[ISSUE 32] - Interesting Things...

@GSElevator – #1: In Sicily, gangsters kill the kids and grandkids of their enemies. In America, we have reverse mortgages.

1. Quote Of The Week / 2. Driverless Cars May Catch Insurers Asleep At The Wheel / 3. Asia To Dominate Global GDP By 2050 / 4. Interesting Links / 5. Joke Of The Week

1. QUOTE OF THE WEEK

In

, James Goldsmith discusses the ramifications of free-trade agreements that were about to take place in 1994. As you can retrospectively see, he correctly predicted many of the things that happened and with global trade increasingly prevalent and the TPP in the news, the astute points he made are as relevant as ever.

Here are some notes from Part 1:

  • Free trade will effectively bring 4 billion people that have been held away by communism and other ideologies into the free labour market, have high unemployment, rapidly growing populations and are willing to work for next to nothing
  • Other changes taking place is that technology and capital can be transferred around the world instantaneously to wherever the returns are highest - Using Europe’s move to free trade as an example: in the 20yrs that followed, the economy grew by 80% while unemployment went from 400k to 5m people
  • The value added in any ‘process’ is split between capital and labour – the share of that value has been debated for generations. When you introduce a market where there is the same access to capital and technology with the cost of labour being the only variant, it shatters the distribution of value and the equilibrium on which a stable society is built
  • [skip to 42:30 in the full version] The governments and corporations in developing countries that control trade are the primary benefactors. Net-net: it is the poor in the rich countries who will be subsidizing the rich in the poor countries

2. DRIVERLESS CARS: INSURERS CANNOT BE ASLEEP AT THE WHEEL

In 2020 Google plans to launch a self-driving car that has already driven nearly one million miles without causing an accident. The in-built chauffeur comes in the form of a rotating LIDAR laser taking 1.3 million recordings per second, and it’s a better driver than you. By eliminating the element of human blunders, driverless cars are forecast to reduce motor accidents by up to 90% in the US according to McKinsey.

Insurers determine premiums by collecting data on individual drivers to predict their riskiness. For instance, a quarter of car insurance claims in the United Kingdom result from parking incidents of which 71% occur during reversing. A switch to driverless cars could largely eliminate these costs and make a substantial impact on the insurance industry, with liability potentially shifting to car manufacturers.

There’s a lesson to learn from Kodak’s failure to embrace digital photography and eventual bankruptcy.

This doesn’t have to be the case for insurers if they utilise their existing customer base and underwriting expertise. There may be opportunities to expand into new lines of business such as insuring for cyber-attacks against cars’ smart technology, which could be both necessary and lucrative. An even more obvious opportunity might be through tie-ups with vehicle manufacturers where the bulk of liability will reside.

A case in point: Volvo has declared that by 2020 no-one will die in one of its cars – a claim which will hinge on the robustness of Volvo’s technology. This could make them liable in the event of a car collision caused by faulty sensors if Volvo guarantees to cover the costs of accidents to lure customers it will make Volvo the de facto insurer of its own product – a risk it will undoubtedly want to offload.

In the case that a manufacturer will not accept liability and is not legally obliged to do so, you may still need to insure your automated driver: in Germany the legality of autonomous vehicles is contingent upon the presence of a fully liable driver operating them. Retail motor insurance – currently based on the relationship between a driver and their insurance company – might increasingly mould into commercial, inter-company insurance contracts.

Ultimately, car ownership is expensive and inefficient - cars are only in use for 5% of the time. The slowing appetite for car ownership has spawned schemes such as Uber which has soared in popularity. If shared driverless vehicles become increasingly prevalent, insurers could participate in a pooled scheme where premiums are received by pay per use customers, similar to hire cars today.

The Google Chauffeur will still be confined to the realm of science fiction for some time, although so were cars once. Insurers will inevitably need to change their business model to adapt to a changing market, giving rise to opportunities for investors.

3. ASIA TO DOMINATE GLOBAL GDP BY 2050

The world’s biggest economies will look like this according to a new report from the Economist Intelligence Unit thirty-five years from now.

As may be expected, the report supports the narrative of a steadily growing Asia. It says that in 2050, 53% of the world’s GDP will be generated in the region, up from 32% in 2014.

None of the countries slipping down the list will do so out of stagnation. For example, France, the country that moves down furthest without dropping off—from sixth largest last year to 10th largest by 2050—will nevertheless treble its GDP in the coming 35 years. The total value of the top 10 economies in 2014 amounted to $50.4 trillion; in 2050, the top 10 economies will account for a whopping $318.3 trillion.

4. INTERESTING LINKS

Why flamingos succeed at escaping zoos; Gravity kills Schrodinger's cat; Most research findings are probably false; How fiat money works; Hack computers using pita bread; Why some people don't need to sleep; The loneliness of the short-seller; Tips on negotiating your salary; Andreessen Horowitz on why mobile is eating the world; Evaluating the staying power of a business; Kiss roaming charges goodbye; Unemployment explained by Abbott and Costello; Solution to the mystery of missing inflation.

5. JOKE OF THE WEEK

Career Advancement Opportunities

March 2024 Consulting

  • Bain & Company 99.4%
  • McKinsey and Co 98.9%
  • Boston Consulting Group (BCG) 98.3%
  • Oliver Wyman 97.7%
  • LEK Consulting 97.2%

Overall Employee Satisfaction

March 2024 Consulting

  • Bain & Company 99.4%
  • Cornerstone Research 98.9%
  • Boston Consulting Group (BCG) 98.3%
  • McKinsey and Co 97.7%
  • Oliver Wyman 97.2%

Professional Growth Opportunities

March 2024 Consulting

  • Bain & Company 99.4%
  • McKinsey and Co 98.9%
  • Boston Consulting Group (BCG) 98.3%
  • Oliver Wyman 97.7%
  • LEK Consulting 97.2%

Total Avg Compensation

March 2024 Consulting

  • Partner (4) $368
  • Principal (25) $277
  • Director/MD (55) $270
  • Vice President (47) $246
  • Engagement Manager (99) $225
  • Manager (152) $170
  • 2nd Year Associate (158) $140
  • 3rd+ Year Associate (108) $130
  • Senior Consultant (329) $130
  • Consultant (586) $119
  • 1st Year Associate (538) $119
  • NA (15) $119
  • 3rd+ Year Analyst (145) $115
  • Engineer (6) $114
  • 2nd Year Analyst (342) $102
  • Associate Consultant (166) $98
  • 1st Year Analyst (1046) $87
  • Intern/Summer Associate (188) $84
  • Intern/Summer Analyst (547) $67
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