The Great Debate UK

Apple attempts to become fashionable

The UK lost one of only three female CEOs on the FTSE 100 on Tuesday, as Burberry CEO Angela Ahrendts quit. My concerns about females at the top aside, the interesting thing about Apple’s new hire is the link between Apple and fashion and what it tells us about the evolution of the tech industry.

Ahrendts is a smart choice to become the head of retail and online stores for Apple. Firstly, her marketing skills are second to none. During her tenure at Burberry she has completely transformed the consumer experience at the iconic British brand. The stores are beautiful. The central London branches are styled just as well as the brand’s catwalk stars; they look more like a high-end boutique hotel in Paris or Milan than a high street shop.

The last time I was in the flagship London store there was a life-size virtual catwalk show going on and what looked like a sculpture wall was actually a collection of accessories, all for sale. The music was pumping, the shop assistants were friendly, helpful and of course draped in the brand and, crucially, the place oozed cool. Ahrendts managed to take a British brand that was once considered the staple of the “chav” and make it covetable once again.

She targeted the aspirational middle class, which could be a reflection of her own upbringing – she is from humble roots in Indiana. Burberry’s success in emerging markets is largely down to Ahrendts and her grasp of what the middle classes in fast growing emerging markets actually want.  This is what Apple desperately needs. It has seen Google’s Android take a substantial bite out of Apple’s market share in recent years, giving it a serious challenger in the race to be the smart phone of choice in emerging markets.

from The Great Debate:

How the Nobel economists changed investing forever

The 2013 Nobel Prize for economics celebrates that financial markets work, but cautions how little we know. One theme unifies the work of all three winners: Eugene Fama, Robert Shiller and Lars Hansen -- risk. (A disclosure: until August I worked at Dimensional Fund Advisors, where Fama is a director and consultant.) Risk is unpredictable, but can be very profitable. That sounds simple enough, but it has profound implications -- not only for the lords of high finance, but households, too. Risk teaches humility, to overconfident investors and also policymakers. That humility was notably absent at the IMF/World Bank meetings last week. Policymakers should take special note of the prize this year; it reveals how little we really understand about financial markets.

Fama’s work showed that prices incorporate all available information; this is known as the efficient market hypothesis. The implication is that you cannot systematically outperform the market, unless you have information other people don’t or can access part of the market others can’t. But that doesn’t mean you can’t make money. Over time you can expect, but are not guaranteed, that riskier assets generate higher returns. Stocks, on average, return more than bonds because they are riskier. The stock of smaller companies is riskier than larger ones, so they typically generate more returns. It’s a straightforward concept, but often poorly understood. Even many sophisticated investors get it wrong.

Never waste a good crisis

The events in Washington over the last couple of weeks have shown two things: how a system of checks and balances government can be extremely frustrating and get nothing done, and how the Republican Party is in desperate need of a major change.

The guiding principle of the U.S. Constitution is to never allow any individual or party to get too much power. The ideal is to have a President and Congress at odds with each other so that one ideology is not given a preferential position.  Thus, what we have seen over the last few weeks in Capitol Hill is, in essence, exactly what the Founding Fathers orchestrated back in the late 18th century.

Science’s innovators are to be prized

–Juha Ylä-Jääski (D.Tech.) is President and CEO of Technology Academy Finland. The opinions expressed are his own.–

The 2013 Nobel season is once again gorging on a Grand Cru vintage of scientific achievement. Today, the Nobel Prize for Chemistry was awarded to three scientists, Levitt, Karplus and Warshel, whose multinational collaboration laid the foundation for the computer models crucial for most advances in chemistry today. Yesterday, Peter Higgs and Francois Englert won the Nobel Prize for physics for conceiving the so-called “God particle” which explains why the Universe has mass. Another trio were recognised on Monday when the Nobel Prize in physiology or medicine was awarded to Rothman, Schekman and Südhof for solving the mystery of how the cell transports crucial cargo.

from The Great Debate:

An unstable global economic system that is being ignored

Today, the International Monetary Fund announced yet another a reduction in its global growth projections for 2014, with its estimate of U.S. growth also reduced (citing reduced government spending, but not the present U.S. government shutdown -- or the heretofore unthinkable notion of the U.S. government defaulting on its obligations). Despite the seeming urgency of global economic slowdown, when world leaders attended their annual fall confabulation at the United Nations in New York last month, they focused on the diplomacy of physical security (Syria, Iran, etc.). Thus another year has passed in which global economic security issues were on no one’s reported agenda.

Policy makers continue to fail to appreciate that the most formidable economic challenge today lies in the area outside the borders of any one nation or region -- and that multilateral action to address this challenge is arguably more important than efforts at increasingly less-effective internal stimulus.

from The Great Debate:

Why “sustainability” should be more than a meaningless buzzword

The term “sustainability” crept into the business lexicon slowly, by way of the environmental movement. It no longer means covering operating costs with profits, the definition I learned at Harvard Business School six years ago. Instead, it’s morphed into a blurry term that fits into whatever suitcase you want it to -- a catchall for everything “socially good,” whatever that means.

The term has been used by various groups -- with various meanings -- for three decades. The Sierra Club first introduced it in the 1970s, during the dawn of the environmental movement. At the time, activists were speaking out against mining, water pollution, and other environmental threats. They defined “sustainability” as an approach to preserving natural resources by creating national parks and enacting legislation that would penalize polluters. In the 1980s, companies like The Body Shop used sustainability to describe their commitment to environmental and human rights, and a corporate focus that expanded beyond profits. For the next 20 years, the term was used by a small group of companies, like Ben and Jerry’s and Eileen Fisher, whose founders tried to incorporate their social values into their business models.

48 hours to save Syria’s children

By Justin Forsyth, CEO of Save the Children. The opinions expressed are his own.–

The pictures of Syrian children lined up dead and others writhing in agony, foaming at the mouth as they struggled to breathe, shocked us all to the core. These horrific chemical attacks were crimes against humanity. That is why we should all welcome the UNSC resolution passed in New York.

from The Great Debate:

Why girls’ education can help eradicate poverty

Educating girls and young women is not only one of the biggest moral challenges of our generation, it is also a necessary investment for a peaceful and poverty-free world. Until we give girls equal access to a good quality education, the world will continue to suffer from child and maternal mortality, disease and other byproducts of poverty.

This week, when world leaders at the United Nations General Assembly debate why many of the Millennium Development Goals remain out of reach, they should look no further than education disparities across the developing world. UNESCO’s Education for All Global Monitoring Report team has released new evidence that shows how education gives girls and young women the freedom to make decisions to improve their lives.

from The Great Debate:

Only Generation Lockdown can resolve America’s gun debate

On the website of the Nationwide Children's Hospital in Columbus there is a statistic worth knowing if you live in Ohio. About 1,100 residents of the Buckeye State lose their lives at the trigger of a firearm every year. That includes homicides, accidental shootings and suicides.

It's also a number that you'd think would be worth knowing if you represented the great state of Ohio in Congress. Yet until April it was not a figure that rolled off the tongue of Senator Rob Portman. Far more astonishing than Portman's ignorance of the number of his constituents killed by guns every year are the circumstances in which this gap in his education was filled. Portman didn't hear it from the hospital, a newspaper or cable news. He learned it from a 13-year-old boy named James Barden.

How central bankers have got it wrong

If you asked someone to list the chief qualities needed to be a good central banker I assume that the list may include: good communicator, wise, attention to detail, clear thinking, credibility, and good with numbers.  However, in recent months these qualities have been sadly lacking, most notably last week when the Federal Reserve wrong-footed the markets and failed to start tapering its enormous QE programme.

The market had expected asset purchases to be tapered because: 1, Ben Bernanke had dropped fairly big hints at his June press conference that tapering was likely to take place sooner rather than later and 2, because the unemployment rate has consistently declined all year and if it continues moving in this direction then it could hit the Fed’s 6.5% target rate in the coming months.

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