Record Industry Braces for Artists’ Battles Over Song Rights

by Larry Rohter

Since their release in 1978, hit albums like Bruce Springsteen’s “Darkness on the Edge of Town,” Billy Joel’s “52nd Street,” the Doobie Brothers’ “Minute by Minute,” Kenny Rogers’s “Gambler” and Funkadelic’s “One Nation Under a Groove” have generated tens of millions of dollars for record companies. But thanks to a little-noted provision in United States copyright law, those artists — and thousands more — now have the right to reclaim ownership of their recordings, potentially leaving the labels out in the cold.

When copyright law was revised in the mid-1970s, musicians, like creators of other works of art, were granted “termination rights,” which allow them to regain control of their work after 35 years, so long as they apply at least two years in advance. Recordings from 1978 are the first to fall under the purview of the law, but in a matter of months, hits from 1979, like “The Long Run” by the Eagles and “Bad Girls” by Donna Summer, will be in the same situation — and then, as the calendar advances, every other master recording once it reaches the 35-year mark.

“In terms of all those big acts you name, the recording industry has made a gazillion dollars on those masters, more than the artists have,” said Don Henley, a founder both of the Eagles and the Recording Artists Coalition, which seeks to protect performers’ legal rights. “So there’s an issue of parity here, of fairness. This is a bone of contention, and it’s going to get more contentious in the next couple of years.”

With the recording industry already reeling from plummeting sales, termination rights claims could be another serious financial blow. Sales plunged to about $6.3 billion from $14.6 billion over the decade ending in 2009, in large part because of unauthorized downloading of music on the Internet, especially of new releases, which has left record labels disproportionately dependent on sales of older recordings in their catalogs.

“This is a life-threatening change for them, the legal equivalent of Internet technology,” said Kenneth J. Abdo, a lawyer who leads a termination rights working group for the National Academy of Recording Arts and Sciences and has filed claims for some of his clients, who include Kool and the Gang. As a result the four major record companies — Universal, Sony BMG, EMI and Warner — have made it clear that they will not relinquish recordings they consider their property without a fight.

“We believe the termination right doesn’t apply to most sound recordings,” said Steven Marks, general counsel for the Recording Industry Association of America, a lobbying group in Washington that represents the interests of record labels. As the record companies see it, the master recordings belong to them in perpetuity, rather than to the artists who wrote and recorded the songs, because, the labels argue, the records are “works for hire,” compilations created not by independent performers but by musicians who are, in essence, their employees.

Independent copyright experts, however, find that argument unconvincing. Not only have recording artists traditionally paid for the making of their records themselves, with advances from the record companies that are then charged against royalties, they are also exempted from both the obligations and benefits an employee typically expects.

“This is a situation where you have to use your own common sense,” said June M. Besek, executive director of the Kernochan Center for Law, Media and the Arts at the Columbia University School of Law. “Where do they work? Do you pay Social Security for them? Do you withdraw taxes from a paycheck? Under those kinds of definitions it seems pretty clear that your standard kind of recording artist from the ’70s or ’80s is not an employee but an independent contractor.”

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High Tech Cowboys of the Deep Seas

by Joshua Davis

Latitude 48° 14 North. Longitude 174° 26 West.

Almost midnight on the North Pacific, about 230 miles south of Alaska's Aleutian Islands. A heavy fog blankets the sea. There's nothing but the wind spinning eddies through the mist.

Out of the darkness, a rumble grows. The water begins to vibrate. Suddenly, the prow of a massive ship splits the fog. Its steel hull rises seven stories above the water and stretches two football fields back into the night. A 15,683-horsepower engine roars through the holds, pushing 55,328 tons of steel. Crisp white capital letters — COUGAR ACE — spell the ship's name above the ocean froth. A deep-sea car transport, its 14 decks are packed with 4,703 new Mazdas bound for North America. Estimated cargo value: $103 million.

On the bridge and belowdecks, the captain and crew begin the intricate process of releasing water from the ship's ballast tanks in preparation for entry into US territorial waters. They took on the water in Japan to keep the ship steady, but US rules require that it be dumped here to prevent contaminating American marine environments. It's a tricky procedure. To maintain stability and equilibrium, the ballast tanks need to be drained of foreign water and simultaneously refilled with local water. The bridge gives the go-ahead to commence the operation, and a ship engineer uses a hydraulic-powered system to open the starboard tank valves. Water gushes out one side of the ship and pours into the ocean. It's July 23, 2006.

In the crew's quarters below the bridge, Saw "Lucky" Kyin, the ship's 41-year-old Burmese steward, rinses off in the common shower. The ship rolls underneath his feet. He's been at sea for long stretches of the past six years. In his experience, when a ship rolls to one side, it generally rolls right back the other way.

This time it doesn't. Instead, the tilt increases. For some reason, the starboard ballast tanks have failed to refill properly, and the ship has abruptly lost its balance. At the worst possible moment, a large swell hits the Cougar Ace and rolls the ship even farther to port. Objects begin to slide across the deck. They pick up momentum and crash against the port-side walls as the ship dips farther. Wedged naked in the shower stall, Kyin is confronted by an undeniable fact: The Cougar Ace is capsizing.

He lunges for a towel and staggers into the hallway as the ship's windmill-sized propeller spins out of the water. Throughout the ship, the other 22 crew members begin to lose their footing as the decks rear up. There are shouts and screams. Kyin escapes through a door into the damp night air. He's barefoot and dripping wet, and the deck is now a slick metal ramp. In an instant, he's skidding down the slope toward the Pacific. He slams into the railings and his left leg snaps, bone puncturing skin. He's now draped naked and bleeding on the railing, which has dipped to within feet of the frigid ocean. The deck towers 105 feet above him like a giant wave about to break. Kyin starts to pray.

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Tragic Heroes - the Forty-Seven Ronin

The account of the 1703 vendetta by a large group of masterless samurai (rônin)--who lost their lord due to political infighting--stands as an enduring narrative of Japanese martial loyalty. The story was reenacted countless times on the puppet and kabuki stages, but, because of restrictions against the public discussion of sensitive issues, the names of the characters were always changed. In this 1869 version by Tsukioka Yoshitoshi (1839-1892), the true names and ranks of the rônin heroes are revealed because in 1868 the restrictions had been repealed.

 

 

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The Elusive Big Idea

Top row from left: Marie Curie, Albert Einstein, George Washington Carver and Betty Friedan. Bottom row from left: Charles R. Drew, Germaine Greer, John Maynard Keynes and Marshall McLuhan.

by Neal Gabler

The July/August issue of The Atlantic trumpets the “14 Biggest Ideas of the Year.” Take a deep breath. The ideas include “The Players Own the Game” (No. 12), “Wall Street: Same as it Ever Was” (No. 6), “Nothing Stays Secret” (No. 2), and the very biggest idea of the year, “The Rise of the Middle Class — Just Not Ours,” which refers to growing economies in Brazil, Russia, India and China.

Now exhale. It may strike you that none of these ideas seem particularly breathtaking. In fact, none of them are ideas. They are more on the order of observations. But one can’t really fault The Atlantic for mistaking commonplaces for intellectual vision. Ideas just aren’t what they used to be. Once upon a time, they could ignite fires of debate, stimulate other thoughts, incite revolutions and fundamentally change the ways we look at and think about the world.

They could penetrate the general culture and make celebrities out of thinkers — notably Albert Einstein, but also Reinhold Niebuhr, Daniel Bell, Betty Friedan, Carl Sagan and Stephen Jay Gould, to name a few. The ideas themselves could even be made famous: for instance, for “the end of ideology,” “the medium is the message,” “the feminine mystique,” “the Big Bang theory,” “the end of history.” A big idea could capture the cover of Time — “Is God Dead?” — and intellectuals like Norman Mailer, William F. Buckley Jr. and Gore Vidal would even occasionally be invited to the couches of late-night talk shows. How long ago that was.

If our ideas seem smaller nowadays, it’s not because we are dumber than our forebears but because we just don’t care as much about ideas as they did. In effect, we are living in an increasingly post-idea world — a world in which big, thought-provoking ideas that can’t instantly be monetized are of so little intrinsic value that fewer people are generating them and fewer outlets are disseminating them, the Internet notwithstanding. Bold ideas are almost passé.

It is no secret, especially here in America, that we live in a post-Enlightenment age in which rationality, science, evidence, logical argument and debate have lost the battle in many sectors, and perhaps even in society generally, to superstition, faith, opinion and orthodoxy. While we continue to make giant technological advances, we may be the first generation to have turned back the epochal clock — to have gone backward intellectually from advanced modes of thinking into old modes of belief. But post-Enlightenment and post-idea, while related, are not exactly the same.

Post-Enlightenment refers to a style of thinking that no longer deploys the techniques of rational thought. Post-idea refers to thinking that is no longer done, regardless of the style.

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Blame the Corporate Lobby

by Steven Pearlstein

Another great week for Corporate America!

The economy is flatlining. Global financial markets are in turmoil. Your stock price is down about 15 percent in three weeks. Your customers have lost all confidence in the economy. Your employees, at least the American ones, are cynical and demoralized. Your government is paralyzed.

Want to know who is to blame, Mr. Big Shot Chief Executive? Just look in the mirror because the culprit is staring you in the face.

J’accuse, dude. J’accuse.

You helped create the monsters that are rampaging through the political and economic countryside, wreaking havoc and sucking the lifeblood out of the global economy.

Did you see this week’s cartoon cover of the New Yorker? That’s you in top hat and tails sipping champagne in the lifeboat as the Titanic is sinking. Problem is, nobody thinks it’s a joke anymore.

Did you presume we wouldn’t notice that you’ve been missing in action? I can’t say I was surprised. If you’d insisted on trotting out those old canards again, blaming everything on high taxes, unions, regulatory uncertainty and the lack of free-trade treaties, you would have lost whatever shred of credibility you have left.

My own bill of particulars begins right here in Washington, where over the past decade you financed and supported the growth of a radical right-wing cabal that has now taken over the Republican Party and repeatedly made a hostage of the U.S. government.

When it started out all you really wanted was to push back against a few meddlesome regulators or shave a point or two off your tax rate, but you were concerned it would look like special-interest rent-seeking. So when the Washington lobbyists came up with the clever idea of launching a campaign against over-regulation and over-taxation, you threw in some money, backed some candidates and financed a few lawsuits.
The more successful it was, however, the more you put in — hundreds of millions of the shareholders’ dollars, laundered through once-respected organizations such as the Chamber of Commerce and the National Association of Manufacturers, phoney front organizations with innocent-sounding names such as Americans for a Sound Economy, and a burgeoning network of Republican PACs and financing vehicles. And thanks to your clever lawyers and a Supreme Court majority that is intent on removing all checks to corporate power, it’s perfectly legal.

Somewhere along the way, however, this effort took on a life of its own. What started as a reasonable attempt at political rebalancing turned into a jihad against all regulation, all taxes and all government, waged by right-wing zealots who want to privatize the public schools that educate your workers, cut back on the basic research on which your products are based, shut down the regulatory agencies that protect you from unscrupulous competitors and privatize the public infrastructure that transports your supplies and your finished goods. For them, this isn’t just a tactic to brush back government. It’s a holy war to destroy it — and one that is now out of your control.

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Wabi-sabi

Wabi-sabi represents a comprehensive Japanese world view or aesthetic centered on the acceptance of transience. The aesthetic is sometimes described as one of beauty that is "imperfect, impermanent, and incomplete". 

Wabi-sabi is the most conspicuous and characteristic feature of traditional Japanese beauty and it occupies roughly the same position in the Japanese pantheon of aesthetic values as do the Greek ideals of beauty and perfection in the West. If an object or expression can bring about, within us, a sense of serene melancholy and a spiritual longing, then that object could be said to be wabi-sabi. Wabi-sabi nurtures all that is authentic by acknowledging three simple realities: nothing lasts, nothing is finished, and nothing is perfect.

The words wabi and sabi do not translate easily. Wabi originally referred to the loneliness of living in nature, remote from society; sabi meant "chill", "lean" or "withered". Around the 14th century these meanings began to change, taking on more positive connotations. Wabi now connotes rustic simplicity, freshness or quietness, and can be applied to both natural and human-made objects, or understated elegance. It can also refer to quirks and anomalies arising from the process of construction, which add uniqueness and elegance to the object. Sabi is beauty or serenity that comes with age, when the life of the object and its impermanence are evidenced in its patina and wear, or in any visible repairs.

After centuries of incorporating artistic and Buddhist influences from China, wabi sabi eventually evolved into a distinctly Japanese ideal. Over time, the meanings of wabi and sabi shifted to become more lighthearted and hopeful. Around 700 years ago, particularly among the Japanese nobility, understanding emptiness and imperfection was honored as tantamount to the first step to satori, or enlightenment. In today's Japan, the meaning of wabi sabi is often condensed to ″wisdom in natural simplicity.″ In art books, it is typically defined as ″flawed beauty.″

Ministry of Silly Walks
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Aimee Mann

Pablo Picasso  (Spanish, 1881-1973) Night Fishing at Antibes.
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Hollywood’s Information Man

by Amy Wallace, September 2001

If you are a doctor or a grocer or an airline pilot with no ties to the business that produces America’s number-one export – entertainment — you probably have never heard of Peter Bart. But if you are among the 70,000 people in Los Angeles, New York, and around the world who can’t start the day without knowing which big-name movie director just got a two-picture deal, Bart is an institution.

Over nearly four decades in Los Angeles he’s been a reporter for The New York Times, an executive at three movie studios, an independent film producer, a screenwriter, and an author of both novels and nonfiction. For the past dozen years he has been the editor of and most influential columnist at Daily Variety and Weekly Variety, the sister publications whose zippy headlines, who’s-in-who’s-out reporting, and largely anonymous sources routinely make and break reputations. In clout-conscious Hollywood, that makes Bart not just an observer but a player.

There are two keys to success in Hollywood: relationships and information. Bart traffics in both. He lunches almost every day with a studio chief, a marketing executive, a top manager or talent agency head, an entertainment lawyer or lobbyist. In the course of just a few weeks earlier this year he dined with Screenwriter William Goldman; Ron Meyer, president of Universal Studios; Lorenzo di Bonaventura, Warner Bros. president of worldwide production; Michael Ovitz, CEO of Artists Management Group; Mike De Luca, former New Line president of production (and now production chief at DreamWorks SKG); Mike Medavoy, chairman of Phoenix Pictures; Tom Sherak, partner at Revolution Studios; Rob Friedman, vice chairman at Paramount Pictures; John McLean, executive director of the Writers Guild of America; Don Marron, chairman of PaineWebber; and Skip Brittenham, a partner in the entertainment law firm Ziffren, Brittenham, Branca & Fischer.

That power derives in large part from his position at Variety, the Industry’s 96-year-old broadsheet that doesn’t just cover entertainment news but helps make it. It is Hollywood’s prime bulletin board — what one marketing consultant likens to “a high school newspaper that everyone has a tremendous need to see their names in.” It’s not just an ego thing. In a world built on illusions, being mentioned in Variety lends legitimacy. It makes you seem real. In Hollywood, seeming is believing.

Here, pecking order determines more than just who gets a table with an ocean view. The perception of who’s on top determines which projects are produced, who will work on them, and how much money they’ll make. More than any other entity, Variety reflects and informs Hollywood’s collective consciousness. Readers don’t just parse the information on its pages; they dissect what stories are where, who is quoted up high, who is relegated to beyond the jump. With its trademark “slanguage,” Variety helps its subscribers keep score — an essential service in a town obsessed with rank. Whether you’ve “ankled” (quit) or been “upped” (promoted) at a “praisery” (public relations firm), a “diskery” (record company), or a “tenpercentery” (talent agency), if the story runs on Variety’s front, it means you matter. By extension, Bart matters to you.

Not for nothing did one top executive in town famously dub Bart “the most hated man in Hollywood.” For not only does Bart control the Industry’s bible, but by virtue of his station he always gets something that everyone–in and out of Hollywood — desperately wants: the last word.

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Vodka Nation

by Victorino Matus

Unemployment once again has crept past 9 percent. GDP growth fell below 2 percent this last quarter. Inflation is up. Home values are down. There’s talk of a double-dip recession. According to one market analyst, “We’re on the verge of a great, great depression.” But through it all, there is one constant, a commodity that has not only survived during these harsh economic times, but even thrived.

The next time you visit a bar, see if you can count on one hand the number of vodkas on the shelf. Chances are you’ll need both hands, and possibly feet. The bar at the original Pizzeria Uno in downtown Chicago contains 13 different vodkas: one bottle of Skyy, one bottle of Smirnoff, four flavors of Stolichnaya, five flavors of Absolut, one Ketel One, and one Grey Goose. At the T.G.I. Friday’s in Reagan National Airport outside Washington, two shelves are devoted to 14 varieties of vodka. Meanwhile, Boston’s übertrendy 28 Degrees restaurant boasts an astounding 22 bottles (13 brands, 15 flavors).

According to the Distilled Spirits Council of the United States, there are currently about a thousand different brands of vodka in existence. Keep in mind that the Alcohol and Tobacco Tax and Trade Bureau defines vodka as “neutral spirits [alcohol produced from any material at or above 190 degrees proof] so distilled, or so treated after distillation with charcoal or other materials, as to be without distinctive character, aroma, taste, or color.” Which means that a brand must often go to absurd lengths to distinguish itself from the rest of the pack. Consider Crystal Head Vodka, co-created by actor Dan Aykroyd, dispensed from a crystal skull and based on a mystical legend. Nostalgic for the Roaring Twenties? Pour yourself a glass of Tommy Guns Vodka, straight out of a bottle in the shape of a Thompson submachine gun. (Just ignore the fact that few Americans actually drank vodka in the 1920s.) Devotion Vodka contains a protein called casein, which contributes to a better “mouthfeel.” More important, it’s received the endorsement of Jersey Shore’s Mike “The Situation” Sorrentino. And of course, there’s the quintuple-distilled Trump Vodka: As its website proclaims, “Finally, a vodka worthy of the Trump name.”

It all sounds unsustainable, but as Jason Wilson, the author of Boozehound: On the Trail of the Rare, the Obscure, and the Overrated in Spirits (Ten Speed, 240 pp., $22.99) points out, “The largest liquor companies in the world haven’t launched more than five hundred flavored vodkas because no one wanted to drink them.” To wit, on your next trip to the bar, will you order a cocktail whose main ingredient is vodka? There’s about a one-in-three chance it will be. If so, will you order a generic vodka tonic, or provide a preference? These days, as any bartender will tell you, most customers specify.

Of course, it wasn’t always this way. Thirty years ago most people weren’t ordering vodkas by name, let alone brand-specific concoctions such as a Grey Goose Cosmo or, as a friend of mine unashamedly orders, Stoli Raz and Sprite. So how did we get here? For 200 years the United States was a brown-spirits nation, and our culture was dominated by whiskey and bourbon (think of Kentucky’s famed Bourbon Trail, Jack Daniel’s, the Whiskey Rebellion of the early 1790s). This is not to say that Americans were completely ignorant of vodka’s existence: One of the earliest mentions of it in the New York Times dates back to 1871 (a profile of a Russian prince written by a Times correspondent in St. Petersburg), and Russia’s legendary vodka maker Pyotr Smirnov sent his bottles to both the 1876 Centennial Exhibition in Philadelphia and the 1893 Chicago World’s Fair, where it won medals. But, writes Linda Himelstein in The King of Vodka: The Story of Pyotr Smirnov and the Upheaval of an Empire (Harper, 416 pp., $29.99), “When it came to hard liquor .  .  . Americans preferred bourbon whiskey. Vodka was still mysterious, a drink yet to be discovered.”

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Going to Graceland

by Deenah Vollmer

Graceland turns twenty-five today, which is how old my mother was when the album came out, and how old I am now. My mother never listened to it, nor did my father, and I found it on my own for a dollar on vinyl at a record store in Santa Cruz. I didn’t have a record player, so I poached the MP3s from a friend’s computer via Firewire, which is how we did things in those days.

A year earlier, as a senior at a private high school in Los Angeles, the most rebellious thing I thought I could do was attend the least prestigious school that accepted me. I would become an environmental studies major. I would get back to the land, bake in the sun, get my hands dirty. It would be an experience. The dream faded, however, when I didn’t find the hippies I met to be loyal friends, I learned the Environmental Studies degree required statistics and policy, and a walk through the garden wore me down, even off the stunning coast of central California. Then I heard Graceland and was redeemed.

There had never been a time I didn’t feel soft in the middle. I walked by an American Apparel party on Sunset Boulevard in Los Angeles and finally understood the line “I don’t want to end up a cartoon in a cartoon graveyard.” I was enamored of unrequited love, and the plea “You don’t feel you could love me, but I feel you could” became a mantra. This of course went hand in hand with “Losing love is like a window in your heart.” You don’t even need to be divorced to know that.  You don’t need to know what a National guitar is, either—I didn’t until I looked it up just now. I had always imagined some kind of “national guitar of America,” not a guitar made of metal, but both meanings have some potency, I think.

Graceland is more about remaining white than it is about becoming black. Even onstage with twenty-four black South African musicians and singers, even while Simon (half the height of any of them) practically disappears among a choir in orange dashikis and a fortress of drums, even though the music is distinctively South African, Graceland is clearly white people’s music.

My suspicion was confirmed this May when I saw Paul Simon perform at New York’s Beacon Theatre, which caters to the peach-faced and white-haired population of the Upper West Side. “It’s always slightly unnerving and exhilarating to play in your exact neighborhood,” Simon told the audience, which did appear to be composed of his peers. From their seats they bobbed their heads, some clapping, some singing along, and since the sound was mixed at a noise level friendly to all ages and ears, their voices were audible, making the concert, at times, more of a sing-a-long. During the encore, a few mostly middle-aged women ventured out of their plush seats to shake their hips. I felt embarrassed but also included. Their whiteness was my whiteness too.

The Graceland origin story is a tale of redemption won in the midst of what seem like bad decisions. It was 1985, the peak of worldwide campaigns against apartheid (then the main issue on most US college campuses) and a high point of apartheid brutality. Paul Simon was at a slow moment in his career (as folk-rock icons from the ’60s could be in the era of synth) when one day somebody sent him a cassette of umbaqanga music, a bouncy style with Zulu roots and jazz leanings, that inspired him to jet to South Africa to make a record with black musicians, breaking an international cultural boycott of the country. Graceland won the Grammy for Record of the Year and went platinum five times over, and Paul Simon’s voice and poetry over umbaqanga’s upbeat rhythms still will make anyone prick up her ears when it comes on satellite radio.  To this day, Graceland does not sound like much else in English, and as a truly self-aware tribute to the privileged American’s search for authenticity and salvation in a world of ease and plenty, it is pretty much sui generis in the genre called “adult contemporary.” The album was ethically controversial, but also a masterpiece, and eventually the UN dropped Simon from its blacklist.

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Radical Sharing

by Alex Goldmark

Download this image to your phone, take it to Starbucks and scan it at the cash register: It'll get you a free coffee. It's part of a radical experiment in sharing that's teaching us something about mobile money in the process.

"It's been extremely uplifting," Jonathan Stark tells GOOD. About one month ago, Stark posted the barcode image for his personal Starbucks card online, for anyone to use. Surprisingly, it still has money on it.

Stark was researching broadcast mobile currency—how to transfer money or pay for goods with your phone. He wondered if he could share his Starbucks account just by sharing the image. "I thought, 'that's crazy that I can just show this online and everyone can use it.'"

On July 7th, he loaded $30 onto his card and posted the image for his friends to use. Within hours, the money turned into caffeine and prefab sandwiches. So Stark added another $50 and invited a few more friends to see if they liked paying for things with their phones, creating an informal user experience focus group.

But this time, the money didn't vanish. People started adding money as well as spending it.

And since then, it's become an experiment in anonymous collective sharing. Buying a cup of coffee on the card becomes a special act of participation, and giving back so a stranger can do the same just feels good, and certainly better than the average frappuccino. In that way, the technology Stark created is adding value to the coffee people purchase.

China's Giant Step Into Nanotech

by Tom Mackenzie

Seated inside one of China's most advanced science laboratories, two PhD students dressed from head to toe in protective white suits listen intently to Mariah Carey's pop classic Hero. It is not the song, but the millimetre-thin, transparent strip making the sound that captures their attention - a nano-speaker they hope will revolutionise where, and how, we listen to music.

"This is cutting edge," says Professor Shoushan Fan, director of the nanotechnology lab at Beijing's prestigious Tsinghua University. Without a cone, magnet or amplifier, the speaker, which looks little more than a slim film of see-through plastic, can be used to transform almost any surface into an auditorium. It is made from nanocarbon tubes which, when heated, make the air around them vibrate, producing the sound. "The speaker's bendy and flexible," says Fan. "You could stick it to the back window of your car and play music from there."

Mega investment

Fan's nano-speaker is just the tip of the iceberg in China's sweeping nanotech programme, which has the potential to transform its export-based economy and nearly every aspect of our lives, from food and clothes to medicine and the military.

Nanotechnology - the manipulation of matter on an atomic scale to develop new materials - is an industry predicted to be worth nearly £1.5tn pounds by 2012, and China is determined to corner the biggest chunk of the market.

China now produces more papers on nanotech than any other nation. Nanotech plants have sprung up in cities from Beijing in the north to Shenzhen in the south, working on products including exhaust-absorbing tarmac and carbon nanotube-coated clothes that can monitor health. Last month, researchers from Nanjing University and colleagues from New York University unveiled a two-armed nanorobot that can alter genetic code. It enables the creation of new DNA structures, and could be turned into a factory for assembling the building blocks of new materials.

"There's no end of areas in which nanotech is already being used," says Wilsdon. "It's the product of targeted investment for the development and refinement of novel nanomaterials. And the reason the Chinese focus on that area is because it's closer to the market."

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Risk On

Do the Fed, computer trading, and a few hedge funds rule the market? That might explain why it's lost its mind.

by Bethany McLean

After the madness of last week and the rollercoaster at the beginning of this week, the stock market recovered from its Aug. 10 rout to bounce 423 points on Aug. 11. It was the fourth day in a row in which the index moved by more than 400 points, which has never happened before in history. As I write this, stock prices are leveling off, but the big swings may not be over. Has the market gone mad? Actually, yes.

In theory, the stock market is supposed to reflect the prospects for the economy—the earnings potential of the stocks that make up the Dow Jones Industrial Average. But there's more than one reason to believe that what's going on now has little to do with any rational view of the future, and a lot to do with the market itself. "Dip your toes into any risk asset right now and understand that you are not entering into anything remotely resembling a normal market environment," wrote David Rosenberg, the well-respected former Merrill Lynch analyst who is now the chief economist at Canadian firm Gluskin Sheff, in his recent newsletter. "Dysfunctional is more like it."

The first factor to consider is that the huge rebound in stocks and in all sorts of risk assets from the spring of 2009 until May of this year wasn't necessarily driven by a belief that better times were coming. It was driven by a belief that investors had to buy riskier assets given the Fed's determination to hold interest rates near zero. Because investors can't get a return in "safe" assets—indeed, a small return will get chewed up by inflation—they are driven to riskier assets. As more investors pile in, everyone is driven further out along the risk curve.

This is what traders call "risk on." What they mean is that you'll be rewarded for buying risk, regardless of reality. The Fed's second round of quantitative easing ("QE2"), in which it bought $600 billion of Treasuries in order to keep interest rates low, encouraged this investment strategy. "We had a nice two-year rally in risk assets and something close to an economic recovery, but as we had warned, it was built on sticks and straw, not bricks," wrote Rosenberg. "This isn't much different than the financial engineering in the 2002-07 cycle that gave off the appearance of prosperity."

You can think of the Fed's medicine as a painkiller. It allows everyone to pretend that bad stuff isn't happening, until something shatters the illusion and the comfortable numbness abruptly gives way to panic. There's massive selling. Then the Fed reassures everyone that its toolbox isn't empty just yet—witness the big upturn on Aug. 9 after the Fed said it would likely hold rates near zero until mid-2013 (a worthless prediction if inflation surges)—and the market soars. Risk on!

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Strolling along the Seashore, 1909
Joaquin Sorolla y Bastida
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Trent Gudmundsen  - Summertime

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Peggy Crombie, Still Life With Fish
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