Emirates statement on operations at London Heathrow – Emirates lays into London Heathrow’s airport chaos. The airport chaos has been labelled ‘airmageddon’, due to the restriction in numbers of passengers who can fly in and out of Heathrow in a given day of just 100,000 people. That’s 25,000 people a day lower than last year. While there is similar restrictions at Amsterdam’s Schiphol airport and a complete failure of their baggage system.
China
China’s Collapsing Global Image – China’s image abroad has declined significantly in the past four years, a sharp revearsal from the relative popularity it enjoyed in Africa, Asia, and Eastern Europe from the 1990s to the late 2010s. While previous Chinese regimes stressed humble non-intervention on the global stage, distributed generous infrastructure funding via the Belt and Road Initiative, and conducted massive soft power outreach programs through media and academia, many of these strategies have been reversed or rendered ineffective. As Council on Foreign Relations Senior Fellow for Southeast Asia Joshua Kurlantzick notes, “[there] are multiple reasons for China’s deteriorating global public image. China’s overall rising authoritarianism at home, its cover-up of the initial COVID-19 outbreak, and its brutal repression in Hong Kong and Xinjiang have hurt its perception among many foreign publics. China’s continued zero-COVID strategy has cut it off from much of the world, undermined people-to-people relations with other states, and cast some doubt on the Chinese model of development—even among some Chinese citizens.” – worthwhile contrasting with the following research, which implies a negative but more complex and nuanced situation – China seen as better than EU in completing African projects, survey finds | South China Morning Post – Poll of more than 1,000 policymakers on the continent puts priority on physical infrastructure, speedy results and non-interference in internal political affairs. European Union charts higher on quality of products or services delivered; good working conditions; creating jobs for Africans; upholding environmental standards
HSBC installs Communist party committee in Chinese investment bank | Financial Times – I don’t think that it would be beyond the realm of possibility seeing HSBC China and Hong Kong breaking off ARM China style under the auspices of Ping An and the Chinese government. Ping An is actually a cross holding: HSBC is the largest shareholder in Ping An and vice versa. The question is can they take the bulk of the HSBC Asia businesses with them like Singapore et al as well? This could happen based on company structure and western shareholders would be left with the equivalent of an empty husk
Hong Kong Law Reform Commission proposes 5 new offences to rein in cybercrime, with tougher penalties of up to life imprisonment | South China Morning Post – Will this proposed ordinance be available as a charge, with the prosecution claiming the criminal intent is an offence involving national security?” he asked. “Could all social media become a target? Given the wide criminalisation of speech in the context of national security and sedition charges is there a risk a charge under this ordinance will be added?” Davis said he was also worried the proposed amendment would be used to reverse the outcome of an earlier decision by the Court of Appeal in 2019 which limits the reach of an ordinance that prohibits “access to a computer with criminal or dishonest intent” to cover a person using their own tech devices.
Prior to reading The Power Law Mallaby wasn’t a familiar name to me. Looking into his background I could see why, Mallaby is a Washington Post columnist and specialises in international economics for the Council of Foreign Relations. A perfect CV for a policy wonk. His previous works have included a biography of Alan Greenspan, the World Bank and a book on hedge funds.
What the book doesn’t cover
The origins of modern venture capital in the pre-second world war era was through the family offices of people like the Wallenbergs and the Rockefellers. The Power Law only picks up the story post-war and has a distinct US bias in its storytelling.
Synopsis of The Power Law
George Doriot
Mallaby starts the story with Georges Frédéric Doriot and the American Research and Development Corporation (ARDC). What’s interesting Doriot is how he was different from today’s VCs with a focus on patriotism. Doriot is most famous for his funding of Digital Equipment Corporation (DEC), an enterprise computer company whose mini-computers facilitated the early internet and many business computer systems. At the time of DEC, the Boston area seriously rivalled the Bay Area as the technology centre.
Treacherous eight
As the book goes into the story of Arthur Rock and his relationship with the treacherous eight who left Bill Shockley’s lab, this is where many Silicon Valley histories start to coalesce with The Power Law. Mallaby adds a little more, such as the 600x return that both the eight and Rock enjoyed from their investment. At 96, Rock is still alive at the time of writing. He is more recently remembered for his involvement of firing of Steve Jobs from Apple in 1985, a good deal of this came down to his distaste for Jobs informal appearance.
Sandhill Road
Arthur Rock and former Doriot student Bill Draper benefited from being in the right place and at the right time. The US government looked to spur innovation as part of the cold war and the Bay Area was were much of this innovation would happen. Sequoia and Kleiner Perkins followed soon after, these names are now central to the Sandhill Road venture capital ecosystem, but in 1972 they were just starting off with businesses like Atari. Atari wasn’t started by experienced business professionals, but by a twenty something who thought meetings in the hot tub were a good idea. Atari marked a point in time when VCs had to become the adults in room, or as Mallaby put it ‘active investors’.
What I didn’t realise at the time was how early in Kleiner Perkin’s history was their engagement with biotech pioneer Genentech. I didn’t realise that Genentech was funded before Apple and was more a peer of Tandem Computers. Much of the early networking was based on a two-way door between established venture funded firms that were descendants of the treacherous eight and early venture capital firms that employed experienced executives as partners.
Apple was notable for two reasons. Firstly, venture capital firms operated for the first time rather like an insurance syndicate with several funding the business rather than one large investor. Secondly, the returns on Apple seems to have solidified the model and bought niche financing to a wider awareness beyond the geographic pockets of the technology industry. Where many books like Accidental Empires would use this as a jumping off point to tell the story of the PC industry. The Power Law instead talks about computer networking, this makes sense if one thinks of Metcalfe’s Law as the power law that matters the most in the internet age. The early east coast venture capital community were more cautious than their west coast counterparts, partly because the east coast technology corridor had less of a loose network of connections compared to the west coast. I think that the different business culture of the east coast also had an effect.
Connectors
Doerr connected Cypress Semiconductor and Sun Microsystems, two companies that Kleiner Perkins funded so that they would make the SPARC RISC microprocessor. You could put this as the starting point for the golden age of UNIX servers and workstations – which we can trace forward to today’s Mac range and modern Google servers.
Doerr had attempted other alliances before and in this way we see a different way how Metcalfe’s Law was the power law of the title. VCs has access to several nodes that they could connect together to try and build a technical vision. This is different to the idea we’re usually sold of the tech visionary / company founder a la the Google founders, Mark Zuckerberg or Steve Jobs.
Meanwhile Don Valentine of Sequoia Capital usurped the founders of Cisco Systems and brought in a new team to run the business bilking the founders out of much of their money. Part of this was down to one of the original Cisco founders being a woman.
Government money
The VC industry of the early 1990s capitalised on government money. Netscape was a remake of Mosiac which was the first graphic internet browser software developed in the NCSA software design group. This was part of the government-funded National Center for Supercomputing Applications (NCSA) at the University of Illinois. UUNET was a commercial ISP based on the back of the ARPANET email delivery system. As the dotcom boom took off it was the largest ISP and the fastest growing. UUNET eventually became part of MCI WorldCom and then Verizon, where UUNET remains a key part of the Verizon business offering. Both Netscape and UUNET were viewed at VC successes but as The Power Law shows, the reality was more complicated.
Irrational behaviour
I thought that the original dot.com boom was irrational behaviour, but I learned from the account of GO Computers a decade or so earlier that irrational behaviour is very much in the blood of venture capital, which explains how we had WeWork and Uber in the 2010s which is where The Power Law finishes its tale. The funny thing about the irrational behaviour is that both the dot com era and the 2010s Softbank appear to have been an accelerant with their late stage momentum approach to venture capital deals which blew valuations on businesses up far beyond what would be reasonably expected otherwise. Softbank gave birth to ‘growth equity’ as a business model that took in many existing and new VC businesses including Russian Israeli Yuri Milner and his DST Ventures business which invested in Facebook, Stripe and GroupOn.
Paul Graham and Peter Thiel
Paul Graham was a founder of an ad tech business who then moved over to investing and had a reputation for warning startup founders about the nature of VC funding. It fitted neatly into the ‘John Gaunt’ type narrative that played well with some of his peers like Peter Thiel. The impact of these people setting an ideological agenda of sorts for Silicon Valley founders, together with a plethora of other founders providing seed capital to businesses from Google onwards greatly impacted the freedom of VCs to operate using their previous models and left the industry open for the Softbanks of the world to inflate everything.
China off-note
The Power Law offers a largely truimphantist view of the role of VCs such as Sequoia Capital in China. However, this seems to ignore the impact of Chinese VC and angel investors. It also chooses to ignore the negative impact of Xi Jingping.
Conclusion
Mallaby illuminates part of Silicon Valley history that I wasn’t familiar with, in particular VCs strategic role in steering technological change during the 1990s. Time has somewhat outpaced the book. The rise of Xi Jingping and the change in attitude towards safety and innovation amongst young Chinese is likely to make the China section look overly optimistic. The end of easy money, at least for the time being will impact the VC industry globally and growth equity looks like a folly during the present time. But if you want to understand how things were The Power Law is the ideal book for you.
Qantas chaos: outsourced baggage handler says one in 10 bags not making flights | Qantas | The Guardian – this lost luggage mess is emblematic of what is happening globally. Delta Airlines put on a dedicated flight to repatriate 1,000 pieces of lost luggage that had been left behind in in London Heathrow airport. Lost luggage and other overwhelmed ground services has seen both Heathrow and Schiphol airport in Amsterdam cut flight numbers. Lost luggage will tarnish airline reputations.
A poor experience on lost luggage will give discount airlines an opening, given that they will be supporting fuel related price increases anyway. These lost luggage problems will also help rail companies. I could see Eurostar running some ‘lost luggage’ response ads as a way of putting pressure on British Airways
China’s image loses its shine in Europe | Financial Times – In the UK, Germany and France, only 14 per cent, 33 per cent and 41 per cent of people questioned in 2006 had an unfavourable view of China. Now, they stand at 69 per cent, 74 per cent and 68 per cent respectively. – its human rights, then military power, then economics and finally Chinese political interference. Central and eastern European’s governments joined hands with Beijing in launching an initiative known as the 16+1 format. It was meant to herald a new dawn of mutually beneficial co-operation. China managed to alienate all with the exception of Hungary and Serbia. The Chinese ignored the region fears of Russia and strong attachment to the US as the ultimate guarantor of each country’s independence – likely because of China’s laser focus on the US as its enemy. Serbia makes sense, Russia backed them during the break-up of Yugoslavia. Yugoslavia wasn’t ‘freed’ by the Soviet Union from Nazi occupation and Tito managed to maintain a distance from them. Hungary is the one that is more puzzling my perspective; the people were crushed in 1956 by Russian tanks when they tried to move away from communism
The UK economy is stagnant — and the reasons run deep | Financial Times – the 15 years between 2004 and 2019 — pre-Covid and pre-Brexit — were the weakest for growth in gross domestic product per head since the years between 1919 and 1934. Low growth in GDP per head caused low growth in household real disposable incomes: those for non-pensioners rose by 12 per cent between 2004-05 and 2019-20. This can be compared to an average rise of 40 per cent every 15 years since 1961. Also significant have been changes in income distribution. Between 1980 and 1995, median non-pensioner household real disposable incomes rose by 37 per cent, but by 67 per cent for the top decile and only 3 per cent for the bottom one. Between 1992 and 2007, incomes rose by 41 per cent, 47 per cent and 37 per cent, respectively: growth then was both fast and widely shared, which was surely far better. But then, between 2004 and 2019, as median incomes rose by a mere 12 per cent, the top decile’s rose 11 per cent and the bottom’s 2 per cent: that was stagnation all round
Hong Kong’s legacy — from Chris Patten’s Diaries to City on the Edge | Financial Times – Patten argues convincingly that for Britain or any other country to abandon liberal principles and yield to the Chinese Communist party’s demands at every opportunity brings neither political nor commercial benefits. The trade and investment statistics he cites from the final decades of British rule do indeed suggest there is little correlation between grovelling and real rewards for business & … “China’s decision [in 2020] to impose the national security law as a pre-emptive strike against a perceived revolutionary situation in Hong Kong amounts to the premature end of ‘One Country, Two Systems’ [the formula for autonomy] 27 years before the 2047 deadline,” Hung writes. “The cost of this move for China could be grave,” he concludes, at a time when the US is already seeking to curb Beijing’s technological and strategic ambitions and China still benefits from Hong Kong’s role as an internationally connected financial centre.
Thinking About the Unthinkable in Ukraine | Foreign Affairs – with back-and-forth tactical nuclear shots is that Russia would be at an advantage because it possesses more tactical nuclear weapons than the United States does. That asymmetry would require U.S. policymakers to resort sooner to so-called strategic forces (intercontinental missiles or bombers) to keep the upper hand. That, in turn, would risk unleashing the all-out mutual destruction of the major powers’ homelands. Thus, both the tit-for-tat and the disproportionate retaliatory options pose dauntingly high risks. A less dangerous option would be to respond to a nuclear attack by launching an air campaign with conventional munitions alone against Russian military targets and mobilizing ground forces for potential deployment into the battle in Ukraine. This would be coupled with two strong public declarations. First, to dampen views of this low-level option as weak, NATO policymakers would emphasize that modern precision technology makes tactical nuclear weapons unnecessary for effectively striking targets that used to be considered vulnerable only to undiscriminating weapons of mass destruction. That would frame Russia’s resort to nuclear strikes as further evidence not only of its barbarism but of its military backwardness. Direct entry into the war at the conventional level would not neutralize panic in the West. But it would mean that Russia would be faced with the prospect of combat against a NATO that was substantially superior in nonnuclear forces, backed by a nuclear retaliatory capability, and less likely to remain restrained if Russia turned its nuclear strikes against U.S. rather than Ukrainian forces.
Hollywood won’t budge for Chinese censors anymore. Here’s what changed – CNN – talent in the Chinese industry had become stronger. Local stories told “in Mandarin and portrayed with Chinese sensibilities … naturally appeal to local audiences, particularly as you move from urban to rural markets,” he noted. “As Chinese producers venture further into the action and sci-fi genres in particular, where Hollywood dominated for many years, there will likely be increased competition from local fare.” – the pandering of Hollywood to the Chinese government has created a sector that will likely attempt to bury the US film industry
A new study points out the biggest threat to the potential of TikTok as it lacks massive earnings for creators compared to rivals / Digital Information World and Nearly Half of Gen Z Prefers TikTok and Instagram Over Google Search – according to Google’s internal studies, “something like almost 40% of young people when they’re looking for a place for lunch, they don’t go to Google Maps or Search, they go to TikTok or Instagram.” Google confirmed this statistic to Insider, saying, “we face robust competition from an array of sources, including general and specialized search engines, as well as dedicated apps.” Google highlighted changes it plans to make to its search engine to appeal to a younger audience, including the ability for a user to pan their camera over an area and “instantly glean insights about multiple objects in a wider scene.” Insider has previously reported about the threat TikTok poses to YouTube, which is also owned by Google’s parent company, Alphabet. Insider Intelligence predicts TikTok’s advertising revenue will overtake YouTube by 2024. – which makes the TikTok shopping TV service shutdown a bit more puzzling
US and UK intelligence chiefs call for vigilance on China’s industrial spies | Financial Times – In a joint appearance in London, the chiefs of the US and British intelligence agencies called on companies to be much more vigilant about China. FBI director Christopher Wray said Beijing was using “elaborate shell games” to disguise its spying and was even taking advantage of Spacs, or special purpose acquisition vehicles. “The Chinese government poses an even more serious threat to western businesses than even many sophisticated businesspeople realise,” Wray told business leaders at an event with his MI5 counterpart, Ken McCallum. “I want to encourage you to take the long view as you gauge the threat.” In a reference to the Ministry of State Security and the People’s Liberation Army, Wray added: “When you deal with a Chinese company, know you’re also dealing with the Chinese government — that is the MSS and the PLA — too, almost like silent partners – that this is news to business leaders shows how naive they all are. Based on my experience I believe that the reality is that the business community is already state captured, culpable and willing to endanger their home countries for marginal short term gain. More here: Joint address by MI5 and FBI Heads | MI5 – The Security Service and NEW: Top UK and USA spy chiefs warning on CCP
Hong Kongers Book Fair, an independently organised book fair set up by Hillway Culture was cancelled the day before its official launch. The landlords claimed that they had violated a sub letting clause in the contract, the reality has more to do with the current environment around publishing in Hong Kong.
Hillway Culture who organised the Hong Kongers Book Fair are looking to keep local Hong Kong culture alive. And what were the books that would have made landlords and the government concern? The diaries of local political prisoners, locally drawn graphic novels, a phonebook of Ukraine and translations of Orwell’s 1984 and Animal Farm. You can support the book fair organisers and exhibitors through this online shop.
Before Fast & The Furious Tokyo Drift raised the international profile of Japanese illegal racing there was Mid Night. This video tells the story of the Porsche 911 Turbo that was at the centre of the club. What I also found interesting was the emphasis on big American muscle cars at the top of the scene rather than say Japanese tuned Mazda RX7s, Nissan Fairlady Zs, Italian sports cars or the big engined German saloon cars like the Mercedes-Benz 300 SEL 6.3 and the Mercedes-Benz 450SEL 6.9. Given how on it the Japanese police usually still are on enforcement I was surprised this could go on, let alone have the impact that it had.
The end of the salary man
The Asia Society and Adecco try to put lipstick on the pig of how middle class ‘iron rice bowl’ jobs are disappearing even amongst the most successful corporate organisations in Japan, Korea and Singapore. This is the end of a social contract between society, exploitive corporations and governments who collaborated in creating directed economies. This has been tearing away at the fabric of society, a large number of middle aged men are now homeless. They spent their best years not present in their marriages and when made redundant were kicked out of their homes on to the streets.
Helihome
In the family farm house were my Mum grew up there hung a jigsaw picture that was of a painting of the post-war American Antarctic Expedition. It captured my imagination with its Trucker Sno Cat vehicles, pallets being moved off bright orange freighters onto sled and a bright orange Sikorsky helicopter.
I spent a good deal of my early childhood looking at that picture. So if you had asked 6-year old me to come up with my dream camper van, I would have likely come up with something like the Helihome. The Helihome was designed in the early 1970s by a Florida aviation company using ex-Vietnam war surplus US marine helicopters.
Orlando Helicopter Airways my 6-year old self salutes you.
BMW 7-series production footage
I love manufacturing footage. This b-roll of the BMW 7-series production line is particularly interesting. I thought back to the old Japanese animated cartoons of the automated processes that put a mecha into action as the pilot was put into the head. The degree of automation in this line looks like the science fiction of a few decades ago. Which makes me wonder, how has automation been so advanced in some ways and so basic in others. Why are smartphones still reliant on an army of women to hand assemble the devices? Why is UK industry like food services still so reliant on agency workers earning minimum hourly wages?
When you think about electric cars you usually think of Tesla. But the reality is that electric cars have been about for almost 200 years. I was reminded of Bob Cringely’s analogy about technology success being about ‘surfing waves‘. The first electric car turned up sometimes in the 1830s. By the beginning of the 20th century there was 30,000 electric cars. But petrol engined cars were cheaper to make and quicker to refill than charging electric cars.
That didn’t stop Irish inventors converting a Volvo 66 saloon to run as an electric car, 23 years before Tesla even existed.
Abducted Canadian billionaire Xiao Jianhua faces trial in Shanghai court | Financial Times – the question not being asked is how many Chinese government officials will the legal action ensnare? They’ve sat on him for five years as they unwound the Tomorrow Group and are only now prosecuting him in the run up to the 20th National Party Congress in November. It is at this event that Xi Jingping is likely to become president for life. The reality is that Mr Xiao’s goose was cooked as soon as he was snatched from the Four Seasons. This trial could affect demand for high-end Hong Kong property adversely
