Financial Times Europe - 19.10.2019 - 20.10.2019

2 ★ † FT Weekend 19 October/20 October 2019

Life

leadership, and demanded they return a $120m cash pile and wind down the firm.I often think about those disas- trous years and wonder what has changed in the tech world — and what hasn’t. Today’s tech market is so much more developed, with vastly better infrastructure and game-changing innovations such as ubiquitous smart- phones. We are only just beginning to move into artificial intelligence, the internet of things, 5G and other areas that many businesses are counting on to propel revenue growth in the future.

What could possibly go wrong?

that the people in charge didn’thave the experience and insightto pull it off. Most of the opportunities we were looking at were copycats of successful start- ups that had already launched, or ill- advised attempts to create internet arms of existing legacy brands. Although the founders kept a deal flow going and the press kept writing naively positive stories about London’s homeg- rown tech incubator, internally the firm was already starting to revert to what it really was — a collection of ex–City bankers looking to make a quick buck. When you pull back the lens, that’s really what much of the late 1990s/early 2000s dotcom boom was all about. Far away in Silicon Valley,a handful ofcom- panies such as Google, Amazon and Pay- Palwere carving out sustainable niches — and then ringfencing those markets. Then there was everyone else. As Hal Varian, who wouldbecome Google’s chief economist,put it in 2001: “The obvious corollary to winner-take-all is loser gets nothing, and there will inevita- bly be many more losers than winners.” True enough. But the frenzy of financial activity was being fuelled by more than just your typical market forces. In retrospect, it reflected the increasingly tight links between the world’s financial capitals and tech hubs, and the halls of power in places like Washington and Brussels. The tech industry had lobbied successfully in the 1990s against new accounting standards that would have forced companies to mark the value of options on their books.Today, companies such as Apple and Googlecan take advantage of ultra-low interest rates ot issue loads of bonds on the US debt markets and then use the proceeds to pay back the richest shareholders in the form of tax preferential buybacks and dividends, further increasing the wealth divide. Back in early 2000, a different problem was emerging — the dotcom boom was turning to bust. The value of the Nasdaq index peaked on March 10 2000.On March 20, Barron’s ran a cover story entitled “Burning Up: Warning — Internet Companies Are Running Out of

Continuedfrompage 1

Cash, Fast.” It’s incredible how similar it seems to the negative sentimentaround tech today. Then, as now, companies were starting to issue reversals of revenue statements, and investors began to realise that many previously lauded start-ups were more style than sub- stance. Once the Fed decided to raise interest rates, the die was cast. The “easy money” had officially run out. Or at least until it was time to reflate the market and create tech bubble 2.0. By September 2001, Antfactory’s investors had lost patience with the

Certainly, it is harder for companies to receive funding just by sticking “.com” behind their names. Still, there are many things about the current economy that remind me of my timein London. Then, as now, we were in the late stages of a credit cycle, with too much money chasing too little value. Investors who were counting on a spate of hot IPOs to buoy the late stage of a boom market were disappointed. Back then, the infamous Pets.com went out of business nine months after its IPO. The turning point this time may be Uber’s IPO on May 10, one of the most antici- pated in history, but in the end a dismal failure. It marked a top in tech stocks that simply don’t make any money, despite their size and disruptive power. Shares in any number of once hot companies, like Lyftor Slack, have slumped. WeWork has, of course, cancelled its IPO, and seems to be bringing property prices in New York and London down with it. It’s only the beginning of what I sus- pect will be a long fall for Big Tech. From 2008 onwards, Silicon Valley took the place of Wall Street as the global hub of corporate wealth and power, creating the world’s first trillion-dollar business, growing companies with more users than the planet’s largest countries, and reshaping everything from our brains to our elections. But just as finance faced an existential crisis a decade ago, so Big Tech is facing one now. The US-China trade and tech war is leading to a “splinternet,” which will make it much more difficult for digital giants to grow. There are calls from reg- ulators and politicians on both sides of the Atlantic to clamp down on the size and power of the sector. I never made any money from those Antfactory shares. In fact,demoralised by listening to people try to make nothing sound like something, I left the company several months before it went bust. But I learnt a few things about bub- bles along the way.

RanaForooharistheFT’sglobalbusiness columnist.Hernewbook‘Don’tBeEvil: TheCaseAgainstBigTech’ispublishedby Businessmen accessing the internet at a New York Burger King, 1998— GettyImages AllenLaneonNovember5

Pets.com “What goes up... must come down,” sang the sockpuppet mascot of US pet products etailer Pets.com in one of its million-dollar advertising campaigns, a fitting accompaniment to the company’sshortlived existence. Pets.com ballooned from a tiny San Francisco-based start-up in August 1998 to a publicly traded company in February 2000, raising an impressive $82m at its IPO, before being put down nine months later due to a faulty business model that underestimated shipping costs and sold most of its goods at a fraction of cost. By November 2000, its stock had plummeted from a high of $14 per share to a low of 22 cents. Thanks to its excessive marketing spend, which included commissioning a 36ft balloon version of its canine mascot at the 1999 Macy’s Thanksgiving Day Parade, Pets.com became the most publicised victim of the dotcom bubble.

Boo.com In an industry where timing is everything, Boo.com, Britain’s first high-profile internet casualty, was arguably 10 years too early. Launched in the autumn of 1999 by Swedish poetry critic Ernst Malmsten and former model Kajsa Leander (below), Boo.com aspired to be the go-to site for sports fashion, replete with virtual shop assistant named “Miss Boo”. It secured investment from the likes of

JPMorgan and Goldman Sachs, and Fortune magazine proclaimed it one of Europe’s coolest companies before it had sold a single item. Its ambition was immense — instead of launching in one country, it decided to start with 18 — but its customers’ slow dial-up connections and its own lavish spending helped to derail the duo’s ambitions. Boo.com burnt through $135m of venture capital in just 18 months and was liquidated in May 2000.

Kozmo Founded in New York in 1998 by young investment bankers Joseph Park and Yong Kang, Kozmo tapped into the irresistible business of instant gratification nd was a harbinger ofa high-speed service unicorns Uber and Deliveroo. The company promised free one-hour delivery of games, DVDs, music, magazines, books, food and even cups of Starbucks coffee ni several major cities in the US — for no delivery fee. Despite raising $280m in capital, and proving popular with college students and yuppies, the company buckled under the weight of its ambitious plans and expansion, failing to turn a profit and eventually closing in April

In March 2018 it
relaunchedunder new
ownership with a more
realistic focus on the bulk
deliveries of groceries.
Madeleine Pollard

Bubble trouble: who lost out in the first dotcom crash

I

realised early in life, even in the family home, that there were much cleverer people than me. (Commenters, please fill in your own jokes here.) But I also realised that intelligence wasn’t static. When people say “X is brilliant”, based on his university degree aged 21, it’smeaningless —X may not have developed since then. You can make yourself more intelligent. One way is to study people with beautiful minds. Here are some of their habits:

They treat every situation as a
learning opportunity. f you fallI
into conversation with one of them,
no matter how low status or stupid
you are, they will absorb what you
say. They won’t try to “win” the
encounter by hitting you with
jargon, titles, name-dropping or
recitations of stuff they thought up
years before. At a wedding once, I
got talking to an older guy named
Bob about US healthcare. Later, the
bride’s sister asked me what I’d
thought of Bob. “He’s not dumb,” I
said generously. “No,” she agreed,
“he won the Nobel Prize for
economics.” ‘What was his
specialism?” I asked. “Healthcare,”
she said. And yetRobert Fogel adh
probably listened more attentively
to me than I had to him.

They can clear their mind to see
the other person.People who have
a gift for seeing the world usually
keep their cameras pointed
outwards. Neurotics and narcissists
can’t do that, though they can be
great artists of their own interior
(thinkWoody Allen).

They often suffer anguished
boredom in ordinary social life.
They feel there is so much to learn
that there’s no time to waste on
route talk, kitchen renovations, real
estate prices r conversation-o
enders. One friend of mine, after
correctly diagnosing himself as
highly gifted, was excused by his
wife from having to socialise with
his brother-in-law any more.

They are specialists, yet are
always try to master other fields.

I got to knowWalter Mischel, the psychologist who helped change our understanding of personality, in his final years before he died at

He’d sit there with cocked head,
listening intently to everything that
everyone said. Above him, on his
apartment walls, hung wonderful
paintings — his own, produced in
his eighties. Similarly,Edward Said,
the scholar who helped found the
field of postcolonial studies, was an
important music critic. These
people respect expertise, because
they know from experience that it’s
hard-won and cannot be
generalised from one topic to all
others. They aren’t like the
businessman who goes into politics
assuming that the same rules will
apply and that he’s smarter than

the idiots who still haven’t even solved unemployment. But they do seek to cross-fertilise from one field of expertise to another. Francis Crick ended up co-discovering DNA partly because he had come to biology from physics, bringing with him a fresh pair of eyes.

They gather insights from many
different realms. he best non-T
fiction book I know is Hannah
Arendt’sEichmann in Jerusalem: A
Report on the Banality of Evil 1963).(
It’s a blend of history, philosophy,
her own reportage (from the
Jerusalem courtroom at Adolf
Eichmann’s trial) and — though this
is unstated — her personal
experience as a refugee from
Hitler’s Germany.

They do the work they want to
do, not the work the world seeks
to impose on them, even if there’s
a cost to their career or income. nI
Warren Buffett’s terms, they use an
“inner scorecard” (an internal

gauge of merit) rather than an “outer scorecard” (society’s estimate of merit). They have no interest in becoming insiders, or rich or famous. They tend not to stay in large hierarchical organisations, either public or corporate, where they have to toe a party line and do work that bosses assign them. For much of the past century, beautiful minds have clustered in academia, but that’s changing: increasingly, academics are rewarded for deep knowledge of their discipline’s conventional wisdom, as fields become more hierarchical, technical and specialised.

They have the imagination to
come up with ideas, but also the
humility and technique to test
these against data. ortenseH
Powdermaker, in her classic
anthropologist’s memoir,Stranger
and Friend 1966), describes(
spending a long weekend in New
Hampshire in 1932 at the summer
house of the anthropologist Edward
Sapir. “The remarkable flow of
conversation” between the host and
anotherguest, the psychoanalyst
Harry Stack Sullivan, awes her. She
attributes it in part “to their
personalities — each man seemed
to combine within himself
something of the scientist and of
the poet”. The poet has the ideas;
the scientist tests them. Thanks to
this testing, people with beautiful
minds in the modern world learn
that there’s no big idea that
explains everything.Esther Duflo,
who this week became the youngest
winner of the Nobel in economics,
told me in 2015: “Big ideas are very
seductive. believe in small ideasI .”

People with beautiful minds say
what they think is true —not
what’s socially appropriate, or
lucratively controversial, or
conventional wisdom, or
optimistic, or beneficial to their
political side. (They don’t stick to
orthodoxy). We can all be a bit
more like them, if we try.

@KuperSimon; [email protected]

How the Booker broke the rules

Even for a crowd well versed in ambitiousplot lines, it was a jaw-dropper. When the assembled guests at London’s Guildhall heard who was thewinner of this year’s Booker Prize or Fiction, the shockf was palpable. Rather than stick to the rules and pick one winner, this year’s judges after much anguish opted to be indecisive and plump for two: Margaret Atwood and Bernardine Evaristo. Cue a sharp intake of breath followed by an animated argument that raged under the Great Hall’s soaring arches and Gothic flourishes long after guests normally retire. While a fewin the Guildhall were taken by the idea that given all the rancour about these days it’s good to share, the prevailing view wascritical. A former judge I ran into was — strictlyentre nous, of course — outraged and told me just how feeble it was. In splitting the award, along with the £50,000 prize money, this year’s judges had botched it. The first time a black woman writer, Evaristo, had scooped the Booker would see her have to share the glory — albeit with one of the giants of English-language literature. On stage and in interviews both writers appeared untroubled by it all, and heaped praise on one another, but... Peter Florence, chair of judges, sought to explain thecircumstances that led to the decision.Atwood’sThe Testaments, a sequel to her path-breakingThe Handmaid’s Tale, and Evaristo’sGirl, Woman, Other —a story of Britain today as told through the lives of 12 mostly female, mostly black characters — were both “phenomenal” books. Compromise was simply not possible. They had tried voting but it hadn’t worked — a fitting metaphor for the times, he quipped. The rules were simply “inadequate to the problem” of choosing between two great novels. Florence also took inspiration from the Extinction Rebellion protesters, who had been out in forcein the streets near the Guildhall — providing an interesting contrast for those of us forced to tip-toe past in our rarely deployed black-tie get- up. Sometimes rules are there to be challenged in the service of a higher cause. “Context is everything,” he noted. Yet, as some were quick to point out tohim, he might as easily have cited Boris Johnson, prime minister, in all his proroguing, rule- thrashing pomp. Others muttered to me it wasup to the chair to impose order.Tear-drenched argumentswere just part of the “one job” judges have to do: choose a winner. Instead, this year’s jury in effect staged a sit-in.In the end theorganisers caved and allowed the joint award — the third in the prize’s 51-year-history.The result was a memorable Booker thatstands out for many reasons, but which also left the organisers to walk through their own looking-glass world of having to assert that while the rules have been broken, the rules still stand. Taxi for Mr Kafka!

The Booker decision was also a topic of discussion in Frankfurt, where I headed the following afternoon to join the world’s publishing industry at the annual Book Fair. One of the top notes for visiting hacks is theKritikerempfang, or critics’ reception, held in the Modernist villa of the late Siegfried Unseld, former head of Suhrkamp Verlag and a titan of postwar European publishing. It is a great place to take the pulse of German literary life in an elegant, slightlydated setting —thekind of gathering where people still smoke, indoors. In the looping sequence of rooms below Unseld’s study, where he used to play chess with Samuel Beckett (one leading US literary agent is said to have requested a moment on his own to sit in the chair used by the great man and commune with “Sam”) — there is head-scratching about what happened in London. Buttalk quickly switches to controversy closer to home: the award last week of the Nobel Prize for literature to the Austrian writerPeter Handke, a Suhrkamp author, who has been widely condemned for his pro-Serb stance during the Balkan wars and his support for Slobodan Milosevic, the late Serbian strongman. It has pitched the German world of letters into turmoil, one critic tells me. Handke’s literary talents are undisputed; but his views on the Balkans are unacceptable. Things escalated this week when Sasa Stanisic, the winner of this year’s Deutscher Buchpreis — the German version of the Booker — used his acceptance speech to express his anger at the Nobel decision. “I had the good fortune

to escape what Peter Handke fails to describe in his texts,” said Stanisic, who came to Germany from Bosnia as a teenage refugee. The fact that he was able to receive the award for his bookHerkunft (“Origin”) at all was due to “a reality” that Handke refused to acknowledge, he added. Stanisicsingled out Handke’s writings about his home town of Visegrad: “He does not mention the victims.” A few days later at a packed public event at the Book Fair, Stanisic said thatscores of people had toldhim how surprised they were to hear what had happened in the Balkans in the 1990s. “It’s astonishing,” he said. One solution, he suggested, may be to teach the Balkan wars in schools.

After years of gloom and existential worries about its very survival, the books business feels in better health. That at least was the message from Markus Dohle, the effervescent chief executive of Penguin Random House, the global publishing giant. In a talk to the troops over drinks, Dohle — carefully decked out in the cool, casual uniform of jeans, T-shirt, a loose scarf — enthused about recent data showing rising sales and increasing numbers of young readers. The industry had mastered the combination of physical and electronic publishing and distribution. It was also performing a huge public good in producing properly researched material in a time of fake news. “Join me in being ambassadors of facts and the truth,” Dohle roared, beer bottle raised to the ceiling. Such admirableambitions were also neatly balanced by bottom-line realities. PRH is doing well — helped along by titles such as those celebrated by the Booker and theBuchpreis. Sometimes, everyone’s a winner.

Frederick Studemann is the FT’s literary editor

Interview with Bernardine Evaristo, p11

What we can learn

from people with

beautiful minds

Simon Kuper

Opening shot

These people aren’t

like the businessman who goes into politics

assuming that the same rules will apply

Are we seeing a second tech bubble begin to burst?

Source: PwC/CBInsights MoneyTree™ data explorer

Total value of global venture capital investments in software companies (bn)

The dotcom bubble burst in early At the end of VC investment into tech firms surpassed the dotcom bubble peak, and has since begun to fall

LITERARY DIARY

FREDERICK STUDEMANN

Luke Waller

Montreal diaryQuebec says ‘bonjour-hi’ to Greta Thunberg, while Justin Trudeau fights for his political lifeft.com/life-arts

OCTOBER 19 2019 Section:Weekend Time: 10/201918/ - 15:16 User:andrew.higton Page Name:WIN2, Part,Page,Edition:WIN , 2, 1

Financial Times Europe - 19.10.2019 - 20.10.2019

Get our desktop app

Company

Features

Documentation

Resources