PM — Is software killing innovation?

Happy hump day, wonderful people. We have a slightly slower news afternoon to bring you today — a welcome breather after the marathon sprint we’ve been keeping up with over the past couple of weeks.

THE BIG STORY TODAY

EFG Hermes’ consumer finance subsidiary valU has acquired 100% of digital financial services platform PayNas, according to an emailed statement (pdf). The acquisition “opens wide doors for valU’s BNPL solutions by tapping into Paynas’s roster of MSME clients and employees, integrating them into valU’s client base, while augmenting Paynas’s offering with a comprehensive range of financing products,” the statement says. The value of the transaction was not disclosed.

^^We’ll have more details on this story in tomorrow’s edition of EnterpriseAM.

THE BIG STORY ABROAD

It also appears to be a slower day abroad, as no single story dominates headlines in the international business press. Among the headlines worth noting: Citi expects inflation in the UK to breach 18% in January on the back of rising energy prices (CNBC | Financial Times); disruption to a pipeline carrying oil from Kazakhstan to Europe via Russia could spell further energy shortages for Europe (Reuters); and GCC countries are doubling down on tech stock investments by buying the dip amid market volatility (Bloomberg).

HAPPENING NOW(ish)-

The launch event for the global ClimaTech Run competition for tech entrepreneurs, hosted by USAID-backed Business Egypt, takes place today at Le Lac du Caire at 5pm CLT. The competition is also backed by the Environment Ministry and the International Cooperation Ministry.

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** CATCH UP QUICK on the top stories from today’s EnterpriseAM:

• Saudi Arabia’s sovereign wealth fund is making headlines in Cairo with at least three possible high-profile acquisitions now appearing to be in its pipeline, including Egypt Aluminum’s capital increase, Egyptian Media Production City, and United Bank.
• Moody’s speculates on the fate of the EGP: Egyptian policymakers will likely choose to maintain a close watch on the EGP and allow it to ease gradually against the greenback to avoid exacerbating inflationary pressures, Moody’s said in a report.
• Pachin’s biggest shareholder to hire advisors for fair value study: Chemical Industries Holding Company (CIHC) will appoint an independent financial advisor to value Paint and Chemical Industries’ (Pachin) amid a bidding war for the EGX-listed paint company.

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FOR TOMORROW-

A delegation of Turkish businessmen and manufacturers is scheduled to visit Cairo tomorrow to talk investment and cooperation, Al Mal reports. The delegation includes investors in sectors including agricultural equipment, automotive components, textiles and garments, food and beverage, consumer goods, and building materials.

???? CIRCLE YOUR CALENDAR-

The Union of Arab Banks is organizing a forum on money laundering and terrorism financing in Sharm El Sheikh from 1-3 September. Participating institutions include the Central Bank of Egypt and the Federation of Egyptian Banks, among others.

☀️ TOMORROW’S WEATHER- We’re in for a hot day tomorrow, as temperatures in Cairo will hit 41°C during the day before falling to 27°C at night, our favorite weather app tells us.

Your in-app browser clicks, screenshots, and form inputs are being tracked by some of your favorite social media apps — and TikTok is arguably the biggest offender, according to tech researcher Felix Krause. When you open a link on apps like Facebook, Instagram, or TikTok, it defaults to an in-app browser that can rewrite parts of web pages, Krause told Forbes. On TikTok, code is inserted that can monitor page activity including keystrokes leading to security concerns around passwords or credit card information shared. In response, the Chinese-owned company confirmed that while those script features exist within their code, they are only used for debugging and performance monitoring. Instagram and Facebook also track every tap on a website and monitor when people highlight text, while Snapchat appears to be the least data-hungry, according to Krause’s researchy.

What’s your safest option to get around this? Head to the in-app menu after you’ve clicked and open pages in Safari or your phone’s default browser for more secure surfing.

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Drought and heat waves in a southeastern Chinese province is prompting an extension of coal usage to make up for electricity shortages, the Financial Times reports. The drought means that hydropower dams are (literally) running dry and starving industry from energy supplies, forcing a return to coal as an alternative source of energy. Coal consumption to fuel power plants in the country increased 15% y-o-y during the first two weeks of August, according to Vice Premier Han Zheng, forcing government officials to order the closing down of some factories to prioritize key industries and residents. These decisions have impacted automotive manufacturers’ supply chains, while energy shortages have also been felt in subway stations and shopping centers.

???? ON THE TUBE TONIGHT-
(all times CLT)

House of the Dragon, the long-awaited Game of Thrones prequel, is finally here. The epic series chronicles different members of House Targaryen vying for the coveted seat on the Iron Throne in a war of succession, known as the Dance of the Dragons, rather than competing houses battling for dominance. After Game of Thrones’ infamously unsatisfying series finale, House of the Dragon has some compensating to do, the New York Times says in a review. The series’ first season is made up of 10 episodes, and is available on OSN+, with a new episode out every week. You can also catch the trailer here (runtime: 2:49).

The standalone sequel is set 172 years before the birth of Daenerys (and the events of GoT), in the golden age of Westeros when the then-100-year-old Targaryen Dynasty was at the height of its power. House of the Dragon is also markedly Targaryen-skewed so expect more long white-blonde wigs this time around, and way more dragons — 10 to be exact. Unlike with the last couple of seasons of GOT that were based on an unfinished book series, House of Dragons is based on George Martin’s finished volume of fictional history Fire & Blood, so Google at your own risk — there will be spoilers abound.

⚽ Manchester United’s clash with Liverpool at 9pm tonight concludes the English Premier League’s Matchday 3.

Speaking of which, don’t forget to sign up for the Enterprise Fantasy League via this link, or by using this code: 8o4sut.

Locally: Pyramids FC tries to hold tight to any chance to earn the league title with a game against Future FC at 8pm. Theoretically speaking, chances are still there in case of a victory, but a tie or a defeat would pave the way officially for Zamalek to grab the title for a second consecutive season. Assuming Pyramids wins tonight’s game, Zamalek can be officially crowned title holder if it defeats Alexandria’s Al Ittihad tomorrow. Rival Al Ahly has already missed the chance to compete for the league after tying 0-0 yesterday against Ismaily FC.

Also at home: Ghazl El Mahalla v Misr Lel Makassa and Ceramica Cleopatra v Talae’ El Geish at 5:30pm.

???? OUT AND ABOUT-
(all times CLT)

Chick-flick fans rejoice: Cairo Jazz Club 610 is screening 10 Things I Hate About You at 8pm on their terrace, followed by How To Lose A Guy In 10 Days at 10:40pm.

If rom-coms aren’t your thing, Wong Kar Wai’s 2046 is screening at Zawya tonight at 7pm. This is the final screening of Zawya’s Wong Kar Wai Retrospective that saw four restored films directed by Wong Kar Wai screened throughout August.

You’re in for a night of laughter at the Tap West, with a lineup of Egyptian comedians taking the stage at 9pm, including: Youssef El Gallad, Mohamed Kamatcho, Kerolos Azer and Amgad Elshawshy.

???? UNDER THE LAMPLIGHT-

A Woman of No Importance recounts the true story of Virginia Hall, an American spy who thrived in the espionage of World War II. Written by award winning author Sonia Purnell, the book details the overlooked story of a spy who was sent to occupied France and ultimately helped the Allied Forces to victory in the war. After being rejected from the foreign service for being a woman and having a prosthetic leg (she lost a leg in a hunting accident) she talked her way into the new British secret service, The Special Operations Executive, and became the first Allied woman deployed behind enemy lines. There, she created a wide network that helped her gain intel on German troop movements and stir up French Resistance. Hall went on to become one of the most sought-after Allied spies, prompting the Gestapo to send out an urgent transmission in 1942: “She is the most dangerous of all Allied spies. We must find and destroy her.”

The EGX30 fell 0.9% at today’s close on turnover of EGP 1.54 bn (47.6% above the 90-day average). Foreign investors were net sellers. The index is down 14.3% YTD.

In the green: Madinet Nasr Housing (+13.3%), Palm Hills Development (+3.7%) and Heliopolis Housing (+2.7%).

In the red: Credit Agricole Egypt (-3.3%), Rameda (-2.5%) and Ibnsina Pharma (-2.4%).

Is the growing use of software at large companies fueling a slowdown in innovation? That’s the broad hypothesis Boston University School of Law’s Technology and Policy Research Initiative Executive Director James Bessen poses in his book, The New Goliaths: How Corporations Use Software to Dominate Industries, Kill Innovation, and Undermine Regulation. Tech-powered corporate giants (think Amazon, Google, and Facebook) have built and mastered software designed to their operational and business advantage, but these software systems have acted as “moats against competitors,” Bessen argues, according to the New York Times.

At the heart of the issue: Proprietary software, which Bessen defines “broadly as not only code but also the data that companies collect on their customers and operations, the skills of their workers, and the organizational changes they made to exploit the technology,” the Gray Lady writes. Proprietary software, he says, is not just the regular software that most businesses build and employ in their operations. It’s the software that is specifically built to “better manage complexity and thus differentiate themselves from rival firms,” making it more difficult for smaller market players or new entrants to unseat one of the heavy hitters in any given industry, Bessen wrote for the MIT Technology Review.

How big is the proprietary software push? In 2016, US firms spent around USD 250 bn on developing proprietary software, Bessen says, citing government statistics.

More investments in proprietary software = larger market shares: Over the past couple of decades, firms have ramped up their investments in proprietary software, which has been accompanied by a rise in market shares held by the biggest firms in individual industries, according to research from Bessen published in 2020. And that trend means that these businesses are more entrenched in their industries: “In a given industry, the chance that a high-ranking firm (as measured by sales) will drop out of one of the top four spots within four years has fallen from over 20% to around 10%,” Bessen said in MIT Technology Review.

With the suppression of innovation comes inevitable economic concentration: “Technology,” Mr. Bessen said, “is playing a different role than it has in the past — less to disrupt than entrench.” Sectors that are highly digitized and reliant on technology can be a double-edged sword as far as concentration goes, researchers Nicolas Crouzet and Janice Eberly argued in a 2019 paper (pdf). While on the one hand, they can lead to efficient concentration (by eliminating inefficient market players), they can also create barriers to entry for smaller companies that can’t keep up with the entry costs associated with high-tech industries.

Startups — which are broadly known for “disrupting” industries with innovative offerings — can’t keep up with the heavy hitters: “Across a wide range of industries, dominant firms are employing large-scale information systems to outflank their competitors, including innovative startups,” Bessen wrote.

That’s not to say that technology is the enemy: Bessen caveats that proprietary software isn’t necessarily an all-bad thing and can — besides improving companies’ bottom lines — serve important benefits. For one, successful software-enabled companies “are more productive than their smaller rivals” and have an average 17% premium on salaries for the same jobs compared to their competitors. Companies that have been able to invest in building proprietary software have also reported significant improvements in their operational efficiency.

But the answer could simply be to make these proprietary softwares more accessible to the wider industry, Bessen argues. Policymakers could enact reforms or policy changes that “nudge or force” dominant companies to open up their softwares to other players, he suggests. “Banning non-competes would help employees spread their knowledge by moving jobs. Reforming patents, which aren’t always necessary to protect software innovation and are abused by patent trolls to the detriment of nearly everyone, would help, too,” he wrote for the Harvard Business Review.