The gliding gadgets are suddenly everywhere, and someone is going to make a killing. Will it be the guy who patented them, the guy who imported them from China, or Mark Cuban? ... The 2-foot-long, two-wheeled, twin-motored plastic board that glided to the forefront of American popular culture this summer could be the skateboard of the young century. The similarities are there. It’s a zeitgeisty short-distance ride that has started to yield its own, self-sustaining viral culture. And you can definitely draw a line from the amateur videos that helped skate culture conquer America to the sudden tide of Vines and Instagram videos that have made the boards a phenomenon. Then again, the so-called hoverboards could simply be the Tickle Me Elmos of 2015 — ubiquitous, overpriced trinkets with a single holiday-season half-life. Time and the collective attention span of America’s teenagers will tell. ... This much is certain: For some weeks or years to come, these devices will be part of the future. Celebrity endorsements on television and social media, enthusiastic word of mouth, and a sudden crop of internet distributors that can barely import the things fast enough to mark them up and meet demand have seen to that. ... As Wired reported earlier this summer, all of the dozen or so tiny American companies that sell the devices, including IO Hawk, buy from Chinese manufacturers like Hangzhou Chic Intelligent Technology (Chic) and make changes to the boards, typically cosmetic, before selling them in the States.
I’d like to tell the story of a paradox: How do we bring the right people to the right place at the right time to discover something new, when we don’t know who or where or when that is, let alone what it is we’re looking for? This is the paradox of innovation: If so many discoveries — from penicillin to plastics – are the product of serendipity, why do we insist breakthroughs can somehow be planned? Why not embrace serendipity instead? Because here’s an example of what happens when you don’t. ... By one estimate, the rate of new drugs developed per dollar spent by the industry has fallen by roughly a factor of 100 over the last 60 years. Patent statistics tell a similar story across industry after industry, from chemistry to metalworking to clean energy, in which top-down innovation has only grown more expensive and less efficient over time. ... Instead of speeding up the pace of discovery, large hierarchical organizations are slowing down — a stagflationary principle known as “Eroom’s Law,” which is “Moore’s Law” spelled backwards. ... Any society that values novelty and new ideas (like our innovation-obsessed one) will invariably trend toward greater serendipity over time. The push toward greater diversity, better public spaces, and an expanded public sphere all increase the potential for fortuitous discoveries.
Information moves, or we move to it. Moving to it has rarely been popular and is growing unfashionable; nowadays we demand that the information come to us. This can be accomplished in three basic ways: moving physical media around, broadcasting radiation through space, and sending signals through wires. This article is about what will, for a short time anyway, be the biggest and best wire ever made. ... FLAG, a fiber-optic cable now being built from England to Japan, is a skinny little cuss (about an inch in diameter), but it is 28,000 kilometers long, which is long even compared to really big things like the planet Earth. When it is finished in September 1997, it arguably will be the longest engineering project in history. ... we all depend heavily on wires, but we hardly ever think about them. Before learning about FLAG, I knew that data packets could get from America to Asia or the Middle East, but I had no idea how. I knew that it had something to do with wires across the bottom of the ocean, but I didn't know how many of those wires existed, how they got there, who controlled them, or how many bits they could carry. ... it behooves wired people to know a few things about wires - how they work, where they lie, who owns them, and what sorts of business deals and political machinations bring them into being.
Breakfasts and dinners are a big part of Hoffman’s life. He recently published two books on how to be successful in business, and is finishing a third, whose working title is “Blitzscaling.” His business is based on the idea of managing your career through relentless networking, which is something he enjoys. ... Work is already becoming more temporary, sporadic, and informal, and this change should be embraced. Many more people will become entrepreneurial, if not entrepreneurs. The keeper of your career will be not your employer but your personal network—so you’d better put a lot of effort into making it as extensive and as vital as possible. ... Hoffman has an uncanny ability to move seamlessly among the worlds of technology, investing, and politics and the worlds of games, science fiction, and comics. “Business is the systematic playing of games,” he says. He seems to conceive of himself as a self-invented superhero: the Ubernode, the world’s most networked person. He isn’t just another conventional networker or another greedy Silicon Valley prick. His project is to build a better world, whose outlines are much clearer to him than to most people. ... All his activities are in the service of the same cause: to make it possible for more people to operate the way he does. ... At the age of twelve, Hoffman went to his first Grateful Dead concert with his father.
Increasingly, digital ad viewers aren’t human. A study done last year in conjunction with the Association of National Advertisers embedded billions of digital ads with code designed to determine who or what was seeing them. Eleven percent of display ads and almost a quarter of video ads were “viewed” by software, not people. According to the ANA study, which was conducted by the security firm White Ops and is titled The Bot Baseline: Fraud In Digital Advertising, fake traffic will cost advertisers $6.3 billion this year. ... Fake traffic has become a commodity. There’s malware for generating it and brokers who sell it. Some companies pay for it intentionally, some accidentally, and some prefer not to ask where their traffic comes from. It’s given rise to an industry of countermeasures, which inspire counter-countermeasures. ... All a budding media mogul—whether a website operator or a traffic supplier—has to do to make money is arbitrage: Buy low, sell high. The art is making the fake traffic look real, often by sprucing up websites with just enough content to make them appear authentic. Programmatic ad-buying systems don’t necessarily differentiate between real users and bots, or between websites with fresh, original work, and Potemkin sites camouflaged with stock photos and cut-and-paste articles.
Matt Ginsberg’s training is in astrophysics. He got his Ph.D. from Oxford when he was 24 years old. His doctoral advisor there was the famed mathematical physicist Roger Penrose, and he recalls rubbing elbows with the academic rock stars Stephen Hawking and the late Richard Feynman. He created an artificial intelligence crossword puzzle solver called Dr. Fill and a computer bridge world champion called GIB. ... Unsurprisingly, there’s pretty heavy math involved to make this real-time sports predictor work. For one element of the system’s calculations, Ginsberg sent me a pdf with eight dense pages of physics diagrams and systems of equations and notes on derivations. It uses something called the Levenberg-Marquardt algorithm. It requires Jacobians and the taking of partial derivatives and the solving of quartics, and code efficient enough to calculate it all up to the split second. If predicting the future were easy, I suppose everybody would do it. ... One thing this project can’t predict, however, is its own future. Its uses are, so far, largely speculative, and cashing in on a minor superpower might not be easy. Even gamblers who bet during play would struggle to make much money from a half-second heads-up that a shot is going in. But Ginsberg’s system would find a natural place in the long line of sports technologies that have been used for a singular end — TV.
This is a country that uses people to do the work of traffic lights and where big-name companies running 10-year-old software is the norm. ... "Japanese companies generally lag foreign companies by roughly five-to-10 years in adoption of modern IT practices, particularly those specific to the software industry," says Patrick McKenzie, boss of Starfighter, a software company with operations in Tokyo and Chicago. ... Yoji Otokozawa, president of Tokyo-based IT consultants Interarrows, says Japan Inc. is poor in digital literacy because small businesses, not multinationals, rule the country. ... "They usually use postal mail, or fax for their communications. We sometimes receive a fax, written by hand which means such firms don't even use word processing software like Word."
The technology behind bitcoin lets people who do not know or trust each other build a dependable ledger. This has implications far beyond the cryptocurrency ... lack of secure property rights is an endemic source of insecurity and injustice. It also makes it harder to use a house or a piece of land as collateral, stymying investment and job creation. ... Such problems seem worlds away from bitcoin, a currency based on clever cryptography which has a devoted following among mostly well-off, often anti-government and sometimes criminal geeks. But the cryptographic technology that underlies bitcoin, called the “blockchain”, has applications well beyond cash and currency. It offers a way for people who do not know or trust each other to create a record of who owns what that will compel the assent of everyone concerned. It is a way of making and preserving truths. ... Other applications for blockchain and similar “distributed ledgers” range from thwarting diamond thieves to streamlining stockmarkets: the NASDAQ exchange will soon start using a blockchain-based system to record trades in privately held companies. The Bank of England, not known for technological flights of fancy, seems electrified: distributed ledgers, it concluded in a research note late last year, are a “significant innovation” that could have “far-reaching implications” in the financial industry. ... Some of bitcoin’s critics have always seen it as the latest techy attempt to spread a “Californian ideology” which promises salvation through technology-induced decentralisation while ignoring and obfuscating the realities of power—and happily concentrating vast wealth in the hands of an elite. The idea of making trust a matter of coding, rather than of democratic politics, legitimacy and accountability, is not necessarily an appealing or empowering one.
During the Cold War, defense money funded much of Northern California’s nascent tech industry, and the military worked closely with universities and companies to develop electronics, microwave devices, semiconductors, and spy satellites. But the military did not stay connected to the venture capital–fueled tech industry that emerged in Silicon Valley in the 1980s. Until recently, the Pentagon didn’t see this as a liability: The United States enjoyed unmatched technological superiority on the battlefield. That advantage, though, is now dissipating. China and Russia have invested heavily in new systems. ISIS is using hobby-style drones for reconnaissance. Rebels in Syria are using iPads to aim mortars. Equipment like this was once prohibitively expensive. Now you can get a lot of what you need off the shelf. ... As much as Defense Department officials say they want better access to commercial technology, the way the Pentagon functions often makes this impossible. The military has spent decades configuring itself to work with defense contractors to build complicated systems that take years to produce, like fighter jets and aircraft carriers. With its cumbersome rules and processes, the Department of Defense is not set up to race alongside small, agile companies. ... The Pentagon is beginning to realize it must operate differently. Some of the most advanced work in computing, big data, cybersecurity, energy, robotics, and space — all areas the military draws on — is being done by tech companies, not traditional defense contractors. Last year, the Pentagon kicked off a large-scale effort called the Defense Innovation Initiative.
What Pyrex-maker Corning is to glass, CoorsTek is to ceramics. Name any big American manufacturer and it probably buys CoorsTek parts. ... CoorsTek makes over 1 billion tiny parts for cars each year, used in brakes, air bags, mirrors and headrests. Its parts are on NASA’s space shuttles; its valves are used in the fountain machines at McDonald’s; its bulletproof armor protects U.S. soldiers; and its fake knees are helping an aging population keep moving. ... With sales of $1.25 billion, CoorsTek is the largest engineered-ceramics manufacturer on the planet. It is also one of the most profitable, with estimated cash flow margins of 27%. ... tapping into the vast clay deposits surrounding Golden to form a pottery company that first made dinnerware and then labware during World War I; the Germans had dominated that market beforehand but were embargoed from selling to Americans during the war. Thomas Edison was an early customer. ... The ceramics business helped to keep the family fortune afloat for nearly two decades. ... Another factor that makes CoorsTek different from most industrial giants is that it can completely change its product offerings year to year without checking in with a public board of directors or worrying how investors will respond. Three of its largest markets–armor and defense, semiconductor equipment and oil and gas–are roller-coaster industries, so it must constantly shift its focus.
Discovery used to mean going out and coming across stuff - now it seems to mean turning inwards and gazing at screens. We've become reliant on machines to help us get around, so much so that it's changing the way we behave, particularly among younger people who have no experience of a time before GPS. ... Experts believe that making maps in our heads, by working out routes and remembering them, is a vital cognitive function for developing minds. ... the maze and its leafy purlieus were also vital as an escape from the overwhelming busy-ness of court life. Kings and courtesans fled the info-babble of their own day to this soothing oasis of flower power, centuries before the hippies were even thought of.
Central to this concern is the prospect of an “intelligence explosion,” a speculative event in which an A.I. gains the ability to improve itself, and in short order exceeds the intellectual potential of the human brain by many orders of magnitude. ... Such a system would effectively be a new kind of life, and Bostrom’s fears, in their simplest form, are evolutionary: that humanity will unexpectedly become outmatched by a smarter competitor. He sometimes notes, as a point of comparison, the trajectories of people and gorillas: both primates, but with one species dominating the planet and the other at the edge of annihilation. ... Bostrom is arguably the leading transhumanist philosopher today, a position achieved by bringing order to ideas that might otherwise never have survived outside the half-crazy Internet ecosystem where they formed. He rarely makes concrete predictions, but, by relying on probability theory, he seeks to tease out insights where insights seem impossible. ... The people who say that artificial intelligence is not a problem tend to work in artificial intelligence.
Inside the 50-year quest to build a mechanical organ ... each year, only about 1 in 10 patients that need a transplant worldwide receives the life-saving surgery. ... Fewer than 2,000 patients have received an entirely artificial heart in the device's three decades of existence, and most patients haven’t used the machines for long. As with Williams, mechanical hearts are typically just a bridge to an eventual transplant. ... It’s unclear whether plastic and metal hearts can ever truly replicate their biological counterparts, which pump 2,000 gallons of blood every day, service 60,000 miles of blood vessels (more than double the circumference of the world), and work without a hitch year after year.
The device, which costs about $40,000, is called a spectrum analyzer. And for years Dooley, a consultant and self-appointed expert who left college after a year, has been measuring and recording wireless data traffic—the billions of transmissions that travel back and forth from smartphones and laptops to cell towers, routers, and other Internet connections. If you’re checking Facebook on your iPhone and Dooley is nearby, his machine will see it and light up. And if hordes of people are posting pictures to Instagram and streaming Netflix videos all around him, the display on Dooley’s machine will turn bright red. Dooley takes the readings to track which parts of the electromagnetic spectrum—the frequencies that carry everything from radio signals to X-rays—are degrading from overuse. He likes to think of himself as a “21st-century version of a land surveyor.” ... What Dooley’s machine is telling him now is this: Wi-Fi is headed for a collapse. The preferred Internet connection for most users is quickly becoming overcrowded, he argues, and could soon be overwhelmed. ... According to Cisco, the amount of data transmitted via Wi-Fi is projected to nearly triple in the next four years. The problem, says Dooley, is that the signals from all our wired devices are increasingly beginning to bump into one another, causing performance to suffer. ... a growing chorus of critics say that Globalstar’s warnings about a Wi-Fi apocalypse are completely unfounded—and that its plan, rather than fixing spectrum congestion, would actually make the situation much worse.
On a typical day Westlake finances 750 cars. It currently has 336,000 outstanding loans, each originating from one of the 23,000 dealerships it works with (everyone from CarMax to small mom-and-pop used car lots). ... most of Hankey’s borrowers aren’t average–they are financial underachievers with credit scores below 600. Many have bankruptcies, past repossessions or limited credit histories–things that make them unattractive to traditional lenders. That’s where Hankey steps in. While Westlake offers loans as low as 1.65%, it specializes in financing credit-challenged car buyers–at an eye-popping rate of 19%, more than double the average for used car loans. ... They typically shell out $344 per month over 49 months, or $16,860 on a $12,000 loan. That translates to an extra $3,920 in interest over the life of the loan when compared to the 3.67% rate a borrower with good credit gets when buying a new car, according to Experian. Sure, each month the company has to write off about $17 million in unpaid loans, but it still banks a profit of around $20 million. In 2014 Westlake netted $230 million on $600 million in revenues. ... He joined forces with the ride-share leviathan in September 2014 as its only outside financing partner. Spanish bank Santander had been working with Uber, offering a lease-to-own program, but that relationship ended earlier this year. Would-be Uber drivers who are looking to purchase a car can get pre-qualified online in a matter of minutes. ... so far a greater portion of its Uber drivers are behind on their payments compared to its typical subprime borrowers, apparently not earning enough to cover the costs.
These kids might never read a map or stop at a gas station to ask directions, nor have they ever seen their parents do so. They will never need to remember anyone's phone number. Their late-night dorm-room arguments over whether Peyton or Eli Manning won more Super Bowl MVPs will never go unsettled for more than a few seconds. They may never have to buy a flashlight. Zac is one of the first teenagers in the history of teenagers whose adult personality will be shaped by which apps he uses, how frequently he texts, and whether he's on Facebook or Instagram or Twitter or Snapchat. Or whatever comes after Snapchat. Clicking like, clicking download, clicking buy, clicking send—each is an infinitesimal decision in the course of the modern American teenager's life. They do this, collectively, millions of times a minute. But together these tiny decisions make up an alarming percentage of their lives. This generation is the first for whom the freedom to express every impulse to the entire world is as easy as it used to be to open your mouth and talk to a friend. ... You hear two opinions from experts on the topic of what happens when kids are perpetually exposed to technology. One: Constant multitasking makes teens work harder, reduces their focus, and screws up their sleep. Two: Using technology as a youth helps students adapt to a changing world in a way that will benefit them when they eventually have to live and work in it. Either of these might be true. More likely, they both are.
In our view, successfully divining the trajectory of markets today has a great deal to do with properly separating the bountiful amounts of information and data we have access to into that which is genuinely useful and that which serves to distract. As a case in point, while we have indeed weighed in on this debate ourselves, the endless discussions about the precise timing of Federal Reserve policy rate lift-off receive far too much attention from investors and the media. Indeed, we think less of a focus on transitory issue like this, and more attention paid to longer-term market influences such as demographic trends and technological change can go some distance toward improving an investment process longer-term. To that end, in this edition of our market outlook we briefly examine a set of influences on markets that we think hold meaningful importance longer-term (demographics, technology, policy evolution and risk, liquidity, and valuation), while at the same time dispelling a set of assertions that we believe are either over-emphasized or mistaken. ... The days of a simple risk-on/risk-off dynamic, depending on whether policy stimulus was waxing or waning, are likely behind us. ... the time may finally have come when carry-focused investments may now be priced as attractively as beta (or down-the-capital-stack) instruments, so investors can selectively search for opportunities there. As described above, though, there are some tail risks in markets, so care is still required. And, perhaps most importantly, investors would do well to tune out the endless streams of noise generated by financial market commentators and focus on the secular themes likely to both endure and help create long-term value.
A new arms race in our skies threatens the satellites that control everything from security to communications ... the activities of the mystery “ghost” satellite have given many in the defence and intelligence community pause for thought. ... Space, military officials like to say, is the ultimate higher ground. Since the cold war ended, however, it has been a largely uncontested territory. In January 1967, the US, UK and USSR became the first signatories to the Outer Space Treaty. In it, they committed to keeping the moon free of military testing and not putting weapons of mass destruction into orbit. China joined the pact in 1984. Another 100 states are now signed up. ... Almost every country with strategically important satellite constellations and its own launch facilities is considering how to defend — and weaponise — their extraterrestrial assets. ... Satellites are fragile things: a nudge to their orbit, a tilt of their solar panels towards the sun, a laser blast directed at their sensors or a projectile casually fired into their path are all capable of wreaking permanent, irreversible damage. ... While developed societies are becoming more dependent on it than ever before for almost every aspect of their digital economies, their grip on the technologies that have given them global strategic dominance is slipping. And as more countries around the world look to maximise their military advantages, space is becoming the most obvious domain to contest. ... The 1967 Outer Space Treaty had one glaring omission: it has no limits on the use of conventional weapons. Even as militaries around the world work hard to build their space weaponry arsenals, many are now wondering whether the treaty needs to be broadened.
Producing hydrogen now costs less and emits less carbon than ever before. In part, that is the result of the United States’ newfound abundance of natural gas, the source of most of the hydrogen produced. But it is also the result of technological improvements in the process of "reforming" natural gas into hydrogen. It now costs around as much to produce a gallon of gasoline as it does to produce the energy-equivalent amount of hydrogen with natural gas. Meanwhile, another method of producing hydrogen-electrolysis, which uses electricity to split water into hydrogen and oxygen-has seen major cost reductions as well. What makes electrolysis particularly attractive is that when powered by renewable sources such as wind and solar power, it directly emits zero carbon. ... Hydrogen storage has also improved. Prototypes used to feature bulky containers that were retrofitted into vehicles designed for conventional engines. But the latest tanks save space by being better integrated into the design of a car and by safely storing hydrogen at a higher pressure, leaving more room for passengers and their belongings. This new generation of containers allows a car powered by hydrogen fuel cells to travel as many miles on a single tank as a gasoline vehicle can and take about the same amount of time to refuel. ... The obstacles to distribution are beginning to fall away, too. True, with relatively few dedicated pipelines in existence, hydrogen has yet to show up at the vast majority of gas stations. But there are promising work-arounds. Most of the developed world does have good natural gas distribution infrastructure, which could feed smaller reactors that produce hydrogen. Hydrogen could also be produced on-site through electrolysis. ... estimates of what it would cost to mass-produce fuel-cell systems have decreased tremendously, from $124 per kilowatt of capacity in 2006 to $55 per kilowatt in 2014. The durability of these systems has improved dramatically as well, and they now meet the expectations of customers used to conventional automobiles.
He says it’s a self-driving car that he had built in about a month. The claim seems absurd. But when I turn up that morning, in his garage there’s a white 2016 Acura ILX outfitted with a laser-based radar (lidar) system on the roof and a camera mounted near the rearview mirror. A tangle of electronics is attached to a wooden board where the glove compartment used to be, a joystick protrudes where you’d usually find a gearshift, and a 21.5-inch screen is attached to the center of the dash. “Tesla only has a 17-inch screen,” Hotz says. ... Hotz was the first person to hack Apple’s iPhone, allowing anyone—well, anyone with a soldering iron and some software smarts—to use the phone on networks other than AT&T’s. He later became the first person to run through a gantlet of hard-core defense systems in the Sony PlayStation 3 and crack that open, too. ... The technology he’s building represents an end run on much more expensive systems being designed by Google, Uber, the major automakers, and, if persistent rumors and numerous news reports are true, Apple. More short term, he thinks he can challenge Mobileye, the Israeli company that supplies Tesla Motors, BMW, Ford Motor, General Motors, and others with their current driver-assist technology. ... Hotz plans to best the Mobileye technology with off-the-shelf electronics. He’s building a kit consisting of six cameras—similar to the $13 ones found in smartphones—that would be placed around the car. ... The goal is to sell the camera and software package for $1,000 a pop either to automakers or, if need be, directly to consumers who would buy customized vehicles at a showroom run by Hotz. ... There are two breakthroughs that make Hotz’s system possible. The first comes from the rise in computing power since the days of the Grand Challenge. He uses graphics chips that normally power video game consoles to process images pulled in by the car’s camera and speedy Intel chips to run his AI calculations. ... The second advance is deep learning, an AI technology that has taken off over the past few years. It allows researchers to assign a task to computers and then sit back as the machines in essence teach themselves how to accomplish and finally master the job. ... Instead of the hundreds of thousands of lines of code found in other self-driving vehicles, Hotz’s software is based on about 2,000 lines.
- Also: BuzzFeed - Google's Cute Cars And The Ugly End Of Driving < 5min
- Also: MIT Technology Review - A Car That Knows What the Driver Will Do Next < 5min
- Also: The Atlantic - How Many Lives Will Driverless Cars Save? < 5min
- Also: Bloomberg - Can Detroit Beat Google to the Self-Driving Car? 5-15min
- Also: Marginal Revolution - Three counterintuitive scenarios for driverless vehicles < 5min
- Also: The New York Times - The Dream Life of Driverless Cars 5-15min
- Also: The Verge - Inside Faraday Future, the secretive car company chasing Tesla 5-15min
- Also: The Atlantic - The High-Stakes Race to Rid the World of Human Drivers 5-15min
- Also: Wall Street Journal - Could Self-Driving Cars Spell the End of Ownership? < 5min
As America switches from an industrial economy to a digital one, its bluest collar workers are facing the toughest challenge of their lives. Can miners really learn how to code? ... coal is basically over. The federal government has pumped nearly $23 million into the region in the last two years to diversify the post-coal economy and retrain miners into jobs like installing broadband fiber. But until there’s some serious new high-paying option, most ex-mine workers are getting by on unemployment, taking lower paying jobs, moving away, or, as one put it to me, “going into panic mode.” ... The job, they determined, would start with a 22-week training program to learn how to code. Trainees would be paid $15 an hour, which came from federal funds pumped through a regional economic development agency. That’s less than miner wages, but it was better than working at the McDonald’s double-lane drive-thru downtown. Then, after those 22 weeks, Justice and Parrish would put up three dollars for every one from the government and build a coding team that could take on real, paying work. ... Most had heard the program’s radio ad. “Have you been laid off from a job in the mining industry? If you are a logic-based thinker willing to work and learn new things, we have a career opportunity for you. BitSource is bringing the computer coding revolution to Eastern Kentucky.”
1. The Hollow Alliance: The trans-Atlantic partnership has been the world’s most important alliance for nearly seventy years, but it’s now weaker, and less relevant, than at any point in decades. It no longer plays a decisive role in addressing any of Europe’s top priorities. Russia’s intervention in Ukraine and the conflict in Syria will expose US-European divisions. As US and European paths diverge, there will be no more international fireman—and conflicts particularly in the Middle East will be left to rage.
2. Closed Europe: In 2016, divisions in Europe will reach a critical point as a core conflict emerges between Open Europe and Closed Europe—and a combination of inequality, refugees, terrorism, and grassroots political pressures pose an unprecedented challenge to the principles on which the new Europe was founded. Europe’s open borders will face particular pressure. The risk of Brexit is underestimated. Europe’s economics will hold together in 2016, but its broader meaning and its social fabric will not.
3. The China Footprint: Never has a country at China’s modest level of economic and political development produced such a powerful global footprint. China is the only country of scale today with a global economic strategy. The recognition in 2016 that China is both the most important and most uncertain driver of a series of global outcomes will increasingly unnerve other international players who aren’t ready for it, don’t understand or agree with Chinese priorities, and won’t know how to respond to it.
4. ISIS and “Friends”: ISIS is the world’s most powerful terrorist organization, it has attracted followers and imitators from Nigeria to the Philippines, and the international response to its rise is inadequate, misdirected, and at cross purposes. For 2016, this problem will prove unfixable, and ISIS (and other terrorist organizations) will take advantage of that. The most vulnerable states will remain those with explicit reasons for ISIS to target them (France, Russia, Turkey, Saudi Arabia, and the United States), and those with the largest numbers of unintegrated Sunni Muslims (Iraq, Lebanon, Jordan, Egypt, and across Europe).
5. Saudi Arabia: The Saudi Kingdom faces a growing risk of destabilizing discord within the royal family this year, and its increasingly isolated status will lead it to act more aggressively across the Middle East this year. The threat of intra-royal family strife is on the rise, and a scenario of open conflict, unimaginable prior to King Salman’s January 2015 ascension, has now become entirely realistic. The key source of external Saudi anxiety is Iran, soon to be free of sanctions.
6. The rise of technologists: A variety of highly influential non-state actors from the world of technology are entering the realm of politics with unprecedented assertiveness. These newly politically ambitious technologists are numerous and diverse, with profiles ranging from Silicon Valley corporations to hacker groups and retired tech philanthropists. The political rise of these actors will generate pushback from governments and citizens, generating both policy and market volatility.
7. Unpredictable Leaders: An unusually wide constellation of leaders known for their erratic behavior will make international politics exceptionally volatile this year. Russia’s Vladimir Putin and Turkey’s Recep Tayyip Erdogan are leaders of an unruly pack that includes Saudi Arabia’s Deputy Crown Prince Mohammed bin Salman and – to a lesser but important extent – Ukraine’s Petro Poroshenko. These unpredictable leaders make our list for 2016 because their interventions overlap and conflict. One powerful, erratic leader spells trouble; four spell volatility with major international implications.
8. Brazil: President Dilma Rousseff is fighting for her political survival, and the country’s political and economic crisis is set to worsen in 2016. Contrary to hopes among pundits and many market players, the battle over Rousseff’s impeachment is unlikely to end the current political stalemate. Should the president survive, her government won’t gain the political boost necessary to move on the economic reforms needed to tackle the country’s growing fiscal deficit. If Rousseff is ousted, an administration led by Vice President Michel Temer won’t fare much better.
9. Not enough elections: Emerging markets underwent a historic cycle of national elections in 2014-2015, but this year there are relatively few opportunities for EM voters to make themselves heard at the ballot box. As slower growth and stagnating living standards stoke popular discontent, governance and stability will suffer. Historically, markets have been less volatile in non-election years, but this time will be different. By raising popular expectations, the massive income growth that most EMs enjoyed over the past 10 years has created conditions for a rude awakening.
10. Turkey: After a decisive victory for his AK party in late-2015, President Erdogan will now push to replace the country’s parliamentary system with a presidential one. He’s unlikely to reach his goal in 2016, but his aggressive electioneering will further damage an already battered Turkish business and investment climate. On the security front, there is little prospect of an imminent end to PKK violence, and unrelenting US pressure on Ankara to clamp down on the Islamic State will produce only modest results while making Turkey more vulnerable to new attacks by ISIS.
* Red Herrings: US voters aren't going to elect a president who will close the country to Muslims. China’s economy isn’t headed for a hard landing, and its politics will remain stable. Continued strong leadership from Japan's Shinzo Abe, India's Narendra Modi, and especially China's Xi Jinping will keep Asia's three most important players focused on economic reform and longer-term strategy, reducing the risk of conflict in Asia’s geopolitics.
Over the past year it has doubled in size to 380 employees and snatched investments that value it at $5 billion, up from $3.5 billion a year earlier. (Recently public Square is worth $4 billion.) Once a U.S.-only service that had to beg for an audience with a bank, Stripe has expanded to 23 countries and is routinely striking partnerships with the likes of Visa, Apple Pay and Alibaba. Facebook, Twitter and Pinterest have chosen Stripe to power their e-commerce efforts, and traditional retailers like Best Buy and Saks Fifth Avenue picked Stripe for their forays into mobile. Slack recently turned over its payments to Stripe after ditching a rival product. ... Industry sources put Stripe’s payment volume at about $20 billion a year. For every transaction it processes, Stripe in the U.S. gets a swipe fee of 2.9% plus 30 cents, roughly the same as other payment firms such as Square, though large customers get volume discounts. That would peg Stripe’s revenue at more than $450 million. The company says that 27% of Americans will have bought something through Stripe in the past year, a big bump from just 3.8% two years ago. ... Stripe’s success at making digital payments easy to process is only a step toward its larger ambition: becoming the edifice upon which new forms of commerce are created. Think Amazon Web Services (which supports all kinds of Internet businesses) but focused on financial transactions. ... The company faces formidable rivals. Braintree, which is owned by PayPal , has said it will process some $50 billion in 2015
Fourteen years later, the drone is the quintessential weapon of the American military, which now boasts roughly a thousand Predator pilots. At any given moment, scores of them sit in darkened trailers around the country, staring at the bright infrared camera feeds from drones that might be flying over Afghanistan, Iraq, Syria, Pakistan, or Somalia. Between August 2014 and August 2015, a single Predator squadron—the 432nd Air Expeditionary Wing in Nevada—flew 4,300 sorties and dropped 1,000 warheads on ISIS targets. By enabling the White House to intervene without committing troops to battle, the drone has transformed US foreign policy. ... The Predator as we know it—with its capacity to be piloted from thousands of miles away and its complement of Hellfire missiles—wasn’t developed with the expectation that entire wars might one day be fought by pilots sitting in trailers. As a matter of fact, most military planners at the time regarded the Predator as pretty much a technological dead end. ... The lethal Predator wasn’t a production vehicle. It was a hot rod, built for one all-out race against the clock. Of course, in those months before September 11, 2001, none of its designers knew the nature of the clock they were racing against. And most Americans have no idea quite how close they came to beating it.
The DOD of course has a long history of jump-starting innovation. Historically, it has taken the megafunding and top-down control structures of the federal government to do the kind of investing required to create important technology for the military. Digital photography, GPS, the Internet itself—all were nourished by defense contracts before being opened up to the private sector, which then turned them into billion-dollar industries. ... Now the flow has reversed. Defense has been caught in the throes of the same upheaval that has disrupted legacy industries, unseated politicians, and upended global dynamics. In the digital age, innovation more often comes from smaller entrepreneurs than from the hierarchical structures that were the hallmark of 20th-century government and business. ... Defense contracting is notorious for bureaucratic lethargy and technological backwardness. And executives are leery of appearing to be too close to the US government while they seek to expand overseas. Put bluntly, they don’t want to alienate potential customers. ... The Valley is a place where brainpower is its own kind of currency, and Carter, who holds a PhD in theoretical physics from Oxford, made an impression on the locals. ... somehow Carter must instill the seeds of a cultural and logistical overhaul that will make the modern military-industrial complex nimble enough to provide the kind of innovation and support its 21st-century fighting force needs.