Stark warnings to China Bulls

Albert Edwards warned the coming bear trigger by the China disappointment. He has a good track record. He was previously vilified then praised for calling the 1997 Asian Bubble, and called for a imminent Equity Market Meltdown last Semptember.

Qutoed from FT.com

View of the Day: China bulls will be let down

By Albert Edwards

Published: June 17 2009 15:09 | Last updated: June 17 2009 15:09

The wholehearted belief in China’s economic recovery could turn out to be the biggest disappointment yet for investors, warns Albert Edwards, global strategist at Société Générale.

“The ongoing enthusiasm for all things China reminds me of the way investors were almost totally blind to the fact the US growth miracle was built on sand,” he says.

“We saw this same investor mania 13 years ago with the Asian Bubble, which the consensus thought was a growth miracle.”

At the heart of Mr Edwards’ scepticism lies doubts about the accuracy of official data releases.

“The Chinese data is derided by economic commentators,” he notes. “Many have highlighted that GDP growth seems inconsistent with other data, such as electricity output. Yet few dare to point out that the emperors’ clothes might be absent – and when they do, they are met with robust official rebuttals.”

“That is not to say that the fiscal stimulus has not had a beneficial effect on Chinese activity this year. What I question is the quaint notion that the Chinese economy can grow at a respectable rate when the rest of the world is in a deep recession.

“I believe the bullish group-think on China is just as vulnerable to massive disappointment as any other extreme of bubble nonsense I have seen over the last two decades.

“The fall to earth will be equally as shocking.”

Business plot

Via Business pundit, the business plot is something worth investigating.

In the summer of 1933, shortly after Roosevelt's "First 100 Days," America's richest businessmen were in a panic. It was clear that Roosevelt intended to conduct a massive redistribution of wealth from the rich to the poor. Roosevelt had to be stopped at all costs. ...

I also found the story pertinent because the government is engaged in its biggest economic rescue since FDR. If high-powered politicians and businessman were able to band together in an attempted coup then, what’s stopping them now? Better surveillance, perhaps? A more centralized government?

Does it ring a bell?

Hard Books

Via Chronicle of higher education, Peter Dougherty at Princeton University Press argues that there is a special place for scholarly publishing, or the university presses like the one he works for.

Hard ideas define a culture — that of serious reading, an institution vital to democracy itself. In a recent article, Stephen L. Carter, Yale law professor and novelist, underscores "the importance of reading books that are difficult. Long books. Hard books. Books with which we have to struggle. The hard work of serious reading mirrors the hard work of serious governing — and, in a democracy, governing is a responsibility all citizens share." The challenge for university presses is to better turn our penchant for hard ideas to greater purpose.

It is true, but I think he missed the point. He begins the essay with Shannon's influential book The Mathematical Theory of Communication and points to numerous other influential books published by university presses. It does not help either. If the society has no patience for anything longer than twitter's 140 character, there is no place for books, let alone hard books. It is not presses, but it is the readers. Newspapers only carry yesterday's news. Books become out-dated even before they hit the press machine, with exception to the Twilight series. Maybe not even the twilight, I don't mind waiting for the DVDs with oversized poster of Robert Pattinson.

There were no educated mass 100 years ago, so why worry if only a handful of people would like to read books and the so called educated no longer read seriously?

By the way, I think Shannon's theory of commucation has little, if anything, to do with destroying the press. It is not the hard form, paper or digital, makes the difference. It is the contents. A book in the form of PDF, html or KINDLE is still a book.

iphone 3gs

Just pre-ordered iphone 3gs from ATT.com with 35% bing cashback. It is a nice deal. But remember to disable the adblock if you are using firefox.

Just "bing" att wireless, and the att store will show up as a sponsor link with 35% bing cashback.

Unfortunately, upgrade not eligible for bing cashback, and only one iphone per address from online. The phone will be shipped after 6/19.

What can money buy? Search engine version

Via TechCruch, Bing overtook yahoo's #2, but only for one day.



Maybe it is not the best way to spend millions of dollars. It is not too difficult to buy hype, but much more difficult to buy loyalty. Even though BING is good, but it is not great yet. It is just another but-its-not-google search engine. We would like to keep it around so that google will not sleep on their technology front, and we can use it as an alternative from time to time.

Seth explains Bing

Seth made two important points. First, there is need out there for next google, because google is not broken. $100M could be much better spent (to change the world) instead of buying a brand.

The next Google

Microsoft, home of the Zune, has just announced that they're going to launch Bing, a rebranding and reformatting of their search engine. So far, they've earmarked $100 million just for the marketing.

Bing, of course, stands for But It's Not Google. The problem, as far as I can tell, is that it is trying to be the next Google. And the challenge for Microsoft is that there already is a next Google. It's called Google.

Google is not seen as broken by many people, and a hundred million dollars trying to persuade us that it is, is money poorly spent. In times of change, the rule is this:

Don't try to be the 'next'. Instead, try to be the other, the changer, the new.

If Microsoft adds a few features and they prove popular, how long precisely will it take Google to mirror or even leapfrog those features?

With $100 million, you could build (or even buy) something remarkable. Something that spread online without benefit of a lot of yelling and shouting. Something that changes the game in a fundamental way. The internet works best when you build a network, not when you buy a brand. In fact, I can't think of one successful online brand that was built with cash.

[For an answer to the popular question: "The next Seth Godin" and a few more pithy Q&A, click here]

[For a preview of the real next Google, check out this presentation of Google Wave. As a presentation geek, I need to point out that the intro (the first 2 minutes) is a fantastic example of how someone (you?) can stand up in front of 4,000 people with no slides and make a significant introduction with no hesitation and no apologies.]

Why China Isn’t “The Next Silicon Valley”

Why China Isn’t “The Next Silicon Valley” and it is more than next Silicon Valley.

I agree with the part China is moving fast at a rate "Which dozens of “old” and “new” economies are all maturing amid one another, and the hyper-network effects that such economic progress is having throughout the country." One of the problems is that it is moving too fast, and nobody cares much about long term prospect. Or I am wrong. We will see.

Since I got home from China last week, I’ve found myself in a lot of conversations where phrases like “the next Silicon Valley,” or “just like Silicon Valley used to be,” keep coming up. But while China is swimming in capital and littered with start-ups, I’m going to argue it’s not the next Silicon Valley. In fact, it’s something far different than I’ve ever seen before.

If you think about it, Silicon Valley doesn’t really move as fast as people say it does. Sure, the rest of the U.S. business world may feel out-lapped by the pattern of companies going from nothing to billions in a few years, but those start-ups are mostly the outliers. For every wunderkind smirking on the cover of a magazine, there are far more entrepreneurs who slogged away for thirty years before ever getting their Nasdaq moments. And there are even more who slogged away for longer and didn’t.

And even the breakout Googles and Facebooks of the Valley had the clear benefit of building their companies on top of decades of infrastructure build-out. I mean “infrastructure” in the sense of technology infrastructure—the chips, routers, open source stack, etc.— but I also mean it in the sense of Valley infrastructure that makes it possible to come up with an idea at breakfast and have a company by noon. It’s taken decades of continual boom-and-bust cycles to create the complex fabric of venture capitalists, angel investors, lawyers, term sheets, accounting methods and best practices that a newby entrepreneur waltzing in the Valley today has the luxury of taking for granted.

What makes China so staggering is that everything that happened to corporate America over decades—think the television and media studios build out of the 1950s, the greed of the 1980s, the dot com bubble, the build out of physical and IT infrastructure, current Web 2.0 and CleanTech innovation—is all happening to China at once.

Imagine: At the same time eCommerce is getting sea legs, TV Home Shopping is also getting hot. Online ads are growing not because people are TiVoing through commercials—both TV and online ads are growth markets at the same time. Ditto for entertainment and piracy: While Hollywood sees the Internet as a threat to its cozy legacy business, China’s entertainment industry is just now building amid a world where piracy is already rampant. No one assumes anyone will buy a CD, so they just look for other ways to make money. The wonder of China right now isn’t just the size of the market. It’s the rate at which dozens of “old” and “new” economies are all maturing amid one another, and the hyper-network effects that such economic progress is having throughout the country.

As for China’s start-up ecosystem , it’s working to build its own Valley-like infrastructure, but it doesn’t have the luxury of growing it steadily over several decades. Experts say there’s at least $20 billion in venture capital sloshing around the country right now. It’s probably double that if you count angels and unofficial or very local funds, says Rocky Lee of DLA Piper, a law firm that represents much of that venture money in China.

That’s why calling China merely “the next Silicon Valley” misses the singularity of what’s happening there. The Valley has never been like this, and I don’t say that to knock the Valley. In many ways, our steady development has been healthier. But it’s also a lot less electric. In the next ten years or so way more money will be lost amid the China chaos, but I’m betting way more money will be made too.

It reminds me of the distinction between start-ups who develop products in “parallel” and those who develop them in “serial.” In the former, you raise a bunch of money, hire an army of coders and develop your whole vision at once. In the latter, you build one product, prove that one works and can make money, then raise more money to develop a second. Typically in a time of economic plenty and investor froth everyone pushes for parallel. When the funding and revenues get tight, the serial approach comes into vogue. Parallel is always more exciting; serial is always more rational.

Silicon Valley tends to develop start-ups in “serial waves,” if you will. There are always outliers and waves can coincide in timing like CleanTech and Web 2.0 did, but investors and entrepreneurs tend to jump on dominant high-growth bandwagons and ride them until a few billion companies come out of them and many more fail. Then they wait for the next wagon.

China, as a country, is developing in parallel. The wagons are running constantly and going in nearly every direction. It’s a time of chaos that can burn people out, but it’s also one so unique in the history of modern economics that many ambitious people can’t ignore it. That’s why most transplants from the West who survive their first two years in China tend to stay for more than ten.

Given all this, China is a lot more inwardly focused than other places like Israel and Europe where start-ups have to be global from day one to have a big enough addressable market. When it comes to the Web and mobile, the biggest surprises will likely come from local, non-English speaking entrepreneurs, maybe even those outside the largest cities. They probably don’t read TechCrunch and may not even know where Silicon Valley is on a map. But that won’t matter, because their local market will necessarily develop very differently than ours.

And while China gets a rap for ripping off U.S. Web start-ups now, I think we’re going to start seeing U.S. start-ups copying a lot of elements of Chinese entrepreneurs’ business plans, whether it’s unlocking the value in virtual goods, experimenting with alternative online payment methods or developing more social forms of e-commerce, where like-minded friends shop together.

You always find the best ideas within atmospheres of constraints. It’s why some of the best companies are started during recessions. It’s why Israel was such a surprising hot-bed for Nasdaq IPOs in the late 1990s. And it’s why Chinese Web companies have come up with other ways of making money than just slapping ads on a site, because they had to.

I’ll be going back to China in October, and I’m learning Mandarin in the meantime. Because odds are the next great grinning Web coverboy may not speak English. (And for the commenters who keep complaining that India isn’t getting enough TechCrunch love, calm down! I’ll be there most of November.)