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The moderator's opening remarks

Everybody loves the cloud. Everybody but Larry Ellison, that is. Whenever he's on stage these days, the boss of the software giant, Oracle, keeps dissing the latest buzzword of the information technology (IT) industry. Cloud computing, he rants, is just "water vapour", "nonsense", "just a computer connected to a network" and "something we have done for more than ten years".
The refreshing anti-hype rant notwithstanding, even this cloud contrarian would not deny that there is something profound going on in IT land. Although cloud computing (or utility computing, software as a service, SaaS, or however you might term it) is certainly nothing new, there is no doubt that computing is increasingly becoming a utility. Whether it is raw computing power (provided, for instance, by Amazon), platforms that allow others to develop (Microsoft's Azure and Google's App Engine), web-based services (Salesforce.com, Google Apps, etc) or most of the online offerings labelled "web 2.0" (Facebook, Twitter), more and more of computing takes the form of a service and happens in big data centres. This does not come as a surprise: it follows naturally from the combination of ever cheaper and more powerful processors with ever faster and more ubiquitous networks, allowing computing to centralise again after years of becoming more distributed.
The participants in this debate, including the three guest speakers, all agree that computing is moving into the cloud. "We are experiencing a disruptive moment in the history of technology, with the expansion of the role of the internet and the advent of cloud-based computing", says Stephen Elop, president of Microsoft's business division, which generates about a third of the firm's revenues ($13 billion) and more than half of its profits ($4.5 billion) in the most recent quarter. Marc Benioff, chief executive of Salesforce.com, the world's largest SaaS provider with over $1.2 billion in sales in the past 12 months, is no less bullish: "Like the shift [from the mainframe to the client/server architecture] that roiled our industry in decades past, the transition to cloud computing is happening now because of major discontinuities in cost, value and function."
Yet the harmony ends when it comes to the question of how far this journey into the cloud should go. "While I advocate for the cloud, there's a desire among many customers to avoid a technology ultimatum," argues Mr Elop. To him, a mixed approach, which Microsoft calls "software plus services", is a much more realistic scenario for most organisations: "Certain applications will be well served by the cloud, while others will benefit from immediate proximity to local computing and graphical capabilities, memory, storage and so on."
Mr Benioff could not disagree more. To him cloud computing is a shift that leaves the old technology behind: "Because the vendor only has a single code base to manage, rather than dozens scattered over various platforms and operating systems, customers receive virtually constant innovation. Upgrades are seamless." In this context, he cannot resist the temptation to take a first swipe at his debating rival: "Once the industry's leader, Microsoft has failed to innovate in its core Windows franchise. Investing in and delivering this rapid innovation without invoking an upgrade tax is a change that customers welcome and is the foundation of trust in the cloud."
Whether and to what extent companies and consumers elect to hand their computing over to others, of course, depends on how much they trust the cloud. And customers still have many questions. How reliable are such services? What about privacy? Don't I lose too much control? What if Salesforce.com, for instance, changes its service in a way I do not like? Are such web-based services really cheaper than traditional software? And how easy is it to get my data if I want to change providers? Are there open technical standards that would make this easier?
These are the questions firms such as Microsoft and Salesforce.com need to answer if the cloud, in whichever shape, is to really take off. We hope to hear some convincing answers as the debate goes on. Just saying that customers will get used to the cloud as they have got used to banks (Mr Elop) or that they already trust the cloud (Mr Benioff) does not suffice.

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The proposer's opening remarks

Let me state, first and foremost, that I believe the cloud can and ultimately will be trusted. There is little debate about whether the cloud is a great technology evolution. The benefits of increased productivity, cost savings and improved efficiency, plus the ability to support and empower a broader range of users via the cloud are clear. Rather, the debate is about how soon companies will feel comfortable about moving mission-critical computing capabilities, or parts of them, to the cloud, which in turn depends on how soon vendors develop the right solutions that are flexible, widely available and have established a proven track record.

The cloud cannot be all things to all businesses. A mixed approach to the cloud, with the choices afforded by software plus services, is a much more flexible and realistic scenario for most organisations. While I advocate the cloud, there is a desire among many customers to avoid a technology ultimatum. So it is smart to focus on what customers want, and their readiness to embrace the cloud for various applications in the context of their circumstances, instead of forcing a decision to move everything to the cloud.
We are experiencing a disruptive moment in the history of technology, with the expansion of the role of the internet and the advent of cloud-based computing. The global economic turmoil has affected the evolution of the cloud too, driving a faster rate of adoption with demand for less expensive cloud services that benefit from the economies of scale. This gives decision-makers more reasons to look for choice and flexibility in a solution, and to make a thoughtful decision about long-term success before moving to the cloud.
A time of disruption is also a time to have impact. I think back to the early days of the internet, when e-commerce was just becoming something of interest. The big question then was when would people become comfortable giving a credit card to a web browser and actually going through with a transaction. People were concerned—rightly so—because there were questions about security, reliability and everything else that goes along with business on the web. Over time, opinions changed as companies gained experience and the ability to protect customer privacy and security, showing us that certain levels of engagement are appropriate for e-commerce. People started saying "I'm comfortable with that."
I can't predict how long it will take for that broad business shift to happen with cloud-based technologies, but it will. Vendors will learn how to deliver the right solutions at the right time and the right price. Customers will demand choice, and the ability to tailor cloud solutions in an unlimited number of ways, including the prerogative to side-step "lock-in" and instead have the option to change vendors in a heartbeat, without their employees, partners or customers feeling any pain.
Today, some of the world's largest companies are using cloud-based computing, paving the way for others. At Microsoft, we are seeing the majority of that adoption through our Exchange Online and SharePoint Online offerings, where millions of paying customers, including Coca Cola Enterprises, McDonalds and GlaxoSmithKline, are signing up for and using the cloud. As these workers gain experience and understand what cloud-based business services are all about, we will see more people become comfortable with the idea of "Hey, it's not in my data center" or "It's in a shared environment". The time it takes to make this leap is also a function of the quality of the experience that customers want and expect as we navigate this new territory.
For example, one of our customers, McDonalds, is deploying Exchange and SharePoint Online to 20,000 employees while continuing to run Exchange and SharePoint Servers on-premises for the rest of its users. This hybrid approach improves collaboration by keeping everyone on the same system, but also addresses some of the company's particular security and compliance needs.
There is, however, another way the house motion could be interpreted, aside from the security and reliability interpretation of the word "trust". Specifically, we could ask: "Will the cloud be the ultimate home for all aspects of computing?" Some companies have attempted to make the concept of "no software" popular (implying that everything will be in the cloud), but I have a decidedly different point of view. To me, the phrase "software plus services" indicates the cloud will not be trusted with all aspects of computing. Certain applications will be well served by the cloud, while others will benefit from immediate proximity to local computing and graphical capabilities, memory, storage and so on. Most applications in the future will also benefit from the marriage of local and cloud-based capabilities; that is why I advocate the union of software plus services.
Amazon's Kindle is a great example showing us that the cloud will not be trusted with all aspects of computing. "Reading a book" on Kindle is best served by local capabilities on a purpose-built device, while "buying a book" for a Kindle is perfectly suited to interoperability with a cloud-based service.
The popularity of iPhone applications is yet another example, with rich applications that take advantage of local computing strengths and are connected to the cloud. Software plus services offers the best of both worlds.
We are taking the same approach with Microsoft Office. You might prefer to use a browser to get work done at an internet café, or while visiting a client's office. An Office web-based application (e.g., Word within the browser) may be the right tool at that time. On the other hand, there are situations where a rich client application is most effective, and the full functionality of the PC is needed. (Today, working with a video in PowerPoint is best delivered on a PC.) Of course, mobility is a rapidly growing requirement for all of us too, with its own set of benefits and specific requirements. The capability of the cloud will continue to evolve, and more utility will be delivered in the cloud over time. At the same time, uses for general purpose computers or purpose-built devices will also continue to rapidly evolve.
When it comes to the cloud, rally the troops and embrace what needs to be done to improve productivity by taking advantage of the PC, phone and the browser. That may entail a little cloud, a lot of cloud, or even (gasp) no cloud at all, at least for right now, in certain situations. I believe we should embrace the opportunities of cloud computing, while continuing to lead innovation in client computing.

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The opposition's opening remarks

Despite the huge changes in technology, this debate would have been remarkably similar 20 years ago. The proponent would have said that current technologies have years of investment and billions of dollars on their side and that the challenger is too risky, too unproven, too lightweight. It would be foolhardy to open up access to corporate data or to give so many people access to so much computing power. No sensible company would allow it. The opposition would have said that the opportunities far outweighed the risk, that we stand at the beginning of a new era of technological insight, worker productivity and economic benefit.
Twenty years ago, companies such as IBM and Digital Equipment Corporation were defending the stalwart mainframe against the rise of the PC and client/server. The client/server period in its early years revolutionised the cost of and access to information technology. But today, we see client/server companies like Microsoft, SAP and Oracle from that period attempt to deny the power and appeal of cloud computing.
Like the shift that roiled our industry in decades past, the transition to cloud computing is happening now because of major discontinuities in cost, value and function. It is happening because legions of companies do trust the cloud. And it is creating winners and losers.
The clear winner is the customer. Salesforce.com, which has been providing what we now call cloud services for ten years, has more than 63,000 customers around the world, including Dell, Cisco, Symantec, Dow Jones Newswires and Aon. When we started, we were pretty much alone in the business. But now, there are many clouds to choose from—everything from financials to the classic productivity apps we all use every day.
Customers are making this choice—and voting their trust with their euros, pounds, yen and dollars—because the software industry grew too greedy, too complex and too out of touch with the customer. Outrageously expensive to buy, costly to maintain and difficult to change, traditional client/server software has failed customers for years.
Now that they have a real choice, customers are moving to the cloud. According to IDC, the cloud is on the minds of every CIO. Over the next five years, IDC expects spending on IT cloud services to grow almost threefold, reaching $42 billion by 2012 and accounting for 9% of revenues in five key market segments.
Even Microsoft, the company that stands to lose the most from this dramatic shift, has embraced the cloud, vowing to introduce cloud-based services.
Customers trust the cloud and are driving this shift for four major reasons: core cloud technology, cloud economics, cloud scalability and agility, and cloud trust and security.
The foundation of cloud technology is multitenancy. In the same way that large urban office buildings house multiple discrete, secure tenants that share core services like plumbing, electricity and elevators, cloud services manage data and applications. This approach has several benefits. Because the vendor only has a single code base to manage, rather than dozens scattered over various platforms and operating systems, customers receive virtually constant innovation. Upgrades are seamless. The contrast with traditional software is stark. Perhaps the best example is Microsoft. Once the industry's leader, Microsoft has failed to innovate in its core Windows franchise. Investing in and delivering this rapid innovation without invoking an upgrade tax is a change that customers welcome and is the foundation of trust in the cloud.
The business model behind the cloud is also a big break with the client/server past. The central idea is subscriptions: customers pay as they go; vendors recognise revenue as they deliver the service. The appeal is compelling for customers of all types. This model aligns the vendor with the customer's success. That is a big change from the way we thought of the relationship when I was in the enterprise software business, where it was all about making the sale. Today, cloud-computing vendors know they have to build enduring customer relationships, not the one-night stands that define traditional software sales.
The cloud model makes sense in any environment, but in a time when budgets are tight, more organisations are taking a closer look at cloud services. Recently, the City of Los Angeles signed its 30,000 employees up for Google Apps. It was a pitched battle with Microsoft for the five-year contract. The LA City Council voted their trust in the cloud 12-0.
Scalability is one of IT's toughest burdens. "Because every company still has to maintain its own data processing plant," says Nick Carr, author of Does IT Matter? and The Big Switch, "You have high levels of inefficiency built into the system." Carr says that according to an HP study, the typical corporate server runs at 20% capacity. That is a staggering waste of resources not just for corporations, but for society at large. The business models of traditional software vendors are built around this captive demand in the data centre. For a low, predictable monthly subscription, cloud computing delivers capacity that can effortlessly scale from thousands to millions of users, all with the complete backup and disaster recovery services that today's enterprise user requires. Nothing builds trust like charging customers for exactly what they need and nothing more.
As clouds mature, a new era of enterprise agility is opening up as cloud platforms become more widely used. Google's AppEngine, Amazon Web Services,and our Force.com take vastly different approaches, but all of them liberate the customer from the time-consuming task of provisioning new hardware and software, and in the case of Force.com, allows developers to achieve results five times faster and at half the cost of traditional platforms. Customers have responded by creating over 120,000 custom objects and applications on our service. And none of our customers had to fire up a server, worry about where it was going to sit in the data centre, or fret over incremental real-estate or infrastructure costs. Customers trust platforms that remove barriers to innovation, enable them to allocate resources more efficiently and, most importantly, move and change with far greater agility.
Allow me to cite an example. About a month before President Obama's inauguration, Starbucks came to us with an idea. They wanted to encourage local volunteerism in the United States by offering a free cup of coffee to anyone who would pledge five hours' work to a local charity. Great idea, I thought. "When do you need it?" I asked. "Three weeks" was the answer. Because the infrastructure had been taken care of and the cloud development platform was robust enough, we delivered the site for CEO Howard Schultz's appearance on "Oprah" before the inauguration. The surge in traffic, which would have strained most corporate infrastructures, caused barely a blip in our daily traffic. Starbucks could not have pulled this off if they had tried to rely on traditional software tools. Schultz knew he could trust the operation of Starbucks breakthrough Pledge5 site to saleforce.com because of the record of reliability that we had established. The site has been a huge hit, with more than 1.3m hours of volunteering pledged.
The conversation around the cloud has changed dramatically in the more than ten years that I have been in this business. At the beginning, companies were taking a leap of faith. But the ensuing decade of customer successs and rapidly developing technologies—both ours and others—have transformed that leap of faith into a leap into the future.
One of the earliest questions was about reliability. What if the service wasn't available? This question was frustrating in our early days because we knew that we could provide a much higher level of service than most companies could do for themselves, and at a far lower cost. Customers could understand and believe in the delegation of responsibility for the application. They were not giving up control; they were shedding an onerous burden. But a missing critical dimension was transparency. On the rare occasions when there were issues, customers wanted visibility of exactly what was going on. That desire was the inspiration behind trust.salesforce.com, our public site that details both the live and historical status of our service. We think that this level of transparency should be the cornerstone of customer trust for every cloud service.
There is no greater priority for me as CEO than the security of our customers' data. We don't have a business without it, and we start each day knowing that there is no finish line in this quest.
However, many discussions of cloud computing start with an assumption that cloud services are less secure than their legacy enterprise software counterparts. But that is certainly not the conclusion of our customers. Our scale lets us devote significant resources to our security life cycle, independent reviews, certifications and control frameworks, vulnerability testing and other security programmes. Salesforce.com has earned some of the most exacting security certifications today, including ISO 27001, SysTrust, TrustE and SAS 70, Type II. The end result is that we meet and in many cases exceed the security needs of our customers, and many of our customers have told us that we have a more comprehensive, in-depth security programme than their resources will allow for their other systems. And we are constantly undergoing thorough security audits by our customers, which include some of the most technologically rigorous and security-conscious organisations in the business. Our customer reviews and and the cooperation of their security watchdogs ensure that our security is constantly evolving and improving—not just for one customer, but for all 63,000 of them. Our security is democratic, flexible and simple for our customers.
That is reassuring to the black belts in security. But what about the rest of us?
At Google's Atmosphere conference in London, Google's Nikesh Arora told a story we can all relate to. He was late for a flight. Airport security was the usual tough slog: Pockets empty. Shoes and belt off. Laptop out. With moments to spare, he makes the plane. But his bag is a little too light. The laptop is back at security. This is not going to be a good flight.
At most companies, the loss of a key executive's laptop would be a major cause for worry. But this laptop is different from most that passed through Heathrow that day: there is not much on it, and certainly no sensitive company data. Everything is in the cloud. Mr Arora got a new laptop, connected to all his Google Apps, and was back in business.
That is why companies trust the cloud today: It delivers more innovation at far lower cost and complexity. And although there are still customers who prefer to trust the devil they know, more and more each day are rejecting the cost, complexity and meagre returns of client/server technologies and are choosing cloud computing.

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A special report on South Africa
The price of freedomSince embracing full democracy 16 years ago, South Africa has made huge strides. But, says Diana Geddes (interviewed here), not everything has changed for the betterJun 3rd 2010 | From The Economist print edition

SPORT matters in South Africa. In his new year’s address to the nation, President Jacob Zuma described 2010 as “the most important year in our country since 1994”. To outsiders, playing host to this year’s football World Cup seemed perhaps a less momentous event than holding the country’s first fully democratic elections that established a black-majority government 16 years ago—especially when the national team, Bafana Bafana, may be knocked out in the first round. But with the kick-off on June 11th, just days after the country’s 100th birthday on May 31st, the world’s eyes will be on Africa’s leading economy for the next few weeks.
Can the “miracle” nation, which won plaudits around the world for its peaceful transition to democracy after centuries of white-supremacist rule, conquer the bitter divisions of its past to turn itself into the “rainbow nation” of Nelson Mandela’s dreams? Or will it become ever more mired in bad governance, racial tension, poverty, corruption, violence and decay to turn into yet another African failed state? With Zimbabwe, its neighbour to the north, an ever-present reminder of what can happen after just a couple of decades of post-liberation single-party rule, many South Africans, black and white, worry that their country may be reaching a tipping point.

Western fans arriving in South Africa for the World Cup could be forgiven for thinking that they were still in the rich world. Much of the infrastructure is as good as you will find anywhere—particularly those parts that have been given multi-million-dollar facelifts in preparation for the tournament. Ten spectacular stadiums have been newly built or upgraded at a cost of 15 billion rand (see box for currency conversions). Visitors arriving at O.R. Tambo, the main international airport, will be whisked into Johannesburg by the Gautrain, Africa’s first high-speed rail link (pictured above). And many of the country’s hotels and restaurants are world-class, including Bushmans Kloof hotel, three hours’ drive from Cape Town, recently voted the world’s best by Travel + Leisure website, and Cape Town’s La Colombe, ranked 12th in this year’s S.Pellegrino list of the best restaurants.
Not as rich as it looksBut in reality South Africa is no more than a middle-income developing country with a GDP per person of around $10,000 (at purchasing-power parity), a quarter of the American figure. On a per-head basis, it is the seventh-richest country in Africa by some measures. The average hides huge disparities. Under apartheid, whites were encouraged to believe they were part of the Western world. It was only when they had to start sharing their streets, goods and services with their darker-skinned compatriots that they began to wonder whether they really were. Many now complain about falling standards. Yet most whites have done rather well since apartheid ended—better, in fact, than most blacks. They still enjoy a good life, helped by cheap domestic help and first-class private medical care and schools.
For the majority of South Africa’s blacks, however, the living is not so easy. Although many of the poorest now get some kind of government support, it is only a pittance. Most blacks still live in shoddy shacks or bungalows without proper sanitation in poor crime-ridden townships outside the main cities. Their schools and hospitals are often in a dire state. And, in a country where there is little public transport, most blacks do not own a car. Although it has the world’s 24th-biggest economy, South Africa ranks a dismal 129th out of 182 on the UN’s Human Development Index (and 12th in Africa).
The country’s constitution, adopted in 1996, is one of the most progressive in the world. It enshrines a wide range of social and economic rights as well as the more usual civil and political freedoms. Discrimination is banned not only on the grounds of race, gender, age and belief, but also of pregnancy, marital status, sexual orientation and culture. Every one of the country’s 49m people—79% black, 9% white, 9% coloured (mixed race) and 3% Asian/Indian—is guaranteed equal protection under the law. Freedom House, a Washington-based research foundation, gives South Africa a respectable rating of 2 in its “freedom in the world” index, where 1 is completely free and 7 totally unfree.

South Africa is a land of contrasts. It has fabulous mineral wealth, with 90% of the world’s known platinum reserves, 80% of its manganese, 70% of its chrome and 40% of its gold, as well as rich coal deposits; yet 43% of its population live on less than $2 a day. It has just announced plans to develop a satellite programme (with India and Brazil) and is the leading candidate to host the world’s biggest science project, the Square Kilometre Array radio telescope; yet in international maths, science and reading tests it performs abysmally. It has sky-high unemployment yet at the same time suffers from crippling skills shortages. It was the first country to perform a heart transplant, and some of its doctors are still among the best anywhere; yet its people’s health record is among the world’s worst. And, leaving aside war zones, it is one of the most violent and crime-ridden countries on the planet. This special report will look at South Africa the way that most of its people see it. The results are often harsh.
The bright sideYet there are some encouraging signs that the contrasts are getting less stark. South Africa has recently cut its murder rate in half; virtually eradicated severe malnutrition among the under-fives; increased the enrolment in schools of children aged seven to 15 to nearly 100%; provided welfare benefits for 15m people; and set up the world’s biggest antiretroviral treatment programme for HIV/AIDS.
What about race? South Africa remains obsessed by it. That is hardly surprising after 350 years of racial polarisation, including nearly half a century of apartheid, when inter-racial sex was a criminal offence and non-whites were even banned from using the pavements. The subject waxes and wanes. Only last August Mr Zuma was warning his compatriots against reviving the race debate. But the murder in April of Eugene Terre’Blanche, leader of a white-supremacist group, and the racist outbursts by Julius Malema, the leader of the powerful Youth League of the ruling African National Congress (ANC), have brought it to the fore again.

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A special report on debt
Repent at leisure
Borrowing has been the answer to all economic troubles in the past 25 years. Now debt itself has become the problem, says Philip Coggan

Jun 24th 2010

MAN is born free but is everywhere in debt. In the rich world, getting hold of your first credit card is a rite of passage far more important for your daily life than casting your first vote. Buying your first home normally requires taking on a debt several times the size of your annual income. And even if you shun the temptation of borrowing to indulge yourself, you are still saddled with your portion of the national debt.

Throughout the 1980s and 1990s a rise in debt levels accompanied what economists called the “great moderation”, when growth was steady and unemployment and inflation remained low. No longer did Western banks have to raise rates to halt consumer booms. By the early 2000s a vast international scheme of vendor financing had been created. China and the oil exporters amassed current-account surpluses and then lent the money back to the developed world so it could keep buying their goods.

Those who cautioned against rising debt levels were dismissed as doom-mongers; after all, asset prices were rising even faster, so balance-sheets looked healthy. And with the economy buoyant, debtors could afford to meet their interest payments without defaulting. In short, it paid to borrow and it paid to lend.
In this special report

    * » Repent at leisure «
    * Paradise foreclosed
    * The morning after
    * Betting the balance-sheet
    * A better bust?
    * The unkindest cuts
    * Judging the judges
    * In a hole
    * Offer to readers
    * Sources and acknowledgments

Like alcohol, a debt boom tends to induce euphoria. Traders and investors saw the asset-price rises it brought with it as proof of their brilliance; central banks and governments thought that rising markets and higher tax revenues attested to the soundness of their policies.

The answer to all problems seemed to be more debt. Depressed? Use your credit card for a shopping spree “because you’re worth it”. Want to get rich quick? Work for a private-equity or hedge-fund firm, using borrowed money to enhance returns. Looking for faster growth for your company? Borrow money and make an acquisition. And if the economy is in recession, let the government go into deficit to bolster spending. When the European Union countries met in May to deal with the Greek crisis, they proposed a

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A special report on gambling    Shuffle up and deal
    The internet is radically changing the business of gambling. Now policy must catch up, argues Jon Fasman          Jul 8th 2010         
         
PINPOINTING a precise moment when the world changes is never easy, even in retrospect. Yet it is possible to say with relative confidence that the world of gambling was changed dramatically by events around a green felt table at Binion’s Horseshoe in Las Vegas on May 23rd 2003, the final day of that year’s World Series of Poker (WSOP). The hand immediately preceding the final table—the last nine of the tournament’s 839 competitors who would play for $2.5m—pitted Phil Ivey, one of the sharpest and most ruthless players of his time, against Chris Moneymaker, an unknown 27-year-old accountant from Nashville. The newcomer eliminated Mr Ivey thanks to a lucky draw on the last card dealt. Mr Ivey, a stone-faced old-school player, declined to shake his vanquisher’s hand. Mr Moneymaker went on to win the tournament.
His victory created what came to be called “the Moneymaker effect”: interest in poker soared. Suddenly spending time playing a game on a computer looked like a road to riches. And those riches seemed attainable. The stars in poker, unlike those in professional sport, look very much like the spectators; they just happen to be more successful. In the years since Mr Moneymaker’s victory, the tournament has variously been won by a patent lawyer, a Hollywood agent and a 21-year-old professional poker player.
It is not just professional poker that has changed out of all recognition in the past decade but all forms of gambling worldwide. The reason has been simple: for the first time anyone who wants to gamble and has an internet connection can do so. The desire has been there for much of recorded history. An excavation of a bronze-age city in south-eastern Iran turned up a pair of dice dating back nearly 5,000 years. Islam forbids gambling, but the Bible mentions casting lots or using fortune to determine an outcome. Card-playing for money has often been depicted in art (see detail above of Georges de la Tour’s “The Cheat with the Ace of Diamonds”, circa 1635-40).
            In this special report

• » Shuffle up and deal «
• The risk instinct
• At war with luck
• Bet on the bot
• Log on, ante up
• Lengthening odds
• Cutting off the arms
• When the chips are down
• The dragon's gambling den
• Come, all ye gullible
• Sure thing
• Sources and acknowledgments
• Offer to readers

   
  Gambling’s widespread and enduring appeal comes as much from the hope of imposing order on the fundamental randomness of the world as from the expectation of economic gain (though that certainly has its charms). Blaming a bad result on an offended spirit or a good result on divine favour is far more comforting than accepting the cold indifference of probability.
But there is a darker side to gambling with which ancient civilisations were also well acquainted. The Rig Veda, a collection of Hindu religious hymns more than 3,000 years old, contains a section known as the Gambler’s Hymn which laments: “Without any fault of hers I have driven my devoted wife away because of a die exceeding by one [an unsuccessful bet]. My mother-in-law hates me; my wife pushes me away. In his defeat the gambler finds none to pity him. No one has use for a gambler, like an aged horse put up for sale.”
As the newly single poet above had just discovered, the numbers make most forms of gambling a mug’s game. The odds of winning the jackpot in America’s richest lottery, Mega Millions, is one in 176m. EuroMillions, available to players in nine western European countries, offers slightly better odds: one in 76m. Roulette players, on average, will hit their number once in 36 or 37 attempts. Poker players’ chances of being dealt a royal flush are much the same as being struck by lightning.

A majority sport


Yet hope never dies. In 2007 nearly half of America’s population and over two-thirds of Britain’s bet on something or other. Hundreds of millions of lottery tickets are sold every week. The global gambling market is estimated to be worth around $335 billion a year (see chart 1). Last year Las Vegas alone raked in gambling revenues of $10.4 billion and Macau $14.7 billion.
For Las Vegas, that represents a decline in revenue from 2008. By contrast, revenues from online gambling continue to rise. H2 Gambling Capital, a consultancy that monitors the global gambling market, estimates online gambling revenues in 2009 at around $26 billion (see chart 2). The world’s gambling centres are no longer just Vegas, Macau and Monaco; they now also include Alderney, Gibraltar, Antigua and Malta, whose favourable tax systems make them irresistible homes for internet-based companies.


Thanks to these companies the old restrictions have started to crumble. Government prohibition of online gambling has worked about as well as prohibition of other online content, which is to say it is observed mainly in the breach. America remains the world’s biggest single online gambling market by far, despite the passage in 2006 of the Unlawful Internet Gaming Enforcement Act (UIGEA)—a provision tacked onto a port-security bill that prohibits the transfer of funds from a financial institution to an online gambling site. After the ban some established sites closed down their American operations, but others filled the void. Americans are gambling roughly the same amount online as they did in 2006.
The move online threatens some traditional forms of gambling, such as betting on horses, but appears to benefit others, such as slot machines and lotteries. And bricks-and-mortar expansion still continues. The latest addition to the Las Vegas Strip, CityCenter, opened last December. Covering 76 acres (31 hectares) and costing around $8.5 billion, it is the largest privately funded construction project in American history. Thirty-three American states have casinos (many of them operated by around 200 Native American tribes), as do more than 20 countries across Europe. The Las Vegas Sands Corporation, which owns the Venetian casinos in Las Vegas and Macau, opened Marina Bay Sands in Singapore in April. Sheldon Adelson, Sands’s chief executive, believes that Asia can easily accommodate “five to ten Las Vegases”.
In the past ten years gambling has changed more than in the previous 70. The internet has forced existing businesses to adapt, opened up new opportunities and fundamentally altered the political, economic, corporate and moral climate in which these businesses operate. This special report will trace those changes through the main forms of gambling, which sadly will mean neglecting strong but local passions such as greyhound racing, bingo, jai alai and cricket fights. It will begin with Mr Moneymaker’s game.

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A special report on Egypt    The long wait
    After three decades of economic progress but political paralysis, change is in the air, says Max Rodenbeck          Jul 15th 2010         
         
TRAVELLING into Cairo, Egypt’s monster-sized but curiously intimate capital, it is hard to tell if these are the best of times or the worst. Visitors who have long known the city are in two minds. Egyptian expatriates returning home are liable to cringe at the worse-than-ever traffic, the ever-louder noise, the fervid religiosity, and what they often bemoan as a new aggressiveness that spoils their nostalgia for a sweeter, cheerier Egypt. But tourists who came here, say, 20 years ago, tend to delight in the sleeker look of the place, the surprisingly efficient and still friendly service, the far better quality and variety of goods in the markets, and the fact that some taxis now actually have functioning meters.
Both impressions are right. The new World Bank-funded, Turkish-built terminal at Cairo International airport is as blandly functional as Cincinnati’s or Stockholm’s. Gone are the sweaty officials and greasy baggage handlers of yore, the taxi touts and shoving crowds. A businessman arriving here may be whisked in an Egyptian-built car to the cigar bar at one of Cairo’s dozens of swish hotels—perhaps one at City Stars, a commercial complex on the scale and in the style of Las Vegas. Or perhaps to another fancy hotel in one of the burgeoning gated exurbs in the desert, surrounded by the lavishly watered greenery of a designer golf course. There, the talk will be of beach houses and yachts on the Red Sea, of hot stocks on the Cairo exchange, and of Egypt’s delightfully low-cost labour.
A less lucky traveller, however, might instead see these things as most Egyptians do: in the giant backlit billboards that clutter Cairo’s roadsides and rooftops, vividly flaunting the unattainable. The consumer paradise they display, with perfect hair, light-skinned children and men in pinstripe suits, stands in stark contrast to the harried, shuffling crowds below. Such sights will probably be accompanied by an earful of complaint from the driver stuck in a jam: about corrupt traffic cops and the absurd impossibility of feeding and schooling the kids on $150 a month, but above all about politics, the staple of all Middle Eastern conversationalists.
            In this special report

• Sources and acknowledgments
• » The long wait «
• America's lieutenant
• The best man always wins
• A favoured spot
• Long-sighted
• A slow learning curve
• No paradise
• Saving faith
• After Mubarak
• Offer to readers

   
   Political talk in Egypt has always been acidly cynical, but now a new bitterness has crept in. This has not been prompted by any change from above, since little has really changed in Egyptian politics since President Hosni Mubarak came to office 29 years ago. The sour mood is informed instead by the contrast between rising aspirations and enduring hardships; by a growing sense of alienation from the state; and by the unease of anticipation as the end of an era inevitably looms ever closer.
It is not surprising that Egyptians should feel rather like driftwood on the Nile, accelerating towards one of the great river’s cataracts. Their current pharaoh is 82 years old, visibly ailing, and has no anointed successor. Most of his people have known no other leader. The vast majority have grown so inured to having no say in the course of events that the reflex is to float patiently rather than try to paddle. Parliamentary elections are scheduled for November this year and presidential ones for September next. As usual, few citizens are likely to take part. They will watch from the sidelines and accept the preordained results with grim humour.

Losing patience
Nevertheless, the expectation of a seismic shift is almost tangible in the air, and not just because of Mr Mubarak’s health. Egyptians may be renowned for being politically passive, but the rising generation is very different from previous ones. It is better educated, highly urbanised, far more exposed to the outside world and much less patient. Increasingly, the whole structure of Egypt’s state, with its cumbersome constitution designed to disguise one-man rule, its creaky centralised administration, its venal, brutal and unaccountable security forces and its failure to deliver such social goods as decent schools, health care or civic rights, looks out of kilter with what its people want.


For some time Egyptian commentators have been noting resemblances between now and the years before Egypt’s previous seismic shift. That happened in 1952, when a group of army officers rolled their tanks up to King Farouk’s palaces and tossed him out. The coup was wildly popular at the time. It had followed a period of drift and growing tension, marked by strikes, assassinations, riots and intrigues between Communists, Muslim Brothers and the king. Egypt was thriving economically, but the spoils flowed mostly to a cosmopolitan elite that was out of tune with the street. It had a functioning democracy, but ever-squabbling politicians seemed unable to get things done. To general chagrin they could not shake off the lingering influence of Britain, whose soldiers refused to budge from the Suez Canal where they had been encamped since 1882.
The officers’ coup replaced this genteel but dysfunctional constitutional monarchy with one-party rule, fronted by a strongman and backed by secret police, with the tanks idling nearby. Republican Egypt became a model for other Arab dictatorships and forced wrenching changes at home. Its promises of free health and education, land reform and jobs in state factories and offices did lift millions out of misery to mere poverty. The ideology of pan-Arabism trumpeted by the coup leader, Gamal Abdel Nasser, gave Egyptians a place of pride in the world, even if his boldness brought ruinous wars in Yemen and against Israel.
Six decades and four presidents on, the revolutionary regime has metamorphosed into one that encourages private business and allows for some pluralism. Yet it looks to many Egyptians like a waning dynasty—the 45th in the long line of houses that have ruled the world’s most enduring nation since 3000BC. Its promises are largely in tatters. Schools and hospitals are indeed free to enter, but they are grim, bare, crowded places where getting learning or treatment requires cash that many still do not have. The lower middle class of army officers and bureaucrats who rose in the revolution have joined the gentry they were supposed to have ousted, adopted their haughty ways and now share Egypt’s spoils with them. The poor still queue for government-subsidised bread and must scrimp and save to buy a pair of shoes.
The government’s plan to perpetuate itself in office, via the traditional electoral rigmarole, is likely to go ahead. Predictions of change in Egypt have almost always proved wrong; generally it bumbles along much as usual. This time may just be different. The country now faces three main possibilities. It could go the way of Russia and be ruled by a new strongman from within the system. It might, just possibly, go the way of Iran, and see that system swept away in anger. Or it could go the way of Turkey, and evolve into something less brittle and happier for all concerned