Silicon Hutong

The Education of a Mogulette

In the Hutong
Ignoring American Idol while the Party Secretary watches
0001 hrs.

Wendi Deng has told Vogue that she will be collaborating with her pals Zhang Ziyi and Florence Sloan to establish a new film production company based on the DreamWorks model. The first project of the unnamed venture is apparently an adaptation of Shan Sa's novel The Empress, and Ms. Deng dropped the name of Ridley Scott as a possible director.

Let us set aside for a moment the fact that DreamWorks SKG was built on the collective talent, track records, and Hollywood street credibility of Steven Spielberg, Jeffrey Katzenberg, and David Geffen. Ignore for a moment that whatever the strengths Deng, Zhang, and Sloan bring to the table, they are simply not in the same league as the the DreamWorks founders. All of that doesn't matter: with the support of Rupert's money and Zhang's screen success, they will likely get some movies made.

You may also remember that MySpace China was publicized as Ms. Deng's deal. From Joseph Kahn's piece in The New York Times last June:

Wendi Murdoch has stepped up her role in China. She plotted a strategy for the News Corporation’s social networking site, MySpace, to enter the Chinese market, people involved with the company said. The News Corporation decided to license the MySpace name to a local consortium of investors organized by Ms. Murdoch.

There is a pattern to all of this, an internal logic.

Ms. Deng is not a News Corporation executive. She plays no official role in the business. When she helped put together the MySpace China deal (assuming, of course, that her participation was real and not some form of positioning), she was basically doing it as The Boss' Wife, as News Corporation laobanniang. That would probably rankle anyone who had an MBA from Yale and a little ambition, so it probably rankled Ms. Deng.

The venture with Zhang and Sloan - let's call it QueenWorks - gives Ms. Deng more than a project on which to occupy her time. It is her first real job since marrying her husband, and her first shot at running her own gig. It is also her shot at a lasting piece of the action, a legitimate business she can build independent of News Corporation that she can use as the foundation of her own media organization. It makes her something more than Mrs. Murdoch, and yet she carries that cachet into every meeting she walks into.

Providing she is serious about it, providing it is not simply a toy for a bored wealthy housewife, she could actually make something out of the organization. Either way, what we will have will be a litmus test: given a wealthy backer (her husband) and interesting partners, is Wendi capable of running a successful business?

This is an important question to News Corporation. If Wendi can prove herself an able executive in her own Hollywood operation, it gives her considerably more credibility at a later date when the complex issue of Rupert's succession comes up. It is one thing for the spouse of the boss to seek a role in the business. It is another entirely when that spouse also has made her bones as a successful businessperson.

This new venture will bear watching.

UPDATED: Why Krispy Kreme is Doomed in Mainland China

In the Hutong
Breathing those little airborne cotton balls
2056 hrs.

Via Danwei, China Economic Review is quoting Krispy Kreme's HK CEO explaining why the confection pushers are planning to start their invasion of the People's Republic of China in Shenzhen.

"Shenzhen is a migrant city, many are from the north, and the people are more receptive to fried products."

Krispy Kreme is doomed in China.

Write it off.

It's going the way of Jack-in-the-Box. Or Wendy's.

You Don't Really Want to Be Here, Do You?

First, any company that would stoop to concocting such a nonsense justification for locating a high-value franchise somewhere is engaged in some high-level self-delusion. I would bet that real reason they're going to do Shenzhen first is that the HK CEO is getting stuck with the job on the mainland, probably likes his mid-levels flat, and doesn't want to be flying to Beijing or Shanghai all the time. Shenzhen, on the other hand, is 45 minutes from Central by car.

Second, if Krispy Kreme was really serious about China, they wouldn't hand the responsibility to a guy in Hong Kong. They would do their research and put a guy on the ground in Shanghai, Beijing, or somewhere else in China to act as representative, get to know the local government, and find local franchisees. Behaving like you need to enter China from Hong Kong, then Shenzhen, is a modus operandi far more appropriate to China's circumstances circa 1990.

Third, if Krispy Kreme really understood the way into China, they would start someplace where there are a lot of people who already like donuts, can't get them, and will form long, slavering lines outside their door each morning. If you're afraid of Shanghai, go with Beijing. Call me crazy, but tens of thousands of American and Canadian businesspeople, students, diplomats, and families seem like a built-in market for a store or ten, better (especially initially) than a million or two migrant workers and their factory bosses.

Alas, Krispy Kreme appears content to sit in Hong Kong and wait for the franchisees to come to them, and then invade the market slowly.

Watch the Other Guy Feel the Stones

Time to study the tactics of companies like Starbucks, McDonalds, KFC, Pizza Hut, Dominos, and Papa John's. They knew where their ready markets were, started with those places, put people on the ground in the mainland separate from Hong Kong, and have insanely thriving businesses today because of it.

And, as The Village Grouch correctly points out, Krispy Kreme can also build on the experience - and failure - of Dunkin Donuts in Beijing. In the late 1990s, Dunkin rolled out about 10 stores very quickly, many located in the same space as their Allied-Domecq sister company, Baskin-Robbins.

However, they did little or no consumer education, and when faced with the choice between something they knew and liked - ice cream - and the cakey things they found too sweet for their palates, the uneducated consumer went with what they knew.

Beijing is without a franchised donut store today. But that has as much to do with timing as anything, and it could be argued that the timing is far better today than it was a decade ago.

Where Giants Have Trod

American-born, Thai-based billionaire Bill Heinecke helped to bring Pizza Hut to China in the early 1990s. (If you ate at Pizza Hut in Beijing back then, thank Bill.) However, the going was slow, the joint venture arrangement difficult (as they are), and Heinecke's group sold their shares after a few years and went back to selling pizza in Thailand, which they did quite well.

After a spat with Yum Brands, the parent company of Pizza Hut, Heinecke founded his own pizza chain, The Pizza Company. Seen any of those popping up in the Hutong lately? Right.

Now, after Pizza Hut, Domino's and Papa John's (not to mention the superior product at Kro's Nest) have all established a foothold, The Pizza Company comes to a market where it must fight for a crust, rather than cut itself a large slice of the pie.

So heads up, Krispy Kreme. You have neither the money nor time to burn on timid, ill-conceived strategies in China.

A Last Word

The above said, I must add the caveat below.

Many of us still remember the days when "experts," Chinese and foreign, were saying that pizza would never sell in China because Chinese lack the enzyme required to digest cheese and other milk products. The aforementioned chains give lie to that.

Beware of people who give you reasons why something will work someplace and won't work another. There is no substitute for ignoring all of the naysayers and getting in there and trying.

Fortune in China usually tends to favor the brave and the wise. Be both.

Cable TV in China: Invest Elsewhere

In the Hutong
Yes, dear, toast is dinner
1938 hrs.

Earlier this month, I was honored to sit on a panel on the future of China's cable television industry sponsored by the American Chamber of Commerce, joined by my friend Kris Kender from CMM Intelligence (the guys who publish the China Media Yearbook & Directory), Leo Austin of Augus Partners, and Tao Libao of China Multimedia Networks. The panel was expertly guided by Jeremy Goldkorn of Danwei.org.

139 Million What? I'd Like Some of That...

On the minds of many of the people in our audience was when and how it would be possible for foreign companies to make some money on the 139 million cable TV subscribers (that's households, not people) in China.

The hopes of the industry are pinned upon some valid commercial and economic truths:

- After nearly two decades of development, cable TV in China is little more than basic cable, a depressing collection of 40 or so look-alike channels with content that is occasionally superb but more commonly mediocre;

- Cable operators make a pittance - maybe RMB 14 per month per subscriber on average;

- Getting cable operators out of this low-end rut means adding more and better programs, new channels, more services, and putting in the systems that will allow operators to charge for them;

- The country (i.e., the nation's cable operators, taken collectively) has invested billions of dollars on fiber-optic and cable networks, and would clearly want to get the most economic value out of all of that wiring;

- Chinese people love home entertainment.

All of this would seem to spell endless opportunity for companies, both foreign and domestic, seeking to make fortunes selling networking equipment, head-ends, set-top boxes, software, expertise, and even programming to China's cable industry.

Funny, It Didn't LOOK Like a Mirage

There is only one problem:

Cable TV in China is not an industry.

At best, it is a highly regulated utility.

At worst, it is a technological laboratory for engineers.

Chinese law and policy state emphatically that foreigners cannot own or control cable TV stations or channels - that is reserved of Chinese organizations, and only those so authorized by the State Administration for Radio, Film, and Television (SARFT).

Some of the world's largest media organizations - News Corp. and Viacom not least among them - have repeatedly attempted to work around the letter of the law, only to find themselves each time face-to-face with the law's intent in the form of agitated, vengeful aparatchiks.

The vast majority of the air time and cable bandwidth available to the operators remains unfilled, hampered by party-enforced restrictions on the local creation of programs and import of content. And value-added services? Cable is rapidly losing out to the Internet and mobile.

Indeed, with operators eking out an operational living from the narrow, shallow stream of subscription revenues and their shares of advertising, they can barely contemplate investing in the network upgrades that would enable them to provide the premium content and value-added services that not only don't exist, but are unlikely to leap into existence as long as the industry is constrained from taking outside investment.

Are there experiments taking place in high-definition television, IPTV, digital, and premium channels? Sure. But these experiments and others like them have been going on for over a decade. And the government seems content to allow experiments to continue, but commercial rollouts have yet to happen.

There is more to it, of course, but that's the gist.

The painful consensus of the panel was that among the multitude of Chinese national treasures we evil foreigners want to get our claws into, the cable TV business is not only among the least accessible, it is also among the least appealing.

Jeremy Goldkorn asked me if I had money to invest in cable television in China, what would I invest in. I wasn't much of a sport. I told the truth: if I had money to invest, the last place in China I would invest it is cable TV.

The End of Cable

Cable television will continue to lumber along for some time in the future, for a couple of reasons. First, the growing appetite for television advertising time - ANY television advertising time - will ensure that revenues continue to pace economic growth. Second, China's urbanization plays right into the hands of cable operators, although returns will decline as they make investments to service the growing urban working class.

But unless something significant changes about the way the sector is regulated, at some point in the future, things are going to turn ugly for the operators. With no means at their disposal of significantly improving revenue streams or financing the hardware that would enable new revenues, cable will become what radio and terrestrial television are today - lowest common denominator entertainment. It's what everyone will have, but everyone will want more.

From a macro-policy level, the course of action that makes the most sense, that will allow the country to get the most out of its cable networks and to use them the way they are most needed, is a radical one:

• Set a basis for fairly valuing the networks.

• Have the local municipalities and the provinces sell them to the telcos after the anticipated round of telecommunications industry restructuring is complete.

• Separate out the channel production and advertising sales functions, spinning them into independent entities that will continue to be regulated by SARFT and the Party.

• Lay out must-carry regulations that ensure that current channels have grandfathered carriage.

• Let the telcos invest in the networks as both programming delivery and service delivery systems, parallel with other broadband but aimed at consumers who want alacarte services, not raw Internet coming into their TVs.

Is this a radical solution? You betcha.

Will it happen tomorrow? No.

Is this the likely eventual fate of the cable networks? Absolutely.

Selling Hong Kong

In the Hutong
Lactose Intolerance is my Cross
0832 hrs.

BusinessWeek reprints Gareth Powell's China Economic Review piece documenting how Shenzhen is about to overtake Hong Kong as the world's third-busiest cargo port.

On trah what?

Hong Kong began and grew as a trade entrepot, and for many years after 1949 was a busy center for manufacturing as well. Reforming and opening of the mainland have sucked most of the manufacturing upriver and inland, and (as today's story underscores) Hong Kong's importance as a center of transshipment declines as its picturesque harbor is pinched by reclamation and development - not to mention rising property values, growing pollution restrictions, and the climbing cost of labor.

In spite of all of this, Hong Kong's port will continue to prosper for a time. But to rely on the port for growth or economic vitality is growing less practical. Even the city's major port operators are betting on investments in faraway quays and harbors for their long term prosperity. Clearly, physical logistics is not the basis on which the SAR's leaders can or should build a vision for the future.

(Nor, for that matter, is some well-intentioned belief that the city is a great place to build online businesses - many of those industries are highly labor, power, and real-estate intensive, and the back rooms of Shenzhen, Hangzhou, Beijing, and Dalian are arguably better suited to become multimedia centers.)

More than Ports and Property

As many readers know, I hardly qualify as a Hong Kong booster: I think many of its people (Chinese and foreign) believe themselves far more expert in mainland affairs than they truly are, and I believe that the city clung to its role as a gateway to China long after that ceased being either true or necessary.

But I believe in Hong Kong, and feel that if the SAR could understand what it offers - and what it doesn't - it need not decline to become a lesser light than Shanghai and Singapore, a path it appears to be treading.

Where Hong Kong excels is in services. It remains perhaps the easiest city in all of Asia to get a lot of stuff done in a very little time. Every time I go to Hong Kong I am amazed at how many things I can knock off my list in the space of a morning or a single day. My company is domiciled there. My lawyers, travel agent, and accountant are all there, as are my bank, my tailor, my computer store, and my dive shop. What is more, I can get to every single one of those places in a single day, with time left over for lunch and some random shopping.

It remains the best place in the region to hold meetings, attend conventions, or run training programs. Setting up - and operating - a company there is about as easy as it gets. It is simpler and faster in Hong Kong than Singapore, Beijing, Shanghai, or Tokyo to do my banking, send a parcel (or myself) anywhere on the planet, buy a mobile phone, shop for just about anything, get a suit made, watch a movie, find a wi-fi hotspot, eat a meal, rent an office, buy a CD, or find a Moleskine notebook.

Where else is there a higher density of every business craft or profession? Law firms, accounting firms, advertising agencies, investment banks, venture capitalists, and head hunters abound in such profusion that you could probably get your needs met in any given office tower in Central.

(The Village Grouch and I frequently swap Hong Kong stories, each trying to outdo the other on how fast we got from the gate to the train at the airport, how much we got done in a morning or an afternoon, or comparing notes on our latest "Hong Kong hack." Yes, I know, it's a pathetic hobby, but it is mine.)

It's the Services, Guys

If I were doing a marketing campaign for Hong Kong, I wouldn't be pushing it as a "city of light" or "Asia's world city." Both campaigns are fine for people who have never been to the city and are looking to spend a few days in a conveniently compact Asian metropolis. They will not, however, bring people - and their investment dollars - back.

If I were doing a campaign for Hong Kong, the tagline would be simple:

Hong Kong. At Your Service.

Forget real estate and shipping. If I were Donald Tsang or any of his staff, I would be giving a lot of thought to how to shift the SAR's industrial policy and external marketing toward highlighting - and growing - Hong Kong's role as the service entrepot of - if not Asia - certainly of Greater China.

Getting Serious about Service

To make that happen, the SAR government needs to get itself a laser-focus on becoming the place where stuff that is unnecessarily difficult to do elsewhere is utterly simple to do in Hong Kong.

That means a marketing campaign aimed at three separate audiences - tourists, business people, and corporations - that all emphasize how Hong Kong is a critical part of Asia for them because Hong Kong will help them a) get stuff done, and b) make getting stuff done elsewhere in the region simpler.

That means an effort to attract and retain major personal and business service companies from around the world.

That means an education policy that prepares Hong Kong's children to be leaders in service based industries, including a commitment to restoring Hong Kong's leadership in English language instruction.

That means a policy focus aimed at encouraging - even subsidizing - companies who are genuine innovators in services. You have a better way to do something for people? This is where you want to be.

The great part of all of this is that Hong Kong is already half way there. Services dominate the economy. Hong Kong's major brands - Cathay Pacific, HSBC, A.S. Watson, Hutchinson, Shangri-La - are almost all service brands.

The greatest problem is one of positioning: Hong Kong has never articulated these strengths well. That needs to change. Now.

Otherwise the city is doomed to become a sad provincial shadow of itself, a narrow stretch of water surrounded by expensive real estate and the effluent of the Pear River estuary.

China and the Salvation of Windows XP

Pacific Century Starbucks, Beijing
Dust in the wind
1343 hrs.

Galen Gruman at IDG publication InfoWorld has done the technology industries a community service, building a petition signed by 100,000 computing industry professionals imploring Microsoft to continue selling Windows XP after June 30, the date Microsoft plans to remove the older version of its personal computer operating system from the shelves. Getting 100,000 IT professionals to do anything together without the incentive of a free t-shirt, free software, or an opportunity to meet females is quite a trick, so IDG's survey is an illustration of how emotional this issue has become for those of us not using some flavor of Linux or Mac OSX (our favs here in the Hutong).

At least, it is an illustration of how emotional this has become outside of China.

While I am certain Microsoft CEO Steve Ballmer would say that the (relative) lack of uproar in China about the impending forced-march upgrade to Vista is due to the fact that Vista is the most loved OS in China's history, I beg to differ.

I would say piracy is the reason for the silence.

Jack Sparrow, Vista Killer

People are somewhat less worried about the availability of Windows XP in China because they know that XP will be available here for as long as anyone wants, and for a very small price. (Without Microsoft support, certainly, but available.)

Microsoft has made tremendous progress against piracy in China over the past several years. The problem is far from beaten, but the company has more than doubled the percentage of people paying for their Microsoft software.

But by taking Windows off the shelves, Microsoft appears to be creating a perverse incentive for people who might otherwise buy legitimate software to resort to piracy. Indeed, Microsoft appears to be creating the ideal conditions for a thriving market in illicit copies of Windows XP after June 30, and not just in China.

Certainly, Chinese users who prefer Windows XP to Vista will have few compunctions about turning to one of the thousands of enterprising vendors to be found on our city streets for a budget-priced DVD if they cannot find it in legitimate places, like Federal Software or on the hard drive of their new computer.

But it won't stop there. Microsoft is almost inviting China to play a leading role in the global anti-Vista backlash. Imagine, if you will, hundreds, even thousands of visitors passing through China during the Olympics, picking up a copy or two of XP to take home.

Imagine IT consultants all around the world continuing to install those copies of Windows XP in new computers - for a service fee.

Imagine computer dealers and manufacturers offering (nudge nudge, wink wink) to install XP in the new computers as an option. It will certainly happen here in China.

Imagine a thriving online marketplace in downloads of Windows XP.

It will happen. Commerce, like love, will always find a way.

What Microsoft would kill, pirates will revive - and sustain.

Inviting a Challenge

In fact, the issue is already causing many people here in China to wonder whether there is a legitimate principle (under fair use or some similar legal tenet) that wokuld support enterprising merchants who wish to sell - or give away - copies of a software product for which there is a continued, legitimate demand after the manufacturer has removed it from sale.

We in the Hutong are no fans of IP pirates, nor are we particularly fond of people who break any law because compliance is inconvenient. We remain firm believers that creators of intellectual property have the right to be rewarded for their efforts. We believe that if you disagree with intellectual property (IP) law, the proper response is not to ignore the law, but to change the law or challenge its underlying principles.

By pulling XP from the shelves when people still want to buy it or use it merely to compel people to spend more money on (what they believe to be) an inferior product, Microsoft may be opening a legal can of tubular invertebrates, if not in the U.S., certainly in China.

The root of legislation is perception, and the perception that Microsoft may be taking advantage of intellectual property laws to hold users over a barrel may be just enough to incite a legal challenge in China not only to Microsoft, but to the core of the relatively young body of law protecting the rights of software companies.

The logical principle is this: if Microsoft stops selling an IP-based and there is still a market, could a case be made that Microsoft has abandoned the product, and that the law should allow for someone else to sell it?

Even Galen Gruman, no man's idea of a socialist, suggests in his InfoWorld article that the very ubiquity of Windows has made it a public good supplied by a private entity, thus subject not to the normal system of rules regulating commerce, but to those principles that govern utilities like the power grid, phone service, and air transport. Galen's implication is that the Windows case calls for a suspension of normal rules, if not direct government intervention.

Policy makers in China, who have long watched Microsoft's growing power with consternation, will likely at some point join their counterparts in the European Union as activist watchdogs over Redmond's global business practices. Stung by what they see as the America's overenthusiastic use of intellectual property law to protect its creative an innovative companies, the Windows XP issue may well provide the high ground for China to take a stand against a flawed body of intellectual property laws imposed on China by its WTO accession.

That's a slippery slope.

Thinking Beyond Vista

No doubt Microsoft wants Vista to succeed. What worries me is that the company's leaders may well have convinced themselves that Vista must succeed for the company to survive.

It is time for Microsoft's leadership to take a step back and ask themselves if killing XP to save Vista isn't a step too far, and to recognize that the unintended consequences of their efforts could have a far more deleterious long-term effect on the company's prospects than would the failure of Vista (and the continued success of XP).

Wisdom before Passion: David Mamet on American Politics

The Silicon Hutong Suite, Singapore
Contemplating a hotel without room service
1822 hrs.

If you are getting caught up in the frenzy of the US elections and all of the triumphalism around Eliot Spitzer's spectacular self-destruction, you might share my despair at the partisan grease pit back into which American politics are sliding.

David Mamet offers some salve in his article "Why I am No Longer a 'Brain-Dead Liberal'" in The Village Voice. Mamet makes a reasoned and subtle appeal for a more even-headed approach to the world.

I could probably write a similar article "Why I Am No Longer a 'Cold-Hearted Conservative'," but I'd rather read my own political evolution into Mamet's writing.

McDonald's Mary Dillon on Olympic Sponsorship

In the Hutong
Stressing about my physical
2119 hrs.

AdAge interviews McDonald's Chief Marketing Officer Mary Dillon on Mickey D's plans for the big event this summer, including bringing 200 kids from around the world to Beijing.

The Darfur question comes up of course, and it's pretty clear that McD's is not going to be walking away from the Olympics.

Pretty clear though, that nobody is yet asking the big question: does Olympics sponsorship deliver return-on-investment?

McDonald's Mary Dillon on Olympic Sponsorship

In the Hutong
Stressing about my physical
2119 hrs.

AdAge interviews McDonald's Chief Marketing Officer Mary Dillon on Mickey D's plans for the big event this summer, including bringing 200 kids from around the world to Beijing.

The Darfur question comes up of course, and it's pretty clear that McD's is not going to be walking away from the Olympics.

Pretty clear though, that nobody is yet asking the big question: does Olympics sponsorship deliver return-on-investment?

Congress Watching - The National People's Congress Website

In the Hutong
Fasting before the physical
1938 hrs.

For those of you keeping an eye on the National People's Congress sessions and want a break from all of that hard journalistic coverage, the official website of the NPC is here.

Not much there as of this writing, but the public proceedings should be available. Check out the NPC's main site as well.

And for those of us in Beijing, get ready for two weeks of traffic jams.

Hollywood Icon Comes East

In the Hutong
Rolling with the changes
1842 hrs.

The Hollywood Reporter, long essential morning reading for the entertainment industry in the United States, Europe, and elsewhere, has had permanent roots in China for a couple of years now, with an official bureau led by Jonathan Landreth. The THR staff have provided a much-needed addition to the coverage of the music, film, television, and new media industries here in China. With occasional exceptions, however, much of the fine reporting coming out of THR in China has been trapped behind a firewall.

That all changed today, when THR launched The Hollywood Reporter Asia, a website that not only allows us to see the superb coverage coming out Jonathan and his team here in China, but also regional and global industry news. One other thing I really like about THR-Asia is that it is edited right here in Beijing, underscoring Beijing's growing role as the media center of the region.

Give it a look. Personally I'm adding it to Danwei.org as part of my daily routine. If I have one quibble, it is the lack of an RSS feed, but I understand that with THR offering their content for free, they want you in the site for the ads. A small price to pay.

A Tale of Two Actresses

In the Hutong
In search of a pain reliever
2027 hrs.

Whatever you may think about the relative merits of entertainers leaping from the screen and onto the world stage, we were treated this week to a profound contrast in the styles and approaches of two young actresses.

Exhibit A is Marion Cotillard, the 32-year-old French actress who won the Academy Award for Best Actress a little over a week ago for her apparently inspired performance as Edith Piaf (yes, I too am a philistine and had to Google it) in La Vie en Rose. In an interview from a year ago broadcast on a French website, she proclaimed that the 9/11 attacks were a hoax manufactured by the US government for political ends, and that the twin towers were demolished because they were obsolete.

Without supporting or debating the veracity of Ms. Cotillard's claims, suffice to say that we here in the Hutong appreciate a good conspiracy theory in the same way we appreciate good science fiction - great stuff with which to tickle the frontal lobes, maybe even ask a few hard questions. But as most bloggers learn fairly quickly, when one takes a public stand that is in direct opposition to popular perception, one had best be very, very sure of one's facts and be prepared to support one's stand through effort and action. Sadly, Ms. Cotillard goes no further than voicing an opinion that begs for support.

Exhibit B is Angelina Jolie, also 32, also an Oscar winner (Best Supporting Actress for 1999's Girl, Interrupted) who in her capacity as goodwill ambassador for the United Nations High Commission on Refugees decided that rather than snuggle up to the armchair activist crowd, she'd hop on a plane and head for Iraq and see what was going on. From her Thursday op/ed in the Washington Post:

"My visit left me even more deeply convinced that we not only have a moral obligation to help displaced Iraqi families, but also a serious, long-term, national security interest in ending this crisis."

She continues:

"As for the question of whether the surge is working, I can only state what I witnessed: U.N. staff and those of non-governmental organizations seem to feel they have the right set of circumstances to attempt to scale up their programs. And when I asked the troops if they wanted to go home as soon as possible, they said that they miss home but feel invested in Iraq. They have lost many friends and want to be a part fo the humanitarian progress they now feel is possible."

Her conclusions are hardly those of an expert, and her focus is exclusively on the issue of the 2.5 million Iraqi refugees for whom she seeks repatriation. More than one pundit has questioned her qualifications to speak on behalf of all of the troops deployed in Iraq. Nonetheless, they are startling because they come from an unexpected source, and because of the inevitable reverberations they will send through celebrity salons on both coasts - not least the circles in which she and husband Brad Pitt circulate.

(For the record, I don't feel qualified to make a call on Iraq either way, so I won't.)

Again, leave aside your own opinions on the specific matters at hand. To me what is germane is the difference in approach. Two young women, each given the opportunity because of fame earned on the screen to voice their opinions on larger matters to their audiences, chose to make use of their bully pulpits in incredibly different ways. One chose to make the kind of flippant, uninformed remark more appropriate to a conversation with close friends. The other chose to take the time and risk to journey to someplace she could learn more, then share her thoughts and findings - whatever they're worth - with others.

Regardless of what you may think about Ms. Jolie, her motivations, the appropriateness of her remarks, or her qualifications to even make them, you must applaud her quest to learn a little something of the subject before volunteering so public an opinion.

A wise old sergeant once told me: "Wolf, opinions are like a**holes: everyone's got one, and they all stink."

The only way I would dare to correct that is to say that the more informed your opinion, the less it stinks. That is the lesson I will take from Ms. Cotillard and Ms. Jolie.

Internet or eSludge?

Jingshun Road, inbound.
Any bets on the first sandstorm?
1028 hrs.

Living in China one gets so used to long lead times for web pages to load and email to download that when the Internet really slows down you don't trust your own senses. You sort of think to yourself, you know, the Internet is really slow today. Or maybe I just drank too much coffee.

But when the CTO of one of my clients grabbed my arm the other day and ask me if I've noticed that the Internet in China had slowed considerably lately, I had all the confirmation I needed that the issue had nothing to do with caffeine-induced impatience. The net IS slower, and not just with overseas connections.

There could be several explanations for this, some quite sinister, like "they're upgrading the GFW." (Part of the joy of living in China is that government conspiracy theorists who would be regarded as crackpots anywhere else tend to start sounding like realists here. It doesn't mean they're right about things, just that people actually have to consider what they are saying before discarding it as paranoia.)

But there are a lot of things going on in and around Beijing that could be contributing to this: network upgrades, Olympic-related projects, construction cutting cables.

Or, indeed, more careful and deliberate scrutiny of the Internet in the weeks ahead of the coming opening of the 11th National People's Congress.

Either way, it's making surfing more painful than it has been in years.

I want my VPN...

Interesting...

In the Hutong
Experiencing Sunday night paranoia
2043 hrs.

So, sitting here behind the firewall, the fledgeling Baidusucks.org is blocked.

The GoogleSux.com site, on the other hand, is readily accessible.

This might just be a problem with my connection.

Anybody else here in China getting similar results?

America's Airline Mashup and China's Future

In the Hutong
Dreaming of Islands
1902 hrs.

The normally astute (and often erudite) BusinessWeek falters a tad in analyzing the value of the coming wave of airline mergers in the United States.

The question BW asks is almost the right one - it wonders if the creation of a small number of American Megacarriers - Northwest/Delta, United/Continental, and American/player-to-be-named-later - will be enough to fend of European competition. The large U.S. carriers - with the sole exception of Southwest, a huge, well-run discount domestic-only airline - lose money on domestic service, making it up only on international passengers and freight. European carriers are, naturally stronger than US carriers in this space.

Asian Airlines are not Chopped Liver

Not a bad question. I suggest there are two others:

1. Given that there are only two airline models that seem to make money (low-frills and high-efficiency discount, or full-service, long-haul international), how is creating larger airlines that do neither of those very well going to make the U.S. industry any stronger? Nobody seems to have picked up the ugly reality that combining two mediocre airlines does not make the resulting company better - just bigger. Opportunities for economies of scale aside, this will still not solve the long-term problem: with the sole exceptions of Southwest and possibly JetBlue, U.S. airlines are operating on an obsolete business model.

and

2. If you think the British Airways, Lufthansa, and Air France/KLM are such a threat, have you ever paused to consider that Singapore Airlines, Cathay Pacific, and ANA would tear even bigger holes into what have become U.S. carriers' most profitable markets - the trans-Pacific trade? It it particularly surprising that BW seems to dismiss the Asian carriers completely out of hand. With the sole exception of Virgin Atlantic, I cannot think of a single European carrier that approaches the quality of service, youth of fleet, and profitability of Asia's leading airlines.

Don't Follow The Americans - At Least Not THOSE Americans

All of this is instructive for China's airline industry. As Air China pursues ownership of China Eastern, it heeds my second question while ignoring my first. Yes, it would probably be bad for Air China to stand by and let Singapore Airlines get its nose under the proverbial tent. Apart from that, however, it will simply create a larger, less nimble, less efficient carrier right at the time when the Chinese airline industry needs to rethink its structure.

China would do itself an injustice by learning the wrong lessons from all of the noise around M&A activity in America, and would do better by looking around the world for airlines that work brilliantly.

Responsa: E-Waste, Some Interesting Processes

Jingshun Road
Watching all of the workers return from holiday
1518 hrs.

Spenser left a comment on an earlier Hutong post about processes that are being developed for managing the growing piles of discarded electronics and computers.

I mentioned in the note that China's rust belt northeast would be a logical place to seed China's own recycling/demanufacturing/remanufacturing and other environment-related sectors.

Spenser correctly noted that it would be silly - and wasteful - to set up such facilities in China and ship our waste there.

He's right, so I should clarify my point.

No way should America move its e-waste to China - the idea is to recycle the e-waste near source, then transport the resulting raw materials to wherever they should go. This ensures the best use of energy in the process, and also keeps third-world countries from getting the impression (correct or not) that we are exporting our garbage to them. Doing so tends to piss off the natives and trash our global relationships. (No pun intended.)

At the same time, I am profoundly aware of the NIMBY factor in all of this, and the possibility that a highly motivated group of people in the US or Europe could discover some implicit dangers (real, speculative, or imagined) to having such processing take place in one's neighborhood. If that happens, electronics recycling will wind up someplace else.

Naturally, this would be a shame, not only because it would waste energy and turn other countries into our garbage dumps, but because such activity could be far better regulated in the US, and location in developed economies would not only drive innovation in process, it would ensure the fastest diffusion of those innovations through the recycling industry.

(Indeed, I think this will be a driver for manufacturers toward "design-for-recycling" and "design-for-remanufacture.)

All of that said, I still see recycling, demanufacturing, and remanufacturing as major potential industries for Asia generally and China specifically, if for no other reason than Asia is a major consumer of electronics in its own right, thus a growing source of e-waste. As the pile of discarded mobile phones, computers, televisions, and the like expands here, the case to process it grows as well.

After all, nobody wants to see containers of Asian e-waste landing at U.S. ports, either, now do they?