Making Money Opportunities

Thought the ZH famiglia would enjoy this comment from my old friend Sol Sanders, who has been watching China long enough to actually remember Mao. I read Chinese history as an undergrad and worked as a banker in the semi cap equipment market, which is now dominated by Asian nations.  But the export market that China and its neighbors depend upon has never come back.  Is China the next Egypt?  A version of this column is scheduled for publication in The Washington Times, Monday, Feb. 14, 2011.  -- Chris
 

Follow the Money No. 53:  Rolling the dice in China

By Sol Sanders <solsanders@cox.net>

When scientists get further along with epigenetics, they may discover the Chinese have two unique DNA: a gambling gene, and another for hospitality. The first, of course, explains why Macau is odds-on favorite for replacing Vegas as No. 1 world gambling champion. The second suggests why few escape the lure of a Chinese campaign to win visitors’ hearts and minds.

Looking at a new determined shift in Beijing’s economic strategy, one has to chalk it up to that gambling gene. Intoxicated with turning into “the world’s factory”, Beijing plans to sail right past their successful collaborative development with foreign multinationals. Its new strategy literally amends Maximal Leader Deng Hsiao-ping’s dying instructions two decades ago to hide their capacities until they had achieved his four modernizations.

One can only chalk up Western businessmen naiveté to that second suspected Chinese gene, the ability to vamp any visitor. Of course, Frederick Engels, Karl Marx’s more literary companion, explained it all more than a century ago. He foresaw that on the way to the gallows, the capitalists’ greed would drive them to compete with one another to sell the rope to their executioners.

From mid-summer last year Chinese authorities – as a muddled but highly informative U.S. Chamber of Commerce report concludes – shifted from defense to offense. Years of studying their acknowledged total dependence on foreign technology has culminated in proposing 16 new megaprojects. With them they aim:

1] To provide new opportunities for stealing foreign technology. Now, before any technology can be introduced into China, it must be intensely “studied” -- in fact, stolen even before it enters the market. Another is increased allocation of “patents” to Chinese firms with virtually no verification, making it virtually impossible to pursue legal indemnification for losses.

2] To restore the primacy of the SOEs, the state-owned enterprises, those giant behemoths notorious for their inefficiency and corruption but powerful political entities. Massive funds [$25 billion] -- out of the huge 2008 stimulus package, originally aimed at warding off contagion from the world financial crisis – have been allocated to the SOEs to produce “indigenous innovation”

3] To continue to ensnare foreign companies, Beijing will suggest in return for continued tech transfers, they will get a share of the growing Chinese markets. They will also be offered participation in new technologies in China using government funds. But increasingly “import substitution”, that protectionist policy which crippled much of the third world before “globalization” became fashionable, is government policy.

Beijing’s new turn is loaded with risk. The history of Chinese innovation during the current boom is miserable. Eighty percent of China’s major firms do not have R&D at all.  One reason may be it has been so easy to rent or steal needed foreign technologies. But there may be even more important – if difficult to evaluate – cultural factors.

Although China was historically leader in basic scientific development, simply said, the Europeans picked up on those breakthroughs to initiate the industrial revolution leaving China behind. Why? The answer to this question is perennial among scholars. One answer lies in China’s intense bureaucratization, in part arising from the need for huge collective enterprises – largely for water control. Another, of course, is Chinese learning has always put the emphasis on rote memorization and an inordinate, even religious, respect and adherence to what has gone before. It may be no accident, as the Communists used to say, now bereft of its Marxist-Leninist-Maoist dogma Beijing is turning back to Confucianism. [A statue of Confucius was recently installed in Tien An Mien square alongside a huge portrait of his greatest adversary, Mao Tse-tung.] With its emphasis on ritual, Confucianism represents the antithesis to the restless European [Greek] mind. An even greater threat to the new effort to produce originality may be the all pervasive corruption permeating Chinese life today which means vast sums promised R&D will go astray.

China is also taking other risks. Despite an intense campaign, Beijing has not been able to lure home more than a few prominent scholars among more than 62,000 Chinese in the U.S., many in technological research. With ties in both cultures, they have been critical to transferring technology. The new Beijing strategy may jeopardize that relationship as American business, reluctantly, and the U.S. government becomes increasingly cautious about China deals.

True, economic development in East Asia was always full of warfare over intellectual property. Japan, Taiwan and South Korea have been major culprits. But the Chinese pour salt in the wound by offering products overseas based on stolen technology. Thus California’s former Gov. Arnold Schwarzenegger was talking to the Chinese about proposed federally subsidized high-speed rail based on their theft from three foreign companies that had cooperated in creating them in China. At the moment, Washington is grappling with the proposed purchase by Huawei, a Chinese entity with military connections, of an American IT company with the Pentagon as a client.

Beijing’s gamble if successful would insure continued giant leaps forward but like Mao’s infamous economic plays, this one could prove catastrophic.

Like some of you, I have an uncle who likes forwarding emails that feature quotations, random slide shows and holiday alerts. Mind you, since we have a lot of holidays and festivals in India, these emails are frequent. Still, it is fun to hear from him (mostly because I love him). Recently, he emailed me an old folk tale.

According to the story, a farmer has a donkey, which falls into a well. The donkey starts braying, forcing the farmer to look for ways to figure out what to do. His conclusion? Since the donkey is old, it’s not worth the effort to retrieve the donkey.

He starts shoveling dirt into the well. The donkey has an “oh-crikey” moment and it starts crying and creating a fuss. But then, it quiets down. With every few shovels of dirt, the donkey re-adjusts, shakes dirt off his back, and stands up. Before the farmer knew it, the donkey was out of the wall.

This old folklore has a simple lesson: When life pours dirt on you, shake it off and move forward. This lesson is particularly true for start-ups that have to face their moment of truth.

Game On

I was reminded of this story when I was transcribing my interview with Neil Young, CEO and co-founder of mobile video games start-up, ngmoco (acquired by Japan’s DeNA for $403 million.) Young and I have talked off and on, and before he sold his company, he and I discussed the change of direction he made for the company.

Neil shared with me the story of how, when facing a near impossible business environment, he had to find a new business model for his company, which started life building premium mobile games.  It sold a lot of games!

To the outside world, ngmoco was a massive success, but Young knew the harsh facts:  the games had a very short half-life and they lost money-making potential once they fell out of the top ten or after the initial couple of weeks.

Young argues that for a company making premium mobile games, the company would have to have two games in the top five paid games on the iPhone store for 365 days for the company to build a $10 million a year business.

Even if you added Android platform opportunities, ngmoco was still in a hit-driven business. With new free (and paid) apps launching every day, Young & Co. knew that it would be difficult to keep on the hit trail. Moreover, the average price of the games was decaying fast and settling at around 99 cents. The ad-based revenue stream wasn’t going to be enough, as the eCPMs were pretty low. Like the donkey, ngmoco was in a well, with no likelihood of coming out.

However, upon closer scrutiny, Young’s team realized they had a lot of games, which had very high engagement and user loyalty. “Games are not built for a fleeting moment in the charts, but are built for an (ongoing) relationship with the customer, “ he says. “The longer you can maintain that relationship, the longer the opportunity.”

Armed with this knowledge, ngmoco started the Plus+ network (its social gaming network), and embraced the Freemium model that eventually led to the company increasing its revenues and later selling out to DeNA.

All Chips In

Young isn’t the first corporate honcho who made tough decisions. Intel Corp., the company we chip-heads affectionately refer to as Chipzilla, was the proverbial donkey in the well in 1983, when it was getting killed in the market by Japanese memory chip makers.

The company had been dabbling in the microprocessor business, supplying chips to the likes of IBM, but the majority of its revenues came from the sales of memory chips, primarily dynamic random access memory (DRAM).

Andy Grove, then-president of Intel (and later its CEO and chairman) made a crucial decision: Forget the memory chips and gamble it all on becoming the single source of microprocessors for the PC industry. His decision came at a time when it wasn’t clear what PC standards were going to prevail, or if the 8086 processor was going to catch on. The rest is history.

And the Story Goes…

Richard Tedlow, a professor at Harvard, in his book, Denial: Why Business Leaders Fail to Look Facts in the Face and What To Do About It once wrote: “Denial is the unconscious calculus that if an unpleasant reality were true, it would be too terrible, so therefore cannot be true… In fact, denial might be the biggest and potentially most ruinous problem that businesses face, from start-ups to mature, powerful corporations.”

Nokia’s denial of the existence of the iPhone and the disruptive impact on its business is a good example. Young of ngmoco could have accepted the short-term success of his company, but instead he decided not to.

I have seen many a startups (and many a founder) spend most of its energies bemoaning its miseries, instead of trying to do something about it. But like the proverbial donkey, the decision is yours to make.

Around the Web

• Niall Ferguson: Americans and Revolutions


• Scott Olsen: DST & Y Combinator: A (VC) Industry in transition


• Brandon Watson: Why developers shouldn’t listen to Scoble

Surface Encounters proudly guarantees customer satisfaction and price tag setting up granite assurance. “I’m consistently skeptical going with new organisations, but your workers has designed me a believer!” - Steve, Indianapolis

Surface Encounters is usually a fast-growing surface encounters organization and, yet still they have kept tempo with each of the recent customer referrals. “This firm is amongst the most budget friendly, reputable and pleasant businesses while in the whole state. I would highly recommend them to anybody.” - Mike R., South Bend

A considerable amount of effort goes into establishing gorgeous countertops from nature. The method contains laser measurement creative vein matching, precision diamond and water-jet cutting, edging and professional installation. One are unable to just simply call in their buy for any custom countertop and have it in per day or two. Excellent usually requires time.

Surface Encounters encourages most people to go to a showroom to realize even more about organic stone countertops. Besides the assortment and fabrication technique, a further valuable aspect of purchaser treatment is ensuring a single is aware how to treatment for his or her granite countertop to maintain it seeking new for years to arrive.

Granite is definitely a gorgeous normal stone merchandise which can be a preferred content employed for countertops and floor tiles in kitchens and bathrooms. Granite has surpassed marble in recognition given that is it much more sturdy and simplier and easier to treatment for. Granite is unmatched by synthetic programs for its strength and durability, tolerance to temperature modifications and resistance to stains and scratches.

Granite is definitely a normally formed stone that is definitely quarried from deep from the earth, harvested, cut, polished, sealed and put in in houses to add attractiveness, elegance and fashion. Considering it's a purely natural merchandise, no two slabs are exactly alike. Granite is available in a number of hues from the several minerals that are observed inside rock. Considering it arrives from throughout the entire world, distinct regions and environmental factors make it distinct.

Granite is largely designed up of quartz crystal, nevertheless it also includes a number of quantities of other metals which includes feldspar, mica, copper and iron. Some granite may well include bits of gold or silver. The amount of every single metal is dependent on the area it comes from. All granite is formed into a hard stone by heat and stress. Rain adds other minerals since it is forming. It can be offered all over the world, in any region, and just about every area will create a surface encounters exclusive number of granite.

Surface Encounters state-of-the-art machinery assures the highest high quality finished product because they style and design and build some of the very best kitchens and bathrooms. Granite Countertops boost the warmth and beauty of households whereas improving their value and improving lifestyles.

Surface Encounters can be involved with employee morale; delighted staff are a lot more most likely to lead to your results of the enterprise. Moreover to becoming a powerful firm and a person that's excellent to do the job for, Surface Encounters does their portion to preserve our planet.

Surface Encounters does what on earth is proper for his or her prospects, employees along with the surroundings. Surface Encounters uses sophisticated water recycling capabilities to recycle as much as 43,000 gallons of drinking water every day. Additionally, a hundred percent for the scrap created in generating sophisticated kitchens and fabulous baths is re-used as aggregate in road creating, surface preparations and concrete.

The Columbus, Ohio Grand Opening of Surface Encounters attributes an artwork gallery showroom of Granite, Marble, Quartz and Engineered Stone counter tops. Retail outlet Manager, Scott Donnelly unlocked the doorways in the showroom at 4717 Roberts Street, just west on the I-270 Beltway. The Surface Encounters production system uses precision, automated technology throughout the fabrication on the customer's customized counter prime, these as: a laser measuring alignment that plans the diamond-tipped sculpturing blades. Surface Encounters' plan involves computer-driven software that perpetuates the stone's organic veins. Each individual Surface Encounter retailer has not less than an individual registered, interior designer to assist you in designing the completed undertaking that you are seeking for. The craftsmanship continues through the

Home owners are deciding to remodel rather than promote their real estate in today’s market
Granite countertops are becoming a prime option between Wixom people for kitchen remodeling assignments. Kitchen remodeling is usually the primary venture tackled with families shelling out three,000 hours or more per year within their kitchen. Granite countertops supply an setting that enhances the quality time invested with relatives and associates. Granite countertops last a lifetime and enhance the top quality of households.

Surface Encounters Wixom retailer supervisor, Sal Dellacasa, says there are many factors people are selecting granite for their countertop wants. “Granite countertops add elegance and elegance to a kitchen. Granite is accessible inside of a number of vibrant shades and loaded textures and its strength and sturdiness is unmatched by any other organic stone or artificial countertop material.”

Surface Encounters’ buyers savor skilled service and also a pleasant, effective workers to guideline them through the kitchen remodeling system. Many of Surface Encounters new clients are referred to them by former potential customers.
"This company is one of the most cost effective, trustworthy, and pleasant vendors from the complete state. I might highly recommend them to anybody." Mike R. Clinton Twp., MI

"The business has frequently been there to help me in whichever way conceivable. Thank you a lot!" David V. Lapeer, MI


Surface Encounters Macomb would be the home of half-off granite for kitchen and bathroom countertops. Granite countertops by Surface Encounters have speedily turned into the the best alternative for Macomb residents that are remodeling their kitchens. Kitchen remodeling normally requires priority with families paying three,000 hrs or more per year in their kitchen. Granite countertops supply an setting that enhances the top quality time put in with friends and family and pals and increase the quality of homes.

Surface Encounters Macomb retail store manager, Sal Dellacasa, says there are numerous explanations buyers are selecting granite for their countertop requirements. “Granite countertops add attractiveness and elegance to a kitchen. Granite is offered within a number of vibrant hues and loaded textures and its strength and sturdiness is unmatched by every other surface encounters all natural stone or synthetic countertop substance.”

Surface Encounters’ clientele savor pro service along with a pleasant, valuable staff to guidebook them through the kitchen remodeling approach. A number of of Surface Encounters new consumers are referred to them by prior potential customers.