How health apps are promising to reshape healthcare

 - Mckinsey

Two executives from a digital diabetes-management start-up discuss the importance of a patient focus and ways innovation is shaping the industry.

In the past few years, health-companion apps that help patients manage chronic conditions such as diabetes and asthma have emerged as a fast-growing and potentially disruptive segment of the healthcare market. Companion apps also offer a way to collect vast quantities of real-world patient data that can be used as appropriate to improve treatment protocols and drug development. In this interview, two executives from mySugr, a start-up that designs apps for diabetes management—Frank Westermann, the CEO and cofounder, and Anton Kittelberger, the COO—talk with McKinsey’s Stefan Biesdorf about the promise of patient apps in reshaping healthcare.

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McKinsey: In today’s environment, apps can be created by anyone with a good idea and some programming skills. When barriers to entry are low, how do you differentiate yourself from the competition in digital diabetes solutions?

Frank Westermann: It always depends what exactly you want to do. Regulation is certainly an entry barrier for anybody who is not familiar with it. If you want to be active in the digital health space and go beyond a wellness or fitness app, you face a complex regulatory landscape that requires significant investment to be able to navigate. Also, there is already stiff competition in digital health, and it requires precise positioning and a well-defined competitive advantage if you want to develop traction with a health app.

At mySugr, we are firm believers that innovation in digital health will be driven by the patient and by patient-centric solutions. We focused on patients from the very beginning, whereas many of our competitors target physicians, hospitals, or solutions for the healthcare industry. Our patient focus is rooted in our history and makeup as a company: Anton and I, as well as 30 percent of our employees, are diabetics. This allows us to work to create something that patients actually need and want to use, because we’ve also tested it ourselves.

McKinsey: You’re known for having a cool brand—the mySugr monster—as well as for being unconventional and focusing on ease of use and gamification. How did that come about?

Anton Kittelberger: When we first started, automatic transfer of glucose values into the app was difficult, and we therefore made it a priority to make data entry easy and fun for patients. That helped us differentiate ourselves. With automatic data transfer now easier, we use gamification for other purposes in our app, for example, to encourage patients to engage more with their health data to enable them to better manage their condition.

Frank Westermann: Gamification isn’t an end in itself; it always serves a purpose. Diabetes is a serious disease, and we aren’t seeking to trivialize it.

McKinsey: With your large installed base, you’re collecting more and more data. How are you thinking about using this data to influence health outcomes?

Frank Westermann: We’re at the beginning of a journey. As data from connected devices increase in volume and quality and the data cloud gets denser, more opportunities are opening up for pattern recognition. For example, we can use data generated by continuous glucose monitoring to predict patients’ blood-sugar levels for three hours. That has a big impact and allows patients to be better equipped to manage their disease. We’re also starting to use this data to feed information to our coaches.

McKinsey: Can you measure the impact of your app?

Frank Westermann: Our user data shows that the more the app is used, the better the patient outcome. We can also see which features drive use of the app. We’re looking to solidify our outcomes information through a clinical trial focused on two parameters: HbA1c value (glycated hemoglobin) and timing range. We’re looking at how patients’ use of the app is related to the lowering of the HbA1c value and how to get them to stay in the 6.5 to 7.0 percent range for longer to quantify the outcomes. Higher HbA1c levels are associated with significantly higher hospitalization costs in diabetic patients.

McKinsey: How is your business model evolving? You started as a free app, but where are you now?

Anton Kittelberger: Our business model has evolved. We focused on our B2C model to grow our user base, with a free basic version and a subscription-based pro version. The uptake of the subscription version helped us demonstrate value and made us more attractive to our B2B partners. On top of that, we’ve built a solid business with diagnostics specialists, to integrate their devices, and with pharma companies as a channel for educating patients and launching campaigns. We’ve also made ourselves more attractive to payors by showing that patients’ use of our app is associated with better control and fewer hospitalizations.

McKinsey: Are you planning to work actively with other healthcare stakeholders?

Frank Westermann: Yes, absolutely. In the United States, for instance, we’ve recently launched a coaching product that links you to a certified diabetes educator who has full access to your data and can give you advice at any time. We’re also looking to form a partnership with German payors to roll out a program for diabetes educators.

McKinsey: Every industry is experiencing a wave of digitization. What do you think will separate the winners from the losers in health tech?

Anton Kittelberger: You need to stay close to the patient and continually improve their experience. I see parallels between healthcare and telecoms. In the telecoms industry, the infrastructure providers eventually lost out to the handset and app companies that had direct relationships with end users. In healthcare, the companies that don’t have direct contact with patients may become more like those commodity infrastructure providers.

In healthcare, physicians have traditionally been king; they had the contact with patients, so you focused your sales and communication efforts around them. With digital health, the physicians are losing some of their relevance as the patient takes more control and becomes more important as an informed decision maker.

Frank Westermann: But we don’t see ourselves as disintermediating the physician. In fact, our technology lowers the barriers between the patient and physician. Just getting to see a doctor can be a complex and time-consuming task. Our vision is to have technology enable more touchpoints with a physician to improve well-being.

McKinsey: So could your app help free up physicians to focus on more serious cases, with a thinner support model for well-managed patients?

Frank Westermann: In some ways, the model we foresee is one that is more intensive, with multiple immediate touchpoints with skilled healthcare professionals such as diabetes educators. We see huge value in that for patients.

Anton Kittelberger: I don’t think we are disrupting the physician’s business model. What will change is how pharma companies and diagnostic players go to market: not just via a physician but also via mySugr directly to patients. But that doesn’t mean excluding the physician.

McKinsey: Let’s look at how big pharma does digital. Why don’t we see more success stories?

Frank Westermann: Pharma traditionally works on 20-year time frames, driven by the patent cycle, whereas we think about renewing our technology every year. Big companies often suffer from inertia, mind-set and skills gaps, and a cultural disconnect; it’s hard to switch thousands of employees from a physician focus to a patient focus in a short period of time. Some companies manage to externalize digitization by creating a separate unit or buying a start-up, but that isn’t easy; moving to a digital business model is a major shift for any large organization. Even if individual thought leaders see the opportunities, they can easily get bogged down in pharma’s long decision-making cycles.

McKinsey: How will the collection of personal health data change the way pharma companies think about innovation?

Anton Kittelberger: I can see it influencing drug development, especially the validation of new compounds. Instead of creating a controlled environment in a clinic, we can use a health app like mySugr to gather large quantities of longitudinal patient data in the real world, which could speed up clinical development and improve quality.

McKinsey: What about data privacy? Are existing laws relevant in a digital world, or are they in fact holding back innovation?

Frank Westermann: How healthcare data is used is very important, and it’s the role of governments to regulate it, though most are moving too slowly. Large corporations push the boundaries of data privacy in healthcare much more than small players like us. I don’t think sensible regulation would hinder innovation, and in fact I’d wish for more conversation with regulators on data privacy, especially in Europe. In the United States, the Food and Drug Administration is taking a more progressive stance and is much more willing to discuss healthcare data and its uses.

As a patient myself, I do believe apps need to be regulated to protect patients against misuse or excessive sharing of their data. But the sensible use of data should be allowed so as to improve treatment guidelines and healthcare as a whole.

McKinsey: Are privacy or security concerns a barrier to adoption, especially for older patients?

Frank Westermann: It’s our responsibility to protect patients as far as we can. We put processes in place to protect our app and employ hackers to test the security of our system. We focus not so much on educating patients as on making the app intuitive and creating the best possible user experience. There’s no reason why older patients can’t use it, especially as they get more comfortable with using smartphones and apps in general.

McKinsey: What about your long-term vision? Are you considering expanding into other therapeutic areas?

Frank Westermann: We have no plans to expand to other disease areas. We live and breathe diabetes, and that gives us our competitive edge. Our long-term plan is to become a digital diabetes clinic: a full-service platform that makes life easier for people with diabetes. We’ve made a start by building a diabetes-educator program, and we also want to bring in physicians. We see our role as being an enabler in any context where the patient doesn’t actually need to be present in the physician’s office.

http://www.mckinsey.com/industries/pharmaceuticals-and-medical-products/our-insights/how-health-apps-are-promising-to-reshape-healthcare?cid=other-eml-alt-mip-mck-oth-1702

12 Habits of Genuine People

- Travis Bradberry, Forbes   

MAY 10, 2016 @ 08:17 AM 

There’s an enormous amount of research suggesting that emotional intelligence (EQ) is critical to your performance at work. TalentSmart has tested the EQ of more than a million people and found that it explains 58% of success in all types of jobs.

People with high EQs make $29,000 more annually than people with low EQs. Ninety percent of top performers have high EQs, and a single-point increase in your EQ adds $1,300 to your salary. I could go on and on.

Suffice it to say, emotional intelligence is a powerful way to focus your energy in one direction with tremendous results.

But there’s a catch. Emotional intelligence won’t do a thing for you if you aren’t genuine.

A recent study from the Foster School of Business at the University of Washington found that people don’t accept demonstrations of emotional intelligence at face value. They’re too skeptical for that. They don’t just want to see signs of emotional intelligence. They want to know that it’s genuine—that your emotions are authentic.

According to lead researcher Christina Fong, when it comes to your coworkers,

“They are not just mindless automatons. They think about the emotions they see and care whether they are sincere or manipulative.”

The same study found that sincere leaders are far more effective at motivating people because they inspire trust and admiration through their actions, not just their words. Many leaders say that authenticity is important to them, but genuine leaders walk their talk every day.

It’s not enough to just go through the motions, trying to demonstrate qualities that are associated with emotional intelligence. You have to be genuine.

You can do a gut check to find out how genuine you are by comparing your own behavior to that of people who are highly genuine. Consider the hallmarks of genuine people and see how you stack up.

“Authenticity requires a certain measure of vulnerability, transparency, and integrity.”

–Janet Louise Stephenson

1. Genuine people don’t try to make people like them. Genuine people are who they are. They know that some people will like them, and some won’t. And they’re OK with that. It’s not that they don’t care whether or not other people will like them but simply that they’re not going to let that get in the way of doing the right thing. They’re willing to make unpopular decisions and to take unpopular positions if that’s what needs to be done.

Since genuine people aren’t desperate for attention, they don’t try to show off. They know that when they speak in a friendly, confident, and concise manner, people are much more attentive to and interested in what they have to say than if they try to show that they’re important. People catch on to your attitude quickly and are more attracted to the right attitude than what or how many people you know.

2. They don’t pass judgment. Genuine people are open-minded, which makes them approachable and interesting to others. No one wants to have a conversation with someone who has already formed an opinion and is not willing to listen.

Having an open mind is crucial in the workplace, as approachability means access to new ideas and help. To eliminate preconceived notions and judgment, you need to see the world through other people’s eyes. This doesn’t require you to believe what they believe or condone their behavior; it simply means you quit passing judgment long enough to truly understand what makes them tick. Only then can you let them be who they are.

3. They forge their own paths. Genuine people don’t derive their sense of pleasure and satisfaction from the opinions of others. This frees them up to follow their own internal compasses. They know who they are and don’t pretend to be anything else. Their direction comes from within, from their own principles and values. They do what they believe to be the right thing, and they’re not swayed by the fact that somebody might not like it.

4. They are generous. We’ve all worked with people who constantly hold something back, whether it’s knowledge or resources. They act as if they’re afraid you’ll outshine them if they give you access to everything you need to do your job. Genuine people are unfailingly generous with whom they know, what they know, and the resources they have access to. They want you to do well more than anything else because they’re team players and they’re confident enough to never worry that your success might make them look bad. In fact, they believe that your success is their success.

5. They treat everyone with respect.Whether interacting with their biggest clients or servers taking their drink orders, genuine people are unfailingly polite and respectful. They understand that no matter how nice they are to the people they have lunch with, it’s all for naught if those people witnesses them behaving badly toward others. Genuine people treat everyone with respect because they believe they’re no better than anyone else.

6. They aren’t motivated by material things. Genuine people don’t need shiny, fancy stuff in order to feel good. It’s not that they think it’s wrong to go out and buy the latest and greatest items to show off their status; they just don’t need to do this to be happy. Their happiness comes from within, as well as from the simpler pleasures—such as friends, family, and a sense of purpose—that make life rich.

7. They are trustworthy. People gravitate toward those who are genuine because they know they can trust them. It is difficult to like someone when you don’t know who they really are and how they really feel. Genuine people mean what they say, and if they make a commitment, they keep it. You’ll never hear a truly genuine person say, “Oh, I just said that to make the meeting end faster.” You know that if they say something, it’s because they believe it to be true.

8. They are thick-skinned. Genuine people have a strong enough sense of self that they don’t go around seeing offense that isn’t there. If somebody criticizes one of their ideas, they don’t treat this as a personal attack. There’s no need for them to jump to conclusions, feel insulted, and start plotting their revenge. They’re able to objectively evaluate negative and constructive feedback, accept what works, put it into practice, and leave the rest of it behind without developing hard feelings.

9. They put away their phones. Nothing turns someone off to you like a mid-conversation text message or even a quick glance at your phone. When genuine people commit to a conversation, they focus all of their energy on the conversation. You will find that conversations are more enjoyable and effective when you immerse yourself in them. When you robotically approach people with small talk and are tethered to your phone, this puts their brains on autopilot and prevents them from having any real affinity for you. Genuine people create connection and find depth even in short, everyday conversations. Their genuine interest in other people makes it easy for them to ask good questions and relate what they’re told to other important facets of the speaker’s life.

10. They aren’t driven by ego. Genuine people don’t make decisions based on their egos because they don’t need the admiration of others in order to feel good about themselves. Likewise, they don’t seek the limelight or try to take credit for other people’s accomplishments. They simply do what needs to be done without saying, “Hey, look at me!”

11. They aren’t hypocrites. Genuine people practice what they preach. They don’t tell you to do one thing and then do the opposite themselves. That’s largely due to their self-awareness. Many hypocrites don’t even recognize their mistakes. They’re blind to their own weaknesses. Genuine people, on the other hand, fix their own problems first.

12. They don’t brag. We’ve all worked with people who can’t stop talking about themselves and their accomplishments. Have you ever wondered why? They boast and brag because they’re insecure and worried that if they don’t point out their accomplishments, no one will notice. Genuine people don’t need to brag. They’re confident in their accomplishments, but they also realize that when you truly do something that matters, it stands on its own merits, regardless of how many people notice or appreciate it.

Bringing It All Together

Genuine people know who they are. They are confident enough to be comfortable in their own skin. They are firmly grounded in reality, and they’re truly present in each moment because they’re not trying to figure out someone else’s agenda or worrying about their own.

http://www.forbes.com/sites/travisbradberry/2016/05/10/12-habits-of-genuine-people/

What CEOs are reading

Dominic Barton, Managing Director, McKinsey

1.           The Black Prince of Florence: The Spectacular Life and Treacherous World of Alessandro de’ Medici — Catherine Fletcher (Bodley Head, 2016; nonfiction)

2.           The European Identity: Historical and Cultural Realities We Cannot Deny — Stephen Green (Haus Publishing, 2016; nonfiction)

3.           China’s Mobile Economy: Opportunities in the Largest and Fastest Information Consumption Boom — Winston Ma (John Wiley & Sons, 2016; nonfiction)

4.           The Seventh Sense: Power, Fortune, and Survival in the Age of Networks — Joshua Cooper Ramo (Little, Brown and Company, 2016; nonfiction)

Carl Bass, CEO, Autodesk

1.           Emerald Mile: The Epic Story of the Fastest Ride in History Through the Heart of the Grand Canyon—Kevin Fedarko (Scribner, 2014; nonfiction)

2.           Ordinary Grace—William Kent Krueger (Atria Books, 2014; fiction)

3.           Out Stealing Horses: A Novel—Per Petterson (Picador, 2008; fiction)

4.           Fundamentals of Press Brake Tooling—Ben Rapien (Hanser, 2010; nonfiction)

Hakeem Belo-Osagie, Chairman, Etisalat Nigeria

1.           Success and Luck: Good Fortune and the Myth of Meritocracy—Robert H. Frank (Princeton University Press, 2016; nonfiction)

2.           Shoe Dog: A Memoir by the Creator of Nike—Phil Knight (Scribner, 2016; nonfiction)

3.           History’s People: Personalities and the Past—Margaret MacMillan (House of Anansi Press, 2015; nonfiction)

4.           The Tea Party and the Remaking of Republican Conservatism—Theda Skocpol and Vanessa Williamson (Oxford University Press, 2013; nonfiction)

Jamie Dimon, CEO & President, JPMorgan Chase

1.           The Conservative Heart: How to Build a Fairer, Happier, and More Prosperous America—Arthur C. Brooks (Broadside Books, 2015; nonfiction)

2.           Ronald Reagan—Jacob Weisberg (Times Books, 2016; nonfiction)

Reid Hoffman, Executive Chairman, LinkedIn

1.           The Inner Lives of Markets: How People Shape Them—And They Shape Us—Ray Fisman and Tim Sullivan (PublicAffairs, 2016; nonfiction)

2.           More Human: Designing a World Where People Come First—Steve Hilton with Jason and Scott Bade (WH Allen, 2015; nonfiction)

3.           The True Believer: Thoughts on the Nature of Mass Movements—Eric Hoffer (HarperCollins Publishers, 2010; nonfiction)

4.           This Brave New World: India, China and the United States—Anja Manuel (Simon & Schuster, 2016; nonfiction)

5.           The Gene: An Intimate History—Siddhartha Mukherjee (Scribner, 2016; nonfiction)

6.           The Seventh Sense: Power, Fortune, and Survival in the Age of Networks—Joshua Cooper Ramo (Little, Brown & Company, 2016; nonfiction)

Andrew N. Liveris, Chairman, Dow

1.           The Intelligent Investor: The Definitive Book on Value Investing—Benjamin Graham (Harper Business, 2006; nonfiction)

2.           The First Clash: The Miraculous Greek Victory at Marathon and Its Impact on Western Civilization—James Lacey (Bantam, 2013; nonfiction)

3.           Australia’s Second Chance—George Megalogenis (Penguin Books Australia, 2015; nonfiction)

Carlo Messina, CEO & managing Director, Intesa Sanpaolo

1.           When Breath Becomes Air—Paul Kalanithi (Random House, 2016; nonfiction)

Phuthuma Nhleko, CEO & Executive Chairman, Mobile Telephone Networks

2.           The Life of the Mind—Hannah Arendt (Mariner Books, 1981; nonfiction)

3.           The End of Alchemy: Money, Banking, and the Future of the Global Economy—Mervyn King (W.W. Norton & Company, 2016; nonfiction)

Chuck Robbins, CEO, Cisco

1.           Tattoos on the Heart: The Power of Boundless Compassion—Gregory Boyle (Free Press, 2011; nonfiction)

2.           Five Presidents: My Extraordinary Journey with Eisenhower, Kennedy, Johnson, Nixon, and Ford—Clint Hill and Lisa McCubbin (Gallery Books, 2016; nonfiction)

3.           The Seventh Sense: Power, Fortune, and Survival in the Age of Networks—Joshua Cooper Ramo (Little, Brown and Company, 2016; nonfiction)

Roberto Setubal, CEO, Itaú Unibanco

1.           The Man Who Loved Dogs: A Novel—Leonardo Padura (Farrar, Straus and Giroux, 2015; fiction)

2.           Fault Lines: How Hidden Fractures Still Threaten the World Economy—Raghuram G. Rajan (Princeton University Press, 2011; nonfiction)

3.           The Spinoza Problem: A Novel—Irvin D. Yalom (Basic Books, 2013; fiction)

Risto Siilasmaa, Chairman, Nokia

1.           Superintelligence: Paths, Dangers, Strategies—Nick Bostrom (Oxford University Press, 2014; nonfiction)

2.           Who Gets What—and Why: The New Economics of Matchmaking and Market Design—Alvin E. Roth (Eamon Dolan/Houghton Mifflin Harcourt, 2015; nonfiction)

3.           Cryptonomicon—Neal Stephenson (Avon Books, 2002; fiction)

4.           Global Energy Interconnection—Zhenya Liu (Academic Press, 2015; nonfiction)

5.           花木兰—the Chinese folk tale of Mulan (fiction, in Mandarin)

Wendell P. Weeks, Chairman, Corning

1.           The Seventh Sense: Power, Fortune, and Survival in the Age of Networks—Joshua Cooper Ramo (Little, Brown and Company, 2016; nonfiction)

2.           The Gilead trilogy, comprising Gilead, 2006; Home, 2009; and Lila, 2015—Marilynne Robinson (Picador; fiction)

3.            Search Inside Yourself: The Unexpected Path to Achieving Success, Happiness (and World Peace)—Chade-Meng Tan (HarperOne, 2014; nonfiction)

http://www.mckinsey.com/global-themes/leadership/what-ceos-are-reading?cid=other-eml-alt-mip-mck-oth-1607

My First Pick:
When Breath Becomes Air—Paul Kalanithi &
 The Seventh Sense: Power, Fortune, and Survival in the Age of Networks—Joshua Cooper Ramo

The party winds down

Across the world, politically connected tycoons are feeling the squeeze    - Economist

May 7th 2016 | From the print edition

·         

TWO YEARS ago The Economist constructed an index of crony capitalism. It was designed to test whether the world was experiencing a new era of “robber barons”—a global re-run of America’s gilded age in the late 19th century. Depressingly, the exercise suggested that since globalisation had taken off in the 1990s, there had been a surge in billionaire wealth in industries that often involve cosy relations with the government, such as casinos, oil and construction. Over two decades, crony fortunes had leapt relative to global GDP and as a share of total billionaire wealth.

It may seem that this new golden era of crony capitalism is coming to a shabby end. In London Vijay Mallya, a ponytailed Indian tycoon, is fighting deportation back to India as the authorities there rake over his collapsed empire. Last year in São Paulo, executives at Odebrecht, Brazil’s largest construction firm, were arrested and flown to a court in Curitiba, a southern Brazilian city, that is investigating corrupt deals with Petrobras, the state-controlled oil firm. The scandal, which involves politicians from several parties, including the ruling Workers’ Party, is adding to pressure on Brazil’s president, Dilma Rousseff, who is facing impeachment on unrelated charges.

A Malaysian investment fund, 1MDB, that is answerable to the prime minister, is the subject of a global fraud probe. Supporters of Rodrigo Duterte, the front-runner to win the presidential election in the Philippines on May 9th, hope he will open up a feudal political system that has allowed cronyism to flourish. In China bosses of private and state-owned firms are now routinely interrogated as part of Xi Jinping’s purge of “tigers” (a purge that has left Mr Xi’s family well alone). Worldwide, tycoons’ offshore financial cartwheels have been revealed through the Panama papers.

The economic climate has been tough on cronies, too. Commodity prices have tanked, cutting the value of mines, steel mills and oilfield concessions. Emerging-market currencies and shares have fallen. Asia’s long property boom has sputtered.

The result is that our newly updated index shows a steady shrinking of crony billionaire wealth to $1.75 trillion, a fall of 16% since 2014. In rich countries, crony wealth remains steadyish, at about 1.5% of GDP. In the emerging world it has fallen to 4% of GDP, from a peak of 7% in 2008 (see chart 1). And the mix of wealth has been shifting away from crony industries and towards cleaner sectors, such as consumer goods (see chart 2).

Despite this slowdown, it is too soon to say that the era of cronyism is over—and not just because America could elect as president a billionaire whose dealings in Atlantic City’s casinos and Manhattan’s property jungle earn him the 104th spot on our individual crony ranking.

Behind the crony index is the idea that some industries are prone to “rent seeking”. This is the term economists use when the owners of an input of production—land, labour, machines, capital—extract more profit than they would get in a competitive market. Cartels, monopolies and lobbying are common ways to extract rents. Industries that are vulnerable often involve a lot of interaction with the state, or are licensed by it: for example telecoms, natural resources, real estate, construction and defence. (For a full list of the industries we include, see article.) Rent-seeking can involve corruption, but very often it is legal.

Our index builds on work by Ruchir Sharma of Morgan Stanley Investment Management and Aditi Gandhi and Michael Walton of Delhi’s Centre for Policy Research, among others. It uses data on billionaires’ fortunes from rankings by Forbes. We label each billionaire as a crony or not, based on the industry in which he is most active. We compare countries’ total crony wealth to their GDP. We show results for 22 economies: the five largest rich ones, the ten biggest emerging ones for which reliable data are available and a selection of other countries where cronyism is a problem (see chart 3). The index does not attempt to capture petty graft, for example bribes for expediting forms or avoiding traffic penalties, which is endemic in many countries.

The rich world has lots of billionaires but fewer cronies. Only 14% of billionaire wealth is from rent-heavy industries. Wall Street continues to be controversial in America but its tycoons feature more prominently in populist politicians’ stump speeches than in the billionaire rankings. We classify deposit-taking banking as a crony industry because of its implicit state guarantee, but if we lumped in hedge-fund billionaires and other financiers, too, the share of American billionaire wealth from crony industries would rise from 14% to 28%. George Soros, by far the richest man in the hedge-fund game, is worth the same as Phil Knight, a relative unknown who sells Nike training shoes. Mr Soros’s fortune is only a third as large as the technologyderived fortune of Bill Gates.

Developing economies account for 43% of global GDP but 65% of crony wealth. Of the big countries Russia still scores worst, reflecting its corruption and dependence on natural resources. Both its crony wealth and GDP have fallen in dollar terms in the past two years, reflecting the rouble’s collapse. Their ratio is not much changed since 2014. Ukraine and Malaysia continue to score badly on the index, too. In both cases cronyism has led to political instability. Try to pay a backhander to an official in Singapore and you are likely to get arrested. But the city state scores poorly because of its role as an entrepot for racier neighbours, and its property and banking clans.

Encouragingly, India seems to be cleaning up its act. In 2008 crony wealth reached 18% of GDP, putting it on a par with Russia. Today it stands at 3%, a level similar to Australia. A slump in commodity prices has obliterated the balance sheets of its Wild West mining tycoons. The government has got tough on graft, and the central bank has prodded state-owned lenders to stop giving sweetheart deals to moguls. The vast majority of its billionaire wealth is now from open industries such as pharmaceuticals, cars and consumer goods. The pin-ups of Indian capitalism are no longer the pampered scions of its business dynasties, but the hungry founders of Flipkart, an e-commerce firm.

In absolute terms China (including Hong Kong) now has the biggest concentration of crony wealth in the world, at $360 billion. President Xi’s censorious attitude to gambling has hit Macau’s gambling tycoons hard. Li Hejun, an energy mogul, has seen most of his wealth evaporate. But new billionaires in rent-rich industries have risen from obscurity, including Wang Jianlin, of Dalian Wanda, a real-estate firm, who claims he is richer than Li Ka-shing, Hong Kong’s leading business figure.

Still, once its wealth is compared with its GDP, China (including Hong Kong) comes only 11th on our ranking of countries. The Middle Kingdom illustrates the two big flaws in our methodology. We only include people who declare wealth of over a billion dollars. Plenty of poorer cronies exist and in China, the wise crony keeps his head down. And our classification of industries is inevitably crude. Dutch firms that interact with the state are probably clean, whereas in mainland China, billionaires in every industry rely on the party’s blessing. Were all billionaire wealth in China to be classified as rent-seeking, it would take the 5th spot in the ranking.

The last tycoons

A possible explanation for the mild improvement in the index is that cronyism was just a phase that the globalising world economy was going through. In 2000-10 capital sloshed from country to country, pushing up the price of assets, particularly property. China’s construction binge inflated commodity prices. In the midst of a huge boom, political and legal institutions struggled to cope. The result was that well-connected people gained favourable access to telecoms spectrum, cheap loans and land.

Now the party is over. China’s epic industrialisation was a one-off and global capital flows were partly the result of too-big-to-fail banks that have since been tamed. Optimists can also point out that cronyism has stimulated a counter-reaction from a growing middle class in the emerging world, from Brazilians banging pots and pans in the street to protest against graft to Indians electing Arvind Kejriwal, a maverick anti-corruption campaigner, to run Delhi. These public movements echo America’s backlash a century ago. The Gilded Age of the late 19th century gave way to the Progressive Era at the turn of the 20th century, when antitrust laws were passed.

Yet there is still good reason to worry about cronyism. Some countries, such as Russia, are going backwards. If global growth ever picks up commodities will recover, too—along with the rents that can be extracted from them. In countries that are cleaning up their systems, or where popular pressure for a clean-up is strong, such as Brazil, Mexico and India, reform is hard. Political parties rely on illicit funding. Courts have huge backlogs that take years to clear and state-run banks are stuck in time-warps. Across the emerging world one response to lower growth is likely to be more privatisations, whether of Saudi Arabia’s oil firm, Saudi Aramco, or India’s banks. In the 1990s botched privatisations were a key source of crony wealth.

The final reason for vigilance is technology. In our index we assume that the industry is relatively free of government involvement, and thus less susceptible to rent-seeking. But that assumption is being tested. Alphabet, the parent company of Google, has become one of the biggest lobbyists in Washington and is in constant negotiations in Europe over anti-trust rules and tax. Uber has regulatory tussles all over the world. Jack Ma, the boss of Alibaba, a Chinese e-commerce giant, is protected by the state from foreign competition, and now owes much of his wealth to his stake in Ant Financial, an affiliated payments firm worth $60 billion, whose biggest outside investors are China’s sovereign wealth and social security funds.

If technology were to be classified as a crony industry, rent-seeking wealth would be higher and rising steadily in the Western world. Whether technology evolves in this direction remains to be seen. But one thing is for sure. Cronies, like capitalism itself, will adapt.

From the print edition: International

http://www.economist.com/news/international/21698239-across-world-politically-connected-tycoons-are-feeling-squeeze-party-winds?cid1=cust/ednew/n/bl/n/2016055n/owned/n/n/nwl/n/n/n/n