This week's interesting finds

Olivia, partner since 2008 (Port Credit, Ontario)   

This week in charts

Business debt

Manufacturing 

Young adults in the U.S. are reaching key life milestones later than in the past   

China set to account for less than half of US’s low-cost imports from Asia 

“By the end of 2023, China’s portion of US imports” from low-cost Asian countries, which excludes Japan and South Korea, “will definitely have dropped below 50 per cent”, said Patrick Van den Bossche, one of the report’s authors. 

The US and China are each other’s largest respective trading partners. Last year, Chinese goods made up 50.7 per cent of US manufactured imports from Asian countries, according to the Kearney Reshoring Index, which is based on US trade data. That was down from nearly 70 per cent in 2013. 

While exports from China, once hailed as the world’s factory floor, have declined, imports from Vietnam have doubled in the past five years and tripled over the past 10, according to the Kearney index. India, Taiwan and Malaysia have also contributed a greater share of products from Asia consumed by Americans. 

“US imports from other countries such as Vietnam [are] rising as producers shift manufacturing away from China,” said Tu Xinquan, dean of the China Institute for WTO Studies at the University of International Business and Economics in Beijing. 

Hedge Funds at War for Top Traders Dangle $120 Million Payouts 

The hunt is no different from the bidding war for Premier League or NBA players, one executive said. Last year, a senior portfolio manager was lured by a major New York fund with more than $120 million in guaranteed payouts, according to a headhunter who said he’d done several deals paying north of $50 million. Contracts worth $10 million to $15 million are increasingly becoming common for traders, said another. 

Hedge funds have long been the land of eye-popping rewards, but a few recent trends are converging to take it to new levels. The stellar track record of several giant firms that spread money across teams of traders following multiple strategies has caused their assets to surge. That’s prompted a hiring spree to add more traders and strategies so the existing ones aren’t over-stretched. 

The performance — and resulting wait lists of investors wanting in — has also given the firms leverage over clients to charge many times than the traditional 2% management fee and use that for recruitment and retention. And as the firms increase rewards and defer more of them over several years, it’s taking even bigger offers to tempt traders into leaving. 

“In a world where there’s a lot of liquidity, the bigger challenge in developing a platform business is investing in talent rather than attracting capital,” said Chris Milner, the chief operating officer of London-based Eisler Capital, which is transforming itself into a multi-strategy hedge fund from its roots in macro trading. 

Millions of dollars in signing bonuses and a higher cut of trading profits during initial periods — aimed at replacing any pay lost from leaving a past employer and having to sit out non-compete periods — are now becoming the norm at multi-manager investment firms ranging from Millennium, Citadel, Point72 Asset Management to BlueCrest Capital Management and Balyasny Asset Management. While the rest of the hedge fund industry grapples with outflows, the biggest are beefing up. 

Clients mostly do not get to see details of the payouts and guaranteed bonuses though they foot the bill through an opaque blank check for a “pass through” fee. That payment allows hedge funds to charge clients for anything from compensation and research to entertainment. 

Clients also can be on the hook for expenses such as fitness plans for traders at Point72, relocation expenses at Balyasny, investment and litigation-related costs at Verition Fund Management and key-man life insurance premium for Englander at Millennium, according to their client offering documents reviewed by Bloomberg News. 

Bank governor: Carbon tax boosts inflation rate by nearly half-a-point 

The federal carbon tax has boosted inflation by nearly half-a-percentage point, Bank of Canada Governor Tiff Macklem told members of the House of Commons Standing Committee on Finance in a letter obtained by Global News. 

In his letter to finance committee members, Macklem repeated an observation he made at the committee’s March 3 meeting that the annual increase in what he called the “carbon pollution charge” was adding 0.1 points to the consumer price index each year. In other words, he said, had the federal carbon tax not increased, inflation in January would have been 5.0 per cent instead of 5.1 per cent.

This week’s fun finds

The latest EdgePointer of the Month features relationship manager Sarah Ford. 

Sarah Ford “like the car”, as she explains her name’s spelling, applies a “quality is job one” mantra to everything she does. Whether it’s cooking (and eating), “cheer mom” duties or working as a relationship manager with EdgePoint advisor partners, she’s driven to pursue excellence. With one of the most eclectic territories in Canadian wholesaling, at any point in time you may find Sarah bounding up Bay St. in Toronto, hustling down Water Street in St. John’s or skipping across Queen Street in Charlottetown. Before EdgePoint, Sarah worked at NEI Investments as an inside sales representative and a manager, information systems and marketing. She holds an Honours B.Comm. from McMaster University as well as the CIM designation. 

As her gift to readers, Sarah decided to share some of her favourite dessert recipes. We can’t thank her enough for her diligence in tasting each one! 

Lime mousse cake 

Chocolate pavlova   

White chocolate-raspberry cake 

Milk chocolate soufflé with nougat whip 

Banana bread 

Note – we aren’t responsible for any “long-term growth” caused by eating these treats. 

Robot Pizza Startup Shuts Down After Cheese Kept Sliding Off 

A robot pizza delivery startup that raised almost half a billion dollars has shut down after a series of technological setbacks, according to The Information. 

The company, founded back in 2015, was working on a mobile pizza-making machine for years, but struggled to turn it into a reality. As a result, the company pivoted to working on sustainable packaging back in 2020. 

It's a shocking turn given the sheer amount of money investors — including $375 million from multinational giant SoftBank, which is renowned for its poor investments like the infamous WeWork — have poured into the startup. And in an even broader sense, it once again shows that even as AI makes incredible strides in the market, practical robotics ventures remain enduring difficult. 

According to Bloomberg, the company struggled to physically keep melting cheese from sliding off pies that were being baked in its moving trucks. 

In early 2020, the company laid off over half of its workers before being bought by the appropriately named compostable packaging company Pivot Packaging. At the time, Zume CEO Alex Garden blamed the cuts on the pandemic and a number of deals that fell through, according to Insider. 

Surprisingly, the robot pizza industry is much bigger than one might think. Zume is only one of several robotic pizza-making companies in Silicon Valley trying to automate pizza-making. For instance, Stellar Pizza, which was founded by former SpaceX engineers, is working on a robot that can make dough, roll it out, and cover it in various toppings before baking it. 

Seaweed farming may help tackle global food insecurity 

Producing and selling seaweed could boost incomes for farmers in low- and middle-income countries (LMICs), particularly in coastal regions of Africa and Southeast Asia, said Patrick Webb, the Alexander McFarlane Professor of Nutrition at the Friedman School and senior author of the study. The other authors were Natalie Somers, and Shakuntala Thilsted, who works for the Consultative Group on International Agriculture Research and won a 2021 World Food Prize for research and innovation in aquaculture and food systems. The team reviewed research papers, existing databases, United Nations and World Bank Group reports, and more. 

A more sustainable alternative to raising livestock, seaweed cultivation requires no land, freshwater, or chemical fertilizers, and could become particularly profitable as demand for nutrient-rich seaweed products grows around the world, the study found. Those profits would mean more buying power for those households and communities who produce, process, package, and export the microalgae, which in turn would translate into healthier diets. 

On top of being relatively easy to grow, seaweed has a miniscule carbon footprint, and may even help lower the ocean's carbon levels. Though little is yet known about how much CO2 seaweed releases during harvest, research has found that perennial brown algae farms absorb up to ten tons of CO2 per hectare of sea surface per year. In addition to its "carbon sinking" powers, when added to livestock feed, seaweed could help dramatically reduce methane gas emissions.

This week's interesting finds

Killian, partner since 2023 (Toronto, ON)

  

This week in charts 

Household debt   

U.S. equity indexes 

Corporate loans   

Democracies  

A Visual Breakdown of America’s Stagnating Number of Births

Experts have pointed to a confluence of factors behind the nation’s recent relative dearth of births, including economic and social obstacles ranging from child care to housing affordability.

Absent increases in immigration, fewer births combined with ongoing baby boomer retirements will likely weigh on the labor force supply within the next 10 years, said Kathy Bostjancic, chief economist at Nationwide, an insurance and financial-services company.

“You’re going to have a real shortage of workers unless we have technology somehow to fill the gap,” Bostjancic said.

China Has a Youth Unemployment Problem Because College Grads Are Waiting for Jobs That Don’t Exist

A central problem, economists say, is that China isn’t creating enough of the high-wage, high-skill jobs that are sought after by its expanding base of educated young people, many of whom have loftier expectations than previous generations. 

Rather than trade down for lower-wage jobs, many young people are opting to wait for more opportunities, even though such opportunities might not be available. 

“China’s high youth unemployment rate is not transitory but structural,” said David Wang, chief China economist at Credit Suisse. “There is a mismatch in the skills the youth are trained to provide and the skills that existing jobs require.” 

Chinese officials are trying several tactics to address the problem, including mandating that state-owned companies hire more graduates, while also prodding more young people to take up blue-collar work or move to the countryside. 

Some economists still believe the problem is a passing phenomenon, and that many more youths will find work as China’s broader economic recovery continues. 

Young people are particularly vulnerable to unemployment during downturns—like the one China experienced last year—because of their relative lack of work experience, economists say. Many jobs that got hammered during the pandemic were in fields that are popular among young people, including tourism and catering; those industries are now recovering.   

This week’s fun finds 

Hot sauce reviews – June 2023 edition 

The hot weather alone wasn’t making us sweat enough, so we brought out some hot sauces to try: 

Neil’s Real Deal Hot Sauce – Carolina Reaper (Waterloo, ON) 

• “Flavourful and sweet!” 

• “A good daily sauce.” 

• “Why are you sweating already? This isn’t bad.” 

Da Bomb – Beyond Insanity 

• “My ears hurt.” 

• “There’s no flavour. Wait. It tastes like cigarettes.” 

• “Take that home and don’t bring it back again.” 

Bonus – Frank’s mystery Costa Rican hot sauce he brought for us to try 

• “Really spicy, but seasoned really well.” 

•  “My main complaint is that I don’t know how to get more.” 

The big idea: why colour is in the eye of the beholder 

For a long time, people believed that colours were objective, physical properties of objects or of the light that bounced off them. Even today, science teachers regale their students with stories about Isaac Newton and his prism experiment, telling them how different wavelengths of light produce the rainbow of hues around us. 

But this theory isn’t really true. Different wavelengths of light do exist independently of us but they only become colours inside our bodies. Colour is ultimately a neurological process whereby photons are detected by light-sensitive cells in our eyes, transformed into electrical signals and sent to our brain, where, in a series of complex calculations, our visual cortex converts them into “colour”. 

This is why no two people will ever see exactly the same colours. Every person’s visual system is unique and so, therefore, are their perceptions. About 8% of men are colour-blind and see fewer colours than everyone else; a small number of lucky women might, thanks to a genetic duplication on the X chromosome, be able to distinguish many more than the rest of us. 

One cause of the problem – or perhaps its symptom – is language. In English we divide colour space into 11 basic terms – black, white, red, yellow, green, blue, purple, brown, grey, orange and pink – but other languages do things differently. Many don’t have words for pink, brown and yellow, and some use one word for both green and blue. The Tiv people in west Africa use only three basic colour terms (black, white, red), and at least one Indigenous community has no specific words for any colours, only “light” and “dark”. 

The meanings of colour are no less socially constructed, which is why a single colour can mean completely different things in different places and at different times. In the west white is the colour of light, life and purity, but in parts of Asia it is the colour of death. In America red is conservative and blue progressive, while in Europe it’s the other way around. Many people today think of blue as masculine and pink as feminine, but only a hundred years ago baby boys were dressed in pink and girls in blue. 

When all of this is taken together – the subjective nature of visual perception, the complicating influence of language, the role that social life and cultural traditions play in filtering our understandings of colour – it becomes really rather difficult to reach a conclusion different from that of the 18th-century philosopher David Hume: that, in the end, colour is “merely a phantasm of the senses”. 

When digital nomads come to town 

Most of the workers here are employed in the U.S., but relaxed post-pandemic office norms permit them to work from anywhere. This is the mobile, location-independent lifestyle of the digital nomad. The Semilla is their oasis. 

As their name suggests, digital nomads move around a lot. Medellín is one of the latest hot spots to join a global nomad circuit that spans tropical latitudes. Southeast Asia remains the preferred destination for nomads — on popular website Nomad List, four of the top 10 cities are from the region. The list also features less-expensive European cities in Portugal and Romania, as well as Latin American destinations like Mexico City, which share time zones with the U.S. The typical nomad might visit 12 or 13 countries in a year, all the while holding down a corporate job, usually in the tech sector. Of the workers I spoke to at Semilla, most intended to leave Colombia within a month or two. 

Within these cities, nomads cluster in safe and prosperous neighborhoods. Laureles, in Medellín, is a tranquil barrio with a university, clean streets, and middle-class inhabitants. But the income differential between the nomads and the Colombian professional class is immense. The result is runaway price inflation — rents in Laureles have skyrocketed, and restaurants cannot raise their prices fast enough. A one-bedroom in Medellín now rents for the “gringo price” of about $1,300 a month, in a country where the median monthly income is $300. 

An influx of digital nomads into a neighborhood can distort the local economy. Seeking foreign cash, many cities invite this kind of visitor, but their arrival can skew the cost of living for residents. 

The increase in nomads has become a flashpoint in debates over the city’s housing problems. “[The presence of foreigners] primarily affects the economic livelihood of the regular person here,” said Arturo Mares, a clerk at a furniture store in the upscale Roma Norte neighborhood. “Costs are rising because these people are spending a lot of money here, since they think everything is cheap.” In November, people took to the streets of Mexico City to protest gentrification and rising rents. 

The digital nomads’ visits are transitory, but they leave neighborhoods permanently transformed. Today, there are streets in Medellín, as in Mexico City or Canggu, that look more like Bushwick — where English is more common than the local language, and where the streets are dotted with brightly painted coworking hubs and prissy restaurants serving international cuisine. The more nomads arrive, the more these locations begin to resemble one another. Building exteriors retain their historic character, but interiors converge to a sterile homogeneity of hotdesking, free charging outlets, affordable coffee, and Wi-Fi with purchase. 

Locals can’t keep pace with such decadence; even the head of the city’s tourism board was being priced out. “I used to go out to eat every Friday,” [head of the Medellín Convention and Visitors Bureau Claudia] Heredia said. “Only at current prices, I can’t afford to.” 

And yet Heredia supported hosting nomads in the city. In fact, she said she was hoping more would arrive. I observed that her quality of life had been directly affected by their presence. “Yes,” she said, “but it’s better for the economy.”

This week's interesting finds

Aisha, partner since 2023 (Toronto, ON)

This week in charts

China

(Opinion) With China unlikely to see a baby boom, boosting population quality should be the focus

China will join high-income countries such as Japan and South Korea in facing depopulation and it will be replaced by India as the world’s most populous country this year.

In a resource-constrained global environment, a declining population is not necessarily a bad thing. With fewer consumers, there will be a reduction in carbon dioxide emissions, which will benefit the environment.

Attempts to stimulate an increase in the birth rate on the mainland in recent years have had a limited impact as having a small family or being childless has become a way of life among married couples in modern China, whether by choice or as a compromise due to the high costs of raising a child.

Instead, the government should prepare for the challenges of population decline before the population ages further. The most effective way to do this would be to focus on improving the quality of the population and setting up infrastructure to support it.

The government must invest in education and skills training to ensure that the workforce is ready to embrace the transformation from a labour-intensive manufacturing economy to a knowledge-based consumer economy. To maintain a 3 per cent gross domestic product growth rate in the face of an ageing population, there needs to be at least a five-fold increase in labour productivity.

The government needs to improve physical and mental health by reforming the healthcare system. In addition to promoting active ageing, Beijing must encourage the development of healthy living habits, including a balanced diet, and reducing smoking and alcohol consumption to alleviate the pressure on the healthcare system.

The chances of the negative population growth being reversed are slim unless there is a drastic change in the immigration policy to attract foreign talent.

Nearly half of foreign businesses in Hong Kong are planning to relocate

Nearly half of all European businesses in Hong Kong are considering relocating in the next year, according to a new report. Companies cite the local government's extremely strict Covid-19 protocols that mirror those on the mainland.

Among the firms planning to leave, 25% said they would fully relocate out of Hong Kong in the next 12 months, while 24% plan to relocate at least partially. Only 17% of the companies said they don't have any relocation plans for the next 12 months.

The city's "zero Covid" strategy led to severe consequences for businesses and residents, the report from the European Chamber of Commerce said. Hong Kong's "biggest advantage" — its global connectivity and proximity to mainland China —"has been almost completely disabled," the Chamber said.

The European survey released Thursday tracks with a similar report from the American Chamber of Commerce in January, which found that 44% of expats and businesses are likely to leave the city, citing Covid-related restrictions.

"Hong Kong still holds business opportunities but an array of issues, especially draconian travel restrictions and worsening US-China relations, weigh on sentiment," the US report said.

Even without the Covid crisis, headhunters were having trouble bringing talent to Hong Kong because of Beijing's growing oversight of the semiautonomous territory. Massive and at-times violent protests prompted by a Beijing-imposed extradition bill plunged the city into a political crisis in the summer of 2019. A year later, as Covid-19 restrictions kept protesters at bay, China passed a wide-ranging national security law that broadly curtails free speech rights in Hong Kong.

This week's fun finds

Is It Real or Imagined? How Your Brain Tells the Difference.

So “why are we not constantly hallucinating?” asked Nadine Dijkstra, a postdoctoral fellow at University College London. A study she led, recently published in Nature Communications, provides an intriguing answer: The brain evaluates the images it is processing against a “reality threshold.” If the signal passes the threshold, the brain thinks it’s real; if it doesn’t, the brain thinks it’s imagined.

Such a system works well most of the time because imagined signals are typically weak. But if an imagined signal is strong enough to cross the threshold, the brain takes it for reality.

Dijkstra’s study of imagined images was born in the early days of the Covid-19 pandemic, when quarantines and lockdowns interrupted her scheduled work. Bored, she started going through the scientific literature on imagination — and then spent hours combing papers for historical accounts of how scientists tested such an abstract concept. That’s how she came upon a 1910 study conducted by the psychologist Mary Cheves West Perky.

Dijkstra expected that she would find the Perky effect — that when the imagined image matched the projected one, the participants would see the projection as the product of their imagination. Instead, the participants were much more likely to think the image was really there.

Yet there was at least an echo of the Perky effect in those results: Participants who thought the image was there saw it more vividly than the participants who thought it was all their imagination.

The observations suggest that imagery in our mind’s eye and real perceived images in the world do get mixed together, Dijkstra said. “When this mixed signal is strong or vivid enough, we think it reflects reality.” It’s likely that there’s some threshold above which visual signals feel real to the brain and below which they feel imagined, she thinks. But there could also be a more gradual continuum.

The differences between Perky’s findings and Dijkstra’s could be entirely due to differences in their procedures. But they also hint at another possibility: that we could be perceiving the world differently than our ancestors did.

Her study didn’t focus on belief in an image’s reality but was more about the “feeling” of reality, Dijkstra said. The authors speculate that because projected images, video and other representations of reality are commonplace in the 21st century, our brains may have learned to evaluate reality slightly differently than people did just a century ago.

Dijkstra and her team are now working to adapt their experiment to work in a brain scanner. “Now that lockdown is over, I want to look at brains again,” she said.

She eventually hopes to figure out if they can manipulate this system to make imagination feel more real. For example, virtual reality and neural implants are now being investigated for medical treatments, such as to help blind people see again. The ability to make experiences feel more or less real, she said, could be really important for such applications.

Why You Should Actually Let Yourself Eat the Foods You ‘Can’t Be Trusted’ Around

Although there’s limited research on so-called food addiction in humans, rodent studies on the subject suggest that the over-consumption of sugar, for example, tends to happen when restriction is involved: A 2016 review published in the European Journal of Nutrition found that only rats who are food-deprived and/or have intermittent (i.e. not constant) access to sugar seem to binge on it.

It’s impossible to say whether the same thing is true for humans, but one (very small) 2011 study published in the American Journal of Clinical Nutrition had some notable findings: 32 women were assigned to one of two groups, both of which ate mac and cheese five times total. One group ate it once per week for five weeks; the other ate it daily for five days in a row. Researchers measured the participants’ calorie intake and found that while the once-a-week group ate more of the mac and cheese as the trial progressed, the daily eaters actually ate less. Their explanation for this? “Habituation,” a phenomenon in which repeated exposure to something decreases the strength of your response to it.

“When you’re deprived of a certain food, or food in general, your sensory system tends to get more aroused to make food look, smell, and taste better,” Kate Sutton, LCMHC, a therapist and certified intuitive eating counselor based in Raleigh, North Carolina, tells SELF. It’s normal to experience intense cravings for food when you’re not getting adequate calories and to specifically crave foods that you’re avoiding or heavily limiting.

But as the research above suggests, despite the instinct to keep a certain food at arm’s length (or even further), the best way to get over such out-of-control feelings might actually be to expose yourself to that food over and over again, even if it feels uncomfortable (or downright terrifying) at first.

The case of the Lego Bandit

In brickspeak, Louis is an Adult Fan of Lego — known as AFOLs, for short — and among the most ardent. His grandmother gave him his first set, the Lego Clone Scout Walker, for his sixth birthday, igniting a singular passion that hasn't let up since. Under his handle Republicattak (the missing "c" a childhood misspelling that gnaws at him), he shares his custom Star Wars-themed builds on his YouTube channel. Unlike many aspiring influencers, he keeps his identity private, other than his first name, to avoid embarrassment at work. "Otherwise, it'll be very awkward," he tells me over Zoom in his thick French accent. "Because in my videos, I'm very much like, basically, a grown man playing with toys."

On that October day, his toys were everywhere. Colorful parts littered the walkway outside his house — a green baseplate here, a yellow sloped brick there. As Louis slowly followed the trail, he recognized chunks of his most beloved builds: a broken cockpit from his UCS X-Wing, the black treads ripped from his Clone Turbo Tank, a limbless Stormtrooper Minifigure staring helplessly from inside its helmet. "It was like a horror movie," he recalls, "but for Lego."

His cash and laptops were untouched, but the Millennium Falcon his parents had given him was gone; so was the original Clone Scout Walker from his grandma. Most painful of all, the intruders had destroyed the massive, original Lego opus he'd been building over nights and long weekends for 10 months, a 35,000-piece installation he called "Imperial Gate."

"I really feel like the whole part of my stomach is missing," Louis recalls. "It is just so much that I'm just collapsing on the ground. I will just crush my head against the floor. Then I will just stand up and crush my head against the walls and just screaming. I will just run outside screaming. I will maybe scream for at least 10, 20 minutes."

That afternoon, he taped what he said was his final YouTube message. "I don't know what I'm going to do," he said into his cellphone camera, blinking back tears. "It really was my passion. That's the end of this channel."

This week's interesting finds

Matilde, partner since 2010 (Toronto, ON)  

Downtowns 

IPOs

Household spending

As household budgets tighten, big brands double down in dollar stores 

Makers of food and household staples are pushing deeper into dollar stores because the low-cost retailers are opening thousands of locations each year. They are adding fresh produce and attracting shoppers squeezed by inflation, giving manufacturers with slumping sales a chance to grow. "It used to be, you would get odds and ends" liquidated from other retailers' unsold inventories, said Ed Johnson, a principal with Deloitte Consulting LLP focused on retail and consumer products. 

Now, makers of pantry staples are treating dollar chains with the same rigor as Walmart due to their size and scale, Johnson said. A study by Tufts University found the low-cost stores, which number well over 35,000 in the U.S., are the fastest-growing U.S. food retailers by share of household spending - though Dollar Tree stopped selling eggs. 

Executives at packaged food companies like Conagra Brands Inc. say the stores are increasingly attractive because they are installing more freezers and refrigerators for items like budget TV dinners, breakfast sandwiches and yogurt. 

"The main play is frozen vegetables," and frozen fruit, in dollar stores' expansion into private label food, said Jim Griffin, executive vice president at Daymon, a consulting firm that works with retailers on their store brands. "There's strong consumer acceptance." 

Griffin added that dollar stores are also introducing more "premium" private label brands, like Dollar General's Nature's Menu for pets. 

Most dollar stores - which are less than half the size of a Walmart location or most traditional grocery stores - only sell the fastest-selling, basic items because of limited shelf space. Crane said the metric dollar store executives watch the closest is "dollars per point of distribution" for individual products, which measures how much in sales each item generates over time.   

New EV entries nibbling away at Tesla EV share 

Throughout 2022, EVs have gained market share and consumer attention. In an environment where vehicle sales are limited by inventory and availability, EVs have gained 2.4 points of market share year over year in registration data compiled through September - reaching 5.2% of all light vehicle registrations - according to S&P Global Mobility data. 

The nascent stage of market growth leaves others competing for volume at the lower end of the price spectrum. New EVs from Hyundai, Kia and Volkswagen have joined Ford's Mustang Mach-E, Chevrolet Bolt (EV and EUV) and Nissan Leaf in the mainstream brand space. Meanwhile, luxury EVs from Mercedes-Benz, BMW, Audi, Polestar, Lucid, and Rivian - as well as big-ticket items like the Ford F-150 Lightning, GMC Hummer, and Chevrolet Silverado EV - will plague Tesla at the high end of the market. 

With the Model Y and Model 3 combined taking 56% of EV registrations, the other 46 vehicles are competing for scraps until EVs cross the chasm into mainstream appeal. (A recent S&P Global Mobility analysis showed the Heartland states have yet to embrace electric vehicles.) 

"Evaluating EV market performance requires looking through a lower-volume lens than with traditional ICE products," Brinley said. "But growth prospects for EV products are strong, investment is massive and the regulatory environment in the US and globally suggests that these are the solution for the future." Production volumes today are restricted by factory capacity, the semiconductor shortage and other supply chain challenges, as well as consumer demand. But the issue of production capacity is being addressed, as automakers, battery manufacturers and suppliers pour billions into that side of the equation. Though there are many signals suggesting consumer demand is high and that more buyers may be willing to make the transition - and to do so faster than anticipated even a year ago. 

But consumer willingness to evolve to electrification remains the largest wildcard. Looking past Model Y and Model 3, no single model has achieved registrations above 30,000 units through the first three quarters of 2022. The second-best-selling EV brand in the US is Ford. However, Mach-E registrations of about 27,800 units are about 8% of the volume Tesla has captured, according to S&P Global Mobility data. 

While logic dictates that further growth will require more EVs being offered in the $25,000-$40,000 price range, the willingness of buyers to spend more today reflects an aspirational nature to the choice. 

Tesla's EV-only strategy gives it a retention advantage - as few EV owners have returned to ICE powertrains. But as new EVs arrive, loyalty will be tested. Currently, the Model Y has a 60.5% -brand loyalty and had nearly 74% of buyers come from outside the brand (the conquest rate) - tops in the industry. Who is Tesla conquesting from? Toyota, Honda, BMW and Mercedes-Benz. Toyota and Honda are only beginning to get into the EV market, though have yet to enter the fray in earnest.  

This week’s fun finds 

What It Takes to See 10,000 Bird Species 

I was sitting in the middle seat of a battered van snaking up switchbacks to the summit of Tinajas Valley, tires inches from the edge of steep drop-offs. Next to me was Peter Kaestner, one of the world’s most prolific birders. “I can see why I haven’t seen this bird before,” he said, speaking loudly as the van rumbled over dirt and rocks. “It’s not the kind of thing you’re gonna bump into.” Kaestner is tall, with friendly blue eyes, and gives off a smart approachability. (He jokes that when he was younger he resembled Robert Redford, but he knew that he’d hit a turning point in his life when people started comparing him to former Syrian president Hafez al-Assad.) 

We were headed to a ridgetop to look for the elusive white-throated earthcreeper, a drab brown bird with a curved beak like a T. rex claw. The bird prefers steep-walled desert washes at specific elevations in the central Andes, and would be a “lifer” for Kaestner. Birders call the complete tally of all birds they’ve ever observed their “life list,” and each new species a lifer. A person who keeps track of their life list is a “lister,” and someone obsessed with listing on a global scale is a “big lister.” I’m a lister myself, though I spend more time researching birds than chasing them. For my PhD at the University of New Mexico, I studied hummingbird migration and speciation in the Andes. These days I work as a postdoc at the Cornell Lab of Ornithology, which runs eBird, the go-to platform for scientists and hobbyists to record bird observations. 

On eBird, Kaestner is ranked number one, and he wants to be the first person in the world to see 10,000 bird species. The 69-year-old’s life list is currently at 9,796. The couple hundred birds he still needs are some of the rarest and most difficult in the world to spot. They’re often found in places that are basically inaccessible, off-limits due to political unrest, or threatened by deforestation and climate change. But Kaestner’s quest to hit 10,000 is his personal Dawn Wall, an obsession he’s sustained over decades, and he will not stop until he reaches his goal—if even then. 

Kaestner has taken a nontraditional path to reaching 10,000. The pursuit is often considered a rich person’s pastime, like climbing the Seven Summits: many obsessive listers and bird chasers take months or years off work, spend personal fortunes, retire to chase birds full-time, or turn to vanlife. Kaestner is an exception. He birded his way to about 9,500 while working for the Foreign Service for 36 years on a modest government salary. He and his wife, Kimberly, a diplomatic specialist, fought for tandem placements so they could work together overseas, and he often achieved his birding goals through creative scheduling. 

While living in Kuala Lumpur, Kaestner left the house at 3 A.M. on Saturdays to drive more than two hours each way in search of the rusty-naped pitta, returning to the Malaysian city by noon to play with his young daughters. “It took me over two dozen trips to get that bird,” he says. “But I wanted to be home to spend the afternoon with my family.” 

“He does go off on his birding trips where it’s just birding, but he always makes time for family,” says Kimberly. “He’s always been good that way.” 

In 1986, Kaestner became the first person in the world to see a representative of every bird family in existence, 159 back then. But the birding event that most changed his life was his 1989 discovery of the Cundinamarca antpitta, a species new to science. Kaestner had traveled outside Bogotá, Colombia, for work and was exploring a forested area up a newly constructed road. Suddenly, he heard a call he didn’t recognize. 

He recorded it, then played the call repeatedly to lure the bird in, waiting for over 45 minutes. At one point, the bird popped up and called behind him. He crawled through the undergrowth and reached a clearing. Then Kaestner saw it. It wasn’t a known Colombian bird, he was sure of it. But back then, the references he needed to verify whether it was a new bird for Colombia, or a new species entirely, didn’t exist. Upon returning to Bogotá, he confirmed that it was a species previously unknown to science; it was formally described by biologists in 1992. His recordings and dictated field observations are now archived in the Cornell Lab of Ornithology’s Macaulay Library. For Kaestner, who has always been driven to contribute to the scientific record, the discovery was monumental. Antpittas remain his favorite birds. 

High costs putting farming out of reach for young people, affecting all Canadians 

The rising cost of land is making it harder than ever for young farmers to enter the business. And those barriers come at a time when a growing number of older farmers are planning to leave the industry. Organizations promoting farm succession worry that if young people are unable to enter the industry, only the largest companies will endure, reducing the diversity of crops and livestock and widening the gap between Canadians and their sources of food. 

"The main challenge right now is really the cost of agricultural land," said Benoît Curé, co-ordinator of ARTERRE, a program that pairs aspiring farmers with landowners and farmers planning to retire. 

Curé said multiple factors are contributing to rising prices, including real estate speculation — especially near Montreal suburbs — and strong competition for the best soil in a province where only around two per cent of the land is suitable for farming. 

Last year, the price of agricultural land rose by 10 per cent, which isn't unusual, he said in a recent interview. "Over the last 10 years, we've had annual increases of about six to 10 per cent." The average dairy farm in Quebec is now valued at almost $5 million, he said, almost double what it was in 2011. 

With 20 per cent down payments usually expected for farm purchases, "you have to almost be a millionaire before starting your agricultural business," Curé said. If young people can't afford to get into farming, then most rural communities risk being left with two or three large farms, he lamented. 

Farming has always been a capital-intensive industry — with high costs for land, equipment and inputs — but prices across Canada have risen above the revenue that can be generated from that land, said Jean-Philippe Gervais, the chief economist of Farm Credit Canada, a Crown corporation that lends to farmers. 

"The relationship between the price of the land and the revenue that can be expected from the land — that ratio is the highest we've ever seen," Gervais said in a recent interview. "So we're really at prices that are the highest we've ever seen, not just in absolute value in dollars per hectare, but also relative to what can be generated in income." 

It's now rare for farmers to turn a profit from land they buy just by farming it, he said, adding that most farmers only make their money back when they sell. Large, established farms can fund the purchase of more land from the revenue generated on land that's already been paid for, he added.

This week's interesting finds

Tracey, partner since 2017 (Toronto, Ontario)

This week in charts

Freight

Air traffic

U.S. Federal spending on seniors

Emissions by country

Crypto-mining energy consumption

Opinion: Alarming drop in mining derails drive for Net Zero

The 38th edition of the World Mining Data report, published annually by the Austrian government, finds that mining production is not meeting the hopes of governments working to increase their own domestic and friendly sources of minerals. Rather, production has roughly plateaued, with the sector yet to match the peak production of 18 billion metric tons achieved in 2019. Far from growing our outputs, we’re struggling to maintain them.

Even more troubling: more than a third of global mining production remains controlled by our two biggest geopolitical adversaries. China is still responsible for over a quarter of the total and Russia another 9.2 per cent on top of that. China is the world’s largest producer of 29 different commodities and dominates the processing and refining of many others.

In Canada, meantime, we are punching below our weight, ranking only eighth in world production, well behind our peers, the U.S. (second) and Australia (fourth). We do lead the pack in new exploration spending but our actual production of critical minerals is falling, despite renewed attention from the federal government and bilateral agreements with most of our closest allies to increase supply.

Natural Resources Canada released its annual mining production results in mid-April, confirming that in 2022 we produced fewer critical minerals — the copper, cobalt, nickel, zinc, uranium and platinum-group metals that are essential to the energy transition — than in 2019. Output of gold, which is a hedge against inflation and economic uncertainty, did increase, as did output of silver, iron and potash, a key ingredient in fertilizer. But they won’t help us hit our climate goals, and output of metals that would won’t be taking off any time soon, according to the Prospectors and Developers Association of Canada.

Governments are aware of and concerned with the problem. At the latest G7 climate and energy meeting in Japan, where critical minerals were at the forefront of discussions, Canadian Minister of Environment and Climate Change Steven Guilbeault assured reporters, “We can become a reliable provider of these resources or products for our international allies.” The key word, of course, is “become.” Because the latest data show that, despite what may be the best of intentions, Canada is not yet filling any of the supply gaps the world is suffering in reliable and affordable critical minerals. Just last month, our only rare-earths mine suspended production due to high costs and low commodity prices. High capital costs, supply chain woes, labour shortages and regulatory burdens are not uniquely Canadian problems. But they are still problems.

A Record Number of Canadians Are Trying to Restructure Their Debts

Consumer proposals, or alternative arrangements to settle debts with creditors, rose 36% from a year earlier, according to data released Wednesday by the Office of the Superintendent of Bankruptcy Canada. That brings the monthly total to 9,337, the most since at least 2011.

Total insolvencies, which also include bankruptcies, jumped to 11,768, the highest since the end of 2019. While that’s in part a rebound from near historically low levels, the jump may add to evidence that restrictive borrowing costs are starting to weigh on Canadian households as debt payments eat up a greater proportion of incomes.

“There are some very concerning trends in the data,” Charles St-Arnaud, chief economist with Alberta Central Credit Union, said by email. “It is clear that we are seeing a rise in households struggling and needing to renegotiate the terms of their loans.”

This week’s fun finds

To celebrate his retirement, Pho treated the Toronto office to lunch from one of our favourite Portuguese restaurants. It’s never fun saying goodbye to someone who’s been an internal partner for 14 years, but we’re happy for him as he starts his post-EdgePoint life. We hope he comes to visit us (especially if he comes bearing grilled chicken).

Taco Bell’s Innovation Kitchen, the Front Line in the Stunt-Food Wars

Taco Bell’s food-innovation staff, which includes sixty developers, focusses on big questions: How do you make a Cheez-It snack cracker big enough to be a tostada? What are the ideal Cheez-It dimensions to guarantee that the tostada won’t crack inconveniently when bitten into? Or consider the Doritos Locos Taco: What safeguards can be implemented to prevent the orange Doritos dust from staining a consumer’s hands or clothing? Can fourteen Flamin’ Hot Fritos corn chips be added to the middle of a burrito and retain their crunch? Can a taco shell be made out of a waffle, or a folded slab of chicken Milanese? These are all problems of architecture and scalability; fast food is assembly, not cooking.

After passing through several doors that were unlocked via a coded keypad, I sat with Rene Pisciotti, the executive chef, who is known as the Taco Whisperer; Liz Matthews, the global chief food-innovation officer; and Heather Mottershaw, the vice-president of pipeline innovation and product development. (She invented the Waffle Taco.) I was handed a plastic cup of Baja Blast soda—tropical Mountain Dew in a proprietary shade of turquoise—and a plate of hard-shell tacos. Pisciotti, a burly man with gelled hair who used to work for Barilla, the Italian food company, averted his eyes in a practiced way as I took a bite, sending an avalanche of shredded lettuce and cheese onto the floor. He then summoned several assistants, who streamed in to hand each of us a sample of a new product: a burrito with melted cheese on top. He wanted to show me an example of how his team solved a problem.

The innovation team at Taco Bell shares this zeal. Its work is intricate, the lab as much think tank as mad-scientist lair. Frito-Lay, which supplies the chain with taco shells, runs a research complex outside of Dallas that’s staffed by hundreds of chemists, psychologists, and technicians, who perform millions of dollars’ worth of research a year examining the crunch, mouthfeel, and aroma of each of its snack products. A forty-thousand-dollar steel device that mimics a chewing mouth tests such factors as the perfect breaking point of a chip. (People apparently like a chip that snaps with about four pounds of pressure per square inch.)

As menu items are developed, various iterations are tested at the Taco Bell Sensory Panel, at the company’s headquarters. Professional testers, trained by Taco Bell, along with members of the company’s broader workforce, sit in carrels at a long counter while researchers on the other side of a window slide trays of samples to them. Each tester has a silver button to push when ready for another dish. Pisciotti studies their faces in real time on a monitor and scribbles notes. “I have a camera on people—it’s not creepy, I promise,” he said. Sometimes testers pick an item up and immediately drop it. “And I’m, like, O.K., we have a temperature problem here,” he said. “We don’t want to hurt consumers.” Other times, “people just have a ho-hum look on their face.” The best scenario is when a tester eats an entire portion before saying anything.

Failure is a big part of the job. “There’s more items that don’t make it than ones that do,” Mottershaw said. “And there are things that are before their time.” Hypotheses are tested; experiments rarely pan out. The Crispy Melt Taco, introduced in 2021, “started out blue, because we made it with blue corn,” she said. “We called it Midnight Melt and Forbidden Taco, to try to give it a reason for having a blue shell. But people were confused—like, Is it made for nighttime? Is this old? What’s forbidden? What happened to it?” Pisciotti said, “The masses don’t know that blue corn is a thing—they don’t shop at Trader Joe’s.” (Other items that haven’t made the grade: the Croissant Taco, Crispy Cheese Curd Loaded Fries, Seafood Salad.) “We introduce things to the masses,” he added.

The Untold Story of the Boldest Supply-Chain Hack Ever

It was late 2019, and [Steven] Adair, the president of the security firm Volexity, was investigating a digital security breach at an American think tank. The intrusion was nothing special. Adair figured he and his team would rout the attackers quickly and be done with the case—until they noticed something strange. A second group of hackers was active in the think tank’s network. They were going after email, making copies and sending them to an outside server. These intruders were much more skilled, and they were returning to the network several times a week to siphon correspondence from specific executives, policy wonks, and IT staff.

Adair and his colleagues dubbed the second gang of thieves “Dark Halo” and booted them from the network. But soon they were back. As it turned out, the hackers had planted a backdoor on the network three years earlier—malicious code that opened a secret portal, allowing them to enter or communicate with infected machines. Now, for the first time, they were using it. “We shut down one door, and they quickly went to the other,” Adair says.

Around the time Adair’s team was kicking Dark Halo out of the think tank’s network, the US Department of Justice was also wrestling with an intrusion—one involving a server running a trial version of the same SolarWinds software. According to sources with knowledge of the incident, the DOJ discovered suspicious traffic passing from the server to the internet in late May, so they asked one of the foremost security and digital forensics firms in the world—Mandiant—to help them investigate. They also engaged Microsoft, though it’s not clear why. (A Justice Department spokesperson confirmed that this incident and investigation took place but declined to say whether Mandiant and Microsoft were involved. Neither company chose to comment on the investigation.)

In fact, the Justice Department and Volexity had stumbled onto one of the most sophisticated cyberespionage campaigns of the decade. The perpetrators had indeed hacked SolarWinds’ software. Using techniques that investigators had never seen before, the hackers gained access to thousands of the company’s customers. Among the infected were at least eight other federal agencies, including the US Department of Defense, Department of Homeland Security, and the Treasury Department, as well as top tech and security firms, including Intel, Cisco, and Palo Alto Networks—though none of them knew it yet. Even Microsoft and Mandiant were on the victims list.

This week's interesting finds

Pho, partner since 2009, (Shibuya Crossing – Tokyo, Japan)  

This week in charts 

Car manufacturing 

Energy 

The Building Boom Is Prolonging Market Pain

Construction spending and employment have risen to new records this year, boosted by government outlays for infrastructure, a domestic manufacturing renaissance and a wave of apartment building that got off to a slow start during the pandemic when prices for building materials, such as lumber, were sky high. 

Construction companies with jobs ranging from airport overhauls to bathroom renovations say they have enough work booked to maintain payrolls—for years in some cases. Even home builders, who slowed down last year when rates began to rise, are ramping up into spring. 

The persistent strength in a sector that is usually among the first to suffer job loss when borrowing costs rise is undermining investor hopes that the Fed’s aggressive interest-rate increases would quickly slow inflation and rejuvenate the stock market. 

It also threatens to upend bets in the market that recession and lower rates are on the horizon. Investors are trading government bonds as if rate cuts will come within the next year and buying technology stocks, bitcoin and other speculative assets that surged when borrowing costs were near zero. 

The issue for investors is that the longer it takes for construction activity and employment to decline, the longer it will be before the central bank can cut rates. 

There are signs of slowdown, to be sure. Apartment construction is expected to decline once the latest batch of buildings is finished. Problems at regional banks are drying up financing for some projects.

This week’s fun finds 

How Music Affects Your Brain 

As a translational researcher at Johns Hopkins School of Medicine, studying how the arts help us to heal, learn and flourish, I’ve read thousands of studies that offer foundational findings about how music and sound impact many parts of our brains and bodies. This day, I was comforted once again by the power of music to support my mental wellbeing. The simple act of listening to a favorite song can alter your mood, triggering long-ago memories. And when we remember to use this knowledge for prevention, wellness practices and interventions, it can significantly enhance your daily life. 

At its core, we feel music—and now we are closer than ever to understanding why. One reason music has such an immediate impact on us is due to the way it is processed rapidly in the limbic system, the part of the brain which helps us experience emotions. 

Over the last 20 years advances in technology including functional magnetic resonance imaging (fMRI), and positron emission tomography (PET) have enabled us to see what is inside our heads and study the extraordinary ways the arts and aesthetics impact us, offering mind expanding gateways to whole health. Music is the most studied art forms, and researchers are now beginning to understand some of the ways they alters a complex physiological network of interconnected systems in the brain including the prefrontal frontal, visual cortex, the amygdala, hippocampus, auditory and sensory cortex, to name a few. 

Turns out that not only listening to music, but making it, also has significant benefits. For example, mothers sing to their babies to help relieve symptoms of postpartum depression and enhance bonding by reducing cortisol, a major stress hormone. And people with dementia are singing too, accessing autobiographical musical memories encoded in multiple brain regions that have not been damaged by the disease. The result is a radical presence with family and friends, if only for a short time.   

French bulldogs are taking over America 

Frenchies are odd little creatures. Colette, a Parisian author born in the 19th century, compared hers to a frog that had been sat upon. Over time they have been bred to have increasingly stocky frames, bat ears and squishy noses—which, though chic, is also cruel and life-threatening (a recent British study of 18 breeds kept as pets found French bulldogs to have the shortest life expectancy; in New Zealand vets reckon the dogs are “too compromised to continue breeding” them). 

Yet they remain attractive to owners, partly because of their small size. In countries with a high concentration of urban dwellers, tiny dogs that can trot around bijou apartments are appealing. Behaviour also plays a part. Frenchies have a reputation for being friendly towards humans and dogs. But that does not make them unique. A recent study found that many popular types of dog are equally or more friendly, on average. 

Bilingualism May Stave Off Dementia, Study Suggests 

Studying hundreds of older patients, researchers in Germany found that those who reported using two languages daily from a young age scored higher on tests of learning, memory, language and self-control than patients who spoke only one language. 

In recent years, scientists have gained a greater understanding of bilingualism and the aging brain, though not all their findings have aligned. Some have found that if people who have fluency in two languages develop dementia, they’ll develop it at a later age than people who speak one language. But other research has shown no clear benefit from bilingualism. 

Neuroscientists hypothesize that because bilingual people switch fluidly between two languages, they may be able to deploy similar strategies in other skills — such as multitasking, managing emotions and self-control — that help delay dementia later on. 

Volunteers who reported using a second language daily between age 13 and 30 or between age 30 and 65 had higher scores on language, memory, focus, attention, and decision-making abilities compared with those who were not bilingual at those ages. 

Investigating bilingualism at different life stages is a unique approach, said Boon Lead Tee, a neurologist at the University of California, San Francisco, who was not involved in the research. With the impressively large sample size, she said, the authors of the study can probably generate other novel results, such as whether the age at which a person acquired each language affected their cognition in later life.