Bloomberg Businessweek Middle East 1 March 2017 issue

Page 1

1 — 15 March, 2017 businessweekme.com

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Jordan....….........….......JOD 2 Kuwait….......…......KWD 0.75

Lebanon..............LBP 4000 Libya…........................LYD 3.5

Oman…….................…..OMR 1 Qatar……….................…QR 10

Saudi Arabia.........…SAR 10 Syria............................SYP 200

UAE...…....…..…........…AED 10 Yemen…..................YER 600

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“Michael use d to say to me , ‘You and I, B ranca, we’re going to be examples for the business , we’re going to be the kings ’ ” p50

PHOTOGRAPH BY ANGIE SMITH FOR BLOOMBERG BUSINESSWEEK

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“We don’t think that the new administration in the US will pose a big problem”

“There are aspects of Saudi that will put people off”

“What can we do? We have nothing”

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Cover Trail 1 — 15 March, 2017

How the cover gets made

Opening Remarks Trump is fighting the wrong trade battle with China

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Bloomberg View Mongolia must end its mining addiction • The Fed loses a tough cop

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Global Economics The US is the breadbasket to the world. Trade wars and gutting Nafta could change that

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Brazil’s crumbling finances trigger a police strike, and violence and looting follow 11 The loss of the TPP may sting, but Vietnam has other irons in the fire 12 “Putin’s Rasputin” says he patched up relations with Turkey—and can do the same with the US 12

Companies/Industries

“Erm, the Maldives was looking like a good option - shouldn’t we be discussing the cover?” “Okay hear me out.. Saudi Arabia. For your hols. And it’s our cover..” “Why Saudi? And aren’t postcards a little out of date?” “They want tourists to come, and are opening things up a bit. Becoming a bit more, cuddly.”

In Iran, it’s a gas, gas, gas

14

“Cuddly!”

Abu Dhabi oil deal shows plenty of Eastern promise

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It’s tough at the top of Trump Towers Istanbul

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Briefs: Tesla’s Dubai drive, billion-dollar Abu Dhabi sovereign fund months away

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“Okay, okay, welcoming and open. The plan is to blend the traditional ideas with a modern approach exactly like the cover.” “Fine I’m sold, on the cover. Not sure about my vacation - and you’re not getting a post card.”

Politics/Policy

2

“So, have you booked your summer holiday yet, where were you thinking?”

Saudi Arabia wears its heart on its sleeve with lofty tourism dreams

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The last of the big spenders, India’s major arms splurge

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Le Pen thinks she’s mightier than the scarf

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Europe going its own way on Iran

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Technology Worried about nuclear waste? Send in the drones

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Startup Gamalon teaches bots to speed-read 25 Federal energy auctions go online, and activists feel shut out 25 Cyborg Nest unleashes the first generation of transhumans to walk the earth 26 Innovation: A needle-size camera to replace MRIs 27

Markets/Finance Saudi citizens could be in for a slice of its giant IPO

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Counting the cost of the currency crisis in Yemen

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Taking a calculated risk on the Istanbul stock exchange

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COVER PHOTO ILLUSTRATION BY SJC

Features The Hole Thing With the Boring Company, Elon Musk aims to reinvent tunnels and traffic

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Homicidal Brainiac Thomas Hargrove asks, why do so many murders go unsolved?

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Killer Techies! Indian media’s obsession with coders

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Don’t Stop ’Til You Get Enough A guide to managing the Michael Jackson estate

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1 — 15 March, 2017 businessweekme.com

Etc. Cruise lines geek out over Trekkies and other superfans filling up their ships

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Stay: Checking out Conrad in Singapore 60 What I Wear to Work: You won’t find Steven Tristan Young wearing any Banana Republic 62 How Did I Get Here? Roy Price of Amazon Studios “moved aggressively” to get Manchester by the Sea 64

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Algeria…..…..…........DZD 215 Bahrain….......................BHD 1

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Egypt……............…......EGP 10 Iraq……...…..…...... IQD 3200

Jordan....….........….......JOD 2 Kuwait….......…......KWD 0.75

Lebanon..............LBP 4000 Libya…........................LYD 3.5

Oman…….................…..OMR 1 Qatar……….................…QR 10

Saudi Arabia.........…SAR 10 Syria............................SYP 200

UAE...…....…..…........…AED 10 Yemen…..................YER 600

26/02/2017 00:16

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Index People/Companies 20

Marine Le Pen has been wading in on the Middle East

16

Recep Tayyip Erdoğan

PQRS Partex Oil & Gas Group Patrick Pouyanne Peter Salisbury Peugeot Rania Mahmoud Nashar Recep Tayyip Erdoğan Richard Mallinson Royal Dutch Shell Plc Saab AB Saad Hariri Sajjad Razvi

4

Abd-Rabbu Mansour Hadi 30 Abdel-Latif Derian 20 Abu Dhabi Co. for Onshore Petroleum Operations 16 Abu Dhabi Commercial Bank PJSC 29 Abu Dhabi National Oil Co. 15 Ahmed Al Said 18 Airbus 21 Aksa Enerji 16

25

Amazon

Al Jazirah Safari Ali Amirani Amazon Amir Hossein Zamaninia

Amit Cowshish 20 Ann Linde 21 Antonio Guterres 30 AstraZeneca Plc 21 Avaya 25 Ayatollah Ali Khamenei 14 Barack Obama 15 Barbaros Muratoglu 17 Bashar al-Assad 20 Beshara al-Rai 20 BMI Research 15 Boeing 21 BP Plc 15 Burak Cetinceker 31 Cargill 10 CEFC China Energy Co. 15 Chatham House 30 China National Petroleum Corp. 15 Christopher Haines 15 Citigroup Inc. 29 Createc 24 Cyborg Nest 26

19 15 25 14

DEF Dassault Aviation SA Deputy Crown Prince

20

GHI Gamalon Machine Intelligence GS Energy Corp. Gulf Research Center Hamid Soorghali Hassan Rouhani Himmet Karadag

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Donald Trump

Mohammed bin Salman 28 Dogan Holding 16 Donald Trump 14 Ekrem Turgut Yucel 17 Emirates 17 Energy Aspects Ltd. 16 Energy Pioneers Ltd. 15 Exxon Mobil Corp. 16 Fethullah Gulen 17 FGE 15 Fibabanka AS 16 Finans Invest 31 Finansbank AS 16,31 Forth Engineering 24

25 16 28 15 21 31

JKL Japan’s Inpex Corp. Jarrod Kyte Jean-Christophe Quemard Jean-Marc Ayrault John Sfakianakis JPMorgan Chase & Co. Koc Holding Lockheed Martin Corp

16 18 21 21 28 29 31 20

15 29 27 21 14

17

Saudi Aramco

Samba Financial Group 29 Sarah Al Suhaimi 29 Saudi Aramco 17,28 Scania AB 21 Sherin Varkey 30 Siamak Adibi 15 Soner Gedik 16 Stefan Lofven 21 Steppes Travel 18 Strateji Portfoy 31 Sultan bin Salman 18

Tesla Total SA Turkcell Iletisim

Microsoft

20 21 29

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Iran’s huge gas reserves are set to take centre stage

Editorial Mayank Singh, Group Editor mayank@umsoman.com Sales & Marketing: Poonam Chawla, Asst GM Sales & Marketing poonam@businessweekme.com; +971 50 144 0703 Art & Design: Steven Castelluccia, Art Director steven@businessweekme.com; +971 4 432 9467 Subscribe: subscriptions@businessweekme.com Address: PO Box 503048, Building 5, Office 206, Dubai Media City, Dubai UAE Web: www.businessweekme.com General enquiries : +971 4 4 329 467 BPA Worldwide Consumer Publication Audit Membership Applied for December 2015

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20 25 29 29 20

TUV

25

MNO Marine Le Pen Medef International Michael Klein

Michel Aoun Microsoft Moelis & Co. Monica Malik Narendra Modi National Iranian as Export Co. NCB Capital Co. North Paw Oghab Afshan OMV AG

25 14 31

WXY Yagmur Satana Yahya Uzdiyen Yatirim Finansman

16 17 31

BLOOMBERG BUSINESSWEEK MIDDLE EAST is published by UMS International FZ LLC and Bloomberg L.P. Articles reprinted in this issue from BLOOMBERG BUSINESSWEEK are copyrighted 2016 by Bloomberg L.P. All rights reserved. Reproduction in any manner, in whole or in part, without prior written permission of Bloomberg L.P. and UMS International FZ LLC. is expressly prohibited. UMS International FZ LLC, a division of United Media Services. PO BOX 503048, Building No 5, Office 206, Dubai Media City, Dubai, UAE. Associate Publisher: Ravi Raman

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ABC

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26/02/2017 08:50


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How to Win a Trade War With China By Michael Schuman

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There’s a smart way to do it. But Trump seems intent on fighting a kind of enemy that no longer exists

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With the ascent of Donald Tr u m p, f e a r s have risen that China and the US might be headed for war. At least for now, any conflict is most likely to be economic. Ever s i n c e R i c h a rd Nixon’s famous visit with Mao Zedong in 1972, the US has striven to treat Beijing as a partner, help its economy develop, and lure the emerging giant into the global order Washing ton has c rafted. Trump, though, believes t h at p o l i c y h a s allowed China to prosper at America’s expense, and that it’s high time Washington stood up for US workers, industry, and power. The Chinese “haven’t played by the rules, and I know it’s time that they’re going to start,” he said in December. Much of what Trump says about China is nonsense. But embedded in his rhetoric is an astute and significant point: China is an economic rival to the US, and Washington has to start acting like it is. A new approach to defend US economic interests against the ascending Chinese superpower may be necessary, perhaps even critical. The problem is that Trump is fighting old battles with archaic weaponry and an outdated strategy. In his eyes, China remains primarily a jobs thief, using unfair trade practices, such as currency manipulation, to pilfer US factories and wealth. The blame, he says, falls on America’s previous leaders, who chose global over national interests and stood by while China committed “the greatest theft in the history of the world.” He’s vowed to stand up

to China, reverse the tide, and bring ­factories and jobs home. The China that Trump rails against, however, no longer exists. There was a time when Beijing did manipulate its currency to promote its exports, but nowadays its central bank is desperately trying to stop the yuan from weakening. Competition from Chinese manufacturing has also likely cost Americans some jobs—by one estimate, at least 2 million from 1999 to 2011. But now wages for shop-floor workers in China are the highest in developing Asia, and the nation is losing jobs to countries with lower costs. In fact, more and more American manufacturers are in the process of “reshoring,” or shifting production back to the US from China. That’s not to say China is no longer a danger to the US Just the opposite. The two countries are still engaged in an economic struggle. It’s just over different things. First and foremost, it’s a battle for the high-tech industries of tomorrow. No longer content to churn out T-shirts and TVs for US consumers, China wants to develop its own products based on homegrown technology and labelled with Chinese brands. Its goal is to nurture champions to compete with and supplant US companies. This strategy is fully backed by all the resources and powers of the government. Beijing adopted a new industrial policy in 2015, called Made in China 2025, which intends to upgrade manufacturing capabilities for high-tech products including medical devices, electric cars, and robots. Ample government cash and other favours are usually offered to such targeted sectors. A report released by an advisory council in the Obama White House in early January outlined China’s efforts to dominate the global semiconductor industry, supported by $150 billion in public or state-linked funds. This is a serious risk for America’s future. When China started assembling stuff such as iPhones, it may have claimed a few jobs, but it wasn’t threatening US economic primacy. If China designs the next ground­breaking product with its own software and chips and under its own brand, then the country can truly undercut America’s main economic strengths and challenge its global leadership. Furthermore, Beijing won’t play nice to achieve its goals. Despite perennial promises to continue “opening up,” it’s tilting the playing field at home toward its own companies, using con­ tinued investment restrictions on

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Opening Remarks

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foreign companies and other barriers to trade, forced ­technology transfers, go-slow red tape, and other methods. In a survey by the American Chamber of Commerce in China released in January, 8 of 10 respondents said they feel less welcome than in the past, while more than 60 per cent have little or no confidence that China will open markets further over the next three years. Cracking the country open to US business is critical. Companies from General Motors to Starbucks need free and fair access to ever-wealthier Chinese consumers to keep their profits growing. The big question is: What should the US do about all this? Trump’s idea is to shake things up. He’s threatened to impose a high tariff on Chinese imports to counteract Beijing’s supposed “cheating” and force open its market. Rather than honoring past agreements with Beijing, Trump has indicated he would place them back on the negotiating table. It’s hard to know what Trump’s China policy will be. For instance, after angering Beijing by questioning Washington’s acceptance of the “One China” policy, in which the People’s Republic is recognised as the sole Chinese government, Trump quickly backtracked in a February phone call with his counter­ part, Xi Jinping. Still, the aggressive approach Trump has seemed to favour will almost certainly achieve the opposite of what he intends. Beijing officials have already warned they would retaliate against US imports if Trump hikes tariffs on Chinese goods, sparking a trade war that would be destructive for both parties. Similarly, if Trump labels China a “currency manipulator,” as he’s vowed to do, he’ll be picking a fight with Beijing over an issue that is, at the moment, almost irrelevant to US-China relations. A better option would be carefully targeted tactical weapons. One method is to use reciprocity as a guideline­—in other words, match Beijing’s restrictive policies with similar measures on Chinese activities in the US That could protect vital know-how from falling into Chinese hands, press Beijing to open its market, and counteract undue advantages the government gives Chinese business. For instance, in sectors where China throws up barriers to foreign companies, Washington should impose the same on Chinese com­panies in the US Washington could also take a page from Beijing’s playbook by identifying and protecting critical technologies and strategic companies. “US policies

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should expand to take into account the differences between the US and Chinese systems,” argues James McGregor, author of One Billion Customers: Lessons From the Front Lines of Doing Business in China. Washington has already been moving in that direction. Members of Congress have called for greater government scrutiny of Chinese acquisitions of American assets in industries as diverse as agriculture and entertainment. The US-China Economic and Security Review Commission, which advises Congress, advocated last year for a ban on purchases of US com­ panies by China’s state-owned enterpr i se s, consider ing them agents of the state. The White House’s semi­conductor report recommended the government take sterner action to prevent sensitive chip technologies from being acquired by Chinese investors. Others say Washington can employ domestic laws and regulations in a broader sense to pressure China. For example, it can apply rules that already allow the US to impose duties on goods dumped, or sold below cost, in the American market to counteract a foreign state that alters the value of its currency in ways that damage US business—if the Chinese try to pull that stuff again. “There are ways to have a more assertive policy toward China that would not single out China,” says Jacob Parker, vice president at the US-China Business Council. There could be pitfalls. China might take its revenge by further hampering US business in China. Or Washington could scare off Chinese investment in the US that could create jobs and revitalise industries. The bottom line is that the US has to see its economy the way China envisions its own. China is unlike any other country participating in the US-led global economy: It intends to benefit from the openness and security offered by that system without being obligated to abide by its norms. Developing certain industries is p ­ erceived as core to China’s national security, not something to be left to the whims of shareholders and stock markets. If the US is to win this new economic war, its leaders have

Washington might scare off Chinese investment in the US that could create jobs and revitalise industries

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to start ­thinking more about what is and what isn’t good for long-term national interests in dealing with China. Trump may have realised the need for this shift in the relationship. But he’s fighting the war with the wrong ­strategies. <BW> Schuman, a journalist based in Beijing, is the author of Confucius: And the World He Created.

25/02/2017 15:57


Bloomberg View Lessons From Mongolia’s Bust The mineral-rich country must diversify its economy to rely less on mining

A new IMF lifeline would avert a default, but Mongolia needs more than that. It must diversify an economy that depends on mining for almost a quarter of its output and 90 per cent of its exports. This in turn requires better schools and new overtures to foreign investors, whom the government has antagonised in recent years. Curbing corruption would help. Attend to all this, and Mongolia’s future still looks bright. It has a young population, a mostly stable democracy, and even an embryonic startup scene. The IMF reckons its mineral deposits may yield $3 trillion over time. An expansion of the immense Oyu Tolgoi mine, now under way, should soon pay hefty dividends. Accepting some pain today will help ensure those riches are well-used. It might also bring Mongolia’s wild economic gyrations to an end.

Who Watches the Banks Under Trump? 8

Not so long ago, Mongolia had the world’s fastest-growing economy. Now, by almost every metric, it’s in a dire fix. Its debt has surged, its currency has plummeted, and its budget deficit has widened alarmingly. Foreign investment has dried up, and economic growth all but ceased. Even the poor antelope are beset by plague. Making matters worse, some enormous bills are coming due. The government, along with a state-backed development bank, is on the hook for more than $1 billion in maturing bonds over the next year. By one account, locals are so anxious they’re donating their horses to help avoid default. Thankfully, better options are available. In mid-February the government started negotiating with the International Monetary Fund for a bailout, its sixth in less than three decades. China also may be willing to lend a hand—at a price. Yet even if it avoids default, Mongolia should stand as a cautionary tale for the ages. Sitting on expansive mineral reserves and sharing a long border with the world’s second-biggest economy, Mongolia long looked like an appealing place to invest. Its economy grew by 17 per cent in 2011, as its mines churned out huge amounts of coal and copper to meet Chinese demand. Ominously, though, government spending rose by 56 per cent the same year. With interest rates abnormally low, Mongolia was one of many not-so-creditworthy countries able to borrow on attractive terms as investors pursued higher yields. In 2012 it issued $1.5 billion in Chinggis bonds to splurge on public works. It boosted pay for civil servants and subsidised mortgages. Politicians doled out cash. Luxury boutiques, fancy hotels, and immodestly large statues began to dot the steppe. Then China’s economy slowed, commodity prices plunged, and Mongolia found itself in a bind. Growth halted, and debt mounted. With foreign exchange reserves dwindling, a ­balance-of-payments crisis was staved off only with help from the People’s Bank of China.

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Almost a decade after a devastating financial crisis, the US remains poorly prepared for a repeat. So it’s unsettling that Daniel Tarullo, the Federal Reserve Board official who has done the most to make the country’s banks stronger, plans to step down—and all the more important that President Trump find a worthy replacement. The 2008 crisis exposed weaknesses at the heart of the US financial system. Big banks had far too little loss-absorbing capital, and shortages of cash forced emergency asset sales that added to their losses. The government had no option but to rescue them at taxpayer expense. Tarullo led efforts to strengthen the system. The Fed adopted capital requirements significantly more demanding than those laid down by international regulators and tied them to liquidity rules aimed at ensuring banks would always have enough cash to meet their near-term obligations. It introduced stress tests designed to assess banks’ ability to weather a crisis and demanded that banks produce “living wills” describing how they could go bust without causing wider harm. Tarullo’s work is far from done. On average, the largest US banks now have about $6 in equity for each $100 in assets, according to international accounting standards. That’s more than in 2007, but it’s still not enough. The stress tests aren’t yet sufficiently realistic. Tarullo had a plan for improving them, but he won’t be around to see it through. And the living wills still give the public too little information. Tarullo seems optimistic about what will happen after he leaves. He says Trump’s “core principles” for financial ­regulation—which include avoiding bailouts and addressing systemic risk—are a “good starting point.” Trump now has three vacancies to fill on the Fed’s board of governors. Let’s hope he chooses someone capable of finishing what Tarullo started. <BW>

ILLUSTRATION BY TOMI UM

Departing Fed Governor Tarullo was leading the efforts to prevent another financial collapse

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Global Economics

Trump in an American Idol spoof at the 2005 Emmys

1 — 15 March, 2017

▶▶Trade barriers would hobble grain and soybean exports ▶▶“Almost everything that’s a bulk crop goes overseas” Kirk Liefer is readying his soybeans for shipment down southern Illinois’s Kaskaskia River. The Kaskaskia feeds into the Mississippi, which, to a great extent, feeds China: About one-quarter of the US crop goes straight to the world’s biggest food market, where it gets eaten by half the planet’s pigs and provides cooking oil for a rapidly growing middle class. “Our soybeans go to China, a lot of the corn goes to Japan or Mexico,” says Liefer, 39. “Almost everything that’s a bulk crop goes overseas. You take that away, you ripple through the entire region.” US farmers and agribusinesses are wary of the protectionism driving the trade policy of President Donald Trump, while rivals are calculating

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how doors closed by the US could open markets for them. David MacLennan, chief executive officer of Cargill, the world’s largest grain trader, says the US “cannot wall ­ourselves off ” from world markets. He warns that protectionism can “provide famine, cause conflict and even war.” The view is different from Brazil, where Agriculture Minister Blairo Maggi, whose family owns one of the nation’s biggest soybean shippers, says his country “is back in the game,” competing for sales it had conceded to the US Now the Trump administration may slow the adoption of Asian trade pacts, giving Brazil an opening. The outcome could be a shift away from America, the world’s traditional breadbasket. Brazil, Australia, Russia,

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and Ukraine are well-positioned to profit from any American disruption. “You’re shooting yourself in the foot,” says Joe Glauber, a former chief economist for the US Department of Agriculture and chief US negotiator on farm issues during the Doha Round of global trade talks. “If a supplier starts to be seen as unreliable, the global supply chain adjusts, and that player will lose market share going forward.” Unlike sectors such as ­manufacturing, where trade deals are blamed for job losses, US agriculture has benefited from globalisation. Sales of US corn, soybeans, cattle, and other commodities will reach $134 billion in the 2017 fiscal year, up from $129.7 billion the year before, according to the USDA. This year, Canada and Mexico will account for $39.6 billion of US farm trade, or 31 per cent. About half of all global corn exports are grown in the US. Almost half of all US wheat, half of its soybeans and rice, and three-quarters of its cotton are shipped abroad. The US is the world’s top exporter and highly competitive. Still, America’s export share is declining as rivals catch up in technology and infrastructure. Russia, once a grain importer, surpassed the US in wheat exports for the first time last year, and the two countries are neck and neck this year. Brazil is rising in soybeans, thanks to weather that allows two crops per year and land that’s yet to be fully developed. US farmers need exports to keep already low commodity prices at home from collapsing. Gluts have pushed down corn prices to less than half their 2012 peak, and farmer profits may fall for the fourth straight year, the longest streak since the 1970s, the government said last month. That’s why US farmers have backed trade deals such as the Trans-Pacific Partnership, which promised an additional $4 billion to $5 billion of sales by opening Pacific Rim nations to US meat, dairy, and grain. But pulling out of the TPP was one of Trump’s first acts as ­president. He’s also threatening to leave the North American Free Trade Agreement with Canada and Mexico. Both moves stoke worries that attempts


TPP or no, Vietnam plans to forge ahead 12 Putin’s Rasputin as peacemaker? 12

to protect manufacturing could harm farmers, with countries such as China retaliating against taxes on fi ­ nished goods exported to the US by buying commodities elsewhere, says Ed Schafer, who served as a ­ griculture secretary under President George W. Bush. “Trade issues are not as ­simplistic as President Trump thinks,” he says. Bob Young, chief economist for the American Farm Bureau Federation, the largest US farmers group, rattles off a series of competitors ready to eat the US’s lunch: Brazil and Argentina in global corn and soybean markets; Ukraine and Russia in grain and oilseeds; Australia and New Zealand in meat and dairy. Australia is still pushing for a TPP without the US, to lock in potential trade gains in Asia. Europe is buying more Ukrainian corn, enjoying lower tariffs that squeeze out US suppliers who had hoped to gain from a European Union trade deal. Brazil and Argentina are becoming the first choice for Chinese buyers who wait for those nations’ spring harvests—when prices are lower—to make purchases. Competitors are penetrating markets In 2008 and 2013 the US once owned. the nation drew down “Mexico is right on the stockpiles to export more cotton than it US’s doorstep, and yet produced Russian wheat can and does price into Mexico,” says Swithun Still, director at Solaris Commodities, a trader in Russian grain, in Morges, Switzerland. The US has hurt its farm trade before, says Glauber, the former USDA official. A ban on grain sales to the Soviet Union after its 1979 invasion of Afghanistan jump-started South America’s development, and earlier

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Cotton

moves during the Nixon administration gave Canada, Australia, and South America market opportunities they never relinquished. “You do not want to convince your customers they need to look elsewhere,” Glauber says. For now, the shipments go on as usual along the Kaskaskia. Liefer says he thinks trade tensions will work out, in part because Trump respects the voters who put him in the White House—rural areas supported the president by a 2-1 margin in November. But he’s watching the new leadership closely. “Where we will be six months from now, that’s a different q ­ uestion,” he says. “I might have a different opinion.” �Alan Bjerga, with Lynn Thomasson The bottom line The US has the biggest agriculture industry on earth, yet farmers face mounting pressure from Russia, Brazil, and Ukraine.

Fiscal Turmoil

Brazilian Police Strike, And Violence Spikes ▶▶Belt-tightening prompts a walkout in Espírito Santo state ▶▶“We’re dealing with very unhappy troops”

Brazilians are feeling the bite of ­austerity measures that have left public services in parts of the country close to collapse. And many are protesting. The most conspicuous example: the strike by police officers in Espírito Santo, which ended on 12 February. During

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the walkout, which lasted more than a week, crime rates soared across the state just north of Rio de Janeiro state. According to the civil police union, almost 150 murders were committed, up more than 300 per cent from the same period last year. President Michel Temer condemned the strike as illegal and unacceptable and sent 2,000 federal troops to assist the state. While local television stations broadcast images of looting, many supermarkets and schools remained closed for most of the week. Residents refused to venture out of their homes, and hospitals admitted only emergency patients, according to local media reports. In Rio de Janeiro state, protesters have launched fireworks at cops, burned buses, and torn down fences. The violence was prompted by proposed austerity measures and delays in paying public servants’ salaries. Six of Brazil’s 26 states are in financial trouble, according to Fabio Klein, an expert on government finances with consulting firm Tendências Consultoria. Three of them—Rio de Janeiro, Rio Grande do Sul, and Minas Gerais—have decreed a state of “fiscal calamity” that gives them more time to meet requirements established by the federal law. Klein says the federal government may be forced to issue debt to help rescue the six states facing the deepest problems, as well as highly indebted São Paulo, Brazil’s richest state. “This could have a significant impact on the treasury’s accounts,” he says. “The effectiveness of federal cost-­cutting could be limited by the crisis of the states.” Luiz Fernando Pezão, governor of Rio de Janeiro, and Finance Minister Henrique Meirelles have agreed on a plan to provide debt relief to the state in exchange for the privatisation of the water and sewage utility, plus austerity measures. Combined, that will be worth 26 billion reals ($8.4 billion) in 2017. The deal needs the approval of federal and state lawmakers. Violent protests outside the state assembly have continued as legislators debate the package. With Espírito Santo’s police strike ended, Rio de Janeiro is the next state that could face a walkout.

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“We’re dealing with very unhappy troops,” Major Ivan Blaz, a spokesman for Rio’s military police, told reporters. “Add to that the situation of neighbouring Espírito Santo, and indeed there are mobilisations toward protest, a shutdown.” Family members of Rio’s military police have been staging nonviolent demonstrations across the city. But, unlike in Vitória, Espírito Santo’s capital, there’s little work stoppage. As a result of the disarray in Espírito Santo, the federal government won’t make cuts to public security spending a condition for assistance to the states, according to Thiago de Aragão, a strategy director with political consulting firm Arko Advice. “The situation will lead the government to realise that if states can’t impose more security, this will create a domino effect,” he says. �David Biller and Walter Brandimarte The bottom line Brazil’s federal government wants the states to accept austerity measures that local civil servants oppose.

Treaties

Vietnam Shrugs Off the Loss of a Trade Pact ▶▶The export power wants to deepen its regional ties ▶▶The TPP “is also a driving force for reform”

Because of its export-driven economy, Vietnam probably would have benefited from the Trans-Pacific Partnership trade treaty more than

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any other nation. Now that President Donald Trump has withdrawn the US from the deal, Vietnam is turning to its Asian neighbors. The end of the treaty “will push us to expand in other markets,” says Nguyen Duc Kien, deputy head of the National Assembly economic committee. “We have a lot of potential to increase exports” to markets in the Association of Southeast Asian Nations and to some “countries where we have bilateral trade agreements, such as Japan.” The US is by far the largest customer for the apparel, electronics, ­furniture, and shoes that Vietnam makes and will probably remain so for some time. In five years, Vietnam doubled the value of its exports to the US, to $38.5 billion in 2016. The TPP would have dramatically lowered or eliminated the tariffs the US imposes on Vietnamese goods. Long before Trump withdrew from the treaty, the Vietnamese were cultivating other ties. “Vietnam is more active than other countries in forging trade deals, and that allows it to diversify its risk,” says Eugenia Victorino, an economist at Australia & New Zealand Banking Group in Singapore. Vietnam has nine free-trade agreements (FTAs), including deals with India, South Korea, Australia, and New Zealand. Seven more are being negotiated. “We are not so concerned about TPP ending,” says Nguyen Van Tuan, deputy general secretary of the Vietnam Textile and Apparel Association. “We will look at ways to boost exports to the EU.” Prime Minister Nguyen Xuan Phuc hopes to revive the TPP. If the

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The bottom line Vietnam has free-trade agreements to compensate for the lower tariffs with the US that the TPP would have provided.

Diplomacy

A Putin Fixer Claims Success With Turkey ▶▶Alexander Dugin says he stepped in after the downing of a fighter ▶▶“Brilliance and madness are very close to each other”

The Russian ultranationalist dubbed “Putin’s Rasputin” by Breitbart News when it was run by President Donald Trump’s chief strategist, Steve Bannon, has emerged as an unlikely foreign policy fixer for the Kremlin. Alexander Dugin, whose lengthy beard gives him a passing resemblance to the Siberian mystic who enchanted Czar Nicholas II, says he played a key role in patching up Russia’s relations with

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Protesters smash a shop window amid clashes with police in Rio de Janeiro, where the president sent 9,000 troops

trade pact continues to exist in some form, the government can use the agreement’s terms to modernise the economy, says Tran Viet Thai, deputy director general of the Diplomatic Academy of Vietnam in Hanoi, where the country’s foreign service officers are trained. “TPP is not only about market access. It is also a driving force for reform, from legal to labour to transparency and anticorruption,” he says. Australia is interested in resurrecting some version of the partnership with Vietnam and other Asian countries. The more free-trade agreements that Vietnam signs, the less it will have to rely on China and its Regional Comprehensive Economic Partnership for the benefits of international commerce. “With the US withdrawing from the TPP, there is a vacuum, and China wants to fill it,” Thai says. “But to lead, there has to be give-and-take, and at this moment, China doesn’t want to give,” he says, referring to China’s reluctance to open its markets. “No one wants to give when populism and anti-freetrade sentiments are on the rise.” �Nguyen Dieu Tu Uyen and Karl Lester Yap

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staff. “He appears to have given the Turks some very good advice.” Dugin’s writings, in dozens of books and on countless blogs, have made him an influential thinker in Turkey and Iran, where he’s a frequent visitor, and among anti-establishment parties throughout the West. “Three ­countries pay the most attention to me—Turkey, Iran, and the US,” he says. The f­oreword to one of his books was written by a retired American humanities professor, Paul Gottfried, one of the first political philosophers to use the term “alternative right” to describe the radical conservative movement. Dugin’s role in resolving the crisis with Erdoğan over the warplane incident was confirmed by Ismail Hakki Pekin, a former head of Turkish military intelligence. Pekin was one of five members of Turkey’s Patriotic Party, including two other retired generals, who flew to Moscow in December 2015 for secret meetings that Dugin arranged with current and retired Russian officers. Dugin took the Turkish d ­ elegation to meet his benefactor, Konstantin Malofeev, a multimillionaire with ties to the Russian Orthodox Church. Pekin says Dugin introduced Malofeev as Putin’s “right-hand man” and that the Turks came to learn the financier can “knock on Putin’s door.” “That’s how the trip became effective,” Pekin says. “We knew what we said went directly to Putin.” Dugin sought out the retired Turkish generals because they all had a history of oppos­ olicies ing Erdoğan’s p and spent time in jail for alleged plots to overthrow the government, Pekin says, which made them more credible. In March, Dugin

flew to Ankara for a follow-up visit that included talks with relatives of Erdoğan and other powerful figures. Dugin says he told the Turks that arresting the person accused of shooting and killing one of the Russian pilots as he tried to parachute to safety would go a long way toward reestablishing relations. The next day, the suspect was taken into custody. “They said they were carrying out an investigation and that Erdoğan would apologise,” says Dugin, who passed the ­information on to Russian officials. Three months later, with Turkey’s economy squeezed by Russian trade curbs, Erdoğan expressed regret over the incident, paving the way for resumed ties. (Malofeev dismisses the assertion he’s Putin’s right-hand man; Peskov, the Kremlin spokesman, denies the fi ­ nancier played a role in the talks.) Dugin has delighted in Russia’s and Turkey’s involvement in the Syria crisis. Erdoğan, with Putin’s ­blessing, sent troops into Syria in August to fight Islamic State and US-supplied Syrian Kurdish militia forces, which Turkey views as ­terrorists for their links to the Kurdistan Workers’ Party. And Turkey blocked rebel ­supplies into Aleppo, enabling Assad’s forces, backed by Russian firepower, to capture the former commercial capital in December. In January, Russia and Turkey carried out ­coordinated air strikes against Islamic State targets. Dugin, who’s long predicted the demise of what he calls “the West’s liberal hegemony,” says Trump’s ­election promises to change the course of world history. “America not only isn’t an opponent, it’s a potential ally under Trump,” he says. Now his focus turns to Europe, where he’s been ­cultivating ties with anti-establishment parties. With key elections in France, Germany, and the Netherlands this year, the Russian polemicist’s mantra for Europe is ripped straight from Trump’s playbook: “Drain the swamp.” �Henry Meyer, with Onur Ant The bottom line Ultranationalist TV commentator and editor Dugin sees America as a potential ally to Russia, thanks to Trump’s victory.

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Turkey, an account confirmed by a senior figure in Ankara. He’s bullish on better ties with the US, now that people more sympathetic to his views are in power. After Turkey shot down a Russian warplane along the Syrian border in 2015, the philosophical rabble-rouser says he used his contacts in both countries to bring Putin and President Recep Tayyip Erdoğan together and help end an increasingly dangerous feud. The rapprochement ultimately opened the door for Russia and Turkey to ­outmaneuver the US and broker a deal with Syrian President Bashar al-Assad that has turned the tide in the civil war. The agreement also moved Russia a step closer to fulfilling Dugin’s vision of Eurasianism, a rejection of the US-led globalist system that calls for luring Turkey, traditionally a US ally, away from NATO and creating a Russo-Islamic pact that includes Iran. Having no official role in the ­government, he says, makes him an effective go-between in matters of state. Dugin, whose father was a Soviet military intelligence official, was blacklisted by the US for aiding the insurgency in Ukraine. He’s advised members of Russia’s government and written a textbook on geopolitics that’s been used by the military. “I can talk to people like an official can’t,” he says in his Moscow office at Tsargrad TV, where he’s a commentator and chief editor. Dugin lost his prestigious job running the sociology department at Moscow State University in 2014 after activists accused him of e ­ ncouraging genocide in a rant in support of separatists in Ukraine in which he said, “Kill, kill, kill.” The Kremlin, which gave Dugin ­prominent airtime on major ­networks to cheerlead during the 2014 annexation of Crimea, has kept him at arm’s length since he criticised Putin for not taking more of Ukraine. Putin ­spokesman Dmitry Peskov denies Dugin’s role in the détente with Turkey. “He’s seen as a brilliant philosopher, but brilliance and madness are very close to each other,” says Sergei Markov, a political consultant to Putin’s Dugin

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▶▶Trillion-dollar gas reserves put Iran in prime position to become a major exporter ▶▶“We don’t think that the new administration in the US will pose a big problem in this department”

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Iran is hard at work gaining a foothold in the global energy market, and it’s not letting US President Donald Trump’s confrontational tone stop it from trying. Political rhetoric is unlikely to turn into tangible impediments for Iran’s ambition to join Russia and Norway in the ranks of major gas exporters, according to Deputy Oil Minister Amir Hossein Zamaninia. The nation has about $7 trillion worth of gas reserves sitting underground, based on European benchmark prices, and its doors are open to those who will help it cash in on the fortune. Zamaninia thinks those sorts of figures mean the business case for Iranian energy is too tempting for the world to pass up, even as its supreme leader Ayatollah Ali Khamenei and Trump exchange barbs. The country may need as much as $100 billion to develop its gas business, but estimates vary widely. Majors from Royal Dutch Shell Plc to Total SA agreed to assess oil or gas fields in Iran last year, but no deals have been signed yet. Total plans to sign a contract if Iran respects an international nuclear treaty and if the US sticks to it, Chief Executive Officer Patrick Pouyanne said in an interview. Austria’s OMV AG has said Iran’s gas market is “a big opportunity.” “There are concerns and the international capital is scarce, but our projects and our

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“Our projects and our environment are so attractive that we don’t think we will face a great deal of difficulty.” —Amir Hossein Zamaninia, Deputy Oil Minister, Iran

environment are so attractive that we don’t think we will face a great deal of difficulty,” Zamaninia said in an interview at the CWC Iran LNG & Gas Summit in Frankfurt. “We don’t think that the new administration in the US will pose a big problem in this department, in the oil and gas business.” While Iran has the largest commercial volumes of natural gas in the world, the country is a smaller exporter than Bolivia. That may soon change. Last year, US President Barack Obama lifted a decade of economic sanctions in exchange for Iran limiting its nuclear programme. Growing populations and economies in nearby countries, including Turkey and India, mean gas demand is also set to rise. But there’s also reason for doubt. Competition from other suppliers is intensifying, European prices have dropped 25 per cent in the past five years and Iran consumes almost as much as it pumps. There’s an election around the corner and political challenges have forced the country to delay some gas projects for years. “Iran’s got just a huge amount of potential but I don’t see anything major happening for some time,” said Christopher Haines, head of oil and gas at BMI Research in London. “We need a lot more trust between operators and the government and confidence in the political environment.” Then there’s Trump. Through an executive order, the new US president banned Iranians from entering the country for 90 days, citing the threat of terrorism. While that order was blocked by a court, he has said he will sign another one this week. He also put Iran “on notice” after it performed a missile test on 29 January, without clarifying what that meant. International politicking is delivering a “temporary hiccup” to investment, but Iran’s gas prize is big enough to motivate people to overcome their differences, Zamaninia said. The country has 56 gas fields with reserves of 33.7 trillion cubic metres, of which 40 are still undeveloped as a

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result of sanctions. Hamid Soorghali, an energy analyst at Iran-focused consultant Energy Pioneers Ltd. in London, said that is probably true, and the country remains attractive to Russian and Chinese investors. “Trump will not have an impact on this macro trend, but rather can only affect the quality of achieved goals,” he said by e-mail. “Internal ambiguities and politicisations, such as over the price of gas for exports, can have more of an effect.” There are still debates within the country on how to make the best use of its natural gas. Using the fuel in oil fields or in power plants may benefit the economy more than exporting at current low prices, according to Ali Amirani, marketing director at the National Iranian Gas Export Co. “In terms of the international market, the price is not so attractive right now, at least until 2024,” Amirani said in Frankfurt. “This encourages us to think about these opportunities inside Iran.” With additional technology, Iran could export as much as 6 billion cubic feet (170 million cubic metres) of gas a day by 2030, mostly to Mideast countries, according to Siamak Adibi, head of Middle East gas at consultant FGE. That would make it the fifth-largest gas exporter in the world behind Russia and Norway, Canada and Qatar, according to 2015 figures in the BP Statistical Review. Iran needs $70 billion to develop proposed oil and gas projects, and half of that could come through in a “few short months,” according to Zamaninia. The first pipeline to Iraq is “ready” to ship natural gas and a second to Basra is expected to start in two or three months, Zamaninia said. Haines of BMI Research agreed that timeline was possible. “Iran has huge potential to export due to its resources,” said Adibi. “The question is only where the market is.” � Weixin Zha and Kelly Gilblom

Oil investments

Abu Dhabi Opens the Door to China ▶▶Chinese come out on top in landmark Abu Dhabi oil deal ▶▶“You can see the attraction for Abu Dhabi and for China”

Chinese companies are big winners in the competition among foreign bidders for stakes in Abu Dhabi’s largest oil concession, snatching a combined 12 per cent of the venture as the Middle Eastern emirate looks increasingly to Asia, its biggest market, for investment. Abu Dhabi National Oil Co. awarded a 4 per cent stake in the onshore venture–the last share of the project that was still up for grabs to– Shanghai-based CEFC China Energy Co., Adnoc said in an e-mailed statement. CEFC is paying an $888 million signing bonus, Adnoc also said. The announcement came one day after China National Petroleum Corp. agreed to buy 8 per cent of the same concession for $1.8 billion. The dual awards mark China’s debut as a major shareholder in the biggest oilfield operator in signing bonus paid by the United Arab CEFC China Energy Emirates, OPEC’s Co, in Adnoc deal fourth-largest member. Together, the stakes held by state-run CNPC and energy investor CEFC exceed the 10 per cent shares that both BP Plc and Total SA own. BP signed on to the project in December, and Total in January 2015. Asia will show the fastest growth in energy demand over the next two decades, according to the International Energy Agency. Abu Dhabi is among Arabian Gulf oil producers including Saudi Arabia and Iraq that are tapping Asia for energy investments.

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Brent crude has gained about 11 per cent since the day OPEC announced that agreement. The 40-year ADCO concession replaces an earlier deal. Exxon Mobil Corp. and Royal Dutch Shell Plc took part in the previous venture, also called ADCO, along with BP, Total and Portugal’s Partex Oil & Gas Group. � Anthony DiPaola and Mahmoud Habboush The bottom line Chinese companies have become major players in an Abu Dhabi oil deal as Asian firms gain a foothold in Gulf oil markets.

Trading Places At Turkey's Trump Towers ▶▶Banker Yagmur Satana to take over at embattled Dogan Holding ▶▶Fortunes have ebbed and flowed with political tides

Turkey’s Dogan Holding, owner of the Trump Towers in Istanbul, said

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it appointed an outsider as board member and acting chief executive after the resignation of Soner Gedik, who served for just over a year. Gedik had been CEO of the conglomerate, which has interests in sectors including media, energy and tourism, since January 2016. The group’s media outlets, which include Turkey’s flagship daily Hurriyet and the TV channel CNN-Turk, have put it in near-constant conflict with Turkey’s government under Recep Tayyip Erdoğan for about a decade. Dogan said in a statement that it would name Yagmur Satana, formerly a board member for power plant operator Aksa Enerji, to replace Gedik as CEO and board member. Satana, born in 1963, has a background in banking, having previously worked at Turkish lenders Finansbank AS and Fibabanka AS. He takes the helm of a company whose fortunes have ebbed and flowed with political tides. Once Turkey’s dominant media group in terms of both market share and influence, Dogan Holding has been slapped with a multi-billion dollar tax fine, forced to sell assets and adjust

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While European and US companies have pumped oil in the Middle East for more than a century, their Asian counterparts are relative newcomers. Japanese and Korean companies are also investors with Adnoc in the deposits. “You can see the attraction for Abu Dhabi and for China on both sides of this deal,” Richard Mallinson, an analyst with Energy Aspects Ltd. in London, said by phone. “In China, Abu Dhabi sees a huge and growing importer. China’s gone to great lengths to establish supply footholds, so there’s a real benefit in tapping large and stable reserves.” CNPC and CEFC are joining the Abu Dhabi Co. for Onshore Petroleum Operations, or ADCO. Japan’s Inpex Corp. owns 5 per cent of the venture, while GS Energy Corp. of South Korea holds 3 per cent. No companies from Asia were involved in the previous concession for the onshore fields. Abu Dhabi plans to retain a 60 per cent stake in ADCO. Japanese companies are partners in at least four other oil-production ventures in Abu Dhabi, the largest sheikhdom in the United Arab Emirates. Korean and Chinese companies are exploring at smaller concessions in the emirate. CNPC’s engineering arm also helped build an export pipeline in Abu Dhabi. Elsewhere in the region, CNPC is developing Iraq’s biggest oil field, together with BP. China Petroleum and Chemical Corp. is a partner in a refinery in Saudi Arabia, and Chinese firms are developing crude deposits in Iran. With the two deals announced this week, Chinese buyers secure more supplies of Abu Dhabi’s main Murban crude grade. CNPC agreed in 2011 to increase purchases of crude from the emirate under long-term contracts. Abu Dhabi, with 6 per cent of global crude reserves, is seeking to boost production capacity to 3.5 million barrels a day by 2018. ADCO pumps about half of Abu Dhabi’s roughly 3 million barrels of daily crude output. The emirate is expanding capacity amid a global oil glut that cut prices to an average of about $50 a barrel over the last two years. The Organization of Petroleum Exporting Countries agreed in November to cut production to trim crude stockpiles and boost prices.

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Companies/Industries coverage amid frequent run-ins with Erdoğan and his Islamist-rooted ruling party. Erdoğan has said the group stands for an “old Turkey" that he’s trying to replace, referring to the typically secular business elite that had long dominated Turkish politics and business. Dogan became even more deeply enmeshed in politics when Donald ●● Tesla Inc. is expanding to the UAE, makTrump, during his campaign for US president, announced a proposal to ing a move to sell its pricey electric cars in one ban Muslims from entering the US of the world’s largest oil-producing nations. The Erdoğan, who’d attended the opening of the Trump Towers in Istanbul company is taking orders for the Model S sedan Russia overtook Saudi himself in 2012, called for Trump’s as the world's and Model X sport utility vehicle for summer de- Arabia top crude producer in name to be removed from the buildpumping ings. Such criticism of the US real livery. Tesla also plans to open its first service December, 10.49 million barrels estate developer died down when day, compared with centre in the Middle East in July and will support aSaudi's 10.46 million Trump won the election, with Turkish officials hoping for better relations online sales with a pop-up store in The Dubai barrels per day. under his administration. Mall, Tesla said in a statement. It will also open a store and US-Turkey ties under President Barack Obama were largely defined service centre in Abu Dhabi next year. The California-based by tension between company is selling the electric cars in In efforts to secure the two NATO allies, further purchase, BAE in particular over the UAE, which holds about 6 per cent Systems Plc seeks strategy in Syria and a new Eurofighter of global oil reserves and is the fourthwarplane order from Turkey’s request 17 Saudi Arabia after that the US extrabiggest OPEC producer. The country is announcing a deal dite Islamic cleric to support previous famed for its supercars, including Dubai aircraft worth Fethullah Gulen. $10 billion. Erdoğan says Gulen, Police’s fleet which includes Ferraris a Turkish preacher, has been leading and Bentleys. ●● Mubadala Investment Co., Abu Dhaefforts to overthrow him from his compound in Pennsylvania, where he lives bi’s $125 billion sovereign fund, will start operations in May in self-imposed exile. through four divisions focusing on interests in energy, infraGedik’s predecessor as CEO, Yahya Uzdiyen, was detained last month structure, technology and aerospace. The company’s board, along with Dogan’s Ankara representaformed from two other government-owned investment funds tive Barbaros Muratoglu and its chief legal officer, Ekrem Turgut Yucel. that announced a merger last year, approved an organisaThey were charged with connectional structure and appointed senior managers. ●● Intions to the Gulen movement, which Erdoğan blames for a coup attempt dia's space agency has put 104 satellites CEO against him last July. Yucel and Wisdom into orbit, the most in history, as it looks to Uzdiyen were released under judicial control, the state-run Anadolu Agency cement its name for low-cost launches. The reported on 13 January. Polar Satellite Launch Vehicle carried nanoDogan shares are up 7.9 per cent this “Some pretty good year, underperforming the 14 per cent satellites from seven countries when it took things are happening here for BP, like Eni. In gain on the Borsa Istanbul 100. off from Sriharikota, a tiny island in south- 2016-17 we’re investing � Asli Kandemir and Benjamin more money in Egypt Harvey eastern India. These include 88 from San than any country in

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Francisco-based Planet Labs Inc. as well as others built by companies and universities in Kazakhstan, Switzerland and the UAE.

the world, so this is important for us, we have confidence in the government.” — Bob Dudley, BP, CEO, discussing the firm's investment plans for Egypt.

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▶▶Saudi Arabia’s fledgling tourism proposition is looking like a hard sell ▶▶“There are aspects of Saudi that will put people off”

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of holidaymakers is as hard to envisage as a Saudi Arabia that’s no longer hooked on fossil fuels. Saudi Arabia doesn’t even issue tourist visas. Its alcohol ban, strict dress code and curbs on gender mixing are red flags for many people who’d be happy to visit Dubai’s beaches or Egypt’s pyramids. Then there are the secret police, who often keep a close watch on foreign visitors, and the religious police, who chastise people for moral violations. Even many Saudis prefer to vacation in Dubai, where they can wear what they want and go to nightclubs or movie theatres. “There are aspects of Saudi that will put people off,” said Jarrod Kyte, product director at UK tour company Steppes Travel. Not all people, though which is why Steppes is offering its first tour to Saudi Arabia next month. It cost almost

People say the social environment isn’t right. I keep telling them the social environment will follow

$6,000 per person, and was hard to arrange because it required invitational visas. But Kyte said it was irresistible to seasoned travellers who wanted to check an unusual country off their list. He’s hoping to do it again: “It became very apparent there was demand there.” That’s what the Saudi government is keen to capitalise on. Its post-oil plan, known as Vision 2030, includes measures to encourage the entertainment industry and develop coastlines and historical sites like Al Ula, where the Shaden resort is going up. Nearby are the 2,000-year-old ruins of Mada’in Saleh, a relic of the same ancient civilisation that built the better-known city of Petra in Jordan. In charge of the tourism drive is Prince Sultan bin Salman, head of the Saudi Commission for Tourism and National Heritage and a son of the king. He said the kingdom is finally waking up to the ideas that he’s been promoting for years. “A lot has been invested, not in the tourism sites as we would like to see it, but the supporting infrastructure, in airports and roads and so on,” Prince

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It’s the day before the grand opening of Shaden, a luxury desert camp in Saudi Arabia where air-conditioned tents look out on sandstone cliffs. A princely delegation is on its way. But the place isn’t quite ready. Peacocks for the garden of the 10,000-riyals-a-night royal suite haven’t arrived. The cow brought in to provide fresh milk for the cafe has been mooing all night. It “won’t shut up,” laments Ahmed Al Said, the project developer, as he gives orders over the clang of hammers and shovels. Saudi Arabia as a whole isn’t ready for tourists either. But its rulers are intent on revolutionsing the economy, and tourism is high on their list. They figure it can create jobs for a youthful population, earn revenue to reduce oil-dependence, and help open the kingdom to the world. Which it might -if anyone can be persuaded to come. To be sure, the country attracts plenty of foreign travellers, about 18 million last year, the most in the Arab world. But they’re almost all Muslim pilgrims visiting Mecca. Regular tourism barely exists. And there are so many obstacles that a Saudi Arabia full

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Sultan said in an interview in Riyadh. He dismissed concerns that opening up the conservative kingdom to foreigners would cause trouble. “People would say the social environment isn’t right,” he said. “I keep telling them: the social environment will follow. And that is what’s happening today.” Prince Sultan reels off a list of museums that are about to open and others he plans to commission. They will let Muslims learn about Islam in the place where it was born, he said. The religious dimension may help win backing from Saudi Arabia’s powerful clerics, who often oppose change. Investment in cultural heritage is underway too: The government has set aside 5 billion riyals ($1.3 billion). It’s also encouraging private spending by companies like Jeddah-based Al Jazirah Safari, which is building the Shaden resort, a 100 million-riyal project. Some Saudis who live there are looking forward to the opportunities. Farmer Ahmed Al Masoud plans to turn his orange groves into a resort where he’ll teach tourists about traditional agriculture. Businessman Faras Al Harby is busy importing souvenirs from China. They’re all waiting for one thing: tourists. On a recent afternoon, 56-year-old Birgit Mitchell had the

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place pretty much to herself. An American teacher who lives in Saudi Arabia, she took the bus there, playing her guitar for Saudi women at rest stops along the way. “Wow, I can’t believe we can just walk here,” she said, as she popped in and out of the carved tombs. Most visitors are Saudi residents, like Mitchell, or citizens of other Gulf countries, who don’t need visas. The government hasn’t said when it will start issuing tourist visas. “The visa is the axis for the numbers that will come,” said Ahmad Al Fadhel, co-owner of another camp nearby. But he sees a chicken-and-egg problem with the government’s plans too: “Investors don’t want to come because tourists haven’t come, and tourists don’t want to come because the services haven’t come.” Turmoil in the Middle East has kept visitors away even from established destinations like Egypt. Saudi Arabia, though more stable than many neighbours, isn’t immune. In 2007, four Frenchmen on their way back from Mada’in Saleh were killed by militants. That’s one reason local schoolteacher Ahmed Al Imam, who works part-time as a tour guide, doesn’t plan to give up his day-job even if visa curbs are lifted and visitors pour in. “Imagine if I quit teaching,” he said, snapping his fingers, “and one night a crazy person did something wrong. Tourism will stop.” Perhaps the most potential lies in persuading Saudis to spend money in their own country rather than abroad. Domestic tourism is expected to grow 7.4 per cent per year to 66 million trips by 2020, driven by both religious and leisure UNESCO World Heritage Site in travel, accordMada’in Saleh. The ing to a Colliers Saudi government International report has set aside $1.3 billion for cultural this month. investment “There is a

positive outlook for tourism in Saudi Arabia, with strong growth forecast and a wave of investment underway,” the report said. The week the new camp opened, there was a programme of Saudi films in Al Ula, which were projected onto a cliff because there are no movie theatres in the kingdom. There’d been some grumbling beforehand about the corrupting influence of such a show. In the event, men and women gathered in their cars to watch, and vendors hawked tea under the stars. “The country does have some beautiful natural resources for tourism,” said Graham Griffiths, an analyst at Control Risks in Dubai. But he said the Saudis will struggle to get a return on their investments “if they don’t open up.” � Vivian Nereim and Glen Carey The bottom line In a bid to diversify its economy away from a reliance on oil, Saudi Arabia is modernising and hopes to build tourism.

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Defence

India Is Up In Arms As Military Spend Rises ▶▶World arms sales are on the rise amid political instability ▶▶“They spend a lot of money trying to develop weapons in India”

Global arms sales over the last five years reached their highest level since 1990, with India continuing to top the charts as the world’s largest defence importer, a report from the Stockholm International Peace Research Institute has found. Between 2012 and 2016, India accounted for 13 per cent of global arms imports, followed by Saudi Arabia, the United Arab Emirates, China and Algeria, said SIPRI, which tracks global arms purchases. Between 2007 and 2011, India accounted for 9.7 percent of global imports, still more than any other country, the group’s data shows. Most Gulf Arab states are involved

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Politics/Policy Ministry of Defence, said India’s defence sector has traditionally been unable to meet the immediate demands of the country’s armed forces, which are battling insurgents, patrolling contested borders and doing joint patrols and military exercises with allies in the region. “It’s a catch-22 situation. Indian industry was not able to meet the requirements because it didn’t have a history of doing defence,” Cowshish said, adding that replacing imports with domestically produced weapons will take time. “You can’t really climb up the value chain overnight, and the requirements are imminent.” Both Cowshish and Wezeman said the shift under Modi to rely more on private Indian companies for defence procurement, could lead to success. India signed an $8.7 billion contract to buy 36 Rafale jets from Dassault Aviation SA. But both analysts also warned that structural changes to India’s defence purchasing would take a long time, given the lengthy timelines involved in defence R&D and manufacturing, as well as the necessity of meeting the military’s pressing requirements for combat-ready equipment. “Since the 1950s, the Indian leadership has continuously maintained that they want to make in India,” Wezeman said. Even “if they realign, it’s not something that can be done very fast.” � Iain Marlow

$250m

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The bottom line As global arms spending rises, India is battling to shore up its domestic defence strategy amid threats from neighbours.

Diplomacy

Le Pen’s Head For Trouble In Lebanon ▶▶Candidate refused to respect rules when meeting senior cleric ▶▶“I assumed they accepted that I wouldn’t be wearing a headscarf”

French presidential candidate Marine Le Pen stirred controversy on the second day of her trip to Lebanon, refusing to wear a headscarf to meet a top Islamic leader and pledging to restore ties with Syrian President

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Bashar al-Assad if elected. Officials at the Dar al-Fatwa, Lebanon’s highest Sunni authority, said Le Pen had been told in advance she’d need to put on a headscarf before meeting Grand Mufti Sheikh AbdelLatif Derian. Reminded again on arriving at his Beirut headquarters, she refused and left. “Dar al-Fatwa regrets this inappropriate behaviour,” the council said in a statement. Le Pen disputed she broke a prior agreement. “I told them that I wasn’t going to wear a headscarf. They didn’t cancel the meeting and so I therefore assumed that they had then accepted that I wouldn’t be wearing a headscarf,” she told reporters after the incident, according to Agence France-Presse. She reportedly also told her hosts that she hadn’t worn a veil when meeting Egypt’s Grand Mufti of alAzhar in May 2015, and she would not do so now, Lebanon’s state-run National News Agency reported. The National Front candidate arrived in Beirut last month, her first major foreign policy foray of the election campaign, and held talks with Lebanon’s President Michel Aoun, Prime Minister Saad Hariri and several Christian leaders. She was also scheduled to meet with the head of the Maronite Christian Church Patriarch Beshara al-Rai. Lebanon is a former French protectorate. In an interview with L’Orient-Le Jour, Le Pen also pledged to restore France’s relationship with Syrian President Bashar al-Assad if elected president. “With geopolitics, one must often make the choice in favour of the lesser evil and for me, the lesser evil is Bashar

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in armed conflicts in Yemen, Syria or on their own territory and have tense relations with Iran, the report noted. In 2012–16, Saudi Arabia’s arms imports increased by 212 per cent compared with the figure for the previous five years, accounting for 8.2 per cent of global arms imports. India faces serious geopolitical threats from its nuclear-armed rival Pakistan and China’s rising military strength. As China becomes more assertive across Asia and invests billions of dollars in strategic infrastructure projects in Pakistan, including in contested territory claimed by India. New Delhi has tried to deepen defence co-operation with the United States and other countries in the region, such as Vietnam. Despite rising threats, and a ‘Make in India’ programme to encourage local arms production, India’s domestic defence sector is not capable of meeting New Delhi’s growing requirements, said Siemon Wezeman, a senior researcher with SIPRI. “They spend a lot of time and also money trying to develop weapons in 20 India and things just go hopelessly wrong,” Wezeman said, adding that leaves them relying on imports. Prime Minister Narendra Modi has pledged $250 billion to modernise the country’s aging military equipment, from fighter jets to guns and The amount promised by India’s submarines. The governleadership to ment wants to award conbolster its military tracts to companies, such as Lockheed Martin Corp and Saab AB, which have promised to build products in India. But Wezeman said red tape, an historic reliance on state-owned companies and constant delays hinder the country’s ability to supplant imports with domesticallyproduced weapons. This leaves India overwhelmingly reliant on foreign imports, mainly from Russia, the United States and Israel. While India’s share of global weapons imports has risen, China has increasingly been able to domestically produce weapons required by its military, SIPRI said, leading China’s share of global defence imports to fall to 4.5 per cent of the global total between 2012 and 2016 from 5.5 per cent between 2007 and 2011. Amit Cowshish, a former financial adviser for acquisitions at India’s

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France’s far-right presidential candidate Marine Le Pen

al-Assad,” the Lebanese newspaper quoted her as saying. Le Pen told Hariri that in her opinion the only realistic alternative to Assad was a Syria ruled by Islamic State. The French government insists Assad must leave office to establish peace in Syria, while saying it’s willing to talk to his government to arrange a transition. Lebanon’s Iranian-backed Hezbollah is fighting in Syria alongside Assad’s troops, a military intervention that Aoun supports and the Sunni majority party headed by Hariri opposes. While polls show Le Pen ahead in first-round support, no surveys so far have shown her close to a victory in May’s run-off. � Dana Khraiche The bottom line French far-right Presidential candidate caused offence during a visit to Lebanon where she refused to wear a headscarf.

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International Relations

Europe Sidesteps Trump To Move On Iran ▶▶Leaders in Europe working towards profitable Iran relations ▶▶“You need to get used to seeing our faces in Tehran”

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Before the platters of roast lamb and fragrant rice were served, visiting executives squeezed into the front room of the Swedish ambassador’s home in Tehran to applaud ambitious plans to restore Iran as a top trade partner. The men and women representing companies including AstraZeneca Plc and truckmaker Scania AB had flown in with Prime Minister Stefan Lofven, who was making the first official visit to Iran by a Swedish premier since a mediation effort during the 1980s war with Iraq. The 75-member delegation was intent on doing business, but the politics was inescapable: as the US under Donald Trump steps away from Iran, Europe’s moving forward, unwilling to throw away years of tortuous diplomacy. “Before sanctions, Iran was the biggest export market for Sweden in the Middle East,” Trade Minister Ann Linde said at the February event attended by Iranian businessmen and

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Politics/Policy ministers. “We hope it will be again.” euro pact between Scania and Iranian European leaders are emerging as heavy-vehicle maker Oghab Afshan to strong backers of the 2015 six-nation produce 1,350 buses. Hamid Akbari, a nuclear deal with Iran, derided by member of Oghab Afshan’s board, said Trump as one of history’s dumbest. the company was in talks with three They want their companies to prosper Swedish lenders for financing. in a largely untapped market of 80 For Europeans turning up in Iran, million people, but there’s a deeper pledging to boost business is the easy motive, to bolster the moderate polpart. Delivering is harder, especially iticians led by President Hassan as sanctions not lifted under the 2015 Rouhani seen as the best bet for an accord, primarily US curbs punishing Iran that’s freer at home and more Tehran for its missile programme and more willing to cooperate in defuslinks to groups such as Hezbollah that ing Mideast flashpoints. Russia, America designates as ter“Before sanctions, another signatory to the agreerorist, continue to scare Iran was the biggest ment, is a key ally of Iran. away major banks. export market for “The Europeans want an admin- Sweden in the Two of Iran’s biggest Middle East. We istration in Iran that will stick to post-sanctions deals, conhope it will be the deal and pursue a moderate tracts for Airbus and again.” engagement with Europe that has —Ann Linde Boeing aircraft worth a begun already,” Ellie Geranmayeh, combined $26.6 billion, policy fellow for the Middle East have been complicated by and North Africa programme at the remaining US restricthe European Council for Foreign tions and difficulties Relations, said by phone. For a arranging finance. The start, Rouhani, who broke Iran out Trump administration accuses Iran of of its isolation in 2013, faces a likely being a destabilising force that should re-election fight in May with hardbe confronted rather than rewarde. line opponents who are suspicious of Finding ways to “finance business in closer ties with the West. Iran” is a major challenge, Linde said. The moderates merit support, said Sweden’s export credit agency, SEK, a senior Western diplomat in Tehran, was doing more to guarantee shortwho requested not to be named in line term loans but longer financing deals with protocol. To help achieve that, remained problematic, she said. Iran’s states try to show their business comown banking system is only slowly munities that Iran is a good market to recovering from years cut off from enter, he said. international finance. The Swedish trade delegation was France’s Treasury is planning sandwiched between a high-level to issue direct loans to businesses French political and commercial visit, that want to work in Iran, accordled by Foreign Minister Jean-Marc ing to a government official, while Ayrault, and an automobiles conferFrench business lobby group Medef ence attended by senior executives International has set up an office in from Peugeot, Citroen, Renault and Iran. Hyundai. European leaders were quick to “I’ve been to Iran 25 times in less point out that they considered last than two years,” Jean-Christophe month’s launch of a ballistic missile by Quemard, Peugeot’s executive viceIran -- seized on by the Trump White president for the Middle East and House which put Tehran “on notice”, Africa, told reporters when asked if didn’t contravene its commitments his latest trip was in any way motiunder the nuclear accord. But they did vated by Trump’s policies. “What does express concern and called on Tehran this mean? Times have changed. You to be more constructive in regional need to get used to seeing our faces in conflicts. � Golnar Motevalli Tehran.” The bottom line European leaders are keen Sanctions imposed on Iran over its to work with Iran, and its moderate politicians, despite Trump’s criticisms of the country. disputed nuclear programme slashed its trade with Sweden by 90 per cent to about 1 billion krona ($112 million) in 2012. Among the documents signed during Lofven’s visit was a 110-million politics-and-policy

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26/02/2017 17:54


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24/02/2017 16:01


A better way to teach AI new tricks 25

Become a cyborg (prices start at just $425) 26

US land auctions move online—and away from activists 25

Innovation: A needlesize camera for seeing into damaged joints 27

1 — 15 March, 2017

It’s a Dirty Job,

Forth Engineering’s prototype is designed to gather data on and monitor its irradiated environment

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But Something’s Gotta Do It ▶▶The UK looks to drones to help mind its nuclear waste

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▶▶A new model of cleanup bot “will make its own decisions” To enter Europe’s largest nuclear site, a visitor must be wearing construction coveralls, steel-toed boots, a hard hat, and a pager-size device that rings if radiation levels get too high. Contamination enters the body through open wounds, so any cuts must be ­bandaged with medical tape. On the way out, after you remove your ­protective gear, a security guard sweeps your body with a handheld detection device to make sure nothing latched on. It’s as unsettling as it sounds. This is Sellafield, on the coast of the Irish Sea, more than 300 miles north (and a bit west) of London. At the dawn of the Cold War, the UK chose this site as the place to begin enriching uranium for its first nuclear weapon. But in the

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country’s haste to build a bomb, little thought was given to disposing of the waste. Much of it was placed in concrete ponds larger than Olympic swimming pools. In 1957 a reactor fire contaminated the local countryside and a devastating meltdown was narrowly avoided. Generations later, scientists, engineers, and government officials are still grappling with the leftover waste. The concrete ponds, surrounded by dilapidated and moldy scaffolding, are filled with murky green water that keeps the waste cool. Hundreds of tons of radioactive material are in the structures, risking leaks into the soil or a fire. The area has been classified an “intolerable risk” for falling short of modern safety standards, a

problem that must be addressed over the next two decades. “There is a time ­imperative,” says Rebecca Weston, Sellafield’s technical director. That urgency is leading Weston and her colleagues to seek help from robots, an important step for the delicate business of nuclear waste. Advances in software and hardware engineering are allowing machines to reach contaminated areas that humans could never survive. The UK government is spending about £2 billion ($2.5 billion) a year at Sellafield, helping make the other­wise sleepy countryside region of West Cumbria an unexpected proving ground for nuclear decommissioning technology. “I’ve travelled in Korea and Japan,

26/02/2017 17:50


Technology

▶ The Sellafield nuclear waste site in northern England is an unusual proving ground for hardy robots

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▼ A submersible VideoRay robot steers through one of Sellafield’s contaminated waste pools

to Fukushima, and West Cumbria is looked at as a ­technology hub,” says Mark Telford, managing director for Forth Engineering, a robotics company working with Sellafield. Forth is developing a £500,000 sixlegged machine about the size of a coffee table. The robot is packed with cameras and sensors to see its environment. A giant pincher on the front grabs contaminated material and breaks it up. Magnets on the machine’s feet will enable it to crawl up walls.

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Artificial intelligence software allows a team of the robots to work without humans at the controls, communicating with one another to complete a task. If one breaks down, others take over. “The robot will make its own decisions on how it walks, what it sees, and its interpretation of its ­environment,” Telford says. Forth has a working prototype, but says the finished product is 18 months away, will need to stay plugged in to a power source, and requires a human operator’s OK for delicate tasks like moving a fuel rod. It’s also unclear how it’ll respond to long-term radiation exposure. Even for robots, Forth says, there’s no coming back from some of the most dangerous areas. Inside Sellafield’s decaying waste ponds, robots from other manufacturers scoop up sludge and other debris and drop it into steel containers later placed in silos. “That little machine has removed thousands of items,” says drone operator Keith Ashbridge. The robots are giving officials

a look inside contaminated areas that have long been abandoned. Createc, another startup working with Sellafield, has developed a ­quadcopter drone nimble enough to fly in the office kitchen, or through holes made by the 1957 reactor fire. It’s loaded with cameras, air-pressure ­ yrometers, accelerometers, sensors, g and other measuring tools that stream back 3D maps locating the radioactive material. Officials in Japan have hired Createc to build maps for the Fukushima cleanup. Those who’ve worked on decommissioning Sellafield say technology isn’t a magic bullet. The 70-year-old site— home to 10,000 employees and its own rail service and police and fire departments—looks its age and will ­eventually cost at least £90 billion to properly clean up, says Paul Dorfman, honorary senior researcher at the Energy Institute at University College London. And even as robots work to scrub Sellafield’s most dangerous areas, more waste continues to arrive from elsewhere in the UK, Europe, and Japan. All told, Sellafield houses one of the largest stockpiles of plutonium in the world and receives about £800 million a year to reprocess and manage spent nuclear fuel. Dorfman says Sellafield’s problems reflect how the expense and danger of dealing with nuclear waste are often hugely underestimated. The g ­ overnment’s estimated cost to clean up Sellafield has almost doubled over the past decade. With renewable power becoming cheaper, Dorfman says the carbon-free benefit of nuclear power isn’t worth the risk. “You have to understand the depth of the problem,” he says. Nuclear waste remains ­radioactive for thousands of years, and the ­government still doesn’t have a long-term place to store it, even if robots can clean it up effectively. The US, France, Germany, and Japan face similar storage challenges. Even if every nuclear power plant in the world were shut down tomorrow, it would take a century or more to deal with the waste, and that task will increasingly fall to machines. With powerful computers being squeezed onto smaller chassis, robots in the next decade will acquire better decisionmaking skills, giving them the ability to improvise within unpredictable

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Technology environments, says Paul Mort, who leads Sellafield’s ­robotics and autonomous systems development. “It’s not that far away,” he says. In an era when people are concerned about job-­snatching robots, Mort says, this is one task humans will gladly cede to machines. �Adam Satariano The bottom line Europe’s biggest nuclear waste dump is a proving ground for increasingly selfsufficient drones, which are working to clean it up.

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Machine Learning

AI Speed-Reading For the Masses

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▶▶“The promise here is that you use data a lot more efficiently”

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▶▶Startup Gamalon gives imagerecognition bots a head start

In 2012, Google researchers found a whimsical way to show off the power of the company’s ­artificial i­ntelligence technology: They trained computers to recognise cats in YouTube videos. The project took years to pull off and required 16,000 ­computer p ­ rocessors to analyse 10 million images. That type of AI, known as deep ­learning, now powers Amazon.com’s smart speaker Echo and Tesla’s self-driving cars. While such ­software can seem magical, it still typically requires thousands of computers to spend months scanning millions of data points. Ben Vigoda, an MIT-trained computer scientist (and nephew of late actor Abe Vigoda), says he can cut out most of the grunt work and make AI projects doable for businesses without Googlelevel resources. His company, Gamalon Machine Intelligence, uses p ­ robability models to teach a computer to ID ­something like a cat in a few minutes by showing it just a few images. “You can run our software on a laptop, and it

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takes 100 times less horsepower to find an answer,” says Vigoda, who started Gamalon in 2013 but is showing its products to the public for the first time. A typical deep-learning system needs to see tons of cats to learn all their ­variations—cats with every length of legs, whiskers, and so on. Gamalon’s system gets a head start on this process with a new form of what’s known as probabilistic programming. Shown a cat with a long tail and another with a short one, it can fill in the gaps. “The promise here is that you use data a lot more ­efficiently,” says Brenden Lake, a data science fellow at New York University. Vigoda’s previous business, Lyric Semiconductor, hard-wired ­probability functions into computer chips. Lyric’s tech has found its way into Echo and cars, where it helps guess what people are saying, and into smartphones, where it improves the results of touches and swipes. With $4.5 million in funding from Silicon Valley investors and backing from the Defense Advanced Research Projects Agency, the Pentagon’s research and development arm, the Gamalon team has spent the past few years advancing probability technology to broaden its usefulness. Academics have been working on probability-based AI systems for more than a decade, but few have made it to the real world. Microsoft’s TrueSkill, which ranks Xbox gamers, uses similar technology, as does pioneering startup Geometric Intelligence, acquired last year by Uber. Such systems have been tough to expand beyond very specific uses because humans still have to do the complex, time-consuming math to adjust their probability models. Gamalon’s big claim is that its software can adjust its own models, essentially reprogramming itself. While Vigoda says his technology can be applied broadly, his company has started by focusing on a niche. Its first products, called Structure and Match, are designed to scour common databases and fix ambiguities, like ­different spellings for customer names and addresses. Communications-hardware maker Avaya, one of Gamalon’s handful of early customers, has been using the software—which costs $10,000 a month for analysis of each 100,000 rows of text in a database—for this kind of task. Thousands of companies resell Avaya’s products and record customer

data in different ways. To keep its databases effectively searchable, Avaya used to use people to pore through them for months at a time, turning “St.” into “Street” or “HP” into “HewlettPackard.” “With Gamalon, we were able to match 85 percent of the data in minutes instead of days,” says senior director Cary Gumbert. Unlike find-andreplace search tools, the software can recognize context, so it doesn’t turn, say, the “St.” in “St. Louis” into “Street.” “If we train it more and tell it where it has missed something,” Gumbert says, “it will only get better.” �Ashlee Vance The bottom line Gamalon says it can cut AI training requirements from millions of photos and thousands of computers down to a few of each.

E-Commerce

Why You Need the Internet to Drill ▶▶Website EnergyNet is the leading hub for federal land leases

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▶▶“We have a lot of protesters. You can’t be too careful these days”

The Obama administration largely put an end to old-school federal energy auctions last year, just when they were starting to get interesting. Those barker-and-gavel sessions, long the primary way the Bureau of Land Management sold leasing rights for oil and gas drilling on federal property, had become targets for climate activists. A year ago, a conservationist worried about drilling near her home in Utah paid $2,500 for the rights to 1,120 acres of federal land. (She put the purchase on a credit card.) The BLM rescinded the lease months later after she’d made it clear she didn’t intend to drill. The bigger disruption came in May, when hundreds of protesters blockaded a 7,000-acre auction at a Holiday Inn in Lakewood, Colorado. Police eventually broke the blockade, and Kathleen Sgamma, president of Western Energy Alliance, a powerful industry lobbying group, told a local newspaper she’d ask the BLM “to get rid of this circus by just holding online auctions.” Over the summer, the BLM changed its rules to do just that, and this year

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The North Sense briefly vibrates when the wearer turns to face north

Technology

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is opacity, not efficiency. “The real effort here is to take auctions out of the public spotlight and to scurry into the cover of darkness to escape people who want to protest,” says Jason Schwartz, a spokesman for Greenpeace, which helped organize the Lakewood protest. Then again, the old auction process wasn’t exactly transparent, either, says Nada Culver, director of the BLM policy group at the Wilderness Society, another conservation advocate. “The guy in the cowboy hat and the boots at the auction is not the giant oil and gas company that ends up with the lease,” she says. “This is not a process that’s ever been open to regular people.” �Mya Frazier The bottom line Sales on EnergyNet more than tripled in three years, reaching $745 million in 2016, including $158 million in government lands.

Implants

Do-It-Yourself Transhumanism ▶▶A $425 sensor-implant kit goes a step beyond wearable gadgets ▶▶“What I did before I started this was no less crazy”

“What’s that thing sticking out of your head?” a woman asks the man with a serpentine antenna between his eyes. Neil Harbisson turns, parts his bowlcut blond locks, and curves the antenna toward the buttinsky. “It’s a way to hear colour,” he says. “What’s it connected to?” she asks. Harbisson looks up at her with smiling, cobalt eyes. “My brain.” At an outdoor cafe at LA’s Original Farmers Market, passersby are constantly checking out Harbisson, 34, and his partner, Moon Ribas, 31. In her left arm, she has a Bluetooth implant designed to analyse the earth’s seismic movements. What’s it feel like? “Two heartbeats,” she says. Harbisson, whose UK passport shows he’s the first legally recognised cyborg, was born colourblind. He designed his antenna—which translates

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colours into one of 360 musical tones he’s memorised—back in 2003 with help from a cyberneticist. At first, he connected it to headphones and a laptop. Eventually, he persuaded a surgeon to drill into his skull, implant a chip, and fuse the antenna to his occipital bone. The couple say merging technology with their bodies has created new senses. “We are trans­species,” says Ribas, whose three-year-old seismic implant vibrates at different intensities based on data from online seismographs. As with other bio­hackers, their claims—he says my colour registers as an F sharp, for example—are difficult to verify. But their London startup, Cyborg Nest, is manufacturing DIY kits meant to bring their transhumanism closer to the mainstream. The first kit, the North Sense, is essentially a $425 wearable implant. “It does one simple thing,” says co-founder and Chief Executive Officer Liviu Babitz, who was fitted with one in December. “A short vibration every time you’re facing north.” That doesn’t sound like an advantage worth body modification, but Babitz likens the experience to a second childhood. “I remember my son discovering things as his senses developed and the look in his eyes when it happened,” he says. “I feel the same.” The sensor itself, a compass chip that detects magnetic fields, is easy to remove. The tough part is installing two pocket-size titanium barbells onto the wearer’s chest, like a piercing. When the skin heals, typically after a month or two, the silicone-coated

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only two of its 26 auctions will be held in person. The rest have been contracted to EnergyNet, a privately held company in Amarillo, Texas, that runs the country’s largest auction site for oil and gas properties. Obama’s BLM gave EnergyNet a five-year exclusive to manage the bureau’s online auctions, and the company has since made similar deals with state agencies in Colorado, New Mexico, North Dakota, Texas, Utah, and Wyoming. The number of federal EnergyNet takes energy-lease auctions a 1.5 per cent comto be held in person mission on its BLM this year, out of a total of 26 auctions, and sales of federal and state lands on the site topped $158 million last year. Overall sales on the platform rose to $745 million, more than triple the 2013 figure. Partly, that’s because cratering oil prices have pushed leaseholders to put their rights up for sale. EnergyNet auctions naturally filter out most protesters. Under the terms listed on the website, registered lessees must be able to prove that they’re professionals “engaged in the oil or gas or other minerals business on an ongoing basis.” Still, Chief Executive Officer William Britain is clearly worried about activists. He responded to an interview request by asking that a Bloomberg Businessweek editor call to confirm the reporter’s identity. “With the government work we are doing, we have a lot of protesters,” Britain says. “You can’t be too careful these days.” Britain, previously an oil and gas driller, founded EnergyNet in 1999 and started pitching the site to the BLM in 2009. At the time, a Reagan-era federal mandate required that all auctions be conducted in person and relatively near the land being auctioned, so “we went to work trying to get that law changed,” he says. Eventually, the company helped get language giving the BLM power to shift its auctions online tucked into the 2015 National Defence Authorisation Act, the annual Pentagon budget. “Everyone should want it to be easier to buy federal leases,” Britain says, “rather than just these little regional live auctions they’d been having.” Anti-drilling activists say the result

CEO Babitz was fitted with one in December and compares the experience to a second childhood

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FROM LEFT: COURTESY NORTH SENSE (2); COURTESY TRICE MEDICAL (3)

g.

Technology North Sense slides onto the implant. Babitz says the sensor is designed to allow the free flow of air and avoid skin irritation, and it’s waterproof. It’s certainly nowhere near as conspicuous as Harbisson’s antenna, though it goes a step beyond less invasive wearable devices, such as the ankle kit from startup North Paw that also vibrates when facing magnetic north. Cyborg Nest, launched in 2015 with about $200,000 in pooled funds, began shipping North Senses in February. The company says about 1,000 people have ordered one. (Babitz verifies their identities to make sure they’re adults.) The Romanian, who used to work for the human-rights group Videre Est Credere getting cameras and other technology to oppressed communities to expose government abuses, admits his wife and friends have been skeptical. Then again, he says, laughing, “What I did before I started this was no less crazy.” Stanford genetics department chairman Michael Snyder says these implants aren’t as fringe as they sound, noting that he employs similar medical sensors to detect colds, Lyme disease, and diabetes risk. He calls the North Sense “analogous to the radiation monitor that I use.” The World Economic Forum says Cyborg Nest’s type of biohacking could be commonplace by 2020. “If you’re alive today, you’re probably going to end up having at least one electronic attachment,” Babitz says. Journalist Mark O’Connell, who wrote To Be a Machine, a book about the transhumanist movement, isn’t convinced that the niche use for the North Sense will appeal to a mass audience. “I don’t see it taking it off,” he says. “Then again, tattoos are everywhere now.” Babitz declined to discuss Cyborg Nest’s next projects, but Harbisson and Ribas have a wish list: a Bluetooth tooth for silent communication; a way to detect pollution; eyes in the back of the head. The big question, Harbisson says, is how to adjust a person’s mental perspective to accept those kinds of inputs. “The body isn’t the focus,” he says. “Modifying our minds is what really changed us.” �Adam Popescu The bottom line Cyborg Nest has sold about 1,000 DIY implants that vibrate when a wearer faces north, retraining their sensory comprehension.

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Innovation Needle Camera Form and function

Innovator Jeffrey O’Donnell Sr.

The Mi-eye2 is a wide-angle camera in a disposable needle with a USB-connected tablet meant to diagnose joint injuries without an MRI.

Age 56

1. Insert After numbing a patient’s knee, shoulder, or other joint, a surgeon inserts the 0.09-inch Mi-eye2 needle.

Chief executive officer of Trice Medical, a 35-employee startup in King of Prussia, Pa.

Origin O’Donnell founded Trice Medical in 2011 with his son, Jeffrey Jr., and engineer Richard Washburn. He’d been a managing partner at BioStar Ventures, an early investor.

Funding Trice has raised about $22 million for Mi-eye2, its only product, from venture capital firms and individual investors.

27

① Customers The FDA-cleared Mi-eye2 is meant for orthopedic surgeons. The imaging system sells for $495, and the tablet rents for $250 a month.

2. Rivals Competing in-office orthoscopic systems are bulkier, with thicker, nondisposable needles and bigger processors, and typically display only a 75-degree field of view.

View Video from the camera shows a 120-degree view of the interior of the joint on the tablet, allowing the surgeon to spot tears and other injuries.

Next Steps Trice plans to launch Mi-eye2 internationally in the second half of 2017. Nirav Amin, an orthopedic surgeon and professor of sports medicine and knee reconstruction at Loma Linda University Medical in Loma Linda, Calif., says the device’s size puts his patients at ease and the disposable needles reduce infection risk. “It’s a fantastic new product,” he says. �Michael Belfiore

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▶▶Saudi Aramco considers opening up historic IPO to locals, as winds of change sweep industry ▶▶“It’s a way of giving back to citizens, especially as some measures have impacted incomes”

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banks to advise on the Saudi listing, the people said. No final decisions have been made on the share pricing or listing venue, the people added. An Aramco spokesman said the company doesn’t comment on rumors or speculation. Saudi Arabia plans to sell shares in the company as part of plans by Deputy Crown Prince Mohammed bin Salman to set up the world’s biggest sovereign wealth fund, reduce the economy’s reliance on hydrocarbons, and diversify the economy. The historic sale could value Aramco at more than $2 trillion, Bin Salman said in an interview with Bloomberg.

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usually far below their true worth. The stock market regulator last year approved new rules to price initial public offerings based on demand. “The government has in the past used the IPO process as way to share wealth with its nationals,” John Sfakianakis, director of economic research at the Gulf Research Center, said. “It’s a way of giving back to citizens some of the state’s wealth, especially as some recent measures have impacted incomes.” Saudi Aramco, as the company is known, is considering listing venues in the US, UK and Asia, in addition to Riyadh, and is planning to choose local

ILLUSTRATION BY SJC, SHUTTERSTOCK (2)

Saudi Arabian Oil Co., gearing up for what may be the world’s biggest initial public offering, is considering discounted shares for local investors, according to people with knowledge of the matter. The oil company has discussed ways to structure the offering in different tiers, allowing Saudi buyers to receive the stock at a lower price than international investors, the people said, asking not to be identified as the talks are private. Shares in companies owned by the Saudi government have traditionally been offered to locals at a nominal value of about 10 riyals ($2.67) each,


A calculated risk on Turkey’s exchange 31

The value of IPOs on the Saudi Stock Exchange has slumped in the past two years as the fall in the oil price and government austerity measures weighed on investor sentiment. Saudi companies raised $273 million dollars through share sales last year, the lowest since 2013, according to data compiled by Bloomberg. International and local banks have been pitching to advise Aramco on the planned share offering, with the company expected to appoint additional banks to work on the IPO over the next few weeks, the people said. Aramco is seeking advisers to help it select underwriters, make decisions on potential listing venues and ensure the IPO goes smoothly, and had shortlisted Evercore previously, people familiar with the talks had said. Deputy Crown Prince Mohammed bin Salman, who is leading the IPO as part of a plan to reduce the economy’s reliance on hydrocarbons, has said the offering could value the business at more than $2 trillion. Aramco added Moelis & Co. to the list of advisers on the offering, people familiar said in February. The firm joins JPMorgan Chase & Co. and a boutique advisory firm run by former Citigroup Inc. banker Michael Klein, who were appointed last year. Meanwhile, the country’s diversification plans have also seen changes in other key areas. Saudi Arabia’s Samba Financial Group named Rania Mahmoud Nashar as chief executive officer, the second woman

“You’re seeing more and more signs of social change occurring over the last year,” —Monica Malik

to have recently ascended to a top finance position as the conservative kingdom goes through unprecedented social and economic change. Nashar’s appointment was effective from 19 February, according to a statement to the stock exchange. She replaces Sajjad Razvi who resigned for personal reasons. This comes after NCB Capital Co. CEO Sarah Al Suhaimi was named the first woman to chair Saudi Arabia’s stock exchange Tadawul, which is the region’s largest. The appointments are significant in a country where the female unemployment rate is more than 34 per cent and women aren’t allowed to drive. Saudi Arabia’s religious authorities enforce an austere interpretation of Islam that limits the public role of women and places them under male guardianship. Efforts to improve women’s rights that started under the former King Abdullah are accelerating. The number of working women jumped 50 per cent between 2010 and 2015, and more females are now working in male-dominated fields such as banking. Under the Saudi Vision 2030 and National Transformation Plan announced last year, the government says it wants to increase women’s participation in the workforce to 30 per cent from 22 per cent by 2030. “Social change is intrinsic to the National Transformation Plan,” said Monica Malik, chief economist at

Offerings Slump The value of IPOs has dropped after a decline in the Saudi Stock Exchange $8bn

Abu Dhabi Commercial Bank PJSC. “You’re seeing more and more signs of social change occurring over the last year.” Samba’s Nashar has almost two decades of banking experience and has had leadership roles at the bank through its executive track programme. Al Suhaimi replaces Khalid Al Rabiah as head of the bourse. She’s expected to keep her position at NCB Capital, the investment banking unit of National Commercial Bank, a person familiar with the appointment said. Al Suhaimi was the first female head of a Saudi investment bank when she assumed the role in 2014. Before joining NCB Capital, she was chief investment officer at Jadwa Investment. Her father, Jammaz Al Suhaimi, was the head of the Capital Market Authority, the market regulator, until 2006. The kingdom’s $439 billion stock exchange, which opened to foreigners in 2015, is seeking to attract more overseas investment as part of the country’s plans to diversify the economy away from oil. � Matthew Martin, Ruth David and Dinesh Nair, with Vivian Nereim

29

The bottom line A trillion-dollar IPO could soon be open to locals in Saudi Arabia where unprecedented change is transforming society.

Currency

Yemen Crisis Deepens Amid Rial Rout ▶▶Currency instability poised to worsen woes with starvation

$7bn $6bn $5bn $4bn $3bn $2bn DATA: BLOOMBERG

ILLUSTRATION BY SJC, SHUTTERSTOCK (2)

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$1bn 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

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▶▶“If the rial devalues, it worsens the hunger crisis in the country”

Anwar Abdullah goes to work every day but he hasn’t been paid in five months. When prices for wheat, sugar and other staple foods spiked earlier this month, the Yemeni school teacher feared for his three children. A civil war that flared into a regional conflict has devastated Yemen’s

26/02/2017 20:31


Markets/Finance A Yemeni child carries empty jerrycans amid continuing wide spread disruption of supplies

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in the streets.” Yemen was already unstable before the outbreak of civil war in March 2015 plunged it into chaos, allowing al-Qaeda to thrive. Houthi rebels drove President Abd-Rabbu Mansour Hadi’s government from Sanaa to the southern port of Aden. Saudi Arabia and Arab allies began bombing Houthi forces and deployed ground troops to support Hadi. Most foreign powers recognise Hadi, while the Gulf Arabs’ regional rival, Iran, instead recognises the Houthis. The economy shrank by 28 per cent in 2015, as Yemen’s already modest output of oil tumbled, and was set to contract further in 2016, according to the latest available data from the World Bank. “We are looking at a serious risk of starvation for a Digits

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Stocks are more expensive relative to company earnings than they’ve been since April 2002

$20t

Total market value of stocks in the S&P 500 index on 13 February, a record. That’s about $14 trillion more than they were worth on 9 March, 2009, the market’s low point during the financial crisis

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ARA KRULWICH/THE NEW YORK TIMES/REDUX

More than $1 trillion is held by fund giant Vanguard

AFP

30

economy and pushed millions to the brink of starvation. The local currency’s depreciation and the bombing of ports and roads have disrupted the distribution of food imports on which the poorest Arab country depends. Two of every three of the nation’s 27 million citizens struggle to get enough food to survive, according to the United Nations. “The situation is deteriorating rapidly because of the conflict,” Reem Nada, a spokeswoman for the UN’s World Food Programme, said by phone from Cairo. “The current level of hunger in Yemen is unprecedented.” Yemen is part of a broader crisis that’s also convulsing Nigeria, Somalia and South Sudan. Humanitarian operations need $4.4 billion in aid by the end of March to avert a “catastrophe” in these countries, UN Secretary General Antonio Guterres has said. The UN declared a famine in parts of South Sudan on 20 February. Wholesale prices for wheat in the Yemeni city of Taiz surged by more than 40 per cent on 12 February, when the black-market value of the currency, the rial, plunged 30 per cent against the US dollar. The latest price spike suggests that food imports, which provide for 90 per cent of the country’s needs, could become even harder for people to afford. “What can we do? We have nothing,” Abdullah, 38 years old, said on 14 February from the capital Sanaa. “With the new price hikes, we will go begging

large proportion of the population,” Sherin Varkey, UNICEF’s acting representative for Yemen, said by phone from Sanaa. The rial slumped to 390 to the dollar on the black market on 12 February, after trading at about 300 for several months, money changers in Sanaa, Aden and the city of Taiz said by phone. As a result, a 50 kg (110 pound) sack of wheat, which many Yemenis buy to make bread, jumped 42 per cent that day to 8,500 rials, while the same amount of sugar rose 27 per cent, according to Ahmed al-Sharabi, a food wholesaler in Taiz. “The rial is very much overvalued and the government isn’t in a position to defend it,” Peter Salisbury, a senior research fellow at Chatham House, said from London. “If the rial devalues, it worsens the hunger crisis in the country.” The rial returned to 300 per dollar on the black market last month, as both the Hadi government and the Houthis imposed controls on money changers. It has fluctuated to as much as 330 to the dollar since then, according to Taha Ahmed, a Taiz-based money changer. Four of Yemen’s 21 provinces; Abyan, Hadhramaut, Taiz and Hodeida, are experiencing a food “emergency,” meaning that more than 15 per cent of their populations suffer from “acute malnutrition,” the UN said in a February report. “Hodeida and other ports operated by the Houthis are operating way below capacity and in many cases have been bombed quite severely,” Adam Baron, a Yemen specialist at the European Council on Foreign Relations, said by phone from Vienna.

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Markets/Finance Hot Tickets There’s no indication investors were aware of the fraud. Their spokesmen declined to comment.

Angelica, Eliza … and Ponzi US prosecutors say an investment that promised profits of at least  per cent from buying and reselling blocks of tickets to hot shows including Hamilton was a scam. Among the more than unwitting investors were billionaire hedge fund manager Paul Tudor Jones and tech mogul Michael Dell, according to people with knowledge of the matter. �Matt Robinson, Katherine Burton, Zeke Faux, and Christian Berthelsen

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,

Hamilton’s ticket prices hit the highest in Broadway history.

“Roads have been bombed, crucial bridges have been bombed, fuel costs are astronomical.” Najeeb Mohammed lives in Taiz, on the front lines of the war. The crisis has cost him his sales job and his apartment, which was damaged in fighting, and the father of five scrapes by as a motorcycle-taxi driver. “Even tea is a luxury,” he said by phone. “This is no longer a life.” � Sam Wilkin and Mohammed Hatem The bottom line The ongoing conflict in Yemen has caused major currency instability, which could now cause mass starvation as food prices soar.

n,

Trading

Summing Up Turkey’s Stock Exchange ▶▶Borsa Istanbul tackles investors over irregular price action

ARA KRULWICH/THE NEW YORK TIMES/REDUX

AFP

▶▶Exchange has a fail-safe to prevent excessive moves

Turkey’s capital markets regulator has slapped punishments on three investors it identified as responsible for irregular price action in two of the country’s biggest companies. Algorithmic trading was to blame for the sudden moves in the shares of Turkcell Iletisim and Koc Holding near the close of trading towards the end of February, Borsa Istanbul Chairman and Chief Executive Officer Himmet Karadag told Bloomberg, shortly before three men were

28_MF.indd 31

identified by the Capital Markets Board for their alleged involvement. The regulator will communicate with investment firms to prevent the individuals from engaging in any algorithm trading for three months, according to the regulatory filing. The restrictions on the trio’s activities include a ban from short selling and margin trading, and their orders will be subject to increased scrutiny. The Borsa Istanbul exchange identified where the trades were executed from and submitted the information to the Capital Markets Board, the country’s market regulator, Karadag said in the interview ahead of the regulator’s announcement. He said the exchange has a fail-safe to prevent excessive moves due to algorithmic trading in the form of circuit breakers, which were activated when each dropped by about 10 per cent within seconds. Turkcell has a 4.9 per cent weighting on the nation’s benchmark equity index, while Koc Holding accounts for 4.5 per cent of it. Algorithmic trading is relatively new to Turkey and wreaked havoc in the market last year, when an unknown trader or group of traders using brokerage Yatirim Finansman dictated market moves with trades that were sometimes double the market’s average volume. Local investors began referring to the mystery trader as “the Dude,” and its identity was never revealed. Yatirim Finansman Chief Executive Officer Seniz Yarcan told Dunya newspaper in April last year that the abnormally large trades weren’t a single investor, “but a big, new fund investor

profile that trades with algorithms.” The Borsa Istanbul opened up to such investors after it moved to the Nasdaq system in November 2015 with a technology upgrade, Yarcan said. “Using this many algos on the Borsa Istanbul is like putting a Ferrari engine in a Murat 131,” said Burak Cetinceker, a fund manager at Istanbul-based Strateji Portfoy, referring to a Turkish-produced family car, a version of the Fiat 131. “You can drive it, but you can’t predict where it’ll go.” In algorithmic trading, computers relying on a pre-defined set of instructions execute trades rather than humans. The high speed and frequency of such computer-generated trading can cause violent price swings or so-called flash crashes in the assets being purchased or sold. On 22 February, both Koc, Turkey’s biggest group of companies, and Turkcell, its largest mobile phone company, suddenly plunged about 10 per cent, triggering the circuit breakers. The shares erased losses after trading was restored. During the plunge, almost all of the sell orders were placed by a single brokerage, Finans Invest, a unit of Finansbank AS, according to data compiled by Bloomberg. Finans Invest didn’t immediately respond to requests for comment. � Asli Kandemir and Tugce Ozsoy

31

The bottom line Turkey’s stock exchange is vulnerable to algorithmic trading and has a fail safe built in to maintain stability.

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he pit is at least 15 feet deep and more than 50 feet wide. It’s in a nondescript lot at Crenshaw Boulevard and West 120th Street, not far from Los Angeles International Airport. If not for the huge pile of dirt next to it, you’d never know it was there. Seen from the top of the parking garage at SpaceX, the aerospace startup founded by Elon Musk, the hole is an eyesore among eyesores—a crater in asphalt, fenced in by rusty-­looking steel plates. But Musk, the chief executive of both SpaceX and the electric car company Tesla, is quite proud of this pit. He started digging as a spur-of-the-moment thing one

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weekend at the end of January. The idea came to him while sitting in a traffic jam early on a Saturday morning in December. “Traffic is driving me nuts,” he tweeted. “Am going to build a tunnel boring machine and just start digging.” Within an hour, the project had a name and a marketing platform. “It shall be called ‘The Boring Company,’ ” he wrote. “Boring, it’s what we do.” Two hours passed, and Musk tweeted again: “I am ­actually going to do this.” It sounded like a put-on. Musk is a serious person, but he can also be something of a loose cannon, making outlandish The SpaceX parking lot near LAX

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statements designed to troll the press or simply amuse himself. In a 2015 interview with Stephen Colbert he semi-seriously endorsed dropping nuclear weapons on Mars; last year he implied on Twitter that he’s developing an Iron Man–style flying suit for the Pentagon. Most reporters assumed that the tunnel thing was another one of his jokes. Musk wasn’t joking. At least that’s what he tells me as we sit in the SpaceX offices in Washington. For years he’s been thinking about tunnels—both out of a personal fascination and because they’d be an important component of the Hyperloop, the fanciful high-speed rail system he proposed in 2013. All the while he’s been quietly encouraging anyone who asks him about new business opportunities to consider digging for a living. “I think they were hoping I’d say some sort of iPhone app that they could make,” he says with a smile. “I would just say, ‘Do tunnels.’ It would obviously solve urban congestion—and we wouldn’t be stuck in soul-destroying traffic all the time.” As Musk tells it, the LA traffic jam was a breaking point. Screw it, he thought, I’ll do tunnels myself. Within days of his tweetstorm, he acquired a domain name— BoringCompany.com—and appointed a leader for the project, Steve Davis, a senior SpaceX engineer who designed the guidance systems for the company’s first rocket. The barely sketched plan was to dig lots of tunnels for cars and high-speed trains. Mostly, Musk was going to approach it in his usual way: He’d figure it out as he went along. One of the advantages of running two large industrial companies is that you can secure earth-moving equipment on short notice. And so, around noon on a Friday in January, an excavation crew started digging. “I was like, ‘Hey, what’s the biggest hole we can make by Sunday evening?’ ” Musk says.

35

Shortly after the 2016 election, Steve Bannon, Donald Trump’s chief strategist, implied that the incoming administration would pursue infrastructure with a fervour not seen since the New Deal. “The conservatives are going to go crazy,” he told the Hollywood Reporter. “I’m the guy pushing a trillion-dollar infrastructure plan. With negative interest rates throughout the world, it’s the greatest opportunity to rebuild everything. Shipyards,

25/02/2017 16:03


36

ironworks, get them all jacked up. We’re just going to throw it up against the wall and see if it sticks.” On Inauguration Day, Trump promised “new roads and highways, and bridges, and airports, and tunnels, and railways all across our wonderful nation.” Like the Boring Company itself, Trump’s big-league construction agenda seems a little half-baked, but the possibility has already prompted private equity firms such as Blackstone and Carlyle to plan big infrastructure investments. “Infrastructure is at an inflection moment in the United States, where both parties agree on that one thing,” said Joe Baratta, Blackstone’s global head of private equity, during a Bloomberg TV interview in late January. He said his firm would raise as much as $40 billion for the efforts. Musk wouldn’t seem to be in a particularly good ideological position to benefit from Trump’s infrastructure largesse. He’s a climate change hawk who was so closely identified with the Obama administration that Mitt Romney attacked Tesla during the 2012 debates. (Tesla had received a government-guaranteed loan in 2010.) In the next presidential election, Musk supported Hillary Clinton for president, describing Trump, in an interview with CNBC, as a man who “doesn’t seem to have the sort of character that reflects well on the United States.” But after the election, Musk made several trips to Trump Tower, impressing the president and, especially, Bannon. A former Goldman Sachs banker, Bannon is the main proponent of Trump’s “America First” economic nationalism. After meeting privately with Musk on 6 January, Bannon told an associate that he views Musk and his companies as embodying the kind of US-based job growth that Trump intends to foster. For Trump, who’s been publicly shunned by many Silicon Valley executives, the connection to Musk gives his administration a whiff of innovation and dynamism. In December, Musk was named to Trump’s Strategy and Policy Forum, an advisory group that includes IBM’s Ginni Rometty, Pepsi’s Indra Nooyi, and JPMorgan Chase’s Jamie Dimon. Musk has warmed to Trump, too. In January he offered his support for Trump’s chosen secretary of state, former ExxonMobil CEO Rex Tillerson, despite having frequently criticised oil companies in the past. “This may sound surprising coming from me,” Musk wrote on Twitter, but “Rex Tillerson has the potential to be an excellent Sec of State.” He noted that Tillerson has expressed openness to a carbon tax, a policy Musk has long supported. After Trump issued a temporary ban on immigration from seven Muslim-majority countries, Musk criticised the order but also urged his many left-leaning followers to read its full text before freaking out. Whereas Uber CEO Travis Kalanick left the Strategy and Policy Forum in response to protests, Musk is sticking with it. “Attending does not mean I agree with actions by the administration,” he wrote in a statement. “I believe at this time that engaging on critical issues will on balance serve the greater good.” Our conversation at SpaceX takes place a few hours after his 3 February meeting with Trump. Musk is attired in his strategyforum best—black suit, white shirt, blue tie—and seems sleepdeprived and loopy as he deflects my question about Trump and changes the subject to the Boring Company, launching into what I can best describe as a tunnel-themed comedy routine. “My other idea was to call it Tunnels R Us and to essentially troll Toys “R” Us into filing a lawsuit,” he says, letting out a loud and well-articulated ha-ha-ha-ha. “Now we’ve decided to troll AT&T instead! We’re going to call it American Tubes and Tunnels.” When I ask him if the tunnel venture will be a subsidiary of SpaceX or an independent company, he responds cryptically. “Don’t you read my Twitter? The Boring Company. Or TBC.

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MUSK

POINTS OUT THAT

To Be Continued.” An aide chimes in: Yes, the Boring Company, aka To Be Continued, aka Tunnels R Us, aka American Tubes and Tunnels, aka whatever, will indeed be an independent company. The Boring Company has no full-time employees yet, nor does it have a clear business model, though government contracts will almost certainly play a role. Musk says the tunneling business is a bit like the aerospace industry, which he shook up by starting SpaceX in 2002. Rockets hadn’t changed much since the Apollo programme, and research projects were slow and expensive. SpaceX differentiated itself by offering low, fixed-price launches, ­eventually winning a $1.6 billion contract from NASA to run supply missions to the International Space Station. Tunnel technology is older than rockets, and boring speeds are pretty much what they were 50 years ago. As with space launches, tunnels are often funded through cost-plus government contracts, in which the contractor assumes no risk for cost overruns, which tend to be enormous as a result. Famously, Boston’s Big Dig, which moved a section of Interstate 93 underground, was delayed by roughly eight years and cost $12 billion more than originally planned, but all tunnels tend to be wildly expensive. In LA, plans to extend the subway’s Purple Line by 2.6 miles will cost more than $2.4 billion and take almost 10 years. “It’s basically a billion dollars a mile,” Musk says. “That’s crazy.” Musk wouldn’t comment on Trump, but a person close to him says that while the Boring Company would be open to building tunnels as part of Trump’s infrastructure plan, it intends to move forward regardless of what happens in Washington. Musk says he hopes to build a much faster tunneling machine and use it to dig thousands of miles, eventually creating a vast underground network that includes as many as 30 levels of tunnels for cars and high-speed trains such as the Hyperloop. Objections spring to mind. Such as: Wouldn’t having hundreds of feet of hollow tunnels destabilise the ground? Nope, Musk says, the mining industry does it all the time. “The earth is big, and we are small,” he says. “We are so f---ing small you cannot believe it.” Not only are these megatunnels possible, he argues, they’re the only way we can rid ourselves of the scourge of traffic. “We have skyscrapers with all these levels, and we have a flat, two-dimensional road system,” he says. “When everyone decides to go into these structures and then exits them at the same time, you’re going to get jammed.” Tunnels, on the other hand, would represent a 3D transportation network. Musk chose the SpaceX parking lot as the site of his first dig, mostly because it was convenient and he could legally do so without city permits. The plan is to expand the current hole into a ramp designed for a large tunnel boring machine and then start digging horizontally once the machine is 50 feet or so below ground, which would make it low enough to clear gas and sewer lines and to be undetectable at the surface. The company, such as it is, is working on securing permits and hopes to have them by the time the tunnel hits the property line. At the moment, Musk won’t say exactly where this “demo tunnel,” as he calls it, will lead—only that it will accommodate cars and be the very beginning of a vast underground transportation network. As crazy as tunneling sounds, Musk points out that it’s a­ rguably less crazy than Silicon Valley’s go-to traffic solution: flying cars. Google’s Larry Page has funded two personal-aircraft startups, Zee.Aero and Kitty Hawk, and companies such as Uber and Airbus have skunk works. But Musk thinks flying cars are a dumb idea, at least for city travel. “Obviously, I like flying things,” he says. “But it’s difficult to imagine the flying car becoming a scalable solution.” As long as the laws of physics hold, he explains, any flying car will need to generate a lot of downward force to stop it from falling out of the sky, which means wind and noise for

25/02/2017 16:03

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“Holy shit. Holy shit! Ha-ha-ha-ha!” By now the sun is low, and Musk, SpaceX’s Davis, and I are ­dangling 20 stories in the air, on a large steel platform surrounded by a railing. The “man basket,” as it’s known in the construction business, is being lowered by an enormous crane into a 100-foot-deep shaft not far from the baseball stadium where the Washington Nationals play. I’m freezing and terrified. Musk, with a wide, open-mouthed smile, stares down into the darkness. He wears a safety harness, a hard hat, and knee-high muck boots over the suit he wore when he met the president. “Holy shit,” he says again as we step into several inches of sloppy mud. “This is cool.” It’s his first time seeing a tunnel-­ boring machine up close. Musk has brought me to the site of a municipal project to kick the cutting wheels, so to speak, on a used boring machine he’s considering. The machine is 26 feet in diameter, about 400 feet long, weighs 1,200 tonnes, and is nicknamed Nannie. It’s been used by Washington’s water utility to dig a tunnel to prevent sewage from overflowing into the Anacostia River. New machines normally cost at least $15 million, but a decade of frantic subway construction in China has created a glut, and lightly used models can be had for 90 per cent off sticker. Nannie, made by the German company Herrenknecht, has been digging only since 2015, but it looks ancient, its surfaces scaled by rust or caked in mud. Although the head looks as you’d expect—like a giant power drill—most of the work happens in the back, where conveyor belts transport mud to the surface, hydraulic pistons brace the wall, and small, narrow-gauge trains haul sections of precast concrete rings to line the tunnel. There are also systems to bring in grout and various foams as well as enormous ducts to pump out exhaust and bring in enough clean air for Nannie’s crew of 15 or so. “This is like an ecosystem,” says Musk. He plans to use a machine like this to test improvements in tunneling technology. He thinks that with more power, better materials, and a design that allows it to continue digging while installing the tunnel walls—a feat that’s impossible today—the Boring Company will be able to drastically reduce the price of digging. “To make it a little better should be easy,” he says. “To make it five times better is not crazy hard. To make it 10 times better is hard, but nobody will need to win a Nobel Prize. We don’t have to change the standard model of physics.” As we walk through the machine, Musk and Davis pepper the tunnel’s project manager, Shane Yanagisawa, with questions. They ask about grouting materials and staffing, but mostly about speed. Yanagisawa says the limiting factor is muck. Nannie’s conveyor belts can carry only so much dirt at a time. The fastest he thinks the machine can possibly run is 75 millimetres per minute. In a typical week, it moves through 300 feet of clay. Musk nods. “We’re trying to dramatically increase the tunneling speed,” he says. “We want to know what it would take to get to a mile a week? Could it be possible?” “Wow,” says Yanagisawa, taken aback. As Musk puts on his harness and steps back into the man basket

for the return trip, he seems only slightly discouraged. “It may make sense to start with something smaller,” he says. “But I think we can simplify this a lot.” As any longtime resident of Boston can tell you, tunneling tends to resist optimism. The average bridge or tunnel project costs 32 per cent more and takes 22 per cent more time than expected, according to Bent Flyvbjerg, a professor at Oxford’s Saïd Business School who studies large-scale infrastructure. The process is slow in part because the machines inevitably bump into unforeseen obstacles, such as boulders. “No matter how many tests you do, how many samples you take, you can’t know exactly what you’re drilling into,” Flyvbjerg says. Even so, Flyvbjerg is enthusiastic about Musk’s plan. “I wouldn’t just laugh it off,” he says. He thinks that Musk can speed up tunneling just by doing some simple things, such as having enough spare parts on-site to avoid long waits for repairs. “The construction industry really needs disruption,” he says. “It’s the only sector of the economy that hasn’t improved its productivity in the last 50 years.” Musk, he notes, “has a long track record of disruption.” This confidence doesn’t so much stem from anything Musk has said about tunnels, nor from any special tunnel expertise he possesses (i.e., none). Rather, it’s a handicapping of Musk himself: a guy with an uncanny ability to recruit smart people to wildly risky causes, while finding ways to make these causes—the colonisation of Mars, an electric car that’s faster than a Ferrari—seem achievable rather than ridiculous. SpaceX’s cheap rockets were perfectly tailored to an effort undertaken by NASA starting in 2004 to privatise missions to the International Space Station; Tesla’s growth was spurred by a tax credit for buyers of electric cars. Both of these policies were created by the George W. Bush administration, then embraced by Barack Obama. Musk rarely talked about the job-creating potential of his endeavours during those years, focusing instead on the advantages of electric cars over gas-powered ones and on the sheer awesomeness of space travel. “People are mentioning jobs more these days,” he tells me. “But I sort of take it for granted that if you solve problems, then it takes people to solve them.” Lately, he’s been more explicit about the economic impact of his work. “My goals,” he recently tweeted in defence of his relationship with Trump, “are to accelerate the world’s transition to sustainable energy and to help make humanity a multi-planet civilisation, a consequence of which will be the creating of hundreds of thousands of jobs and a more inspiring future for all.” Musk might be an environmentalist, and Trump might believe climate change is a Chinese hoax, but Musk’s companies employ 35,000 people, many of them working the very sorts of manufacturing jobs that Trump says are key to America’s future. Last year, Tesla began operations at its Reno, Nevada-based Gigafactory, which will eventually be the largest battery plant in the world. SolarCity, the solar panel company that Musk helped start and which recently merged with Tesla, opened a 1.2 million-square-foot factory in upstate New York. The Boring Company, Musk suggests, is a natural extension of this: “It would certainly create a lot of jobs.” Then he smirks. “A trillion jobs,” he says. “With a T.” <BW> �With Joshua Green

SOLUTION:

eds ce ent ern’s was rigLA, ost ya

TUNNELING

those on the ground, not to mention debris from midair fenderbenders. “If somebody doesn’t maintain their flying car, it could drop a hubcap and guillotine you,” he says. “Your anxiety level will not decrease as a result of things that weigh a lot buzzing around your head.” Eventually the aide says it’s time for me to ask my last question. But Musk isn’t done. He pulls off his tie, lays it on the table, and looks at me seriously. “You want to come see it?” he asks.

IT’S LESS CRAZY THAN

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AS CRAZY AS

SOUNDS,

AT

25/02/2017 16:03


A

B

C

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E

F

G

H

I

J

K

L

M

N

O

P

Q

R

S

T

U

V

W

X

Y

Z

AA

AB

AC

A

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18

Suspect identified at time murder was reported, by circumstance

19 20 21

Gangland killings

22

Arson

Argument over money or property

Burglary

23 24 25 26 27 28 29

38

30

YES

31

NO

32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55

Police officers per 1,000 persons in the US

2.2 2.1

56 57 58

2.0

59

By Robert Kolker

60

1.9

61 62 63 64 65

1.8 1998 2014

66

38_FEA_Murder.indd 38

25/02/2017 16:07

Lover


AB

AC

AD

AE

AF

AH

AI

AJ

AK

AL

AM

AN

AO

AP

AQ

AR

AS

AT

AU

AV

AW

AX

AY

AZ

Victims by age, 2014 22

BA

BB

BC

BD

BE

600

400

200

0 0 99

circumstance, 2014

over roperty

AG

Lovers triangle

Suspects by age, 2014 21

450

300

150

0

39

0 99

A tenacious data miner has built a tool that can help find serial killers and bring down murder rates—if police are willing to use it

38_FEA_Murder.indd 39

DATA: MURDER ACCOUNTABILITY PROJECT, FBI UNIFORM CRIME REPORT

AA

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38_FEA_Murder.indd 40

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tha va inc cas plu cle 90 mi

mo po Su 20 ne of at the Da too wh the las Ma Wi pe an

sile he the ing of mi He res La bu Va the is u ula vic ha lea to as pre

25/02/2017 16:07

DATA: MURDER ACCOUNTABILITY PROJECT, FBI

Hargrove at home, which is also the home office of the Murder Accountability Project

polling data to practically any subject that required statistical analysis. “In the newsroom,” he remembers, “they would say, ‘Give that to Hargrove. That’s a numbers problem.’ ” In 2004, Hargrove’s editors asked him to look into statistics surrounding prostitution. The only way to study that was to get a copy of the nation’s most comprehensive repository of criminal statistics: the FBI’s Uniform Crime Report, or UCR. When Hargrove called up a copy of the report from the database library at the University of Missouri, attached to it was something he didn’t expect: the Supplementary Homicide Report. “I opened it up, and it was a record I’d never seen before,” he says. “Line by line, every murder that was reported to the FBI.” This report, covering the year 2002, contained about 16,000 murders, broken down by the victims’ age, race, and sex, as well as the method of killing, the police department that made the report, the circumstances known about the case, and information about the offender, if the offender was known. “I don’t know where these thoughts come from,” Hargrove says, “but the second I saw that thing, I asked myself, ‘Do you suppose it’s possible to teach a computer how to spot serial killers?’ ” Like a lot of people, Hargrove was aware of criticisms of police being afflicted by tunnel vision when investigating difficult cases. He’d heard the term “linkage blindness,” used to describe the tendency of law-enforcement jurisdictions to fail to connect the dots between similar cases occurring right across the county or state line from one another. Somewhere in this report, Hargrove thought, could be the antidote to linkage blindness. The right person, looking at the information in the right way, might be able to identify any number of at-large serial killers. Every year he downloaded and crunched the most recent data set. What really shocked him was the number of murder cases that had never been cleared. (In law enforcement, a case is cleared when a suspect is arrested, whatever the eventual outcome.) Hargrove counted 211,487, more than a third of the

PHOTOGRAPH BY CAIT OPPERMAN FOR BLOOMBERG BUSINESSWEEK

40

n 18 August, 2010, a police lieutenant in Gary, Indiana, received an e-mail, the subject line of which would be right at home in the first few scenes of a David Fincher movie: “Could there be a serial killer active in the Gary area?” It isn’t clear what the lieutenant did with that e-mail; it would be understandable if he waved it off as a prank. But the author could not have been more serious. He’d attached source ­material—spreadsheets created from FBI files showing that over several years the city of Gary had recorded 14 unsolved murders of women between the ages of 20 and 50. The cause of each death was the same: strangulation. Compared with statistics from around the country, he wrote, the number of similar killings in Gary was far greater than the norm. So many people dying the same way in the same city—wouldn’t that suggest that at least a few of them, maybe more, might be connected? And that the killer might still be at large? The police lieutenant never replied. Twelve days later, the police chief, Gary Carter, received a similar e-mail from the same person. This message added a few details. Several of the women were strangled in their homes. In at least two cases, a fire was set after the murder. In more recent cases, several women were found strangled in or around abandoned buildings. Wasn’t all of this, the writer asked, at least worth a look? The Gary police never responded to that e-mail, either, or to two follow-up letters sent via registered mail. No one from the department has commented publicly about what was sent to them—nor would anyone comment for this story. “It was the most frustrating experience of my professional life,” says the author of those messages, a 61-year-old retired news reporter from Virginia named Thomas Hargrove. Hargrove spent his career as a data guy. He analysed his first set of polling data as a journalism major at the University of Missouri, where he became a student director of the ­university’s polling organisation. He joined an E.W. Scripps newspaper right out of college and expanded his repertoire from political

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of difed to ght in age he ge

DATA: MURDER ACCOUNTABILITY PROJECT, FBI

PHOTOGRAPH BY CAIT OPPERMAN FOR BLOOMBERG BUSINESSWEEK

ent der ase ual he

homicides recorded from 1980 to 2010. Why, he wondered, wasn’t the public up in arms about such a large number of unsolved murders? To make matters worse, Hargrove saw that despite a generation’s worth of innovation in the science of crime fighting, including DNA analysis, the rate of cleared cases wasn’t increasing but decreasing— plummeting, even. The average homicide clearance rate in the 1960s was close to 90 percent; by 2010 it was solidly in the mid-’60s. It has fallen further since. These troubling trends were what moved Hargrove to write to the Gary police. He failed to get any traction there. Sure enough, four years later, in October 2014, in Hammond, Indiana.—the town next door to Gary—police found the body of 19-year-old Afrikka Hardy in a room at a Motel 6. Using her phone records, they tracked down a suspect, 43-year-old Darren Deon Vann. Once arrested, Vann took police to the abandoned buildings where he’d stowed six more bodies, all of them in and around Gary. Anith Jones had last been seen alive on 8 October; Tracy Martin went missing in June; Kristine Williams and Sonya Billingsley disappeared in February; and Teaira Batey and Tanya Gatlin had vanished in January. Before invoking his right to remain silent, Vann offhandedly mentioned that he’d been killing people for years—since the 1990s. Hargrove went to Gary, reporting for Scripps, to investigate whether any of the cases he’d identified back in 2010 might possibly be attributed to Vann. He remembers getting just one helpful response, from an assistant coroner in Lake County who promised to follow up, but that too went nowhere. Now, as the Vann prosecution slogs its way through the courts, everyone involved in the case is under a gag order, prevented from speculating publicly about whether any of the victims Hargrove noted in 2010 might also have been killed by Vann. “There are at least seven women who died after I tried to convince the Gary police that they had a serial killer,” Hargrove says. “He was a pretty bad one.” Hargrove has his eye on other possible killers, too. “I think there are a great many uncaught serial killers out there,” he declares. “I think most cities have at least a few.” e’re in a moment when, after decades of decreases nationally in the overall crime rate, the murder rate has begun creeping upward in many major US cities. For two years running, homicides in major cities jumped on average more than 10 per cent. (Those increases aren’t uniform, of

38_FEA_Murder.indd 41

US homicide clearance rates 80%

60%

40%

20%

0% 1965 2014

course: Chicago leapt from 485 reported killings in 2015 to 762 in 2016, while the number of murders dipped in New York and Baltimore.) President Trump, in the campaign and since, has vowed to usher in a new era of law and order, hammering away on Twitter at Chicago’s “carnage” in particular. Threats of federal intervention aside, it will be difficult to fix the problem of high murder rates without first addressing clearance rates. So it’s fortuitous, perhaps, that we are living in an age in which the analy­sis of data is supposed to help us decipher, detect, and predict everything from the results of presidential elections to the performance of baseball players. The data-focused approach to problem-solving was brought to life for a lot of people by Michael Lewis’s Moneyball, which introduced the nonbaseball-nerd public to the statistical evaluation of Major Leaguers and made a hero of Billy Beane, an executive with the Oakland A’s. Law enforcement would seem to be a fertile area for data to be helpful: In the 1990s the New York Police Department famously used data to more shrewdly deploy its officers to where the crimes were, and its CompStat system Clearance rates by metropolitan area, 2014 Houston Dallas Miami Atlanta Washington New York Los Angeles Philadelphia Boston Chicago 0% 100%

became the standard for other departments around the country. What Hargrove has managed to do goes a few orders of magnitude beyond that. His innovation was to teach a computer to spot trends in unsolved murders, using publicly available information that no one, including anyone in law enforcement, had used before. This makes him, in a manner of speaking, the Billy Beane of murder. His work shines light on a question that’s gone unanswered for too long: Why, exactly, aren’t the police getting any better at solving murder? And how can we even dream of reversing any upticks in the homicide rate while so many killers remain out on the streets? It took a few years for Hargrove’s editors at Scripps to agree to give him enough time to lose himself in the FBI’s homicide data. With help from a University of Missouri grad student, Hargrove first dumped the homicide report into statistics software in 2008. He spent months trying to develop an algorithm that would identify unsolved cases with enough commonalities to suggest the same murderer. Eventually, he decided to reverse-engineer the algorithm by testing his ideas against one well-known case, that of Gary Ridgway, the so-called Green River Killer, who confessed to killing 48 women over two decades in the Seattle area. Hargrove thought that if he could devise an algorithm that turned up the Green River Killer’s victims, he’d know he was on the right track. “We found a hundred things that didn’t work,” he recalls. Finally, he settled on four characteristics for what’s called a cluster analysis: geography, sex, age group, and method of killing. For gender, he stuck with women, since they make up the vast majority of multiple-murder victims who aren’t connected to gangrelated activity. When he used women between the ages of 20 and 50—the cohort most commonly targeted by serial killers— the algorithm lit up like a slot machine. “It became clear that this thing was working,” he says. “In fact, it was working too well.” The Green River Killer came up right away in this algorithm. That was good news. Hargrove’s algorithm also pulled up 77 unsolved murders in Los Angeles, which he learned were attributed to several different killers the police were pursuing (including the so-called Southside Slayer and, most recently, the Grim Sleeper), and 64 unsolved murders of women in Phoenix. Then there was a second group of possible serial killers, those unrecognised by local police. “The whole point of the algorithm was to find the lowhanging fruit, the obvious clusters,”

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he police have never been great at leveraging the power of their own statistics. Police culture is notably paper-based, scattered, and siloed, and departments aren’t always receptive to technological innovation. The National Crime Information Center (NCIC) database gives police access to information such as fugitive warrants, stolen property, and missing persons, but it’s not searchable for unsolved killings. The Center for Disease Control and Prevention’s National Violent Death Reporting System compiles death-­ certificate-based information for homicide victims in 32 states, but, again, can’t be searched for uncleared cases. Some states have their own homicide databases, but they can’t see the data from other states, so linkage blindness persists. In the 1990s the FBI created another voluntary reporting database, this one

38_FEA_Murder.indd 42

Homicide clearance rates by victim’s race and gender

90%

80%

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70%

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60%

Black men 50% 1976 2014

specifically for violent and sexual crimes, called the Violent Criminal Apprehension Program, or ViCAP. It never succeeded, either, primarily because it’s voluntary, making it easy for police departments to ignore. “Most law enforcement agencies don’t have a real solid understanding of what the purpose of ViCAP is,” says Gregory Cooper, who ran the programme for three years. “The frustration is, I’ve got a car, but no one’s putting any gas in it.” Hargrove calls ViCAP “an experiment that was never properly funded, and most police departments never really bought into the idea.” All of this contributes to, or at least fails to mitigate, the trend in the Uniform Crime Report and its Supplementary Homicide Report. Hargrove’s analysis of that data shows that the clearance rate, already so low compared with what it was decades ago, dropped from 64.5 per cent in 2014 to 61.5 per cent in 2015. That translates into 6,043 murder cases in 2015 that didn’t result in arrests. He picked apart those findings and learned that large cities tend to have worse clearance rates than Unsolved cases by weapon/cause of death, 2014 Handgun 2,317

Other or unspecified firearm 1,093

Rifle 76

Fire 23 Knife 277

Blunt object 107

Shotgun 32

Other 341

Hands and feet 81 Asphyxiation 18 Strangulation 16

small towns, perhaps because major cases are more rare in less populated areas and therefore tend to get special attention. (This might at least partially explain why about 75 per cent of Canada’s 500 to 600 homicides each year are cleared.) Hargrove also learned that not all big cities are the same when it comes to murder. “The variance is breathtaking,” he says. Los Angeles, New York, and Houston are well above the average clearance rates—in the low- to mid-70s. The bottom of the class includes New Orleans, Detroit, and St. Louis, all bumping along in the mid-40s. Police in large cities with stubbornly high murder rates point the finger at gang- and drug-related killings, and the reluctance of witnesses to come forward to identify the murderers. “The biggest problem is that everyone knows everyone,” Chester, Pennsylvania, Police Commissioner Darren Alston told the Philadelphia Daily News in September. (Chester’s homicide rate outstrips all other US cities’—and is more than double that of nearby Philadelphia.) City residents, in turn, point to a lack of trust in the police. But one other obvious problem is resources. “We fund homicide investigations like we fund education— it comes down to a local tax,” Hargrove says. “When an economy fails enough and we just have to start firing cops, we see everything going to hell.” MAP tracks staffing trends on its website, too. Hargrove notes that Flint, Michigan, and Dayton, Ohio, have seen their clearance rates fall more than 30 percentage points since the 1990s, coinciding with huge reductions in police manpower (330 to 185 officers in Flint; 500 to 394 in Dayton). When Hargrove’s group filed a FOIA request to get homicide data about a suspected serial killer in Detroit, the response was that the police lacked the budget to fulfill the request. “What do you do when a city says, ‘We’re too broke to even try to pull the records?’ ” Hargrove says. “I joke that what we’ve done is to create what amounts to a failed government detector.” There is a case to be made, though, that clearance rates aren’t just a function of a police department’s staffing. Priorities and management also figure heavily. In 2000, Charles Wellford, a criminologist at the University of Maryland, published a seminal paper in which he identified the commonalities for departments that do effective murder clearance. No. 1 on that list was ensuring that cops are able to chase leads in the critical early hours after a murder, even if that means earning overtime pay. Wellford’s current research looks closely at the amount of money

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

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DATA: MURDER ACCOUNTABILITY PROJECT

42

Hargrove says. “But there were dozens and dozens of them all over the country.” In 2015, Scripps spun off the last of its newspapers, and Hargrove and the other print reporters lost their jobs. “The only guy who left with a skip was me,” he says. Hargrove, who was 59 at the time and had worked at the company for 37 years, qualified for a large severance and a nice pension, leaving him well-­covered. Now he had enough time to go all in on his data project. He founded the Murder Accountability Project, or MAP, a tiny nonprofit seeking to make FBI murder data more widely and easily available. Using Freedom of Information Act (FOIA) requests, MAP has tried to chase down data from the many municipalities and counties that weren’t supplying their murder data to the FBI, out of bureaucratic laziness, a lack of manpower, or perhaps just rank incompetence. MAP has already assembled case details on 638,454 homicides from 1980 through 2014, including 23,219 cases that hadn’t been reported to the FBI. This is the most complete list of case-level details of US murders available anywhere, and the group’s website has open-sourced all of it. Anyone with statistical analysis software, available for free online, can start looking, across jurisdictions, for serial killers. Anyone can compare convicted killers’ timelines against the timing of unsolved murders to determine if a connection is plausible. “You can call up your hometown and look and see if you see anything suspicious,” Hargrove says. “If you’re the father of a murdered daughter, you can call up her record, and you can see if there might be other records that match. We wanted to be able to crowdsource murder.”

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“If you leave the killers to walk the street, why wouldn’t that cause more killings? The answer is, it does”

M

spent per officer, the amount spent per case, and the percentage of detectives on the force. Clearance rates, Wellford says, “are very much determined by priorities and resources. I’m beyond thinking that’s an open question. The question now for me is: How can we use the resources departments have to improve what they’re doing in clearing serious crimes?” The most discouraging thing Hargrove has learned since starting his organisation is how many police departments around the country not only ignore the FBI’s data but also don’t bother sharing their data with the FBI at all. Among the offenders: the state of Illinois, which MAP has sued for the information. Hargrove recently reported that homicides were more likely to go unsolved in Illinois in 2015 than in any other state: Only 37.3 per cent of the 756 homicides were cleared. That dreadful clearance rate would seem to go a long way toward explaining Chicago’s notoriously climbing homicide rate, just as the president and others start searching for solutions.

DATA: MURDER ACCOUNTABILITY PROJECT

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rom his experience with the Gary police, Hargrove learned the first big lesson of data: If it’s bad news, not everyone wants to see the numbers. Lately, he’s taken to forcing the issue. Together with MAP Vice-Chairman Eric Witzig, a retired FBI investigator who worked with ViCAP, Hargrove has conducted teaching sessions with homicide detectives at meetings of the International Homicide Investigators Association and at the FBI’s Training Division in Quantico, Virginia. Hargrove gets the attention of the detectives in the room by using the JonBenét Ramsey case as a test for the database. The detectives watch as he selects “Colorado” under state, “strangulation” under weapon, “female” under victim’s sex, and “6” under victim’s age. Colorado has only one such case, JonBenét. But then Hargrove broadens the criterion to include strangulations of girls ages 5 through 10, and a second Colorado case pops up: Melanie Sturm, a 10-year-old girl found strangled in Colorado Springs in 1985. Then he broadens it nationwide and finds 27 unsolved cases, 11 of them in Western states. He shows them how easy it is to download this information into a list. It’s like something from CSI. “I believe every law enforcement agency should be made aware of and utilise this programme’s database,” Janet Oliva, president of the FBI’s International Criminal Investigative Analysis Fellowship, told Hargrove. The police in Atlanta are working with MAP now to trace a long string of unsolved murders. But elsewhere, there’s still

38_FEA_Murder.indd 43

some skepticism about the power of transparent data to serve the public good. For one thing, it’s expensive. “This is an open debate,” Hargrove says. “Things are getting so bad out there financially that the mayors are wondering, ‘Does it make sense for me to spend my resources on solving crimes against the dead when I’ve got the living who need help, too?’ ” Why not just grab the easy cases—the cases with witnesses, ballistics, and DNA— and put the hard ones on the back burner? The answer, at least intuitively, would seem to be that at least some of these murderers will kill again. But if that were true, it ought to affect the murder rate. Sure enough, using his database, Hargrove has confirmed that this is the case. Pulling up information from 218 metropolitan jurisdictions in the 2014 Uniform Crime Report, he found that in the places with poor clearance rates, the homicide rate was almost double that of places where the clearance rate was better—from 9.6 homicides to 17.9 per 100,000 people. “It makes perfect sense,” Hargrove says. “If you leave the killers to walk the street, why wouldn’t that cause more killings? The answer is, it does.” Others have reached the same conclusions in different ways. In Ghettoside, a powerful examination of the unsolved-murder epidemic in Los Angeles, author Jill Leovy raises the notion that solving murder cases legitimises the social order, undermining the ad hoc phenomenon of “street justice” that emerges in lawless areas and makes people feel powerless. So much attention has been paid to police racial bias cases that another sort of injustice—lack of thorough policing—gets overlooked. “It’s not enough to just stop doing the wrong kind of policing,” Mark Funkhouser, a former mayor of Kansas City, Missouri, and now publisher of the magazine Governing, wrote last fall. “It’s vital that we do much more of the right kind.” A number of studies over the years show that strong community policing and giving high priority to casework can raise clearance rates, independently of workload and budget. This is where management comes in. “When Michael Nutter campaigned for mayor of Philadelphia in 2007, he was saying, ‘I’ll make solving major crimes a major issue in my administration,’ ” Hargrove says. “Well, damned if they didn’t elect him and damned if he didn’t do just that.” Over two years, Philadelphia raised its homicide clearances from 56 per cent to 75 per cent. In Santa Ana, California, the clearance rate climbed from about 28 per cent in 1993 to almost 100 per cent in 2013, after a new police chief created a special homicide unit for gangs and attracted anonymous donations to offer higher rewards for tips leading to arrests. In Oakland, where clearance rates dropped to 30 per cent in 2012, the police worked with the FBI to add five agents to the department’s squad of 10 full-time homicide investigators; in 2015 the clearance rate rose to 60 per cent. MAP has joined forces with a local TV news station to shine a light on other underperforming police departments in the Bay Area. “I don’t want to blast a particular politician,” Hargrove says, “but it’s been my experience that when you ask a police chief or a mayor in a well-performing police jurisdiction what their clearance rate is, the mayor and the police chief can snap those figures off, because they’re paying attention.” As are the police in Austin. Vann, the Gary murderer, was caught not long after moving back to Indiana from Texas, where he’d spent a number of years. While Hargrove never heard back from the Gary police, he did hear from the police in Austin. “They said, ‘We need to know whether he could’ve killed anyone here.’ ” Hargrove sent the Austin police data on every strangulation death in Texas. It looked like Vann had kept his nose clean; Hargrove couldn’t see any cases there that matched his pattern. “They must have agreed,” Hargrove says, “so that’s a kind of consultation.” The first, perhaps, of many. <BW>

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The Killer Wrote Code

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Why is India obsessed with tech industry crime? By Ben Crair

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rachi Das was murdered on a Monday. The killer, a friend of her husband’s named Basudev Jena, showed up at her apartment in Bangalore on 2 March, 2015, in hopes she would help him with his debts. Jena hadn’t meant to hurt Das, he later told the police, but he lost his temper when she refused to lend him money. He tried to tear away her necklace, and when Das screamed he cut her throat. The landlady stopped him in the hallway as he tried to flee, his shirt stained with blood. In India, print newspapers thrive as if it were 1995. They’re numerous and energetic, and they rush to the scene of a good story. Das’s murder was a ­sensation, and each publication did what it could to distinguish its coverage. The Indian Express dwelt on the meaning of a carton of ice cream found melting near her body, and the Times of India floated an alternate theory of the crime, ­speculating that Das had screamed because she saw a rat, leading Jena to panic. But all the papers agreed on the overriding importance of a single, seemingly inconsequential detail: Both Jena and Das’s husband were software engineers. Or, as the profession is known in India, they were techies.

When I visited the city in September, the Bangaloreans I met fondly recounted their favourite techie stories from the local press. One involved a couple whose nanny secretly rented out their baby to street beggars. Another featured a software engineer who pretended to be an astrologer to trick his wife into ­confessing infidelity, then bludgeoned her to death with a religious idol and, for good measure, called in bomb threats to the airport pretending to be the husband of an ex-girlfriend with whom he hoped to get back together. Reddit users recently observed that the “Indian techie” has become like the “Florida man” meme in America: an archetype of incompetent criminality and hapless violence. But in India, the techie is also celebrated as a symbol of the country’s ascendancy in the global economy. “In a society where there are no heroes, techies are the only heroes,” said Mohandas Pai, a venture capitalist, in his corner office on the top floor of a building near Bangalore’s central park. “A techie is a person you look up to with great respect,” he said, adding that the media’s sordid stories “are just sensationalising.” Even if that’s true, the coverage resonates with readers. The resentment implicit in techie headlines o ­ ccasionally spills over into actual violence. On 12 September, riots broke out

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“techie’s wife murdered” read the headlines in both the Hindu and the Bangalore Mirror. “techie stabs friend’s wife to death” ran in the Deccan Herald. To read the Indian newspapers regularly is to believe the software engineer is the country’s most cursed figure. Almost every edition carries a gruesome story involving a techie accused of homicide, rape, burglary, blackmail, assault, injury, suicide, or another crime. When techies are the victims, it’s just as newsworthy. The Times of India, the country’s largest English-language paper, has carried “techie dies in freak accident” and “man held for pushing techie from train”; in the Hindu, readers found “teacher chops off fingers of techie husband” and “techie died after being force-fed cyanide.” A long-standing journalistic adage says, “If it bleeds, it leads.” In India, if it codes, it explodes. The epicenter of techie tragedy is Bangalore, a city in the southern state of Karnataka that bills itself as India’s Silicon Valley. Bangalore has more startups than any other city in the country and is home to Apple, Google, IBM, Intel, Microsoft, and Oracle, in addition to big domestic i­ nformation technology companies such as Infosys and Wipro. More than 10 per cent of Bangalore’s 10.5 million residents work in tech, giving j­ournalists plenty of unfortunate events to­sensationalise: “assault over banana split: 3 techies held”; “depressed bangalore techie injures 24 in sword attack spree.”

across Bangalore after a court ordered Karnataka to share water with a neighbouring state. Thirsty mobs t­ argeted the well-kept Oracle office, which had to be evacuated, as well as eight Infosys employee buses, whose passengers were forced to walk home under a hail of stones. Technology was supposed to deliver India from poverty, but in Bangalore it’s also deepened the division between rich and poor, young and old, modern and traditional. As the city has grown richer, it’s also become unruly and unfamiliar. If the tech worker is the star of the Indian economy, then the techie is his shadow—spoiled, untrustworthy, adulterous, depressed, and sometimes just plain senseless. (“techie with e ­ arphones run over by train.”) In one occupational ­boogeyman, Bangaloreans can see their future and their fears.

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Hundred Feet Road runs through Indiranagar, a once-quiet neighborhood that’s now the centre of the Bangalore tech scene. It feels as if someone diverted a highway through a shopping mall. Shops and restaurants crowd the sidewalks like spectators at a parade, and rooftop pubs crank their music to drown the clamour from the street. People complain that Bangalore’s traffic is the worst in India, and the eight lanes of Hundred Feet Road often come to a standstill as drivers, trying to get somewhere as quickly as possible, make it impossible for

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anyone to get anywhere at all. Only the cows, headed nowhere, enjoy the right of way. Across from an Adidas shop, Chiranjiv Singh, the former development ­commissioner of Karnataka state, lives in a small but verdant plot—a sliver of the wilderness he found when he moved there 40 years ago. The land was a coconut grove then, and a few tall trees still lend his home their shade. The birds and monkeys have stopped visiting, though, and Singh, a softspoken Sikh with a long and coarse beard, expects he will leave soon, too: “I don’t know how long we can continue here because of all this noise.” Bangalore used to be known as the Garden City. It was a medium-size, ­middle-class metropolis in one of the few areas of India that didn’t broil in summertime. Colonial bungalows nestled among flower beds, old trees, and pristine lakes. “I have discussed the subject of Bangalore with persons in other parts of India and have found that 90 out of a hundred dream of settling down in Bangalore, after retirement,” the novelist R.K. Narayan wrote in 1977. Another nickname for the city was the Pensioner’s Paradise. Bangalore’s makeover began in the 1980s. Previously a centre of textiles, aerospace, and electronics, the city became an

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­ utsourcing hub as undersea fiber-optic cables made it p o ­ ossible for US and European corporations to offshore IT work. Texas Instruments opened a software-design centre there in 1985; Infosys, an omnibus software and services ­provider, went public in 1993; and three years later a local coder invented Hotmail. By the turn of the century, Bangalore had established a reputation for coding quality software at low cost, and corporations hired the city’s engineers en masse to guard their systems against the Y2K bug. Bangalore inspired Thomas Friedman’s 2005 best-seller on globalisation, The World Is Flat. From 1981 to 2001, Bangalore doubled its population, to 5.7 million. The invaders had a name. “We had a new occupational category emerge: the IT engineer,” said Balaji Parthasarathy, a professor at the International Institute of Information Technology in Bangalore. IT engineers brought a lot of benefits. Real income grew much faster in Bangalore than in other parts of India, and the city became

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the country’s main link to the economies of the West. “We have more connections with Silicon Valley than with Delhi,” said Pai. “Bangalore is India’s only global city.” But the IT engineers lived differently from the pensioners and other longtime residents. They spoke English, not the native Kannada, and lived in gated condominium towers with pools and fitness clubs rather than in traditional bungalows. They worked in amenity-rich office parks, shopped in designer malls, ate at Western chain restaurants, and socialised in posh microbreweries. And their strange habits were chronicled by the booming local press. The word “techie” first appeared in newspaper headlines in the 1990s simply because it was shorter than “software engineer.” Readers loved the stories, and editors soon went out of their way to assign them. “The news value of anything to do with a techie seems to be more,” said B. Pradeep Nair, the news editor of the Hindu, in his office, as that day’s edition was being put to bed. Media consultant Imran Qureshi recalled a story he covered 15 years ago about a married couple in

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One afternoon in Bangalore, my Uber driver, Chethan J., invited me to join him in the front seat of the car. (Many Indians use a single name, or mononym, sometimes with an initial.) We were in the centre lane of one of the city’s busiest roads, which meant, of course, that we weren’t moving. Chethan is 22, with thick black hair and a mustache grown long at the tips. Thinking to myself, When in Bangalore, do as Thomas Friedman does, I asked him for a driver’s-eye view of tech workers. Chethan’s mood darkened. “They are coming and destroying our culture,” he said. Industry boosters are fond of saying that each tech job creates anywhere from 3 to 10 support jobs in the city, but Chethan had no ­affection for the engineers he ferried around all day. He has a bachelor’s degree in political science and economics and joined Uber only when he couldn’t find a better-­paying job. “The locals are ­servants,” he said. “All of Bangalore is going bad.” The tech boom that was supposed to profit the city has made daily life harder. Bangalore’s population has doubled again since 2000, buckling the local infrastructure. There are more than 6 million vehicles, and the average driving speed in the city centre is below 6 miles per hour, meaning it would be faster for everyone to jog slowly than to drive. During the initial IT boom, the portion of Bangalore’s population living in slums doubled. Blackouts became daily occurrences, and road-­widening projects destroyed parks and trees without decongesting the streets. Money flooded in, but the lakes dried up—of the 900 the city once counted, fewer than 200 are still considered “live,” and most of those are filled with sewage. In October, thousands

India’s largest IT companies, including Wipro, draw young workers whose ways are often at odds with local tradition

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protested in the streets over plans to build a m ­ ultibillion-dollar elevated bypass connecting the Bangalore airport to the city centre. Demonstrators argued the project would benefit the jet-setting elite but do little to help poorer residents who spend hours every day in gridlock. Frustration was palpable all over Bangalore. A kindly older man named Vijay Thiruvady, who leads tours of the botanical gardens and Cubbon Park, the city’s largest remaining green spaces, rued the failure of the IT industry and government to coordinate the growth. “The tech boom has completely changed the city. They’ve ruined it,” he said, as we sat in yet another traffic jam. “I’m going to use a strong term,” he warned, before cursing another motorist as “a stupid fellow.” Then he resumed grousing about techies. “With the coming of the techies, you can see the traffic, you can see the road rage, you can see the problems with infrastructure, you can see trees being cut everywhere,” said Narayanan Krishnaswami, a reporter with the Times of India. “For a lot of people, that is a repudiation of what the city used to be. And they trace it back to the cause of the prosperity, which is the tech sector.” One of the main appeals of the newspapers’ techie coverage is schadenfreude. “When a techie falls, everyone is secretly happy,” said Joshi, the Mirror editor. Techies ­arriving from across India are assumed to be more interested in the Western lifestyles of the modern workplace than the local culture of their new city. They tend to live away from their parents, drink alcohol, spend money freely, travel abroad, keep strange hours (because they work on the schedules of US and European clients), and choose “love marriages” over traditional arranged ones. Someone who suspects tech workers of immorality would find plenty of grist in the newspapers, where techies are f­ requently killing their spouses and having affairs. Such stories sometimes implicate the victim in his fate. An article might note, for example, that the parents of a woman whose techie husband killed her had disapproved of the marriage, or that a techie killed himself after a “trivial” argument with his wife. Taken together, the stories can read like morality plays. They assuage a reader’s envy by suggesting that a tech w ­ orker’s material wealth conceals a deeper poverty. “If a techie can commit suicide or kill his own wife,” said Sahana Udupa, a social anthropologist who previously worked as a journalist in Bangalore, “it says something about the stress, something about the depression, something about their loose morals.” I thought it unlikely that tech workers were genuinely troublesome, so I visited the Bangalore police headquarters to ask for an official perspective. Bureaucracies in India like to unfurl themselves before visitors, and the police commissioner on the first floor referred me to an additional police commissioner down the hall, who referred me to a deputy police commissioner on the fifth floor, who was so thrilled by my visit that he paused our interview midway to take my photo with his phone. His name was M.G. Nagendra Kumar, and a few years earlier he had studied crimes involving software engineers. He concluded that the techie “lacked the general thinking of other common people,” he told me. “His mind works like a computer machine.” Kumar said the techie’s long hours in front of a PC could make him dangerously impatient: “He wants life to go at ­internet speed.” At a busy intersection, a techie wouldn’t wait for the signal. “Only techies are the deceased in road accident cases,” Kumar said. And at home, a techie might grow angry and violent with a wife or family member who didn’t follow commands automatically like his computer. At this point, a

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Chennai who were producing child ­pornography. That in itself wasn’t scandalous enough to make the story a sensation. “It became a headline story because the man happened to be an IT professional,” Qureshi said. Today, Indian journalists apply the word “techie” to anyone remotely connected to the IT industry. Some headlines imply that techies are more important than other people, such as “techie among three burnt alive in garuda bus mishap.” Other stories tell of incidents so minor they seem to exist only so the journalist can use the word. The Herald recently reported on a techie who had stepped on a “brittle footpath slab” and suffered “swelling in his leg.” The close scrutiny makes the techie seem alien, like a strange specimen in a cage. “When we use ‘techie,’ it is a bit of a local-vs.-outsider thing,” said Ravi Joshi, editor of the Bangalore Mirror, in his newsroom. “It is ­basically the profession that does not belong here.”

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police inspector named Kanakalakshmi (also a mononym), who’d been sitting quietly beside me in Kumar’s office, spoke up. “They’re always before the system,” she said. “It makes them behave like a beast, almost.” Kanakalakshmi produced two spreadsheets. The first listed 139 cases since 2010 in which a software engineer had been accused of a crime; the second listed 297 cases, excluding petty thefts, in which a software engineer had filed a complaint. Neither sum really suggested a crime wave in a city with more than 1 million tech workers, and it was hard to make sense of the statistics. The translation from Kannada to English had rendered many case descriptions unintelligible, and the spreadsheets seemed to exclude certain cases I’d read about in the papers while listing others twice. It was nevertheless interesting that the most common complaint by far was a spouse alleging mental and physical harassment (in some cases, the police use the word “torture”), often in connection to a dowry dispute. The clash between the ­traditional expectations of Indian culture and the demands of modern professional lives doesn’t only shape the relationship between techies and the rest of the city, it also plays out in tech workers’ private lives. “Social liberalisation hasn’t kept pace with economic liberalisation,” said Asha Rai, a senior editor at the Times of India. “The values they imbibe at the workplace and when they travel are in conflict when they come home.”

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I wasn’t attacked by sword, pushed from a train, force-fed cyanide, tortured, or otherwise harmed by any of the techies I met in Bangalore. I was introduced to coders, startup f­ ounders, investors, and engineers, including a group that was building a moon lander for Google’s Lunar X Prize competition. A ­robotics specialist from IBM named Aswin Subramanian gave me a tour of Whitefield, a tech district, in his race car and then invited me to his home, where he played Yanni songs on a keyboard. (OK, perhaps there was some torture.) Techies in Bangalore extol a strain of utopianism similar to that found in Silicon Valley. “Eventually everything will be solved by tech,” said Mukund Jha, the co-founder of Dunzo, a concierge app that lets users hire a runner to carry out almost any task for

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a few dozen rupees—less than a dollar. At the moment, a Dunzo runner was fetching him a coffee from Starbucks; he’d also used the service to repair the cracked screen of his iPhone and install pigeon nets on his balcony at home. Customers have used Dunzo to retrieve lost phone chargers, deliver birthday cakes, purchase toilet paper, and check whether a shop is open. “Once you get started, you get hooked to it,” Jha said. “On a good day, you can get anything you want within 10 minutes.” Dunzo is incredibly useful in a city where completing simple tasks grows harder by the day. But the app also indicates how technology further cocoons the privileged from the rest of the city. Dunzo’s founders say they hope their app will trickle down to the masses, but they’ve targeted early builds at the elite. “We haven’t seen a single request which is non-English,” Jha said. Although tech has offered millions of young Indians a ladder out of poverty, there’s also concern that it will soon eliminate jobs instead of creating them. At IBM, Subramanian was designing robots for use in automation. (He recently left the company.) Dunzo is working to build artificial intelligence that would eventually replace much of its operations staff. Wipro and Infosys, the IT companies that most symbolise Bangalore’s tech industry, replaced 8,200 human jobs last summer with software. Tej Pochiraju, the managing ­director of Jaaga Startup, which bills itself as India’s first co-working space, said the divide between engineers and laymen would only accelerate. “As things get more and more automated, ­technology and techies will become more godlike,” he said. In a New Year’s letter to his employees, Infosys Chief Executive Officer Vishal Sikka wrote of “the tidal wave of a ­ utomation and technology-fuelled transformation that is almost upon us”—a choice of words that sounded more apocalyptic than utopian. A few weeks later a techie was m ­ urdered by a security guard on Infosys’s campus in Pune, about 500 miles northwest of Bangalore. The Hindustan Times warned about “a growing list of IT workers kidnapped, molested, raped, or killed on campus.” Although unrelated, Sikka’s letter and the crime coverage shared a certain anxiety: Tech could guarantee neither job security nor personal safety. The techie, the hero of the Indian economy, would never be as safe as he seemed. <BW>

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The man who engineered Michael Jackson’s afterlife ­comeback made the pop star’s heirs rich. Now the IRS wants to be startin’ somethin’ By Devin Leonard Photograph by Angie Smith

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h John Branca, Jackson’s attorney, at home in Beverly Hills

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The man largely responsible for the estate’s current fiscal health is not Michael Jackson, or not exactly. For the balance of the past 37 years, a 66-year-old Los Angeles entertainment attorney

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named John Branca, a partner at the firm Ziffren Brittenham, has handled the singer’s record deals and tried to shield him from his own worst impulses. After Jackson’s death, Branca and John McClain, a veteran music industry executive and former Jackson confidant who keeps a lower profile (and declined to be interviewed for this story), were appointed executors of the singer’s estate, which gave them responsibility for generating income for the beneficiaries named in his will—his children Prince, Paris, and Blanket, and his mother, Katherine Jackson, whom he designated as their guardian. “Michael used to say to me, ‘You and I, Branca, we’re going to be examples for the business, we’re going to be the kings,’ ” Branca says. It’s early July, and he’s reclining in the opulently furnished living room of his home in a gated community high in Beverly Hills. He looks like an aging rock star himself, intent on defying the calendar. He’s slim, brown-haired, and dressed fashionably in a black polo shirt, black pants, and expensivelooking black leather sneakers. The twice-divorced Branca is engaged to Jenna Hurt, a 32-year-old model who makes a brief appearance and then withdraws to let her fiancé hold court. The walls are covered with signed portraits of clients extolling his expertise, including Berry Gordy, the former head of Motown Records, the Eagles’ Don Henley, Brian Wilson of the Beach Boys, and, of course, Jackson, who can be seen posing happily with Lisa Marie Presley, his first wife. Branca casually notes that he introduced them. It all might be too self-congratulatory if Branca himself weren’t so convivial. He grew up in Mount Vernon, New York, the nephew of the late Ralph Branca, a three-time AllStar pitcher for the Brooklyn Dodgers. Branca liked sports— he became an avid baseball card collector—but he was more interested in music. His parents divorced, and he eventually moved to Los Angeles to live with his mother, a dancer. As a teenager, Branca was kicked out of the Chadwick School in Palos Verdes Peninsula, California, and played keyboards in a band that opened for the Doors on the Sunset Strip in the ’60s. Branca enrolled in Los Angeles City College to study music, where he got A’s on his harmony papers but felt out of his league when it came to playing with some of his fellow students, among them pianist Les McCann, a future soul-jazz great. “I just looked around and said, ‘This is ridiculous. I don’t belong here,’ ” Branca recalls. So he got a law degree at UCLA in 1975 and found a job working for the late entertainment lawyer David Braun. Braun, whose clients included Bob Dylan, Neil Diamond, and former Beatle George Harrison, was established enough not to bother keeping up. One day the Beach Boys came into the office. “David didn’t even know who they were and didn’t care,” Branca says. “So he sent me to the meeting. I was 27 years old at the time, and all of a sudden, I became the Beach Boys’ lawyer.” Fortuitously, the Beach Boys’ accountant also did Jackson’s taxes. In 1980 he introduced Braun and Branca to the ascendant pop star, who’d recently turned 21 and was in the process of distancing himself from his domineering father and primary manager, Joseph Jackson. Branca found Jackson pleasantly eccentric. “He had sunglasses on, and he pulled them down and he goes, ‘Do I know you?’ ” Branca recalls. “I go, ‘I don’t think we’ve met, but I look forward to getting to know you.’ And he goes, ‘Are you sure we don’t know each other?’ I said, ‘Michael, I would remember if we had met.’ ” The next day, Branca got a call from the accountant. Jackson was hiring him to be his attorney. One of the first things Branca did was renegotiate what he

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even years after Michael Jackson’s fatal ­overdose of propofol and lorazepam in 2009, the statute of limitations on gossiping about the deceased is, apparently, over. In one of her rare interviews in the midst of the presidential campaign, future First Lady Melania Trump told the luxury magazine DuJour how Jackson, a friend of Donald’s and onetime Trump Tower resident, mischievously suggested they kiss to make her husband jealous. Then Madonna, on CBS’s Late Late Show, revealed that she’d smooched amorously with him long ago. And the New York Post’s Page Six dropped a chunk from Tommy Hilfiger’s memoir, American Dreamer: My Life in Fashion and Business, about the designer’s visit in the 1990s at Neverland Ranch, the singer’s compound in Santa Barbara County, California. After encountering a giraffe and a string of baby elephants outside, Hilfiger found Jackson in his office, with a bandage on his nose, wearing sunglasses and sitting on “an enormous gold-and-burgundy throne.” His two oldest children, Prince and Paris, were there, dressed “like characters from a Broadway show or The Sound of Music—velveteen knickers, dirndl jumper, ruffled blouses, patent leather shoes, each in full makeup.” Paris, in response to such banter and because she’s now 18, just gave her first full-length interview in a Rolling Stone cover story, setting the record straight: She’d had a wonderful childhood until her father’s death at age 50. After, she struggled with drugs and attempted suicide several times, but she’s now happy, clean, and, the magazine reports, “heir to a mammoth fortune—the Michael Jackson Trust is likely worth more than $1 billion, with disbursements to the kids in stages.” That number could change if the IRS has anything to do with it. The agency’s lawyers are taking the executors to trial, which began last month in US Tax Court in Los Angeles. The IRS intends to prove that $702 million of that inheritance is owed in penalties and back taxes. The crux of the case is the disputed value of Jackson’s name and likeness, which is to say the right to use his visage on everything from coffee cups to baseball caps. An estate tax filing is supposed to be a snapshot of the person’s assets on the day of his expiration, and under California law that includes the value of a star’s name and likeness. The IRS claims Jackson’s should have been valued at $434 million. The estate claims that it was worth a mere $2,105, implying that his image had been rendered all but worthless by stories about skin bleaching, his obsession with plastic surgery, prescription drug abuse, odd parenting choices—such as covering his children’s faces in black veils or Spider-Man masks in public—and allegations that he molested young boys who visited Neverland. Celebrity estate lawyers are watching closely. It felt like a record year for the deaths of icons in 2016, with the passing of Prince, David Bowie, Leonard Cohen, Merle Haggard, Muhammad Ali, and Debbie Reynolds and her daughter Carrie Fisher. Fisher’s December departure prompted reports that Walt Disney was rushing to make a deal to use her digital likeness in future Star Wars movies. (Disney denied this.) The Jackson case signals that tax examiners see enhanced value in a deceased star’s face and name as technology and social media open up novel paths to profit, such as the ability to conjure up appearances using computer-generated imagery and voice software.

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describes as Jackson’s “absurd” contract with his label, Epic Records, winning him a royalty rate that only a few artists such as Dylan enjoyed at the time. When Jackson was ready to unveil Thriller, he wanted to spend $1.2 million on the video for the title track. Branca protested—this was a time when music videos typically cost $50,000­—but Jackson curtly told him, “I don’t care. Just figure it out.” Branca persuaded Showtime and MTV to pay a total of $600,000 for a movie about the making of the Thriller video and got another company to spend $400,000 on the home video rights.
The finished 13-minute film featured a troupe of corpses rising from a conveniently located graveyard to dance with a zombielike Jackson, their knees high and claws up. Jackson, then a Jehovah’s Witness, decided it was blasphemous and should be destroyed. Branca came up with another crafty fix. He told his client that Bela Lugosi, the star of the classic 1931 Dracula, was also religious and had had the movie’s producers include a disclaimer to the theatrical release saying it didn’t represent his personal views. “It was a complete fabrication,” Branca

deal for Jackson to merge ATV with Sony’s music publishing company in exchange for $115 million and a yearly stipend that started at $10 million. That year, Jackson prepared the first of his wills, naming Branca and McClain as his executors. It was updated twice, as he had children, but the document essentially stayed the same. It was getting harder for Branca to protect Jackson, though. He was abusing prescription drugs and acting strangely. He spent $30 million, a record sum, to record Invincible, his splendid final studio album, released in 2001. Jackson blamed Sony when it sold a mere 8 million copies, a hit for any other artist. In July 2002, Jackson, looking pale and Kabuki-like, held a series of press conferences in New York in which he described himself as a victim of a racist music industry with a history of ripping off black artists like himself. He made headlines that year when he dangled infant Blanket over the railing of a hotel room in Germany so his fans could get a look. Jackson overrode Branca’s attempts to control how British

says, laughing. Jackson added the disclaimer, and the hugely popular video helped propel the album’s sales to 100 million copies worldwide. It’s still the best-selling record ever. In 1984, Branca learned that the Australian corporate raider Robert Holmes à Court was shopping a company called ATV Music, which held the rights to more than 200 Beatles songs, including Yesterday, Revolution, The Long and Winding Road, and Hey Jude. An excited Jackson told Branca to spend whatever it took to acquire ATV. “It’s my catalogue!” he wrote in a note. But Jackson and Branca’s $47.5 million offer was beaten by Marty Bandier and Charles Koppelman, two New Yorkers who promised $50 million. Bandier remembers flying to London on the Concorde with Koppelman to meet with Holmes à Court. “We thought it was a closing,” he says. He noticed Branca on the same plane but didn’t think anything of it. When they arrived, Holmes à Court said he’d accepted Jackson’s lower bid. Branca had offered to let the seller’s daughter, named Penny, keep the rights to the Beatles classic Penny Lane. He’d also agreed to have Jackson appear for an hour at an event in Perth put on by Holmes à Court’s favorite charity. “It was depressing,” Bandier recalls. Branca sold off the rights to the catalogue’s cinematic background music for $6 million, which brought the effective price down to $41.5 million. In the end, Jackson, who borrowed $30 million to cover his costs, put only $11.5 million in cash on what would become his life raft when he was drowning. Jackson gave Branca a Rolls-Royce for his efforts. Three years later, Branca helped Jackson buy Neverland, listed at $60 million, for $17.5 million. Jackson was so pleased that he rewarded his attorney with another Rolls-Royce. Around the same time, Jackson was best man at Branca’s wedding to his first wife. He brought along his beloved chimp, Bubbles, in a matching tuxedo. “I’ve got fun pictures of Bubbles with my ex-wife and people at the wedding,” Branca says nostal­gically. Little Richard, it should be noted, performed the service.

television producer Martin Bashir used interviews in the show Living With Michael Jackson, which aired in 2003. In it, Jackson admitted he sometimes shared his bedroom with the youngsters who visited Neverland, including a young cancer survivor who sat beside him on camera, and blithely insisted that it was nothing unusual. Soon after, the boy’s family accused Jackson of molesting him, which led to a criminal trial. In 2005 he was acquitted by a jury in Santa Maria, California. By then, Branca had been fired again, though he continued to get calls for help from Jackson’s advisers. Finally, the Jackson maelstrom became too much, and Branca walked away from his former best man. Without Branca, Jackson floundered. He was no longer releasing records or touring, so the only way he could afford his lifestyle was by basically borrowing against his half of Sony/ ATV. By 2008 his debt secured by the publishing company had swelled to $300 million. Fortress Investment, a New York hedge fund, purchased his mortgage on Neverland and threatened to foreclose if Jackson didn’t pay up. Then Dr. Tohme R. Tohme appeared, a person often described as a mystery man because he declines to provide details about his history or the provenance of his degree. “I’m a self-employed guy,” Tohme says. “I advise many people, many top people in the world, about investments.” Tohme first met Jackson, who was in a wheelchair wearing mismatched socks, in Las Vegas, through his brother Jermaine. Tohme connected Jackson with Colony Capital, a real estate buyout company founded by Jackson admirer (and now Trump confidant) Tom Barrack. Colony purchased the debt on Neverland to keep the property out of foreclosure. “It was 10 days from being sold in court,” Tohme says. After that, he became Jackson’s manager, persuading him to return to the stage so he could raise money to pay off his debts. Jackson agreed in late 2008 to perform 50 concerts at the O2 arena in London the following summer. The ­concerts quickly sold out; Jackson expected to make $50 million on ticket sales alone. Tohme insists the pop star wanted nothing to do with Branca and spoke ill of him in his

ey said about Elvis Presley when he died. Good career move”

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As things got rocky for Jackson, so did his relationship with Branca. Various people competed for the performer’s ear, and Branca was fired, then rehired in 1993 when the star was in the throes of the first molestation accusations, which were settled in a civil suit for what was widely reported to have been $20 million. Branca, now back in charge, thwarted other advisers who were pushing for Jackson to sell half of ATV to Sony for $75 million to cover his costs. By 1995 he’d negotiated a

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Jackson was best man at Branca’s first wedding

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This Is It The 2009 documentary, based on Jackson’s last planned tour, made $290 million globally

final months. Eight days before his death, however, Jackson summoned Branca to a meeting at the Forum in Inglewood, California, where he was rehearsing. They embraced, and the attorney says Jackson told him, “Branca, you’re back.” At this point in the interview, Branca disappears into a closet and returns with a framed letter bearing Jackson’s signature. “Here’s the letter he signed at that meeting confirming I was his lawyer again for all the family members that doubt it,” Branca says. Jackson looked sleepy at their meeting, Branca says, but he assumed his client was trying to conserve energy for his rehearsal. Eight days later, Jackson overdosed from the mix of sedatives administered by his personal doctor, Conrad Murray, who was later convicted of involuntary manslaughter. The outpouring of sympathy for Jackson was over­whelming. “His extraordinary talent and his music was matched with a big dose of tragedy and difficulty in his private life,” then-­ President Barack Obama told CNN. “I don’t think we can ignore that, but I think it’s important to affirm what was best about him.” Obama’s eventual successor provided a more self-­ referential tribute. “I knew Michael Jackson very well. He was a special guy. He was with me many times at Mar-a-Lago and Palm Beach.” (On the campaign trail last year, Trump offered some unexpected analysis about the nature of this tragedy at a GOP town hall: “He lost tremendous confidence because of, honestly, bad, bad, bad plastic surgery.” Jermaine Jackson, claiming it was external stress that broke his brother, tweeted back: “This fool Trump needs to sit down.”) Shortly after Jackson’s death, Branca says, he read the ­singer’s final will, dated 7 July, 2002, and signed in Los Angeles, to the family at Jermaine’s home. As he recalls, they applauded. But Joseph Jackson, the family patriarch, accused Branca and McClain of forging the document, insisting that Jackson had been in New York that day lambasting Sony. According to court documents, Joseph also revealed that his son had been paying him a monthly allowance of almost $60,000. He wasn’t likely to keep getting it if Los Angeles Superior Court Judge Mitchell Beckloff accepted the will, which he did. He also gave Branca and McClain the power to manage the estate. Now that Branca was in charge, he discovered that concert promoter AEG had footage of rehearsals for the O2 shows that had been filmed at Jackson’s request. Several movie studios were eager to distribute a documentary stitched together from this material. Branca orchestrated a bidding war. Sony, the winner, agreed to pay the estate a $60 million guarantee and almost 90 per cent of the profits. When it released This Is It in November 2009, the movie grossed $290 million globally, making it one of the most successful documentaries ever. With cash flowing in from the movie, the estate was able to refinance its debt. It pushed the rate on a $75 million loan

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Sony record deal Signed in 2010 for $250 million— unprecedented for a dead musician—this deal promised 10 albums of new and old material

B S d a 2 e i A

Immortal tour Cirque du Soleil’s roadshow (2011-14) is the eighth-topgrossing tour of all time, with $360 million in sales

secured by Jackson’s compositions from an onerous 17 per cent to 6 per cent and lowered the rate on the $300 million loan backed by Jackson’s share of Sony/ATV, from 5.8 per cent to 2.9 per cent, saving millions of dollars a month in payments. This Is It addressed another one of Branca’s chief concerns: He wanted to restore Jackson’s tainted legacy. Jackson looks spectral in the film, but he banters about music with his band members and footwork with his choreographers. “I went to see it 11 or 12 times,” says Susan Fast, a professor of cultural studies at McMaster University in Hamilton, Ontario, who wrote a well-regarded book examining Dangerous, Jackson’s eighth studio album. “They did an amazing job of humanising him, showing him as being kind of vulnerable, and giving us a glimpse into his artistic process.” She did also think it was “exploitative” to have released the imagery of Jackson when he looked like he already had one foot in the grave. The estate’s income grew further in 2010 when Branca negotiated a $250 million deal with Sony to release 10 albums featuring old and new Jackson material. He also enlisted Spike Lee to direct documentaries to accompany rereleases of favourites like Off the Wall and Bad. Lee and Branca were in agreement on the direction: “I just wanted to focus on the music, his musicianship, the great artist that he was,” Lee says. “All the other stuff ? I wasn’t down with it.” In the midst of this productive whirl, Branca got a call from Celine Dion’s manager asking him if he was interested in meeting with the top executives of Cirque du Soleil, the Canadian theatrical company that had produced the successful Las Vegas show called The Beatles LOVE, featuring the band’s music. He flew to Montreal to see Guy Laliberté, the com­pany’s founder, who’d just returned from a voyage in a space capsule during which he hadn’t been allowed to enjoy a single cigarette. He was now chain-smoking to make up for it. “I said to Guy, ‘We want a show in Vegas that’s like The Beatles LOVE only better,’ ” Branca recalls. “He said, ‘I want a show that’s going to tour around the world.’ So we said, ‘OK. Why don’t we do both?’ ” The Cirque travelling show, called Michael Jackson: The Immortal World Tour, featured many of Jackson’s band members, ran for three years, and, according to Billboard, became the eighth-top-grossing tour of all time, with $360 million in box-office revenue. Two years later, Michael Jackson: One, the company’s Las Vegas show, complete with a hologram of its star, premiered at the Mandalay Bay Resort and Casino. “I think it will run forever, because Michael’s music will be popular forever,” says Daniel Lamarre, Cirque’s chief executive officer. Branca also negotiated a video game deal; the rerelease of Moonwalk, Jackson’s 1988 memoir edited by the late Jacqueline Kennedy Onassis; and an agreement with Pepsi to put Jackson’s face on a billion soda cans. By 2012 the estate had paid off Jackson’s debt except for the Sony/ATV

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Xscape The 2014 album of previously unreleased recordings sold 2.5 million copies Bad 25 Spike Lee’s documentary aired on ABC in 2012; the anniversary edition box set flew into the top 50 on Amazon.com

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hunk. Jackson was proving to be more popular in death than he’d been when he had a pulse. The following year, 60 Minutes, in a highly flattering segment, called Branca and McClain’s management of their ghostly client “the most remarkable financial and image resurrection in pop music.” Correspondent Lara Logan asked Branca, “His image was so battered and tarnished by the time of his death. Have his fans just forgotten about all that?” “We don’t really pay attention to the tabloids,” Branca replied. “We look at the Michael that we knew, the real Michael, the artistic genius, the visionary.” “The real Michael Jackson also told Ed Bradley on 60 Minutes that he let young boys sleep in his bed,” Logan persisted. “You can’t run away from that, right?” “Well, I don’t recall that interview,” Branca replied. “The Michael Jackson that I knew was somebody I considered a very honourable person.”

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Michael Jackson One Tickets start at $69 for this Cirque production, which has been running since 2013 at Mandalay Bay in Las Vegas

The IRS took notice of the estate’s prosperity, too. In 2013 the agency informed Branca and McClain that they’d insufficiently appraised the Jackson estate. The IRS said it was worth $1.1 billion. The estate, however, claimed he was worth $7 million at the time of his death. To hear Branca and McClain tell it, Jackson was on the verge of bankruptcy in July 2009. The star owed $500 million. He hadn’t filed personal income taxes in three years. He’d neglected to make the mortgage payments on his mother’s home, which he owned, in Encino, California. IndyMac, the subprime mortgage lender, was preparing to foreclose. Meanwhile, more than 60 creditors claimed that Jackson owed them money. They included Ola Ray, the actress who played his easily frightened love interest in the Thriller video, and a woman who said she was the real Billie Jean. If it weren’t for the executors’ smart plays, Branca’s position goes, everything might have been sold off in a fire sale and there’d have been little for the beneficiaries. Branca declines to discuss the IRS case, but in a 2015 deposition in a civil suit filed against the estate by another of Jackson’s former managers, he said the molestation investigations “would have negatively affected his commercial value” and that Jackson had received “minimal income from pure name and likeness rights.” This offers some explanation for why the estate valued his name and likeness at only $2,105. Still, it seems a puzzlingly low number. “Well, let me put it this way,” says Jeffrey Eisen, an estate attorney in Los Angeles. “If somebody had come to you in July of 2009 and said, ‘I will sell you all of the rights to Michael Jackson’s name and likeness for $2,106,’ one more dollar than the estate tax, would you have bought it? You bet! I would have. So the real number has to be higher.” The IRS is also skeptical. The agency has subpoenaed Tohme, who scoffs at the estate’s valuing of Jackson’s image. He argues that he resuscitated Jackson, rather than Branca, with the AEG

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Slave to the Rhythm A holographic performance that aired during the 2014 Billboard Music Awards

75 million likes Jackson has more than 75 million fans on Facebook (a shade more than Taylor Swift), a sign to the IRS of the dead star’s “forseeable” success

deal—which, Tohme says, led to a flurry of endorsement offers from Louis Vuitton, Nike, and others. “Most of the money the estate has collected is because of me,” Tohme says. “I did all the work.” He and the estate are battling in court over his claim that he’s owed millions in unpaid fees; the estate argues that Tohme abused his position and sought to enrich himself by persuading Jackson to sign overly generous contracts. The IRS also disputes the claim that Jackson’s interest in Sony/ATV was worth nothing at the time of his death. But documents from the estate value Jackson’s piece of the company at $242 million, less than the $300 million loan against it at the time. The estate didn’t pay all the debt off until last year when Branca, in another negotiating coup, sold the singer’s share to Sony for $750 million. Meanwhile, the dispute puts Jackson’s personal effects in limbo, which, according to Paris Jackson’s lawyer Craig Peters, is hard on the children. “The kids would like to have some of their dad’s stuff that he wanted them to have,” he says, describing clothes Jackson wore and pictures that hung around the house. “Mostly because of the IRS, it is still tied up in a warehouse. It’s not the shimmering glove. It’s personal stuff that means something to them.” The government’s attorneys write repeatedly in their court filings that all of the estate’s deals were “foreseeable.” In other words, all he had to do was stop breathing, and the money would come flowing. “It’s like what they said about Elvis Presley when he died,” says Michael Morris, a former IRS trial lawyer now in private practice. “Good career move.” But this suggests that anybody would have turned Jackson into a thriving m ­ ultimillion-dollar business. Brancalytes would disagree. “What John did for Michael while he was living, he did probably 10 times more after he had died. He really protected a man who was no longer here,” says Motown’s Gordy, who once called Branca the “Smokey Robinson of dealmakers.” Bee Gee Barry Gibb, another client, calls his lawyer’s insight priceless: “I always listen. He’s taught me a lot.” The estate’s feud with the IRS isn’t likely to tarnish Branca’s image. Even if he has to give in, the Jackson estate, which has been paying income taxes all along, will survive and refill the children’s coffers. Branca says he’s been trying to slow down now that he’s reaching retirement age, but his practice continues to grow in one area. Because of his success with the Jackson estate, he’s attracted many clients who are no longer with us. He’s been hired as a consultant by the estates of Kurt Cobain, Janis Joplin, Otis Redding, and Muddy Waters. Much as he’d like to take them all, Branca has to set limits. “I got a call from Sammy Davis Jr.’s heirs,” Branca says. “I always try to help them, because he and Michael were friends. I said, ‘I can’t represent you. You guys are all fighting.’ The late Rat Packer’s heirs worked out their differences and tried once again to hire him. “I told them, ‘I can’t,’ ” Branca recalls. “ ‘You guys don’t have enough assets.’ ” <BW>

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WORKING IN STYLE HEADING UP AMAZON STUDIOS

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Travel

n her left upper arm, Allison Holmes has a tattoo of an octopus with pointy Vulcan ears wrapping its tentacles around a spaceship that resembles an elongated VW camper. The “Spocktopus” is a tribute to Leonard Nimoy, who played the half-Vulcan, half-human Mr. Spock on the original Star Trek television series. “It was ­inspired by old science fiction posters,” says Holmes, 33, of San Antonio. Holmes is a self-described Trekkie, though that probably goes without saying if you’re showing off Spock-inspired body art. Especially if you’re showing it off in a hot tub aboard the N ­ orwegian Pearl as it sails through the Western Caribbean on the first-ever Star Trek: The Cruise. Joining Holmes in January were Trekkies from as far away as Australia and New Zealand, their suitcases full of costumes and body paint. Shorts and bathing suits were the favoured daywear, but at night fans emerged from their cabins dressed as Vulcans, fierce-­looking Klingons, antennaed blue Andorians, and green Orions. There were also several r­ eptilian Gorn and Yeoman Rand look-alikes with beehive hairdos. Didn’t get any of these references? Then this cruise was definitely not for you. You might not think of wannabe Klingons as people who leave their parents’ basements much, let alone as sun-andfun types. But superfans such as Holmes make up one of the newest and most enthusiastic groups hitting the high seas. Music themes have dominated the industry for years, but cruises are increasingly embracing other forms of pop culture. In addition to the Star Trek trip, fans are filling ships for shows including The Walking Dead and Property Brothers, where the Scott brothers held Q&A sessions about design, signed autographs, and sang karaoke. Oprah is going to attend an O, The Oprah Magazine cruise to Alaska in July, and the publication, with partner Holland America line, is running four additional theme cruises this fall and next year. “There is a tremendous sense of camaraderie” on these cruises, says Howard Moses, a travel agent who also runs the website Theme Cruise Finder. “It’s nice to know t h at p e o p l e you meet at dinner share your passion.” It’s also nice for the c rui se lines, which see themed events as a way to draw new clientele. Third-party production companies book entire ships, usually during what would otherwise be cruising’s fallow season; fans care more about the what of the experience than the when or where.

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And they’re willing to spend. The average fare paid by the 2,300 passengers on the six-day Star Trek cruise was $2,400 per person, more than double Norwegian Cruise Line’s typical January rate. Since the first theme cruises set sail about 30 years ago, they’ve become a bigger and bigger part of the industry. Moses’ site recorded 150 in 2012. Today there are 600-plus listings. Included are small group gatherings and shipwide

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takeovers. Music and superfan charters have become such an attractive business that in 2012 Norwegian bought Sixthman, a production company in Atlanta that began staging Festivals at Sea each year; the 2017 lineup includes cruises featuring Pitbull, Kid Rock, Kiss, acts from the Warped Tour, outlaw country musicians, and the funny men of the TruTV show Impractical Jokers. “The purpose of a theme cruise is orange juice concentrate,” says Michael Lazaroff, executive director of Entertainment Cruise Productions and the mastermind behind the Star Trek voyage. “We are providing fans with a chance to experience their passion in the most intense possible way.” Lazaroff and his team started talking with CBS, owner of the Star Trek franchise, in the summer of 2015. As it happened, CBS had been looking for ways to celebrate the 50th anniversary of Gene Roddenberry’s creation, which went on the air in 1966. “We considered developing a Star Trek cruise for fans for some time, and the 50th anniversary seemed ideal,” says Veronica Hart, senior vice president for CBS’s consumer-­products

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PHOTOGRAPHS BY EVA O’LEARY FOR BLOOMBERG BUSINESSWEEK

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Etc. division. She adds that the “stars aligned” when William Shatner, 85, Captain James T. Kirk in the original series, signed on to host. “He wasn’t cheap,” Lazaroff says. That September, Lazaroff and his staff headed to the annual Las Vegas Star Trek convention to test fan reaction. “The website we had wasn’t ready to take reservations,” he says. Interest was overwhelming, and his team cobbled together an online ­sign-up. “We just threw it up, and next thing we knew— boom!—we were done.” The cruise sold out in three weeks, although many who booked had never attended a Star Trek convention, according to a precruise survey. Hart says the experiences aren’t mutually exclusive: “The cruise is a completely unique, immersive experience.” The Pearl was tricked out with references to the shows— the original series, Next Generation, Deep Space Nine, Voyager, Enterprise, and Discovery, which is set to premiere this May— and films. Special signage transformed elevators into turbolifts. The ship’s speciality restaurants incorporated the names of characters into dishes such as Vic Fontaine’s chateaubriand, named for Deep Space Nine’s holographic lounge singer. Programming included the Q&As and the autograph and photo sessions you’d find at a convention; autographs cost $25 to $35, depending on the actor, and photos were $40. Klingon foreheads ran $45. Shatner, whose contract mandated that he pose for one photo per cabin, joked to the crowd about how cute Chris Pine’s portrayal of Captain Kirk is in the latest Star Trek movies, talked physics and global warming, and attempted to answer fans’ requests for details about his experiences on set. Passengers could also attend a no-fee yoga class hosted by Terry Farrell, aka Jadzia Dax, Deep Space Nine’s Starfleet science officer; play blackjack with Marina Sirtis, aka the half-human, half-Betazoid Deanna Troi on Next Generation; and attend a happy hour with Denise Crosby, aka Tasha Yar, briefly the USS Enterprise’s chief of security on Next Generation. Special actor-led shore excursions to Cozumel and the Bahamas, which cost $75, up from the normal $50, sold out before the ship set sail. A lecture by theoretical physicist Lawrence Krauss, author of The Physics of Star Trek (1995), drew a standingroom-only crowd. Former Saturday Night Live cast member Joe Piscopo, who guest-starred as a comic on an episode of Next Generation, got

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­ ultiple standing ovations for m a nighttime set. If the Pearl wasn’t quite a floating Enterprise—the crew didn’t wear Starfleet uniforms— there were constant references to “boldly going” and “warp speed.” The mood was friendly and accepting. “It’s nice to be among your people,” says Holmes of the Spocktopus. “You see a lot of cool costumes and a lot of people really, really geeking out.” Her parents were also on board, and she and her husband, Allen, 33, have already booked a penthouse for the first of two more Star Trek cruises that will take place next year, both hosted by George Takei, who played Sulu, the helmsman on Kirk’s Enterprise. The cruisers knew their stuff. At a trivia contest with Max Grodénchik, who played Rom, a large-eared Ferengi on Deep Space Nine, passengers rushed to call out answers to questions such as “In the ‘Enterprise Incident’ episode, the Romulan commander offers Spock what?” (Answer: “The Right of Statement.”) During a $40 pub crawl with Robert O’Reilly, Gowron from Deep Space Nine, passengers showed off their Klingon language skills. One man pounded his feet as he sang the words to several Klingon battle songs. O’Reilly was impressed. In one session, Rabbi ElizaBeth Beyer, 57, and husband Tom, 63, of Reno, Nevada, renewed their wedding vows at a ceremony officiated by Deep Space Nine’s Farrell. Married 35 years and wearing Starfleet uniforms, they repeated vows written by Jordan Hoffman, host of Engage: The Official Star Trek Podcast. They referenced phasers and Tribbles and holodecks and, near the end, said, “You are the bridge to my Enterprise, you are the captain to my starship.” <BW>

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Etc.

Stay

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EVERY HOTEL WANTS TO BE Conrad Centennial Singapore By Sudeep Guha

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WHAT

long with being a global financial centre, Singapore is also a tourists’ delight. It is therefore a city that is frequented by both business travellers and tourists who want to absorb the metro’s lifestyle and cultural offerings, and for whom, finding the right base from which to conduct business or explore the city is very important. Conrad Centennial Singapore is one such place that offers the best to visitors who are in Singapore for business or pleasure, or very often for both. This award winning 31-storey luxury hotel is now one of the city’s landmarks located within business and shopping districts of Marina Bay. Located a few minutes away from Marina Sands, the hotel boasts a total of 507 rooms, 25 of them suites, all with breathtaking views of either the city’s skyline or the Marina Bay. Stylish and cosy interiors, and world-class service, including a pillow menu, ensure that every need of

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Ballroom Banquet seating

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occupants is met throughout his or her stay. After a tiring day at work or touring the city, guests can unwind with a bubble bath in their all-marble bathroom, then enjoy a minibar snack while watching the 46-inch flat-screen TV with home theatre system. There are also services, such as, Conrad Concierge App, which puts the hotel’s services and amenities at guests’ fingertips, and The Press Reader App, which comes with complimentary access to thousands of newspapers and magazines when used in the hotel. Guests at Conrad who are connoisseurs of culinary art, or just plain foodies, can sample a wide range of local and international cuisine at its four dining venues, which include the Golden Peony Chinese restaurant, made famous by celebrity chef Ku Kueng, along with Oscar’s buffet restaurant, the Lobby Lounge, and The Terrace alfresco dining area, perfect for quick bites on-the-go. For those visiting Singapore for business, the hotel sports one of the city’s

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SOAK UP CITYSCAPES WHILE SWIMMING IN THE OUTDOOR POOL, OR WORK OUT IN THE FITNESS CENTRE IN THE DAY

largest ballroom foyers that can accommodate up to 450 delegates theatre style, there’s also one grand and five regular salons, four conference rooms, two boardrooms, and a fully-equipped business centre. Those with a stay-at-home bent of mind can soak up cityscapes while swimming in the outdoor pool, or work out in the fitness centre in the day, and after sunset, there is always the Lobby Lounge, where signature drinks are served in opulent surroundings. When it comes to exploring Singapore, the city’s MRT is right outside, and the hotel is close to a host of main attractions. For those who love nature, the 101hectare Gardens by the Bay is merely a few minutes’ walk away, and for music aficionados, there are regular performances by both local and international artists at the bay-side venue, Esplanade.

With something to suit all tastes, for those who like to pamper their tastebuds or shop till they drop, guests will not be disappointed during their stay at Conrad. Suntec City nearby boasts of a wide selection of stores, more than 1,000 to be precise, and there are restaurants located in the area to suit a wide variety. All of this, along with little but thoughtful services such as babysitting and in-room childcare services, and free city shuttle services, is what has earned the Conrad Centennial more than 15 awards to date, including Service excellence Award, Best Accommodation Award, Singapore Quality Award, and Best Business Hotel Award. As guests at Conrad are told: Never Just Stay. Stay Inspired.

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Etc.

What I Wear to Work Your vest is sporty. I got it at a tech ­conference. Vests are so big in tech—that’s kind of how I connect.

STEVEN TRISTAN YOUNG

PATAGONIA

41, vice president for growth, GrubHub, New York

You don’t dress how most tech guys dress. I’m meeting with a ­ gencies, media ­planners, creative teams, and tech teams. There’s this idea that tech people only wear hoodies. I don’t want to look that way, but I don’t want to look Banana Republic ­business casual either.

MICHAEL BASTIAN No Apple Watch? An old-school gadget like this reminds you to be present. It’s the one analog thing I have on me when ­everything else is digital.

How would you describe your style? I like to say I’m neopreppy.

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What’s going on with your shirt? I was drawn to it because of the mandarin collar. If I wear it without a suit jacket, I look dressed, not stiff.

ROLEX Those aren’t dress pants. I’m particular, because I have an athletic build and rower’s legs. I love the reinforced knees on these. They’re ­motorcycle pants and meant to be ­protective in case you fall off your bike.

WOOYOUNGMI

PHOTOGRAPH BY CHRISTOPHER LEAMAN FOR BLOOMBERG BUSINESSWEEK

EN NOIR

You have a grown-up backpack. It’s all about form and f­unction. I want something I can take to the office but can bring to an event afterward without feeling like I’m heading to third period.

Are you more of a loafer guy? Yeah, totally. I don’t like shoes with laces. I want to slip them on and off.

GUCCI Interview by Jason Chen

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Etc.

How Did I Get Here?

ROY PRICE Head of Amazon Studios Education

Phillips Academy, Massachusetts, class of 1985 Harvard, class of 1989

“I’d gotten some exposure to film development, but I wanted more exposure to the finance part.” On the set of Return to the Blue Lagoon, 1990

“We did a deal with TiVo, which was significant, because it helped us get to televisions. On the way, I picked up 14 patents.”

University of Southern California Gould School of Law, Los Angeles, class of 1995

1989–90 Film set assistant

1990–92

Financial analyst, Allen & Co. Vice president for series development and current programming, Walt Disney

“I was looking at startup opportunities in digital video.”

2001–02

Consultant, McKinsey

2003–04 Principal, Price Entertainment

2004–09

Group product manager, director, Amazon Video on Demand Director, Amazon Studios

2014– Present

Head of Amazon Studios, VP for Prime Video, Amazon

With a Disney colleague, 1997

“We saw Manchester by the Sea at Sundance and moved aggressively to get it. It’s gratifying and exciting that the movie received six Oscar nominations— we’re incredibly proud of the cast, crew, and everyone behind the film.”

At the Manchester premiere with Michelle Williams, 2016

Life Lessons

re

al

“I had to help everybody around Hollywood understand what we were trying to do and what the opportunity was for them and also help everybody in Seattle understand what to expect from the business.”

“I have no outside interests. My interests are film, TV, literature, computers, and video games. And that’s it.”

1995–2000

2009–14

At Amazon’s Emmy Awards party with Jeff Bezos, 2016

With Sidney Poitier, 1986

Work Experience

1. “If you have an idea and everybody thinks it’s great, it’s probably passé.” 2. “Always have a slightly unrealistic vision. You’ll be surprised by what can be

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Courtesy subject (4). Getty Images (3)

With Majors, 1972

“I realised that the people who ran the entertainment business either dropped out of school, like [David] Geffen and [ Jeffrey] Katzenberg and [Barry] Diller, or were lawyers. It was too late for me to drop out, so I had to go to law school.”

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“I studied all the time—maths and physics and computers. My Harvard interviewer spent most of the time asking why I wasn’t applying to MIT.”

i st i c.” 3. “If it’s not a little scary, then it’s probably not interesting or daring.”

“I grew up in Beverly Hills. My father ran movie studios, and Lee Majors taught me to swim.”

25/02/2017 16:16


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1

1/31/17

4:50 PM

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