Portfolio | November 2014

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

Published for Emirates by

Media One Towers, Dubai Media City, PO Box 2331, Dubai, UAE. Telephone: (+971 4) 4273000 e-mail: emirates@motivate.ae

84

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

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Portfolio

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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

Google

2.

mark Zuckerberg

Facebook

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

A.D. nAtAliA corbettA / fotogrAfiA mArio ciAmpi

made in italy

PIA COLzANI

FLEXFORM

SPA

gROundpiEcE

Tel. +39 335 8394824 pia.flexform@gmail.com

MEDA (MB) ITALIA www.flexform.it

design by ANTONIO CITTERIO

Asia

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.

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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.

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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

82

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.

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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.

piaget.com

PIAGET Boutiques: Abu Dhabi – Dubai – Kuwait – Jeddah – Doha – Bahrain