Monday, September 26, 2016

"Can Iceland be to data what Switzerland is to money?"

For folks keeping track, Facebook opened a Swedish data center in 2013 nicknamed the "Node Pole" although it's actually about 1° latitude south of the Arctic Circle.

Norway's Green Mountain operates a data center at Stavanger with plans for another at Telemark.
There is some development talk for a couple other sites, one of which is actually in the Arctic.
Additionally, the Lefdal Mine Datacenter at Måløy is supposed to be the largest in Europe when it is completed.

From Inverse:
In the satellite town of Keflavík, a forty-minute drive from the center of the Icelandic capital of Reykjavík, sits a 200,000-square-foot data facility containing 400,000 servers. Poking up above the snow-covered hills, the whitewashed exterior of the complex resembles a military barracks. Inside, winding, sterile corridors are flooded with the hard light of fluorescent ceiling bulbs.

The place feels dystopian — like the wrong side of a quarantine fence — but it isn’t. Not at all. Owned by a company called Verne Global, the world’s first zero-carbon data center represents both the future of big business (BMW keeps ones and zeroes here) and a national ambition. Data centers are sprouting up from Iceland’s cold soil as the country races to build out a data infrastructure sufficient to make it a global “Data Capital.”

Innovation in data infrastructure, both physical and legislative, is an Icelandic speciality. In 2010, the Icelandic Modern Media Initiative (IMMI) was passed unanimously by the oldest standing parliament in the world. This legislative framework was designed to transform the country and its capital city into safe havens for information by providing strong legal protections, unrivaled by any other country on Earth.

“Icelanders are gadget freaks. We live on this tiny island with 330,000 people. It’s a very long winter, so we’re like a completely indoor culture,” says Birgitta Jónsdóttir, the parliamentarian who co-founded the Icelandic Pirate Party and appears poised to become the country’s next prime minister.

Iceland’s journey towards data haven status began on the streets of Reykjavik in 2008, when the global financial crisis hit and Iceland’s economy imploded. Unlike the rest of the world, the island nation didn’t freeze. The Icelanders made moves: They jailed the bankers responsible for the crash, crowdsourced a new constitution and got behind the Pirate Party — the once fringe political movement that’s expected to win a majority in next month’s parliamentary elections.

Jónsdóttir’s work has been instrumental in drafting, championing and implementing the IMMI legislation that underlies Reykjavik’s metamorphosis into the forward operating base for the digital rights movement. “95% of Icelanders are on the Internet and almost as many are on Facebook. We are not a technology-afraid nation and that really changes what is possible,” she explains.

There’s also a lot of local expertise. Having homed NATO bases for the US nuclear early-warning system during the Cold War, Iceland has been a key data hub since the inception of the internet. Data sent back and forth between Europe and North America is bounced along submarine data cables that plug directly into Iceland’s internet infrastructure.

More impressive still, Reykjavik’s energy grid is powered entirely by geothermal and hydroelectric sources. Iceland’s volcanoes and glacial rivers provide virtually unlimited sustainable energy for data centers, and at dirt cheap prices too. When the servers get too hot, smart ventilation systems open up and allow the sub-arctic winds to cool the systems at near-zero cost.

Because of its unique natural assets and its population’s determination to leverage them, Reykjavik, which has the same population as Evansville, Indiana, could become a global leader for all things digital. Two-thirds of Iceland’s population live in the metropolitan area, which is poised to become to data what Zurich is to finance....MORE

Agricultural Commodities: Corn, Wheat Soybeans Fall Again

Last Chg
Corn 329-0s-7-4
Soybeans 945-2s-9-6
Wheat 396-0s-8-6

The big three are all within a few percentage points of recent lows, again.*
Corn and wheat are flirting with life-of-contract lows.

From Agrimoney:

PM markets: grain futures fall back, as US turns drier

Corn futures tumbled, as US weather forecasts suggested that the US Midwest will turn drier, allowing the harvest to pick up pace. 

The harvest got off to a slow start this year, due to wet weather, and there were fears that if the wet weather persists disease problems could develop.

US harvest progress due to be released this afternoon to show the harvest about 15% complete, compared to an average of 25% at this time of year. 

Harvest pressure
"Harvest activity is expected to pick up pace this week," said Brent Hasbargen at CHS Hedging.
"This week traders will be closely monitoring harvest progress and actual yield reports coming out of the field," said Mr Hasbargen. 

"Look for harvest progress to ramp up if the weather turns dryer which could add a little pressure to the market," Mr Hasbargen said. 

Drier outlook
And that drier weather is on its way, according to the latest forecasts. 

"Showers will favour the eastern Midwest over her next few days, but drier weather should prevail over the Central US this week, favouring corn and soybean drydown and harvesting and allowing wetness to ease across the north-western Midwest," said Kyle Tapley at MDA Weather Services.
The dry weather should continue into the 6-10 day period, but rains should return to the north-western Midwest late in the 6-10 day period," Mr Tapley said. 

US corn export expectations were reported at 1.34m tonnes, compared to 1.30m tonnes last week.
December corn futures finished down 2.3%, at $3.29 a bushel, breaking back below the 20 and 40-day moving average....

*Here are soybeans as the most extreme example viz recent prices:


Trading The SolarCity/Tesla Merger (SCTY; TSLA)

Always remember: merger arbitrage is not arbitrage.

From Barron's Stocks to Watch:

Why It’s a Good Time to Play the Tesla-SolarCity Merger
Will the merger between Tesla Motors (TSLA) and SolarCity (SCTY) happen? The market has its doubts, but Baird’s Ben Kallo and Tyler Frank expect it to happen…and that makes this a great time to play the merger:
We like SolarCity as a short-term trade as the spread between SolarCity’s share price and expected Tesla acquisition price is substantial, and we expect the deal to close. Under the proposed merger, SolarCity shareholders would receive 0.11 Tesla shares per SolarCity share, equivalent to ~$23 based on Tesla’s current price, which represents potential upside of >15% from current levels. We like SolarCity as a short-term trade and we expect the stock to catch up to its deal price as the shareholder vote nears.

We are increasingly confident that the merger will go through....

Deutsche Bank: Chalk One Up For The Electron-Stained Wretches

Today's most commented post (ex-Markets Live, see below) at Alphaville:
Deutsche’s new market cap, in context

Yes, the humble, anonymous toilers who post simply as FT Alphaville, bring home the comment bacon.

Of course I had to exclude The Murphy/Elder production which is in a different commenting class and seems to have a different class of commenter.

Here's the part of their post on Deutsche Bank:
... BE Yep. We’re choosing, largely through a lack of alternatives, to worry about Deutsche Bank and Opec.
BE Which, in addition to the Fed, are the default worries in times when it’s a down day and there’s no specific new news.
PM Well Deutsche is a worry!
PM Especially if you work there
BE Yeah, sure …. but ……..
BE  Deutsche since 1992, rebased against the Dax.
BE Put a dollar in a Dax tracker in 1992, you get $7.
BE Put it into Deutsche and you get 36 cents.
PM This are shocking stats Bryce
BE It’s been a terrible investment for decades, because the vicious cycle inherent in banks.
BE As in, they need to issue stock to retain their best people and keep the plates spinning on capital.
BE As soon as they’re fragile they can’t raise cash. And that is basically that.

"Chinese Investors Are Buying Up French Farmland"

Following up on Sunday's "California Dreamin' for Chinese investors in US".

As noted in 2012's "French Farmland Offers Better Value than UK Land":
We've been posting on British farmland for years but, outside of the odd Chateau listing and the effects of climate on wine growing I think this is the first French farmland post.
Two things to be very, very wary of: The Common Agricultural Policy and the French tax code....
From Marketplace via Farmlandgrab:
Driving down a country lane through what the poet Péguy, writing about this part of France, described as "oceans of wheat", the farmer and local farmers’ union leader Hervé Coupeau points right and left.
  A farmer drives a combine harvester during a wheat harvest in Monthodon near Tours, central France.

A farmer drives a combine harvester during a wheat harvest 
in Monthodon near Tours, central France
"From here, everything you can see belongs to the Chinese," he said.
French farms are very often farmed by the same families for generations. But in the Berry, the heart of French cereal farming in the center of the country, Chinese buyers have been purchasing farmland in order to assure food supplies for their growing population.
Coupeau doesn’t like it. We get out of the car and go and look at a deserted farmhouse that stands in 2,000 acres of wheat and rapeseed.
The farmer has gone, he tells me, replaced by casual labor.
"[The new owners] hire people for a month or two. The rest of the year there’s no one. It’s empty! With normal owners, as it were, you’d have a family with children in the local school, a farmer’s wife who’d stay on the farm or go out to work — whichever way there’d be life. Here, in this wide open space, there’s nobody," Coupeau said.
A company called Hongyang purchased this and several other farms, acquiring 5200 acres so far. When there’s livestock, it sells that to concentrate on the crops. Wheat, barley and rapeseed mainly.
Coupeau says they paid over twice the market price. Locals say that after each purchase, a group of Chinese investors come to see what they have bought. Then they eat at a local restaurant and return to China. The apparent unwillingness of the buyers to explain who they are and what they are about has upped anxiety.
On a farm that belongs to his parents (his farm is just next door), I met Arnaud Morin as he feeds his eighty black-faced Suffolk sheep. He also raises cattle and grows wheat. The Chinese have bought a farm that also borders on his.    
Like Coupeau, Morin’s family has been cultivating this land for generations. Although Morin does not own the land he farms outright.
"I lease 95 percent of the land I farm," he said. "If one of the owners decided to sell, I wouldn’t be able to afford to buy because the Chinese have pushed prices up so high. It’s the same for young farmers starting out. They can no longer afford to buy land. And I don’t like our land going to foreigners. The land is like our soul."
China is investing heavily in Europe — $23 billion last year compared with $15 billion of Chinese investments in the U.S., according to U.S. business attorneys Baker & MacKenzie.
And this not the first time China has displayed interest in French agriculture....MORE
If interested see also April's "China Buying Farmland In Central France".

Commodities: The Feds, Merchant Banks and a Famous Default

From Matt Levine at Bloomberg View:
Physical commodities.
As far as I know there are no capital requirements for trading oil. Planet Money bought and sold some oil this year, and they are a public radio show. Bloomberg's Tracy Alloway bought some last year and sold it to  Izabella Kaminska, who then defaulted on the trade. If you wanted to get into the oil business and borrowed $45 from your mom to buy your first barrel, that would be fine. There are of course lots of environmental regulations, and you'd probably need insurance to drill it up or move it around, but the basic capital structure of the oil industry -- how much of the money comes from shareholders and how much is borrowed -- is a private decision, a matter for negotiation between companies and investors and banks.

Meanwhile the Federal Reserve wants to put a 1,250 percent risk weight on some physical commodity trading at Goldman Sachs and Morgan Stanley. "The 1,250 percent risk weighting basically means about $1 in capital would be needed for every $1 in investment." So while you are free to borrow money to get into the oil business, Goldman wouldn't be: Banks would need to back their physical-commodity trades with their own money. Other physical commodity trading activities at big banks would get a 300 percent risk weight, and the proposed rules have other restrictions. The Fed says that the purpose of the proposed rules is "to help address the legal liability and reputational risks of physical commodity activities as well as the inherent uncertainty in valuing the potential damages associated with a catastrophe." Viewed as environmental regulation -- as a way to make sure that physical commodity traders have enough money to pay for any damage they cause -- it is odd, insofar as it applies only to banks. But of course it's not environmental regulation; it's banking regulation, and we're much more worried that a bank could fail than we are that an oil company could cause catastrophic environmental damage and be unable to pay to clean it up.

The core business of banking is taking deposits and making loans. It's a fine business as businesses go, but there you are, a bank, with all that money. You want to do things with it, things other than making 30-year fixed-rate mortgages....

See also:
Default, dear Brutus, is not in our stars,
But in ourselves, that we are underlings.

Zombie Moore's Law shows Hardware is Eating Software (INTC; NVDA)

From The Register:
After being pronounced dead this past February - in Nature, no less - Moore’s Law seems to be having a very weird afterlife. Within the space of the last thirty days we've seen:
  1. Intel announce some next-generation CPUs that aren’t very much faster than the last generation of CPUs;
  2. Intel delay, again, the release of some of its 10nm process CPUs; and
  3. Apple’s new A10 chip, powering iPhone 7, is as one of the fastest CPUs ever.
Intel hasn’t lost the plot. In fact, most of the problems in Moore’s Law have come from Intel’s slavish devotion to a single storyline: more transistors and smaller transistors are what everyone needs. That push toward ‘general purpose computing’ gave us thirty years of Wintel, but that no longer looks to be the main game. The CPU is all grown up.

Meanwhile, in the five years between iPhone 4S and iPhone 7, Apple has written its obsessive-compulsive desire for complete control into silicon. Every twelve months another A-series System-on-a-Chip makes its way into the Apple product line, and every time performance increases enormously.

You might think that’s to be expected - after all, those kinds of performance improvements are what Moore’s Law guarantees. But the bulk of the speed gains in the A-series (about a factor of twelve over the last five years) don’t come from making more, smaller transistors. Instead, they come from Apple’s focus on using only those transistors needed for their smartphones and tablets.

Although the new A10 hosts an ARM four-core big.LITTLE CPU, every aspect of Apple’s chip is highly tuned to both workload and iOS kernel-level task management. It’s getting hard to tell where Apple’s silicon ends and its software begins.

And that’s exactly the point.

The cheap and easy gains of the last fifty years of Moore’s Law gave birth to a global technology industry. The next little while - somewhere between twenty and fifty years out - will be dominated by a transition from software into hardware, a confusion of the two so complete it will literally become impossible to know where the boundary between the two lies.

Apple isn’t alone; NVIDIA has been driving its GPUs through the same semiconductor manufacturing process nodes that Intel pioneers, growing more, smaller transistors to draw pretty pictures on displays, while simultaneously adding custom bits to move some of the work previously done in software - such as rendering stereo pairs for virtual reality displays - into the hardware. A process that used to cost 2x the compute for every display frame now comes essentially for free.

Longtime watchers of the technology sector will note this migration from software into hardware has been a feature of computing for the last fifty years. But for all that time the cheap gains of ever-faster CPUs versus the hard work of designing and debugging silicon circuitry meant only the most important or time-critical tasks migrated into silicon....MORE

"Energy’s Worst Performing Commodity Sinks Lower Amid Oversupply"

From Bloomberg, Sept 23: 
  • Spot uranium price declines below $25 a pound to 11-year low
  • Demand lacking; market conditions unlikely to change soon: Ux
Uranium prices have gone from bad to worse, slumping to an 11-year low as brimming global inventories weigh on a market that hasn’t recovered from the Fukushima disaster in Japan.

Spot uranium declined 1.4 percent to $24.40 a pound on Thursday, the lowest since April 2005, according to data from Ux Consulting Co. Prices have slumped 29 percent this year, making it the worst performing energy commodity in 2016. The fuel has more than halved since hitting $73 the month before the Fukushima meltdown in 2011.
Uranium is heading for a second annual decline, even as producers cut output and Japanese utilities attempt to restart atomic plants. Prices are unlikely to rebound until at least 2019 as a market rebalancing may take another three years, Kirill Komarov, first deputy head of Rosatom Corp., said last month. The Russian company is the world’s fourth-largest producer of the nuclear fuel....MORE

Sunday, September 25, 2016

Guy Gets An Upgrade to First Class, He Seems Happy

Especially about the shower.

"California Dreamin' for Chinese investors in US"

From AFP via France24:

© AFP / by Jocelyne Zablit | The $1 billion condominium and hotel development dubbed Fig Central 
is being built by Beijing-based Oceanwide Holdings near the Staples Center in Los Angeles 
From real estate, to high-tech firms to entertainment giants, Chinese investments in the United States, notably California, are moving at a dizzying pace and are on course to smash records again this year.
Chinese companies shelled out a record $15 billion last year in the US and that figure could more than double in 2016, according to research firm Rhodium Group and the National Committee on US-China Relations.

California, especially the San Francisco Bay Area and Los Angeles, has been at the forefront of China's appetite to invest overseas, with billions of dollars going into the technology, renewable energy and entertainment sectors, and increasingly into real estate.

China has pumped $8 billion into California businesses since 2000, more than in any other state, a recent Rhodium Group study said.

It added that there were 452 Chinese-owned businesses that employed more than 9,500 people in the Golden State as of the end of last year, among them the online commerce giant Alibaba Group and the Internet company Tencent Holdings Ltd.

- Buying spree -
Cash is also flowing into Hollywood, with the Beijing-based Wanda Group paying $3.5 billion earlier this year to acquire the film studio Legendary Pictures, the largest-ever cultural takeover by China.
The buying spree is showing no signs of abating for the foreseeable future, experts say, despite tumult in China's economy and mounting rhetoric during the US presidential campaign.

"Chinese investment in the US -- and California in particular -- will almost certainly multiply in the coming years," said Matt Sheehan, who consults and writes about Chinese investment in the Golden State and whose forthcoming book is entitled "Chinafornia."

While the political climate isn't helping, cities across America are welcoming Chinese investments with open arms, drowning out the campaign rhetoric and anti-China sentiment in Congress.
"If the domestic Chinese economy continues to boom, firms will have the loose cash to make strategic investments and vanity purchases abroad," said Sheehan.

"If the Chinese economy and RMB currency go into a nosedive, you'll likely see a large capital flight disguised as overseas investment."

One sector increasingly on the Chinese shopping list in the US is real estate, with buyers snapping up expensive homes and high-end commercial properties at a record pace.
Chinese investors pumped nearly $11 billion into US real estate in the first five months of 2016, outpacing last year's total of $4.37 billion, according to a report by real estate firm Cushman & Wakefield.

- Changing skyline -
The West Coast has proven a major draw with Chinese investments literally changing the skylines of downtown Los Angeles and San Francisco.
Of the four mega development projects currently underway in Los Angeles, three are by Chinese firms, including a $1 billion condominium and hotel development by Beijing-based Oceanwide Holdings and a similar project -- Metropolis -- by Shanghai-based Greenland Holding Group....MORE

"Is the Digital Economy Much Less Competitive Than We Think It Is?"

From Chicago Booth's Stigler Center blog, Sept. 23:
Maurice E. Stucke from the University of Tennessee Knoxville and Ariel Ezrachi of Oxford University explain how big data and artificial intelligence can be used to facilitate collusion and potentially harm consumers. The first part of a two-part interview.

The Economist devoted its cover page last week to a remarkable project on the dark side of the superstar economy: namely, the rapid rise in concentration and anti-competitive conduct, particularly in the US.

The tech sector, the magazine noted, is at the forefront of this rise in concentration. Once a harbinger of a new kind of capitalism, Silicon Valley has since become a place where “a handful of winner-takes-most companies have taken over the world’s most vibrant innovation centre, while the region’s (admittedly numerous) startups compete to provide the big league with services or, if they are lucky, with their next acquisition.” 

Powerful tech companies, it warned, have used economies of scale to become giants, shifting their focus “from the supply side (production efficiencies) to the demand side (network effects).” “The superstars are admirable in many ways,” the magazine cautioned, “but they have two big faults. They are squashing competition, and they are using the darker arts of management to stay ahead.”
A lot of attention has been devoted in recent years to the growing monopolization of online markets like search, web advertising, mobile operating systems, and online retail. Google is currently facing three antitrust cases against it in Europe—where it holds a 90 percent market share in online search—after being accused by the European Commission of abusing its dominance in mobile and search to favor its own products over rival services. 

What if this isn’t the case of a single company misbehaving but a fundamental and lasting change in the way competition works in the digital economy? In a series of papers from the last two years, Maurice E. Stucke from the University of Tennessee Knoxville and Ariel Ezrachi of the University of Oxford argue that in the world of big data and artificial intelligence, network effects can raise barriers to entry, enabling big platforms to engage in behaviors such as collusion, tacit collusion, and price discrimination, to the detriment of consumers.

In the first part of a two-part interview with ProMarket, Stucke—a former antitrust prosecutor at the Department of Justice—and Ezrachi elaborate on the changing dynamics of what they call the “digitized hand” and explain how the market may in fact appear to be more competitive than it really is.

Q: In your recent papers, you argue that the digital economy, which is typically thought of as innovative and highly competitive, is in fact a lot less competitive than we typically assume it to be. Can you explain?

Ariel Ezrachi: The Internet, big data and big analytics, provide us with extremely valuable benefits that often promote a competitive online environment. This is achieved through the increase in number of sellers, the availability of information, improved market transparency, reduced barriers to entry, etc. However, we cannot uncritically assume that we will always benefit. When we critically examine the complex algorithm-driven environment, we can witness imperfections that result in the new market realities being less competitive than one would expect.

In many ways, the new market dynamic might have the characteristics of competition as we know it. But it’s a much more complex environment, in which the invisible hand that we all rely upon has been pushed aside by what we refer to as the “digitized hand.” This hand is controlled by corporations and can be manipulated. It has the capacity to be selective, to generate different levels of competitive pressures on the players, and that results in an environment that operates using different rules from the ones we assume in the theoretical models.

Q: In your upcoming book Virtual Competition, you make the case that big data, algorithms, and artificial intelligence can all be used to potentially harm competition and consumers. How so? 

AE: We identify three main areas of harm–collusion, behavioral discrimination and frenemy dynamic.

The first–collusion–includes both express or tacit collusion through algorithms. As pricing shifts from humans to computers, so too will the types of collusion in which companies may engage. Take for example the possibility that as part of dynamic pricing, smart algorithms with artificial intelligence are used to monitor the market and stabilize price competition. Under certain market conditions, each algorithm can adopt a strategy which fosters interdependence between operators – following price increases by competitors and punishing deviations from the new equilibrium.

Another collusive example concerns the possible use of a single algorithm by numerous competitors to establish a hub-and-spoke alignment of price. To illustrate, consider the use of a single pricing algorithm by Uber and other similar ride providers. To clarify, we have nothing against Uber.

But we use Uber to illustrate how a hub-and-spoke cartel can develop over time. Here you have independent drivers, all of whom rely on a single algorithm to determine the fare. Moreover when Uber’s algorithm decides, perhaps because it’s raining, that there is a lack of supply, it then determines to raise prices for a specific time period and area. The Uber drivers cannot discount from this algorithm-determined price. As Uber’s market power increases, and as more drivers in the market use the same algorithm, you’re likely to witness an alignment of pricing across the industry.

Our second theory of harm concerns behavioral discrimination, which differs from price discrimination in several important respects. The strategy involves firms harvesting our personal data to identify which emotion (or bias) will prompt us to buy a product, and what’s the most we are willing to pay.  Here sellers track us and collect data about us in order to tailor their advertising and marketing to target us at critical moments with the right price and emotional pitch. So behavioral discrimination increases profits by increasing overall consumption (by shifting the demand curve to the right and price discriminating) and reducing consumer surplus.

Our third theory of harm concerns the unique “frenemy” dynamic between the “super-platforms” and independent apps. A relationship of both competition and cooperation exists between the super-platforms and independent apps. One example involves the operating systems for mobile phones. Two super-platforms—Apple’s iOS and Google’s Android mobile software platforms—dominate. Each super-platform, like a coral reef, attracts to its ecosystem software developers, apps, and accessory makers.

One anticompetitive risk is when the frenemies cooperate to extract data from individuals and promote asymmetrical information flows to foster behavioral exploitation, while simultaneously competing among themselves over the consumer surplus. Another risk is when the super-platforms, as the gatekeepers, can exclude or hinder the independent apps. When the super-platform vertically integrates, its incentives can change. It can engage in unfair practices to favor its own app over rival apps. We see these issues currently in Europe, where there are already three Statements of Objections against Google.

Within that dynamic, perhaps the next frontier will be how those super-platforms will actually control the interface. As internet search is changing and with the rise of digital personal assistants, we are distancing ourselves from the junctions of decision-making and basically putting our trust in those platforms.

Q: What role do network effects play in the ability of super-platforms to subvert competition?

Maurice Stucke: They can play a significant role. Some argue that Big Data does not lend itself to entry barriers. Others go even further. They claim that most online markets are notable for their low entry barriers. If one used the traditional factors for assessing entry barriers, one might agree. Many online industries are dynamic and fast-growing. Data-driven mergers often involve free products, where customers seemingly are not locked-in. Consumers could easily switch to other free products or services. Finally launching a competing app may not require a lot of time and investment. And the requisite technology to enter may be standardized.

Take a look at search engines, like Google, Bing, Yahoo!, and DuckDuckGo. They are free and easy to use. Users can easily switch from one search engine to another. Seemingly users are not locked-in by any data portability issues. Moreover, search engines do not display the classic direct network effects that the courts and agencies have identified. So under antitrust’s traditional factors, the entry barriers appear low, obviating the need for antitrust intervention.

In Big Data and Competition Policy, Allen Grunes and I identify four different types of network effects that can be at play in these online markets. We want to be careful here: these network effects are not necessarily bad. They can be actually quite good and benefit consumers with higher quality products and services. But the data-driven network effects also have the potential to raise entry barriers and enable the big firms to become even bigger, until they dominate the industry....MUCH MORE 
HT: Economist's View