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Shenzhen Trip Report

A walk through China’s tech-manufacturing capital, Shenzhen, the Silicon Valley of hardware. “They do quad-band GSM, bluetooth, SMS, etc. on a chip that costs about $2. The retail price of the cheapest full featured phone is about $9. This could not be designed in the US. This could only be designed by engineers with tooling grease under their fingernails who know the manufacturing equipment inside and out” (2,300 words)

Where Danger Lurks

Lessons learned from the crash of 2008. New models needed. “We all knew that there were ‘dark corners’ — situations in which the economy could badly malfunction. But we thought we were far away from those corners, and could for the most part ignore them. The main lesson of the crisis is that we were much closer to those dark corners than we thought — and the corners were even darker than we had thought too” (2,642 words)

Tim Cook’s Apple

Three years on from taking control of Apple, Tim Cook is looking better and better as CEO. He’s seen off the early turbulence, ignored the critics who dismissed him for not being Steve Jobs, kept a tight grip on operations — and started to fill the new product pipeline, as sales of existing products plateau. It’s likely that the iWatch and maybe other wearables will be announced this year and shipped next year (1,400 words)

IBM’s Corporate Songbook

“The 1937 edition of the songbook is a 54-page monument to glassy-eyed corporate inhumanity, with every page overflowing with trite praise to The Company and Its Men. The booklet reads like a terribly parody of a hymnal—one that praises not the traditional Christian trinity but the new corporate triumvirate of IBM the father, Watson the son, and American entrepreneurship as the holy spirit” (1,211 words)

What Happened To Motorola?

Motorola was one of the great tech companies of the 20th century. It invented the mobile phone. It launched a private satellite network. And now it’s a dog, bought for peanuts by Google and sold on to Lenovo. What went wrong? Lots, including the satellites, but probably Motorola’s worst move ever was to build a phone jointly with Apple in 2005. Motorola learned nothing much. Apple learned how to make phones (6,400 words)

Lunch With Raghuram Rajan

Governor of India’s central bank talks about bureaucracy, business, banking. “Central bankers have had enormous responsibilities thrust on them to compensate, essentially, for the failings of the political system. And my worry is we don’t have sufficient tools to do that, but we’re not willing to say it. And, as a result, we push as hard as we can on the existing tools, and they may create more risk in the system.” (2,490 words)

Monopoly Is The Democrat’s Foe

We tend to worry about monopolies mainly on the grounds that they may raise prices; and past work in economics has shown, or claimed, that the effect of monopolies on pricing is relatively small. But the far bigger arguments against monopolies are that they stifle innovation; they capture regulators and legislators; they restrict choice, and, with it, individual freedom. They are anti-democratic (1,000 words)

Celebrating Greenspan’s Legacy Of Failure

Alan Greenspan enjoyed “one of the most interesting and, to be blunt, weirdest tenures ever for a Fed chairman.” At the time he was treated as a genius. With hindsight he seems to have got all his most important decisions wrong. “He was a free marketer who loved to intervene in the markets, a chief bank regulator who seemingly failed to understand even the most basic premise of bank regulations” (780 words)

When She Talks, Banks Shudder

Profile of Anat Admati, Stanford academic who argues that the best way to stabilise the banking system is to raise sharply the ratio of equity that banks must hold, to perhaps 30% of total assets. That need not constrain borrowing and lending; but it would transfer more of the costs and risks of banking from taxpayers to shareholders. Once a marginal voice, she is gaining influence, and has Obama’s ear (Metered) (2,070 words)

A Cure Worse Than The Disease

An investment banker explains why, if you really want to sell your company, it is worth hiring an investment banker to do the job, even at two per cent of transaction value. “It is our job and embedded in the way you pay us to do everything in our power to close your transaction, including beating you up if you’re backsliding, procrastinating, or otherwise doing anything unreasonable and likely to derail a potential sale” (2,600 words)

Inequality Is A Drag

For decades economists have argued that inequality and economic growth went together. Rewarding the rich and neglecting the poor increased the incentive to make money. But we see now that inequality beyond a certain point constrains growth. Incentives aren’t the only thing. Opportunity is also crucial. Extreme inequality deprives many people of the opportunity to fulfill their potential (900 words)

How Apple Deploys Its Cash

Apple’s cash pile gives it a big lead in adopting new technologies. Typically new components are disproportionately expensive to produce at first, before they scale. Apple can pay for the factory and contract for its production. This allows it to introduce products that are impossible for rivals to duplicate until the market has caught up; it took a year for other manufacturers to match the iPhone’s touch-screen (670 words)

Money Talks: The Language Of Finance

Financial language baffles outsiders with its jargon and density. Such opacity is not necessarily sinister: sometimes words are complicated because reality is complicated. But we should make a special effort to understand. “Incomprehension is a form of consent. If we allow ourselves not to understand this language, we are signing off on the prospect of an ever-widening gap between the rich and everyone else” (3,500 words)

A Dollar A Day

Apple’s stock-market valuation assumes that it continues on its present course for another decade. “The forward price to sales ratio is about 2.5. Each sale yields a certain net profit, which for Apple is on average 21%. Multiplying 2.5 by (1/.21) gives 12 which is about the P/E ex cash. This exercise summarizes Apple’s valuation nicely. Apple is expected to keep its current customers for about a decade and then disappear” (260 words)

Structural Change In Venture Capital

Changes in the structure of the venture capital industry mirror changes in the fundamentals for tech start-ups. It’s got much cheaper to launch per the past decade because Amazon, Google, Apple et al offer shareable infrastructure that start-ups can rent instead of building their own. But it’s much more expensive to break out as market leader, because the market has grown at least ten-fold (1,580 words)

Musical Gold

Portrait of three thirty-ish New York siblings, the Carpenters, who deal in rare stringed instruments. They can find you a good Stradivarius “in the low millions”. They seem pretty accomplished at selling themselves, too: “The combined effect of their personalities can feel overwhelming, like an elixir that is more potent than anticipated”. Their aim is to create “the Gagosian gallery of the fine-instrument business” (6,960 words)

Airbnb’s Weird Corporate Nationhood

Airbnb’s new corporate branding urges users to join the “Airbnb nation”. There is some logic here: If owners and renters believe they are part of the same community, they are likely to behave better towards one another. But Airbnb also seems to be taking a lead from Facebook, another “nation”, in prompting for user affection and trust. Perhaps Airbnb is planning to morph into full-function social network (1,345 words)

Global Inequality Is Falling

Rising income inequality is a problem within many nations. But global inequality has been falling for 20 years thanks to rising prosperity in developing countries, China especially. True, China’s industrial growth has held down the wages of middle-class American workers, probably enriched the 1%, and thus worsened inequality within America. But still: “The world is headed in a fundamentally better direction” (Metered) (980 words)

Target The Planning Laws, Not The One Per Cent

Some 40% of UK national wealth is illusory. It consists of the premium in house prices due to planning and zoning restrictions. This artificial wealth has been created “not by improving our living standards but by making them worse; by building too few houses, not too many”. The effect is a transfer of money from the young and poor to the old and rich. “This is not wealth, this is plunder” (Metered) (850 words)

The New Jet Age

Portrait of Dubai International Airport and Emirates airline. Some froth on top, lots of interesting stuff underneath. Aviation accounts for 30% of Dubai’s GDP, up from nothing 20 years ago. DIA is busier than London Heathrow. Location and investment have allowed Emirates to capture fast-growing long-haul routes connecting Asia and Africa with Europe and the Americas, thanks in part to US airlines’ retrenchment (2,860 words)

Fireside Chat With Larry Page And Sergey Brin

Interesting throughout. Larry Page: “We feel like right now, computers are still pretty bad. You’re just messing around. You’re scrolling on your touchscreen phone, and trying to find stuff. The actual amount of knowledge you get out of your computer versus the amount of time you spend with it is still pretty bad. So I think our job is to solve that, and most of the things we’re doing make sense in that context” (6,100 words)

Free Markets Killed Capitalism

Interview with Barry Lynn of the New America Foundation, on how monopolies and the reaction against them have shaped America since independence. The Boston Tea Party was not a revolt against taxation but against the East India Company, which Americans feared would monopolise their commerce. A basic problem of capitalism is the relative ease with which monopolists can capture free markets (8,220 words)

Has GDP Outgrown Its Use?

GDP gets far too much respect as an economic indicator, given its fuzzy and shifting nature. It’s pretty good for measuring production of raw materials and simple manufactured goods, but much less reliable with complex manufactured goods, and “atrocious” at capturing services — which account for two-thirds of rich-world output. “Our societies have been somehow hijacked by pursuit of a single data point” (3,300 words)

The PayPal Mafia

The team that founded PayPal, and dispersed after its acquisition by Ebay, went on to become Silicon Valley’s new A-team of founders and investors. Peter Thiel, Max Levchin, Elon Musk and Reid Hoffman are all PayPal vets. Companies founded by PayPal alumni include at least seven billion-dollar “unicorns”: Tesla Motors, LinkedIn, Palantir, SpaceX, Yelp, YouTube, Yammer. What was in the water at PayPal? (3,880 words)

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