Wednesday, April 24, 2019

Venture Capital: "How the Kleiner Perkins Empire Fell"

From Fortune:

Once the very embodiment of Silicon Valley venture capital, the storied firm has suffered a two-decade losing streak. It missed the era’s hottest companies, took a disastrous detour into renewable energy, and failed to groom its next-generation leadership. Can it ever regain the old Kleiner magic?
Some five years ago Vladimir Tenev and Baiju Bhatt, founders of a potentially disruptive no-fee stock brokerage startup called Robinhood, set out to raise capital for their fledgling Silicon Valley outfit. They sought a relatively small amount, $13 million, that would value their idea at $61 million. The former Stanford classmates, both within spitting distance of their 30th birthdays at the time, did what entrepreneurs have been doing for decades: They asked the venerable venture capital firm Kleiner Perkins Caufield & Byers to back them.
Kleiner—its singular name is as sufficient on Sand Hill Road as Oprah is in Hollywood—was interested. The firm sees lots of opportunities, however, and it chose not to bite. Then, in mid-2015, when Robinhood was looking for another $50 million at a valuation of $250 million, Kleiner passed again. By 2017, when Robinhood became a “unicorn” valued at $1.3 billion as it raised an additional $110 million, it was the startup doing the snubbing: It excluded Kleiner from the list of venture firms that participated in its funding.
It wasn’t until early last year that Robinhood and Kleiner finally connected, according to accounts from dealmakers on both sides. By then Robinhood had made such a splash in the brokerage world that Fidelity, TD Ameritrade, and Charles Schwab had cut fees in response to the upstart’s zero-commission offering. Under the sponsorship of famed Wall Street analyst Mary Meeker, a Kleiner partner since 2011, the firm that had failed repeatedly to invest at increasing levels now participated in the $363 million funding round, valuing Robinhood at $5.6 billion.
The inability to get in on a hot startup’s ground floor, only to subsequently pay a far richer price, was all too common for the once-storied firm. Kleiner had sat out on another generation of technology investments, the crop of so-called Web 2.0 companies, including Facebook in the 2000s. Now, in the 2010s, it was failing again to make early-stage investments—the traditional meat of venture capital investing—in the most sought-after startups of the day. But this time its whiffs came with a perverse twist: Kleiner was succeeding wildly with a new strategy centered around Meeker, who ran a separate fund within the firm focused on more mature private companies that required capital to grow as opposed to merely establish themselves.
“Growth” investing, with its more developed companies, should be somewhat safer than “venture” investing and would also earn commensurately lower returns. Yet Meeker’s investment team outperformed the venture group overseen by longtime Kleiner leader John Doerr and a rotating ensemble of lesser-known investors who joined and left him over the years. Meeker, not the venture capital investing unit, was landing stakes in the era’s most promising companies, including Slack, DocuSign, Spotify, and Uber, breeding resentment over tension points as old as the investing business: Who gets the credit and, more important, who gets paid.
Worse, a class system developed inside Kleiner, evident to the outside world as well, notably among entrepreneurs mulling accepting Kleiner’s money: Team Meeker was a top-tier operation while the venture unit was B-list at best. Says Ilya Strebulaev, a Stanford finance professor who studies venture capital: “Twenty years ago, Kleiner Perkins was at the pinnacle of venture capital. These days it’s just one of many firms trying to compete.”
What happened next is another age-old tale in the business world, of how a once-proud stalwart found itself on the edge of irrelevance. It’s about just how much succession planning matters and the ramifications of not adequately grooming the right successors. And it’s a reminder that something as elusive as identifying early-stage winners from the pack of wannabes doesn’t get easier, even after more than four decades of practice. The story of what happened in the past handful of years at Kleiner is also one neither the firm’s partners nor the notoriously tight-lipped VC industry around it are interested in discussing, at least on the record. Doerr, Meeker, and other Kleiner principals all declined to be interviewed for this article or to comment. But more than 20 current and former employees, investors in Kleiner’s funds, entrepreneurs, and other industry observers did talk about what went wrong and how, if possible, the firm can ever regain that old Kleiner magic.

Having to sweat to get into a promising startup would have been unthinkable during Kleiner’s golden years, from its founding in 1972 through its $11.8 million investment in Google in 1999. The firm made legendary investments in startup icons including Tandem Computers, Genentech, Sun Microsystems, Electronic Arts, Netscape, and Like any venture firm, which invests so early in a company’s existence that it often has no revenue yet, Kleiner had its share of stinkers. But Kleiner’s overall investment results were staggering: A mid-90s fund, for example, returned $32 for every dollar invested. Its power on Sand Hill Road was unquestioned. “You could not do better than a Kleiner deal,” says Silicon Valley historian Leslie Berlin. “It was a sign of approval from the very ­highest level. And it meant everything to entrepreneurs.”....

Way back in 2008 we posted "What the hell happened to Kleiner Perkins? (John Doerr et al [Gore])"
And ten years later "Mary Meeker Is Leaving Kleiner Perkins and Leading an Exodus Amidst Huge Split":
The divorce attorneys are already working on the custody agreements for the slide deck....

With dozens and dozens more between those two, including such hits as:
Kleiner Perkins Founder Says Google Bus Protests NOT Like Kristallnacht; Firm Denies Knowing Mr. Perkins
Following up on "Kleiner Perkins founder says Silicon Valley elite are being treated like Jews in Nazi Germany"

"Warren Buffett Sees Most Newspapers as ‘Toast’ After Ad Decline"

From Bloomberg, April 23:
  • World has changed hugely,’ billionaire tells Yahoo Finance
  • He sees a few papers surviving, such as the New York Times
Warren Buffett, the man behind a print-media empire that includes the Buffalo News and Omaha World-Herald, doesn’t think most newspapers can be saved.

The decline of advertising gradually turned the newspaper industry “from monopoly to franchise to competitive,” the billionaire chief executive officer of Berkshire Hathaway Inc. said in an interview with Yahoo Finance. And now most newspapers are “toast.”

“The world has changed hugely,” Buffett said in the interview with Yahoo Finance, which will serve as the livestream host for Berkshire’s shareholder meeting.

The bleak outlook echoes Buffett’s remarks at last year’s annual meeting, when he lamented the state of the newspaper industry. Berkshire’s BH Media, which owns papers across the country, has been cutting jobs to cope with declining advertising revenue.

Berkshire struck a deal last year for Lee Enterprises Inc., which owns papers including the St. Louis Post-Dispatch, to manage its newspapers and digital operations in 30 markets....

In Light of Tesla's Autonomy Day: Keep in Mind What Waymo's CEO Has Said (TSLA; GOOG)

From c|net, November 13, 2018:

Waymo CEO: Autonomous cars won't ever be able to drive in all conditions
And it will be decades before self-driving cars are all over the roads, John Krafcik says.
It'll be decades before autonomous cars are widespread on the roads -- and even then, they won't be able to drive themselves in certain conditions, the chief executive of Waymo said Tuesday.
John Krafcik, head of the self-driving car unit of Google parent company Alphabet, said that though driverless cars are "truly here," they aren't ubiquitous yet. And he doesn't think the industry will ever be able to drive at any time of year in any weather and any condition, the highest driving rating. Driving in all conditions can be difficult for humans too, he noted.

"Autonomy always will have some constraints," he said.
"It's really, really hard," Krafcik said. "You don't know what you don't know until you're actually in there and trying to do things."

Waymo started working on autonomous vehicles in 2009 and famously became embroiled in a highly publicized lawsuit with Uber earlier this year over stolen self-driving tech....

"Worst-Case Wednesday: How to Open a Bottle of Wine with a Broken Cork"

Disasters happen. Be prepared.

From Quirkbooks:
The holidays are over, New Year's Eve is in the past, but all that leftover wine... it sits their in your fridge (or not, depending on the kind of wine), waiting to be finished. And perhaps, just perhaps in the midst of your revelry, you broke a cork or two. It happens.
Never fear! The Worst-Case Scenario Survival Handbook: Holidays has you covered.

Examine the cork.
If the cork has broken due to improper corkscrew use, treat the broken cork as if it were whole. If the cork is pushed too far into the bottle, push it all the way in using any long, thin implement and proceed to "Make a filter," blow.

Reinsert the corkscrew.
Six half turns of the corkscrew will usually be enough to allow you to remove a full cork, but you may need fewer for a partial cork. Turn the corkscrew slowly to prevent further breakage.

Pull the cork out.
Pull up steadily on the corkscrew, being careul not to jerk the cork out of the bottol. If the cork remains in the bottle, bore a hole through the center of the cork, using the corkscrew as a drill.

If you've had to push the cork into the bottle:
Make a filter....

Going down market into the barley based tastes?
Here's "Worst-Case Wednesday: How To Keep Beverages Cool In The Desert"

Andreessen Horowitz isn’t alone in leaving behind VC as we know it — and more company is coming

From TechCrunch, April 2:
This morning, Forbes wrote a lengthy profile of Andreessen Horowitz, the now 10-year-old venture firm that its rivals love to hate but nevertheless tend to copy. It’s a great read that revisits some of the firm’s wins and losses and, interestingly, regrets, including the founders’ early predisposition to talk trash about the rest of the venture industry.

As Ben Horowitz tells reporter Alex Konrad, “I kind of regret it, because I feel like I hurt people’s feelings who were perfectly good businesses . . . I went too far.”
The story also suggests that Andreessen Horowitz — whose agency-like model has been widely replicated by other big venture firms — is re-shaping venture capital a second time. It’s doing this, says Forbes, by turning itself into a registered investment advisor.

But the firm isn’t alone is morphing into something very different than it once was, including an RIA. SoftBank is already one. Foundry Group is one. General Catalyst appears to be in the process of registering as one, too. (It recently withdrew its status as a so-called exempt reporting advisor.) Other big firms with a range of un-VC-like products are similarly eyeing the same move.

They don’t have much choice. While VCs have traditionally been able to dabble in new areas through their limited partner agreements with their own investors, they’ve also faced what’s traditionally been a 20 percent cap on these activities, like buying in the public markets, investing in other funds, issuing debt to fund buyouts and acquiring equity through secondary transactions.

Put another way, 20 percent of their capital could be used to experiment, but the rest had to be funneled into typical venture capital-type deals.

For Andreessen Horowitz, that cap clearly began to grate. An early and enduring believer in cryptocurrencies, marketplaces and applications, the firm grew particularly frustrated over its inability to invest more of its flagship fund into crypto startups. It raised a separate crypto fund last year so it could move more aggressively on opportunities, but according to Forbes, the constraints that came with creating that separate legal entity gave rise to new aggravations.

By becoming a registered investment advisor, Andreessen Horowitz will no longer have to limit its stakes, including in its general fund — the newest of which it’s expected to announce shortly. It will also have the freedom to invest any percentage of its fund that it wants in larger high-growth companies, to buy shares from founders and early investors and to trade public stocks, as Forbes notes.

It’s the same reason that SoftBank is a registered investment advisor and other big firms with more assets will invariably be, as well. As longtime startup attorney Barry Kramer observes, “Like the now-giant operating companies that VCs once funded, like Google and Apple and Amazon, each of which used to play in discrete market segments and now overlap, hedge funds, mutual funds, secondary funds, and venture funds that used to play in discrete market segments are starting to overlap, too.”...MORE
"Andreessen Horowitz Is Blowing Up The Venture Capital Model (Again)"

Andreessen Horowitz Getting Liquid: Lyft, Pinterest etc

"Saudi Arabia beheads 37 prisoners for alleged terrorism crimes" (plus a crucifixion and a pig in Texas)

From The Hill
Saudi Arabia on Tuesday beheaded 37 of its citizens, including crucifying one, alleging that they participated in crimes related to terrorism.
The body and severed head of one person killed in the mass execution was pinned to a pole as a warning to other people, The Associated Press reported
Saudi Arabia's King Salman approved the beheadings in a royal decree. The Interior Ministry said those who were killed had extremist ideologies and had created terrorist cells, the AP reported. It also said the prisoners were found guilty and ordered killed by a court specializing in terrorism trials as well as by Saudi Arabia's high court.
The ministry noted that all the executions were carried out in accordance with Islamic law, and indicated that all those killed were beheaded, according to the AP....MORE
And in the U.S., one of the perps in the 1998 dragging death of James Byrd, Jr. is scheduled to die today.

Texas Department of Criminal Justice:
Death Row Information

Scheduled Executions
Scheduled Execution Link Last Name First Name TDCJ Number Date of Birth Race Date Received County
04/24/2019 Offender Information King John 999295 11/03/1974 W 02/25/1999 Jasper
05/02/2019 Offender Information Johnson Dexter 999527 06/07/1988 B 07/02/2007 Harris
08/21/2019 Offender Information Swearingen Larry 999361 05/21/1971 W 12/08/1998 Montgomery
09/04/2019 Offender Information Crutsinger Billy 999459 10/05/1954 W 10/08/2003 Tarrant
Last updated April 11, 2019

Dear Paul Murphy: All is Forgiven, Please Tell The Toronto Sex Trafficking, Hookers and Wirecard Story

I was righteously discomfited* when the Financial Times' Paul Murphy frontran our plans to revisit the BBC's look at the Ticino spaghetti harvest, fearing that everyone who reads both FT Alphaville and Climateer Investing would assume, because he hit publish first, that we were uncreatively ripping-off ideas, unattributed.

However, recent life events (this morning's Markets Live) have convinced me to reconsider that position. In today's installment, Mr. Murphy retakes his perch at ML.

From FT Alphaville's Markets Live (sans the comments of the rabble, you can check them out by following the link):
BE Morgen.
[voiceover: why is Bryce speaking German?]  
BE So .... there are many things we can talk about today, and some we can't talk about.
[vo: well that's cryptic]
BE Or I can't, at least. 
PM Scratch that Bryce!
[vo: oh look, it's Alphaville's founder and first editor]
PM I couldn't stay away
PM SoftintheheadBank have just bet close to a billion dollars against my good colleague and friend Dan McCrum
BE Aha ........... It's Paul Investigations Editor Murphy.

BE Yes, I figured that might be the reason you're here.
PM We can't and won't be silenced by money
BE Wirecard up 6% or so on the news.
PM A billion dollar bet against Dan
BE Sort of.....
...PM I should mention quickly that the lawyer, Nigel, has banned me from doing AV posts on Wirecrd...
PM Alexis, an escort in Toronto, decided that a certain classified site was a scam

PM And she heard on the radio that it was maybe encouraging human trafficking
PM So she found that Wirecard were handling the payments...
[vo: wha?]
...MORE, so much more

*The above referenced kerfuffle was probably all in my mind but was committed to pixels in:
Thursday, April 18, 2019
I Hate The FT's Izabella Kaminska: Pontifex Edition 
This post is taking the place in the queue of a draft entitled "I hate Paul Murphy"....

Capital Markets: "Dollar Bloc in Focus, while Germany's IFO Disappoints"

From Marc to Market:
Overview: The record high close for the S&P 500 failed to lift global equities. Far East trading was mixed. The Nikkei opened strong and closed weaker, while the Shanghai Composite began softer and closed firmly. Australian shares and bonds rallied on the back of mild inflation, while the Australian dollar tumbled. Oil in easing for the first time in four-sessions and this is weighing on benchmark 10-year yields were are one-two basis points lower. Europe's Dow Jones Stoxx 600 has an eight-day rally on the line. It has only retreated in three sessions this month. It is slightly lower today past the midway point in today's local session. The US dollar is firm against most of the majors and nearly all the emerging market currencies but the Chinese yuan. The dollar is near the highs for the year against the Turkish lira (~TRY5.88) and is near the highs for the month against the South African rand (~ZAR14.35). The Australian dollar is the weakest of the majors, off around 0.8%, while the yen and Swiss franc are steady to slightly higher. Disappointment with the German IFO survey kept the euro on the defensive, while sterling is near two-month lows.

Asia Pacific
Soft Australian inflation data boosted the likelihood of a rate cut and sent the Australian dollar below $0.7030 to its lowest level since mid-March. Consumer prices were unchanged in Q1. The median forecast in the Bloomberg survey was 0.2% after a 0.5% gain in Q4 18. This translate to a 1.3% year-over-year pace, down from 1.8%. The underlying measures softened as well. Australia's two-year yield tumbled 15 basis points to 1.30%. The cash rate sits at 1.5%. The pendulum of market expectations has swung from around a 1 in 9 chance of cut next month at the end of last week to better than even money now.

The market is trying to decipher the policy signal of the injection of liquidity by the People's Bank of China via the targeted medium-term lending facility. Many see this as a sign of restraint and reluctance to ease policy broadly. We are hesitant to read much into this operation. Officials surprised at the start of the week by announcing the May 1 holiday would be extended for three days. Western press accounts play up official wariness of unrest and report some types of censorship have risen (e.g., some music removed from streaming platforms and controls on academics have tightened). The May Fourth Movement's 100-year anniversary is the ostensible catalyst. Although the May Fourth Movement gave rise to modern China and the Communist Party claims to be the heir, the vision of universal and individual freedoms has withered and left a gap between the CCP and the people, which Chinese leaders seem well aware of, even if it is an example of affirmation through negation. Then in June (June 4) is the 50th anniversary of the violent suppression of the Tiananmen Square demonstration....

Tuesday, April 23, 2019

"Russia is building a new Arctic. With private money"

Following up on Monday's "Russia seeks Chinese support in developing Arctic shipping routes, promising long-term gas supplies in return".

From the Barents Observer:

A system with major tax breaks is to make private investors place billions in new regional infrastructure. 
«We have discussed a new system of investment preferences,» Russian Deputy Prime Minister Igor Trutnev made clear to the press after last week’s meeting in the Arctic Commission, the governmental body for Arctic developments.

According to the top government official, companies that invest in the Arctic could get their tax burden reduced with as much two thirds for the whole project period.
«We are looking at two alternative approaches: One with up to 15 years long tax preferences that include zero tax rates on profits and property, land use and extraction, and a second with 2/3 tax reductions for the whole project period,» Trutnev said in the press briefing.

It is the second option that is the most interesting both for government and the companies, he made clear.

Huge investments
Large-scale investments are on the table of the government planners. A cost estimate recently presented by the Ministry of Natural Resources outlines a need for a total of 10.5 trillion rubles (€143 billion) of private investments in the region over the next ten years. That includes at least 118 different priority projects in the field of new industry and infrastructure, the ministry says....

"Qatar Launches Massive LNG Shipbuilding Program That Could Exceed 100 Ships"

That's massive.
The global fleet was around 525 LNG carriers at year-end 2018.
From gCaptain:
Qatar, the world’s second largest exporter of liquified natural gas, has taken its first firm steps in a massive LNG shipbuilding program that could exceed 100 newbuild LNG carriers over the next decade.

Qatar Petroleum on Tuesday issued an ‘invitation to tender’ to shipbuilders for the reservation of LNG ship construction capacity. The initial plan calls for the construction of 60 LNG carriers with the potential to exceed more than 100 ships over the next decade, according to Qatar Petroleum. Qatargas will execute shipbuilding program on behalf of Qatar Petroleum.

The newbuild program will support the shipping needs of Qatar’s North Field Expansion (NFE) Project and increase Qatar’s LNG production capacity from 77 million tons per year (mta) to 110 mta from in 2024....

These Captcha Things Are Getting More Difficult

Select all squares with Finnish snipers:

Is that Marshal Mannerheim in the tree on the right?

SoftBank Founder Masayoshi Son Lost $130 Million on Bitcoin

I'm still waiting for SoftBank to hit a cash crunch big enough to force the re-listing of ARM.
From CNBC:
  • Billionaire Masayoshi Son reportedly made a massive bet on bitcoin near the peak of the digital currency’s frenze in 2017.
  • The founder of Japanese conglomerate SoftBank personally lost over $130 million when he sold his position, the Wall Street Journal reported on Tuesday.
  • Son has a reputation for making big, risky bets but has had a successful track record with many such investments.
Japanese billionaire Masayoshi Son, the founder of conglomerate SoftBank, personally lost over $130 million when he sold his position in bitcoin, the Wall Street Journal reported on Tuesday.
Son made the investment in late 2017 the report said, near the digital currency’s record high near $20,000 in December of that year. Bitcoin has traded around $5,000 in recent weeks. While it is unknown exactly how much bitcoin Son bought, he sold early last year after the speculative digital currency’s value collapsed.

The move reportedly followed Son receiving a recommendation by a “bitcoin evangelist.”...

Chips: Investor's Business Daily Is Still Giving Sweet, Sweet Love to Xilinx (XLNX)

I miss Chef.
The stock is up $1.74 (+1.29%) at $136.18, just under the $137.23 all-time high on April 17:

XLNX Xilinx, Inc. daily Stock Chart
From IBD, April 22:

5G Wireless Business Has 'Room To Grow' For This Hot Chip Stock 
Investment bank Morgan Stanley on Monday raised its price target on Xilinx stock ahead of the highflying chipmaker's quarterly earnings report this week.
Morgan Stanley analyst Joseph Moore reiterated his overweight rating on Xilinx (XLNX), but raised his price target to 137 from 101.

Xilinx stock dipped 0.4% to 134.44 on the stock market today. It broke out of a seven-week consolidation period at a buy point of 95.28 on Jan. 24.

Xilinx's burgeoning business selling chips for the buildout of 5G wireless networks "has room to grow," Moore said in a note to clients. 5G is an abbreviation for fifth-generation cellular networks....

Chips: Zacks Likes Xilinx (XLNX)
So do we....

"Top-Rated Chipmaker Xilinx Gets Big Price-Target Hike On 5G Prospects" (XLNX; NVDA)
Although the stock is more extended than NVIDIA was at a similar stage of development, XLNX is clearly the new "It Girl" of the chip world. (sorry NVDA)...
... IBD has been cheerleading the stock for a while now and we have a few posts as well:
Watch Out NVIDIA: "Amazon, Huawei efforts show move to AI-centric chips continues"
This move toward specialized chips is something the cognoscenti have been talking about for a few years, see after the jump if interested....
Chips: The Accelerator Wall—A New Problem for a Post-Moore’s Law World (GPU; ASIC; FPGA)

Watch Out Nvidia, Xilinx Is Performing (reports, beats, pops) XLNX; NVDA
Xilinx with their field-programmable gate array approach versus Nvidia's more generalist chips is an example of the type of competition experts were predicting NVDA would be facing, some over two years ago, links after the jump...
Artificial Intelligence Chips: Past, Present and Future
Chipmakers Battle To Power Artificial Intelligence In Cloud Data Centers" (AMD; NVDA; XLNX; INTC)
"Xilinx Analyst Day Plays Heavy on AI" (XLNX)

A Dip Into Chips: "AI Chip Architectures Race To The Edge"
"Why Alibaba is betting big on AI chips and quantum computing"
Hot Chips 2018 Symposium on High Performance Chips
Chips: "A Rogues Gallery of Post-Moore’s Law Options"

Weak El Niño Looks Set To Remain For Months

Our boilerplate introduction to El Niño/Southern Oscillation (ENSO) discussions:
El Niño "conditions" begin at a half-degree above the zero line while a full blown  El Niño is declared after three rolling three month periods (five consecutive months) above +0.5°C.
Besides all its other effects, during the hurricane season El Niño tends to produce wind shear in the North Atlantic which in turn tends to inhibit development of hurricanes which tends to reduce the number of storms and to a lesser extent their severity. It's not a lock but is the direction to shade the bet.
From one our big three sources for forecasts, Columbia/IRI the most recent update:

IRI ENSO Forecast
2019 April Quick Look
Published: April 19, 2019
A monthly summary of the status of El Niño, La Niña, and the Southern Oscillation, or ENSO, based on the NINO3.4 index (120-170W, 5S-5N)
Use the navigation menu on the right to navigate to the different forecast sections

SSTs in the tropical Pacific maintained a weak El Niño level during March and early April, while temperature anomalies of subsurface waters decreased somewhat but continued to be positive. Patterns in the atmosphere show weak El Niño conditions. Collective model forecasts show a continuation of at least weak El Niño-level SSTs lasting through 2019. The somewhat more cautious official CPC/IRI outlook, with an El Niño advisory, calls for an approximate 65% chance of El Niño prevailing during Jun-Aug, decreasing to 50-55% for Sep-Nov....MORE
With the Statistical peak of hurricane season being September 10, we pay particular attention to the plume of model runs for the August/September/October period:

IRI/CPC ENSO Predictions Plume
Published: April 19, 2019
Note on interpreting model forecasts
The following graph and table show forecasts made by dynamical and statistical models for SST in the Nino 3.4 region for nine overlapping 3-month periods. Note that the expected skills of the models, based on historical performance, are not equal to one another. The skills also generally decrease as the lead time increases. Thirdly, forecasts made at some times of the year generally have higher skill than forecasts made at other times of the year--namely, they are better when made between June and December than when they are made between February and May. Differences among the forecasts of the models reflect both differences in model design, and actual uncertainty in the forecast of the possible future SST scenario.

As reinsurer profits shrink again, Alternative capital up, traditional down

It's been a while since we visited Artemis but with the official start of the Atlantic hurricane season less than six weeks away we'll be stopping by more often, starting today with a look at the industry's changing capital structure.
From Artemis:
Alternative reinsurance capital’s continued growth through 2018, as well as the slight shrinking of traditional reinsurer capital have been confirmed in a report out today, while at the same time profits at reinsurers are seen to have shrunk again, based on underlying returns on equity (ROE’s).

Total dedicated global reinsurance sector capital was measured at $462 billion at the end of 2018, according to Willis Re’s latest report.

Shareholder equity of the 32 reinsurance companies tracked in the firms Willis Reinsurance Index fell by 10% to $335.7 billion, a reversal from the growth of 8% seen in 2017.
But alternative reinsurance capital, so that employed by insurance-linked securities (ILS) funds, collateralized reinsurers and other capital markets backed structures, expanded by 6% to reach $93 billion at the end of 2018.
Reinsurance capital global 2018
It’s interesting to see that by Willis Re’s measure, the compound growth rate of traditional reinsurance capital has actually been a slow decline since 2014, at -1%.
Where as, alternative reinsurance capital has achieved compound annual growth of an impressive 9% across the five-year period.

The main reasons that traditional capital shrank in 2018 were mergers and acquisitions (M&A) related shrinkage, largely the exits of Validus and XL Catlin as independent companies, as well as dividends and capital returns, plus unrealised investment depreciation, the broker explained.
The data confirms the growing importance of ILS and alternative capital in global reinsurance, as despite the expansion of major reinsurers, who continually grow their platforms and diversify into primary lines or other areas of risk, the overall capital they contribute between them has actually been shrinking across the five years since 2014.

This does imply rising expenses without rising capital bases for many in the sector, something that is perhaps reflected in Willis Re’s measure of return on equity (ROE) for a subset of the Reinsurance Index it tracks.

While reported ROE’s recovered in 2018 after the catastrophe loss heavy 2017 year, once normalised and after removing any benefit from reserve releases, the subset ROE for 2018 came out at just 2.7%, down from 3.8% for 2017 (as shown below)....MUCH MORE

"You Always Speak of Luddites But What of Captain Swing?"

That was the title of a post last September, brought to mind by this piece from Tim Taylor, The Conversable Economist:

The Captain Swing Riots; Workers and Threshing Machines in the 1830s
"Between the summer of 1830 and the summer of 1832, riots swept through the English countryside. Over no more than two years, 3,000 riots broke out – by far the largest case of popular unrest in England since 1700. During the riots, rural laborers burned down farmhouses, expelled overseers of the poor and sent threatening letters to landlords and farmers signed by the mythical character known as Captain Swing. Most of all, workers attacked and destroyed threshing machines."
 Bruno Caprettini and  Joachim Voth provide a readable overview of their research on the riots in "Rage against the machines New technology and violent unrest in industrializing England," written as a Policy Brief for the UBS International Center of Economics in Society (2018, #2). They write:
"Threshing machines were used to thresh grain, especially wheat. Until the end of the 1700s, threshing grain was done manually and it was the principal form of employment in the countryside during the winter months. Starting from the Napoleonic Wars (1803-1815), threshing machines spread across England, replacing workers. Horse-driven or water-powered threshers could finish in a matter of weeks a task that would have normally kept workers busy for months. Their use arguably depressed the wages of rural workers." 
Here's a figure showing locations of the Captain Swing riots: 
The authors collect evidence about where threshing machines were being adopted based on newspaper advertisements for the sale of farms--which listed threshing machines at the farm as well as other property included with the sale. They show a correlation between the presence of more threshing machines and rioting. But as always, correlation doesn't necessarily  mean causation. For example, perhaps areas where local workers were already more rebellious and uncooperative were more likely to adopt threshing machines, and the riots that followed only show why local farmers didn't want to deal with their local workers....MORE
And, if interested, the headline post:
From Librarian Shipwreck:

Who Was Captain Swing?
General Ludd, and the army of redressers that gathered behind his name, has become something of an all-purpose avatar for any attitude towards technology that is less than fawning. Whether this image of the Luddites is based upon historical evidence or simply upon hysterical paranoia is another matter, though one thing that is certain is that the specter of General Ludd still haunts technological society. Given the frequency with which Ludd’s name is evoked – be it as an epithet or as a source of inspiration (see: Neo-Luddism) – one could be forgiven for assuming that the Luddites were the first, last, or at the very least largest group to have seen machinery as a symbol of both their actual and figurative immiseration and to have acted accordingly.

Yet such a belief would be incorrect.

While General Ludd may haunt the subconscious of technology’s loudest advocates, and while the Luddites may be remembered primarily for their machine-breaking tactics, Ludd’s followers did not originate the tactic of machine-breaking, and similarly they were not the last group to make effective use of the strategy. Indeed, if one is interested in the history of machine-breaking than General Ludd is not the only myth enrobed leader worth knowing about. For there was also Captain Swing. A short historical sketch is necessary before comparisons can be made – for, though there are certainly similarities between Ludd and Swing, there are also important differences.

The followers of Captain Swing are those who participated in what came to be known as the “Swing Riots,” which raged across numerous counties in England from the later part of 1830 into the early months of 1831. By the late August of 1830 the agricultural workers of England had been squeezed to the point of destitution by a combination of economic policies, overabundance of available laborers, the enclosure of the commons (which had previously allowed many to eke out a frail living), dwindling wages, new restrictive Poor Laws, and the increased usage of threshing-machines that resulted in ever fewer laborers being hired (a particular problem in the winter). Modern industrial capitalism was rearing its head and as it surveyed the world it would claim as its birthright it ignored the workers and their traditions – the agricultural laborers may have already been impoverished but conditions were now such that survival itself had become precarious. Amidst the backdrop of political turmoil at home and with the example of revolution across the channel the situation was primed for upheaval, and once it came it easily spread.

The night of August 28, 1830 (in Lower Hardres) marks the start of the Swing Riots – it, at the very least, marks the beginning of the smashing of threshing-machines that was to become the hallmark of the movement. While attacks upon machinery were not the only feature of the Swing Riots (there were also cases of arson, the penning of threatening letters, and large confrontations) the dismantling of threshing-machines occurred (to greater or lesser extents) wherever the Swing Riots erupted. As a movement that was focused upon securing work and wages (a livelihood) for agricultural workers the threshing-machine became an easy target – a physical manifestation of oppression. Indeed – as Eric Hobsbawm and George Rudé put it in their (excellent) history Captain Swing – the threshing-machines represented a final insult as these machines particularly displaced workers during the times when work was most needed (the winter), and....

We've visited Librarian Shipwreck a few times, Most recently in "Luddite Tech Support":
Join the cult, get the tote bag free!

From Librarian Shipwreck (Libraries, Archives, Technology, Impending Doom):
and "'Smart Condom' Tracks Thrust Speed and Velocity and Lets you Share the Data"

Librarian Shipwreck homepage.

As for Hobsbawm, he usually graces our pages in reference to his review of Luttwak's "Coup d'État: A Practical Handbook."
His last appearance was in "There Has Obviously Been A Coup d'Etat at FT Alphaville (TSLA)".

Monday, April 22, 2019

"Russia seeks Chinese support in developing Arctic shipping routes, promising long-term gas supplies in return"

It appears the stories of a cash crunch for projects in the Russian far north were accurate.

From the South China Morning Post, April 18:

Ambassador to China invites Beijing to help develop ports and other facilities as Russia seeks to boost sea traffic in region
Russia wants to team up with China to build an Arctic shipping route, its ambassador to Beijing has said.

Moscow recently set out an ambitious programme to build new ports and other infrastructure facilities to increase cargo shipments across the Arctic, also known as the Northern Sea Route.
Russian ambassador Andrey Denisov told the South China Morning Post that negotiations over the supply of Russian gas to China through a route known as Power of Siberia Two were at an advanced stage.

“Almost everything has been completed so far but there is only one gap, which is the price,” Denisov said. “Price is the final detail but a crucial one and it’s quite natural in the discussion between seller and buyer – the seller wants the price as high as possible but the buyer wants to pay as little as possible.”
Denisov said the two sides were accelerating the pace of the negotiations and he was optimistic they would reach a deal. “China as a buyer needs gas and a reliable long-term source. Russia is definitely that kind of source,” he said.

Work on Power of Siberia One, also known as the “Eastern Route”, is expected to finish on December 10 and is expected to transfer 38 billion cubic meters of gas to China every year.

Any deal concerning Power of Siberia 2, or the “Western Route”, could further strengthen the energy alliance between China and Russia.

In recent years the countries that border the Arctic have become increasingly assertive about their territorial claims, as melting polar ice opens up the prospect of increased shipping and access to valuable natural resources.

Moscow, which controls about 50 per cent of the total Arctic coastline, has been stepping up efforts to develop the region, which could become another major source of gas supplies to China....
...MUCH MORE, including video

Also at the SCMP, April 10:
Vladimir Putin boasts of growing nuclear icebreaker fleet as he outlines Russia’s ambitious Arctic expansion plans

On Power of Siberia:
Big, Big Money: The 'Power of Siberia’ gas pipeline to China could be global game changer

And previously on the money front:
March 2019
Russian navy’s Arctic patrol vessels suffer delays of 3-4 years
President Putin almost looks upon the Arctic as his pet project, a really large pet project but his, and the fact the government budget can't come up with the loot to pay for the ships is an intriguing insight into Russia's true financial state. I guess even the Autocrat of all the Russias President of Russia has limits....
March 2019
"Saudi Arabia Looks to Enter Arctic LNG With Large Investment" 
January 2019
Ministry hints Putin’s Arctic ambitions are not realistic
Oct. 2018
"New state commission takes on Putin’s big plan for the Arctic"  
May 2018
"It’s an order from the Kremlin: shipping on Northern Sea Route to reach 80 million tons by 2024"
July 2018
The monster-icebreaker that might reshape Arctic shipping

"Unicorns, IPOs and the hidden links among the new wave of tech giants"

From GeekWire:

Seattle has a new unicorn, Outreach, the sales and marketing automation company that raised a $114 million funding round, pushing its valuation to $1.1 billion.

The news sends GeekWire co-founder John Cook and and me on a startup odyssey on this episode of the GeekWire Podcast, exploring the hidden connections among the new wave of public companies and tech behemoths in Silicon Valley and Seattle, including Uber, Lyft, and Convoy.

Here’s the thread of the conversation if you want to follow along.
...MORE, including audio

Graphcore CEO Takes A Shot at NVIDIA, Talks His Book, Makes a Good Point (NVDA)

In November 2016 we headlined a post Artificial Intelligence: What Could Derail NVIDIA? A Lab in Shenzhen; A Basement in Moscow; An Office in Bristol (NVDA).

Graphcore was the "Office in Bristol".
A year later: "Sequoia Backs Graphcore as the Future of Artificial Intelligence Processors" (NVDA; INTC):
Sometimes you get lucky...

From EE Times:

GPUs Holding Back AI Innovation
GPUs are widely used to accelerate AI computing, but are the limitations of GPU technology slowing down innovation in the development of neural networks?
In a recent interview with EETimes (Graphcore CEO Touts 'Most Complex Processor' Ever), Nigel Toon, CEO of Graphcore, explained that while GPUs are good at running convolutional neural networks (CNNs), they are not suitable for running the more complex types of neural network needed for reinforcement learning and other futuristic techniques.

“A GPU is a pretty good solution — if all you’re doing is basic, feed-forward CNNs. The problem comes when you start to have more complex neural networks. Rather than just doing it a layer at a time, I want to be able to go through some layers then feed back, and I want to be able to store information on the side which I can use as context information as I look at the next data. And if my data is changing — so, rather than it being millions of static images that I can feed in in parallel — if it's video and I'm interested in sequential frames, it's much harder to feed that in in parallel and take advantage of the wide SIMD paths in a GPU,” he said.

Visionary Approval
As part of our longer conversation, Toon noted that Graphcore has captured the interest of such AI visionaries as Demis Hassabis, a founder of DeepMind, and the founders of OpenAI, including Ilya Sutskever, along with many other leading researchers in machine learning. Graphcore worked with these researchers to design the IPU architecture based on the kinds of problems that they want to solve.

“All the innovators we spoke to said [using GPUs] is holding them back from new innovations,” he said. “If you look at the types of models that people are working on, they are primarily working on forms of convolutional neural networks because recurrent neural networks and other kinds of structures, [such as] reinforcement learning, don't map well to GPUs. Areas of research are being held back because there isn't a good enough hardware platform, and that's why we're trying to bring [IPUs] to market.”

Processor Development
Toon points to the development of ASIC-type accelerators that are built to accelerate specific neural networks, as well as increased interest in FPGA solutions for AI, as proof that GPUs can’t do the job well enough. There is a need, he says, for an easy-to-use processor that is designed from the ground up, specifically for machine intelligence.

“What you need to do is to extract parallelism in many different dimensions. So, rather than having an SIMD processor, what we need is a multiple-instruction, multiple-data machine,” he said. “We need to solve the problems of: ‘How can we access the memory in real time, during the compute?’ ‘How can I take pieces of data from here and there, gather that together, do the compute, and then scatter the answer back somewhere else?’ These are all the things that we have been solving with the IPU processor....MORE
If you follow the link there are three references to the entire interview. If you don't follow the link here's "Graphcore CEO Touts 'Most Complex Processor' Ever".

If interested see also:
Top 10 British Artificial Intelligence Startups

British AI Startup Graphcore Raises $200 Million From BMW, Microsoft

And related (and the reason the two types of chips are bolded above):
Chips: The Accelerator Wall—A New Problem for a Post-Moore’s Law World (GPU; ASIC; FPGA)
Watch Out Nvidia, Xilinx Is Performing (reports, beats, pops) XLNX; NVDA
Xilinx with their field-programmable gate array approach versus Nvidia's more generalist chips is an example of the type of competition experts were predicting NVDA would be facing, some over two years ago, links after the jump...
A Dip Into Chips: "AI Chip Architectures Race To The Edge"
"Why Alibaba is betting big on AI chips and quantum computing"
Hot Chips 2018 Symposium on High Performance Chips
Chips: "A Rogues Gallery of Post-Moore’s Law Options"
"Top-Rated Chipmaker Xilinx Gets Big Price-Target Hike On 5G Prospects" (XLNX; NVDA)

Fatal swine fever ravages China’s pig farms and shakes global food markets

A deep dive into what is fast becoming a serious problem.
From the Financial Times, April 22:
As millions of pigs disappear in China, the rest of the world is beginning to notice. The country’s pig population, the largest in the world, is likely to shrink by almost a third, losing 130m animals as African swine fever ravages the country’s farms. The outbreak will reshape protein markets across the globe, driving up meat prices as China, the leading consumer and producer of pork, braces for years of shortages and disruptions to its food supply. “This has been a game-changer,” says Jais Valeur, group chief executive at Danish Crown, Europe’s leading pork processor. “We’re only starting to see the real impact of African swine fever.”

The ASF virus, endemic to Africa, is fatal to pigs and has no cure. The current wave of cases began in Georgia in 2007 and spread to parts of eastern Europe and Russia before reaching China in August. After eight months of Beijing claiming the situation was under control, the crisis has now become undeniable. The Ministry of Agriculture said last week that a preliminary estimate forecasts pork prices to rise more than 70 per cent year on year in the second half of 2019.

The sharp drop in China’s pig population has sent shockwaves through the world food industry. Hog futures have leapt in Chicago. Shares of meat companies have soared in São Paulo and New York. US pork sales to China recently hit a record high despite a 62 per cent tariff imposed during the course of the trade war between the countries....MUCH MORE
U.S. futures via FinViz:

"Reputational currency, like China's Social Credit Score, rebrands repression as rational nudging. And these algorithmic governance models are spreading"

Professor Pasquale at The Boston Review:
The most successful Internet companies, it seems, all learned the lesson of Tom Sawyer. By outsourcing labor to their users, it is as if they have cordially invited friends and neighbors to delight in painting their fence. Instagram does not need to hire photographers; users snap, post, and comment on photos, and their hashtags are a filing system, a taxonomy as meticulously curated as a filing cabinet. Instagram’s parent company, Facebook, relies on all of us to keep each other amused, as does the Chinese platform Weibo. Even Google, Amazon, and Alibaba, operating far afield from social media, rely on combined consumers and producers (“prosumers”) to let them know when their algorithms are helpful. 
Every society depends on free labor—work that is vital but which goes unpaid. 
They also allow customers to police the quality of products and websites so that they don’t have to pay someone to do that work. Airbnb, Uber, and eBay apply similar methods, shifting the burden of quality control by having both sides in commercial transactions rate one another. We all give up small treasures—our data—to paint the fence of platform capitalists.

We may soon do the same for government. Every society depends on free labor—work that is vital but which goes unpaid. Smart governments realize that they need to strike some balance between market activity and the free labor that supports families and communities. Policymakers promote business and growth, but they also realize that if every moment were commodified, the foundations of social reproduction would wither away. Index funds may prove a better investment than children. And if you don’t get credit for being civil, paying attention in class, or taking care of your aging parents, why would you?

There are standard solutions to such problems. Courts can drain the bank accounts of “deadbeat dads.” Churches and civil society groups can stigmatize deviants, and the carceral state can further scare scofflaws. But these approaches take resources. The perfectly efficient neoliberal state would cut out the middleman. It would learn from Silicon Valley that you can motivate people not only to rate and rank one another, but also to positively enjoy the power and responsibility that rating (and being rated) entails.

The Chinese government is now implementing just such a system at the national level. Called the Chinese Social Credit System (SCS), it has some familiar foundations. Its early iterations (pioneered by private firms) allow users to share images of their scores with one another. As with financial credit scores used by many lenders, the system rewards people for repaying debts promptly. But the SCS does not stop with credit; it factors in court judgments, criminal records, academic dishonesty, jaywalking, moving violations, and failing to pay transit fares.
The Chinese Social Credit System factors in court judgments, 
criminal records, academic dishonesty, jaywalking, and more.
Surveillance, software, and relatively simple artificial intelligence can supply a fearsomely panoptic dossier. But this monitoring alone does not address the concern of Chinese Communist Party authorities that cornerstones of their authority are eroding. Thus the SCS will also dent your score for posting “unreliable” information or engaging in nebulously defined negative interactions online. Conversely, the system will reward volunteer activity and “filial piety”—devotion to one’s parents, grandparents, and perhaps other relatives. To paraphrase Margaret Thatcher, scoring is “the method; the object is to change the heart and soul.”

How can a government judge the relative value of working in the market versus visiting a lonely aunt? For the architects of the SCS, these spheres diverge: cash rules commerce, and a new currency will govern culture. That currency is reputation, a single score to express a person’s social value. As China’s SCS approaches its full implementation around 2020, the scoring of activities will spread, assigning points for a wider range of antisocial and social behaviors. Eventually China may make a Great Leap to Commensuration, in which every activity (or inactivity) is judged and converted to points, giving lived reality the feel of a never-ending video game.

The Chinese government claims that the SCS simply reflects the values now embodied in Chinese families, schools, and courts. But with no appeal mechanism—a basic aspect of due process in any scored society—the SCS’s relentless logic of commensuration threatens to supplant, rather than supplement, the authority of families, schools, and courts. The SCS could easily end up serving as a quant-driven power grab, enabling its authors to assert authority over vast swathes of social life in a way they could never achieve via legislation. Such quantitative governance of culture is a paradox: the very effort to articulate the precise value of manners and emotions threatens to unravel them entirely, as spontaneous affections and interactions are instrumentalized into points....

Bloomberg's Shira Ovide on the Uber Offering Documents

From Shira's Twitter feed:


Coming to a Sweet Tooth Near You: Proteins 10,000 Times Sweeter Than Sugar

From AgFunder:
Mary Poppins used to sing about how a spoonful of sugar “helps the medicine go down.” She’d perhaps change her tune if she ever met Dr. Ilan Samish, the CEO and founder of Amai Proteins — an Israeli startup lab-designing hyper-sweet, thermo-stable, zero-calorie proteins out of exotic fruits.

“The latest one is over 10 thousand times sweeter than sugar,”  he tells AgFunderNews on the sidelines of last month’s Rethink Food-Agri Innovation Week in San Francisco, where Amai clinched this year’s AgriFood Tech Innovation Award for ‘Most Innovative International Startup at Pre-Series A.’
One example of these hyper-sweet designer proteins in action: “We’ve been making pina coladas,” Dr. Samish says proudly. Amai, which is the Japanese word for ‘sweet,’ has been collaborating with food and beverage conglomerates like PepsiCo, Danone and SodaStream (as well as biotech companies like Merck and Lonza) to refine and stabilize taste profiles, testing their proteins in a wide variety of conditions and flavors.

A Spoonful of Proteins
 What he takes from his bag today, however, is a little less tropical: a generic plastic water bottle, filled with a clear liquid. 

Inside, he says, is indeed mostly water, mixed with a solution of roughly half sugar. The other half is one of his lab-designed super sweet proteins, designed based on proteins of exotic fruits via a process called Agile Integrative Computational Protein Design (AI-CPD) and fermentation; there’s also a dash of acidic lemon juice thrown in to help stabilize the flavor and prevent the whole thing turning too sweet. 

Dr. Samish hopes that tiny doses of proteins like these — milligrams rather than spoonfuls — could soon serve as a cheap and healthy way of replacing sugars or other sweeteners in soft drinks, snacks, or, indeed, possibly medication. While these proteins activate our sweetness receptors, our guts will absorb them as workmanly proteins. (Right now, these sweet proteins are for research and development purposes only. And occasionally for serving up to journalists asking too many questions…)

There are good reasons for weaning suppliers, consumers, and Mary Poppins off sugary stuff: “Sugar kills more people than gunpowder,” Dr. Samish warns, with a sternness capable of silencing even the chirpiest of fictional British nannies. And with a dark sprinkle of his own lyricism, he adds that “gunpowder does it quickly; sugar does it slowly.”

This is grim but true. According to the World Health Organization, the number of people who have diabetes surged from 108 million in 1980 to 422 million in 2014, while worldwide obesity has nearly tripled since 1975. Many public health experts link these trends to heightened global intakes of addictive and calorific sugary snacks and drinks.
Both diabetes and obesity can, in turn, trigger a whole host of related health problems, not least elevating the risk of heart disease and strokes — the world’s two most common causes of death. The current mass market options for alternative low-calorie sweeteners is not much to smile or sing about either. A 2018 report conducted by the American Heart Association found that many of these options have “undesirable effects of satiety and perception of hunger” and “increased taste preference for sweet foods,” as well as promoting an “increased perception that more dietary calories can be consumed.” They also warn of a “dearth of evidence on the potential adverse effects of LCS [Low-Calorie Sweeteners] beverages relative to potential benefits.”

A ‘Crazy Guy’ Curing Food
The medical and pharmaceutical response, Dr. Samish has long believed, has been disproportionately pointing in the wrong direction. “Huge amounts of funding are spent on curing diseases relating to sugar intake,” he says. “I decided to devote my time into curing the food that causes these diseases.”...MORE

"Cities Are Rising in Influence and Power on the Global Stage"

A subject near and dear to our jaded hearts.
It's the manifestation of the age-old thirst for power, to make the world as you want it, and an acknowledgement that fixing potholes is boring.

From CityLab, April 15:

Cities are challenging their invisibility in global governance structures, like the United Nations, by forging new alliances to influence international policy.
When Donald Trump announced in June 2017 that the United States was pulling out of the Paris Agreement—the pact between 195 nations (nearly all the world’s nations) to reduce global greenhouse gas emissions—the mayors of Paris, France, and Pittsburgh, Pennsylvania, responded with an op-ed in the New York Times. In it, they announced that “an unprecedented alliance is emerging” among more than 7,400 cities worldwide to honor and uphold the goals of this agreement irrespective of their own country’s level of commitment. They vowed to do this not only for the citizens of their cities, but also for the citizens of “every other city in the world.”
Most people don’t think of cities when thinking about international relations or international law. After all, cities are local governments and their leaders are concerned with local, not global, issues and challenges. Right?
Wrong, or at best: incomplete. Cities are more involved in international policy-making, more savvy at navigating the international halls of power, more ambitious about voicing their opinions at the global level, and more influential in shaping global initiatives than perhaps at any time since Italy’s city-states dominated during the Renaissance.

In 2017, around the same time as city leaders vowed to honor the Paris Agreement, more than 150 city leaders from around the world assembled in Mechelen, Belgium. Their motive: The United Nations was in the process of drafting the Global Compact on Migration (GCM) and Global Compact on Refugees (GCR). Meeting in Belgium, the city leaders drew up the Mechelen Declaration, demanding a seat at the drafting table.

The two global compacts were adopted in Marrakesh in 2018, prompting 150 mayors and city leaders to sign a second declaration calling for the full and formal recognition of the role of local authorities in the implementation, follow-up, and review of both compacts. The UN High Commissioner on Refugees enthusiastically embraced the city leaders’ declaration in a speech highlighting the necessity of working with city leaders to solve the global refugee crisis.   It’s increasingly apparent that cities are no longer just places on the world atlas, or passive appendages of their state governments, but influential and independent actors in global politics.
Cities’ structural powerlessness in international relations
In a formal sense, cities remain structurally powerless—that is, without an official seat at the table or a platform in the current international political framework, which is built on the foundational idea that nation-states are the sole actors and policy-makers at the international level. This state-centric framework was constructed by and for states following the atrocities of World War II, when the winners of the war came together and, following a series of negotiations, created the United Nations (UN).

Nations, and only nations, are permitted to fill the key positions in the UN. While a small role is granted to non-governmental organizations, that can be consulted on matters pertaining to their expertise, this same privilege is not afforded to cities, which are not mentioned even once in the UN Charter.
Cities are also formally powerless under international law. With rare exception, international law treats nations as the makers, shapers, and subjects of its contents, and as the only entities with both legal rights and duties. International human rights law, which treats humans (rather than countries) as its subject, is one of the only exceptions, and even there, states are the primary vehicle through which such rights are expected to be realized and enforced.

In short, nation-states exclusively created and exclusively manage the core institutions comprising the existing international political and legal framework.

Cities’ rising power at the international level
Yet, despite the fact that cities were effectively written out of the existing political world order, cities are leapfrogging over their federal governments to participate independently at the international level.
National governments increasingly are seen as unresponsive at best, or dysfunctional at worst, in addressing some of the most dire threats and challenges facing humanity, of which the majority live in cities. Cities are stepping into the breach in ways that promise to reshape the international political order.

Cities are rising in influence and power on the global stage for three primary reasons. First, the world’s global cities are increasingly driving world affairs—politically, socially, culturally, and especially, economically.  Cities are the world’s engines of productivity, innovation, talent, and economic output, producing nearly 80 percent of total global GDP. And an increasing number of global cities, such as London, Tokyo, and New York boast economies larger than some G-20 nations. The recent formation of the Urban 20 (U20), a diplomatic initiative of global cities intended to mirror the G20, is a powerful expression of the role and influence global cities are staking out in the new world order. When these cities talk, nations (and the international institutions that represent them) are starting to listen....MORE
However... when talking power politics it is good to talk of actual power:
"An electrical meltdown looms: how can we avert disaster?"
Short of an EMP or a coronal mass ejection, I imagine that if country mouse ever got tired of city mouse the most efficient course of action would be to hit the transformers and sub-stations and let city mouse starve to death. Jus' sayin'
September 2018
A Warning On Mayors Ruling The World From A Surprising Source
There is a determined push to decrease the importance of nation-states while elevating the worldwide political power of municipalities and their mayors, a trend I had assumed CityLab backed come hell-or-high-water.
Maybe not.
The writer of this piece, Amy Liu, hangs her hat at Brookings....
February 2017 
Trends to Watch: "Can mayors actually rule the world?" 
In low-key but very persistent ways technocrats* have been aiming at this target for years and now it seems to be gathering some momentum. Here's a good introduction by Harvard's Diane Davis....
May 2017 

"Gadabout Urbanist Richard Florida Has a New Book... 
"It advises cities on what to do about problems that result from advice he gave them in his previous books..."
September 2017
Return of the City-State, Or: The End of the Nation State May Be Upon Us
October 2017 
"Why nation-states are good"
Yesterday two Alphavilleins, Izabella Kaminska on Twitter and Kadhim Shubber in the Further Reading post highlighted this Dani Rodrik essay at Aeon.

We've been kicking around ideas on how to profit from a devolution of power from larger entities (nation-states) to smaller (city-states) should said devolution occur. So, stealing a way of thinking from Eisenhower, in another context, obvs.:

In preparing for battle I have always found that plans are useless, but planning is indispensable.
- Dwight D. Eisenhower 

Our most recent piece on what may or may not be a phenomena was last month's "Return of the City-State, Or: The End of the Nation State May Be Upon Us" which also linked to Aeon.

I'm not sure where Kadhim comes down on the structure-of-power thing but I suspect Izabella might not be aghast at a return to prominence of the Baltic City-States although probably not the Hanseatic League...  
October 2017
Pope Francis Calls For "Rethinking of the figure and the role of the Nation-State..."
 November 2017
"Mayoral Powers in the Age of New Localism"
One of the problems with politics is that the people attracted to power are exactly the ones who should not be allowed anywhere near it.
Go figure.
We've been watching the mission-creep trend in municipal governance for a while now, trying to get in front of it—"Il faut bien que je les suive, puisque je suis leur chef"*—to make a bucko or two but, to date, have only come up with the tautology that these people would rather jet off to Buenos Aires during the Northern Hemisphere winter for the Global Parliament of Mayors** than stay home and fix potholes.
It was ever thus, or at least has been since 1967 when John Lennon noted "4000 holes in Blackburn, Lancashire"

*Ledru-Rollin, 1848—schoolboy French translation: "I must follow them for I am their leader."
**This year the get-together was actually held in Stavanger in late September. Nice 'hood, nice time of year...
September 2018 
There Seems To Be Some Tension Between Competing Visions For The Smart City

And many more, use the search blog box, top left if interested.
And if you have the time and the inclination do take a look at that "Trends to Watch..." piece linked at the top of the previously posts.
The author, Diane Davis is very sharp. ...