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In Sailing’s Most Famous Race, Britannia Definitely Doesn’t Rule the Waves

It’s been 173 years since Britain first competed in the America’s Cup. And in all that time, the greatest naval power the world has ever known has never managed to bring home the trophy.

The annals of sporting futility are full of sad-sack teams that run into humiliating defeat, season after season, only to come back for more. The NFL’s Arizona Cardinals, for instance, have never won a Super Bowl in 58 years of trying. The Toronto Maple Leafs have gone more than half a century without a Stanley Cup. The Seattle Mariners have never reached a World Series.

Yet all of those streaks are just drops in the ocean compared with Britain’s record competing for the world’s oldest international sporting trophy.

The America’s Cup was invented in Britain and first contested in 1851. And in all that time, the greatest naval power the world has ever seen—the country of Horatio Nelson, Sir Francis Drake and “Britannia Rules the Waves”—has somehow never won the most famous race in sailing.

But this week, on shimmering waters off the coast of Barcelona, a British crew will attempt to undo 173 years of national ignominy when it takes on the defending America’s Cup champions from New Zealand. To lose again would represent more than the failure of a $140 million project. It would also perpetuate nearly two centuries’ worth of shambolic embarrassment.

“It has been a source of derision around the world that the British, who invented this damn thing in the first place, managed to lose it,” said Royal Yacht Squadron chairman Bertie Bicket, whose club is represented in the America’s Cup by the Ineos Britannia team.

“I would describe it as getting a new football, kicking it over the garden fence, and 173 years later, they still haven’t given it back.”

The thing is, Britain’s history in other maritime contests had made the country quite accustomed to winning on the open sea. British schoolchildren can recite the names of famous naval victories the way kids in Brazil can rattle off World Cup wins—the Battle of Trafalgar, the Battle of the Nile, repelling the Spanish Armada.

“We might not have won the America’s Cup in the 20th century, but the Royal Navy was existentially important in winning both World Wars,” said Andrew Lambert, the Laughton Professor of Naval History at King’s College London. “That we take seriously.”

But from the moment a boat named America from the New York Yacht Club first took down the Royal Yacht Squadron in a race around the Isle of Wight, it was clear that this battle would be different. Since then, U.S. clubs have held the America’s Cup for most of its existence. The Auld Mug, an enormous silver pitcher, has also been won by crews representing Australia, New Zealand, and the landlocked country of Switzerland—never the U.K.

It isn’t for lack of trying. British boats have been America’s Cup challengers on 16 previous occasions. Across all of those series, Bicket said, they have scored just five points. Experts agree that the problem through much of that history was that Britain treated it too much like a gentlemanly pursuit and not enough like a cutthroat, boundary-pushing competition that might tar British sailors as losers.

“There’s always been a bit of the Brits calling up the rules, saying, ‘Hold on, old chap, are you cheating?’” Bicket said.

What makes the America’s Cup uniquely frustrating is that the competition is so stacked in favor of the previous winner. The reigning champion is known as the Defender, who has the advantage of writing the rules for the next America’s Cup, setting the specifications for the boats, and choosing a course on home waters. Then it awaits the Challenger of Record, which is now selected through a grueling regatta that stretches over a month. In order to face the Kiwis, Ineos Britannia had to hold off four other teams from Italy, the U.S., France, and Switzerland.

And whatever happens now, the team can at least be sure it can’t go as badly as the last time a British team became the Challenger of Record. Back in 1964 a boat called the Sovereign traveled to Newport, R.I., to take on the U.S. defender known as the Constellation. Even by the standards of a 100-year losing streak, the 4-0 rout was particularly demeaning.

“The debacle at Newport,” the Daily Express called it. “Staggering and humiliating,” said the Daily Telegraph.

“The roses have wilted,” wrote the yachting correspondent of the Times of London. “The days of hope and excitement are things of the past.”

In short, the 1964 British challenge was a fiasco.

“They were all a fiasco, quite frankly,” Bicket said.

That’s because for most of the Cup’s history, Americans and Brits took opposite views on what it represented. American skippers dreamed of racing hard and going home with the Auld Mug. British crews saw it more as a friendly challenge between chums.

“And the British are surprised to find, ‘Oh, the Americans are quickest,’” Lambert said. “The British gentlemen who would go over and contest this weren’t obsessed with winning.”

That much has changed. Bicket believes that Ineos Britannia is the most professional outfit that the Royal Yacht Squadron has ever put on the water. Backed by the British petrochemicals billionaire Jim Ratcliffe, who also owns stakes in Manchester United, the Mercedes Formula One team, and the Ineos Grenadiers cycling team, the current boat is the result of nearly half a billion dollars’ worth of development.

The 75-foot yacht uses a state-of-the-art hydrofoil system to fly above the waves. The sails are moved by a crack squad of elite athletes pedaling stationary bicycles. And its skipper is Ben Ainslie, a four-time Olympic gold medalist, and possibly Britain’s finest sailor since Lord Nelson.

Ainslie, who is making his third consecutive run at the Auld Mug, has said that he would trade all of his medals for one America’s Cup. And by now, he adds, Ainslie feels battle-hardened enough to claim Britain’s most elusive naval triumph.

“The Royal Navy’s been the best navy in the world for the past 400 years,” Lambert said. “When it comes to war, we’re professional.”

Mike Ashley’s retail group has made two conditional offers for the UK luxury handbag maker

The majority shareholder in UK luxury handbag maker Mulberry has told Mike Ashley’s Frasers Group that it is not interested in selling the business, in a clear rejection of its two conditional offers to date.

After Frasers made a second proposal on Friday, valuing Mulberry at £111mn, Challice said in a statement on Sunday that it had “no interest in . . . selling its Mulberry shares to Frasers”.

Challice has been the majority owner of Mulberry since 2002 and has a 56.4 per cent stake in the business. Challice is controlled by billionaire property tycoon Ong Beng Seng and his wife Christina.

The statement said that Challice was “very supportive” of Mulberry and its management team and that while it “appreciates that Frasers is a supportive minority Mulberry shareholder” it believes that it is “an inopportune time for Mulberry to be sold”.

“Challice hopes that by making its position clear, Frasers will be encouraged to announce that it does not intend to make an offer for Mulberry,” it added.

Mulberry shares closed at 112.50p on Friday before the latest Frasers bid of 150p. The stock is down more than 40 per cent in the past year.

Frasers made its first conditional offer, which implied a valuation of £83mn, last month. It has owned shares in Mulberry since 2020 and has a stake of around 37 per cent.

Under UK takeover rules, it has until October 28 to either make a formal offer or walk away.

Mulberry sank to an annual pre-tax loss of £34mn in the year ended March 31, from a £13mn profit the previous year. Revenues fell 4 per cent to £153mn.

It appointed chief executive Andrea Baldo in July to lead a turnaround of a company that has suffered as wealthy customers have cut their luxury spending.

Mulberry supplies the House of Fraser and Flannels department store chains that are both owned by Frasers.

Ashley stepped back from the FTSE 100 business in 2022, handing the reins to his son-in-law Michael Murray, who serves as its chief executive.

The company has a wide range of retail interests, ranging from its recent investment in UK ecommerce company THG to stakes in Hugo Boss, Asos, Boohoo, and white-goods seller AO World.

But its main profit engine remains sportswear retailer Sports Direct, which was founded by Ashley in 1982.

Earlier this month, Singapore charged Ong with two offences of abetting a former Singapore transport minister to obtain gifts and obstruct justice. Ong did not enter a plea, local media reported.

German online fashion retailer Mytheresa announced this week it was acquiring Yoox-Net-A-Porter (YNAP) from Cartier owner Richemont. The long-awaited deal removes a major thorn in the side of Richemont and puts an end to more than 14 years of having to disburse hundreds of millions of euros on botched IT projects and on covering YNAP’s losses every year.

Richemont, which acquired a controlling stake in Net-A-Porter in 2010, lost more than €5 billion on that company hoping it would have a state-of-the art e-commerce service for its brands. Now it has to start all over again. It’s been an expensive distraction for Richemont Chairman Johann Rupert. You wonder if its cash would not have been better spent if Richemont had concentrated on its core business.

The Swiss luxury group is great at making and marketing watches and jewelry. Cartier is far and away the world’s leading jewellery brand by revenues. Rupert got badly burnt trying to figure out how technology and luxury goods go together.

Richemont could have bought a brand like U.S. jeweler Harry Winston – which Swatch Group acquired in 2013 for €1 billion and has severely damaged as Miss Tweed reported in 2021. Richemont would have been a much better parent for Harry Winston. It would also have allowed Rupert to better rival LVMH which is now gaining global clout in watches and jewellery since Bernard Arnault’s purchase of US jeweller Tiffany in 2020. LVMH’s market cap today now worth €325 billion, dwarfing Richemont’s €70.7 billion.

As part of the agreement with Mytheresa, Richemont will get a 33 percent stake in New York-listed Mytheresa, which prior to the deal had a market capitalization of around €350 million. Richemont will also inject €555 million into YNAP, making it debt-free, and the Swiss luxury group will provide a one-year €100 million credit facility. The news which came out on Monday pushed up Mytheresa’s share price by nearly 40 per cent. The stock price has doubled in the past month, closing at $7.95 and valuing the company at $678 million.

It looks like Richemont is giving away much more than it’s getting.

SETBACK

Richemont must finance YNAP’s losses until the deal closes in the first half of next year. That means that it will need to disburse another €250 million – at least. It will also have to pay for the re-platforming of several of its brands including Chloé, Alaïa and Dunhill which were using YNAP’s e-commerce software solutions. That’s one more major expense on which by past form there will likely be little communication.

In all, it is a setback for the Swiss luxury group. Richemont spent vast amounts on YNAP’s new e-commerce platform after its failed attempt to development of its “Next Era” software project four years ago as Miss Tweed reported in 2020.

Now it will have to disburse roughly another €1 billion in cash to get rid of YNAP if you add up the cash injected into the business, the funding of losses and the e-commerce platform switch of its brands, industry insiders estimate. If you talk about just YNAP, Richemont said the write-down of its net assets would amount to approximately €1.3 billion and the final figure would depend on Mytheresa’s share price when the deal closes.

It's unfortunate since Rupert strongly believes in the future on online retail – which he continues to call “New Retail” even though the Internet has been around for 25 years. The problem is that he never hired the right talents to succeed in that field nor does he understand that technology was a fast-moving world. It requires agility and is incompatible with the slow-moving, risk-averse and excessively hierarchical corporate culture he instilled in the group.

By contrast, LVMH owner-boss Bernard Arnault hired Apple executive Ian Rogers in 2015 to head up its digital business. He helped guide the world’s biggest luxury group to ride the disruptive Internet era, allowing LVMH to emerge as by far the biggest luxury player of the new age. Rogers then put LVMH front and centre at Europe’s biggest tech conference Viva Tech. Since 2020, Rogers remains an adviser to Europe’s richest man. Smaller luxury groups have sought to link tech and luxury in other ways. Remo Ruffini, Moncler owner-boss last month launched a collection designed by Apple’s former design supremo Jony Ive.

Richemont has been through several technology chiefs in the past ten years. The group takes a long time to make decisions. This was one of the many symptoms of how dysfunctional the group’s corporate structure was until the appointment of Nicolas Bos as CEO earlier this year.

MIGRATION

Mytheresa said that all the YNAP companies would migrate to the new e-commerce platform developed in-house which the German firm started using in April. “We have a technology platform that fulfills absolutely the requirements of Mr Porter and Net-A-Porter and it’s working,” Mytheresa CEO Michael Kliger told reporters in a conference call after the deal was announced.

Kliger said he believed the newly combined entity had the potential for annual growth of 15-20 percent. In the last five years, the top line average yearly growth rate was 19 percent, he noted.

“We expect that the integration will be a multi-year process,” Kliger said.

One question is what will happen to the fancy tech and logistical hub in Bologna on which YNAP spent tens of millions of euros. Mytheresa opened a new 55,000 square meter warehouse near Leipzig airport in September. It’s one of the many questions the company will need to address.

ONLY ONE

The Richemont-YNAP deal signals welcome consolidation in what was a very competitive and overcrowded market. It comes after the demise of MatchesFashion earlier this year and the implosion of Farfetch. The firm has been forced to sell many of its businesses since it was acquired by South Korea’s Coupang in December last year. In August, Farfetch discontinued FPS, its white label e-commerce service used by dozens of brands and retailers including Harrods.

Matches’ website now reroutes to Flannels, the online fashion retail business of Frasers Group, which bought MatchesFashion in December and refused to pay many brands for their stock after the company was placed into administration in March, as Miss Tweed reported at the time.

Like in the film Highlander, in the end, “there can be only one” with the last immortal standing being all powerful and getting “the prize.” It looks like Mytheresa will end up being the only online fashion operator still operating in a year or two as rivals fall by the wayside.

There are still a few players out there. There’s Canada’s Ssense whose future is looking uncertain due to its high losses. It has had to lay off a lot of staff in the past two years. Then there is Italy’s Luisaviaroma which got another capital injection of tens of millions of euros from Style Capital this year but it’s not clear how long it will be able to continue trading.

By acquiring YNAP, Mytheresa takes out a competitor. The plan could be for Mytheresa to continue focusing on Europe where it is now the dominant platform and for Net-A-Porter and Mr Porter to concentrate on the United States, one person close to the deal said. Mytheresa denied that was the case. “There is no plan to reduce the geographic reach of these brands,” a spokeswoman for the company said. Time will tell.

But what will happen is that Mytheresa will service the ultra-high end with its curated offering and NAP and Mr Porter will offer more accessible fashion and luxury brands. Mytheresa will gain access to NAP and Mr Porter’s base of affluent customers. That’s precious when you know how expensive it is to acquire and retain customers. Having bought out such a big competitor such as YNAP also means that Mytheresa will be able to corner the market in terms of price, particularly in Europe and the United States.

SEPARATION

Mytheresa said it was going to separate from YNAP the online platforms Yoox and the Outnet which sell collections from past seasons at discounts of up to 80 percent. The expectation is these will then be sold. Still, disentangling the e-commerce platforms of the two companies as well as the back-office, HR, finance, logistics and other functions is going to a long, painful and expensive process. That’s what the €550 million from Richemont will be partly spent on.

Kliger already hinted at significant job cuts when he said that they were going to be much “leaner” businesses. Several industry sources said the plan was to sell on Yoox and YNAP to a venture capital fund or another online business operator or shut them down if no one wants them. It’s clear that this was a pre-condition for Mytheresa to accept to acquire YNAP. The German company wants to focus on selling fashion and luxury at full price. It is essential to preserve those crucial good relationships with brands. Flannels owner has learned that the hard way too with its takeover of MatchesFashion.

Interestingly, Mytheresa said the off-price businesses were lossmaking but NAP and Mr Porter were profitable. It declined to give details about that or disclose what were YNAP’s total losses. We will find this out once the transaction is closed next year since Richemont will have to say how much it spent on financing the company’s losses.

Last month, Mytheresa said it was investing in China – a smart move considering the super competitive Chinese market will pick up eventually. It’s also timely considering YNAP pulled out in June. YNAP also closed its joint venture with Alibaba which was called Feng Mao.

Online luxury failures are mounting up for Richemont.

CRUCIAL CHINESE CLIENTS

Mytheresa said it had launched a WeChat Mini Program for Chinese clients. It offers a “curated selection of more than 180 of the most coveted luxury brands across the womenswear, menswear and kidswear categories.”

“The Mini Program will leverage all the famous service elements of Mytheresa with fast shipping directly from Europe, a constant offer of exclusive products and capsules, highly luxurious packaging and personal shopping services for the top customers,” the company said last month.

The success of the Mytheresa and YNAP deal will very much depend on how well it is executed. Investors hope that it will not be too much of a distraction for Mytheresa’s management. Online sales are down compared to those in boutiques. After being trapped inside their houses during the pandemic people prefer the “live” experience of shopping on the high street than on the Internet these days. Battling a severe downturn in luxury spending and handling a complex merger is going to be a challenge.

- Believes neutral rate is higher than used to be in the past; There is room to go before reaching it.

- Fed Funds rate is high relative to where inflation is currently

- Fed has to be more forward-looking than the market

- I would cut rates by a (further) 25 bps. Stop-and-go is not a good look for the Fed.

- Recent data has not changed the medium-term economic outlook

- Don't think that much has changed in the economy

The French luxury group celebrated the 10th anniversary of its Institut des Métiers d’Excellence vocational training program.

PARIS – Excellence in craftsmanship will be key to riding out the current turbulence roiling the luxury market, LVMH Moët Hennessy Louis Vuitton chairman and chief executive officer Bernard Arnault said on Thursday.

Speaking at an event marking the 10th anniversary of the luxury group’s Institut des Métiers d’Excellence, the vocational training program aimed at promoting, enhancing and ensuring the transmission of know-how, Arnault began his speech by quoting French philosopher Denis Diderot, who lauded artisans for their wisdom, patience and mental resilience.

“At this stage of the company’s development, you have to be patient,” Arnault said. “It’s an absolutely essential quality to get through a troubled economic period and to continue feeling passionate about what makes the group successful, that is to say, the quality of the products.”

Speaking to the crowd gathered at the Grand Rex cinema in Paris for the evening event, which featured personalities including Belgian singer Pierre de Maere, retired basketball player Tony Parker, and Maria Grazia Chiuri, artistic director of womenswear at Dior, the luxury magnate argued that marketing should take a backseat to product.

“We must keep in mind that the long-term success of a group like LVMH is based mainly on what the artisans contribute in terms of quality of detail, and that’s where patience is key,” he said.

“People talk a lot about marketing, but ultimately, marketing is completely secondary,” Arnault continued. “Our future customers should feel drawn to our products because of their perception of the excellence of our craftspeople, and not because we’re trying to reel them in with some classic marketing tactic based on a study of what they want.”

The pep talk came as LVMH unveiled the first renderings of its future Maison des Métiers d’Excellence in Paris and announced that Ramy Fischler has been commissioned to design the dedicated space for craftsmanship, which it plans to open in 2026 in a move designed to give the group a competitive edge amid a shortage of skilled workers.

The house located in the French capital’s eighth arrondissement, a stone’s throw from the Dior ateliers and Avenue Montaigne, will allow visitors to touch and feel the breadth of the 280 skilled trades represented across its 75 brands, which range from Louis Vuitton to Dom Pérignon, Tiffany & Co. and Sephora.

The location will be open to the public as well as provide a physical home for the Institut des Métiers d’Excellence, or IME, which has trained more than 3,300 apprentices in its first decade, of which 70 percent went on to work for LVMH, according to Chantal Gaemperle, group executive vice president of human resources and synergies.

The program is active in eight countries, including France, and is being extended to China, she said at a press conference before the Show Me event.

Looking to the future, Gaemperle said LVMH is considering creating craftsmanship hubs in other parts of the world. “That’s my dream. We’ve even scouted potential locations,” she said.

The executive has also been working to preserve the knowledge of artisans who are ready to retire. “I’ve been working for a year on a library of know-how by reaching out to everyone from perfumers to managers so that before they retire, before they leave, they share a little bit of what they’ve learned,” she explained.

Fischler, the designer behind the recent revamp of the terraces on the Avenue des Champs-Elysées, said it was important to ensure LVMH’s craftsmanship center in Paris is not intimidating for young people. He has conceived the six workshops inside the building like boxes housing a microcosm of each profession’s working environment.

“We have to find a balance between a very sophisticated, beautiful setting, but one that doesn’t overwhelm young people and makes them want to discover all these professions and to come and learn them,” he said.

The lobby of the building will feature a tapestry titled “The Wisdom of the Hands” designed by Chiuri and created by the Chanakya School of Craft embroidery workshop in India. Students at the IME are taking part in a design competition for the house’s stained glass windows.

Alexandre Boquel, head of development for LVMH’s Métiers d’Excellence division, said the group has created formal training programs for jobs that were previously taught orally, for example, prototype maker. “That’s how we create a chain of transmission,” he noted.

“Thanks to the variety of professions and the diversity of programs that have been created by LVMH and by these houses, we are the leading trainer for craftsmanship worldwide,” Boquel said. “That’s already a first achievement we’re proud of after 10 years.”

Having started with just 27 participants in its first year, the IME is welcoming 520 this year, with ages ranging from 16 to 58, he said.

Yann LeCun, an NYU professor and senior researcher at Meta Platforms, says warnings about the technology’s existential peril are ‘complete B.S.’

Yann LeCun helped give birth to today’s artificial-intelligence boom. But he thinks many experts are exaggerating its power and peril, and he wants people to know it.

While a chorus of prominent technologists tell us that we are close to having computers that surpass human intelligence—and may even supplant it—LeCun has aggressively carved out a place as the AI boom’s best-credentialed skeptic.

On social media, in speeches and at debates, the college professor and Meta Platforms META 1.05%increase; green up pointing triangle AI guru has sparred with the boosters and Cassandras who talk up generative AI’s superhuman potential, from Elon Musk to two of LeCun’s fellow pioneers, who share with him the unofficial title of “godfather” of the field. They include Geoffrey Hinton, a friend of nearly 40 years who on Tuesday was awarded a Nobel Prize in physics, and who has warned repeatedly about AI’s existential threats.

LeCun thinks that today’s AI models, while useful, are far from rivaling the intelligence of our pets, let alone us. When I ask whether we should be afraid that AIs will soon grow so powerful that they pose a hazard to us, he quips: “You’re going to have to pardon my French, but that’s complete B.S.”

In person, LeCun has a disarming charm: mischievous, quick-witted, and ready to deliver what he sees as the hard truths of his field. At age 64, he looks simultaneously chic and a bit rumpled in a way that befits a former Parisian who is now a professor at New York University. His glasses are classic black Ray Ban frames, almost identical to one of Meta’s AI-powered models. (LeCun’s own AI-powered Ray Bans stopped working after a dunk in the ocean when he was out sailing, one of his passions.)

Sitting in a conference room inside one of Meta’s satellite offices in New York City, he exudes warmth and genial self-possession, and delivers his barbed opinions with the kind of grin that makes you feel as if you are in on the joke.

His body of work, and his perch atop one of the most accomplished AI research labs at one of the biggest tech companies, gives weight to LeCun’s critiques.

Born and raised just north of Paris, he became intrigued by AI in part because of HAL 9000, the rogue AI in Stanley Kubrick’s 1968 sci-fi classic “2001: A Space Odyssey.” After earning a doctorate from the Sorbonne, he worked at the storied Bell Labs, where everything from transistors to lasers were invented. He joined NYU as a professor of computer science in 2003 and became director of AI research at what was then Facebook a decade later.

In 2019, LeCun won the A.M. Turing Award, the highest prize in computer science, along with Hinton and Yoshua Bengio. The award, which led to the trio being dubbed AI godfathers, honored them for work foundational to neural networks, the multilayered systems that underlie many of today’s most powerful AI systems, from OpenAI’s chatbots to self-driving cars.

Today, LeCun continues to produce papers at NYU along with his Ph.D. students, while at Meta he oversees one of the best-funded AI research organizations in the world, as chief AI scientist at Meta. He meets and chats often over WhatsApp with Chief Executive Mark Zuckerberg, who is positioning Meta as the AI boom’s big disruptive force against other tech heavyweights from Apple to OpenAI.

LeCun jousts with rivals and friends alike. He got into a nasty argument with Musk on X this spring over the nature of scientific research, after the billionaire posted in promotion of his own artificial-intelligence firm.

LeCun also has publicly disagreed with Hinton and Bengio over their repeated warnings that AI is a danger to humanity.

Bengio says he agrees with LeCun on many topics, but they diverge over whether companies can be trusted with making sure that future superhuman AIs aren’t either used maliciously by humans, or develop malicious intent of their own.

“I hope he is right, but I don’t think we should leave it to the competition between companies and the profit motive alone to protect the public and democracy,” says Bengio. “That is why I think we need governments involved.”

LeCun thinks AI is a powerful tool. Throughout our interview, he cites many examples of how AI has become enormously important at Meta, and has driven its scale and revenue to the point that it’s now valued at around $1.5 trillion. AI is integral to everything from real-time translation to content moderation at Meta, which in addition to its Fundamental AI Research team, known as FAIR, has a product-focused AI group called GenAI that is pursuing ever-better versions of its large language models.

“The impact on Meta has been really enormous,” he says.

At the same time, he is convinced that today’s AIs aren’t, in any meaningful sense, intelligent—and that many others in the field, especially at AI startups, are ready to extrapolate its recent development in ways that he finds ridiculous.

If LeCun’s views are right, it spells trouble for some of today’s hottest startups, not to mention the tech giants pouring tens of billions of dollars into AI. Many of them are banking on the idea that today’s large language model-based AIs, like those from OpenAI, are on the near-term path to creating so-called “artificial general intelligence,” or AGI, that broadly exceeds human-level intelligence.

OpenAI’s Sam Altman last month said we could have AGI within “a few thousand days.” Elon Musk has said it could happen by 2026.

LeCun says such talk is likely premature. When a departing OpenAI researcher in May talked up the need to learn how to control ultra-intelligent AI, LeCun pounced. “It seems to me that before ‘urgently figuring out how to control AI systems much smarter than us’ we need to have the beginning of a hint of a design for a system smarter than a house cat,” he replied on X.

He likes the cat metaphor. Felines, after all, have a mental model of the physical world, persistent memory, some reasoning ability and a capacity for planning, he says. None of these qualities are present in today’s “frontier” AIs, including those made by Meta itself.

Léon Bottou, who has known LeCun since 1986, says LeCun is “stubborn in a good way”—that is, willing to listen to others’ views, but single-minded in his pursuit of what he believes is the right approach to building artificial intelligence.

Alexander Rives, a former Ph.D. student of LeCun’s who has since founded an AI startup, says his provocations are well thought out. “He has a history of really being able to see gaps in how the field is thinking about a problem, and pointing that out,” Rives says.

AI on your face

LeCun thinks real artificial general intelligence is a worthy goal—one that Meta, too, is working on.

“In the future, when people will talk to their AI system, to their smart glasses or whatever else, we need those AI systems to basically have human-level characteristics, and really have common sense, and really behave like a human assistant,” he says.

But creating an AI this capable could easily take decades, he says—and today’s dominant approach won’t get us there.

The generative-AI boom has been powered by large language models and similar systems that train on oceans of data to mimic human expression. As each generation of models has become much more powerful, some experts have concluded that simply pouring more chips and data into developing future AIs will make them ever more capable, ultimately matching or exceeding human intelligence. This is the logic behind much of the massive investment in building ever-greater pools of specialized chips to train AIs.

LeCun thinks that the problem with today’s AI systems is how they are designed, not their scale. No matter how many GPUs tech giants cram into data centers around the world, he says, today’s AIs aren’t going to get us artificial general intelligence.

His bet is that research on AIs that work in a fundamentally different way will set us on a path to human-level intelligence. These hypothetical future AIs could take many forms, but work being done at FAIR to digest video from the real world is among the projects that currently excite LeCun. The idea is to create models that learn in a way that’s analogous to how a baby animal does, by building a world model from the visual information it takes in.

The large language models, or LLMs, used for ChatGPT and other bots might someday have only a small role in systems with common sense and humanlike abilities, built using an array of other techniques and algorithms.

Today’s models are really just predicting the next word in a text, he says. But they’re so good at this that they fool us. And because of their enormous memory capacity, they can seem to be reasoning, when in fact they’re merely regurgitating information they’ve already been trained on.

“We are used to the idea that people or entities that can express themselves, or manipulate language, are smart—but that’s not true,” says LeCun. “You can manipulate language and not be smart, and that’s basically what LLMs are demonstrating.”

How will the UK government pay for much-needed infrastructure upgrades?

High energy bills and a troubled water sector trigger debate about which private finance schemes provide value for taxpayers

UK chancellor Rachel Reeves is hoping to attract billions of pounds of private finance to upgrade the nation’s creaking infrastructure and will be courting potential investors at the government’s investment summit on Monday.

Private finance schemes are already used more extensively in the UK than anywhere else in the world and include the energy, water and telecoms sectors and some ports and roads. Companies and investment funds provide upfront cash for projects, mostly in the form of loans with some equity. They recoup and earn a return on their initial investment via customer bills or taxpayer charges, sometimes over many years.

But the patchy record of private finance over the past few decades has triggered debate about which is the best model for attracting investors while still providing a good deal for taxpayers.

Will the Regulated Asset Base model remain dominant?

The most widely used method of securing private finance for infrastructure projects is the Regulatory Asset Base model.

The RAB model gives a value to a collection of physical assets, such as pipes and pumping stations, which can be borrowed against, much like a mortgage on a house. As it is used by companies that are natural monopolies, the regulator sets the charges to customers. This provides a guaranteed revenue stream to repay investors.

It is now being used to finance new projects, such as the Thames Tideway, a £4.5bn sewage tunnel being built under London.

This model allows investors to charge customers while the asset is still being built so they can receive returns from day one. For example, Thames Water’s customers are already paying for the Tideway through an annual surcharge of £28 per household added to water bills.

The late infrastructure expert Martin Blaiklock likened it to a diner “being forced to pay for a meal at a restaurant before the restaurant has even been built, let alone served any food”.

The government often acts as a backstop so if there are significant cost overruns, it has to inject equity or take over management of the project.

Contracts for difference model: the best option for low-carbon energy?

Contracts for difference are the government’s main mechanism for supporting large, low-carbon power infrastructure, providing certainty for investors on the price they will receive for the energy produced. The model has been used to support renewables throughout the UK, including one of the biggest solar and battery farms in Kent, which should provide enough renewable power for 10,000 homes.

The CFDs guarantee a set price for electricity — known as a strike price — that generators receive per unit of output. As the wholesale market price fluctuates, the generator is either paid a subsidy up to the set price, or pays back any surplus above the set price.

Similar models include the cap and floor regime, which sets minimum and maximum levels of revenues for energy storage and interconnectors to neighbouring countries.

The government is also setting up the state-backed Great British Energy, which it says will “attract private investment in the UK’s clean homegrown power”.

Will there be a PFI revival?

Private finance initiatives were canned for central government projects in 2018 after they were deemed poor value for taxpayers. Special purpose vehicles are set up by investors who hire contractors to build and maintain infrastructure such as schools, hospitals, housing or roads.

The Labour government is being urged by investors to launch a new version of PFI after a review by former Siemens chief executive Jürgen Maier backed the model.

A relaunch would come at a difficult time as there are a growing number of legal disputes between investors and public authorities over the terms of the contracts in the previous wave of PFI projects. Many local authorities and NHS trusts are also saddled with crippling debt repayments.

Former Labour minister Lord Hutton believes an amended version of PFI could work for future projects. This could include the Welsh model, where the government or local authority takes an equity stake and investor returns are capped.

Water regulator Ofwat is also encouraging utilities to use a similar model called “direct procurement for customers” for £14bn of new infrastructure.

Government guarantees: too much risk for public sector?

The government guarantees scheme is run by the UK Infrastructure Bank and provides unconditional assurance to lenders that they will be repaid in full in exchange for a fixed fee.

Most recently it was used to back Gigaclear, a broadband company, but the UKIB says it has more in the pipeline.

A 2016 National Audit Office report criticised the scheme for transferring “risk to the public sector”.

The UKIB invests in infrastructure projects alongside private investors and has recently been put in charge of managing the new £7bn National Wealth Fund.

What will the government do?

As the government is seeking to limit public borrowing it is expected to stick with most of these existing schemes.

Richard Threlfall, head of global infrastructure at KPMG, an adviser on several privately financed projects, said: “All infrastructure is ultimately paid for by us as citizens and consumers — but although private capital is more expensive than government borrowing it ensures the asset is delivered and maintained, rather than being deprioritised due to public spending constraints.”

But Stephen Glaister, infrastructure expert at Imperial College London, said the government should “avoid getting into overlong, unmanageable contracts just to disguise the total amount it is really borrowing”. 

Infrastructure experts also argue that where private finance is used it needs to be more tightly regulated. In particular, Alex Jan, a former economics director at Arup who advised several PPP schemes, said the schemes needed to be more transparent.

“It would be an easy hit for the government to insist on full disclosure on returns in exchange for public subsidies,” he said.

But Dieter Helm, utilities expert at Oxford university, warned that Labour’s pursuit of private finance meant it risked “leaving as its legacy a great new burden of debt that will have a long aftertaste, as did the earlier PFI schemes and the great financialisation of the utilities as witnessed in the disaster at Thames Water”.

Eli Lilly told UK health secretary that new drug had ‘potential to prevent Alzheimer’s’

Drug company made claims even though a study of donanemab’s preventive potential is not due to end until 2027

The drugmaker Eli Lilly told the-then UK health secretary last year that its new Alzheimer’s drug could be a one-off preventive treatment course, despite limited data to back up these claims, freedom of information requests have revealed.

In a December 2023 meeting with the Conservative minister Victoria Atkins, Eli Lilly’s chief executive David Ricks said that the company’s donanemab drug had “the potential to prevent Alzheimer’s by treating those with a diagnosis before symptoms have developed”. This would be done by reducing the amyloid plaque protein clumps in the brain that are thought to cause the disease, according to paraphrased minutes released in response to the FOI requests.

Atkins noted the drug’s “game-changing potential”.

But the company has yet to prove this is the case: a study examining donanemab’s preventive potential is not due to end until 2027, a point that was not made clear in the meeting minutes provided for the FOI requests.

Asked about the minutes, Lilly told the Financial Times it believed “there is the potential to treat those with an Alzheimer’s disease diagnosis before symptoms have developed, which we are validating through our ongoing trial”.

The comments have been revealed as drugmakers face more scepticism from European than from US regulators about the costs of identifying eligible patients and administering new Alzheimer’s drugs as well as safety concerns, after a rival treatment was rejected by the European Medicines Agency.

In a wide-ranging discussion, Ricks also told Atkins that donanemab was a “one and done treatment course, with amyloid plaque taking a couple of decades to reaccumulate after treatment”.

Amyloid does build up slowly in the brains of Alzheimer’s patients but whether donanemab is a “one and done” treatment is unknown because the drug has only been trialled in recent years.

Several experts said it was difficult to tell yet if the drugs had preventive potential, while longer-term benefits were also unproved.

Lilly told the FT that its ongoing trial exploring the preventive potential of the drug involved “nine monthly doses [delivered by infusion], following which therapy is stopped”. After the amyloid is removed “it will likely take many years to accumulate”, it added.

Atkins said that meeting companies like Eli Lilly was “one of the most exciting parts of the role to understand the developments and treatments” for diseases like dementia.

The meeting was one of several between Eli Lilly and Conservative health ministers in 2023.

Eli Lilly’s drug is being reviewed by the UK’s Medicines and Healthcare products Regulatory Agency (MHRA) to treat patients with symptomatic, early-stage Alzheimer’s.

Donanemab and lecanemab, a rival treatment developed by Japanese drugmaker Eisai and US biotech Biogen, have both been approved by US and Japanese regulators. But the European Medicines Agency has rejected lecanemab and is still assessing donanemab.

The MHRA approved lecanemab for UK use in August but Nice, the

National Institute for Health and Care Excellence cost-effectiveness watchdog, said it would not be prescribed by the NHS because its benefits were “too small to justify the significant cost”.

During clinical trials, lecanemab slowed the progression of Alzheimer’s disease by four to six months in people in the early stages of the disease. Donanemab slowed it slightly more.

However, 27 per cent of lecanemab patients and more than a third of donanemab patients experienced “amyloid-related imaging abnormalities” (Aria) caused by brain swelling and bleeding.

In its decision to reject lecanemab, the European Medicines Agency said “the seriousness of this side-effect should be considered in the context of the small effect seen with the medicine”. The MHRA has called for testing for a gene linked to higher Aria rates.

Another challenge for health systems is the infrastructure required to diagnose the disease early enough for the drugs to be effective and to administer them and monitor patients for side-effects.

In his meeting with Atkins, Ricks noted that the Pet scans — used to identify potential patients and monitor their progress — are “expensive and there are not enough Pet cameras to test at the scale required”.

Eisai is appealing against both the Nice decisions and the EMA’s ruling. Gary Hendler, head of Emea at Eisai, said regulators should avoid making “a short-term decision that could impact R&D in the long term.”

Lecanemab is “obviously not the panacea, it’s not the cure. But without the first step, what’s the add-on medicine? Where do you go after that?” he said.

Anne White, head of neurology at Lilly, said it was “hugely disappointing that they reacted this way to [lecanemab]”. She added that it was “almost unthinkable” that new Alzheimer’s drugs would be “available in the US, China, Japan, UAE . . . across the world potentially and then, not in Europe”.

The EMA and MHRA declined to comment.

Spectre of low inflation returns to haunt Eurozone policymakers

Weak growth and reduced price pressures could force European Central Bank to consider prolonged series of rate cuts

The Eurozone’s weak economic growth and sluggish consumer price rises have raised concerns that the European Central Bank may be facing the threat of too little rather than too much inflation, economists have warned.

The prospect of a bout of reduced price rises is a sharp turnaround from recent historic levels of high inflation, which forced the ECB to push interest rates up to a record 4 per cent in September 2023.

Monetary policymakers will meet this Thursday and are widely expected to reduce rates. Having previously not anticipated a cut until December, investors now view a quarter-point reduction to 3.25 per cent as a given.

The October cut could usher in a series of faster and steeper reductions in borrowing costs in an effort to stop inflation from persistently undershooting its target, economists said. Financial markets are now pricing in that the ECB will lower rates to just 1.7 per cent by the second half of next year. In September, annual inflation fell to 1.8 per cent, putting it below the ECB’s 2 per cent medium-term goal for the first time in more than three years.

“Avoiding a fall back into the pre-Covid world [of inflation below 2 per cent] will be one of the ECB’s biggest challenges,” said Jens Eisenschmidt, chief Europe economist at Morgan Stanley, who until 2022 worked at the ECB. He predicts the ECB’s key deposit facility rate will have halved to 1.75 per cent by December 2025, but added: “It is very well possible that this level will not be the end [of the easing cycle].”

Historically, too little rather than too much inflation had been the ECB’s bigger problem. In 93 of 120 months to July 2021, when the recent surge in prices began as demand rebounded during the pandemic, inflation was lower than the ECB’s goal. The 2 per cent target was introduced that summer.

It replaced a more conservative goal of inflation being “below, but close to 2 per cent”. To stop further falls in inflation, the ECB embarked on an unconventional monetary policy, inflating its balance sheet through bond purchases and pushing its key interest rates into negative territory.

Minimal price increases increase the danger of falling into deflationary territory, which can trigger a self-reinforcing downward cycle as consumers postpone purchases while shrinking income makes it harder to pay down debt. Overcoming deflation can be much harder for central banks than reining in inflation.

For now, the latest ECB staff forecasts predict that annual inflation will hit its 2 per cent target in the fourth quarter of 2025 and stay well above that level over the first nine months of the year.

But central bank officials were concerned that the forecast, which was published in September, might be too rosy even before the month’s annual 1.8 per cent inflation figure was published. According to the minutes of the September meeting, rate-setters noted that “the risk of undershooting the target was now becoming non-negligible”.

Yannis Stournaras, governor of the Bank of Greece, said this week the most recent data “suggests that perhaps we get to 2 per cent in the first quarter of 2025”.

This is despite an expected temporary rise in headline numbers by the end of the year. Due to a statistical quirk, the year-on-year comparison in November and December will be distorted upwards as oil prices in the final months of last year fell temporarily.

But the ECB “will see through that”, said Bill Diviney, ABN Amro’s head of macro research.

As wage rises in leading Eurozone economies respond with a time lag to the past surge in inflation, headline inflation numbers next year are also expected to be higher than the more feeble underlying economic dynamics would suggest, said one person familiar with the thinking of a member of the governing council.

“In the short term, the weak growth outlook is the more critical factor but the risk of undershooting [the 2 per cent inflation target] is already part of the equation,” the person said.

ECB president Christine Lagarde said last week that the central bank would take into account increasing confidence that the ECB’s medium-term inflation target was in touching distance, a remark that increased investors’ expectations of a rate cut.

Yet Sebastian Dullien, research director of Düsseldorf-based Macroeconomic Policy Institute, said weak growth and sharply falling inflation suggested that the ECB “is acting too slowly [on adjusting rates] once again”, adding that the central bank’s analysis of the drivers of inflation was “flawed”.

Dullien argued that the inflationary surge between 2021 and 2023 was a temporary one driven by higher energy prices and supply chain bottlenecks rather than a fundamental rise in demand. He said the ECB increased interest rates too much, harming an economy that was already hit by low productivity, tepid investment and an ageing population.

“The overly restrictive monetary policy exacerbated some of the structural issues,” Dullien added.

European carmakers plan dozens of cheaper models to survive ‘EV winter’

Manufacturers must sell more electric cars to meet tough new EU carbon targets

European carmakers are planning dozens of affordable electric models next year as they brace for an “EV winter” driven by tough new EU carbon emission targets and fierce competition from China.

Ahead of this week’s Paris Motor Show, the big European manufacturers, who have also been squeezed by falling demand, are focused on recovering lost market share with new vehicles.

“We are here to fight,” said Renault chief executive Luca de Meo earlier this month as he unveiled a battery recycling project and plans to support the company’s EV business. “We have challenges everywhere. It’s not a walk in the park but we see a lot of potential.” 

Renault is the only major European carmaker that has not issued a profit warning recently. Volkswagen, Stellantis, BMW and Mercedes-Benz have all cut their earnings forecasts because of problems on multiple fronts from intense competition to weak European demand and rising inventories in the US. 

The pressure on the industry will increase again next year when new EU emissions targets come into force. These require carmakers to cut carbon emissions from their fleets — by increasing the proportion of electric and hybrid vehicles — or face large fines. 

Executives say meeting the emissions targets has been made harder by a recent slowdown in the growth of EV sales: consumers have become more cost conscious and subsidies have been cut in big markets such as Germany.

Some carmakers, with the exception of Stellantis, have called for the targets to be watered down or delayed, to avoid fines that could add up to a collective €51bn by 2030 according to consultancy AlixPartners. 

Addressing an Italian parliamentary committee on Friday, Stellantis CEO Carlos Tavares said the shift to EVs required by the rules would add significant costs for carmakers.

“In a system that cannot absorb more price because the consumer does not want to pay more, we are inserting 40 per cent more cost,” he said.

Barclays analyst Henning Cosman estimates global carmakers will launch more than 100 EV models this year in Europe and around 70 in 2025, but the cheaper prices required to make sales could cause an “EV winter”, he added. 

“If you are a consumer, you almost feel like buying an electric vehicle today is a mistake because you know that you can get a better one with longer range and newer technology and most likely at a lower price pretty soon. That’s really the downward spiral,” he added.

European carmakers, knowing they would be under pressure to sell cheaper models in 2025, have focused on the more expensive end of the market this year.

That has made them less able to compete with the likes of China’s BYD and Xpeng which have a €20,000 price tag for some models — about half the average price of an EV in Europe according to Transport & Environment, an NGO. 

“There could be a price war, but I’m not sure the Europeans are the best place to win it,” said Alexandre Marian of AlixPartners. 

EVs are already less profitable for carmakers before any new discounting next year. Across the industry, gross margins are about 15 percentage points lower than they are for combustion engine models, according to Barclays.

Some cheaper models will be displayed at the motor show, including an under €20,000 car made by Leapmotor, the Chinese partner of Stellantis.

Renault is already taking orders for its electric R5, priced at around €25,000. While Citroën, another Stellantis brand, will show models including the C3 Aircross compact SUV, though only the non-electric versions are priced at around €20,000.

According to research compiled by Renault, EU carmakers will need a 20 to 22 per cent share of the European market share to comply with the emissions targets. But at the moment, they are stuck at less than 15 per cent. 

Analysts say the targets are achievable if carmakers buy emissions credits from rival groups that sell cleaner vehicles. But the cost of doing this for the likes of Volkswagen and Ford, which are the most behind on the targets, are likely to drag their profits down further.

Ahead of the motor show, Luc Chatel, the head of French car lobby PFA, told radio station RTL that “manufacturers and the whole industry are investing billions of euros” to shift to EVs.

But he added a warning on the “serious danger” for the industry. “Consumers aren’t following any more. This means manufacturers will no doubt have to pay European fines next year, which is pretty surreal.”