Feb 1, 2019

Axios Future

By Bryan Walsh
Bryan Walsh

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1 big thing: Robots sever a path to wealth
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Data: United Nations Department of Economic and Social Affairs; Chart: Naema Ahmed/Axios

For decades, economists have forecast that pooling people in big cities will lead to improved productivity in developing countries and, ultimately, middle-income wealth. But the rise of automation has begun to short-circuit that path, as robots can take the place of low-cost labor.

Erica writes: Poorer countries are starting to look for other routes to economic growth, but it's not yet clear that they can achieve the same economic record as has been built using traditional low-wage manufacturing.

  • Two countries stand out in their departures from the usual route: Malaysia, which is building a service-based economy, and the Philippines, which dumped factories in favor of call centers.

The big picture: Fast-growing cities in countries like India and Nigeria — some of the world's most distressed — have become home to masses of urban poor, living in abject conditions with little way out. And by 2030, the world's cities are projected to grow by 80% in size, the bulk of it in the developing world, putting even more people in the same conditions.

The backstory: During the industrial revolution, hundreds of U.S. and European cities turned themselves into prosperous manufacturing towns. After World War II, Japan used the same export-led growth strategy to rebuild itself. More recently, China did the same and lifted hundreds of millions of people out of poverty.

  • Now technology is shifting manufacturing away from humans and toward machines, and the need for massive labor pools in emerging markets to do the work is slowly disappearing.
  • This is not necessarily bad news, as long as poorer countries pivot, says Judy Baker, a senior economist at the World Bank. “The concentration of people in cities creates a ripe environment for innovation,” she tells Axios. ”If it’s not manufacturing, other things will be created.”

But, but, but: Nations slow to move away from the promise of export-led growth are seeing poverty at mass scales in their cities.

By the numbers: The world's fastest-growing cities are stretched too thin to serve their gargantuan populations. The crisis will only deepen as they grow, says Anjali Mahendra, co-author of a new report from the World Resources Institute.

  • In 60 years, Lagos, Nigeria, grew from a city of 200,000 to 22 million. But less than 10% of Lagos' population has a sewer connection, and just one-fifth has access to tap water.
  • Mexico City, which is home to 20% of the country's people and has seen its population double in the last decade, attempted to build affordable housing on the periphery of the city center to address the boom. But the homes were too far from jobs and have remained largely empty, Mahendra says.
  • In Bangalore, like many big Indian cities, amenities like paved roads and piped water drop off just 3 miles from the center of the city. The outskirts, where the population is just as dense, has seen a spike in unregulated well digging for access to drinking water, Mahendra's research found.
  • "In Kenya, the largest number of un-immunized children are in the slums of Nairobi, not the hinterlands," says Seth Berkley, CEO of Gavi, which vaccinates children.

The bottom line: "There’s still a lingering belief that the next success story will be an exporter," says Karen Harris, managing director of Bain Macro Trends. But in many of the world's poorest, biggest metro centers, "you've created a labor force without anything to apply it to."

2. India's strike against Amazon

A bazaar in Varanasi. Photo: Jodie Griggs/Getty

Amazon's share price fell in after-hours trade this evening despite a third straight quarter of record profit, as its model of selling more of its own online merchandise took a hit in India, a key future growth market.

What's happening: Starting tomorrow in India, both Amazon and Walmart have to drop any merchandise sold by companies in which they have an equity stake or an exclusivity deal. The new Indian rules are meant to promote local businesses and prevent the kind of retail destruction that the two big U.S. retailers have wreaked elsewhere.

  • Both Amazon and Walmart have seen the robust Indian economy as a primary driver of growth.
  • Amazon has committed to spend $5.5 billion on its India business, and last summer Walmart spent $16 billion to buy Flipkart, the Indian e-commerce site.
  • Amazon had already begun to pull such items from its Indian website tonight, report Reuters' Aditya Kalra and Sankalp Phartiyal.

Amazon's cloud service business buttressed its fourth-quarter earnings, the company said today, but it also said that its growth will slow in the current quarter. Its shares were down almost 5% in after-hours trade.

The bottom line: The Indian policy is an example of a new, more hostile global environment for Amazon, which will have to figure out how to ease its reputation for slash-and-burn retail.

3. 1 insane stat: The price of an egg

Photo: Chesnot/Getty

If you're not a teen with an Instagram account, you may not know that a stock photo of an egg recently received the most-ever likes on the platform, Kaveh writes.

Why it matters: That virtual egg may be worth $10 million.

  • That's what Nik Sharma, an executive at VaynerMedia, tells The Atlantic's Taylor Lorenz.
  • The anonymous Instagram account has been posting images of the egg with spidering cracks, suggesting that it will soon break open. And brands, nonprofits and even political campaigns are jockeying for the privilege to hatch from the viral egg.

The egg is already making overtures.

  • Jerry Media, the beleaguered marketing agency behind the nuclear meltdown that was the Fyre Festival, last week approached Need to Impeach — Tom Steyer's pro-impeachment non-profit — with an offer.
  • The proposal: The egg would crack open to reveal President Trump doing a chicken dance along with the words "Impeach Trump."
  • The nonprofit passed. The sum was not disclosed.
4. Worthy of your time
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Data: National Association of Realtors; Chart: Harry Stevens/Axios

The political storm around Foxconn (Kathrin Hille — FT)

The housing slump gets worse (Dion Rabouin — Axios)

The office sick-shamers (Chip Cutter — WSJ)

A robotic Jenga opponent (Will Knight — MIT Tech Review)

11 days without the internet (Daniel Victor — NYT)

5. 1 fashionable thing: The future of sneaker shopping

Photo: Kevin C. Cox/Getty

Erica writes: I'm from Boston, so I say "sneakers" to describe what you see above. What do you say? Tennis shoes? Gym shoes? I'd love to hear!

Regardless, there's a new way to try them on.

A new app called Wanna Kicks out of Belarus uses augmented reality so shoppers can see how different sneakers would look on their feet, all while sitting on the couch, reports TechCrunch. You can even take the shoes for a walk.

Watch it in action.

Bryan Walsh