Weekend reading links

1. Richard Thaler on measures to increase Covid 19 vaccination rates,

A focus on teamwork is also featured in the Cleveland-Cliffs steel company’s generous offer to its employees. Vaccinated employees get a bonus depending on how many others at their work site do likewise. The company will pay vaccinated workers $1,500 if 75 percent of employees get the vaccine, and $3,000 if the proportion reaches 85 percent. This focus on group vaccination rates reinforces the message that everybody benefits if more people get jabs.

2. Morgan Housel eternal wisdom of the week,

Incentives are almost like a drug in their ability to cloud your judgment in a way you would have found unthinkable beforehand. They can get good people to justify all kinds of things... it’s hard to know what you’d be willing to do until you’re exposed to an extreme incentive, and that blindness makes it easy to criticize other people’s mistakes when you yourself may have been just as tempted if you were in their shoes...

Everything worth pursuing has a less than 100% chance of working. And a lot of terrible ideas have at least some chance of working. So you can make good decisions that don’t work, bad ones that do, and everything in between. The hard thing is that when the probability isn’t easy to determine, the path of least resistance is to put your own failures in the “good bet that unfortunately didn’t work” category and other people’s failures in the “that was clearly a bad idea” one.

3. ReNew Power has won an SECI tender for delivering 1.3 GW of hybrid renewable energy to provide round-the-clock (RTC) renewable power by quoting a tariff of Rs 2.9 per unit. This, the first such tender in the country, will involve an investment of $1.2 bn and a plant load factor of 80%. 

The company would set up the cumulative capacity at three locations – Karnataka, Maharashtra and Rajasthan. The hybrid capacity would include 0.9 Gw wind power, 0.4 Gw solar power along with corresponding battery storage... The project will be designed to operate at an 80 per cent average annual PLF and will have a minimum capacity utilisation factor of 70 per cent monthly, despite being a renewable energy project... Power from this hybrid project is likely to be sold to northern and eastern states. SECI officials did not confirm the states. The tender provides for 3 per cent tariff escalation annually for 15 years. The company said ReNew Power will supply the electricity in the first year at Rs 2.90 per unit and this tariff will increase by 3 per cent annually for the first 15 years. After which it will stabilise for the remaining 10 years of the 25-year contract. Industry calculations indicate that the average tariff over the life of the life of the project would come to around Rs 3.5-3.6 per unit.

4. The multiple "truths" (HT: Collaborative Fund Blog)

Your truth and the truth are not always the same thing. The truth is a fact. Your truth is just an opinion. Nobody values somebody who is honest about their opinions if their opinions always suck. Knowing when to offer your truth and keep your mouth shut is a rare quality. The line between thoughtful dialogue and disrespectful disagreement is razor-thin.

5. Iceland has nearly three-quarters of its population vaccinated. Despite this, its third wave is clearly the worst. Also this about the resurgence of Covid in Israel, the first country to largely vaccinate its population. 

From a few dozen daily cases in early June — even zero on June 9 — new Covid infections twice hovered near 6,000 this week, the highest daily rate in six months... The Israeli ministry of health has twice revised downwards the long-term efficacy of the jabs — from the advertised 94 per cent protection from asymptomatic infections against the then-dominant Alpha variant, to as low as 64 per cent against the now-dominant Delta variant.

6. Fascinating NYT article about Liechtenstein. In terms of pace of casinoisation, the principality has few equals,

But only four years after opening its first casino, Liechtenstein — a tiny principality squeezed between Switzerland and Austria that is known mainly for its private banking and former status as a tax haven — now has more casinos per capita than Monaco, Macau or Clark County, Nev., which is home to Las Vegas. In the past few years, Liechtenstein has seen five casinos open — aimed mainly at attracting gamblers from neighboring countries — and there are plans for five more. The proliferation is causing alarm among some in a country where gambling had largely been illegal until 2010... The gambling boom in Liechtenstein dates to 2017, with the opening that year of two casinos. Three more followed soon after, and another two are scheduled to open by the end of this year.

This is predictably creating its backlash.

7. Business Standard report about the project for redevelopment of the Bombay Development Directorate's (BDD) chawls (large buildings divided into many separate tenements, offering cheap, basic accommodation) in central Mumbai. 

Spread over 92 acres in Central Mumbai's prime localities of Worli, Lower Parel, and Dadar and consisting of 195 four-storey houses, the BDD chawls were constructed in the 1920s... They were used as prisons to house freedom fighters. Later, they were used as accommodation for textile mill workers. Now, tenants live cheek by jowl in 160-square (sq.) feet (ft) cramped spaces. These chawls have remained trapped in time, even as swanky office buildings got constructed on textile mill lands next door... The Worli chawls will be redeveloped by the Tatas. Shapoorji Pallonji Group will redevelop the chawls on NM Joshi Road. Larsen & Toubro will redevelop the chawls in the Naigaon area. We have promised to hand over the keys within three and a half years to the present-day tenants, with only Rs 100 as registration fee... Meanwhile, the tenants have been given free housing in the government's transit camps till they are given the keys to their brand new 500-sq. ft home. As an additional incentive, the new highrises will not attract maintenance fees for the next 10 years after possession... smaller structures will be replaced by nearly 40-storey buildings, the entire landmass will significantly decongest these areas, bringing in elements of recreation, retail, and open spaces... Experts say over the next decade, 12-million sq. ft development will transform the micro markets of Worli and Lower Parel into a mid-market affordable housing settlement. Worli is currently a luxury destination, with prices ranging from upwards of Rs 50,000 per square feet on carpet area. With the BDD development, prices are likely to significantly come down to the Rs 30,000-40,000 per square feet on the carpet area... The possible addition to the housing stock, after settlement of all the project-affected people, may run into over 25,000 apartments of various sizes. 

If this gets completed in even five years, it'll be a great achievement. A rare example of large urban renewal in the Indian context. 

8. A bill in the California Legislature proposes deregulation of parking requirements to boost new housing construction, 

Known as AB 1401, the legislation would abolish local parking requirements for new residential and commercial developments near bus or train stops. It applies to counties with more than 600,000 residents and cities with more than 75,000 people. The bill does not prohibit or restrict parking. It merely deregulates it, allowing developers to decide what works best for a given project. It opens up the possibility, for example, of providing parking in an off-site garage or lot. It permits tandem parking to save space or subsidized shared ride services. It doesn’t prescribe a one-size-fits-all solution to how buildings can best serve the people who use them, and it allows flexibility as transportation options evolve.

This is an illustration of the distortions engendered by restrictive parking regulations,

Shoup’s book gives the real-life example of a standard-size L.A. parcel whose zoning allows eight apartments, with required parking of 2.25 spaces each, or 18 total. The lot is only big enough to accommodate 16 spaces on one level of underground parking, however. Going from seven to eight apartments means digging down another level, which is prohibitively expensive. So the builder settles for seven units. The parking requirement costs one more family a home. The biggest beneficiaries of abolishing parking requirements would probably be the sorts of projects both planners and ordinary city dwellers tend to like: smaller infill buildings, mixed-use projects with street-level retail that neighbors can walk to, repurposed historic buildings, and nonprofit low-income projects. Stringent parking requirements encourage large buildings that can spread garage costs over many units and charge luxury prices. Add in the parking minimums for commercial operations, and many mixed-use developments become impossible... A 2020 study of Low-Income Housing Tax Credit developments, conducted by the Terner Center for Housing Innovation at the University of California, Berkeley, found that a parking structure cost nearly $36,000 a unit. “For a 100-unit building required to include an on-site parking structure, this would mean that roughly $3.6 million of the project cost goes to parking,” write the Terner Center’s David Garcia and Julian Tucker in a report on AB 1401.

9. Berliners are campaigning for expropriating large residential landlords, 

... a radical campaign urging Berlin’s city government to expropriate 240,000 properties from Germany’s biggest publicly listed residential landlords, accusing them of squeezing out lower income, long-term residents through shoddy maintenance and jacked-up rents. After collecting more than 350,000 petition signatures, their proposal — which targets corporate landlords with more than 3,000 apartments each — will be voted on in a local referendum in September. Polling suggests nearly half of Berliners support expropriation, which would force the companies to sell their properties to the city government at a “fair” price.

Also this,

A referendum due in Berlin next month on expropriating big residential landlords should be a wake-up call. The ballot, prompted by a petition, would activate a never-before-used part of the German constitution that allows the state to take over “land, natural resources and means of production” in exchange for compensation. If it passes, the largest private landlords would be forced to sell their properties to the city government at a “fair” price. This would do little to solve Berliners’ grievances, but it demonstrates the extent of anger about seemingly broken housing markets across the developed world.

10. Last week saw the latest (and first since 2013) report of the UN's Intergovernmental Panel on Climate Change, signed off by 234 scientists from more than 60 countries, which estimated that even in a best case scenario of deep cuts in greenhouse gas emissions the world is likely to temporarily reach 1.5 C of warming within 20 years. Living in a world 1.5 C warmer than it was 200 years ago means that a heatwave that would previously have occurred once in 50 years is likely to occur nine times. 

CO2 will have the dominant contribution to global surface temperature increases from various kinds of emissions.

11. On a related note, India has been experiencing the effects of global warming - a 0.6 degree Celsius increase in temperature since 1950 has led to a three-fold increase in extreme rainfall and flooding. 

12. Chinese authorities have been clamping down on for-profit schools to promote public education,  

China has almost 190,000 private schools, educating more than 56m, or one-fifth of all students, according to official figures. There are more than 12,000 primary and middle schools. Beijing wants to reduce the proportion of non-high-school students attending for-profit schools from more than 10 per cent to less than 5 per cent as soon as the end of this year... Annual earnings for the tutoring industry have been forecast to fall from $100bn to less than $25bn. The problem for private sector owners of junior and middle schools has become more acute since May, when Beijing told local governments to “rectify” their runaway expansion. “We must make sure public schools are the main compulsory education provider,” said a circular sent by the central government to lower-level authorities, adding that Beijing would encourage the conversion of some for-profit schools into public ones... The education reforms marked a striking change after years of liberalisation. Over the past two decades, China’s private primary schools grew 10-fold, teaching about 9.5m students in 2019.

India faces the same problem of hugely expensive private schools creating an elite-only market and also a highly competitive coaching market. But the Chinese actions are not possible in the Indian context.

13. FT has an article on the rising trend of outsourcing of fund management by smaller investors. Globally, as on March 2020, there were about $2 trillion in assets managed with full or partial discretion by outsourced fund managers, a two-fold rise from 2013. Smaller funds and investors prefer not to incur the high fixed cost of putting in place an in-house investment team. This imperative is also amplified by the search for yields prevalent in the financial markets today. 

The article points to the latest seven year projection by Jeremy Grantham's GMO of returns from various asset classes.

14. Status report on piped drinking water supply to villages under the Jal Jeevan Mission.

This is very impressive,

New tap connections, which had ranged between 2,000 and 10,000 per day till FY20, zoomed to more than 88,000 taps per day in FY21... Government officials said one reason for this speed is the use of groundwater. Household tap water systems can be developed quickly in such villages with the next 30-40 years in mind... However, the speed has mellowed somewhat this year, despite a fivefold increase in central funding. In 2021-22 (FY22) till August, the daily rate has gone down to 18,000.

Even 18000 is impressive. The issue here is to ensure they are actually working and supply water.

15. Finally, an article that highlights how Sweden has emerged as the Silicon Valley of Europe. 

Sweden's home computer drive (government policy to put a computer in every home), and concurrent early investment in internet connectivity, help explain why its capital Stockholm has become such rich soil for startups, birthing and incubating the likes of Spotify, Skype and Klarna, even though it has some of the highest tax rates in the world... In the three years the scheme ran, 1998-2001, 850,000 home computers were purchased through it, reaching almost a quarter of the country's then-four million households, who didn't have to pay for the machines and thus included many people who were otherwise unable to afford them... Some executives and campaigners say the Scandinavian nation demonstrates that a deep social safety net, often viewed as counter to entrepreneurial spirit, can foster innovation... Childcare is, for the most part, free. A range of income insurance funds can protect you if your business fails or you lose your job, guaranteeing up to 80% of your previous salary for the first 300 days of unemployment...

It has the third highest startup rate in the world, behind Turkey and Spain, with 20 startups per 1000 employees and the highest three year survival rate for startups anywhere, at 74%, according to a 2018 study by OECD economists. Stockholm is second only to Silicon Valley in terms of unicorns - startups valued at above $1 billion - per capita, at around 0.8 per 100,000 inhabitants, according to Sarah Guemouri at venture capital firm Atomico. Silicon Valley - San Francisco and the Bay Area - boasts 1.4 unicorns per 100,000, said Guemouri, co-author of a 2020 report on European tech companies. No one can say for sure if the boom will last, though, in a country where capital gains are taxed at 30 percent and income tax can be as high as 60 percent.