Bulletin 4/09 'Structure' · bulletin 4/09 Credit Suisse Structure Chaos Theory > Photos: Scott...

The Credit Suisse Magazine since 1��5 Issue 4 Nov./Dec. 200�International Edition

StructureUnderground Two IT Experts Puzzle Over the Best Plan

Chaos Theory Small Causes With a Big Effect

Zurich Film Festival Big Screen, Big Names, Big Time

Child’s Dream Offering Children a Better Future

Swiss Economy The Winners and Losers in the Crisis

Ben van Berkel Interview With the Star Architect

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Editorial 3

I like the subway. I like its typically stale odor, and the droning and rattling of the subway cars as they whoosh out of the tunnel shaft and into the station. I like reveling in idleness as nothing but dark tunnel walls whizz past. And, of course, I like the subway because it takes me to my destination in notoriously congested cities like London, Paris and Berlin faster and more reliably than any taxi.

I’m particularly fond of the subway in London – the “ tube,” as the locals call it – having had the good fortune to have spent some time in the British capital many years ago. In my free time, the tube took me to all corners of London’s under-ground on my visits to the city’s numerous sights. The map of the tube routes, which portrays the various city sectors along the subway lines, became my most important navigational tool.

Even without the map, I soon knew that the “District” and “Northern Line” led from my stroll in Kew Gardens to a concert in Camden Town. But the various tube stations were always safe landmarks in my inner navigation system. Their escalators offered a welcome respite from the hectic streets to a stream-lined system consisting of but a few different-colored lines.

Sooner or later, though, I noticed that especially in downtown London, many places were much nearer than the subway map would have me believe. Covent Garden is just a stone’s throw from the British Museum on foot, for example, but by subway the route entails an inconvenient change of lines. From that day onward, I began to explore London from atop the ground rather than under it, and to put the individual geographical puzzle pieces of my memory into place. In the process, I created a new, distortion-free map of the city in my mind.

Which brings us to the problem outlined in this issue’s title story: A subway map cannot be based on an accurately scaled miniature version of reality. It requires a minimal structure and distortion of actual distances by compressing or stretching them as necessary. Incidentally, it is interesting to note that for the sake of easier orientation, the London Underground transport authority issued a new map in September without the River Thames, essentially eliminat-ing the last remaining reference to ground level features. The outrage at this measure was so severe that the city’s mayor, Boris Johnson, personally ordered its reversal, putting the Thames back on the subway map, and so gaining a small victory over the power of structure.Daniel Huber, bulletin Editor-in-Chief

Some think art.

We think commitment.

Thinking New Perspectives.

Credit Suisse provides long-term support to selected cultural institutions. Such as the Kunsthaus Zürich, the Kunstmuseum Bern, the Kunstmuseum Winterthur, the Museo d’Arte Lugano, and the Fondation Pierre Gianadda in Martigny, as well as the Singapore Art Museum and the National Gallery in London.www.credit-suisse.com/sponsorship

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Contents 5

Structure Two IT experts from Germany have spent years working on a computer program that defi nes the best structure for the visual display of subway plans.

6_ Chaos Theory Why the smallest of causes can have an enormous effect on the weather or a game of billiards.

10_ Underground Two IT specialists are working on a program to make transportation maps more compre-hensible.

15_ Picture Gallery Photographer Nadja Tempest has captured situations in which structure plays a decisive role.

22_ Key to the World How the structures of the brain and language are connected.

26_ Revealing Living Spaces A psychologist from Texas draws conclusions from the way people live.

28_ Structural Change Where is the fi nancial industry heading after the crisis? An assessment by Giles Keating.

Credit Suisse

31 _ News in Brief 65 branches now renovated to be client-friendly and environmentally sound

34 _ Georges Seurat The Kunsthaus Zürich shows the Neo-Impressionist in his best light

36 _ Zurich Film Festival The festival promoting young talent has become a fi rm fi xture

37 _ Swiss Venture Club Establishment of a foundation to promote SME entrepreneurs

38 _ Cantonal Ranking Which Swiss cantons are the most attractive economically ?

39 _ New York Philharmonic Major European tour and a new second home in London

40 _ Top Marks The Outbound Sales unit of the Contact Center gains certifi cation

41 _ Art Unit Supporting young Swiss artists by purchasing pictures

42 _ Young Singers Project Highly talented opera singers receive fi netuning

45 _ Developing Young Talent Two very promis-ing artists honored at the Lucerne Festival

46 _ Child’s Dream Building schools and improv-ing health care infrastructure in Thailand

49 _ News in Brief Habitat for Humanity: tackling the housing shortage together

Economy

50 _ Mexico In the economic shadow of its powerful neighbor

54 _ Data Storage Media Moore’s Law still valid thanks to nanotechnology

56 _ A World Changed Human psychology has fundamentally altered the fi nancial landscape

58 _ Brands National brands from emerging markets conquer the global market

Leader

62 _ Ben van Berkel The star architect gives his views on the pros and cons of digital design

Service

41 _ Masthead

61 _ Good to Know/Book Reviews

10

The Forest Stewardship Council (FSC) sets the standard for environmentally and socially responsible forest management. Swiss paper (Z offset, with 30 % FSC component), from European pulp, produced by Ziegler Papier AG, Grellingen ( ISO 14001-certifi ed). Your link to our know-how: www.credit-suisse.com/bulletin

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bulletin 4/09 Credit Suisse

� Structure Chaos Theory

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When Chaos ReignsWeather forecasts, games of billiards, planetary orbits: In many systems, the most minute of causes can have im-mense repercussions. According to mathematician Benoît Mandelbrot, the same applies to the financial markets.

Text: Mathias Plüss Chaos theory ? Sounds rather like a contradiction in itself. “When-ever we try to understand something, we are looking for structure,” wrote the American Linus Pauling (1901–1994), who won the No-bel Prize for both Chemistry and Peace. “The whole of science is based on this quest.” But in that case, how do we go about adopting a scientific approach to describing chaos – a subject that is by definition characterized by the absence of any order ?

It was probably precisely this apparent con-tradiction that contributed to making chaos theory popular in the 1980s. It appeared that not everything was precise in the mathemat-ical world after all, and its practitioners had to deal with disorder too. This false associa-tion is the reason why most scientists nowa-days avoid the term “chaos theory” and prefer to talk of the “theory of dynamic systems.” Even so, the word chaos is quite fitting, as at first glance many systems appear to be in the throes of wild disorder. But it is none-theless possible to identify underlying rules and structures that are at times actually fair-ly simple. Chaos theory has done away with the old conviction that simple formulas must

always produce simple patterns and that similar causes must always have similar effects. And this is what lies at the heart of the theory: However similar two slightly different sets of initial conditions might be, in a cha-otic system they may lead to totally different developments.

Minuscule Cause, Enormous Effect

The father of chaos theory is considered to be the American meteorologist Edward Lorenz (1917–2008), who was a pioneer of computer-based weather forecasting. As early as 1961, Lorenz was feeding data into his computer relating to temperature, wind and thermal flows, with a view to obtaining future weather simulations. One day he re-ran his most recently executed simulation to ensure that the machine was calculating accurately. However, to shorten the period of simulation reproduction, instead of enter-ing the previously used initial data he used the interim results that he had printed out. Essentially, that should have made no differ-ence. But when Lorenz saw the result, he could hardly believe his eyes – in the repeat-ed simulation, the weather progressed in line

with the original calculation only for a short period, before deviating from it wildly and leading to a completely different result.

What had happened? The crux lay in the interim results. Lorenz had printed out only the first three digits after the decimal point – including the number 0.506. He then typed in this figure again for a second calculation. Internally, however, the computer was using six figures to calculate, in this particular case 0.506127. The difference was less than 0.2 thousandths, but the result was a completely different weather forecast within a few days. Minuscule cause, enormous effect. In a title for a later speech, Lorenz summarized his findings in the following question: “Can the flap of a butterfly’s wings in Brazil set off a tornado in Texas?” And so came about the famous butterfly effect.

We should be in no doubt about one thing, however: Chaos does not mean that anything goes. One of the myths of chaos theory is that the butterfly effect can render any fore-cast null and void. In reality, predictions for a certain period of time can clearly hold. Bil-lions of butterflies beat their wings every day without triggering a hurricane or indeed even a tangible breeze. Chaos theory simply states that at that precise moment when all other factors are in alignment – in other words when a system is right at the tipping point – a force as minuscule as the beating of a but-terfly’s wings can make a difference. When combined with a myriad of other influential factors, the tiniest breath can lead to a storm over the days and weeks that follow.

The Third Officer’s Crucial “Nyet”

That the tiniest thing can sometimes decide the future course of events is not a discovery exclusive to chaos theory. As the philosopher Gottfried Wilhelm Leibniz (1646–1716) once wrote, “I like to say that a fly could change an entire nation if only it were to buzz around a powerful king’s nose just as he was sitting deep in council.” The late Swiss singer Mani Matter penned a song about a man lighting a match that sparked off a world war. And there’s no doubt such situations occur. Take October 24, 1962: At the height of the Cuban missile crisis, an American warship approach-es a Soviet atomic submarine. Two of the Russian officers on board are in favor of sink-ing the enemy vessel. But this course of ac-tion can only be taken if the third officer

Credit Suisse bulletin 4/09

Chaos Theory Structure �

The “apple man” is the best-known figure in modern mathematics. It is the consistent implementation of a unique mathe-matical mapping rule.

Graphic illustration of a heartbeat.

The minuscule varia-tion of parameters allows the creation of structures that resemble stunning mountain land-scapes.


� Structure Chaos Theory

agrees. Officer Archipov says no, however – quite possibly preserving global peace as a result. What motivated him to make this cou-rageous decision is unclear.

The new thing about chaos theory, how-ever, is that it also allows for quantitative statements to be made about unpredictable systems. Because, while chaotic events can look utterly random, they actually aren’t – mathematicians talk of deterministic chaos, which again sounds like a contradiction. “Deter-ministic” here means that everything is deter-mined by natural laws, so theoretically every-thing is calculable. If you run a weather model twice with exactly the same initial conditions, you will receive exactly the same result twice over. The fly in the ointment, however, is that for any forecast to be obtained the initial con-ditions need to be measured and fed into a model. But every measurement can give rise to error, and given a chaotic system such errors can grow exponentially. If you want to produce a slightly better forecast, you need much more accurate initial data. This is why it will never be possible to produce a decent weather forecast four weeks ahead, even with an infinite number of measuring stations available. Because such an endeavor would require an exactitude on the part of the start values that even quantum mechanics does not allow for. As the Heisenberg uncertainty principle states, measurements of ultimate precision are essentially impossible.

Storm Lothar up to 2� Percent Visible

In practice, weather models can now simply be run several times with slightly modified initial data. The longer they run, the more the individual forecasts differ. The prediction therefore becomes a statement of probabil-ity: How many simulations indicate rain, and how many sun? After 24 hours, the individ-ual forecasts tend to be quite similar – the forecast is accurate in more than 90 percent of cases. But with every day that follows, the degree of probability falls. In 1999, the Lothar windstorm, which ravaged Switzer-land, appeared in only 28 percent of the fore-cast simulations, but that was enough for a storm warning to be issued.

Once the butterfly effect had come to light, it was then discovered almost every-where. Dripping faucets, black-market prices, mountain hare populations – all of these are subject to chaotic development. In the game

Be it the weather or the population of mountain hares: Small deviations from initial parame-ters can result in huge differences, making precise fore-casts impossible.


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of billiards too, tiny differences in start con-ditions multiply with every shot: Even if an observer approaches the table, thereby cre-ating a tiny gravitational force on the balls, the effect can be enough for another dis-tribution to result after nine shots – under otherwise identical conditions! For the same reason, it is completely impossible to predict which lottery numbers will be picked from the initial distribution of the lottery balls.

Chance or Necessity ?

There is an elegant answer to the old conun-drum of chance versus necessity: Even if the world were a deterministic place, it would still be one beyond our powers of prediction. To a certain extent this realization is a liberating one, but perhaps it is also an unnerving one. It means that even something as straightfor-ward and apparently stable as our solar sys-tem takes on a degree of unpredictability. True, forecasts are not limited to a few days as they are with the weather, but the prin-ciple remains the same. Astronomers can guarantee the stability of the solar system only for the next 40 million years. The reason for this is the fact that the planets do not just simply follow their elliptical orbits around the sun – they actually exert a pull on one an-other. These lesser forces may be very small in relative terms, but because a gravitational community is essentially chaotic once there are three bodies or more involved, certain dramatic developments over the long term cannot be ruled out – for example Mercury colliding with Earth, or Mars being hurled out of the solar system altogether.

This is one of the major findings of chaos theory: Complex patterns of behavior can emerge in relatively simple systems. This much is clear from so-called fractals, which have become the iconic face of the chaos concept. Fractals are unbelievably beautiful curves or shapes that branch out into infini-tesimally small dimensions, but which are mostly based on remarkably simple formulas. For example, behind the famous Mandelbrot set (also known as the “apple man”), prob-ably the most famous figure in modern math-ematics, lies a single mapping rule: zn + 1 = zn2 + c. This simple formula lies behind the remarkable wealth of forms that arise from this shape.

Many of the fractals created in this way look astonishingly natural, which is why com-

puter graphic artists use the convenient for-mulas of chaos theoreticians to depict moun-tain landscapes, for example. The reverse also applies: Trees, coastlines, cauliflowers and snowflakes can all be considered natural fractals. These branch out into the tiniest dimensions, and if we enlarge an isolated extract, for example a tiny cauliflower floret, we see the degree to which even this small part once again resembles the whole.

This connection to nature has no doubt also contributed to the popularity of fractal geometry. The French-Polish mathematician Benoît Mandelbrot – leading light of the chaos theory intelligentsia – argues that this is why conventional geometry is so “dry,” as it is not capable of describing shapes such as clouds, mountains or coastlines. “And yet clouds are not orbs, mountains are not cones, coastlines are not circles.” In the past, argues Mandelbrot, the scientific community sought “to view the irregularities of nature as tiny imperfections of an idealized design.” By contrast, for Mandelbrot it is precisely this element of rawness that “constitutes the essence of many natural objects.”

One criticism often laid at the door of chaos theory is that little progress has been made in this discipline after its stunning start. Mandelbrot himself cannot be reproached in this respect, however, as he transferred his fractal concept to the sphere of economics and expanded it into a highly controversial but equally fascinating theory. The rawness of nature, says Mandelbrot in his book “The (Mis)Behavior of Markets: A Fractal View of Risk, Ruin, and Reward,” is reflected in price volatility in the global economy. Many price curves and stock market prices sport fractal features just like a cauliflower: “Without the corresponding chart legend it is impossible to say if a price chart covers 18 minutes, 18 months or 18 years.” A small excerpt always replicates the curve as a whole.

Conventional economic theory has mainly treated the volatility of the financial markets as random fluctuations: Though they cannot be predicted, when price changes are exam-ined over a certain period of time, the distri-bution looks like a Gaussian bell curve. For example, this smooth type of distribution is found by looking at the height of all women in Switzerland: Most women are clustered around the mean value, and although there are a few outliers at both ends of the curve,

there are no extreme data values such as 15 centimeters or four meters.

Price Falls as Fractal Chance

Mandelbrot too talks of chance – but for him chance is a wild, jagged and once again fractal concept that does not follow the nor-mal pattern of distribution. When viewed from the conventional standpoint of random dis-tribution, a stock market crash such as that of October 19, 1987 (Black Monday) would have a probability of just one in 1,050 – in other words, it would be virtually impos-sible. In Mandelbrot’s theory, by contrast, outliers of this nature are very much part of the mix: “Extreme price fluctuations in the financial markets are the rule, and not devia-tions that can just be ignored.”

These are not just academic observations, but have repercussions for the way in which risk is evaluated. For example, the Black-Scholes formula, which remains the standard model for calculating the value of options, treats the volatility of prices just like normal random fluctuations. As such, the model fails to hold up during extreme market turbulence. “The risks of ruin in a free global market econ-omy have been grossly underestimated,” says Mandelbrot, who believes the fractal point of view offers a much better reflection of the way things are.

Mandelbrot argues that the financial world needs a risk culture similar to that of maritime engineering: “Shipbuilders are well aware that the sea is moderate for most of the time. But they also know full well that typhoons and hurricanes are facts of life. They do not build their vessels for the 95 percent of sea-faring days when the weather is favorable, but for the remaining five percent, when storms whirl like dervishes and subject their craftsmanship to the most rigorous of tests. The financiers and investors of this world are currently like seafarers who simply do not heed weather warnings.” It’s worth noting that these observations came before the out-break of the current financial crisis.

Bibliography:

Benoît B. Mandelbrot, Richard L. Hudson: “The (Mis)Behavior of Markets: A Fractal View of Risk, Ruin, and Reward” Basic Books, 2004.

Edward N. Lorenz: “ The Essence of Chaos” University of Washington Press, 1��3.


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10 Structure Underground

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Order on the UndergroundSubway maps provide a clear overview of complex t ransportation networks. So far this has been done manually, but two IT experts recently reassigned this fiddly task to the computer.

Text: Stefanie Schramm Every big-city dweller knows it (often off by heart), every commuter faces it on a daily basis, every tourist uses it to plan their city sightseeing itinerary. The subway map is an everyday tool for life in the city. These maps have a design that is intensely fascinating. “People love maps. They display a huge number of oppor-tunities: Where might I go, what connections work the best ?” says psychologist Maxwell Roberts of Britain’s University of Essex.

Maps of famous subway networks are more than just colored lines on paper, some-thing that is particularly true of the London “tube” map. “The London Underground dia-gram paints a mental picture of the city. It has become a cultural icon; it is London,” writes Mark Ovenden in his book “Transit Maps of the World.” Many artists and design-ers have drawn inspiration from the natural aesthetic of subway maps. And subway en-thusiasts have invented imaginary maps, dis-covered animals in the maze of their city sub-way lines, and rearranged the letters of sta-tion names to create new words. At first glance, creating a subway map is simplicity itself – all you need is the lines, the stations, the intersections, and you have it. But achiev-ing a sufficient degree of simplicity that al-lows the traveler to identify the optimal route

to their destination with just one look requires a great deal of highly complex work.

Simplifying Reality

If one were to simply draw the different branch lines and subway stops on a standard map of the city, as indeed was the case in the early years of the subway, transit users would rapidly lose any overview of today’s complex networks. City centers would be-come a contorted mess of stations and inter-change options, while the suburbs would have only stationless expanses for large stretches of the lines.

The art of designing a clear subway map requires a new approach to reality, one that entails simplification, magnification and compression. The question is how, and also how much? At what point does the map first become comprehensible thanks to the dis-tortion of reality ? And how much of the real structure should be retained to ensure that the plan remains decipherable?

This is more than just a tricky theoretical problem. A good subway map can also make an indirect contribution to reducing traffic congestion in the city and protecting the cli-mate. “If people find an urban transport map easy to understand, they will also use public forms of transport more often,” reckons psy-

chologist Roberts. Until recently, such plans have been designed by hand, involving con-siderable racking of brains, erasing of errors and redrafting. True, computers have now been brought into play, but only in the ca-pacity of a drawing tool. Independently cre-ating a subway map with a computer was not an option. But four years ago, German IT expert Martin Nöllenburg and his colleague Alexander Wolff at the University of Karls-ruhe began to teach their computer to under-take just this kind of Herculean task. A proto-type of the program was ready after just a few months.

Drafting a subway map is a complex form of calculation for the mathematician: If the number of stations doubles, the computer doesn’t just need twice or even four times as long to calculate a solution. It requires a much more extreme multiple.

The famous problem of the commercial traveler illustrates this: A sales representative needs to travel to a large number of towns to introduce his products in person. Which route is the shortest ? The principle is a sim-ple one, involving a straightforward compar-ison of all possible routes. In the case of four towns, whereby one must be the starting point and another the final destination, there are three variants to choose from (actually six, but the order in which the towns are cov-ered makes no difference). With eight desti-nations, however, there are suddenly 2,520 options, and with 16 stations 653,837,184,000! This is enough to make even the fastest com-puter capitulate.

Helpful Set of Rules for the Computer

For this reason, the key is to help the com-puter by setting the parameters for the task in such a way that it does not try to find the best solution, but one that is good enough. As for what solution is “good enough,” this has to be written into the program. Where subway maps are concerned, Nöllenburg and Wolff arrived at the following set of rules:

1. The lines may only be drawn horizontally, vertically or diagonally at an angle of 45 de-grees. This was the trick with which the Eng-lishman Henry Beck revolutionized plans in the 1930s (see box).

2. The topological structure of the net-work must be preserved: Every station on the network must be linked with other stations in the same order as in reality.


Underground Structure 11

More than just an object of everyday use: The map of the London Under-ground is celebrated as an icon of cult status. It is essen-tially based on a map drawn up by the Englishman Henry Beck in 1�33.


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London’s Tube Network as a Geographical Representation of RealityWhile the different underground lines in the suburbs lose the reassuring regularity of stations, the city center is a jumble of chaos.

The London Underground Network as Drawn Up by ComputerIf a subway map is to be understood, reality needs to be simplified by means of magnification and compression.


Underground Structure 13

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3. The gaps between stations along a line must have a minimum length.

4. Each line must be set a minimum dis-tance away from other lines.

In addition to these rules, a couple of less rigorous criteria also come into play, for ex-ample each subway line having the fewest number of kinks possible. As Nöllenburg ex-plains, this reduces a complex problem to a manageable one: “The computer doesn’t always have to take into account all the rules, only the most important ones.”

The approach taken by the IT experts to the subway problem was the right one. “This is the kind of practically relevant task that is rarely found in theoretical computing. And you can test the solution out by the way it looks,” observes Nöllenburg, who often has trouble when faced with the simple task of actually using a subway map. Ways of im-proving what he sees often whirr away in the back of his mind. “I commute every day be-tween Heidelberg and Karlsruhe. There are many unnecessary kinks in the line on the local S-Bahn map. It does annoy me a bit.”

Moscow’s Circular Ring Line

He particularly admires the London tube map – which is hardly surprising, as even to-day it essentially adheres to Beck’s rules. But Nöllenburg also finds the Moscow map aesthetically pleasing, although it is not as strict. “It has a circular subway line that is actually circle -shaped, rather than rectan-gular as our program would make it. I like that very much.” Just as Nöllenburg und Wolff improved their program step by step, so too does the program now work step by step to produce a beautiful map. An initial sketch can be produced in just a few seconds, but it takes the computer a few more minutes or even hours – depending on how much time the scientists allow it – to calculate a more sophisticated solution.

However, the computer cannot manage any map all on its own, and it can only design medium-sized networks. “But that provides a good starting point for graphic designers,” argues Nöllenburg. “A great deal of work would still be needed to create the right pro-duct from the underlying prototypes. So far this is not something network operators want to invest in.” If the British psychologist Rob-erts had his way, the maps would continue to be designed by hand. He is particularly

Above:The original London Underground map from 1�20 is a close approximation of geographical reality, and accordingly provides no clear overview.

Middle:In 1�33, Henry Beck simplified the map by straightening the lines, setting diagonal lines at 45 de-grees, and standard-izing the distance between neighboring stations.

Below:Psychologist Maxwell Roberts is convinced that arc-shaped line layouts make the London tube map easier to understand.


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critical of the rules that lie behind the pro-gram: “These straight lines and 45-degree diagonals are simply not suited to every sub-way network. In London the distortions are too great, and this is something people al-ready moan about.” Instead, reckons Roberts, the rules should be adjusted for each city network. “And that’s something the computer would struggle with.”

Roberts himself draws subway maps, tak-ing a whole week for the London tube net-work, for example. The result is a contoured picture with arc-shaped lines. In the psychol-ogist’s view, these are more readily com-prehensible, an opinion he has subjected to empirical testing. Using his map, test sub-jects found their way around the complex Paris Metro network 30 percent quicker than with the official map. In London’s tube network too, test subjects navigated 20 per-cent quicker.

How People View the World

Roberts has been a London Underground enthusiast from an early age. “I was totally fascinated by it as a child. All those escala-tors, tunnels, trains! There’s surely nothing more exciting you can experience as a child in London than riding on the tube.”

The University of Essex psychologist cur-rently grapples with the issue of how people understand the world and solve problems. And this is why badly drawn subway maps irritate him: “A good map should help people to understand the world. It should relieve them of a cumbersome step in the process of calculation.” By contrast, many maps ac-tually confuse the reader. “I’ve yet to clap eyes on a map that I haven’t wanted to im-prove.” His new contoured diagram of Lon-don’s tube network has already been incor-porated into a few travel guides, but London Underground itself simply doesn’t want to know, admits Roberts. “They don’t like out-siders meddling in their business.”

But perhaps it’s not bureaucracy alone that is at fault if his plan is not hitting home. In tests, even Roberts himself has had to cede that test subjects do not always prefer the simplest maps, sometimes indeed prefer-ring maps that are difficult to read. “Unfortu-nately, people will not use a map that they don’t like,” says the psychologist. And what test subjects liked most was what they knew – their old linear map with its neat angles.

“I commute every day between Heidel-berg and Karlsruhe. There are many unnecessary kinks in the line on the S-Bahn (subway) map. It does annoy me a bit,” says Martin Nöllenburg.

Four years ago, IT expert Alexander Wolff began working with Martin Nöllen-burg on a program for developing sub-way maps.

The Man Who Revolutionized the “Tube”

It was the Englishman Henry C. Beck who invented the subway map as we know it. The man who revolutionized the London Underground map and influenced transport line diagrams all over the world was unemployed at the time. A technical draftsman, Henry Beck was employed by the London Underground at various times before being once again made redundant in 1�31. But for his part, the 2�-year-old did not let go of the London Underground. He was in the habit of referring disparagingly to the confusing lines that became jumbled up in London’s city center as “vermicelli.” Then he was gripped by an exciting idea: “I looked at the old map of the underground network, and realized that it could be simplified by straightening the lines, experimenting with diagonals, and standardizing the gaps between the stations.” The result was a diagram with vertical, horizontal and diagonal lines – much clearer and easier to understand. However, it was initially too revolutionary for the managers of the London Under-ground. A year later, Beck tried again – and this time with success: His map was printed in 1�33. But Londoners didn’t just use his diagram, they came to love it. For his design and the month’s work it had taken, Beck received precisely 10.50 British pounds, or the equivalent of 1,000 euros in today’s money. But he still wasn’t offered a permanent position. Nonetheless, he became increasingly absorbed in working on the detail of his map. Today he is remembered as a great designer; in a BBC program, his diagram was selected by the British public as the second most important design icon after Concorde.


Photo Gallery Structure 15

Mankind and Structure

The life of mankind revolves around structure – from the ringing of the alarm clock that sets the pattern for our everyday life to the per-sonal environment we create in our homes, the water that comes out of the faucets, the transportation network we use to get to work, and the regulated forms of leisure that we enjoy.

Zurich-based photographer Nadja Tempest has ap-proached the issue of man-kind and structure from a visual perspective, embarking on a quest for areas in which we have created structures to make life easier, more effi-cient, more comfortable and more interesting.

Urban traffic maze

Metropolitan lights

Where the road follows the water

Freedom in familiar settings

Keeping to the right lane

Construction site at Escher-Wyss-Platz in Zurich: constant optimiza-tion of traffic flows.

View from Felsenegg, Zurich: the city awash in a sea of lights.

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Between the Furka and Grimsel passes: where both traffic and river flow in harmony.

Camping site on the Türlersee: familiar structures as feel-good factor.

Oerlikon indoor swimming pool: enjoying a swim in regulated lanes.

22 Structure Brain


Positron Emission Tomography (PET). Neural images of a healthy subject (small picture) and the victim of a stroke (large picture). The brain is shown in horizontal sec-tion. Compared to the healthy subject, the patient shows significant changes

in the blood flow and metabolism of the left hemisphere of the brain (arrow). The damage affects the speech struc-tures, which in turn leads to partial loss of speech (aphasia). (Color coding: high brain activity red/yellow, low activity blue.)


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The Key to the WorldPerhaps nothing else shatters the structure of our everyday life quite so much as the loss of our speech. If we can no longer transform our thoughts into sentences, we lack access to the external world. Some reflections on the connection between the structure of everyday life, the structure of our brains and the structure of speech.

Text: Mandana Razavi “Four, two, two!” Maria Flühler, 71 years old, repeats these numbers for the third time. She speaks slowly, clearly, underlining her words with gestures. All would be well if she were simply repeating the last digits of a telephone num-ber. But it’s not about a telephone number. Flühler is actually trying to explain she has four children, of which two have two children of their own. But her brain cannot remember how to formulate a complete and correctly structured sentence from the number combi-nation 4-2-2, no matter how hard she tries. Flühler suffers from aphasia – a language disorder caused by damage to the brain. The fateful day on which a cerebral hemorrhage robbed Maria of her speech is now 18 years in the past: She was in the process of giv-ing a lesson on Bach flowers when she noticed that there was something “very wrong” with her. She felt no kind of pain. The first question asked at the hospital was whether she had perhaps had a drop too much of wine. At this juncture of her life story, Flühler cries out excitedly “Yes, yes!”. She shakes her head, and her eyes widen. And although her animation when remem-

bering this scene is only enough to bring forth the words “Yes, yes!” it is clear how much that brusque initial diagnosis all that time ago still rankles. In a world in which a rich spectrum of rhetoric is associated with intelligence, aphasics are often erroneously considered deranged. But aphasia is no thinking disorder.

Where Does Language Lie in Our Minds?

Holding a conversation with an aphasia pa-tient is not easy. The knowledge of language may still be there, but the individual no lon-ger has any access to it. Communication is heavily impaired, and sometimes impossible. In the most serious cases the patient loses everything – grammar (rules), syntax (form and structure), semantics (logic and mean-ing) and linguistic motor skills. Even 18 years after the diagnosis of her cerebral bleed, Maria Flühler still struggles to find words, to express them, and to structure sentences. As is very common with aphasics, her stories and concerns often come across as “tele-grams”: Randomly arranged key words help the outsider to understand or at least guess what she wants to convey. The communica-

tion process is a struggle for speaker and listener alike, and yet both take the trouble to make it work – language is, after all, the key to the world.

Aphasic patients suffer from a wide range of different problems – and different combi-nations of problems – affecting their speech. Depending on which brain structures have been damaged, the individual may suffer from impairment of different sets of language skills – comprehension, speech, reading and writing. Dr. Andrea Federspiel of the Department for Psychiatric Neuropsychol-ogy at the University Clinic and Polyclinic for Psychiatry in Berne explains: “Broadly speaking, the brain is divided into two sides that are linked to one another and collabo-rate closely. It has been known for more than 100 years that the two halves of the brain fulfill different functions. In around 60 per-cent of people, the speech center – includ-ing in particular the fiber connections inside the speech center – is located in the left hemisphere of the brain. That’s why people with damage to the left side of the brain, like Maria Flühler, are frequently affected by aphasia. In around 20 percent of people, the speech center is mainly located in the left hemisphere with a small proportion on the right-hand side. In around 17 percent of peo-ple, these fiber connections are distributed evenly on both sides, and there is evidence that these people are able to process lan-guage particularly efficiently. “Which cer-tainly raises interesting questions about highly intelligent people,” muses the neuro-logical researcher.

Thanks to modern imaging procedures such as magnetic resonance tomography (MRT), the brain damage responsible for the condition of aphasia can nowadays be clearly illustrated. Reduced neuronal density (neurons being the cells in the central ner-vous system responsible for the processing of information) in a given area is a sure sign of damage to the corresponding brain struc-ture, explains Federspiel. And the reverse has also been shown in a study with American language students carried out in the Waldau Clinic: Following a language sojourn, stu-dents displayed increased neuronal density in the specific regions of the brain that are important for speech. In other words, learn-ing German demonstrably enlarged the brain structure in the students’ speech centers.

24 Structure Brain


However, Federspiel stresses that we should be cautious in our attempts to localize speech in the brain. Quite aside from the fact that every person’s brain is different, even the most modern of techniques cannot define precisely where language actually starts and where it stops in the brain: “In just a single square millimeter of brain tissue there are countless neurons. We can still only guess at the functions these fulfill.”

Prisoner of One’s Thoughts

Research into aphasia is uncovering valuable evidence that there are actually specialized structures for grammar and word search within the speech center. Whereas Maria Flühler can just about tell her life story – albeit with heavily simplified grammar and content – it takes much longer to notice that 54-year-old Kurt Kohler from Münsingen is an aphasic. “It was two whole years after my stroke before I could say a word – yet I understood everything during this period. For outsiders it is probably almost impossible to imagine how bizarre this situation was. Everybody around me thought that I was incapable of understanding anything. They talked about me without knowing that I could follow everything they were saying and that I wanted to contribute.” Kohler appears lost in thought as he utters these sentences with virtually no effort. The grammar and sentence structures are indeed perfect. He is just slightly slow in his delivery, and every so often uses filler phrases such as “how would you put it?” – but this doesn’t really stand out.

He explains that he was a successful banker up until six years ago, with a stellar career: New York, London, Singapore. Then came the stroke that left him completely speechless for two years. “A number of doc-tors believed that I wouldn’t survive, let alone be able to speak again. But after more than two years of intensive speech therapy, I reacquired my ability to speak. The break-through came when I noticed that I was once again understood by those around me,” recalls Kohler. Dr. Thomas Nyffeler, Senior Doctor in the Department for Cognitive and Restorative Neurology at the Inselspital (University Hospital) in Berne, explains the different clinical situations of Maria Flühler and Kurt Kohler: “Almost every patient has a different form of aphasia.” He compares

speech disorders to problems on the railway network. If problems occur at a major inter-change, this will have greater repercussions for rail connections than if a problem is re-ported at one small station. As Nyffeler points out, a major affliction such as a stroke can potentially nullify all the individual’s lan-guage skills (speech, comprehension, read-ing, writing).

In his opinion, the case of Kurt Kohler is both striking and extreme – for someone to experience complete loss of speech for more than two years, and then suddenly begin to talk fluently and formulate complete sen-tences is extraordinary. Indeed, in specialist circles it is generally accepted that the great-est progress in therapy is to be expected in the first two years after the brain has been damaged. Accordingly, this is the length of time health insurers in Switzerland will pay for speech therapy. As a living exception to this rule, however, Kohler has a very different opinion on the issue. “Decisions should be more flexible with respect to younger pa-tients. No one would probably ever have anticipated a result like mine.” Kohler is con-tinuing to work on his language functions

with a view to one day being once again able to read, write and add up.

“Maria Flühler’s impaired grammar, her lack of sentence structure (‘Yesterday – we – Aare Gorge – rain’), her difficulty in finding the right words and her problems of expres-sion suggest that her brain damage is locat-ed in the front left side of the brain. Although she can be understood, it’s difficult for the listener to read between the lines or pick up on states of mind like humor or irony,” ob-serves Nyffeler. When asked about what she finds most frustrating, Maria Flühler replies that she is actually quite a humorous person, so it makes her sad that no one can now understand her jokes. By contrast, she de-scribes one of her happiest moments as fol-lows: “If someone a song – I noticed – sing much better speak – loved it then!” Trans-lated, this probably means that singing words is clearly easier for Maria Flühler than saying them – a phenomenon that is often described by aphasia patients. How is that possible? Specialist Nyffeler offers us an explanation: “Unlike speech, singing requires the active participation of the right side of the brain. The damaged left hemisphere of the brain

The cause of aphasia is brain damage caused by an injury to the neurocranium, inflammation of the brain, brain tumors, neural bleed- ing or a stroke. As in the case of Kurt Kohler, the most frequent reason for a case of aphasia is a stroke. In Switzerland, 43 out of every 100,000 people fall victim to a stroke each year. bulletin had the op-portunity to visit Maria Flühler and Kurt Kohler during a vacation week organized by “aphasie suisse,” active throughout Switzerland as a specialist society to support those affected by this disorder ( www.aphasie.org).

The Empiris Foundation, a client foundation set up by Credit Suisse, supports neurological research through the annual Empiris Award for Research in Brain Diseases ( www.empiris.ch).

http://www.aphasie.org

http://www.empiris.ch


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therefore receives support in producing speech, which is why singing works better for patients.”

Radio Silence or “Damdamdam”

“We recently had a patient, a construction worker from Canton Berne, who in the first few days after his brain injury suddenly start-ed speaking High German, as he found it easier than his native dialect,” recalls Nyffeler. The fact that cases of this kind keep on oc-curring would seem to suggest that there are substructures within the speech center, such as those responsible for foreign languages. Otherwise, believes Nyffeler, one would ex-pect to find the same dysfunctions occurring in all languages.

Just as the structures of the human mind are extremely complex, so too do the clinical symptoms of brain damage vary from case to case. Some aphasia patients can still write but find that they can no longer talk. Some who were previously avid readers can no lon-ger even read the words in a children’s book. Or they are able to read, but can do so only in a nonsensical way: instead of “economy” they read “trade.” In the worst cases, days can go by before those affected even realize that their fellow human beings can no longer understand them. Particularly difficult for the afflicted and those around them is global aphasia – a condition where people are first completely speechless, and where commu-nication even after therapy is limited to recur-ring and often incomprehensible successions of sounds or syllables such as “yayaya” or “damdamdam.”

One can only imagine how difficult it must be to incorporate all your feelings, messages and needs in a supposedly nonsensical suc-cession of sounds in the hope that someone might perhaps notice small but highly reveal-ing differences in intonation. Kurt Kohler is one of the few people who know the answer to this question. With unremitting effort, in-tensive speech therapy, along with a good dose of luck, he managed to rebuild the structure within his brain, within his speech and within his everyday life. And to hear him now, the former banker, talking rather hesi-tantly, but with specialist knowledge about the current economic crisis, one comes away with the impression that it was the turbulence on the markets alone that slightly affected his speech.

Despite aphasia and paralysis down her right side, a common occurrence with patients who suffer damage to the left side of their brain, Maria Flühler is able to live an indepen-dent life.

Extreme case: Completely out of the blue, banker Kurt Kohler suffered a stroke six years ago. After two years of complete “speech-lessness,” he can now talk almost entirely normally thanks to intensive speech therapy – despite a prognosis to the contrary.


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2� Structure Environment

Show Me How You Live …The way people think and feel is not just played out inside their heads – or their hearts for that matter. It also leaves its mark on the structure of their personal environment. A psychologist from Texas studies personal surroundings with a view to analyzing what sentimen- tal souvenirs on a shelf or the way someone arranges their furniture reveals about their personality.

Text: Ute Eberle Lisa’s bathroom con-tained matching towels that were identically folded and hung the same length from the towel rail. Cindy’s college room was covered with stickers, souvenirs and upbeat quota-tions such as “Think positive!” Then there was Duncan, who had transformed his sleeping area into a cozy den, with a bed covered with soft cushions taking up virtually all the space. And in Gideon’s home the visitor would continually bump into things at every turn. For example, the second-lowest shelf housed loose change, several receipts, a role of thread, some candy, an upside-down card-board box, a bottle of Tipp-Ex, any number of vitamin capsules, a half-crumpled paper bag, a shoelace, an open packet of pens, a pile of envelopes from banks and other of-ficial sources, and random pieces of paper. “And above it all hung a single sock,” recalls Sam Gosling.

Since 1997, Gosling has been “snoop- ing” – as he himself puts it – through the apartments, offices, websites and cars of his fellow beings. Purely to satisfy his pro-fessional curiosity, of course. Among other things, the professor of psychology at the

University of Texas studies how our person-ality is reflected in the physical structures of our living environments. With this goal in mind, he has poked around fearlessly under beds in student accommodation, counted pictures on walls, examined how we arrange our files, and noted whether we have candles in the bathroom. All of which has brought him to the conclusion that the way people struc-ture their personal environment reveals much more about their values, customs and hopes than even they might think. “Most people give no thought at all to what the unruly pile of shoes under the table, the withering plant in the corner, or the rubber chicken dangling from the lamp might say about them,” writes Gosling, who recently summarized his re-search in a book entitled “Snoop: What Your Stuff Says about You.”

Autographs for Conservative Types

The psychologist carried out personality tests on the volunteers who let him poke his nose into their personal space, and asked ques-tions of their friends. One finding, for ex-ample, was that people who litter their living environment with inspiring quotations are

often prone to be anxious worriers. “These posters serve as a form of visual medicine,” observes Gosling. By contrast, those who are keen on sporting mementos, like the auto-graphs of famous athletes, often tend to have politically conservative mindsets. As for those who prefer to stay at home on Saturdays with a good book rather than going out to party, this predisposition will also be clear to those in the know – thanks to their landscape and still life paintings.

Gosling also found that extroverts prefer to surround themselves with pictures of people, while their offices were more likely to have soft rather than hard chairs – and perhaps even a bowl of sweet things. “Un-consciously they structure their layout so that it encourages people to come in and feel at home.”

However, the interpretations are not al-ways so clear-cut: A well-assorted whisky rack could mean that the owner is often look-ing for a way to relax after a taxing day’s work. Or that they like the drink to really flow on special occasions. Often it is only with the full context that the meaning becomes clear.

Important Not to Be Misled

Gosling has noticed, however, that unprac-ticed “snoopers” all too often focus on things that stand out. For example, on one occa-sion the students who assisted the pro-fessor in many of his fact-finding missions found a hashish hookah behind a shelf in what was otherwise a painstakingly tidy and dutifully ordered apartment. However, this actually belonged to an acquaintance of the occupant and was only being stored on a temporary basis, so had no value as an in-dicator of any supposed rebellious streak on the part of the occupant. “Individual things that the snooper unearths can be particu-larly problematic,” says Gosling. “They often lead you down a blind alley. And they can distract you from the bigger picture.”

Amateurs are also highly likely to misin-terpret certain environmental characteristics. For example, according to Gosling, art works or books on the subject of art are liable to be seen as an indicator of liberal political views on the part of the subject being exam-ined. But actually there is no correlation b etween the two. By contrast, tools used to actually create works of art (such as palettes, paints or woodcarving implements) will in-


Environment Structure 2�

deed more often than not indicate a left-wing tendency on the part of their owner.

Other fallacies include the idea that the occupants of cozily arranged and brightly colored rooms must be lovers of humanity, or that a room full of books where everything is strewn randomly about the place must b elong to someone who is an extrovert and is open to new things.

In fact, it is not the number of books that indicates an open mind, but the breadth of subject matter they cover. And a well- illumi-nated room turns out to be a surprisingly accurate indicator of an occupant’s consci-entiousness.

Gosling is also keen to stress the impor-tance of just how objects are laid out. “This is an indicator of the value that is attached to them.” So are the office colleague’s fam-ily photos arranged so that only he can see them? If so, they are likely to be a source of inspiration on tiresome working days. Or do the wife and children bestow their smiles on the visitor instead? “Look what a splen-did wife I have and admire the fruits of my loins,” is how Gosling summarizes a setup of this nature.

But is it possible to conceal our personali-ties? Only to a limited extent. “Key features of our personality simply cannot be sup-pressed, however much we strive to do just that,” writes the American researcher.

Sure, we might sweep everything on our desk into a drawer before our boss comes in so as to hide the usual chaos that prevails. Or shove a dog-eared thriller behind high-brow volumes on our living room shelves so as to cultivate a more intellectual image.

But a well-attuned snoop will quickly see that our music collection may be labeled by category such as “Classical” or “Dance,” yet the CD cases themselves are not at all so well -organized, and often do not even con-tain the CD in question. Or that the tea set at the ready for entertaining visitors has sim-ply never been used.

Because it is above all in our homes and offices, the places where we spend most of our time, that the physical traces of our char-acter are stored – be it side by side, or on top of one another like layers of an archeological site – until they come to form a monument to who we truly are. <

Student accom-modation setups, with architecturally identical bedrooms yet wholly different individual stamps depending on the occupant, constitute perfect research laboratories for the fascinating field studies of psycholo-gist Sam Gosling.


2� Structure Financial Industry

Where Is the Global Financial Industry Headed After the Crisis?An assessment by Giles Keating, head of Global Research at Credit Suisse.

As the global economy gradually recovers from the credit crisis, many profound chang-es are starting to become visible. Financial flows are no longer dominated by savings moving from Asia to fund US consumer bor-rowing and the trade deficit. Instead, US con-sumers have become significant net savers, the trade deficit has shrunk, and the emerg-ing markets look set to become the leaders of global demand growth and the dominant magnet for investment flows.

The global financial system, which has to transport these savings around the world, has suffered a profound shock. In this article we examine how it is likely to evolve over the next five to ten years, focusing mainly on the changing role of the banks and the dollar.

The Banks

US and European banks, but not those in Asia or Latin America, have taken unprece-dented losses during the crisis. To plug the gap, these banks have raised capital from governments and private investors. However, there are further major losses still in the pipe-line for many banks, and these will swallow up a substantial part of their profits for the

next ten years. Looking beyond that, the big structural issue is whether the US and Euro-pean banks embark on a major new round of leveraging-up and risk-taking to fund eco-nomic growth in their own economies and abroad, or whether they take a back seat, with local emerging market banks and direct investment flows through the capital markets being in the lead.

Over the last few decades, many of the US and European banks have generally recov-ered reasonably quickly from credit slumps and started robust loan expansion again, but will it be different this time?

Currently, the political debate in America and Europe is focused on ways to restrain such leverage and risk-taking. Governments can enforce this through three main routes. First, by explicit direction to banks in which they have invested – but most governments are reluctant to go too far with this, and any-way they are looking to sell their stakes soon-er or later. Second is by requiring banks to break up into smaller and perhaps specialized units, but this is controversial and could dam-age the competitiveness of the banks affect-ed if it is not done in all countries. Third is

by tightening regulations. For example, banks could be forced to build up extra capital buf-fers in good years, to be run down in the bad years (“countercyclical provisioning”).

It would also be feasible to require mini-mum liquidity standards or impose an overall minimum ratio of capital to loans. This would be a sensible addition to the existing rules which apply lower capital requirements for less risky loans (the “Basel II” rules). Rule changes like these are probably the main way in which governments will aim to influence banks, although they are unlikely to be adopt-ed uniformly around the world. As a conse-quence, the regulatory environment will differ greatly from one country to the next.

The impact of all this is likely to vary some-what among banks and between countries. Of the large US and European banks that previously had large international investment banking operations, some seem to be evolv-ing to focus mainly on domestic clients; some are staying internationally orientated, but are adopting a significantly more conserva-tive approach to risk; while others, within the context of somewhat tighter regulations, seem likely to resume reasonably aggressive risk-taking. In the short term, this means reduced competition (and thus greater op-portunity for oligopoly profits) for those that remain active in international investment banking.

But new competitors are on the horizon. Some of the Asian banks, which are already strong and very large but domestic-focused, are likely to move to play a much larger role in intermediating capital flows at the global level. Thus, if we look ahead five years or so, the total number of major banks operating at scale on a truly global basis may be similar to that before the crisis, but these banks are likely to be more evenly spread around the world, with the US and Europe no longer so dominant. Moreover, they are likely to be accompanied by rapid growth in a number of second-tier banks in emerging markets around the world, active in intermediating flows into their fast -growing home markets.

The US Dollar

The dollar currently plays a central role in the world’s currency system in several key ways: It is the main currency for invoicing and set-tlement of international trade; it is by far the largest component for the foreign exchange


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reserves of most sovereign states; it is the unit to which many countries explicitly or in practice link their own currencies, at least in part; its capital markets are still the deepest and most liquid in the world; and it is the cur-rency which many international investors use when monitoring their investment portfolios. But many investors have started to question this role, given that the financial crisis had its epicenter in the US financial markets, and given the focus this has brought to the debt-or status of the US.

The dollar’s central role dates back to the post-Second World War economic arrange-ments under the Bretton Woods agreement. In the 1970s, a central part of those arrange-ments ended, when the dollar’s link to gold was broken and many currencies moved from fixed to floating rates. For a while the dollar’s central role was in doubt, but there were several reasons why, in the end, it retained that position: The US was still a creditor na-tion; the geopolitical power of the US was rising as the Soviet Union moved toward col-lapse; and there was no serious alternative currency.

Now, however, circumstances are very different. The US is the world’s largest debt-or, and while this ensures a plentiful supply of dollar assets, it is a concern for investors that could ultimately threaten its credibility. In geopolitics, the US is still by far the world’s largest power, but the medium-term pros-pects for China, India and other nations are a clear pointer toward a multipolar world in coming decades. And an alternative currency satisfying some of the functions played by the dollar now exists, in the form of the euro. Foreign exchange reserves held in euros are rising, though still modest relative to those in dollars. The euro is now the major peg for

the currency of a number of countries. Mean-while, China’s renminbi has the potential to take on a similar role within perhaps one to two decades, assuming that China’s rapid economic development continues and that currency reform keeps pace. This is still far from being a creditable alternative at the moment, as the Chinese currency is not even freely convertible and domestic money mar-kets are underdeveloped.

None of this seems sufficient to unseat the dollar from its global financial role in a timeframe of a few years. But if we look for-ward ten years or so, it seems likely that the dollar will have lost its current pre-eminence, as the world becomes more multipolar in both politics and economics. One possibility is that the dollar, euro and renminbi form a kind of tripartite system, each with its own sphere of countries that tie their currencies to them more or less formally, each with a sphere for trade invoicing and settlement, and each p laying a major role in foreign exchange reserves. A variant of this vision would see a key role for the IMF’s basket currency (the SDR or Special Drawing Right) updated to include emerging market currencies inte-grate the renminbi.

Conclusion

In the aftermath of the credit crisis, the world is becoming multipolar, and this is likely to be clearly reflected in many aspects of the financial system. The dominant role of the dollar and of the US banks is set to give way to a world in which the US is still important, but in which other countries, their currencies, their capital markets and their banks, all play a greatly enhanced role. As with all great changes, this structural shift will offer both threats and opportunities for investors. <

Giles Keating:“If we look ahead five years or so, the total number of major banks operating at scale on a truly global basis may be similar to that before the crisis, but these banks are likely to be more evenly spread around the world.”

Hallen für neue Kunst | Baumgartenstrasse 23 | CH-8200 Schaf fhausen | tel. 0041 (0)52 625 25 15 | fax 0041 (0)52 625 84 74 | hfnk@modern-ar t .ch | www.modern-ar t .ch

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Mario Merz, Vento preistorico dalle montagne gelate, Hallen für neue Kunst, Schaffhausen, Photo: Raussmüller Collection

«If you are really interested in seeing work of the highest calibre, very well presented, then it is necessary to visit Schaffhausen» (The New York Times)


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Credit Suisse

Business / Sponsorship / Corporate Citizenship

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White Turf in St. Moritz

Reducing Energy Usage

The annual winter sports event White Turf, held on the first three Sun-days in February atop the frozen surface of Lake St. Moritz, is to use 40 percent less oil in the future. What is more, for every person at-tending the event one “climate franc” will be donated to an Engadine environmental protection project.www.whiteturf.ch

Credit Suisse Young Artist Award

Echo. Echo. Echo.

In August, the fifth Credit Suisse Jeunes Solistes award was pre-sented to the pianist Andriy Dragan at the Lucerne Festival (see page 45). The Credit Suisse Young Artist Award (CSYAA) was also presented for the fifth time – by a profes-sional, highly competent jury led by Michael Haefliger, the Lucerne Festival’s artistic and executive di-rector. As always, there was a slight feeling of uncertainty: Had the jury really chosen the right win-

ners? Were they really on the brink of a glittering career ? All remaining doubts were dispelled on Octo-ber 21 when three CSYAA winners were also honored at the renowned ECHO Klassik awards in Dresden. Sol Gabetta received an award for her performance of Shostakovich’s Cello Concerto no. 2, as did Martin Helmchen for his rendition of Pia- no Sonata D 959 by Franz Schubert, and Patricia Kopatchinskaja and Fazil Say for the performance of Beethoven’s Kreutzer sonata, plus pieces by Ravel, Bartók and Say. For Sol Gabetta (2007) and Martin Helmchen (2006), this marks the second time that they have claimed the ECHO Klassik prize.

Credit Suisse Board of Directors

Benmosche Steps Down

Following his appointment as CEO of the US insurer AIG, Robert H. Benmosche has stepped down from the Board of Directors of Credit Suisse after seven success-ful years. Mr Benmosche had been a member of the Compensa-tion Committee since 2003.

Branch Excellence

From Schaffhausen to Pully

At the end of 2008 we reported on the reopening in Bienne of the 50th branch renovated in accor-dance with the Branch Excellence concept. The branches in Schaff-hausen and Schönenwerd bring this number up to 65, with five such branches opening in French-speak-ing Switzerland in 2009: in Delé-mont, Montreux (pictured), Geneva Eaux-Vives, Pully and at the EPFL in Lausanne. These branches are not only more modern, lighter and more client-friendly, but also meet the latest ecological standards. Efforts have also been made to en-

sure optimum access to banking services from these facilities for the disabled and the visually impaired. In a difficult economic climate, the building volume – 10 million francs in Zurich-Aussersihl alone – is also significant.

The Uetlihof complex, started in the 1��0s, was awarded the “Grünpreis der Stadt Zürich” (“City of Zurich Green Award”) in 1��3 and was named a “Naturpark der Schweizer Wirtschaft” (“Nature reserve of Swiss industry”) in 1��. Ecological factors are also being taken into consideration in the major building project, which began on June 2� to create space for more than 2,000 employees. Currently, everything is going according to plan. The new workplaces will be available for use from autumn 2011.

53%Worry Barometer 200� Unemployment was the main source of worry for the Swiss in 200� at 53 percent, followed by health care and retirement pensions. The results of the new survey will be published in the next issue of bulletin in December. How is the economic crisis affecting the mental state of the Swiss population? We have chosen “Responsibility” as a major theme – so the next bulletin will address us all.

http://www.whiteturf.ch


32 Credit Suisse

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Locals Save the Salzburg FestivalDespite the economic situation and the threat of swine flu, the Salzburg Festival proved a success once again in 200�. A total of 24�,432 visitors from �� coun-tries attended 2�0 events, according to festival president Helga Rabl-Stadler, artistic director Jürg Flimm and the festival’s commercial director Gerbert Schwaighofer.

Although visitor numbers from China and Russia increased dramatically and those from Switzerland remained constant, it was the locals from Salzburg and cross-border guests from nearby Bavaria who had the decisive effect on returns.

Most performances received praise, although there was talk of a tight rein being kept on finances in some cases.

The opera “Al gran sole carico d’amore” (“In the Bright Sunshine Heavy with Love”) by Luigi Nono, adapted for theater and with live video recordings by director Katie Mitchell plus an impressive musical arrangement by Ingo Metzmacher, was certainly one of the festival’s highlights.

Top: Charles Naylor, Chief Communi-cations Officer of Credit Suisse and a former opera singer, welcomes �0 jour-nalists to a “summer gathering” with the performers. At the front is Nuria Nono. Below: the four sopranos Virpi Räisänen, Elin Rombo, Sarah Tynan and Anna Prohaska, and – to the far right – the alto Susan Bickley. More on page 42 and at www.credit-suisse.com/bulletin.

“The banking giant Credit Suisse, at num-ber 2, has per-formed consis-tently as one of the top-ranked institu-tions for many years (…). Credit Suisse did not use pretty pictures to impress the jury, but rather a clear report structure and a logical order. The depth of the analysis was well above the average of other reports.” In the annual reports ratings list 2009, Credit Suisse takes second place, behind Kuoni and ahead of Novartis.

Live at Sunset Leaves Its Mark

After the Festival Is Before ...

The 14th Live at Sunset festival ended with a record number of visi-tors, despite some terrible weather conditions: A total of 35,000 peo-ple made the trip to the Dolder skating rink on Zurich’s Adlisberg over the series’ 12 evenings. And the musicians also fulfilled the high expectations, perhaps none more so than the British singer Jamie Cullum and Swiss songstress Sophie Hunger. The Japanese Kodo

drummers and the French chanson-nière Patricia Kaas, as well as Swiss “Monsieur Magique” Stephan Eicher, also gave notable perfor-mances, as did Katie Melua and Amy McDonald (pictured), much to the enchantment of their Swiss fans. www.liveatsunset.ch;

interviews with Sophie Hunger and

Amy McDonald also available at

www.credit-suisse.com/bulletin.

Economic Outlook 2010

Rocard Looks Into the Future

At many Credit Suisse client events, the last few months of any particular year are spent looking forward to the one about to start. The “Perspectives” meetings in Lausanne and Geneva on Septem-ber 30 and again on October 1 attracted particular attention thanks to the appearance of the socialist politician and former French prime minister Michel Rocard as the guest speaker.An interview with Michel Rocard

is available at www.credit-suisse.

com/bulletin.

Prestigious Appointment

New CIO of Private Banking

In mid-June, Stefan Keitel was appointed Chief Investment Officer (CIO) of Private Banking and Chair-man of the Credit Suisse Invest-ment Committee. In this position, he will be working closely with Giles Keating, head of Global Research for the Private Banking and Asset Management divisions. A Credit Suisse employee since 2001, Mr Keitel will be responsible in his new position for short-, medium- and long-term asset allocation recommendations across all client segments. He will also continue in his previous job as Global CIO of the Multi Asset Class Solutions business unit, part of the Asset Management division.

National Minergie-P Days

Sustainable Construction

On November 7 and 8, around 80 owners of houses certified to the Minergie-P standard across Switzerland are opening their doors to highlight the advantages of the Minergie method to visitors inter-ested in building or refurbishing houses. This event, which attracts more and more attention each year, is once again being sponsored by Credit Suisse, which also offers special Minergie mortgage rates.www.credit-suisse.com/living

www.minergie.ch

Classic Cars

Goodwood Revival

Between September 17 and 20, more than 130,000 spectators were drawn to the 11th Goodwood Revival in Sussex, England, which counts Credit Suisse among its sponsors. The event is the only one of its kind. The 1950s and 60s –




http://www.credit-suisse.com/living

http://www.minergie.ch


Credit Suisse 33

the glory days of UK motor sports – are celebrated in style through cars dating from the period, and it is a mark of honor not only for the driv-ers, but also the spectators to wear clothing of the day. A total of 16 races were punctuated by some hair- raising battles between the drivers – who included big names from days gone by such as Derek Bell, Jochen Mass and David Coulthard. Sir Stir-ling Moss was also honored on the occasion of his 80th birthday with a parade featuring 80 of his most im-portant cars. www.goodwood.co.uk

Sustainable Investments

Fair, Clean, Profitable

The first Swiss Equity Sustainability Day, held at Technopark Zurich on October 20 and supported by Credit Suisse as a Premium Partner, met with enormous interest. After the introductory speech by Christopher Flavin, president of the Worldwatch Institute, on the topic of the New Green Deal, various companies pre-sented their contributions to green technology. Alongside this there were speeches on specialist topics, with Credit Suisse represented by Nannette Hechler-Fayd’herbe

(“Microfinance After the Global Cri-sis”) and Lars Kalbreier (“Resource Efficiency – The LowHanging Fruit of Sustainability”). The event was concluded with a panel discussion led by Antoinette Hunziker-Ebneter of Forma Futura Invest AG. www.sustainabilityday.ch

Jazz Recitals and Jazz Classics

Jazz of the Highest Caliber

Together with the Schaffhausen Jazz Festival, the Stanser Musik-tage and the Estival Jazz Lugano, the All Blues concert series “Jazz Classics” and “Jazz Recitals” – around 20 events between October and May in seven Swiss towns and cities – have been a sweet-sound-ing highlight of Credit Suisse’s cultural sponsorship activities since 1996. Concerts featuring Roberto Fonsecca, Cassandra Wilson and The Manhattan Transfer have already been and gone for this year, but there is still plenty to look for-ward to in the shape of Ron Carter, Dee Dee Bridgewater, Abdullah Ibrahim, Ahmad Jamal, Dianne Reeves, Bobby McFerrin and Mare Nostrum.www.allblues.ch; www.credit-suisse.

com/sponsoring > jazz

Business School

Partnership in Moscow

In July, Credit Suisse became the only international banking group to enter into a partnership with the Skolkovo Business School in Moscow. Skolkovo was founded as a private institution in 2006 by a group of Russian and interna-tional business people. As a founding partner, Credit Suisse supports the business school by providing banking professionals as lecturers for the full-time MBA program.

Osec – a Partner of Credit Suisse

Special Export Fund

Osec Business Network Switzer-land is making financial contribu-tions to support third-party projects run by SMEs promoting exports. Phase 1 has seen 630,000 Swiss francs earmarked. On April 15 and 16, 2010, the export industry forum will examine lessons to be learnt from the financial crisis and seek to shed light on the EU market, focusing particularly on Germany.

Text: Andreas Schiendorfer

The Kunstmuseum Bern and the Bündner Kunstmuseum Chur

Giovanni Giacometti – Master of the Orchestration of Light

The Kunstmuseum Bern is continuing its attractive series featuring prominent Swiss artists. Following Amiet, Anker, Valloton and Hodler, the current exhibition covers the aspect “color in light” and features works by the Graubünden artist Giovanni Giacometti (1��–1�33), the father of Alberto Giacometti, who absorbed and further developed the latest trends of modernism between impressionism, post-impres-sionism and fauvism. Around 100 paintings demonstrating Giacometti’s prodigious use of color and his genial, vibrant light orchestration will be on display in Berne until February 21, 2010, and then in Chur from March 1� until the end of May. To complete the exhibition, works by contemporaries such as Amiet and Segantini are on display for comparison. www.kunstmuseumbern.ch

Giovanni Giacometti, “Fanciulli al sole” (“Boys in the Sun”), 1�10, oil on canvas, �1.3 x 100 cm, courtesy of the Gottfried Keller foundation/Kunstmuseum Bern, a gift from the Stiftung Gemäldesammlung Emil Bretschge.

Online Forum The cellist Sol Gabetta received the Credit Suisse Young Artist Award in 2004. Her path to stardom continues: She has just received an ECHO Klassik award for the second time. Until December 15 you can put your questions to Sol Gabetta and have the chance to win concert tickets. www.credit -suisse.com/bulletin

http://www.goodwood.co.uk

http://www.sustainabilityday.ch

http://www.allblues.ch

http://www.credit-suisse.com/sponsoring


http://www.kunstmuseumbern.ch


34 Credit Suisse

Georges Seurat at the Kunsthaus ZürichHenry Fuseli, Alberto Giacometti, Claude Monet, Georgia O’Keeffe, Auguste Rodin and J. M. W. Turner have something in common – Credit Suisse has sponsored exhibitions for all of these artists at the Kunsthaus Zürich. From now until January 17, 2010, the spotlight will be on another pioneer of modern art: Georges Seurat.

Credit Suisse 35


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“ Sunday Afternoon on the Island of La Grande Jatte,” a delightful snapshot of a favorite spot for outings along the banks of the Seine. Georges Seurat showed this painting (which is two by three meters in size and forms part of the collection of The Art Institute of Chica-go) in 1886 at the last Impressionist exhi-bition. The work was the much-discussed highlight of the exhibition and made the 27-year-old artist the hub of an avant-garde movement that was knocking loudly on the door of classical modern art.

As poetic as this key painting may be, it is ultimately also a construct in terms of content and form. For the first time, Seurat had taken the pointillist technique to its logical conclusion, placing little dots of un-mixed paint in close proximity to one an-other, pure colors that come together only in the eye of the beholder. His painting style was based on scientific findings, and his work was marked by discipline. The seem-ingly spontaneous scene in La Grande Jatte arose through the marriage of impressionis-tic plein air painting with academic studio art. For months, Seurat would go down to this island in the Seine, making over 20 drawings. The painting, depicting more than 40 people, was created later on in his studio. It parodies the prevailing fashions and decadent bour-geois morals. His contemporaries would have recognized the women with the fishing rod and the monkey on a leash were “cocottes,” or prostitutes.

Seurat’s importance has generally not received the recognition it merits because he died, of diphteria, at age 31. Moreover, his works are spread far and wide, and many of them are in private collections. A retro-spective of the quality shown in Zurich is not likely to be possible ever again, also on account of the fragile condition of some of the principal paintings. schi

“Some say they see poetry in my paintings. No: I apply my methods, and that’s all there is to it.”Georges Seurat

Kunsthaus Zürich. Georges Seurat. Figure in Space. More than �0 paintings and drawings. October 2, 200� – January 24, 2010.


36 Credit Suisse

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The Film World Comes to ZurichNow in its fifth year, the Zurich Film Festival has become an established brand. Karl Spoerri and Nadja Schildknecht, working with Christine von Fragstein and Nikolaj Nikitin, know how to combine glamor and the promotion of young talent to optimum effect.

Let’s be honest. Of the 30 film entries and 36 directors, we probably wouldn’t have heard of even three of them before the Zurich Film Festival. That’s all changed now. Naturally, film fans won’t be able to remember them all forever, but they’ll recognize them when they encounter them again. There’s no question that some of the directors who traveled to Zurich will make their breakthrough and per-haps reappear at the festival in 2020 as red-

carpet celebrities.

Their names sound like an international poem on film: An Sun-Kyong, Cherien Dabis, Martin Pieter Zandvliet, Adrian Biniez, Lynn Shelton, Peter Strickland, Reshef Levy, Tina Mabry, Mia Hansen-Løve, Julia Solomonoff, Henry Barnadet, Myriam Verreault, Cary Jôji

Fukunaga and Vasilij Sigarev entered their work in the international feature film cate-gory. Frieder Wittich, Carsten Ludwig, Jan-Christoph Glaser, Lancelot von Naso, Lutz Konermann, Maximilian Erlenwein, Wolfgang Groos, Markus Welter and Marco Antoniazzi vied for the prize for the best German-lan-guage feature film. Arantxa Aguirre, Anita Blumer, Yoav Shamir, Davide Barletti, Edo-ardo Cicchetti, Lorenzo Conte, Christoph Heller, Gabriel Noble, Fernanda Tornaghi, Ricardo Bruno, Greg Barker, Patrik Soergel and Ryan Fenson-Hood are all entered for the Golden Eye award for the best interna-tional documentary film.

bulletin will publish portraits of the three winners (bold) at the beginning of 2010. schi

On the closing night, the stars of today have the opportunity to meet the stars of tomorrow.

Master Class 1: Morgan Freeman responds to the tricky questions from the young directors.

Master Class 2: Terry Gilliam discusses his new film “The Imaginarium of Dr. Parnassus.”

Master Class 3 : Monika Schärer presides over the session with Peter Fonda of “Easy Rider” fame.

Credit Suisse 37


Red carpet: jury head Debra Winger with “Grease” director Randal Kleiser.

Michael Keaton grants Credit Suisse an exclusive interview on “The Merry Gentleman.”

Hannah Herzsprung and Daniel Brühl (“Lila, Lila” ) with Urs Rohner, Vice Chairman of Credit Suisse.

Promoting EnterpriseSwiss SMEs are set to benefit from a “Foundation for Entrepreneurship” in the future. The Swiss Venture Club intends to inject a million Swiss francs, provided other donors can be found.

“Overcoming Barriers” was the topic for the panel discussion moderated by Dirk Schütz, editor- in-chief of Bilanz magazine, at the annual meeting of the Swiss Venture Club (SVC) in Berne. It was interesting and stim-ulating to hear what military pilot Susanne Siegenthaler-Schürmann, heart surgeon Thierry Carrel and Thomas Lamperstorfer, CEO of Porsche Switzerland, had to say on the topic.

The Swiss Venture Club also overcomes barriers in its promotional visits to new mar-kets. It visited India for the second time in October, and in November a trip was orga-nized to China and Vietnam, this time in col-laboration with Credit Suisse and Osec.

It’s Better With Partners

At the annual meeting in September it be-came clear just how extensive the SVC’s network has now become and that the orga-nization will not act alone if there are partners with whom it can achieve key objectives more quickly, more easily and more cost-effec-tively. According to SVC president Hans-Ulrich Müller, the SVC can currently count on the support of more than 500 partners and sponsors.

The SVC is also relying on the power of networking in its ambitious “Foundation for Entrepreneurship” program. Although the members have practically unanimously agreed to inject a maximum of one million Swiss francs into this foundation, and also to accept responsibility afterward by provid-ing at least two members for the board of trustees, the organization will be established only if one or more partners can be found who will contribute a minimum of an addi-tional half a million Swiss francs.

“The foundation acts primarily in the inter-ests of small and medium-sized enterprises, is active in all of Switzerland’s economic regions, and wants in particular to fight for better framework conditions in order to im-prove Switzerland’s competitiveness,” explains Hans-Ulrich Müller. “This is an urgent require-

ment, particularly for SMEs, even though a study published by the World Economic Forum identifies Switzerland as the world’s most competitive economy.” (p. 38)

The foundation will be active in four areas: education, public relations, sustainabilityand commitment. None of this is entirely new to the SVC, but the foundation will provide additional impetus by generating new energy, new projects and new income sources.

Board Reappointed for Two Years

Otherwise, there was no great debate at the annual meeting, which means in effect that the SVC is on course to succeed.

Accordingly, all the members of the board were reappointed to their demanding honor-ary positions for a further two years: Presi-dent Hans-Ulrich Müller, Vice President Elisabeth Zölch-Balmer and Secretary Beat Brechbühl, along with Peter Bühler, Denis Grisel and Silvio Tarchini. Heinrich Christen and Heinz Herren had already been reap-pointed a year ago. schi

Hans-Ulrich Müller, one of the most enthusiastic promoters of Swiss SMEs, put himself forward for a further two-year period as president.


38 Credit Suisse

Cantonal Competition Strengthens the WholeZug and Zurich top the locational quality indicator compiled by Credit Suisse: This year they come in ahead of Basel-Stadt and Geneva. The cantons of Appenzell Ausserrhoden, Nidwalden, Schwyz, Zug and Zurich all now have an AAA rating in the bank’s credit handbook.

One of the things that make the Swiss econ-omy strong is the fact that the cantons com-pete against each other and constantly strive to improve their relative position. This com-petition for investment, jobs and residents has become even fiercer recently in light of the recession and due also to increasing mo-bility and a lowering of administrative hurdles.

Since 2004, Credit Suisse has calculated and published an annual “locational quality indi-cator” (LQI ) that is based on five core factors in the areas of taxation, education and acces-sibility.

“Numerous cantons have succeeded in im-proving their tax appeal, due not least to the reform of financial equalization and task al-location between the cantons as well as to the large revenue surpluses earned by the cantons over a number of years,” say the team of authors at Economic Research – Sara Carnazzi Weber, Viktor Holdener, Thomas Rühl and Nora Sydow. “As in the previous year, the rankings are led by the cantons of Zug and Zurich. Zug boasts an ideal combination of a low tax rate, a well-educated population, and rapid access to other major Swiss cities. Metropolitan cantons like Basel-Stadt and

Geneva benefit even more strongly from their excellent local transportation networks and from their role as hubs in the regular-interval timetable of the Swiss Federal Railways. Mid-way down the league standings are cantons like Schaffhausen, Thurgau and St. Gallen, where tax cuts have improved their relative position.”

The mountainous canton of Graubünden has steadily improved its locational quality since 2004, despite an adverse topography. But it is the canton of Basel-Stadt that has registered the biggest advance over these five years.

This year’s LQI study from Credit Suisse does, however, show that the locational qual-ity of cantons and regions cannot always be equated with the financial appeal of living in the area concerned. In the traditional low-tax cantons in central Switzerland and the areas around Lake Zurich, for example, residents pay for their low tax charge through higher real estate prices. “Properties in some re-gions have already become noticeably over-valued in relation to the development of in-comes,” warns Economic Research.

Financial Scope Receding

The credit handbook for the Swiss cantons was reissued in abridged form in October 2007. At that time, it was stated that most cantons had essentially improved their finan-

Attractive

1 st Zug 2 nd Zurich 3 rd Basel-Stadt 4 th Geneva 5 th Nidwalden 6 th Aargau 7 th Schwyz 8 th Obwalden 9 th Schaffhausen 10 th Thurgau 11 th Basel-Land 12 th Appenzell Ausserrhoden

Average for Switzerland

13th Solothurn 14th Vaud 15th Appenzell Innerrhoden 16th Lucerne 17th St. Gallen 18th Berne

Less attractive

19 th Graubünden

20 th Fribourg

21 th Ticino

22 th Glarus

23 th Valais

24 th Neuchâtel

25 th Uri

26 th Jura

Switzerland at the TopAccording to the World Economic Forum (WEF), Switzerland is the world’s most attractive location for tourism and also has the most competitive economy.

The world economic crisis has had a serious impact on Switzerland too. Between January and July 2009, exports receded by 15.6 p ercent while overnight stays declined by 7 percent.

This decline is not to be taken lightly, and calls for action. However, in two recent stud-ies by the World Economic Forum, Switzer-land comes out top. So other countries are evidently doing less well.

The Travel & Tourism Competitiveness Re-port (TTCR) published in March again puts Switzerland ahead of Austria and Germany –

and some 130 other countries – in terms of the 60 criteria studied. These take account of security and health, infrastructure, local price levels, legal regulations, and environmental and cultural aspects.

Even more important is the Global Com-petitiveness Report 2009/2010 published by the WEF in September. After Singapore, Switzerland was among the big winners in this report. Owing to weaker financial mar-kets and reduced macroeconomic stability in the US, Switzerland has narrowly overtaken the United States. Both have the same lead

Credit Suisse 39


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cial figures in the wake of the economic boom. That is hardly visible in the ratings, however, as these also take account of forward-looking data. Tax receipts for 2009 and especially for 2010 – reflecting the crisis, but after a time lag – look set to fall as the unemployment rate rises. In fact, deficits are on the cards.

Moreover, the weak performance of the financial markets will result in extra pension fund obligations of about 25 billion Swiss francs, taking all the cantons together. “Most cantons are expected to see their self-financ-ing ratios fall below 100 percent. This means they could start issuing more securities, which would in turn be favored by the high demand and historically low interest rates,” say Daniel Rupli and Fabian Keller from Swiss Institutional Credit Research at Credit Suisse. Overall, a stable picture emerges from the ratings, though two cantons (Appenzell Innerrhoden and Ticino) have been down-graded and five others now have a worse out-look. Zurich is the only one whose outlook has changed for the better.

Locational Quality: Which Swiss Region Is the Most Attractive? Economic Research Swiss Issues Regions, August 2009. Swiss Cantons Credit Handbook – Update. Swiss Institutional Credit Research, August 2009. www.credit-suisse.com/shop > Other Research Publications

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over the next-highest countries. “Switzerland boasts a highly innovative environment,” said a WEF spokesperson in a video interview.

“Companies make it easier for research and development. Firms use highly developed corporate practices, the infrastructure is out-standing, the state of technological deve-lopment is also very high and, above all, the labor markets are very flexible compared to Switzerland’s European neighbors.”

The next best after Switzerland and the US are: Singapore, Sweden, Denmark, Finland, Germany, Japan, Canada and the Nether-lands.

Credit Suisse has been a member of the World Economic Forum for some decades and is one of its strategic partners.

London as a Second HomeThe New York Philharmonic will be coming to Europe in January and February, with its new music director, Alan Gilbert. The orchestra will perform in Spain, Germany, France, the UK and Switzerland.

Its concert in Hanoi, part of an Asian tour in October, was a real milestone, because Viet-nam was the 60th country in which the New York Philharmonic had performed.

Now Alan Gilbert and the New York Phil-harmonic will be in Europe from January 21

to February 4. Of course, they’ve already played in Spain, France, the UK, Germany and Switzerland on many occasions. But this time they’ll be venturing into new territory: Their concerts at the Barbican will mark the beginning of a closer collaboration with the London center of the arts.

The New York Philharmonic will become one of five international associate orchestras for the Barbican Centre, and every two years they will be staying for an extended period. “London is one of the world’s great cultural capitals,” says Alan Gilbert. “I thank the Bar-bican Centre for allowing us to make London our second home through our coming series

of biennial residencies.” They also plan to hold educational outreach programs in schools, “making friends not only with today’s audiences, but with the listeners of tomorrow,” as Gilbert explains.

The orchestra will feature two soloists, the famous pianist Yefim Bronfman, who was born in the Republic of Uzbekistan, and the leading baritone in the US, Thomas Hampson, who is enjoying his status as the orchestra’s first artist- in-residence. The group also has its first composer-in-residence, Magnus Lind-berg of Finland, and will present two commis-sioned works of his during its tour.

The New York Philharmonic will be return-ing to Switzerland once more, where the group will be playing at the Tonhalle in Zurich on January 26. schi

More information can be found at http://nyphil.org and www.credit-suisse.com/sponsorship.

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http://www.credit-suisse.com/sponsorship


40 Credit Suisse

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Pearl Hunters in Contact Center Gain ISO Certification With Top MarksThe Outbound Sales unit of Credit Suisse’s Contact Center Switzerland has been awarded a seal of approval in the form of ISO certification in direct marketing. Credit Suisse is the first bank to gain this particular accreditation, which attests to the high quality of its 50,000 annual contacts with clients.

You won’t hear any phones ringing in the Outbound Sales section of Credit Suisse contact centers. This is in complete contrast with CS Line, the bank’s telephone window on to the world, where thousands of calls are received each day. After all, in Outbound Sales, it’s not the clients who contact the bank but the bank that contacts the clients. Reactions to the bank’s calls are very posi-tive. Many clients are interested, and are open to the idea of a personal consultation. Outbound Sales offers advice and product solutions specially tailored to meet client needs and potential. This advice primarily covers payments and savings. In the case of investment and financing requirements, an appointment is made for an in-depth meeting with the client. Around 40 employees contact 50,000 clients each year in the four regions of Mittelland, French-speaking Switzerland, Ticino and Zurich/Eastern Switzerland.

Quality Has Top Priority

Each call is planned individually to ensure clients receive the best possible service. This requires extensive high-quality preparation. Quality assurance measures such as service excellence, employee coaching, technical checks and regular satisfaction surveys therefore have high priority.

Outbound Sales doesn’t see itself as a conventional contact center, according to Urs Joss, head of the Private Clients Switzerland Contact Center. “We want to position our-selves as a quality provider and differentiate ourselves from other contact centers,” he explains. So it was important for Outbound Sales to be quality-checked by an indepen-dent body that is recognized worldwide, and is not active in the financial services sector. ISO certification demonstrates that high ethical standards are being adhered to, and gives clients confidence. The direct market-

ing seal of approval with ISO certification really puts contact centers through their paces. A direct marketing “code of honor” has to be observed, with checks to ensure compliance with basic principles of truth and clarity, data and privacy protection, phone manner, confirmation of the signing of agree-ments, staff selection and training, remu-neration, and supervision. Then there are audits in the form of interviews with all levels of staff including management at all four locations. “What’s key to fulfilling the ISO certification requirements is a clear commit-ment from management,” says Erwin Peter, head auditor at the Swiss Association for Quality and Management Systems (SQS).

No Areas for Improvement Found

Outbound Sales demonstrated commitment, provided all the documentation required, and

passed the test with flying colors. “Credit Suisse has received certification with abso-lutely no provisos. No areas for improvement were found,” declared Peter. Credit Suisse is the only bank in Switzerland that has so far received this accreditation.

The result has delighted both manage-ment and staff alike. “It just goes to show that we’ve got the correct strategic focus, and that our employees are providing an outstanding service,” asserts Urs Joss. Where such dedication is required, the work-ing atmosphere needs to be right. To this end, a coaching culture was established four years ago, with the aim of encouraging communication and feedback among and between management and staff. The excel-lent working atmosphere within the Out-bound Sales team was also noticed by Peter, who commented that a high level of employee motivation and satisfaction was particularly evident during the interview process.

The Successful Hunt for Pearls

Discovering clients with high potential – known colloquially as “pearls” – doubtless contributes to employee motivation. “Every day, client circumstances change as a result of inheritances, marriages, new work situa-tions and property purchases, to name just a few examples,” explains Joss. There are thus new opportunities waiting to be found each day. Since this “pearl hunting” is one of the unit’s main tasks, the Outbound Sales logo depicts a pearl in a shell.

With ISO certification now firmly under its belt, and an expert team at hand, Outbound Sales will also be highly motivated to tackle this task in the future. “Moreover, this ac-creditation is an obligation to constantly im-prove the way in which we help our clients,” says Joss. Maya Kunz

On behalf of 40 members of staff, Urs Joss (right), head of the Private Clients Switzerland Contact Center, receives the ISO 9001 certification from Erwin Peter.

Credit Suisse 41


Promoting Talented Artists Credit Suisse promotes young Swiss artists and tries to take every opportunity to include them in its collection in the early phase of their work. At the begin-ning of this year, painter Sébastien Mettraux from Vallorbe was presented with the art award of the Federal Office of Culture (BAK/OFC) in Berne. The 24-year-old artist has also caught Credit Suisse’s eye – the bank has acquired a whole group of the artist’s works, which includes the featured composition “Ohne Titel” (“Untitled”). This painting depicts a closed interior devoid of people – a warehouse. Mettraux creates this interior by applying his paint precisely and evenly, underlining the sober nature of the composition, and by dividing the space in a classical way. Only the brightly colored barrels on the right of the painting provide colorful accents and contrasts to the various shades of gray elsewhere in the room. The ceiling is characterized by its girder structure, whichcombines with the functionally cool atmosphere to give a feeling of oppression and create prison-like associations. In contrast, the fact that the room is sealed off to the outside world suggests safety and refuge and provides a certain degree of protection. The pared-down painting technique and the bareness of the room push the architectural and hence the aesthetic aspect into the fore-ground. Sébastien Mettraux has painted a series of similar interior views encompassing such subjects as air-raid shelters, cellars and storerooms. All are given an oppressive, chilling feel by the painting technique used, and by the choice of subject. At the same time, they call into question the relationship between space and security, and bring to mind considerations of the human yearning for security. For further information, see www.credit-suisse.com > About Us > Sponsorship > Art > Collection Credit Suisse

Barbara Hatebur, Art Unit

The deliberate way in which the artist handles the treatment of perspective, the application of paint and the precision with which the objects are positioned are evidence of an intensive relationship with the medium of painting. Sébastien Mettraux, Untitled, 2008 –2009, oil on canvas, 110 × 130 cm.

MastheadPublisherCredit Suisse P.O. Box 2CH-8070 ZurichTelephone +41 44 333 11 11Fax +41 44 332 55 55

Editors Daniel Huber (editor-in-chief, dhu), Regula Gerber (rg), Michael Krobath (mk), Mandana Razavi (mar), Andreas Schiendorfer(schi), Dorothée Enskog and Marcus Balogh (mb)

E-mailredaktion.bulletin@credit -suisse.com

Contributors to this issueLalita Advani, Miroslav Durana, Ute Eberle, Christian Etzensperger, Barbara Hatebur, Reto Hunziker (rh), Frédéric Junod, Maya Kunz, Michael O’Sullivan, Mathias Plüss, Rob Scott, Roger Signer, Pascal Rohner and Stefanie Schramm

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Editorial committeeRené Buholzer (Head of Public Policy), Monika Dunant (Head of Communications Private Banking), Urs P. Gauch (Head of Corporate Clients Switzerland – Large Corporates), Fritz Gutbrodt (Head of Chairman’s Office), Angelika Jahn ( Investment Services & Products), Martin Lanz (Economic Research), Hubert Lienhard (Asset Management Distribution Services), Andrés Luther (Head of Group Communications), Charles Naylor (Head of Corporate Communications), Christian Vonesch (Head of Private & Business Banking Aarau)

115th year of publication(Five issues per year in English, German, French and Italian)Reprinting of texts permitted with acknowledgement of source(“Credit Suisse bulletin”).

Changes of addressPlease send notification in writing, accompanied by the original envelope, to your Credit Suisse branch or to:Credit Suisse, ULAZ 12, P.O. Box 100, 8070 Zurich.

This publication is for information purposes only. It does not constitute an offer and is not a recommendation by Credit Suisse to buy or sell securities. Indications of past performance are no guarantee of a positive performance in the future. The analysis and conclusions contained in this publication were established by Credit Suisse and may already have been used for transactions by Credit Suisse Group companies prior to being made known to clients of Credit Suisse. The opinions expressed in this document are those of Credit Suisse at the time of going to press. (We reserve the right to make amendments.) Credit Suisse is a Swiss bank.

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42 Credit Suisse

The Finishing Touches: Fine-Tuning For Young MusiciansThe Salzburg Festival’s Young Singers Project gives eight highly talented young opera singers – among them the two “Swiss” Terry Wey and Christina Daletska – two months and a half of intensive tuition. At the closing concert you could hear the difference. It was small, but crucially important.

1 Together with conductor Ivor Bolton, the Young Singers take their bows in the Mozarteum to well-deserved applause that seems to last forever. 2 Michael Schade, the spiritus rector of the project, is justifiably pleased about the major success. 3 On a CD of her own before long? Christina Daletska signs autographs. 4 Artistic director Jürgen Flimm congratulates the Young Singers. On his left is Evamaria Wieser, who has also actively supported the project.

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“One area in which a singer never stops de-veloping and improving,” explains Terry Wey,

“is acting – particularly at a time when the critics mention the director before the con-ductor. Working with such a magnificent actor as Peter Jordan, who plays the Devil in the Salzburg production of Hofmannsthal’s

‘Jedermann,’ obviously helps a lot.”

The Mother’s Day Concert on TV …

Let’s rewind the tape. Terry, aged eight, sees the Vienna Boys’ Choir in a Mother’s Day concert on television. He is determined to join this famous choir, no matter what. He even persuades his family to move house from Berne to Vienna. At the age of 12, Terry sings the soprano solo in Mozart’s Corona-tion Mass in New York’s Carnegie Hall. It’s impressive when he talks about the places where he’s performed all over the world. But suddenly I notice that he’s not especially keen on talking about them. “After your voice breaks,” he explains, “you have to restart your musical career totally from scratch. Many of my colleagues had to give up singing alto-gether, because their voices were no longer up to it. To be on the safe side, I didn’t sing a note for two years.”

Now, however, Terry Wey is getting ready to conquer the world’s opera houses as a countertenor. He is accorded the honor of singing at the ceremonial opening of the Salzburg Festival, and he misses a few days of the Young Singers Project because he is appearing at the Bregenz Festival.

Constructive Criticism Hugely Important

But as he himself well knows, Terry Wey is still far from having nothing left to learn. A great many details need improving – details that will have a great influence on his career. That’s why he and the other participants in the Young Singers Project are prepared to work so hard on themselves, and also to swallow criticism that hurts. In the public master class, for example, Thomas Quasthoff describes Terry’s interpretation of a Schubert lied as too optimistic. “If all we ever got were pats on the back,” Terry comments,

“none of us would ever make any progress. The opinion of a Thomas Quasthoff or a Michael Schade is something I take very seriously – even if we each have to plough our own furrows.”

He benefits most from being able to cover the role of Didymus in Handel’s “Theodora.” Christof Loy is the director in Salzburg,

5 Michael Schade with his “flock”: Sara Hershkowitz, Alisa Kolosova, Christina Daletska, Adrian Strooper, Andrei Bondarenko, Nahuel Di Pierro and … 6 … Terry Wey: “I am benefiting enormously from the experience of great singers like Marjana Lipovsek. It’s giving me all sorts of ideas for interpretation.”

Young Singers Project 2009 “This isn’t a musical holiday camp for the next generation of talented artists,” Michael Schade emphasizes. “These young singers are already professionals: We are trying to put the finishing touches to them. The question isn’t whether they will have careers. The question is what sort of careers will they have, and how long will they last.” Andrei Bondarenko, Christina Daletska, Nahuel Di Pierro, Sara Hershkowitz, Alisa Kolosova, Anna Siminska, Adrian Strooper and Terry Wey have spent ten weeks continuing their development under expert in-struction. Not only did they work hard on their voices, they also studied theatrical expression for the operatic stage (with Peter Jordan) and practiced with assistant directors various roles that they covered for the Salzburg Festival. The final concert under conductor Ivor Bolton was preceded by four public master classes, given by Michael Schade, Marjana Lipovsek, Christa Ludwig and Thomas Quasthoff.>

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while musical direction is in the hands of Ivor Bolton. (“Wrong way round,” Terry Wey corrects me with a frown.) “For me Bejun Mehta, the real Didymus, is one of the very greatest countertenors of our age. To be able to watch him and spend time with him is an unforgettable and extremely instructive experience.”

If you talk to Ukrainian baritone Andrei Bondarenko, Russian mezzo Alisa Kolosova, Argentinian bass Nahuel Di Pierro or Polish soprano Anna Siminska, you sense that although they are totally different, their biog-raphies have much in common. At some point the urge to sing becomes irresistible – so irresistible that everything else gets subor-dinated to it. After that point, life is utterly different. The singers develop an exemplary determination to learn, though this is con-cealed by an attitude of relaxation. And they take every opportunity that presents itself, absolutely anywhere on the planet. None of them still lives in his native land: Music knows no frontiers.

Take Adrian Strooper, for example. A tenor from Cairns in Australia, he is already a member of the Comic Opera Ensemble in Berlin. Sara Hershkowitz, a soprano from Los Angeles, has a permanent engage-

ment at the Bremen Theater. But even she sees the Young Singers Project as a great opportunity.

The Project Isn’t Over Yet

Weeks have now passed since the end of the Salzburg Festival. Christina Daletska sends greetings from France, where she is singing Zerlina in a production of “Don Giovanni” under Christopher Moulds. Her resumé on the Lyon Opera House Web site includes a

prominent reference to the Young Singers Project. All her e-mail says is this: “I’ve seen the Credit Suisse video on the Internet. Bril-liant ! Rehearsals here at the opera house are very strenuous. Got to go.”

Another time, another place: In Salzburg Christina talks happily about her future en-gagements, starting off with several in Lyon.

On March 20, 2010, she sings Cherubino in “The Marriage of Figaro” at the Graz Opera, and in 2011, she will tour Europe as Idamante in “Idomeneo,” with Thomas Hengelbrock conducting.

At the same time we see Hrystyna visiting a school for musically gifted children in Lviv, taking violin lessons with her mother, appear-ing as a violin or viola soloist with various orchestras all over Europe, studying piano at the age of 19 at the Zurich Academy of Music – and all this with a single desire, not openly expressed: to become an opera singer. How far does she think she’ll go? “If I can make a living from singing,” says Christina,

“then I’ll be happy. And I’d like to become well-known enough so that when I’m an ambas-sador for Amnesty International and people hear me talk about the evils in the world, they will take me seriously.”

We look forward to following the careers of Christina Daletska, Terry Wey and the oth-er Young Singers with great interest. schi

Credit Suisse is convinced that corporate responsibility toward the environment and society at large is a key factor for economic success.

“The question isn’t whether they will have careers, it’s what sort of careers they will have and how long they will last.”Michael Schade, initiator of the Young Singers Project

1 Christina Daletska enjoying her highly successful performance as part of a public master class. 2 Marjana Lipovsek with Sara Hershkowitz: Body control is very important to opera singers. 3 You can learn an enormous amount by listening. For Nahuel Di Pierro it makes (almost ) no difference whether he’s listening to performances in a master class or to bass baritone Luca Pisaroni singing Figaro, the role he is covering in Salzburg.

For more articles, profiles, interviews and a video about the Young Singers Project, visit www.credit-suisse.com/bulletin.

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Honors for Performers At the Lucerne FestivalPeople in musical circles may not yet have heard of Andriy Dragan or Konstanze von Gutzeit. But that will soon change. The Ukrainian pianist and German cellist gave impressive performances in the Debut series at the Lucerne Festival.

Andriy Dragan opened his concert to a full house at the Casineum in Lucerne with Schubert’s “Wandererfantasie.” He played with strong emotion, almost feverishly, pound-ing the keys, then tenderly caressing them, eyes aloft. Where was his imagination wan-dering to in these moments? Perhaps back to Lviv, Ukraine, in the early 1990s. Andriy’s parents, both pianists, were just about to get their concert diplomas. No wonder they were practicing day and night. This was when he first heard Schubert’s “Wandererfantasie,” played by his father. Little Andriy listened to them for hours, whether he wanted to or not – the piano stood right next to his bed. They all lived together in a single room. His parents made sure that Andriy didn’t start

playing at too early an age. But he subse-quently attended the Solomiya Krushelnytska music boarding school in Lviv for 11 years.

After attending a master class in Lviv with Adrian Oetiker, Andriy decided to continue his musical education at the Basel Univer-sity of Music.

There he gave his diploma concert in June of this year. This was followed in August by a brilliant performance in the Debut series at the Lucerne Festival. The distinguished jury, presided over by Pierre Wavre, director of the Lausanne Conservatory, named Andriy the winner of the Prix Credit Suisse Jeunes Solistes. This was the fifth time the prize, sponsored by the Credit Suisse Jubilee Fund, has been awarded.

“Your skill, your elegance and your cha-risma have impressed me deeply,” said Urs

Rohner, Vice Chairman of the Board of Direc-tors of Credit Suisse, as the prize and its CHF 25,000 endowment were bestowed on the young musician. “That was a superb perfor-mance.”

Andriy received particular praise from the music critics present, some from France and Japan, for his interpretation of the especially difficult suite “Im Freien” by Béla Bartók. No one is in any doubt that Andriy will make his way as a musician, like his predecessors Sol Gabetta (cello, 2001), Pawel Mazurkiewicz

(piano, 2003), the Tecchler Trio (2005) and Aniela Frey (flute, 2007).

Gianni Bergamo Classic Music Award

The German cellist Konstanze von Gutzeit, who performed in the Debut series at the beginning of September, is also a deserving prizewinner. She beat Umberto Clerici of Italy and Sebastian Diezig of Switzerland in the competition for the EUR 25,000 Gianni Bergamo Classic Music Award from the charitable Accentus Foundation. Her perfor-mance at the Lucerne Festival showed both humor and poetic sensibility, and her inter-pretation of the modern works by Henri Dutilleux and Francis Poulenc made a par-ticularly strong impression.

Last year, the Gianni Bergamo Classic Music Award for composition was conferred on Panayiotis Kokoras, who ultimately pre-vailed over Simone Movio and Carlo Ciceri. Next on the agenda will be a chamber music competition. schi

“Even when you’re not at the piano practicing, you’re always preoccupied with music.” Andriy Dragan, pianist

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1 Cellist Konstanze von Gutzeit has a great career ahead of her. 2 The Lucerne Festival performance of Ukrainian-born Andriy Dragan, a graduate of the Basel University of Music, was impressive in every way. 3 Urs Rohner, Vice Chairman of the Board of Directors of Credit Suisse, awards the top prize to Dragan.


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Happiness for Helpers and Those in NeedThe aid organization Child’s Dream Foundation was established in 2003 by Swiss nationals Marc Jenni and Daniel Siegfried, who had previously worked in the financial sector. By helping those in need, they found the happiness and meaning that had been missing in their lives. The organization now includes a staff of 30, who work to build schools as well as to promote health care. A visit to the organization’s headquarters in Chiang Mai, Thailand.

Finally, with the help of directions communi-cated by cell phone in the Thai language, the taxi driver is able to find the building. The windowless structure stands out among the surrounding one-story buildings. “Until just over a year ago, we worked out of a small house – now this is the headquarters of Child’s Dream,” says Daniel Siegfried, one of the founders of this charitable organization.

“The contributions of three donors allowed us to buy this building, otherwise we would not have been able to afford it. When we travel, we almost always stay with friends. Our policy is to use less than 10 percent of our donations for administrative costs, a minimal amount compared with the 40 percent spent by some organizations in the US.” Together with Marc Jenni, Siegfried founded Child’s Dream six years ago. Both had lived in Asia for several years while working in the finan-cial sector – and had witnessed the prob-lems plaguing that region. As time went on, they felt increasingly compelled to take ac-tion, and decided to devote their knowledge and energies to helping needy children.

“Many humanitarian disasters take place in the Greater Mekong Subregion,” says Sieg-fried.“ Poverty, disease, political persecution and sexual exploitation are widespread, and

children are most severely affected.” Many have come to Thailand as refugees or illegal immigrants. Stateless and undocumented, they have no access to the Thai system, and are thus unable to use public institutions such as hospitals and – above all – schools.

Donations From All Over the World

These problems are the focus of the work of Child’s Dream, which implements programs to improve health care for children while also

building preschools, schools and other edu-cational facilities, and providing educational materials for over 55,000 children. “We are delighted that donors have responded to our ‘Let’s get to work’ attitude. At first, 90 percent of our donations came from Switzerland, but now 50 percent of our funding comes from countries like Singapore, Japan and from Hong Kong. The Credit Suisse APAC Philan-thropy Committee has just awarded us a grant of 250,000 dollars – our largest single corporate donation to date. This will allow us to build 30 new classrooms!” Daniel Sieg-fried’s enthusiasm is undiminished, even after more than 60 projects have been suc-cessfully completed. He now has the support of a staff of 30 in promoting these good causes. Three years ago, a third Swiss nation-al, Manuela Bianchi, joined the organization.

“At that time, Marc and Dani had only four employees, and one of them was the house-keeper,” says Mrs Bianchi, who had formerly worked in human resources in Asia. Her ex-perience in the Asian labor market has not only led to an increase in donations, but it

“The future of a village community is its children. And that’s why they are the focus of our work.”Marc Jenni

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1 In Southeast Asia it is usual to wear a school uniform until university level. 2 The Lao language uses an alphabet very similar to that used in Thai. 3 Graduates of the English-language program: Child’s Dream Foundation currently finances the entire studies of approximately 80 students.

Credit Suisse 47


has also allowed the organization to hire a large number of people within a short period of time, making additional projects possible.

Shortages on Every Front

Apart from donations, having good people is critical to the success of Child’s Dream. Every time a project solved one problem, others came to the fore: energy or water shortages,or an outbreak of malaria. Child’s Dream had limited its mandate to helping children, but as Daniel Siegfried points out: “Our approach to sustainable development meant not only helping children to develop into responsible,active members of the community, but also ensuring that their villages were able to shape their own future. With this in mind, we

established the diversethics Foundation in 2006.” Four long-term programs are now in progress under the auspices of this founda-tion. The Malaria Control program works with a clinic in border regions to test the popula-tion for this disease, since early detection allows for successful treatment. The Basic Health Interventions for Children program seeks to ensure that pregnant women re-ceive the best possible nutrition, and that infant mortality is reduced. Currently, that rate is extremely high in many poor regions. Another program was established in the wake of the destruction caused by Cyclone Nargis; the diversethics Foundation provides on-site aid in the form of emergency medical assistance, and is also helping to rebuild infrastructure and restore food production. The fourth program was created to enable students from neighboring countries to study at Thailand’s universities.

Scholarships: Sole Hope at a New Future

Students find out about these scholarships only through word of mouth, since computers, Internet access and even typewriters are rare in their home countries.

“ Applications – most of them handwritten – find their way to us in a variety of unusual ways, some being hand-delivered by a

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“We work closely with the village communities in order to gain their active participation.”Daniel Siegfried

Child’s Dream Foundation, established in 2003 by the Swiss nationals Marc Jenni and Daniel Siegfried, is headquartered in Chiang Mai, Thailand. It encourages disadvantaged village communities in the Greater Mekong Subregion to take control of their own futures. The organization works closely with these communi-ties to raise the standard of children’s health and education and to improve their families’ socioeconomic conditions.

Child’s Dream focuses its efforts on educational infrastructure (preschools, primary and secondary schools, vocational schools, and institutions of higher education). The organization also works to improve health care, through such programs as the Children Medical Fund, and provides educational materials for over 55,000 children.

It can be very difficult to reach the remote schools when unsurfaced roads remain the only option.

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Thailand Is Homebulletin met Daniel Siegfried ( left) and Marc Jenni during their last visit to Switzerland.

bulletin: What tasks do you have to

perform when you come to Switzerland?

Marc Jenni: The main reason for us to come is fundraising. We have a busy program of meetings with existing and new sponsors, as well as with other organizations and inter-ested parties.

How do you feel when visiting your

former home?

Daniel Siegfried: As soon as we arrive in Zurich, we start looking forward to going back to Thailand, which after all these years has become our home. When I visit Switzerland, I miss the carefree and warm-hearted nature of the Thai people – the Swiss lack sponta-neity. In Thailand, people have no idea what they’ll be doing in two days’ time, whereas in Switzerland people fill their diaries three months in advance. What we miss in Thailand are the different seasons, especially the snow. And our families of course.

Which projects are you particularly

involved in at the moment?

Marc Jenni: We are currently building schools in six Laotian villages, which is a major proj-ect. In Cambodia, we have opened an office that we are now establishing as a full partner by trying to continuously improve its timing and reporting standards. And then we are expecting the Burmese elections planned for 2010 to trigger a wave of migration in Thai-land. In anticipation of this, we are already extending our existing infrastructure of schools and health programs.

What direction will Child’s Dream take

in the future?

Daniel Siegfried: We don’t want to go on growing ad infinitum, but to build upon the solid infrastructure that we have put together in the last five years. Our aim is to place the operational side in local hands so that we can devote ourselves in detail to the strategy and major projects.


48 Credit Suisse

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priest,” explains Manuela Bianchi. “An insti-tute collects and sorts the applications for us, and then we carry out the selection pro-cess.” Donors can influence the selection process by indicating preferred courses of study or deciding whether to support young women or young men. “We look for sponsors only after we have chosen the students. There was clearly an urgent need for scholar-ship money, and we intended to meet that

need in one way or another,” says Daniel Siegfried. And Manuela Bianchi adds: “It makes sense to support students, since they are potential agents of change who will take democratic ideals back with them to their home countries.” An initial group of eight students was selected in 2006, and today four of them are receiving assistance from Credit Suisse.

The program has now grown to include 80 students, a good two-thirds of whom are women. “We are extremely proud of our first eight students, all of whom have consistent-ly earned excellent grades. They recognize that this is probably their only opportunity to change their lives, and they must not squander it,” says Manuela Bianchi, obviously pleased by the success of this program. It is clear from the low dropout rate that these young people are very serious about their studies. Over the past three years, only four students have left the program – two of them moved to the United States, one had a child, and one left for unknown reasons.

The Path to Personal Happiness

But what will happen to these students after graduation? A third of them will return to their home countries and pass on what they have learned, for example as teachers. Another third will work for an NGO, as journalists, translators or project managers. The rest have not yet decided on their goals, but many of them will pursue a career in health care. Another option, a program called Business Angels, has been available for one year. Dur-ing their last year of university studies, stu-

dents can submit a proposal for a sustainable project that fulfills the following conditions: It must create at least one job, benefit the community, cost less than 20,000 dollars in startup funds, and be self-supporting after a certain length of time. For instance, they might open an office supply store or a small lending library.

The leaders of the organization sometimes discuss the question of whether these young people should be required to return to their home countries, or whether they should have the opportunity to move to the United States, for example, or to work in a bank. So far, none of them has chosen to do so, and this is likely to remain the case. Indeed, if the

attitude of these young people is at all simi-lar to that of the founders of Child’s Dream, they, too, will choose to follow a path of serv-ing others – and they will recognize that it can lead to their own happiness as well. This was true of Marc Jenni, who enjoyed his work in the financial sector, but sensed that some-thing was missing in his life. Jenni found that missing piece through his work for the orga-nization, helping the needy. No doubt Daniel Siegfried speaks for both of the founders of Child’s Dream in answering the question of what it was that motivated him to become involved in doing charitable work. He sums it up neatly with his straightforward response:

“It just feels exactly right.” Regula Gerber

1 The Bung Kaew School was in desolate condition, and with every storm became more dangerous for the students. 2 In the new school, the mud is guaranteed to stay outside – and security is guaranteed inside. 3 The veranda of the Pakkam School is particularly important, as the rainy season lasts from May to October. 4 The building materials are transported to the school by a Child’s Dream team using the only available route.

“We monitor our students’ progress very closely, as they are experiencing a new world here.”Manuela Bianchi

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Credit Suisse 49

Enduro Challenge Triathlon

From Tower to TowerWith a lead of 62 minutes, the Credit Suisse team won the Enduro Challenge Triathlon on August 28. The team of Paul Annegarn, Matthew Caldwell, Oliver Caldwell, ChristopherDettmar, Rebecca Glover, Helen Haworth, Ben Jervis and Christopher Twycross beat Barclays Capital and Deutsche Bankwho finished in second and third places, respectively. The annual relay race, which sees competition between six leading financial firms, features a 150-km run from London to Dover along England’s Channel coast, followed by a 40-km swim to Calais, France, and a 300-km cycle ride from there to Paris. This year, there was no Channel swim due to rough seas; instead, competitors had to complete a swim within the con-fines of Dover harbor.

It was a race from “Tower to Tower” – starting at the Tower of London, and finishing at the Eiffel Tower in Paris. All the teams raised considerable sums of money for their chosen charities. This year too, Credit Suisse supported The Place2be –an organization that provides support to children from de-prived backgrounds. The collection will help the charity move toward meeting its objective of expanding the number of schools with which it works to around 190 by 2010. During the two years Credit Suisse has supported the organization through fund-raising events, the charity has benefited to the tune of more than 625,000 British pounds.

Habitat for Humanity

Tackling the Housing Shortage Together

Nearly 1.6 billion people globally face housing problems. That is why Credit Suisse has a long history of supporting Habitat for Humanity and has entered into a global partnership with Habitat for Hu-manity International. On a regular basis, Credit Suisse employees volunteer to help build homes with low-income families. For in-stance, the Americas Foundation has organized global employee teams in Sri Lanka and India follow-ing the devastating tsunami. In the US, Credit Suisse volunteers have supported projects in New York, Raleigh, San Francisco, Atlanta, Boston, Princeton and the areas affected by Hurricane Katrina. Volunteers from the Singa-pore and Hong Kong offices travel regularly to Indonesia and China to help with construction work. And London-based employ-ees also participate in various reconstruction and restoration projects.

In June alone, 95 employees from six branches volunteered with Habitat. This involved the Credit Suisse offices in Buenos Aires, Mexico City, Seoul and Wroclaw volunteering with Habitat for the first time. The Private Banking office in Dallas took this commit-ment a step further by enlisting the help of clients in the volunteer effort. Lalita Advani

Health Care

Awareness Day

As a result of the shortcomings that were brought to light in a num-ber of Zurich nursing homes, it has only been in the last few months that the topic of violence against the elderly has become the topic of public discussion. With the support of the Credit Suisse Jubilee Foundation, an awareness day at the Zurich cantonal center for health care training (ZAG) in Winter-thur will now be held on November 24 for specialist staff whose profes-sion brings them into contact with the elderly. Andreas Schiendorfer

Switzerland

Young Employees for Credit Suisse

For many years, Credit Suisse has been a strong advocate of long-term initiatives aimed at developing young talent. This year too, more than 200 apprentices and high school graduates started their training program in August. At the end of July, a full 96 percent of our apprentices successfully com-pleted their final apprenticeship e xamination. Credit Suisse goes to great lengths to retain its appren-tices and high school graduates a fter completion of their training – developing their qualifications and success to strengthen our work-force. Once again this year, Credit Suisse is pleased to announce that more than 80 percent of those who are completing their training, and who meet the requirements and want to move straight into a full-time position at Credit Suisse will be continuing their employ- ment with our bank. Mandana Razavi

Further information on Credit Suisse training programs: www.credit-suisse.com/careers/en/

Mandana Razavi

Credit Suisse is convinced that corporate responsibility toward the environment and society at large is a key factor for economic success.

http://www.credit-suisse.com/careers/en/

“Made in USA”: On US soil next to the Mexican border city of Tijuana – in some cases right behind the heavily fortified border fence – firms assemble components that have been manufactured in Mexico.

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Mexico: In the Shadow Of Its Powerful NeighborThe Mexican dictator Porfirio Díaz (1830 –1915) once said: “Pobre México, tan lejos de Dios y tan cerca de Estados Unidos” – which in English means: Poor Mexico, so far from God and so close to the United States. Its geographical proximity to the US has not only shaped Mexico’s history, but also played a key role in defining the future development of the country’s economy.

Text: Pascal Rohner, Equity Research Zurich

Strong ties with the US are probably the key feature of the Mexican economy. Since Mex-ico’s integration into the North American Free Trade Agreement (NAFTA) in 1994, Mexican exports to the US have quadrupled to more than 200 billion US dollars annually. Many American as well as multinational firms – such as Ford, General Motors, the former Daimler Chrysler, Siemens, Philips and Toshiba – have outsourced elements of their produc-tion to Mexican border cities such as Ciudad Juáres, Tijuana and Mexicali. Right next to the US border, these firms – known as “maquiladoras” – assemble individual com-ponents or semifinished goods to produce three-quarters finished or finished goods that are destined exclusively for export to the US. Today around 80 percent of Mexican ex-ports are destined for the US market, while exports to the US account for about 20 per-cent of Mexican gross domestic product.

Apart from exports of crude oil, consumer electronics and automotive components are the most important categories. But there are also other links between the two neighboring

countries. For example, 50 percent of Mexi-co’s foreign direct investment comes from the US. These capital flows exhibit a very strong correlation with the earnings growth of US companies.

For a long time, Mexico has consequent-ly benefited from booming consumer spend-ing and rising corporate earnings in the US. So it comes as no surprise that the most se-rious US recession in decades has hit the Mexican economy hard. The crisis in the au-tomotive industry and difficult consumer en-vironment in the US have led to falling Mex-ican exports. Due to the meager earnings of US firms and the slashing of investment programs, foreign direct investment is likely to be halved in 2009 compared with the pre-vious year.

Remittances Are Drying Up

Remittances sent by Mexicans living in the US to help their families back home have also been hit by the US recession. At 25 bil-lion US dollars in 2008, these payments rep-resented the most important source of for-

eign currency earnings after exports of oil. In the period from October 2008 to January 2009, monthly payments were down 40 per-cent. For all these reasons, a severe reces-sion in Mexico was inevitable. The first quar-ter saw gross domestic product fall 8.0 per-cent year-on-year. For Mexicans, the fact that they didn’t cause the crisis themselves this time round is only a minor consolation.

The Mexicans can hardly be held respon-sible for the outbreak of swine flu at the end of April either. Quite the reverse: The Mexi-can authorities seem to have acted in a very quick, responsible manner to halt the spread of the H1N1 virus. Many schools, bars, night-clubs and shopping malls were closed for several weeks. Even soccer matches took place in empty stadia. But it was the Mexican tourist industry that was worst hit. Tourism receipts constituted the third-biggest source of foreign currency earnings in 2008 at more than 1.3 billion US dollars (about 1.5 percent of GDP).

Following the outbreak of swine flu and given the large number of worried tourists, >

52 Economy Mexico


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a substantial number of travel firms removed Mexico from their itineraries – in some cases until the end of 2009. The big cruise ships avoided Mexican ports like Acapulco, Cancún, Los Cabos and Puerto Vallarta. According to the Confederation of the Mexican Cham-bers of Trade, Service and Tourism (Con-federación de Cámaras Nacionales de Co-mercio, Servicios y Turismo), hotel occupancy nationwide fell to around 10 percent in mid-May and the start of June. The airport in Cancún recorded a 63 percent drop in inter-national passenger numbers in May. Consid-erably fewer tourists visited the Mexican coastal city on the Mayan Riviera in June (down 38 percent) and July (down 25 per-cent). The situation has improved somewhat since then, but talk of a normalization would be misplaced. The Mexican Tourism Secre-tariat expects a decline in foreign tourism earnings of more than 40 percent across 2009 as a whole.

Reminiscent of the “Tequila Crisis”

Following the damage caused by the US re-cession, swine flu resulted in a further wors-ening of the economic situation in the second quarter. Gross domestic product fell 10.3 per-cent year-on-year. Mexico’s central bank an-nounced July 29 that it expected GDP to con-tract by between 6.5 and 7.5 percent in 2009. In April, it had been expecting a fall of only 4.8 percent. Thus the correction is likely to be more severe than during the last recession in 1995, when GDP fell a “mere” 6.2 percent versus the previous year. The Tequila Crisis had begun in December 1994, when the Mexican government was no longer able to maintain the peso’s fixed exchange rate with the US dollar. This led to a crisis of confidence, and ultimately to a massive withdrawal of foreign capital, which within only a few days resulted in a currency devaluation of up to 50 percent. With the capital withdrawal, sharp rise in the cost of borrowing, and a surge in inflation to more than 50 percent, the cur-rency crisis ultimately developed into a gen-eral economic crisis. Mexico’s banks had run up debts largely on the liberalized markets of the US. The peso’s devaluation sparked a dramatic increase in the cost of borrowing. Staring bankruptcy in the face, many Mexican banks were ultimately taken over by foreign banks in the vast majority of cases. Following the crisis, Mexican firms were forced to bor-row from foreign lenders, while the govern-ment’s finances were severely affected by high-interest government securities held by

the – now foreign-owned – banks. Since the Tequila Crisis, however, Mexico’s macroeco-nomic situation has improved significantly. Net debt as a percentage of GDP was re-duced from nearly 50 percent in 1995 to 8 percent in 2008. First, government debt was reined in. Second, US dollar loans were replaced by loans in Mexican pesos. Thus, in the last five years alone, the share of govern-ment borrowing in US dollars fell from 95 percent to 63 percent by the end of 2008. Over the last few years, Mexico has also built up currency reserves in excess of 70 billion US dollars. In addition, a 30-billion-dollar swap arrangement with the US Fed-eral Reserve and a 47-billion-dollar flexible credit line with the International Monetary Fund ( IMF) have ensured greater currency stability, and reduced the risk of a more sig-nificant devaluation of the peso. As the IMF credit line is aimed at countries with solid macroeconomic fundamentals, it sent a pos-itive signal to investors about the economic health of the country. John Lipsky, the IMF’s first deputy managing director, said in April that the Mexican authorities had in the past paid a lot of heed to political implications, and that Mexico was an excellent candidate for the new flexible credit line. Mexican firms too have reduced their proportion of dollar debt, replacing it with local loans. This means Mexico is much less dependent on external capital flows. As a result, the Mexican peso’s mild, temporary depreciation no longer trig-gered a negative chain reaction and inflation remained under control. Indeed inflation has actually continued to moderate. It fell from 6.5 percent in December 2008 to 5.4 per-cent in July 2009, and is likely to continue to reduce in the coming months. Modest in-flation in particular makes the current situa-tion for Mexicans much easier to bear, above all by comparison with 1995 and previous currency crises.

Surviving the Crisis Relatively Well

The recently won macroeconomic stability and expected recovery in the world’s econ-omy – and therefore in Mexican exports – suggest Mexico is likely to emerge from the crisis relatively unscathed. For 2010, we are expecting GDP growth of 4 percent again. Nevertheless, the recovery would seem to be built on shaky ground. The improved state of government finances has been achieved largely on the back of rising oil exports. M exico’s government finances will remain heavily dependent on oil exports in the future

1 Net DebtSince the 1994 Tequila Crisis, net debt has fallen continuously from nearly 50 percent to 8 percent. Source: Datastream, CS

2 Falling Oil ProductionOil production in Mexico has been falling for years, and in 2008 hit a 13-year low. Source: CS, US Department of Energy, Datastream

3 US Is Dominant Export MarketAround 80 percent of Mexican exports are destined for the US market. Source: Banco de México, Credit Suisse


Mexico Economy 53P

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too. Mexico is the world’s seventh-largest oil producer. Oil exports account for “just” 5 per-cent of GDP – at first glance a moderate figure by comparison with other oil-exporting nations. However, the high tax burden placed on state oil company Pemex means oil re-ceipts now account for almost 50 percent of total government income.

Dwindling Oil Reserves

The big problem is that Mexico’s proven oil reserves are gradually running out. Cantarell, one of the biggest oil fields ever discovered in the world, will likely have been exhausted in a few years’ time. Oil production in Mexico is currently dropping by approximately 10 percent each year, and in 2008 hit a fresh all-time low. State oil company Pemex has in recent years lacked the financial re-sources to invest sufficiently heavily in new exploration projects. Access to Mexico’s oil reserves continues to be blocked to foreign oil firms. Mexico does possess considerable potential reserves. In particular, the onshore field of Chicontepec and deep-sea reserves in the Gulf of Mexico have great potential. However, exploration is financially and tech-nically problematic. The long-expected en-ergy reform passed at the end of 2008 allows for a more flexible process of award-ing contracts and for greater flexibility in terms of investing the surplus income from Pemex. The risk associated with the explora-tion and development of new fields, as well as the attendant costs, will nevertheless con-tinue to be borne by Pemex, with the private sector still prohibited from making direct investments in the oil sector. The scale of private investment remains limited, and it is highly uncertain whether Mexico can manage to stop the slide in oil production over the next few years.

Comprehensive Tax Reform Needed

Tax receipts outside the oil sector amount to just 9 percent of Mexico’s gross domestic product. This is the lowest figure of all OECD countries, and also well below the Latin American average of 15 percent. President Felipe Calderón’s efforts to implement a wide -ranging tax reform package have so far failed in the face of political resistance. It remains uncertain whether the political desire for reform will improve to any great extent in the near future. Calderón’s govern-ing party – the conservative National Action Party (PAN) – was among the big losers in the parliamentary elections at the start of

July. The winner of the election was the larg-est opposition party, the Institutional Revo-lutionary Party (PRI ). With its eyes on the next presidential elections, which are sched-uled for 2012, it is therefore rather unlikely that the PRI will take part in the unpopular decisions that would be necessary for the institution of a comprehensive tax reform plan. Ironically, it is the renewed rise in oil prices that could divert attention from the problem, and delay the necessary oil and energy reforms.

Conclusion: Mexico is likely to survive the worst recession in decades relatively un-scathed thanks to the macroeconomic stabil-ity it has established. The biggest challenge

now facing the nation will be to reduce the degree to which the government’s finances depend on oil, and to create more incentives for investment in the oil sector. If the neces-sary structural reforms can be successfully implemented, the country’s growth potential is likely to improve and the domestic market in particular will be strengthened. This would also reduce Mexico’s high level of depen-dence on the US economy. <

Top Every day, thousands of trucks carrying exports destined for the US cross the border near Tijuana. Lef t To stem the tide of illegal immigrants, the US has in recent years massively strengthened the walls and fences on its border with Mexico.

54 Economy Storage Technology


On the Way to the Ultimate Universal MemoryResearch is breaking new ground in the development of innovative data storage media. New nanoenhanced memories are likely to confirm a continuation of Moore’s Law beyond 2010.

Text: Miroslav Durana, Nanotechnology Research, Zurich

Evolution of Moore’s Law Since 1960 and Expected Development to 2010The assumption made by Moore’s Law that the number of transistors would double every two years is still a valid one, since the use of nanotechnology is allowing the development of innovative data storage media that are more intelligent, more rapid, more cost -effective and more universal in their usage. Source: Computer Measurement Group, Credit Suisse


Storage Technology Economy 55

Since the late 1960s, the innovation capa-bilities of information technology ( IT ) have been very high, bearing out the famous Moore’s Law, a visionary prediction given by the Intel co-founder Gordon Moore in 1965. This original law stated that the number of transistors (reflecting increased functional-ities of many electronic devices such as c omputers) would double every two years. Almost all the capabilities of digital informa-tion technology have been linked to this law, processing speed and memory capacity for instance, and have been empirically observed for nearly a half century. However, a point has been reached at which the impressive growth of many functionalities of microelec-tronic devices is not expected to be main-tained with the current complementary met-al oxide semiconductor (CMOS) technology. Hence, many companies are developing al-ternatives to provide better solutions at the nanoscale level.

Advance Into a Molecular Regime

In the next ten years and beyond, silicon tech-nology will enter a near-molecular regime with feature sizes below 20 nanometers aimed at obtaining even better performance (speed, complexity, reliability, costs). The In-ternational Technology Roadmap for Semicon-ductors ( ITRS) expects that today’s standard semiconductor (silicon) technology may reach the physical limits of possible optimization by 2020. By then, a transistor could have an electrode (gate) length of 6 –7 nanometers and a memory chip a width of 14 –15 nano-meters. Such dimensions are far beyond the capabilities of today’s technologies.

Therefore, many semiconductor compa-nies are currently working on the integration of carbon nanotubes and nanowires into i ncumbent silicon technology. Many elec-tronic applications are expected to gradu-ally shift toward molecular systems. Nano-imprint lithography, silicon nanowires, phase change memory, three -dimensional chips and other technologies are among the many emerging technologies that may extend the life of Moore’s Law, the famous computing principle whose demise has been predicted repeatedly over the last few decades.

In order to achieve this next level of min-iaturization, strong private investments of around USD 20 billion in 2010 are expected in the nanoenhanced IT sector, implying a three -year growth of more than 30 percent by then. Many applications such as nanoenhanced mass storage media, printed elec-

tronics, radio frequency identification tags and organic light-emitting diodes are ex-pected to benefit from this spending and to increasingly come on the market by 2012.

Rapid Memories Without Electric Power

The main features of next-generation data storage media are that they will be: (1) non-volatile, (2) fast, (3) cheap, with (4) very long life (high number of read/write cycles) and (5) a very high data density. The term non-volatile means that data entry in the chip does not require electric power.

Non-volatile storage media available in today’s market are hard drives and flash memory. While hard drives do not permit r apid data access (which is why computers go through a time-consuming boot – or down-load – process after being turned on before they are ready for use), flash memory (in dig-ital cameras, for instance) is expensive to produce and – compared to volatile storage such as dynamic and static random-access memories (DRAM and SRAM ) – likewise slow in granting access. Some new technol-ogies are aiming to become the ultimate uni-versal memory, i. e. to fulfill the five criteria mentioned above. Nanoscale will play a key role with all of them. Many technology com-panies have active development programs to develop the following key memory tech-nologies:

FRAM (Ferroelectric RAM): FRAM is (together with spintronics) the only commer-cially available new storage technology. It is based on the combination of a conventional DRAM chip and an additional ferroelectric nanometer layer, which is used as a non- volatile memory element whose electrical properties are altered by a magnetic field.

Spintronics: In conventional electronic storage chips (DRAM or SRAM), the charge of the electrons serves as a data carrier. Spintronic technology uses the spin of atoms and electrons to store information. The spin can be described as the particle’s inner an-gular momentum, and it can be influenced by magnetic fields. Giant Magneto-Resis-tance (GMR) is the most advanced technol-ogy in this group and is already in use in sen-sors, ultra-sensitive reader heads in hard disks and magnetic RAM (MRAM ).

PRAM (Phase-Change Memory): Data is stored in storage materials that change their phase (from crystalline to amorphous) and thus their electrical conductivity, which can be used to create electronic storage. Energy Conversion Devices possesses the

sole patent on the technology and Samsung Electronics (as licensee) started mass pro-duction last month. This PRAM can rewrite data without having to erase previous data and is 30 times faster and has 10 times the lifespan of flash memories. Moreover, low power consumption is achieved by confining the switching volume to sub -100 nm scale by using UV nanoimprint lithography.

Today’s highly innovative research efforts are constantly leading to new nanoenhanced memory technology releases, such as:

the first 40 -nm class DRAM -based pro-cess technology from Samsung Electronics, which is expected to shorten the time-to-market cycle by 50 percent to one year, in-crease production volumes by 60 percent, and offer energy savings of 30 percent.

Toshiba’s 32-gigabit (Gb) NAND flash memory chip, based on a new 32-nm ad-vanced flash memory technology.

Strong Growth Expected

The main producers of these key memory technologies include Ramtron (for FRAM ), Sony, Infineon, Toshiba and Fujitsu (for FRAM and spintronics), IBM and NVE Corp. (for spin-tronics) and Samsung (for all three technolo-gies, as cited above). Due to this acceleration of nanoadvanced memory process technol-ogy and new storage media releases in the near future, revenue growth is expected to exceed 40 percent ( three -year CAGR ) to attain nearly USD 7 billion by 2012.

Credit Suisse therefore advises investors to selectively gain exposure via equity invest-ments into the firms active in this field, and for investors who wish to get an exposure into nanoenhanced-linked products in a broader sense, to invest into a broadly diver-sified nanotechnology portfolio.

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56 Economy Wisdom of Wizardry

A World Changed As the old adage goes: “The more things change, the more they stay the same.” This acutely perceptive observation has long held true for all areas of human behavior, including investing. But in the wake of the current credit crisis, long-term investors can expect to see fundamental changes in the finance industry and to the broad industrial landscape.

Text: Michael O’Sullivan, Research UK, London

Given that we have had some 28 recessions in the US economy alone over the past 150 or so years, the contraction of the economic cycle was inevitable, though the shock that brought on the recession is of course much less typical of the kinds of slowdown we have become used to. Indeed the banking crisis and general panic of 2008 in particular are probably more like the crashes seen in the late 19th and early 20th centuries ( i. e. the Crash of 1873 and the Bankers’ Panic of 1907).

At the same time, the economic “cycle” of the past 15 years has been unusual, in length and rate of growth – it has been a period of great prosperity, not just in the developed world, but very much across a range of emerging economies. The recession of 2001 was only a brief interlude in an otherwise remarkably healthy period of growth. This period, termed the Great Moderation, fea-tured strong and steady economic growth against a backdrop of generally low inflation and burgeoning globalization. For a while this near perfect state of affairs was referred to as the “Goldilocks” scenario. Like the por-ridge in the fable, developed economies like the US were neither too hot nor too cold.

We are now largely disabused of the secrets behind the “Great Moderation” – it had produced its own enormous excesses and imbalances, and to a very large extent its success had led to a dangerous compla-cency on the part of many bankers, policy

makers and politicians, and to a fatal lower-ing of expectations of volatility and risk.

The elongated nature of the expansion caused many financial market practitioners and economists to embed very optimistic views of return and risk into models, and sub-sequently their behavior. In this sense, mar-kets and many economies were unprepared for the shock when it came.

Bubble Trouble

There is a much broader and very interesting psychological or behavioral issue here which relates to how humans create and allow themselves to be prone to asset price bub-bles. One book that has been rediscovered by many recently is Charles MacKay’s “Extra-ordinary Popular Delusions and the Madness of Crowds.”

The book is an examination of asset price bubbles going back to the Crusades. When he wrote the book in 1841, MacKay may have very well imagined that his book would alert people to the dangers of bubbles and that as a result they would not reoccur. But, from the Railway Bubble of 1947 to the “dot.com” bubble of 2000, bubbles have regularly re-appeared in financial markets.

What is interesting about these bubbles is that we very often see the same template repeated over and over again. Usually a shift in expectations or new technology (the Inter-net for example) sparks an upward move in prices. This boom then becomes a bubble

where cheap money and easy credit are made available. Then, investors discard fun-damental forms of analysis for somewhat less rational ones, and their general zeal and appetite for risk is little match for the aptitude of regulators.

When the bubble is in full flow, it produc-es many side effects – such as the revision of economic logic (“this time it is different”) as well as plenty of spurious wealth effects. One of the great bubbles was created in France in 1720 by John Law, a Scot. While at the same time the Mississippi Scheme bubble was taking hold in England, Law’s initially successful plan to swap government debt for corporate equity led to a thriving derivatives market, exaggerated money sup-ply, inflation (especially in luxury goods) and finally, a brutal economic crash. Though Law can be credited with developing a range of economic theories and innovations, he was essentially an alchemist.

His tradition has been proudly continued by bankers, mortgage brokers, financiers and some policy makers over the past ten years, reaching its crescendo with the credit crisis. So-called innovation dulled the trans-parency of many financial products and sharply increased the complexity of intercon-nected financial markets, while at the same time failing to innovate away liquidity and tail risk. Poor regulation and skewed incentive structures meant that bankers and mortgage sales people had an interest in building up


Wisdom of Wizardry Economy 57

large mountains of low-quality debt, while having little downside in that debt’s default.

Sorcerer’s Apprentices

In the Anglo-Saxon countries of the UK, US and Australia, as well as Ireland and Spain, these trends were pronounced. In Ireland and Spain, matters were worsened by the fact of their entry to the Eurozone. As a result, inter-est rates were inappropriately low, settling off a flood of credit into these economies. Indeed, levels of household debt (to GDP) and house prices (relative to income) in these countries have hit extremes in recent years.

Against this backdrop the financial engi-neers and alchemists were bound to be found out, and to use Goethe’s phrase, they have been shown up as “sorcerer’s apprentices.” If the lessons of the credit crisis are learnt, then financial sorcery will need to be curbed. So far the regulatory backlash in the wake of the credit crisis is not as severe as some fi-nanciers had feared, and not as far-reaching as others would hope.

It will take some time before the many imbalances that caused and result from the credit crisis have settled. Then we can think again about “normal” economic cycles. Ensur-ing that these business cycles are not “abnormal” requires a number of important changes in policy making. They are the cre-ation of new institutions to help adjust n ational fiscal policy and regulation to imbal-ances arising from regional/multinational monetary policy, more explicit consideration of asset prices and the potential for asset price bubbles by central banks, more clever and in-depth regulation of important financial institutions, and an end to the widespread and indiscriminate separation of risk taking and risk bearing.

Industry Winners and Losers

The emergence of both winners and losers at the country levels are likely to produce tensions that could fuel protectionism and even might challenge the globalization pro-cess. From a long-term investor’s point of view, the credit crisis will fundamentally alter the shape of not just the finance industry, but also the broad industrial landscape. Some companies will probably emerge weakened, but a small number of important companies will arguably be structurally stronger.

In banking, we have already seen some dramatic changes. Greater regulation of the banking sector is one of the immediate con-sequences of the credit crisis. This may raise

required liquidity buffers, see the introduc-tion of leverage limits, the potential separa-tion of banking subdivisions, and certain sub-industries such as structured finance might be aggressively curbed. Overall, new busi-ness models are expected to emerge in both developed countries and in emerging.

The credit crisis has led to many corporate casualties over the last 12 to 24 months. We see it as impacting the longer-term structure of industries looking ahead as much as the immediate problems it has posed. For ex-ample, many weaker players will have been squeezed by a lack of access to finance for expansion harming their market positioning – that is if they still exist. Others will be able to take advantage of weakened competitors to consolidate a market-leading position and potentially improve pricing. Their cost struc-tures may also be superior due to their abil-ity to invest or acquire others.

The autos sector stands out as one where there is still excess capacity and where re-

turns on capital have historically not covered the cost of capital. It is likely to see further consolidation. The IT sector will also likely see further consolidation, though in general the technology sector is well positioned in the credit crisis given its short asset life and ability to generate profits in a deflationary environment. Finally, we think the retail in-dustry could face significant pressure for consolidation, as consumer trends change in countries from Japan to the UK. <

A scene from Johann Wolfgang von Goethe’s late eighteenth-century poem “Der Zauberlehrling” (The Sorcerer’s Apprentice). Through fourteen stanzas, Goethe points out that a little knowledge can indeed prove to be a dangerous thing.

“Extraordinary Popular Delusions and the Madness of Crowds” – deep insights into market psychology.


58 Economy New Brands

Strong Brands from Emerging MarketsJapan has shown that with successful national brands even the global market can be conquered. The rise of emerging-market consumers is giving strength to an array of new brands that are likely to find success in the West as well.

Text: Roger Signer, Thematic Research, Zurich

Brands have a crucial function in today’s markets of abundance and overwhelming choice as they guide consumers towards the expected quality and reduce seeking costs. In addition, they allow consumers to make a statement about themselves, which is argu-ably a key feature of brands in today’s society. In return for this service, brands can some-times charge their clients a substantial pre-mium. A brand name is hence an important asset for a company, and is usually the result of a long-term development process – for instance, current brand names of US, Euro-pean and Japanese companies such as Coca-Cola, Daimler or Sony. With the trend toward a multipolar world and the rise of the emerging-markets consumer, we are now seeing the appearance of new brands that have their origins in emerging markets. The

research unit at Credit Suisse categorizes them into one of the two following models:

The domestic market model: A strong domestic market, often additionally protect-ed from foreign competition through, for in-stance, prohibitive import taxes, will support local brands. As economic growth enables higher salaries and thus greater domestic consumption, some local companies will prof-it from the domestic development, achieve economies of scale, and build up a high brand recognition thanks to exclusivity and price competitiveness. This was observed in the US between the Civil War and World War II, a period during which the US was protected from foreign competition when its industry was still in its infancy. It was also seen in Europe in the 1950s and 1960s. Companies benefiting from a growing domestic market

are often mirror companies of similar firms in larger countries or countries at a more advanced stage of development, and focus on a population’s rising spending on staples, discretionary items etc., while benefiting from a still lower cost base.

The export model: Companies with insuf-ficient domestic markets choose to specialize in specific niches and focus on exporting value-added products. These companies are often backed by their government and tout-ed as export champions. This was the case in European countries such as Sweden, Denmark, Switzerland and the Netherlands, where domestic markets soon appeared to be limited, but companies had some com-petitive advantages in terms of resources, educated workforce, research or manage-ment. This model was also used in recent


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New Brands Economy 59

decades by countries such as Singapore, Ko-rea and Taiwan, where companies often ad-ditionally benefited from a lower cost base.

The Japanese Model

The development we are now witnessing in emerging markets can be compared with what happened a few decades ago with Japanese brands. Japan started its dynamic economic development in the 1960s. In the 1950s, companies in the US and Europe used Japan as a source of low-cost manu-facturing to feed their own distribution chains. In the 1960s, Japanese companies turned the tables, building up their own brands and distribution systems. They developed inno-vative products and production processes at such a pace that by the mid-1970s, they were dominating American and European compa-nies in sectors from automotives to consumer electronics, with brands from recognized ex-port champions such as Toyota and Sony and mirror companies such as Nomura becoming world leaders from a zero base. Japan ac-counted for only 1.5 percent of world exports in 1953, but by 1978 its export share had jumped to 7.5 percent. Looking forward, we see that many EM domestic brands are de-veloping rapidly, but it will only gradually be-come apparent which of these have the po-tential to follow in the footsteps of the suc-cess of companies such as Sony, Toyota and Nomura. Several firms could emerge as new global brand leaders. With the financial crisis, the likely winners of the race to build up a new brand will be the companies that match the new reality.

Broad Middle Class as a Motor for Growth

The current financial crisis has had a major impact on consumers in developed markets.

Low savings and pressure on salaries make it harder for Western households to replace debt-financed discretionary spending (as was the case before the crisis) with cash spending. As a result, consumers in highly leveraged countries such as the US need to deleverage their balance sheets to bring down their level of indebtedness, possibly over a period of several years. This has start-ed to put a dent into consumer spending, including spending on products from EM ex-porters. On the other hand, consumers from emerging markets are increasingly taking over the lead from developed market con-sumers. Indeed, EM are looking for a new sustainable engine of growth to rely less on exports. In order to help the local popula-tion switch from saving to spending, several countries are now trying to address the tra-ditional barrier to consumption: a threadbare social safety net, which forces a large share of the population to save in case of unemploy-ment or illness. In addition, the wealth effect in EM continues to be supported by resilient economic growth, and an increasing number of individuals are passing the income thresh-olds triggering discretionary spending. Over the long term, this process will likely lead to the emergence of a large middle class in emerging market nations. The World Bank predicts the number of EM middle-class con-sumers will increase by 800 million sometime before 2030.

Brands Must Offer Genuine Added Value

Given these substantial changes in the eco-nomic landscape, emerging brands are likely to be more successful if they focus on con-sumers in growth markets. The “mirror com-pany” model is hence more promising than the model of export champions to devel-

Teenagers in Shanghai: The middle class as a motor for growth in emerging markets.

Factory in China: Low production costs as competitive advantage for emerging markets.

Competition for Nike: The Chinese sports-wear company Anta sponsors Zhen Jie.

>

BRIC retail sales proxyUS real retail sales

% YoY, 3 mma, real

0%

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10%

–5%

7.02 7.03 7.04 7.05 7.06 7.07 7.08

Emerging Markets in the Fast LaneRetail sales in the US are increasingly falling compared to the BRIC nations (Brazil, Russia, India, China). Source: Bloomberg


60 Economy New Brands

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oped market consumers. Nevertheless, ex-port champions with outstanding innovation capabilities and products that truly offer added value to consumers will continue to record success and weather the storm of lower consumer demand in Western coun-tries. As highlighted by the Toyota and Sony examples, two companies that thrived in the midst of the early 1980s crisis, key compet-itive advantage can enable major market share gains against peers. Credit Suisse es-timates that corporations such as Sasol, the South African energy company that owns a patent for coal-to-liquid processing, is likely to keep recording further success in this al-

ternative energy field, offsetting the impact of temporary weaker energy demand.

Opportunity for Export Champions

Export champions with access to scarce re-sources also have a key competitive advan-tage and can weather the storm of lower Western demand. Energy companies such as Petrobras and Gazprom have huge re-serves at their disposal, particularly com-pared to competitors, and are in our view emerging as global majors, joining the league of ExxonMobil and BP. Industries Qatar, a petrochemical company, is rapidly gaining market share in liquefied natural gas produc-

tion thanks to Qatar’s large natural gas re-serves and the Qatari government’s efforts to boost local LNG production.

Finally, export champions focused on emerging markets consumers and less on Western consumers are likely to benefit from rising demand from this consumer base. These export champions are likely to display similar growth rates as local mirror companies.

New Brands Close to a Breakthrough

Accelerating consumption trends in emerging markets and access to scarce resources are two key drivers for emerging market compa-nies to fuel their rise to become global brands. Many companies are already well positioned in emerging markets, but they still have some way to go in order to become well-estab-lished global brands. Anta Sports, a Chinese sportswear producer, for instance, is already experiencing rapid sales growth, driven mainly by Chinese consumers. But Anta has also entered the global stage by establishing sponsorship agreements with international athletes in basketball and tennis. In the fu-ture, we may well see Anta flagship stores opening in several developed market cities as the brand becomes a real global com-petitor to established brands such as Adidas and Nike. Other emerging brands in con-sumer electronics and household appliances are steadily increasing their footing in devel-oped markets. So, as the world is increas-ingly becoming multipolar, this is also likely to be reflected in the brands that we rely on in our daily shopping and business deci-sions. <

Oil refinery of Petrobras in Manaus, Brazil: The company is soon to be a world market leader thanks to huge reserves.

Access to the global market: The Chinese car manufacturer Geely at the international automobile exhibition in Frankfurt.

Disclaimer: This magazine has been produced by Credit Suisse for information purposes only and is for the exclusive use of the recipient. The details listed herein are indicative only and may be amended at any time. Credit Suisse provides no guarantee as to the accuracy or completeness of this magazine and does not accept liability for losses that might arise from making use of the information contained herein. It does not constitute an offer and is not a recommendation by Credit Suisse to buy or sell securities. Indications of past performance are no guarantee of a positive performance in the future. The analysis and conclusions contained in this magazine were established by Credit Suisse and may already have been used for transactions by Credit Suisse Group companies prior to being made known to clients of Credit Suisse. The opinions expressed herein are those of Credit Suisse at the time of going to press. (We reserve the right to make amendments.) Neither this magazine nor any copy thereof may be sent, taken or distributed in the United States or to any US person. Local law or regulation may restrict the distribution into certain jurisdictions. This magazine may not be reproduced either in whole or in part, without the written permission of Credit Suisse. Copyright © 2009 Credit Suisse Group AG and/or its affiliates. All rights reserved.

Distribution: Except as otherwise specified herein, this magazine is distributed by Credit Suisse, a Swiss bank, authorized and regulated by the Swiss Financial Market Super-visory Authority. Australia: This magazine is distributed in Australia by Credit Suisse, Sydney Branch (CSSB) (ABN 17 061 700 712 AFSL 226896). Dubai: This magazine has been distributed by Credit Suisse Dubai Branch. Related financial products or services are only available to clients of a professional nature as defined by the Dubai Financial Services Authority (DFSA). Credit Suisse Dubai Branch is licensed and regulated by the DFSA. Germany: Credit Suisse (Deutschland) AG, authorized and regulated by the Bundes-anstalt fuer Finanzdienstleistungsaufsicht (BaFin), disseminates this magazine to its clients that has been prepared by one of its affiliates. Gibraltar: This magazine is distributed by Credit Suisse (Gibraltar) Limited. Credit Suisse (Gibraltar) Limited is an independent legal entity wholly owned by Credit Suisse and is licensed, regulated and authorised by the Gibraltar Financial Services Commission to conduct investment business registration number 14788. Hong Kong: This magazine is issued in Hong Kong by Credit Suisse Hong Kong branch, an Authorized Institution regulated by the Hong Kong Monetary Authority and a Registered Institution regulated by the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong). Italy: This magazine is distributed in Italy by Credit Suisse ( Italy) S.p.A., a bank incorporated and registered under Italian law subject to the super-vision and control of Banca d’Italia and CONSOB. Luxembourg: This magazine is distributed by Credit Suisse (Luxembourg) S. A., a Luxembourg bank, authorized and regulated by the Commission de Surveillance du Secteur Financier (CSSF). Qatar: This magazine has been distributed by Credit Suisse (Qatar) L.L.C., which has been authorized and is regulated by the Qatar Financial Centre Regulatory Authority (QFCRA) under QFC No. 00005. Singapore: This magazine has been distributed by Credit Suisse Singapore branch, regulated by the Monetary Authority of Singapore.


Good to Know Economy 61

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Management structure [ the way the management of staff or a company is organized ]: The boss is always right. This unspoken rule applies in every company. But the more individual the business, the more specific its management structures will typically be, although in a company these may depend on numerous factors such as its corporate history: Has the manage-ment structure evolved over time? Or has it simply become set in a particular way, justified on the grounds that “we’ve always done it like that”? The size of the company and the industry in which it operates will also impact on a management structure. And finally, the ownership structure will also play a part: How much is owned by whom will in turn determine who holds how much power. Essentially, however, there is a distinction to be made between single-person management – albeit often with support units – and a management body in which the various tasks are distributed among several managers. The principle of single-person management admittedly has the advantages of a straightforward leadership structure, high flexibility, a clear hierarchy, and a transparent division of responsibility. On the other hand, the success of the company as a whole will also depend on a single individual, which requires them to have a strong personality as well as numerous other qualities. By contrast, management bodies divide up responsibility among several indi-viduals, which allows for greater continuity and more balanced decision-making. On the negative side, this can make the decision-making process more complicated.

Structured products [ investment product ]: For the uninitiated, this might evoke images of the worst kind of artificial food. But no:

Structured products involve the mbination of two or more finan-

cial instruments. One of these, known as the “underlying,” is a traditional investment instrument such as a bond, while the other is a derivative product. Together this results in a new investment product,

co

which is traded as a security in its own right and has its own specific risk profile and characteris-tics. Depending on the derivative strategy employed, a structured product may be designed to match any market expectation – rising, falling or drifting – and any investment profile. Thanks to their ability to replicate differing market expectations and different risk appetites, structured products can optimize the relationship between risk and return. Structured products are therefore above all suitable for more risk-averse investors.

Banking structure [ statistical breakdown of the Swiss banking landscape ]: Italy has beautiful women, Sweden has the mighty moose, and the Swiss have banks. Lots of them, too. Indeed, the Confoederatio Helvetica has one of the highest numbers of banks per capita in the world. In 2008 there were 327 banks and financial companies, comprising two large banks, 24 cantonal banks, 75 regional banks and savings banks, one Raiffeisen bank, 31 branches of foreign banks, 14 private banks and 180 “other” banks. And it’s not just since the collapse of Lehman Brothers and Merrill Lynch that the Swiss have been aware of how important such a diversified system is for the stability of the financial center. Among other things, it is thanks to Switzerland’s banking structure that the country has not been so severely affected by the financial crisis as other European countries. Even so, the last 20 years have been marked by consolidation that has led to the marginalization of the regional banks, which have more than halved in number. rh

Review: The Starfish and the Spider

The Starfish and the Spider: The Enduring Strength of a Headless OrganizatiOri Brafman and Rod A. BeckstromWiley-VCH, 2007 192 pagesISBN-13: 978-3527503452

This is not a book about zoology as the title may lead you to think. Instead, it is about organizational structures. Ori Brafman and Rod A. Beckstrom’s insightful analysis concerns the remarkable organizational revolution under way as hierarchies (“spider” entities) give way to decentralization (“starfish” entities). Today’s decen-tralization movement makes structural awareness even more critical. The authors show connections within our “wikified” world (Wikipedia is one of their favorite examples) which no one has really explain-ed before, much less condensed into a theory. Exciting and insightful examples that go back in history tie in with more recent ones. If you want to find fault with this book, you could complain about its brevity. Not even 250 pages long, it is finished much too quickly. getAbstract recommends this book to anyone with an interest in organizational trends.

on

© getAbstract

Review: Business Reengineering

Reengineering the Corporation: A Manifesto for Business RevolutionMichael Hammer, James ChampyCampus, 1996 288 pagesISBN-13: 978-3593350172

In this seminal best seller, Michael Hammer and James Champy, the pioneers of business process engineering, show how organiza-tions can radically restructure their processes to save time and money, and win over customers. The authors make dramatic claims about the potential of reengineering and highlight interesting successes. The book presents it as a simple, straightforward way to view business processes, figure out how to make them more rational and economical, and then implement necessary changes. The text provides food for thought rather than hands-on advice – even though it has some of that, too. The authors made a splash with their approach in the 1990s, when the term “reengineering” became a euphemism for mass layoffs, then fell into discredit. getAbstract finds this ’90s management bible well worth reading. Many of its familiar verities still have the ring of truth. © getAbstract

© getAbstract. For five-page summaries of these books, visit www.getabstract.com.

http://www.getabstract.com

62 Leader Ben van Berkel


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“I Want to Keep Improving”It’s his unpretentious approach to the role of architect that sets Ben van Berkel apart from the luminaries of his profession. Yet, the numerous projects that he and his architecture firm UNStudio have completed in recent years serve as a testament to the fact that he is indeed deserving of his place among the stars. In an interview, he shares his thoughts with us regarding the pros and cons of digital design, the conditions that give rise to creative architecture, and the direction in which the profession is taking us.

bulletin: What are your feelings when you walk through

a building you’ve built ?

Ben van Berkel: I’ve got very mixed feelings. On the one hand, I feel proud. On the other hand, it’s really hard to be objective because I always look at my buildings with such a critical eye. In the case of the Mercedes-Benz Museum in Stuttgart, for exam-ple, my first question was who would be returning to the building. And the second was where and when I could talk with the client about what should be improved. I always think that I can do better. Sometimes that attitude gives people the im-pression that I want to distance myself from my buildings, but of course that’s not the case at all.

So you’re reconciled to the fact that architecture is ephemeral?

Yes. I’m not interested in what has been built in the past. Every ruin makes new architectural structures possible, and they in turn become ruins themselves – my own included. As a graphic and interior designer, I experienced the highly transitory nature of that profession, which I didn’t enjoy. As good as my book or poster

Interview: Regula Gerber

designs may have been, nobody remembered them a year later. It’s a different story with architecture, as it’s very public. People can come back to it all the time. And that’s what I find appealing.

Is that why you decided to become an architect ?

Yes, I very much like communication and public interaction. I enjoy this public construct, and like being part of it.

You mentioned that you didn’t take the traditional route

into architecture.

Although I’ve always had an interest in architecture, at 19 I didn’t think it was the right profession for me. So I studied art to begin with, and then switched to interior and product design. I did a four-year night school program in art, and worked during the day as a designer. I’d get up at 8:00 in the morning, be in the office until 6 :00 or 7:00, and then go to art school. I finally got to my home-work at 10 :00, so never got to bed before 2:00 or 3 :00 in the morning. And then after four or five hours’ sleep, it was time to do it all over again. That was the way I lived for four years. I was absolutely inspired by my art history professor, who lectured >



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almost exclusively on architecture. He was the reason I registered at the Architectural Association School of Architecture in London, which was, at that time, the mecca of architecture. I was there for five years. I studied design and architecture for a total of nine years and then began working as an architect.

So what happened after that ?

After spending some time working for Santiago Calatrava in Zurich, I got together with art historian Caroline Bos and we opened our office in Amsterdam in 1987. She has a superb writing style and distinct creative talent. We always work in close partnership, and develop new ideas together. Besides that, I was working for galleries and art collectors, and took on a few commissions in interior and furniture design. At the same time, our Amster- dam practice began work on a power station project and on our first buildings. One of my first major projects was the Erasmus Bridge in Rotterdam in 1996. It paved the way for additional inter-esting projects, but also deeply influenced the understanding of my role as architect.

To what extent ?

I realized that today it’s impossible to achieve innovation single-handedly. The most innovative results come from experimenting together, from working with other people and trying to move ahead with the same idea in mind. So I wanted to develop myself more by working in a team.

Was it this point of view that led to the founding of

UNStudio in 1998?

To some degree, yes. But I also had the impression that architects simply weren’t well organized, and that they thought too much in linear processes. With UNStudio we became part of a network of specialists from various disciplines: architecture, engineering, design and communication. This way, every project has a custom-ized team that can highlight a wide variety of approaches and meet the different requirements. We have worked hard on achiev-ing good communication and organization, which has paid off, and this allows us to dedicate more time to developing content and the design together.

Is it this principle that has made UNStudio successful?

I believe that many people like both the uniqueness and diversity of this approach. On the one hand, there are the organizational a spects of architecture that I’m interested in: the clever use of modern materials and engineering techniques, good logistics as well as sustainability and cost efficiency. On the other hand, I place great value on interpretational diversity as it relates to aes-thetics, concepts and design. The result from this combination often surprises our clients. Personally, the greatest compliment is hearing positive comments on our projects from the client.

Isn’t your standing as a star architect threatened by having

such a network?

(Laughs) That status irritates me more than it delights me. We’re currently working on a project in Korea, where I have to deal with red-carpet events all the time, and am greeted by people who are excited and screaming. I don’t feel very comfortable at such things. On the contrary, I find it rather liberating when you can dis-associate yourself from a personal branding image.

Let’s talk about the design model you’ve developed.

What’s the idea behind it ?

A design model allows you to process and filter ideas by means of a computer. In the course of this filtering process it’s possible

The Netherlands’ Ben van Berkel studied architecture at the Rietveld Academie in Amsterdam and at the renowned AA School of Architecture in London, where he gradu-ated with honors in 1987. One year later, he founded an architecture firm in Amster-dam together with art historian and journalist Caroline Bos. Immediately thereafter, he implemented his first projects – an achieve-ment reached even before one of his former lecturers in London had realized early drafts of his own. His first major project, the Eras-mus Bridge in Rotterdam, which spanned the period between 1990 and 1996, led to the founding of the UNStudio network (see box on page 66). Van Berkel held a visiting profes-sorship post at Princeton, and has lectured at Columbia University, the Berlage Institute and the University of California, Los Angeles (UCLA). He is currently a professor and head of the architecture faculty at the Städel-schule in Frankfurt am Main.

Ben van Berkel Leader 65


to select the key details for the design that follows. You can compare the design model to a prototype for a car. A design idea for a vehicle becomes a prototype, which in turn can be the basis for anywhere between five and eight different cars. So a prototype can spawn a lot of new ideas.

So you want to eliminate the draft from the architect’s

working method?

Yes. With design models, we suggest that the architect practice with technology to develop long-term draft models instead of moving from project to project and case to case. With design models, architects have a set of principles that helps them to select and implement the correct parameters, while also remaining true to their own vision.

Isn’t there a danger with the design models that

architecture ends up being an assembly kit without any

individual vision?

That’s an interesting argument. But I don’t believe there’s any danger of that since I’ve enhanced and refined my design models over the years. I’m interested in using these design models to sift out potential application areas and to find out in what phase I could test out maybe ten ideas within a group of projects. I want to get away a little from the notion that every project has to be a masterpiece. Let’s take artists as an example, who are much more flexible in their use of new technology and design models. Like Andy Warhol for instance. Warhol was very clever in that he only developed final concepts, so that possibly five or six paintings could be regarded as masterpieces. At the moment I’m doing analysis, taking various ideas such as this into account, whereby I’m also investigating the degree to which design models deliver new findings with regard to existing experiments. So your question is a good one. Poor design models can in fact lead to serious construction defects.

What guiding principle do you adhere to in your work?

I define myself as an architect less by the form than by the struc-ture and organization of a building – the form develops on its own. There’s no doubt structure is an important aspect. That’s why in all my work the emphasis is on the way a building is structured. That would include, for example, how a house is divided into two floors or how a double helix is organized. But even more important in my view is the fact that as an architect I bring people together in a building where they can interact.

But it’s impossible to satisfy all expectations and

tastes. Behind this public dialogue, is there an attempt to

educate society?

My rather unusual way of communicating isn’t very didactic. I consider architecture to be an expression of modern society and I would like to prompt people into critical thought. I like it when our projects are interpreted differently and trigger discussion. Take for example the big orange-colored theater in Lelystad. The fact that I designed it in such dazzling colors gave rise to a lot of ques-tions. But such provocation often fosters a sense of community to a large degree, and relegates aesthetics to the background a bit. I find that fascinating.

Speaking of aesthetics, how does it relate to functionality?

Not that long ago, functionality and aesthetics stood in opposition to each other. Things have changed in the meantime. With the expansion of functionality, the technological complexity of build-ings has grown. I like to make the boundaries between aesthetics

and functionality disappear during the planning stage of a building, so that both aspects flow into each other.

Complex requirements demand that compromises be made.

How do you handle that ?

I’ve made it a habit never to think about compromises. I see the questions that have to be resolved within the team more as opportunities to rethink and refine our plans. I always try to see the positive side. If, for example, cost saving is required when we’re designing a building, it presents us with a challenge to work even more efficiently.

The digital revolution has progressed swiftly in recent years.

What impact has this development had on your work?

It’s had a big influence on my work. But I’d like to return to my perhaps over-enthusiasm for computers. In the 1990s, I was already pointing to the possibilities and effects that computers could have and said that the invention of the computer was just as important to architecture as was the invention of cement – and

I still see it that way. But if you believe as an architect that design technology is the key aspect in architectural design, then you’re wrong. An architect must first answer the following ques-tions: What purpose does the technique fulfill ? What kind of gestures do you want to influence this technique with? How do you want to guide the technique? How do you make your intended purpose clear ? The computer is just one of these techniques – it can provide you with ideas and concepts, but it doesn’t answer those previous questions.

So the digital possibilities can also lead you astray into

the bizarre?

Today, with the computer you can create the craziest and weirdest forms imaginable. It certainly can be dangerous because in the computer-assisted design process a lot of premises to which the architecture is subjected are no longer taken into account. That of-ten leads to amorphous results – ones that are purely theoretical, but not realizable. The design model can filter out these kinds of results.

What does the architecture of the future look like?

It’s white and very strange. ( Laughs.) I have no idea. But the ar-chitecture of tomorrow will probably be more autonomous and less traditional. Many years ago, when my friend gave me my first iPod without the headphones, I didn’t know what it was, and thought it might be a phone at first. Once I understood what it was, I was really excited because I realized that you could still have intriguing ideas that nobody else had ever thought of. And that’s what I find so exciting about technology and innovation. I believe in the new – also in the field of architecture. We’re currently working on a project in Abu Dhabi, which I’m not yet allowed to discuss, >

“I don’t feel very comfortable in the role of a star. On the contrary, I find it rather liberating when you can disassociate yourself from a personal branding image.”



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but the architectural concepts there are so innovative that there actually isn’t any reference to traditional architecture.

What other projects are you working on at the moment ?

One of my favorites is a wonderful loft for a New York art collector who’s going to live in his gallery. I’m also working on a new theater here in Holland. In addition, I now have the oppor-tunity to plan the Dance Palace in St. Petersburg, Russia, as my design submission was the one that was selected for the project. This is a very important project – partly because of its cultural significance, but also because it’s one of the biggest construction projects in Russia. And we’ve also been commissioned in China to design a pair of 250-meter-tall towers with a building foot- print of 400 square meters. It’s a huge project, so we’ve got almost 20 people working on it.

You’ve won many awards. Which was the most important ?

I received the Jencks Award three years ago, and that recognition has special significance for me because I admire Charles Jencks as an author and architecture historian. I like it when

people appreciate my work and communicate that in their deci-sions as jury members.

Is there anything that you would like to build or design

but haven’t been able to yet ?

No. We’ve covered every area already. We do renovations, building housing, office buildings and bridges, and create product designs. I’m spending a lot of time on the latter, like the chair I designed for Walter Knoll. My greatest wish for the future is to consistently keep improving my work. Other than that, I’m ex-tremely happy. Sixteen years ago, I was competing with some 300 architects. Now that number is down to 10. So I can’t complain. I’m completely satisfied.

UNStudio Founded in 1988, the Van Berkel & Bos architecture firm evolved over the next ten years to become the United Network for urbanism, infra-structure and architecture, UNStudio. This non-hierarchical network developed in answer to the need for more flexible and structured design processes, and for the maximal exchange of creative ideas. Since that time, UNStudio has completed projects in all areas of architecture – from housing to bridges, train stations and shopping centers to museums.

In its work, UNStudio combines sophisticated digital design skills with a treatment of form and material that embraces the experimental. This results in projects often based on diagrams, and which feature flowing, flexible and innovative design language. The prime example in this regard is the computer-assisted architecture of the Mercedes-Benz Museum in Stuttgart, widely considered to be a masterpiece (see image 1).

The firm is located in Amsterdam, and is active internationally, including Germany, the US, China and Russia. In the case of the latter, UNStudio was com-missioned this year to construct the 21,000-m2 Dance Palace in St. Petersburg (see image 2). UNStudio is also in the planning stage of a project for the Chinese city of Guangzhou, which intends to see the construction of a development for hotels, commercial space, offices and housing (see image 3).

The wide range of architecture produced by UNStudio has once again manifested itself in the recently unveiled New Amsterdam Pavilion, located in New

<

York’s Battery Park (see image 4). The pavilion, a gift from the Netherlands to the city of New York in honor of their 400 years of mutual friendship, is equipped with digital information stations to help visitors become acquainted with the city and to find out about organized events in the Netherlands. The pavilion is thus intended as a meeting point for both locals and tourists alike. Considering Ben van Berkel’s predilection for dialogue with the public, it’s a project that could hardly be more fitting. rg

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