The Economist Articles for May. 3rd : May. 15th(Interpretation)

[Statesman]

The Economist Articles for May. 3rd :  May.  15th(Interpretation),  May. 16th (Discussion)

Economist Reading-Discussion Cafe : http://cafe.daum.net/econimist

https://www.economist.com/leaders/2021/05/08/the-digital-currencies-that-matter

The rise of e-money

The digital currencies that matter

Get ready for Fedcoin and the e-euro

Leaders

May 8th 2021 edition

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May 8th 2021

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Technological change is upending finance. Bitcoin has gone from being an obsession of anarchists to a $1trn asset class that many fund managers insist belongs in any balanced portfolio. Swarms of digital day-traders have become a force on Wall Street. PayPal has 392m users, a sign that America is catching up with China’s digital-payments giants. Yet, as our special report explains, the least noticed disruption on the frontier between technology and finance may end up as the most revolutionary: the creation of government digital currencies, which typically aim to let people deposit funds directly with a central bank, bypassing conventional lenders.

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These “govcoins” are a new incarnation of money. They promise to make finance work better but also to shift power from individuals to the state, alter geopolitics and change how capital is allocated. They are to be treated with optimism, and humility.

A decade or so ago, amid the wreckage of Lehman Brothers, Paul Volcker, a former head of the Federal Reserve, grumbled that banking’s last useful innovation was the atm. Since the crisis, the industry has raised its game. Banks have modernised their creaking it systems. Entrepreneurs have built an experimental world of “decentralised finance”, of which bitcoin is the most famous part and which contains a riot of tokens, databases and conduits that interact to varying degrees with traditional finance. Meanwhile, financial “platform” firms now have over 3bn customers who use e-wallets and payments apps. Alongside PayPal are other specialists such as Ant Group, Grab and Mercado Pago, established firms such as Visa, and Silicon Valley wannabes such as Facebook.

Government or central-bank digital currencies are the next step but they come with a twist, because they would centralise power in the state rather than spread it through networks or give it to private monopolies. The idea behind them is simple. Instead of holding an account with a retail bank, you would do so direct with a central bank through an interface resembling apps such as Alipay or Venmo. Rather than writing cheques or paying online with a card, you could use the central bank’s cheap plumbing. And your money would be guaranteed by the full faith of the state, not a fallible bank. Want to buy a pizza or help a broke sibling? No need to deal with Citigroup’s call centre or pay Mastercard’s fees: the Bank of England and the Fed are at your service.

This metamorphosis of central banks from the aristocrats of finance to its labourers sounds far-fetched, but it is under way. Over 50 monetary authorities, representing the bulk of global gdp, are exploring digital currencies. The Bahamas has issued digital money. China has rolled out its e-yuan pilot to over 500,000 people. The eu wants a virtual euro by 2025, Britain has launched a task-force, and America, the world’s financial hegemon, is building a hypothetical e-dollar.

One motivation for governments and central banks is a fear of losing control. Today central banks harness the banking system to amplify monetary policy. If payments, deposits and loans migrate from banks into privately run digital realms, central banks will struggle to manage the economic cycle and inject funds into the system during a crisis. Unsupervised private networks could become a Wild West of fraud and privacy abuses.

The other motivation is the promise of a better financial system. Ideally money provides a reliable store of value, a stable unit of account and an efficient means of payment. Today’s money gets mixed marks. Uninsured depositors can suffer if banks fail, bitcoin is not widely accepted and credit cards are expensive. Government e-currencies would score highly, since they are state-guaranteed and use a cheap, central payments hub.

As a result, govcoins could cut the operating expenses of the global financial industry, which amount to over $350 a year for every person on Earth. That could make finance accessible for the 1.7bn people who lack bank accounts. Government digital currencies could also expand governments’ toolkits by letting them make instant payments to citizens and cut interest rates below zero. For ordinary users, the appeal of a free, safe, instant, universal means of payment is obvious.

It is this appeal, though, that creates dangers. Unconstrained, govcoins could fast become a dominant force in finance, particularly if network effects made it hard for people to opt out. They could destabilise banks, because if most people and firms stashed their cash at the central banks, lenders would have to find other sources of funding with which to back their loans.

If retail banks were sucked dry of funding, someone else would have to do the lending that fuels business creation. This raises the queasy prospect of bureaucrats influencing credit allocation. In a crisis, a digital stampede of savers to the central bank could cause bank runs.

Once ascendant, govcoins could become panopticons for the state to control citizens: think of instant e-fines for bad behaviour. They could alter geopolitics, too, by providing a conduit for cross-border payments and alternatives to the dollar, the world’s reserve currency and a linchpin of American influence. The greenback’s reign is based partly on America’s open capital markets and property rights, which China cannot rival. But it also relies on old payments systems, invoicing conventions and inertia—making it ripe for disruption. Small countries fear that, instead of using local money, people might switch to foreign e-currencies, causing chaos at home.

New money, new problems

Such a vast spectrum of opportunities and dangers is daunting. It is revealing that China’s autocrats, who value control above all else, are limiting the size of the e-yuan and clamping down on private platforms such as Ant. Open societies should also proceed cautiously by, say, capping digital-currency accounts.

Governments and financial firms need to prepare for a long-term shift in how money works, as momentous as the leap to metallic coins or payment cards. That means beefing up privacy laws, reforming how central banks are run and preparing retail banks for a more peripheral role. State digital currencies are the next great experiment in finance, and they promise to be a lot more consequential than the humble atm. 

https://www.economist.com/business/2021/05/06/private-equity-is-losing-its-mystique

Schumpeter

Private equity is losing its mystique

Investors want it to become more virtuous

Business

May 8th 2021 edition

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May 6th 2021

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There has long been an element of the gentlemen’s club about the private-equity (pe) industry. It is still predominantly male. It has a buccaneering history filled with mystique. It cherishes discretion. And its fees are exorbitant compared with the services it provides. If anything covid-19 has made it even more exclusive. Despite what Preqin, a data gatherer, says was a slowdown in fundraising during the pandemic as in-person meetings stopped, the firms with the longest pedigrees have had the least trouble raising money, doing deals and earning bumper profits.

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That includes kkr, a 45-year-old pioneer of the leveraged buyout market, which in five months has just amassed its biggest private-equity fund ever, at about $18.5bn, according to Reuters. It extends to Apollo, which on May 3rd agreed to spend $5bn acquiring two digital-media brands, Yahoo and aol, from Verizon, a telecoms firm, weeks after taking part in a $6.25bn deal for casinos in Las Vegas. Meanwhile Blackstone, the biggest pe company of all, raised $95bn across all its funds in 2020, on a par with three previous years, and recently reported record quarterly profits.

These companies have vivid pasts that have helped burnish the industry’s reputation for gutsy dealmaking. kkr is the legendary “barbarian” behind the buyout in 1988 of rjr Nabisco, a food conglomerate. In 1990 Apollo emerged from the ashes of Drexel Burnham Lambert, a collapsed junk-bond firm. Blackstone’s founder, Stephen Schwarzman, is on schmoozing terms with many world leaders. Yet no longer does he nor many of his counterparts play the role of company frontman. In March, Leon Black, longtime leader of Apollo, relinquished control of the firm, following revelations of his links to the late, disgraced financier, Jeffrey Epstein.

On earnings calls, a younger generation is at the helm. Their talk is as much of the reliable fees earned from managing vast sums of money, including those coming from financial acquisitions (kkr recently bought Global Atlantic, an insurer, and Apollo merged with Athene, an annuity provider) and credit funds, as it is about the swashbuckling world of buyouts. Increased predictability has helped the firms’ share prices easily outperform America’s s&p 500 over the past five years. Yet they also make the once-snazzy “alternative investment” market look more mainstream. Coupled with pressure on the industry at large to become more transparent, to adopt environmental, social and governance (esg) standards, and to pay more taxes, it is increasingly hard to tell where public markets end and where private equity begins.

The impetus for transparency comes first from investors—for good reason. One of the articles of faith of private equity is that it is worth the high fees because it reliably outperforms public markets over long periods. Yet recent evidence from Josh Lerner of Harvard Business School, among others, shows that in America, private equity’s biggest market, it has performed only slightly better than public markets during the past decade, and that returns are on a downward trend. Hugh MacArthur of Bain, a management consultancy, says that at the start of the pandemic there was a lot of discussion between private-equity firms and their investors about returns as asset prices plunged, which led to a relatively unprecedented level of disclosures.

But questions remain. They revolve around the flakiness of private-equity data and the industry’s internal measurements of return. These will get fiercer as retail investors, in America in particular, are allowed greater access to private markets that were once the exclusive domain of sophisticated investors. Buyout returns will come under more scrutiny because deals in America and Europe last year were among the priciest ever, making it harder to make money on them. It won’t help, either, if inflation is rising and higher interest rates raise buyout firms’ borrowing costs.

More financial transparency is one thing. pe firms are also under pressure from investors to demonstrate their environmental and social credentials. Some of the biggest firms, such as kkr and Apollo, were early converts to esg. But scrutiny has always been haphazard. Blackstone has recently taken measurement seriously: within the last year it has set out to cut the carbon footprint of firms it acquires by 15% within three years, as well as instructing companies it owns to report on esg risks to their boards.

Some will see such efforts as a wise risk-mitigation strategy, as well as a way of appealing to consumers and employees. Others will deride them as a pesky box-ticking exercise. Inevitably, they will be subject to accusations of “greenwashing”. So like it or not, governments are stepping in. From March 10th the European Commission has been phasing in a regulation that obliges asset managers, including private-equity firms, to meet esg requirements. Since President Joe Biden took office, the Securities and Exchange Commission, America’s markets regulator, has also taken the matter more seriously. Sooneven buyout firms without an esg mandate may be under the cosh.

From PE to PC

The need to be seen as good citizens becomes all the more important as private equity engages in more consumer-sensitive digital businesses, such as health care and fintech, as well as doing more work on behalf of governments, including bankrolling an infrastructure boom in America proposed by Mr Biden. The administration already has the industry in its sights. It is hoping to raise tax revenues by getting rid of “carried interest”—a perk of private-equity investment managers whereby they can pay low rates on long-term capital gains. It is a threat the industry has long evaded. But it has yet to contend with a Democratic Party whose left-wing regularly accuses it of “looting”.

Such accusations are nonsense. By funding and reshaping companies, private equity generates wealth, jobs and growth. It used to do so, though, while revelling in its bad-boy image. It no longer has the option of being so politically incorrect. 

https://www.economist.com/briefing/2021/05/08/the-new-rules-of-the-creator-economy

Serfing the web

The new rules of the “creator economy”

Social-media platforms used to get most of their content for free. That dynamic is changing

Briefing

May 8th 2021 edition

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May 8th 2021

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“Look at you down there, trying to run for your life,” jeers Summer Solesis, peering down at the camera. “You don’t stand a chance against my giant, size 11 feet!” Standing over her phone, she pretends to stamp on the viewer, who gets the effect—sort of—that Ms Solesis is a “giantess with dirty feet getting rid of the tiny men infesting my house”, as one video is captioned. The production quality is low-fi, but viewers seem not to mind. “Unforgettable sweet crushing,” swoons one fan, Sven, in the comments below.

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The pseudonymous Ms Solesis, a personable 26-year-old Floridian, reinvented herself as an online “foot goddess” last March after covid-19 did for her restaurant job. “My mom’s just always told me I had pretty feet,” she says. So “I was just like, well, let’s see if the internet thinks I have pretty feet.” It did. On Instagram she gained 20,000 followers. Some offered money for personalised photos and videos. A few months later she joined OnlyFans, a London-based subscription platform. About 50 people around the world pay $10 a month for Ms Solesis’s newsfeed, adding up to around $5,000 a year after OnlyFans takes its 20% cut. She roughly doubles that with tips and merchandise, including unwashed socks ($10 per day worn).

In the past decade anyone with a phone has become a potential content creator. Cameras have got sharper, processors more powerful and networks faster. Apps can improve even the shoddiest content. Instagram, launched in 2010, provided filters that made ordinary photos look cool. TikTok has made it as simple to edit video. In April Facebook unveiled recording tools that aim to do for amateur podcasters what Instagram did for bad photographers. The internet’s limitless, free distribution and searchability has made it possible for this output—videos, music, jokes, rants and all manner of things that defy categorisation—to find an audience, however niche.

Yet apart from a few megastar “influencers”, most creators receive no reward beyond the thrill of notching up “likes”. Facebook, the world’s largest social network, has built a $92bn-per-year advertising business by selling space alongside posts by its 2.8bn happily unpaid user-suppliers. Twitter makes $3.4bn a year flogging ads among the free editorial typed by its 350m contributors. Being on the platform can feel like “the greatest unpaid internship of all”, Samhita Mukhopadhyay, an American journalist, recently tweeted.

But the serfs tilling the internet are increasingly finding that their output can command a price, with the effect that some of the internet’s most successful companies are being forced to adapt their business model. New platforms are offering creators ways to capture the value of their output for themselves, as Ms Solesis did when she moved from Instagram to OnlyFans. Bloggers and tweeters are moving their musings to paid newsletter services like Substack; amateur video-game makers are selling their pixelated creations on platforms like Roblox; viewers are paying to watch experts play them on streaming services like Twitch, owned by Amazon.

The upstarts are forcing incumbents such as Facebook to compensate users for the unpaid work they may not have realised they were doing. And they are helping professional creators, who once relied on middlemen, reach their audience directly.

The abundance of content in the internet age has meant that the success of online media platforms has depended on their ability to help users discover it. Rather than commissioning videos or articles, they have focused on building algorithms or content-management systems which serve users the best of others’ creations.

One consequence of the internet is that “value has shifted away from companies that control the distribution of scarce resources to those that control demand for abundant ones,” writes Ben Thompson, author of the tech newsletter, Stratechery, who calls such firms “aggregators”. Because the platform sets the conditions for a piece of content’s success, via its algorithm, suppliers have to adapt to its rules, thus commoditising themselves. In this world of abundant supply, content providers become as interchangeable, and have as little bargaining power, as Uber drivers.

All things are become new

Yet something in this model is changing. Though there is more content than ever, platforms are competing harder than ever to get it. “There's an arms race to acquire creators,” says Li Jin, founder of Atelier Ventures, a venture-capital firm. Startups are developing new ways for creators to monetise their work. Substack gives writers 90% of the subscription fees they charge for newsletters; together its top ten authors earn more than $15m a year. Twitch gives its game streamers more than half of its subscription fees, plus a cut of ad revenue and the money paid to “cheer” their performance. Cameo, a platform on which 40,000 celebrities sell personalised videos to fans, passes 75% of the spoils to contributors. Brian Baumgartner, an actor in “The Office”, an American sitcom, was its top earner last year, making over $1m. Clubhouse, a social-audio app, allows tips and has an “accelerator programme” for promising hosts. It plans to test features such as tickets and subscriptions.

In response, platforms that once paid little or nothing to creators are ponying up. Companies “need to either offer some way to monetise that content on-platform, or…they'll become just a promotional hub, where people essentially advertise the content that they're monetising on other platforms,” says Josh Constine of SignalFire, another venture-capital firm.

Twitter was in danger of becoming a promotional tool for Substack writers and Clubhouse broadcasters. It is now trying to beat both at their own game. In January it bought Revue, a newsletter firm, and cut its commission to 5%, half Substack’s. On May 3rd it added Spaces, a Clubhouse-like audio feature; soon it will let users sell tickets to chats they host. The ability to sign up for a newsletter or join an audio room directly from Twitter, without the friction of moving apps, gives the company an edge over its startup rivals, says Mark Shmulik of Bernstein, a research firm.

Facebook is also trying to make creators stick around. Last year it made paid subscriptions widely available and enabled tips. It is now testing a Cameo-like feature called “Super”, a Substack-esque newsletter platform, and is paying gamers big bucks to join Facebook Gaming, its tribute to Twitch. In all, it says, the number of content-makers earning over $1,000 a month on the platform almost doubled in 2020.

“In developing all of these things, we’re actually really focused on the creator side, even more than on the consumption side,” said Mark Zuckerberg, Facebook’s boss, in a recent interview with Casey Newton, author of the Platformer newsletter. In an effort to attract more of them, it is offering creators not just money but power: newsletter authors will own their recipient list and be able to take it to another platform, the equivalent of being allowed to move one’s Facebook friends over to Twitter.

YouTube, which has long given regular video-posters a 55% cut of ad revenue, is developing new features including tips in the form of paid “applause”. It says the number of channels joining its paid “partner programme” in 2020 was more than double that in 2019. In all it has paid contributors $30bn in ad-revenue shares and subscription fees in the past three years, far more than any other social platform. Last year TikTok, a short-video app, launched a “creator fund” which it says will dispense more than $2bn to users in its first three years. Douyin, its Chinese twin, is investing $1.5bn with the aim of doubling its creators’ revenues. Snapchat, another social-video app, last year launched Spotlight, a sharing feature through which it is paying $1m a day to the creators of its most popular clips.

Newer types of media are joining in. Douyu and Huya, China’s largest game-streaming platforms, each paid out 7.1bn yuan ($1.1bn) to streamers last year, 31% more than in 2019. Spotify and Apple, the two biggest podcast platforms, are wooing amateur broadcasters. Last month Apple announced that it would let podcasters charge subscription fees, of which it would take a 30% cut for the first year, then dropping to 15%; days later Spotify followed suit—but said creators could keep the lot (from 2023 it will take 5%).

As platforms fight over the most popular content, bargaining power is being transferred to the people who make it. Simon Kemp of Kepios, an internet research firm, compares platforms’ negotiations with top creators to tv networks’ wrangling with the cast of “Friends” over each season’s contracts. Many offer better terms to their most successful creators: Twitch reportedly pays a higher share of subscription revenues to its top streamers; Substack offers advances to writers it believes will be a hit. The share of revenue that creators can earn seems to depend on how easily they could leave. Moving one’s email list away from Substack is simple, so the firm lets writers keep 90% of their revenues. Game-makers on Roblox, who are basically stuck there, keep about 25%.

The dancers of TikTok and pranksters of YouTube, whose popularity rises or falls on the tweak of a recommendation algorithm, may seem easily replaceable. In reality, the opportunities for interaction with online stars may make their audiences more loyal than those of other celebrities, Mr Kemp points out. Jennifer Aniston and her buddies were in people’s sitting rooms for half an hour a week. Charli D’Amelio, TikTok’s top bopper, is in their pockets all day. “After a decade of building their audiences, a class of Super Creators have emerged that have leverage over their aggregators,” wrote Rameez Tase, head of Antenna, an audience-measurement company, in a recent blog post. “They simply built such large, engaged audiences that those audiences would follow them anywhere.”

A great multitude

Yet what of those creators with more modest followings? A few online stars earn megabucks, but the tail is long (see charts). Spotify says it wants to give “a million creative artists the opportunity to live off their art”. But only about 0.2% of the 7m-plus musicians on the platform make more than $50,000 a year in royalties; just 3% make more than $1,000. There are 20m gaming “experiences” on Roblox, but nearly 15% of all play takes place on one game, “Brookhaven rp”, according to analysis by Ran Mo of Electronic Arts, a game developer. On Patreon, where people can subscribe to creative services of all sorts, 200,000 creators earn a total of $1bn a year. The top earner makes around $2m, but about 98% make less than the federal minimum wage of $1,257 a month.

The main way to monetise online content has been advertising. Making real money requires a huge audience: even 1m views on YouTube might make the poster only about $2,000. Some types of content attract even lower ad rates. PornHub says its amateur contributors earn an average of $0.60 per 1,000 views; 1m hits would net just $600. Ads can make megastars rich, but cannot provide a living for small-time foot goddesses and other niche creators.

The trend towards subscriptions, and other models of monetisation, is changing that, bringing with it the possibility of a creator middle class. Consider Craig Morgan. The sports journalist was laid off last year by the Athletic, an online publication, after the pandemic put live sport on hold. A friend suggested he try writing a newsletter. az Coyotes Insider was launched on Substack in July. Its detailed updates about a single National Hockey League team—everything from goaltender Darcy Kuemper’s knee injury to the immigration woes of defenceman Ilya Lyubushkin—are not designed for a wide audience. But with a subscription model, they don’t need one.

Ten months on, Mr Morgan has more than 1,000 people paying a minimum of $5 a month (about 18% voluntarily pay more, he says), close to his old salary on the Athletic. Mr Morgan misses bouncing ideas off colleagues, and the safety-net of an editor. But he can write what he likes—and, he adds, “No one can lay me off anymore.”

Mr Morgan is a living example of the observation in 2008 by Kevin Kelly, a technology writer, that any artist could make a living with just “1,000 true fans” willing to spend $100 a year or so on whatever the creator makes. With that, he wrote, “You can make a living—if you are content to make a living but not a fortune.” The broadening range of online monetisation methods is making it easier to wring that sort of money out of devotees. Video-gamers can top up the money they make from streaming by working as paid wingmen on gaming platforms such as China’s Heizhu Esports. Some creators see non-fungible tokens, a method of certifying digital creations, as a way to earn more from their superfans. With platforms like Teachable or Podia, which deal in pricey online courses, creators can plausibly get by with more like 100 true fans, Ms Jin reckons.

The more possible it becomes to make a living out of online content, the more precarious becomes the position of the companies that have acted as intermediaries between creators and consumers. Newspapers, which solved a physical distribution problem that no individual writer could hope to overcome, are one example. Substack’s leaderboard includes journalists such as Glenn Greenwald and Matthew Yglesias who have found that readers are willing to pay them far more than the outlets that used to employ them (and that newsletters give them greater editorial freedom, too). Some newspapers, most recently the New York Times, have forbidden writers from launching personal newsletters without permission. A tyrannical few deny their writer-serfs bylines, ensuring that the value from every article accrues to the brand and not the author.

Record labels are another endangered middleman. They have historically taken care of turning a song into a hit, in return for an ongoing share of revenues. But more and more artists are going it alone. More than 60,000 new songs are uploaded to Spotify every day, most by bedroom-based rockstars who can use new online services to handle the logistics themselves. UnitedMasters, a music-distribution platform which bills itself as “a record label in your pocket”, recently raised $50m in a venture-capital round led by Apple. Tools like Splice make recording easier. Companies like Fanjoy take care of merchandise.

And financing is getting simpler. One startup, hifi, helps artists manage their royalties, paying them regularly and fronting them small sums to make up shortfalls. Another, Karat, extends credit to creators based on their follower count. Helped by such services independent artists took home 5.1% of global recorded music revenues last year, up from 1.7% in 2015, calculates midia Research, a consultancy. In the same period the share of the three largest record labels fell from 71.1% to 65.5%.

What has been will be again

Just as the internet allowed brands to bypass physical shops and sell directly to customers online, social platforms “offer a path for creators to communicate directly with their audience,” says Mr Shmulik. Yet they still need the new media platforms, which are becoming more like old media companies. Rather than simply helping consumers navigate a mass of commoditised online content, they play an active role in commissioning and curating it.

Substack insists that advances are determined by “business decisions, not editorial ones”. Yet it offers writers mentoring and legal advice, and will soon provide editing services. YouTubers can post what they like, within broad guidelines, but they cannot monetise content around what YouTube deems “controversial” subjects, including abortion. Twitch has imposed rules for its streamers’ behaviour offline. On May 5th Facebook’s “oversight board”, which rules on editorial matters, upheld Donald Trump’s ban from the platform.

Mr Zuckerberg has said that his social network ought to be treated like something between a phone company, through which information merely flows, and a newspaper, which has editorial control of its content. As his and other platforms more actively court and compensate creators, they are moving further towards the newspaper end of that continuum. 

https://www.economist.com/books-and-arts/2021/05/08/the-real-reasons-some-languages-are-harder-to-learn

Johnson

The real reasons some languages are harder to learn

They slice up the messy reality of life differently from your own

Books & arts

May 8th 2021 edition

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May 8th 2021

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When considering which foreign languages to study, some people shy away from those that use a different alphabet. Those random-looking squiggles seem to symbolise the impenetrability of the language, the difficulty of the task ahead.

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So it can be surprising to hear devotees of Russian say the alphabet is the easiest part of the job. The Cyrillic script, like the Roman one, has its origins in the Greek alphabet. As a result, some letters look the same and are used near identically. Others look the same but have different pronunciations, like the p in Cyrillic, which stands for an r-sound. For Russian, that cuts the task down to only about 20 entirely new characters. These can comfortably be learned in a week, and soon mastered to the point that they present little trouble. An alphabet, in other words, is just an alphabet. A few tricks aside (such as the occasional omission of vowels), other versions do what the Roman one does: represent sounds.

Foreign languages really become hard when they have features that do not appear in your own—things you never imagined you would have to learn. Which is another way of saying that languages slice up the messy reality of experience in strikingly different ways.

This is easily illustrated with concrete vocabulary. Sometimes the meanings of foreign words and their English equivalents overlap but don’t match exactly. Danish, for instance, does not have a word for “wood”; it just uses “tree” (trae). Or consider colours, which lie on a spectrum that different languages segment differently. In Japanese, ao traditionally refers to both green and blue. Some green items are covered by a different word, midori, but ao applies to some vegetables and green traffic lights (which, to make matters more confusing, are slightly blueish in Japan). As a result, ao is rather tricky to wield.

Life becomes tougher still when other languages make distinctions that yours ignores. Russian splits blue into light (goluboi) and dark (sinii); foreigners can be baffled by what to call, say, a mid-blue pair of jeans. Plenty of other “basic” English words are similarly broken down in their foreign corollaries. “Wall” and “corner” seem like simple concepts, until you learn languages that sensibly distinguish between a city’s walls and a bedroom’s (German Mauer versus Wand), interior corners and street corners (Spanish rincón and esquina), and so on.

These problems are tractable on their own; you don’t often have to refer to a corner in casual conversation. But when other languages make structural distinctions missing from your native tongue—often in the operation of verbs—the mental effort seems never-ending. English has verbs-of-all-work that seem straightforward enough until you try to translate them. In languages like German, “put” is divided into verbs that signify hanging, laying something flat and placing something tall and thin. “Go” in Russian is a nightmare, with a suite of verbs distinguishing walking and travelling by vehicle, one-way and round trips, single and repeated journeys, and other niceties. You can specify all these things in English if you want to; the difference is that in Russian, you must.

Sometimes verb systems force choices on speakers not only for individual verbs, but for all of them. Many English-speakers are familiar with languages, such as French and Italian, which have two different past tenses, for completed actions and for habitual or continued ones. But verb systems get much more exotic than that.

“Evidential” languages require a verb ending that shows how the speaker knows that the statement made is true. Turkish is one of them; others, such as a cluster in the Amazon, have particularly complex—and obligatory—evidentiality rules. Many languages mark subjects and direct objects of sentences in distinct ways. But in Basque, subjects of intransitive verbs (those that take no direct object) look like direct objects themselves, while subjects of transitive verbs get a special form. If Martin catches sight of Diego, Basques say the equivalent of “Martinek sees Diego.”

In the end, the “hard” languages to learn are not those that do what your own language does in a new way. They are the ones that make you constantly pay attention to distinctions in the world that yours blithely passes over. It is a bit like a personal trainer putting you through entirely new exercises. You might have thought yourself fit before, but the next day you will wake up sore in muscles you never knew you had.

https://www.economist.com/science-and-technology/2021/05/06/a-blood-test-may-help-the-diagnosis-and-treatment-of-depression

Unlucky 13

A blood test may help the diagnosis and treatment of depression

Snippets of RNA are the giveaways

Science & technology

May 8th 2021 edition

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May 6th 2021

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Major depression is a serious illness, but also an elusive one. It wrecks lives and may drive people to suicide. It sometimes, though not always, alternates with periods of mania in a condition called bipolar disorder. And it is disturbingly common. Reliable figures are hard to come by, but in some parts of the world as many as one person in four experiences major depression at some point during their life.

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Depression’s diagnosis has, though, a worryingly arbitrary quality to it, depending as it does on a doctor’s assessment of a patient’s mood against a checklist of symptoms which may be present in different combinations and are often, in any case, subjective. This has led to a search for reliable biochemical markers of the illness. Not only might these assist diagnosis, they may also improve assessments of prognosis and point towards the most effective treatment in a particular case. Now, a group of neuroscientists at Indiana University, in Indianapolis, led by Alexander Niculescu, think they have found a set of markers that can do all this.

As they write in Molecular Psychiatry, Dr Niculescu and his colleagues have been working with data and blood samples collected over the course of 15 years from hundreds of patients at the Indianapolis Veterans Administration Medical Centre. The targets of their investigation were small pieces of rna, a molecule similar to dna which is copied from the dna of genes as part of the process by which the information encoded in those genes is used by cells to make proteins.

Tracking levels in the blood of relevant rna molecules shows the activity of the underlying genes. That let the researchers identify, in an initial sample of 44 patients’ records, which genes were becoming more and less active as people’s mood disorders waxed and waned. To start with, they found thousands of possible candidate genes in this way, but they first narrowed these down to those that seemed to show the best prediction of mood and then, by turning to the corpus of published research on genes associated with depression, narrowed the selection still further to 26 that had previously been suspected of involvement in the illness. They then followed this clutch up in eight groups of patients, ranging in size from 97 to 226, to see which best predicted the course and details of a patient’s illness.

Thirteen markers survived this final winnowing. The genes they represent are involved in a range of activities, including running circadian rhythms (the endogenous clocks which keep bodily activities synchronised with each other and with the daily cycle of light and darkness); regulating levels in the brain of a messenger molecule called serotonin, the activity of which is well known to get out of kilter in depression; responding to stress; metabolising glucose to release energy; and signalling within cells.

Together, these 13 rna markers form the basis of a blood test that can not only diagnose depression, but also predict who will go on to develop bipolar disorder, who is likely to become ill enough to need hospital treatment in the future, and which drugs will most probably be effective in particular cases. Six of the rnas were good predictors of depression alone. Another six predicted both depression and mania. One predicted mania alone.

On top of their potential role in diagnosis, three of the genes identified are known from previous work to be affected by lithium carbonate, an established treatment for bipolar disorder, and two others are affected by a class of antidepressant drugs called selective serotonin reuptake inhibitors, of which Prozac is probably the best-known example. It is for this reason that Dr Niculescu thinks his blood test may help to pick appropriate treatments.

Tests of reason

The results even indicate some non-psychiatric drugs that might be worth trying, since the analysis showed they had characteristics which could affect some of the biomarkers. A beta blocker called Pindolol, for example, is currently used to treat high blood pressure. But this drug is also known to affect serotonin activity, and Dr Niculescu and his colleagues found, from a search of the published literature, that it has been seen to affect levels of all six of the depression-only biomarkers. That, he thinks, might make it a good candidate for the treatment of depression.

To turn all this into practical help for patients, Dr Niculescu and his colleague and co-author Anantha Shekhar have founded a company called MindX Sciences and are seeking regulatory approval for the test’s medical use. If all goes well, future versions might incorporate additional biomarkers, and might use saliva rather than blood as the fluid sampled. Biomarker-diagnosis of depression is unlikely to replace assessment by checklist, which would still be needed to see who should be sent for screening in the first place. But as a way of confirm‎ing and refining diagnoses, and also of suggesting treatment in what is both an uncertain and a sensitive area, it seems an important advance.

https://www.economist.com/finance-and-economics/2021/05/06/could-sending-criminals-to-prison-be-good-for-their-kids

Bad apples

Could sending criminals to prison be good for their kids?

A new study causes controversy

Finance & economics

May 8th 2021 edition

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May 6th 2021

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In a forthcoming paper in the American Economic Review, one of the discipline’s most prestigious journals, three economists conclude that “[p]arental incarceration has beneficial effects on some important outcomes for children.” Unsurprisingly the study has provoked outrage from keyboard warriors. Some are uncomfortable with the very notion that prison could have anything other than wholly malign effects. Others worry that the research, however well intentioned, gives politicians ammunition to double down on punitive penal policy. In reality, though the study has some uncomfortable findings, it should help governments devise better policy.

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The authors analyse 30 years’ worth of high-quality administrative data from the state of Ohio. They study children whose parents are defendants in a criminal case. Using a clever methodology, they in effect divide the children into two groups, which are identical except in one crucial respect: whether or not one of their parents was sent to prison. In some cases, parents who committed relatively minor crimes were on the wrong side of harsh judges, whereas others got off scot-free for the same offence.

The paper reports a number of outcomes, not all of which are improved by a parental stay in prison. The “estimates on academic performance and teen parenthood are imprecise,” the authors say. But a parent’s incarceration lowers the chance of their child going to prison from 12.4% to 7.5%. It also appears to cause the children to go on to live in better-off neighbourhoods, which could be a sign that household earnings rise. Perhaps having a parent go to prison scares a child straight; or perhaps removing a bad influence from a family allows those left behind to thrive.

Does this mean that America would benefit from even tougher penal policy? Hardly. The paper’s findings suggest that the overall costs of the prison system, including the money spent on housing inmates, are likely to outweigh the benefits. The true messages of the paper are subtler. Any effort to reduce America’s sky-high incarceration rate, though noble, would need to reckon with the costs that it might impose on some children. It is a sorry state of affairs that American kids could stand to gain when their parents are locked up. The challenge for economists and politicians is to find policies to help them that are not as socially destructive.

https://www.economist.com/finance-and-economics/2021/05/06/a-new-age-of-suburbanisation-could-be-dawning

Free exchange

A new age of suburbanisation could be dawning

Americans’ pursuit of leafiness contains hints of a transformative shift

Finance & economics

May 8th 2021 edition

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May 6th 2021

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Though the pandemic has not fully released its grip on America, signs of an incipient boom are everywhere: in surging demand for workers, imports and, above all, houses. Residential property prices rose at an annual rate of 12% in February—the fastest pace since 2006—buoyed by rising incomes, low interest rates and the belated plunge into housing markets by a crisis-battered generation of millennials. A clear preference for large but affordable suburban homes over pricey city-centre flats seems to be emerging. That covid-weary Americans might be eager for suburban life is hardly surprising. Yet the latest pursuit of leafiness and expansive floor plans contains hints of a potentially transformative shift in how Americans choose where they live.

People’s housing decisions incorporate much more than mere economic concerns. Yet the geographical distribution of households reflects some rough balancing of the costs and benefits of living in one place rather than another. Other things equal, people flock to areas that provide access to good jobs or desirable amenities, like pleasant weather, or a lively arts scene. Movement towards attractive places is ultimately checked, however, by the associated costs—congestion, say, and the price of housing—which rise until there is no longer much to be gained from relocating.

From time to time, however, economic shifts disrupt the prevailing equilibrium and trigger large-scale movement. In the mid-20th century cars and highways enabled people to obtain more for their money by moving into suburbs while still maintaining access to city-centre jobs and amenities. Explosive suburbanisation followed. In 1940 about half of Americans lived in metropolitan rather than rural areas, and most metropolitan residents—about one-third of the total population—resided in city centres rather than suburbs. By 2000, in contrast, 80% of all Americans lived in metropolitan areas, but the vast majority—accounting for half the total population—lived in the suburbs.

In the past two decades, shifts in demand have given rise to a new equilibrium. Rising incomes in knowledge-economy industries attracted workers to a few highly productive places (like New York and the Bay Area), and increases in congestion and commuting costs encouraged many to live near work. Housing costs in high-wage cities rocketed, propelled by restrictive zoning policies that prevented housebuilding from keeping up with demand. Highly paid elites were concentrated in pockets of wealth, while many other Americans settled in places offering jobs of middling productivity and pay, but where housing was more affordable.

Though it is early days yet, covid-19 may have disrupted this pattern. Before the pandemic, about 5% of full-time-work days in America came from people working at home. That figure rose above 60% last spring; though it has since fallen back, it remains well above pre-pandemic levels. Broad adoption of remote work stands to drastically alter households’ locational calculations. Recent research by Jan Brueckner of the University of California, Irvine, and Gary Lin and Matthew Kahn of Johns Hopkins University considers two ways in which a transformation might unfold. People with high-productivity jobs could work remotely from anywhere, potentially severing the link between a local economy’s productivity and the demand to live there, and thus enabling a large-scale migration from high-cost cities to low-cost ones. And remote work could allow workers to spend more time at home while still occasionally commuting into the office. In that case, remote work would reduce the cost of a given commute and might thus lead metropolitan areas to become more sprawling.

In fact, both appear to be occurring. In 2020 price gradients flattened between metropolitan areas, as house prices in low-cost cities rose faster than those in high-cost cities, and also within them, as prices in low-cost suburban counties rose faster than those in high-cost urban ones. Another recent paper, by Arpit Gupta and Jonas Peeters of New York University and Vrinda Mittal and Stijn Van Nieuwerburgh of Columbia University, arrives at a similar conclusion. In the year to December 2020 and across America’s 30 largest metropolitan areas, house prices rose faster the farther one moved from urban hubs. Prices of properties 50km from a city centre grew by 5.7% more than those in centres.

Whether these trends continue depends on the extent to which remote-working habits stick. But even a modest persistent change would have large knock-on effects. One recent estimate, by Jose Maria Barrero of the Instituto Tecnológico Autónomo de México, Nicholas Bloom of Stanford University and Steven Davis of the University of Chicago, suggests that the share of hours worked remotely is likely to stabilise at about 20%. In that case, dense city centres could face a cycle of straitened circumstances like that which accompanied car-driven suburbanisation, as local spending and tax revenues decline, leading to cutbacks in amenities. Spending within city centres could drop permanently by 5-10%.

Sometimes I wonder if the world’s so small

A new equilibrium might also yield striking macroeconomic benefits, however. Slow growth in housing supply in high-productivity cities has weighed on the economy by rationing access to high-wage jobs. Had building rules in New York and the Bay Area been no stricter over the last third of the 20th century than those of the typical American city, then the growth rate of national output would have been a third higher, according to one estimate. Remote work stands to relax this constraint on growth, by allowing workers to take high-wage jobs without having to buy costly homes within easy commuting distance.

The geographically disruptive potential of information technology has long been apparent. In a book published in 1997 Frances Cairncross, formerly of this newspaper, imagined that it might yield a “death of distance”. It may have taken the public-health imperative to stay away from others to help realise it at last. 

https://www.economist.com/finance-and-economics/2021/05/08/the-broader-lesson-from-booming-copper-prices

Buttonwood

The broader lesson from booming copper prices

Shortages in commodity markets offer a paradigm for the post-virus economy

Finance & economics

May 8th 2021 edition

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May 8th 2021

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Editor’s note (May 7th 2021): This piece was updated after the price of copper reached an all-time high on May 7th

Blessed are the cheesemakers. A revival in restaurant visits in America has fed demand for one of the more obscure financial instruments—cheese futures. The number of contracts traded on the Chicago Mercantile Exchange surged last month. It is not only cheese that has melted up. A year-long rally in broader commodity markets shows few signs of cooling. Iron-ore prices are at record highs. A boom in American housing has driven timber prices to a new peak. Corn and soyabean prices are at their highest since 2013.

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If you are looking for a paradigm for the immediate post-virus economy, in which supply snags lead to higher prices as activity revives, then commodity markets provide it. Bottlenecks are everywhere. Corn production has been hurt by dry weather. The supply of industrial metals has been held back by slower ore production in virus-hobbled South American mines. The archetypal commodity is copper, which has broad uses in industry and construction. “Dr Copper” is closely watched in markets because of its ability to diagnose important shifts in the world economy. And on May 7th its price reached a record high on the London Metals Exchange.

Amid excitement about a new commodity “supercycle”, copper has one of the stronger bull cases. Plans for fiscal stimulus in America and Europe lean heavily towards greening the economy, which in turn favours copper demand. A bigger question-mark hangs over the supply response. Here Dr Copper may offer some uncomfortable lessons.

Commodity prices are subject to wild swings, reflecting periodic gluts and shortages. The market for copper and other commodities, including oil, is currently in “backwardation”, a state in which futures prices are below cash prices (see chart). In theory stock levels should respond to the spread between cash and future prices. In a backwardated market, the marginal benefit of adding to copper stocks is low. So backwardation is a prompt for stocks to be run down to meet immediate demand. It is a telltale sign of physical shortages. The opposite condition, in which futures prices are above spot, is “contango”. A market in steep contango signifies a short-term glut.

Some analysts believe that the current copper shortage will prove to be a structural feature. A recent note from Goldman Sachs, a bank, predicts that prices will rise to $15,000 per tonne by 2025, from $10,000 today, as the red metal undergoes a new supercycle, a longish period in which demand outstrips supply. The spur to rapid demand growth will come, not from China, whose urbanisation lay behind the supercycle of the first decade of this century, but from the greening of richer countries. As a pliable, cost-effective conductor of heat and electricity, copper is a vital input to green tech. It takes four or five times as much copper to build an electric vehicle as a petrol-fuelled one. Copper goes into the cabling for ev charging stations, and into solar panels and wind turbines. At present, annual “green” demand for copper is 1m tonnes, or just 3% of supply. Goldman reckons that will reach 5.4m tonnes by 2030.

For some people, the case for another commodity supercycle has more holes in it than Swiss cheese. Policymakers in China, the world’s largest consumer of raw materials, are already putting the brakes on. Without a boom in China, there cannot be a supercycle. And high commodity prices are often their own nemesis. The response in agricultural products is simply to grow more crops. In the oil market, shale production can ramp up if prices warrant it.

But copper supply is far less flexible. It takes two to three years to expand output at an existing copper mine and a decade or more to develop a new one. And mining firms, burned by the commodities bust of the early 2010s, have focused more on paying out dividends than on investing in new supply. “Capital discipline” is an industry slogan. It will take further rallies in copper prices to chip away at this mindset.

That brings us to the wider lesson. The view of central bankers is that today’s supply shortages are likely to be temporary and inflation will prove transient. Recent history is on their side. Supply shocks have generally washed out of inflation quickly. If this time proves to be different, it will be because of a peculiar clash. Habits of capital discipline formed in the previous, slow-growth business cycle are not obviously well suited to an economy running hot. As the cycle unfolds, copper prices will signify just how smoothly supply is responding to demand. Dr Copper’s most important diagnosis may yet lie ahead.

https://www.economist.com/business/2021/05/08/can-human-creativity-prevent-mass-unemployment

Bartleby

Can human creativity prevent mass unemployment?

The market for artisan goods is likely to grow. But organised craft could lose its charm

Business

May 8th 2021 edition

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May 8th 2021

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In “THE REPAIR SHOP”, a British television series, carpenters, textile workers and mechanics mend family heirlooms that viewers have brought to their workshop. The fascination comes from watching them apply their craft to restore these keepsakes and the emotional appeal from the tears that follow when the owner is presented with the beautifully rendered result.

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Perhaps the idea of craftsmanship is not simply nostalgic. In a new paper in the Academy of Management Annals, five academics examine the idea of crafts as a way of remaking the organisation of work. They define craft as “a humanist approach to work that prioritises human engagement over machine control”. Crafts require distinct skills, an all-round approach to work that involves the whole product, rather than individual parts, and an attitude that necessitates devotion to the job and a focus on the communal interest. The concept of craft emphasises the human touch and individual judgment.

Essentially, the crafts concept seems to run against the preponderant ethos of management studies which, as the academics note, have long prioritised efficiency and consistency. Frederick Winslow Taylor, a pioneer of management studies, operated with a stopwatch and perceived human workers as inefficient, and potentially disobedient, machines. Craft skills were portrayed as being primitive and traditionalist.

The contrast between artisanship and efficiency first came to the fore in the 19th century when British manufacturers suddenly faced competition from across the Atlantic as firms developed the “American system” using standardised parts. Initially these techniques were applied to arms manufacture but the worldwide success of the Singer sewing machine showed the potential of a mass-produced device. This process created its own reaction, first in the form of the Arts and Crafts movement of the late 19th century, and then again in the “small is beautiful” movement of the 1970s. A third crafts movement is emerging as people become aware of the environmental impact of conventional industry.

There are two potential markets for those who practise crafts. The first stems from the existence of consumers who are willing to pay a premium price for goods that are deemed to be of extra quality. This niche stretches all the way down from designer fashion through craft beers to bakeries offering “artisan” loaves.To the extent that automation takes over more sectors, this niche seems likely to become more lucrative; there is “snob value” in owning a good that is not mass produced. The second market lies in those consumers who wish to use their purchases to support local workers, or to reduce their environmental impact by taking goods to craftspeople to be mended, or recycled.

For workers, the appeal of craftsmanship is that it allows them the autonomy to make creative choices, and thus makes a job far more satisfying. In that sense, it could offer hope for the overall labour market. Let the machines automate dull and repetitive tasks and let workers focus purely on their skills, judgment and imagination. As a current example, the academics cite the “agile” manifesto in the software sector, an industry at the heart of technological change. The pioneers behind the original agile manifesto promised to prioritise “individuals and interactions over processes and tools”. By bringing together experts from different teams, agile working is designed to improve creativity.

But the broader question is whether crafts can create a lot more jobs than they do today. Demand for crafted products may rise but will it be easy to retrain workers in sectors that might get automated (such as truck drivers) to take advantage? In a world where products and services often have to pass through regulatory hoops, large companies will usually have the advantage.

History also suggests that the link between crafts and creativity is not automatic. Medieval craft guilds were monopolies which resisted new entrants. They were also highly hierarchical with young men required to spend long periods as apprentices and journeymen before they could set up on their own; by that time the innovative spirit may have been knocked out of them. Craft workers can thrive in the modern era, but only if they don’t get too organised.

https://www.economist.com/business/2021/05/06/berkshire-hathaways-questionable-performance-and-governance

Honky Tonk

WarrenBerkshire Hathaway’s questionable performance and governance

The world’s most famous conglomerate will struggle to outlast its feted founder in its current form

Business

May 8th 2021 edition

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May 6th 2021

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The annual shareholders’ meeting of Berkshire Hathaway has been dubbed “Woodstock for capitalists”, so large is the throng it usually attracts. For the second year running, though, thanks to covid-19, the groupies have been denied their close-up love-in with Warren Buffett. The event on May 1st was online only, with Mr Buffett joined on screen by his longtime sidekick and fellow nonagenarian, Charlie Munger—a headline act that makes the Rolling Stones look like striplings.

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Nevertheless, Warren and Charlie outdid Mick and Keith for stamina, taking more than three hours of questions, covering everything from Berkshire’s first-quarter results, announced earlier that day, to the ways in which its subsidiaries do and don’t resemble children. For Buffettologists, the highlight was an apparent slip of the tongue by Mr Munger: “Greg will keep the culture”. The following day Mr Buffett, who had hitherto refused to publicly name an heir apparent, confirmed that the nod had gone to Greg Abel, the 58-year-old head of Berkshire’s non-insurance operations.

Mr Buffett has long held the stage as the world’s most celebrated investor, having turned a troubled textile firm purchased in the mid-1960s into a conglomerate worth $645bn spanning everything from railways and real estate to insurance and ice cream. Berkshire—a collection of owned or controlled businesses employing 360,000 people, and a $300bn portfolio of minority stakes in blue chips—has done long-term investors proud. Under Mr Buffett’s stewardship its stock has enjoyed a compounded annual gain of 20%, double that of the s&p 500 index (including dividends).

On with the show

Berkshire’s more recent record looks less stellar, however—leaving some wondering if the company, like the Rolling Stones, is trading on its back catalogue, its greatest hits a thing of the distant past. That prompts another concern. At 90, Mr Buffett is still sharp and seemingly in good health. But no one lives forever. The change of front man, when it comes, will be a test of the endurance of Berkshire’s unique culture and its quirky (some would say anachronistic) governance.

It will also test whether the sprawling group can remain in one piece at a time when conglomerates are out of fashion. Berkshire has long enjoyed a sort of corporate exceptionalism, thanks to the halo over Mr Buffett. With disquiet growing over so-so returns, poor disclosure and more, that benefit of the doubt looks threatened.

Start with the financial performance. Operating profit—the number Mr Buffett urges shareholders to focus on—fell by 9% in 2020, to $22bn, after a flat 2019 (though it rebounded in the latest quarter, up by 20% year on year). Berkshire’s shares badly underperformed the s&p 500 index in both years. Over the past ten years, its per-share market value has handily beaten the index just twice, while lagging far behind it four times. In truth, Berkshire’s performance relative to the s&p has been slipping for decades (see chart).

This loss of oomph is partly explained by the law of large numbers: the bigger Berkshire grows, the harder it is for any single successful investment to move the needle. Another factor is the dwindling of a past advantage. Berkshire has long used the float (premiums not paid out as claims) from its giant insurer, Geico, to funnel low-cost capital to its other operations. But these days capital is cheap for everyone.

Some wounds have been self-inflicted. Big bets on Occidental Petroleum and Kraft Heinz soured quickly. The consumer-goods giant, of which Berkshire owns 26.6%, is weighed down by $28bn of debt and bloated goodwill after a mispriced merger in 2015. Mr Buffett has admitted that he overpaid for Precision Castparts, an industrial-parts-maker that Berkshire bought in 2016, which subsequently triggered an $11bn write-down. Some of his timing has looked awry, too. Having built a big position in American airline stocks, Berkshire bulked up on more at the start of 2020, but lost its nerve as the pandemic spread, dumping its holdings and crystallising a loss of $3bn-4bn. Within months the sector’s share prices had rebounded.

Indeed, the past year has given the lie to the received wisdom that Mr Buffett thrives in adversity. That was certainly true during the financial crisis of 2007-09, when Berkshire acted as an investor of last resort, striking highly lucrative deals to bail out ge and Goldman Sachs; the ge investment yielded a 50% return, most of it within three years. This time, though, with market liquidity less constrained, Berkshire has had less opportunity to pounce.

Nor has it been able to find an acquisition that is both good value and big enough to move that needle. Identifying “elephants” on which it could spend a sizeable part of its $145bn cash pile has become a parlour game in investment circles. When covid-19 first struck, many thought Mr Buffett would be spoilt for choice. But buoyant stockmarkets mean fewer bargains for value investors like him to snaffle up. And Mr Buffett eschews corporate auctions as they often involve paying big premiums.

Another turn-off is increased competition from private equity and spacs. Berkshire’s biggest deal of 2020 was more bolt-on than blockbuster: the $10bn purchase of a gas-pipeline operator by its utility, Berkshire Hathaway Energy (bhe). That was less than half of what Berkshire spent over the year on buying back its own shares.

Perhaps the clearest sign that Berkshire may have lost its touch when it comes to finding attractive targets was the rapid in-and-out of Bill Ackman. The star hedge-fund manager, a lifelong Buffett fan, built a $1bn position in Berkshire in 2019 but had fully sold out by mid-2020, apparently after concluding he could find overlooked gems more effectively himself.

Berkshire has also taken flak for largely missing out on the tech boom of the past decade owing to Mr Buffett’s preference for mature businesses. There is one glaring exception, though: its 5.4% stake in Apple, which has produced a whopping $90bn gain over five years. Moreover, the economic pendulum may be swinging back towards the industrial firms he favours: they should benefit from trillions of federal dollars earmarked for infrastructure upgrades. bnsf, Berkshire’s railway network, can expect to profit as more heavy stuff needs shifting for all these projects.

Some investors have grown increasingly vocal in pressing Berkshire to eke out more from its main divisions. Mr Buffett has described bnsf as one of the conglomerate’s four “jewels”, along with Geico, bhe and the Apple stake. But when Mr Ackman crunched the numbers in 2019, he found the railway’s operating margins to be five percentage points below the average of its peers. Geico has many virtues, including making a profit on its underwriting most years. But its margins, and use of analytics, lag those of an arch-rival, Progressive.

Shine a light

The answer, says one large investor, is for Mr Buffett to be more hands-on with subsidiaries. That, though, would go against the grain of the idiosyncratic management structure and governance long in place. Bosses of subsidiaries are given almost total autonomy; it is not unheard of for them to go months without speaking to Mr Buffett. Berkshire’s head office is tiny, with just 26 people; divisions have their own legal, accounting and human-resources departments. They report to head office, but it reports little to the outside world. Berkshire does not hold analyst calls or investor days. It gives out scant financial information beyond mandatory filings, says Meyer Shields, an analyst with kbw (who has long been shut out of Berkshire’s annual conclave because of his sceptical views).

Mr Buffett is proud of being different. Whereas other big firms have moved to a command-and-control approach, Berkshire’s remains rooted in trust: he trusts the divisions to get on with it, and shareholders are expected to trust that he will make more right calls than wrong ones.

This approach is increasingly at odds with corporate trends. At this year’s agm, Berkshire faced shareholder proposals on its skimpy climate-risk disclosure and diversity policies (both were defeated). It is also under fire over executive pay, which at Berkshire is heavily weighted to base salary, owing to Mr Buffett’s long-held suspicion that stock incentives encourage managers to manipulate the share price. Big proxy-advisory firms like iss have backed some of these criticisms. Some have also taken aim at the board for being too old (five of its 14 members are 89 or over), too entrenched and too close to the boss.

Mr Buffett has little time for esg metrics, diversity targets and the like. He has said he doesn’t want his managers to have to spend their time “responding to questionnaires or trying to score better with somebody that is working on that”. A lot of what is considered good governance today doesn’t fit with Berkshire’s heavily decentralised approach.

Yet pressure for change is growing, and will surely intensify further once the founder no longer calls the shots. Moreover, the post-Buffett leadership is likely to be more diffuse, which those hoping to shake up Berkshire may see as an opportunity to apply more leverage. Mr Abel is ceo-in-waiting, but Mr Buffett’s role as chairman is set to go to his son, Howard. His third role, as investment chief, will probably go to one of the group’s two top equity-portfolio managers, Todd Combs and Ted Weschler.

The most forceful efforts to impose change may come from those seeking to break up Berkshire. When he is gone, Mr Buffett conceded last year, “everybody in the world will come around and propose something, and say it’s wonderful for shareholders, and by the way it involves huge fees.” Some on Wall Street would see it as a coup to “release value” by, for instance, splitting the conglomerate into three bits, focused on insurance, industrial assets and consumer businesses.

Few doubt that Berkshire trades at less than the sum of its parts. But even the sceptical Mr Shields thinks the discount is only around 5%. Others think it may rise above 10% once its leader departs. Mr Buffett insists that a well-run conglomerate has enduring advantages. One is not being associated with a given industry, meaning it feels less pressure to maintain the status quo—“if horses had controlled investment decisions, there would have been no auto industry,” as he once put it.

A crunchier benefit relates to tax: Berkshire can move capital between businesses or into new ventures without incurring any. And taxable income at one subsidiary can help generate tax credits at another. Mr Buffett has claimed this gives bhe a “major advantage” over rivals in developing wind power and solar-energy projects.

How vulnerable to centrifugal forces Berkshire proves to be will depend more than anything else on the composition of its shareholder base. Currently, it affords protection. The typical large American listed company is mostly owned by institutional investors. Berkshire is different. Mr Buffett has around 30% of the voting share; another 40% is held by an estimated 1m other individuals, many of them long-term loyalists (with whom he has spoken of having a “special kinship”); the rest is owned by institutions. If a vote were held today, it would overwhelmingly reject a break-up or wrenching strategic shift.

Mr Buffett and his retail kinsmen may not form such a powerful block for much longer, however. Many of the loyalists are getting on in years. The children who inherit their shares may show less zeal. Even some of the faithful may sell once the Oracle of Omaha has gone. Moreover, Mr Buffett’s stake will be sold into the market after his death, albeit over more than a decade. He has bequeathed it to various foundations on condition that they sell the shares and spend the proceeds on good causes. Posthumous shifts in the shareholder base are Berkshire’s “Achilles heel”, reckons Lawrence Cunningham of George Washington University.

As a keen student of corporate history, Mr Buffett will doubtless know that James J. Hill, a 19th-century railroad baron who led an operator that would later become part of bnsf, once declared that a company only has “permanent value” when it no longer depends on “the life or labour of any single individual”. Berkshire’s greatest challenges will come only after its grizzled rock star has left the stage. 

https://www.economist.com/special-report/2021/05/08/a-future-with-fewer-banks

The future of banking

A future with fewer banks

Imagining a world without banks

Special report

May 8th 2021 edition

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May 8th 2021

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It is hard to conceive of a world without banks, partly because they are so visible. Picture the horizon of any big city, and the skyscrapers in view are usually banks. Commuters emerge from Grand Central station in New York in the shadow of the Park Avenue base of JPMorgan Chase. Morgan Stanley looms over Times Square; Bank of America over Bryant Park. In London the skyline is dominated by odd-shaped towers in the City and Canary Wharf. In Singapore the top floors of the offices of Standard Chartered and uob house rooftop bars looking out over the entire city. Even in places like Auckland, Mexico City or Jakarta, the logos adorning the tallest buildings are those of anz, bbva or hsbc.

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The physical dominance of banks symbolises their importance. Most people interact with their banks for such mundane transactions as buying groceries. Companies pay their workers, suppliers and landlords through banks. Banks are also there for bigger decisions, such as buying a house or getting a student loan.

For almost as long as there has been money (whether cowrie shells, gold, banknotes or digital deposits),there have been institutions providing safe storage for it. And for as long as deposit-taking institutions have existed, their managers have realised how in normal times not all depositors will demand their money back at once. That means they do not have to keep cash on hand for every deposit—instead they can use the money to make loans. Thus bankers provide funding for private investment and earn interest for themselves. This was a marvel to classical economists. “We have entirely lost the idea that any undertaking likely to pay, and seen to be likely, can perish for want of money,” wrote Walter Bagehot, then editor of The Economist, in his 1873 book “Lombard Street”. “Yet no idea was more familiar to our ancestors.”

The “fractional reserves” that banks hold against their deposits have another effect, however: to make them inherently unstable institutions. The history of capitalism and of money is thus one of relentless economic enrichment, pockmarked by the scars of frequent bank runs and financial crises.

Much has changed about banking since Bagehot’s day. Then the biggest banks were in London; now they are in New York, Beijing and Tokyo. Technological change means nearly all payments are settled digitally, rather than with notes or cheques. The banks are also far bigger. The total assets of the world’s biggest 1,000 banks were worth some $128trn in 2020, dwarfing annual global gross product of $84.5trn.

And yet a world without banks is also visible on the horizon. As never before, their role is under threat from new technology, capital markets and even the public sector. Central bankers have seen tech giants develop quicker and easier payments systems that could pull transactions out of the banking system. They worry that digital payments may bring about the end of cash. Financial regulation and monetary policy have traditionally operated through banks. If this mechanism is lost, they may have to create digital central-bank money instead.

Because technology has disrupted so many industries, its impact on banking may seem like one more example of a stodgy, uncompetitive business made obsolete by slick tech firms. But money and banking aren’t like taxis or newspapers. They make up the interface between the state and the economy. “The deep architecture of the money-credit system, better known as banking, hasn’t changed since the 18th century, when Francis Baring began writing about the lender-of-last-resort,” says Sir Paul Tucker, formerly deputy governor of the Bank of England and now at Harvard. “Which means it has not, so far, depended on technology at all, because Francis Baring was writing about it with a quill pen.”

Now a new architecture is emerging that promises a reckoning. “Economic action cannot, at least in capitalist society, be explained without taking account of money, and practically all economic propositions are relative to the modus operandi of a given monetary system,” wrote Joseph Schumpeter in 1939. Yet it is possible to see a future in which banks play a smaller role, or even none at all, with digital money and deposits provided by central banks, financial transactions carried out by tech firms and capital markets providing credit.

Bad change or good?

The question is whether such a world is desirable. Banks have many flaws. Scores of the unbanked are too poor to afford them. They can be slow and expensive. They often make more money from trading and fees, not normal banking. Negligent banks can create boom-and-bust cycles that inflict economic hardship. So it is easy to assume that the sidelining of banks might be just another shackle broken by technological advance.

Yet a world without banks poses some problems. Today central banks provide very little to economies. Around 90% of the broad money supply is in bank deposits, underpinned by small reserves held with the central bank and an implicit central-bank guarantee. This makes it easier for central banks to instil confidence in the system while still keeping at arm’s length from credit. Widely used central-bank money would bring them nearer the action, causing their balance-sheets to balloon. This creates risks.

Banking and capitalism are closely linked. Economists still debate why Britain industrialised first, but it is hard to read Bagehot and not conclude that the alchemy of banks turning idle deposits into engines for investment played a part. The question is what happens if central banks play a bigger role instead. It might be possible for them to avoid actually distributing loans, but it is hard to see how they could avoid some interference in credit markets.

There are broader social risks as well. Banking is fragmented, with three or four big banks in most countries, plus lots of smaller ones. But state-issued digital currencies and private payments platforms benefit from network effects, potentially concentrating power in one or two institutions. This could give governments, or a few private bosses, a wealth of information about citizens.It would also make the institutions a lot more vulnerable. A cyber-attack on the American financial system that closed JPMorgan Chase for a time would be distressing. A similar attack that shut down a Federal Reserve digital currency could be devastating. And there is the potential use of money for social control. Cash is not traceable, but digital money leaves a trail. Exclusively digital money can be programmed, restricting its use. This has benign implications: food stamps could be better targeted or stimulus spending made more effective. But it also has worrying ones: digital money could be programmed to stop it being used to pay for abortions or to buy books from abroad.

The scope of the issues this special report will consider is vast. It includes the role of the state in credit provision, the concentration of power in tech firms or governments, the potential for social control and the risk of new forms of warfare. A world without banks may sound to many like a dream. But it could turn out to be more like a nightmare.

https://www.economist.com/europe/2021/05/08/meet-the-man-who-could-oust-viktor-orban-hungarys-strongman

Charlemagne

Meet the man who could oust Viktor Orban, Hungary’s strongman

Gergely Karacsony wants his country to stop being a byword for cronyism

Europe

May 8th 2021 edition

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May 8th 2021

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Gergely karacsony, the mayor of Budapest, and Viktor Orban, the prime minister of Hungary, could not be less alike. Mr Karacsony presides over the cosmopolitan capital; Mr Orban counts on the rural hinterland as his base. Mr Orban has near-total control over Fidesz, the party that has had near-total control of Hungary since 2010; Mr Karacsony owes his job to an ungainly alliance of six parties. The football-mad Mr Orban built a 3,800-seat stadium in his home village (population: 1,700); Mr Karacsony, a former academic, campaigned against an expensive athletics stadium in his city (population: 1,000 times larger). For anyone still struggling to tell the difference, Mr Karacsony helpfully points out that: “He is short and fat, and I am tall and slim.”

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Like the differences between Mr Karacsony and Mr Orban, Hungarian politics is now refreshingly clear-cut. It is Mr Orban’s Fidesz party versus everyone else. After losing badly in all three general elections since 2010, Mr Karacsony’s party and the other main opposition groups have teamed up to bring down Mr Orban in next year’s vote. Individually, these parties were happy to poll in double digits. Together the alliance, which ranges from the formerly far-right Jobbik to socialists via centrist liberals, is polling level with Fidesz, in the high 40s. For the first time in more than a decade, someone has a chance of booting Mr Orban out.

Attention has turned to who will lead the charge. A primary to choose the opposition’s candidate for prime minister will kick off the process this summer. Mr Karacsony’s surprise victory in Budapest in 2019 was the first example of this approach succeeding. The 45-year old pollster-turned-politician won the primary on the basis of being the least objectionable candidate, able to garner support from voters with often wildly different views. Two years on and Mr Karacsony polls ahead of potential rivals for prime minister, yet he is still coy about whether he will eventually stand. Dithering adds to the common criticism of Mr Karacsony that his natural meekness looks more like weakness to some voters.

The choice of candidate will dictate the choice of strategy. Mr Karacsony revels in a reputation as a peacemaker, able to heal differences between his diverse supporters. He is reluctant to fight Mr Orban on his own terms. If Mr Orban feeds on confrontation, then it is best not to feed him, runs the logic. Other potential candidates adopt a more abrasive tone. Peter Jakab, the leader of the formerly far-right Jobbik, recently told Mr Orban: “I’ve never seen a coward such as you.” (He was also once fined for trying to hand Mr Orban a sack of potatoes in parliament, accusing him of vegetable-based electoral bungs.)

Whether Mr Karacsony’s manner will work outside the capital is unknown. In Hungary, politics is as much about geography as ideology. In Budapest, home to one in five Hungarians, residents rely on still-vibrant online Hungarian media; in the countryside, pro-government radio and tabloids rule. Last October the opposition failed to win a by-election in a rural seat, despite ganging up. As well as picking a potential prime minister, the parties must also arrange 106 primaries for individual constituencies this summer.

Those keen on helping from abroad should steer clear. Well-meaning foreign interventions are not always welcome, says Mr Karacsony. Mr Orban loves to portray his enemies as globalist puppets, taking their orders from Brussels. Over-enthusiastic international support for the opposition can backfire. But a change in the international atmosphere does help. Patience among Mr Orban’s European allies ran out earlier this year, when the Hungarian leader quit the powerful European People’s Party club of centre-right politicians before he was pushed. Mr Orban’s reputation as a canny operator on the European stage has been dented.

Elections in Hungary are free but unfair. Ballot boxes are not stuffed; opposition politicians are not disappeared. Still, gerrymandering is rife, state media spout propaganda and opposition parties find their state funding cut at short notice. Even so, talk of dictatorship is overdone: Mr Orban can lose and he knows it. Recent steps such as shunting Hungary’s universities into private structures run by Mr Orban’s cronies show he plans to cling to some power, even if he loses office. “They are building a deep state,” says Peter Kreko of Political Capital, a think-tank. “If you are confident, then you do not build that.”

And now for something completely different

Yet winning will still be the easiest part of the process. If it reaches office, the opposition will have the task of “de-Orbanisation”: unpicking a state that Mr Orban has devised to enrich his friends and entrench his politics. This will take years. To explain the challenge, Mr Karacsony quotes Ralf Dahrendorf, an Anglo-German political scientist, who once said it takes six months to write a constitution, six years to develop a market economy and 60 years to change a society. Keeping the coalition together in the country at large will prove harder than in Budapest. At the moment, the opposition parties have little choice but to stick together. If they do, they could win. If they don’t, they almost certainly won’t. This concentrates minds. Once in office, they may find the slow task of unpicking of Mr Orban’s deep state less thrilling than the campaign trail, so they will have to strain to stay united.

Get it right, however, and there is a bigger prize than reforming Hungary. Mr Orban provided a how-to guide for the eu’s band of wannabe autocrats. A small, poor landlocked country with an impenetrable language became one of the most influential countries in the bloc, for entirely negative reasons. The Hungarian method of grinding down democratic norms has been adopted elsewhere, from Poland to Bulgaria to Slovenia. Infighting and ineptitude from the opposition allowed Mr Orban to embed himself in the Hungarian state over a decade. For years, Hungary has provided an example of what not to do. If Mr Karacsony and his allies succeed, it could for once prove an example worth following.

https://www.economist.com/united-states/2021/05/06/facebooks-oversight-board-says-that-donald-trump-can-be-kept-off-the-platform-for-now

Speechless

Facebook’s oversight board says that Donald Trump can be kept off the platform—for now

Did the chances of an eventual government intervention to regulate content just go up?

United States

May 8th 2021 edition

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May 6th 2021

SAN FRANCISCO

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“Save america” is the slogan at the top of Donald Trump’s newly launched blog, where anyone nostalgic for 2020 can find tirades resembling those he plastered on social media before he was kicked off Facebook, Instagram, Twitter and YouTube for his statements during the storming of the Capitol on January 6th. Next to his posts are icons for users to click and share Mr Trump’s messages on Facebook and Twitter, reminders of how those platforms confer the widest reach and influence.

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For now, Mr Trump’s blog is all he has. On May 5th Facebook’s independent content-review body, the Oversight Board (ob), issued its most anticipated ruling since it began hearing cases last year, upholding the company’s decision to suspend Mr Trump’s accounts but saying that doing so indefinitely was inappropriate.

In essence, the ob has returned the burden to Facebook, telling it to devise clearer rules and more consistent penalties, and giving it six months to make a final decision regarding Mr Trump's access to the platform. It also asked Facebook to review its role in helping spread Mr Trump's lies about November's election being stolen, and in fomenting the riot of January 6th.

Those hoping for a final verdict on whether Mr Trump could return to Facebook will be disappointed. But the ob’s decision is significant nonetheless. It points to the difficult three-way balance online platforms must strike between free speech, online misinformation and real-world harm—a quick calculus made by too few people with too little transparency. It also highlights the influence that the ob is trying to exert by speaking snark to power. “In applying a vague, standardless penalty and then referring this case to the Board to resolve, Facebook seeks to avoid its responsibilities,” the ob wrote in its decision. According to Michael McConnell, a former judge who is co-chair of the ob, Mr Trump’s “is not the only case in which Facebook has engaged in ad hoc-ery”.

The ob was conceived in 2018 by Facebook’s founder, Mark Zuckerberg, as a “supreme court” for content decisions. Cynics view it as an attempt to deflect responsibility for the company’s thorniest decisions, but it is a worthwhile experiment in creating a middle ground between corporate autonomy and government intervention. The 20 members of the board have an independent streak. Of the nine cases on which the ob has ruled, it has overturned Facebook’s initial decision six times.

If the decision on Mr Trump’s case pushes the social network to make its policies about how and when bans are imposed clearer, the ob will have proved its worth. But it left a “big gap” by not offering more definitive guidance, says David Kaye, a former un special rapporteur on free speech. He argues that the board should have been clearer about when politicians should receive different treatment than other users, and also that it should have been given Facebook more direction about investing more to reach faster decisions on questionable but significant posts.

Nor will the ob’s decision shield Facebook from more criticism. Senator Bernie Sanders and Alexei Navalny, the Russian opposition leader, are among those who have expressed concern about social-media platforms censoring Mr Trump. The ob’s decision “will be cheered by people on the left in the short run,” predicts Matthew Perault, who runs the centre on science and technology policy at Duke University and was formerly Facebook’s director of public policy. “But in the long run, regulators will be scared of what this shows about the company’s ability to choose winners and losers on speech.” According to Mr Perault, the chances that the government will eventually take on big tech by rewriting antitrust, privacy and content rules have just gone up. 

https://www.economist.com/china/2021/05/08/why-so-many-young-chinese-seek-plastic-surgery

Nipping and tucking

Why so many young Chinese seek plastic surgery

It’s not just that they want to stay young

China

May 8th 2021 edition

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May 8th 2021

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Hannah tang, a company manager in Beijing, first went under the knife when she was 18. The surgeon made an incision across each of her eyelids, then stitched folds of skin back to transform her monolids into “double eyelids”. The result was eyes that look bigger, rounder, and in Ms Tang’s opinion, more beautiful. Now 35, Ms Tang (not her real name) has since had two more eyelid surgeries, as well as botox injections in her neck and monthly non-invasive “skin booster” treatments. “Pretty much everyone I know around me has had fillers or surgery,” she says.

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China’s cosmetic-surgery market is booming. Some analysts think it is now the world’s biggest. In 2019 the Chinese “medical-aesthetics” industry (which includes surgery, injections and skin treatments) had revenue of $27bn, around one-fifth of the global total, estimates Deloitte, a consultancy. It reckons the average annual rate of growth in China’s market between 2015 and 2019 was 29%, compared with a global average of around 9%. By 2023, Deloitte estimates revenue will reach $48bn.

Figures can be vague partly because “there is a huge hidden market” that goes unreported, says Yi Wu of Maastricht University in the Netherlands. For example Dongguan, a city in southern China, has over 6,000 unlicensed clinics but only 43 licensed ones. The International Society of Aesthetic Plastic Surgery has not included detailed data on China in its global reporting since 2011.

Starting young is common. In 2020 61% of patients were aged 16-25, up from 48% two years earlier. More than 90% are under 35, and 85% are female. In America, 81% of cosmetic-surgery patients are over 30 and nearly one-quarter are over 55. Ms Wu believes part of the reason young people have surgery is the influence of Confucian parenting, which means that children grow up without unconditional approval. This normally leads to academic pressure, she says, but it can also be internalised so that children feel the need to improve their appearance from a young age.

Double-eyelid surgery accounts for half of all treatments. (In America breast augmentations are the most popular procedure, although in 2020, the year of Zoom, more Americans fixed their noses than their breasts.) Some say the desire for rounder eyes is about looking more Western. But women care more about achieving the “golden ratio” of facial proportions, a more Chinese requirement, reckons Joyce Xu, who works in marketing in Beijing.

The golden ratio is an upside-down triangle: big eyes, relatively flat cheekbones, a narrow jaw and a small mouth. Ms Xu (also not her real name) started Botox injections to that end when she was 27.

As middle-class incomes have risen, surgery has become more affordable. Ms Xu’s quarterly injections are 3,000-5,000 yuan ($460-770) each time, which she deems a bargain. However, the popularity of such things has led to widespread fakery. An estimated two-thirds of injectables in China are unlicensed. In February Gao Liu, an actress, shared shocking pictures on social media of her botched nose job. It resulted in the tissue on the tip of her nose dying and turning black.

Horror stories such as Ms Gao’s may not slow growth. One consequence of starting on treatments so young is that your “baseline appearance gets forgotten,” notes Ms Wu. As a movie character almost said, there’s a great future in plastic surgery. 

https://www.economist.com/asia/2021/05/08/south-koreans-are-discovering-a-taste-for-instagrammable-interiors

Let there be mood lighting

South Koreans are discovering a taste for Instagrammable interiors

A move away from fluorescent tubelights is softening the ambience

Asia

May 8th 2021 edition

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May 8th 2021

SEOUL

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Walking around Seoul at night, Suzie Son noticed a curious change. The city’s high-rise residential blocks usually emit a harsh white glare from the fluorescent lights fitted in every South Korean flat. But in recent years she has seen an increasing number of soft yellow rectangles appearing in the grids of windows. “My foreign friends always complained about the cold bright light in their homes,” says Ms Son, who runs the lighting division at ikea Korea and goes on night-time walks as part of her market research. “None of the Koreans ever thought about changing them.”

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That is no longer the case, especially among younger Koreans. “I have those bright ceiling lights in my place but I never turn them on,” says Kim Yeon-soo, a 24-year-old paralegal who recently moved into a small flat in Seoul. Instead, she uses lamps with low-wattage yellow lights to create what she considers a more calming atmosphere. Her new bed was chosen for the soft, indirect reading light built into the headboard. Her friends have similar tastes, she says: “Young people just pay more attention to light and mood.”

Their parents are not far behind. Ms Kim says her mother shares her distaste for white lights. A shopkeeper in Euljiro, Seoul’s lighting district, says his most popular product—single-bulb pendant lamps inspired by mid-century European designs—is sought by 20-somethings and middle-aged housewives alike.

Countless pictures of impossibly sumptuous interiors, shared on social media, have helped home decor join handbags and cars as a way of displaying status, reckons Minsuk Cho, an architect in Seoul. “People used to pay little attention to their homes in that respect,” he says. Most South Koreans work long hours and socialise outside the home. “But now there’s Instagram and YouTube, so even if you’re rarely there your home is something else you can put on display to compete with others.”

The pandemic has had an effect as well. Like their counterparts elsewhere, South Koreans have spent more money on their homes the longer they have been stuck in them. Sales in Ms Son’s division rose by 20% over the past year, she says. Department stores run by Lotte, a local conglomerate, report a similar increase in demand for lights. Monthly sales of designer lamps at the Conran Shop, a pricey British retailer, have grown five-fold since it opened in Seoul’s glitzy Gangnam district two years ago. Gentice, a purveyor of bedroom furniture, is expanding its range of bedside tables “because people want somewhere to put their reading lights”, says a saleswoman at an interior-design fair at a mall in Gangnam.

Soft yellow lights are casting their glow outside the home, too. Though most Korean restaurants and pubs remain in thrall to white striplights and multicoloured leds, the self-consciously hip coffee shops, wine bars and noodle joints popping up across the country are aiming for a more sophisticated vibe. Their owners scour traditional markets and the internet for vintage Tiffany lamps and knock-off versions of Bauhaus light fixtures, importing design trends beloved by cool kids across the globe. For long-suffering aesthetes such as Mr Cho, that is some light relief.