Tuesday, October 20, 2015

Why Is Physics Beautiful?: Frank Wilczek


The nineteenth-century physicist Heinrich Hertz once described his feeling that James Clerk Maxwell’s equations, which depict the fundamentals of electricity and magnetism, “have an independent existence and an intelligence of their own, that they are wiser…even than their discoverers, that we get more out of them than was originally put into them.” Not long after, Albert Einstein called Niels Bohr’s atomic model “the highest form of musicality in the sphere of thought.” More recently, the late Nobel laureate Richard Feynman, describing his discovery of new laws of physics, declared, “You can recognize truth by its beauty and simplicity.” Similar sentiments are all but universal among modern physicists.
Wishful thinking could never produce working iPhones, photographs of Pluto, or atomic bombs. Physics, as summarized in a handful of mathematically precise laws, indisputably works. Yet many things that “work” do not inspire the kind of admiration that the fundamental laws of nature do.
Their beauty is rooted, first, in the laws’ symmetry, here meaning the possibility of change without change – a precise yet almost mystical concept. Just as a circle can be rotated about its center at any angle, changing the position of each of its points without changing its form, symmetric laws apply to changed situations without changing or losing validity. For example, special relativity asserts that the fundamental laws of physics remain the same when we view the world from a platform moving at constant velocity. Similarly, so-called time translation symmetry encodes the uniformity of physical law in time: Even as the universe ages, the laws remain the same.
The second source of beauty in the laws of physics is their productivity – what I call their exuberance. Just a handful of basic principles generates an astonishing wealth of consequences – everything in the physical world! You can write the equations of the core theories of physics – known as the standard model – quite comfortably on a T-shirt. To paraphrase Hertz, they give back far more than we put in.
It is important to note that the laws of physics need not necessarily have such marvelous properties. Consider this hypothetical situation: Developments in computer power, virtual reality, and artificial intelligence enable the creation of self-aware beings whose “world” is, from our perspective, a programmed simulation. If a self-aware Super Mario began to analyze the laws of his world, he would find very little symmetry or productivity. Instead, he would find a vast collection of loosely connected, quirky rules, reflecting the whims of the programmer.
The beauty of physical law is too impressive to be accidental. It has led people throughout history to believe that some tasteful higher being created us, and that we inhabit a consciously designed world, like our notional Super Mario. But this is an extravagant hypothesis, which goes far beyond the facts it is meant to explain. Before adopting it, we should explore more economical alternatives.
The answer likely lies within us. Beautiful things are those in which we find pleasure and seek out. They are, in neurobiological terms, things that stimulate our reward system. That explains why parents tend to find their young children beautiful, and adults are attracted to nubile models and their images. It makes evolutionary sense to reward such feelings.
The evolutionary utility of the beauty of physical laws is somewhat less obvious, but no less real. Given the usefulness of accurately assessing the consequences of our actions, our reward system has evolved so that we derive joy from making successful predictions. Understanding the forces and patterns defining our world, and especially principles that apply (without changing) to a wide variety of situations, can help to improve our predictions. The fact that we can often infer the behavior of complex objects or systems from knowledge of their parts – that we get back more than we put in – can help us to hone our predictions further.
In short, because evolution predisposes us to find beautiful those things that help us understand the world correctly, it is no accident that we find the correct laws of nature beautiful. Viewed from this perspective, the apparent beauty of the laws of physics – our attraction to their symmetry and exuberance – is not surprising.
What remains mysterious is why they are comprehensible. A profound link between beauty and comprehensibility is an increasingly important source of scientific progress. Today’s frontiers of fundamental physics are far removed from everyday experience. They are difficult and expensive to access experimentally, and we cannot rely on our intuition to fill in the blanks. The patient accumulation of fact recommended by Francis Bacon, Isaac Newton, and Sherlock Holmes is thus no longer practical.
Instead, we reverse the process, using guesswork to motivate experiment. We first construct beautiful equations, then derive their consequences, and, finally, craft experiments to test them. In recent decades, that strategy has proved remarkably successful. It has given us quantum chromodynamics, which resolves the central problem of nuclear physics, as well as predicting the Higgs particle and much else.
Rather than recognizing the beauty of laws otherwise discovered, we use principles of beauty – vast symmetry and a high ratio of output to input – to enable discovery. When this works, we have an “anthropic” explanation of the laws’ beauty: If they were not beautiful, we would not have found them.

China is Not Collapsing: Anatole Kaletsky


One question has dominated the International Monetary Fund’s annual meeting this year in Peru: Will China’s economic downturn trigger a new financial crisis just as the world is putting the last one to bed? But the assumption underlying that question – that China is now the global economy’s weakest link – is highly suspect.
China certainly experienced a turbulent summer, owing to three factors: economic weakness, financial panic, and the policy response to these problems. While none on its own would have threatened the world economy, the danger stemmed from a self-reinforcing interaction among them: weak economic data leads to financial turmoil, which induces policy blunders that in turn fuel more financial panic, economic weakness, and policy mistakes.
Such self-reinforcing financial feedback is much more powerful in transmitting global economic contagion than ordinary commercial or trade exposures, as the world learned in 2008-2009. The question now is whether the vicious circle that began in China over the summer will continue.
A sensible answer must distinguish between financial perceptions and economic reality. China’s growth slowdown is not in itself surprising or alarming. As the IMF noted, China’s growth rate has been declining steadily for five years – from 10.6% in 2010 to a projected rateof 6.8% this year and 6.3% in 2016.
This deceleration was inevitable as China advanced from extreme poverty and technological backwardness to become a middle-income economy powered by external trade and consumer spending. It was also desirable, because rapid growth was hitting environmental limits.
Even as the pace of growth slows, China is contributing more to the world economy than ever before, because its GDP today is $10.3 trillion, up from just $2.3 trillion in 2005. Simple arithmetic shows that $10.3 trillion growing at 6% or 7% produces much bigger numbers than 10% growth starting from a base that is almost five times smaller. This base effect also means that China will continue to absorb more natural resources than ever before, despite its diminishing growth prospects.

Yet China is causing high anxiety, especially in emerging countries, largely because financial markets have convinced themselves that its economy is not only slowing, but falling off a cliff. Many Western analysts, especially in financial institutions, treat China’s official GDP growth of around 7% as a political fabrication – and the IMF’s latest confirmation of its 6.8% estimate is unlikely to convince them. They point to steel, coal, and construction statistics, which really are collapsing in several Chinese regions, and to exports, which are growing much less than in the past.
But why do the skeptics accept the truth of dismal government figures for construction and steel output – down 15% and 4%, respectively, in the year to August – and then dismiss official data showing 10.8% retail-sales growth?

One reason can be found in the financier George Soros’s concept of “reflexivity.” Soros has argued for years that financial markets can create inaccurate expectations and then change reality to accord with them. This is the opposite of the process described in textbooks and built into economic models, which always assume that financial expectations adapt to reality, not the other way round.
In a classic example of reflexivity, when China’s stock-market boom turned into July’s bust, the government responded with a $200 billion attempt to support prices, closely followed by a small devaluation of the previously stable renminbi. Financial analysts almost universally ridiculed these policies and castigated Chinese leaders for abandoning their earlier pretenses of market-oriented reforms. The government’s apparent desperation was seen as evidence that China was in far greater trouble than previously revealed.
This belief quickly shaped reality, as market analysts blurred the distinction between a growth slowdown and economic collapse. In mid-September, for example, when the private-sector Purchasing Managers’ Index (PMI) came out at 47.0, the result was generally reported alongthese lines: “The index has now indicated contraction in the [manufacturing] sector for seven consecutive months.”
In fact, Chinese manufacturing was growing by 5-7% throughout that period. The supposed evidence was wrong because 50 is the PMI’s dividing line not between growth and recession, but between accelerating and slowing growth. Indeed, for 19 out of the PMI’s 36 months of existence, the value has been below 50, while Chinese manufacturing growth has averaged 7.5%.
Exaggerations of this kind have undermined confidence in Chinese policy at a particularly dangerous time. China is now navigating a complex economic transition that involves three sometimes-conflicting objectives: creating a market-based consumer economy; reforming the financial system; and ensuring an orderly slowdown that avoids the economic collapse often accompanying industrial restructuring and financial liberalization.

Managing this trifecta successfully will require skillful juggling of priorities – and that will become much more difficult if Chinese policymakers lose international investors’ trust or, more important, that of China’s own citizens and businesses.
Vicious circles of economic instability, devaluation, and capital flight have brought down seemingly unbreakable regimes throughout history. This probably explains the whiff of panic that followed China’s tiny, but totally unexpected, devaluation of the renminbi.
The renminbi, however, has recently stabilized, and capital flight has dwindled, as evidenced by the better-than-expected reserve figures released by the People’s Bank of China on October 7. This suggests that the government’s policy of shifting gradually to a market-based exchange rate may have been better executed than generally believed; even the measures to support the stock market now look less futile than they did in July.
In short, Chinese economic management seems less incompetent than it did a few months ago. Indeed, China can probably avoid the financial meltdown widely feared in the summer. If so, other emerging economies tied to perceptions about China’s economic health should also stabilize.

The world has learned since 2008 how dangerously financial expectations can interact with policy blunders, turning modest economic problems into major catastrophes, first in the US and then in the eurozone. It would be ironic if China’s Communist leaders turned out to have a better understanding of capitalism’s reflexive interactions among finance, the real economy, and government than Western devotees of free markets.

State electricity boards reluctant to buy power from NHPC projects


In what may impact India’s hydropower generation plans, states are averse to buying electricity from NHPC Ltd’s projects because of high tariffs. State electricity boards (SEBs) are not signing the power purchase agreements (PPAs) for the full life cycle of a project, further exacerbating the situation for the state-owned utility.
The primary reason behind high tariff is time and cost overrun because of issues such as disputes between states, geological issues and resistance from the local population.
In the case of the 330 MW Kishanganga project in Jammu and Kashmir, Rajasthan, Uttar Pradesh and Himachal Pradesh are unwilling to buy electricity from the same.
A senior NHPC executive who spoke on condition of anonymity confirmed this.
Another NHPC executive who asked not to be identified admitted that tarrifs from hydropower projects being commissioned now will be higher than current tariffs.
There have been concerns expressed in some quarters about faltering hydropower generation and its impact on India’s energy security plans.
In the case of some commissioned projects, PPAs have been signed for five years as compared to a desired 35-year period. Many SEBs are unwilling to extend even those PPAs which have been signed for five years and have lapsed.
PPAs totalling 1,337 MW, enough to supply electricity to a state such as Jammu and Kashmir from projects such as Uri-II (240 MW), Parbati-III (520 MW), Teesta Low Dam-III (66 MW), Sewa-II (120 MW), Chamera-III (231 MW) and Teesta Low Dam-IV (160 MW) have only been signed for five years. Even in the case of those PPAs which have signed for five years and have lapsed, the electricity distribution companies are unwillingly to extend them due to high cost; BSES Rajdhani Power Ltd (BRPL) and BSES Yamuna Power Ltd (BYPL) refused to do so in the case of the Sewa-II project.
India has a power generation capacity of 276,089 megawatts (MW), of which 15% or 41,997.42 MW is hydropower.
Hydropower is the ideal solution for meeting peak demand, as it is relatively easier to switch on and off, compared with thermal sources.
Analysts believe hydropower has an important role in India’s energy mix.
“Hydro projects can support and stabilise the sector as India aggressively chases solar and wind projects. NHPC is uniquely positioned to support this endeavour. With the appropriate mix of old and ongoing projects, NHPC is able to get financing at a corporate level rather than project specific. Its only focus should be towards reducing its project development cycle and bringing onstream projects pending for long,” said Sambitosh Mohapatra, who oversees the power and utilities practice at consulting firm PricewaterhouseCoopers.
He explained that the delays are the bigger problem and dismissed the trouble with getting customers to sign long-term PPAs as a hiccup. “Hydro projects typically operate for 35-40 year period and substantial tariff reduction comes in post 10-12 years of its operating life.” 
While queries emailed to the spokespeople of NHPC and power ministry remained unanswered till press time, a BSES spokesperson said in an emailed response that it has “sought advice from the DERC (Delhi Electricity Regulatory Commission” on the issue.
Executing a hydropower project is time-consuming and tedious. It includes a thorough survey and investigation, detailed project report preparation, relocation and resettlement of the affected population and infrastructure development.
While work at the Uri-II project in Jammu & Kashmir was stalled due to the agitation against the hanging of Afzal Guru, who was convicted for his role in the terrorist attack on Parliament in 2001, work on the 330 MW Kishanganga project’s dam site was halted as Pakistan had questioned the “legality of the construction and operation of an Indian hydro-electric project” under the Indus Waters Treaty of 1960. The International Court of Arbitration at The Hague ruled in India’s favour.
Mint reported on 6 May about a majority of state-owned NHPC Ltd’s under construction projects been delayed, hampering the government’s bid to increase power generation in order to meet demand and boost economic growth. These SEBs are increasingly showing reluctance to buy power on account of poor financial health. SEBs, which control the discoms in their respective states, owe nearly Rs.4 trillion in debt to the banking system.
Of this, a majority of the debt is held by utilities in eight states, namely, Rajasthan, Uttar Pradesh, Haryana, Tamil Nadu, Andhra Pradesh, Jharkhand, Bihar and Telangana.
The push for hydropower is also aimed at expanding the electricity user base in the country. India’s per capita power sector consumption, around 1,010 kilowatt hour (kWh), is among the lowest in the world. Around 280 million in the country do not have access to electricity.
In comparison, China has a per capita consumption of 4,000kWh, with developed nations averaging around 15,000kWh per capita.
The Bharatiya Janata Party, which leads the government, had made energy security a part of its poll plank. The Narendra Modi-led government’s energy security plans include harnessing renewable sources such as solar energy, biomass and wind power along with coal, gas, hydropower and nuclear power to bring about an “energy revolution” in the country.

Indian microfinance institutions have just busted a myth


By definition, microfinance is the business of giving tiny loans to people who do not have access to formal banking services. The Investopedia website defines microfinance as a type of banking service that is provided to unemployed or low-income individuals or groups who would otherwise have no other means of gaining financial services. “...the goal of microfinance is to give-low income people an opportunity to become self-sufficient by providing a means of saving money, borrowing money and insurance,” it says. In India, microfinance institutions (MFIs) cannot collect deposits, but sell insurance products, besides offering small loans that are typically paid back in weekly or monthly instalments.
Such institutions operate in the hinterland where traditional banks balk at serving. Or, so we believed. The scene has changed. MFIs have shifted their focus from rural pockets to urban India. For the first time in its 25-year history, Indian MFIs have more urban clients than rural ones. The latest data, compiled by industry self-regulatory organization Sa-Dhan, shows 67% of the 37 million MFI customers live in urban India.
The share of rural customers was 69% in fiscal year 2012. That dropped marginally to 67% in 2013. In the following two years, the share of rural customers has declined drastically. In 2014, rural customers constituted 56% of the total. It dropped further to 33% in the following year. This busts the myth that Indian microfinance is predominantly a rural phenomenon, very different from what we see in Latin America and large parts of Africa and Asia.
The industry’s outreach to urban clients was increasing every year and it has now outstripped that of rural customers. Why has this happened? Before we look for an answer, let’s look at the broader picture. The industry had a customer base of 37.1 million in March 2015, up from 33 million a year ago. It included 6.5 million customers of Bandhan Financial Services Ltd, the largest MFI that turned into a bank in August. The percentage of women customers remained unchanged at 97%, while the share of Scheduled Caste and Scheduled Tribe customers rose from 19% to 28%. The loan portfolio was close to Rs.40,000 crore and 80% of it was for income-generating activities. The average loan per borrower in the year ended 31 March rose to Rs.13,162 fromRs.10,079 in at the end of the previous fiscal.
The quality of assets has improved. If we leave a few MFIs that had been affected by the crisis that gripped the industry following the Andhra Pradesh state law five years ago, the industry’s non-performing assets (NPAs) were to the tune of 13 basis points as on 31 March. A basis point is one-hundredth of a percentage point.
Such MFIs were referred to the so-called corporate debt restructuring cell as their equity and reserves were eroded by accumulated bad loans. About 80% of 250-odd MFIs have less than 1% of their loan portfolios at risk. About 12% of MFIs have 1-3% of their loan portfolio at risk, and 8% of MFIs have more than 5% of their loan portfolio at risk. The loans at risk are those that have not been serviced for 30 days.
In contrast, the quality of small loans distributed through the so-called self-help group (SHG) model is inferior. The number of SHGs shrank to 7.71 million in 2015 from 7.43 million in the previous year even though the number of families involved in SHGs increased from 97 million to 101 million. SHGs, typically a group of 20 women, save as well as offer credit to its members from money sourced from commercial banks. SHGs’ total savings stood at Rs.11,307 crore in 2015 and the loan portfolio was Rs.51,727 crore. The average loan outstanding per SHG was Rs.1.15 lakh and NPAs were 7.4%, up from 6.8% in the previous year.
One reason behind the rise in urban customers is the phenomenal growth of a few urban-focused MFIs such as Janalakshmi Financial Services Pvt. Ltd, Ujjivan Financial Services Pvt. Ltd and Satin Credit Card Network Ltd. These three collectively had around 5.7 million customers in March. Their growth last year had been higher than the average industry growth and most of their customers live in urban India. Till it became a bank, Bandhan had an 18% market share of customers, followed by SKS Microfinance Ltd and Shri Kshethra Dharmasthala Rural Development Project. Others among the top 10 are Janalakshmi, Equitus Microfinance Pvt. Ltd, Spandana Spoorthy Financial Ltd, Share Microfin Ltd, Satin and Grameen Koota Financial Services Pvt Ltd. Janalakshmi, Ujjiivan and Equitus have received in-principle approval from the Reserve Bank of India to become small finance banks.
Another reason behind the growth in urban customers is the shift in the business models of many MFIs. They are becoming increasingly urban-centric to cut down operational expenses and maximize operational efficiency. Under the priority sector lending norms, banks in India are required to give 40% of their loans to small borrowers. As they do not have the reach, they give money to the MFIs to be on-lent to such borrowers. While fixing the loan price for small borrowers, the MFIs cannot charge more than 10% over the cost of loans taken from banks. This means their profitability solely depends on operational efficiency as the cost of raising resources is almost the same for all MFIs.
The rise in urban clients of MFIs also tells us that banks in India have a cultural problem—they don’t like small borrowers, be they in rural or urban India. The official reason for not reaching out to small borrowers are many—ranging from higher transaction costs and lack of reach to the absence of a competent rural cadre. These probably explain the banks’ absence in remote villages. But what about urban India? Our drivers and housemaids, vegetable vendors and fishermen in Mumbai and Delhi are being serviced by MFIs as the banks refuse to see business there.

Amazon India adds muscle to B2B segment


The India arm of global e-commerce major Amazon is strengthening its business-to-business (B2B) segment and adding categories such as furniture to its marketplace in a bid to boost the value of goods sold and edge past homegrown rivals Flipkart and Snapdeal.
Amazon, which launched its invite-only business-to-business platform AmazonBusiness (Amazon Wholesale India Pvt. Ltd) in May, has opened the offering to all merchants, and launched furniture as a category on its marketplace (Amazon Seller Services Pvt. Ltd), the company said on Monday.
India is the only country outside the US where Amazon has set up its B2B operations.
The move comes at a time when the company is locked in a three-pronged fight with Flipkart (Flipkart Ltd) and Snapdeal (Jasper Infotech Pvt. Ltd), in a market driven by deep discounts for customer acquisition.
Incidentally, neither Flipkart nor Snapdeal has a B2B business. Shopclues, run by Clues Network Pvt. Ltd, is the only other e-commerce marketplace to have launched a B2B segment. Amazon entered the B2B segment with the launch of Amazon Supply in April 2012. The company rolled back Amazon Supply and launched AmazonBusiness in April this year.
The B2B segment, focused on the small and medium businesses, is operational in Bengaluru and Mangaluru.
The company has a dedicated 30,000 sq.ft warehouse in Bengaluru to cater to this segment and claims to have more than 200 brands across eight categories, including health and personal care, food and beverages, kitchen and dining, office stationery and computers.
“The number of buying members has increased five times since launch and we have thousands of buyers across Bengaluru and Mangalore,” said Kaveesh Chawla, general manager at AmazonBusiness.
Unlike the marketplace, where Amazon connects consumers with merchants, the company buys products directly from the manufacturers for the B2B venture.
India’s foreign direct investment (FDI) laws bar foreign investment in e-commerce websites that sell directly to consumers but allows in marketplaces that link sellers and buyers.
According to experts, the scope of the B2B segment is way bigger than the business-to-consumer sector, especially because the order values are higher. According to a report by Frost and Sullivan, the global B2B e-commerce market will reach $6.7 trillion by 2020.
According to a report by American retailer Wal-Mart Stores Inc., the B2B e-commerce industry in India is poised to become a $700 billion segment by 2020.
Wal-Mart operates a B2B e-commerce portal BestPrice that allows shopkeepers and institutional buyers to register and shop online.
Amazon’s online B2B business will be pitched against businesses such as Industrybuying.com, Tolexo, Power2SME and Bizongo among others.
Meanwhile, Amazon also followed the footsteps of homegrown marketplaces such as Flipkart and Snapdeal with the launch of furniture. Furniture and home decor is a lucrative category for online retailers.
According to industry estimates, it is a $25-billion category which is largely unorganized, giving online retailers a huge opportunity to consolidate supply from thousands of sellers and offer products to a large customer base that physical stores can’t reach.
Besides, higher value items also helps e-tailers boost their topline. Investors have pumped cash into online home stores since April this year.
Urban Ladder Home Decor Solutions Pvt. Ltd. secured $50 million from Sequoia Capital and TR Capital and others in April; Pepperfry (Trendsutra Platform Services Pvt. Ltd) raised $100 million in a round led by Goldman Sachs and Zodius Technology Fund in July; and Livspace (Home Interior Design E-commerce Pvt. Ltd) mopped up $8 million from Helion Ventures, Jungle Ventres and Bessemer Venture Partners in August.

BCG-CII report sees massive potential for Indian media industry


The Indian media and entertainment sector is one of the best performing sectors, growing 10% annually over the past five years, but is still underperforming, offering scope for a much larger growth, says a report jointly published by the Boston Consulting Group (BCG) and the Confederation of Indian Industry (CII) that was released at the CII Big Picture Summit, a media industry conference on Monday. Advertising, for instance, is only 0.33% of GDP in India compared with the global average of 0.64%.
The report titled Shaping the Industry at a Time of Disruption predicts the industry size to touch Rs.1.15 trillion by 2015-end and Rs.3.8-5 trillion by 2025. A few consumption metrics point to India being a significant global player in this sector—it has world’s third largest television viewership base (after the US and China), the world’s second largest print industry (in circulation terms) and produces the highest number of films worldwide (1950+ films produced in India in 2014).
The report says that the next decade could fundamentally transform the sector, thanks to the digital media. “Unlike in the West, where many parts of the industry are struggling, India’s unsaturated markets brim with opportunity. Demand levels are set to surge as vast, latent consumer segments are tapped. On the other hand, the advertising pie is poised to expand on the back of robust economic growth. If India could reach China’s media consumption levels, it could create an incremental ‘Billion media hours’ a day.”
In India, this growth has come on the back of macroeconomic factors like rising gross domestic product (GDP), strong economic activity and increasing consumer income coupled with industry initiatives like improving addressability, content innovation and deeper segmentation.
“At the core of this optimism is the fact that the underlying Indian consumer trend is positive,” said Kanchan Samtani, partner and director at BCG. “Unlike mature Western markets, digital media could expand the overall market size by tapping into latent demand and driving new media consumption rather than merely replacing other, more traditional platforms.”
Globally, digital has hurt print, music the most and TV, radio, films to a lesser extent. But India could be very different. Its monetization benchmarks—both for subscription and advertising—are substantially different, says the report.
In India, a couple of factors have driven advertising growth at 10%, subscriber growth at 4-6% and per capita media spend growth at 9-10% over the past five years. Even newsprint circulation, which has been declining globally, continues to grow in India on the back of rising literacy and income.
India is gearing for a consumption explosion as per this latest media industry report. “India already has 250 million digital screens (including smart phones, tablets, laptops and PCs), which is more than the number of TV and film screens put together. This number is projected to multiply to 600 million by 2020, implying that every second Indian will have a personal media consumption device.”
“Ours is an industry that is perpetually on the cusp of disruption. Dealing with these forces of disruption has become a habit for most of us. That said, we often suffer from ‘tunnel vision’ and tend to focus solely on the sectors we play in,” said Sudhanshu Vats, chairman, CII National Committee on Media and Entertainment and Viacom 18 Group CEO.
According to the report, new consumption behaviours will get created with always-on, on-the-go, on-demand and seamless pick-where-you-left models across multiple devices and time frames. “The distinction between prime and non-prime time will become redundant due to these changing patterns and behaviours of online consumption. It will also create fragmented audiences,” added the report.
Consumers will gravitate towards the most popular content or niches of personal interest. “There could be significant disruption in sourcing models. The sheer volume of content is also exploding with user-generated content and cheaper content models are emerging, challenging the premise that good content must be expensive,” as per the report.
Another trend identified in the report was that advertising will need to be reimagined in terms of metrics, formats and techniques “ Metrics revolving around prime time and front page will become archaic as the focus moves to “my time” and “my page”. With the ever-increasing choice of content and the popularity of time-shifted and on-demand viewing, measuring viewer behaviour will become increasingly critical as it will facilitate targeted advertising. Further, there is a fast growing need for innovative and newer ad formats for effective monetization.”
“Netflix with its $8/month offering disrupted the $80/month pay TV connection in the US, but digital pay TV, priced at under $5/month, is already one of the cheapest items in an Indian household’s purchase basket. Likewise, at under $3-5/month, Indian consumers have access to newspapers delivered daily to their doorsteps. This creates a stronger case for continued momentum in the traditional media sectors in the short to medium term,” stated the report.
Irrespective of how the monetization models evolve, the industry structure is expected to transform. Linear value chains of the past will collapse, accommodating new roles and new players, says the report. “This evolving ecosystem will create new winners and these winners will do three things differently,” said John Rose, Senior Partner at The Boston Consulting Group. “They will think big, leverage multiple monetization models—adding up dimes to create dollars and invest heavily in content—for content will continue to be king.” “Content aggregation and content management will become as important to the value chain as content creation,” states the report.
Minister of state for information and broadcasting Rajyavardhan Singh Rathore said in his address at the CII Big Picture Summit on Monday that the government has put its weight behind the digital media. “More and more government advertisements will be pushed on digital platforms, including Youtube and Facebook in comparison to the print media. Apart from that creative work for state broadcaster Doordarshan and All India Radio will be outsourced to private companies. Plans are under way to revamp the terrestrial broadcast of DD to couple it with Internet and DTH so that there would be opportunities for making local programmes based on events happening in smaller towns and rural areas. This would also give a boost to creation of contents, which have local flavour and relevance,” said Rathore.
Sanjay Gupta, chief operating officer, Star India, highlighted the systemic flaws in the television distribution sector, which contributes to a third of the total valuye of the media industry. “In the past few years, immense investments have been made in both DTH and the cable business. But the tragedy of this sector is that even after many years of continued investment not a single company or business makes any money. Since the sector is considered a basic need from a consumer viewpoint, the prices at which content is sold by creators to platforms is regulated – prices frozen in 2003 haven’t changed in the past 12 years,” said Gupta.
He said that such anomalies bleed the sector but no one seems to care. “In Delhi, for example, the new government has doubled entertainment tax. Consequently, almost 30% of revenue is paid as entertainment tax. The lack of political alignment and consistency of policy in the sector makes it impossible to plan a sustainable business model,” he said.

Honey I shrunk your bank branch


The future has a way of arriving unannounced - George Will
If you work in a bank, you should probably read this.
Banks are in grave danger.
Especially so in India. A 4x5-inch screen is going to eat your business. Or at least most of it. If you don’t move. Now. 
Except for a couple of big banks, most of you seem to be sitting at ease, waiting for this tsunami to hit.
Everything looks fine today. Your stock price is rising. You have millions of accounts, thousands of ATMs and more employees than even you can count. Every corner has a hoarding with your smiling brand ambassadors exhorting me to buy a new car or a new home. And your TV ads showcase how your bank is changing people’s lives and bringing happiness to millions. Your balance sheets are large and growing. Profits are rolling. Of course, I speak of the banks that haven’t given loans to celebrity CEOs (especially the ones who handpick their charming employees).
But the walls that protect you are being taken out brick by brick. Millions are being poured into businesses that are aiming to be quicker and better at serving the financial needs of customers.
And rightfully so. Once venture capitalists (VCs) have overcome their fascination with pouring billions into ecommerce players who want to deliver mouthwash to my house in Mumbai all the way from Bhiwandi on the outskirts of the city, even though my bania is just round the corner, their next attack will be on the bedrock of all these markets, the lubricant for all transactions, the business that you are in. The business of money. 
The challengers are coming
A VC-funded wallet founder claims he’s got a 100 million users. A leading telco, armed with a payment bank licence, is talking about 300 million active users. Whereas most banks have less than 5 million downloads on their own mobile app. Even more unbelievable, some banks are still investing in bricks and mortar branches and ATMs in tier 1 and 2 markets.
In every part of the world, there is a bunch of 25-year-olds working on disrupting your archaic business model and cost structure. They know that banks make too much profits compared to the real value they add. They make money on the float, on the fees—it’s a lucrative business. It is ripe for disruption. 
And these new babies won’t have the drag of regulations. You’ve been sheltered for so many years, now you have to pay the price. And even the regulator believes that the rent you charge and the profits you make from other people’s money is too much. Slowly but surely, RBI is opening the door to the big bad world of competition and saying “Let the best man win”.
Before you know it, millions of customers will move their transactions to the challengers. 
Most bankers don’t realise that the moat around them is getting filled. Fast. And the challengers have nuclear-grade weapons. 
It’s time to smell the coffee. Times have changed. 
You opened the door
You opened the door to them—you stood by when credit card usage went down due to two-factor authentication in 2009; you looked the other way when cash on delivery (COD) drove 80% of ecommerce transactions—you were the mighty bank, how did a few transactions matter, right?
I wonder how many of you could have stood together and lobbied at RBI to do away with authentication for sub Rs 2,000 transactions. I wonder how much fraud-risk did we really face—you could have used location, SMS, and many other features to ensure against it. Lubricating the payments ecosystem was your responsibility, not RBI’s.
It was your job to assess the trade-off between fraud-risk and convenience. Today, you’ve got to win back the consumer who is hankering for convenience. It’s his money, yet why is it so difficult for him to spend it?
The fee economy is vanishing. Zero-fee banking is coming. And coming fast. Whereas you are wasting time negotiating with RBI on how to charge me for accessing my own money at the ATM. 
Don’t be like the telcos who’ve squandered away their mega customer bases and have done so little to enable payments on smartphones. Spectrum to them is like bank licences to you. Everyone loves their moat, don’t they?
Smell the coffee
Even the poorest can afford a second-hand smartphone. There. That’s your branch, right there in a mobile. Your branch has just shrunk to a 4x5-inch screen. It can talk, it can interact, it can speak any language. It can do pretty much everything your physical branch can.  
If you add in Aadhar verification and digital signature into your app, it can do morethan even your branch can. People can create their virtual and secure identities on your platform; you can become my single-point locker for everything.
Realise that each of your consumers has a computing device that’s more powerful than most PCs in your branches. You can help them do more – you just need to open your mind.
More changes round the corner
While RBI is handing out more licences, the fact is that the number of banks needs to shrink. With technology each bank employee can handle 100x the transactions and there is no need to have so many banks and branches. Consolidation is inevitable, whether our regulators like it or not.
It’s even worse if you are a small or regional bank—you need to be “acquirable”. Geographical reach or community banking as a differentiator will not help you survive. Your geographic footprint is now a disadvantage. Do you want to be the winner or the vanquished? And if you are not a technology-led bank, then no one will even acquire you. They’ll bypass you and get your customers, and you will be left to die. Slowly. (Someone should ask the government, why recapitalise the ailing banks? Just merge them and kill the overheads. These banks won’t be able to afford them in a few years anyway.)
Banks have utterly failed at getting the credit and debit card economy going. The race is on for the mobile economy—don’t miss it. Your nice little profits will evaporate, and with them your future. 
You are not a bank anymore
Ten years from now when you look back you will marvel at the amount of bricks and mortar you had created.
In hindsight you’ll realise that at the core a bank is nothing but a glorified and secure data centre, supported by people and process—applying their rules and risk-management processes which haven’t changed much for the last 100 years. Despite all the governance, the biggest problems banks have faced is when they have let human beings apply discretion, whether they did CDOs (collateralized debt obligations), or Libor fixing or the rogue-trader bets that hurt them every few years. 
If you think about it, your secure data centre is actually better off running with algorithms. Over 99% of the transactions on your systems don’t need human intervention. Computers don't make discretionary calls, don't give bad loans. Banks will eventually direct their people to run the front-end of the business—where it matters—facing consumers.
And most consumers won't need this servicing. Customers now want to be able to do thing themselves; they only want a simple interface to manage and monitor their money. 
Here’s how a consumer sees you: You are simply a secure storehouse for my transactions. That’s it. You trade in bits and bytes of information about me. I don’t want to do anything more with you. I don’t have to see you, meet you, or touch you. Your existence is now limited to my phone screen and your job is to be the least intrusive layer between me and my money. You are here to do my bidding. I should be able to visualise it; I should be able to literally “swipe” it. I should have full control over it, like I do over my Candy Crush. 
Banking is not a services business anymore. It’s time that you thought of yourselves as product companies with sliced-up micro-SKUs (stock keeping units). Easy to interpret and easy to enable.  
And there is no excuse. We’ve all seen the smartphone revolution coming for over five years now. These ideas need to come off the PowerPoints in board meetings into every single element of your business. Bank CEOs have no excuses if they fail in the mobile payment economy. 
Changing the viewpoint
The heart of the problem is that banks internally work in ossified silos. 
I am not a credit card customer, nor a debit card one, nor a savings bank customer. Oh, you called me a home loan customer. Wait, you labelled me as a private banking customer. Customers don’t want to deal with your internal divisions. I am simply a customer, ready to buy one of your products.
Incentives in banks are not aligned. The credit card team does not talk to the debit card team does not talk to the home loan team does not talk to the savings bank team does not talk to assurance team does not talk to the mutual fund team does not talk to….
Remove your silos and think of me as one. 
Imagine the opportunity if your bank were to become the single mobile window for every transaction. Your bank presently captures commissions on only a fraction of what your consumer spends. 
But each and every transaction can become a commission-earning transaction. A 100% cashless system will ensure that a 100% of transactions with merchants will earn commissions for you. You can make billions in commission income by enabling frictionless and low value transactions compared to all the financial engineering you do to earn that sliver of net interest margin and juggling with arbitrage in your treasuries.
How to do it? 
First, see where you stand. Download your bank app on your phone. If it takes more than 20 seconds for your existing customer to get on-boarded, you are in trouble. 
Second, ask your entire team to go cashless for a month. That’s how every 25-year-old is going to be in the next two years, like it or not.
Rethink your entire strategy around the branch-on-the-phone. Create a vernacular voice-enabled system. Create apps in languages. Run TV ads which educate the illiterate. Make sure that you can enable every purchase at a smallkirana shop. You can transform India. Your next 100 million customers are just a smartphone screen away—backed by the same servers, the same team, the same systems. You need to believe in it. Your leverage is infinite. 
Make your interface intuitive. Even today when I pay on an app, most netbanking pages are NOT designed for mobile usage. Why? Does your team have any explanation? (You know which bank I am talking about.) And hey, it won’t hurt to integrate a web-chat client in case I am getting stuck in a transaction—I will be happy to be redirected by a bank-robot than just be stranded and helpless.  
Personalise. Personalise. Personalise. You have a track of what kind of transactions I’ve carried out in my last 100 visits to your website. But you still treat me like a newbie. It’s like starting a new relationship each time.
Not a second has been spent on thinking through what a consumer wants to accomplish. In fact, personalisation may actually reduce the load on your systems. A little extra cost upfront in development of a personalised screen for me, behind which all your 200-odd service offerings can stay. Also while you are at it, try and hire a global designer who will ensure that I don’t struggle with your little off-placed buttons each time I transact. I am assuming that you won’t need a committee to be set up to approve their hiring. Even your ATM vendor has personalised his dinosauric machine and it remembers my favourite withdrawal amount.
Banks don’t even need to launch wallets; they already have everything they need—my money, my identity and my account. The mobile has to become a seamless extension of your branch. Just mobile-enable my debit card as a first step. It’s that S.I.M.P.L.E. 
The good news
It’s not too late—you have the brand, you have the customers, you know their language and you have the people. You can re-train them—and embrace the digital age. Arm every employee with technology so they can service thousands of customers. Aim to improve your customer per employee ratio by 10x first and then 100x.
I hear that one of your brethren is doing huge advertising and paying merchants to adopt their wallets to acquire new customers. You don't need to do that. Just do a marvellous job with your current customers and the word will spread. Most “bribed” wallet customers never transact again. Most wallet players have less than 20% active wallets, and have balances of less than Rs 150. Don’t get carried away by the hype. 
And you will do a world of good by creating a cashless economy. Brokers hated it when India moved from those little green forms to the most demat-ed and sophisticated stock market in the world. Similarly, politicians and some bureaucrats hate Aadhar and its potential for transparency and they will hate the economy going cashless. But you, sir, can drive this change in three years.
A cashless India is a black-money-free India. Imagine getting all the black money participating in our economy—you alone can drive an extra point of GDP growth every year, if not more.
And what if you decide to make even gold fungible and electronic? You will herald the acche din before Narendra Modi can say Swacch Bharat. 
Two points finally: as I was writing this, I saw a conversation on my Twitter feed between two young men, already dreaming of a day when they can simply chat with their bank and give instructions over a messenger app. It’s all doable, right here, right now. Just get in some sharp engineers and they’ll write you a NLP (natural language processing) bot—and you can make this happen in weeks.
Then there is another tsunami coming in the next few years. It’s called Bitcoin.
In simple terms, it can do what Napster and Torrent did to music and video piracy, except with the exact opposite effect. They were designed to remove traceability; Bitcoin will make it completely secure and traceable. Bitcoin doesn’t need the banks. Banks need Bitcoin. Risk management as we knew it will change. Currently the bank has a role as a counter-party in most transactions. That will go away. Transactions will get squared off without ever hitting your systems. So you can join the revolution or be swept by it. Maybe I am oversimplifying it—one leg of your business is to manage risk, the other liquidity and third return. Liquidity is going to change with customers’ control over their money and risk will change with Bitcoin, leaving you to hunt for return.
As I sign off, I see your margins slipping as fixed-fee remittances, direct-to-consumer mutual funds and insurance comparison sites start weaning away your customers. You simply can’t afford to lose this battle. Get going now. It’s all fix-able, and you can become the single-stop-shop for me. Yes, your returns may drop, but again imagine:all these consumers paying fees on each transaction. That’s a lottery, sir.
So go off on a retreat, take your whole team, strip them of their designations and labels and come back as a new-bank.
You have a few years to shift the gears, but shouldn’t the mind-set shift happen tonight?
Dar ke aage jeet hai.
PS: You won’t give those big loans to the big, bad corporates anymore, will you? 

Rio Tinto shifts to driverless trucks in Australia


Rio Tinto has rolled out fully automated driverless truck fleets at two of its iron ore mines in the Pilbara in Western Australia, in what it says is a world first.
The Anglo-Australian miner is also trialling driverless trains and deploying autonomous drills in the region as it embraces new technologies to cut costs and boost safety.
The world’s biggest miners are turning to technology to cut costs as they struggle to adapt to a decline in commodity prices, which has seen iron ore prices fall from a peak of $190 in 2011 to $53 at present due to an economic slowdown in China and oversupply.“Our autonomous fleet outperforms the named fleet by an average of 12 per cent, primarily by eliminating required breaks, absenteeism and shift changes,” said Andrew Harding, Rio’s iron ore chief executive. “Innovation and technology is critical in our efforts to improve safety.”
This follows a similar trend across a wide range of industries, from car manufacturing to computing, whereby robots or artificial intelligence are increasingly taking roles traditionally performed by humans.
BHP Billiton and Fortescue are both testing and deploying driverless trucks in the Pilbara, although Riois the most advanced with its rollout of the autonomous technology.
“Removing people from the mine environment is safer,” said Dr Carla Boehl, a lecturer at Curtin University’s school of mining.
“It has cost advantages too. It can be very costly for companies if employees are hurt on-site,” she said, adding that “removing drivers saves on breaks, bathroom stops and the logistics of feeding people”.
The automated trucks respond to GPS directions to deliver their loads of iron ore 24 hours a day, 365 days a year. They are supervised remotely by operators at a control centre in Perth, more than 1,000km away from the Yandicoogina and Nammuldi mine sites.
Rio has 69 automated trucks, which is about a fifth of its entire fleet in the Pilbara. The trucks collectively move about 20m tonnes of material a month at the iron ore mines.
Mr Harding said automating the fleet improves utilisation, which allows the company to reduce its fleet size and cuts capital expenditure costs.
“We have also seen a 13 per cent reduction in load and haul costs due to the greater efficiency,” he said.
69
Number of Rio’s driverless trucks — about a fifth of its Pilbara fleet
Rio is forecasting that capital expenditure will fall to $5.5bn in 2015, less than half what it was in 2012 at the peak of the commodities boom.
Sam Walsh, Rio’s chief executive, said the company had an iron ore cash cost of $16.2 a tonne in the first half of this year, down 21 per cent from the same period in 2014.
More than 38,000 mining jobs were lost in Australia between May 2012 and December 2014 due to cutbacks and the introduction of more efficient work practices and new technologies. A recent survey by Newport Consulting showed 80 per cent of mining executives expect to cut employment in 2015-16.
But Dr Boehl said embracing technology could create more interesting jobs while making lower-skilled positions obsolete.
“You will tend to lose the boring, repetitive jobs performed in the 50 degrees [centigrade] heat in the Pilbara but you can also create new innovative roles in analysing data and developing technology,” she said.