Weekend reading links

1. Martin Ford, author of the Rise of Robots, has an oped in NYT where he says,

Midea, a leading manufacturer of home appliances in the heavily industrialized province of Guangdong, plans to replace 6,000 workers in its residential air-conditioning division, about a fifth of the work force, with automation by the end of the year. Foxconn, which makes consumer electronics for Apple and other companies, plans to automate about 70 percent of factory work within three years, and already has a fully robotic factory in Chengdu.

Even assuming some hype associated with the numbers, the pace of displacement is truly staggering. It assumes great significance for countries like India which have staked its economic growth and job creation fortunes behind manufacturing. While the initial trends in India are not alarming, the global experience does not lend much comfort.

2. Fascinating article on Phantom, the high-end audio speaker, developed by Devialet, the French acoustics engineering firm. This nugget about the Phantom was stunning,

There are only 10 separate parts inside the Phantom and not a single wire. 

3. Stephanie Flanders captures the dismal world trade scenario

The latest World Trade Monitor showed the volume of world trade falling in May by 1.2 per cent. It slid in four out of five months in 2015 and risen just 1.5 per cent in the past 12 months — less than the growth in global output and far below the long-term average of about 7 per cent a year... A recent study by the International Monetary Fund calculated that in the 1990s, every 1 per cent rise in global income generated a 2.5 per cent rise in global trade, much more than in the past... Since 2013, every 1 per cent of global growth has produced a trade bump of just 0.7 per cent.

This trend has to be the context to view India's new Foreign Trade Policy, 2015-20 which seeks to nearly double exports from $465.9 bn to $900 bn by 2019-20, an annual increase of about 12%!

4. At a time when the rapidly expanding share of Indigo Airlines, nearly 40% of the total domestic traffic, has raised concerns about monopoly in the Indian airline market, Economist points to an Associated Press study report that has some very interesting statistics about the US airline market,

At 40 of the 100 largest U.S. airports, a single airline controls a majority of the market, as measured by the number of seats for sale, up from 34 airports a decade earlier. At 93 of the top 100, one or two airlines control a majority of the seats, an increase from 78 airports... The four largest airlines control more than 80 percent of the U.S. market... 

In Indianapolis, the two leading airlines controlled just 37 percent of the seats a decade ago, and domestic fares were 9 percent below the national average. Then the city’s main airline, ATA, went bankrupt and was bought by Southwest, and its No. 2 carrier, Northwest, was absorbed by Delta. Now two airlines control 56 percent of the seats, and airfares are 6 percent above the national average. The Dayton, Ohio, airport was served by 10 airlines in 2005, and fares were 5 percent below average. Today, just four airlines fly there and prices are almost 10 percent above average. Big hub airports aren’t immune. In 2005, US Airways controlled nearly 66 percent of the seats in Philadelphia. Now that US Airways has merged with American, the combined airline has 77 percent of the seats. Airfare has gone from 4 percent below average to 10 percent above it. Delta’s hold on Atlanta, the world’s busiest airport, increased during that same period from 78 percent of seats to just over 80 percent. At the same time, low-cost AirTran merged into Southwest and reduced flights there. Domestic airfares at the airport went from nearly 6 percent below average to 11 percent above. Some cities are actually seeing lower fares than they did a decade ago. Prices in Denver were once 5.6 percent higher than the national average. Now that United’s market share there has dropped to 41 percent from 56 percent, fares are almost 15 percent lower than the rest of the country.

This market concentration is in some ways inherent in the conventional hub-and-spokes model of airline market. Even in the largest airports, it would not be competitive for more than an airline to operate hubs in one airport. Once a hub is established, the destinations in its vicinity are more likely to be competitively serviced by the hub airline.

5. In the context of the demand by big US airlines that the US Department of Justice revoke the rights of the three big Gulf carriers (Emirates, Etihad, and Qatar) to fly to US destinations on the grounds that they have benefited from $42 bn worth of government subsidies in the past decade, Edward Luce had this to write about the benefits enjoyed by the US carriers,

US airlines have benefited from the huge advantage of the Chapter 11 bankruptcy law. Starting with United in 2002, most of the big US carriers have gone bankrupt at some stage. US law has enabled them to restructure debts, slough off legacy pension costs and survive to fly another day. The industry-wide crisis has also prompted consolidation. The market has shrunk to just three big legacy airlines plus Southwest. A fifth, Virgin America, is nibbling at the edges. Nor are they strangers to direct government subsidy. At today’s prices, US airlines have benefited from $155bn of government help in the past half century, according to a US government report.

6. Why has leisure time declined even at the top-end of the income ladder even as today's top one percent earn a few times more than their peers from a century or earlier? Tim Harford offers this explanation,

The best educated and the highest earners, both men and women, had less free time than ever. Starting in the mid 1980s, this elite began to drop everything and work ­furiously... By pulling the longest hours and taking the least leave, we climb the corporate ladder. It may be no coincidence that the collapse in leisure time began in the 1980s, at a time when inequality at the top of that ladder was surging. The rewards for working hardest are large.

7. Finally, FT has this richly informative graphic from Rystad Energy that maps the price points at which the different oil sources become commercially viable.

In fact, as oil prices have plunged, it has been estimated that the oil majors have cut about $200 bn in projected investments. FT points to consultant Wood Mackenzie's report that 46 big oil and gas projects with 20 bn barrels of oil equivalent in reserves have been deferred, of which 5.6 bn barrels are in the tar sands of Canada.