Great read. I do think companies like EH should invest locally as the arbitrage opportunity of outsourcing such operations to China has been waning recently given higher labor costs in China, variable shipping costs, and more variability in trade policy. To address Joe’s comment on the labor front, I believe automation can help provide the push to move local. The benefit of automation is that at very low rates in the markets, companies can borrow cheap capital to fuel growth locally through capital versus labor. Automation can substitute away large labor expenses for cheaper capital depreciation and interest expense and can result in better yields. Moreover, it can result in lower defect rate upfront, as there wouldn’t be the same learning curve for low-skilled labor. Automation can provide a powerful antidote to the current outsourcing model.
Great article. I like how Antofagasta Minerals (AM) is using a highly upstream approach in changing its sourcing mix to allow for a “cleaner” copper product. Given potentially large economic costs as Tomas touched on in making this a full renewable mix, my question is whether there is room for “bridge” financing on part of the government in the form of a subsidy, which can roll off once renewable costs fall below a certain level. This would mean that the country’s minerals business will remain competitive and remain clean. There is some degree of market failure here that a government’s subsidy may be able to address. Namely, there is an externality, whose costs for complete renewable mix, 1) may be hard (if not, likely impossible) to pass on to consumers given the highly commoditized nature of copper and 2) may completely erode margin for AM, making it unfeasible for the producer to assume the whole cost of the externality. In this way, there may be a role for public-private partnership in ensuring both private and societal objectives are met.
Interesting article, Anton. While there are several promising aspects to the VR element in the context of IKEA, I feel this is still sub-par to the real-time experience of a furniture store in particular. While you may get to visualize the furniture in your home, you still don’t get to test the product or the “trialability” aspect of the offering. Before you purchase, you can’t sit on the chair to see how it feels or move around the product to test the sturdiness! Moreover, you can not compare quality as easily amongst comparable IKEA products on VR as you can by trying it in the store. Two chairs may look similar, but one feels more comfortable and sturdy than the other, which you could only know by going to the store. This is similar to why people visit mattress stores because it is hard to tell a good mattress from a poor one without physically testing it out. This can be important as well if you have small children and want to make sure there is nothing hazardous about the product design by going and testing its feel. In all it is an interesting idea that has a lot of merit, but we shouldn’t lose sight of the customer intimacy that is lost by foregoing the physical feel aspect of buying!
The concept of digitizing elements of higher education or education more generally is a compelling one. We’ve seen the proliferation of online teaching academies like Khan Academy (https://www.khanacademy.org/) aimed at increasing the accessibility of education and concepts to anyone with access to a computer and broadband. This is part of today’s larger access trend where people turn to YouTube for instantaneous and fast tutorials on just about any subject and simultaneously are accessing content in more mobile ways than ever before (iPhone, iPad).
I am compelled by the applicability of mobile and digital learning as a means to encourage interactive learning and increase usage of educational tools for individuals in less fortunate circumstances. One company that caught my eye is Edovo (https://www.edovo.com/), which provides high-security iPads with learning content for prison inmates. The iPad includes content such as GED learning material. The potential for this is far-reaching with the company looking to provide video tutorials down the road. This keeps the inmates busy, while simultaneously allowing them to develop skills and concepts during their time. The societal impact is promising with a Forbes article from last year stating, “While more than 50% of inmates return behind bars after release, educational and vocational programming can reduce recidivism by 43% in three years. ” This is an example of how digitization can truly transform the education supply chain and access for those in some of the worst social positions.
 Ann Field, “Edovo, Maker Of Tablet-Based Education For Inmates, Aims To Reduce Recidivism And Continues To Grow” March 12, 2016, Forbes, https://www.forbes.com/sites/annefield/2016/03/12/edovo-maker-of-tablet-based-education-for-inmates-aims-to-reduce-recidivism-and-continues-to-grow/#754c15fe57b6, accessed November 30, 2017.
Interesting article, BC. Intel has taken a strong leadership role in addressing its own impact as well as its suppliers’ impact on global climate change. However, two key aspects stood out to me that are worth additional consideration:
1) I agree with Intel’s PASS partnership model between Intel and its suppliers and believe these are critical in ensuring a unified approach towards solving a sustainability issue that will carry through the supply chain. Furthermore, the auditing role is critical as an enforcement mechanism, so both parties can cooperate and don’t operate in “silos” with respect to addressing this issue as well as in creating a measurement system to assess impact. This reminded me of IKEA’s sustainability proposition upstream with its suppliers of certified lumber, where if IKEA works with its suppliers to ensure its criteria are met, they can both work towards sustainability targets. That said, while this investment makes sense for both from a sustainability point, it is harder for me to see the direct and / or immediate positive impact of this on the company’s bottom-line. In other words, why would a shareholder care above and beyond if a customer does not? It is not clear that the customer here, a buyer of its chips, would switch its provider away from Intel in the short-run due to higher usage of flourinated gases (the buyer likely is inelastic in the short-run to the chip they are used to utilizing for the product they are selling). The Intel shareholder would be using profits to further sustainability without reaping direct and immediate business impact. A larger question for society and the government is: Could incentives along the lines of carbon credits trading help provide incentives to create environmental benefit that would impact the bottom line and do so immediately, thereby incentivizing corporates to invest in clean projects and veer away from polluting ones? This would help bridge the social externality present in chip production.
2.) Additionally, a key question of consideration is: What can Intel do further upstream in its energy usage to improve its impact on the environment? For example, Intel has many offices and other infrastructure that are not directly related to the production. Maybe switching to solar panels or other cleaner energy could help offset the emissions they have in chip production. As well, maybe Intel can work with its electricity provider to use more clean energy in its electricity usage in its factory. This would go a step beyond making direct production inputs and processing more sustainable to making it a comprehensive initiative across all organizational elements.
Nice read, Steve. A few key points that stand out to me and need to be further considered by Barclays and other banks in the ongoing debate over Brexit-influenced job relocation, particularly as they relate to location selection are:
1) Relocation of jobs out of London are not all necessarily transitioning to other EU countries. Some banks and institutions are thinking of bringing certain jobs that were in London to the United States, partly due to ease of business in US. This is perhaps most applicable to US-based companies that are in Britain, but I would imagine given Barclays’ large presence in the US, this would be an option on the table.
2) Unlike “Alex Robinson’s” post above, which highlights the immigration frictions and frictions in trans-border mobility, I believe the bigger issues will be cultural / socio-political. Partly in line with 1), talent migration is an important piece of the overall relocation strategy and enticing people to move to Frankfurt from a family lifestyle and education perspective may not be that easy. On the other hand while a location like Paris (where HSBC has decided to move some of its employees there) may be better from a cultural perspective, there are political realities in France on how much bonuses banks can pay and how banks fund into social security for employees, which may be meaningful over time in retaining key talent.
A question I have on the “software” component of re-location, is: once people move to the new locations, how will they culturally interact with the local employees? Will there be communication / cultural problems that make doing business and serving clients difficult?