Economist 2/16/15

  1. THE eleventh Cricket World Cup, which began in Australia and New Zealand on February 14th, consists of 42 largely meaningless games, followed by 7 important ones. To understand why this is, consider what happened in the 2007 rendition of cricket’s biggest tournament, which was held in the West Indies. It was a financial disaster because the Indian team, traditionally a poor traveller, was knocked out in the early stages. As a result, most of the world’s cricket fans switched off their television sets. This (perfectly sporting) calamity cost Indian broadcasters millions of dollars in lost advertising revenues.If India has the commercial heft to shape international cricket, why are its cricketers not better? Cricket, after all, has an almost monopolistic hold on the sporting affections of India’s 1.2 billion people. According to a survey by an Indian think-tank, 80% of Indians under the age of 25 followed cricket “to a great extent” or “somewhat”. By contrast, New Zealand has a bit over 4m people, who mostly prefer rugby to cricket, yet their cricketers have a good chance of winning the World Cup. The explanation for India’s underperformance is complicated; it has to do with malnutrition and poverty, as well asbad sports administration, and an elitist cricketing culture that favours batsmen over the hardworking attacking bowlers required to succeed abroad.
  2. Revenues at Rolls-Royce fell for the first time in a decade and annual pre-tax profits sagged by 8% to £1.6 billion ($2.5 billion).The poor results should come as no surprise. In 2014 Rolls-Royce issued two profit warnings, laid off 2,600 workers, lost its chief financial officer and saw its share price sink by a third.Aggrieved investors should have anticipated the slowdown in defence spending that has hit its military-aerospace business over the last year.Bulging order books for wide-bodied passenger planes mean that the company will have to double production, from its current level of 300 engines a year. It has expanded globally, opening new plants in America and, more recently, Singapore.Despite the huge orders, Rolls-Royce blames delays to Boeing’s 787 Dreamliner for part of its problems.It may provide half the engines for all wide-bodied planes but it left the much larger narrow-body market when it abandoned a joint venture with Pratt & Whitney, an American aerospace manufacturer, in 2013.
  3. In 2013 more businesses were created in Britain than in any year for at least a decade. Many of them are laid-off builders and architects setting up on their own. But among these “necessity entrepreneurs” are a valuable clump of more ambitious folk, who are taking on established businesses with more innovative technology and better customer service.But the government has also made it easier to run a business from home by changing the tax code: in most circumstances home businesses will no longer attract business rates. The government has just doled out its 25,000th start-up loan. In January 2014 it introduced “growth vouchers” to help businesses pay for advice from experts.After prodding, immigration rules have been relaxed to allow more software engineers to work in Britain under the “exceptional talent” visa scheme.A current-account switching service introduced in 2013 in theory allows customers to move accounts in no more than seven days.These changes have contributed to what the regulator calls an “unprecedented” demand by entrepreneurs to start new banks.
  4. The new prime minister of Greece, Alexis Tsipras has sound ideas on attacking corruption, fighting tax evasion and shaking up Greece’s cosy business elite. His ministers now talk of keeping 70% of the old government’s reforms (see article). But his first moves in office included promises to raise the minimum wage to pre-crisis levels, reverse labour-market reforms, restore pension increases, rehire thousands of public servants and scrap privatisation projects. These would not just breach Greece’s bail-out terms, but also wreck the country’s economic prospects. Mr Tsipras foolishly refuses to prolong Greece’s bail-out programme when it expires at the end of the month, talking instead of a bridging loan that would create time for negotiations to take place without monitoring by the hated “troika” of the European Commission, the European Central Bank and the IMF. Greece’s total debt stock stands at an unpayable 175% of GDP (up from 109% before the euro crisis). Here, then, is a simple message for European leaders to give Mr Tsipras. They will negotiate, but only once the bail-out is extended. They will help him on debt and the budget, but only if he is prepared to make his economy more competitive.
  5. Crowdfunding—in which artists, authors and designers raise money directly from their fans—has been good to the makers of video games.”Star Citizen”, a video game being developed by Cloud Imperium Games (CIG) crowdfunding campaign run simultaneously in 2012 on Kickstarter and CIG’s website, raised about $6m. But the donations kept coming. So far the game has accumulated $72m; another few million dollars rains down every month. That makes it the biggest crowdfunded project, of any sort, yet seen. Its nearest competition is Ethereum, a Bitcoin-inspired publishing platform, which raised $18m. Every cent has come from roughly 750,000 ordinary fans. In return for pledges—ranging from $36 to $18,000—they get virtual spacecraft to use in the game, early access to unfinished versions, T-shirts and so on. What they do not get is equity in the business or a cut of any profits.CIG’s owner, Chris Roberts’s reputation has made it easier to get them to part with their cash: he made his name in the 1990s with a popular game called “Wing Commander”.
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