ApprovedBusinessBusiness and finance

New York deflates Airbnb

No rules broken here

IN 2007, Brian Chesky and Joe Gebbia came up with a wheeze to rent out two air beds in their San Francisco apartment, because a conference had left the local hotels full-to-overflowing. Thus, Airbed & Breakfast was born. Since then, the firm’s only contraction has been its name. Today, Airbnb’s website lists over 2m properties for short-term let in 191 countries. Piper Jaffray, an investment bank, estimates that bookings through the firm will reach $14.4bn in 2016, compared with $52m in 2010. Analysts think the upstart might fetch $30bn were it to be taken public. That would make Airbnb worth more than Marriott, the world’s largest hotel chain.

But legislation signed in New York state on October 21st has taken some of the puff out of Airbnb’s mattress. New York City is the firm’s largest market in America, with around 35,000 properties available for rent. But many of the hosts offer their apartments illegally. In 2010, the state passed a law banning rentals of whole units in residential blocks for less than 30 days. (It is legal to do so if the tenant is living there at the same time.) To…Continue reading

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Known unknown

COMPETITION between currencies is the stuff libertarian dreams are made on—and central bankers’ nightmares too. Already digital monies, in particular Bitcoin and Ethereum, are rivals. On October 28th a new crypto-currency will join the fray: Zcash. Many such “altcoins” are dubious affairs and don’t add much. But this one brings important innovations.

Zcash is based on Bitcoin’s code, but its creators, a bunch of cryptography researchers, have tweaked it. The new digital cash is minted more quickly and the system can handle more transactions. This makes for more liquidity and shorter transaction times, says Zooko Wilcox, who leads the project.

The newcomer also differs in the way it is governed. The incumbent started—and is still run—as an open-source project: a small group of volunteer developers decides which changes are made. Zcash’s code is also open-source, but its inventors have formed a company and accepted money from investors. In addition, 10% of the 21m coins to be issued are earmarked for founders, investors, employees and a putative Zcash foundation. All this, says Mr Wilcox, is to align incentives for all…Continue reading

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Wind and solar advance in the power war against coal

THE battle between clean energy and dirty coal has entered a new phase. The International Energy Agency (IEA), an industry forecaster, this week reported that in 2015 for the first time renewable energy passed coal as the world’s biggest source of power-generating capacity.

The IEA, whose projections for wind and solar energy have in the past been criticised as too low, accepted that renewables are transforming electricity markets. Last year 500,000 solar panels were installed every day around the world. In China alone, home to a whopping 40% of the 153 gigawatts (GW) of global growth in renewable-energy installations, two wind turbines were erected every hour. Based on existing policies, it forecasts that from 2015-21, 825GW of new renewable capacity will be added globally, 13% more than it projected just last year.

All those new wind and solar plants will not generate electricity all the time. Unlike coal, which burns around the clock, renewables are intermittent. But the IEA expects the share of renewables in total power generation to rise to almost 28% from 21%. Government policies to curb global warming and reduce air…Continue reading

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The greatest moderation

ON OCTOBER 19th China reported that its economy grew by 6.7% in the third quarter. It would have been an unsurprising, reassuring headline, except that China had reported exactly the same figure for the previous quarter—and for the quarter before that. This freakish consistency invited the scorn of China’s many “data doubters”, who have long argued that it fudges its figures. China has expanded at the same pace from one quarter to the next on numerous occasions. But it has never before claimed to grow at exactly the same rate for three quarters in a row.

Has anywhere? This growth “three-peat” is not entirely without precedent. Seven other countries have reported the same growth rate for three quarters in a row, according to a database spanning 83 countries since 1993, compiled by the Economist Intelligence Unit, our sister company. The list includes emerging economies like Brazil, Croatia, Indonesia, Malaysia and Vietnam, but also two mature economies: Austria and Spain. Indeed, Spain has performed this miracle of consistency twice. It grew by 3.1% (year-on-year) in the first three quarters of 2003 and by 4.2% in the first…Continue reading

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ApprovedBusinessBusiness and finance

Big tobacco’s new ambitions

Innovator at work

BIG Tobacco is about to get even bigger. On October 21st British American Tobacco (BAT) announced that it had bid $47bn for the 58% of Reynolds American that it does not already own. Though Brexit has weighed on some British companies, BAT is unencumbered, with most of its revenue earned overseas. Many investors expect the deal to go ahead, although BAT might need to puff up its offer. BAT would then become the world’s largest tobacco company by sales and profits.

As in other volume businesses, like beer, some of the merger logic is simply to cut costs. With consolidation, BAT reckons its deal would generate $400m of annual savings. However, it also underscores two big, long-term changes for cigarette-makers.

The first is that America has become an attractive market for tobacco firms and buying Reynolds, whose brands include Camel and Newport, is the easiest way for BAT to grow there. This is a reversal from the recent past. Not long ago America seemed stale and overrun by lawsuits, particularly compared with fast-growing economies. Cigarette firms quarantined their American businesses. In 2004…Continue reading

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Steel trap

BESIDES being dirty and dangerous, making steel in China has been a good way to burn through money over the past few years. But in recent months, the fires from the country’s blast-furnaces have started to emit the warm glow of profits. Steel prices have risen by nearly 50% this year. Production, which fell in 2015 for the first time in decades, is also up. Smelters are set for a strong recovery after losing $10bn last year. And it is not just the steelmakers who will be pleased. Asia’s central bankers can also take some comfort in the rising prices: they suggest that the threat of deflation might be receding.

Once seen in Asia as a peculiarly Japanese phenomenon, deflation spread throughout the region’s factories in the past half-decade. The prices that consumers see in shops have on the whole continued to increase, albeit more gently than before. But the prices that companies charge for goods as they leave their factories’ gates have dipped lower and lower. Virtually all big Asian economies, including South Korea, India, the Philippines, Taiwan and Thailand, have experienced prolonged bouts of falling producer…Continue reading

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ApprovedBusinessBusiness and finance

Brazilian firms emerge from the gloom

“BRAZIL is back in business,” proclaimed Abílio Diniz, chairman of BRF, a Brazilian pork and poultry giant, at a recent investor shindig. Really? The economy, mired in recession since mid-2014, is not expected to stir before the end of the year—and then only sluggishly. After rebounding in the first half of 2016, industrial production plummeted again in August. Retail sales fell by more than forecast. Firms expect to hire just 100,000 temporary workers in the run-up to Christmas, 3% fewer than last year’s already low tally. BRF’s own domestic operations are hardly a picture of health. Sales dropped by 5% in the second quarter, year on year (though this was offset by rising global revenues).

For all that, Mr Diniz is not alone in his optimism. Surveys point to rising confidence among bosses and consumers alike (see chart). Investors’ spirits are up—and with them the São Paulo stockmarket, which has returned to levels last seen in 2012. The real has strengthened by a third against the dollar since January.

The collective mood swing has less to do with the real economy, and more with realpolitik. In August the…Continue reading

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Rebooting

JUST outside Stanford University’s campus sits the headquarters of Symphony, one of the myriad tech companies that sprout like weeds in Silicon Valley. After a lunch break exercising in a nearby park, a dozen fit-looking employees, still in workout clothes, help themselves from buckets of fruit, energy bars and the food of the day (Indian), before plopping themselves in front of monitors in an airy room bathed in natural light. For the sought-after engineers making up most of the company’s 200-strong workforce, this sort of environment is the norm. Work is supposed to be healthy and relaxed—a far cry from the terrors of a New York bank with its incessant pressure to sell and complex internal politics, not to mention often unappetising, pricey food.

Across the continent, in a newly opened tower within the World Trade Centre, Kensho, a three-year-old company, has a similar feel. Like Symphony but a bit smaller, it is stuffed with talented engineers. In a New York approximation of the West Coast, it boasts “vertical gardens”—rectangular patches of vegetation like framed paintings—and a pool table.

Symphony is a messaging platform,…Continue reading

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