Thursday, April 27, 2017
Bumper profits for Alphabet, Amazon; The rise of inequality; Why going to university is still worth it
1 Bumper profits for Alphabet, Amazon (Martin Farrer in The Guardian) A slew of large tech companies including Google parent Alphabet and Amazon have reported better than expected bumper profits, promising to boost the Nasdaq index to fresh highs.
The tech-heavy index already pushed to a new record on Thursday of 6,048.94, a rise of 0.39%, thanks to strong results from PayPal and Comcast. But after-the-bell figures from the industry’s giants looked set to take it even higher.
With shares already buoyant on the hopes of huge corporate tax cuts by the Trump administration, the impressive earnings helped Wall Street brush aside any concerns about a possible US government shutdown amid continued congressional wrangling.
The record-breaking run is likely to continue next week when the market will hear from Apple and Facebook. Alphabet’s profit beat Wall Street estimates and rose 29% to $5.43bn, a performance that analysts called exceptional for a company so large.
Like its arch-rival Facebook, Google has aggressively shifted the focus of its business to mobile advertising. The two companies accounted for 99% of the industry growth in digital advertising in 2016, demonstrating market power that some advertisers complain amounts to a duopoly.
Amazon, the world’s largest online retailer, said net income rose 41% in the first quarter of the year. Retail and cloud-computing sales led the way, boosted by fees from its Prime shopping club and media streaming services, along with growing advertising revenue.
Shares rose 3.9% to $954 in after-hours trading, adding nearly $3bn to the personal fortune of founder and chief executive Jeff Bezos. His wealth is now estimated at $79bn, making him the world’s third richest person ahead of Warren Buffett on $74bn, according to Bloomberg. Bezos is $8.3bn behind Bill Gates, the Microsoft founder who is in top spot with a fortune put at $87.3bn.
2 The rise of inequality (Yuval Noah Harari on BBC) In the 19th and 20th Centuries, something changed. Equality became a dominant value in human culture, almost all over the world. It was partly down to the rise of new ideologies such as humanism, liberalism and socialism.
But it was also about technological and economic change - which was connected to those new ideologies, of course. But now that's changing again. The best armies today require a small number of highly professional soldiers using very high-tech kit. Factories, too, are increasingly automated.
This is one reason why we might - in the not-too-distant future - see the creation of the most unequal societies that have ever existed in human history. And there are other reasons to fear such a future. With rapid improvements in biotechnology and bioengineering, we may reach a point where, for the first time in history, economic inequality becomes biological inequality.
Until now, humans had control of the world outside them. They could control the rivers, forests, animals and plants. But they had very little control of the world inside them. They couldn't cheat death. There are two main ways to upgrade humans. Either you change something in their biological structure by changing their DNA. Or, the more radical way, you combine organic and inorganic parts - perhaps directly connecting brains and computers.
In the past, the nobility tried to convince the masses that they were superior to everyone else and so should hold power. In the future I am describing, they really will be superior to the masses. And because they will be better than us, it will make sense to cede power and decision-making to them.
We might also find that the rise of artificial intelligence - and not just automation - will mean that huge numbers of people, in all kinds of jobs, simply lose their economic usefulness. The two processes together - human enhancement and the rise of AI - may result in the separation of humankind into a very small class of super-humans and a massive underclass of "useless" people.
Once you lose your economic importance, the state loses at least some of the incentive to invest in your health, education and welfare. It's very dangerous to be redundant.
There is one more possible step on the road to previously unimaginable inequality. In the short-term, authority might shift to a small elite that owns and controls the master algorithms and the data that feeds them. In the longer term, however, authority could shift completely from humans to the algorithms. Once AI is smarter than us, all humanity could be made redundant.
3 Why going to university is still worth it (Goh Eng yeow in Straits Times) Is going to college still worthwhile? I would still give an unequivocal "yes", even though I agree that not all university degrees will fatten the wallet.
In my view, Bill Gates and Mark Zuckerberg are big exceptions to the rule. For most of us who have been to university, not only does a degree provide an important stepping stone to a good career, but also it lays the framework for a life-long learning process.
True, many of us took courses at university which did not quite equip us with the skills for the jobs we were subsequently hired to do. But the rigorous training received enabled us to do well in our chosen careers. In my case, I studied physics in university. But I have spent most of my working life as a financial writer dealing with subjects which have nothing in common with physics.
It was at university that I was taught simple ways to solve even the most complicated physics problems. It is a philosophy I find useful in helping me make sense of the bewildering complexities of the financial landscape I write about.
Moreover, a university degree should not be viewed as an end in itself. Future generations will live longer because of the rapid advances in medical technologies. Given that, working till the current retirement age of 62 may not be viable anymore because this would mean the number of years we spend in retirement would far exceed the time we spend working - and we may find ourselves running out of money in our advanced years.
Life can no longer be split up into merely three stages - education, career and retirement. Working long past 62 will be the norm, rather than the exception. In that case, we may end up with six or seven phases in our lives, working in a certain job for some years, then returning to education to learn new skills before picking up another job, and taking time off to pursue other activities such as starting a family.
Given such scenarios, a person may find himself doing more than one university degree in his lifetime - a basic one which offers him thinking skills, as well as many subsequent post-graduate courses to give him the skills necessary to perform his job. The trick is to keep finding work which robots cannot do.