Executive Magazine

Entrepreneurship and youth in lebanon

by Sally Hammoud November 8, 2018

written by Sally Hammoud

Lebanon may be officially classed as an upper-middle-income country by the international community, but it lags far behind other countries of a similar status. Serious deficiencies in the dynamics of the labor market—where youth unemployment is almost 40 percent, and women account for less than 25 percent of the workforce—are largely to blame.

It is hard to get a clear picture of unemployment in Lebanon. Statistics on unemployment are notoriously inaccurate, with official numbers putting the level of unemployment in 2018 at just 10 percent. Unofficial figures frequently reported in the media, however, put the level of unemployment at 25 percent. And it is the Lebanese youth who are most likely to be affected; finding job opportunities is challenging due to high competition and the unstable economic situation.

Lebanese youth are highly educated, with a large number of young people graduating from universities with higher degrees, such as a masters or a PhD. Yet, some reports say that an average of one Lebanese youth in three is unemployed.

One solution for tackling this high level of youth unemployment would be to equip young people with the skills they need to become entrepreneurs. Entrepreneurship has the potential to help countries achieve both internal and external targets. Several of the UN’s Sustainable Development Goals (SDGs), including sustainable education and environment, and the eradication of poverty, could all be benefited by entrepreneurship. In Lebanon’s case, there are several intersecting opportunities that could be taken up by civil society organizations, schools, and universities, along with the government and the private sector, to establish proactive strategies to stop the brain drain and bolster the country’s economy.

There is a huge need to equip the next generation with the skills needed to bring about sustainable growth. Strategies to do so should go beyond education, focusing also on building capacity to provide youths with labor market opportunities. This need is becoming more urgent by the day, equal to the need for education, to help current and future generations get through difficult times and weather massive economic, social, and political challenges. Youth empowerment is essential—at its core, it is the incubation of human potential. By empowering Lebanon’s youth, we will bring considerable economic, social, cultural, and human benefits to our country at all levels.

Entrepreneurship for all

What draws youths toward entrepreneurship is their belief that it allows for creative freedom, unencumbered by obsolete organizational structures. Research on American millennials in 2014 found that 94 percent want to use their skills to benefit a cause. Social entrepreneurship attracts millenials because they want to engage in their community and become efficient global citizens. This is why social entrepreneurship is becoming more common in Lebanon. Youth are looking for solutions that can do for their community what the government is unable to do. But they lack the guidance to become young social entrepreneurs, as these kinds of skills are so far only being taught to those studying business or entrepreneurship itself. These skills should be taught to everyone, and at a young age. With a base in entrepreneurship those Lebanese university graduates currently struggling to find work at home despite their expertise could find their own solutions and work toward improving the Lebanese economy.

There are many possible routes that could benefit the youth and country as a whole, but the most feasible ones are education, media, and civil society. Education systems require constant improvement at all levels: curricula, educators, administrators, and students, as knowledge-based technology is intersecting with every aspect of our lives. Educational institutions must introduce entrepreneurship to students at an early age to enhance their creativity. Some institutions are adopting this approach, but it is not enough to cover the current needs of the market. Such a curriculum would provide students with better career orientation, which would help them in selecting their major at university.

For the past few years, my organization, Loyac, which works to promote youth development, has hosted several groups of school students from Kuwait, and enrolled them in school entrepreneurship programs with a mandate to assess, design, and implement solutions for underprivileged youth. This peer-to-peer approach has so much impact on communities. Teaching design thinking from a young age, as well as promoting peer-to-peer learning, comes with several benefits. It allows for active learning, and helps reinforce these skills through the teaching of them to peers, benefiting all sides of the equation.

Networks for innovation

Partnership between educational institutions and civil society is also vital. Civil society is the ecosystem for social change, as civic engagement helps youth observe, assess, and understand societal problems. This fosters empathy and an eagerness for change, encouraging youths to care about each other, and the planet. When engaging in civil society, they learn how to design their thinking to find pragmatic, sustainable solutions. According to the 2017 Global Entrepreneurship Monitor (GEM) for Lebanon, one in six adults in Lebanon cited fear of failure as preventive factor for starting a business; incubating youth at early age would perhaps help them counter these fears in later life.

With all the challenges that Lebanon is facing, entrepreneurship is one of the keys to stabilizing the economy. Of the eight MENA countries that participate in the GEM, Lebanon had by far the highest level of women-driven startups, almost twice that of the next highest, while, for both male and female entrepreneurs, most starting or running a new business were under 35 years old. Indicators such as these are worth celebrating and sustaining. Injecting entrepreneurship skills through education, civil society, and media literacy can help work miracles.

November 8, 2018 0 comments

Entrepreneurship Entrepreneurship 2018 Entrepreneurship 2018 Overview Special Report

Entrepreneurship and the digital economy in Lebanon

by Thomas Schellen November 7, 2018

written by Thomas Schellen

When making the rounds through the Beirut Digital District (BDD) to assess how Lebanon’s entrepreneurship system is developing, there is a lot to observe. Over the past five years, there have been several exercises—usually with significant self-promotion and marketing—to map this emerging system in all its components. Invariably, such exercises seemed incomplete by the time they were done, simply because the entrepreneurship realm was changing and expanding faster than it could be mapped.

Driven into existence by the initiative of Banque du Liban’s Circular 331, from the moment of the circular’s publication in August 2013, the ecosystem has grown with each passing year (with Executive committed to publishing annual observations on its progress). This year is no exception. Regardless of the months of political wrangling in the halls of the Grand Serail and Parliament, and also regardless of deteriorating conditions in key sectors of the real economy and intense propaganda-mongering about alleged crises in the Lebanese currency, the BDD at the end of the third and beginning of the fourth quarters of 2018 emits energy, optimism, and innovation.

The first vision of this year’s progress in the system was provided by accelerators, who presented their graduating startups in September and October. Flat6Labs and Smart ESA, two programs that stepped onto the Beirut startup support scene less than two years ago, both organized their second demo days. The professional organization of the events made a strong impression, as did the high quality of the programs’ new graduates.

In talking to the two accelerators, the picture sharpens. Mira Zeidan, project manager in the Smart ESA team, tells Executive that the accelerator—which demonstrates the importance of the role that academic institutions can play in the entrepreneurship realm, especially if they have good relationships with the local and international corporate sector—has seen considerable improvements in the quality of participating startups in its short history. “There might be lower numbers of applicants, so less quantity, but definitely higher quality,” Zeidan says. “This is also reflected in the quality of service provided by the support organizations. When you have better people working on realizing startups, you will require better quality support systems. This is a learning curve that we all are on, accelerators and startups, and this learning curve is confirmed by the improvement in quality of startups that we saw in 2018.”

Perceptions of what it means to embark on entrepreneurial journeys are also maturing, as more and more people understand how much it takes, and those not up for this immense effort orient themselves toward different trajectories. “The ecosystem started with people having the image of the startup being something built in a garage by someone who had dropped out of college,” Zeidan says. “There was a lot of mythology in that. A startup means very hard work, and people are realizing this more and more. Entrepreneurship is starting a business and requires hard work, dedication, and commitment.”

Over at Flat6Labs, managing director Fawzi Rahal tells Executive his observations on the direction of Lebanese entrepreneurship. He, too, notes that locally one sees “many more refined solutions, much more refined technology and much more refined entrepreneurs, when compared with just a few years ago,” characterizing the ecosystem’s development trajectory as “a game of numbers and a game of time.”

Improve financing efficiencies

Operating an accelerator that also integrates elements of a venture capital (VC) and seed funding operation, Rahal says that the Lebanese ecosystem needs to evolve to include efficiency gains in its financial flows. According to him, regulatory and legislative frameworks are not fully tuned for optimal entrepreneurship support, given that the current taxation regime and fee mandates draw funds from the system right back into the state’s fiscal cycles, even though the funding of startups is strongly based on funds that enjoy subsidization from the public through Circular 331.

When Flat6Labs supports a startup’s path through formal incorporation, it encounters layers of time-and money-consuming fees, such as an annual $100 fee that is to be paid to the Beirut Stock Exchange. This adds up to a considerable financial burden when a batch of eight or ten new startups goes through the process of properly establishing themselves as joint-stock enterprises—burdens that startups would not have to bear, Rahal says, if they had gone the dangerous route of non-limited liability companies.

This drains away funds that had entered the ecosystem as subsidies for startup companies in the knowledge economy .“This is not a very efficient way of transferring money. With this in mind, I am saying the intentions are there, but the regulations are not,” Rahal says. He notes, however, that there is a silver lining: probable improvements in the ecosystem’s financing efficiencies, as political and institutional stakeholders, such as the prime minister’s office, the Ministry of Labor, and UNDP, have more actively engaged with the ecosystem’s constituents in order to research how many jobs are being created and how regulations can be optimized.

“From the understanding that money inserted in digital ecosystem is coming back by way of adding to GDP growth, every penny spent on capacity-building [with an] entrepreneur, and every time we, as VC, invest the second time [with such an entrepreneur], the odds of a startup succeeding become higher and the capacity in the ecosystem improves,” Rahal says. “This is an impact that you can see [at the BDD] and it is a general direction that BDL is big believer in.” To his way of thinking, the impact of the ecosystem will improve by another great leap, once there are exits that grab real attention.

Exit with style

“Money is something that everybody will get the message of, from entrepreneurs to governments,” he says. “This will be seen the minute when we have our first [very large] exit. If a startup like [music platform] Anghami were to be acquired for a billion USD, you would suddenly have people that have a billion in cash, and if such an amount landed in Lebanon, it would get attention from people who would ask how we can get more of these companies. This kind of money is no joke, even with a prime minister or a governor of a central bank, and will make them ask how to assure that the least portion of this money is leaked via fees or other outflows, and how we can create a system that generate more such amounts.”

Positive entrepreneurial energy in the BDD in autumn of 2018 is in no way only concentrated in the accelerators that staged their demo days in September and October. Sami Abou Saab, the chief executive of accelerator Speed@BDD, was with a delegation of 13 Lebanese startups in Dubai in October, and told Executive upon his return that the entrepreneurs from Beirut were able to shine on the international stage.

“It is a very small ecosystem in Lebanon and we really care for the whole Lebanese startup ecosystem to be highlighted on the international scene,” Abou Saab says, noting that the decision to attend the Future Stars competition at Gitex was based on the positive experience of Lebanese startups at the event a year earlier. The success of teams from Beirut on the Gitex stage, surrounded by enormous competition (140 startups in 2017 and over 230 this year), was, for Abou Saab, another validation of Lebanon’s entrepreneurial capacity. “We have strong local talent and have seen the value of our talent being highlighted and able to shine on those stages,” he says.

Just one notch below the acceleration of amazing new startups, the graduation of coding seminars at SE Factory last month added another paving stone to Lebanon’s road toward the transition to a digital economy that must extend far beyond just the biotope of tech startups. Fadi Bizri, one of the co-founders of SE Factory and a partner in venture capital firm B&Y Partners, tells Executive that over the coding program’s existence of more than two years, interest from banks and companies in the wider economy has increased, and been reflected in the hiring of graduates by all sorts of enterprises, from startups and software houses to some large companies. Bizri says that some explanations that local corporate players used to give for their reticent approach to digitization are no longer convincing. “We think that Lebanon is an ideal place to skill digital talents, and not only local companies agree with that but also foreign companies. I do not buy into the argument anymore that there is not enough internet availability in Lebanon.”

The many positive developments in the tech entrepreneurship realm are not diluted by the observations—shared by many stakeholders in the ecosystem with whom Executive spoke—that much development is yet to be achieved, and that the enthusiasm for this new system, which on occasion boiled over into vapid and sometimes counterproductive hype during the past five years, is most effective in moderation. As Nicolas Rouhana, general manager of IM Capital, puts it, there are issues that make the use of the term “ecosystem” for the entrepreneurship space in Lebanon somewhat questionable.

“It is a landscape with missing parts. There are parts in place but others are missing and we need to keep growing them and tie them together so that they can all together form an ecosystem,” Rouhana tells Executive, noting the sector’s need for more and better mechanisms for exits, as well as a more complete legal and regulatory framework, mechanisms for channeling funds into early stage startups, and research and development. “Universities need to have bigger roles [and we need] more innovation labs. What we are somehow doing well in is the middle stretch of the startup road,” he says.

Digital transformation

Other essentials that are not yet fully developed in the context of Lebanese entrepreneurship are governance and communication, specifically constructive communication in case of problems that arise in any entrepreneurship environment. There is plenty of room in the local entrepreneurship culture for the construction of much better ways to settle financial disputes that are inevitable in these risk-rich realms. This year provided a lesson in that regard, as the failure of one enterprise with a—by local standards—large investment of BDL-backed VC money is still unfolding (see report on the Bookwitty case on page 20).

One big concern that relates to the need for improving risk culture in Lebanon is which paths the stakeholders in the national economy, and, critically among them, the traditional corporate stakeholders and family groups, will choose in transitioning into the inescapable digital economy. Not a single person inside and outside of the entrepreneurship realm uttered any misgivings that this transition is coming and needs to be supported from many angles (see interview about the data center, and its importance in digital infrastructure, on page 50).

From the perspective of BDD insiders, there is much potential for tech entrepreneurs and successful startups to contribute in important ways to the country’s digital future. IM Capital’s Rouhana notes that the Lebanese corporate sector and legacy business community is lagging severely in moving toward the digital world, and emphasizes the urgency of cultural change. The extant corporate culture, he says, is becoming a major hurdle. Companies need to change their mindset and be put in a position to see that the choice to commit to digital transformation will determine whether they remain relevant.

As Flat6Lab’s Rahal sees it, there are many ways for the economy to advance into the digital era, but such a move cannot be orchestrated solely by entrepreneurs left to their own devices. “There is potential and there are intentions to utilize the BDD entrepreneurship ecosystem as a lever for speeding up digital transformation, and the only institution I can name that is wholly behind this is BDL,” Rahal says, adding: “It would be fake news if I said the youth can take this nation forward into the digital transformation of the economy if you just give them the space to do so. A lot more has to happen, on a regulatory, infrastructure, and cultural basis. However, that does not devalue the fact that you have to start somewhere. And that [ability to begin this digital transformation] is where I see the power of the entrepreneurs.”

For the perspective of a successful business group contemplating the digital future, Executive spoke with Hisham Itani, chairman and chief executive of RGH group. RGH is invested in using digital capacities in areas that a few decades ago were ruled by traditional methods and mindsets. “Digital transformation in Lebanon is manifested through several entities, such as BDD and other incubators and accelerators,” Itani says. “For the last 10 years, it has been growing steadily through the private sector as well, and more precisely technology-based companies in the country. RGH is one of the companies that invests in technology startups and entrepreneurs, and we are constantly on the lookout for opportunities that drive the digital transformation in Lebanon.”

Itani agrees with the stakeholders in the BDD entrepreneurship system that tackling the legal and regulatory framework is a matter of urgency, to prepare the ecosystem for digital transformation. “We are pushing for this with the government along with other stakeholders. [The country] is going in this direction, and applications are now being deployed very fast. We are looking at important projects that the new government is poised to implement … including the digitization of Lebanon’s civil registry, which contains files that date back to 1932,” he says. “With this achievement, Lebanon is taking a leap into the future. It is the cornerstone for any regulatory reform in the digital transformation.”

Itani goes on to conclude: “We have to think outside the box to create examples and set standards that others will follow, and this in return will create a better ecosystem. The story is not about competing [with other Lebanese players in the same sector or specialty]. Once you create the entrepreneurship ecosystem, you create a nation-level tech hub, and this is my dream.”

November 7, 2018 1 comment

Leaders Opinion

Opportunites for new startups abound

by Executive Editors November 6, 2018

written by Executive Editors

Near the center of Beirut sits the heart of Lebanon’s startup ecosystem, the Beirut Digital District. It is mainly here that Lebanon’s entrepreneurs gather to pitch and develop solutions to problems that are uniquely Lebanese, and others that are less so.

The country’s entrepreneurship ecosystem today faces challenges that are not insurmountable, and there are opportunities that may not be quite the stature of a “unicorn”—the rapid ascent to a valuation of at least $1 billion—but are attractive and exciting nonetheless. Executive has examined the companies jostling for these opportunities in its profiles of this year’s batch of new startups, a survey the magazine conducts annually.

On the one hand, we see the ecosystem advancing and evolving in good ways. Interspersed with that is the fact that the entrepreneurship ecosystem is still incomplete. The sector’s most needed financial elements, in this magazine’s view, are more allocations of risk-friendly capital and better exit options, at the early and late stages, respectively, of a startup’s journey.

The ecosystem also needs stronger and more sophisticated regulatory support and improvement of rules, regulations, and arbitration. All stakeholders—from the ecosystem’s initiator, the central bank, to commercial banks and venture capitalists, all the way to entrepreneurs—understand the pattern and readiness to “fail fast,” but learn faster out of failures than anyone else, but this ethos has yet to be fully incorporated into the ecosystem’s cultural DNA. Lebanon’s first significant homegrown proof that entrepreneurship is indeed risky, the Bookwitty collapse, demonstrates the importance of improving the acceptance of failure, as much as it shows the perils of ego, and highlights the value of investing in sincere and honest dialog. This should be a priority for all stakeholders.

On the other side of our entrepreneurial landscape, Executive adds its voice to the call for increased commitments from academic institutions. We can see progress when we compare the involvement of universities today with two years ago, but, in the eyes of Executive editors, more could be done. It is crucially important for the future of the Lebanese economy that we develop and exponentially increase the ability of our entrepreneurs to nurture Lebanon’s digital economy transformation, and understand that tech entrepreneurship is the natural core driver for Lebanon’s transitioning into a digital future.

The urgency of transitioning the Lebanese economy into a digital economy has been acknowledged, but there must be renewed vigor and support on the part of the state. While we have seen some progress—for example an e-transactions law that should help expand Lebanon’s online commerce—there is still much to be done.

The next government, yet to be formed when Executive went to print, must renew efforts to upgrade infrastructure necessary for the success of local startups, the ecosystem as a whole, and Lebanon’s transformation to a digital economy. Public stakeholders have indicated support for the digital economy and building infrastructures, but this can really only happen if Lebanon has a government equipped to meet its obligations to the country and national economy, and not the parochial interests of some actor, party or group.

The digital economy, just like the entrepreneurship ecosystem, will surely develop better going forward if the impulse to cohesion is emphasized over and above that of ego and partialities. If, instead, young Lebanese entrepreneurs can bury any such lingering mentalities and turn them into the legacy corporate environment and public sector decision making, then the ecosystem can aspire to be a cultural rocket with the power to propel the national transformation into a digital economy—a transformation much needed for Lebanon, in 2018 and beyond.

There are indications, or stated intentions at least, that a civil registry, health card digitization, and other examples of digital infrastructure rollout are coming. But long overdue initiatives also linger—such as the Beirut Stock Exchange’s electronic trading platform, an overhaul of the Capital Markets Authority’s regulatory capability to oversee capital markets, as well as legal frameworks and judiciary infrastructures to enable the digitization of the economy.

It is also necessary to reassure the private sector, and further connect it with the digital economy. One project that could solidify the relationship is the planned national data center, which is still undergoing technical preparations as a public-private partnership. This center, and other projects, would allow the private sector to expand the mindset that considers the digital economy not an impossible mission, but something that Lebanon has the human capital to work on and achieve.

Lebanon has so much knowhow in the digital sphere and ITC sector that could be applied to the transformation to a digital economy, but it has not fully realized or applied this expertise at home. There is some political will within the government, from certain actors, but overall this political energy is still lacking. All state entities need to work together to continue nurturing the ecosystem and set the country on a path to digitalization. On this path, there is much to be done.

November 6, 2018 0 comments

Editorial Opinion

You can’t handle the truth

by Yasser Akkaoui November 6, 2018

written by Yasser Akkaoui

Our naive and simple minds have proven time and time again to be susceptible to transparent excuses. They shield us from accepting the facts on the ground and allow us to orbit in an imaginary reality instead—one that suits our ambitions and aspirations. Sometimes reality is so unacceptable, it needs to be absorbed and digested, repressed and denied, before we can carry on.

Jamal Khashoggi’s murder last month obliges us to stop and face the bitter reality. His death was so horrendous and flagrant that it awakened many from the illusions of their blinding virtues. In the interest-driven world that we live in, only greed, ego, ignorance, disrespect for human dignity, and disregard for integrity prevails. It is the interests of nations and greed, amplified by leaders’ superegos, that decide our fate.

This disruption to the global order makes clear how immature our political elite are in assessing the regional geopolitical situation and its impact on Lebanon. Their political failure is no different from their economic ignorance and disinterest. Their reliance on the promise of greater nations to ensure the stability of Lebanon does not specify what the definition of stability means and whom this stability serves. If this current status is the definition of stability, we do not want it. It only serves others’ interests, above our sovereignty. It does not permit for any progressive thinking about development and change.

To zoom in further, our naive entrepreneurs are exactly in the same rut. While living in their bubble, mimicking Silicon Valley, they expose their vulnerability to the greed and self-interest and entitlement that surrounds them. There is a worrying status-quo that is settling in—one that lacks accountability and a commitment to best practices.

Unless we open our eyes and deal with reality, we will remain a vulnerable, unsovereign nation, unable to protect entrepreneurial youth.

Wake up. Watch your back.

November 6, 2018 0 comments

Artists

Art in the Instagram age

by Nayla Kai Saroufim October 22, 2018

written by Nayla Kai Saroufim

The growth of social media has changed the way people experience and share parts of their lives, from instagramming each meal to finding a relationship via an app. Art is no exception. Social media has, without a doubt, widened the arts community. With over 700 million users worldwide, Instagram has developed into the leading photo-based media platform on the web, and for artists navigating this modern world, an Instagram account has replaced the canvas, portfolio, and private gallery—and become a prime tool when pursuing a career in art.
How many Instagram followers you have is becoming the new standard of popularity, and a prerequisite for art curators serving millennial clientele and searching for emerging artists. According to the European Fine Art Foundation (TEFAF)’s 2017 art market report, the internet is the second most fruitful platform for meeting new clients; half of the art dealers reported making contact with 40 percent of their new buyers on the web. This is something myself and fellow artists have noticed happening more and more. My own client base is increasingly growing through social media, and a high percentage of my painting and installation sales are initiated through Instagram.

I now find myself spending more time on my phone than ever before, and my Instagram inbox pings far more often than my three email accounts, with inquiries about painting sizes, installation material, and prices. Social media has replaced traditional communication channels and developed into a new platform for artists like me to interact with fans and clients. Instagram specifically has gained fame among artists for its emphasis on visuals and lack of words. “The platform strips away all the pretense and bullshit, and forces artists to make cases for their art with little or no hype,” explains art consultant Alan Bamberger in an article for his website, Art Business. The simplicity of Instagram’s medium allows art lovers to engage with art and its creators directly.
In the art world, as in most industries, social media has become about more than exposure. Artists and buyers are using it as a tool for art sales—an approach made even more valuable in the era of social media influencers. According to Artprice, a French online art price database, the total auction value for art globally reached $14.9 billion in 2017, an increase of 19.8 percent from 2016. Online art sales, meanwhile, according to insurance company Hiscox’s 2018 report, reached an estimated $4.22 billion in 2017, up 12 percent from the previous year. While online art sales are small scale compared to auctions, finding art through social media and buying it online has a clear generational divide. According to the TEFAF report, more than 40 percent of 18-24 year old consumers in the US discovered art through social media and over 50 percent in that age bracket would buy art online. Compare this to the 55-64 age bracket where less than 9 percent discovered art through social media, and just under 23 percent would buy art online. The argument can be made that social media and online buying are trends set to increase as millennials come of age.
My own eureka moment with Instagram came when I installed an artwork for a prominent social media influencer who ended up posting to her feed a picture of her living room that included my installation. I woke up the next morning with hundreds of additional followers and a barrage of messages asking about my work and where it could be bought. This eventually resulted in increased sales. It was this experience that helped me understand the power of social media.
Having a digital interface has allowed me to dedicate more time to the creation process than the marketing process. From 2005 to 2010, I worked to be present at every art fair and exhibition in Lebanon and Dubai to promote my work and gain peer recognition. Today, I tend to exhibit in select galleries in London and Singapore, and use Instagram as the main showcase of my work, and as the primary communication channel with agents and clients. And I am not alone.
To catch-up with the trend, even reputable art websites such as Artsy and Saatchi Art are offering guides on how to market art on social media. Tips range from identifying which hashtags to use and at which times to post, to the captions to write and the people to follow—all aimed at helping artist increase visibility and rise to fame.
One of the most successful examples of using social media as a trampoline to success was the Museum of Ice Cream (MOIC), which opened its doors in 2016 in New York after months of online hype and anticipation. With more than 400,000 followers on Instagram, the museum became the “it” place to see and be seen, with hundreds of selfies posted each day alongside #museumoficecream. After a three-month wait for an $18 entry ticket, I had the chance to visit the museum’s Los Angeles location with my three children. All of us enjoyed the museum. While definitely not on the scale of the Museum of Modern Art (MoMA), with its 3.8 million Instagram followers and prestigious curation, the MOIC is part of a new generation of exhibition areas and art spaces that specifically target millennials as a desirable new audience. One of the gimmicks of the MOIC is that you are only allowed to spend three minutes in each gallery—enough time to take a quick selfie. And let’s face it, if it weren’t for social media and the buzz generated online, the New York MOIC would only have been visited by local students on field trips and curious locals. Instead—in less than a year—the MOIC has had over 500,000 visitors and has opened locations in Los Angeles, Miami, and San Francisco.
Social media not only assists with the promotion and sale of art, it has also begun to shape it. As Carolina Miranda wrote for the Los Angeles Times in 2016: “The relationship between art and social media is a tricky one. The former is about pushing boundaries; the latter, enforcing them.” She goes on to argue that social media is “quietly shaping the way art is produced and shown.”
Social media often drives artists to worry more about accumulating likes and followers than creating beauty, sharing emotions, and raising voices via their art. While it has made it possible for many artists to have greater access to the world, it has also lowered the threshold to becoming recognized as an artist. Anyone can call themselves an artist on Instagram; no one can bestow the title upon them, or take it away. And while this means greater access to talented people, it also means that less-than-talented individuals are able to thrive and prosper. As the street artist Plastic Jesus pointedly preached in a 2013 slogan stenciled across the city of Los Angeles: Stop making stupid people famous.

Nayla Kai Saroufim is a Lebanese art director and illustrator. For a decade now, she has been engaging in creative expression through her work, which embodies her attraction to colors and interest in varied forms of expression, especially steel installations. You can see her work at: www.naylasaroufim.comlations.

October 22, 2018 0 comments

Last word Opinion

Peace for those left behind

by Christophe Martin October 5, 2018

written by Christophe Martin

“Just a bone,” she said. “All I need is one bone for me to put his memory at peace.” On the International Day of the Disappeared, at an event organized by the International Committee of the Red Cross (ICRC), a woman from the crowd took the floor and reminded us again why, year after year, we commemorate those who have gone missing: For each family, the day their loved ones went missing is as fresh as yesterday, and they need answers to find peace.

Despite the tragic circumstances that surround this commemoration every year, the country has never been closer to bringing answers to those who lost a son, a mother, or a loved one. A draft law on the missing has been passed in Parliament’s Human Rights and Justice and Administration committees. If this law is approved by the full legislature, it will set up a legal framework establishing a humanitarian, independent mechanism charged with finding answers about those who went missing during the Lebanese Civil War.

The 15-year civil war has distorted the collective memory of a nation. It bears a heavy toll not only on the relatives of those still missing, but on the country as a whole. The transgenerational burden needs to be lightened for Lebanon to move forward. Since 2012, the ICRC has been working on a number of initiatives with purely humanitarian ends, such as collecting ante-disappearance data and biological reference samples of family members. Experts in forensic science and human identification, anthropologists, and archeologists are being trained in order to form a network of expertise. ICRC has also been supporting the families in their efforts to revive the memories of their missing relatives and to mobilize themselves back into action.

However, the ICRC can only go so far to address the needs of the families of the missing. It is, rather, the government’s responsibility to make sure that the fate and whereabouts of the missing are known, and their families are informed. That said, after years of work, the tools to provide answers to families are in place. With the passage of the Law on the Missing, a legal framework would be established that would allow for the work to reach its completion: The fates of the missing would be uncovered and with it, Lebanon could turn a new page. We are halfway there.

A few years ago, Um George, the mother of a missing person, passed away without any news about her son, who was last seen in 1983. Before she passed away, Um George told her daughters that she’d look for their brother up there, in the skies. But she also tasked her daughters to look for him on Earth, and to knock on her grave once they have found him.

If the Law on the Missing passes in Parliament, thousands of families like that of Um George’s will finally be delivered from decades of living in uninterrupted grief. Some claim, however, that by initiating a process to clarify the fate of the missing, Lebanon would reopen a wound better left closed. But the 3,000 family members that we have visited will tell you that the wound is not closed for them. Rather, legislation such as the Law on the Missing has the power to exhume individual trauma, ascribe it with collective meaning, and ultimately archive the event. And until traumas of the Lebanese Civil War are collectively processed, the present will continue to be shackled to the past.

The International Committee of the Red Cross requests that the Lebanese Parliament passes the Law on the Missing and gives long-awaited answers to families on the fate of their loved ones.

October 5, 2018 0 comments

Q&A Real estate Real estate Special Report

Paula Yacoubian talks development

by Nabila Rahhal October 4, 2018

written by Nabila Rahhal

Six months into her role as a member of Parliament, Paula Yacoubian has been busy doing what she can in a difficult situation, given that a new government has not yet been formed. While admitting that she alone cannot resolve the major issues facing Lebanon today—such as water shortages and power cuts—Yacoubian details how she is working toward fixing the smaller challenges facing residents of Beirut and its proximal suburbs.

E How did you become involved in the Saint Simon area of Jnah? Why that area?

It was the fishermen in the area who first thought of contacting me, represented by Idriss Atriss, the head of the fishermen association, because they saw how I supported the fishermen of Bourj Hammoud and Dora during their protest against sea pollution.

At that time, they had been suffering from a total lack of running water for around a month, and since the majority of residents there are fishermen living in poverty, they cannot afford to buy water, as most people in Lebanon do. So I went there to protest with those residents and show my support.

In Saint Simon, I saw the miserable situation the children there were living in. I saw what was once the most beautiful strip of beach in the world covered with open sewers flowing onto the sand and making their way to our underground water reservoirs and to the sea.

So we connected the small open sewers to the main sewage line; the sewage is still flowing into the sea untreated, but this solution is better than nothing since these sewers were running onto the sand amongst the children and people living there. We also set up a football field for the children to play on and painted some of the houses with the help of the residents.

Photo by: Greg Demarque/Executive

E What is the objective behind these activities?

All this cost me was a phone call to my friend Wafa Saab from Tinol paints and around $500; the balls were donated by Muwafaa Harb. So it cost me [next to] nothing and it changed the lives of these people. The children used to play on a shore full of trash and sewage—it was heartbreaking.

If every parliamentarian—or anyone with a little bit of money—just cleaned up the area around themselves, we would have a clean Lebanon, but we have grown accustomed to this miserable situation.

Still, there are many individuals who are working to improve the country. If we assume that there is no government and stop relying on them (establishment politicians) for anything and instead work together as Lebanese, we can achieve a lot.

For example, today I believe we don’t have a municipal council in Beirut; we have a municipal council that is the enemy of the city. So what I am doing is working as if there is no government or ministries. I look for good individuals and collaborate with them. But I wish people would realize how bad the situation in Lebanon is and understand that they have a responsibility to fix it. Today we cannot not be engaged citizens—we cannot sit in our bedrooms and get frustrated with the situation without engaging in protests or debates and taking action.

E You are now a member of Parliament. How does this position help you address and work toward resolving the challenges you mention?

Parliament has given me wider opportunities to address these issues. You are interviewing me because I am a parliamentarian—you wouldn’t have done so if I were [still just] a fellow journalist. It gave me the opportunity to propose laws; I have proposed nine to date. It gave me the opportunity to communicate directly and daily with fellow parliamentarians to ask for their support in various issues and some of them are indeed supporting me.

It also gave us [the anti-establishment] the hope that, if citizens are appreciating our work today, we will gain their trust and pave the path for non-sectarian and non-party voting in the next elections. Today the Lebanese know that their zaims are crooks and they know the situation in the country is very bad but they have been convinced that “the other” is the obstacle that is stopping them from fixing the country.

Photo by: Greg Demarque/Executive

E What are the nine laws you have co-signed or sponsored?

Amongst them is the law for subsidized housing for first time house buyers. It is a one-article law and is a quick solution to reactivate the ability to provide housing loans for those who want to buy small homes.

I also proposed a law that was developed by [NGO] Legal Agenda regarding the transparency and independence of our judiciary system.

I also signed the [draft] law legalizing medicinal marijuana with other parliamentarians, as I am with anything that brings in money to the farmers and to the government, and I believe if we legalize medicinal marijuana it will go a long away in regulating cannabis plantation in Lebanon. We are not legalizing it for people to smoke it [recreationally], but for medical reasons, meaning what is extracted from this plant with the CBD molecule, which has many medical benefits.

E Are you working on other projects similar to Saint Simon?

Saint Simon was a sort of small trial to see the impact, cost, and mechanics of such projects especially since I didn’t have experience in this field before. So now I am working on a similar project in Beirut’s northern entrance, the Medawar area. It is a very ambitious project to make it a beautiful entrance instead of the [state of]ugliness it is in today. We will be beautifying building walls, working on any water damage in the homes, and developing public spaces and a football field.

Lebanon positions itself as a touristic destination so how can we accept that parts of our capital are so neglected and have so many areas that resemble ghettos? The least one can do is to improve some people’s homes and surroundings. I am unable to help with the electricity or waste problem since it is controlled by the big mafias of the establishment, so I do what I can.

October 4, 2018 0 comments

Real estate Special Report Urban planning

Pegged urbanization and the (in)stability of Lebanese capitalism

by Bruno Marot October 4, 2018

written by Bruno Marot

Ten years ago, the massive failure of subprime mortgage holders and lenders in the United States dealt a devastating blow to the world economy. The worst international financial, economic, and social crisis since the Great Depression had its origin in one of the most potent features of the financial turn of capitalism: the ever-intensifying finance-property link. In most countries worldwide, the use of property financing as an “arterial route in the circulation of finance,” as economic geographer Philipp O’Neill puts it, has increasingly intertwined the fates of the financial and real estate sectors, for better and for worse.

In Lebanon, the intensification of the finance-property interplay is too often ignored, despite its central position in the workings of local capitalism. For instance, the current debates on the soundness of subsidized home loan programs—and on the decision earlier this year to temporarily shut them down—rarely question the root reasons for which Banque du Liban (BDL), Lebanon’s central bank, i.e., the gatekeeper of Lebanese capitalism, has invested so much time and money in encouraging and subsidizing bank-sponsored homeownership. A detailed investigation of central bank involvement by the author reveals housing solutions to be a secondary concern, if that. Rather, property financing has first and foremost been leveraged over the past 20 years to bolster GDP growth and to secure a precarious financial and monetary stability. This reality comes to the fore when the countercyclical timing of central bank monetary and regulatory interventions in the property sector is examined: a majority have taken place during periods of financial, economic, and property stagnation. This was the case, for example, in the late 1990s when BDL orchestrated the establishment of the state-owned Public Corporation for Housing, which assumed a pivotal intermediary role in the development and standardization of private-led housing finance, and again in the 2010s when it deployed successive housing-focused stimulus plans and debt-restructuring schemes for property firms. The object, here and elsewhere, has been the invigoration of property demand and asset prices, to which were added in recent years the avoidance of mortgage holder and development firm failure. But why, and through which mechanisms, is property so critical to the country’s macroeconomic performance and financial and monetary stability?

The property peg: a key trait of crisis-prone Lebanese capitalism

Two major features, among others, characterize Lebanon’s rentier and finance-driven growth regime: a currency peg between the Lebanese lira and the US dollar to secure monetary stability, and the high remuneration of sovereign debt and bank deposits to ensure the country’s financial attractiveness. A third, added in the past two decades or so, is a property peg. The property market, through real estate and housing finance, has acquired an important strategic position and mediating role in the country’s political economy. It functions as a stabilizer that pins together the imperative, at the country level, of capitalist expansion and regulation, and, at the city level, the eminently capitalist process of urban development. By regulation I mean the action of public authorities and elite business actors whose aim is to correct the vulnerabilities, tensions, and contradictions of the local economy, financial system, and monetary order and to reduce, or postpone, the risk of a systemic crisis. This regulation-urbanization nexus, which is the central mechanism of the model I have termed ‘pegged urbanization,’ is common to a number of financializing economies of the Global South dependent on incoming money transfers. It is also a prevailing feature of the very liquid political economies of Japan, Hong Kong, and the United Arab Emirates. In this cross-level feedback loop, urbanization is both a consequence and an instrument of regulation, enhancing GDP growth and protecting financial and monetary stability.

In Lebanon, regulation initiatives importantly shape the nature, location, and materiality of real estate and construction activity, and the trajectory of property asset prices. The 2002 Paris II international donor conference decision to lower the remuneration of sovereign securities, and consequently of bank deposits, is, in many ways, a telling illustration of the property peg. This public policy initiative, intended to loosen debt pressure and restore confidence in the domestic financial system, unexpectedly reinforced the attractiveness of local property assets for wealthy capital holders. In doing so, and alongside other policy decisions that diminished risk, increased asset liquidity, and maximized the absolute and relative financial performance of property, Paris II helped to trigger the 2000s upmarket property boom in municipal Beirut. The resulting asset price growth subsequently pervaded other market segments, extending the construction frenzy to most areas of greater Beirut. In a similar way, reducing the remuneration of traditional financial products played an important role in the proliferation of condominium towers in prime city locations. On the supply side, such capital-intensive projects provided high-yield, relatively liquid, placement vehicles in the short to medium term. On the demand side, they offered appealing investment opportunities for stocking and fructification of value, and diversification of capital portfolios in the longer term. The plethora of residential high-rises invading the city have thus been constructed primarily to accommodate capital, not people, as anyone can see at night, when most units soaring above are unlit.

At the same time, city-making, through property financing and property asset prices, has also purposely been used as a pivotal instrument of regulation to avoid crises and to reproduce, in the short term, the local outward-oriented growth pattern. The rapid expansion of housing finance in particular was intended primarily to provide new vehicles of capitalization, to allow banks to absorb yield-seeking surplus liquidity in times of financial and economic boom, such as the second half of the 2000s. According to the International Monetary Fund, as of 2015, real estate and construction lending in Lebanon totalled at least 40 percent of private debt. Housing finance also helped to reinforce the size and influence of a growing equity-owning middle class whose interest in the stability of the financial system is expected to generate more economically, socially, and politically conservative behaviors. To put it bluntly, research has shown worldwide that the need to avoid failure and foreclosure motivates indebted homeowners to support the status quo, a tendency that clearly upholds and benefits the ruling political-economic elite. As importantly, in the context of the post-2010 financial and economic stress, the fast-paced deployment of mortgage-based homeownership has also sought to sustain consumption-based growth and to shield the local banking industry from a range of financial risks. By increasing the volume of private debt on the banks’ loan books, property-related credit and costly property assets acting as high quality collaterals that secure private debt growth do indeed help to alleviate, or at least contain, sovereign risk. Moreover, by supporting property asset prices, housing finance also helps, at least temporarily, to mitigate property risk.

A critical threat to the financial system?

The regulation dimension of property activity—and more generally the ever-growing finance-property link—is subject to controversy, however, since it carries a number of risks. Economic decisions of agents in the property sector (e.g., households, development firms, etc.) can contribute to regulation, but they can also constitute a negative feedback capable of propelling the domestic economy and financial system into crisis. Unlike the period of late 1990s property sluggishness, during which the banking industry’s exposure was limited, the fast-paced deployment of bank debt in real estate and construction activity in the past 20 years has placed Lebanese banks in a fragile position. The credit system is now a critical channel for the transmission and amplification of booms and busts between the real estate and banking sectors. Simply put, the extensive use of credit has accentuated the vulnerability of the property market by exposing it to credit risk as much as it exposes the financial sector to a sudden drop in property asset values. Any sharp increase in the delinquency rate of housing and construction loans is, in effect, able to trigger a rapid downward adjustment of property prices. Just as importantly, any plunge in property asset values is likely to jeopardize credit system stability. As such, the various scenarios of crisis contagion, which could involve both the demand and supply sides of the property sector, should be considered a serious possibility in a context where asset prices—despite a progressive decline—remain artificially overvalued, real estate demand is persistently stagnant, and the prospects for the growth of construction and real estate activity are bleak. In the face of the country’s accentuated financial and political vulnerability, any exogenous and endogenous shock, of an economic or extra-economic nature (e.g., an economic recession, a protracted drop in remittances, diplomatic tensions among/with Gulf countries, an episode of civil violence), could very well deal a fatal blow to this house of cards.

The property-based regulation of Lebanese capitalism ultimately raises a number of policy questions. Over the past 20 years, the maximization of real estate activity and exchange value, a key feature of ‘pegged urbanization,’ has, from the perspective of the Lebanese people, negatively and irremediably affected property use value. The Lebanese have been the first to bear the cost of this financialization of urban development, both individually, with the housing market’s ever-increasing unaffordability, and collectively, with the increased wealth and income disparity between equity-owning groups and others. This can only worsen in the event of a property-generated financial crisis, during which private debt default and eviction could throw tens of thousand of people into turmoil throughout the country. The experience of the millions of bankrupted Americans who became homeless or who suffered very poor living conditions in the aftermath of the subprime crisis reminds us that such a scenario goes beyond theory.

October 4, 2018 0 comments

Marketing plays Real estate Real estate Special Report

The scramble to sell as Lebanese real estate nears crisis point

by Jeremy Arbid October 4, 2018

written by Jeremy Arbid

Times are very tough for Lebanon’s real estate sector. After years of poor demand in the upper and middle segments of the housing property market, demand for entry level units plunged in 2018 with the news that subsidized home loans were no longer available (although Parliament did legislate a one-year $66 million fix to subsidize housing loans as Executive went to print). The market has come to a standstill this year, leaving developers scrambling to sell units any way they can—more keen than ever to offer deals.

There have been visual cues that the property market is in a depression, more easily seen in the middle and upper class neighborhoods of Beirut. Walk around the city at night and you’ll see story after story of unlit, seemingly empty, apartments. During the day, the for-sale and for-rent signs tell the same story: There are a lot of vacant apartments in Lebanon’s capital.

The indicators reflect a slowdown in sales, and a decline in market sentiment. Real estate transactions have been declining in quantity since 2015, and the total value of transactions fell off pace from a year ago, according to data from the Ministry of Finance’s General Directorate of Land Registry. The year-on-year comparison through July shows transactions down almost 10 percent, with their value declining by nearly 23 percent. Demand for real estate was down 26 percent in the first quarter of this year compared to the preceding quarter, and down 24 percent compared to Q1 2017, results of the Byblos Bank Real Estate Demand Index show. The index improved during Q2 2017 thanks to the news that the government and central bank were devising a solution to thaw frozen applications for subsidized home loans, which had stalled due to lack of funding. Parliament’s legislative fix passed at the end of September should temporarily boost demand and sales, but presumably for only the starter home portion. (See subsidy story.)

Value options

Demand for and sales of middle and upper segment apartments might rebound when Lebanon’s economy recovers from its seven-year malaise. Such a recovery would be predicated on several substantial “ifs”: if the next government is formed, if CEDRE pledges make landfall, if conflicts in the region subside, and if the regional economy starts pumping again.

Despite the local real estate sector’s current status as a buyer’s market, with developers advertising steep discounts and attractive payment options, investors are putting their money elsewhere. Banks are offering very attractive interest rates on deposits—at least 10 percent for larger amounts—that make tying up cash in long-term investments like real estate less enticing.

But Lebanon’s real estate sales professionals are not giving up so easily. They are presenting value options to entice borrowers to reach for their wallets. One such option is the lease-to-own contract. Such a contract works in the following way: when signing the initial rental contract, the tenant and owner include a clause specifying the price for which the renter can buy the apartment from the owner; after a certain period of time (typically three years) paying rent, the tenant can decide to purchase the house at the price initally agreed upon. A portion of the rent paid during that three year period can be applied to the principal of the apartment’s value, or as a downpayment for the unit if a loan is needed to cover the remaining cost of the apartment. “I advise buyers to ask for it, and I strongly advise sellers to offer it,” says Walid Moussa, president of Lebanon’s real estate brokers syndicate (REAL) and CEO of Property Brokerage & Management. “It may be difficult now to have the same level of transactions as previously, so don’t let your properties be vacant—rent them.”

Flexibility

Some sales firms are offering flexible terms and credit facilities to help buyers afford homes, and to try and get stock off the books. Sakr Real Estate, for example, is offering financing for a period of 10 years at 0 percent interest, though buyers will have to put down 25 percent in order to qualify. “Our clients do not need to go to banks any more,” Fadi Jreissati, the company’s general manager, tells Executive.

Yet others are switching up marketing and sales tactics, bringing targeted offers to the doorsteps of potential buyers. “It’s become direct sales,” says Mireille Korab, head of business development at FFA Real Estate and vice president of Lebanon’s developers syndicate, REDAL. “You do not wait, you go out there and talk to the people directly. It is the people you know, your sphere of influence, and how innovative you can be in reaching out. You have to look at your project and imagine who would be interested to buy into this project, and why would they be interested in buying into your project and not another project.”

Whether these ideas can help breathe life back into the market is yet to be proven, and any real progress may rely more on external market factors than deals and marketing alone can solve. What is a positive quality in a depressed market? A good salesperson, who knows how and when to put a good face on a tough situation.

October 4, 2018 0 comments

Lifestyle

Smokers’ rhapsody

by Yasser Akkaoui October 4, 2018

written by Yasser Akkaoui

During the third week of July, three things happened: my brother—against the advice of his doctor—began smoking again; my younger son stepped off a plane with an e-cigarette shaped like a USB hanging out his mouth; and my eldest son shared his worst nightmare with me—a dream in which I was disappearing in a cloud of smoke. The subconscious reveals our deepest fears, and my sons are obviously extremely concerned for my health. They’re not alone; I was troubled by these three incidents as well. I need to be more conscientious about my addiction, and the effect it is having on my family.

That same week, my brother gifted me an IQOS device, along with a few packs of HEETS.

My brother thought that at age 50, gadgets were not for him, but he knew that I’m always curious to try new tech. I was also given the opportunity to visit the CUBE in Neuchatel, Switzerland—the $200 million R&D facility where the IQOS was developed. Between this new tech and my family’s smoking habits or fears are a lot of mixed feelings I decided to share. IQOS is a heated tobacco system designed by Philip Morris International (PMI) and HEETS are the tobacco consumable that is designed to be used with the IQOS.

“Je vous parle d’un temps que les moins de quarante ans ne peuvent pas connaître.” To misquote Azanavour.

Michel Piccoli and Romy Schnider smoked through every scene in Les Choses de la Vie when it was released in 1970. The script writer wanted to make sure they represented the liberal, romantic, and sophisticated middle class of the late 60s. Only the kissing scenes got the cigarettes briefly moved from their lips. Lucky Luke, our childhood hero, had a cigarette in his mouth in every illustration we rubbernecked. It was impossible to find one picture in my parents’ wedding album that does not have at least one smoker in it. Growing up, a big silver plate decorated the middle of our salon, and in it you could find every brand, size, and flavor of tobacco cigarettes on the market. My high school teacher allowed students to smoke with him in philosophy class. We smoked in planes, cars, restaurants, nightclubs, bedrooms, and bathrooms. Cigarette companies (the Big Four) competed ferociously; their commercials always found healthier, happier, more beautiful, and more famous stars to make the audience drool. The Marlboro Man was our hero, although to this day I am still not sure what he meant by “Come to where the flavor is, come to the Marlboro country.” Was it an invitation to come to the USA? Or just insinuating that smoking Marlboros would be as good? As a kid, I just wanted to be a cowboy just like him—the ads seemed to work just as well on children.

I don’t remember who I was with or where I was when I started smoking. Was it with Marwan in his orange Mini Cooper? With Cherine next to Mehio, the shopkeeper who had a stand on my high school campus and would sell students a cigarette when we couldn’t afford a full pack? Or with Iyad at Mecano, the legendary discotheque at Summerland Hotel? All I remember is that it was the summer of 1984, and I was 15.

The whole Rolling Stones crew, Bowie, Hendrix, Audrey Hepburn, JFK, Churchill, Che, Castro—all smoked. There was a cigarette for every taste, mood, and character—Marlboro reds for the “Joe Camaro,” Camels for the “Gino Cappuccino,” while the “Artsy Fartsy” smoked Gitanes sans filtre. We smoked without a care, trying every new offer on the market in constant pursuit of cool, while listening to Serge Gainsbourg’s tunes: “Dieu est un fumeur de havanes, Je vois ses nuages gris, Je sais qu’il fume même la nuit, comme moi ma chérie.” We believed Serge.

It wasn’t until Sharon Stone’s famous police precinct scene in Basic Instinct in 1992 that the anti-tobacco witch hunt began. Ever since, we have been bombarded with anti-smoking campaign after anti-smoking campaign. To be a smoker now is to be alienated: We have been fired, sanctioned, and judged by lawmakers, health practitioners, and NGOs, who persistently traumatize us with shocking pictures and bold-print warnings.

For most of us it is too late; we are vulnerable nicotine addicts who fell victim after a decades-long brainwashing. Coolness removed, we still strike the “too-cool-for-school” pose—this time disgraced in the cold outside restaurants, airports, nightclubs, and hotels.

When deprived, we get distracted during meetings, leave our dates and families at dinner tables, go out hunting in the middle of the night in search of an open store, even gaze into ashtrays in hope of finding an unfinished cigarette butt. Anything to get a fix. Yes, a fix. We are no different from any other type of addict. And we accept the humiliation: Imagine the feeling of disgrace when standing in a smoking glass cage at an airport, the tobacco-stained walls and the passersby looking in with disdain while us addicts suck in as much nicotine as possible before the last call, boarding the plane stinking from head to toe. Education is irrelevant: Reason does not work with addicts; we will always find a good reason to smoke just one more cigarette. Health warnings and doctors’ advice be damned, some nicotine addicts are even caught smoking on hospital balconies after heart surgery and chemotherapy.

I don’t know what was in the brief given to design thinkers at the CUBE—located not far from the International Institute for Management (IMD) in Lausanne, the university where the Nespresso machine was conceptualized, not unlike many other genius entrepreneurial ideas that Switzerland has become known for—but I can imagine it would go something like this:

“Philip Morris International is looking to compete against the wave of nicotine vape products and devices that are popping up every day and flex its corporate muscles through the development of a new tobacco product that will allow it to capitalize on its leading market positioning, good image (among smokers only, of course), logistics, supply chain, etc. The new design needs to look cool, be user-friendly, and should relieve smokers from many of the discomforts of cigarette smoking: smell, aftertaste, stained teeth, stained fingers, stained walls, stained carpets, stained furniture, stained children, and, of course, stained lungs. As for the latter, the new device should administer the same amount of nicotine found in a cigarette but allow us to argue that it reduces harm compared to other products that have leading contributors to heart disease and lung cancer. The consumable, should be made from biodegradable elements, and be manufactured using our existing production facilities.” (This reconstruction was drawn solely from my imagination).

Several packs of cigarettes later—assuming that PMI scientists are loyal to the brand—the design team came up with the brilliant IQOS, a concept that is so promising for PMI that it has secured $4.5 billion in investment so far. Built on a heat-not-burn concept, the HEETS use the existing production lines at the company’s facilities. Shaken, shredded, then mixed with other ingredients and flavors, the tobacco is transformed into long sheets before being packed in neat mini cigarettes that are inserted into the IQOS. It takes 20 seconds for the tobacco to reach 350 degrees Celsius—thanks to the rechargeable battery heated blade inside the IQOS device—before releasing vape for the user to inhale. It is quite a long wait when you need an immediate fix, and an even longer wait when the IQOS needs to recharge. This is particularly frustrating when you require two fixes in a row: Journalists like me who work under strict deadlines will understand. Personally, I enjoy the smell that dissipates during the heating process; it reminds me of a smell from my childhood—one that would appear when my father used the cigar lighter before it reached burning point in his non-air conditioned 1969 Mercedes 280 SE.

Since it does not burn the tobacco, no tar is inhaled, and PMI’s research argues that this minimizes the effect on the lungs. For my part, I do feel healthier. I run better and for longer. I feel as though my lungs are happier. Even my neighbor, an oncologist, confirmed this to me—with a disclaimer of course since the United States Food and Drug Administration has not yet approved the IQOS.

The taste of the HEETS is not bad and there are several flavors to choose from, but its smell does linger in the room and can bother others, even if it dissipates quite quickly after use.

To test in social impact further, I discreetly monitored people’s reactions at Barcelona airport, while waiting in line to board and in the comfort of airport lounges and restaurants. No one seemed to notice the smell.

I am sure that PMI board members and management are proud of themselves. Ten thousand converts per day or $366 million from sales of the IQOS per year at $100 a pop, not to mention they are using the Apple playbook with never-ending upgrades—the IQOS 2.4, 2.4+, 3. The real money is in the sale of HEETS. One carton costs $50 in Europe, duty free, so one a week or 52 per year comes to $2600 on HEETS annually per person—unless you have a good friend willing to bring HEETS from Russia, where the price is less than half. Do the math and subtract the extra 35 percent in additional costs to produce HEETS, that’s good business. At least their consciences have been sold at a high price.

As an addict, I must say I am satisfied with my two-month experience so far. The IQOS device successfully allows me to replicate my terrible smoking habits, while arguably reducing my self-inflicted harm. Hopefully IQOS can help me keep my promise to my elder son—to one day quit entirely—and maybe if I can overcome my nicotine dependence, then at least when he kicks my ass at basketball I will go down with a bit more style.

As for my younger—at times overly inquisitive—son with his new e-cig contraption: I beg you not to make the same mistakes I made. Sons are supposed to outgrow their fathers, and become stronger, smarter, with slicker dance moves. Do not fall victim to nicotine. Do not become an addict, willing to shell out thousands a year on the latest piece of tech that tries to sell you a smoker’s habits with none of the downsides. Smoking is not good for your health, end of story. Anyone who tries to argue otherwise is deceiving and manipulating you, no matter how hard they try and sell it. Smoking, much like your father, used to be cool.

October 4, 2018 0 comments