Page 1


Issue 99 ■ March 2014

Exclusive to Emirates First Class and Business Class

MARKET FORCES Greece’s Social Economy YOUTUBE STARS A New Media Paradigm SOLAR ECLIPSE Spain’s Green Tax



The Yahoo! Challenge

This issue MARCH 2014



Exclusive to Emirates First Class and Business Class

Marissa Mayer knew that the odds were stacked against her when she became CEO of Yahoo!. The internet giant’s core business was eroding, its user base shrinking and it hadn’t launched a successful product in years. Now, 19 months later, opinion remains divided about her performance.

Features 28 The $1 Billion Valuation Game

48 Burnt by Solar

The club of billion-dollar technology startups is growing –

The Spanish government’s decision to pay less for solar

raising fears of another bubble.

energy is a huge blow to both small and large investors.

34 Europe’s Skill Shortage

52 France’s Fight for Fresh Food

Despite Europe’s high unemployment rate thousands of jobs

The use of industrial foods is a growing phenomenon, but

remain open due to a lack of qualified candidates.

French legislators are fighting back with consumer protection

38 Commuters Bearing Cash High-profile tax investigations and rule tightening at Swiss


56 Greeks Promote ‘Social’ Economy

banks have resulted in European customs agents seizing

Cutting out middlemen by selling directly to consumers

increasing amounts of undeclared cash.

illustrates the problems inherent in the Greek economy.

42 Subsidies Stifle Farmers


The Japanese are starting to question the tariffs and subsidies that protect their farmers from global competition.




Cover Story 22 Saving Yahoo!



Exclusive to Emirates First Class and Business Class

Essentials 61 The Fortress City Lying at the heart of the ancient Indian state of Rajasthan, Jodhpur has attracted travellers for centuries. It is home to polo – the ‘Game of Kings’ – and some of the country’s most majestic monuments.

66 A Love for Spam South Korea has become the largest consumer of Spam


outside the US, where it’s not only a culinary staple but also a tasteful gift.

72 Chasing Their Star, on YouTube YouTube has been providing resources and incentives to help amateur video makers step up their game, but it’s a tough way to earn a living.

76 Industry Versus Agriculture Chinese officials are becoming increasingly worried about


the industrial pollution of agricultural lands, which is affecting food safety.

80 The NFL in All Its Glory Madden NFL, the EA Sports game, has sold more than 100 million copies thanks to its extreme realism.

84 London’s Underground Movement With sky-high real estate prices, it is little wonder that art establishments, restaurants and shops are literally moving




88 Other Business

9 Notebook

Portfolio takes a light-hearted look at the latest business news.

World business in a nutshell.


15 Observer Spotting and analysing business trends.

20 Column: Quentin Hardy The Beliefs Behind Money

Published for Emirates by

Media One Towers, Dubai Media City, PO Box 2331, Dubai, UAE. Telephone: (+971 4) 4273000 e-mail:

Editor-in-Chief Obaid Humaid Al Tayer Managing Partner & Group Editor Ian Fairservice Editorial Director Gina Johnson Group Editor Guido Duken Junior Writer Mary Sophia Picture Researcher Hilda D’Souza Editorial Assistant Londresa Flores Art Director Tarak Parekh Designer Charlie Banalo Head of Production S Sunil Kumar Senior Production Manager C Sudhakar Group Sales Manager Jaya Balakrishnan Email: General Manager – Group Sales Anthony Milne Email: Sales Manager Melroy Noronha Email:

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#FZĹŽĂš(PMĂš adnanjewelleryllc






Oman’s $3 Billion Railroad Plan

through which some 20 per cent of crude supplies pass to reach global markets, equal to 35 per cent of seaborne traded oil, according to the US Energy

Oman, which faces iran

Oman signed a $35 million deal for design

Information Administration. About 17 million barrels of oil passed

across the Strait of Hormuz, is poised to

work with Italferr SpA, the engineering

start raising cash for a $3 billion rail line

arm of Italy’s state railway. Awards to

through the channel each day in 2011, almost

offering an alternative route for oil and

construction companies will take place by

five times the total for the Suez Canal, the

freight shipments that funnel through the

the end of this year, with work commencing

next busiest chokepoint, the EIA estimates.

38-kilometre-wide channel.

by the first quarter of 2015, Al Hatmi said.

Oman is considering issuing bonds by the

Rather than hugging the coast to reach

The GCC Railway has a projected cost of $20 billion and aims to provide a

end of 2014 to kick-start funding for the track

Oman, the line will take the shortest route

route spanning six Gulf countries by 2018.

across some of the Arabian Peninsula’s harshest

east from Abu Dhabi on the Arabian Gulf,

Work is most advanced in the UAE, where

terrain, said Abdulrahman Al Hatmi, a director

crossing the border from the United Arab

the government is backing the railway to

at Oman National Railway Company.

Emirates near the desert town of Al Ain

boost integration and ease pressure on

before ploughing for 160 kilometres through

congested roads.

Oman wants to push on with its leg of the

GCC ambitions stretch beyond a rail

so-called Gulf Cooperation Council Railway,

the Hajar Mountains, which rise to 2,980

due to stretch 1,940 kilometres from the

metres, and reaching the ocean near

system that reduces the bloc’s reliance on the

borders of Iraq to the shores of the Indian

Suhar, 240 kilometres north of the Omani

Strait of Hormuz. The UAE public works

Ocean by 2018, just as nations including

capital, Muscat.

minister, Abdullah Al Nuaimi, has suggested

Kuwait – which have less to gain from the

By circumventing the Strait of Hormuz

that a study be carried out into a link to Arab

project – have admitted they’ll struggle to

the railway would dilute the impact of

countries in the north to creating a long-

meet agreed deadlines.

further closure threats to a waterway

distance line to the borders of Europe. n

March 2014

Notebook Sydney’S Real eState FRenzy

Numbers Game

Buying by locally resident Chinese and those from mainland China is inflating housing bubbles in and around


billion deal

Sydney. Prices in some suburbs

has secured

have surged as much as 27 per

Lenovo group Ltd rights over

cent in the past year. That’s

google’s Motorola phone unit.

almost three times faster than

Lenovo has been buying into

the overall Australian market. The proportion of foreigners

Us technology businesses and this latest acquisition has seen its shares fall eight per cent amidst investor concerns that Lenovo may have paid too much for the dwindling phone


million visitors in 2013 to Burj Khalifa’s at the top, hailed as the world’s highest observation deck, means it is now one of Dubai’s most popular tourist attractions. Visitor numbers increased 13 per cent in 2013, up from 1.66 million visitors the previous year.

purchasing new homes in Australia more than doubled to 12.5 per cent in the three months to September, from five per cent throughout most of 2011, according to a survey



billion loss is suffered by

the eU economy annually as a

of more than 300 property

The World

professionals by National Australia Bank Ltd.

In Figures

Australia’s housing market was the fifth-most overvalued

result of widespread corruption in europe says the european

hit California amid a worsening

among countries in the

Commission. the Commission

drought condition this year

Organisation for Economic

studies revealed high levels of

according to the California Farm

bribery in Croatia, the Czech

Water Coalition, an industry

automotive. Mexico is poised

relative to rents, the

republic and Lithuania.

group. California is a top Us

to pip Japan to the post this

International Monetary Fund

agricultural producer and the

year as its auto exports to the

said in a December report.

gW is the new record

drought is depriving the state

Us have more than quadrupled

for a country’s annual

of water needed to produce

from 1993 to 2013. Next year

were also among the 10 most

installation of solar power.

everything from milk and beef to

Mexico should also overtake

unaffordable cities for housing

China doubled its rate of solar

fruits and vegetable crops.

current no.1 Canada.

in a Demographia survey.


Cooperation and Development

Sydney and Melbourne

installation in 2013, and no


other country has ever added more than 8gW of solar power in a single year before according

billion bid signed by Britain’s smith

& Nephew wins it control

to an analysis by greenpeace

over Us sports medicine firm

east asia.

arthroCare Corp. the deal will strengthen smith & Nephew’s


billion in lost revenue from farming and

related businesses such as trucking and processing could

treatment in sporting injuries,


auto exporter

an area growing faster than

to the Us could

its main replacement hips and

soon be Mexico according to Ihs

knee business.

gettY IMages



Notebook Mining’s Positive M&A outlook


potential buyers are attracted by signs that the bottom might be near. At the same time, BHP Billiton, Rio Tinto and Anglo American are among major mining companies seeking to shed unwanted and higher-cost assets as part of an industrywide push to trim expenses and bolster profits. This combination of reduced values and an influx of mines for sale is luring private equity investors. Last month Citigroup upgraded its 12-month view on the industry to bullish from neutral, its first such call in three years. M&A in the mining industry last year slumped more than half to $81 billion compared with a year earlier, data compiled by Bloomberg show. Anglo American has said it has


identified as many as 15 assets for divestment, while Deutsche Bank has put The world’s mining assets may be the

mining since 2012, only about 14 per cent

the value of all projects that could be sold

target of mergers and acquisitions as an

of the almost $10 billion raised in the last

at $35 billion. Mining companies are also

$8 billion pool of private-equity money

two years has been deployed, according to

looking for capital to fund new mines.

that has lain dormant is stirred this year

data compiled by Bloomberg Industries.

by attractive valuations and predictions of

That could change if they face pressure

criticism of mining executives for

resilient demand for raw materials.

from their investors to act.

swamping the world with an oversupply of

While buyout firms have targeted

While valuations remain depressed,

The influx of private equity follows

raw materials from copper to coal.

Saudi’s Social Media Buzz Saudi Arabia has the world’s largest

unrest that has swept through other

companies improving their 4G and fibre-

proportion of people using Twitter. A

Arab countries. Record funds have been

optic services.

third of Saudi internet users access

allocated to build roads, airports and

Twitter each month, according to data

industrial centres to reduce the country’s

cent of the population at the end of the

from PeerReach, while YouTube and

oil dependency. The Saudi authorities

first half of last year, according to data

Instagram are the other two most popular

have also accepted greater online freedom

from the country’s telecoms regulator.

social media sites in the kingdom.

since the Arab Spring uprisings started in 2011.

being supported by economic growth

Saudi Telecom and

of 3.6 per cent last year, employment

Etihad Etisalat, the two

initiatives and by a population structure

largest telecommunications

where a majority of the 30 million people

providers in the country,

in the country are under the age of 30.

have expanded their services

The government raised the minimum

in response to customer

wage for Saudi workers and increased

demand. The focus has been

spending to ward off the political

on data services, with the

March 2014


The increase in online media use is

Internet penetration reached 55 per


Notebook DUBAI EVENT: OFFSHORE ARABIA 2014 WEBSITE: OFFSHOREARABIA.AE DATE: MARCH 3-5 VENUE: DUBAI INTERNATIONAL CONVENTION CENTRE Strengthening its position as a global event, 200 companies from 33 countries including the US, Norway, Netherlands, Singapore and Japan will participate this year. The vast list of exhibitors range from oil industry, tanker and shipping to renewable energy, satellite tracking systems and marine environment research centres. This year’s theme “Regional Oil Spill Prevention & Preparedness” reflects the industry’s focus on spill prevention and protecting the marine environment from contamination. In keeping with the theme invited experts in the field will hold Visionary sessions and keynote addresses. The show will also honour key individuals in the environmental field at the Environmental Awards held on March 4 as part of a gala dinner.

EVENT: AGRA ME WEBSITE: AGRAMIDDLEEAST.COM DATE: MARCH 25-27 VENUE: DUBAI INTERNATIONAL EXHIBITION CENTRE Presenting the opportunity to meet industry leaders across agriculture, poultry farming and aquaculture this event will showcase over 250 international exhibitors from across the globe. Buyers and distributors will gain first-hand information on several government trade initiatives that will be revealed at the show. The event also hosts the Agribusiness and Poultry Outlook forums where the latest know-how on food security, food preservation and sustainable farming are deliberated.


United Arab Emirates

EVENT: ARAB OIL AND GAS WEBSITE: OGSONLINE.COM DATE: MARCH 17-19 VENUE: DUBAI INTERNATIONAL CONVENTION AND EXHIBITION CENTRE For over 30 years this biennial Arab Oil and Gas show is the region’s key networking platform bringing together representatives from throughout the industry including operators, contractors, governments and regulatory bodies. The event highlights include open forums where exhibitors display their product and technology to an audience of keen buyers, the Excellence in Engineering forum where the importance of training and career development within the energy sector is emphasised and a clean energy programme that helps connect distributors of solar products with buyers across the public and private sectors.

EVENT: THE SME WORLD SUMMIT 2014 WEBSITE: SMEWORLD.AE DATE: MARCH 26-27 VENUE: JUMEIRAH BEACH HOTEL The summit will witness a gathering of entrepreneurs from across the globe together with thought leaders, researchers and investors. It is aimed at harnessing the innovative and entrepreneurial spirit of the region’s small and medium enterprises and recognising them as key drivers of economic growth. The show will host 10 prestigious awards, four keynote conferences and four fashions shows plus there will be the chance for attendees to participate in interactive workshops, gauge first-hand insights on their newly launched products and build alliances with some of the world’s most innovative organisations.

EVENT: MIDDLE EAST INVESTMENT SUMMIT 2014 WEBSITE: TERRAPINN.COM/CONFERENCE/MIDDLE-EAST-INVESTMENT-SUMMIT DATE: MARCH 26-27 VENUE: RITZ-CARLTON DIFC Held over two-days the event will showcase a plethora of investment opportunities available to Middle East investors. Attendees representing more than $3 trillion worth of capital will gain from connecting with the region’s top performing and emerging funds. There will be investor strategy clinics held by global funds to help investors plan and strategise their investment funds. Additionally there are business-networking managers at hand to facilitate with setting up meetings and partnering sessions. With networking being the chief focus, the event’s social menu includes 15 plus hours of dedicated interactive sessions, an invitation-only lunch with global industry heavyweights, and a dinner party at the No.5 Terrace of the Ritz-Carlton DIFC. Portfolio



Amanda Hernandez retrieves Johnson & Johnson products for testing.


The Customer is Always Right

ingredients in their products. The complex

Johnson & Johnson has removed two questionable chemicals from baby products due to consumer pressure, reports Katie Thomas.

re-engineering of some of Johnson &

effort carries both risks and rewards for the health care giant – it requires difficult Johnson’s most beloved brands, but success in the marketplace could serve as a muchneeded boost. Cathy Salerno, vice president of research and development for the company’s consumer products division in North

The only hinT ThaT someThing

America, said she had seen consumer

companywide effort to remove an array of

attitudes change significantly over the past

Johnson’s Baby Shampoo arriving on store

increasingly unpopular chemicals from its

decade. When Johnson & Johnson acquired

shelves are two words: “Improved Formula.”

personal care products, and is the biggest yet

Aveeno, the natural skin care company, in

by a major consumer products manufacturer.

1999, it polled customers about their interest

100 other baby products sold by Johnson &

Johnson & Johnson has also promised to

in the brand’s ingredients. The answer

Johnson, isn’t so much about what’s been

remove such chemicals, and others, from all

demonstrated little consumer concern about

added; it’s what’s missing. The products

of its consumer products by 2015.

the details. “They’re telling us the opposite

What’s different about the shampoo, and

© 2014 New York Times News service

The move is the first step in a

is different inside millions of bottles of

now,” she said.

no longer contain two potentially harmful

In doing so, the company is navigating a

chemicals, formaldehyde and 1,4-dioxane,

precarious path, investing tens of millions of

Other manufacturers are also responding

that have come under increasing scrutiny

dollars to remove the chemicals while at the

to these concerns. Wal-Mart has announced

by consumers and environmental groups

same time insisting that they are safe. The

that it would eventually require suppliers

in recent years. In response to consumer

company is responding, executives said, to

to reduce or eliminate 10 chemicals from

pressure two years ago, the company pledged

a fundamental shift in consumer behaviour,

cleaning and personal care products. Target

to remove both chemicals from its baby

as an increasingly informed public demands

has said it would monitor suppliers’ use of

products by the end of 2013, and in January,

that companies be more responsive to their

potentially harmful chemicals, then give

it said that it had achieved that goal.

concerns, especially when it comes to the

incentives to companies that use safer

March 2014



Responding to pressure from consumers’ groups, Johnson & Johnson revised the ingredients in its baby shampoo to remove a formaldehyde-releasing preservative called quaternium-15.

chemicals. Procter & Gamble has promised

levels of 1,4-dioxane in many of

even held a dinner to celebrate. But their

to eliminate phthalates and triclosan, whose

the company’s baby products were at the

hopes were dashed when the normally clear

safety has also been questioned, from its

target levels.

wash turned cloudy, and they were forced to

products by the end of this year. Environmental groups disagree with

But Heather White, executive director of the Environmental Working Group, a part

start over. The challenges continued: Two products

the safety claims that Johnson & Johnson

of the Campaign for Safe Cosmetics, said

were scrapped when they failed a skin test in

makes about the chemicals it is removing.

there was not enough information to know

adults, an initial step before they are tested

Nevertheless, they praised the company for

the long-term effects of these chemicals, and

on babies. Altogether, the team vetted 2,500

keeping its commitment.

there was mounting evidence that cumulative

raw ingredients and tested 12 to 18 versions

exposure can be dangerous.

of each product before seeking the opinion of

Even before its removal, customers would not have found formaldehyde or 1,4-dioxane

Taking it out, however, has not been

74,000 consumer volunteers. Mostly, the task was to make the change

listed on the back of products because they

simple. In remaking its baby products,

aren’t technically ingredients. Formaldehyde,

Johnson & Johnson’s scientists had a delicate

as invisible as possible. “If you can’t tell the

which has been identified by government

task before them: how to remove the

difference, then we did our job,” said Trisha

scientists as a carcinogen, is released over

chemicals in question without compromising

Bonner, principal scientist for Johnson &

time by preservatives, like quaternium-15.

some of the company’s most iconic brands.

Johnson’s consumer products. The team’s next step is removing another

And 1,4-dioxane, which has been linked to

“There was a lot of angst about it,”

cancer in animal studies, is created during

recalled Salerno, who was one of the

type of preservative, parabens, from their baby

a process used to make other ingredients

executives who oversaw the team of close

products, and removing those and additional

mild – important for a company that has

to 200 people who worked for two years on

chemicals from their adult products.

sold billions of bottles of baby shampoo on its

the project. “Our people in the marketing

“No More Tears” claim. Johnson & Johnson

department were adamant that they wanted

frustrated at critics who promote the idea

has removed the preservatives that release

the exact same product.”

that natural ingredients are inherently better.

formaldehyde, and said it has reduced the

But as the scientists set to work, they

Salerno and others say they sometimes get

“I like to remind people that poison ivy is natural,” Salerno said.

levels of 1,4-dioxane to very limited trace

discovered that replacing the problem

amounts, from one to four parts per million.

ingredients often led to a chain reaction

But she said that the concerns of their

Johnson & Johnson executives are quick

of unintended consequences. One new

customers, especially those related to health

to note that formaldehyde occurs naturally

preservative led to a snow-globe effect,

and safety, could not be ignored. “This lands

in many products – a person’s exposure to

with particles settling at the bottom of

right at the heart and soul of what Johnson &

formaldehyde in a single apple, they claim,

the bottle. But the fix for that turned the

Johnson is about, so we really had to take this

is greater than it is in 15 bottles of baby

shampoo from a golden honey colour to

very seriously,” she said.

shampoo. And 1,4-dioxane is found in their

a dull brown. Another change turned the

products at levels low enough to be safe.

consistency to water.

An outside analysis by the Campaign for Safe

The team thought it had successfully

Cosmetics published in 2009 found that the

reformulated the Head-to-Toe wash and

“I tell people, in 28 years with this company, this is by far the most challenging project I’ve ever worked on,” Salerno said. “But it’s a real point of pride.” n Portfolio

Observer O N E 2 W AT C H TExT: HildA d’sOuzA

Satya Nadella US technology giant Microsoft appointed Indian-born Satya Narayana Nadella as its chief executive officer on February 4. Nadella took over from Steve Ballmer, who was Microsoft’s CEO since 2000 and announced his retirement last year. Nadella – a 22-year Microsoft veteran – has extensive experience working with cloud technologies, a domain that Microsoft is focused on. As executive vice president of Microsoft’s Cloud and Enterprise Group he led the team in charge of computing platforms, developer tools and cloud services. He was successful in transforming the company’s technology business from client services to cloud infrastructure and services. Under his management the cloud services division accounted for $20.3 billion in revenue and $8.2 billion in operating income last fiscal year. Microsoft founder Bill Gates has emphasised his faith in Nadella saying, “Satya is a proven leader with hard-core engineering skills, business vision and the ability to bring people together. His vision for how technology will be used and experienced around the world is exactly what Microsoft needs as the company enters its next chapter of expanded product innovation and growth.” Born in 1967 and educated in India and the United States, Nadella’s technological career began at the internet software pioneer Sun Microsystems. He joined Microsoft in 1992 and quickly climbed the corporate ladder holding key positions in the Office and Bing search-engine teams. He was promoted to run the company’s server and tools unit in 2011. That unit now forms the backbone of Microsoft’s cloud-computing platform. Analysts and investors expect Nadella will maintain the company’s momentum in the rapidly expanding field of cloud computing. In a statement the 46-year-old Nadella said, “our industry does not respect tradition, it only respects innovation.” He has emphasised his intention of staying focused on transforming the company’s business. “I see a big part of my job as accelerating our ability to bring innovative products to our customers more quickly. Our job is to ensure that Microsoft thrives in a mobile and cloud-first world.” Some investors and critics have expressed concerns over Nadella’s inexperience in the retail sector. However, Bill Gates has quit being Microsoft’s chairman and taken up a position as technology adviser. In his new role Gates will support Nadella in shaping Microsoft’s future technology and products.

Crisis for Egypt’s Tourism

getty images


Egypt’s tourism industry is battling to recover from what the tourism minister has described as its “worst year in modern history”, after millions of tourists were put off visiting Egyptian resorts and heritage sites in 2013 by reports of civil unrest. The industry made £3.6 billion in 2013, compared with £7.7 billion in its record year of 2010, before the uprising that toppled Hosni Mubarak and led to three years of political instability. Only 9.5 million tourists stayed in Egypt’s hotels in 2013, against 14.7 million in 2010, according to the tourism minister, Hisham Zaazou. In a country where tourism provides 12.5 per cent of employment, and 11.3 per cent of GDP, the effect has been catastrophic for many Egyptians. The industry suffered during 2011 and 2012, as tourists stayed clear of a country that had swung from crisis to crisis after Mubarak’s removal. But numbers fell off entirely between July and November 2013 after western governments issued warnings against travel to most areas following the overthrow of Mohamed Morsi. Media reports of unrest from hotspots in Cairo and northern Sinai appeared to put tourists off even the tranquil holiday resorts hundreds of kilometres away on the Red Sea, and in Luxor and Aswan. Tourism workers say visitors’ fears are largely unfounded. “If you go back over the past three years, most of the tourist cities were under control like this one. It was safe and sound,” said Zaazou, interviewed near Hurghada, a Red Sea resort. Portfolio

EU to Cut Emissions by 40 Per Cent

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Europe will cut its greenhouse gas emissions by 40 per cent by 2030, compared with 1990 levels, the toughest climate change target of any region in the world, and will produce 27 per cent of its energy from renewable sources by the same date.

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The EU is now the first to set out emissions reduction targets ahead of a crunch meeting of world governments in Paris in 2015 that will decide a global framework for avoiding dangerous levels of global warming. Every other major developed and developing economy is expected to set out its own binding national emissions target within the next year, for the United Nations talks to go ahead. Europe’s emissions trading system will also be reformed as part of the 2030 energy and climate package, with a more flexible mechanism to allow the surplus of carbon permits to be curbed, and member states will have an “indicative” target – that is, not legally binding – of improving energy efficiency by 25 per cent by 2030. The targets are weaker than many green campaigners had called for, but stronger than the alternatives that some member states and commissioners were championing right to the final stages of the negotiations. The 27 per cent renewables target may be easily achieved by 2030 not least because Germany, the world leader on renewable power and the EU’s biggest economy, is implementing a radical energy shift away from nuclear into renewables.

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Quentin Hardy

The Beliefs Behind Money How sHould we tHink about

like Bitcoin might mean. In many ways,

partners, saying that belief in Bitcoin

a currency like Bitcoin? The first thing

that is the more interesting phenomenon.

was another symptom of Silicon Valley’s

to remember is this: Money is a kind of

Certainly, it is applicable not just to Bitcoin

enormous self-regard.

collective fiction. What money we trust says

but to Bitcoin proxies like Zerocoin or to

much about how we see the world.

other new stateless, math-based currencies

central bank is being swapped for the new

like Ripple. It also sharpens current

collective fiction of the almighty tech elite.

preoccupations in the high-tech world.

That idea settles in uncomfortably close

Above the simplest exchanges, most money has limited use. Gold, the most common historical currency, is good

In the place of believing in a central bank,

By those lights, the old fiction of the

to recent calls by some prominent tech

almost only for adornment. To its fans,

or its owner, a powerful nation state, what

executives to detach, as much as possible,

gold’s uselessness is a value in itself; since

do we believe in when we believe in Bitcoin?

from the old, failed nations.

the stock of gold is not consumed, it is

Specifics around the algorithm, of course.

reasonably stable, while governments can

More deeply, we believe in a borderless

with other currencies. Ripple, developed

print all the currency they want.

world of hyper-empowered individuals.

after Bitcoin, hopes to be a kind of

Paper is, of course, a proxy for the

They are not gated by language, thanks

There are also other fictions associated

universal proxy currency, perhaps enabling

government issuing the money. How much

to image-sharing and Google Translate.

the owner of a farm animal in Nepal to

we trust the government’s ability to collect

Many have sent thousands of messages

directly trade it for an iPhone in Britain, or

taxes, pay debts and so on is the collective

around the world without ever using a

American frequent-flier miles to become

fiction that gives a country’s money value.

sovereign nation’s stamps. Many have never

gold in Mexico.

Paper or metal, money is worth

done national service in the physical world.

The poet Wallace Stevens called money

something only if people continue to believe

Nor do they expect their children to fight

“a kind of poetry.” He also had the horse

in it. And right now, an increasing number

in a country’s wars, at least not as soldiers

sense to write his verses about the romance

of people believe in Bitcoin and similar,

carrying arms.

of the human imagination while walking

emerging stateless currencies.

Charles Stross, the science fiction writer,

to his job as a vice president for an

wrote in a strong critique of Bitcoin that it

insurance company. He knew both sides

whose firm has invested just under $50

has an inherently elitist, libertarian agenda.

of the coin when he said how closely the

million in startups related to Bitcoin, wrote

Alex Payne, another critic, wrote a piece

real and the imaginary need each other

a very helpful introduction to Bitcoin for the

sharply criticising one of Andreessen’s

for society to work. n

Marc Andreessen, a venture capitalist

New York Times. It is also a spirited defence of Bitcoin. Mind you, Andreessen has a significant number of US dollars bet on Bitcoin’s increasing use. The journalist Glenn Fleishman, with whom Andreessen has been spiritedly debating Bitcoin on Twitter, wrote a strong the argument is about the mathematics, or whether Bitcoin is deflationary, or the way in which the creation of new Bitcoins burns increasing amounts of electricity to no good end.

getty images

© 2014 new york times news service

critique of Andreessen’s thinking. Much of

So far, there is little discussion of what the collective decision to believe a fiction Portfolio


TONDA 1950

Rose gold Ultra-thin automatic movement Hermès alligator strap Made in Switzerland




Saving Yahoo! Marissa Mayer knew that the odds were stacked against her when she became CEO of Yahoo!. The internet giant’s core business was eroding, its user base shrinking and it hadn’t launched a successful product in years. Now, 19 months later, opinion remains divided about her performance, reports Guido Duken.


Yahoo!, which once had been valued at $128 billion,

and CEO of Yahoo! and former Google employee

is now worth around $40 billion. That valuation is little

number 20, was always facing an uphill battle. When

more than the sum of its two key Asian assets: Chinese

she was appointed on July 16, 2012, the company

internet giant Alibaba and Yahoo! Japan. Its user

had run through three CEOs in less than a year.

base was more than 700 million, but unlike Facebook,

There hadn’t been a hot new product launch in years,

Google and Apple, Yahoo! had no fundamental function

revenue was falling, and the stock price – which had

– such as e-mail, search and photo-sharing – that

peaked at $118.75 in early 2000 – was bumping along

wasn’t done better by others. But the biggest worry was,

between $14 and $19.

and still is, that its core business – premium display

There was no shortage of scepticism when Mayer

advertising – has been steadily eroded by the switch to

departed Google, her only professional home, for

smartphones and competitors such as Facebook and

the struggling giant that was Yahoo!. A pay package

Google. In short, Yahoo! had become something of a

valued at $36.6 million in salary and stock for 2012

joke in Silicon Valley and had huge trouble retaining

alone obviously played a role. The question was: How

skilled people, never mind hiring new talent.

could she turn around a company that was a mere shadow of its former self?

The first thing Mayer did on joining Yahoo! was to order a major overhaul of Flickr, the sites photoPortfolio




March 2014

sharing service. She also went into

maps, weather, news, stock quotes, share

acquisition mode, buying microblogging

photos, group communication, sports

engineers who develop mobile apps are

and social-networking service Tumblr

scores, games – these are all things people

young and scarce. Furthermore, working

for $1.1 billion in May 2013 and story-

do on their mobile phones.” Under Mayer,

for a limping giant such as Yahoo! is rarely

summariser Summly for $30 million.

Yahoo!’s new description of itself is “a

high on their list of personal goals. So

With the acquisition of Tumblr, Mayer

global technology company focused on

Mayer and Cahan bought talent, spending

managed to solve the problem of Yahoo!’s

making the world’s daily habits inspiring

close to $200 million to acquire at least

aging demographics and lack of cool.

and entertaining.”

18 startups. In each instance, Yahoo! has

“I’ve done now between three and four

Cahan’s biggest challenge is that

As a result one of Mayer’s top priorities

locked up engineers with two- to four-year

dozen acquisitions in my career,” Mayer

was to re-establish a centralised mobile

contracts and set them loose to build apps

says about the Tumblr purchase, “and I’ve

group. To run the unit she selected Adam

and hire more mobile developers.

never seen this kind of lock-and-key fit

Cahan, who’s startup, IntoNow, was

between two companies. Our demographic

acquired by Yahoo! for around $20

Mayer’s begun shifting funds back into

is older. Theirs is the youngest on the web.

million in 2011.

Yahoo!’s research organisation, which

In addition to her mobile hiring spree,

We pride ourselves on publishing at scale –

previous CEO Scott Thompson gutted in

they have some of the best publishing tools

a round of layoffs. She says the lab has a

available. We’re strong in news, sports and

goal of hiring 50 Ph.D.s this year and

finance. They are strong in all the different

has already signed up 30.

complementary pieces – fashion, food and

One place where these hard-core

architecture. They need monetisation. We

researchers might focus their attention

have monetisation that can be turnkey for

is search. Although Google dominates

them and not very obtrusive.”

the space and Yahoo! has had Microsoft

However, Tumblr is far from profitable

power its search engine for the last three

with a user base deeply resistant to

years, Mayer still believes Yahoo! can

advertising, which means it will be a

find new ways to present search results.

burden on Yahoo!’s bottom line until the

“Search is far from over,” she says. “It’s

company figures out how to monetise it.

physics in the 1600s or biology in the

Mayer also decided early on in her

1800s. There’s miles to go before you get

tenure that Yahoo!’s fortunes were tied

to quantum physics or even a microscope.

to mobile. “What people want on their

There’s a lot of that you can do once you

phones is content. It’s just another way of delivering the web,” she says. “E-mail,

have mobile, and we are going to be very

Adam Cahan has been put in charge of the centralised mobile group.

focused on the user experience.” MAYER WAS off to a great start. A new weather app for mobile phones, the relaunch of Flickr, and an update of Yahoo Mail earned the company its first positive reviews in ages. By September 2013 the stock price of Yahoo! had doubled in the 14 month’s since Mayer’s appointment as investors pinned their hopes on the new CEO and surging growth at Chinese online retailer Alibaba. However, Yahoo!’s overall revenue fell six per cent in the last three month’s of 2013, marking four consecutive quarters of eroding revenue. A seven per cent drop REUTERS



Marissa Mayer has been busy outlining Yahoo!’s new corporate strategy.

in the share price greeted this news and the first rumbles of discontent started emanating from Wall Street about Mayer’s Portfolio



Yahoo! owns a 24 per cent stake in the giant Chinese online retailer Alibaba.

turnaround plan. More criticism headed her way in September when she became the first CEO of a Fortune 500 company to feature on the cover of Vogue. Mayer has been talked about ever since

Mayer’s begun shifting funds back into Yahoo!’s research organisation, which previous CEO Scott Thompson gutted in a round of layoffs. She says the lab has a goal of hiring 50 Ph.D.s this year and has already signed up 30.

she became Google’s first female engineer in 1999. During her 13 years with the company she was an engineer, designer, product manager and executive. In her final years with Google she was vice president of Local, Maps, and Location Services and, before that, vice president of Search Products and User Experience. She reportedly amassed a $300 million fortune at the search giant when Google went public. Yet Mayer has always downplayed her achievements. “I didn’t set out to be at the top of technology companies,” she insists. “I’m just geeky and shy and I like to code. Once, Eric Schmidt [then Google’s CEO] pointed out to me that at Google, when you want to have an impact that’s bigger than just you, you move from being an individual contributor to managing a team… And I March 2014

Mayer has been on an acquisition spree. She bought social network Tumblr for $1.1 billion.


Yahoo! Smart TV gives customised recommendations of what to watch and instant access to on-screen information.

Yahoo! owns a 35 per cent stake in the successful Yahoo! Japan.

was like, Oh, right, it would be nice to have

product strategies and CEOs. It was a web

deal to buy the social network for $1 billion.

an impact that’s bigger than just me. It’s not

directory under founders Jerry Yang and

Then Semel decided to offer $850 million

like I had a grand plan where I weighed all

David Filo, then a web portal under Tim

instead, and Mark Zuckerberg took that as

the pros and cons of what I wanted to do –

Koogle. Terry Semel made it into a tech

his opportunity to walk away.

it just sort of happened.”

company with Hollywood pretensions, while

Depending on whom you listen to, Mayer drove the rigorous testing and analytics that perfected Google’s search and other

Yet despite that huge blunder by Semel,

under Carol Batz and Scott Thompson it

his executive team did two deals that

languished as a dot-com relic.

make up the vast majority of Yahoo!’s

Yahoo! also became infamous for the

value today. One was Yahoo Japan that

offerings and that she worked incredibly

deals that it didn’t do. The worst one:

the company owns a 35 per cent stake of,

hard to get to the top. Her detractors say

Facebook. In 2006, Yahoo! had a handshake

and in 2005 Yahoo! took a 40 per cent

she is as ruthless as her ambition. On thing is sure, Mayer knew she was taking on what was probably the toughest job in Silicon Valley when she left Google. Yahoo! lost a decade due to a series of failed

Looking across the company’s existing products, she argues “in many cases, we haven’t lost those users. We just want more of their time and attention.” According to her, Yahoo!’s core competency has always been figuring out the web.

Yahoo! has its headquarters in Sunnyvale, California. Portfolio

Mayer points to Yahoo!’s acquisition

stake in Alibaba (now 24 per cent). This

Mayer also recently outlined Yahoo!’s

Chinese equivalent of eBay and Amazon

company strategy. In her view, Yahoo! is

of Aviate as a prime example. Yahoo!

mixed together is on a phenomenal

“really a personalisation company.” Looking

announced in January it had bought the

growth curve. Should Alibaba go public

across the company’s existing products, she

company, which organises the home screen

its value has been put between $70

argues “in many cases, we haven’t lost those

of a person’s Android device based on what

billion and $200 billion. “I think there

users. We just want more of their time and

they’re doing at the time. So if a person is

have been certainly some very smart

attention.” According to her, Yahoo!’s core

walking into a restaurant or pulling away

investments that I owe to my predecessor,”

competency has always been figuring

in a car, the technology uses signals from

acknowledges Mayer.

out the web.

things like the GPS and accelerometer to

WALL STREET may be starting to lose

it will partner with San Francisco-based

“Aviate gives us a nice building block in

faith in Mayer, but she remains upbeat.

Yelp for local search, incorporating Yelp’s

terms of what we can do with context,

Firstly, she says Yahoo!’s transition into

listing into Yahoo!’s search engine. Yelp

and improve search,” she says.

the mobile world is working. According to

has a strong presence on mobile and has

her, 800 million consumers visit Yahoo!

seen its advertising revenue explode.

Yahoo! also announced in February that

properties each month, up 20 per cent

This all ties in with Mayer’s focus on

push related apps onto the home screen.

When Mayer took the CEO job she said that turning around Yahoo!’s core business would take at least three years.

from when she arrived. More importantly,

contextual search, which gives people

Now, a little over one-and-a-half years

390 million of those consumers are

the right information at the right time,

later, it is still unclear if she is succeeding.

accessing Yahoo! on mobile devices, which

by looking at signals such as where they

could help expand its advertising revenue.

are located and what they’re doing “We’re

there. “Name another internet giant that

“I hope that at some point we are looking

long on search,” Mayer said in February,

went through three years of decline and

at a world where mobile is a majority of

meaning the company sees it as a good

then started to grow again,” she says. “It’s

our revenue,” says Mayer.

area for investment.

a very good sign. n

Mayer received a $36.6 million salary for her first year at Yahoo!.

March 2014

But Mayer seems to think she is getting





The $1 Billion ValuaTion Game

The club of billion-dollar technology startups is growing – raising fears of another bubble, report David Gelles and Claire Cain Miller.



trouble, it fired hundreds of employees. A company co-founder and the chief operating officer left the company. Its valuation sank below $1 billion, leaving some investors underwater. The rise and stumbles of Fab demonstrate how swiftly the fortunes of startups can change. At the company’s giddy high point, it also illustrated why some billion-dollar-plus valuations have raised concerns of a new dot-com bubble. “Predicting what’s undervalued and what’s overvalued is fabulously hard,” said Josh Lerner, a professor of

© 2014 New York Times News service

entrepreneurship at Harvard Business


School. “It’s a trope to see a young, highly, an online

valued company and say it’s wrong, but

retailer selling affordable

sometimes it is.”

high design, last year seemed as if it could be the

next Amazon. Just a few months later,

a decade ago. In the three years from

however, it looked as if it could become

2011 through 2013, there were at least 34

the next

investments that valued companies at $1

Big-name venture capitalists, including the Andreessen Horowitz firm, poured money into the company over the last few years, lured by its startling growth rate. After raising some $170 million in venture funding, Fab accepted

VentureSource, compared with 16 from 1998 to 2000. Yet it is more than a speculative frenzy that is driving up the valuations of these companies. A number of changes in the capital markets, the venture capital industry and the public equity markets have conspired to make it easier than ever for unproven startups to be valued

million in June, a

at $1 billion or more. For one, the stock and merger markets

the company at

have demonstrated that many companies’

$1 billion and

high-flying valuations are justified.

vaulted it into the

Facebook’s stock has surged after its

club of billion-

early stumbles. Newly public companies

dollar technology

like Twitter are performing well. And

startups that

Instagram and Tumblr both sold for

include Snapchat, Pinterest, Evernote, Spotify and Dropbox. But by the end

March 2014

billion or more, according to Dow Jones

an additional $150 round that valued

Jason Goldberg, chief executive of, at the company’s office in New York.

The growth of the billion-dollar club has eclipsed the exuberance of more than

of the summer, Fab had fallen from that elite. Amid financial



Fab was valued at $1 billion but fell below that level last year, burning some investors.

more than $1 billion each, emboldening

networking company reportedly valued

venture capitalists.

near $2.5 billion.

“A number of high-profile companies

What’s more, the availability of cheap

in the social media space have been

financing for companies and investors,

successful,” Lerner said. “It’s creating a

which has helped buoy the stock market,

feedback loop.”

is allowing investors to easily finance

Another factor driving up valuations

deals and borrow money. Pension funds

is the 38 per cent rise last year in the

and endowments are putting more money

Nasdaq composite index, which is heavy

into venture funds. In the third quarter,

with technology companies. For venture

venture capital firms raised $4.1 billion, an

investors eager to find the next big thing,

increase of 28 per cent from the previous

the healthy stock market acts as a green

quarter, according to the National Venture

light to keep pouring money into private

Capital Association.

companies that might go public or get sold.

In the third quarter, venture capital firms raised $4.1 billion, an increase of 28 per cent from the previous quarter, according to the National Venture Capital Association.

And with so much cash to deploy, venture funds are competing with one

Partners, were interested in investing.

irrational exuberance tied to the

another to invest the money, a process that

But before they could offer Lyft any cash,

enthusiasm, excitement and growth

often drives up valuations.

Andreessen Horowitz swooped in with an

“There’s always this long and almost

of a company when the economy is

When the ride-sharing service Lyft was

doing well,” said Jayshree Ullal, chief

seeking to raise a new round of funding

executive of Arista Networks, a cloud

last year, many firms, including Greylock

offer that Lyft could not refuse, according to people briefed on the situation. Andreessen Horowitz is known in Silicon Portfolio



higher. Just seven months later, interest from Valiant, a hedge fund based in San Francisco that also invested in Dropbox, and AGC Equity Partners’ affiliate m8 Capital, elevated the valuation to a reported $2 billion. For those venture firms that aren’t able to invest in the top companies, the inclination is to spread out their investments among a broad pool of companies, many of which are derivative. Ride-sharing service Lyft easily found investors for a new round of funding.

When the deals site Groupon was thriving, for example, big investors including Amazon poured money into rival LivingSocial. For a time, the company was valued at more than $1.5 billion. But in February, LivingSocial took $110 million in new funding at a lower valuation, a so-called down round. “These funds have a lot of money and push money out into whatever looks hot,” said Alexander Ljungqvist, professor of finance at New York University. “It’s like throwing spaghetti at the wall and seeing what sticks.”


But many investors contend that young companies will one day justify their eye-

The technology-heavy Nasdaq has had a bumpy ride this year.

popping valuations. “Valuations are never a reflection of today’s performance, it’s a reflection of

Valley for such tactics, having had success

new investors jockey to compete with

the future opportunity,” Ullal of Arista

with companies like Facebook, Twitter and

venture funds. Competition from later-

Networks said. “Most of these companies

Skype. According to CB Insights, which

stage investors like Meritech Capital,

grow into their valuations nicely and those

tracks venture investing, the average size

Institutional Venture Partners and hedge

that don’t fall by the wayside.”

of the firm’s investment was substantially

funds like Tiger Global and Valiant Capital

higher than those of rivals New Enterprise

Management has driven up valuations.

Associates and Greylock.

These funds expect lower returns than venture capitalists, so they take less risk by

And technology boosters note that the market for internet companies is larger than it was 15 years ago. “In the last cycle, there were barely 500

But Andreessen Horowitz is not

investing in more mature companies that

million people online, and they were all on

alone. In the third quarter, venture capital

are safer bets. “If you have funds and you

56k modems,” said David Lee of SV Angel,

firms invested $7.8 billion, an increase

need to basically deploy pretty big chunks

an early-stage investor. “By 2015, there will

of 12 per cent from the previous quarter,

of capital, wouldn’t you rather invest in

be five billion people with a supercomputer

according to the venture capital association

things that seem like a sure thing?” said

in their hands.”

and PricewaterhouseCoopers.

Aileen Lee, founder of Cowboy Ventures. In

Still, to some, Fab and other companies

The competition is especially tough

a widely read blog post on tech companies

that attain high valuations are a sign that too

when it comes to later-stage investments

worth more than $1 billion, Lee called the

much money is chasing too few good ideas.

in the most admired billion-dollar tech

group the “Unicorn Club.”

companies, a group that includes such

Last May, Evernote, a company that

“This is a drama that has played out many times before,” said Lerner of

companies as Square, Box and Uber.

makes a productivity app, raised money

Harvard. “The music inevitably stops at a

And the fight is becoming fiercer as

that drove the valuation significantly

certain point.” n Portfolio




eek after week, newspapers issue hopeful headlines: Microsoft, PayPal,

Fujitsu and scores of other companies are expanding in Ireland, creating thousands of jobs as unemployment hovers near record highs. There is just one hitch: Not enough people are qualified to fill all the jobs. In some cases, the companies have had to look outside Ireland to recruit candidates with the right skills. After a five-year economic crisis, the mismatch represents one of the biggest problems facing Ireland and many other European countries. Hundreds of thousands of people who lost work, and many young people entering the workforce, are finding that their skills are ill suited to a huge crop of innovation-based jobs springing up across the Continent. “In all countries, there is an expectation that many of the new jobs created will be in the knowledge-intensive economy,” said Glenda Quintini, a senior labour economist at the Organisation for Economic Cooperation and Development. “But we are seeing a worrisome skills mismatch that means a large number of unemployed people are not well prepared for the pool of jobs opening up.” Employers have long complained that AFP/

graduates do not have the skills they need. But in a recent report, the International Labour Organisation warned that “skills mismatches and occupational shifts have worsened” in Europe after the crisis. People laid off in hard-hit sectors, like construction and finance, face lengthy retraining, while too few graduates entering the job market have chosen engineering, science or technology degrees for the growing

© 2014 New York Times News service

innovation-based jobs market. The gap in Europe has important consequences for the recovery as the Eurozone grapples with unemployment rates stuck stubbornly above 12 per cent.

EuropE’s skill shortagE Despite Europe’s high unemployment rate thousands of jobs remain open due to a lack of qualified candidates, reports Liz Alderman.

It may hold back a return to meaningful growth and generate “significant economic and social costs,” according to the European Portfolio


About two million job vacancies around the EU are going unfilled, about the same number as in 2010, in sectors ranging from hotel work to computer programming, according to Eurostat, the statistics office of the EU. Ireland is exiting its recession woes.

Commission, the policymaking arm of the European Union. In the United States, the phenomenon has helped contribute to a rise in long-term joblessness, the organisation said. About two million job vacancies around the EU are going unfilled, about the same number as in 2010, in sectors ranging from hotel work to computer programming, according to Eurostat, the statistics office of the EU. A study released in November by Eurofound, the research arm of the EU, showed that despite the recession, almost 40 per cent of companies reported difficulty in finding workers with the right skills, compared with 37 per cent in 2008 and 35 per cent in 2005.

are generating jobs at a rapid clip. By


The problem is especially striking for innovation-based companies, which

A GenCell employee works on a microfluid sample at their headquarters in Limerick.

2015, about 900,000 information and

programmes and sought to polish the allure

communications technology vacancies

of mathematics degrees as alarm bells

may go unfilled in the EU, the European

sounded over the issue a couple of years ago.

PayPal’s chief executive in Ireland,

Commission warned in a recent report on

At the time, unemployment was around

Louise Phelan, stoked controversy by

the digital economy.

14 per cent after an economic collapse that

acknowledging that the company had

destroyed jobs in the construction sector.

recruited from 19 other countries for

Governments and companies around Europe are fast-tracking efforts to retrain

Multinational technology and social media

jobless rate of around 12.5 per cent. The issue peaked last summer, when

500 positions in its operations centre in

the unemployed for a burst of technology-

companies kept investing, lured by Ireland’s

Dundalk. This summer, Fujitsu, which

related jobs. They are also stepping up

ultralow 12.5 per cent corporate tax rate and

employs 800 people in Ireland, revealed

campaigns to lure university students to

an English-speaking workforce. But many

that it had to hire most of its Ph.D.-level

mathematics, engineering and science.

have been forced to look outside the country

experts from abroad.

In Ireland, the government introduced a series of retraining and higher-education March 2014

for employees with the right skills, despite more than 391,500 being out of work and a

All told, around half of information technology jobs in Dublin were being filled

eBay employees stand in the glass fronted entrance area of the company’s European headquarters in Dublin.

getty images

getty images



PayPal had to look abroad to find suitable candidates for 500 positions.

with foreign workers, while about 4,500 information technology jobs in the country were going unfilled because of a limited supply of suitably skilled applicants, various studies have shown. Part of the problem for all countries, not only Ireland, was that technology-related university training lost appeal after the dot-com bust in the early 2000s, said Regina Moran, the executive director of Fujitsu in Ireland. In Ireland, people flocked to construction or tourism work, which

Ian Sharpe works at a desk at VCE, a cloud computing provider with offices in Ballincollig.

blossomed in the middle of the decade. Ian Sharpe was one of them. He spent nearly 15 years working in the hotel industry until Ireland’s banking crisis

that provides cloud and virtualisation software and services. After six months as an intern, he was

with no job ultimately materialising. Sharpe said that people had urged him not to enter the programme. But he

left him jobless in 2010. He tried fruitlessly to

hired full time to help manage a data centre,

wanted to avoid the fate of friends who

find new work, but last year he latched on to

with an annual salary of about ¤30,000

had fallen into a rut, where the longer they

the government’s back-to-work programmes.

($40,773) – about what he had made as a

were unemployed, the less likely they were

hotel manager.

to get back into the job market. “I know

Recently, 182 candidates – most of them

The initiatives are not without flaws. For

people who had to get medication for being

that include farming, construction and even

example, as part of the JobBridge internship

depressed, because they don’t see anything

astrophysics – went through retraining. One

programme, people continue to collect

coming,” he said.

company, VMware, hired 82 people, and

unemployment and receive a modest ¤50

other companies hired nearly everyone else

stipend per week. For many, that barely

from someone who had never been

– including Sharpe.

covers transportation and food. Stories

professionally involved in IT to getting an

have littered the Irish news media of abuses

engineering position just nine months later,”

with a team of technicians in the Cork-

by companies in the programme, such as

Sharpe said.

based offices of VCE, a joint venture

giving interns either menial tasks or fully

between VMware, Cisco, EMC and Intel

fledged professional work with no pay, and

unemployed, with backgrounds in fields

On a recent weekday, he was huddled

He now has an air of hope. “I’ve gone

“You can see where you’re going,” he added. “Finally, there’s something to aim for.” n Portfolio

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Commuters Bearing Cash

© 2013 new York TiMes news service

High-profile tax investigations and rule tightening at Swiss banks have resulted in European customs agents seizing increasing amounts of undeclared cash, report Doreen Carvajal and Raphael Minder.


The passenger, Boris Boillon, 43, is a

in economic crisis, customs agents say

extraordinary about the casually

former French ambassador to Iraq and

they are seizing increasing amounts of

dressed businessman waiting on a

Tunisia with two degrees from prestigious

undeclared cash exceeding the ¤10,000

Paris train platform except, it turned out,

universities and a Legion of Honor

($13,750) that each traveller is allowed

for the envelopes he carried – stuffed with

medal. But to customs agents, who seized

to carry. They find it stashed in luggage,

¤350,000 in cash, and seized by French

the money in July, he was just one of a

cake boxes, potato-chip bags, cookie tins

customs agents as he prepared to depart

growing number of “cash commuters.”

and sometimes even in children’s pockets.

here was nothing

for Belgium.

At the borders of European countries

The cash, often in bundles of ¤500-notes, Portfolio

is moving with political currents as some

networks and tax evaders,” said Mathieu

of deterring money laundering and tax

Europeans seek to hide their wealth from

Delahousse, a French journalist

evasion. Undeclared cash can be seized

rising taxes, high-profile tax investigations

and co-author of a book about the

and held for six months, and fines of

and tightening rules at Swiss banks and

phenomenon, Cache Cash. “People are

25 per cent or more can be withheld.

other traditional havens.

still taking money abroad for tax

The authorities can also start broader

The agents say they are routinely

evasion, but it is also moving in the other

investigations into the origins of the

detaining business travellers who are on

direction, because Swiss banks are closing

money in special customs courts.

their way to European financial capitals,

accounts of foreign customers, and then

carrying minimal luggage and behaving

they have to make a choice: declare these

catching business people, but they were

nervously. “We see professionals and

bank accounts and pay high taxes, or hide

amused to see an American family of

businessmen in insurance and banking,

the money.”

four, including two young children, in a

like him, every day,” said Philippe Bock, secretary general of the French solidarity trade union for customs agents, referring to Boillon. “Three hundred fifty thousand euro was nothing exceptional,” Bock said. “Every month it passes like that, and there’s more and more money because of the crisis.” For decades, banking secrecy laws in Switzerland made banks there a refuge

Customs agents are blasé about

discreet corner of a railway station near

The main reason for the increase in seizures is simply the rising use of cash by fraudsters, including criminal networks and tax evaders.

the Swiss border, dividing ¤600,000 among themselves. The money was seized when they boarded a train, according to Bock of the customs trade union. Cash seizures by French customs agents have soared over the last decade even as budget cuts have thinned the agents’ ranks by 25 per cent. The total for the first quarter of 2013 was up sixfold from

for foreigners hoping to keep assets away

a year earlier, to ¤103 million, most of it

from official notice. But Switzerland

from a man who tried to drive into France

signed a treaty in October providing for the automatic exchange of tax information

from Switzerland with ¤86 million in The rule requiring travellers crossing

bearer bonds, which are tantamount to

with depositors’ home countries, and

borders within the European Union

cash. On an average day in 2012, French

bankers have been warning clients to

to make a written customs declaration

agents seized ¤300,000, 50 per cent

make tax declarations or risk having their

when carrying more than ¤10,000 in

more than the 2011 average, according

Swiss accounts closed. That has left many

cash was introduced in 2007 in the hope

to government figures. And the customs

would-be tax avoiders with little choice but to move their money around the oldfashioned way. “The main reason for the increase in seizures is simply the rising use of cash by fraudsters, including criminal

A dog with the Guardia di Finanza that has been trained to detect the ink on currency notes. March 2014

The Guardia di Finanza check out a car, whose driver was suspected of smuggling cash from Switzerland.



agency estimates that it catches only five per cent of the undeclared cash crossing the country’s borders. The precautions are growing more elaborate, and the finds more eyecatching. In February, inspectors on the fast train between Zurich and Paris stopped a Spanish traveller who was carrying ¤1.8 million ($2.5 million), made up entirely of ¤500-notes. Those bills, the largest denomination in circulation, have come to be nicknamed Bin Ladens for and illicit transactions. In Italy, cash-sniffing Labrador retrievers and German shepherds


their association with money laundering Uli Hoeness, the president of Bayern Munich football club, is part of a German tax investigation.

helped the financial police who prowl the country’s five main airports and its northern border to nearly triple their seizures of cash in 2012, to ¤124 million. The authorities were close to exceeding that figure this year by mid-autumn. Sergio Callipo, national secretary of the Italian customs agents’ union, said that much more cash slipped through. “Millions of passengers pass every week, and some officers and one or two dogs are not a real deterrent for smugglers,” he said. “We would need an army, and we are




just sentinels.” Some expertS believe that

FC Barcelona football start Lionel Messi (right) appeared in a Spanish court over alleged tax evasion.

widespread publicity about tax

they have been making more seizures

up a ring that was using a fake import-

investigations of well-known figures in

this year despite their ranks having been

export company to launder hundreds of

struggling countries is driving an increase

depleted by budget cuts. In Spain, most

millions of euros belonging to Chinese

in cash smuggling. Those ensnared

seizures are of undeclared money leaving

criminal gangs and wealthy Spaniards.

include Jérôme Cahuzac, the former

the country, but some are of cash on its

The network was smuggling cash out of

French budget minister; Uli Hoeness, the

way in.

Spain by train and car.

president of the Bayern Munich football

The bulk of the Spanish cash seizures

That case resulted in the arrests of

club in Germany; and the football star

are in euros – about ¤17.5 million

more than 100 people. But in most cases,

Lionel Messi of FC Barcelona in Spain.

so far this year – but some involve

people caught moving undeclared money

other currencies, including American

are dealt with more discreetly, in private

they feel like targets. A European aristocrat

dollars, Korean won and Chinese yuan.

judicial proceedings, and are fined rather

who did not want to be named, for fear of

Increasingly, it seems, intermediaries are

than imprisoned.

drawing more scrutiny, said that friends

being used to move the money, according

were sharing stories of Italian financial

to Eladio Barrado, a spokesman for Siat,

diplomat, news of the cash seizure leaked

police boarding docked yachts to check for

the main union representing employees of

out almost immediately to the French

undeclared cash in safes on board.

Spain’s national tax agency.

investigative website Mediapart. His case

Some wealthy travellers complain that

Like their French counterparts, Spanish customs agents and tax authorities say

In a prominent case last year, named Operation Emperor, the authorities broke

In the case of Boillon, the former

is pending before the National Judicial Customs Service. n Portfolio





Tel. +39 335 8394824



A.D. nAtAliA corbettA / fotogrAfiA mArio ciAmpi

made in italy




of this rice has nowhere to go, as Japanese

defended its 778 per cent tariffs

favour bread over their traditional staple.

ground 10 years ago, when Konsho first

on rice with a kind of religious

The government will soon raise subsidies

came to Niigata from a Tokyo office job

zeal. Rice is a sacred crop,

that encourage farmers to divert their rice

with the idea of starting an organic rice

to animal feed.

farm. Bureaucrats tried to block his land

the government has argued, not open to

leases. Local farmers threw rocks into

trade negotiations. Its farmers are not just

More enterprising farms face difficulty

defenders of a proud agrarian heritage, but

in expanding their plots or experimenting

his rice paddies and flung salt at him, an

form the nation’s spiritual centre as well.

with more sustainable cultivation, steps

insult reserved here for evil spirits. “The

that would let them better compete in a

idyllic rice farms most city people think of

free market.

are things of the past,” Konsho said. “Rice

Hardly, says Hiromitsu Konsho, a young organic rice farmer in the ricegrowing region of Niigata. Many Japanese

© 2014 New York Times News service

Echigo Farm almost did not get off the

or decades, Japan has

Konsho points to his Echigo Farm,

farming is collapsing, and not because of free trade.”

farmers have all but given up on their tiny

a rare upstart in rural Japan, whose

plots, he says. They earn most of their

organically grown rice sells at high-

income elsewhere, farming only part time

end retailers as far away as Tokyo and

Japan should open up its agricultural

and paying little attention to improving

Singapore. It faced difficulties at first, but

sector to join a proposed free trade

their crops.

now its rice has become a hit, fetching

group led by the United States, the

5,500 yen per kilogram – almost 10 times

Trans-Pacific Partnership, is opening

the market price.

up new rifts in Japan, rifts that defy

Yet, kept on life support by subsidies, production controls and tariffs, these farmers grow mediocre rice year after year, he says. Now an increasing amount

“It’s high time to revive Japanese rice farming,” Konsho said.

The recent debate over how much

traditional urban-rural divides. Increasingly, urban Japanese – and

SubSidieS Stifle

farmerS The Japanese are starting to question the tariffs and subsidies that protect their farmers from global competition, reports Hiroki Tabuchi. Portfolio


even some farmers – are questioning exactly what those tariffs protect. Japan has signed only a few limited free trade agreements, thanks to its tough stance on agricultural tariffs. Consumers pay more than twice the global average price for rice, and four times more for wheat. Still, Japan will not give in on farming tariffs, Akira Amari, Japan’s trade minister, declared at the latest talks for the Trans-Pacific Partnership in December, holding up talks at the eleventh hour. The TPP, which involves

Japan has signed only a few limited free trade agreements, thanks to its tough stance on agricultural tariffs. Consumers pay more than twice the global average price for rice, and four times more for wheat.

Shigeaki Okamoto, 52, who runs a successful fruit and vegetable farm in Aichi, in central Japan, says Japanese farmers can compete without tariffs. Unlike rice, Japan-grown vegetables face global competition, with most import levies between zero and three per cent. Still, four-fifths of the vegetables the Japanese consume are homegrown. Vegetable growers on average earn far more than rice farmers. Indeed, Japan’s stiff protections on rice no longer have much to do with protecting

the United States, Japan and 10 other

farmers, Okamoto says. They instead

Pacific Rim nations, would create the

protect a sprawling network of farm co-ops that has leeched off farmers and

world’s biggest free trade zone. Tens of thousands risk losing their

the government going to protect all the

stymied their efforts to innovate, he says.

livelihoods if farming tariffs are brought

small-time farmers scattered across the

That network, as Okamoto likes to say,

down, critics said at a recent national

country?” said Kazumori Yamazaki, a rice

is bureaucracy run amok. About 216,000

rally against the TPP in Tokyo. “How is

farmer from Ishikawa in central Japan.

people work in agricultural cooperatives

getty images

Most Japanese rice farms are smaller than a hectare.

March 2014



in Japan, under the umbrella of the Japan

In addition, the JA acts as financier

the JA would lose its commissions and its political clout.

Agricultural Group, or JA. There is one

to Japanese farmers, handling deposits,

co-op employee for every two full-time

loans and insurance in a side business

The rise of entrepreneurial farmers like

rice farmers. The central government’s 2.3

that has made it one of Japan’s largest

Konsho or Okamoto would have the same

trillion yen farming budget for the current

financial organisations.

effect because they do not rely on the JA for sales or equipment.

year is seven times the budget to oversee

Okamoto refused to work with the

the non-agricultural 99 per cent of the

Japan could make a full switch to

Japanese economy.

direct-income subsidies, like the US

JA in expanding his farm, focusing on

Much of that money makes its way to

and European Union have done, which

produce like strawberries, which he

these co-ops, charged with administering

would at least protect farmers against

is able to sell independently. “Japan’s

production controls on rice, as well as its

international competition without the

agricultural policy hasn’t made farmers

sales and distribution. Under that system,

need for tariffs. But that would mean

strong – it’s made them weak to the point

farmers receive subsidies in exchange for limiting the amount of rice they grow, which keeps rice prices high and small, and part-time rice farmers in business. The average Japanese rice farmer spends only about 30 days a year on agricultural work, and more than half of all farmers till less than a hectare each of land, according to the latest census data. The tiny farms find it impossible to achieve economies of scale. But that suits the JA just fine, because the organisation gets commission income from collecting and selling their crops –vv something larger, dedicated farms could do on their own. The JA also makes money selling small farmers the machinery, fertiliser and pesticides necessary for growing rice part time.

A worker carries a bag of processed rice at Echigo Farm, which grows high-quality organic rice.

Japan could make a full switch to directincome subsidies, like the US and European Union have done, which would at least protect farmers against international competition without the need for tariffs. But that would mean the JA would lose its commissions and its political clout. Hulled rice after processing, left, and rejected rice and small rocks, right, at Echigo. Portfolio

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of collapse,” he said. But the biggest problems lie in rice cultivation, Okamoto says. Most Japanese rice farmers have no incentive to raise the quality of rice they grow, because JA buys their harvest regardless of quality. Years of neglect have made Japanese rice not just more costly, but also lower in quality – and more dependent on fertiliser and pesticides – than much of the rice grown in the United States, Southeast Asia or China, industry insiders say.

Studies in Tokyo, said that at TransPacific Partnership negotiations Japan could be forced to offer concessions to

getty images

Kazuhito Yamashita, an agricultural expert at the Canon Institute for Global

the Americans on some farm products,

Employees taste freshly made Japanese sweets named Samuchi, which are made with Azuki bean and Mochi (rice cake).

like wheat and sugar. Japan could even

market in the real sense,” he said. “There

local farmers sceptical of Echigo Farm.

expand the small quota of rice imports it

are too many vested interests.”

But now he helps Konsho run it. “We’ve

accepts each year to appease the US and other rice producers.

been growing rice for the JA, not for the consumer,” Wakatsuki said. “Farmers need

generations in Aga, was initially among

to start taking the initiative.” n


“But Japan will never free up its rice

Toyokazu Wakatsuki, 47, a farmer whose family has farmed rice for

Japan’s Prime Minister Shinzo Abe drives a rice planting machine at a paddy field in Sendai. Portfolio





The Spanish government’s decision to pay less for solar energy is a huge blow to both small and large investors, reports Suzanne Daley.



So when the government passed a law

“It seemed so safe,” he said recently. “It was a government guarantee.”

Justo Cruz Rodríguez,

offering attractive rates for solar energy –

who runs a small business

and guaranteed them for the next 25 years

in Aguilas designing

– he mortgaged his house, his father’s house

its mind. It plans to pay less, a lot less.

signs, was looking for

and his workshop to install half a dozen

Under legislation that goes into effect this

a way to generate a steady, if modest,

rows of solar panels in his father’s garden,

year, it will drop its per-kilowatt-hour

pension for himself and his father.

with the idea of selling his excess electricity.

payment system altogether and effectively

But the Spanish government has changed

impose retroactive cuts in payments. It also plans to make solar power producers pay a charge on electricity they generate and use themselves, a measure that angry protesters have named the “sun tax.” Spain has good reason for wanting to take action. It is facing a growing deficit – about $40 billion now – because it has never passed on the true cost of producing energy to its consumers, a problem that has ballooned with the


economic crisis. If it does



not do something, that deficit will only grow, experts say. Energy experts across Europe are watching Spain’s actions closely, however, wondering if they amount to folly. Thousands of solar energy investors large and small will doubtless face insolvency, and perhaps just as worrisome, experts say, the new charges for those using their own electricity may set off a rush by owners of solar panels to find ways to sell or use their electricity without reliance on the national grid at all, further reducing its customer base. Nor is Spain’s abrupt U-turn likely to go “When a government changes the terms of existing contracts, that’s a bad move,” said Toby Couture, a solar energy consultant


over well with future investors, experts say.

The PS20 solar thermal tower in Andalucia will be capable of producing 300 mega-watts of electricity when the project is finished.

with E3 Analytics in Berlin, who believes that the government will have trouble when it wants to develop public-private partnerships to fund water treatment plants, highways or pipelines, for instance. “There are reasons we live by contract rules,” he said. “If you keep changing the rules of the game, then, after a while, your friends don’t want to play. The government has lost credibility.” Spain was once at the forefront of the solar energy movement. It barrelled into the renewable-energy business, winning over thousands of investors big and the country has already come close to the European Union’s goal of 20 per cent reliance on renewable energy by 2020. But experts say the government never


expected so much investment and never


small with its guarantees. Experts say

Angel Miralda poured his retirement savings into a small solar farm, encouraged by the Spanish government’s promises of stable returns.

The new government payment system

But no other measures are as drastic as

came up with a way of paying for it.

has left thousands of investors, like Cruz,

the reduction of payments to the nearly

When the economic crisis hit in 2008 and

51, in a state of shock. “I am going to lose

60,000 producers of solar power, 50,000

demand for energy went down, the deficit

everything,” Cruz said, standing near the

of which are small-time investors like

widened at an even faster rate.

panels he thought would make his old

Cruz, according to the Spanish Solar

age easier. “I will be homeless. At my

Power Union.

Spanish officials say they have no choice now but to reduce the payments, which were once offered to spur investment

age, homeless.” The government has proposed cuts to

“If we did nothing, the only two alternatives would either be bankruptcy

in solar energy but are now considered

other parts of the energy sector as well,

of the system or an increase of the price

overly generous, especially because

and has taken other steps to reduce the

to consumers of more than 40 per cent,”

the cost of solar panels has dropped

energy deficit, including asking Spaniards

said José Manuel Soria, the minister for

precipitously in recent years.

to pay more for the electricity they use.

industry, energy and tourism, defending

March 2014


the government plans shortly after they were announced last summer. The government’s plans have prompted

Under the new law, instead of the current per-kilowatt-hour fees, the government will offer a formula intended

stated that any future changes could affect only new installations. “The law was drafted in a very sure

angry accusations across the energy

to produce a 7.5 per cent return on

way,” said Piet Holtrop, a Barcelona

sector here. Solar energy producers feel

investment. The problem, experts say,

lawyer representing about 1,200 investors,

unfairly singled out and say more savings

is that the basis for determining that

ranging from individuals like Cruz to

might be squeezed from other electricity

investment is unclear, and the formula

small town councils. “The people who

producers. Spain’s other energy producers

looks likely to penalise those who paid

invested gave it some thought. They

are offering little sympathy.

more for their equipment, took out big

were not just putting their money into

loans or are paying high interest rates.

anything. It was a sound investment.”

They say the terms that the Spanish government was offering in 2007 were so

The Solar Power Union estimates a cut in

Several large investors have decided to

good that no one should have expected

income of 30 to 50 per cent for producers.

take Spain to the World Bank’s arbitration

Already, some investors are turning to

agency, the International Centre for

were speculators,” said Eduardo Montes, the

the courts. Their lawyers say the original

Settlement of Investment Disputes.

president of the Spanish Electricity Industry

law specifically guaranteed a fee of 58

Association, which represents traditional

cents for each kilowatt-hour for the next

questions on the subject. They are being

electricity producers. “It was not reasonable

25 years and guaranteed 80 per cent of

widely criticised for coming up with the

to expect it would stay that way.”

that for the years thereafter. It also clearly

new plan without consulting any of the

them to last. “Essentially, these investors

Government officials declined to answer





Jose Manuel Soria, Spain’s minister of industry, energy and tourism, is adamant that solar payments need to be cut.

affected parties and for changing their

the government had little trouble getting

mind about several components in the last

approval for its main proposals in

few months.

December, although many details will be clear only when new regulations are

“The government made a bad situation


worse by following a process that lacked consultation and transparency and instead

Justo Cruz Rodriguez, who runs a small business designing signs, stands at his solar farm in Murcia.

Some investors say they will respond

created confusion and uncertainty,” said

to the government’s plan by finding ways

David Robinson, an economist in Madrid

to become independent. Diego Nicolas,

who specialises in energy policy and who

who owns a car repair business in Murcia

is a senior research fellow at the Oxford

and installed solar panels in his garage

Institute for Energy Studies.

last year, said that he was considering investing in some wind turbines and a

But with a solid majority in Parliament,

generator and becoming self-sufficient. “I will be completely independent then, and not subject to their numbers game,” he said. But that option is not available to Cruz, whose business has suffered badly in the economic crisis. After the government first reduced his income from the panels in 2010 by capping the amount of electricity it would pay for, he renegotiated the terms of his loans. But he ended up with a higher interest rate and a longer term of repayment. He has already given up any dreams that the panels will contribute to his retirement. REUTERS

“I can’t go to the bank and say, ‘I am not

Workers remove solar panels after Spain’s government unveiled levies on green energy. March 2014

going to pay you anymore,’” he said. “But the government can just do what it likes? That does not seem right to me.” n




FRESH FOOD The use of industrial food is a growing phenomenon, but French legislators are fighting back with consumer protection laws, reports Liz Alderman.


IT DOWN AT A CUTE Parisian bistro and the chances are the onion soup, the paté and the boudin blanc set

before you were not prepared from fresh ingredients delivered that morning. Even though France is renowned as a world capital of gastronomy, these days, odds have grown that a savourylooking entree or dessert – especially at establishments near tourist attractions like the Eiffel Tower, Notre Dame or Montmartre – may have been at least partly prepared by an industrial food giant, frozen, then reheated in a kitchen. Even the bread, the French bread, may have been made in an industrial bakery. While this practice is taken for granted in the rest of the industrialised world, to



many French it is an astonishing affront to their very culture. The solution is just as French: Lawmakers are expected to soon approve a consumer protection law requiring restaurants to designate fresh dishes with a “fait maison,” or “homemade” logo. If a dish is unlabelled, some or all of it is Portfolio


presumed to come from an assembly line.

ON A recent morning at Le Petit Paris,

Castagnet recalled. “When people ordered,

a cosy bistro in the touristy Marais

they would pull out a bag of frozen

restaurants is a growing global

quarter, Alexandre Castagnet wrote out

lasagna, blanquette de veau or whatever

phenomenon,” said Daniel Fasquelle,

the day’s lunch specials on a blackboard:

was on the menu, pop it in the microwave

a National Assembly lawmaker among

cauliflower velouté, country ham and

and serve it on a plate,” he said.

those pushing for the label. “But for

other dishes made only with fresh

France, we’re talking about our heritage.

ingredients delivered that morning. But

choice,” said Hubert Jan, a representative

If we don’t do anything, in 10 years, real

before he and a partner took ownership,

of the French restaurant and hotel union

restaurants will be the exception.”

the bistro was serving very different

UMIH. Labour costs including taxes

fare. “The previous owners used factory-

have increased 40 per cent since 2000,

made foods, stored in two huge freezers,”

accounting for about 45 per cent of a

“The use of industrial food in

As is often the case in France, however, resolving the issue is not so simple.

“Businesses are making an economic

Restaurant owners behind a fresh-food movement say the government has not gone far enough. They want menus to note every frozen item, citing the right for consumers to know after a European food scandal last year in which frozen beef products were found to contain horse meat. Pushing back is an influential coterie of agro-food companies. Although the quality of frozen foods has vastly improved, they are concerned that singling them out on a menu could cut into a lucrative business that is expanding as dining habits shift and restaurants seek to improve margins as labour and food costs rise. The stars of French cuisine like Alain Ducasse and Joël Robuchon are offering their own “Restaurant de Qualité” seal for establishments that meet higher

Metro and other influential industrial food businesses are pushing back against a proposed consumer protection law.

standards for cuisine and atmosphere. Only 10 per cent of France’s 100,000 restaurants would qualify, since most “only do industrial cooking,” Ducasse said while unveiling it last year. The rest of the world may think the French are gastronomes, but about onethird of French restaurants acknowledged using ready-made meals in a recent anonymous survey conducted by Synhorcat, the French hotel, restaurant and café operators union. But Xavier Denamur, a leader of the fresh-food faction who owns five restaurants in the Marais, estimates the figure is closer to 70 per cent when ingredients like frozen fish are part of an otherwise homemade dish. March 2014

A cook cores fresh apples for a pie in the kitchen of Le Petit Paris, a bistro which serves only fresh-made meals.


Kodad Chafik, an assistant of the chef, prepares fresh scallops at Les Philosophes restaurant.

restaurant’s costs, while raw materials prices are rising. In addition, “there is a dearth of skilled kitchen workers and people aren’t willing anymore to rise at 2 am to make bread or pastries.” The modern French diner is more pressed for time: Most have cut back to two sit-down meals a day, from three. And last year, for the first time, more money was spent in fast-food chains than traditional restaurants, 54 per cent of the ¤34 billion French market. For restaurants eager to maintain

The rest of the world may think the French are gastronomes, but about one-third of French restaurants acknowledged using ready-made meals in a recent anonymous survey conducted by Synhorcat.

a competitive edge, padding a menu with ready-made dishes is economically attractive – even if no one dares to admit it, Jan said. One of the biggest tell-tale signs is a menu with a large range of choices. “If the menu is gigantic, the kitchen would need to be as big as the restaurant for all the food to really be fresh,” Jan said. “I have no interest in talking about it,” said Bernard Grateloup, who runs the Café de la Poste in Carmaux, in southern France. He was one of several owners who refused to speak after earlier telling French media that they bought frozen meats, vegetables or other dishes because the quality was good. THE BIGGEST players in industrial food see a growing market. They include Davigel, one of Europe’s largest food providers, owned by the Swiss giant Nestlé; the Brakes Group, owned by the private equity firm Bain Capital; Bonduell, the world’s largest purveyor of prepared vegetables; and the German wholesale giant Metro.

Xavier Denamur, a leader of a fresh-food faction who owns five restaurants, at his restaurant Les Philosophes.

Castagnet said representatives of almost all the companies had visited his bistro Portfolio



and others, bearing glossy catalogues and profit calculations for items. He said a Brakes salesman recounted how a 50-cent factory-made molten chocolate cake was made to “look homemade,” and could be microwaved and sold for ¤6. If enough menu items were replaced, he was told, he could even save on the cost of an employee. A spokesman for Brakes declined to comment. Castagnet rebuffed the arguments. “If you run your kitchen right, it is just as costeffective to use fresh products,” he said. That may be so – but only if restaurants can charge higher prices. At Denamur’s nearby flagship restaurant, Les Philosophes, the cost of workers preparing meals from scratch is passed on to consumers willing to pay more for quality.

A frozen food catalogue at Les Philosophes restaurant.

Duck confit is ¤25 ($34), compared with about ¤16 at a corner cafe. Nearly 60 per cent of Davigel’s ¤783 million in sales in 2012, the latest figures available, came from independent restaurants in France, where it has 66,000 accounts. The Brakes Group had annual sales of ¤630 million in 2012, up six per cent from 2011. The companies employ chefs to craft alluring offers – Brake, for instance, has a partnership with Ducasse to enhance quality and create new recipes. Its lush catalogue includes 3,500 items like frozen foie gras with caramelised apples or a precooked kit for gourmet beef stew with sous-vide meat, vegetables and broth.

The modern French diner is more pressed for time: Most have cut back to two sit-down meals a day, from three. And last year, for the first time, more money was spent in fast-food chains than traditional restaurants, 54 per cent of the €34 billion French market. March 2014

Baskets of fennel await preparation at Les Philosophes, a restaurant serving only freshmade dishes.

Denamur, the activist, is concerned

chef uses frozen onions to save time and

that many such dishes contain additives

costs, does that really need to be pointed

not found in fresh foods. One morning

out?” said Didier Chenet, the president

at Les Philosophes, he brandished an

of Synhorcat.

empty container that had held salt cod

For the industry, the answer is no.

purée, which he said he had found in a

“When you identify something as frozen,

rival restaurant’s trash bin. The ticket

you put it in the head of the consumer

was stamped “like homemade,” but it also

that it might be less good,” said Ignace de

listed chemical preservatives.

Villepin, the marketing director of Davigel,

But the argument isn’t really about preservatives; it’s about origins. “If a

said. “That is wrong, but they may be less inclined to choose it,” he said. n




he feisty owner of a

Greeks Promote

small family business that makes detergents in Alonia

‘Social’ Economy

has never had time for anti-

capitalist firebrands. So he was “suspicious and sceptical” when he was approached by left-leaning activists campaigning to purge “profiteers” from the market. But, struggling to keep his business afloat under the weight of unpaid invoices and constant demands for bribes, the owner, Savvas Mavromatis, decided to give their proposal a shot. He started selling his products directly to consumers for cash at fixed prices through a non-profit collective, instead of shops and traders as he had always done. Fourteen months later, he credits the group with saving his enterprise from a Greek economic meltdown that rivals the Great Depression. “We are in the middle of a terrible crisis and are just looking for solutions,” said Elias Tsolakidis, the driving force behind the no-middlemen movement here in northern Greece, a small, quixotic but surprisingly successful effort to redefine the terms of commerce. “We don’t have a magic wand. We are not communists and we are not capitalists, but we are trying to help people survive.” In their search for solutions, Greeks are tinkering with a new kind of economy with little precedent in modern Europe. The collapse of the Greek economy is challenging not only the survival of Greeks, but also of some of the basic mechanisms of capitalism in a nation where the economy has shrunk by about In the view of widening numbers, Greece’s market-driven system has broken down, a victim of endemic corruption, budgetary mismanagement by the state, and the overbearing demands of global financial markets. In response, experimental ventures like the one


© 2014 New York Times News service

25 per cent since 2008.



Mavromatis joined have sprung up on the margins in towns and cities across

Cutting out middlemen by selling directly to consumers illustrates the problems inherent in the Greek economy, reports Andrew Higgins.

Greece. While they may not offer a longterm solution, and are too small to alter the overall shape of the economy, they represent a bottom-up effort to address an economic crisis whose closest antecedent may be the aftermath of World War II. Attacks on modern profit-driven capitalism are hardly new in Greece, where Syriza, a coalition of radical leftist forces, narrowly lost the last national election in 2012 and, according to opinion polls, is now the country’s most popular party. Its leader, Alexis Tsipras, decorates his party’s office in Athens with a poster of revolutionary icon Che Guevara. But Syriza, like many other left-wing parties across Europe, has had a hard time matching fiery rhetoric against “neoLiberal” economics with concrete actions to ease economic pain, including 27 per cent unemployment. It has focused mostly on denouncing job cuts, particularly in the bloated public sector, and attacking austerity measures imposed by Greece’s international creditors in return for $328 billion in bailouts.

Syriza, like many other left-wing parties across Europe, has had a hard time matching fiery rhetoric against “neo-Liberal” economics with concrete actions to ease economic pain, including 27 per cent unemployment. It has focused mostly on denouncing job cuts. March 2014

As the left remains deeply committed

economy, starting with what became

to much of the status quo, the task of

known as the “potato revolution,” a now

answering calls for a new economic order

nationwide movement that has slashed

and bringing some relief to Greece’s

the price of potatoes by getting farmers to

misery has fallen to people like Tsolakidis,

sell directly to customers.

who organises the ranks of the “no

In addition to its regular “no

middlemen” movement in his region

middlemen” markets, held in parking lots

through a local non-profit collective called

across the region, the Voluntary Action

the Voluntary Action Group of Pieria.

Group operates a free health clinic staffed

The movement seeks to cut out wholesalers, shop managers, state bureaucrats or anyone else between

The movement seeks to cut out wholesalers, shop managers, state bureaucrats or anyone else between producers and consumers, and who once took a share of profits and added to the costs of goods.

by volunteer doctors and a pharmacy stocked with donated drugs. Christos Kalaitzis, 53, a convert to

producers and consumers, and who once

the cause who grows kiwis, olives and

took a share of profits and added to the

chickpeas with his wife on their farm

costs of goods. Instead, Tsolakidis’ group

near Mount Olympus, acknowledged

runs a website where orders are placed in

that he, too, had initially been sceptical

advance and then distributed at markets

but got so fed up with not being paid by

to customers for a fixed price paid in cash.

big wholesalers and exporters that went

should I sell to big companies if their

bust after taking his products, that he

cheques bounce? If the free market in

took the chance.

Greece worked properly, none of this

His group takes a small cut to cover expenses, but it does not pay salaries to its members, more than 3,500 volunteers

“The goal is not to destroy the old

would be necessary.”

who have jobs or are unemployed. It is

market system but just to slow it down

a small link in a long chain of ventures

and get it to change,” Kalaitzis explained.

and avoiding appeals to the state for help

seeking to create a parallel “social”

“Maybe this is a bit romantic, but why

– the customary approach of many Greek

By cutting out marketplace middlemen

getty images



Christos Kalatzis, who produces chickpeas and other products, sells direct to consumers with the help of a volunteer group.

Greece has an unemployment rate of 27 per cent, with large cuts in the public sector. Portfolio


leftists – the activists say they hope to address the passive despair felt by many Greeks, who may need a generation or more to climb out of their economic hole. “This is a whole new concept for Greece,” said Fiori Zafeiropoulou, an expert on ways to mix social goals and business initiatives who advised officials drafting a new law that gives legal status to “social cooperative enterprises,” entities that combine business interests and social benefits. Unlike left-leaning activists, however, she does not want to upend market forces, only to make them better serve the underprivileged. Progress, she said, has often been slow because “in Greece there is a problem, and the problem is called corruption” – what she defined as a whole culture that revolves around getting favours from the state, as well as demanding bribes and kickbacks. Mavromatis, the detergent maker, said that the purchasing managers at

Savvas Mavromatis’ detergent business has flourished since he started selling directly to consumers.

supermarkets, whether owned by Greeks

Greece, where it is distorted by corruption

or foreigners, all demanded bribes just

at every level, public and private.

to agree to a meeting so he could present

no-middlemen markets. While he said

to ensure good display for his goods, he

he gets a slightly lower price than before,

said. The price varied depending on which

he no longer has to worry about paying

shelf he wanted his detergent placed,

bribes or getting cheques that bounce.

with the shelf near the floor costing

Struggling families, meanwhile, get to buy

less. On average he paid about $1,300 a

household detergent, fruit and a host of

transaction, plus gifts at Christmas and

other goods at a fraction of the normal

other holidays.

market price.

He said that when he started selling

Flush with cash for the first time since

through the no-middlemen group, “I had

Greece’s economy went into a nosedive

been dealing with supermarkets for so

in 2008, Mavromatis recently bought

long I kept waiting for them to ask for

a new Mercedes truck to transport his

money under the table. But nobody ever

detergents from his factory in a village

asked and I have not paid anything.”

near the town of Katerini, the regional

“I could not understand why they were

March 2014

Today, Mavromatis is a regular at the

his products. They also asked for money

capital, and has expanded his product

doing all this for free,” Mavromatis, 46,

line to include toilet paper. Even after

added. “I was very suspicious and kept

six straight years of recession, he said,

thinking: ‘Where is the catch?’” He said

“People need to wash clothes, do their

he believed in the free market, but not in

dishes and go to the bathroom.” n

ROGER FEDERER ARTIST Enjoy responsibly –





Lying at the heart of the ancient Indian state of Rajasthan, Jodhpur has attracted travellers for centuries. It is home to polo – the ‘Game of Kings’ – and some of the country’s most majestic monuments, reports Nick Rice. THE PANORAMIC VISTA AT

The Mehrangarh Fort is one of several

Named after the Indian ruler Rao

Mehrangarh – the fort of the sun – is an

essential places to visit in Jodhpur, the

Jodha, Jodhpur is universally known as

assault on the senses. A concrete blue sea

second largest city in the Indian state of

the ‘Blue City’ thanks to the multitude

of dwellings stretches to the horizon, as

Rajasthan. Founded in 1459, Rajasthan is

of houses painted in various hues of

though the sky is being reflected on the

significant in Indian history as it formed

indigo. The origin of the blue houses

earth below. As the eye skirts across a

the bedrock of the Indus Valley Civilisation,

bears resemblance to what the Western

sprawling desert metropolis that recently

widely acknowledged as one of the most

world might refer to as ‘Keeping up with

topped a million residents, the cacophony

ancient human civilisations on the planet.

the Joneses’. The widespread daubing of

Due to its central location in the state,

blue paint is connected to the prevailing

of noise being created in the faraway distance is carried on the wind up to this

Jodhpur is a popular travel hub and

caste system in India, and it began when

staggering perch atop a hundred foot cliff.

attracts a huge amount of tourists, both

members of the priestly class, known as

The British writer Aldous Huxley said

domestic and international. The whole city

Brahmins, painted their homes to signify

of this phenomenon, “From the bastions

emanates outwards from the 10 kilometres

their own perceived elevated status.

of the Jodhpur Fort one hears as the gods

of city walls surrounding Mehrangarh.

What they didn’t count on was the rest

must hear from Olympus, the gods to

Like a mirage in the inhospitable Thar

whom each separate word uttered in the

Desert, Jodphur glistens in the almost

innumerably peopled world below, comes

year-round sun.

up distinct and individual to be recorded in the books of omniscience.” Although I wouldn’t go as far as to say one can hear snippets of conversation, or any discernible words for that matter, it is still a curious deception to hear the daily racket and bustle from so remote a standpoint.

March 2014




of the population following suit, and the custom still lives on. However, today the

to buy it. Very eager! And persistent. When it comes to accommodation there

‘haveli’ can be a good option. These multifloored mansions are constructed with a

locals are more likely to cite blue as being

is also a great deal of choice – a somewhat

central courtyard, and many families and

an effective insect repellent or coolant

daunting range of over 100 guesthouses,

businesses can be based within, meaning

as motivation for painting their home.

all within close proximity of each other.

they are often lively places.

Regardless, the effect is striking and

Unsurprisingly the competition is fraught

people flock to see it.

as locals vie for your custom. An old

of Jodhpur’s city centre can be found

traditional Rajasthani building known as a

in areas such as Navchokiya. Slightly

Respite from the unremitting activity

TOURISM IS the second largest industry of Jodhpur after handicrafts. Shopping is a major attraction and in the warrens of medieval streets, amid the roaming sacred cows, constant blare of motor horns and the pungent aromas of sweet and foul, visitors can find all manner of textiles, souvenirs and jewellery. On a larger scale the city has a thriving export sector, with an estimated 200,000 workers sustaining a $200 million furniture industry. The landmark clock tower in the Sardar Market serves as a good orientation point when exploring the old city. This is the heart of the action and a degree of patience will serve you well. There is a lot for sale – and a lot of people eager for you Jodhpur is also known as ‘the Blue City’ due to its painted houses.

Dancers perform in traditional colourful saris at the Mehrangarh Fort.



further west, this part of the old city is

and has converted it into a five star hotel

poised tigers lining sweeping staircases. A

equally fascinating but less overwhelming.

and museum run by Taj Hotel Resorts &

subterranean spa offers modern creature

South of the old city in the more recently

Palaces, with visitors paying a nominal

comforts whilst a stunning outdoor pool,

developed neighbourhoods there is more

fee to see the grounds and museum, while

neat tennis courts, and squash courts

space and less hustle. But for real peace

restaurant and hotel guests have the

cater for active guests.

and quiet a visit to the other great edifice

freedom to explore. Walking through the

in Jodhpur is a must.

vast marbled lobby the sheer scale takes

for the Maharaja and aside from the

a while to process. Taxidermy decorates

conversion of his own home into a hotel

the walls, with roaring leopards and

and museum, he has provided leadership

ENCIRCLED BY 26 acres of

Tourism has been a major concern

meticulously maintained gardens, the Umaid Bhawan Palace is one of the largest private residences in the world and the last of the great palaces of India. It was built between 1928 and 1943, both as a symbol of a progressive Jodhpur and a way to provide people with work during periods of struggle and drought. The palace was designed by Henry Lanchester, the lauded Edwardian architect, and named after Maharaja Umaid Singh, grandfather of the present Maharaja of Jodhpur. This stunning sandstone monument was conceived on a grand scale, boasting 347 rooms, and combines Eastern and Western architectural influences. The present Maharaja, His Highness Gaj Singh II, still resides at the palace

The huge Umaid Bhawan Palace was built between 1928 and 1943.

The present Maharaja of Jodhpur, His Highness Gaj Singh II, has done a lot to promote tourism. March 2014




It was a tightly fought contest at the final of The Royal Salute Maharaja of Jodhpur Golden Jubilee Cup.

Johannes Huebl, a big name in the modelling world, added some glamour.

IPG Bedla was the winning team at this year’s Royal Salute Maharaja of Jodhpur Golden Jubilee Cup.

to the innovative movement of ‘Heritage

his palace. Portfolio had the good fortune

the action would take place. In the same

Hotels’ in Rajasthan and the neighbouring

of being invited to the most prestigious

car with me was Malcolm Borwick, one

states, which is positively influencing

event of the year – The Royal Salute

of England’s leading professional polo

tourism and conservation in India.

Maharaja of Jodhpur Golden Jubilee Cup.

players, and he whetted an already keen

The Maharajah is not secreted away in

Royal Salute was originally created in

appetite saying, “As an international

a private corner of the palace either, but

1953 by Chivas Brothers as a tribute to

polo player you get to play in some

is often seen around, especially at polo

Her Majesty Queen Elizabeth II upon her

pretty special places, but the foothills

events. Polo is huge here and Jodhpur is

coronation. The brand has been a market

of the Umaid Bhawan palace is really

often referred to as the ‘Cradle of Polo’.

leader ever since and the Royal Salute

spectacular. India makes for an incredible

The Maharaja is the Ambassador and

World Polo tour has a presence in every

cross-cultural stage to showcase polo,

Founding Patron of the Jodhpur Polo &

major region globally.

immersed in magnificent style with

Equestrian Institute, and he rejuvenated

The journey to the pitch was a rare

the sport back in 1997 when he created

treat as a retinue of vintage motorcars

impressive new grounds in the shadow of

arrived at the palace to drive us to where

majestic company.” It was a riveting match, and despite the fact Borwick played a great game, his Portfolio


A vintage car from the Maharaja of Jodhpur’s collection.

team were narrowly beaten. There were no damp spirits though, and Neil Macdonald, the global brand director for Royal Salute, summed up the day concisely saying, “There is no other setting quite like it. This is a great way to round off a very busy year of Royal Salute World Polo events.” PLUS, HOW could anyone be down at heart when the evening was yet to unfold at the exclusive Royal Salute Golden Jubilee Ball – which was back at the Mehrangarh Fort. By night it was no less impressive… the expanse of blue buildings gave way to an electric orange lake of glimmering beauty. The fort towers upwards into the stars, its serrated battlements glowing red

The Royal Salute Golden Jubilee Ball was held at the Mehrangarh Fort.

against the inky sky. The words of another English writer, the Bombay-born Rudyard Kipling, (the first English-language writer to be awarded the Nobel Prize for Literature in 1907, and at 42, still the youngest recipient to this day) describe the fort perfectly. “The work of angels, fairies and giants... built by Titans and coloured by the morning sun... he who walks through it loses sense of being among buildings. It is as though he walked through mountain gorges...” n March 2014

Polo ponies are unique horses that combine the traits of a number of breeds.





Love For


South Korea has become the largest consumer of Spam outside the US, where it’s not only a culinary staple but also a tasteful gift, reports Choe Sang-hun.



Holiday gift sets of Spam at Lotte Department Store in Seoul.


ith the Lunar New Year holiday that passed, Seoul’s increasingly well-

heeled residents scoured store shelves for tastefully wrapped boxes of culinary specialties. Among their favourite choices: imported wines, choice cuts of beef, rare herbal teas. And Spam. Yes, Spam. In the United States, the gelatinous meat product in the familiar blue and yellow cans has held a place as thrifty pantry staple, culinary joke and

South Korea has become the largest consumer of Spam outside the United States, according to the local producer. And that does not include the knockoffs that flood the market.

kitschy fare for hipsters without ever

© 2014 New York Times News service

losing its low-rent reputation. But in

March 2014

economically vibrant South Korea, the

States, according to the local producer.

pink bricks of pork shoulder and ham have

And that does not include the knockoffs

taken on a bit of glamour as they have

that flood the market.

worked their way into people’s affections.

Spam’s journey from surplus meat

“Here, Spam is a classy gift you can

shoulder in Minnesota to the centre of

give to people you care about during

the South Korean dining table began at

the holiday,” said Im So-ra, a saleswoman

a time of privation – hitching a ride with

at the high-end Lotte Department

the US military during the Korean War

Store in downtown Seoul who proudly

and becoming a longed-for luxury in the

displayed stylish boxes with cans of

desperate years afterward, when American

Spam nestled inside.

troops stayed to keep the peace.

South Korea has become the largest consumer of Spam outside the United

“PX food was the only way you could get meat,” said Kim Jong-sik, 79, a




South Korean veteran who was stationed

with eggs, and a mixture of little cubes of

at US bases in the 1950s. “Spam was

Spam, sour kimchi and rice (stir-fried and

a luxury available only to the rich and

preferably served with an egg sunnyside


up on top) is a favourite snack Korean

These days, it is sometimes easy to forget the US military presence that

women say they crave when pregnant. And then there are the gift boxes, which

has lasted for decades. The sprawling

have helped loft Spam’s sales in South

military base in the heart of Seoul, the

Korea fourfold in the last decade to nearly

capital, is shrinking in deference to

20,000 tons, worth $235 million, last

Korean sensibilities, and even the famed

year. The local producer, CJ Cheil Jedang,

district of Itaewon, once a warren of

said it released 1.6 million boxed sets this

bars for servicemen, is now a stylish

holiday season alone, boasting of contents

neighbourhood with a more international

that make Koreans “full of smiles.”

feel. But Spam remains ubiquitous, so

An exact comparison with American

much a part of the fabric of culinary life

sales remains elusive. A spokeswoman for

here that many young people have no idea

Hormel, the US maker, said the company

of its origins, even as they order “military

does not report individual product sales,

stew,” or budaejjigae.

noting however that Spam remains a

Restaurants that specialise in the stew –

“high-quality kitchen staple made of 100

a concoction that often mixes Spam with

per cent pure meat that the world has

the more-indigenous kimchi – dot urban

come to know and love.”

South Korea’s love affair with the former PX food has so far been enduring. It grew in popularity even through the years of a gradual reduction in the size of the US forces in South Korea and even when student-led anti-American protests rocked the country, some of them set off by the foreign military presence.

That may be. But George H. Lewis, a

of Popular Culture that Spam won its

in the convenience of opening a can and

sociologist at the University of the Pacific,

“highest” status in South Korea. Here,

serving a breakfast of pan-fried Spam

noted in a 2000 article in the Journal

he observed, Spam not only outranked

alleys. Some harried Korean mothers revel

Ahn Myeong-sook prepares Johnson’s Stew, which includes Spam, at the kitchen of her restaurant.


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International and Area Studies. “Given Spam’s introduction to South Korea through the US military, it enjoyed an association with prosperity and nutritiousness during an earlier era.” Kim, the army veteran, is of the generation that remembers first-hand the painful origins of the product’s popularity. “In those early years, children scavenged through American Army Dumpsters, collecting Spam, sausage, half-eaten hamburger patty, bacon, bread, anything edible, and sold them to restaurants,” he said. The stew that came to be known as budaejjigae was born that way, as people cleaned the castaways and began mixing them, or black-market US military Factory workers check Spam tins before they are packed at CJ Food Factory in Jecheon, Chungcheongbuk-do province, South Korea.

During a recent lunch, Bada was packed with well-dressed young Koreans. Sung Min-kyeong, 35, an interior designer dining at the 14-table restaurant, said she could not understand what Americans found so funny about Spam while they loved hot dogs.

rations, with kimchi. (The dish is also sometimes called “Johnson’s Stew” to honour President Lyndon B. Johnson, who visited in 1966 and promised continued US economic aid.) Kim and his wife now run Bada Sikdang, one of the most popular budaejjigae restaurants in Seoul. One past high-profile client: President Park Geun-hye, whose framed signature hangs on the wall. During a recent lunch, Bada was packed with well-dressed young Koreans. Sung Min-kyeong, 35, an interior designer

Coca-Cola and Kentucky Fried Chicken

obsession, some richer South Koreans

dining at the 14-table restaurant, said she

in status, but was given as a gift “on

turn up their noses at the canned product

could not understand what Americans

occasions of importance when one wishes

(which, incidentally, lent its name to

found so funny about Spam while they

to pay special honour and proper respect.”

those irritating, unwanted emails known

loved hot dogs.

For a time, Korean children even

as spam).

Even some who do not consider themselves big fans said that though they

considered it cool to have pan-fried slices

But South Korea’s love affair with the

of Spam in their school lunchboxes. (Now,

former PX food has so far been enduring.

did not live through the war, they have

it is at least not uncool.) Its cachet was

It grew in popularity even through the

their own fond memories of Spam as a

obvious in a recent television commercial

years of a gradual reduction in the size of

fixture of their childhoods.

featuring movie and television stars. In it,

the US forces in South Korea and even

a man makes a romantic dinner invitation

when student-led anti-American protests

had been a revelation when her American

that his picky girlfriend cannot refuse:

rocked the country, some of them set off

brother-in-law once looked shocked to see

How about slices of pan-fried Spam over a

by the foreign military presence.

her buy Spam and told her it was “junk

steaming bowl of rice?

So what explains the staying power?

One, 40-year-old Seo Soo-kyung, said it

food for the homeless in the US.”

“Spam maintains a mythical aura

“To me, Spam was just a tasteful and

ThaT is not to say everyone here has a

on the Korean market for reasons that

convenient food that mother used to cook

soft spot for Spam. At a time when there

escape many,” mused Koo Se-woong,

for us,” she said. “The thing about Spam is

is no shortage of fresh meat and organic

a lecturer of Korean studies at Yale

that it goes marvellously well with kimchi

foods have become a bit of a national

University’s MacMillan Center for

and rice.” n Portfolio









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T IS 3 PM, AND OUTSIDE another brilliant Los Angeles afternoon beckons. But Olga Kay has drawn her blinds, leaving her living room in a semi-darkened haze.

She has been up since 8 am, though she

is still in her pyjamas and has ventured outside only briefly to walk her dog, Roxy. Otherwise, Kay sits cross-legged in front of a glowing screen, offering cheerful commentary as she navigates her way through the video game Grand Theft Auto 5. The video game marathon is not a diversion; it is her job. Kay, 31, is part of an emerging group of entertainers who are trying to make a living by producing content for YouTube. On this particular weekend, she is filming a week’s worth of segments for her online game channel, because during the week she must feed the rest of her network. Yes, network. With neither writers nor producers, she has made herself the star of five channels on YouTube that together attract roughly one million subscribers. That following helps her earn money through advertising, sponsorships and merchandise like Olga Kay knee socks. It’s a living. But it’s a frantic one. Kay, who started her entertainment career as a juggler in Russia, is a juggernaut who has turned everything in her life into material for her videos. Her living room has become a studio for Olga Kay Games, the hall space outside her kitchen is used as an editing suite, and her bedroom has been wallpapered in pink and white stripes to create a background for the taping of Mooshville, on which she gives makeup and fashion tips to her fans, who are largely young and female. There is even a channel featuring Roxy, her Shih Tzu.


In total, she posts at least 20 videos a week to her main channels – a punishing pace. “It is very stressful,” she says. “Every morning I wake up and think, ‘What can I do that’s different that will keep me relevant for another year?’” Kay is in the vanguard of a do-it-yourself entertainment revolution, which YouTube


ON YOUTUBE YouTube has been providing resources and incentives to help amateur video makers step up their game, but it’s a tough way to earn a living, reports Leslie Kaufman. Portfolio

Essentials Media

Olga Kay is part of an emerging group of entertainers who are trying to make a living by producing content for YouTube.

has been nurturing since its inception in

revenue from their videos. The company

Angeles to amateur cooks working out

2005. Once an outlet for zany antics and

had allowed some ad sharing as early as

of small kitchens in SĂŁo Paulo.

animal videos, YouTube has more recently

2007, but the simplicity of the new model

sought to attract the kind of high-quality

set off a gold rush: All creators have to do

more than 100 content producers grants

programming that advertisers will want

is click a button agreeing to let Google sell

of roughly $1 million apiece to improve

to buy against. To do that, it has been

advertising that will appear on their site

the quality of their videos. And it has

providing resources and incentives to help

in return for a share of the revenue. Today,

built huge, modern production facilities

amateur video makers step up their game.

the company says, there are a million

that are open for no charge to YouTube

“partners� trying to make money off the

contributors in Los Angeles, London and

programme that would allow content

platform, ranging from venture-backed

Tokyo. (A New York studio will open at

producers to share with YouTube the ad

enterprises that fill warehouses in Los

the end of 2014.)

In 2012, YouTube announced a partners

March 2014

That same year, the company gave



The message to aspiring video makers was clear, and seductive: Come to YouTube, attract an audience, build your brand and even make real money. Jason Calacanis, who received a $1 million YouTube grant to encourage his company to produce more of its popular cooking and lifestyle videos, set off a minifirestorm last summer when he published an article explaining why he thought YouTube’s terms were unfair. Titled “I Ain’t Gonna Work on YouTube’s Farm No More,” after a Bob Dylan song, the article Kay earns between $100,000 to $130,000 a year, but most of it is reinvested in her business.

called YouTube’s take an “absurd” tax. “We were huge fans of YouTube,” he said in a recent email exchange, “but we are not creating content anymore because it’s simply not sustainable. YouTube is an awesome place to build a brand, but it is a horrible place to build a business.” Relaxing in a swivel chair in YouTube’s mod headquarters in downtown Los Angeles, Robert Kyncl, the company’s head of content and business operations, acknowledged the fundamental tension built into the YouTube business model. Yes, he said, ad rates are declining and will probably drop even further in the near future as more people post material. But Kyncl is unapologetic.

The YouTube production centre is open for no charge to YouTube contributors, enabling creators to build their brand in hopes of earning viewership and attracting advertisers.

“No other platform has invested in video delivery like we have in terms of ad force and technology,” he said. “There are huge

The message to aspiring video makers

KAY, WHO has been slogging away since

amounts of people behind it and costs.” Google, which has owned YouTube since

was clear, and seductive: Come to

2006 to be in this elite group, says she

YouTube, attract an audience, build your

has earned from $100,000 to $130,000

2006, has put its worldwide advertising

brand and even make real money.

in each of the last three years. And while

sales force of 12,000 behind the platform.

that’s a good income, she puts much of

Kyncl also cited the investments that allow

wealth, remain elusive. YouTube is

it back into her business, investing in

for high-quality video uploading from

vague on its numbers and says only that

merchandise, equipment and staff.

all over the world, even on cellphones or

But success, let alone stardom and

thousands of channels, among the million

Then there is YouTube’s cut of the profits.

or so that collect revenue directly through

The company would not provide details, but

the partners programme, earn at least six

content creators say the company takes 45

figures in revenue.

per cent of the ad revenue.

other mobile devices. All of this has made YouTube more attractive to A-listers. As a result, once-wary advertisers are pouring in. In 2013, YouTube attracted Portfolio

Essentials Media all of Advertising Age’s 100 top spending

aren’t so sure that the deal makes sense

brands. The company’s ad revenue for

for them financially.

last year, according to eMarketer, totalled

Olga Kay grew up in rural Russia until

about $5.6 billion, up 51 per cent from

her family ran out of money and she

2012. (By comparison, CBS, the most-

went to work for a circus. She learned to

watched network and three-quarters of

juggle and eventually got a visa to come

a century old, reported $8.5 billion in

to the United States to join the Ringling

ad revenue in 2012, the last full year for

Brothers and Barnum & Bailey circus.

which data is available.)

She began to get work in commercials

It’s a lot of money, but it is spread so

– for example, juggling glasses in a

thinly among the many content providers

Smirnoff Vodka ad. In 2002, she moved

that an increasing number are saying they

to Hollywood, looking for a career in

Korean singer Psy earned $8 million from his one billion YouTube hits.

show business. At the time, YouTube was a burgeoning phenomenon, and Kay was sucked in. In 2006, she began a video blog Crew members shoot a segment of The Next Great Starship, a reality-based competition series, at the YouTube production centre in Los Angeles.

about her daily life and soon had tens of thousands of followers. Currently, she says, more than one million people, generally female and 13 to 21 years old, subscribe to all her channels combined – which means they have clicked a button asking to receive notice when she posts something new. That kind of traffic gives her a strong base for pre-roll ads, but not enough to make up for declining rates overall. The problem is worsened by the fact that fat sponsorship deals for promoting products directly are increasingly rare – and even when they come through, they are not as lucrative as they seem. “We are underpaid,” Kay says. “We are


not only coming up with the commercial

Big sponsorship deals for promoting products are becoming rare. March 2014

concept and tapping into a loyal audience, we are also doing marketing. We are doing all of these jobs for a relatively small fee.” n





Industry Versus AgrIculture

A pool of water next to a lead factory in Songbai Township, China.



Chinese officials are becoming increasingly worried about the industrial pollution of agricultural lands, which is affecting food safety, reports Edward Wong.

The farm-To-Table process in

released the results, adding to the fear and

China starts in villages like Chenjiawan

making it more difficult for most Chinese

in the agricultural heartland. Food

to judge what they eat and pinpoint the

from the fields of Ge Songqing and her

offending factories.

neighbours ends up in their kitchens or

An alarming glimpse of official findings

in the local market and, from there, goes

came recently, when a vice minister of

to other provinces. The foods are Chinese

land and resources, Wang Shiyuan, said

staples: rice, cabbage, carrots, turnips and

at a news conference in Beijing that 3.2

sweet potatoes.

million hectares of China’s farmland, equal

But the fields are ringed by factories and

to the size of Maryland, had become so

irrigated with water tainted by industrial

polluted that planting crops on it “should

waste. Levels of toxic heavy metals in the

not be allowed.”

wastewater here are among the highest

A signal moment came in May, when

in China, and residents fear the soil is

officials in Guangdong province, in the far

similarly contaminated. Though they

south, said they had discovered excessive

have no scientific proof, they suspect that

levels of cadmium in 155 batches of rice

a spate of cancer deaths is linked to the

collected from markets, restaurants and

pollution, and worry about lead levels in

storehouses. Of those, 89 were from Hunan

the children’s blood.

province, where Ge farms.

“Of course I’m afraid,” said Ge, in her

The report set off a nationwide scare.

60s, pointing to the smokestacks looming

In June, China Daily, an official, English-

over her fields and the stagnant, algae-

language newspaper, published an editorial

filled irrigation canals surrounding a home

saying that “soil contaminated with heavy

she shares with a granddaughter and her

metals is eroding the foundation of the country’s food safety and becoming a

“Soil contaminated with heavy metals is eroding the foundation of the country’s food safety and becoming a looming public health hazard.”

looming public health hazard.” One-sixth of China’s arable land – nearly 20.2 million hectares – suffers from soil pollution, according to a book published this year by the Ministry of Environmental Protection. The book, Soil Pollution and Physical Health, said that more than 13 million tons of crops harvested each year were contaminated with heavy metals, and that 8.9 million hectares of farmland were affected by pesticides. But the government has refused to divulge details of the pollution, leaving

husband, a former soldier. “But we don’t do

farmers and consumers in the dark about

physical checkups. If we find out we have

the levels of contaminants in the food chain.

cancer, it’s only a burden on the children.”

The soil survey, completed in 2010, has

With awareness of China’s severe

© 2014 New York Times News service

environmental degradation rising, there

March 2014

been locked away as a “state secret.” “We think it’s always the right of the

has been a surge of anxiety in the last

public to know how bad the situation is,”

year among ordinary Chinese and some

said Ma Tianjie, an advocate at Greenpeace

officials over soil pollution in the country’s

East Asia who is researching toxic soil. “The

agricultural centres and the potential

Chinese public can accept the fact that our

effects on the food chain. In recent years,

environment is polluted. The important

the government has conducted widespread

thing is to give them the means to challenge

testing of soil across China, but it has not

polluters and improve the environment,


and not just keep them in the dark.” There has been some acknowledgment

producers of nonferrous metals. As a result, it is the leading polluter of cadmium,

of the problem by top officials. In January,

chromium, lead and non-metal arsenic,

the State Council, China’s Cabinet,

according to data collected in 2011 by the

announced that it would set up systems

Institute of Public and Environmental

to comprehensively monitor soil

Affairs, a research group based in Beijing.

pollution by 2015 and promote pilot projects for treatment. Scholars say soil pollution is especially

That year, the province was responsible for 41 per cent of the nation’s cadmium pollution when measured by its presence

acute in Hunan province, China’s rice bowl.

in industrial wastewater; the number

In 2012, Hunan produced 17 million tons

has not dropped below 30 per cent

of rice, 16 per cent of the national total,

since 2004, when the data were first

according to one market research company.

collected by the group. The wastewater is

The province is also one of China’s top

discharged in rivers, where it flows into


A farmer prepares his land to plant sweet potatoes beside a lead factory.

A workers prepares to remove farmed catfish from a contaminated pond.

Residents dig through trash for recyclable materials near Hengyang. Portfolio

Essentials Environment irrigation channels. “There’s this pressure from the central government on Hunan to maintain a high

of pollution. Some scientists are now conducting studies. In July, the Chinese Centre for Disease

level of yield for rice production,” said Ma,

Control and Pollution published some

the Greenpeace programme director. “On

findings from a study that drew a direct

the other hand, rice production never gives

connection between pollution of the Huai

you the same kind of GDP growth that

River, which crosses several provinces in

industrial development gives you.”

central China, and high rates of cancer

Hunan’s abundance of raw metals has led to a push by provincial Communist Party

among people living by the river. Here in Hunan, and particularly in this

leaders to develop mining and smelting

area administered by Hengyang City, which

there further, leaving officials caught in

includes Ge’s village, stories of cancer are

what Ma calls a clash of two imperatives:

common. One woman in the village of

“They have to feed the country with their

Liujiacun said her husband had died in his

rice, but they want to grow their economy.”

late 50s of liver cancer. “He didn’t do heavy

Among the heavy metals seeping into

labour, didn’t smoke and he would drink

Hunan’s crops, the worst may be cadmium,

only a little bit,” said the widow, who gave

which at high levels has been linked to

only her surname, Li. As in nearby villages,

organ failure, weakening of bones and

crops here appear wilted, and the village well

cancer, scientists say.

is clogged with green muck. These were all sharp changes from Li’s childhood, she said.

IncreasIngly, chInese news

Twenty people still live in Chenjiawan

organisations are reporting on clusters

now, down from a population of about 100

of villages that have high rates of cancer,

in 2007, most of them elderly, Ge said,

raising questions about the potential

adding that many recent deaths had been

link between cancer and various forms

from cancer. There is no public data drawing a direct connection between these cases and the factories that loom over the farmland. But a 2009 study published in a Chinese journal said that the area’s main crops were “at a high risk of heavy metal contamination,” and that only less than half could be rated “secure” or “good.” Given the nationwide health risks, some environmental officials in Beijing have praised recent experiments done by scientists that show certain plants could help clean the soil by absorbing poisons. Still, there has been no sign of action on the State Council’s announced goal for comprehensive monitoring and treatment of soil pollution. Many farmers working their ravaged lands remain fearful and fatalistic. “You’re born on this earth, you grow up on this

A family of A worker feeds a male farmers eat lunch Orinoco crocodile horse at their home in meat at Masaguaral Ranch. Chenjiawan village. March 2014

earth, and you can’t do anything about it,” Ge said, sitting in an alley next to a pail of carrots. “Those who are most vulnerable have died.” n






Essentials Technology



Madden NFL, the EA Sports game, has sold more than 100 million copies thanks to its extreme realism, reports Ken Belson.


HE FOOTBALL PLAYERS STRUTTED DOWN A 36.6-metre strip of synthetic turf in Burnaby, British Columbia, yelling, jumping and flailing their arms to whip the fans into a frenzy. But there was no stadium and no crowd here, only a barn-like studio with an animator

directing the mock celebration and a few computer technicians recording the movements with dozens of high-speed motion-capture cameras that zero in on 65 reflective markers fastened to the players’ uniforms. While the National Football League (NFL) season has just ended, EA Sports is busy preparing the next version of Madden NFL, the best-selling video game whose release each August represents the unofficial kickoff of another season. To entice fans to pay $60 for the latest edition, EA Sports has spent uncountable hours and drawn on the skills of technical experts, athletes and John Madden himself to mimic the real pro game. Much of what goes into the effort to add fresh details each year is based on a half-dozen stunt players who enact thousands of elements of the game day experience and the game itself. Computers could simulate the movements, but it would take more time and money, and ultimately the results would look as if they had been created by a machine. The popularity of the video game, which has been around a quartercentury and has sold more than 100 million copies, thrives on its realism, from a running back’s stutter step to the sweat on his brow.

Matt Spanos (left), Kenny Bell (centre) and Omar Nazel are stunt players for EA Sports’ Madden NFL. March 2014


“The sport is so complicated and has so many individual little things, to do it at a scale where it isn’t repetitive at every play, you’d need a country of animators to try to crank that out,” said Jason Danahy, Madden NFL animation director. “An animator can convey weight and speed, and handle that kind of stuff, but they don’t have necessarily a football mind like these guys do, and that’s a huge help for us.” The attention to detail in Madden NFL is a huge help to the league and its players, because they receive tens of millions of dollars in



licensing fees. The video game also helps

video game (and of seeing themselves in

an exhibition on the history of Madden

introduce the sport to fans that might not

it), and some features – like the circles

NFL. “It’s a double-edged sword, because

otherwise follow it, especially as some

that highlight players – have worked their

the experience at home is so good, it’s

parents steer their children away because

way into television broadcasts. Before

another reason not to go to the stadium.”

of safety concerns.

each Super Bowl, EA Sports simulates

Madden’s hyperrealism is partly a

a game between the two teams and has

result of increasingly sophisticated game

simulation games, but few have Madden

predicted eight of the past 10 champions.

consoles and software. But the game is

NFL’s staying power. It has been the

(This year’s forecast, however, was less

also inextricably entwined with the league.

Number 1-selling sports video game the

successful: EA Sports picked the Denver

Madden NFL is known informally as “the

past four years and has ranked in the

Broncos to win in overtime, 31-28. The

33rd franchise,” because its developers

top three since 1995, according to Liam

Seattle Seahawks triumphed 43-8.)

are sent the same game footage that the

There is no shortage of sports

Callahan, an analyst at the NPD Group

“Video games were for a long time

market research company. Last year, the

the cart, but now they are becoming the

game generated 27 per cent of the $900

horse,” said Carl Goodman, the executive

million in sales of sports video games.

director of the Museum of the Moving

among our best partners, not just in total

Image in New York, which has assembled

dollars, but in the fans they bring in and

It has also entered the cultural lexicon

coaches on all 32 teams receive every week during the season. “Especially the last 10 years, EA has been

partly because of the popularity of Madden, the former NFL coach and television announcer who, in the 1980s, agreed to help develop the video game if it resembled the real thing. “There are people who know me as Coach,” Madden said. “But the last year I coached was 1978. Then as a broadcaster with CBS, Fox, ‘Monday Night Football’ and ‘Sunday Night Football’. Then video games. Usually, I can tell the video game people because they just call me Madden.” NFL players talk about their love of the Travis Griggs, senior animator at EA Sports, speaks with stunt players during a motion capture shoot for Madden NFL.

Players on a field of synthetic turf at the EA Sports building in Vancouver, Canada. Portfolio

Essentials Technology the fans they retain,” said Tim Langley, the director of consumer products for the NFL. “It’s very important to us, because we anecdotally see time and time again people who said they didn’t really follow the NFL, ‘but then I started to play Madden.” WHILE EA Sports has an exclusive license to use names, plays and other elements of the league, the NFL has editorial oversight. Langley and others vet thousands of pages of recorded scripts and delete inappropriate dialogue, like the harshest trash talk. Chop blocks, helmet-to-helmet hits and other illegal plays are not permitted in the video game – even with accompanying penalties – despite the other efforts at realism. This stems not only from the

Troy Thibadeau places markers on a stunt player.

league’s fastidiousness about its image but also from Madden’s insistence that the game be exciting and educational. He still helps developers at EA Sports identify trends to add to the game. “The goal was to make the video game the same as what’s on TV,” Madden said. “This isn’t a kid’s game. It’s a football game that kids play.” The video game has been around so long that some stunt players were born after the first edition was released in 1988. Others, like Omar Nazel, who played defensive end at the University of Southern California but never reached the NFL, trace their love of football to their first encounters with it. “I’ve always played video games, and

A computer screen displays the motion capture recorded for the EA Sports animators designing the latest edition of Madden NFL.

Then Clint Oldenburg, a former

I didn’t know anything else to do but be

around in the air a few times a season.

inside of it,” said Nazel, who was a stunt

Nazel and his teammates might do that

offensive lineman who became a designer

double in a Nike commercial starring

several times in a session. An emergency

for EA Sports, showed them footage of

Calvin Johnson, the Detroit Lions receiver.

medical worker is present, as well as a

a game between the Indianapolis Colts

“This was a key, key, key vehicle for a lot of

trainer to help the players stretch.

and the Miami Dolphins on a big screen.

things in my life.”

Most of what the players do, though,

Oldenburg was focused on how Mike

is more pedestrian. Nazel and another

Pouncey, the Dolphin centre, repelled a

like Tom Brady and Peyton Manning

player, Matt Spanos, for instance, spent

charging lineman.

fill the video game, NFL players do not

15 minutes acting like opposing linemen.

“I want to recreate that,” Oldenburg

portray themselves because of the risk of

They pointed around the field, just as real

told them. “It should be like, this lineman

injury. The stunt players are journeymen

linemen would, to communicate before

dominates you so much you gave up.”

like Nazel, who have collegiate and some

the snap. They were also asked to crouch,

professional experience, if not in the NFL.

pause and stand up. Nazel was told to

on his heels, Nazel hung his head in

pretend to jump offside.

pseudoshame. n

Though the likenesses of quarterbacks

An NFL player might be hit and spun March 2014

After Spanos pushed Nazel back





London’s UndergroUnd MoveMent With sky-high real estate prices, it is little wonder that art establishments, restaurants and shops are literally moving underground, reports Christine Ajudua.




he British capital’s evolving

layered palimpsest. During construction for

elevator-shafts-turned-climbing-walls and

skyline is as impressive as it is

the coming Crossrail subway, archaeologists

24/7 karaoke clubs where there were once

unusual. Consider the Shard,

have unearthed medieval ice skates, Roman

secret war rooms.

the 309.7-metre “vertical city”

skulls and prehistoric bison bones, all within 3.7 metres of the pavement. Meanwhile,

in the world than looking into your

building when it was completed in 2012,

with sky-high property rates above ground,

old cupboards and finding a toy,” the

and 20 Fenchurch Street (aka the Walkie-

some of the city’s most innovative art spaces,

company’s founder, Ajit Chambers, said.

Talkie), which made headlines last summer

restaurants, shops and bars have been

when the glare from its cartoonishly flaring

springing up below street level.

facade warped the panels of a Jaguar

Of course, Londoners have long possessed

In the fantasy novel Neverwhere, Neil Gaiman depicts an underworld invisible to “London Above,” where the tony

a downward-cast gaze. Take the Tube –

neighbourhood of Knightsbridge becomes

the world’s first underground rail system,

an ominous Night’s Bridge. In reality, with

rock, London – ancient, sprawling, famously

introduced just over 150 years ago. Its

the confluence of wealth in the area and

self-deprecating – has its roots buried in

stations provided shelter when the city was

the city’s notoriously restrictive planning

a bed of clay, sand and chalk, an unlikely

blitzed during World War II; they’ve also

laws (generally, those looking to expand

foundation for high-rise grandeur. Rather,

displayed commissions by artists from Man

their homes cannot build up or out – only

as the author Peter Ackroyd noted in

Ray to Tracey Emin. Now, the Old London

down), it is prime territory for digging out

London Under, “the geology of London is

Underground Co. is hoping to reopen

multilevel “billionaire basements.”

a clue to the labyrinth beneath”: a deeply

26 ghost stations as attractions. Think of

parked outside. Whereas Manhattan is built upon hard © 2014 New York Times News service

“There’s nothing more valuable

that topped out as Western Europe’s tallest

Following suit, a sleek, 85-room

The Chalk Room offers bespoke fashion. March 2014




labyrinth of disused rail tunnels opened in January for Vault 2014 – a six-week immersive arts festival, January 28 to March 8, with more than 60 acts and latenight parties. The Establishment has also been going underground. In 2012, Tate Modern unveiled the Tanks, a live art space occupying the former power station’s three subterranean oil chambers (while currently shut for the building of a 10-level extension

Patrons at B.Y.O.C. (Bring Your Own Cocktail).

above ground, they’ll reopen by 2016). Under a parking lot, archaeologists have discovered London’s second-oldest and best preserved Shakespearean playhouse: the 16th-century Curtain Theatre, or the “wooden O” that premiered Henry V and Romeo and Juliet. “Digging down in London is like going back in time,” said architect John Drew, of Pringle Brandon Perkins+Will. restAUrAnts WithoUt A VieW More and more establishments have been inspired by their own underground histories. Last September, the Royal Academy of Arts opened its 19th-century Keeper’s House – never before accessible

Citrus at the candlelit B.Y.O.C. which is hidden under a juice bar.

The entrance to Hostem, which features the Chalk Room in its cellar, a fashion boutique.

Bulgari Hotel opened here a year-and-a-

– forerunner of the Tube, burrowed by

half ago with six subterranean floors for

Marc and Isambard Brunel as an under-

the restaurant, ballroom, cinema, spa and

river path for horse-drawn carriages – was

glittering glass-mosaic swimming pool,

soon overrun by criminals and closed to

the jewel in an inverted crown. There’s

pedestrians for nearly 150 years. Now, the

even a plan to convert an underground

Brunel Museum offers guided descents into

parking lot in Bloomsbury into a budget

the tunnel’s Grand Entrance Hall and plans

hotel with 172 windowless guest rooms.

to turn the sooty underground shaft into a

Pending a green light, it’s one of many new

proper amphitheatre. Last year it started

schemes to repurpose parts of London often

hosting concerts from the likes of the Pop-

overlooked. Here are some of those projects,

up Opera company, which will pop down

along with places you can visit now.

again come spring.

UndergroUnd Art

abandoned, lie beneath London. Off the

Hailed as the “Eighth Wonder of the World”

graffiti mecca that is Leake Street, under

when it opened in 1843, the Thames Tunnel

Waterloo station, a 1,672-square-metre

Countless passageways, many long



to the public – with a seasonal British

come in and forget the outside world,” Gott

boutique Hostem has repurposed its cellar

restaurant designed by Sir David

explained. Previously a “dodgy strip club,”

as the Chalk Room, a by-appointment store-

Chipperfield and Rolfe Kentish in the

the Spitalfields cellar bar – which serves

within-a-store for bespoke offerings such

formerly unused basement. Previously the

cheeseburgers with ox cheek (£9.50, or

as made-to-measure Casely-Hayford suits

kitchen and scullery, it was, before that,

$15) – was a natural fit. “We like off-pitch,”

and custom umbrellas from Oliver Ruuger.

the servants’ quarters, a beer store and a

he said.

Swathed in off-black chalk paint, the space is itself worth a trip down the creaking,

17th-century crypt with a wine cellar, now a vaulted ladies’ room. In Soho, the just-opened Coal Vaults is

Drop til YoU shop

burlap-covered stairs.

It’s been said that from a window in

situated within a 19th-century subterranean

the Selfridges basement you could see a

Bottoms Up

coal storage facility. Here you’ll find low-lit,

perfectly preserved Victorian high street.

Speakeasy-type bars have been cropping

exposed-brick dining vaults and a copper-

This is a myth, according to a spokesman

up all over town – below a Breakfast Club

topped bar, plus small plates (devilled

for the department store, though the “sub”

cafe in Spitalfields (ask to see “the mayor”)

popcorn; venison sliders with shallot rings)

and the “sub-sub” – going nearly 61 metres

or a BrewDog in Shoreditch (UnderDog,

and cocktail pairings.

below ground – did shelter 50 US Army

downstairs, serves cocktails in addition

Signal Corps soldiers during World War II,

to pints).

“We actively avoid the sites that most restaurateurs would describe as prime,” said

with remnants of prison cells at the bottom.

Huw Gott, co-founder of Hawksmoor, a

While they’re off limits to customers, the

Garden, the tiny, candlelit B.Y.O.C. (Bring

group of clubby British steakhouses mostly

regular basement staged a six-week Festival

Your Own Cocktail) requires guests to bring

set below ground. Its latest location – a

of Imagination, through March 2, with a

a bottle of liquor: the mixologist, pushing

level-two spot on Air Street, near Piccadilly

mirror-clad “Imaginarium” designed by

an antique trolley with ingredients from

Circus – is an anomaly, but the windows

Rem Koolhaas for talks by “imagineers” like

upstairs, will need it to fix your drink.

have been blurred and darkened with

the Swedish electronica band Little Dragon.

B.Y.O.C. does not have an actual bar, or a

stained glass. “The aim is for customers to

In Shoreditch, the avant-garde fashion

Hidden under a juice bar in Covent

liquor license. Some feel that the trend is a bit overkill. “If I hear of another speakeasy coming up, I might literally have to kill myself,” said Mark Holdstock, owner of Bourne & Hollingsworth, a ‘20s-style basement bar in Fitzrovia. In 2012, his team started converting a cellar on Goodge Street that, they soon discovered, was the home of a now-deceased vicar. They named the bar after him – Reverend J.W. Simpson – and kept the water-stained wallpaper and peeling paint, adding votive candles and a series of “sermons” on reviving forgotten spirits of another sort. Ruby’s is situated under an old cinema sign in Dalston. Previously the kitchen of a Chinese takeout joint, it now serves seasonal cocktails in 1940s milk bottles. Nearby, the hipster favourite Dalston Superstore recently opened Dance Tunnel, spinning left-field house and techno under a pizza parlour. “People come in looking for the ‘secret

Patrons in the Attendant, a coffee shop in a Victorian “gentlemen’s loo”.

March 2014

entrance,’” said Dan Beaumont, a co-owner, though the venues sit down the road from each other. “Usually they end up trying to get into a storage cupboard.” n



Other Business

Automotive Vote Rigging The head of Germany’s Allgemeiner

The revelations have

Deutscher Automobil-Club (ADAC) car

battered the reputation of

club, Europe’s largest, has resigned in

ADAC, which before it

disgrace after an external audit found

first admitted wrongdoing

it had rigged the results and order

in January was one of

of its award for the country’s most

Germany’s most respected

popular car.

institutions with 19 million members.

Leading German carmakers Daimler,

The scandal erupted when it

ADAC had said that 34,299 motorists endorsed the Volkswagen Golf as the most popular car in Germany, but auditor

Volkswagen and BMW immediately

emerged that its popular ADAC

Deloitte said only 3,271 votes had been

said they would hand back the once-

Motorwelt magazine had massively

cast for the vehicle. The accountants also

coveted annual “Yellow Angel” awards

inflated readership votes for the

found evidence of “willful manipulation” as

after the audit found irregularities in

“Yellow Angel” award for Germany’s

well as technologically flawed processing

the counting and ordering.

favourite car.

of data.

Goldfish Drives Tank A team of tech wizards at Studio Diip – which specialises in innovative imagerecognition projects – have kitted up a goldfish tank with a camera and computer vision software, turning it into a robot car. As the goldfish swims around in the tank, the system detects which way he’s heading and directs the car there, essentially allowing the fish to control the vehicle. “By swimming towards an interesting object, the fish can explore the world beyond the limits of his tank,” Studio Diip says. The team is also developing new -technology such as number plate

Facebook Doomed to Die

recognition, and even vegetable recognition

Facebook has spread like an infectious

for supermarket checkouts.

disease but we are slowly becoming

versions of other – perhaps more everyday

Studio Diip admits there’s no practical application yet for their goldfishmobile, but at least their finned friends are having fun.

within the next three years. For their study, John Cannarella and

immune to its attractions say researchers at

Joshua Spechler used what is known as the

Princeton University.

SIR (susceptible, infected, recovered) model

The forecast of Facebook’s impending doom was made by comparing the growth curve of epidemics to those of online social

of disease, which creates equations to map the spread and recovery of epidemics. “Ideas, like diseases, have been shown to

networks. Scientists argue that, like bubonic

spread infectiously between people before

plague, Facebook will eventually die out.

eventually dying out, and have been

The social network, which celebrated its

successfully described with epidemiological

10th birthday on February 4, has survived

models,” the authors claim

longer than rivals such as Myspace and

Investors do not appear to be heading for

Bebo, but the Princeton forecast says it will

the exit just yet. Facebook’s share price

lose 80 per cent of its peak user base

reached record highs in January. Portfolio

Elegance is an attitude

Conquest Classic

Simon Baker

Portfolio | March 2014  
Portfolio | March 2014