jared cohen our interconnected world – a force for

ISSUE #3 FIRST MOVERS
HOW TO MAKE THE MOST
OF AN EARLY ADVANTAGE
VISIONARY THINKERS
FROM NANOTECH TO FASHION
TO FUTURISTIC CITIES
OCTOBER 2015
JARED COHEN
OUR INTERCONNECTED WORLD
– A FORCE FOR GOOD?
URBANISATION WILL
CHANGE FUTURE PLANS.
DO YOU HAVE
TOMORROW’S BLUEPRINT?
>> Discover our approach at juliusbaer.com/visionary-thinking
Julius Baer is the leading Swiss private banking group and present in some 50 locations worldwide. From Dubai, Frankfurt, Geneva,
Guernsey, Hong Kong, London, Lugano, Monaco, Montevideo, Moscow, Nassau, Singapore to Zurich (head office).
FiRst-MoveR ADvAntAGe
when should you be a first mover and when should you sit back and allow others
to test the waters and then move in when the time is right? is being first always the
best recipe for lasting success?
we explore these questions, and more, in this edition of ‘vision’, which is dedicated to the topic of ‘First movers’ to coincide with our 2015 next generation
summits held in Zurich and singapore. in this issue, we ask professor marvin
lieberman, who first explored the concept of ‘first-mover advantage’ in 1988, if
this theory has proven true for all companies in all markets. we also ask leading
entrepreneurs from the fields of nanotechnology, media, fashion, art, and automobile engineering, just how they became leaders in their businesses. was it by
being ‘first’ or was it by stepping in at the right moment?
we firmly believe that while it is vital to make the right decisions in business,
it is even more important to know when the time is right to implement those
decisions. it is a matter of experience. it’s about understanding interdependencies
and exercising patience. after all, it may take years for a particular decision to be
proven right – which is why waiting often takes as much courage as jumping in
head first.
in my case, i have a long-term vision which helps me decide when to make a move
– be it first or otherwise. my decision horizon is defined by our overall aim to
achieve enduring value for you, our clients, and for the Julius baer group.
we feel privileged to be able to share our vision with you, and also the vision of
some of today’s leading thinkers. enjoy.
Yours sincerely,
boris F.J. collardi
chief executive officer
3
editoRial
Contents
22
Supercharged
Mate Rimac – powering the future
interview
6
Regional potential
in a global context
28
Uniting values and
technology in fashion
Technology artisan Elena Corchero brings meaning back
into the production and consumption of fashion.
Julius Baer’s Gian A. Rossi, Head Northern, Central and
Eastern Europe, and Rémy A. Bersier, Head Southern
Europe, Middle East and Africa, reflect on current developments and future paths in their respective regions.
First movers
12
First movers:
How to make the most of
an early advantage
18
Jared Cohen
The Director of
Google Ideas on
the pros and cons
of interconnectivity
contents
4
32
Awarenessbased change
Darcy Winslow,
Co-Founder of the
Academy for Systemic
Change, on making a
difference on a scale
that matters.
34
The nano revolution
Aymeric Sallin sees a big future
for small things
40
building a
sustainable FutuRe
ouR business
70
Julius baeR – YouR wealtH
You decide how we should
support you
investment tRends
two leading experts share their vision of cities of the future
and why change is needed to make urban living sustainable.
72
avoiding the pitfalls of
behavioural investing
Recognising that investment choices are often emotional
rather than rational is the first step toward circumvention.
aRt
46
claudia
comte
75
exploring the disruptive
powers of digital technology
the innovative, young
swiss artist making waves
in the art world to great
critical acclaim.
52
new acquisitions
the Julius baer art collection
sponsoRing
66
Young talent witH
electRic vision
the digital age may be fundamentally changing how we live,
but it’s possible to navigate through these developments.
about us
80
82
84
86
Julius baer at a glance
our products and services
disclaimer masthead
5
contents
Regional
potential in a
global context
Interview: Michèle Bodmer
Julius Baer’s presence in both mature and growth markets is characterised by very different
needs, challenges, and opportunities. Gian A. Rossi, Head Northern, Central and Eastern
Europe, and Rémy A. Bersier, Head Southern Europe, Middle East and Africa, – both members
of the Executive Board of Bank Julius Baer – reflect on current developments and future
paths in their respective regions.
What distinguishes Julius Baer from its competitors?
BERSIER: The fact that we only offer wealth management for private clients is a major point of differentiation
that can’t be stressed enough. Being wholly geared to private
banking, with, for instance, no investment banking and asset
management units, we have a clear advantage. We also have
an open product platform, which means that our clients are
not pressured into buying products stemming from the Bank
and our advisors can search the entire market for the best
financial solutions for their clients.
ROSSI: Our client-centric business model is clearly what
differentiates us, along with our unique corporate culture.
We are the only financial institution where six heads of clientfacing operations are also members of the Executive Board.
This means that our votes effectively represent our clients.
Another of our key differentiators is that our relationship
managers are very loyal to us because we treat them as
­partners. This translates into longevity of service.
Clients appreciate that they can count on the same relationship manager taking care of them during both the ups
and downs of economic cycles. The service, the dedication,
the honesty, and the trust that is achieved through this longevity is unique to Julius Baer.
What distinguishes your regions from others?
BERSIER: In Southern Europe, there is a strong, sustained
demand for a Swiss cross-border private banking offering because clients want to diversify their banking risks and the way
they manage their wealth. Especially now, given the recent
situation in Greece. If residents of Southern Europe see a risk
of contagion to the entire region, this might provide them
with an additional incentive to diversify.
The Middle East continues to offer promising growth.
The region’s key macroeconomic fundamentals remain
strong, with wealth creation likely to reach between 6 and 10
percent. Overall, this part of the world has generated superior performance for Julius Baer over the past 4–5 years.
ROSSI: This year will be quite interesting for NCEE
(Northern, Central, and Eastern Europe). Right now, Germany and the Nordic countries are Europe’s growth engine,
while the crisis is in the South.
In Central and Eastern Europe, such as the Czech Republic, Slovenia, Hungary, and Poland, we are seeing growth and
also new clients. This broader client base is keen to have their
assets managed by an internationally positioned bank. Their
wealth mainly stems from a growing number of small and
medium-sized enterprises (SMEs). People are also getting
richer in those regions. Poland, for example, with a population of almost 40 million people, is actually one of the larger
economies in Europe and has a lot of potential.
Overall, economic growth in the region has not stopped
in the past 7–8 years. There were small currency crises in
Poland and the Czech Republic, but the resulting devalu-
Interview
8
ations eventually helped their economies to get stronger. We
also see improving fiscal systems and a greater transparency
in their regulatory frameworks. All these factors are positive
for the region.
In 2015, Julius Baer is hosting Next Generation summits
in Zurich and Singapore under the banner ‘First Movers’.
Has Julius Baer adopted more of a ‘first-mover’ or a ‘fastfollower’ approach in your regions?
BERSIER: In my regions, I don’t see Julius Baer as either a
first mover or a fast follower. We are perceived as a Swiss
cross-border private bank with a strong Swiss character,
operating from abroad. We’ve been able to bring the brand
to an institutionalised level. Julius Baer is seen as a bank with
experienced relationship managers who can provide fast
solutions at high standards in terms of quality and services.
This distinguishes us from our competitors.
ROSSI: It actually depends on the market. Our German domestic business, for example, was the first with a
pure private banking model. We stand out from the crowd in
Germany when it comes to growth and success. The country
remains one of the most attractive wealth management
destinations in Europe. In the UK, we were rather small, but with the recent acquisition of Merrill Lynch’s international business we’re now
among the 15 largest wealth managers in terms of assets
under management in London. This is reflected in our new
regulatory status there. We are now category two, which
really emphasises our relevance in the City when it comes to
wealth management. We are getting more attention too,
which can translate into capturing some of the huge potential of this market. For example, we have extended our cooperation with the British Museum, and in July 2015, the
Formula E races gave us valuable TV presence.
In Moscow, we opened a representative office about
7 years ago. Since there are no other banks in this region
focusing solely on private banking, we can say we are a
first mover.
Mr Bersier, Julius Baer celebrated its 10-year presence in
the Middle East last year. Were the growth rates anticipated when entering the market reached?
BERSIER: Julius Baer was the first international private
bank to be granted a license from the Dubai International
Financial Centre back in 2004.
We’ve been successful in entering the markets in the
region and have recorded excellent growth momentum. This
is despite the challenging political environment encountered
in some of the markets in the region.
In regard to growth, we’ve even been able to exceed our
expectations. We’ve managed to triple our asset base over
the past three years, boosted by the acquisition of Merrill
Lynch’s International Wealth Management business outside
the US, and the sound decisions taken in terms of recruit-
ment and global market coverage. But the story there is
not just about growth. It’s also about aligning with local
specific needs.
The region’s investment philosophy was once about cash
management and short-term positions. Now we are in the
process of finalising Sharia-compliant investment solutions
in our mandates and structured products area, and we are
developing a Sharia-compliant leveraged product. This will
potentially give additional wings to our growth strategy in
the Middle East.
Rémy A. Bersier
“Our strong international background
appeals to Africa’s emerging class of
local entrepreneurs and well-established
business owners with a strong international background. We are targeting
the continent’s core segment of highnet-worth individuals.”
Rémy A. Bersier
Your aim is for Julius Baer to be among the Middle East’s
five largest wealth managers by 2017. How will this ambitious goal be reached?
BERSIER: We are on the right path. As mentioned, the
acquisition of the private banking activities of Merrill Lynch
has enabled us to strengthen our position in the region by
adding Bahrain and Beirut to our offering.
This is in addition to our existing presence in Dubai, Abu
Dhabi, and Cairo. Organic growth, strategic recruiting, and
acquisitions over the past 3 to 4 years have also increased
our standing and, as mentioned, Sharia-compliant investment solutions will give us an additional tool for growth.
In which region do you see the most opportunities, and
why? Where do you see the greatest challenges?
ROSSI: There are still great opportunities in Germany
and the numbers reflect it. In the first half of 2015, net
new money was driven by the local businesses in Germany.
There is a need for an individual offering from a pure private bank, producing unconstrained research. There are
some local players, but they are only strong regionally. No
one has Julius Baer’s broad reach.
9
Interview
But the greatest opportunities are in the smaller countries
of Central Europe and towards the East. The region is totally
‘under-banked’. We have been able to gain some good business there, however, the sum of wealth does not yet justify
setting up a permanent presence. Therefore, we operate
out of our home country and travel to the region. Complementing our office in Moscow, we have continued to
strengthen our dedicated desks covering Central and Eastern Europe from our Singapore, London, Luxembourg,
Monaco, Geneva, Zurich, and Vienna locations in order to
provide even better service.
Eastern Europe also has its challenges. Although we’ve
seen substantial growth over the last couple of years, we’ve
also seen a lot of money leaving the region – not only
investable assets for wealth management, but also in terms
of other investments.
After several quarters of down trending markets in the
area, we have recently seen individuals and companies come
back and invest. People with Russian roots are known as
successful investors and entrepreneurs globally. As a result,
wealth creation will continue.
We are targeting the continent’s core segment of highnet-worth individuals. We have to allocate our resources
wisely, so we focus on three key countries: Egypt, Kenya, and
South Africa.
Mr Rossi, how has the private banking sector developed in
Russia since the Bank first entered the region?
ROSSI: This large and fragmented region continues to
show diverging economic development. Yet thanks to our
ability to capitalise on our growing reputation as a leading
wealth manager in the region, we recorded solid net new
money inflows again in the first half of 2015.
Russia does not have a huge domestic private banking
sector. Transactions mainly stem from commercial banks
BERSIER: We will continue to focus on opportunities in
the Gulf Cooperation Council (GCC) markets – predominantly the United Arab Emirates, Kuwait, and Saudi Arabia.
The last of these seems to be opening up slowly to international players.
From a private banking perspective, there is tremendous potential in what is a rather underdeveloped market.
However, we also have to consider risk management and
medium-term economic risks.
On another note, Abu Dhabi is developing a centre called
Abu Dhabi Global Market, which will be similar to Dubai’s
International Financial Centre. We are currently considering
increasing our visibility and positioning there.
Political instability and physical security remain our major
challenges in the Middle East and Africa. Taking our Cairo
office as an example, we were able to transform these challenges successfully into an opportunity. During the Arab
Spring, we maintained our local operations in Egypt.
The dedication and commitment of our colleagues in
Cairo was very well received by our clients and has created a
lot of appreciation and recognition for Julius Baer. Building
on this mutual trust, our team was able to further develop the
business even during these turbulent times.
Mr Bersier, can you share more details about Julius Baer’s
strategy in Africa?
BERSIER: Africa is still in the early growth phase. It is a
market that requires close monitoring with regard to political
exposure and other risks. The private banking culture is
not yet mature in most African markets.
Our international reach appeals to the continent’s emerging class of local entrepreneurs and well-established business
owners with a strong international background.
Interview
10
Gian A. Rossi
“Our German domestic business was the first
with a pure private banking model. We stand
out from the crowd in Germany when it
comes to growth and success. The country
remains one of the most attractive wealth
management destinations in Europe.”
Gian A. Rossi
and investment banking. Domestic private banking services
often end with concierge services such as special credit cards.
But wealth distribution has become much broader.
SMEs have developed over the last couple of years in vari­
ous regions. They used to be Moscow-centric but that is no
longer the case. Businesses are also popping up in all sorts of
sectors from nutrition to health care.
Russia has also become much more international, with
clients having a second home abroad and holding investments in Asia or as far away as Latin America, for example.
It’s a typical trend for a market that was once pretty closed.
On the other hand, there are risks and we need to adopt a
cautious stance.
What are some of the biggest hurdles in Russia?
ROSSI: Geopolitical and regulatory issues affecting the
overall business outlook. For example, there’s the RussiaUkraine situation, where my personal belief is that there
will eventually be a framework put in place and that relations will be friendlier. The tone has changed somewhat,
but it ­remains tense. As an international bank we need to
respect international law while showing our clients that we
are around in difficult times as well. It’s possible, but it’s not
an easy task.
What can or should the banking industry do to strengthen its foundations globally?
ROSSI: Public opinion has been shaped by the actions of
a few black sheep and the industry has been heavily criticised
in recent years. But banking remains an important pillar in
every country.
Banks will remain an essential part of the economic value
chain as long as goods are exchanged for money. It is important that the industry regains the reputation it once had:
that banks are trustworthy organisations able to conduct
business transparently with well-educated employees.
We place a strong emphasis on internal education programmes for all levels. In Switzerland, we will continue to
support banking apprenticeships as we believe in youth
learning from experience. Through its leading apprenticeship
programme, Switzerland is in a strong position to teach banking to a higher standard than most other countries. The system provides the foundation to train people from scratch,
and enables them to understand the ethics behind banking
along with learning the profession.
The banking industry should also invest more in client
education and support academic research related to new
developments in the financial industry. In time, this will
again help us to convey the positive aspects of banking to
the public.
BERSIER: I agree that we need to make the banking industry more attractive. Forty years ago, it was perceived as
an honour to work in a bank, but that has changed with the financial crisis and it won’t improve overnight. Employees are
the face of the industry and knowledgeable and trustworthy
employees will turn this negative image around.
My view is that over the past decade, the Swiss banking
industry has been focused on hiring people with strong profiles to address the needs of certain market segments. While
hiring the right people for a job is essential, more effort
should have been made to train employees. Julius Baer will
continue to invest in the young individuals wanting to learn
this trade via an apprenticeship.
How important are Julius Baer’s 125-year history and
Swiss roots to existing and potential clients?
BERSIER: For the past two centuries, the Swiss banking
system has been founded on quality and stability. Our regulatory and political framework, strong currency, and the
quality of the banking sector’s employees, are the essence of
the Swiss banking system’s success. These are some of the
factors that attract clients to our Bank. We can respond
quickly to client needs, and I believe they appreciate our
Swiss values.
In addition, Julius Baer enjoys a highly resilient business
model, a solid financial base with a strong balance sheet, and
the top management is very committed to supporting our
employees. With this in mind, the DNA of Swiss banking will
generally continue to be very important in positioning our
brand and services in most of our markets.
ROSSI: It is always important to have a strong foundation
in terms of history. The last 125 years have seen challenging times, particularly in Europe. Yet Julius Baer was not
endangered during past turmoil, even during the World
Wars. This demonstrates the positive aspects of our consistent and conservative approach – namely the stability and
reliability we offer.
11
Interview
First movers:
How to make the
most of an
early advantage
For all the stories of successful business pioneers, there are countless more unheard stories of
those who tried but failed. Yet the human spirit is such that we are constantly drawn to the challenge of discovering new worlds and exploring new opportunities. What is it about successful
pioneers that enables them to spot new opportunities and grasp hold of them? How does a business implement the right idea at the right time?
Author: Janet Anderson
Is there an inherent advantage in being the first? The idea
has instinctive appeal. Whether as an explorer, inventor,
sportsman or game player, the person who is first hopes to
outwit the competition, leaving them scrabbling to catch up.
It is an ancient idea that has its roots in battle strategy. As
the Chinese military strategist Sun Tzu put it in the 6th century BC, “Generally, he who occupies the field of battle first
and awaits an enemy is at ease. He who comes later to the
scene and rushes into the fight is weary.”
In the 1980s, the business community took the idea of the
‘first-mover advantage’ from the military arena and began to
develop it as a marketing strategy. The premise was that
­pioneering companies that seek out new business terrain can
redefine what the market is. This means they can stake a
claim before others have realised its potential and build
defences against subsequent attack.
Although the warfare analogy has since gone out of fashion
in business-school thinking, there is still a strong belief that
the smart thing for a business to do is to look for unchartered, currently non-existent markets where the water is blue
and there is everything to play for. The idea is to avoid sharkinfested waters where later entrants are likely to be gobbled
up in a feeding frenzy.
It’s an enduring idea that the business that gets into a
market first has the best chance of success. But is this
always the case? In 1988, Marvin B. Lieberman and David B.
Montgomery then of the Stanford Graduate School of Business, published a seminal paper on the first-mover advantage, exploring exactly what first movers gain over their competitors, and the conditions under which this arises. They
also asked the equally important related question: when is it
better not to rush in, but to sit back and allow rivals to make
the pioneering investments?
Gaining a head start
Lieberman and Montgomery examined some of the different
ways that a first-mover company can attain an advantage.
“First-mover advantage arises from three primary sources:
(1) technological leadership, (2) pre-emption of assets, and
First movers
14
(3) buyer switching costs,” they said. By being first, a company has the chance to get ahead of the learning curve in a
new technology. It can also take ownership of scarce assets,
making it more difficult for later arrivals to access them.
Finally, it can start to build an early base of customers who
would find it inconvenient or costly to switch to other companies’ offerings.
“The dot-com era was interesting. The belief then was that
the only winner would be the
first mover.”
Professor Marvin B. Lieberman
Pre-emption of assets is a good place to start. A smart company foreseeing future market developments might purchase real estate, natural resources or even shelf space at a
relatively low price, simply because the competition has not
yet woken up to the way the market is going. Lieberman and
Montgomery cited the US multinational retail company
Walmart as a good example. The company’s founder, Sam
Walton, was the first to spot the potential opportunity of
building supermarkets in small towns in the southern US
that competitors found unprofitable to service.
Walton developed a more efficient distribution network and
retailing system. Critically, he passed the savings on to the
consumer and thereby pioneered the business model of selling products at low prices to get higher-volume sales at a
lower profit margin. By undercutting the competition and
keeping prices low, Walmart gained a leading position in the
market. The model has since been adopted successfully by
large retailers around the world who have effectively piggybacked on the original idea. But Walmart has succeeded in
fighting the competition from later entrants by maintaining a
relentless focus on efficiency and low prices. As the Walmart
example shows, gaining the initial advantage is one matter,
but sustaining it is quite another. In the field of technology,
which is characterised by a rapid pace of change and constant upheavals, it might help to be first, but it is rarely
enough for the long term. The initial benefits are clear: the
first company to develop and use a new technology has more
time than later entrants to accumulate and master the technical knowledge. This expertise can then translate into lower
costs. In industries such as pharmaceuticals, it can mean
being the winner in a patent race and securing the proprietary rights to the use of a new technology. “Learning curves
can generate substantial barriers to entry. Fewer than a
handful of firms may be able to compete profitably,” said
Lieberman and Montgomery.
But patents and learning curves can only hold back the
tide for so long if a profitable new market has been dis­
covered. Learning soon leaks, new inventions can be reverseengineered, and clever competitors can invent a way round
a patent. GE is a good example of a company that gained a
technological lead in several key areas, secured that lead
through patents, and has gone on to grow and prosper over
the long term. Founded on the basis of Thomas Edison’s
inventions, the most famous of which is undoubtedly the
incandescent electric light bulb, it maintains a lead today in
many of its diversified businesses by working out quickly
how to commercialise new ideas and turn new technologies
into viable products. Its patents have given it protection
from competitors, but it has been able to thrive thanks to its
commercial strategy and its focus on the customer.
What is the value of early success?
The Internet boom of the 1990s was perhaps the closest
thing in recent history to a gold rush. As the Internet grew
and people began to see its vast potential, many entrepreneurs let their enthusiasm for the new technology carry them
away. They latched on to the idea of the first-mover advantage. “The dotcom era was interesting,” explains Lieberman
today. “The belief then was that the only winner would be
the first mover.” In many ways it was like a land grab. Every
company wanted to be a first mover and get big fast. But not
all of them did. In fact, many failed and the subsequent dotcom crash in 2000 caused some observers to claim that the
first-mover advantage was an illusion. It is instructive to
look back and examine what happened. Lieberman revisited
the issue in 2007 and asked the question “Did first-mover
advantage survive the dotcom crash?” In a paper with this
question as its title, he looked at a wide range of Internet
markets and companies and concluded that, in the absence
of certain other key conditions, the advantage of being a first
mover was minimal. What also emerged was that many of
the biggest names in the Internet that have survived until
today were not, strictly speaking, market pioneers.
“Some first movers succeeded, like Amazon and eBay,” says
Lieberman, “but others, such as Google, Facebook, and
Apple were all followers.” In many cases, the first movers
bore the extra costs of investing in buyer education and infrastructure, only to be overtaken by “fast followers”, who
were able to free-ride on the hard work of the pioneers that
“Clever fast followers watch
the early entrants trying different things, and they figure
out the right recipe.”
Professor Marvin B. Lieberman
had established the new market. Looking back, some of the
main survivors of the dotcom crash were those who, like their
pre-Internet predecessors, developed superior technology
and maintained their leadership by patenting innovations
and staying ahead on the learning curve. Lieberman today
considers Amazon a great example of a first mover, with
its patented one-click technology. “There were other booksellers online before Amazon,” he says, “but Jeff Bezos saw
an opportunity in Internet retailing and decided that books
were the place to start. Over time, Amazon evolved and
broadened its retail presence. Now it’s a supermarket to the
world. Bezos had a plan and carried out a systematic search
to find the right place to begin. He was right about books – it
was a perfect beachhead.”
15
First movers
In the case of eBay, Lieberman, who has been Professor of
Policy at UCLA Anderson School of Management, says that
the reason for their success lay in making the most of network effects. Network effects occur when the value of a product to the individual user grows along with the number of
other users. With the rapid expansion of the Internet, for
­example, network effects were the key to success. The online
auction site eBay became more attractive the bigger it grew
– more bidders means that sellers have the chance of achieving higher prices, thus attracting more sellers which, in turn,
increases the number of bidders. It is a virtuous circle. Lieberman described eBay as “market makers”. In a similar way, he
points out that the new taxi service Uber also benefits from
network effects. “Passengers want to use the service with the
most cars so that they will be picked up fastest, while drivers
want to be part of the service with the most passengers so
that they have the least wait. Uber is able to deliver this via
its innovative technology.” But will Uber, like eBay, be able to
maintain its first-mover advantage? Lieberman is sceptical.
“In Los Angeles there are already two apps offering a similar
service – Uber and Lyft – and it’s easy to switch. Uber may
currently have technological superiority, but others may be
able to catch up.”
new, uncertain market involves a high degree of risk. With
the breathtaking pace of technological change today, shifts
in consumer demand can undermine a first mover very
­rapidly. In that sense, surely you need to be a big company
with sufficient resources to experiment, or maybe it is better
to be a fast follower? Often it helps to be both.
Staying the course
“First movers very rarely get it right immediately,” says Lieberman. “Clever fast followers watch the early entrants trying different things, and they figure out the right recipe.” While disruptive innovations can shake up existing industries in ways
that dominant incumbents may be slow to catch on to, dominant incumbents can nevertheless be canny and aggressive
followers. “When Apple launched the iPod there were already
mp3 players on the market,” says Lieberman. “What Steve
Jobs saw was the potential of connecting to the Mac and thus
leveraging Apple’s capabilities.”
There is another factor as well – and that is persistence. “The
first prospectors make lots of mistakes,” says Lieberman.
To succeed requires resilience. Bezos has talked about the
­necessity of being willing to fail, repeatedly, and still continue
experimenting and looking for the right solutions. Sir James
Dyson said that it took more than 5,000 prototypes and
5 years to develop the first of his bagless vacuum cleaners.
But continual experimentation is expensive and entry to any
The Internet brought the ability to interconnect, and this
meant that network effects became more important than ever.
These effects relate not just to the use of the product itself,
but to the entire web of related services and products associated with it. When these together provide clear benefits, consumers are less likely to switch to a competitor offering, particularly if this means learning new systems and changing
habits. The consumer technology market is growing con-
Technological superiority is clearly not enough on its own.
Bezos himself has ascribed Amazon’s pioneering success to
another factor, one that harks back to the pre-Internet era of
traditional retailing. Like Sam Walton’s Walmart, Amazon
put the consumer at the heart of its business strategy. “If
you’re competitor-focused,” he told US News in 2008, “you
have to wait until there is a competitor doing something.
Being customer-focused allows you to be more pioneering.”
First movers
16
stantly, and the costs of switching have been a significant
brake on later entrants. Apple has excelled in making the most
of this factor by placing their products in an entire ecosystem
of connected offerings. Once a consumer is invested in this
ecosystem, it is painful to change.
Is it necessary for success in a new market to have the complementary assets and skills in marketing, distribution, and
manufacturing of an established firm, in order to be able to
scale up production quickly and efficiently? Has the advantage of being a first mover been entirely overrated? Not so,
says Lieberman. “If you are a small start-up, a successful
strategy is to stake out territory and defend it. Many are then
bought by established firms. It can be a win-win,” he says, citing Instagram as a good example. Launched in October
2010 as a free photo and video-sharing mobile app, it quickly gained in popularity and in 2012 was bought by Facebook.
Under its new ownership it has continued to grow, and by
December 2014 had over 300 million users. “This is also a
form of first-mover success,” says Lieberman.
Google is perhaps the company that disproves the rule. It
was naturally not the first-ever search engine, but a classic
case of a fast follower. Earlier text-based search engines included AltaVista and Netscape. Google only rose to prominence at the end of the 1990s, but has since been dominant,
consigning the pioneers to early Internet history. But what is
interesting about Google is that they are now looking at new
opportunities well beyond Internet search, such as augmented reality headsets, robotics, and even cures for diseases of
ageing. Established firms tend to lack the skills and the mindset needed for radical innovation and therefore tend to be
less effective in the early phases than smaller start-ups. But
in Google’s case, it could be different. “They are entering all
kinds of new areas and could become first movers elsewhere,” says Lieberman. “They are doing what established
firms normally shouldn’t do – but they are an unusual firm
and perhaps they can succeed.”
Google is building on a long tradition of doing things for
which there is no game plan (long, at least, in Internet terms).
As its popularity soared through the early 2000s, it continued to innovate and scale up its infrastructure at an
­ nprecedented pace, reinventing the way it handled web
u
search and data storage many times over. In “Collective
Genius”, a recently published book by business academic
Linda Hill and co-authors Greg Brandeau, Emily Truelove,
and Kent Lineback, the challenge of creating an organisation capable of continual innovation is described by Bill
Coughran, Google’s senior vice president of engineering
from 2003 to 2011: “We were doing work that no one else in
the world was doing,” he said. “So when a problem happened, we couldn’t just go out and buy a solution. We had
to create it.” Coughran had to build a team and a culture
that shared the will and the vision to meet this challenge
over and over.”
Luck plays a role
There is another factor that plays a big role in all this: luck.
How much of a first mover’s success comes down to exceptional foresight, and how much is down to pure luck, is a
tricky question, more easily answered in hindsight. Whether
or not a pioneering company can survive and even thrive will
depend not just on its own resourcefulness, but also on external factors beyond its control – changes in society that can
radically alter markets in ways that no one expected.
The lesson learnt from the dotcom era, Lieberman believes,
is that there is no single best time to enter a market. It all depends on the characteristics of the emerging market as well
as on the capabilities and resources of the company in question. If a company enters a market too early without sufficient resources to survive the initial vicissitudes, then it is
likely to drown or, in the best case, be swallowed up by bigger
fish. If a company decides to sit back, wait for the market to
develop sufficiently, and then follow, it had better follow fast
enough to gain any advantage. If it arrives too late, it will immediately fall victim to the competitive attacks of the companies that are already established.
But it is still clear today that what every pioneering company
needs, besides luck, is a combination of appropriable technology and the ability to pre-empt the best resources and
lock in customers. “If you have these and you can add to this
network effects,” says Lieberman, “you have a good chance.”
17
First movers
Our interconnected
world – a force
for good?
The world gets more connected every day.
In the coming years, several billion more
people will come online. What opportunities
do new communication technologies offer
and how can they be used to solve some
of the biggest challenges we face? What
are the dangers? Jared Cohen, Director
of Google Ideas and former advisor to the
US Department of State, has travelled widely
in countries that suffer from unrest and
has probed the question of how new technologies are used both for good and for
bad. He discusses the impact this has on
national politics and international relations.
Author: Michèle Bodmer
You have said that the Internet is among the few things
humans have built that they don’t truly understand. For
many, this idea is both exciting and worrying.
The ecosystem we have created is yielding innovation
that is difficult to keep up with. We invent hardware and software without always knowing the ultimate use case. The tech
sector subscribes to a methodology of ‘launch and iterate’,
which means: think of a really amazing technology that
can solve a problem, launch it as a work-in-progress, and
iterate on it as you get feedback. This is how great products
are created and ensures that assumptions aren’t made about
how they will be used.
But with this comes disruptions. Look at cryptocurrencies, for example. We are struggling to understand
where this ecosystem is going. We know the technology
is extremely sophisticated. We know that they can be both
regulated and unregulated. We know that there is real value
there. We know that both criminals and law abiding citizens
will use them. Where does this leave us? It leaves us torn debating the benefits and costs. I would argue that the better
way to think about this is not in terms of costs and benefits.
Instead, we should look at the aspects of the technology that
are inevitable and focus more on how to prevent the worst
use cases. From there we can work backwards.
You describe the Internet as the world’s largest ungoverned space. What are the implications of this?
States have a hard enough time implementing laws in
the physical world. As they go from a minority of their population being online to the majority, this will only become more
difficult. In an effort to maintain control, we will likely see a
balkanization of the Internet. This is already happening at
an individual state level, where the Internet looks a little
­different from country to country.
This happens on three levels. First, is the politically acceptable. The best example of this is looking at Germany and
the US, where both share values of free speech but have a
nuanced difference in how this applies to neo-Nazi hate
speech. In Germany, neo-Nazi hate speech is filtered out, in
the US it is not. Second is the sheepish. These are countries
such as Russia and Turkey that filter out opposition content
first movers
18
19
first movers
under the auspices of things like child safety using umbrella
laws that have convenient ways to go after the opposition.
Finally, there are the blatant.
These are countries such as China and Iran who don’t
hide the fact that they filter and censor content. But the
real way states will seek to maintain control in a world that
is multi-dimensional is through alliances. Like-minded
states will band together to collectively edit the web based
on shared values and norms. There will be two dominant
cyber superpowers – the US and China – as both have the
capacity to build out the world’s infrastructure.
There are some countries that are naturally going to turn
to American companies for this (the democracies). There are
other countries that will gravitate towards China (the autocracies). Then there are a number of countries in the middle,
which are up for grabs. This is where the geopolitical game
will play out as the US and China spar for influence.
“States have a hard enough time implementing laws in the physical world. As
they go from a minority of their population being online to the majority, this
will only become more difficult. ”
Jared Cohen
In Africa mobile phone networks have leap-frogged over
the development of landline telephone networks. In the
same way, will the Internet develop differently in countries such as Africa?
In answering this, it is useful to think about the dilemma
ahead. Take a country like Nigeria, which is roughly 200 million people. The cost of a smartphone is going down dramatically. But, despite the technological innovation, Nigeria still
lags behind in two areas: infrastructure, which will make
access to electricity difficult, and bandwidth, which makes
using mobile devices difficult. This is not insurmountable.
Necessity is a tremendous driver of innovation and there
are few places on earth where the needs run deeper than
Sub-Saharan Africa. As a result, we will see an explosion of
entrepreneurial solutions across the continent that will be
easily scaled for specific types of emerging markets. We already see this with mobile money transfers, where Africa has
had some of the greatest success in the world in developing
mobile money platforms and mobile banking tools as a way
to work around the lack of financial inclusion.
While all of this is good, Africa faces a larger challenge.
Most of the 55 countries are autocratic, so we should assume
that they will look to turn physical autocracies into digital
autocracies. States rich in natural resources will be able to engage in trade with countries such as China, who want the oil
and minerals, and are happy to trade the surveillance tools.
first movers
20
As ISIS and other terrorist organisations are proving, the
digital world can be used very effectively to recruit and
radicalise young people through social media. What do we
know about how they operate?
ISIS is the first terrorist group to occupy both physical
and digital territory. They control lands that are as vast as
the UK across both Iraq and Syria. In the digital domain, they
are active across multiple technological platforms. They use
messenger platforms such as Wickr, Telegram, and Whats
App, as well as social networks such as Facebook, video platforms like YouTube, and microblogs like Twitter. They use an
app called Kik, which turns their phones into walkie talkies.
But this really doesn’t tell us much about how they have
been effective online, it just tells us the topography – where
they are. So, if we probe deeper and ask who are they, does
that give us more insight? There are four types of digital foreign fighters. The first are a digital core, who operate private
accounts and develop the content. They disseminate that
content to rank and file digital fighters, who are ISIS members with public accounts. That group then disseminates to a
broad base of supporters worldwide.
How do we tackle this threat?
In order to understand how to defeat ISIS online, we need
to ask not where are they, or even who are they online. Instead, we need to ask how is it that they are able to hold
such vast digital territory. ISIS actively uses trolls to proliferate tens of thousands of fake accounts across multiple
platforms. They write software that is used to automatically
run these accounts. They also have reserve accounts that
they don’t publicise, but they use to replenish when necessary. ISIS utilises a tactic called hashtag bombing, where
they get all their supporters and automated accounts to post
the same hashtag at the same time so the topics they want
are trending.
So, how do you defeat them? The answer is not more
counter-narratives, which seem to be the prevailing approach. Instead, we need to look for opportunities to level the
playing field so they are not able to proliferate online. This
requires new approaches to deny them their capabilities. We
can use machine learning to empower moderators on various
platforms to more effectively enforce their code of content
and drive violent extremist voices from their forums. We can
use social graphing to inject risk into the ecosystem, so that
an ISIS aspirant feels as though the risk of engaging online
and in the open is too high. And we can use targeted advertising to leverage the voices of former violent extremists.
You argue that nations need to have foreign and domestic policies for the virtual and the real world, but warn
that these might sometimes contradict each other. Why?
The best way to understand this is by looking at the relationship between the US and China. In the physical domain
they have a complex relationship, but they are partners. They
trade, do business with one another, engage militarily, and
“We need to think about our cybersecurity
like we think about our physical health, to
the extent that we increasingly split our time
between the physical and digital domains,
what makes us a healthy individual is how
well we fare in both domains.”
Jared Cohen
politically, etc. If we look at the digital relationship between
these two countries, it is more adversarial than the physical
one between the US and North Korea. They are in a perpetual state of war, engaging in kinetic attacks of massive proportions on a daily basis. So you could say that the foreign
policies towards each other in the physical world are cordial
and cooperative, while the foreign policies in the digital
domain are adversarial.
But herein lies the problem. What happens if one domain
impacts the other? While the two countries may have separate policies for separate domains, they are still just two
countries. We must ask the question at what point does an
attack in the digital domain carry such consequences that it
results in a physical world response? The threshold for a digital attack is much lower than a physical one, but at some
point the notion of an attack straddles both domains.
How can we manage these contradictions?
Most states will be able to get away with different behaviour in the digital domain and the states that are best able to
navigate it are the ones who understand the boundaries and
the limits. Our conception of power in the new digital age will
be derived not by the independent physical and cyber capacity of a state, but its ability to maximise both capacities
without having them result in setbacks. In order to do this,
governments will need to understand and navigate the risks
that come with utilising these newer capabilities.
How do we protect ourselves as nations from cyber attacks? Are we already living in a state of uncontrollable
cyber war?
The world is in a perpetual state of cyberwarfare and
there is a lot of asymmetry. You have countries attacking
countries, people attacking countries, countries attacking
people, people attacking people. If you are online, you are
caught in the crossfire of geopolitics whether you like it or
not. If you have been phished, hacked, infected with malware, DDoS (distributed deniel of service) attacked, you
have caught a stray bullet from a war that is unfolding
before our very eyes.
We need to think about our cybersecurity like we think
about our physical health, to the extent that we increasingly
split our time between the physical and digital domains.
What makes us a healthy individual is how well we fare in
both domains. In the physical domain, we get it. If we are sick
we go to the doctor, we find out what is wrong with us, and
we take medicine. It is rarely convenient, but we do it because
the cost of poor physical health is too high. We don’t do anything like this in the digital domain despite the fact that it
is far more convenient. We don’t install software updates, we
click on bad links, we don’t use two-factor authentication. A
normative shift has to take place. The tools are there, they
are just being underutilised.
Are we in a “technology arms race” with cyber criminals?
I would describe it more as a cat and mouse game, where
the anti-criminal ecosystem is the cat and has the distinct
advantage. Criminals have to use technology to be relevant,
but technology by nature involves playing in more transparent ecosystems than they are comfortable with.
Criminals have less capacity to innovate and they don’t
control the platforms. They also have less awareness of the
risks they are taking. Many of them operate in what is called
the dark web, which is the digital equivalent of caves and
hidden laboratories. These places are often infiltrated by
law enforcement, which makes it difficult for them to have
the reach they want. Criminals can’t be effective operating
entirely in the dark web, so each time they pop up into the
regular web, they expose themselves.
What’s interesting and a bit awkward is that many of the
same tools used by dissidents are also useful for criminals.
This is not surprising, given that in repressive countries, dissidents are considered criminals. There is a way to navigate
this, but it requires those building the tools to think about
both use cases and optimise for the right things.
What challenges can technology help solve today? More than two-thirds of the world’s population experiences some kind of censorship and one out of every three
people on earth experiences severe censorship. Censorship is
typically thought of in the context of political oppression, but
in the case of countries like China, it is also about capitalism
and gaining an extra edge.
Regardless of the motivation, the cost to the individual is
extreme restrictions on free expression. This is going to be
increasingly difficult for repressive regimes to do as the
anti-censorship and circumvention ecosystem is growing
and innovating. I believe that in our lifetime, we will experience a world where repressive online censorship tactics no
longer work.
Jared Cohen
Jared Cohen is the Director of Google Ideas and an Adjunct Senior Fellow at the Council on Foreign Relations in the US. He previously served
as a member of the US Secretary of State’s Policy Planning Staff and was
a close adviser to both Condoleezza Rice and Hillary Clinton. He is one
of the World Economic Forum’s Young Global Leaders and was named in
2013 by ‘Time Magazine’ as one of its 100 most influential people.
21
first movers
Supercharged
Mate Rimac – powering the future
The 27-year-old Croatian built the fastest electric car in the world. Now Mate Rimac’s
innovative designs and technologies, from electric powertrains to battery packs, are
being licensed by other carmakers and applied to the next generation of bicycles, boats,
and supercars. Author: Andy Isaacson
On an August afternoon in 2013, Mate Rimac sat behind the
steering wheel of the Concept One, an electric sports car he
designed at 21 years old. I was his passenger in the cherryred, sleek, and low to the ground vehicle, tasked with writing
an article about the young entrepreneur for the ‘Wall Street
Journal’. The car’s presence on a suburban road west of
Zagreb provoked curious looks from the drivers standing
beside their internal combustion engine sedans at a local
petrol station. Rimac glided by the station at a reasonable
speed, and then, pushing the throttle, suddenly propelled
the car to 100 kilometres per hour (kph) in under 3 seconds.
“The advantage of electric car is that the power is linear, so
there are no shift interruptions,” he instructed. At the next
roundabout, Rimac jerked the steering wheel in a single
­motion to reverse direction. “That’s how you make a turn,”
he joked, grinning from behind aviator sunglasses. “You see,
I just turned the wheel and the torque vectoring system
did the rest.”
Returning to the parking lot outside Rimac Automobili, his
automotive startup, he made tight, screeching circles over
the tarmac painting it black and pinning me to the back of
my seat. “I’m not showing off,” Rimac said finally through a
haze of smoking rubber. “I want to show you that the technology is reliable and you can do crazy stuff with an electric
car. It’s not just something that looks pretty at an auto show.
The technology is here. We can build it today.”
When I recently spoke with Rimac for an update on his progress, he explained that in the past two years, Rimac Automobili has sold six Concept One cars, and has quadrupled its
work force. It now employs 110 people and has expanded into
a second facility in Sveta Nedelja, a suburb west of Zagreb. In
2014, the company was voted Croatia’s best mid-size employer in the country’s largest employee satisfaction survey.
The Concept One, which Rimac designed and built from
scratch, is arguably the world’s fastest accelerating electric
automobile. The car spreads a mighty 1,088 horsepower
across four individually controlled electric motors, one for
each wheel. As the car turns a right corner, for example, the
front right wheel can break for a fraction of a second while
the rear wheel generates power. It’s the sort of innovation
that Rimac points to as “the stuff you can’t do with an
­engine,” and which, in his estimation, defines the Concept
One as “the sports car of the 21st century.”
Rimac began developing the technology for the car when he
was 19. At the time, he had been winning international competitions for an electronic glove he designed in high school
that functions as a keyboard and mouse. Meanwhile, the idea
came to him for a car mirror system that eliminated blind
spots. After managing to license his mirror invention to a
few European car manufacturers, Rimac had earned enough
first movers
24
by 2009 to purchase a boxy, white 1986 E30 BMW for
under 1,000 euros. After a few rounds on the track the engine blew up. That sparked an idea to put in an electric
motor. He had to build a lot himself as off-the-shelf components weren’t available. Somewhere along the line, he also
painted the car lime green.
A racer at heart
“At that point, it started to get serious,” Rimac says. With the
help of a well-known young car designer named Adriano
Mudri, he began work on a prototype of the Concept One.
As word spread, a Croatian businessman approached Rimac
on behalf of Abu Dhabi’s royal family; they wanted to see a
prospectus. “They were like: ‘We want two cars’,” he recalls.
“I was like: ‘We’re just a couple guys in a garage.’” Thus,
what began as a hobby turned into Croatia’s first domestic
car company.
After hobbling along on a shoestring for a few years, helped
by some seed money from his father, a shopping-centre
developer, the Concept One prototype debuted at the 2011
Frankfurt Motor Show. The industry took notice of its impressive performance: using a unique powertrain which is
divided into four sub-systems, each consisting of one motor,
inverter, and reduction gearbox, the all-wheel-drive vehicle
has 2,800 pound-feet of torque, and can rocket from
0-100 kph in just 2.8 seconds, reaching a top speed of
325 kph. All of that thrust is generated by a battery pack
that is liquid cooled and boasts the ability to hold onto
82kWh of energy, allowing an average range of 600 kilometres on a single charge. The power-to-weight ratio is on
par with a Formula One engine.
The striking supercar has a glossy, two-tone carbon fiber
body, and exterior flourishes such as tail lights with a deep
3D tunnel effect and animated indicators for more appeal, as
well as a cover for the electricity plug in the shape of a necktie – a nod to claims that the cravate (a French pronunciation
of Croate) is of Croatian origin. The interior contains plush,
cream-coloured leather seats, customised by the Bulgarian
company Vilner, and a high-tech infotainment system.
True to his Croatian roots
Fabrication of the vehicles takes place almost entirely at
Rimac Automobili’s facilities. Most of the components, from
the chassis and suspension to the powertrain, transmission,
battery packs, and entertainment system – almost everything but the battery cells and airbags – are developed inhouse. Rather than use molds to make the wheels or pedals,
for example, as is typical in mass production, large milling
machines cut individual parts out of solid aluminum blocks, a
costly process that wastes leftover raw material, but which
enables the startup to adapt quickly to design changes by
Above: the D-pM-oC 600 system consists of two oil-cooled permanent magnet motors (two independent motors in
shared housing). Below: the infotainment system which can be fully customised.
25
FiRst moveRs
not having to change tools. “Only Formula One cars or
spaceships are made this way,” Rimac explains. After the
Concept One debuted at the Frankfurt Motor Show, a few
orders for the vehicle, which has a sticker price of around
1 million USD, trickled in, but as Rimac recalls, “we were bootstrapping the company the whole time.”
An investment deal with the Abu Dhabi royal family fell
through after Rimac baulked at a last-minute condition that
he relocate his startup to the Gulf. “Nikola Tesla had to go to
America to be successful. I wanted to stay here to give young
Croatians a chance to work on something interesting,” says
Rimac. “I wanted to push the technology forward, to be the
best in the whole world at what we’re doing, compete with big
guys, and create a product that Croatians can be proud of.”
Croatian investors weren’t exactly buying the vision, however. When I visited Rimac’s headquarters in 2013, he said
that banks wouldn’t issue him a loan, and there weren’t really
any foreign investors to speak of. “I think they consider what
we’re doing as some guys playing in their garage with their
toys,” Rimac told me at the time. “They don’t understand
the kind of scale or impact this can have. People here search
for something they can feel, see, and understand, something
tangible like real estate. They don’t understand the concept
of investing in technology, which is a long-term project. We
need a lot of money, but in terms of the automotive industry,
we’re talking about peanuts.”
ment systems – for other companies. The Rimac Automobili
recently made a deal to supply Swedish carmaker Koenigs­
egg with “the world’s most power-dense battery system” for
the Regera, its hybrid supercar.
Rimac has also developed a driverless car for a large German
multinational, and recently supplied electric powertrains to a
boat manufacturer. The company’s focus on high performance, Rimac says has allowed it to hone a core expertise in
making very small, powerful, and long-lasting powertrain
systems and battery packs that can have a variety of applications. The company’s roots began and remain on the racetrack, where earlier this year it developed a 1,500 horsepower competition supercar for Japanese racing legend
Nobuhiro ‘Monster’ Tajima.
From first ideas to finished product
“We can also design and build a prototype fast and inexpensively,” Rimac explains. “We are the only company in the
world where you can produce a complex model, like a car or
bike or boat, from the design office to engineering, carbon
fiber production, machining, chasse production, battery
pack, to suspension – all under one roof. That is unique. No
one else can do the whole thing. And we can develop the
whole car in less than one year. Usually it takes much longer
because everyone is in the same building. We understand
Rimac finally gained more secure footing in November 2014,
when the company received 10 million euros in Series A investment. The first investor in was Frank Kanayet Yepes, a
South American entrepreneur originally from Croatia, who
made his fortune in the oil and energy business. Yepes is also
an investor in the Formula E championship, as well as the
owner of several racing teams, and the Ferrari and Maserati
importer for Colombia. “The trigger to invest was Mate, his
confidence, and the technology he has developed with so
few resources,” Yepes says. The single largest investor was
China Dynamics, a company active in the electric vehicle industry in China that acquired 10 percent of shares based on
a valuation of 70 million Euros. This injection of funds, Rimac
explained when we spoke again recently, helped the company “bring things to the next phase.”
That next phase is to expand the company’s different lines of
business. Rimac Automobili continues to manufacture the
Concept One for a handful of direct buyers: the company is
on track to deliver the last of the eight-car limited production
by end of next year, and meanwhile is developing another
supercar, the sequel to the Concept One. At the same time,
it develops cars and prototypes for other companies. Rimac
Automobili’s primary revenue stream now derives from
designing and producing various components – from electric
powertrains to infotainment systems to battery manage-
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26
Mate Rimac, founder of Rimac Automobili.
Fabrication of the Concept One takes place almost entirely at Rimac Automobili’s facilities.
each part of the car, and we are really vertically integrated.”
In the last couple of years, Rimac Automobili has spun off a
high-tech electric bicycle startup called Greyp Bikes.
The company manufactures a kind of hybrid bicycle, using a
state-of-the art battery-pack, which is capable of a 70 kph
top speed and a range of up to 120 kilometres without
­pedalling. The e-bike has other nifty high-tech features as
well, such as fingerprint-activated keypad. “It’s a new product for that market,” Rimac says.
Already, the company has sold over 200 units of its first
e-bike model – retail starts at about 8,500 euros – to customers in 26 countries. Rimac believes that with the right
management and funding, which he says is in place, Greyp
Bikes has the potential to become even bigger than his automotive business. “This market doesn’t have a clear leader
yet,” he says of electric bicycles. “We don’t want to compete
in high-volume numbers, but we want to be the best in terms
of technology and performance.”
“We are the only company in the world
where you can produce a complex model,
like a car or bike or boat, from the design
office to engineering, carbon fiber production, machining, chasse production,
batterypack, to suspension – all under
one roof. That is unique.”
Mate Rimac
Rimac intends to complete production of the Concept One,
and then develop a brand new electric supercar. Five more
years from now, he hopes to be selling hundreds of cars a
year, and exporting his proven electric power technologies
worldwide. He admits it’s a long-term project. “We’re still at
the beginning with both companies,” he says. “We’ve managed to do a lot in five years, but we a have long way to go.”
27
first movers
Uniting values
and technology
in fashion
Elena Corchero describes herself as a ‘technology artisan’, a title that neatly encapsulates her work at the juncture between futuristic high tech and old-fashioned craftsmanship. Specialising in smart materials and wearables, the former MIT Media Lab
Europe researcher’s goal is to bring meaning back into production and consumption.
Author: Janet Anderson
“I don’t want to use
technology just because
it’s there, or just to ‘wow’
people. True innovation is
not just the latest thing;
true innovation is in the
meaning – in the ‘why’.”
Elena Corchero
“Most of the things we wear today are produced in a way that
is meaningless to the makers. They are also meaningless to
the consumers, and ultimately end up as landfill,” says Elena
Corchero, founder of the London-based consultancy, Lost
Values. “At Lost Values, we study how to use smart materials
and wearable technology in meaningful ways – to bring a
human touch to wearable technology.” To illustrate what
Corchero means, take the humble sweater as an example.
Automation has made the creation of knitted apparel fast
and efficient. Jumpers can be purchased for just a few euros.
But they are equally easily disposed of. A hand-knitted pull-
first movers
28
over, by contrast, is a treasured piece of clothing – the hours
spent making it, stitch by stitch, are part of its appeal and
value. The reason we are less likely to dispose of a handmade item, Corchero maintains, is that it contains something human and personal. This automatically gives it a certain kind of sustainability.
Corchero believes that today’s technology does not necessarily have to lead to depersonalised, disposable products. By
integrating artisan craft skills, cutting-edge technologies,
and the aesthetics of fashion, her aim is to create something
that consumers desire and want to keep – not just an impersonal wearable solution encased in silicone. To continue with
the knitwear example, today with 3D printing we can create,
modify, and customise products. If we can use this technology to ‘print’ in wool, we can create bespoke garments and
bring the meaning back into our knitwear, making it more
personal and therefore more precious.
“When you design something people will consume, it will
change the way they think, the way they behave,” says
Corchero. “Designers should plan ahead for the afterlife of
their creations and elongate as much as possible the use of a
piece.” She believes designers can actively promote change
in society through the products people consume. She calls it
‘design-activism’. “The deeper the values your product incorporates into its design and production, the deeper it will
connect with the values of consumers,” she explains.
Corchero grew up around people who knew how to make
things. Her mother was a tailor and her father an agricultural
engineer who worked on plant genetics. She was encouraged
from an early age to make her own clothes, and the broader
concept of ‘tailoring’ was deeply ingrained. “My father would
take me to the forest and show me how you can mix two
plants to make a new plant, and my mother would show me
how you can make clothes to measure. I was always taught
that if you want something, you can make it. And when things
are tailored to your needs and desires, these things are forever. This idea has always resonated throughout my work. In
terms of sustainability, recycling is not always the solution.
Things should be made to last.”
Today’s challenges require a
multidisciplinary approach
Corchero began studying art and design in Spain and continued her studies in Germany. Here she found she was working alongside product designers who were coming up with
ideas for Volkswagen using 3D design software, and so it was
here that the possibilities of the high-tech world opened up
for her. “These things connected perfectly for me,” she says.
At the same time, MIT had just started research on wearable
technology and in 2000 they opened the MIT Media Lab in
Dublin. Corchero decided to make the leap and joined the
MIT team as one of their research associates.
connect with the values of the company and its customers,”
she says. “I don’t want to use technology just because it’s
there, or just to ‘wow’ people. True innovation is not just the
latest thing; true innovation is in the meaning – in the ‘why’.
That is what creates the emotional bond between the customer and the product or brand.”
Corchero believes that although many values got lost in the
industrialisation process, today’s technology can help bring
them back. “With the introduction of mass, out-sourced production, many things disappeared: communication between
the makers and the consumers, the sense of community, and
the concept of made-to-measure. But now technology has
evolved to the point where it can bring back these benefits.
Technology now makes mass customisation possible and
enables greater transparency – people can see how things
are made and they can communicate with the maker even
if they are on the other side of the world. So we shouldn’t just
blame technology for things we have lost, but take advantage of it to bring back the things we value,” she explains.
In fact, the link between technology and artisans is nothing
new. As Corchero points out, it has been integral to the Swiss
watchmaking industry for centuries. “People talk today about
wearable technology as if it were a new concept, but the
watch was the first truly cutting-edge, wearable technology.”
In the world of textiles and materials, the early concept of
“It was a very lucky opportunity. I had no background in
engineering. But Nicholas Negroponte, Co-Founder and Director of the MIT Media Lab, said innovation happens when
you mix together very separate disciplines. My job was to be
the designer who helped the engineers to develop this wearable technology. In working so closely with them I, in turn,
learnt from them about electronics – knowledge that has
stood me in good stead ever since. If I hadn’t made that
move, I would be a different person today,” she explains.
When the MIT Media Lab closed, Corchero went to London
to complete a Master’s in Material Futures at Central Saint
Martin’s art school. “St Martin’s was one of the first colleges
to spot the emerging trend of wearable technology. The
focus was on innovation and sustainability. Materials are
everywhere – not just in clothes, but also in cars and homes.
Because materials are so widely used, it is important that
they are sustainable.”
In 2008, with the foundation of her consultancy, Lost Values,
in East London’s creative district, she established a base
from which to experiment, prototype and create new products, engage in collaborations with people from a wide
range of disciplines, and inspire others with her ideas. Lost
Values’ tagline is: “We care for a future where technology
enhances our humanness”. It is all about giving meaning to
consumption. “My strategy is to ensure that projects deeply
Cultivating Albedonite crystals which change colour in the sun.
binary computing can be seen in the first looms that were
developed for weaving. “Lace-making is a very mathematical
exercise, mainly carried out by women. The link between
traditional skills and cutting-edge technology may seem
broken, but it has always been there,” she says. The difference today, is that the tools are no longer visually understandable – you can’t see the working parts in software. It is
for this reason that it is no longer possible for an expert from
a single field to innovate alone – as Negroponte said, today,
innovation can only come in a multidisciplinary environment.
29
first movers
Innovative products
with lasting appeal
As a technology artisan, Corchero seeks to innovate in three
areas: tools, materials, and skills. “Digital innovation effects
all of them,” she says. “It requires knowledge across these
disciplines, bringing together all the strands of my background.” It is a rare background, but more and more relevant
today – as evidenced by the fact that many companies look
for people with a ‘T profile’, meaning they have broad horizontal knowledge in different fields along with deep, vertical
expertise in one of those fields.
the needs of the urban cyclist who wishes to be safe and look
good at the same time. By sourcing the wool from Scotland,
the products are helping to keep a traditional industry alive.
The smart part is that she has found a way to make the
wool reflective without adding any environmentally unfriendly ingredients. With LFECT, Corchero won the “Best use of
Materials” Blueprint award at 100% Design London in 2009.
Sitting alongside this is the ECOLORIUM range – beautiful
pieces of handcrafted jewellery made of a cultivated crystal
called Albedonite™, whose colour changes astonishingly
from a pale white to a dark fuchsia when exposed to UV rays.
“Designers should plan ahead for
the afterlife of their creations and
elongate as much as possible the
use of a piece.”
Elena Corchero
Reflective wool products with no environmentally unfriendly elements.
The product range that Corchero has developed is as diverse
as her background, from smart knitwear to educational toys
and eco-friendly jewellery. The theme that constantly runs
through and connects this varied offering is the thoughtful
and future-oriented approach that she takes to design.
“I have two main starting points,” she says about beginning a
project. “I might start with a new technology that I find interesting, or with a new challenge or concept in society that
I want to tackle. In either case I first analyse what has gone
before, see how it has been used or solved, and how not.
Then I look at how I can improve on it, or tackle what has not
been done before. Only when I have found something that is
truly meaningful do I dedicate resources to the project.”
One of her first product developments is sustainable, reflective wool, which she uses to make beautifully designed
scarves and other clothing and accessories. She describes
her LFLECT range as “high visibility products for the highly
fashionable”. Made on demand, they are intended to meet
first movers
30
The effect of this colour change is to make UV rays visible
and thereby raise awareness of the sun’s invisible power in a
very direct way. Its beauty reflects the sun’s benefits – the
vitamins it provides and the happiness it spreads. The intention is to create a joyful reminder to us to use the sun responsibly. “Of course there are apps you can download to your
phone to measure UV rays more accurately, but that is not
the point,” says Corchero. “The trouble I have with these
kinds of wearables is that they just create paranoia. The
Albedonite™ is like nature talking about itself. Instead of a
number, the colour directly reflects the strength of the rays.
It’s a much more natural form of communication.” Every purchase of the award-winning jewellery includes a donation to
melanoma skin cancer research.
In the area of educational toys, she is creating “smart toys for
both girls and boys”, drawing on the electronics expertise
she picked up working with the engineers at MIT. With her
ZippyKit toys she hopes to inspire more girls to develop and
use their technology skills. “I knew the technology existed
to combine textiles and electronics, and I also knew that few
girls learn about electronics, so I saw a huge gap in the market and decided to do something about it. In the UK only
8 percent of engineers are women and this is a number that
has not changed in 30 years. I can’t solve this problem alone,
but I can make a small contribution,” she says.
The children make the toy by themselves and, in so doing,
not only gain hands-on skills but also learn about new materials and various electronic components like wireless power
­inductors. Corchero hopes that the experience will create a
spark in girls and give them confidence to go on using and
developing technology. The additional sustainability benefit
is that, as the children have made the toys themselves, they
have a closer attachment to them and tend to keep them for
longer. The personal connection with the product is in-built.
ZippyKit won the “2nd most disruptive business” award in
the Duke of York’s Pitch@Palace initiative, and Corchero
herself was voted one of the top three female innovators in
technology by the network Everywoman UK.
Toys, like fashion and technology, are used and thrown away
very quickly in today’s world. The cycle of consumption has
become faster and faster over the decades. Constantly
changing trends generate an endless demand for the new.
“Even if the product itself is produced sustainably, it’s no
good if it ends up the next day in the trash,” says Corchero.
“This is why it is important to make something that will have
a long life.”
A sustainable impact
on consumer behaviour
Corchero, unsurprisingly, has a love-hate relationship with
fashion. “Fashion creates a desire to constantly change the
way we look. People want to have the latest thing. Designing
something that can be recycled is not always the best solution. It is easier said than done and a lot of energy is wasted
in transportation and sorting. So recycling shouldn’t be the
starting point – it’s the lazy solution,” she says.
Instead, she believes that technological solutions should be
employed to make the production process more efficient, for
example by reducing waste in pattern cutting, using digital
printing instead of dyes that contain toxins and pollute water
sources, or using self-cleaning materials that reduce water
usage. She believes that businesses that adopt these practices on their own initiative will benefit in the long term over
those that wait to be forced to make these changes. She
thinks more has to be done to educate customers about the
pollution that some materials generate, so that more pressure comes from the consumer side to make improvements.
“There is this general misconception that natural fibres are
the most eco-friendly,” she says. “That is not necessarily the
case. In fact, some man-made fibres, such as Tencel®, are
produced in a closed-cycle process that does not pollute the
water. Cotton, by contrast, is one of the biggest polluters.”
As a designer, Corchero believes she can have a beneficial
impact on consumer behaviour. But to do so requires the
right approach from the very start of the design process. “I
know the end point will be a physical product, but the starting point for me is always the concept of a service. People will
consume the product, so ultimately you are providing a service to a person. If you start with this approach, you can
ensure that the product has the impact you desire on consumer behaviour – how it will be used and how long for,” she
says. To date, many of Corchero’s products are sold as gifts,
meaning the buyer is not the end user – a fact she bears in
mind from the very beginning. “When you buy a gift for
someone else, it is a form of communication. You are saying:
‘I know you and what you care about, and this is the perfect
thing for you’. The service is in providing an opportunity for
this kind of conversation,” she says. The effort made at the
ideation phase is clearly paying off.
Awareness of her brands is spreading, largely by word of
mouth. People are coming to her – not just individual customers, but also the media and larger brands seeking collaborations. She has brought her thoughtful approach to
­collaborations with Guinness, Hugo Boss, and Cadbury. Her
latest collaboration is with Diageo to create a safety awareness campaign around their Johnnie Walker brand. For this
“I believe we will see materials that can
give humans the qualities that nature
developed for other species.”
Elena Corchero
project, Corchero is developing a way to use her LFLECT
materials on a much larger scale, making huge, illuminated
billboard advertising that works on reflection alone, requiring
no power source.
As for the future, she believes it will be in materials that are
inspired by biomimicry. “You can already see these developments in the construction industry with self-healing materials – materials that can repair themselves. This leads me to
believe that the main surprises will come from biology and
chemical innovation,” she says. “I believe we will see materials that can give humans the qualities that nature developed
for other species. We can already change our bodies through
plastic surgery for aesthetic reasons. The willingness is there
and the surgical skills are there. When the technology is
ready, I believe we will see a growth in enhancing implants
that are powered through the glucose of the body – it might
not be that far off. If you were told you could have an implant
that would let you speak any language in the world, would
you not do it? I think the future of wearable tech is not in
fashion accessories but in implants and prosthetics.”
Corchero’s ideas are large-scale and her goals are ambitious.
But this does not daunt her. “One can only do so much, but
it’s important to do what you can,” she says. “Because what
you make can inspire someone else to do the next thing. For
me, that’s the biggest achievement – inspiring others and
allowing my vision to grow.”
31
first movers
awarenessBased Change
Making a difference on a scale that matters
Darcy Winslow is one of the foremost
experts in steering a large, successful
company toward greater environmental
sustainability. Her pioneering work at Nike
in the 1990s, brought about fundamental
changes in many of the company’s attitudes and practices toward the environment. She explains what it took to do this
and the urgent challenges that lay ahead.
Interview: Janet Anderson
In the 1990s, you initiated Nike’s sustainability programme long before many other large companies were
thinking about these issues. What inspired you to do it?
It started with the personal. I had experienced health
issues and discovered that my problems were likely caused
by chemicals in our environment. They had been deemed
safe at the time, but five years later they were banned
because of their toxicity. Back then I was running Advanced
Research and Development at Nike. I started to ask myself
whether there was a bigger impact I could make in the world,
beyond developing the next cool product. About that time,
we were asked at Nike if we knew what chemicals were in our
shoes. We had to say that we didn’t. That day opened up a
new world for me. I realised that sustainability efforts could
not come from corporate social responsibility alone. I went
to the then president of Nike and said, “If we are going to
make this happen, it has to happen within the business. He
said, ‘OK, go figure it out.’”
Your success at Nike was in aligning organisational values
with the development and implementation of practical,
systemic, sustainable design strategies. What were the
hurdles and how did you overcome them?
At the time, people thought of sustainability only in
terms of sustaining business growth. I had to learn to interfirst movers
32
pret this new concept for people, to engage them in a conversation around what it is and why Nike should take it on.
Environmental issues were nowhere on the list of traits that
create brand loyalty. I had to develop a business case for Nike
being a first mover in this area. To begin with I got nowhere.
So I looked at who the heroes were in the system. At Nike it
was the designers. Translating the concept of sustainability
into innovation helped my colleagues listen and engage. As
an example, one of our goals was ‘zero waste’. We calculated
that the waste created in making a single pair of running
shoes equated to a third shoe’s worth of material. We asked:
‘How do we turn that around’? So instead of saying: ‘You
can’t do this or that’ – which just did not mesh with the culture – we worked with the designers to develop design for
environment principles that started a whole host of innovation around materials and design. The results are evident
today, as one example, in Nike’s Flyknit.
How did you bring external stakeholders on board?
Another of our goals was ‘zero toxics’. To tackle this we
had to go upstream to our materials suppliers. Our largest
supplier at the time was Dupont. We had to find common
goals and values with them. Once we’d done that, it opened
the door. After a year of discussions they agreed to sign on.
They would identify which chemicals were in the products,
which allowed us to begin drafting a restricted substance list,
identify environmentally preferred materials, and create a
toolkit for designers and product engineers to draw from.
With Dupont on board, we had leverage with other suppliers.
Today you are the Managing Partner for the Academy for
Systemic Change. What is its purpose?
The Academy is made up of people from around the
globe who are focused on awareness-based systemic change.
We say ‘awareness-based’ because it starts with the self –
the success of an intervention is completely dependent on
the inner state of the intervener. Some of the domains we initially focused on were transforming education, marine ecosystems and fisheries, agriculture and food, alternative banking, women’s empowerment, sustainable communities, and
tropical rainforests. It’s our goal to build the capacity of
other practitioners, leaders, and the community. We share
access to all of our networks, and incubate and create hubs in
the domains we’re focused on. The goal is to continue to
scale up the number of emerging leaders that have the
­commitment, the aspirations, and the capability to lead at
the systems level.
Looking at where we are today, how optimistic are you?
Going back 30 years, sustainability was a new word.
Today, the term ‘sustainability’ is widely understood. But if
you score our efforts on a scale of 1 to 5 – where 1 is just
being compliant, and 5 is where you redesign financial systems and sustainability is baked into everything you do, your
visions and your principles – most companies and organisations are operating at about level 2. It’s not strategic, it’s more
volunteer efforts. All this is important, but these are just
drops in the ocean. We need more collaboration, like the
Sustainable Apparel Coalition from my own industry, which
has come together around the water challenge. You can’t
transform a system by pulling one lever. It takes everyone
picking up a rein and pulling in a new direction.
Can we achieve sustainable growth in consumption without sacrificing our standard of living, and what does this
mean for investors?
We are currently using around 1.5 Earths’ worth of natural resources and we only have one Earth. Increasing affluence, the growth of the middle classes and consumption patterns based on a western life style are the things that will take
us down if we don’t do something about it. We can’t assume
growth can go on exponentially forever. Getting to a circular
economy where we’re not drawing on virgin natural resources, that is the challenge. With all due respect, are we investing for short-term growth and gain for some, or are we
making investments in our long-term ability not just to survive but to thrive, for everyone?
Darcy Winslow
Darcy Winslow is a Co-Founder and Managing
Partner at the Academy for Systemic Change,
founder of Designs for a Sustainable World Collective, LLC, and a Senior Lecturer in the MIT
Leadership Center at the MIT Sloan School of
Management. Previously, she worked at Nike Inc.
for more than 20 years, where she spearheaded
a major sustainability initiative.
33
first movers
The nano
revolution
Aymeric Sallin sees a big future
for small things
Nanotech is everywhere – an enabler across all industries that promises advances in all facets of
society. This science of small things is unlocking opportunities over a wide range of products and
applications, from healthcare to energy and manufacturing, to name but a few. Aymeric Sallin, the
founder of NanoDimension, is convinced that companies that move the science from the lab into
the commercial sector have the potential to become the blue chips of tomorrow.
Author: Michèle Bodmer
first movers
34
Glass with an IQ. View Dynamic Glass creates adaptive glass.
According to Aymeric Sallin, the CEO of venture capital
firm NanoDimension, the science of nanotechnology is
about to impact traditional technologies on a scale similar
to the way Uber is revolutionising the taxi industry in our
cities today. And he should know. As the head of a firm that
invests at an early stage in companies using breakthrough
nanotechnology, he understands how working at the atomic
and molecular level is about to change the global technological landscape.
Sallin has specialised in taking science out of the laboratory
and into the sphere of manufacturing since he launched his
company in 2002. He believes that breakthrough science
must be converted into disruptive technology to help revolutionise entire marketplaces. “I love what I do: translating
science from the lab into successful companies that sell
products with the power to reshape entire industries. Those
technologies also help solve some of the biggest challenges
in society,” explains Sallin, who is a Young Global Leader of
the World Economic Forum.
Success is all about fusion
His history of fusing his passions with entrepreneurship
began when he launched his first company while studying
physical engineering at the Swiss Federal Institute of Technology in Lausanne (EPFL). Back then in the early 1990s, his
passion was snowboarding, and he aspired to become a professional until he was thwarted by injury.
But Sallin refused to let his injuries end his relationship with
the sport, so he founded a company that would keep him
close to the slopes and his fellow athletes. “The company
managed a team of professional snowboarders,” he explains.
“We won 12 European and World titles between ’96 and ’98,
shot movies on volcanoes and big mountains, and competed
around the world. It was a wonderful escape from the labs
first movers
36
It automatically adjusts or can be controlled by smart phone.
and classrooms.” After completing his laboratory work at
EPFL, Sallin pursued a career as a strategy consultant at the
global management consultancy Bain & Co. From there, his
passion for nanotechnology and entrepreneurship moved
him to create the first-ever venture capital firm focused on
nanotechnology. “The best way for me to contribute to the
emergence of this sector was not with consulting or advice,
but with capital to enable entrepreneurs to set up and build
their companies,” he explains. As a result, Sallin started
NanoDimension back in 2002.
He recalls it was tough to begin with. It was just after the
Internet bubble had burst, and investors were not keen on
taking risks in an emerging field with a new team that had
no track record. “Metaphorically, I had to break my head
through a wall of challenges. It was either my head or the
wall that would eventually break. Luckily, in my case, it was
the wall that ended up breaking first. It took about four
years of team building, deal-flow cultivation, business
model development, and pitching the promise of nanotech
to just about anyone who would listen,” says Sallin. Today,
he explains, he has teams in Switzerland and Silicon Valley,
and with several hundred millions of dollars deployed globally, NanoDimension is the largest venture capital firm
specialising in nanotechnology.
It was the American physicist Richard Feynman who in 1959
first suggested the possibility of manipulating atoms and
molecules. By 1981, nanoscale science had become a reality
with the development of the Scanning Tunnelling Microscope. Things have moved on significantly since then.
“Today, we are able to organise atoms and design molecules
the way we want and need,” Sallin explains. “This gives scientists an unprecedented level of control, and allows them to
exploit the change of physical properties that occurs at the
nanoscale.” This ability to organise atoms and design mol-
ecules has opened the door to applications that no one could
ever have imagined just a few years ago. These include more
efficient, targeted drugs and vaccines, new water treatment
systems, next-generation energy production and storage
devices, and many more.
Nano-enabled products have made significant contributions
to the development of more effective medicines. NanoDimension has several biopharmaceutical firms in its in­
vestment portfolio that focus on the development of new
therapies for the treatment of cancer, fibrosis, inflammation,
and other diseases.
One example is ARMO BioSciences, a biopharmaceutical
company that has a leading programme in Phase I clinical
trials, and has treated over 200 patients in under two years.
“The research process can move forward so fast because
existing components (or molecules) can be used and then
repackaged using nanotechnology,” explains Sallin. “These
targeted treatments can circulate within the human body,
accumulate at disease sites, and deliver their payload more
effectively, right where it’s needed. This is not science fiction;
we currently have several companies involved in clinical trials
in the US.”
As an example, he shows an X-ray of a patient’s triple negative breast cancer tumour and points out: “Nearly 90 percent
of this tumour had disappeared four weeks after being treated with one of the drugs in the clinical trials that I just mentioned.” He hopes to have these treatments approved by the
health authorities and commercialised in the near future.
ecosystems. “There are rivers where all the fish are female
and regions where girls are fertile at the age of 8. If we can
functionalise nanoparticles to identify cancer cells in the
human body, there is no doubt in my mind that we can also
soon do this with functionalised nanomembranes that remove these compounds,” Sallin says.
Global population growth, changing demographics, and urbanisation are all set to put extreme pressure on our existing
energy resources, and nanotechnology can also help to ease
some of these pressures. “Climate change and exploding
energy demands are a reality. We are the last generation
that can do something to reverse these trends,” says Sallin.
Storing electrons and converting photons all happens at the
nanoscale. More efficient batteries, solar cells, CO2 capture
technologies, and other energy-related solutions will all be
based on nanotechnology.
Unleashing disruptive technology
Nanotechnology has large-scale applications in both energy
storage and solar power generation. Using nanomaterials for
lithium-ion batteries, for example, could extend the storage
capacity of batteries. The use of nanomaterials could also
significantly increase the light harvesting and energy generation capacity of solar cells. As both batteries and renewable
Nanotech today and tomorrow
Nanotechnology is also being used to develop materials and
devices that emulate human biology. These devices combine
aspects of nanotechnology from the physical and life sciences, and enable living human cells or blood to grow in
micro-engineered environments that mimic physiological
conditions better than traditional methods. This technology
provides a window into the inner workings of the human
body, and can be used to predict the human response to
drug treatments, chemicals or foods with greater precision
than traditional cell cultures or animal-based testing. “This
could well become the ultimate personalised medicine of the
future, as one could test potential treatments in personalised
chips before moving to the patient,” Sallin predicts.
In countries such as Israel and Singapore, waste water is recycled many times for reuse. Existing nanofiber technology is
already being used to eliminate as much as 99 percent of
contaminants including viruses and bacteria. However, hormonal compounds from agriculture and industrial waste also
make their way into the waste water and aren’t removed by
current treatments. This can cause major disruption to entire
Emulate Inc.’s ‘Organs-on-Chips’ imitate human biology.
37
first movers
for decades to come.” He knows that it will not all be smooth
sailing. In Europe, he says, there is a tendency to focus on the
potential risk presented by new technologies, while in the US
regulators are treating new nanotechnology applications
with caution. The US Food and Drug Administration (FDA)
has a special programme on nanoparticles and nanostructures to check potential toxicity. “The scientific community
takes these safety aspects very seriously,” says Sallin.
A nanoparticle spans between 1–100 nanometres.
energies become more efficient and cheaper, demand is likely to continue to rise in the coming years. The technology
also has a part to play in creating sustainable cities. View
Dynamic Glass, also part of NanoDimension’s portfolio,
has created glass with an electrochromic coating inside
that can be tinted on demand to control how much light
and heat enter a building, without losing visibility. By applying an electrical current, ions move between multiple layers
coated onto the glass to keep out unwanted glare and heat,
while reducing the overall energy consumption of a building
by as much as 20 percent. This precise, adjustable environmental control results in increased occupant comfort, which
Sallin explains can influence everything from patient recovery in hospitals to employee performance at work.
Bringing science out of the laboratory and into production
takes time, infrastructure, and capital. For View Dynamic
Glass, it took around eight years. But Sallin believes the
rewards are worth it. One factory has the potential to make
USD 125 million profit per production line annually, he says,
while it costs just USD 100 million to build. So if one estimates that 10 percent of new commercial buildings worldwide will be fitted with dynamic glass, one would need about
500 factories just to meet demand. “This is exactly what
nanotechnology is about: disrupting an entire sector, addressing a real problem, and evolving into a massive player,”
explains Sallin.
The nanotechnology market is expanding fast. Last year, for
example, the global market for nanotechnology products
was valued at around USD 26 billion, according to an estimate by BCC Research. The market research company
RNCOS predicts that the nanotech market will increase to
USD 76 billion by 2020. Sallin is confident that nanotechnology is not destined to become the next dotcom bubble. “The
first generation of nanotechnology is already here, and it’s
starting to impact every industry. It will get bigger every year
first movers
38
And yet, despite such enormous potential today, Sallin had
to expand his company into the US because of a lack of
compelling investment opportunities in Europe. With teams
in Switzerland and Silicon Valley, NanoDimension now
benefits from a global deal flow, and leverages infrastructure and talent wherever they are. “There is no shortage of
brilliant scientists and leading universities in Europe, but
unlike the US, they lack infrastructure, technicians, entrepreneurs, and a risk culture.”
Silicon Valley sets the standards
Sallin would like to see policymakers around the world understand what fundamental innovation means today, and what
it requires, not just theoretically, but also on a practical level.
He underscores that the globalisation of technology requires
that science should move quickly out of the lab into an
environment that facilitates scale, manufacturing, and commercialisation. “Companies and teams sometimes have to
relocate to leverage infrastructure and talent at various
stages,” he explains.
He fears that Europe is too dependent on funding doctoral
grants through research budgets rather than focusing on the
creation of manufacturing and commercialisation hubs that
support ecosystems for innovation; this is a process that will
take time. “Without leveraging Silicon Valley, we would not
have been able to convert the science into technology,”
Sallin explains.
Large-scale manufacturing can be located anywhere. Europe
and Switzerland need to be ready to open up to opportunities to establish high-tech manufacturing centres and create
high-value manufacturing jobs top keep up. “These hightech hubs of manufacturing could establish the ecosystem
where innovation happens, just as it does in Silicon Valley.”
The best piece of advice that Sallin could give to someone
interested in entering the nanotech market is to look at it
very pragmatically and with a product-focused approach.
“Ask yourself, do I get a much better value proposition for my
product, an order-of-magnitude cost advantage, and a much
more efficient manufacturing process than with other competing technologies? If the answer is yes, go for it and don’t
get distracted by all of the other things that this technology
could achieve.”
FIRST MOVERS WILL ALWAYS
CHANGE THE WORLD.
BUT WHICH ONE?
>> Discover our approach at juliusbaer.com/visionary-thinking
Julius Baer is the leading Swiss private banking group and present in some 50 locations worldwide. From Dubai, Frankfurt, Geneva,
Guernsey, Hong Kong, London, Lugano, Monaco, Montevideo, Moscow, Nassau, Singapore to Zurich (head office).
Singapore’s Supertree Grove is part of the city’s strategy to raise the quality of life with greenery.
Building a
sustainable
future
As people migrate to cities new technologies are being developed to make
urban living sustainable. Driverless cars, automated buildings, and networked
information technologies are already in use, giving us a glimpse into a future
that will transform how we live. Two leading experts share their vision of cities of the
future, and explain the necessary of change and how it will take place.
Author: Stuart Spear
Whether you love them or hate them, cities are here to stay,
and they are getting much bigger. Back in the sixties and seventies when people talked about sustainable living they
were usually referring to the rural idyll. The back-to-the-land
movement saw migration from cities as our salvation. By living in harmony with nature, we would solve the social and environmental problems we had caused through urbanisation.
Today that narrative is reversed. Now experts talk of how
­innovative designs, technology, and planning are about to
shape our cities so they provide the model of sustainability.
By living close together we will be able to use energy efficiently, recycle, share resources, live smartly, cut travel, and
ultimately reduce our environmental impact on an already
over-stretched planet.
There is no single template as to how we might achieve the
sustainable city. Someone living in Dhaka in Bangladesh will
have different priorities and challenges from someone living
in London or Zurich. But wherever they are on the globe, our
major cities have one thing in common: they are growing,
and the way they are growing is no longer sustainable.
Alex Steffen is an environmental journalist who has been
writing and speaking about planetary challenges for many
years. He believes that the bucolic dream of the sixties and
seventies failed because it was premised on a simple deceit.
Rather than moving to the countryside, as the back-to-theland movement envisaged, to practice ecological farming,
sustainable forestry and lifestyles lived in harmony with
nature most people simply chose to export urban living to
the countryside.
“People moving to the country and living ex-urban lifestyle is
the least sustainable way to live,” explains Steffen, who is the
author of ‘Carbon Zero: Imagining Cities That Can Save the
Planet’ and ‘World Changing: A User’s Guide for the 21st
Century’. “If you are going to live two hours away from a
major city and just happen to live on a large plot that you
garden or landscape, and yet you drive everywhere and still
live like you did in the suburbs, there is no ecological benefit
at all. In fact, it is worse.”
Millions are migrating into cities
Our future lies in the city for pragmatic reasons, explains
Steffen. He describes himself as a planetary futurist –
someone who works on planetary issues, especially urbanisation and sustainability. According to the World Health
Organization, 54 percent of the world’s population live in
urban areas, up from 34 percent in 1960. This figure is set to
grow by 1.8 percent each year. “We are a rapidly urbanising
species, so by the middle of the century, we are going to be
three-quarters urban and 95 percent of humanity will live
within a two-hour distance of a major city. We are going to be
overwhelmingly connected to our cities,” says Steffen.
Economics is one of the main drivers for this growth. Cities
are where our economies are based, where opportunities are
at their richest, and where trade flows. They are fertile ground
for new ideas and they are where culture, art, and innovation
thrive. Which is why, across the globe, migration is from the
rural to the urban.
For urban planners, the immediate challenge will be how
to accommodate these new populations more sustainably.
According to Steffen, this will mean building up. The highrise will increasingly become a feature of our lives. “There is
no way to build those cities in a sustainable manner unless
we concentrate that growth,” says Steffen. “If you were to
spread China’s urbanisation across the landscape at a density compared to, say, Houston in the US, it would spread
thousands of miles. We cannot urbanise at the scale of billions more people, and grow outwards to do it.” While population density will be even greater in the future, Steffen believes with it will come the chance to live more sustainably.
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First Movers
Masdar City in Abu Dhabi is a city of the future.
“City density allows us to build services and infrastructure
that low density does not. There is a direct benefit to having
a certain number of people in an area,” says Steffen.
The most immediate advantages are around economies of
scale. It is easier to provide sustainable energy supplies and
waste management to a concentration of people than it is to
a population spread through a suburban sprawl. By living
nearer to where we work, sustainable transport networks become more achievable. By planning efficiently, we will be able
to walk or cycle where we need to go. The buildings we live
and work in will require so much less energy to sustain them.
Technological innovations and processing speed will evolve
to create an interconnected world that will allow us to use
our material and social resources much more efficiently.
Steffen points to car ownership as an example of how current
thinking is outdated when it comes to using our resources.
“There is a huge array of ways to use the immense surplus
capacity that exists in any given vehicle. It is usually stationary for 23 hours a day, but we can crank up that surplus capacity to service as many trips as possible,” Steffen explains.
“You can have a self-driving car travelling almost 24 hours a
day, delivering many more trips than the best Uber driver. It
can do so at a much lower cost, and you would never have to
park the car unless it’s electric and you have to charge it.”
He adds that in some high-density places, the cost of owning
and parking a car already far outstrips the cost of using taxis.
“Add to this the other big changes, like our ability to use consumer data, and systems to predict with increasing accuracy
what is happening in the near term, then we have the potential ability to get cars to people before they actually know
First Movers
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Masdar City is designed to maximise shade.
they want them.” Of course, the use of information technology is not just limited to better transport options. It can be
used in every aspect of our lives, as long as we are living close
enough to each other to be able to share those resources.
“We are talking about a more cooperative way of living,” explains Steffen. “We are seeing a different system replacing
the formal system we have in place, and we are seeing that
potential across the board. Every major part of the economy
that I have been able to look at has a comparable kind of
effect happening.”
Smart cities are on the rise
Songdo International Business District lies 65 kilometres
southwest of Seoul in South Korea, and it offers us a glimpse
of the sort of future that Steffen envisages. Dubbed the
‘world’s smartest city’, Songdo has been built from scratch on
land reclaimed from the Yellow Sea. It is 60 percent complete
and is home to around 70,000 people so far. Its population is
anticipated to be three times that number when it is completed in 2018.
High-rise residential buildings mean that 40 percent of the
city is set aside for outdoor spaces such as parkland or a golf
course. The plan is for every service or device to be linked
through an information network so as to create a coordin-
ated, synchronised city. Home devices will be controlled by
mobile phone, while waste will be sucked into underground
pipes where it will be automatically sorted, recycled or burned
for fuel. Bikes are everywhere, parked at night in neat ranks
outside apartments. Pedestrian thoroughfares link city dwellers to shops and restaurants with outdoor seating. Everyone
is connected through video to minimise the need for meetings, while sensors control electrical amenities, such as escalators that are turned on as you approach them.
Masdar City in Abu Dhabi, United Arab Emirates, is another
city of the future. Scheduled for completion by 2025, Masdar
is being built in the unforgiving heat of the Arabian Desert. It
will be powered by solar buildings designed to match energy
needs with the energy created. There are no light switches
or taps, just sensors. ‘Passive house’ building techniques are
being used to minimise the energy needed for cooling as
planners draw on traditional Arab designs to create narrow,
well-shaded streets. The city is being designed to maximise
shade while a wind tunnel funnels cool air through the streets.
In the Middle East, 60 percent of a building’s energy is used
for cooling. Masdar has managed to cut this figure in half.
You won’t find heat-creating fossil fuels in Masdar either.
Cars are parked on the outskirts due to the city being built on
top of an electric driverless vehicle network powered by renewable energy. This new city is a crucible for sustainable
learning. At its heart is the Masdar Research Institute where
students from around the world come to learn about cuttingedge developments. The Institute provides the research and
the theory, pilot sites test the theory and optimise the engineering, and the results are then applied and commercialised within the city.
Most cities grow with the times
Unlike Songdo and Masdar, both engineered cities, most
other cities evolve over time. The story usually begins with a
natural seaport, a crossing point for trade routes, a bridge or
fertile land. Singapore is the perfect example. In 1819 the
British statesman Sir Stamford Raffles arrived to find nothing
but tropical jungle. Perfectly situated for trade between India
and China, the 700 square kilometre island now has a population approaching 5.5 million. It boasts the second busiest
port in the world and, according to certain criteria, it is the
tenth most sustainable city in the world.
Professor Peter Edwards is head of the Future Cities Laboratory based at the Singapore-ETH Centre for Global Environmental Sustainability. The Laboratory is an interdisciplinary
research programme that aims to produce the ideas and
knowledge needed to make cities and urban life sustainable.
By partnering up different academic disciplines, the Laboratory prides itself in providing creative solutions to the challenges of urban living. “You can have a great scientific under-
“We are soon going to reach a limit with
what you can do with highly centralised
cities and we will simply have to move
towards cities that more closely resemble natural ecosystems.”
Professor Peter Edwards, Head of the Future Cities Laboratory
standing of a problem and you can have a great technological
understanding, but if the design is not right and you have
not created a comfortable living environment, then no one is
going to want it,” explains Edwards. “You need this design
component. The involvement of architects in developing a
vision of what the future can look like, using more sustainable
technology, is very important.”
Professor Edwards started his career as a botanist. Which explains why he sees the story of Raffles providing insight into
the direction the sustainable city will ultimately take us.
“When Raffles arrived, the tropical rainforest had been there
for 80 million years,” says Edwards. “Rain forests are highly
decentralised. Their production systems – the leaves – are
decentralised, their waste processing systems are decentralised, and they possess all sorts of homeostatic mechanisms. In contrast, modern industrial cities are highly centralised – for example, in their systems of energy production
and waste disposal, and balancing mechanisms present in
rain forests are mainly absent. This centralisation has been
driven mainly by the goal of greater economic efficiency, but
the result has been increasing imbalance with the environment, so that cities have become less sustainable and less
­resilient.” He believes the rain forest has something to teach
us about the future of the sustainable city.
Buildings will need to be autonomous, like trees, by collecting
water and perhaps supplying water to a larger supply. They
will need to be energy-neutral, collecting energy through
photovoltaic technology. They will have to exist in balance
in terms of nutrients. “We are soon going to reach a
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First Movers
limit with what you can do with highly centralised cities, and
we will simply have to move towards cities that more closely
resemble natural ecosystems,” Edwards explains.
Rainforests are the benchmark for cities
The work of the Future Cities Laboratory is taking us a step
closer to that vision. One example is a project that his team
is currently working on to cut the energy needed for cooling
buildings by up to 40 percent. This could provide massive
energy saving for Singapore where 70 percent of a building’s
energy goes into cooling. What is exciting about this technology is that it is designed for commercial buildings, and as
a result will reduce the current requirement for ducting used
for cooling. The project is called ‘3for2’ because by reducing
the bulky ducts, you can build three floors where there are
currently two.
The technology originated in Zurich and was mainly used in
Switzerland to keep warm not cool, however, by using the
same principles and adding techniques, such as dehumidifying the air before cooling, the technology is being applied in
the tropics, and the result could be dramatic. In addition,
architects, designers, and engineers from the laboratory are
coming together to provide a new lease of life for some of
the old shopping quarters of Singapore, where shophouses
are the predominant typology.
“There are still many traditional terraces of shops with service lanes at the back that are a bit like the London mews. But
the hundreds of air conditioner condensers blasting out hot
air make these back lanes a horrible environment, a sort of
inner circle of hell,” says Edwards. “If we can apply our new
cooling technologies to the back lanes, however, we might
transform this circle of hell into a wonderful environment, a
mews environment with bijou cafés, trees, and places to sit.”
Another project involving science and design in an existing
city is taking place in the informal settlements of Jakarta.
Cities in the developing world tend to grow in a chaotic
fashion to accommodate new arrivals from the country.
Greater Jakarta has grown from around 3 million in the
1970s to 30 million today. Loss of ground water has meant
that low-lying areas, where these settlements are situated,
have sunk and so have become vulnerable to flooding. But
the rivers are still used to provide everything from sanitation
to drinking water.
Rather than the draconian option of clearing people off the
land and decanting them into high rises at the city edge, the
Future Cities Laboratory has sent in a multi-disciplinary
team to look at how these informal settlements can be made
more sustainable. “Breaking up the community and livelihoods is arguably not a good thing, so we plan to use good
planning and good technologies to help develop those com-
First Movers
44
“If you look at the speed at which a place
like China has accelerated its investment and
development and you compare it to England
and the time it took England to industrialise,
it is faster by a factor of 10.”
Alex Steffen, author, journalist, and planetary futurist
munities and allow them to grow incrementally,” Edwards
says. Hydrologists and landscape architects are exploring
river rehabilitation that balances issues of flooding, water
quality, culture, and ecology. They are now working with local
authorities and urban planners to develop design concepts
that improve the ecology of the Ciliwung River and mitigate
the impact of flooding. “Then we started to develop a type of
housing that could be extended incrementally. This would
allow a growing family, for example, to expand its accommodation vertically by raising the house roof and building
another floor,” Edwards explains. “Our design concept also
includes decentralised systems of water collection, waste
processing, and electricity generation, making these houses
as autonomous as possible. This is important in areas where
public service infrastructure is poorly developed. The whole
emphasis is to use planning and intermediate technologies
to enable these rather chaotically assembled urban areas to
grow out of their problems and develop in a better way.”
Steffen has also been exploring the challenges faced by cities
in developing nations. He believes that they may paradoxically have the edge on developed cities because they have
not sunk investment into old infrastructures. “There are
many cars in the developing world but per capita there are
far fewer. People are far less connected to the idea of a car
as something essential,” says Steffen. “As development
continues, it is entirely possible that they could be the places
where autonomous vehicles take off the fastest, because you
are not competing to get rid of the private car, you are competing with other methods of transit.”
He points to China as an example of how this technological
leapfrogging can take place. In Europe, for example, transport systems have evolved over hundreds of years to a point
where Victorian and Edwardian engineering is trying to support the demands of 21st century London. “China has said:
‘Look, we are going to invent new ways to build, we are going
to build on a massive scale. We need transit, so we are going
to build an entire subway system in Shanghai in 20 years, we
are going to build thousands of miles of national rail, and so
on’. If you look at the speed at which a place like China has
accelerated its investment and development and you com-
Copenhagen, with its many bicycles, is a primary example of a sustainable city.
pare it to England and the time it took England to industrialise, China is faster by a factor of 10,” Steffen explains. So
where does that leave the world’s slowly evolving historical
cities in the race to live sustainably? Professor Edwards explains that many of these cities were built before the invention of the motorcar, so they have at their heart a street layout and a density characteristic that provides a good
template for sustainable living. “In that sense it is the big
sprawl that came after vehicles that perhaps presents a more
difficult problem,” Edwards says. While retrofitting houses
built over a hundred years ago may work in the medium term,
he believes they will eventually have to be replaced by something more efficient in the longer term.
Housing costs must shrink
For all of the world’s great cities there is one problem that will
have to be addressed in the very short term: the cost of housing. Supply and demand is distorting housing markets to
such a point that it is starting to skew economies and is particularly disadvantageous to younger generations.
“Of this I am relatively certain: we are entering a moment
where the cost of inaction is escalating so rapidly that cities
are going to have breakthrough moments, one after the
other,” says Steffen. “They will realise that the cost of not
building new infrastructure, of not pursuing new policies, of
not planning better, far outweighs the benefits of keeping
the status quo. The current system everywhere is fraying
to the point of breakage. It is not just true of London: it is
everywhere. If you look at housing costs, transport time, and
the backlog of deferred infrastructure of almost every city in
the world today, you are looking at the decline of government
services. Some cities are doing better than others, but none is
doing as well as citizens expect.”
Both Professor Edwards and Steffen share a common optimism for the future. They both cite Copenhagen as probably
their favourite example of a sustainable city because of its
bicycles, walkability, green initiatives, and polycentric design.
But what about the future city 20, 50, and 100 years from
now? In 20 years, the autonomous building will have arrived,
city planners will have been forced to address their housing
shortages, and technology markets will have matured, bringing us solutions such as automated transport. For Steffen,
social and political pressure will prompt a snap forward towards sustainability as an increasing coalition of people
questions the status quo and realises that incremental
change is not enough.
In 50 years, the polycentric city will be the norm, as cybertechnology will have done away with the need to commute.
But it will take 100 years, believes Professor Edwards, before
his ultimate dream of a city which is in true ecological
balance will be realised.
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First Movers
claudia comte
46
Tucked down a Berlin
back street, in a building
that looks like a storage
facility on an industrial
estate, is the studio
of artist Claudia Comte.
Tipped as one of the top
20 Swiss artists set for
great heights, Comte,
in her early 30s, has
achieved artistic acclaim
with exhibitions in New
York, Paris, London,
Brussels, and Zurich,
to name but a few.
Author: Michèle Bodmer
This year, Comte has been commissioned to create a largescale sculpture – one of her most ambitious projects to-date
– for a prime location in London. The sculpture will go on
show in 2018, but the exact details of where it is located and
when it will be unveiled will be kept under wraps until nearer
to the inauguration date. “In terms of scale, production, and
budget, this important commission takes Claudia’s career
another leap forward and allows for enormous international
visibility,” explains Chaja Lang, co-founder of BolteLang, the
Zurich-based gallery representing Comte. “We are confident
that she and her highly professional studio have what it takes
to work on similar large-scale productions in the future.”
Comte’s work sits in the margins between sculpture, painting, video, and even computer-generated design. She is as at
ease talking about her recent horse-riding trip to Kyrgyzstan
for a new video project as she is about her latest spherical
paintings, described by her as wall sculptures, or another project in progress where she juxtaposes singed wooden cube
sculptures with linear wall art. It is her abstract wooden sculptures for which she is best known, and it is here you will discover her roots. She grew up in the Swiss forests 20 kilometres outside the French-speaking city of Lausanne in the
small village of Grancy. When Comte speaks of the energy
and colours intrinsic to a piece of wood she speaks with a
passion born of familiarity. “The fact that I spent my childhood in a chalet near the woods has had an important impact
on my attitude toward nature and it influenced how I work,”
she explains.
From nature to industry
Her journey from the Swiss forests to her Berlin industrial
estate workshop has been eventful. En route she has had
residencies in Rome, Berlin, Paris, and Johannesburg and has
won the Swiss Art Award, the Kiefer Habliltzel Award, and
the Mobiliar Award, three significant prizes from her home
country. Her latest coup is a massive leap in the 22nd annual
‘50 Best Swiss Artists Ranking’ organised by the Swiss economics magazine, ‘Bilanz’. She is currently ranked 18th, up
from 44th in 2014. The very first time Comte made it into the
Bilanz ranking was 2013. Barbara Staubli, Curator of the
Julius Baer Art Collection and member of the Bilanz jury in
2015 and 2014, explains the significance of the jump. “Over
the last few years, Claudia Comte has had a series of impressive exhibitions and projects in Switzerland and abroad, such
as at the Centre PasquArt, in Biel, the Centre Culturel Suisse,
in Paris, and her solo show this year at the Gladstone Gallery,
New York. The 2015 ranking reflects her strong and convincing appearance on the art scene.”
Though she travels the world for her art, it is to the childhood
chalet where her parents still live, that she returns to source,
store, and sometimes work on the cherished wood she uses
for her sculptures. “It is like a kind of cellar for wine,” explains
47
art
Comte. “I talk to the lumberjacks from the area to find just
the right piece for a sculpture because when you look at wood
it does not always immediately reveal itself. For example:
yew, the Rolls Royce of woods, is very valuable and expensive, and has these crazy colours inside that you just can’t see
when the wood is rough. But when you work with it and start
to polish it, incredible colours are brought out.”
space, and yet she has divided the large room in a way that
creates a relaxed and warm atmosphere. It is split level, with
a kitchen below the stairs and a living room above, complete
with her cats, Minus and Cortex, who roam freely around the
studio and the industrial complex.
It is through her relationships with the forest and its workers
that Comte has learnt her craft. She can explain the rate at
which a certain wood will shrink as it dries, where and how it
will crack, and how to treat it to ensure that the wood’s intrinsic beauty is given true expression. In her studio she keeps
pieces of oak, pear, acacia, walnut, cherry, and cedar ready for
use. But this stash, she points out, is nothing compared to her
Swiss forest stockpile.
Comte moved in to her Berlin studio a year ago, having spent
a two-month residency in the city in 2009. She says Berlin
pulls off the trick of being both functional and enabling. It’s
a dynamic city that provides the sort of creative freedom
necessary for a vibrant contemporary art scene. Comte also
enjoys being away from the commercial distractions of the
art market. “While there is an art scene here, there is not a lot
of money. The collectors are not here, which is good in a way,
because artists don’t feel the pressure to sell so much.”
For Comte, the sculpture comes first. She decides on its form
and then she chooses the wood to work with. “First I make a
precise sketch, then a clay model, and then I pick the right
material for the sculpture,” she says. “Finding the right wood
is half of the process. Now that I sell my work, I can invest
more in the material and be much more precise. What’s so
interesting is the way that wood reacts to where it grew. If
there is a river next to it or it’s in a forest, there is a particular
energy within the material.”
Mastering her craft
Comte likes to work fast, which is one reason her sculpting
tool of choice is the chainsaw. She normally begins the process in the forest and then transports the sculpture to her
studio for sanding. She explains how she started out with her
grandfather’s electric chainsaw, which she broke within hours
by using it on trunks that were far too big. Undaunted, she
then borrowed a more powerful petrol machine from a local
in her village and so loved the rapidity with which it allowed
her to work that it became her adopted method. She keeps
five chainsaws of varying size in her studio. “I learnt how to
use the chainsaw from people in the woods near my home
and have never had an accident. I now really know how to use
it. It is still dangerous, for example you cannot cut at 90 degrees because you get a kickback when the chain is turning.
But when I use it I know how to react,” she says.
Process is key for Comte. For each day working with the
chainsaw there are about seven of sanding, followed by waxing. She gets the wax from a 90-year-old living near her
hometown. The smell, she says, is “so good” and the effect
when applied to her art is “just right”.
Comte’s studio in Berlin reflects her artistic versatility. Divided in two to accommodate the dusty work of sanding and
the cleanliness needed for painting, the space has the utilitarian air of a factory with its high ceilings and its bright, open
Art
48
Berlin – the city for artists
Time is a key consideration. Comte reflects on how working
with a material that takes so long to mature, and that will
continue changing by small degrees as it dries, contrasts with
the ever-increasing pace of the art world. She is concerned it
is moving too fast, driven by the number of artists now producing work. “What is interesting to me is that you have to
keep coming up with ideas fast in the art world – you have to
produce fast, and react to whatever requests you get from
museums or galleries. But with the wood, you have to take
time and be gentle, because it cracks. You cannot push it.”
It is the immutable nature of the wood that captures
her imagination. “My fascination with wood is simply that
it represents the biggest resource worldwide, it’s a material
that was here long before us. Its artisanal quality suggests a
counter trend and thus its so interesting for me to use.
This material grows so slowly in comparison to the speed we
communicate and do things today in our digital age. Its
heavy in essence and I am trying to make something precise,
radical, and humorous out of it.”
The artist started her career at Ecole Cantonale d’Art de
Lausanne (ECAL). It was a rite of passage for her and where
she determined her destiny as an artist. She went on to do her
Master’s at the Haute école pédagogique (HEP), while also
teaching art at a local school. The experience taught her how
to sequence the creative process, much in the way that you
have to sequence the learning process when teaching teenagers, she explains. She believes the experience has made her
more efficient, providing her with systems, rules, and characteristics for each project she works on.
For 10 years, Comte also worked weekends as a cashier at the
Musée militaire in Morges. It gave her an insight into the
commerce of exhibition. “When I was still at the school of art,
I proposed an exhibition, where I invited some friends from
class to participate. It was good for me to have the experience of organising a show, even if it was in a military museum.
Inside the wood workshop.
Video still from ‘La Dance Macabre’, 2015.
‘Outdoor Wall Painting’ at Domaine de la Muy, 2015.
Comte with her cat Minus outside her Berlin studio.
Models of Comte’s future projects and
finished woodwork.
It was still an institution and it helped me to understand how
it all works. You just don’t learn that at school.” It was her
year-long residency at the Swiss Institute of Rome, surrounded by the world’s greatest art, that she believes had
the most impact on her work – though she finds inspiration
just about everywhere. While in South Africa, at the Pro Helvetia residency in Johannesburg, she discovered new and exciting woods to add to her stock. Just today, Comte says she
has bought a special piece of African ebony. Her passion for
the material shines through as she excitedly describes the
depth of the black along with its distinct structure.
Comte is unconstrained by a medium. “I am interested in a
wide range of basic forms, their make-up, and structure, how
their shape – both in science and in nature – can have a beautiful poetic and mathematical consistency.” Her latest medium is video. One work that captures her new direction is
called HAHAHA. Using 18 pine trunks, she erects the lettering of the three Hs and As. She then describes ‘activating’ the
sculpture by setting it on fire while two pianists in front of it
play the ‘Danse macabre’ by the French composer Camille
Saint-Saëns. “It is very funny because at some point a motorcycle jumps through the burning letters and between the
pianists, doing a wheelie in front of the burning sculpture, all
of which is then videoed.”
Comte is now applying the precision of process she uses
when working with wood to her new London sculpture.
Although this time, computer generated-design is her medium. By using a specialist company based in Zurich, she
Art
50
plans to perfectly reproduce – through a complex 3D scanning and milling process – three caged bananas in aluminium. The human-sized fruits will be held aloft only by the
side structures of a 4-metre-tall rectangular frame, and so
will look as if they are floating at the top and bottom. The
bananas will be slightly ‘squashed’ or indented by the frame,
bringing to mind the tension and texture of Gian Lorenzo
Bernini’s sculptures. She describes it as “scanning life” and a
homage to Leonardo Da Vinci’s ‘Vitruvian Man’.
“The sculpture is called ‘The Three Graces’ in reference to
the painting from Raphael of the same title from 1505.
In that case they are holding apples. This is a funny version
with the bananas,” Comte says. “With this project I want to
move away from the traditional wood sculpture that sits on a
plinth. Here, the plinth is an intregral part of the piece, and
the sculpture and the plinth are merged. The frame around
the fruit sculpture illustrates the proportions of nature and it
becomes a study – a scientific rendering of what we consume. It is about life.”
Ideas pour out of Comte as she shares her thoughts about
her chosen path. “I love to produce, if I had two brains and
more hands I would accept more projects because I just love
to create and experiment all the time.”
video
www.juliusbaer.com/
vision
51
art
Acquisitions
Julius Baer Art Collection
Every year, the Julius
Baer Art Committee
purchases new artworks
to grace the halls and
offices of the company’s
premises around the
world. In 2014, the
Committee purchased
39 contemporary artworks covering a wide
range of media, from
paintings, to sculpture,
to photography,
and video.
Among the recent acquisitions are artworks by
Niklaus Rüegg (1977), Pierre Vadi (1966), Sara
Masüger (1978), and Claudia Comte (1983) to
name a few. We are pleased to share several of
these artworks in the following pages.
Since its inception in 1981, the focus of the
Julius Baer Art Committee has been to find outstanding Swiss talent at an early stage. Its aim is
to start collecting at the beginning of the artist’s
career, and also to follow the artist during his
or her development over the years. Today, after
almost 35 years of strategic collecting, the Collection contains over 5,000 artworks. Many important Swiss artists of the past decades are represented in the collection, as are all recent trends in
the visual arts in Switzerland.
Over the years, art has become a valuable
component at Julius Baer as it is the most visible
part of our Swiss heritage: a trademark of the company and an integral part of its corporate culture.
The Collection is for all Julius Baer employees to
enjoy, and the artworks displayed are intended
to offer new perspectives and so to inspire, challenge, and even provoke both staff and visiting
clients. Art in the workplace offers a good starting
point for an exchange of views among people. It
opens up new horizons and motivates people to
see things from a different angle. We hope you
enjoy this small selection of artworks.
Barbara Staubli, Curator,
Julius Baer Art Collection
Art
52
Sara Masüger, 1978
‘Sitting’, 2013, Acrystal, 86 x 90 x 49 cm
Tanja Roscic, 1980
No title, 2014, acrylic, felt-tip pen, leather, latex, pen, and fabric, 43 x 33 cm
No title, 2014, thread and felt-tip pen on fabric, 43 x 33 cm
Nicolas Party, 1980
‘Still Life’, 2014, chalk pastel on canvas, 120 x 100 cm
Taiyo Onorato & Nico Krebs, 1979/1979
‘Fire’, 2014, film, 16 mm transferred on SD DVD
56
Bernard VoÏta, 1960
‘Melencolia IV’, 2014, inkjet on paper, 180 x 130 cm
Niklaus Rüegg, 1977
‘Voids’ (two parts), 2012, gouache and indian ink on paper, 100 x 70 cm (each)
Claudia Comte, 1983
‘Lapin africain 3’, 2014 , cedar, 33.5 x 20 x 9 cm
Shahryar Nashat, 1975
‘Not the stuff of stone’, 2011, plaster, colour pigments, and steel, 62 x 135 x 35 cm
Fabian Marti, 1979
‘Capsule (All is All)’, 2014, textile cast in polyester, 43 x 34 x 31 cm
Franziska Furter, 1972
‘Island Parasite II’, 2013, metal, wire, 44 x 66 x 52 cm
Pierre Vadi , 1966
‘Brands - and - Bands’, 2012, acrylic resin, dyes, 23.5 x 33 x 16 cm
Young talent
with electric vision
Motor racing is providing engineering students with a unique opportunity to understand business in a way that could never be taught in a classroom. Jonas Abeken,
named Chief Executive Officer of the Academic Motorsport Association Zurich (AMZ)
for a one-year term, has been tasked with developing an electric car to race on the international Formula Student racing circuit. He explains some of the challenges he and the
AMZ team have faced in their efforts to build a winning race car.
Author: Ayako Lehmann
The team placed No. 1 in two out of four events in the 2015 series, defending their overall first place in the world ranking.
sponsoring
66
At the heart of Zurich’s technology district is a modern building that is both
the garage and offices of the student
racing team Academic Motorsport Association Zurich (AMZ). Founded in
2006 by students from the Swiss Federal Institute of Technology (ETH), the
team was set up to design, build, and
race cars in Formula Student com­
petitions around the world. Passing
through the main entrance of the
team’s headquarters, one enters an impressive engineers’ Hall of Fame containing cars developed by AMZ on display at ­Sauber Motorsport in Hinwil,
Switzerland. Abeken, the CEO of AMZ,
proudly explains the track record of the
various cars on show in the huge hall.
Aged 24, he joined AMZ three years
ago as a freelancer studying mechanical engineering to help develop a car
steering wheel. Today, he is in the driving seat with overall responsibility for
the latest �Flüela’ car project. Each car
is named after a mountain pass in Switzerland in tribute to the team’s Swiss
­origins. Abeken will lead AMZ as CEO
for one year, along with two Chief Technology Officers who are also part of the
AMZ project management team.
ways to achieve this than by joining
AMZ for a year. All students who participate in the project do it primarily
because they are passionate about cars
and because they love researching and
developing a new electric car.”
It was a joint decision to make Abeken
CEO. “This career development all
came very naturally, and interestingly
enough there was no rivalry when we
had to decide who would be the next
CEO for a year,” he explains. “During
the past year, we gradually figured out
who had leadership qualities, who feels
comfortable leading others, and who
prefers to be led.” Abeken believes that
the key to leadership is the ability to
work in a structured way: “A leadership
function is nothing more than coordinating other people.”
Incubator FOR
ENTERPRENEURIAL STUDENTS
Being CEO of AMZ requires a good
understanding of mechanical and electrical engineering and a lot of passion.
“This job requires you to work long
hours, including weekends and public
holidays, and asks a lot of you,” Abeken
says. “If you’re just interested in getting
the necessary credits to continue your
studies, then there are much easier
Abeken decided to interrupt his studies
for a year in order to gain hands-on
managerial experience. He plans to
start his two-year Master’s studies after
he steps down as CEO. “I would most
definitely have learnt much more at the
ETH during this year with regards to
mechanical engineering, but when it
comes to social and soft skills such as
how to deal with different people, how
to interact with sponsors and the
media, then this one year has enabled
me to learn a lot,” he says.
It’s the multidisciplinary experience
gained by the student engineers taking
part in Formula Student that is attractive to recruiters in the automotive industry. “There aren’t many mechanical
engineering students who will have
gained such a wealth of business and
soft skill experience at a young age,”
Abeken says. “This is an advantage.”
ETH Zurich is working with other universities of applied sciences such as the
University of Lucerne and Winterthur
to offer students the chance to put
their acquired theoretical knowledge in
mechanical and electrical engineering
into practice. Each year, the students
take part in what is the world’s biggest
competition for engineers within the
electric and combustion engine class.
Since starting to race nine years ago,
the AMZ team has been a strong contender for the championship. But in
2010, when an electric car category was
first introduced, they took the big decision to turn their backs on the petrol
engine. It proved to be the right choice
and their efforts were rewarded last
year at the Formula Student Germany
when they took the lead in the electric
class competition as well as in the
­category ‘overall dynamics’ which is a
combined scoring of all vehicles, both
electric and combustion. “It was even
more surprising that an electric car won
in this category last year because it
was also competing against ­combustion
cars,” says Abeken. The victory was a
great boost for the team and for the
future prospects of the electric car. He
believes that the increasing role the
The Flüela ranked No. 1 for design in 2015.
electric car will play is now unstoppable.
“There are still a couple of areas which
need to be worked on, such as improving the battery technology, so batteries
last longer and can be charged faster in
order to become valuable alternatives
to combustion engines,” he says.
It is an area where AMZ has been able
to make significant progress. The team
has developed technology that allows
them to recuperate around 30 percent
of the energy used, thanks to intelligent braking systems and efficient drive
trains. As a result, energy loss is kept to
a minimum and the overall energy used
is much lower than that is required for
combustion engines.
To compete in the races students have
to follow strict rules laid out by the
global association. Originally founded
in the US in 1982, Formula Student racing entered Europe through the UK in
1998, where the first race took place. A
project year starts in September and
ends in August. Students have to de­
velop, create, and build a car from
scratch. They then compete against
other student teams in the second half
of the year.
67
sponsoring
Jonas Abeken, CEO of AMZ.
Cars developed by AMZ on display at the Sauber Motorsport headquarters.
video
www.juliusbaer.com/
vision
While performance and speed play a
crucial role, teams are also judged for
their car’s endurance, efficiency, autocross, skid pad, and acceleration. However, it is not always the fastest car that
wins. The jury judges a team under categories such as engineering design,
cost analysis, and business plan for
hypothetical sales. This means that
teams have to think across the board
and not just focus on their areas of
­expertise. In the 2015 series, the team
placed No. 1 in two out of four events,
successfully defending their overall first
place in the world ranking.
Since Formula Student was introduced
in 1982, the number of countries taking
part around the world has significantly
increased to include Germany, Spain,
Austria, Hungary, the Czech Republic,
Brazil, Russia, Japan, China, and Australia as well as the home countries of
the US and UK. Teams do not have to
compete in all the countries as each
race is a stand-alone event. At the end
of the year, the total number of points
gathered decides who becomes number one in the world ranking.
sponsoring
68
CATCHING A Breath
OF BUSINESS AIR
Getting a car ready for the racetrack
has a lot to do with getting the right
funding. “There are a lot of expenses
when one builds a race car, and not all
of them are covered by direct production or material sponsoring,” Abeken
explains. “Funding is important for a
lot of areas, including event logistics.”
Securing funding from sponsors is one
Abeken’s key roles as CEO. It is not the
sort of thing that one can get training
on so it has been very much an “on the
job” learning curve for Abeken.
The fact that some sponsors have been
working with AMZ for many years has
eased him into the process. “I started
contacting these sponsors first, as they
know us and we are even good friends
with some of them,” he says. “Later, I
gradually started meeting potential
sponsors, including Julius Baer, which is
actually our very first private banking
sponsor. I was very proud to be able to
enter negotiations with such a professional company in 2014.” As part of its
global Formula E sponsorship, which
Julius Baer launched in 2014, the Bank
also decided to support young talents
in the area of electric car development,
which made AMZ a good fit. Julius Baer
has been an official sponsor of the AMZ
team in Switzerland since 2015.
Working at AMZ also enables Abeken
and the other students to get an understanding for international business relationships. While their own team is made
up of mostly Swiss and Germans, they
also have some members from countries such as China, Poland, and Italy.
But it’s once they have finished developing their cars and start competing
that things get truly international.
It depends on the types of sponsorship
available in each country as to the type
of car the teams can construct and
race. While students from developed
market countries such as Europe, the
UK or US tend to be able to produce
more expensive cars, with materials
provided by generous sponsors, students from less developed countries
such as India, Pakistan or China have to
The Flüela also took first prize in the ‘acceleration’ category in the 2015 series.
be more creative with the resources
they have. “I’ve seen some teams develop their cars based on bits and
pieces they found in the scrapyard,”
Abeken says. “But that is in no way
meant to be negative. While these
teams obviously can’t compete against
the cars that have been put together in
developed countries, this is not their
goal. Instead, they are more focused on
being able to put a car together that
can actually drive, and they are simply
proud to participate in these racing
events. It’s more about having fun and
being part of it.”
For a sponsor, working with a team like
AMZ can provide invaluable test data
on a component that they provide for
the car. Although the kind of racing
cars developed by the team are completely different from your average
electric vehicle and do not qualify for
a street licence, using a component in
this context enables the sponsor to collect unique test data. One example, is
the controllers, which steer the car’s
motor. Originally developed by the
sponsor for use in electric buses and
trains, the sponsor was able to gain insights for using the part in a potential
new market. “The fact that we deploy
the components in an unusual context
can also eventually lead our sponsors
to think about new areas where their
components could be used,” explains
Abeken. “In this sense, we also act as a
potential idea generator for them.”
already be served by hybrid cars. In the
long-term he also does not believe the
combustion engine will become completely extinct. There will remain some
business areas outside the car industry
The future for cars
is electric
Abeken and the ambitious engineers
working at AMZ have been putting all
of their efforts into developing this season’s Formula Student winning car, but
they also have a long-term view of what
types of vehicles will be on the streets in
the future.
The young CEO does not believe the
sun will set on the internal combustion
engine anytime soon, saying that in
the mid-term, combustion engines will
become important as range extenders
in hybrid cars. Abeken explains that
most people drive on average less than
50 kilometres a day, a distance that can
Working at the AMZ requires an eye for details.
that come under less scrutiny from an
increasingly environmentally conscious
public and so will be allowed to continue using petrol or diesel engines.
“I expect that within the next 50 years
the majority of the population will drive
electric vehicles, as there is no other
viable option for humanity in the long
run,” Abeken says.
69
sponsoring
Julius Baer –
Your Wealth
You decide how we should support you
Change is inevitable, progress isn’t. The ability to embrace change and translate
it into evolution is a matter of understanding the key drivers and having an
open-minded culture. While global markets and tougher regulatory requirements
are radically altering the world of wealth management, Julius Baer is finding
opportunities in these changes and, as a result, has launched ‘Your Wealth’, a
new, enhanced service offering.
Author: Michèle Bodmer
Boris F.J. Collardi, CEO of Julius Baer, describes ‘Your
Wealth’ as a way of ensuring even better delivery of the
Bank’s services, as it is designed to truly define a client’s
needs in order to serve them in a more structured and
­systematic way. “We expect the full ‘Your Wealth’ service
offering to ensure even better q
­ uality of advice, more regular
contact between relationship managers and clients, and
more targeted advice to our clients. All of this should ultimately lead to better performance,” Collardi explains.
“It is important that we build on our
client-centric approach, and improve
our offering and the delivery of
services rather than limit ourselves to
just fulfilling regulatory requirements
and adapting our services to the
new rules.”
Dr Burkhard P. Varnholt
‘Julius Baer – Your Wealth’ was launched in Switzerland in
September 2015 and will be rolled out globally starting in
2016 until 2018. The initiative encompasses the Bank’s entire
service offering, including a discretionary mandate offering
our business
70
and execution-only offering, wealth and tax planning, financing, research, and trading along with three revamped
service models with different levels of advice.
The sharpened advisory services are even more transparent
than before, which is vital as the world of private banking
continues to change as regulations with regard to both advisory quality and transparency are strengthened. In today’s
information age, clients have further broadened their know­
ledge of the industry and they are rightly requesting more
services from their bank, says Dr Burkhard P. Varnholt,
Chief Investment Officer and Head of Investment Solutions
Group. “We view all of these developments as an opportunity to r­eshape our entire service offering. It is important
that we build on our client-centric approach, and improve
our offering and the delivery of services rather than limit
ourselves to just f­ulfilling regulatory requirements and
adapting our services to the new rules.”
The new service offering
The core objective of Julius Baer’s ‘Your Wealth’ service
offering is to support our relationship managers in being
even closer to their clients and to deliver enhanced services.
“Our research universe has, for instance, been expanded
and ­entirely revamped,” says Varnholt. Based on its unique
investment approach, Julius Baer offers proactive advisory
services via two models, under which permanent monitoring
for investment risks is conducted to provide all of its clients
with investment advice carefully selected to meet their specific needs. Purely reactive advice – where investment advice
is provided on a single product or on a transaction basis only
when and if the client requests it – is also offered. Whichever service model a client may choose, they can rest assured
that the advice received stems from extensive research and
significant experience and that, thanks to Julius Baer’s truly
open product and service platform, the suggested solutions
are ideal for their individual needs, underscores Varnholt.
“The way we deliver advice has been improved markedly
in order to better match client expectations. It is an opportunity for our clients to rethink the services they need, to review and adapt their investment portfolio, and to re­analyse
their investment strategy. In most cases the right strategy is
probably already in place, but in some cases they may want
to adapt it. It’s like a yearly ‘financial’ check-up.”
Depending on the model they choose, clients will receive
permanent monitoring of their portfolio and investment proposals. The provision of these enhanced and tailor-made
­advisory services will not be subject to a max­imum number
of annual interactions with a relationship manager. “We allow
our relationship managers to meet the specific requests of
their clients in order to fulfil their needs, full stop. We don’t
want to regulate the number of interactions,” he says.
­“Rather, we want clients to know that we are ready to serve
them. Of course, the best proof of confidence from a client
is to be trusted with the full delegation of their investment matters. In making this choice, the full potential of
Julius Baer’s investment approach is available to them.”
Setting the foundations
Julius Baer started offering advisory services nearly a decade
ago, explains Varnholt. Back in 2006, it introduced feebased, tailor-made advisory services aimed at a selected
group of clients who had a specific need for added advice,
and wanted to be able to call upon the expertise of specialists in addition to their relationship manager. To fulfil their
needs, a proactive and disciplined investment process was
established. “It was a slow start, putting in place the right
tools and the right investment philosophy, and then finding
the right people to deliver on our promise. The concept of
being paid for ­giving advice was revolutionary at the time,
but we had a strong conviction that this step was necessary
to be in a position to deliver exceptional services, in a transparent way, with a clear pricing structure,” Varnholt says.
“Every additional step made since 2006 has been a nat­ural
evolution of our advisory services.”
In 2008, two years after the introduction of the advisory service offering, the financial crisis shook the world. Having had
a basis for proactive advice in place, Julius Baer was in a good
position to offer tailored advice to its clients during this critical time. “Our clients were not let down during this difficult
period and our advisory teams were constantly in contact
with them. Reaching out in a structured and proactive way
during this time was made easier thanks to the fact that we
had the right processes in place,” Varnholt says. “We have
­always had a service culture of being there for clients in good
times as well as in bad times, however, this system was an
added support. The word quickly spread about our highquality service offering, attracting an increasing number of
clients. Seeing how well appreciated this service model was
triggered us to further expand our advisory services offering
under ‘Your Wealth’.”
“We expect the full ‘Your Wealth’ service
offering to ensure even better quality of
advice, more regular contact between
relationship managers and clients, and
more targeted advice to our clients.
All of this should ultimately lead to
better performance.”
Boris F.J. Collardi
As a result of this experience, in 2011, structured advisory
services were made available to all clients through an investment advisory mandate with systematic and client-centric
advice in a portfolio context. “This is not something you can
put in place overnight, as you need the right people, locations, and language skills,” Varnholt says.
In 2013, permanent monitoring ­services were presented to
interested clients as a first step, and by 2018 ‘Your Wealth’
will be made available to Julius Baer’s entire client base.
Such constant monitoring of client portfolios requires
many skills, with a precise knowledge of the clients’ various
positions, ­asset allocation, and risk appetite, Varnholt explains. To ensure everyone involved has the same level of
knowledge, ­relationship managers have received additional
specialised training.
While other finacial institutions are, one after the other,
­announcing their new advisory services, Julius Baer has a
significant competitive edge with its ‘Your Wealth’ service
offering, explains Varnholt. “We have a long history in shaping ­excellence in delivering tailor-made advisory services
for ­clients: we have had the right advisory model in place
since 2006. Delivery of the best possible services is not a
static proposition – it can always be improved, and it is our
culture to continuously strive for client excellence.”
71
our business
AVOIDING THE
PITFALLS OF
BEHAVIOURAL
INVESTING
Interview: Janet Anderson
Maximum
Risk
Thrill
Euphoria
Excitement
Optimism
Maximum
Risk
Anxiety
Denial
Fear
Optimism
Desperation
Relief
Panic
Capitulation
Economic cycle
Behavioural cycle
Hope
Despondency
Maximum
Opportunity
investment trends
72
Depression
economists assume that investors make rational decisions to achieve their own
interests. but any examination of actual investor behaviour reveals that investors
often make irrational and detrimental financial decisions. some of these psychological forces lie so deep, we might not even be aware of them. dr burkhard p.
varnholt, Julius baer’s chief investment officer and Head investment solutions
group, explains how to avoid the pitfalls of emotional investment decisions.
What does behavioural investing mean to you?
behavioural investing is something that every one of us
faces. every human being is very much driven by emotions –
more than we would like to admit. many of us pretend that
we are very rational. but think about the car you own: did you
buy that for rational or emotional reasons? emotions influence behaviour, and these behavioural patterns shape our
way of investing, for better or worse. very often these patterns are implicit, unknown or overlooked, even though they
matter far more than the analytics and the mathematics.
What is the problem with behavioural investing?
every generation has to find out the hard way that our
intuition and preferences can sometimes trip us up. if i give
you a choice between an investment that can lead to a high
profit with a 50/50 probability or an equally high loss with a
50/50 probability, or another one with a much smaller loss
probability but also a disproportionately smaller but safer
profit, mathematically the expectation value of the first is
higher than the expectation value of the second, but it
doesn’t mean that investors will pick that one.
actually, investors very often pick the one with the
smaller risk of losing anything. even if an experienced
investor explains this to his children or grandchildren, it is
very likely they’ll have to find out for themselves.
What are the main traps?
we tend to attach more credibility to stories that support our views, and dismiss those that don’t. a good example is the belief that home ownership is always the best
investment. but if you own one house and it represents 60 or
70 percent of your wealth, that is what we would call an undiversified asset allocation – it’s all in one asset and highly sensitive to interest rates and bond yields. Yet people think it is
safe because they can feel it, touch it, and live in it.
stories are very powerful. they drive investors and can
be a catalyst for market booms and busts. in such situations,
we see the behaviour that academics call ‘herding’, where
everyone runs like lemmings in the same direction because
they all think the person at the front of the herd knows more
than they do.
Herding can pay off well for a considerable period of
time, so stories are made up time and again to justify it. this
is what we see in the media. markets move and then people
look for stories to explain them. those stories often have
little to do with what really moves markets.
Is fear of doing the wrong thing also a danger?
paralysis usually happens in extreme circumstances.
when investors are spooked by a market crisis they become
paralysed very quickly. everything dries up. there’s also
the well-known, well-documented phenomenon of investors
holding on to their losers for far too long and selling their
winners too early.
investors hold on to losers too long because they become paralysed the moment the accounting value of the
asset goes below the purchase price. that is not necessarily
the best investment strategy. neither is taking profit too
early. if you have winners in your portfolio, hold on to them
and be patient. they will probably take good care of you in
the long run. there are many investors who hold shares in a
winning company but sell them far too early and would have
made a fortune if they had just held on to them. Yet they still
own stocks they should have sold years ago. it’s very common behaviour and one of the most typical pitfalls.
How strong are these emotions?
people can fall in love with certain stocks and don’t want
to believe that their stock has gone out of fashion. i have
seen this behavioural trait many times, even among fund
managers. people are so stubbornly in love with their favourite company and everything about it that they are unable to
distance themselves from that view. they can’t accept the
reality that the company has become out of sync with the
market and its consumers in an unforgiving way.
i am particularly keen on trying to avoid this with our
fund managers. the only way to deal with it is by implementing processes. You have to create a system of checks and balances where there are at least two stakeholders who have
very different perspectives.
Few of us find it easy to admit that we have fallen into a
trap. Is it a painful process?
very much so. You can fall in love with one person and
stick with them for the rest of your life. but that is not good
advice for the investment world. time and again you will
have to go through painful divorce proceedings from the
company you loved so dearly. it can be a wearing process.
73
investment tRends
“You can fall in love with one person
and stick with them for the rest of
your life. But that is not good advice
for the investment world. ”
Dr Burkhard P. Varnholt
Can anyone be immune to behavioural investing?
Most people are not immune to it, though most people
think they are. That is human nature. If you ask 100 people if
they think they are an above-average, average, or belowaverage car driver, the vast majority will say they are above
average, which cannot possibly be true. If I swapped ‘car
driver’ for ‘investor’, you’d have the same response pattern.
This realisation teaches us to be humble, and it teaches us
the value of rules as opposed to intuition or judgement. It
teaches us both to apply rules in a systematic, sensible way,
and to challenge ourselves constantly.
If our emotions lead us astray, would a machine make
better investment decisions than a human being?
As happens so often in life, the truth is somewhere in the
middle. The machine has great advantages but no judgement. The trouble with rule-based investment approaches is
that they tend to be procyclical. You could develop a contrarian rule, but – ironically – that in itself is also cyclical. I think
you need both. It’s interesting to contemplate just closing
your eyes to names because they immediately evoke images
or emotions, and instead focusing solely on numbers. But
I have to ask: who would really do that? The ‘contrarian investor’ is probably one of the most abused terms. Essentially,
almost every investor will claim to be contrarian. Yet again,
by definition, that is true of only very few of them. It’s easily
said, but difficult to put into practice.
How can we avoid these traps?
The conclusions, to me, are simple. Be humble as an investor. Use skills, judgement, and rules in a complementary
fashion – use them all, don’t just rely on one. You have to
understand the current dynamics but also have a cool assessment of the medium term – how things can pan out once
the herding has subsided.
This is why I am such a passionate advocate of discretionary portfolio management and advisory mandates. A
good wealth manager is very much driven by investment
investment trends
74
processes and is part of a group of seasoned professionals
who do not all think alike, but rather cherish differences
of opinion. If you have these conditions, then you greatly
increase your chances of sleeping better at night. I believe
portfolios will be exposed to less volatility and will fare far
better than if they are run by just one individual.
That’s why, as the person responsible for the discretionary and advisory mandates that we manage at Julius Baer,
I am so keen on ensuring that we have processes designed to
mitigate the behavioural traps that every one of us can fall
into. Of course, the danger they pose can never be completely excluded. But the processes can be designed so that it’s
less easy for everyone to fall into the same trap, at the same
time, for the same reason. If feedback loops are built in, and
if there are people with different perspectives and different
views who can challenge one another, then you can benefit
from it. The numbers bear that out.
How do you create this kind of feedback culture at
Julius Baer?
This is a constant challenge, every day of the week. I’m
keen on investment processes, but they are the easy part. It’s
the cultural aspects where we have to challenge ourselves
constantly. What it really boils down to is values.
The people I work with are all first-class professionals
who know their craft – that’s a given. Beyond that, it’s about
being able to vary your perspective, seeing the big picture
while still understanding the details. Most importantly, it’s
about being humble, open-minded, willing to learn, but also
willing to admit failure, to move on, and to make corrections.
Dr Burkhard P. Varnholt
Dr Burkhard P. Varnholt has been Chief Investment Officer and a Member of the Executive
Board of Bank Julius Baer since March 2014.
Varnholt started his career as an Assistant
Professor at the University of St. Gallen, where
he earned his Ph.D. in Economics. He has also
taught at the Massachusetts Institute of Technology (MIT) and the Stern School of Business, New
York University.
In 2004 he founded Kids of Africa, a charity
registered in Switzerland and Uganda that operates a home for orphaned and abandoned
children in Kampala, Uganda (www.kids-of-africa.
com). It runs a primary school for 500 children, a
small health clinic, a kindergarten, and a midsized farm. He was awarded the Swiss Re Civilian
Services Prize for his commitment and work in
connection with this project. In 2012 he was
awarded an honorary doctorate in International
Relations from the Geneva School of Diplomacy
and International Relations. Varnholt is also a
founder and a Member of the Executive Board of
W.I.R.E., a Zurich-based think tank for business,
society, and life sciences.
Exploring the
disruptive powers
of digital
technology
Interview: Robert Ruttmann
The digital age of the 21st century has already fundamentally changed the way we
work and live. Julius Baer’s Andreas Feller, Global Head of Investment Solutions and
Advisory, and Luigi Vignola, Head of Investment Services Group Asia, explain the
the industry trends driving this rapid structural change, and discuss what this means
for long-term economic growth. They also offer insight into how investors can best
navigate these fast-moving developments.
Looking into the digital future can help you prepare for the effects of disruption.
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investment Trends
The digital age has brought about an enormous shift in
the way we live and work. But what exactly is digitisation
and why is it more important today than ever before?
Feller: That’s right, the 21st century has already
brought about remarkable technological achievements.
Many of these have evolved from the process of digitisation.
This is the process by which physical assets are progressively replaced by digital ones.
Can you name an example?
FELLER: Perhaps the most popular examples are books
and music. Some readers may remember that music used to
be sold on vinyl records and later on CDs. Digitisation then
caused physical CDs to be replaced by digital downloads.
The industry responded to this technological transition
in a very awkward way. Rather than develop its own legal
download service, it unsuccessfully focused its efforts on
legal battles to shut down file-sharing services, such as
Napster and Gnutella, which had given consumers their first
taste of downloading single tracks as opposed to having to
buy the whole album in the form of a physical CD.
But there was no going back. With physical music sales
in free fall, Apple emerged as the perfect partner for
the music industry. Steve Jobs was able to negotiate a
30-percent price reduction of USD 0.70 on the implicit
price per song on a physical album. Although this meant
lower royalties for artists, it also made it easier for consumers
across the globe to discover new music at lower costs and
in a much more convenient format.
This in turn helped new artists to find an audience they
might not otherwise have found. So yes, the music industry is
one of the best examples of the effects of digital disruption. This process of digitisation is important for us to watch,
because it is happening faster than any previous technological revolution, and in the process it is causing a lot of disruption to the way we live and work.
That’s the process of digital disruption, correct?
Vignola: Yes. The topic of digital disruption has received a lot of attention recently, but many people are still
unclear about what it means exactly. Put simply, digital disruption is the unexpected redistribution of an industry’s
profits that occurs when a new product or service is introduced that is better than current offerings in terms of cost,
capability, efficiency, and overall customer experience.
A powerful example is the way Amazon and Netflix and
even Hulu have disrupted the media and entertainment industries by changing how content is accessed by customers
– and also how it is monetised by advertisers. The result is
that traditional TV networks can no longer charge as much
for advertising as they could when all viewers used their TVs
to access content.
Or think of travel agencies: the ability to compare and
book travel arrangements online has almost eliminated them.
That’s digital disruption.
investment trends
76
Digital downloads have disrupted the music industry.
Looking ahead, which developments are set to further
drive the digital age forward?
Feller: In the coming years, I believe we will see a lot of
advancements in the areas of robotics, artificial intelligence,
nanotechnology, molecular science, and biotechnology.
Moreover, what is really exciting to me is that we are likely
also to benefit from a ‘cognitive surplus’ of sorts emerging
from having more people with great ideas being connected
via powerful technologies, enabling them to solve more challenges, more quickly. This confluence of technologies is set
to accelerate the digital age like no other technological revolution before it.
Vignola: We should also point out the potential of
practical applications in the areas Andreas mentioned. For
instance the Internet of Things and big data can significantly accelerate the rate of change in the way we work and
live. One of my favourite examples is 3D printing. This technology uses computer-aided design software to build threedimensional objects of nearly any shape or geometry. Its big
impact is that it enables a much greater degree of customisation in the manufacturing process than ever before.
This means companies can tailor products to the exact
specifications of their customers – quickly, locally, and at a
much lower cost. For instance, 3D printing is already used to
manufacture hearing aids, dental braces, and custom-fit
clothing. Further ahead, we could use it to print artificial
heart valves, corrective eye lenses, skin tissue, and other
medical devices.
“This process of digitisation is important for
us to watch, because it is happening faster
than any previous technological revolution,
and in the process it is causing a lot of disruption to the way we work and live.”
Andreas Feller
Feller: Big data is another exciting field that has the
potential to accelerate the digital age. With the increased
availability of large amounts of data, we are able to automate
a number of tasks relying on pattern recognition.
For example, in healthcare, IBM’s Watson system is being
used by oncologists at Memorial Sloan Kettering Cancer
Center in New York to suggest treatment options for cancer
patients. These suggestions are based on data from 600,000
medical evidence reports, 1.5 million patient records, and
2 million pages of text from medical journals. With this data,
the Watson system personalises a treatment plan with reference to a given patient’s individual symptoms, genetics,
family history, and medication history. This is truly amazing.
Another good example of how big data is used is Google
Translate. Its success is built on Google amassing more
than 10 trillion translated words, with algorithms then identifying short phrases commonly translated into equivalent
phrases in other languages. The result is a remarkably efficient, machine-based translation system.
Luigi, you mentioned the Internet of Things, what is this
and what are its potential impacts?
Vignola: The Internet of Things refers to a new generation of connected personal computing in which devices
interact with one another. You can think of the concept as an
army of billions of tiny robots with sensors processing data
and working to make our lives easier.
They can range from fitness trackers monitoring our
physiology in real time, to self-learning, Wi-Fi-enabled
thermostats that help optimise the temperature and energy
efficiency of our homes, to the driverless cars that are set to
hit the mass market by 2020.
This ability to monitor and manage physical objects electronically is already having a dramatic impact on the way we
live. In a few decades from now, as driverless cars navigate
effortlessly along highways worldwide, future generations
will hardly believe that people at one time were driving
cars manually.
Which industries are set to be revolutionised by a cycle of
digital disruption?
Feller: The healthcare industry is one primed for disruption as breakthroughs in biotechnology, nanotechnology,
and 3D printing transform it. For example, biotechnology is
already enabling doctors to grow new organs, such as ears,
bone, heart valves, and blood vessels from the patient’s own
cells. This means that the organs will not be rejected by the
body. Moreover, nanomedicine is being used to repair damaged tissue and to deliver medicine accurately on a molecular level.
There are even nanoparticles that can locate and kill cancer cells. Another interesting development is the introduction of ‘smart pills’. These are pills that contain tiny chips and
a TV camera to perform endoscopies, and which are guided
down the patient’s throat by means of a magnet.
Vignola: There are endless applications and some
of them are not too far from our own business. Think of the
retail banking sector. One of the biggest changes to the
banking sector has been the success of digital banking, which
has caused branch transactions to fall significantly.
The good news here is that there is plenty of upside awaiting those European banks willing to embrace it. The bad
news is that change is coming whether or not banks are
ready. This is happening in Asia as we speak. In fact, there are
already a number of ‘mobile wallets’ on the market that enable consumers to access their banking accounts via a mobile
device, such as eBay’s PayPal, Google Wallet, MasterCard’s
Millennials have a culture of sharing goods and information.
77
investment trends
MasterPass, and Square’s Pay with Square. In short: the
future of banking will probably be defined by more mobile
interaction and more automation – and more advisory staff,
who will be able to offer clients increasingly customised solutions and advice.
Are these emerging technologies also having an impact
on consumer behaviour?
Feller: The confluence of emerging technologies is also
creating new, low-cost marketplaces for buyers and sellers,
leading to unprecedented benefits for consumers. For example, Airbnb connects hosts and travellers, providing consumers with much cheaper accommodation. In a similar way,
Uber uses a smartphone application that connects passengers with drivers, substantially reducing costs for consumers,
but in the process disrupting the existing taxi franchises.
Vignola: Consumers are increasingly shifting their
consumption habits from existing models to these new platforms due to their lower cost, superior convenience, and
easier access. All this is leading to the emergence of a sharing economy in which access to goods and services becomes
more important than ownership. A good example of this is
the car, which typically remains parked in the garage for
95 percent of its lifecycle.
Today, more people are opting for car-sharing models,
such as Mobility in Switzerland, which allows its members
to rent a car at very low prices, and sometimes for just a
couple of hours.
What role do younger consumers play in this context?
Feller: Young people play an important role in shaping
consumption habits. Most millennials are ready to share
nearly everything. They are already sharing their homes and
apartments – and many are now also sharing clothes, tools,
and even sporting equipment. Indeed, according to many
surveys, the millennial stewards of the digital economy typically value social capital or the value of being a member of a
community over financial capital. They often also value sustainable ideas over mindless consumerism, and many indicate that cooperation is at least as important as competition
in the marketplace.
The sharing of toys is a trend that is particularly indicative
of this generational impact. Today, young parents are using
toy-sharing websites that have thousands of toys to choose
from. A subscription fee allows them to have any toy sent to
their house for a period of time, after which they can exchange it for something else.
Children learn that the toy is no longer their property, but
rather an experience to access and share with others. In this
way, the next generation of consumers is already learning
about stewardship and sharing – and they are learning from
a very early age that experience and access to goods can
matter at least as much as the physical ownership of them.
This could further drive the idea of a sharing economy.
investment trends
78
“Along with the potential growth in wealth
and productivity that the digital age promises, I believe that there are also significant
economic risks that come with the breakneck pace of current technological change.”
Luigi Vignola
Thanks to processing power, we can extract true value from big data.
It is clear that the digital age has brought unquestionable
gains to consumers in the form of lower costs, easier,
and much better convenience. But has it also brought
any downsides?
Vignola: The impact of digitisation on the world of
work has arguably been more disruptive than anything seen
in the past. Clearly, new technologies, such as smart phones,
ubiquitous internet access, fitness trackers, and 3D printing,
for example, offer a great deal more options and convenience
to consumers. However, for producers of goods and services,
the effect of these technologies is more complex.
In fact, the potential scope for automating tasks that
were previously performed by humans has expanded significantly in the digital age. Just think of the jobs of supermarket
cashiers or chauffeurs. Automation could potentially put a
lot of people in out of work.
Feller: Perhaps it is also useful to look at this issue from
a historical perspective. An important feature of the Industrial Revolution was that it benefited people both as producers and consumers – consumers got better, cheaper goods
and low-skilled workers got access to better-paying jobs.
By contrast, the digital age has mainly benefited consumers, but not producers, with new employment opportunities in the digital age being mainly reserved for highly-skilled
workers. As such, the digital age risks leaving low-skilled
workers at a big disadvantage, while innovators and entrepreneurs are set to benefit disproportionately.
What effect could the digital age potentially have on the
global economy in the next 10 years?
Vignola: In the past, revolutionary technologies have
generated enormous economic growth. This time, however, I
think the digital age may also bring with it more disruption
and change than any previous technological revolution. This
is largely because it is also happening faster than any other
cycle before it and it has no boundaries because it is a global
phenomenon and the trend is likely to accelerate.
So, to be sure, along with the potential growth in wealth
and productivity that the digital age promises, I believe that
there are also significant economic risks that come with the
breakneck pace of current technological change.
The prospect of rising inequality is probably the biggest
risk that not only threatens to divide our society, but also our
macroeconomic stability over this timeframe.
Feller: In my opinion there is really quite a compelling
case that robotics and other technological advancements
will have a dramatically positive overall effect on average living standards.
On an individual level, the impact of the digital age will
also depend on one’s level of skill – in other words, whether
that individual can substitute or complement the robot
knocking on his or her door. But if the right understanding of
the challenges that Luigi mentioned is coupled with sensible,
In the not too distant future, personal robots will help us
with our work.
forward-looking policies to boost aggregate demand and
also to reduce inequalities, then the digital age could very
well become an inclusive one. It could become an age that
benefits all people, both as consumers and producers.
How can investors best participate in these numerous
technological revolutions?
Feller: While investing into all this can be rewarding
over time, the process is certainly not without risk. For instance, investor hype around any particular theme can drive
valuation levels up high in the short-term, only for them to
fall abruptly when investors shift their attention to ‘the next
hot topic’. Such market swings can occur even as the underlying theme remains structurally intact.
It is for this reason that we developed the Next Generation framework. Not just to help identify secular trends like
digital disruption, but also to offer investors actionable investment solutions at an attractive time in the cycle.
Vignola: That’s right. Our Julius Baer Next Generation initiative aims to offer investors precisely this guidance
in terms of building positions with long-term growth opportunities. To this end, the initiative publishes regular thematic
research studies, conducts monthly video debates, and hosts
high-profile investment conferences with insights from global thought leaders.
All of this is done to help Julius Baer’s clients prepare for
important future trends, and benefit from them. Because, as
Mark Twain once said: “Plan for the future because that’s
where you are going to spend the rest of your life.”
79
investment trends
Julius Baer at a Glance
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Julius Baer: The international reference in private banking
Julius Baer Group** / 30 June 2015
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our business
80
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81
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83
our business
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FIRST MOVERS
HOW TO MAKE THE MOST
OF AN EARLY ADVANTAGE
VISIONARY THINKERS
FROM NANOTECH TO FASHION
TO FUTURISTIC CITIES
JARED COHEN
OUR INTERCONNECTED WORLD
– A FORCE FOR GOOD?
60437_JB_VISION_3_Cover_EN.indd 1-3
06.10.15 09:25
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to a market first might garner
the best chance of success,
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to move in and try to stake
a claim over the first mover’s
initial advantage.
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EBOOK VERSION
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VISION
DEMOGRAPHIC SHIFT
WILL CHANGE LIFESTYLES.
ARE YOU PICTURING
THE POSSIBILITIES?
>> Discover our approach at juliusbaer.com/visionary-thinking
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