17% Women Board Directors in World

December 12, 2017 Ben Yeoh

I found these numbers shocking. In the ACWI world index, only 17% women board directors. Only 28 out of 2,541 members of the MSCI ACWI Index (1.1%) had boards consisting of at least 50% women. Only 7 had boards majority female. (My data is from 2017, but this MSCI paper is 2015 data, which is all a little worse)

23% of ACWI have all male boards (as of Oct 2017). That's over 1 in 5 ACWI companies.

Sure, we must focus of equality of opportunity and not necessarily outcome. But, these indicators suggest we still have some way to go.

Is it a surprise we have MeToo when the makeup of people in power are so dominantly men?

Of course, there are other lens to seek diversity of thought and to reflect the fabric of our society. But we can be intersectional and multi-faceted, running ‘identities’ in parallel.

Mother, daughter, girlfriend, sister, partner – we can be all these at once. It is healthy for the boards of the companies of our world, not to better reflect the mix of our world?

A note on academic papers below here

In terms of eg company profits, Peer-reviewed academic data is mixed (despite what certain media and consultant reports might say) made harder as causality/correlation is difficult. There is a good non-technical summary by Katherine Klein (Wharton) here examining two meta-studies (Post and Byron, 2015, 140 studies of board gender diversity with a combined sample of more than 90,000 firms from more than 30 countries) and (Pletzer, Nikolova, Kedzior, and Voelpel (2015) in a different approach, conducting a meta-analysis of a smaller set of studies — 20 studies that were published in peer-reviewed academic journals and that tested the relationship between board gender diversity and firm financial performance (return on assets, return on equity, and Tobin’s Q).

Klein concludes: "The results of these two meta-analyses, summarizing numerous rigorous, original peer-reviewed studies, suggest that the relationship between board gender diversity and company performance is either non-exist (effectively zero) or very weakly positive."

But, it seems safe to conclude there is no academic case against a more gender equal board. So we can have more women directors for gender equality, societal reflections and positive cultural reasons and NOT impact business. That should be reason enough.

(I will note one recent positive correlational study "Using annual data on over 3000 US firms from 2007 to 2014, we show that the presence of women on the board has a positive effect on firm performance, and this effect varies at different parts of the performance distribution. Critically, we demonstrate that the presence of women directors alters the dispersion of firm performance. " by Conyon (wharton) and He (SUNY) (2016, 2017) This paper also has good references to other papers; but I think the meta-studies carried more statistical weight; you can find some individual positive and negative correlational studies in the literature, but not overwhelmingly pointing in one direction).

If you'd like to feel inspired by commencement addresses and life lessons try: Ursula K Le Guin on literature as an operating manual for life; Neil Gaiman on making wonderful, fabulous, brilliant mistakes; or Nassim Taleb's commencement address; or JK Rowling on the benefits of failure. Or Charlie Munger on always inverting.

Cross fertilise. On investing try a thought on stock valuations. Or Ray Dalio on populism and risk. You can also click on the Carbon tag below.

A lesson from autism here. And a post on the seductive story of Bitcoin

Lost Einsteins. Cost of Inequality.

December 4, 2017 Ben Yeoh

This paper makes for sobering reading on the cost of inequality for lost inventions in the US.

Full paper here. Summary paper here. NYT article here.

“We characterize the factors that determine who becomes an inventor in America by using de-identified data on 1.2 million inventors from patent records linked to tax records. We establish three sets of results. First, children from high-income (top 1%) families are ten times as likely to become inventors as those from below-median income families. There are similarly large gaps by race and gender. Differences in innate ability, as measured by test scores in early childhood, explain relatively little of these gaps. Second, exposure to innovation during childhood has significant causal effects on children’s propensities to become inventors. Growing up in a neighborhood or family with a high innovation rate in a specific technology class leads to a higher probability of patenting in exactly the same technology class. These exposure effects are gender-specific: girls are more likely to become inventors in a particular technology class if they grow up in an area with more female inventors in that technology class. Third, the financial returns to inventions are extremely skewed and highly correlated with their scientific impact,as measured by citations. Consistent with the importance of exposure effects and contrary to standard models of career selection, women and disadvantaged youth are as under-represented among high-impact inventors as they are among inventors as a whole.”

From the NYT:

“Much of human progress depends on innovation. It depends on people coming up with a breakthrough idea to improve life. Think about penicillin or cancer treatments, electricity or the silicon chip.

For this reason, societies have a big interest in making sure that as many people as possible have the opportunity to become scientists, inventors and entrepreneurs. It’s not only a matter of fairness. Denying opportunities to talented people can end up hurting everyone….

…

The project’s latest paper, out Sunday, looks at who becomes an inventor — and who doesn’t. The results are disturbing. They have left me stewing over how many breakthrough innovations we have missed because of extreme inequality. …

I encourage you to take a moment to absorb the size of these gaps. Women, African-Americans, Latinos, Southerners, and low- and middle-income children are far less likely to grow up to become patent holders and inventors. Our society appears to be missing out on most potential inventors from these groups. And these groups together make up most of the American population….

...The groups also span the political left and right — a reminder that Americans of different tribes have a common interest in attacking inequality….

Cross fertilise. On investing try a thought on stock valuations. Or Ray Dalio on populism and risk. You can also click on the Carbon tag below.

A lesson from autism here.

Bitcoin. A mystery narrative of seductive freedom.

November 30, 2017 Ben Yeoh

Bitcoin has a seductive story. All great investment manias have a compelling narrative behind them, all with a fistful of truth. An early one being tulip bulbs. I still argue Bitcoin is NOT an investment, but a speculation in a maybe-currency. It also is waste of energy (in my view). Bitcoin mining energy, which consumes the same as a medium sized country like Ireland, could be used more productively given the pollution cost emitted.

Still, the mania has further to run, in my view, as although many random people I meet talk about it, there are still many people to be seduced.

Jeffrey Robinson, the author of BitCon, writes that bitcoin is "a digital-something pretending to be a currency; that same digital-something pretending to be a commodity; a political movement that reeks of a delusional cult; and a technology — a unique peer-to-peer transfer system — that happens to be brilliant."

Block chain technology is great. Bitcoin itself, not so much.

But, back to the story…. My early career was as a stock broker - the sell-side - and as all good sell-siders know, selling investments is about selling a story, selling a narrative… indeed politics and much of life today is about the story… “facts” and data are only a small (or even non-existent) part of the debate. Don’t let a fact get in the way of a good story (fakenews).

An early story of being seduce by investment manias involves Isaac Newton of gravity, physics and maths fame. He supposedly said (though my guess this is made up):

“I can calculate the movement of stars, but not the madness of men.”

(Nassim Taleb would agree. Stars and comets and that type of physics are systems we can calculate. Complex systems like markets are beyond us, mix in fat tails and by their nature, black swans, will always be beyond our imagination).

Newton was an early winner then victim of the South Sea China Bubble. See picture above. He made a nice profit, but then went back in and lost it all. Some traders (eg supposedly Soros) can identify bubbles early and exit before the crash, but it’s a rare skill / luck.

So… the bitcoin story… it starts with a legendary mysterious inventor (pen name Satoshi Makamoto), who is unknown, unidentified and has walked away from billions to serve a larger purpose….this purposes inspires those such as this FT reader:

...The internet as we know it would not exist without the government. Crypto makes governments obsolete. Cryptocurrency combines value and governance into one package that obviates the need for nation-states. And it doesn't have to just be used for money; it can be used to decentralize anything that we currently produce or exchange in a centralized way. That is what is exciting here. Not making a bunch of money, or the massive transfer of wealth from the old guard to a bunch of risk taking nerds. The latter is exciting to me because who doesn't like money, but it's much more deeply exciting because our current governments (all of them), while mostly better than what we had before, are a truly awful human system. They tax humanity to make war with each other….

It’s also used by criminals (or any who don’t want to be traced), those who might consider gold a store of value, those who only have access to very unstable currencies.

It appeals to a certain kind of libertarian thinker, it appeals to those who are disillusioned with government (and that’s a lot of people)... and there’s the nub:

It appeals to those who love a good story. And that’s all of us. Economists would do well to remember that.

Cross fertilise. On investing try a thought on stock valuations. Or Ray Dalio on populism and risk. You can also click on the Carbon tag below.

A lesson from autism here.

Wolverhampton

November 30, 2017 Ben Yeoh

Oh when the wolves (Oh when the wolves) go marching in (Go marching in) Oh when the Wolves go marching in I want to be in that number When the Wolves go marching in....

This was my first time to Wolverhampton and the "Black Country".

Two possible origins of the term Black Country.

(1) the exposed coal seams that run through the country (2) the smokey black fog that was prevalent in the 1800s.

I also learnt the gold and black colours of Wolverhampton Wanderers FC originate from the city's motto 'Out of darkness cometh light', with gold and black representing light and dark respectively.

Many Wolverhampton workers are feeling happy at the moment as they sit top of their football league table (Championship).

And we know happy employees, satisfied employees (better #ESG) make better companies (!) and better stock returns. See Alex Edmans paper.

Listened to the West Midlands Pension Fund AGM and spoke about ESG, stewardship and #responsible #investment.

A topical question was asked on engage / divest conundrums. When a shareholder divests they may no longer influence the board/management. If coal [insert controversial item] assets are divested to a less responsible owner - is the problem solved or made worse?

The discussion revolved around needing both engage and divest prongs at work. Neither alone is as effective together. Discuss.

There is no simple answer, but universal owners such as index funds have a duty to engage; and active managers gain more returns if they do successfully engage - this paper would suggest.

If one puts the active ownership paper together with the work on the outperformance of Global Equity managers described here, one can start to build a defense of Active Management; where John Kay would argue Active Managers should compete on style and philosophyin any case.

Google Campus, London. Visit.

November 27, 2017 Ben Yeoh

With my investor and start up hat on, I went to check out Google Campus, London, this week. It’s near the Liverpool St / Shoreditch area. There are certain elements that impressed me.

A decent number of women. Campus claims female membership overall is 38%. This is much better than Google which is only 20% female in tech roles, 31% overall (see Google Diversity)

The room seemed about 40/60 and the café downstairs perhaps also close to that, maybe 30/70.

It helps having Code First: Girls (CFG) on the 4th floor. (Code First: Girls works with companies and with men and women directly, to help increase the number of women in tech).

You get a decent amount of intangibles for free. There’s no silver bullet but you get access to a co-working café-space, events, mentoring and advice; plus that all important network and start-up go-getting vibe. All of that means, I recommend you sign up if you are at all interested in the start-up area.

“the basement, which houses our first come, first served coworking café space. Members can post and find jobs on the community board, meet fellow founders, and make connections that could change your business. On the ground floor is our Main Event Space, which fits 135”

BUT. The café looks crammed (see top photo) few sockets and so I imagine it is hard to get written or coding work done. Then again – it is likely super useful for getting feedback on work in progress, and for the random focused serendipity networking effects. If you are shy, you can rely on others to approach, I expect – though start up land generally doesn’t seem initially a place conducive to the shy.

So, good for networking, demoing apps, sites and ideas. Not good for concentration work.

The other floors, you don’t really have access to for free, but you can get a spill over network effect from the people working there.

“coworking floors (1 and 2) are run by TechHub, who run community coworking spaces across the globe from Bangalore to Boston. Seedcamp sits on the 4th floor alongside Code First: Girls (CFG)”

The co-working prices are not super cheap, there are cheaper in London, but perhaps not the same vibe. Though I think WeWork, Central Working amongst others are giving it a good go in tech startups; in arts… Makerversity at Somerset House is a London coworking space for designers, markers and start-ups - Somerset House..... Impact Hub Westminster is co-working for Social Enterprise and charities...

“Why did Google start Campus? Google began life as a startup in a garage in California, and we’ve kept our passion for entrepreneurship. With Campus, we wanted to create a connecting space, somewhere for founders to network, learn, teach, and grow.” I don’t fully buy this as the entire reason, but it’s good enough and does align with long term values.

On that note Campus has these community values, which they were keen to impress upon at orientation. I took that as a good sign.

I’d note the concentration on tech startups. There are other types of startups, which could also do with this networking mingle (the social enterprise sector as mentioned above with the Impact hub).

There’s also – I sense – an obsession of scale with startups at the moment. I suppose, “big money” comes with scale and startup peeps are ambitious. But, I admit I’d like to see what localism could achieve. Tech is there to scale on smaller amounts of capital to make large returns, I guess…. A local coffee shop, with nice food and drink won’t do that.

But are these startups solving problems that need to be solved?

Climate change, water use, recycling

Gender inequality, Income inequality, Access for marginalized and minority groups

Fake news, privacy, hacking, housing...

...Or are startups just giving you a chance to rent-a-dog? There’s space for both in the world, I suppose.

That’s not to denigrate Campus. It’s worthy. It’s interesting. You should sign up!

If you'd like to feel inspired by commencement addresses and life lessons try: Neil Gaiman on making wonderful, fabulous, brilliant mistakes; or Nassim Taleb's commencement address; or JK Rowling on the benefits of failure. Or Charlie Munger on always inverting; Sheryl Sandberg on grief, resilience and gratitude or investor Ray Dalio on on Principles.

Cross fertilise. Read about the autistic mind here.

Why are drug prices high?

November 22, 2017 Ben Yeoh

Why are drug prices high? Cutting through complex roots, I note patents grant drugs time-limited monopolies that are then priced often on what markets/payors can bear to pay, and society values health highly.

Patents have roots in the idea that without incentives intangible assets (ideas, processes, designs, R&D) would be under-produced. The length of patents and copyright, now mostly globally harmonised has an intriguing and semi-arbitrary history.

Note the US did not grant copyright to foreign works for most of the 1800s and then from limited nations from 1891.

In Japan, Texas Instruments applied for 14 semi-conductor patents in 1960, these were not granted for decades allowing Japanese companies to copy the tech and advance their own industry. (The patents threatens to disrupt the development of a domestic semiconductor industry, an area that business and government leaders had decided was strategic to Japan’s long-term economic growth. By refusing to act the bureaucracy allowed the Japanese companies to copy the tech without paying for years). This was one key component (there were others such as low interest loans, accelerated depreciation, and other measures that lowered capital costs, enabled Japanese companies to continue investing heavily despite years of large losses. Also US firms that wanted to make joint ventures in Japan were obliged to transfer technologies as part of the deal)

Drug R&D is expensive and often fails. The cost of this failure is another major reason for the high price of drugs. Most drugs tested in humans never make it to market. Recent data H/T Bernstein / KMR:

Preclinical 17.3 compounds to yield one approved product, a failure rate of 94.2%

Phase 1 compounds: It takes ~11.8 phase 1 molecules to yield one approved product. The implied hit rate is 8.5% (or inversely, a failure rate of 91.5%).

Phase 2 compounds: It takes ~5 phase 2 molecules to yield one approved product. The implied hit rate is 20% (or inversely, a failure rate of 80%).

Phase 3 compounds: It takes 1.4 phase 3 molecules to yield one approved product. The implied hit rate is 71% (or inversely, a failure rate of 29%).

Another cut suggests:

As shown, for the period 2012-2016:

Phase 1 drugs: 42% advanced to phase 2 (58% stopped)

Phase 2 drugs: 29% advanced to phase 3 (81% stopped)

Phase 3 drugs: 74% advanced to registration (26% stopped)

Registration: 95% of drugs filed for approval got approved (5% didn’t make it past the regulators.)

Cross fertilise. Read about the autistic mind here.

What a healthcare investment banking conference looks like

November 19, 2017 Ben Yeoh

I went to a healthcare conference this week, sponsored by an investment bank. My Linkedin post is below (for those not on there). It was noted, the lack of women.

https://www.linkedin.com/feed/update/urn:li:activity:6336858664145600512

Though I note: Both surface gender, race and my guess LGBT etc. too are under represented vs general population. But the proportion did seem roughly representative of the women entering finance. (Only 1 in 4) So much more needs to be done at interview, application and out reach levels. Investment/Finance is not super attractive (and hasn't been) at moment...

Cross fertilise. Read about the autistic mind here.

Digital Pill. Schizophrenia drug.

November 18, 2017 Ben Yeoh

The U.S. pharmaceutical drug regulator (Food and Drug Administration, FDA) approved this week (on Nov 13) the first drug with a digital ingestion tracking system. Abilify MyCite (aripiprazole tablets with sensor) has an ingestible sensor embedded in the pill that records that the medication was taken. The product is approved for the treatment of schizophrenia, acute treatment of manic and mixed episodes associated with bipolar I disorder and for use as an add-on treatment for depression in adults.

The NY Times raises privacy and coercion concerns. The FT and NYT both discuss problems around compliance and adherence* of taking drugs. Adherence to prescription drugs is remarkably low at only about 50%** (in one study, though I’ve seen 75% in others which I can’t locate) Although a tracker might only address one part of the myriad of problems with adherence.

There are other two points, I view, as more intriguing.

The two other aspects not picked up are (1) Branded drug defence [generic makers won't have this] and (2) The historic (arguably still be present) of use of anti-psychotic drugs to keep patients sedated in care homes to make it easier for the patients to be handled but not in the patients’ best interests. This has included patients with autism, learning disabilities and dementia.

The positive news here is that better awareness is driving this abuse of drugs as a chemical restraint down. The bad news, is that is still seems prevalent.

A UCL study here on the abusive practice in UK. A NPR report on same issue here in US.

**See this Mayo Clin paper here.

“approximately 50% of patients do not take their medications as prescribed. Factors contributing to poor medication adherence are myriad and include those that are related to patients (eg, suboptimal health literacy and lack of involvement in the treatment decision–making process), those that are related to physicians (eg, prescription of complex drug regimens, communication barriers, ineffective communication of information about adverse effects, and provision of care by multiple physicians), and those that are related to health care systems (eg, office visit time limitations, limited access to care, and lack of health information technology).”

*There is some healthcare philosophy behind these terms. Often, the terms adherence and compliance are used interchangeably. However, their connotations are somewhat different: adherence presumes the patient's agreement with the recommendations, whereas compliance implies patient passivity. As described by Steiner and Earnest,5 both terms are problematic in describing medication-taking behavior because they “exaggerate the physician's control over the process of taking medications.”

Cross fertilise. Read about the autistic mind here.