Bankruptcy, Canadian-style

What happens when a Canadian homeowner walks away from their mortgage? PLUS: Instagram is maybe destroying the natural world

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Bankruptcy, Canadian-style

During the height of the 2008 financial crisis, strange tales abounded south of the border about homeowners sending “jingle mail”—as in, the sound that the envelope made when they mailed their house keys back to the bank, abandoning their underwater mortgages. The conventional wisdom is that Canada’s legal and financial system makes similar scenarios here far less likely. But not so fast, says insolvency and debt advisor Scott Terrio:

Indeed the legal risk faced by borrowers who try to walk away from their loans is so great, it’s been frequently held up as an argument for why Canada won’t see anything like a U.S.-style housing crash and its repercussions for the economy. (Never mind that a 2010 study by the Federal Reserve Bank of Richmond found that several states hit hardest by the U.S. housing crash—such as Florida, Nevada, Illinois and Michigan—had some element of recourse for lenders.) That’s certainly the position now widely held by Canadians, as well as people who invest in Canada, such as big international institutions, mutual funds, sovereign funds, hedge funds. Only it’s not that straightforward.

Link: Maclean’s

Does Canada want Google’s city of the future?

Google is famously unafraid of “moonshots.” It’s one of the reasons the company restructured as Alphabet, so its cashflow-generating dynamo, the search advertising business, could be protected from its more outlandish, money-losing projects. One of those long-term bets is Sidewalk Labs, an incubator for bold and possibly brilliant ideas for how to Google-ize cities, and Toronto is its first target. Alphabet has pledged to spend $64 million just on its application process to build its city-of-the-future on a 12-acre waterfront site. The ideas that Sidewalk Labs has put forth are certainly intriguing—but Spacing columnist John Lorinc warns Canada’s largest city against letting a huge tract of prime land become the site of the urban-infrastructure equivalent of a VHS-or-Beta war:

Everyone’s all giddy about tech and innovation these days, but none of us should forget that much of what’s being proposed for this space is highly experimental and may not, in the long run, become the best solution. Pilot projects are all fine and well, but [Waterfront Toronto], in the public interest, has to make sure that it’s not locking in to a half-developed technological solution advanced by one particular company at one particular moment in time.

Link: Spacing

Instagram’s environmental footprint

Photo-based mobile-first social network Instagram is making its presence felt in all kinds of industries, from fashion to food to fitness. But one of its biggest effects is on tourism: since the service allows people to browse photos by geographic location, and popular accounts can reach millions of users, some of the world’s most photogenic spots—which also happen to be some of its most ecologically fragile—are under strain:

Five years ago, Horseshoe Bend saw only a thousand visitors in a year. But this year, over 4,000 people a day have come to see the bend, take selfies at the rim, and dangle their feet over the exposed edge. All this traffic has put a lot of strain on the attraction, or at least its parking lot. So on November 6, construction began on new parking amenities and a platform at the canyon’s edge complete with railing and signs to safely handle all the new visitors. Once complete, the bend will be a perfect tourist attraction with great parking, water, and shade. But the wild beauty that brought so many here in the first place will be gone. Social media gets blamed for everything — but this time, it really is Instagram’s fault.

Link: The Outline

Apple and Google, best of frenemies

Apple and Google control the two dominant mobile operating platforms: iOS and Android, respectively. They seem like natural rivals, but as Ben Thompson points out, the two companies have vastly different business models, which makes the situation more complicated—and less overtly competitive—than it might at first seem:

The presumption is that the usage of Technology B necessitates no longer using Technology A; it follows, then, that once Technology B becomes more important, Technology A is doomed. […] There’s [an] error, though, that flows from this presumption of zero-summedness: it ignores the near-term business imperatives of the various parties. Google is the best example: were the company to restrict its services to its own smartphone platform the company would be financially decimated. The most attractive customers to Google’s advertisers are on the iPhone — just look at how much Google is willing to pay to acquire them — and while Google could in theory convince them to switch by keeping its superior services exclusive, in reality such an approach is untenable. In other words, Google is heavily incentivized to preserve the iPhone as a competitive platform in terms of Google’s own services; granted, Android is still better in terms of easy access and defaults, but the advantage is far smaller than it could be.

Link: Stratechery

WATCH: The mathematics and psychology of auctions

An auction is a very old business innovation—researchers can say with confidence that ancient Mesopotamians were engaging in them—but they are equally prevalent today. In fact, millions of auctions are held every second by online ad networks, where automated systems bid in real-time for the chance to advertise to web surfers. On the surface, an auction seems like a fairly simple system, but there are different types of auctions, each with subtle mathematical differences in how they determine and extract value—and big differences in their psychological dynamics. Whether you’re buying a multi-million-dollar piece of unique artwork or a collectible lunchbox on eBay, it pays to understand the dynamics at work. In this short explainer, Microsoft chief economist Preston McAfee explains the different types of auctions and why they work the way they do.

Link: YouTube

Earnings reports today

Canadian publicly traded companies of note scheduled to report quarterly earnings today:

Pure Industrial REIT (AAR.UN), Alio Gold (ALO), Birchcliff Energy (BIR), Bonterra Energy (BNE), B2Gold (BTO), Boyd Group Income Fund (BYD.UN), CCL INdustries (CCL.B), Calian Group (CGY), Chorus Aviation (CHR), Chinook Energy (CKE), Carmanah Technologies (CMH), Crombie REIT (CRR.UN), Delphi Energy (DEE), Dream Global REIT (DRG.UN), Encana (ECA), Exchange Income (EIF), Essential Energy Services (ESN), First Capital Realty (FCR), GDI Integrated Facility Services (GDI), Gibson Energy (GEI), Gear Energy (GXE), Industrial Alliance Insurance and Financial Services (IAG), Intact Financial (IFC), Kinross Gold (K), Manulife Financial (MFC), New Flyer Industries (NFI), Northland Power (NPI), Pan America Silver (PAAS), Premium Brands Holdings (PBH), Pine Cliff Energy (PNE), Painted Pony Energy (PONY), Surge Energy (SGY), Source Energy Services (SHL.E), Savaria (SIS), Sun Life Financial (SLF), Semafo (SMF), Spartan Energy (SPE), Slate Retail REIT (SRT.U), SmartCentres REIT (SRU.UN), STEP Energy Services (STE.P), Trinidad Drilling (TDG), Timbercreek Financial (TF), WPT Industrial REIT (WIR.U), Westport Fuel Systems (WPRT)

Thanks for reading! Have a truly excellent day.