Portfolio
Issue 107 n November 2014
Exclusive to Emirates First Class and Business Class
BEYOND CHINA A New Asian Focus BREAKFAST WARS Cereal’s Steady Decline MONSTER SHIPS Too Big To Fail?
Sergio
Marchionne Fiat-Chrysler’s Dealmaker
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This issue NOVEMBER 2014
Portfolio
Exclusive to Emirates First Class and Business Class
Cover Story 32 Rebuilding Fiat-Chrysler at 300km/h Fiat CEO Sergio Marchionne says his expanded company will boost sales by 60 per cent by 2018. But there are many doubters who believe the transatlantic marriage of two struggling regional carmakers is facing too many obstacles.
Features 40 Looking Beyond China
56 Indonesia’s Rising Consumer Confidence
Some companies are shifting personnel from China as they
The election of Joko Widodo as president has raised the
renew their focus on Southeast Asia.
already free-spending Indonesian consumer confidence
46 Cereals Lose Traction Changing habits, more competition and a move to healthier
even further.
60 Hi-tech Portfolio Mapping
alternatives is behind a consistent decline in cereal sales.
A new breed of wealth managers is using the same approach as spy agencies to determine the value of portfolios and the
50 Aboard a Cargo Colossus
risk involved.
Container ships are getting larger to transport cargo more economically, but there is now too much capacity in the market.
40
50
56
9
Portfolio
10
Exclusive to Emirates First Class and Business Class
Essentials 63 A Royal Hideaway The picturesque town of Sintra, close to Lisbon, was where the Portuguese royal family escaped from the affairs of state.
68 The Diner is Right Dinner Lab, a pop-up restaurant company in the US, has the radical belief that high-end chefs ought to listen to their customers.
63
74 London’s Houseboat Alternative High rents have made living on a canal houseboat an increasingly affordable option, but this has led to urban overcrowding.
78 Flying Through Changing Times Luxury Swiss watch maker, Breitling, talks market shifts, family businesses, and a history closely linked with aviation.
68
80 For Polar Bears, a Climate Change Twist Climate change has shortened the seal-hunting season for polar bears, but on the western shore of Hudson Bay they have found an alternative food source.
84 Sharing Economy’s Bumpy European Ride Companies like Uber and Airbnb are facing a myriad of regulatory hurdles across the European market.
88 Other Business
80
Portfolio takes a light-hearted look at the latest business news.
Departments 13 Notebook World business in a nutshell.
21 Observer Spotting and analysing business trends.
30 Column: Molly Wood Mobile Malware Threat
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Editor-in-Chief Obaid Humaid Al Tayer Managing Partner & Group Editor Ian Fairservice Editorial Director Gina Johnson Group Editor Guido Duken Junior Writer Mary Sophia Picture Researcher Hilda D’Souza Editorial Assistant Londresa Flores Senior Art Director Tarak Parekh Senior Designer Charlie Banalo Head of Production S Sunil Kumar Assistant Production Manager Murali Krishnan Group Sales Manager Jaya Balakrishnan Email: jaya@motivate.ae General Manager – Group Sales Anthony Milne Email: anthony@motivate.ae International Sales Manager Martin Balmer Email: martin.balmer@motivate.ae Senior Sales Manager Michael Underdown Email: michael@motivate.ae
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Portfolio
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Notebook
13
REUTERS
BUSINESS NEWS IN BRIEF
Hi-tech Boost to Copper Production Producers are turning to 21st
networks, electric motors and other
formed a joint venture with JX Nippon
century ideas to boost copper output that’s
staples of the growing middle class in
Mining & Metals that harnesses
becoming a more crucial component of
many developing countries.
microorganisms called extremophiles
the expanding global economy.
Central Asia Metals is using a complex
to help extract copper from previously
solvent-extraction technique to recover
unusable sulphide ore. Their Biosigma SA
may reach two million tons within four
about 10,000 tons of copper a year
venture is building a bioleaching facility
years, companies including Codelco, the
in Kazakhstan from a mining waste
at Codelco’s Radomiro Tomic mine in
world’s largest copper producer, Central
dump that dates back to the 1930s. The
northern Chile that will boost production
Asia Metals and Nautilus Minerals are
company has invested about $42 million
as regular supplies dwindle. Codelco
using specialised microorganisms to
for access to the site and to build a
plans to spend more than $30 billion this
extract copper from previously unusable
processing facility.
decade to increase output by 10 per cent.
Seeking to overcome a shortfall that
ore, sending robots a mile below the
Total copper production in 2013 was
Rio Tinto plans a $5.4 billion expansion
sea to tap rich deposits and recovering
13.8 million tons. The push for new
to its Mongolian mine at Oyu Tolgoi, one
the metal from decades-old dump sites
technologies and ideas comes at a time
of the world’s largest copper and gold
in Kazakhstan.
when copper producers face a global
deposits. The expansion will boost the
deficit of 296,433 tons in the first half of
London-based company’s copper output
to operate as they age. The new
this year, according to the World Bureau
by 490,000 tons a year.
technologies offer a wide range of
of Metal Statistics. Goldman Sachs Group
creative, and sometimes cheaper,
expects the supply gap to reach two
mines in anticipation of rising prices, but
options to produce a metal used in
million tons in 2018.
there are few for sale as owners hold on to
Mines become more expensive
air conditioners, telecommunications November 2014
Codelco, Chile’s state-owned producer,
Investors are trying to buy up copper
them in anticipation of higher prices. n
Notebook Numbers Game
1%
of the world’s
Modi Eases Fuel Controls
population owns
India scrapped controls on
almost half of the world’s wealth
diesel prices and increased
according to a recent report by
natural gas tariffs in Prime
Credit Suisse global wealth. The
Minister Narendra Modi’s
wealth of the one per cent of
biggest steps toward
the world’s richest amounts to
curbing subsidies, spurring
$110 trillion, that’s 65 times the
energy output and reviving
total wealth of the bottom half
the economy.
of the world’s population.
75%
GETTY IMaGES
of the $3.3 billion fortune pledged
to charity by Indian billionaire anil agarwal will see the founder of Vendanta Resources join the philanthropic campaign, Giving Pledge. The programme,
$8.3
billion offered by German software giant SaP will gain it complete control over american softwarecompany Concur Technologies, a leading provider of cloudbased travel and expense management solutions. The deal will boost SaP’s cloud revenue from approximately $1.6 billion to an estimated $2.3 billion.
Buffet, encourages the world’s wealthiest people to give away half of their wealth to charity.
natural gas will climb about a third, the government said yesterday. The changes build on Modi’s vow to revitalise Asia’s third-largest economy after sweeping to office in May. The diesel step eliminates the risk of the administration
which was founded by Bill Gates and US investor Warren
Diesel will now be market determined and the price of
The World In Figures
£800
challenges Europe’s status as
and state-run crude producer
the birthplace of cave art, where
Oil & Natural Gas Corp
until now the oldest known
(ONGC) bearing the brunt of
painting was of a red disk
subsidies in the future, while
found at El Castillo in Spain.
higher gas prices may spur
Researchers found the paintings
investment in exploration.
million takeover
in seven caves in Sulawesi, a
bid for addison
large island east of Borneo.
Ending price controls encourages private retailers
Lee, London’s biggest minicab
to restart idle fuel pumps,
operator, is being considered by
and consumers will be
SMRT Corporation, Singapore’s
the main beneficiaries of
largest transport group. addison
rising competition.
Lee’s owner, the private equity group Carlyle, has kicked off
11
million barrels per day
an auction of the company for
of crude oil produced
which it paid £300 million just 18
by the US has made it the
months ago.
Russia according to Bank of america. US oil output will rise
billion theme park development in China
has finally been launched by
world’s largest oil producer, overtaking Saudi arabia and
£2
40
-thousand-year-old rock
Universal Studios after nearly
art found in Indonesia
13 years of trying to enter the booming entertainment market.
to 13.1 million barrels a day in
The company said Hollywood
2019 and plateau thereafter to
director Steven Spielberg will
loose its top-producer ranking
help design the Beijing Universal
at the start of the 2030s, said
park, while reports suggest the
the Paris-based IEa.
park will open in 2016.
GETTY IMaGES
14
Portfolio
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Notebook SamSung’S Fall From grace Samsung Electronics reported a 60 per cent slump in quarterly profits as the sudden decline in its mobile phone business draws comparisons with fallen rivals BlackBerry and Nokia. Having risen in just three years to getty images
dominate the hugely lucrative global smartphone market, Samsung faces challenges on all fronts. Its flagship Galaxy S5 handset is not selling as well as last
47 trillion won falling 20 per cent from the
price, and helping to win outside business.
year’s model; Chinese and Indian rivals
same period in 2013.
When phone sales slow, the multiplier
are stealing business and show no signs
It is the first time Samsung's
fades away, as do profits. Samsung’s problem is that while it has
of stopping; and Apple has moved into its
smartphone shipments have dropped
patch with large-screen premium phones.
year-on-year, which carries warning
dominated Android smartphones across
signs for its future. Its profit also relies
the whole spectrum, it is seeing its low-end
company to announce that operating profits
on a multiplier effect: its phones use its
sales eroded by upstarts such as Xiaomi
for the three months to 30 September were
displays and chips, so when handset sales
and Huawei and Micromax from India,
4.1 trillion won (£2.4 billion), down 60 per
are booming, more displays and chips
which have begun to match and even beat
cent from a year before, with revenues of
are made, improving scale and lowering
it for price and popularity.
Those factors led the South Korean
Renewables to Surpass Hydropower Generation Non-hydropower renewable power
scale solar capacity doubled in 2013. EIA
generation is expected to surpass
predicts another doubling by 2015, with
hydropower on an annual basis in 2014
about two-thirds of the new capacity
for the first time, according to the US
being built in California. EIA expects ethanol production to
Energy Information Administration.
average 927,000 barrels per day in 2014
Conventional hydropower generation is projected to fall by 4.2 per cent, while
and 933,000 barrels per day in 2015.
non-hydropower renewables rise by 5.6
Biodiesel production averaged 89,000
per cent for this year, the EIA said in
barrels per day in 2013 and is forecast to
its short-term energy outlook. The EIA
average 81,000 barrels per day in 2014
predicts that wind power capacity will
and 84,000 barrels per day in 2015. EIA predicted an uptick in energy-
increase by 8.8 per cent in 2014 and 16.2 per cent in 2015. Electricity
related carbon dioxide emissions as a
generation from wind is projected to
result of rising natural gas prices that
contribute 4.7 per cent of total electricity
make coal more competitive for producing
generation in 2015. Solar generation will continue to see robust growth, although the amount
getty images
16
of utility-scale generation remains
growth has historically been focused on
a small share of total US generation
small distributed generation units for
at 0.6 per cent in 2015. While solar
individuals or aggregators, the utility-
electricity. Carbon emissions are forecast to rise by 1.1 per cent in 2014, after rising 2.5 per cent in 2013 compared with the prior year, EIA said. The agency sees a slight decline in emissions by 0.4 per cent in 2015. Portfolio
18
Notebook DUBAI EVENT: HELISHOW DUBAI WEBSITE: DUBAIHELISHOW.COM DATE: NOVEMBER 4-6 VENUE: MEYDAN RACECOURSE The biennial Helicopter Technology & Operations Exhibition is the sixth in the series since its launch in 2004. The international helicopter industry will present leading-edge products, services and technologies covering the commercial, civil defence and military helicopter sectors. This edition will highlight the expansion of homeland security by showcasing unmanned aerial vehicles alongside armoured vehicles and the air medical and rescue sector. There will be presentations and training session on air rescue and aviation safety led by experts in the field.
EVENT: SEAFEX WEBSITE: SEAFEXME.COM DATE: NOVEMBER 9-11 VENUE: DUBAI WORLD TRADE CENTRE Over three days, seafood buyers including high-end hotels and restaurants will sample premium quality offerings of a variety of live, fresh, organic seafood products and related services and equipment. Welcoming both returning exhibitors and new participants, the highlights of this year include a SEAFEX seminar theatre, plus the launch of the SEAFEX Awards that recognise leading industry innovations and launches within the seafood industry. There will also be a SEAFEX Award winner showcase that provides an opportunity for visitors to learn and interact with the award winners.
DUBAI
United Arab Emirates
EVENT: THE BIG 5 INTERNATIONAL BUILDING & CONSTRUCTION SHOW WEBSITE: THEBIG5.AE DATE: NOVEMBER 17-20 VENUE: DUBAI WORLD TRADE CENTRE The Big 5 show has cemented its position as the largest construction exhibition in the Middle East, serving as a networking platform for construction product suppliers and buyers since 1979. Last year the event drew over 74,800 participants from 124 countries, making it the largest construction exhibition ever. This year’s programme will focus on green initiatives by recognising eco-innovative construction products and equipment through the Gaia Awards. There will be seminars and conferences led by industry experts to discuss Dubai’s green building regulations and sustainable development frameworks.
EVENT: MEE (MIDDLE EAST EXCLUSIVE) WEBSITE: MIDDLEEASTEXCLUSIVE.COM DATE: NOVEMBER 25-27 VENUE: DUBAI WORLD TRADE CENTRE Discover the finest duty free and luxury retail products from around the globe at this event that is dedicated to the travel retail industry. This year the show is projected to be one of the biggest in its 11-year history with a 40 per cent increase in exhibitors. Many new suppliers are coming on board including fashion accessories, confectionary and souvenirs according to the event organiser. Amongst the lengthy list of buyers, board-level executives and retail decision-makers attending the show are duty free operators, travel retail and luxury goods buyers.
EVENT: THE DUBAI PRE-OWNED BOAT SHOW 2014 WEBSITE: DUBAIGOLF.COM/DUBAI-CREEK-GOLF-YACHT-CLUB/THE-DUBAIPRE-OWNED-BOAT-SHOW-2014 DATE: NOVEMBER 27-29 VENUE: DUBAI CREEK MARINA Established in 2010 this annual event is the only successful used boat show of its kind in the region. With a complete range of retail offerings from the marine and leisure industries plus boat insurance, boat management services and finance deals the show is a one stop-shop for visitors. And to make it an enjoyable family experience it has plenty of on site activities planned such as boat rides, boat races, jet ski competition to raffle draws, dedicated kids zone and a large food and beverage area.
Portfolio
Observer
21
BUSINESS NEWS IN BRIEF
Bernard Arnault, the chairman of LVMH Möet Hennessy Louis Vuitton.
Cultural Image Change Luxury companies such as LVMH are evolving from economic returns to more emotional ones, reports Vanessa Friedman.
of Paris. Arnault has spent the last decade making the FLV a reality – it opened to the public in October – at a reported cost of more than $135 million. In his private conference room, however, surrounded by works of Andy Warhol and Picasso, Arnault was reluctant to tally the costs. “We don’t speak of numbers when we
HigH above tHe luxury-sHopping
LVMH into the largest luxury conglomerate
speak of a dream,” he said, gazing down at
utopia that is the Avenue Montaigne in
in the world, owner of more than 60 brands
some photographs of the museum. “Let’s just
Paris, Bernard Arnault, the 65-year-old
including Louis Vuitton, Marc Jacobs,
say it is a very expensive sculpture.”
chairman and chief executive of LVMH
Givenchy, Fendi and Bulgari. Along the way,
Moët Hennessy Louis Vuitton, was sitting
he became the richest man in France, with
to house the contemporary art collection of
in a wood-panelled conference room and
a net worth of $29.5 billion, according to
LVMH (including works by Jeff Koons and
smiling. You might even say he was grinning.
Forbes. And yet, on this sunny afternoon,
Gilbert & George), as well as pieces from
Arnault was looking less like a calculating,
Arnault’s personal collection, the FLV may
is known all over Europe, but its expression
globetrotting billionaire than a child in
be the most ambitious new structure in Paris
is normally one of poker-faced impassivity.
thrall to a wonderful new toy. Which he
since I.M. Pei’s pyramid landed in the Louvre
Always clad impeccably in a dark suit, he is
kind of was.
in 1989. And because the new museum sits
It was slightly disconcerting. Arnault’s face
© 2014 New York Times News service
But, of course, it is more than that. Built
on land that belongs to a public park, in 55
as mythical – and as feared and admired –
The toy is a contemporary art museum
as Steve Jobs was in the United States. For
and performance space: the Fondation Louis
years, Arnault was referred to as “the wolf in
Vuitton, a sinuous, 11,700-square-metre glass
It is, in other words, a very expensive gift.
the cashmere coat.”
and steel structure designed by Frank Gehry
One that, like so many gifts, has implications
and tucked away in the Bois de Boulogne
for the recipients, as well as the company that
The first of the luxury titans, he built November 2014
years it reverts to the city.
Observer gave it. “I hope that it will make the group
the strategy. But the question for a business
more understood, to show its extraordinary
being courted by several buyers is not so
values to the public,” Arnault said.
much “Can you afford us?” as “Who do we
The museum gives physical shape
like best?”
to the sentiments often voiced by
In that context, “linking to culture is a
LVMH executives: that the company
very powerful tool,” said Claudia D’Arpizio,
is a place of creativity and a preserver
a Bain partner based in Milan. “You are
of heritage. As such, it is the crowning
dealing largely with entrepreneurs who want
expression of an LVMH effort to shift the
their brand to survive them and last into the
conversation around the business group
future, and culture is all about preserving
away from that of a predatory, bottom-line-
that for the future.”
oriented conglomerate toward something more benevolent. It began with an initiative called Open
Yet benign protectionism is not necessarily
Getty imaGes
22
a concept generally associated with Arnault and the company he built. In fact, it’s more
as Dior and Dom Pérignon threw open
Paris’ latest landmark, the Fondation Louis Vuitton, reportedly cost more than $135 million.
their normally closed ateliers to the public.
the new view is that they now care about
Arnault never made much effort to retire it
In 2013, the company began to sponsor
the less apparent marks of connoisseurship:
and in part because those on the other side
the LVMH Young Fashion Designer Prize,
handwork and craft.
were strategic about promoting it.
Days in 2011, in which 25 brands as varied
the largest award to a new designer, and
“If the 20th century was about
the opposite. The corporate-raider image has survived over the decades in part because
Add to this the fact that Arnault sees his
this year LVMH created a series of degree
manufacturing,” said Michael Burke, the
role as ensuring the future of brands, but not
programmes and paid internships in
chief executive of Louis Vuitton, “the 21st
necessarily the designers behind them – a
conjunction with professional schools aimed
century will be about intangibles” – concern
crucial distinction. As a result, whenever he
at creating a new generation of craftspeople.
for preservation, heritage, the environment.
makes a controversial play for a company, the
As a result, a new front has opened in the
predator image becomes part of the fight. This was nowhere more true than when
These projecTs reflect an evolution
luxury wars, with the names stitched inside
within the luxury industry itself, in which
handbags now also chiselled on cultural
LVMH quietly acquired 14 per cent of the
competition for consumers, acquisitions
institutions. In Italy alone, Tod’s, the Italian
stock of Hermès International in October
and talent is fierce. And the “character” of
luxury group, is underwriting the restoration
2010 via previously undisclosed equity swaps
companies is increasingly important. In this
of the Colosseum for ¤25 million ($31.7
then increased its stake to 23 per cent in the
context, said Will Hutchings, an executive
million); LVMH’s Fendi is spending ¤2
next few months. The move shocked the
director at Goldman Sachs, the museum is
million ($2.5 million) for restoration of the
fashion world, which deemed Hermès the
“very long-term thinking.”
Trevi Fountain; Versace is helping to restore
purest example of craft over commerce.
Jean-Paul Claverie, who has run LVMH’s
Milan’s Galleria Vittorio Emanuele II; and
The Hermès ordeal alerted LVMH to the
philanthropic initiatives for more than
Salvatore Ferragamo pitched in at the Uffizi
need to focus on the image of the company
two decades, said the FLV was aimed at
Gallery in Florence.
as a whole, said Antoine Arnault, Arnault’s
producing “not economic returns, but emotional ones.” Of course, the two are not entirely unrelated. The luxury business is changing. As consumers have experienced what Bain &
LVMH’s greatest rival, the former PPR, went so far as to rename itself as Kering
oldest son. The new FLV museum and performance
(pronounced as “caring”) last year, to
space has the potential to reach a broad
symbolise a transformation from business
group of people – one that goes beyond
opportunist to committed company.
Europeans and designers. Given the
As LVMH and Kering – which owns
importance of tourism to luxury spending in
Co calls “logo fatigue,” growth for brands
Gucci, Yves Saint Laurent and other
France, linking a must-see visitor destination
including Gucci, Prada and Vuitton has
brands – strive to bolster sectors like
with a luxury name has undeniably positive
slowed. The conventional wisdom was
watches and jewellery or to better balance
implications for LVMH brands.
that consumers cared about obvious
their holdings across geographic markets,
aspirational signifiers like name and price;
smaller acquisitions are necessarily part of
“It will show everyone who he really is,” Claverie said. n Portfolio
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Observer O N E 2 W AT C H TExT: HildA d’sOuzA
Frederic Cumenal Upscale jeweller Tiffany & Co, based in New York, has selected Frederic Cumenal to be its new Chief Executive Officer effective April 1, 2015. He will succeed long-standing CEO of 15 years, Michael Kowalski. Cumenal, 54, joined Tiffany in 2011 overseeing worldwide sales and distribution as its executive vice president. He was promoted to president and also landed a newly created position on the company’s board in September 2013. Furthermore, he was given the added responsibilities of design, merchandising and marketing functions. Many in Wall Street see his nomination as part of a planned succession. The news of Kowalski stepping down was long awaited and the joining of Cumenal was timed with the launch of the company’s strategic turnaround plans. Tiffany expanded internationally into new markets and took the brand further upscale. It invested heavily into revamps and rollouts with more stores, new product lines and ambitious advertising campaigns. The development strategy showed results with Tiffany’s most recent quarter reporting a jump of 16 per cent in its net earnings and a seven per cent profit in global sales mostly generated from the US and Asia-Pacific markets. The company even raised its earnings forecast for the third time this year. Analysts and shareholders are keen to see whether Cumenal will be able to continue this momentum. Analyst Rahul Sharma at Neev Capital said, “Frederic Cumenal is absolutely the right man for this job. He has the global outlook to ensure he can continue making progress and exceed expectation.” Cumenal will certainly face significant challenges say some experts. Despite the opening of new flagship stores in Europe sales were below expectation due to weak consumer demand and strong currency headwinds. Meanwhile turmoil in Russia has subdued what was meant to be a boom market for Tiffany, and in Japan – where the group has 55 stores – a rise in sales tax in April sent sales tumbling 13 per cent in the last quarter. The volatility of the diamond market also plays a significant role in Tiffany’s gross margins, especially as the company is ramping up production of one-of-a-kind spectacular creations. Tiffany’s jewellery subsidiary accounted for 92 per cent of sales last year. Cumenal, born in Bordeaux, France is a graduate of French university, Institut d’Etudes Politiques, and Harvard Business School in the US. His high-flying education background and lengthy experience in the luxury sector should contribute to keeping America’s luxury brand moving forward.
London Is Top City London is the most attractive city for business and innovation, outranking New York, Paris and Tokyo, according to Japan’s Global Power City Index. The survey covers 40 of the world’s major cities and provides a ranking for the cities’ ability to attract creative people and businesses, according to the Mori Memorial Foundation and Institute for Urban Strategies. The study takes into account the economy, research and development, cultural interaction, livability, environment and accessibility of cities. The total score for London rose by 28 points, while the scores for the rest of the four cities remained little changed. The city’s hosting of the Olympic Games in 2012 helped boost its ranking. For the cultural interaction category, London was ranked the highest, followed by New York and Paris. Cultural interaction is based on categories such as sports facilities, dining and shopping, and the city’s appeal to overseas visitors. New York received the highest points for research and development, followed by Tokyo, the survey showed. For the economy category, Tokyo ranked at the top, while New York and Beijing took second and third spots. Seoul and Hong Kong were the other high-ranking Asian cities, while Amsterdam, Berlin and Vienna where the other top European cities.
reUters
24
Portfolio
M ESUR E ET D ÉMESUR E *
TONDA METROGR APHE
Steel Automatic chronograph movement Steel bracelet Made in Switzerland
www.parmigiani.ch
Observer
26
passenger jets. With the Chinese project also delayed, Mitsubishi’s Pratt & Whitney turbofan-engined MRJ will be a test of whether a new entrant can successfully break into the small group of leading aircraft manufacturers. Boeing and its European rival Airbus dominate the market for larger passenger planes. One advantage Mitsubishi has is an reuters
order book, including options, for 407 jets. ANA will be the debut carrier, and three
Mitsubishi Aircraft Unveils First Passenger Jet
more airlines became customers this year,
Japan’s first passenger jet was unveiled
it estimates at $1.7 billion. The company
its new CSeries jets, also delayed, which will
last month after a delay of almost four
plans by June to conduct a first flight of the
be able to carry as many as 160 passengers.
years, with a helping hand from bullet-
jet, designated MRJ, with the larger model
train specialists as test flights were set
available first.
for next year.
Japan and China are leading an Asian
Mitsubishi is building 78- and 92-seat versions of the plane, developed at a cost
boosting the tally to six. Mitsubishi Aircraft targets winning half the global market for regional aircraft over the next 20 years as Bombardier focuses on
The world fleet of jets seating 70 to 130 passengers will increase to about 6,580 by 2033, from 3,850 last year, as travel
race to break the hold of Embraer and
demand increases, according to forecasts
Bombardier on the market for small
from Brazil’s Embraer.
India’s Groundwater Problem There is pressure on India’s Prime Minister
faces some of the world’s worst water
Narendra Modi to improve groundwater
challenges, they said.
management in the world’s biggest user of
A 2009 study by the University of
the resource as he seeks to transform India
California, Irvine, and the National
into a manufacturing hub.
Aeronautics and Space Administration
Growing aquifer overexploitation by
showed groundwater depletion in
farms, businesses and cities imperils
northwestern India from 2002 to 2008
India’s development goals, according to
was equivalent to a net loss triple the
the World Bank, signalling challenges for
capacity of Lake Mead, the largest man-
industries from mining to brewing in need
made reservoir in the US.
of reliable water sources.
Modi’s steps to address water shortages
India draws 230 cubic kilometres of
include initial implementation of a plan to connect 30 rivers, a project estimated a
of the global total, World Bank data
decade ago to cost $92 billion. The central
shows. Agriculture uses the most, growing
government is also trying to convince
about 70 per cent of India’s grains with it, followed by industry. While groundwater is the main
getty images
groundwater a year, more than a quarter
states, which administer the resource, to pass a law to curb overuse. Thirteen
arsenic make it unfit for humans in a third
of India’s 36 states and union territories
drinking water for more than 1.5 billion
of India’s 600 districts, WWF India and
have enacted the legislation, the federal
people worldwide, pollutants such as
Accenture Plc said last year. The country
administration said in August. Portfolio
Observer The World
CompIled by Hilda d’souza
Top 10
China Cuts ‘Phantom’ Workers
MosT FiNaNCEd Cloud CoMPaNiEs rank
country
1.
Cloudera
total financing ($m) 900
2.
pure Storage
375
3.
dropbox
325
4.
box
112
5.
New Relic
100
6.
SoundCloud
60
7.
datastax
45
8.
Couchbase
25
9.
datadog
15
10.
Cloudant
12
GeTTy ImAGeS
28
SoURCe: bloombeRG
China’s government removed tens of thousands of “phantom
HiGHEsT-Paid soFTWaRE ENGiNEERs rank
country
1.
pakistan
aVEragE incomE 5.56
2.
India
3.91
3.
South Africa
3.64
4.
bulgaria
3.28
5.
China
3.15
6.
Ukraine
2.96
employees” from state payrolls amid a campaign by President Xi Jinping to crack down on corruption and eliminate waste. A total of 162,629 employees who had continued to draw salaries after leaving their posts were cleared out of central and provincial governments, state-controlled financial companies and universities as of September 25, the official People’s Daily
7.
philippines
2.69
reported. The country also disposed of 114,418 government
8.
brazil
2.46
vehicles, it said in a separate report.
9.
egypt
2.19
The moves build on Xi’s broader anti-graft campaign to crack
10.
mexico
2.04
down on the abuse of power by officials after he became head of
*(bloombeRG RANked CoUNTRIeS bASed oN The RATIo oF medIAN pAy FoR SoFTwARe eNGINeeRS To Gdp peR CApITA)
the Communist Party in November, 2012. Central government agencies cut their fleet by 37 per cent last year, according to the
loWEsT Paid us TECH CEos total compEnsation ($m)
Central Commission for Discipline Inspection and Ministry of
rank
cEo
company
1.
larry page
2.
mark Zuckerberg
0.65
3.
Steve ballmer
microsoft
1.26
4.
Zach Nelson
NetSuite
1.28
5.
Ursula burns
Xerox
2.49
province who were getting paid even though they no longer hold
6.
marc lautenbach
pitney bowes
3.40
positions, People’s Daily reported. In the southwestern Sichuan
7.
Tim Cook
Apple
4.25
province, more than 28,000 officials were paid even though they
8.
moshe Gavrielov
Xilinx
4.49
9.
Steve Sanghi
microchip Technology
4.59
didn’t work, and 15,000 were uncovered in Henan province,
10.
lothar maier
linear Technology
5.03
0.000,001
Supervision. Xi’s government has also cut spending on business travel and entertainment. The government removed over 55,000 workers in Hebei
according to the report. The missing employees are typically government officials’ relatives or children, according to China National Radio. Portfolio
Commentary
30
Molly Wood
Mobile Malware Threat A smAll security compAny
Play store. Malicious apps can sometimes
revealed a flaw in millions of smartphones
system is the overwhelming target of these
find a way in, but it’s unusual. Google
that could allow dangerous software to
mobile hacking attempts. But Google
says most infections it sees are in Russia
masquerade as a legitimate app and seize
argues that actual infections are rare,
and Vietnam, and they come through
control of a phone. The threat was a big
especially in the United States and Europe,
unauthorised app stores.
conversation topic at this year’s Black Hat
where most Android phones are running
security conference. But after that, we
official versions of the operating system
approved sources is an easy preventive
didn’t hear much more about it.
and the Google Play or Amazon app stores.
step. And Google recently introduced
Perhaps that should not be surprising.
Take the Android security hole called
So, downloading apps only from
updated app scanning that will
For some time, computer security
“Master Key” as an example. The flaw
continuously check your phone for apps
companies have been on the lookout for
was believed to affect up to 99 per cent of
that might be misbehaving.
apps meant to harm smartphones. Yet
Android phones. The fear was that it could
so-called mobile malware has not had
be used to turn a real Android app into one
if you get programs from other app
much of an impact on regular people.
that would allow hackers to read personal
stores, like those that come preinstalled
data on the phone, send premium text
on non-Google Android phones in other
messages or call premium numbers.
countries or even third-party alternatives
A recent report by the security company McAfee said there was a 197 per cent increase in mobile malware from 2012 to
But Adrian Ludwig, who is in charge of
You might encounter more malware
that anyone can access, like SlideME or
2013. The actual number of phones hit by
Android security at Google, said Master
AppsLib. But if you’re using a version of
mobile malware, however, is tiny. McAfee
Key and the flaw identified this year,
Android verified by Google, it has a built-
said one of the largest mobile infections it
called Fake ID, didn’t end up causing
in scanning system that looks for malicious
was tracking recently – a kind of malware
much trouble. “On the order of one or two
apps from third-party sources.
that can lock your phone and all the data
out of every million installs were actually
on it and hold it for ransom – had infected
potentially harmful to users,” he said
activated automatically when you change
Google, like Apple, Microsoft and
your Android settings to allow apps to be
BlackBerry, works to verify the apps it
installed from somewhere other than the
20,000 to 40,000 mobile users in the United States. So is mobile malware a threat? Sure. But your threat level depends on who you are. If you’re not a celebrity and you’re not carrying corporate or government secrets
allows into the Google
The system, called Verify Apps, is
Google Play store. You can turn it off. But if you leave it on, Google says, it should catch most bad apps. Kevin Mahaffey, the chief technology
on your device, it is certainly not your
officer at Lookout, said about four per
biggest computer security problem. And
cent of its US users encountered one or
if you practice basic security hygiene on
© 2014 New york TiMes News service
Google’s popular Android operating
more pieces of mobile malware a year.
your mobile phone – good passwords,
The numbers are much higher in Russia,
downloading apps from reputable sources
at 63 per cent, and China, at 28 per cent,
and treating email on a phone with caution
he said.
as on a computer – it is easily avoided. Phones can get infected when someone
But security companies like McAfee maintain that mobile malware is on the
accidentally downloads a malicious app.
rise and that, while it might not be a major
Clicking some ads can also start downloads
problem now, it’s a rising tide.
of malware, and hackers can even pretend
“We think the threat is real; we think it’s
to be a public Wi-Fi hot spot to steal
a growing threat,” said Gary Davis, McAfee’s
personal data.
chief consumer security evangelist. n Portfolio
Fiat CEO Sergio Marchionne says his expanded company will boost sales by 60 per cent by 2018. But there are many doubters who believe the transatlantic marriage of two struggling regional carmakers is facing too many obstacles. WRITTEN BY DAVID ROCKS AND TOMMASO EBHARDT Š BLOOMBERG
Profile
32
Portfolio
33
November 2014
S
ERGIO MARCHIONNE likes to move fast. The chief executive officer of Fiat SpA and Chrysler Group LLC owns a half-dozen Ferraris, has homes in three countries, and spends much of his time on a private jet shuttling between
Detroit, Fiat’s hometown of Turin, and other outposts of his growing empire. Fuelled by a dozen espressos a day, he stormed into Fiat a decade ago and fired most of the top management, then did the same at Chrysler in 2009, installing a dozen newcomers on his second day. And on a recent grey Tuesday morning, Marchionne took one of his Ferraris – a black Enzo – around Fiat’s high-speed test track near the town of Balocco, 70 kilometres east of Turin. “When you’re tense,” he said, stamping on the accelerator and pushing the car from a comfortable 190km/h to something over 300, “there’s nothing better than this.” As he and Fiat Chairman John Elkann prepared to ring the closing bell at the New York Stock Exchange on October
REUTERS
Fiat has been losing out in Europe to strong competitors like Volkswagen and Toyota.
13 to mark a new listing, Fiat Chrysler
to spend about $60 billion adding more
cars and churn out a profit of ¤5 billion
Automobiles, Marchionne has been racing
than 30 models, from subcompacts to
($6.3 billion). “We’re moving as fast as we
to create a lineup of cars that will lure
a Maserati sport utility vehicle. That,
possibly can,” Marchionne said after his
buyers into showrooms worldwide.
he predicts, will help the new company
spin around the circuit’s banked curves.
By 2018, the combined company plans
boost sales 60 per cent to seven million
Marchionne would be the first to tell you speed can be dangerous. “In the car business, sometimes you crash,” he said. He should know: In 2007, he smashed up a $350,000 Ferrari on a highway in Switzerland. Yet he argues that moving any slower would be even riskier. Fiat Chrysler is the world’s No. 7 automaking group by deliveries, and Marchionne has long said there’s room for just a halfdozen or fewer major players. The transatlantic marriage of two struggling regional carmakers will probably be the capstone of Marchionne’s career. He says he’s only committed to GETTY IMAGES
Profile
34
On October 13 Fiat Chrysler Automobiles listed on the New York Stock Exchange.
staying at Fiat through 2018. So how quickly he gets the new company on its feet may well determine his legacy. Marchionne’s plan has legions of Portfolio
REUTERS
35
Marchionne presented the new LaFerrari hybrid car at last year’s Geneva Motor Show.
Four years later, he took over Chrysler,
European automaker. “I’m a car freak,” he
ultimately spending only about 10 per
said, looking over the lineup of Maseratis and
cent of the $36 billion Germany’s Daimler
Ferraris at Balocco. “But my survival instinct
AG paid for the company in 1998.
is stronger than my addiction to cars.”
He’s been less successful with cars.
That survival instinct has led him
doubters. Half of the analysts who cover Fiat
Marchionne ditched the storied Italian
to largely abandon the mass market in
recommend investors sell the shares, saying
brand Lancia after trying to rebadge
Europe, which he says is too crowded to
the CEO’s sales goals are unrealistic and its
Chrysler models as Lancias for sale in
offer a significant profit. Instead, he wants
¤10 billion in debt is too high. Researcher
Europe. He was late to China. And despite
to transform Fiat’s under-utilised Italian
IHS forecasts the company will fall short of
initial promises of bringing Alfa Romeo
plants into export machines for more
its 2018 targets by about 1.8 million cars.
back to the US as early as 2011, the
expensive cars. In 2000, Fiat made 1.4
Sipping espresso on the veranda of the
sporty luxury brand won’t get there until
million vehicles in Italy. By 2013, its Italian
19th-century farmhouse at the centre of the
2016, with the exception of a two-seater
output had dropped below 400,000 as Fiat
Balocco track, Marchionne said: “I’m used
introduced this year that won’t sell more
wound down models that compete directly
to incredulity.” He sets ambitious targets,
than 1,000 cars.
with bestsellers like Volkswagen’s Golf. “We did a lot of soul-searching to try to see
he said, because aiming lower would be “to establish mediocrity as a benchmark. If you
MARCHIONNE ACKNOWLEDGES
how best to utilise what we had in Italy,”
dream of peanuts, you get monkeys”.
that he was new to the auto industry when
said Marchionne’s boss, Elkann, the great-
he took over Fiat, but points out that he’s
great-grandson of Giovanni Agnelli, who
now the longest serving CEO of any major
founded Fiat in 1899.
Marchionne has a record more as a dealmaker than an automaker. In the past decade, he has pulled both Fiat and Chrysler back from the edge of bankruptcy. In 2005 he played a game of chicken with General Motors, threatening to enforce a contract that would have required the struggling American company to buy evendodgier Fiat; he walked away with a $2 billion cash settlement. November 2014
The transatlantic marriage of two struggling regional carmakers will probably be the capstone of Marchionne’s career. He says he’s only committed to staying at Fiat through 2018.
Marchionne echoes in his gravelly voice.
car roots of sportsters like the Charger
Marchionne is always ready with a quick
Some executives who know both men say
and Challenger. Most troubled are the
riposte, the gangly, 38-year-old Elkann
that they have something of a father-son
company’s namesake brands. “Fiat is the
speaks slowly, as if every word has been
relationship, but Marchionne said, “He’s
toughest nut in Europe and Chrysler is the
squeezed through a filter.
more like a kid brother.”
toughest in the US,” Marchionne said.
The two make an unlikely team. While
At Balocco he’s wearing a pin-striped
Chrysler, which previous management
The brawny Jeep brand is central to
suit; he rarely appears in public with
their plan. Marchionne plans to start
had sought to position as a near-luxury
an open collar, a sharp contrast to
building the Cherokee SUV in China
nameplate, is being shifted downmarket. A
Marchionne’s trademark black sweater
by 2016 as he seeks to double sales to
new sedan called the 200 – best known as
and dark blue slacks. As the scion of
more than 1.9 million vehicles, largely
the car driven by rapper Eminem in a 2011
the Agnelli family, Elkann is almost like
by quintupling deliveries in the world’s
Super Bowl ad with the tag-line “Imported
royalty in Italy. He drinks tea instead of
most populous nation. The Jeep name,
From Detroit” – has been well-received. But
coffee. And he owns just a single Ferrari.
Marchionne says, “is credible, and is
the brand has only three models, and US
understood by everybody”. And he expects
sales have dropped six per cent this year.
Elkann and Marchionne say they fire off dozens of BlackBerry BBM text messages
Alfa Romeo and Maserati to steal buyers
to each other daily – mostly in English,
from BMW, Mercedes and Audi.
despite their shared Italian heritage.
What’s important is to ensure each
Elkann, who took over management
brand stands for something. That’s easy
of the family’s holdings at age 28, says
with Ferrari: Really fast cars that can
Marchionne has taught him to be flexible.
cost a lot. And it’s not tough with Alfa,
“You can’t plan everything,” said Elkann. “We’ve learned that serendipity is real”
The brawny Jeep brand is central to their plan. Marchionne plans to start building the Cherokee SUV in China by 2016 as he seeks to double sales to more than 1.9 mil ion vehicles.
Maserati, Jeep, or even Dodge, which is being refocused around the muscle-
Marchionne speaks to John Elkann, chairman of Fiat Chrysler Automobiles.
FIAT IS buffing up its image in the US and Europe as the maker of the retro-hip 500, intended as an answer to BMW’s Mini range. The problem is that the identity is muddled elsewhere. Brazil, for instance, now builds more Fiats than any other country, so “when a Brazilian goes to New York and sees a Fiat, he says, ‘Hey, there’s a Brazilian car,’” Marchionne said. At the Balocco test track, Marchionne and Elkann are eager to show the cross-pollination of their brands. In the farmhouse courtyard a Jeep Renegade sits next to its Italian cousin, the 500X, both to be built at a Fiat factory in Melfi, 160 kilometres east of Naples. “This is a real SUV,” Marchionne said, slapping the tailgate of the diminutive blue Renegade. GETTY IMAGES
Profile
36
“It’ll take you anywhere.” Though the two cars look nothing alike, Fiat says they share about 40 per cent of Portfolio
their components. The Renegade is boxy and muscular, with a wide stance and six-pillared Jeep grille that make it look like it just forded an Idaho stream. The 500X, while also featuring four-wheeldrive and the higher profile of an SUV, has the seductive curves of the original Fiat 500 and is intended to ooze Dolce Vita. “This is urban, civilised,” Marchionne said, running his hands across the creamcoloured five-seater. “It’s Italy at its best.” MARCHIONNE HAS a deep understanding of the cultural barriers that separate the Italians and their American
GETTY IMAGES
Michigan Chrysler Plant celebrates production of the 2015 Chrysler 200.
partners. He was born in Chieti, a hill town about two hours east of Rome. At
Marchionne has support at the
age 14, his parents uprooted the family
highest levels in Italy. Former prime
and moved to Toronto, where Marchionne
minister Mario Monti helped him
learned English from a standstill.
inaugurate the production lines that will make the Renegade and the 500X.
After studying philosophy, law, and business, he worked as an accountant
And Renzi on September 26 spent
in Canada. Marchionne consolidated
the afternoon with Marchionne at
his reputation at SGS, a Swiss product
Chrysler headquarters. After a tour of
testing company, where he doubled profits
the facility, Renzi said Marchionne’s
by cutting costs and eliminating several
turnaround of Fiat could serve as a model
layers of management.
for all of Italian industry. “The most important thing is not the headquarters
SS was controlled by Elkann. In 2004, he was looking for new leadership at Fiat,
and where they hold their annual
which had lost more than six billion euros
meeting,” Renzi said, “it’s the strategy of
GETTY IMAGES
Profile
38
over the previous two years, and he took note of Marchionne’s success at SGS. That May, he met Marchionne for dinner at Geneva’s lakeside Hotel de L’Angleterre.
Italian prime minister Matteo Renzi at Fiat’s headquarter in Turin.
making investments in the country.” While Marchionne said Fiat can manage his investment plan on its own, he would consider another alliance if the right opportunity arises. “The industry
Over coffee and grappa, Elkann floated the idea of Marchionne running Fiat. “He never asked me to work for him,” Marchionne said.
needs it,” Marchionne said. “This is still a very fragmented industry for the level of capital you have to invest.” If such a deal happens, Marchionne
“He asked me if I could
doesn’t expect to stick around beyond
lend a hand, and that’s
2018 to make it a success. He says he’s
why I said yes.” Elkann must shoulder
grooming several members of his team for the top job since Elkann says he’s not
significant historical weight
interested in combining the chairman
as he oversees Marchionne’s
and CEO titles.
shift away from Italy. Fiat’s
“You’re asking me if there are other
name, after all, is an acronym
things I like to do apart from this?
for Fabbrica Italiana
Phenomenally, yes,” Marchionne said.
Automobili Torino, or Italian
“I like to be able to think, and that’s not
Auto Factory Turin.
always possible in this job. ■ Portfolio
Asia
40
Looking Beyond Some companies are shifting personnel from China as they renew their focus on Southeast Asia, reports Keith Bradsher.
© 2014 New York Times News service
General Motors Moved the
“I’m going to spend a lot of time going
headquarters of its international division to
back and forth – the five-hour flight is going
Singapore from Shanghai in August. Archer
to be my monthly bus trip,” said Ismael
Daniels Midland, the agribusiness giant, is
Roig, the president of Archer Daniels
gradually doing the same with its Asian and
Midland’s Asian and Pacific operations.
Pacific operations. Other multinationals,
The moves reflect the broader evolution
like IBM, have shifted staff members to
of China, the world’s largest market for
Singapore from China for a few functions,
cars, flat-panel televisions and scores of
like treasury operations.
other products. The Chinese economy
Portfolio
41
China has become so large and affluent that companies increasingly treat it like Europe, with reports going directly to head offices in home countries and no longer lumped in with those from developing countries. “We are big in China, and we want to be,� said Stefan Jacoby, the president of
November 2014
Asia
42
Southeast Asia have been strained by its Stefan Jacoby, president of General Motors International, which recently moved its operations from China to Singapore.
increasingly assertive claims to control over practically all of the South China Sea. The reasons for companies to shift headquarters to Singapore “relate to the growth opportunities in Asia Pacific beyond just China,” said Keat Chuan Yeoh, the managing director of the Economic Development Board, Singapore’s investment promotion agency. PhiliPP RösleR, a former vice chancellor of Germany who is a managing director of the World Economic Forum in Davos, Switzerland, said the forum had been surprised by the number of its member companies that had said in the past several months that they were considering moving their local or regional headquarters out of mainland China.
General Motors International. His division,
also manifested itself in large-scale raids
which officially moved to Singapore on
on the Chinese offices of multinationals
But so far, it has not translated into a
August 5, no longer includes the company’s
in the automotive, pharmaceutical and
mass exodus. Two of the largest corporate
China operations but encompasses GM
technology sectors.
leasing brokers in Singapore – New
subsidiaries in Africa, the Middle East, Southeast Asia, Australia and South Korea.
More important, many multinationals
York-based Cushman & Wakefield and
are starting to pay renewed attention to
Chicago-based Jones Lang LaSalle – say
Southeast Asia, which is showing signs of
they see no sign of large-scale moves by
in China have made some difference in the
revival 17 years after the Asian financial
multinationals from mainland China or
plans to move executives to Singapore –
crisis. They have found it hard to do that
Hong Kong to Singapore.
choking air pollution, countless regulations
from Shanghai or Beijing. Each major
“There isn’t a huge long list of people
that favour local competitors and weak
city has no more than one flight a day
moving out of China; that isn’t what we
protection for intellectual property. A
to Jakarta, Indonesia, for example. And
see at all,” said Chris Archibold, the head of
rising wave of economic nationalism has
China’s diplomatic and trade ties to
Singapore leasing for Jones Lang LaSalle.
The many frustrations of doing business
Many US companies that rushed to open A man takes a picture of the central business district in Singapore.
Asian headquarters in Shanghai a decade ago regret it but are leery of antagonising the Chinese government by moving out, said the chief executive of a Western company who spoke on the condition of anonymity. History looms large. Jardine Matheson, Hong Kong’s leading British company for more than a century, moved its incorporation to Bermuda in the 1980s and delisted from the Hong Kong Stock Exchange in 1994, before the return of Hong Kong to Chinese sovereignty. Those decisions prompted retaliation by Beijing, which hindered the company’s ability to make large investments in mainland China for more than a decade. For now, the operations being moved to Portfolio
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44
Singapore remain tiny, even microscopic,
of top-end office buildings in Beijing and
in demand because the government had
compared with those remaining in China.
Shanghai, said she was stunned when three-
arranged for a series of other international
Archer Daniels Midland has built a
fifths of the mostly European teenagers and
schools to open in the past five years.
large team in Shanghai that can negotiate
the coach at her son’s soccer club in Beijing
acquisitions of agribusiness factories in China,
moved out of China this summer, a shift
Kong right now is schooling,” said May
do due diligence and conduct audits, Roig
that she attributed to air pollution.
Tung, the head of the Hong Kong financial
said. So the priority for the company in Asia is
The European Union Chamber of
to develop the same capability in the growing
Commerce in China said in its wide-ranging
Indonesian and Vietnamese markets.
annual position paper, released in Beijing
By contrast, “the bottleneck in Hong
services practice of DHR International, a Chicago-based executive recruitment firm. While few headquarters, and even fewer
on September 9, that eight of its member
factories, are moving, multinationals do
Jakarta and from Ho Chi Minh City,
companies had reported rising difficulties in
appear more cautious in adding further
Vietnam. Singapore also has tax laws that
persuading talented staff to move to China,
to their already numerous research centres
favour commodities trading operations
particularly because of air pollution.
in China.
Singapore is a two-hour flight from
and agreements with other countries that make it relatively easy to resolve trading disputes with companies elsewhere. But
Shortages of spaces at English-language schools have also been an issue. Singapore has prevented local families
Companies like Procter & Gamble and Baxter Pharmaceuticals have been opening or expanding research and development
most of Roig’s subordinates remain in
from enrolling their children in the
centres and high-tech factories in Singapore,
Shanghai. Similarly, only 40 GM managers
elementary and junior high grades at the
although they also retain large operations
and executives have moved from Shanghai
city’s international schools, avoiding the
in China.
to Singapore, and the entire international
overcrowding that has afflicted many such
operations headquarters occupies a single
schools in mainland China and, particularly,
Lee Kuan Yew School of Public Policy
floor of a downtown office building.
Hong Kong.
at the National University of Singapore,
Kishore Mahbubani, the dean of the
Companies are finding it easier to
Chip Kimball, the superintendent of
persuade talented managers to move to
the highly-regarded Singapore American
companies like Baidu and Huawei meant
Singapore, with its fairly clean air, than to
School, said more expatriates were moving
that a constituency was growing in China
Shanghai. Zhang Xin, the chief executive
to Singapore. But he noted that his school
for eventual improvements in intellectual
of SOHO China, the leading developer
had experienced only a slight increase
property protection. n
said the growth of Chinese technology
Workers at General Motors International in Singapore.
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Food
46
Cereal, that bedroCk of breakfast, has lost some of its snap, crackle and pop. For the last decade, the cereal business has been declining, as consumers reach for granola bars, yoghurt and drivethrough fare in the morning. And the drop-off has accelerated lately, especially among those finicky millennials who tend to graze on healthy options – even if Cheerios and some other brands come in whole-grain varieties fortified with protein now. As a child, Adam Feuerstein started his day with a homemade breakfast. “Growing up, I would combine Frosted Flakes and Cap’n Crunch,” said Feuerstein, a financial reporter at The Street. “I have such vivid memories of it that if I walk down the
Changing habits, more competition and a move to healthier alternatives has caused a consistent decline in cereal sales, reports Stephanie Strom.
those cereals.” Cereal companies have tried to play © 2014 New York Times News service
Cereals lose TraCTion
cereal aisle today, I still gravitate toward
on that nostalgia, with commercials featuring generations of Cheerio eaters or couples fighting over the marshmallows in Lucky Charms. But Feuerstein, 46, isn’t buying the sales pitch. These days, he eats breakfast around 10 or 11 in the morning, preferring juice he makes himself. If he Portfolio
47
because they’re faced with people making choices and they’re not really sure which trend to blame.” Fereday noted, for instance, that the birthrate was declining – and children traditionally have been the largest consumers of cereal. Other demographic factors are at play as well: Many surveys have shown that Latinos and Asians prefer other breakfast foods. And, of course, there are the millennials, those consumers between the ages of 14 and 32 who are proving to be a headache for food companies. “They’re much more likely to be snacking rather than eating three meals a day, and therefore may not have a traditional breakfast at all,” said Jeff Fromm, president of FutureCast, a consumer Jim Murphy, president of Big G, General Mills’ cereals division, at the General Mill’s headquarters in Minneapolis.
research firm specialising in millennials. “Additionally, there’s a small but very
eats cereal at all, it is a Trader Joe’s private
many cereals are neither gluten-free nor
active and influential group of millennials
label version “as a treat,” he said.
protein-rich, so they fail to resonate with
who are focused on health and don’t
the growing number of consumers who
like processed food. Guess what, cereal
vehicle,” he said of cereal. “We’ve all gotten
are gluten-intolerant or adherents of the
companies? They want to kill you.”
a little smarter about the foods we eat,
so-called paleo diet.
“You realise that it’s just a sugar delivery
and while there are plenty of healthy
But investment analysts say the current
As if those challenges were not enough, new kitchen gadgets make whipping up
cereals out there, I just don’t choose to eat
slump is a result of more pernicious
a smoothie or a custom blend of juices
much cereal.”
trends. “The common observation by a
easy to do at home. Plus, a number of new
lot of companies facing declining cereal
fast-food breakfast options – waffle taco,
Cereal consumption peaked in the mid-
anyone? – have put dents in cereal sales.
1990s, according to the NPD Group, a consumer research firm. Still, some 90 per cent of American households report buying ready-to-eat cereal, which remains the largest category of breakfast food with some $10 billion in sales last year, according to Euromonitor, down from $13.9 billion in 2000. And the consumer research firm estimates sales will fall further this year to $9.7 billion.
For the last decade, the cereal business has been declining, as consumers reach for granola bars, yoghurt and drive-through fare in the morning.
For example, Daniel Bjornson travels four days a week as a consultant, and he likes to eat cut fruit and toast with peanut butter while on the road. “If I’m just at home, it would be Greek yoghurt,” he said. “I don’t dislike cereal, but yoghurt just seems like a healthier option.” A few months ago, he said, he bought a box of Kashi with added protein, an attribute that attracted him.
“More and more consumers are eating
At General Mills, the company’s yoghurt
breakfast,” said Noel Geoffroy, senior vice
brands have eaten away at sales of its
president for morning foods marketing and innovation at the Kellogg Company.
sales is that this is a kind of death by a
cereals, which include Lucky Charms,
“The absolute market is growing - and
thousand cuts,” said Nicholas Fereday, an
Cinnamon Toast Crunch and Cheerios.
along with that, so are the choices of what
investment analyst specialising in food
“Some of my business has definitely gone
consumers eat for breakfast.”
and agriculture at Rabobank and author
to my colleague running yoghurt,” said
of a report, The Cereal Killers: Five Trends
Jim Murphy, president of Big G, General
to dips brought on by food fads like
Revolutionizing the American Breakfast.
Mills’ cereals unit.
the Atkins diet or bagel mania. And
“This is frustrating for food companies
Cereal sales have long been subject
November 2014
Big G has made tweaks in advertising
Food
48
“We had tried everything to move the needle: new advertising, new flavours – and then we marketed it as glutenfree, and it took off.”
Daniel Bjornson adds honey to his yoghurt as his dog Mia watches during breakfast at his house.
Kellogg, was characteristically blunt in explaining the decline to investment analysts on July 31. “The overall decline has been largely due to innovation that hasn’t worked,” Bryant told them, citing
Adam Feuerstein makes juice for breakfast at his home in Winchester.
disappointing sales of Mini-Wheats Crunch, now discontinued, as well as efforts to alter its FiberPlus and Crunchy Nut brands. Kellogg’s has added protein to Kashi GoLean and Special K, a move that Geoffroy, the marketing executive, said was working well, and it has begun packaging its staple cereals for children in pouches to make them more convenient for mothers to use as snacks. MOM Brands, formerly Malt-O-Meal, has so far been immune to the trends buffeting the rest of the industry; two years ago, it surpassed Post to become the third-largest cereal maker, largely with simple innovations. “Over the last 10 years or so, as the
and ingredients to address changing
appeal to nostalgia: Adults account
consumer preferences. For instance, it
for almost half of the consumption of
category has been going down, we’ve
continues to reduce sugar in its cereals,
Cinnamon Toast Crunch, for instance.
doubled our market share,” said Paul
and it reintroduced Nature Valley cereals
Such changes have kept the company’s
Reppenhagen, senior vice president for
sales of cereals stable at a time when its
marketing and corporate strategy. “We’ve
competitors are struggling. In September,
had five per cent compound annual
It also found a way to capitalise on
Post Holdings reported that sales of its
growth over the last five years.”
Chex, which had produced consistent
cereals, which include Alpha-Bits and
sales but little growth since General
Grape-Nuts, were down 3.4 per cent in the
descendants of its founder, John
Mills acquired it in the 1990s. “We had
fiscal third quarter compared to the same
Campbell, has had success with a
tried everything to move the needle: new
period last year, while sales of morning
relatively new brand, Mom’s Best cereals,
advertising, new flavours – and then we
foods at the Kellogg Company, which
“because of an absence of negatives,”
marketed it as gluten-free, and it took off,”
includes Pop-Tarts, breakfast bars and
Reppenhagen said. “No hydrogenated oils,
Murphy said.
beverages in addition to its cereal brands,
no preservatives, no artificial flavours and
slid 4.9 per cent in the second quarter.
colours – we even use vegetable dyes in
and added protein to them in 2013.
General Mills also is marketing its iconic cereals as family brands in an
John Bryant, the chief executive of
MOM, which is owned by the
the packaging.” n Portfolio
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Transport
50
AboArd A CArgo Colossus Container ships are getting larger to transport cargo more economically, but there is now too much capacity in the market, reports Danny Hakim.
Portfolio
51
A helicopter AppeAred in the
above deck and 10 below. But they can sail
capacity more than 10 per cent. The
sky over the North Sea. It was 7 am
only between Europe and Asia, as their
timing was unusual. A report from
on a Wednesday this summer, and the
nearly 60-metre wide hull is too large to
the Boston Consulting Group, which
helicopter circled in a wide arc before
fit into US ports or to slip through the
counts Maersk as a client, called 2011 a
hovering above a ship travelling south at
Panama Canal.
year that “executives in the containershipping industry would probably like
about 15 knots. At more than 396 metres
The Mary will stop at a dozen ports,
long, the ship, the Mary Maersk, was hard
going from Gdansk in Poland to Ningbo,
to forget,” in part because a wave of
to miss. It is longer than the Eiffel Tower is
Yantian and Shanghai in China. It carries
new vessels ordered in earlier years
high, and the Mary and its sister ships are
seafood. It carries auto parts. It carries
swelled capacity.
the biggest container ships in the world.
perfume, grated cheese and frozen meat.
But demand for space has lagged
While computers and clothing are among
since 2008, according to Drewry, a
then a pair of Levi’s, and gradually a
China’s biggest exports, chemicals and
shipping consultancy that tracks the
man was lowered by rope onto the ship’s
timber are more likely to leave Europe.
industry. The idle space at Maersk
Feet appeared first from the helicopter,
amounts to one Triple-E.
deck. His job was to pilot the ship down
The Mary – stacked so high with
a narrow dredged channel in the Weser
cargo that little is visible beyond two
River, toward the port of Bremerhaven,
smokestacks and a glassed-in command
said Ulrik Sanders, global head of the
Germany. Later that morning, the Mary
centre – is an apt symbol for an
shipping practice at Boston Consulting,
would undertake the largest-scale act of
increasingly global marketplace. But it
“if you can fill it. There’s too much
parallel parking ever – or at least since
also represents the container shipping
capacity in the market and that drives
the last time it docked, the day before, in
industry’s overreaching ambitions. Few
down prices,” he continued. “From an
Gothenburg, Sweden.
carriers besides Maersk are profitable,
industry perspective, it doesn’t make
too many new ships are being built, and
any sense. But from an individual
ways to move freight from factories in
demand for space on container ships is
company perspective, it makes a lot of
China to consumers in Europe, the Mary
slowing as economies in Europe and Asia
sense. It’s a very tricky thing.”
is among the newest giants, known as the
face headwinds.
As companies look for more efficient
Triple-E’s. Owned and operated by A.P.
Maersk, based in Copenhagen, ordered
“It’s a simple logic, bigger is better,”
the cAptAin wears Crocs. He is
Moeller-Maersk of Denmark, the world’s
20 Triple-E’s from Daewoo of South
standing on the bridge, in black jeans
largest container shipping company, the
Korea in 2011, increasing its worldwide
and a white shirt with black stripes
Triple-E’s went into service last year, muscling their way into the $210 billion container industry. They have also gained a following: Hobbyist spotters watch for the Triple-E’s and post pictures online, and Lego has created a mini version with 1,516 bricks. Until the late 1990s, the largest container ships could carry about 5,000 steel shipping containers, each about six metres long. Today, such ships are little more than chum. The size of container
© 2014 New York Times News service
ships has exploded, reflecting their role as the packhorses of globalisation. Each year, the maritime shipping industry transports nearly $13 trillion of goods, roughly 70 per cent of total freight, according to the World Trade Organisation. The Triple-E’s can carry more than 18,000 containers, piled 20 high, with 10
November 2014
Workers attached a tugboat’s line to the Mary Maersk in Bremerhaven, Germany.
Transport
52
The Mary Maersk can carry 18,000 containers.
at the shoulders. The captain, Franz Holmberg, is an easy-going Dane. There is a tattoo on his left arm of an eagle fighting a dragon; he says the image is “not as vivid” as it once was. A formidable camera rests among the bridge instruments – he likes to memorialise landscapes, such as the Suez Canal scene he uses as a screen saver. He came from a farming family, but decided to try a life at sea and got hooked. After graduating from nautical school, he was a third officer on a ship that carried 3,800 containers, a fifth of Mary’s capacity. “Every time a new series comes out, everyone says this is it; it can’t get any bigger,” the captain says, adding, “Then a few years after, they just add a little bit more.” The industry wants ships that carry
Captain Franz Holmberg steers the Mary Maersk into port at Bremerhaven.
more containers, more slowly. Fuel prices are a major factor, so ships now commonly “slow steam” to save fuel, cruising at 16 or 18 knots instead of 22. A typical trip from Poland to China takes 34 days. During a recent voyage to the Suez, the Mary’s crew sailed on a parallel course with a 10-year-old Maersk container ship that held half as much cargo, but the Mary used only six per cent more fuel. “We’ve seen during the last 10, 15 years a dramatic increase in fuel costs,” said Jacob Pedersen, an analyst at Sydbank, a Danish bank. “That gives them reason to get rid of the old uneconomic ships.” But
When the world economy slackens, so does the shipping industry. At one end of Mary’s route, the growth engine of China has been losing steam, while at the other, Europe is again flirting with recession. Portfolio
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Transport
54
fuel is only one part of the equation. “The supply of ships has far outstripped the growth rate” of container traffic, said Richard Meade, the editor of Lloyd’s List, a leading nautical newspaper, adding that the top shipping lines “have entered into an arms race in terms of size, led by Maersk” and its Swiss rival, the privately held Mediterranean Shipping Co. Newer ships, he said, “are more efficient, more economically viable and more environmentally friendly, but they are only going to deliver those results if they are full.” When the world economy slackens, so does the shipping industry. At one end of Mary’s route, the growth engine of China has been losing steam, while at the other, Europe is again flirting with recession.
The crew of the Mary Maersk at breakfast.
side are actually pretty thin,” the captain
be men who gave up the months at sea for
It was time to park the world’s largest
explained. “If we get a speed higher than
home life.
container ship. Several hours had passed
that, we’ll start buckling plates.” He
since the first pilot arrived by helicopter,
smiled. “And that does not go well with
“That was a big container ship then,”
and a second, Karsten Burckner, 45, had
anybody, obviously.”
Holmberg explained.
come aboard from a tugboat gangplank.
Burckner, too, was once a container
His ship carried 2,500 containers.
“When I started, nobody was thinking
Burckner’s job was to help turn
ship captain – 11 years ago. But he had to
that this size of vessel will be built,”
large boats in front of the harbour at
give it up. “I was forced,” he said, pausing
Burckner said. “I don’t know where it
Bremerhaven and back them into their
ominously and then smiling, “by my wife.”
will end,” he said, looking over its vast
spot alongside the port where towering
This is true of many pilots, who tend to
expanse. “Ask Maersk.” n
cranes would soon begin hoisting crates on and off the ships. Speedy, it is not. Three tugboats nudged the Mary, while the ship’s twin engines fired in opposite directions. The ship began a very slow 360. It eased toward large rubber cushions on the dock. Beyond were steel shipping crates, stacked like dominoes and stretching out in a vast paved expanse in the port. They were scooped up by gangly red vehicles called “Straddle Carriers,” which are not much wider than a truck but tall enough to carry three or four containers. The two men looked over the ship’s side and spoke on walkie-talkies to sailors on the ground. Minutes passed – 10, 20, 30. The Mary, crawling at 0.1 knots, began sidling up to a pier. “Compared to the whole size and the weight of the ship, the steel plates in the
After navigating the ship from the port at Gothenburg, Sweden, to the open sea, the local pilot prepares to climb down the ship’s ladder to a waiting boat. Portfolio
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Consumers
56
IndonesIa’s RIsIng ConsumeR ConfIdenCe
getty images
The election of Joko Widodo as president has raised the already free-spending Indonesian consumer confidence even further, reports Joe Cochrane.
Attendees look at Mercedes-Benz vehicles during this year’s Indonesia International Motor Show in Jakarta.
Portfolio
57
Komp recently sat behind the wheel of a
poverty and bad infrastructure. Yet its
black Toyota SUV in a showroom atop one
consumers are among the world’s most
of the luxury malls in Jakarta, preparing
across the country. According to a global
optimistic, hopeful that a new government
for a test drive.
measure of consumer confidence by
That kind of confidence is on display
Business keeps rolling in for Komp’s
Nielsen, Indonesia is second in confidence
populous nation and put the economy on a
office building maintenance company,
only to India, which also has a new leader.
par with emerging powerhouses like China
despite a general economic slowdown. The
About 84 per cent of Indonesians surveyed
and Brazil.
recent election to the presidency of Joko
said that they were confident about
Widodo, the populist governor of Jakarta
their personal finances, 76 per cent said
and the resulting urge to splurge are
and a former businessman, is making
that they were confident about their job
people like Johannes Komp, a 30-year-old
Komp even more confident in the future
prospects and 57 per cent said that they felt
entrepreneur who just started a family.
and more willing to spend, he said. “He’s
now was the time to buy expensive items.
creating excitement, just like Obama.”
National data released by the central bank
Komp is more worried about driving on
showed that consumer confidence rose
Jakarta’s gridlocked roads than he is about
in August, compared with July, when the
will lift the fortunes of the fourth-most-
Emblematic of Indonesians’ optimism
presidential election was held.
That kind of confidence is on display across the country. According to a global measure of consumer confidence by Nielsen, Indonesia is second in confidence only to India, which also has a new leader.
Indonesia is a country of 250 million people and, by one estimate, its numbers of middle class and wealthy consumers will nearly double to 135 million by 2020. When the departing Indonesian president, Susilo Bambang Yudhoyono, first took office in 2004, per capita annual income was about $1,100; by the time he left office in October, it was around $4,500. Above and beyond election results, analysts say that rising income levels have given consumers more power to spend, in particular on trendy international brands that flood the market. Culturally, Indonesians are more likely to spend than save. In addition, the country’s transition
Indonesians place a lot of confidence in their new president Joko Widodo.
geTTY images
© 2014 New York Times News service
paying $35,000 or more for a new car.
IndonesIa Is saddled wIth
November 2014
Consumers
58
income families a monthly stipend of one
to democracy from authoritarian rule, beginning in 1999, has most Indonesians thinking their nation is on the right track. “When they have more money, Indonesians buy luxury items whether they need them or not,” said Miranda Natasya, 26, a marketing strategy adviser who recently purchased an iPhone even though she knew she would never use most of its apps. “Everyone else bought it, so I did.” Whether Joko succeeds in creating policies that translate into tangible economic change depends in large part upon his battle with corruption, the price of commodities and the whims of
Whether Joko succeeds in creating policies that translate into tangible economic change depends in large part upon his battle with corruption, the price of commodities and the whims of currency markets.
million rupiah ($85), to establish a special bank to support farmers and to open up more than one million hectares of land for the agricultural sector, the country’s biggest employer. Indonesian government spending on social assistance programmes for poor and vulnerable households was only 0.7 per cent of gross domestic product in 2013, compared with an average of 1.5 per cent of GDP among Latin American countries. Also last year, Indonesia spent only 0.9 per cent of GDP on health programmes. “Truly important challenges have arrived to this country,” said Rodrigo
currency markets. gap between the country’s rich and poor
Chaves, the Indonesia country director for
faced a number of crucial medium-term
is one of its most pressing problems.
the World Bank. “Whether Indonesia can
challenges, including poverty, inadequate
Indonesia has about 100 million people
become rich before it becomes old should
infrastructure and energy subsidies that
living on $2 a day or less, and income
be on the minds of the new government
cost the country tens of billions of dollars
levels for poor Indonesians are rising at
and the public.”
annually. Indonesia will also need to
a slower pace than for middle-class and
address issues in its labour and financial
affluent Indonesians.
After he took office on October 20, Joko
markets. And it will need to learn how to
Despite a decade-long official fight
Joko has promised more “people-
against corruption, Indonesia remains
better ride the turbulence in the global
centric” government programmes,
among the most corrupt countries in Asia,
economy, according to economists.
including expansion of free public
according to Transparency International.
health care and increased funding for
Graft is thought to reduce Indonesia’s
urban slum in Central Java province
the education of Indonesia’s poor. Those
underlying or potential economic growth
to victory in Indonesia’s presidential
issues resonated with voters during the
rate by two percentage points, the World
election on July 9 has made him a political
presidential campaign.
Bank has estimated.
Joko, whose rise from boyhood in an
phenomenon, has said that the widening
He also promised to provide low-
The agricultural sector is Indonesia’s largest employer.
getty images
Per capita personal income has been steadily rising in Indonesia.
On the economic front, commodities
Portfolio
Consumers
59
account for about 60 per cent of Indonesian exports, but global prices have fallen, and the rupiah remains weak. The country also has a current-account deficit, meaning the value of imports outweighs that of exports, and inflation worries. Gita Wirjawan, who until recently served as Indonesia’s trade minister, said that the country’s economic growth during the last five years had been driven by strong commodities cycles and low interest rates. He said this would not recur anytime soon after Joko took office. He also said that as high as Indonesia’s consumer confidence has been, it has nowhere to go but down. “You need to put some realism into the story of Jokowi,” Gita said, referring to Joko by his popular nickname. Any problems that may lie ahead have
Johannes Komp tries out a new vehicle displayed in a Toyota showroom in Jakarta.
failed to dent Indonesians’ optimism and
an office – hail entrepreneurialism!” On
with the new Flying Spur, which sells at its
willingness to spend. Indonesians’ love
another billboard, a purple card screamed
showroom in Jakarta for 8.9 billion rupiah
affair with consumerism was clearly on
out: “I’m getting a BMW!”
($742,000). “I am very optimistic,” he
display recently at a luxury shopping mall
“Our economy is driven by consumers,”
said. “Maybe it’s because the results of the
in South Jakarta. The mall’s management
said Muhammad Ikhwan Muslimin, the
presidential election will bring even more
had erected billboards for shoppers to post
manager of a local securities firm, as he
investors into Indonesia.”
personal visions for the future on brightly
window-shopped at a car dealership.
coloured cards.
“People buy, buy, buy.”
“The target is to buy a house!” one
In the end, Komp walked away from the Toyota SUV in the Jakarta showroom. The
Muhammad Irfan, an executive with
reason: He wants the cash to hire more
person wrote on a blue card. Another card,
Bentley Indonesia, said that his company
employees and expand his business. “I’m
coloured hot pink, read: “I will make more
had sold 15 of the luxury vehicles in 2013
very optimistic,” he said. “What’s there not
money from home than I would from
and was set to break that mark this year
to be optimistic about?” n
November 2014
getty images
getty images
A worker prepares pieces of wood for a prefabricated wooden house in Woloan Village, North Sulawesi.
Wealth
60
Although the list of wealth managers who use Addepar is confidential, Poirier says it has already grown from people like Joe Lonsdale, its tech-billionaire founder, and Iconiq Capital, which manages some of the Facebook co-founder Mark Zuckerberg’s money, to include family offices, banks and investment managers at pension funds. “In this state, some people are just getting wealthier,” said Joseph Piazza, chairman and chief executive of Robertson Stephens LLC, a San Francisco investment adviser that manages about $500 million using software from Addepar. Ten years ago, he said, “It might be a young entrepreneur with $50 million. Now it could be 10 times that, and they are thoughtful, bigger risk-takers.” Karen White, president and chief operating officer of Addepar, and its chief executive, Eric Poirier.
Investing used to be a relatively simple world of stocks, bonds and cash, with perhaps some real estate. But deregulation, globalisation and computers have meant
Hi-tecH
more choices. For a wealthy person, this could mean derivatives, private equity,
Portfolio MaPPing A new breed of wealth managers is using the same approach as spy agencies to determine the value of portfolios and the risk involved, reports Quentin Hardy.
venture capital, overseas markets and a host of other choices, like collectibles and bitcoin. And for all the computers on Wall Street’s trading floors, a lot of money management is surprisingly old-fashioned. Venture capitalists may invest in cutting-edge technology, but they sometimes still send out quarterly reports on paper. Financial custodians, which hold securities for people, often have custom-built computer systems. That makes it hard to compare a trade at one with a trade at another. “The market is much more complicated
Some of the engineerS who uSed
of dollars of holdings to figure out whether a
than it used to be,” said David Tittsworth,
to help the CIA solve problems have moved
portfolio is about to crash.
president and chief executive of the
© 2014 New York Times News service
on to another challenge: determining the
Professional wealth managers are going
Investment Adviser Association, a trade
value of every conceivable investment in
to be seeing a lot more of big data. Last
group of 550 registered firms. “The rich have
the world.
spring, Addepar raised a substantial sum to
bigger appetites for futures, commodities,
Five years ago, they started a company
take this mainstream, and although it is not
alternative investments. There’s a lot of
called Addepar in California, with the aim
the only one bringing big data to a portfolio
demand for helping them keep track of what
of providing clear and reliable information
statement, its cast of characters sets it apart.
their holdings actually are.”
about the increasingly complex assets inside
“One of the most foundational questions
Poirier, 32, a New Hampshire native
pensions, investment funds and family
in finance is ‘What do I own, and what is all
who started a coding business at 14 before
fortunes. In much the way spies diagram a
of this worth?’” said Eric Poirier, the chief
heading to Columbia University, worked
communications network, Addepar filters
executive of Addepar. “‘What is my risk?’ turns
on analysing fixed-income products at
and weighs the relationships among billions
out to be an almost intractable problem.”
Lehman Brothers from 2003 to 2006, Portfolio
61
before that Wall Street firm collapsed from mismanagement of its own risk. “Trying to figure out a yield, I’d work with a dozen different computer systems, with different interactions that people didn’t
There were plenty of parallels between the two worlds, but instead of agencies, spies and eavesdropping satellites, finance has markets, investment advisers and portfolios.
understand well,” he said. He then took a job with Palantir Technologies, a company founded to enable military and intelligence
paper is a billionaire from his Palantir
or family money. They are, he said, “just
agencies to make sense of disparate and
holdings. He also knew lots of other young
the early adopters.” Karen White, Addepar’s
incomplete data. He went on to build out
people in tech who could not make sense
president and chief operating officer, says
Palantir’s commercial business, managing
of what was happening to their money.
a typical customer has investments at
risk for things like JPMorgan Chase’s
“Wealth management is designed for the
five to 15 banks, stockbrokers or other
portfolio of subprime mortgages.
1950s, not this century,” he said.
investment custodians.
Lonsdale left Palantir in 2009, starting
Addepar charges based on how much
the two worlds, but instead of agencies,
Addepar with Jason Mirra, another Palantir
data it is reviewing. White said Addepar’s
spies and eavesdropping satellites, finance
employee, in 2009. “It didn’t make sense
service typically started at $50,000, but can
has markets, investment advisers and
for Palantir to hire 20 or 30 people to work
go well over $1 million, depending on the
portfolios. Both worlds are full of custom
in an area like this,” Lonsdale said. Mirra
money and investment variables involved.
software, making each analysis of a data set
is Addepar’s chief technical officer. Poirier
unique. It is hard to get a single picture of
joined in early 2013 and became chief
find common espionage themes, like social
anything like the truth.
executive later that year.
connections and bomb-making techniques,
There were plenty of parallels between
And in much the way Palantir seeks to
among its data sources, Lonsdale has sought
Besides Lonsdale, early investors in
Even a simple question like “How many shares of Apple do I own?” can
Addepar included Peter Thiel, a founder of
to reduce financial information to a dozen
be complicated, if some shares are held
both PayPal and Palantir. More money came
discrete parts, like price changes and what
outright, some are inside a venture fund
from Palantir’s connections to hedge fund
percentage of something a person holds.
where the wealthy person is an investor and
investors. Addepar’s $50 million funding
some are locked up in a company that Apple
round last May was led by David Sacks –
behaviour of a certain asset, it begins to
acquired. Finance “was the same curve I
another PayPal veteran, who sold a company
build a database of probable relationships,
encountered in the intelligence community,”
called Yammer to Microsoft for $1.2 billion
like what a bond market crisis might mean
Poirier said. “How do you make sense of
in 2012 – and Valor Equity Partners, a
for European equities. “A lot of computer
diverse information from diverse sources,
Chicago firm that has also invested in
science, machine learning, can be applied to
when the answer depends on who is asking
PayPal, SpaceX and Tesla Motors, among
that,” Lonsdale said. “There are lessons from
the question?”
other companies.
Palantir about how to do this.”
The parallel was also evident to Lonsdale,
As a computer system learns the
A number of other firms are also trying
Despite the pedigree, Lonsdale says
a Palantir co-founder. From an earlier stint
Addepar, which has 109 employees, is not
to map what everything in a diverse
at PayPal, he had millions in cash and on
meant just as a tool for rich tech executives
portfolio is worth. One of the largest, Advent Software, in 2011 paid $73 million
Joe Lonsdale is a co-founder of the wealth management company Addepar.
for Black Diamond, a company that, like Addepar, uses cloud technology to increase its computing power and more easily draw from several databases at once. “We’ve been chipping at the problem for 30 years,” said Peter Hess, Advent’s president and chief executive. “There
getty images
getty images
is a lot more complexity now, and the
Peter Thiel, a founder of PayPal, is one of Addepar’s early investors. November 2014
modernisation of expectations about how things should work is led by the new tech money. But because of Apple and Google, even my parents have expectations about how easy tech ought to be.” n
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Essentials
63
The besT of leisure and lifesTyle
A RoyAl Hideaway
getty images
The picturesque town of Sintra, close to Lisbon, was where the Portuguese royal family escaped from the affairs of state, reports Elisa Mala.
November 2014
Essentials
64
Travel
o matter how well
felt promising to be the sole passenger with
all traces of Lisbon had disappeared. What
it begins or ends, every
an overnight bag and unburdened by worry,
greeted me were hallmarks of quaintness:
fairy tale has a villain. In
free to skip suburbs and humdrum routine
a smattering of restaurants and shops,
my storybook adventure
for the adventure at the end of the line.
pleasantly sleepy streets and a street clock as
But it wasn’t until we had passed the
old-fashioned as they come. But despite the
kilometres west of Lisbon, it was the hands
penultimate stop, where the only other
pleasant scene, I couldn’t help but stare into
of the clock. Roaming the pristine grounds
passenger in my car stepped onto the
the distance, recognising the steep slopes
of castles high in the hills, I wished that
platform, that the scenery started to feel
and explosion of greenery depicted in local
time would stand still.
otherworldly. Staring out the window in
postcards. For centuries, the municipality
Š 2014 New York Times News service
in Sintra, a Portuguese town about 32
Fifty-three minutes was all it took to
reverie, nose almost pressed against the glass,
served as the preferred hideaway for the
travel back several centuries. The train
I marvelled at the swirls of colour whooshing
Portuguese royal family. A heartbeat away
that pulled out of Rossio station, a major
past: grey apartment complexes turned into
from the political and economic centre
transportation hub in Lisbon, was filled
quaint pastel houses until even those were
of Lisbon, the lush slopes provided the
with the distractions of the modern age. In a
replaced by messy rows of stubby trees.
aristocracy with a quiet, breezy escape from
swarm of pressed suits and baby strollers, it
By the time I stepped out of the train,
the city air.
Portfolio
65
According to local lore, inclement
for foreign travellers. Several new hotels
weather forced Christopher Columbus,
have increased lodging options in a place
in one of his lesser-known sailing
where vacancies vanish during high season.
misadventures, to dock nearby before
And 2012 saw the return of a summertime
continuing on to Lisbon. But it wasn’t until
45-minute tram service (¤2 each way) from
Ferdinand II, king of Portugal, arrived
Sintra to Praia das Macas, a budding resort
in the mid-1800s and built an elaborate
town with steep cliffs that overlook the white
vacation home that the entire region
sand beaches along Portugal’s western coast.
became worthy of its current UNESCO
The mere sight of Sintra foliage is enough
World Heritage status, with sprawling
to understand why Lord Byron described it
estates that showcase a millennium’s worth
as a “glorious Eden.” Verdant forests extend
of architectural influences.
in every direction. Greenery envelops every
Sintra remains a crown jewel among
A heartbeat away from the political and economic centre of Lisbon, the lush slopes provided the aristocracy with a quiet, breezy escape from the city air.
surface, from moss-covered rocks to sinewy
the Portuguese regions, but two major
vines that wrap around trees. Thick roots
developments have broadened its appeal
of felled trees point skyward, and wispy sprouts break through minuscule crevices in
Visitors at the eighthcentury Moorish castle, the oldest structure in the area.
stone walls. The lushness embraces you in a mystical sort of world. Shortly after my arrival on a warm June evening, after I deposited my bags at the Sintra Bliss House, I set out to explore the area on foot. A serene sunset walk took me past a half-dozen ornate statues and sculptures, all part of a public art project reminiscent of a vast private garden. (The artwork changes every year.) The surrounding castles glowed in the dark, illuminated by coloured spotlights. Popping into Adega das Caves, a bar in the centre of town, I paired the local getty images
specialty, Queijada de Sintra, a sweet pastry with a cheesecake-like filling, with a ginjinha, a tipple of cherry liqueur in a chocolate shot glass. Walking back to the
Tourists explore Sintra’s tight streets.
getty images
Coffee with a view at Pena National Palace.
November 2014
66
Essentials
Travel
inn around midnight on empty sidewalks flanked by empty parks, I felt safe, as if the town were my own.
The grounds of Quinta da Regaleira.
The next morning, my alarm clock at the Sintra Bliss House was a horse-drawn carriage clip-clopping past the window. But my ride that day would be a bus. Emerging from the tourist office with a stack of maps and a multisite pass (starting at ¤25), I chose one of the three routes that loop around the major attractions (¤2). Given Sintra’S layout, a good starting point is the eighth-century Moorish castle, a holdover from Arab rule and the oldest structure in the area. It is above all a military fortress: austere, uniformly grey throughout its granite and limestone walls, and not meant to be invaded. A 15-minute
The most memorable panoramas were of
attribute to 19th-century Romanticism.
walk down a flat, scenic path leads to the
Pena National Palace, my next stop, which
If the Moorish castle invited purposeful
main gate. Once inside, a loop formed by
loomed above on a nearby promontory. I
forward marches, Pena Palace encouraged
walkways atop the castle’s inner walls was
looked forward to walking in the clouds.
aimless wandering.
none too taxing. “No matter where you
At the palace, gone was the no-nonsense
Back in the centre of town, I edged my
start,” a park ranger said of the simple path
nature of the armed forces, replaced by
way into Sintra National Palace just before
around the perimeter, “you can’t get lost.”
an unmistakable whimsy. Pena National
the last entry at 6:30 pm. Its faded white
The knights of old earned their stripes
Palace, a former summer residence of the
exterior belied rooms furnished with period
by remaining watchful – ducking beneath
Portuguese royal family, is a hodgepodge
pieces and ceilings covered in festive tiles,
low entryways and tiptoeing up the tiny
of cheerful colours (canary yellow, bright
the most striking of which featured wall-
steps while ascending turrets. These days
salmon, lavender) and towers (narrow and
to-wall azulejos, classic glazed white tiles
the only enemies are rain clouds. As I
cylindrical, widely rectangular), generating
with blue paint that are aligned to depict
stood at strategic vantage points I could
an understated Alice in Wonderland
historical scenes. But what struck me
imagine the pride of guarding the kingdom.
vibe that architecture aficionados would
was what I couldn’t see: visitors. Between
Inside the Palace of Monserrate, which exhibits Gothic, Indian and Moorish influences.
The Palace of Monserrate was the traditional summer resort of the Portuguese court. Portfolio
67
The town of Sintra, seen through abundant hills and foliage.
The initiatic well, a massive, cylindrical upside-down tower that plummets deep into the ground. Inside one of the many grottoes in Quinta da Regaleira.
False ruins in the gardens of the Palace of Monserrate.
beautiful weather drawing everyone else
that plummeted deep into the ground, with
charmingly kitschy tram that could whisk
outdoors and the late hour, I pretty much
a spiral staircase embedded in its walls.
me away to the beach along the Atlantic.
had the place to myself. Wandering around
Children-turned-spelunkers investigated
in solitude, with only the docents for
the scene with flashlights attached to their
though. The final farewell was anti-
company, provided the most authentically
heads, more a novelty than necessity.
climactic, with no carriages or fairy
royal experience.
For all that I had seen, there remained
Happily ever after couldn’t last forever,
godmothers, just a taxi to the train station.
But the best was yet to come. The
so much more: the bubblegum-hued
But after several days of playing the princess
final stop on my regal tour was one that
Montserrate Castle, the lemon-yellow
– and an independent, adventurous one
every Sintra resident and visitor I had
Queluz Castle, the contemplative Convent
at that – the return to real life brought the
spoken to said could not be missed:
of the Capuchos, not to mention the
promise of another adventure. n
Quinta da Regaleira, a walled park and estate established by 19th-century trading barons. Although smaller than the Moorish castle and Pena Palace, the structures here – Romantic palace, Roman Catholic chapel and multi-storey gazebo, dotted across four hectares – were luxurious. The real showstopper: the initiatic well, a massive, cylindrical upside-down tower November 2014
Between beautiful weather drawing everyone else outdoors and the late hour, I pretty much had the place to myself. Wandering around in solitude, with only the docents for company, provided the most authentically royal experience.
68
Essentials
Cuisine
The Diner is righT Dinner Lab, a pop-up restaurant company in the US, has the radical belief that high-end chefs ought to listen to their customers, reports David Segal.
Christopher Sorter, chef of Dinner Lab, called his menu “Vonnegut,” because both he and the famous author hail from Indiana.
Dinner Lab’s winning chefs go on 10-week tours, and their future is determined by customer feedback.
Workers with Dinner Lab set up in an abandoned office space. Portfolio
69
The diners sit at communal tables, which creates a different atmosphere to standard restaurants.
I
t was a late-July evening,
you wouldn’t tell this person that an
restaurant. The company plans to open at
and Christopher Sorter had just
entree lacks flavour for the same reason
least one – and perhaps as many as three –
finished cooking an exotic, five-course
that you wouldn’t tell an artist, “That
in locations and with menus determined by
meal that included such triple-dare
painting needs more blue.”
the input of thousands of diners.
dishes as beef heart ragù and crème brûlée
But Sorter works for Dinner Lab, a pop-
To determine who will do the cooking,
with bone marrow. When the dinner
up restaurant company that started two
Dinner Lab set up a competition that
began, there had been some apprehension
years ago and is dedicated to the notion that
sounds like a reality TV pitch. This
about the food among the 120 guests, who
high-end chefs ought to listen to customers.
summer, Dinner Lab sent nine chefs on
had gathered in a warehouse-like space
This is a surprisingly radical idea. Usually,
a 10-week tour, and through customer
in Silver Spring, Maryland. But as waiters
at the wallet-thinning end of the dining
feedback it winnowed the field to three.
cleared the last plates, the event had a
spectrum, you can send your compliments
Soon, these finalists will partake in
relieved and jubilant air, as if everyone
to the chef, or you can shut up.
another 10-week tour and, ultimately one,
had just narrowly dodged a bus. Sorter is a lean, 28-year-old chef with a
Dinner Lab thinks that ethos is idiotic. The company wants to bring the wisdom
two or all three of the chefs will end up running their own restaurants. The company’s goal is a new paradigm
perfectly coifed updo and a pair of black,
of crowds to fine dining, and it does so at
nickel-sized stretchers in his earlobes,
about 1,500 events a year, in 20 cities. Soon
for eating out, one that transforms
the kind that make you wonder what
Dinner Lab will try this approach in a more
the meal into an experience, in large
happens when they come out. He had
conventional setting: a brick-and-mortar
part because of the people you meet.
joined a group of diners sitting at a long communal table, and he asked the five
© 2014 New York Times News service
or six who could hear over the din of the music to weigh in on the food. They rhapsodised for a few minutes. “OK,” Sorter asked, “what didn’t you like?” This is an unusual question from anyone making haute cuisine. Typically, the pricier the food, the more likely that it’s prepared by a culinary maestro, and November 2014
The company’s goal is a new paradigm for eating out, one that transforms the meal into an experience, in large part because of the people you meet. High on that list are the chefs, who are encouraged to sidle up to diners for postprandial chats.
70
Essentials
Cuisine
markets, like New Orleans; three a week
High on that list are the chefs, who are encouraged to sidle up to diners for postprandial chats. “I didn’t like the grilled sardines,” a woman in her 30s told Sorter. “The eyes were still on them.” “I wasn’t crazy about the horseradish whip on the oyster,” her boyfriend said. “Little too strong.” Sorter nodded politely. This was only the start of the reviews he would hear about the evening. When you attend a Dinner Lab event, you are given an index card and asked to rate each dish’s creativity and taste, as well as each drink pairing, on a scale of one to five. The scores are fed into a computer, and each week the numbers are crunched and the
Dinner Lab runs on a membership model: Pay an annual fee of $100 to $175, depending on the city, and be invited to all the meals served there each week. There’s a charge of $50 to $80 for each meal; drinks and tips are included.
in larger ones, like Chicago, Los Angeles and New York). There’s a charge of $50 to $80 for each meal; drinks and tips are included. Adding to the sense that the meal is a performance, every menu gets a title from the chef – Sorter called his “Vonnegut,” he explained, because both he and the famous author hail from Indiana. Bordainick predicts profitability next year, when, if all goes as planned, Dinner Lab will operate in 40 cities, including international ones. Initially, he and his partners hoped to sell the data gathered at its events to anyone looking to overhaul or create a menu. If big data could help industries like health care and housing, the thinking went, why not restaurants? Owners could acquire original recipes that were surefire hits, rather than
results are relayed to chefs, along with
waiting for customers and critics to weigh
suggestions gleaned from the comments space on the cards and from emails sent
PoP-uP restaurants have been
in. And by serving prix fixe menus, Dinner
in by diners.
around for more than a decade, but
Lab could demonstrate that diners loved
Dinner Lab is the most ambitious attempt
certain dishes that they otherwise wouldn’t
take this information and to learn from
to turn the concept into a viable and
even try.
it, tinkering with and improving recipes.
continuing business. The company runs
And it is the job of Dinner Lab’s chief
on a membership model: Pay an annual
they know they will like it,” Bordainick
executive, Brian Bordainick, to find chefs
fee of $100 to $175, depending on the
said. “Like beef tongue. People don’t
who will tolerate, and maybe even enjoy,
city, and be invited to all the meals served
find it appealing, from a marketing
this process.
there each week (one a week in smaller
perspective. But it’s one of the things that
It is the job of Dinner Lab’s chefs to
“We know what people will like before
Dinner Lab serves prix fixe menus (a complete meal offered at a fixed price). Portfolio
enjoy responsibly
DOM PÉRIGNON VINTAGE 2004 EACH VINTAGE IS A NEW CREATION DOMPERIGNON.COM
72
Essentials
Cuisine
people enjoy the most when you put it in front of them.” But when Dinner Lab tried to sell its data trove to a handful of restaurant owners, the pitch went over like beef tongue. Maybe people would have loved it, but nobody wanted to try it. “They basically said, ‘We don’t need you,’” Bordainick said. Dinner Lab does have its share of believers, including John Elstrott, the chairman of Whole Foods Market, who along with 24 other investors has staked the company with $2.1 million. That money, and additional funds that Bordainick hopes to raise in coming months, will help open the restaurant, or restaurants, which will be built with Dinner Lab principles in mind:
Brian Bordainik (white shirt, centre) is the CEO of Dinner Lab.
prix fixe menus, communal tables, highly visible chefs. Most of the chefs recruited by Dinner Lab are second-in-command types at high-profile restaurants, people with the skills, but not the opportunity, to run their own kitchens. They typically get a one- or two-night tryout, and if that goes well, they’ll tour a few cities. Some chefs have
It was a moment to describe the fare, but in true Top Chef fashion, it was also a chance to win over diners, and perhaps bump up scores, by providing a condensed, sympathy-inducing biography.
wowed the right diners and moved on to jobs in restaurants; others have found gigs
at the outset of a 10-minute soliloquy he
That led to enrolment in the Culinary
at other private events. But this summer,
delivered to audiences during the tour.
Institute of America, and then to jobs
the focus of nine Dinner Lab chefs was
“Not really by choice, but by necessity, to
at two of Manhattan’s most celebrated
on earning high-enough scores to become
keep the lights on.” Later, he continued,
restaurants, Per Se and Eleven Madison
one of the three finalists.
he sold candy bars on the subway to raise
Park. Hence the title of his meal: “From
money to start his own catering company.
Candy Bars to Michelin Stars.” n
Diners knew about the competition, as well as the unfolding results, because the event manager had explained the whole story. Members, in other words, knew that they would have a hand in crowning winners. This helped shape one of the more unusual tropes of every Dinner Lab evening: the chef ’s pre-meal speech. It was a moment to describe the fare, but in true Top Chef fashion, it was also a chance to win over diners, and perhaps bump up scores, by providing a condensed, sympathy-inducing biography. “My version of taking out the trash and mowing the lawn was peeling shrimp and fabricating vegetables,” said Kwame Onwuachi, 24, a chef raised in the Bronx,
A diner fills out a comment card for featured chef Jae Jung of Dinner Lab. Portfolio
74
Essentials
Culture
London’s Houseboat ALternAtive High rents have made living on a canal houseboat an increasingly affordable option, but this has led to urban overcrowding, reports Georgi Kantchev.
Portfolio
75
David Ros, who has been living aboard the Elizabeth since 2006, knows the vexations of houseboats in London.
Houseboats line a canal next to Paddington Station in central London.
In the LIttLe VenIce
ask a boater along London’s 150 kilometres
police if summoned to address mayhem
neighbourhood of west London, the boats’
of canal network, and chances are they will
on the towpath.
names appear as colourful as their paint
describe something less than idyllic.
does. The crimson Mayflower bobs in
© 2014 New York Times News service
Little Venice, where two of London’s biggest canals intersect, can seem a pocket of picturesque tranquillity and the sweet spot of an increasingly popular mode of residence in the city: the houseboat.
David Ros, who has lived aboard his
Lately, though, the houseboaters are facing a new and potentially bigger sort
front of the dark green Esmeralda, not far
boat, Elizabeth, since 2006, has endured
of problem: urban overcrowding. London
from the navy blue Globetrotter, moored
the vexations, which include the daily
housing prices continue to soar, up about
behind the violet Hobbit.
struggle with the elements and the burden
20 per cent so far this year. One result is
of emptying the bilge tank. Even the lack
that the canal houseboat – once mainly an
biggest canals intersect, can seem a pocket
of something seemingly as trivial as a
alternative lifestyle choice – has become
of picturesque tranquillity and the sweet
postal code can pose problems – whether
an increasingly sought-after affordable-
spot of an increasingly popular mode of
for ensuring timely and accurate mail
housing option.
residence in the city: the houseboat. But
delivery, or the quick appearance of the
Little Venice, where two of London’s
November 2014
“The last two years have been an
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Culture
There are now about 3,000 houseboats in London, twice the number as seven years ago, according to the Canal and River Trust, which oversees the inland waterways of England and Wales. Houseboats in Little Venice, where the Canal and River Trust has recently installed new CCTV cameras due to security concerns.
explosion,” said Ros, 53, who works as a
not seem a large number. But that growth
freelance sound designer and lives alone
is stretching the limits of the existing canal
in his one-bedroom boat. “With the cost
support system – including the provision of
Moulsecoomb and a Green Party member
of housing so stupidly high, there is a load
household water and waste disposal.
of the House of Lords in Parliament, is part
of new, inexperienced people on the water. And a lot less space.”
Although London’s canal network is one
known it when it was quieter,” Ros said. Jennifer Jones, baroness of
of a local London group that has studied
of the longest in Europe, nearly twice the
the growing houseboat population. She
length of that in Amsterdam, boaters say
cited “an appalling lack of infrastructure,
in London, twice the number as seven
its liveable stretches are operating near
such as showers, toilets, recycling, even
years ago, according to the Canal and
full capacity. “The need to find affordable
rubbish bins.” The aptly named “Moor
River Trust, which oversees the inland
housing has had a bad effect on life as a
or Less” report, of which Jones was an
waterways of England and Wales. It might
boater – at least for some of us who have
author last year, found that the number of
There are now about 3,000 houseboats
moorings and other houseboat facilities in London was being outstripped by the rising demand. There are not enough permanent mooring sites available for rent from the Canal and River Trust or from private operators. That means most boaters in London must now rely on “continuous cruising” licenses, which allow staying at the same spot for no longer than two weeks, before shoving off in search of the next available tie-up spot. Some boaters, of course, do not mind living as floating nomads in the heart of one of the world’s busiest cities. Even before permanent moorings became so scarce, Kevin Kibbey had by choice been a continuous cruiser on England’s canals in Katie Goulet, a Toronto native, was spending £800 a month on rent before taking up the canal life to save money.
the six years since he retired as an officer on the London Metropolitan Police force. Portfolio
77
For the last two years, he has been plying the canals of London, where by day he works as a software analyst. “It means the freedom to change your scenery with the turn of an engine,” he said while applying a fresh coat of dark green
Kevin Kibbey has been touring England’s canals with his boat, Rymardas, since he retired from London’s police force eight years ago.
paint on his boat, the Rymardas, while temporarily tethered in Little Venice. “Last week, I was at Kings Cross. Next week I am going to Notting Hill.” London’s waterways have not always been residential. Built more than 200 years ago, they are part of the 3,200 kilometres of a British canal network stretching from the river Thames in London to Manchester and Liverpool in the north of England. During the industrial revolution, London’s canal system was
security has become a growing concern,
his boat. “People have a romanticised
a crucial commercial transport system,
because the dark and secluded towpaths
vision of living on a boat,” he said, “but
conveying some five million tons of freight
make boats and boaters vulnerable.
they just don’t realise the amount of risks
a year. By the middle of the 20th century,
Break-ins are an increasingly common
they are taking.”
though, canal trade was eclipsed by land-
occurrence. Although the Canal and River
based transportation. The waterways
Trust has recently installed new video-
his chosen residency: the lack of a postal
became attractive for leisure cruisers and,
surveillance cameras, many boaters say
code, which in London is a highly specific
eventually, residential boaters.
they do not feel safe at night.
number that can pinpoint an address.
Although the boats are still cheaper
Wilf Horsfall, who decided to live on a
The ordeal exposed another drawback of
“When I called the police, they wanted a
than most other housing options in
boat three years ago because his London
postcode,” Horsfall recalled. “It took them
London – where the average rent on a
rent was “going up ridiculously,” has
forever to arrive.”
one-bedroom apartment is now more
experienced the risks first-hand. Last year,
than £1,200 a month (around $2,000)
he was mugged, at knifepoint, just outside
Safety aside, there are other complications. Kibbey, for his part, is
– the initial houseboat investment is not
quick with a list that includes clearing
inconsequential. A new vessel can cost
the propellers, fuelling up the diesel tank,
more than £100,000, although a secondhand one can be had for about £20,000, depending on age and quality. The annual license costs more than £10,000 for a permanent mooring, or about £1,000 a year for continuous cruising. In the last year, the number of continuous cruisers in East London alone has increased by one-third, to over 1,000 boats, according to the Canal and River Trust. “This is a cause of concern for us, as there is growing pressure on facilities as the numbers of boats using them rises,” said Sorwar Ahmed, the boater liaison manager for the trust. “The system just wasn’t designed to hold so many boats.” With the growing number of houseboats, November 2014
London’s waterways have not always been residential. Built more than 200 years ago, they are part of the 3,200 kilometres of a British canal network stretching from the river Thames in London to Manchester and Liverpool in the north of England.
topping up the water supply and emptying the toilet tank. “These are the things you take for granted in a house,” Kibbey said. Jones of the Green Party said that there had been increasingly frequent reports of disputes between residents and boaters, involving complaints that include smokey stoves (many houseboaters use wood as a cooking fuel) and noise late into the night from engines left running to charge the batteries that keep a boat’s lights on. For boaters like Ros, the barriers to houseboat life are troubling. “Living on a boat provides a wonderful alternative lifestyle, and should be protected,” he said. “It should not be a last resort for those who can’t afford anything else.” n
78
Essentials
Luxury
Flying through changing times Luxury Swiss watch maker, Breitling, talks market shifts, family businesses, and a history closely linked with aviation, reports Danae Mercer.
I
n early September, flying
an outline of an Aermacchi, one of the ten
in 1884 with a focus on chronographs and
high above the earth, Swiss
planes flown by the Italian flight squadron.
timers, there have only been five CEOs:
watchmaker Breitling took a risk by
“Breitling and aviation adventure goes
three Breitlings and two Schneiders.
hand-in-hand,” Adwan said. “And what
“Just five bosses over the whole history of
launched a special anniversary model.
we enjoy most is having the opportunity
Breitling. That’s few.”
The risk came in the setting. Tucked
to share our passion with the world, both
within the lounge of the Emirates Airbus
through our watches and our conquests in
to Schneiders is one the brand openly
A380, surrounded by journalists, flight
the sky.”
discusses. “The Swiss watch industry in
doing what watch brands always do: it
attendants, and a few curious passengers, Aed Adwan of Breitling Middle East waited. Then, with a simple flourish and a bit of a smile, Adwan unveiled the watch: a
The shift from the hands of Breitlings
In a watch world increasingly
the 1970s almost died. We went from
dominated by large conglomerates,
more than 100,000 people working in
Breitling is fairly small.
the industry, to very few people in a
“It’s one of the few independent family-
few years. At the same time, Breitling
30th anniversary Chronomat Airborne.
owned brands in the watch industry,”
was becoming old, ill. Ernest Schneider
On the back were a celebratory inscription
stressed Jean-Paul Girardin, Vice-President
was a pilot, an engineer, and already in
(Edition Spéciale 30e Anniversaire) and
of Breitling. Since the company launched
the watch industry. As a pilot, he was
Portfolio
79
Aed Adwan, Breitling Sales Manager, Middle East, unveiled the Chronomat Airborne at 35,000 feet.
The limited edition Breitling Chronomat Airborne.
that’s very important,” adds Girardin.
in contact with Breitling, and he had a vision,” said Girardin. “He thought: ‘if there’s a future in the watch industry in Switzerland, it’s not what I’m producing, but in something more unique, special, something that not anyone can do.” The brand’s next steps “took a while,”
“This symbolised the rebirth of Breitling in 1984, because it was an immediate success.”
The flight comparison isn’t surprising where Breitling is concerned. The brand has a history interwoven with aviation: in the 1930s, Breitling focused on on-board chronographs intended for aircraft cockpits; in 1952, the group launched the Navitimer wrist chronograph, featuring a circular slide rule to perform navigation-
but in 1984 Breitling launched its first
related calculations; in 1962, Breitling
Chronomat – the very one celebrated on the Emirates flight. Schneider had
movements by taking “the best parts from
went into space with Scott Carpenter and
answered a bid from the Italian Air Forces
the best suppliers,” the Swatch Group
on and on. Today there’s the Breitling
aerobatic team. “They wanted something
announcement was “the last push we
Jet Team, a group of pilots that compete
special. He was the one, the only one, who
needed to have a real project. We knew we
internationally in air shows.
went down to the airbase, asked ‘what do
had to do something to stay independent,
you need, what functions do you want,
some strategy to verticalise the production.
“The brand is focused on technical watches and being linked with aviation. Aviation is not a new idea for a newly hired
what design?’ He understood it couldn’t be
“In 2004, we started the product. In
just glass. It had to be protected. He made
2006, we had the first prototypes. And in
a watch designed around the function
2009, we were able to present our new
Yet perhaps the most telling moment
these pilots wanted.”
Chronomat, our bestseller with our own
about the brand and its identity happened
movement. We have the industrial capacity
in a lightly lit building in Switzerland,
in 1984, because it was an immediate
now to produce and develop our own
where a reserved Girardin talked about
success,” said Girardin.
movements.” The movement is available in
the appeal of watches. “It’s something
its Transocean Chronograph, Chronomat,
very intimate, a watch. It’s on your wrist,
and Navitimer models.
your skin, so it’s near you. It expresses
“This symbolised the rebirth of Breitling
There’s an element of independence to the group’s history that Girardin draws the conversation back to again and again,
“What was very important for us
particularly within the context of recent
was that we have the tools internally to
market shifts.
respond to market demand. If you want
“Swatch Group informed us that the suppliers of some strategy components
something about yourself, your character, your personality. “I would say, you will buy a Breitling
only in-house movements, we will be
watch if you have a strong character. They
ready to produce.
are maybe not the most obvious choice.
could be questioned in the future,” he
“We can decide which level we fly, what
noted. Given that Breitling created its
kind of speed, where we want to go – and
November 2014
marketing manager,” said Girardin.
It’s an instrument – it’s more than a watch,” he added. n
Essentials
80
Environment
geTTY images
A polar bear searches for food near Churchill in Canada.
For Polar Bears, a Climate Change TwisT
Š 2014 New York Times News service
Climate change has shortened the seal-hunting season for polar bears, but on the western shore of Hudson Bay they have found an alternative food source, reports James Gorman.
T
As the ice is melting earlier, the bears
he sea ice in La Perouse Bay,
climate change. And for good reason. A
Manitoba, on the western
warming planet means less ice coverage of
come on shore earlier, and the timing
shore of Hudson Bay breaks
the Arctic Sea, leaving the bears with less
turns out to be fortunate for them. As a
up each summer and leaves
time and less ice for hunting the seals they
strange side-effect of climate change, polar
depend on for their survival.
bears here now often arrive in the midst
the polar bears swimming for shore. The image of forlorn bears on small rafts of ice has become a symbol of the dangers of
But the polar bears here have discovered a new menu option. They eat snow geese.
of a large snow goose summer breeding ground before the geese have hatched and Portfolio
81
A melting iceberg in Hudson Bay in Manitoba.
To fully appreciate how the chain
fledged. And with 75,000 pairs of snow
Rockwell, who runs the Hudson Bay
geese on the Cape Churchill peninsula –
Project, a decades-long effort to monitor
reaction plays out in La Perouse Bay
the result of a continuing goose population
the environment.
requires studying the individual links in the chain – the geese, the bears, and the
explosion – there is an abundant new supply of food for the bears. What’s good for the bears, however, has been devastating to the plants and the landscape, with the geese turning large swaths of tundra into barren mud. Nor does it mean the bears are going to be OK in the long run. What is clear is that this destination for polar bear tourism has become a case study in how climate change collides with other environmental changes at the local level and plays out in a blend of domino effects, trade-offs and offsets. “The system is a lot more complicated than anybody thought,” said Robert November 2014
As a strange sideeffect of climate change, polar bears here now often arrive in the midst of a large snow goose summer breeding ground before the geese have hatched and fledged.
plants and the land beneath them. Rockwell, 68, has been counting geese in this area every summer since 1969. In the late 1970s, he started building his current camp – a few buildings surrounded by an electric bear fence. It is reachable by helicopter only from nearby Churchill. From this vantage point, Rockwell and his team have witnessed the snow goose population swell to the point where they are harming their own nesting grounds. The number of snow geese that live and migrate in the continent’s central flyway exploded from about 1.5 million in the 1960s to about 15 million now, and
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Essentials
Environment
many of them nest here or stop by on their way farther north. The reason for the increase, Rockwell said, can be traced largely to Louisiana and Texas, in the coastal marshes where the geese long spent their winters feeding on spartina, also known as salt hay or salt meadow cordgrass. They then migrate north in spring to nest and raise goslings on grass, sedges and other plants in the marsh and tundra of the bay shore. The goose population, Rockwell said, was once limited in size by its sparse winter food supply in the Southern United States. “After many of the marshes were drained for various kinds of development, the snow geese just sort of said, ‘well, wait
A seal spine on the barren tundra in Manitoba.
a minute, what was that green stuff just north of here?’ And it turns out those are
Nebraska and Iowa where these crops
not enough food on land to make a
the rice prairies,” he said.
are grown. But they keep coming to the
significant contribution to their diet. But
sub-Arctic and the Arctic in the summer,
the snow geese may have changed that, at
Louisiana, the geese continued to explore
following ancient habit. During Rockwell’s
least here.
and expand their winter range, finding the
time here, the colony increased from
vast agricultural fields of the Midwest. “So
2,500 pairs to 75,000, and the birds
was melting earlier, on average, and
a species that was once in part limited by
moved as far as 30 kilometres inland as
the polar bears were often coming on
winter habitat now has an infinite winter
they ruined areas near the coast because
shore in time to harvest the eggs from
supply of food, and that includes the
of their eating habits.
vast numbers of geese and other birds.
Having found the rice farther north in
best agricultural products: corn, wheat,
By 2007, it was clear that the sea ice
Rockwell, a researcher at the American
soybeans, canola, rapeseed, all of that,”
The convenTional view is that
Museum of Natural History, and Linda
Rockwell said.
overall, polar bears are “food-deprived”
Gormezano, a graduate student he was
in the summer because there is just
supervising, decided to go beyond the
Some snow geese now winter in Robert Rockwell at La Perouse Bay Field Station.
Christa Mulder checks on the plant ecosystem in the tundra.
Portfolio
Essentials Environment
Snow goose nests are easy pickings for polar bears.
sightings of bears eating geese and eggs. They approached the bear diet question in a scientific way. Gormezano, who this autumn began postdoctoral research at the University of Montana, specialises in non-invasive
Rockwell and Gormezano have published several papers on their findings. Some other polar bear researchers
worried that these findings would be taken by the public to mean that polar bears were doing fine. “What they have
reacted with dismay about how the results
established,” he said of Rockwell’s work,
may be interpreted.
“is that some bears are eating some goose
Steven Amstrup, chief scientist of Polar
eggs and even geese. The important
methods for monitoring the behaviour
Bears International, says he does not
question is how many bears are doing that
of predators. In terms of diet, scientists
doubt that bears eat geese but questions
and what is the impact.” Studies, he said,
can observe what goes in, or what goes
how important that fact is. He said he
have shown the condition of polar bears in
out. With an animal like a polar bear, the
the western Hudson Bay is deteriorating,
second approach is more practical. They
whatever their diet.
turned to polar bear feces, or scat, as it is commonly called. Gormezano trained a Dutch shepherd dog named Quinoa to find polar bear scat and drove him north for several field seasons. She and Quinoa worked with Rockwell to collect and study samples of polar bear scat for several years and found that the bears were eating lots of geese. They were also eating caribou and other animals, as well as berries – anything in reach. November 2014
There is the potential for some number of polar bears to offset some of their nutritional losses by taking advantage of goose eggs.
He added, “There is the potential for some number of polar bears to offset some of their nutritional losses by taking advantage of goose eggs.” But, he said, “It’s not reasonable to expect there’s going to be some great salvation of polar bears.” Besides, he said, the concern for the bears is long-term and global. In the future, as sea ice declines, “There’s no evidence that anything like current polar bear populations can be supported,” he said. n
83
Essentials
84
Technology
StartupS like uber and airbnb want European consumers to embrace their companies. Yet when it comes to persuading policymakers, these companies
Tourists wait in line for transportation at the Terreiro do Paco Square in Lisbon, Portugal.
have run into regulatory hurdles that have exposed the European Union’s uneven response to technological innovation. Some cities are clamping down on the companies, like Barcelona, where Airbnb, an apartment-sharing service, was recently fined for breaching regional property rental rules. In other cities, like Amsterdam, politicians have passed legislation to help jump-start the local sharing economy. Some European countries are sending mixed signals: Uber, the car-sharing service, was banned in Germany until mid-September, when a court in Frankfurt overturned the ban. And here in Lisbon, the capital of Portugal, the latest country to address these issues, a new rental law is meant to help Airbnb and local rivals grow, while also encouraging apartment owners to register their property and – more important – pay taxes. As in the United States, where tech startups have also faced legal challenges, the wide-ranging response in Europe often comes down to whether lawmakers view the companies as a threat to local businesses or an opportunity to improve economic growth. Whatever the reasoning, the patchwork of rules and regulations has left companies struggling to navigate regulatory changes. “It would be paradise for us if we only had one regulator, not thousands of different authorities, that we had to deal with,” said Arnaud Bertrand, a French entrepreneur who co-founded HouseTrip, a European rival to Airbnb.
© 2014 New York Times News service
Neelie Kroes, the departing European commissioner for the digital agenda, has supported many startups as a way to promote growth and innovation. Some
Sharing Economy’S Bumpy
EuropEan ridE
technology companies have even received financing from the European Union to challenge American leaders like Uber. Adolfo Mesquita Nunes, the Portfolio
85
Some cities are clamping down on the companies, like Barcelona, where Airbnb, an apartmentsharing service, was recently fined for breaching regional property rental rules. In other cities, like Amsterdam, politicians have passed legislation to help jump-start the local sharing economy. Portuguese secretary of state for tourism, said his government had studied the response to Airbnb in places like Barcelona and Amsterdam and concluded that “in a digital world, this is an unstoppable movement.� Airbnb allows people to list their room or home for rent for short periods of time. More than half of its business now comes from Europe, with Paris as its biggest listing city in the world, ahead of New York City. In July, the house-sharing startup received its first fine in Europe, of ¤30,000 ($38,500) for violating a 2012 law introduced by the regional government of Catalonia, whose capital is Barcelona, that forbids renting individual
Companies like Uber and Airbnb are facing a myriad of regulatory hurdles across the European market, report Raphael Minder and Mark Scott.
rooms for tourism purposes. Airbnb is appealing the fine. Mesquita Nunes said the authorities should focus on improving property tax collection from people using Airbnb. Governments, he said, should not just add rules that are difficult to enforce, even if that strategy upsets traditional hoteliers who are themselves subject to tough regulations.
November 2014
Essentials
86
Technology
Federico González Tejera, chief
Hotel operators pushed unsuccessfully
previously chose not to confront. “Until
executive of the Madrid-based NH
for more stringent rules, like forcing
services like Airbnb came along, many
Hoteles, which operates about 360 hotels
apartment owners to offer a bathroom
people weren’t paying any taxes if they
in Europe, said if regulators granted
with each room, according to Adília
rented out rooms to travellers,” said
Airbnb and others unfettered market
Lisboa, the president of the Confederation
David Hantman, head of global public
access, “perhaps they should also reduce
of Portuguese Tourism. Still, she said,
policy for Airbnb. “We’re helping to
the conditions put on us.”
the new law is an improvement if “it
increase transparency.”
Portugal’s new law, which goes into
gets people into the system who are now
effect in November, sets no limit on how
renting their apartments and competing
revenues for Portugal are not a
many rooms or how long an apartment
with established hotels but not even
foregone conclusion.
can be rented. It forces owners, however,
paying any taxes.”
to register their properties online with
Even with the changes, greater tax
André Penin, 32, started renting out a one-bedroom Lisbon apartment last June
local municipalities as an apartment or a
Airbnb Argues that it has simply
for ¤45 a night ($58) but said he would
hostel if it has more than nine rooms.
magnified issues that policymakers
now study whether the law made it “still profitable or better to shut down”. “It has been an incredibly successful and crazy summer” of renting, Penin said. Some European politicians warn that weaker oversight raises safety risks and other concerns for customers. “All the risks are currently delegated to people who are the most at risk in the labour market,” said Mei Li Vos, a left-leaning Dutch politician who wants startups to hold more legal responsibility for the way people use their services. Vocal opposition by some of Europe’s
getty images
hoteliers has been somewhat muted by Airbnb was fined €30,000 for violating a 2012 law in Barcelona.
record tourism revenues in countries including Spain and Portugal. Some hotel owners have even welcomed competition from the likes of Airbnb. My Story Hotels,
Supporters of Airbnb argue that the service attracts more tourists to cities like Lisbon.
Andre Penin prepares the bedroom of his flat for guests, which he has been renting for about $58 a night. Portfolio
87
getty images
Uber has run into legal problems in Europe, where it is seen as direct competition for established transport companies.
Alfredo Tavares, operations manager of My Story Hotels, in Lisbon. Amanda Skeen, left, who used Airbnb to rent a room in Lisbon, has breakfast with the owner of the house.
getty images
In San Francisco landlords have evicted tenants to rent out their rooms through Airbnb.
which opened its first establishment in
German capital has introduced rules
often applicable to local hotels – to the
downtown Lisbon this year, plans to have
that ban short-term renting without
homeowners that rent out apartments
five hotels in the area within 18 months.
approval from local authorities.
through the startups’ websites.
Alfredo Tavares, its operations manager,
Airbnb has faced similar problems
Yet to build trust with local authorities,
said the government needed to oversee
in New York, where politicians say
Airbnb has recently started collecting taxes
the safety and tax compliance of rental
the service has led to a reduction in
on behalf of some city governments in the
apartments but should not outlaw them.
available apartments.
United States, first in Portland, Oregon,
“With more offers available, Lisbon will have more visibility,” he said.
In contrast, cities like Paris have passed rules specifically meant to
and October in San Francisco. Hantman of Airbnb said the Portland
allow people to rent out their homes
trial had gone well, though he added that
however, in a city like Berlin, where the
through companies like Airbnb
the company still needed “to figure out
population is increasing by almost 50,000
as long as they fulfil certain safety
what each city thinks about who should
people each year. To allow residents to
checks. But even in these cities,
pay each tax,” before it can consider
lease apartments that might otherwise
companies have outsourced the
extending the Portland plan to more of
be set aside for short-term rentals, the
collection of local tourist taxes –
the 34,000 cities where it operates. n
The stance toward Airbnb is different,
November 2014
Essentials
Other Business
Croc On the Menu Russian gourmands may
been granted a permit for
no longer have access to
exports to Russia. Russia banned imports
fresh mozzarella di buffalo or juicy Australian lamb
of meat from the US, the
chops but a new delicacy
EU, Australia, Canada
is about to appear on
and Norway for a year in
the menu: prime
August, in retaliation at
Philippines crocodile.
sanctions imposed by those countries on Russia over
watchdog announced
the Kremlin's actions in
on October 9 that the
Ukraine. Imports of fish,
largest crocodile farm
dairy, fruit and vegetables
in the Philippines has
have also been banned.
getty images
Russia’s food standards
Lego Ditches Shell Lego will not renew its marketing contract with Shell after coming under sustained pressure from Greenpeace to end a partnership that dates to the 1960s. The environmental campaign group, protesting about the oil giant’s plans to drill in the Arctic, had targeted the world’s biggest toy maker with a YouTube video that attracted nearly six million views for its depiction of a pristine Arctic, built from 120kg of Lego, being covered in oil. Lego toy sets are currently distributed at petrol stations in 26 countries, in a getty images
88
deal valued at £68 million. Lego had previously argued that the relationship meant Shell had a positive impact on the world by inspiring children with its toy sets.
New York’s Official Snack yoghurt became New york’s official state snack in October, joining the likes of popcorn
state snack. Only a handful of states have official
and salty boiled peanuts among popular
snacks. south Carolina has boiled peanuts,
foods honoured by Us states.
texas has tortilla chips and salsa, illinois has
New york has become the nation’s top yoghurt producer amid the booming
popcorn and Utah has Jell-O. New york state produced 336 million
popularity of strained greek-style yoghurt,
kilograms of yoghurt last year, accounting
the office of governor andrew Cuomo said.
for 16 per cent of total Us production, the
Cuomo signed a bill making it the official
governor's statement said. Portfolio
- Manhattan, New York Piaget Altiplano 1205P, The world’s thinnest automatic watch and manufacture movement with small seconds and date indications. Piaget, the master of ultra-thin.
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