Decoded was originally written in 2013. I read this version. I know that there is a new edition being published in September 2022. Barden had been a marketer working at T-Mobile (now EE, BT’s mobile phone network), Diageo and Unilever.
His background and a foreword written by British marketing grandee Rory Sutherland give an indication of the book’s quality.
Once more with emotion
Barden’s background has skewed towards CRM, online marketing and consumer marketing. I disagree with Barden in one important way. Barden doesn’t think that emotion has any benefit in marketing. I agree with Barden to a point, beyond nostalgia, I won’t have an emotional connection with the brand of margarine spread that I buy. The nostalgia is largely out of control of the brand.
However, both the IPA and WARC have shown that communications that provokes an emotional reaction can build long term awareness over time. Think about the adverts that get stuck in your memory, versus rational adverts. Emotional adverts make you feel something, even if they don’t change your opinion of the product they can build memory structures with enough exposure.
The challenge as Barden points out, being able to do this consistently. The example that Barden cites is Cadbury’s inability to match the quality of its ‘Gorilla’ advert.
Getting beyond emotion
Beyond a difference of opinion on the effect of emotion in communications, I thought that the content in Decoded was very good. The book felt to me as if it was aimed at British junior inhouse brand marketers at the likes of Unilever and Diageo where Barden aimed his stripes. The book is full of British examples, this might limit its success in the US. The examples are already old enough that they might not resonate with marketers who recently left college; but they would leave US readers clueless. While British marketers are often exposed to US authors at the start of their careers like David Aaker and Philip Kotler; the same isn’t true for their American peers of British marketing thinkers.
I also see it valuable for marketing undergraduate students, with its real world examples. He also does these summary pages at the end of each chapter that reminded me of ‘Dummies Guides‘ format books.
Decoded covers behavioural science principles and is valuable for the quality of reading list that it provides the reader to delve into after they have read the book.
Barden dives into the kind of concepts that brand marketers would come across in shopper marketing and ad testing from the likes of Kantar. He provides a sound basis on which marketers can rely to understand, if not, critique their agency’s efforts.
Beside emotion, my biggest concern is that marketers might think that Decoded is the final step on their education journey, rather than the first step. It provides a useful primer that the engaged marketer can then delve into. Unfortunately for us all, there are a lot of surface player who would declare mission accomplished at this point.
If like me, you wanted a follow on read from Decoded, my recommendation would be Phil Graves Consumerology, which I reviewed here. Graves’ work nicely fits in with the discussion Barden had on shopper marketing from an expert in the field.
For a while Vice News was the hotness in news reporting, now they seem to have got their mojo back with a report on Chinese business people taking advantage of corruption at the highest level in Guyana. British Hong Konger Isobel Yeung did an amazing report on how Chinese business, especially state owned enterprises, had supercharged corruption in Guyana.
Hyundai N Vision 74
Korean car manufacturer has been following the path taken by the likes of Toyota to expand from being a manufacturer of value, but low margin cars. This involved making a luxury division – Genesis is a clear Lexus analogue but with Korean characteristics. N is their version of what used to be Toyota’s TRD or Gazoo Racing as it is now.
The N Vision 74 shows a reignition of Hyundai’s interest in hydrogen fuel cells for passenger cars, Hyundai had paused hydrogen fuel cell development for passenger cars in 2021. Presumably the higher energy density of fuel cells together with the skyrocketing price of lithium and cobalt has caused to them to resurrect the programme? The design is a homage to Italdesign’s Hyundai Pony Coupe concept from 1974. The same year Italdesign had also designed the first Volkswagen Scirocco and the Alfa Romeo GTV. Many commentators have compared it to the later DeLorean DMC 12. The DMC 12 was also designed by Italdesign in 1981.
There is a good deal of 1970s and 1980s track car vibes in there as well including a louvred back window and muscular arches. The wheels seem to use vintage Speedline influenced guards that would funnel air into the brake discs but keep rocks, sand and snow ingress to a minimum.
Japanese itchiness
Japanese skincare brand Muhiis a line of products that deal with itchy or irritated skin from the likes of allergies or insect bites. They have launched a campaign that deals with the subject of crotch itch including an e-sports tournament and a branded series of anime. The e-sport tournament is a clever way of getting attention for the series of crotch related games that they have on the Muhi website.
Perun
Perun has done some of the better analysis for armchair warriors following the Ukraine war. The analysis is thoughtful and doesn’t have an inherent bias. He had used to run a mediocre gaming channel, but analysis seems to be his strength.
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
