpriced and yielding only 5.5 cents of corporate earnings for every dollar invested.

August 2014

getty images

prices that are high by historical standards

down from 7.4 cents two years ago – and lower than just before the global financial crisis in 2007-08. Prefer a more solid asset? The price of office and apartment buildings has risen similarly; office space in central business districts across the United States costs $300 per square foot on average, up from $147 in early 2010, according to Real Capital Analytics. In Manhattan, an investor in an office building can expect rent payments after expenses to add up to a 4.4 per cent return, known as the capitalisation rate, lower than in 2007, the top of the last boom. Spain and other Southern European

getty images

Economy

countries that were the nexus of the

The Everything Boom brings obvious economic risks. In the most pleasant outcome, global economic growth would pick up, causing today’s expensive assets to begin looking more reasonably priced.

Former Federal Reserve chairman Ben Bernanke has spoken of a “global savings glut”.

European debt crisis are not the only

extreme as those of stocks in 2000 or

places where bond rates have plummeted

houses in 2006; rather, what is new is that

(even Greece was able to issue bonds

it applies to such a breadth of assets. In

at favourable rates earlier this year).

2000, when the stock market was, with

Emerging markets, which generally

hindsight, a speculative bubble, other assets

have higher interest rates because of

like bonds, emerging market investments

higher inflation and less political stability,

and real estate looked reasonable.

are offering record low interest rates as well. Bonds issued by the governments

The everyThing Boom brings obvious

of Brazil and Malaysia, for example, are

economic risks. In the most pleasant

currently yielding a relative low of around

outcome, global economic growth would

four per cent.

pick up, causing today’s expensive assets to

The high valuations now are not as

begin looking more reasonably priced. But other outcomes are also possible, including busts in one or more markets that could create new ripples in a world economy still not fully recovered from the last crisis. There are two principal reasons behind this low-return environment, though people might dispute which is the cause and which is the effect. Global central banks have been on an unprecedented campaign of trying to stimulate growth through low interest rates and of buying assets with newly created money. If the Federal Reserve keeps its short-term interest rate target near zero

An 80 acre piece of land near Minburn, Iowa, that recently sold for $10,500 an acre.

until next year, as most officials of the central bank expect, it will have maintained the zero-interest-rate policy for seven years. The Fed held $900 billion in assets in Portfolio

enjoy responsibly

DOM PÉRIGNON VINTAGE 2004 EACH VINTAGE IS A NEW CREATION DOMPERIGNON.COM

Economy

August 2008; now that number is $4.4 trillion and counting, with the third round

valuations where they are today.” But while central banks can set the

feel that capital expenditures are unwise because they won’t pay off.

of asset-buying set to expire at the end

short-term interest rate, over the long run

of the year. Central banks in Britain,

rates reflect a price that matches savers

with the possibility that the original

Japan and the Eurozone have pursued

who want to earn a return on their cash

framing of a global savings glut got

similar policies.

and businesses and governments that

the problem in reverse. “I may have

wish to invest that savings – whether

made a mistake in trying to assign a

markets, the low returns are a byproduct of

in new factories or office buildings or

name,” Bernanke said in an interview. “A

those low rates. The Fed and other central

infrastructure. In this sense, high global

glut means more than is wanted. But it

banks have siphoned off trillions of dollars’

asset prices could be the result of a world

doesn’t necessarily arise because people

worth of the supply of global investments,

in which there is simply too much savings

want to save more. It can be because they

and private investors are having bidding

floating around relative to the desire or

invest less.

wars for whatever is left.

ability of businesses and others to invest

In a view widespread in the capital

Bernanke himself has been wrestling

“It’s entirely possible that if you look at

that savings productively. It is a reassertion

the world, you have slow-growing advanced

Clare, a managing director and co-head

of a phenomenon that the former Federal

economies, China cutting back on capital

of the US buyout group at private equity

Reserve chairman Ben Bernanke (among

investments, that the rate of return is just

firm the Carlyle Group. “There are few

others) described a decade ago as a “global

going to be low.”

other attractive places where investors can

savings glut.”

“Interest rates are so low,” said Peter

If this analysis is correct, investors

But to call it that may not get things

have an unpleasant choice: consign

money into equity markets. It’s just

quite right either. What if the problem is

themselves to returns lower than the

the most basic of supply and demand

not too much savings, but a shortage of

historical norm, or chase obscure

equations: When there’s more demand,

good investment opportunities to deploy

investments that might offer an extra

it drives up the price and pushes

that savings? For example, businesses may

percentage point or two of return. n

direct their money, so it drives investor

Pedestrians across the street from the One Hyde Park development, where an apartment sold for nearly $240 million, in London.

Portfolio

Europe

The

daNgers

Of deflaTiON European inflation figures have slumped to the point where deflation is close to becoming a reality, which could derail the economic recovery, reports Liz Alderman.

Portfolio

geTTY images

Shops are forced to cut prices as salaries fall and unemployment rises.

While consumers welcome lower prices, economists are worried that an outbreak of ultralow inflation across the 18-nation Eurozone is doing more harm than good to the bloc’s economic recovery.

Eurozone is doing more harm than good to the bloc’s economic recovery. Europe’s statistics agency recently reported that annual Eurozone inflation slumped to 0.5 per cent in May from 0.7 per cent in April, falling further below the two per cent level that the European Central Bank considers healthy. Even in Germany, which has been the Eurozone’s stalwart economy, inflation fell to a 0.9 per cent rate in May, its lowest level in four years. The situation has grown so alarming that the central bank has taken extraordinary measures to try to stimulate the economy. Not only did it cut its main

A street vendor sells perfumes in downtown Athens.

their wages cut, she eventually lowered

interest rate to a record low, but it also

her rates. Soon, revenues dwindled and

started charging interest on deposits held

her debts mounted, and she had to let go

by the bank.

of all but two of her 13 employees. In May,

preventing low inflation from becoming

In her upscale three-storey

street, renamed Cheap 'N’ Chic – more

outright deflation: a tailspin of falling

beauty salon in a middle-class suburb of

fitting to the times.

prices and wages from which it can

The central bank’s moves are aimed at

she downsized to a tiny salon across the

“When prices fall so much, you can’t not

be difficult for economies to recover.

¤30 for a haircut. But when a wrenching

follow the trend,” Tsirigotis said, gazing

In such an environment, consumers

recession set in, her competitors started

at the now-darkened beauty boutique

and companies may delay spending

cutting their prices, first to ¤20, then

she ran for 20 years. “But in such an

in anticipation that prices will fall

to ¤10 and even as low as ¤5 – or less

environment, no one wins.”

further, which would only exacerbate

than $7. Tsirigotis tried to resist discounting her prices. But as her clients lost jobs or had August 2014

While consumers welcome lower prices,

the economic problems. That problem

economists are worried that an outbreak

plagued Japan’s moribund economy for

of ultralow inflation across the 18-nation

two decades, and officials are only barely

getty images

ECB President Mario Draghi has been criticised for failing to act on Europe’s “lowflation”.

starting to halt the price declines. After years of a debt crisis, a number of

the dynamic is crimping growth and

the term “lowflation” to describe the

dampening government efforts to pay

Eurozone’s dilemma.

countries in the Eurozone are grappling

down debt, regain competitiveness and

with the effects of economic lethargy. At

tackle unemployment.

clothing stores, cellphone companies and

“Greece may be a front-runner in terms of telling us what may happen to other Eurozone countries that are subject to lowflation and confronting deflationary futures.”

“The big picture is that with low

CritiCs say the ECB delayed acting for so long that the Eurozone economy risks

factories making items as disparate as

inflation, it is more difficult for debt to

becoming stagnant like that of Japan – a

aluminium and tiles, owners faced with

come down and for economic growth to

charge that the bank’s president, Mario

slumping demand have been pressured

come back, so you could have a period

Draghi, has disputed.

to cut their prices. In hard-hit countries,

of stagnation,” said Reza Moghadam,

wages have also fallen sharply from pre-

the director of the European department

Eurozone countries – Portugal, Cyprus,

crisis levels.

at the International Monetary Fund

Slovakia and especially Greece, which

in Washington. He recently coined

has sustained an 18 per cent plunge

Especially in the most fragile economies,

Doria Tsirigotis, who closed her upscale beauty salon and now runs this smaller salon, Cheap ‘N’ Chic, in Athens, Greece.

Already deflation has troubled four

A clothes store with heavily marked-down prices in Athens.

Portfolio

Europe

in wages since 2008, and where high unemployment has contributed to a decline in prices for more than a year. Elsewhere in the Eurozone, inflation is worrisomely low. “Inflation is so low,” said Simon Tilford, deputy director of the Centre for European Reform in London, “because wages have fallen sharply and consumer demand and investment have been depressed.” In addition, banks have curbed lending, stifling thousands of small and midsize businesses, which create the majority of jobs across the Eurozone. “So economies are not growing as much as they could,” Tilford said. “Human and physical resources are not being employed and prices are pushed

Out-of-work men and women wait to speak with job-search advisers at a government agency.

down further.” “Greece may be a front-runner in terms of telling us what may happen to other Eurozone countries that are subject to lowflation and confronting deflationary futures,” said Jens Bastian, an economist who was a member of the European Commission’s task force for Greece until this year. Greek inflation fell below zero more than a year ago. Deflation is endangering the country’s ability to service its staggering ¤318 billion debt, partly

to 60 per cent since 2008. The price of

because the money Greece is using to

the apartment, once about ¤1 million,

repay those loans is worth less than the

had dropped to ¤400,000. But the buyer

money it borrowed. The economy has

held off to see if it would fall even more, a

shrunk about 25 per cent in the last

reflection of deflationary psychology.

five years, raising Greece’s debt as a

badly needed commission, but notaries

Greek debt has surged to 175 per cent

and lawyers also lost business, as did

of gross domestic product, from 130 per

renovators poised to refurbish the

cent in 2010. While inflation would help

apartment. And the Greek government, he

reduce the interest Greece pays on the

said, would not reap around ¤70,000 in

debt, deflation has made the interest

taxes on the transaction.

burden larger. The ripple effects of deflation are being felt throughout the Greek economy. Lefteris Potamianos, a long-time real

August 2014

Not only did Potamianos lose a

percentage of economic output. Today,

Across town, Nikolas Varelas, the owner of Varelas Home Design, has cut prices on the decorative tiles, designer faucets and other home furnishings in his

estate agent, was about to make a rare

showroom by 45 per cent to 60 per cent.

sale on an apartment in central Athens

Even with that deep discounting, “sales

in May when the deal ground to a halt.

are still low,” he said, “because people

Property values have fallen by 40 per cent

don’t have money.” n

Japan

Big

Problems for micro-cars The Japanese love their cheap and fuel-efficient micro-cars, but now the government is targeting them with higher taxes, reports Hiroki Tabuchi.

Toshie Yamada’s “kei,” wiTh iTs pint-size engine and tiny wheels, looks more like a Fisher-Price toy car than a regular truck. But do not underestimate her Nissan NT 100 Clipper micro-truck. At a recent farmers’ market, where she sells orchids from her flower farm in central Japan, she loaded up a mountain of crates, buckets and a folding table before hopping in and zipping away. “In these parts, keis are definitely the No. 1 car,” Yamada said. “Big cars are too much of a hassle.” As farmers’ trucks, family cars, delivery vans and even tiny cafés-on-wheels, keis are everywhere in Japan. They are country’s high fuel prices, a preferential tax system and an uneven economic recovery that have made the wee cars enticing value propositions. Keis have terrific fuel economies that rival Toyota’s Prius hybrid, but they sell for half the price. Last year, a record 40

getty images

more popular than ever, thanks to the

Portfolio

A Daihatsu Hijet microtruck, at a farmers market in Shinshiro, Japan.

per cent of all new cars sold in Japan were keis. But industry and government officials are increasingly worried that these microvehicles have become a distraction for the nation’s automakers – still bastions of the Japanese economy – and are moving to wean drivers off them. In April the government took what its critics charged was a hard-line route. Kei

As farmers’ trucks, family cars, delivery vans and even tiny cafés-on-wheels, keis are everywhere in Japan. They are more popular than ever, thanks to the country’s high fuel prices, a preferential tax system and an uneven economic recovery that have made the wee cars enticing value propositions.

drivers were hit with a triple whammy of a higher sales tax, higher gasoline tax and higher kei car tax, the last of which the government raised by 50 per cent, sharply

sufficient safety equipment. The engines

narrowing their tax difference with regular-

are limited by law to just 0.66 litres, similar

size vehicles.

to an engine of a midsize motorcycle. Even

car manufacturers are using the same

Ford’s smallest car, the Fiesta subcompact,

basic components to build a wide range

has a substantially larger engine.

of models. Servicing a niche, Japan-

“We need to rebalance our priorities,” Yoshitaka Shindo, the minister for internal affairs, said ahead of the tax increase. Though made by some of Japan’s

That means much of the research

cutthroat global competition. As with other big automakers, Japanese

only market is a luxury that Japanese

and development that go into kei models

automakers increasingly cannot afford,

biggest automakers, including Nissan,

is wasted, officials warn. Producing

some government officials argue.

Honda, Suzuki and the Toyota subsidiary

kei cars just for domestic drivers also

Generous tax breaks on kei vehicles, a

Daihatsu, the kei – pronounced like the

hurts automakers’ efforts to achieve

vestige of post-war policies that encouraged

letter K – is not manufactured for export,

economies of scale, which has become

Japanese to ditch their scooters and hand-

largely because of its small size and lack of

increasingly important in an era of

drawn carts for cars, are also becoming

August 2014

Japan

Takeshi Suzuki, inside the vehicle, sells coffee to customers from his microvan.

a drain on government coffers. And kei

at SC-ABeam Automotive Consulting,

Here in Shinshiro, an estimated three-

cars have become a perennial thorn in

an advisory firm based in Tokyo. “The

quarters of households own a kei car;

trade talks between Japan and other

distinction no longer makes sense.”

that proportion is close to 100 per cent in

car-producing countries, like the United

But the push to move beyond kei cars,

some parts of the country, according to the

States and Germany, who say Japan’s

which the government used to promote a

Japan Light Motor Vehicle and Motorcycle

unique tax breaks and restrictions for keis

car culture in Japan’s lean post-war years,

Association, an industry trade group.

protect domestic automakers from foreign

is being hurt by the success of that policy.

competition. More than 90 per cent of cars

Simply put, the Japanese love their keis.

sold in Japan are Japanese.

That is especially the case in rural

Raising taxes on kei cars “resorts to bullying the weak,” Osamu Suzuki,

regions, like Shinshiro, where lower

chairman of Suzuki Motor, a major

car in Japan. But now its role is over,”

incomes and sparse public transportation

manufacturer of kei vehicles, said at the

said Mitsuhisa Yokoyama, an analyst

systems have made the tiny cars a necessity.

introduction of a new kei truck last year.

“For years, the kei was the people’s

Portfolio

of kei car drivers, according to the

Pain from the higher kei taxes is also

manufacturers association. Women in

being felt unevenly across the auto

Shinshiro said that their husbands drove

industry. Japan’s smaller carmakers, which

standard-size cars, but that their household

rely more on kei car sales, have complained

would struggle to buy and maintain a

bitterly that raising kei taxes hits their own

second standard car.

bottom lines, endangering jobs. Suzuki, for

“I don’t know what I’d do without my

example, has said that it expects kei sales to

kei,” said Yui Shirai, who relies on her

slump this year because of the higher taxes.

Tanto, made by Daihatsu, to drive to her

It was one of only two carmakers that did

job at her parents’ tea farm. Her husband,

not give raises to its employees this year.

Takuya, drives a standard-size Suzuki.

Suzuki also argues that manufacturing

Shirai said that they might not be able to

keis offers insights into other parts of

own a second car – and she might not be

its business. It applies some of the kei

able to work – if not for the low cost, low

technology, for example, to small cars that

taxes and low fuel needs.

it sells in India, a market where it has a

The new kei taxes are feeding into a debate over what some Japanese see as

sizeable share. And Suzuki has been aggressively

a growing gap between haves and have-

upgrading its keis, transforming them from

nots under Prime Minister Shinzo Abe’s

cut-rate cars with minimal trappings. Now,

economic reforms. Critics charge that

Suzuki’s best-selling “Wagon R” micro-car

the big measures Abe has pushed so far

features slick seats, a small lithium-ion battery that can capture energy when the

Almost 20 per cent of kei owners surveyed by the automobile manufacturers’ association said they would consider giving up their cars altogether because of higher taxes, while 10 per cent would upgrade to standard cars.

car slows down, and an advanced, radarsupported braking system. These are all technologies that are applicable across all its models, Suzuki says. “In the past, people used to say they’d settle for a kei. Now they say they desire a kei,” said Aritaka Okajima, a Suzuki spokesman. Still, the future is tough for Japan’s micro-cars. Daihatsu’s president, Masanori Mitsui, warned on April 28 that the automaker expected overall kei sales in Japan to shrink by some 500,000 vehicles during the next two years, from 2.23 million vehicles last fiscal year to 1.7 million in 2015.

The popularity of keis is also increasing

– raising taxes, stoking higher oil prices

Takeshi Suzuki, a Shinshiro retiree who

among young city dwellers, who have been

and nudging up inflation – have hit poorer

sells coffee from the back of his Mitsubishi

hit hardest by Japan’s decades of slow

Japanese the hardest.

Minicab microvan, said raising taxes on keis

income growth. About 26 per cent of kei

Almost 20 per cent of kei

would quash Japanese entrepreneurism. In a space a little more than 3.4 metres

drivers last year said they had downsized

owners surveyed by the automobile

from a standard car, according to a

manufacturers’ association said they

survey published in April by the Japan

would consider giving up their cars

long, less than 1½ meters wide and about 1 ½ metres high, Suzuki has squeezed

Automobile Manufacturers Association, a

altogether because of higher taxes, while

in an industrial coffee grinder, electric

trade organisation.

10 per cent would upgrade to standard

generator, ice box, paper cups and a

Keis have also become an important

cars. “The burden appears to be heaviest

Cimbali espresso machine.

mode of transport for Japanese women,

for families with children, and for young

who make up an estimated 65 per cent

people with low incomes,” the survey said.

August 2014

“Keis are the working man’s friend,” he said. “How could they do this to us?” n

Music

The drinks flowed freely in New York in June at the Libera Awards, a three-year-old alternative Grammys for the world of independent music, as awards went to prestige indie acts like Arcade Fire and Arctic Monkeys. Meanwhile, executives at small labels congratulated one another about what a great year it was for their music. But despite the celebratory atmosphere, anxiety about competition and fairness in the digital marketplace runs deep in the independent sector of the music industry. Small labels complain that consolidation by the major record companies has left them squeezed in negotiations with the online music services that now account for a

inDie

Music’s majority of their revenue.

Executives and advocates for the indies

say they are vulnerable to strong-arm tactics by internet giants like YouTube, which has recently threatened to block some labels’ videos unless they sign new licensing deals. Like the standoff between Amazon and the book publisher Hachette, the dispute has crystallised a fear that access to the online marketplace controlled by a few has become a privilege affordable only by the biggest and richest players. “In the growth of the internet, what was to be a utopian levelling of the playing field, a democratisation for all, what is actually

happening is a form of cultural apartheid,” said Alison Wenham, chief executive of

Digital

Drag

Independent music labels are claiming that they are vulnerable to strong-arm tactics by internet giants such as YouTube and Amazon, reports Ben Sisaro.

the Worldwide Independent Network, an umbrella group for small labels. The YouTube battle involves a longdelayed effort by the online video giant to develop a paid, advertising-free premium version to compete against subscription Portfolio

Sharon Jones & The Dap-Kings, a popular group on a small label, perform during the SXSW Music Festival in Austin.

music services like Spotify, Rdio and Beats

Dinosaur Jr., spoke before a US House

and the blog Digital Music News, which

Music. YouTube, a division of Google, has

Judiciary subcommittee as part of a

purport to be from leaked contracts, reveal

made licensing deals with Universal, Sony

hearing on music licensing. In a statement

sticking points like a “negative most-

and Warner, the three major labels, but it

supplied to the subcommittee in advance,

favoured nation clause,” meaning that if

has stalled with the independents, which

Van Arman said that in the streaming age,

YouTube strikes a lower deal with any

contend that YouTube has offered them

“the three major recording companies

label, it can reduce all rates accordingly.

inferior terms.

have become proficient at extracting a

As the indies tell it, the dispute is typical of their disadvantage in the larger digital sphere.

Which labels and bands will be affected

disproportionate share of copyright-related

– and what will happen to their videos

revenue from the marketplace.”

– is not clear. According to a number of

In the YouTube negotiations, no label

people who have been engaged in talks

has come forward with specific complaints

with YouTube, the company is threatening

co-founder of the Secretly Group, whose

about the contract terms in dispute. But

to block videos from indie labels’ official

acts include indie stars like Bon Iver and

details published by Billboard magazine

channels; videos uploaded by users

On June 25, Darius Van Arman, a

August 2014

Music

Marc Ribot, left, and members of the Content Creators Coalition protest internet companies’ revenue sharing arrangements.

One of the independents’ main complaints about the major labels with which they compete is how market share is computed.

would remain on the site, but yield no

to connect, and as a revenue source for

advertising revenue.

the music industry,” the spokesman, Matt

Yet how much money is at stake is

McLernon, said in a statement. “We’re

unknown. According to the Recording

adding subscription-based features for

Industry Association of America, which

music on YouTube with this in mind.”

primarily represents the major labels, YouTube and other so-called on-demand,

One Of the independents’ main

ad-supported services made $220 million

complaints about the major labels with

in revenue for the music industry last

which they compete is how market share

year, about as much as vinyl records;

is computed. According to Van Arman

by comparison, download sales were

and Richard Bengloff, president of the

$2.8 billion.

American Association of Independent A YouTube

Music, a trade group, the big labels

spokesman said the

overstate their share of the music market

company had already

by counting not only recordings that they

signed deals with 95

own, but also those that they distribute and

per cent of its label

that are owned by independents. Each of

partners, but declined

the big labels has distribution subsidiaries

to comment further on

that handle hundreds of independents,

negotiations.

leading to a wide grey area in which both

“Our goal is to continue making

the majors and the indies claim control. Universal, the world’s biggest music

YouTube an amazing

company, sells or distributes 38.9 per

music experience, both

cent of the music in the United States,

as a global platform

according to data from Nielsen SoundScan.

for fans and artists

But measured strictly by copyright Portfolio

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Music

mergers have resulted in a concentration of power among just three major labels. “Even if the market shares were more accurately measured, we would still have the inescapable fact that the three big labels account for the majority of music sales and the indies only have an impact as a collective,” said Mark Mulligan, a digital media analyst and consultant. Representatives of the three major labels declined to comment on how market share was used in licensing negotiations. In some ways, the new digital marketplace has helped the indies flourish. Members of the Content Creators Coalition protest in front of Google’s offices in New York.

Music on smaller labels tends to perform better on digital outlets like Spotify and iTunes than it did when the market was dominated by brick-and-mortar stores, and the cost of promotion presented a higher barrier. Merlin, an agency that negotiates digital deals for hundreds of indies, said

ownership, Universal has only about 28.5

rates, as well as other payments like

that streaming services brought $89

per cent of the market, while independents

minimum guarantees and large advance

million in revenue to its members from

collectively hold about 34.6 per cent,

payments. Those payments may be

May 2013 to April 2014.

according to the American Association of

unavailable to indies, or available only in

Independent Music.

much smaller amounts.

Market share is important leverage in

The fight with YouTube is only the latest

Yet indie executives say the YouTube and Amazon deals show how fragile access to the marketplace can be. “I don’t have any idea what this business

negotiations with digital services over

to galvanise the independent sector, as

licensing terms, and the independents

technology companies like Apple, Amazon

is going to be like in a year, much less five

claim that the majors’ inflated share

and Pandora have become the most

years,” said Bruce Iglauer, the founder of

allows them to demand higher royalty

powerful outlets for music and years of

the Chicago blues label Alligator Records, who received a lifetime achievement award at the Liberas. In June, the dispute spilled out into the streets of New York. On a Saturday afternoon, a few dozen supporters of the Content Creators Coalition, an artists’ advocacy group, picketed Google’s office, playing New Orleans-style marches on horns and carrying signs like “Economic justice in the digital domain” and “What YouTube pays? Nothing.” Marc Ribot, a guitarist who has played with stars like Tom Waits and Elvis Costello, summarised how the larger

getty images

conflict over streaming revenue affected artists’ careers. “If we can’t make enough from digital media to pay for the record Darius Van Arman – co-founder of the Secretly Group, Tom Silverman and Rich Bengloff attend the Libera Awards in New York City.

that we’ve just made,” Ribot said, “then we can’t make another one.” n Portfolio

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Energy

At Dimitris Poliviou’s cAr rePAir shop in London, customers are increasingly turning up with diesel-powered vehicles.

All London buses and cabs are now diesel powered.

“There are loads and loads of them,” Poliviou said as his crew in the Belsize Park neighbourhood worked on a diesel Volkswagen Passat. The statistics bear him out. Over the last quarter-century, European drivers have embraced diesel cars as they tried to save money in a region of high-priced fuel. More than half of the new cars registered in Western Europe last year were diesel powered, compared with only about One in 10 back in 1990. (Even now, only about GETTY iMAGES

three per cent of new cars in the United States are diesels, according to the market researcher IHS.) That is why Exxon Mobil, the biggest US oil company, is trying to take advantage of the diesel boom to bolster its struggling European refining business. As fuel refining has eroded into a money-losing proposition for most European players, Exxon Mobil is making a contrarian bet, with a plan to invest more than $1 billion in expanding diesel-fuel production at its big refinery in Antwerp, Belgium. Steve Hart, Exxon Mobil’s head of refining for Europe and most other regions petrol the United States, said in an interview that the company was taking a long-term view in betting on diesel to

diesel Challenges Oil RefineRs Diesel-powered cars are now the biggest sellers in Europe. That is a problem for refineries that are geared towards petrol production, reports Stanley Reid.

reinvigorate its refining operations. “If you look at Europe, demand for diesel continues to increase, and demand for petrol is decreasing,” he said.

European carmakers like Renault and

locations in Europe, where the company

from the United States, the Middle East

has nine refineries and is second-largest in

and Russia.

Volkswagen have responded to changing

the industry, after the French giant Total.

customer tastes with new diesel designs

From its network of refineries in northwest

with a powerful trend that was initially

that have helped make diesel even more

Europe, Hart said, Exxon Mobil will collect

encouraged by lower taxation on diesel

popular, through changes like adding

heavy fuels for which there is no longer

cars and fuel, and then grew with big

turbo chargers to smooth acceleration.

much demand – like the so-called bunker

improvements in European auto design.

But fuel suppliers in Europe, because of

used by older ships – and carry it by boat

the expense of converting refineries,

to Antwerp. There, a new refinery unit will

have developed popular diesel versions

have been slower to adjust. Many find

distil the gooey substances into diesel and

of the Volkswagen Golf, the Audi A4,

themselves awash in petrol, for which there

a similar lighter-weight fuel used by more

the Renault Clio and the Peugeot 308,

is diminishing demand.

modern ships. The company will then sell

allowing diesels to grab around two-

the diesel in northwestern Europe, which

thirds of the new-car market in France,

now imports large quantities of the fuel

Spain and Belgium, and about half of that

Hart also suggested that Exxon Mobil was considering diesel investments at other

Exxon Mobil is trying to catch up

Carmakers in Germany and France

Portfolio

market in Britain and Germany.

Robert Campbell, an analyst at Energy

“When European margins may not

“The European manufacturers are the

Aspects, a market research firm, figures

rise for many years, a new investment in

market leaders,” said Oliver Waschilowski,

that the smaller European refineries are

European capacity is not what I like to see,”

who follows the car industry for IHS in

losing $4 to $6 a barrel on the oil they

said Oswald Clint, an analyst for Bernstein

Essen, Germany.

process, while larger refineries may be

Research in London. Exxon Mobil could

making a razor-thin profit of $1 to $2 a

improve profits quicker by closing poorly

diesel cars as being pokey and for emitting

In bygone days, many drivers disdained

barrel. Refiners, he said, have thought

performing facilities in Europe, he said.

smelly fumes. But thanks to a string of

that “because European oil demand is

Others disagree.

improvements, diesel vehicles are now

going down, there is no reason to invest

“European refineries have to invest

considered high-performance machines.

in refineries.”

“People prefer the power delivery with

But Exxon Mobil, with its deep pockets,

in a difficult environment if they want to be around for the long term,” said

diesel – they feel a lot quicker,” said Luke

is doing what it thinks is necessary to

Paul Hodges, chairman of International

Madden, news editor of Auto Express and

continue as a European player.

eChem, a consulting firm in London. “It

Carbuyer, websites based in London. Madden said diesel cars achieved substantially more kilometres per litre

Some analysts question whether the

would be far more expensive to pretend

move is wise in an industry still plagued by

that somehow the world will return to the

substantial overcapacity.

market conditions of 25 years ago.” n

than their petrol-burning counterparts. That is particularly important in European countries, including Britain, where petrol and diesel cost more than double than in the United States. Madden and Poliviou, the mechanic, cautioned that diesels have drawbacks. For instance, diesel cars need to be driven regularly and at a fairly high speed to clean the filters that catch the soot and other particles their engines produce. In cars used only for stop-and-start city driving, those filters can gum up and cause problems.

GETTY iMAGES

The big shifts in the European auto fleet have caused huge changes in fuel consumption. Car and truck drivers in the European Union now burn more than 2.5

More than half of new cars registered in Europe last year where diesels.

times as much diesel as they do petrol. A decade ago the use was even. Those changes have left European refiners with a product mix too skewed toward petrol – creating a glut of fuel that is increasingly difficult to export to the United States as North American refineries can produce it themselves at a lower cost. Many European refineries are thought to be losing money due to sluggish petrol demand in Europe and competition from imports coming from the United States and new facilities in the Middle East. Unlike Exxon Mobil, many are reluctant or unable to make the big investments needed to adjust to the new environment. August 2014

Dimitris Poliviou at the repair shop he owns, where more customers are turning up with diesel cars.

Essentials

The besT of leisure and lifesTyle

Isle of

Wonder

The birthplace of Zeus and the oldest civilisation in Europe, Crete is the most visited of all the Greek islands. With stunning Venetian harbours, ancient landmarks and extraordinary scenery, it is a jewel in the Mediterranean, reports Nick Rice.

August 2014

Essentials

Travel

Old Venetian Lighthouse at Rethymnon.

For decades Greece was

tide is changing and it’s a perfect time to

kilometre island, taking in the ancient

highly ranked in the world’s most

discover the many wonders of Greece.

archaeological sites, renowned museums,

popular tourist destinations, but the

Away from the mainland there are

wild expanses of coastline, picturesque

global downturn in 2008 and the

thousands of Greek islands to visit, over

resultant Greek Depression caused a

200 of them inhabited, and many with

slump in visitor numbers. Recent years

a particular charm and appeal, so the

off the Acropolis and other essential sites,

have been undoubtedly tough, with a

curious tourist is very much spoilt for

venture away to discover this rich island

prolonged period of austerity.

choice. Should indecision be an issue,

located at the southernmost point of Europe.

towns and jaw-dropping natural landscapes. So after arriving in Athens and ticking

any traveller would do well to opt for the

A memorable way to arrive is by sea.

the crisis, the country seems to have

biggest of them all – the “Great Island” or

From the Piraeus port in Athens a range

come through the worst and people are

“Megalónisos” as the Greeks call it.

of ferry companies offer daily trips to

Although tourism did not escape

Crete is often described as being more

the various cities in Crete, including the

figures reveal that tourism employs one

like a country in its own right, and it’s easy

capital of Heraklion. An overnight trip in

in five residents and contributes more

to see why. The fifth-largest island in the

a deluxe room costs less than ¤100, and as

than 16 per cent to GDP. More than 17

Mediterranean Sea, it boasts warm and

the sun rises you can see the glory of the

million tourists arrived last year and

hospitable people, delicious Cretan cuisine,

island stretched out before your eyes.

Greek tourism is once again one of the

a temperate climate and an abundance

Crete is practically equidistant from

few sectors of the national economy

of visitor attractions. It would be easy to

Europe, Africa and Asia, and with such

that is competitive at a global level. The

spend months exploring this 8,336-square-

obvious strategic value, over the centuries

heading back to this ancient land. Recent

Portfolio

getty images

The well-preserved Palace of Knossos offers a glimpse into the splendour of the Minoan civilisation.

Just 20 minutes outside Heraklion,

still undeciphered after 3,600 years. A

Knossos is one of the most important

special ¤10 ticket is valid for visiting both

archaeological sites in the world with more

attractions and it is money well spent.

getty images

than a million visitors per year. These ancient ruins were once the ceremonial

Although multiple bus services

and political heart of Minoan culture. In

operate the length and breadth of Crete,

beautiful surroundings amongst cypresses,

the advisable way to travel is by private

olive trees and vineyards, exhibits such

car. There are plenty of friendly and well-

as the throne room, royal chambers

organised rental car companies and an

and Queen’s suite are staggeringly well

average daily rate is ¤30. Heading west

preserved considering they were created

from the capital it’s around a two-hour

in the Bronze Age.

drive along the coast and through several

Back in the city centre, on one corner of the central Eleftherias Square, stands

pretty beachside villages to Crete’s third largest town, Rethymnon.

it has been ruled by Venetians, Turks,

the Heraklion Archaeological Museum.

Ottomans, Egyptians and Germans. The

Re-opened in May 2014 after many

here is an immediate reminder of the

island was also home to the Minoans, the

years of closure for renovations, this

past, whilst modern life is very much

earliest recorded civilisation in Europe

world-renowned museum spans a period

pushing forward. Contemporary shops

(circa 2700–1420 BC). Two unmissable attractions whilst in Heraklion are the Palace of Knossos and the

starting several thousand years ago, progressing to the

The Venetian and Turkish architecture

and hipster markets blend together with aging minarets and domed mosques. The

Minoan, post-Minoan

harbour area is ideal for a stroll, although

and later periods.

passing the line of waterfront restaurants

Highlights include

to head back into the centre is like

Archaeological

classic Hellenic

running the gauntlet. The proprietors are

Museum – both

and Roman

so keen for customers that they bombard

places giving

sculptures,

passers-by with timeworn patter that can

insight into

frescoes, wall

veer close to harassment. Having said

the fascinating Minoan civilisation. The writing on the Phaistos disc has never been deciphered. August 2014

paintings and

that, the food is largely excellent and the

the mysterious

Erofili restaurant in the Old Town and

Phaistos disc – a

Prima Plora in the Koubes area on the

clay disc bearing inscribed symbols unlike any signs in any writing system and

beach are both worth a visit. Daytrips to nearby villages along the coast are perfect for escaping the activity of

Essentials

getty images

Travel

The picturesque harbour of Rethymnon.

getty images

Backstreets of the Old Town in Chania.

The backstreets of Rethymnon are lined with restaurants.

Rethymnon. Platanes and Adele are good

Entering the harbour from the west

The Casa Leone hotel is in a renovated Venetian three-storey house.

furniture, chandeliers, beamed ceilings

examples of small tourist resorts that have

side on Akti Kountourioti, the small Faros

and four-poster beds with muslin drapes

many restaurants and cafés plus easy access

lighthouse, the oldest in Greece, can be

are found in every room of this delightful

to eight kilometres of fine sandy beaches.

seen directly opposite. To the right is the

boutique hotel. The balcony in the lobby

Firka Fortress, built by the Venetians to

overlooks the entire harbour and is a

Moving further west, around

protect the harbour entrance. Following

perfect spot to enjoy a tasty Cretan lunch.

one hour’s drive from Rethymnon, is

the walls you will eventually arrive at

Crete’s second largest city and one of the

Angelou Street, leading up and away

Delfino Hotel & Spa is another triumph

highlights of the entire island. Chania

from the port into an enticing warren

of meticulous renovation. This 17th-

(pronounced with a silent C) is the former

of backstreets filled with plant-life and

Century Venetian mansion has been in

capital and lies on the north coast at the

doorways that provoke the imagination.

the same family for six generations, and

foot of the impressive White Mountains.

Many hotels can be found in this area

the present owner personally spent two

At first sight of the harbour it seems as

and two that deserve special mention are

years laying the pebble-stone mosaic in

though you’ve somehow been transported

Venetian mansions painstakingly restored

the entrance courtyard – testament to a

to Venice. Four centuries of Venetian rule

by families rather than hotel chains. Casa

labour of love that has culminated in a

(1252-1645) has left refined mansions,

Leone at 18 Theotokopoulou, the first

truly stunning hotel. They have achieved

crumbled and repaired time and again,

side street you meet, is a 15th-Century

a subtle marriage of modern minimalism

dominating the port.

Venetian three-storey house. Antique

with historical preservation. The spa is

A minute’s walk away the Casa

Portfolio

The ‘Iron Gates’ of the Samariá Gorge National Park, a World Biosphere Reserve.

The Faros Lighthouse in Chania is the oldest in Greece.

the longest gorge in Europe and quite rightly the major attraction on the island. Booking a pre-arranged tour from one of the many operators in Chania is a good idea as it includes a bus journey to the gorge, followed by a boat trip once the walk is complete, and a final return bus at the end of a long day. InItIally the walk descends for several hours into the heart of the gorge and proper walking footwear is strongly advised – my heart went out to some visitors who had worn flimsy sandals and plimsoles. In total the walk is 18 Casa Delfino is the hotel of choice for visiting VIPs in Chania.

kilometres through rich landscape and rare flora and fauna. It will take around

immaculate and the rooms are vast and

exhibition space and it’s worth going in to

eight hours and you are rewarded at

stylish, so it’s easy to see why visiting VIPs

see the interior, as well as the art displays.

the other end with a clean beach and a

routinely opt for the Casa Delfino. Winding through the restaurant-lined

Between the hive of alleyways in the Old Town hugging the waterfront and the

luxurious dip in Agia Roumeli Bay. There are countless more pleasures to

backstreets it is easy to find yourself back

hustle and bustle of the New Town and

discover in Crete and you will long to stay.

at the waterfront. Passing the central

its lively markets and trendy stores, there

As the author of Zorba the Greek, Crete-

Sintrivani Square the Akti Tombazi

are enough sights and attractions to last at

born Nikos Kazantzakis once said, “Crete’s

begins and it is on this stretch of harbour

least a week or more in Chania. When you

mystery is extremely deep. Whoever sets

you’ll find the Mosque of the Janissaries,

manage to drag yourself away, head south

foot on this island senses a mysterious

or ‘seaside mosque’, the oldest Muslim

and walk off the delicious Cretan cuisine

force branching warmly and beneficently

building in Crete. Built in 1645, the stoutly

at the Samariá Gorge National Park.

through his veins, and senses his soul begin

impressive building is now used as an August 2014

This World’s Biosphere Reserve is

to grow”. n

Essentials

Cuisine

Ode tO the ClassiC BistrO Finding a “real” bistro that serves authentic French food is becoming more difficult in Paris, but there are still some gems, reports Elaine Sciolino.

t is a question i have come

table that must be vacated two hours later

report that despite the disturbing changes

to dread: Can you recommend the

when the next shift arrives.

afoot, the old-style Paris bistro – an

perfect bistro?

None of that for me. Call me old-

unpretentious place that celebrates honest

fashioned, but my idea of the perfect

food and wine, a cozy atmosphere and

visiting friends a good answer is that the

bistro is a place where the dishes are

great conversation – is alive and well.

Paris bistro scene is in full transformation.

traditional, the ingredients seasonal, the

Ideally, this bistro has a zinc-topped

And the trends are moving in contradictory,

service attentive, the price acceptable and

bar with a heavy wood frame where I can

and worrisome, directions.

my relationship with the chef close enough

sit and have a drink before dinner, and

that I can visit the kitchen when the

an owner who doubles as a magician and

bistro food these days: dishes like onion

meal is over. Julia Child put it best in her

can always find a table for his friends

soup and blanquette de veau that are mass-

posthumous memoir, My Life in France:

(including me and mine).

produced at large industrial sites, shipped

“The kind of food I fell in love with,”

to kitchens and reheated just before

she wrote, was “not trendy, souped-up

they’re coming to my home for dinner,”

serving. If you’re not careful, you can end

fantasies, just something very good to eat.”

said Sébastien Guénard, the owner and

The reason it’s so hard to give my

On one hand, there’s a lot of really bad

up paying serious money for a meal that was vacuum-packed or frozen just a few

Good bistros are essential to this city and to me. After living here for 12 years, I can

“I want all my clients to feel like

chef of Restaurant Miroir, a bistro in Montmartre. “I hate to turn people away.

hours before. At the other extreme, there’s

“bistronomy,” a movement among mostly younger chefs who are trying to update the tried-and-true classics using fresh, seasonal ingredients. The décor tends to be modern, the presentation pretty, the portions smaller. Some have become so trendy that you have to book several weeks in advance

Call me old-fashioned, but my idea of the perfect bistro is a place where the dishes are traditional, the ingredients seasonal, the service attentive, the price acceptable and my relationship with the chef close enough that I can visit the kitchen when the meal is over.

at the un-French early hour of 7:30 for a Portfolio

Diners at a sidewalk table at Bistro Valois, near the Palais Royal in Paris.

August 2014

Essentials

Cuisine

I always keep three or four tables free – just in case friends show up. And if they don’t, well, imagine the pleasure when a stranger walks in on a Friday night with no reservation and I say, ‘Of course I have a table for you!’” Part of that spirit is the flexibility to give clients what they want when they want it. Laurent Chainel has made Bistrot Valois, his newly-renovated place near the Palais Royal, a nearly nonstop dining experience, from morning to evening every day except Sunday. There is no requirement to order from a fixed menu. You want two extra-large Restaurant Miroir waitress Catherine Mourrier, chef and owner Sebastien Guenard, centre, and head waiter and manager Julien Bellet outside the establishment in the Montmarte district.

organic hard-boiled eggs topped with huge globs of perfect homemade mayonnaise and served with twice-cooked French fries at 11 am? Done. A Coke with your rare veal

Steak tartare with salad and fries at Bistro Valois.

chop? The waiter won’t look at you funny. “You won’t find foam or sun-dried tomatoes here,” Chainel said. “You won’t find a tiny piece of meat and three carrot slices as a main course. My goal is to give a soul to the old bistro.” Le Bistrot Paul Bert, a rock-solid place in the 11th Arrondissement, has all the qualifications for the ideal bistro: simple, straightforward cooking with just the right creative tweaking of the classics, and always the signature côte de boeuf. It’s so good that the fanciest hotels send their bistro-craving clients there. And then there’s the service. One evening, my older daughter, Alessandra, insisted that her best friend try her favourite chocolate mousse cake. When dessert time came, so did the bad news: no chocolate cake that night. Alessandra was crestfallen. “Give me a minute,” the waiter said. He disappeared, and then came back with a gorgeous chocolate confection on a plate – from the seafood restaurant next door. But another essential of the great bistro is that it feels truly French. It’s Head waiter and manager Julien Bellet serves diners at Restaurant Miroir.

unsettling to arrive at one of your favourites and discover that it’s been so thoroughly reviewed back home that you find yourself seated in a room where all Portfolio

the diners are also American. “A couple of Fridays ago, an American guy came up to the bar to complain,” said Bertrand Auboyneau, the owner of Paul Bert. “He said, ‘I’ve been living in Paris for 20 years, and I didn’t come here to be put in the American room’.” Benoît Gauthier, the chef and owner of Le Grand Pan, is able to avoid most foreign diners, not because his cuisine is lacking but because of his remote location in the far southwestern corner of Paris – a good 10- to 15-minute walk from the closest Metro stop. You have to really be motivated to get there. The son of a butcher from the Corrèze, the south-central region of France where locals believe they produce some of the finest cattle in the land, Gauthier whips up a five-course tasting menu from a closet of a kitchen. His specialty: big fat cuts of veal, beef or pork on the bone for two. And

Rugby fan Benoit Gauthier is the chef and owner of Le Grand Pan, which specialises in big cuts of veal, beef or pork on the bone for two.

There is nothing nouvelle about the

bowls of chocolate mousse, rice pudding,

there’s always a surprise for friends, like a

cuisine: leek tart, garlic-rich escargots,

génoise cake, fresh pineapple, sliced

Mont Blanc that’s not on the menu. Like

frogs’ legs, goose liver foie gras, stuffed

oranges, conserved chestnuts and figs, even

his father, Gauthier is a rabid rugby fan,

cabbage, blanquette de veau, cassoulet,

stewed prunes? They arrive at once.

and the front room is lined with signed

and rabbit in white wine and shallots.

One night, a group of 30-somethings

rugby balls from around the world.

A classic terrine made with pork neck,

was celebrating a birthday at the table next

chicken livers, eggs and cognac is served

to ours. At the end of the meal, Bosshard

fashioned experience, there’s Le Quincy

with a raw cabbage salad tossed with

heated large snifters of prune de Souillac

in the depths of the unfashionable 12th

mustard-garlic vinaigrette. This is no

over a Bunsen burner. Why choose such an

Arrondissement. Open the door and

place to be squeamish: There are also

old-fashioned place, I wanted to know.

discover a place frozen in 1950s Paris. You

veal’s heads and andouillette sausage

almost expect General Charles de Gaulle

(made from intestines).

For anyone who wants a very old-

to walk in. It’s more auberge (country inn)

You want dessert? How about communal

“They have the best escargots in France,” one said. Another added, “The food is exactly the way my grandmother made it.” n

than urban corner hangout, with a woodbeamed ceiling; an old map of France, a painting of animal heads and decorative plates on the walls; and a very large stuffed rooster in the corner. The tablecloths and napkins are checked pink with the words “Le Quincy” woven into the fabric. No credit cards are accepted. The owner, Michel Bosshard, 77, covers his big belly with a white chef ’s apron and always wears a red bow tie. He welcomes his guests with slices of a fat, garlicky, cured sausage that he cuts with a large knife and serves with a pleasant, bubbly white wine from the Loire. “You have to drink it without making a face because it’s a gift I offer you,” he said. August 2014

Freshly cooked langoustine at the 40-year-old Paris fixture Le Quincy, owned by Michel Bosshard.

Essentials

Environment

geTTY images

Since 1943, Vietnam has lost at least a third of its forests with the total area falling from 13.5 million hectares to nine millions hectares.

efore the patrollers

sector, has made ecosystem payments a national policy.

a responsibility to my community and that

heard the sounds of illegal

I should protect nature,” said Nghia, who

Government officials say nearly half of

logging. When the two groups

receives about three million dong ($142)

Vietnam’s 63 provinces are carrying out the

finally met, violence erupted and rocks

a year in exchange for patrolling about 30

programme, which is intended to support

flew, according to one of the patrollers,

hectares of state-owned land. The payments

economic development in poor areas while

Huynh Van Nghia. He later spent months

amount to three to six per cent of his

protecting forest cover and supplementing

recovering from injuries he received in the

family’s annual income from farming coffee,

state forestry budgets. But they concede

scuffle, which occurred in a forest near

passion fruit and other crops.

that the programme, which is mandatory

Variations on this programme have been

for hydropower companies, is hindered by

Highlands. A few of the two-dozen loggers

applied around the world to water, soil and

administrative inefficiencies and does not

were also wounded, he added.

forest conservation projects. New York City

yet measure the effects on water quality or

introduced incentives to protect water quality

forest or watershed health.

the village of Kalkill in Vietnam’s Central

“I’m part of this programme because I feel

spotted the interlopers, they

Nghia and the other patrollers, a band

Some experts now wonder whether the

of about 30 farmers, essentially work as

in the Hudson River Valley, for example, and

freelance park rangers under a 2010 law

China gave farmers cash and grain subsidies

programme, officially called Payments

that established a nationwide incentive

to convert sloping cropland to forests in a bid

for Forest Environmental Services, is

programme in which companies – mainly

to prevent catastrophic floods.

environmentally or financially sustainable.

state-owned hydropower operations – pay communities to protect watersheds.

But Vietnam which, like China, has a state-dominated economy and forestry

So far, the payments are “not really paying for environmental services – they’re Portfolio

Watching Over vietnam’s EcosystEm Vietnam has established a nationwide incentive programme that pays villagers to act as freelance park rangers to deter illegal logging, reports Mike Ives.

essentially labour contracts,” Pamela

national programme generated about $47

including $10 million since 2005 from the

McElwee, a professor at Rutgers University

million a year. A handful of tourism and

US Agency for International Development.

who studies environmental policies in

water-supply companies participate, he

Vietnam, said recently in Hanoi. “There’s

added, but 98 per cent of the payments

is “different from other conservation

not any sort of good monitoring, so the

come from hydropower producers.

approaches in that it intends to apply a more

hydropower companies are kind of taking it

The payments programme is the latest in

An ecosystem payment programme

market-like approach,” Joakim Parker, the

on faith that they’re getting something out

a series of forestry reforms in Vietnam since

Vietnam mission director for the US agency,

of this.”

the late 1980s, when the ruling Communist

said in a written response to questions. He

Party gradually began to introduce market-

said that some hydropower companies were

pay 20 dong per kilowatt-hour – less than

based changes across its government-

assessing whether the programme helped

one-tenth of a cent – into a government

dominated economy.

reduce sediment in reservoirs and that it

Under the rules, hydropower companies

fund and pass on the fees to their

Environmental experts say the concept

would be a long-term process. But Luong of the Agriculture Ministry

customers, typically via electricity rates,

of ecosystem payments began to take hold

according to Pham Hong Luong, a forestry

in the early 2000s, when the government

said forestry officials struggled to collect

official at the Ministry of Agriculture

viewed them as a budgetary replacement

from many small and midsize hydropower

and Rural Development. The state then

of sorts for state-financed reforestation

companies. All such companies in the

distributes the money to communities and

programmes that were scheduled to expire.

country have contracts with Vietnam

companies tasked with protecting forests. Luong said in an interview that the August 2014

The programme has since received financing from many international donors,

Electricity, or EVN, the state power distribution monopoly. But Luong said

Essentials

Environment

the company often refused to renegotiate long-term electricity-buying agreements, and hydropower companies said they could

Illegal loggers carry a slab of sandalwood.

not manage the extra expenses. “It’s very difficult for them to pay us if EVN cannot pay them,” he said in an interview. Representatives for four hydropower companies in Vietnam that participate in the payments programme either could not be reached by telephone or declined to comment. Even if more of those companies eventually participate, environmental experts say, ecosystem payments will not eliminate the financial incentive for poor getty images

farmers to log or illegally plant coffee trees in state forests. In the Central Highlands province of Lam Dong, a household typically earns the equivalent of $15 per

during an interview in the city of Da Lat,

resource-rich forests. As for concerns

hectare a year from the payments, while

the provincial capital of Lam Dong.

about the programme’s environmental sustainability, Luong said the government

the same area of coffee yields more than $2,000, according to Pham Thanh Nam,

ScholarS write that poor members

was working with experts from the Asian

a forestry officer there who coordinated

of ethnic minority groups in the Central

Development Bank to introduce state-

the programme’s pilot stage before the

Highlands are often pushed off their land

of-the-art technologies, like satellite

2010 decree.

by settlers from the Kinh ethnic majority

monitoring to monitor forests.

“If we think of the opportunity cost, it cannot compare with the coffee,” Nam said

Huynh Van Nghia receives $142 per year in exchange for patrolling state-owned land.

group, prompting them to cut trees and grow crops in some of Vietnam’s most

But Pham Thu Thuy, Vietnam country director at the Centre for International

In the province of Lam Dong a household typically earns $15 per hectare of farmed land.

Portfolio

Forestry Research, said the programme’s environmental monitoring capabilities were still at an “infant stage.” Thuy and other experts also question whether the programme is supporting the poor as intended. She said that in some areas of rural Vietnam, villagers might not trust the leader who signed the contract on the village’s behalf. In other cases, villagers also wanted to invest the money they received into farming, Thuy added, and so resented a clause that required them to spend a percentage on items that benefited the community, like furniture for a village community centre. Meine van Noordwijk, chief science adviser at the World Agroforestry

A motorbike drives through forests protected by Payments for Forest Ecosystems Services.

Centre, said the Vietnam programme’s shortcomings were not unique. He said

A few Central Highlands villagers said

several countries, including China and

Vietnam’s programme, though not perfect,

Costa Rica, have tried to regulate a wide

made sense for them.

protecting state forest land was his primary source of income. Protecting the government’s woods

range of ecosystem payments, but none

In the village of Diom A, Touneh Duy,

have achieved perfect success as putting

a farmer from the Churu ethnic minority

can be dangerous, Duy, 45, said recently

price tags on ecosystems is such a complex

group, has fallen on hard times after a

at the general store in Diom A. But he

undertaking: “The challenge is that the

stint in the Vietnamese army. He said the

was willing to take his chances. “This

definition is setting up a target that is

$113 he received every three months

programme supports poor people,” he said.

almost unreachable.”

from the programme in exchange for

“I’m one of them.” n

from loggers and rogue coffee planters

Hydropower companies contribute financially to the government’s Ecosystem Services scheme.

August 2014

Essentials

Profile

Master of the Iron throne Author George R.R. Martin has reached pop-culture stardom thanks to HBO’s hit Games of Thrones TV series, reports Dana Jennings.

The culTure has a crush on

passions lay. And he was able to make

New Mexico. “I’d love to have 13 episodes.

George R.R. Martin’s writing these days,

those observations from the rare point of

With 13 episodes, we could include smaller

specifically his best-selling “A Song of Ice

view of a writer who has done extensive

scenes that we had to cut, scenes that make

and Fire” series, the inspiration behind

television work and publishes chart-

the story deeper and richer.”

the hit HBO show Game of Thrones,

topping novels.

He understands the calculus of budgets,

In a recent telephone interview, he

though. With its far-flung location shoots –

said he hadn’t found the translation to

Iceland, Northern Ireland, Malta, Croatia,

there is some tension between HBO’s

television too difficult “because they’ve

Morocco – and all of those vast yet essential

interpretation of the Thrones dream and

done such a wonderful job of it,” referring

battles, one season of Thrones is reported

Martin’s. Thrones averages more than

to the Thrones team led by David Benioff

to cost $60 million to $70 million. “Battles

18 million viewers per episode and this

and D.B. Weiss – think of them as

are expensive,” said Martin, who worked in

season surpassed The Sopranos as HBO’s

Stepfathers of Dragons – who created the

TV in the 1980s, with a seasoned veteran’s

most-watched series. With numbers

series for HBO. But there is one thing that

resignation in his voice.

like that, the Starks and Lannisters, the

would make Martin very happy.

whose fourth season ended in June. Even with all of this success, though,

Martin, who first published his short

As a man with an epic imagination

stories in science-fiction magazines in

populated by hundreds, if not thousands,

the 1970s, has always seen himself as a

of vivid characters, it would please him

fiction writer first, and the world of books

peaks as well as attracting pointed

if his creation had more elbow room on

has wreathed him in honours, including

critiques this season, Martin agreed to

HBO, where each season runs just 10

the Hugo, Nebula, Stoker and World

talk about what the show had gotten right

chapters. “I wish we had more episodes,” he

Fantasy Awards. “I am more of a

so far, what was missing and where his

said, speaking from his home in Santa Fe,

solitary than a collaborator,” he said.

Baratheons and Targaryens don’t belong solely to Martin anymore. With the show climbing those ratings

Portfolio

August 2014

Essentials

Profile

fantasy filigree, often more Tolstoy than

Queen Elizabeth II has a look at the Iron Throne on set in Belfast.

Tolkien. Martin said he never imagined it could be tailored for TV. And there are those who would have been pleased if it hadn’t come to HBO. With its increased popularity, some critics have complained about the show’s depictions of sexual violence. But Martin said it was an inescapable aspect of this world. “Rape and sexual violence have been a part of every war ever fought, from the ancient Sumerians to our present day,” he told The New York Times in an email in May. “To omit them from a narrative

getty images

centred on war and power would have been fundamentally false and dishonest.” Martin was quick to point out in this Though he certainly collaborated when he worked in television, as a story editor for The Twilight Zone on CBS in 1986, and

take it. In TV, you have the network, the

latest interview that his role with the HBO

studio over your head like Zeus on high.”

series was secondary. He’s a co-executive

So he turned his back on TV and

producer and has written one episode each

a writer and producer with Beauty and the

re-embraced the novel, starting his “Ice and

season. He said he tries not to fret over

Beast, which debuted on CBS in 1987. But

Fire” saga in 1991, determined to let the

television revisions. “But,” he said, “small

“there was some frustration,” he said. As

story lead him where it would, to journey

changes can lead to big changes.”

a writer, he’s more concerned with: “How

back to his first creative passions.

do I make it better, stronger? What’s the

In the “Ice and Fire” series, Martin has

Take the musician Marillion, from Season 1. On HBO, Marillion is maimed

right word here? I want final say. I got

been all about lots of action and lots and

– his tongue plucked out – at the whim

tired of fighting that secondary fight, the

lots of pages – some 5,000 and counting

of King Joffrey and then vanishes from

Hollywood power equation.”

so far – starting in 1996, when A Game of

the show. That isn’t the case in the books,

Thrones was published. Even though it has

where he served as the fall guy in Lord

suggestions” – that would be his editor at

plenty of fantasy elements, in many ways it’s

Petyr Baelish’s murder of Lysa Arryn

Bantam Books, Anne Groell – “I just don’t

more like an epic 19th-century novel with

(shown on HBO this season). “So that has

He added: “If I don’t like one of Anne’s

to be changed” for the TV show, Martin said of her murder. “The butterfly effects are accumulating.” But what about his dream, his vision? Has HBO fulfilled it? He said he was pleased overall by the costume and set designs and special effects. If he were more involved, he said, there would be tweaks and twists he’d suggest. “No, no, let’s make the helmet more like this.” But there is one crucial element that frustrates him: the portrayal of the cruel

getty images

and monumental Iron Throne. “The HBO Game of Thrones’ executive producers D.B. Weiss and David Benioff with Martin at an HBO panel.

throne has become iconic,” he has written on his blog. “And well it might. It’s a terrific design, and it has served the show very well. There are replicas and paperweights of it in three different sizes. Everyone knows it. Portfolio

Peter Dinklage, who portrays Tyrion Lannister, has received four Emmy nominations for his role in Game of Thrones.

Jack Gleeson as the tyrannical King Joffrey Baratheon made the Iron Throne his own.

I love it. I have all those replicas right here,

the throne room, ugly and asymmetric ...

Famous or not, Martin is still obliged

sitting on my shelves.”

The HBO throne is none of those things.”

to sit down each day and write because

But, he continued: “It’s not the Iron

The success of “Thrones” on TV has

Throne I see when I’m working on The

turned Martin into something of a star.

millions of agitated fans are waiting, hoping that Winter is coming – soon. He’s

Winds of Winter. It’s not the Iron Throne I

A man of hobbit-like mirth and girth, he

writing too slowly for some fans’ tastes,

want my readers to see. The way the throne

isn’t quite the classic People-driven figure

but quality takes time. When asked about

is described in the books ... HUGE, hulking,

of pop-culture stardom. “It’s been surreal,”

his progress on The Winds of Winter, all

black and twisted, with the steep iron stairs

he said during the interview. “You always

Martin would say, a sigh tinting his voice,

in front, the high seat from which the king

hope for success. But this takes it to a whole

was, “It’s going along.”

looks DOWN on everyone in the court ...

other level, to being a celebrity, which has

my throne is a hunched beast looming over

gotten old fast.”

It was the sigh of a good dreamer on deadline. n

Author George R.R. Martin poses with fans of his “A Song of Ice and Fire” novels at a convention.

August 2014

Essentials

Health

Shirley Friedman works out under the supervision of Martin Luther King Addo.

Portfolio

Shaping Frail

ClientS Martin Addo, a former Mr Ghana, is helping frail senior citizens improve their quality of life, reports Louie Lazar.

ith his enormous

Southbridge Towers, a housing

muscles bulging

development in Lower Manhattan that is

beneath a small T-shirt,

home to many older adults. The walls are

Martin Luther King

decorated with posters of Addo shirtless

Addo guided one of his most dedicated

and flexing. “Ask me how to build a Rock

clients through a squat exercise inside

Solid foundation,” says one that features

his tiny Manhattan gym. “You can do it,

him in nothing but tiny yellow trunks.

Shirley,” he said. Shirley Friedman, a silver-haired

86, was willing herself through a kettlebell

90-year-old, shifted into another gear,

dead lift. Killoran, a retired medical

bending at the knees for multiple

transcriber, has lived alone since 1971

repetitions. “I never did this stuff before,

in an apartment overlooking the East

but he gives you the confidence that you

River. A few years ago she suffered a bad

can do it if you’re up to it,” Friedman said

fall and began using a walker. Addo, 44,

afterward. “He’s not a phony. Got me?”

taught her exercises like balance lunges

Addo, who honed his muscles using a

August 2014

On a recent afternoon, Mary Killoran,

and stretching techniques. Gradually,

mango tree as a pullup bar and concrete

she regained her balance and traded the

blocks for dumbbells, is a two-time former

walker for a cane.

winner of the Mr Ghana bodybuilding

Now, she drinks a protein shake each

championship. Years ago, his chiselled

morning and strolls to the World Trade

physique, bowling ball biceps and camera-

Center and back – twice a day. She works

ready smile brought him fame across his

out about three times a week, but stops by

homeland in West Africa. Today, Addo

the gym even on off days to visit Addo. He

uses his imposing muscles and hard-

helps her “be more cheerful, so you don’t

won expertise to help frail seniors like

have to be depressed,” she said.

Friedman restore their balance, mobility and strength. He works out of a storefront gym that he opened last summer inside

Addo, too, says the seniors energise him. Raised within the Ashanti tribe, Addo was always taught that improving the lives of one’s elders is of the

Essentials

Health

highest virtue. “They remind me of my grandmothers and aunties back home,” he said. Addo’s life changed when he was a teenager in the mid-1980s and first saw Commando starring Arnold Schwarzenegger. He was living with his grandmother in the village of Asafo, in Ghana’s western countryside, and he watched, spellbound, as Schwarzenegger pushed Chevrolets around and hauled tree trunks on his shoulder. Addo decided at that moment to pattern his life after Schwarzenegger’s. He studied American muscle magazines and built a gym in his aunt’s backyard. By age 24, Addo was enormous, an Ashanti He-Man doll come to life, and he knew he “finally had the muscle” to enter

Addo sees his work as more than just improving older people’s fitness. He set up a computer for them to use and organised a holiday party and a trip to a Ghanaian restaurant in Brooklyn. Addo’s clients vary in age and shape, but they skew older and female.

Addo’s gym attracts all types, but his customer base is skewed towards older women.

Martin Luther King Addo, a former bodybuilding champion in Ghana.

Ninety-year-old Shirley Friedman (centre) now works out regularly.

bodybuilding competitions.

America – “the land of gold and great

middle-income cooperative that offered

opportunity,” as he put it – and follow in

free yoga and knitting classes. Addo

title and became a national celebrity,

Schwarzenegger’s footsteps. In 1999, Addo

started teaching a weekly fitness class

starring in television commercials. He

arrived in New York City. He became

there, and it became popular, especially

flexed his muscles whenever he was in a

certified as a personal trainer and worked

among older women. (A one-hour

crowd, making girls giggle, said Samuel

in clubs like Equinox and Gold’s Gym.

personal training session costs $60, and

Kissiedu, a former sports reporter in

All along, his goal was to open his own

monthly memberships are $30.)

Ghana. “Everybody talked about his

club, said Camille Agro, a former client at

strength, his power,” Kissiedu said.

Dolphin Fitness who befriended Addo.

In 1995 and 1996, he won the Mr Ghana

But Addo’s dream was to live in

Agro lived in Southbridge Towers, a

A few years ago, a storefront by the main courtyard became available, and Portfolio

Memorabilia adorns the walls of Addo’s gym, including a picture of Arnold Schwarzenegger.

Addo jumped to claim it.

loves Addo’s inspirational speeches on the

Friedman mailed him a reward cheque.)

connection between physical and mental

She thought she was “too old” to work

on a Facebook page he created. “Glory

health. There’s Diane Harris Brown, 66,

out. But Addo made her comfortable, and

be to God!!” he wrote. Addo hung up

who attends his Monday classes and has

after a few months of stretching, massage

plaques of his bodybuilding achievements

Parkinson’s disease.

treatments and suspension training, her

He announced the club’s grand opening

and a framed photo of Schwarzenegger as governor wearing a suit and tie. The gym quickly “became like a little home to him,” Agro said.

And there’s Carmen de LemosChiarandini, 77, a former associate research professor and scientist, who had

shoulder’s range of motion had improved remarkably, she said. On Friedman’s 90th birthday, in March,

fallen three times in two months before

Addo ended class early for a party. About

she came to Addo. Two months later, after

25 people, including many women of

improving older people’s fitness. He

working on her balance and posture, she

Friedman’s generation, gathered as

set up a computer for them to use and

was able to rise from her chair without

Friedman beamed and blew out the

organised a holiday party and a trip to a

using her hands. She has not fallen since.

candles on a cake provided by Addo.

Addo sees his work as more than just

Ghanaian restaurant in Brooklyn. Addo’s

But Friedman might be his most loyal

Eventually, Addo wants to open more

clients vary in age and shape, but they

client. She has private training sessions

fitness studios and go into acting, like

skew older and female. There’s Elizabeth

twice a week, attends a suspension

Schwarzenegger. Lately, there has been

Birnbaum, 72, a retired librarian, who

training class, and, she said proudly,

a buzz in the gym about his arms, which

“I also do the boot camp.” She lives by

have grown from very large to simply

herself in a one-bedroom apartment

colossal. He recently confirmed that he

around the corner from the gym. A native

is training for the National Amateur

of Brooklyn, she worked as a medical

Bodybuilders Association’s Mr. Universe

technologist at a Manhattan hospital and

contest next year.

Addo leads a workout at his small gym.

moved into Southbridge Towers when it opened in the early 1970s. She has had trouble lifting her shoulder

August 2014

Pete Molinelli, a court officer who lives in Southbridge Towers, said the building’s seniors used to be “just kind of shut in.”

since a mugging two decades ago, when a

And then Addo arrived. “All of a sudden,

man ripped her purse from her shoulder,

it’s like there are all these new people

damaging her rotator cuff. (She said she

in the neighbourhood,” Molinelli said.

chased the assailant into the subway; a

“But no, they’ve been here forever. Addo

city worker later returned her purse, and

brought them out.” n

Essentials

Culture

A Plot twist worthy of

Dickens

Beach huts at Stone Bay in Broadstairs, on the Isle of Thanet in England.

Portfolio

HE ISLE OF THANET, A THUMB of land protruding from the Kent Coast in England, has always been a draw for creative types.

T.S. Eliot wrote there, referencing “Margate Sands” in The Waste Land; Broadstairs was a favoured getaway of Charles Dickens; and the 19th-century painter J.M.W. Turner

Margate, one of Kent’s coastal towns, is experiencing a regeneration thanks to the Turner Contemporary gallery and a new high-speed rail link with London, reports David Shaftel.

supposedly said “the skies over Thanet are the loveliest in all Europe” – a sentiment no doubt shared by many of the artists who are again coming to the area. In recent years, this coastal stretch on the North Sea has become a redoubt for them and tuned-in Londoners, aided by a new high-speed rail link and an expressway linking the British capital with Kent. “The town has picked up, and that’s the best thing,” said John Cripps, a 58-yearold Margate native and volunteer with the Dreamland Trust, an organisation working to reopen the 1920s Dreamland amusement park, once one of the town’s premier attractions. “We lost our way a little bit, but people are starting to come back.” In Victorian times, Margate, Broadstairs and Thanet’s other resort towns were celebrated for their recuperative air and therapeutic waters, hosting such institutions as the Royal Sea Bathing Hospital and the Home for Convalescent Children of the Better Class. In the 1960s, as Margate became a holiday spot for working-class East Londoners, the town became associated with seaside kitsch and saucy beach weekends, known more for its “Kiss Me Quick” hats and lewd postcards than its cultural inheritance or health-giving water.

The grand hotels and guesthouses that

August 2014

lined its 1.6-kilometre-long promenade were eventually converted into subsidised housing for impoverished Londoners as tourists began to forsake Margate for cheap package tours to the Continent. The decaying wooden Victorian pier finally gave out amid a storm in 1978, and the closing nine years ago of

Essentials

Culture

The Dreamland amusement park used to be one of Margate’s biggest attractions.

Dreamland, the attraction most vivid in the memories of many Margate holidaymakers, was seen as the town’s death knell. All of which makes Margate’s resurgence more surprising. The town has pegged its regeneration to the Turner Contemporary gallery, an angular white fortress of a building at the end of a sweeping promenade, above a sandy beach again crowded with bathers in the summer. Turner’s presence has paved the way for numerous other galleries, restaurants and shops to make a go of it nearby. Though the Javelin high-speed trains, introduced in 2009, whisk weekenders

The Turner Contemporary gallery has put Margate back on the map.

getty images

and commuters from central London to the Kent Coast in under an hour, my

sure, but a better town in which to push a

Pleasures of Knowing, which was based

wife and I decided to drive, since Thanet

wakeful baby around at odd hours.

on 17th-century cabinets of curiosities and curated by Brian Dillon, the publisher of

is only an hour and a quarter from our Southeast London home. Since we were

The Turner is on the site of the

the eclectic New York magazine Cabinet.

travelling with our two-month-old baby

Victorian boarding house once owned

Our favourite pieces were a taxidermied

late last summer, we decided to stay in

by the mistress of J.M.W. Turner, its

penguin collected in Antarctica by the

neighbouring Broadstairs, an old-fashioned

namesake, and its giant sea-facing

explorer Ernest Shackleton, glass models

town that never sank to the economic

windows enable views of the skies that

of sea creatures such as squid and jellyfish,

depths that Margate did and whose

dazzled the artist.

and the contemporary French artist Laurent

picturesque seafront is virtually unchanged from its Victorian heyday – not as edgy,

On our visit we saw the captivating exhibition Curiosity: Art and the

Grasso’s reproductions of old photographs taken in the Vatican observatory. Portfolio

From the Turner we made the fiveminute walk across the beachfront drive to the cobblestone streets and flint stone houses of Margate’s old town, the section most transformed by revitalisation. Here, several new galleries have opened. In the old town, we puttered through clothing boutiques and second-hand and antiques stores, where my wife bought a 1930s teapot and haggled ruthlessly for a reproduction of a painting by the kitsch Russian portrait artist Vladimir Tretchikoff. Our favourite vintage and retro shop was Hunkydory-24, whose stock was much more treasure than trash. After the 6.5-kilometre drive to

The Victorian-era Shell Grotto, a man-made cave entirely bedecked with seashells, in Margate.

Broadstairs, we checked into Belvidere Place, a stylish bed-and-breakfast in a Georgian town house opened four years

the hotel is for sale, as in a French atelier. Broadstairs is crowded with sites

go out and wallop the donkey boys” – who offered rides on their beasts to tourists –

ago by Jilly Sharpe, a photographer from

boasting relationships to Dickens. The best

“with a house brush” when they strayed

Southeast London. Sharpe said the idea

of them was the Dickens House Museum,

onto her property.

was for guests to feel as if they were in her

once the home of Mary Pearson Strong

home, but also to have a place where much

who, according to Eddie Ault, a museum

house next door, was impressed, and made

of the art and vintage furniture that adorns

guide, was “an English lady who used to

her the model for Betsey Trotwood in

Dickens, who was staying at a boarding

David Copperfield, Ault said. Her parlour,

The town has pegged its regeneration to the Turner Contemporary gallery, an angular white fortress of a building at the end of a sweeping promenade, above a sandy beach again crowded with bathers in the summer.

as described in the novel, is recreated in the museum, which also has rare first editions, original letters and furniture belonging to the author. On a promontory overlooking Viking Bay sits the fortress-like Bleak House, a hotel where Dickens sometimes stayed. Called Fort House in Dickens’ time, the house

Bleak House, in Broadstairs, was once the home of author Charles Dickens.

originally served as a military lookout point and was renamed Bleak House after the writer’s death. Visitors can see his study with its view of the bay and the Tartar Frigate, a pub the writer patronised that is now a popular seafood restaurant. More curious is a dusty smuggling museum in the house. The bit accessible to Bleak House’s visitors has the small museum and creepy, life-size dioramas depicting the history of smuggling in Broadstairs. In need of fresh air, we walked along the beach below the chalk cliffs of Stone Bay, just north of town, where families sat in

getty images

front of colourful beach huts, seemingly oblivious to the brisk, soggy weather that had suddenly taken a Dickensian turn. n August 2014

Essentials

Other Business

Dictator Sues Video Game Manuel Noriega, the former

of “blatant misuse, unlawful

military dictator of Panama, is

exploitation and misappropriation

suing games publisher Activision

for economic gain”. Noriega is

over its depiction of him in Call of

currently in prison in Panama

Duty: Black Ops II.

serving a 20-year sentence for

Released in 2012, the military

crimes committed during his rule

shoot-em-up takes place throughout

including the murder of political

1980s Latin America and features

rival Hugo Spadafora.

scenes in which Noriega aids CIA

In 2009, Activision, one of the

operatives before betraying them.

largest video game publishers in

The 80-year-old former soldier and

the world, was sued by pop group

politician is claiming lost profits as

No Doubt, over the use of the

well as damages for the depiction.

band's likeness in the music game

The lawsuit accuses Activision

Band Hero.

German Sausage Cartel Germany’s biggest food producers have been fined ¤338 million for cooking up a plan to fix the price of sausages. The Federal Cartel Authority (FCA), Germany’s competition watchdog, said 21 manufacturers including the country’s biggest producer, Zur-Muhlen-Gruppe, had been part of a cartel that had stitched up sausage prices for decades. The ZurMuhlen-Gruppe has denied the allegations. The sausage cartel has been dubbed the Atlantic Group, after the Hotel Atlantic in Hamburg where the sausage producers reuters

first met. The inquiry was launched after the FCA

Singapore Scores Own Goal

received a tip off. The bumper fine will

singapore tried its best to save an own goal

that the ad would encourage rather than

Germany such as Boklunder, Wiesenhof

in July by updating an anti-gambling ad that

deter gambling.

and Rugenwalder.

the laughs got louder after germany beat

friends his dad had bet his life savings on

argentina 1-0, with many people taking to

germany winning the World Cup.

social media to congratulate andy on his

the National Council on Problem gambling’s commercial was lampooned

producers – some are household names in

family’s good fortune. the council said it had chosen germany

around the world after germany thrashed

in the ad to inject a sense of “realism” into

Brazil 7-1 in the semi-finals, sparking jokes

its message.

gettyimages

starred a despairing boy named andy telling

be shared among 33 individuals and 21

Portfolio

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