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FTR#1313 Update on The Destabilization of China, Part 2

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FTR#1313 This pro­gram was record­ed in one, 60-minute seg­ment. 

Great Wall of Chi­na
Pho­to Cred­it: Wikipedia

Intro­duc­tion: This pro­gram updates the ongo­ing desta­bi­liza­tion of Chi­na.

The pro­gram begins with a long blog essay in a very con­ser­v­a­tive pub­li­ca­tion: The Nation­al Inter­est.

Pre­sent­ing a nec­es­sary and, frankly, refresh­ing analy­sis of the devel­op­ment and suc­cess of the Huawei elec­tron­ics com­pa­ny, Chan­dran Nair high­lights the fac­tors behind the company’s suc­cess includ­ing: An employ­ee friend­ly work struc­ture; a demo­c­ra­t­i­cal­ly orga­nized man­age­ment hier­ar­chy; a cor­po­rate cul­ture that fac­tors in both the good and errant fea­tures of oth­er com­pa­nies around the world; pri­or­i­ti­za­tion of renew­able ener­gy projects; an inter­na­tion­al devel­op­men­tal struc­ture that is inclu­sive of pro­gres­sive indus­tri­al projects in Third World coun­tries; fis­cal man­age­ment that has avoid­ed employ­ee lay­offs even dur­ing hard times; a larg­er share of com­pa­ny finances devot­ed to research and devel­op­ment than oth­er, com­pa­ra­bly large cor­po­ra­tions.

By way of com­par­i­son with the first arti­cle in the pro­gram, we present an analy­sis from a British econ­o­mist liv­ing in Chi­na who details data emphat­i­cal­ly refut­ing the fore­casts of impend­ing eco­nom­ic col­lapse for the world’s sec­ond-largest econ­o­my.

It should be not­ed that Chi­na is still a [very quick­ly] devel­op­ing coun­try, and that some of the data com­par­ing its rate-of-growth with more ful­ly devel­oped coun­tries should be fac­tored into the analy­sis.

Next, we present a sto­ry that high­lights the neg­a­tive spin put by the West­ern press on devel­op­ments in Chi­na. The Guardian eclipses analy­sis of a Chi­nese ini­tia­tive facil­i­tat­ing peace­ful inte­gra­tion of Chi­na and Tai­wan by stress­ing mil­i­tary maneu­ver­ing by the PLA.

We con­clude the pro­gram with intro­duc­tion of the top­ic of the next broad­cast: Covid-19.

Fol­low­ing dis­cus­sion of soar­ing rates of SARS Cov‑2 infec­tion in the U.S., we reprise a 55-sec­ond clip, orig­i­nal­ly fea­tured on Twit­ter, but now delet­ed. The speak­er is Pro­fes­sor Jef­frey Sachs, for­mer head of The Lancet’s com­mis­sion on the ori­gins of Covid.

He is “pret­ty con­vinced” it came from a U.S. bio­lab.

1.“The Side of Huawei We Don’t Know” by Chan­dran Nair; The Nation­al Inter­est; 09/11/2023.

Though often con­demned and sus­pect­ed by West­ern pol­i­cy­mak­ers and experts, the company’s ori­gins and unique gov­er­nance sys­tem are poor­ly under­stood.

China’s mete­oric rise in the short space of thir­ty years to become the sec­ond-largest econ­o­my in the world and a glob­al pow­er has been by far the biggest sto­ry of the twen­ty-first cen­tu­ry. It has also unfor­tu­nate­ly been accom­pa­nied by a great deal of wor­ry by a fear­ful West, which togeth­er with the glob­al main­stream media, has paint­ed an ugly pic­ture of the country’s remark­able pace of devel­op­ment.

One of the most vis­i­ble man­i­fes­ta­tions of this progress is Huawei, a Chi­nese com­pa­ny and now the world’s largest mak­er of tele­coms gear. Yet the company’s growth has been accom­pa­nied by fear and mis­trust from the West—particularly from the Unit­ed States, which regards the firm as a poten­tial threat to U.S. nation­al secu­ri­ty.

A great part of Huawei’s sup­posed infamy can be boiled down to two things. The first is that the com­pa­ny is actu­al­ly very well-run and extreme­ly innovative—a fact that West­ern­ers, con­vinced of their own tech­ni­cal supe­ri­or­i­ty and the rela­tion­ship between tech­no­log­i­cal inno­va­tion and a par­tic­u­lar set of political/cultural val­ues, find unnerv­ing. The sec­ond is the view that because it is a Chi­nese tech firm, and its founder was in the mil­i­tary as well as a mem­ber of the Chi­nese Com­mu­nist Par­ty (CCP), it must be con­trolled by the Chi­nese gov­ern­ment. This lat­ter view demon­strates how lit­tle is under­stood of mod­ern Chi­na, espe­cial­ly the rela­tion­ship between China’s com­mer­cial ecosys­tem and the state.

This lack of knowl­edge relat­ing to Huawei’s ori­gins, method­ol­o­gy, and rela­tion­ship with the Chi­nese stake makes it a recur­ring tar­get. It would behoove Wash­ing­ton to know more about the com­pa­ny and how it came to be first.

Huawei’s Ori­gins

For those unaware of the strug­gles with­in Chi­na after the cre­ation of the People’s Repub­lic of Chi­na in 1949, it is worth remem­ber­ing that even in the 1970s and 1980s there were parts of Chi­na where famine was not unusu­al. One such region was Jiang­su province, where peo­ple were forced to for­age in the for­est for berries, nuts, and any­thing edi­ble they could get hold of to sur­vive. Bear in mind that this was also a time dur­ing which neigh­bor­ing Hong Kong (and Sin­ga­pore, too) saw fast food like McDonald’s and KFC become ubiq­ui­tous. This peri­od of per­sis­tent pover­ty and suf­fer­ing in Chi­na was a result of ongo­ing inter­nal strug­gles and ill-con­sid­ered poli­cies that failed to sup­port the coun­try.

One man who grew up dur­ing this peri­od was Ren Zhengfei. His fam­i­ly was so poor that he would for­go some of his mea­ger rations so that his sib­lings could eat, and would instead mix his meals with rice bran to sus­tain him­self. He used to go into the for­est to pick any­thing edi­ble for the fam­i­ly to sur­vive.

An ear­ly life of strug­gle moti­vat­ed him as a young man to embark on a most remark­able jour­ney. Ren joined the Chi­nese mil­i­tary after study­ing archi­tec­ture and engi­neer­ing. He even­tu­al­ly left the army with big­ger entre­pre­neur­ial plans, dri­ven by a desire to con­tribute to soci­ety. He taught him­self the work­ings of com­put­ers and oth­er nascent dig­i­tal tech­nolo­gies. After sev­er­al failed for­ays into busi­ness, and in a last roll of the dice in 1987 at age 43, he formed Huawei, mean­ing “com­mit­ted to Chi­na and mak­ing a dif­fer­ence,” with the inten­tion of sell­ing pro­gram-con­trolled switch­es.

The com­pa­ny is now, in many ways, one of the most rec­og­nized brands in the world—partly due to its inno­va­tions and mar­ket cap­i­tal­iza­tion, and part­ly for being caught in the geopo­lit­i­cal strug­gle between the West and Chi­na.

Ren’s sto­ry of depri­va­tion and des­per­a­tion stands in stark con­trast to that of many of the founders of today’s tech giants. It should also pro­vide a clue into the resilience of the com­pa­ny, the sense of pos­i­tiv­i­ty that it is imbued with, and how it plans to with­stand cur­rent exter­nal pres­sures. The launch of a new smart­phone, demon­strat­ing that Huawei has man­aged to over­come U.S. sanc­tions and can inno­vate by itself, has drawn rapt atten­tion. Sim­i­lar­ly, although it did not make the glob­al head­lines, the com­pa­ny also recent­ly announced the intro­duc­tion of its own Enter­prise Resource Plan­ning soft­ware, which ends its reliance on Oracle’s soft­ware. Many more inno­va­tions are expect­ed, prov­ing the old adage that neces­si­ty is the moth­er of inven­tion.

What makes Huawei so inno­v­a­tive? Under­stand­ing this requires look­ing at three aspects of the com­pa­ny and how it is run, which pro­vide insights for observers.

Huawei’s Gov­er­nance and Own­er­ship Sys­tem

It is often wrong­ly assumed that Huawei oper­ates as a com­mer­cial exten­sion of the CCP, and is run sim­i­lar­ly, where the founder Ren Zhengfei holds absolute author­i­ty, close­ly over­see­ing a very top-down, hier­ar­chi­cal sys­tem.

The real­i­ty appears rather dif­fer­ent­ly. The pri­vate­ly-held com­pa­ny is 100 per­cent, employ­ee-owned with Ren hold­ing 0.7 per­cent of the company’s shares. This gov­er­nance struc­ture is unique to Huawei and draws from exten­sive stud­ies of best prac­tices from across the world, cus­tomized to suit its needs.

The com­pa­ny oper­ates under a col­lec­tive lead­er­ship mod­el with numer­ous checks and bal­ances, where share­hold­er rep­re­sen­ta­tives and those sit­ting in deci­sion mak­ing bod­ies are demo­c­ra­t­i­cal­ly elect­ed. The share­hold­ers’ meet­ing, the company’s pre­mier deci­sion mak­ing forum, decides on the company’s major mat­ters such as cap­i­tal increas­es, prof­it dis­tri­b­u­tion, and elec­tion of the mem­bers of the board of direc­tors and super­vi­so­ry board. Employ­ees are rep­re­sent­ed by the Trade Union Com­mit­tee, and the Rep­re­sen­ta­tives’ Com­mis­sion is the employ­ee vehi­cle through which the Union ful­fills share­hold­er respon­si­bil­i­ties and exer­cis­es share­hold­er rights. The share­hold­ing employ­ees with vot­ing rights elect the Com­mis­sion on a one-vote-per-share basis, after which the Com­mis­sion elects the company’s board of direc­tors and super­vi­so­ry board on a one-vote-per-per­son basis. These events are trans­par­ent and even live-streamed to all employ­ees.

As the founder of Huawei, Ren’s influ­ence and author­i­ty comes from the respect he has gained for his achievements—a par­tic­u­lar­ly Chi­nese approach towards orga­ni­za­tion­al har­mo­ny and order, root­ed in a cul­ture of respect for elders and lead­ers.  While Ren car­ries veto rights on board deci­sions, it is a mat­ter of record that he has exer­cised this right only a few times and typ­i­cal­ly on tech­nol­o­gy and busi­ness direc­tion, as is com­mon in most pri­vate­ly held firms any­where in the world. He is depict­ed inter­nal­ly as one who prefers to share his vision and ideas through com­pa­ny-wide address­es that serve as guid­ance on direc­tion mak­ing.

The main moti­va­tion for set­ting up such a gov­er­nance struc­ture is to ensure the com­pa­ny’s longevi­ty and to enable it to achieve sus­tain­able growth. Being a pri­vate­ly held com­pa­ny has allowed Huawei to design struc­tures and set tar­gets for the long-term, able to focus on its core vision and mission—inclusive of cus­tomers and employ­ees.

While recent sanc­tions have impact­ed Huawei’s smart­phone busi­ness and short-term prof­its (there was a 69 per­cent year-on-year decline in net prof­it in 2022), Huawei has con­tin­ued to make strate­gic invest­ments and devot­ed even more cap­i­tal to research and devel­op­ment (R&D). In 2022, they invest­ed 25 per­cent of their rev­enue in R&D, equiv­a­lent to 161.5 bil­lion yuan, more than any com­pa­ny in the world out­side Amer­i­ca in absolute terms, and more than the tech giants as a per­cent­age of rev­enue. For com­par­i­son, Ama­zon, the world’s biggest spender on R&D, and Alpha­bet invest­ed around 14 per­cent of their rev­enue on R&D in the same year.

Despite not being able to launch high-end 5G phones glob­al­ly, the smart­phone busi­ness units have not laid off any staff. This is also a cul­tur­al dif­fer­ence that is often mis­un­der­stood and unap­pre­ci­at­ed, where the employ­ee is seen as being part of the fam­i­ly. This is such that, when hard times arrive, every­one bears with it and goes into “sur­vival” mode. The launch of the new Mate 60, Mate 60 Pro, Mate 60 Pro+, and Mate X5 which is a new ver­sion of its fold­able phones, is a tes­ta­ment to the wis­dom of this strat­e­gy.

Huawei’s gov­er­nance struc­ture is what allows it to rein­vest in the com­pa­ny, its facil­i­ties, R&D, and its employ­ees, even dur­ing times of busi­ness down­turn and exter­nal pres­sures.

A Cul­ture of Learn­ing from the World and Glob­al Open­ness

Huawei’s empha­sis on hard work, based on the Con­fu­cious tra­di­tion of col­lec­tive resilience, has enabled it to attract tal­ent who firm­ly believe they can over­come obsta­cles and cre­ate solu­tions that best achieve the company’s offi­cial goal of “Stay­ing cus­tomer-cen­tric and cre­at­ing val­ue for cus­tomers.” Employ­ees are not dri­ven only by the finan­cial rewards on offer, but also by a sense of pur­pose and the need to be engaged in find­ing solu­tions to prob­lems. The company’s appeal has enabled it to attract the best tal­ent Chi­na has to offer.

In com­ing up with the company’s cur­rent cor­po­rate gov­er­nance mod­el, what is note­wor­thy is that Huawei’s lead­er­ship spent time study­ing the gov­er­nance mod­els of suc­cess­ful, long-last­ing com­pa­nies from around the world, includ­ing Japan­ese fam­i­ly-owned com­pa­nies and cor­po­ra­tions from France, Ger­many, and the Unit­ed States. They active­ly con­sid­ered the mer­its and weak­ness­es of dif­fer­ent mod­els, learn­ing from lessons of suc­cess and fail­ure, tak­ing these ideas and cus­tomiz­ing them for Huawei.

The design of Huawei’s super­vi­so­ry board is a good exam­ple. It drew inspi­ra­tion from Ger­man cor­po­rate gov­er­nance struc­tures and the gov­er­nance prin­ci­ples devel­oped by Fred­mund Malik. How­ev­er, Huawei’s struc­ture is dif­fer­ent from Ger­man com­pa­nies in that the rep­re­sen­ta­tives of share­hold­ers sit at the top. In addi­tion, the super­vi­so­ry board does not only super­vise the board of direc­tors but plays an active role in devel­op­ing the lead­er­ship pipeline at dif­fer­ent lev­els of the com­pa­ny and set­ting reg­u­la­tions for how the com­pa­ny oper­ates.

The par­tic­i­pa­tion of employ­ees is also unique. All mem­bers of the super­vi­so­ry board and board of direc­tors are Huawei employ­ees. It is also a require­ment that share­hold­er rep­re­sen­ta­tives nom­i­nat­ed to the board have con­tributed to the com­pa­ny and demon­strat­ed the req­ui­site lead­er­ship skills.

A sim­i­lar mind­set of learn­ing from dif­fer­ent mod­els was applied to suc­ces­sion plan­ning and the estab­lish­ment of its rotat­ing co-chair sys­tem five years ago. Huawei places an empha­sis on devel­op­ing lead­ers with­in the com­pa­ny. To achieve the sys­tem it want­ed, it stud­ied dif­fer­ent lead­er­ship struc­tures from estab­lished com­pa­nies with sim­i­lar approach­es, includ­ing fam­i­ly-found­ed com­pa­nies.

By retain­ing top tal­ent, the com­pa­ny believes it can over­come the lim­i­ta­tions of any one indi­vid­ual and pro­vide checks and bal­ances. Huawei present­ly has three rotat­ing co-chairs. When co-chairs are off duty, they vis­it oth­er coun­tries, meet employ­ees, learn about the busi­ness, and, impor­tant­ly, have space and time to think, which is giv­en a lot of empha­sis.

Huawei’s open world­view and its appre­ci­a­tion for oth­er cul­tures are most dra­mat­i­cal­ly reflect­ed in its R&D cam­pus in the city of Dong­guan, nick­named the “Euro­pean city,” where 30,000 staff work in twelve dif­fer­ent “vil­lages” mod­eled after nine dif­fer­ent Euro­pean coun­tries. Man­i­cured gar­dens sur­round life-size repli­cas of the most famous cities and archi­tec­ture in Europe, includ­ing the Palace of Ver­sailles, Hei­del­berg Cas­tle, Ams­ter­dam, and Verona. Dot­ted across the vil­lages are numer­ous restau­rants and cafes, a reflec­tion of Ren’s advo­ca­cy of cof­fee cul­ture. There is also an elec­tric train ser­vice so that no one needs to dri­ve with­in the cam­pus. The con­cept for the cam­pus was con­ceived as part of a design com­pe­ti­tion and was select­ed for its unique­ness, set­ting it apart from the usu­al tech com­pa­ny or Chi­nese-inspired designs.

The orga­ni­za­tion and its employ­ees clear­ly con­tin­ue to have an appre­ci­a­tion for pro­mot­ing glob­al cul­ture exchanges and learn­ing from non-Chi­nese mod­els of suc­cess. Promi­nent observers have tak­en notice of this.

A Com­mit­ment to Social Oblig­a­tions and Mak­ing a Dif­fer­ence

Many might be sur­prised to learn that Huawei con­sid­ers sus­tain­abil­i­ty to be an inte­gral part of its busi­ness pri­or­i­ties. It has four sus­tain­abil­i­ty strate­gies, all of which are aligned with its vision and mis­sion: Dig­i­tal Inclu­sion, Secu­ri­ty and Trust­wor­thi­ness, Envi­ron­men­tal Pro­tec­tion, and Healthy and Har­mo­nious Ecosys­tem. Each of these strate­gies is inte­grat­ed with the company’s busi­ness and prod­uct devel­op­ment. For exam­ple, Huawei’s prod­ucts and solu­tions are increas­ing­ly designed to help the busi­ness and their clients reduce ener­gy con­sump­tion and CO2 emis­sions.

While the com­pa­ny does release annu­al sus­tain­abil­i­ty reports, these do not adhere to the typ­i­cal West­ern ESG (envi­ron­men­tal, social, and cor­po­rate gov­er­nance) or CSR (cor­po­rate social respon­si­bil­i­ty) report­ing. Sim­i­lar­ly, the com­pa­ny does not place too much of an empha­sis on phil­an­thropy and has not set up a foun­da­tion or phil­an­thropic arm. Instead, it invests in devel­op­ing cost-effec­tive and sus­tain­able solu­tions using its tech­nol­o­gy and work­ing with local and mul­ti­lat­er­al part­ners to achieve its objec­tives in coun­tries where the needs are most crit­i­cal. 

Con­sid­er TECH4ALL, the company’s long-term dig­i­tal inclu­sion ini­tia­tive, ded­i­cat­ed to pro­duc­ing inno­v­a­tive tech­nolo­gies and solu­tions that enable an inclu­sive and sus­tain­able world. They have applied AI and cloud to learn the sound of endan­gered ani­mals, rain­forests, and wet­lands, to remote­ly mon­i­tor and pre­vent ille­gal hunt­ing and log­ging. This appli­ca­tion has been used in many coun­tries in Latin Amer­i­ca and Europe and has the poten­tial to be deployed in oth­er fields.

Anoth­er exam­ple is Rural­Star. As part of its com­mit­ment to rur­al devel­op­ment and bridg­ing the dig­i­tal divide to boost devel­op­ment in remote areas, Huawei invest­ed in inno­vat­ing sim­pler and small­er tech­nol­o­gy for data trans­mis­sion. The Rural­Star solu­tion allows a base sta­tion to be con­struct­ed on a sim­ple pole instead of a ded­i­cat­ed tow­er, with low-pow­er fea­tures that can be pow­ered using six solar pan­els. Rural­Star is wide­ly rec­og­nized as one of the green­est and most cost-effec­tive solu­tions avail­able for remote and rur­al com­mu­ni­ties. Notably, the busi­ness deci­sion to ser­vice rur­al areas comes at an esti­mat­ed 30 per­cent reduc­tion in prof­it mar­gins com­pared with the tra­di­tion­al focus on high-den­si­ty urban areas only. Glob­al­ly, this tech­nol­o­gy ser­vices small vil­lages of sev­er­al thou­sand res­i­dents at a 70 per­cent cost reduc­tion com­pared to tra­di­tion­al solu­tions. Fol­low­ing its first pilot in Ghana in 2017, over six­ty coun­tries have imple­ment­ed Rural­Star and over 50 mil­lion peo­ple in rur­al areas have ben­e­fit­ed. As an exam­ple of how such projects are fund­ed, in 2020 in Ghana, the Min­istry of Com­mu­ni­ca­tions and the Ghana Invest­ment for Elec­tron­ic Com­mu­ni­ca­tions signed a financ­ing agree­ment with Export-Import Bank of Chi­na for Huawei to deploy more than 2,000 Rural­Star sites for Ghana to pro­vide voice and data ser­vices for over 3.4 mil­lion peo­ple.

With­in its goal to dri­ve dig­i­tal­iza­tion, Huawei has also been con­sis­tent­ly invest­ing in green trans­for­ma­tion. Beyond a sig­nif­i­cant increase in the use of renew­able ener­gy with­in their own oper­a­tions (a 42.3 per­cent increase from 2020), an increased ener­gy effi­cien­cy of their prod­ucts is also an impor­tant met­ric in their inno­va­tion process. A com­pa­ny reports a 1.9 times increase in ener­gy effi­cien­cy in their main prod­ucts since 2019, which in turn helps their cus­tomers and indus­try part­ners reduce their car­bon foot­print.

More broad­ly, Huawei’s dig­i­tal pow­er tech­nol­o­gy is being deployed and used in many solar farms glob­al­ly. The idea is to man­age watts with bits to help bet­ter pro­duce clean ener­gy and cut emis­sions. By the end of 2021, Huawei Dig­i­tal Pow­er had helped cus­tomers gen­er­ate 482.9 bil­lion kWh of green pow­er and save about 14.2 bil­lion kWh of elec­tric­i­ty. These efforts have result­ed in a reduc­tion of near­ly 230 mil­lion tons in CO2 emis­sions, equiv­a­lent to plant­i­ng 320 mil­lion trees.

The abil­i­ty to choose to meet its social com­mit­ments and to take con­crete steps towards real­iz­ing its cor­po­rate vision beyond the mis­sion state­ments is rel­a­tive­ly unique to Huawei. At a time when com­pa­nies are striv­ing to meet ESG goals and over­come the fun­da­men­tal ten­sion between short-term pri­or­i­ties and invest­ments for sus­tain­able growth, Huawei works to over­come such chal­lenges by see­ing its prod­ucts and ser­vices as key enablers of sus­tain­able devel­op­ment. It is com­mit­ted to devel­op­ing infor­ma­tion and com­mu­ni­ca­tions tech­nolo­gies for reduc­ing car­bon emis­sions, pro­mot­ing renew­able ener­gy, and con­tribut­ing to the cir­cu­lar econ­o­my.  Huawei strives to pro­mote ener­gy con­ser­va­tion and emis­sion reduc­tion in its own oper­a­tions and to use more renew­able ener­gy. This is pos­si­ble to achieve due to inter­nal con­sen­sus across the lead­er­ship team to make strate­gic choic­es aligned with their sus­tain­abil­i­ty agen­da, the desire to invest in long-term ambi­tions, and the capac­i­ty to inno­vate new prod­ucts that allow them to achieve their sus­tain­abil­i­ty goals.

A Com­pa­ny That Isn’t Going Away

Huawei’s suc­cess on the glob­al stage, based upon excel­lence in deliv­er­ing new inno­va­tions, demon­strates that Chi­na has much to teach the rest of the world. Yet this suc­cess came about via a strat­e­gy of open­ness and a will­ing­ness to learn from oth­ers. The company’s crit­ics, scram­bling to respond to recent devel­op­ments, ought to take note.

Chan­dran Nair is the founder and CEO of the Glob­al Insti­tute For Tomor­row (GIFT). He is the author of Dis­man­tling Glob­al White Priv­i­lege: Equi­ty for a Post-West­ern World.

2.“The News Is Full of News about Chi­na’s Eco­nom­ic Collapse–Ignore them” by John Ross; Learn­ing from Chi­na.

About: John Ross was the first non-Chi­nese cit­i­zen to be appoint­ed to a full time post at a lead­ing Think Tank in Chi­na — Chongyang Insti­tute for Finan­cial Stud­ies, Ren­min Uni­ver­si­ty of Chi­na.

The appoint­ment was based on work begin­ning with his 1992 study ‘Why the Eco­nom­ic Reform Suc­ceed­ed in Chi­na and Will Fail in Rus­sia and East­ern Europe’- which accu­rate­ly pre­dict­ed that Chi­na’s eco­nom­ic reform would pro­duce rapid eco­nom­ic growth while the ‘shock ther­a­py’ alter­na­tives in the for­mer USSR and East­ern Europe would be a fail­ure in com­par­i­son.

He is a prize-win­ning res­i­dent colum­nist in pri­vate (Sina Finance Opin­ion Lead­ers), aca­d­e­m­ic based (Guancha.cn) and state (China.org.cn) media in Chi­na with over 200 arti­cles pub­lished on Chi­na and the inter­na­tion­al econ­o­my includ­ing in Sina Finance, Inter­na­tion­al Finance News, Chi­na Finance, Peo­ple’s Dai­ly, Glob­al Times, Guancha.cn, and Shang­hai Dai­ly.

His book The Great Chess Game became the no.1 best sell­ing book on Eco­nom­ic Pol­i­cy on Ama­zon Chi­na. His work has been pub­lished in Eng­lish, Chi­nese, Span­ish, French, Indone­sian, Russ­ian and Por­tuguese. He appears reg­u­lar­ly on TV & radio.

John Ross has almost one mil­lion fol­low­ers on Wei­bo — Chi­na’s equiv­a­lent of Twitter/Facebook and receives over 10 mil­lion hits on his Wei­bo each month.

John Ross was for­mer­ly Direc­tor of Eco­nom­ic and Busi­ness Pol­i­cy for the May­or of Lon­don and a con­sul­tant to FTSE 100 com­pa­nies.

A com­plete list of his pub­li­ca­tions in Eng­lish and Chi­nese since 2013 may be found here.

Once again, the West­ern media Estab­lish­ment, and sad­ly some on the left, are talk­ing up an impend­ing eco­nom­ic dis­as­ter in Chi­na, when the truth is quite the oppo­site, shows John Ross

IN THE last four years, cov­er­ing the peri­od of the Covid pan­dem­ic, China’s econ­o­my has grown two-and-a-half times as fast as the US, 15 times as fast as France, 23 times as fast as Japan, 45 times as fast as Ger­many, and 480 times as fast as Britain.

To add in small­er G7 coun­tries, Chi­na has grown four times as fast as Cana­da, and 11 times as fast as Italy.

China’s out­per­for­mance of advanced cap­i­tal­ist coun­tries is even greater in per capi­ta terms — a still bet­ter mea­sure of pro­duc­tiv­i­ty changes and poten­tial for increas­ing liv­ing stan­dards.

China’s per capi­ta GDP grew three times as fast as the US, five times as fast as Italy, 44 times as fast as Japan or France, and 260 times as fast as Britain — while per capi­ta GDP fell in Ger­many and Cana­da.

China’s out­per­for­mance of devel­op­ing cap­i­tal­ist coun­tries shows the same pat­tern — China’s per capi­ta 4.4 per cent GDP annu­al aver­age growth com­pares to 2.6 per cent in India, 1.3 per cent in Brazil, or 0.9 per cent in South Africa.

What is impor­tant about such eco­nom­ic growth, of course, is not abstract sta­tis­tics but its mean­ing for the real lives of ordi­nary peo­ple.

The Inter­na­tion­al Labour Organ­i­sa­tion data on real, infla­tion-adjust­ed, wages shows that up to the lat­est avail­able data — for most coun­tries to 2022, and for India to 2021 — China’s annu­al real wage growth was 4.7 per cent.

For Britain it was 0.1 per cent, for the US it was 0.3 per cent, in France it was minus 0.4 per cent, in Ger­many minus 0.7 per cent and in India minus 1.3 per cent.

Giv­en this enor­mous eco­nom­ic out­per­for­mance by Chi­na of cap­i­tal­ist coun­tries, any ratio­nal dis­cus­sion that should be tak­ing place in West­ern main­stream media about the inter­na­tion­al eco­nom­ic sit­u­a­tion would be, “why is China’s econ­o­my huge­ly out­per­form­ing the US and the rest of the cap­i­tal­ist West?” and, “what lessons are to be learned from China’s social­ist econ­o­my that is so out­per­form­ing the West?”

For the left, the issue that needs to be assessed and pub­li­cised is, “Why are real wages ris­ing 18 times as fast in Chi­na as in the US, 44 times as fast as in Britain, while in France, Ger­many or India real wages are falling?”

Indeed, the present author would argue that much greater stress should be placed on the lat­ter point. The inter­na­tion­al left has begun to absorb that Chi­na has lift­ed more than 850 mil­lion peo­ple out of World Bank-defined pover­ty in 40 years — by far the great­est pover­ty reduc­tion achieve­ment in human his­to­ry.

But it has not yet inter­nalised how rapid­ly not only the poor­est but aver­age liv­ing stan­dards are ris­ing in Chi­na — far faster than in any West­ern coun­try.

But, of course, this real eco­nom­ic sit­u­a­tion can’t be dis­cussed in the main­stream media, because its con­clu­sions would be too dam­ag­ing for the cap­i­tal­ist West.

Instead, a type of mad dis­cus­sion is unfold­ing, with US claims about China’s econ­o­my becom­ing increas­ing­ly bizarre — one might say deranged — as they get fur­ther and fur­ther out of touch with real­i­ty.

Pres­i­dent Joe Biden, for exam­ple, recent­ly made a speech claim­ing China’s eco­nom­ic growth rate is “around 2 per cent,” when it was 5.5 per cent in the first half of this year and, as already not­ed, China’s econ­o­my is grow­ing two-and-a-half times as fast as the US.

Biden bizarrely claimed that in Chi­na “the num­ber of peo­ple who are of retire­ment age is larg­er than the num­ber of peo­ple of work­ing age” — entire­ly false, and inac­cu­rate by a fig­ure of many hun­dreds of mil­lions of peo­ple.

Dis­cus­sion in the US finan­cial media equal­ly refus­es to face real facts. Because I am an econ­o­mist, every morn­ing, after the over­all news, I switch on Bloomberg TV to catch up on the lat­est eco­nom­ic data. Dis­cus­sion there is like Alice Through the Look­ing Glass — the book the prin­ci­ple of which is that every­thing is reversed com­pared to the real world.

Appar­ent­ly, accord­ing to Bloomberg’s analy­sis, China’s annu­al aver­age of 4.5 per cent a year growth in the last four years is an econ­o­my in severe cri­sis, where­as the US’s 1.8 per cent is alleged­ly strong growth — not to speak of Britain’s 0.1 per cent. Sim­i­lar rhetoric, out of all con­tact with fac­tu­al real­i­ty, per­vades the Finan­cial Times, The Econ­o­mist, or the Wall Street Jour­nal.

The left is well used to such US polit­i­cal lying — the com­plete­ly fake claim that North Viet­namese ships attacked US naval ves­sels on August 4 1964 in the Gulf of Tonkin, used to launch the Viet­nam war, or the equal­ly untrue claim that Iraq had weapons of mass destruc­tion to jus­ti­fy the US inva­sion, were clas­sic exam­ples.

Today, the US sys­tem­at­i­cal­ly lies about the state of Chi­na and its own econ­o­my because it is cru­cial for US cap­i­tal­ism to pre­vent its own cit­i­zens, and close allies, from under­stand­ing the real eco­nom­ic trends.

It is fur­ther proof, if one were need­ed, of the truth that if the real world and a the­o­ry do not coin­cide only one of two things can be done. One is to aban­don the the­o­ry, the oth­er is to aban­don the real world.

In this case, the the­o­ry is that the US, because it is cap­i­tal­ist, should out­per­form social­ist Chi­na. The real world is actu­al eco­nom­ic per­for­mance — in which Chi­na con­tin­ues to out­per­form the US and oth­er cap­i­tal­ist coun­tries by an enor­mous mar­gin.

Unable to aban­don its the­o­ry the US is there­fore forced to aban­don the real world — hence the dement­ed denial of com­par­a­tive eco­nom­ic per­for­mance not­ed at the begin­ning of this arti­cle.

While the left should expect lies from cap­i­tal­ism what is rather shame­ful is that some sec­tions of the left repeat such non­sense — appar­ent­ly believ­ing that if they put in a few left phras­es into an analy­sis tak­en from the West­ern press this con­sti­tutes “social­ist” com­men­tary.

For exam­ple, an arti­cle in the New Left Review’s Side­car called Chi­na a “zom­bie econ­o­my.” Some “zom­bie” when China’s econ­o­my is grow­ing any­where between two-and-a-half times and 480 times as fast as any major cap­i­tal­ist econ­o­my.

The real data shows the real­i­ty is sim­ple. Chi­na has far out­grown any West­ern cap­i­tal­ist econ­o­my for more than 40 years. It con­tin­ues to do so.

The result in Chi­na is by far the world’s most rapid rise in liv­ing stan­dards — not only for the poor­est but for the whole aver­age pop­u­la­tion. It is known as the prac­ti­cal advan­tage of social­ism. It is fact. We know why the US has to make up big lies about it. There is no jus­ti­fi­ca­tion for sec­tions of the left echo­ing them.

This arti­cle was orig­i­nal­ly pub­lished by the Morn­ing Star.

John Ross Senior Fel­low at Chongyang Insti­tute at Ren­min Uni­ver­si­ty of Chi­na and the win­ner of China’s top book award for for­eign writ­ers on Chi­na.

3.  “Mea­sures include mak­ing it eas­i­er for Tai­wanese peo­ple to live and work in Chi­na, but the plan comes amid major mil­i­tary exer­cis­es” by Helen David­son; The Guardian; 9/13/2023.

China’s gov­ern­ment has unveiled a “new path towards inte­grat­ed  devel­op­ment” with Tai­wan, includ­ing pro­pos­als to make it eas­i­er for Tai­wanese peo­ple to live, study and work in Chi­na.

At the same time, it sent the largest num­ber of war­ships to gath­er in years to the waters on Taiwan’s east, in what ana­lysts said sig­nalled a choice between peace­ful “reuni­fi­ca­tion” and mil­i­tary vio­lence, just months out from Taiwan’s pres­i­den­tial elec­tion.

The new mea­sures, released by the rul­ing Com­mu­nist party’s Cen­tral Com­mit­tee and the State Coun­cil on Tues­day said the coastal province of Fujian would become a “demon­stra­tion zone” for inte­grat­ed devel­op­ment.

The 21 mea­sures include facil­i­tat­ing Tai­wanese peo­ple to live in Fujian and access social ser­vices, expand­ing enrol­ment of Tai­wanese stu­dents in Fujian schools, and deep­en­ing indus­tri­al coop­er­a­tion.

The move is aimed at deep­en­ing cross-strait inte­grat­ed devel­op­ment in all fields and advanc­ing the peace­ful reuni­fi­ca­tion of the moth­er­land,” said offi­cial state media out­let, Chi­na Dai­ly.

The Glob­al Times, a hawk­ish state-backed news out­let, described the doc­u­ment as “equiv­a­lent to out­lin­ing the future devel­op­ment blue­print of Tai­wan island”.

Chi­na Dai­ly said that “pair cities” of Xia­men and Kin­men, and Fuzhou and Mat­su would play “an even more promi­nent role”. The islands of Kin­men and Mat­su sit just a few kilo­me­tres from the Chi­nese main­land and have some cul­tur­al and eco­nom­ic ties, but are gov­erned by Tai­wan.

Taiwan’s media exten­sive­ly cov­ered the announce­ment, with a par­tic­u­lar focus on mea­sures encour­ag­ing Tai­wanese to buy homes and invest in Fujian. Respons­es were scep­ti­cal, with many point­ing to the prop­er­ty mar­ket cri­sis in Chi­na.

“The Chi­nese gov­ern­ment has cut leeks among its own peo­ple, now they turn to the Tai­wanese,” said one com­menter, using an idiom that refers to finan­cial indus­tries tak­ing advan­tage of gullible investors.

In cen­tral Taipei on Wednes­day, sev­er­al res­i­dents told the Guardian they were not attract­ed by the pro­pos­al. Ter­ry Hung, a 37-year-old phar­ma­ceu­ti­cal indus­try work­er, said it looked “very risky”.

“I do not want to invest in prop­er­ty in a com­mu­nist nation, shar­ing my prop­er­ties with that gov­ern­ment. I do not want to work in an auto­crat­ic coun­try because human rights and labour rights are all con­trolled by the gov­ern­ment,” he said. “If one day your opin­ion does not align with the government’s stance, you will be at risk of arrest or deten­tion.”

Ms Hsieh, a retired teacher, said young peo­ple could make their own deci­sions but “the polit­i­cal envi­ron­ment, the sur­round­ings, etc, in Chi­na are so dif­fer­ent from Tai­wan that the Tai­wanese may not adapt”.

Not all were opposed. A young TV pro­duc­tion assis­tant, Shin, said she was inter­est­ed in the pro­pos­als to broad­en exchanges for stu­dents and for the TV and radio indus­try.

“I believe that any oppor­tu­ni­ty to pro­mote cross-strait exchanges and mutu­al ben­e­fits is excel­lent,” she said. “If there is an oppor­tu­ni­ty I would be inter­est­ed in going to Chi­na.”

Xi Jin­ping wants “reuni­fi­ca­tion” with Tai­wan with­out war, although he has said he is pre­pared to use force. The inte­gra­tion plan coin­cid­ed with the mass­ing of Chi­nese war­ships in the west­ern Pacif­ic for what appeared to be major mil­i­tary exer­cis­es.

On Mon­day the People’s Lib­er­a­tion Army (PLA) sent a car­ri­er strike group past Taiwan’s south­ern tip into the west­ern Pacif­ic Ocean, led by the air­craft car­ri­er Shan­dong. Dozens of war­planes were also detect­ed by Tai­wan fly­ing new and longer pat­terns over the medi­an line of the Tai­wan Strait, and to the islands south as they accom­pa­nied the strike group.

On Tues­day, Japan’s defence min­istry detect­ed two flotil­las of eight war­ships sail­ing through the Miyako Strait south of Oki­nawa, on a course that ana­lysts said could con­verge with the Shan­dong-led group. Anoth­er 36 war plane sor­ties were detect­ed on Wednes­day morn­ing, Taiwan’s defence min­istry said. Should the groups con­verge, it would form the largest ever manoeu­vres seen involv­ing a Chi­nese air­craft car­ri­er, Su Tzu-yun, an ana­lyst at the Insti­tute for Nation­al Defense and Secu­ri­ty Research, told the Finan­cial Times.

In Tai­wan a senior mil­i­tary offi­cial, Gen­er­al Huang Wen-chi, told media on Tues­day the Shan­dong “undoubt­ed­ly pos­es a new threat”.

Chi­nese author­i­ties have made no announce­ment about the exer­cis­es, and as of pub­li­ca­tion there were no nav­i­ga­tion­al warn­ings issued for the area. The PLA last held major exer­cis­es with the Shan­dong to Taiwan’s east in reac­tion to a meet­ing between Tai­wan pres­i­dent Tsai Ing-wen and US House speak­er Kevin McCarthy. Ana­lysts have told the Guardian they sus­pect this week’s activ­i­ty is in response to recent tran­sits of the Tai­wan Strait and joint exer­cis­es involv­ing the US and allies, and a con­tin­u­a­tion of mil­i­tary threats to Tai­wan.

In Jan­u­ary, Tai­wan will have its next pres­i­den­tial elec­tion, and it is wide­ly expect­ed that Bei­jing will seek to influ­ence vot­ers dur­ing the cam­paign, as it has done in pre­vi­ous years. It is most opposed to a vic­to­ry by the rul­ing Demo­c­ra­t­ic Pro­gres­sive par­ty (DPP), which is the most stri­dent in assert­ing Taiwan’s sta­tus as a sov­er­eign nation. Vice-pres­i­dent Lai Ching-te, the DPP’s pres­i­den­tial can­di­date, is the present fron­trun­ner.

How­ev­er oppo­si­tion par­ties – and a grow­ing major­i­ty of Taiwan’s peo­ple – also reject the prospect of Chi­nese rule. After Tsai came to pow­er in 2016, Bei­jing cut off for­mal com­mu­ni­ca­tions with Taipei.

Ror­ry Daniels, man­ag­ing direc­tor of the Asia Soci­ety Pol­i­cy Insti­tute, said Wednesday’s dual sig­nals of a peace­ful inte­gra­tion plan, while simul­ta­ne­ous­ly stag­ing inten­sive mil­i­tary exer­cis­es were a sign of the con­fused mes­sag­ing.

“How are the Tai­wanese peo­ple sup­posed to inter­pret this? Go to the main­land for great eco­nom­ic oppor­tu­ni­ty, but fly over the war­ships we’ve sur­round­ed your island with?”

3. “COVID levels are so high, they’re hovering near 2020’s initial peak,   as the WHO urges those at high risk to take any booster they can get   their hands on” by Erin Prater; Fortune; 09/16/2023.

U.S. COVID infec­tions are hov­er­ing near lev­els of the pandemic’s first peak in 2020, and approach­ing the Delta peak of late 2021, accord­ing to waste­water sur­veil­lance and mod­el­ing by fore­cast­ers.

It’s yet anoth­er sign that while the offi­cial pan­dem­ic state may be over, the days of COVID are far from it.

Viral waste­water lev­els are not far behind all of the pandemic’s 2020 peaks except for one—the ini­tial peak of March 2020, which they’ve already sur­passed. And they lag just slight­ly lev­els seen dur­ing the dead­ly Delta peak of late 2021, accord­ing to Biobot Ana­lyt­ics, which mon­i­tors such data for the fed­er­al gov­ern­ment.

A fore­cast issued this week by Jay Wei­land, a lead­ing COVID mod­el­er, came to the same con­clu­sions. On Thurs­day, Wei­land esti­mat­ed that 650,000 Amer­i­cans are becom­ing infect­ed dai­ly, with 1 in 51 Amer­i­cans cur­rent­ly infect­ed with COVID. 

An addi­tion­al 7% to 10% of the U.S. pop­u­la­tion will be infect­ed over the next month and a half, Wei­land pre­dict­ed.

Both Biobot data and Wieland’s mod­el­ing show U.S. cas­es begin­ning to recede. But they may not fall much more, if any, before the antic­i­pat­ed fall and win­ter surge.

WHO flags concerning trend

Infec­tions aside, COVID hos­pi­tal­iza­tions and deaths are con­tin­u­ing to rise, accord­ing to the lat­est data avail­able from the U.S. Cen­ters for Dis­ease Con­trol and Pre­ven­tion. Hos­pi­tal­iza­tions rose near­ly 9% from Aug. 27 through Sept. 2, the most recent peri­od for which the fed­er­al health agency made data avail­able. And deaths rose near­ly 5% from Sept. 3–9.

The World Health Orga­ni­za­tion con­tin­ues to receive reports on con­cern­ing COVID trends, includ­ing a grow­ing num­ber of coun­tries report­ing an increase in infec­tions, hos­pi­tal­iza­tions, and ICU admis­sions, Maria Van Kerk­hove, tech­ni­cal lead for COVID-19 response, said at a Thurs­day news con­fer­ence.

Vac­ci­na­tion, in addi­tion to ear­ly diag­no­sis and access to care, can pre­vent severe dis­ease and death, she said. WHO offi­cials encour­aged those at high risk for poor out­comes from the virus, like the elder­ly and immuno­com­pro­mised, to obtain a boost­er ASAP—even if it’s not the lat­est XBB for­mu­la being rolled out in some parts of the world.

Vac­ci­nat­ing and boost­ing with any avail­able ver­sion “remains vital­ly impor­tant to sav­ing people’s lives now,” offi­cials said.

U.S. approves updated XBB boosters

All Amer­i­cans ages 6 months and old­er are eli­gi­ble to receive an updat­ed COVID boost­er tai­lored to the XBB Omi­cron strain, the CDC announced this week.

The agency’s Advi­so­ry Com­mit­tee on Immu­niza­tion Prac­tices vot­ed 13–1 Tues­day to approve updat­ed jabs from Mod­er­naPfiz­er, and Novavax for the vast major­i­ty of U.S. res­i­dents. Short­ly there­after, the fed­er­al health agency announced that it had accept­ed the committee’s rec­om­men­da­tion, and that vac­cines would be avail­able lat­er in the week.

The U.S. Food and Drug Admin­is­tra­tion has yet to approve Novavax’s updat­ed for­mu­la. But the agency autho­rized such boost­ers from Mod­er­na and Pfiz­er on Mon­day.

The CDC antic­i­pates hav­ing ade­quate boost­er sup­ply and shouldn’t need to pri­or­i­tize cer­tain groups—like the elder­ly or immunocompromised—for first dos­es, fed­er­al health offi­cials said at the Tues­day com­mit­tee meet­ing.

All eli­gi­ble should get the new boost­er when pos­si­ble, Dr. Georges Ben­jamin, exec­u­tive direc­tor of the Amer­i­can Pub­lic Health Asso­ci­a­tion, told For­tune on Tues­day.

“It is clear that the vac­cine remains safe and effec­tive at all ages,” he said. “Peo­ple at high risk will espe­cial­ly ben­e­fit from the vac­cine.”

In a state­ment pro­vid­ed to For­tune, the Amer­i­can Med­ical Asso­ci­a­tion on Tues­day said it wel­comed the committee’s rec­om­men­da­tions, con­tend­ing that the updat­ed jabs would pre­vent about 400,000 hos­pi­tal­iza­tions and 40,000 deaths over the next cou­ple of years.

“We con­tin­ue to strong­ly urge every­one to stay up to date on their COVID-19, influen­za, and RSV vac­cines to pro­tect them­selves and their loved ones from severe com­pli­ca­tions, hos­pi­tal­iza­tion, and death,” the orga­ni­za­tion said, adding that it expect­ed an increase in infec­tions this fall and win­ter.

New boost­er, dying strain

Last year’s updat­ed Omi­cron boost­ers, released around Labor Day, were biva­lent, tai­lored to both Omi­cron and the ini­tial strain of COVID. This year’s boost­ers are mono­va­lent, mean­ing they’re tai­lored to just one strain of the virus: XBB.1.5 “Krak­en,” which dom­i­nat­ed in the U.S. and else­where late last year into ear­ly this year.

The strain is now near­ly extinct. XBB.1.5 was esti­mat­ed to be respon­si­ble for just 2.2% of U.S. infec­tions Fri­day, accord­ing to the lat­est vari­ant data the CDC has made avail­able.

While the newest jabs are tai­lored to a dying strain of Omi­cron, they’re still expect­ed to pro­tect against severe dis­ease and death from cur­rent­ly cir­cu­lat­ing strains, the vast major­i­ty of which are mem­bers of the XBB viral fam­i­ly.

The for­mu­la for the new vac­cines “is high­ly sim­i­lar to the EG.5‑related vari­ants cir­cu­lat­ing now,” Dr. Stu­art Ray, vice chair of med­i­cine for data integri­ty and ana­lyt­ics at Johns Hop­kins’ Depart­ment of Med­i­cine, told For­tune on Tues­day.

Recent­ly released pre­lim­i­nary data shows that refreshed boost­ers should also offer decent pro­tec­tion against new, high­ly mutat­ed Omi­cron spawn “Piro­la” BA.2.86. It’s not a mem­ber of the XBB fam­i­ly, and is instead thought to have evolved from so-called “stealth Omi­cron” BA.2.

The updat­ed vaccine’s pro­tec­tion against Piro­la won’t be as good as the pro­tec­tion it offers against EG.5 and oth­er XBB vari­ants, Ray said. Still, there is more to immu­ni­ty than anti­bod­ies, pro­duced by B cells in response to infec­tion and vac­ci­na­tion. The oth­er, oft-for­got­ten half of the immune sys­tem, T cells, pro­vides pro­tec­tion against severe dis­ease. While T cells can’t pre­vent infec­tion like B cells can, they still help soft­en the blow—of a BA.2.86 infec­tion, EG.5 infec­tion, or oth­er­wise.

Rising concern for troublesome ‘flip’ mutations

While the Unit­ed States’ “vari­ant soup” remained large­ly unchanged Fri­day, accord­ing to new data released by the CDC, experts con­tin­ued to sound alarm bells about a ris­ing pro­por­tion of vari­ants that share the same con­cern­ing muta­tions.

Around 93% of U.S. COVID sequences over the past month con­tain the muta­tion F486P, Raj Rajnarayanan—assistant dean of research and asso­ciate pro­fes­sor at the New York Insti­tute of Tech­nol­o­gy cam­pus in Jones­boro, Ark., and a top COVID-vari­ant tracker—told For­tune on Fri­day. The muta­tion, locat­ed on the spike pro­tein, increas­es the virus’s abil­i­ty to effec­tive­ly infect by bind­ing more tight­ly with human cells. Raj­narayanan refers to it as this season’s sig­na­ture muta­tion.

About half of U.S. sequences in over the same peri­od picked up the F456L muta­tion, also in the spike pro­tein, he said. The muta­tion makes the virus bet­ter at evad­ing immu­ni­ty from vac­ci­na­tion and pri­or infec­tion. All top U.S. lin­eages have this muta­tion, he added.

What’s more, top lin­eages are also begin­ning to pick up the spike muta­tion L455F, which prof­fers fur­ther ease of infect­ing cells, Raj­narayanan added. 

Vari­ant track­ers refer to the F456L and L455F muta­tions as “flip” muta­tions, for com­plex sci­en­tif­ic rea­sons involv­ing amino acid changes. The duo is becom­ing one of the most con­cern­ing trends of the sea­son, experts say, with near­ly 20% of waste­water sam­ples tracked by Biobot con­tain­ing such muta­tions.

Once again this fall and win­ter, no one vari­ant may gain a major advan­tage over oth­ers, experts say. But vari­ants with the “flip com­bo” like­ly to become dom­i­nant and pose this season’s largest issue.

What’s more, it’s like­ly that high­ly mutat­ed vari­ant “Piro­la” BA.2.86 picks up “flip” at some point, Raj­narayanan said, mak­ing it more of an issue—and poten­tial­ly grant­i­ng it the abil­i­ty to spread more effec­tive­ly.

Discussion

2 comments for “FTR#1313 Update on The Destabilization of China, Part 2”

  1. Chi­na grad­u­ates more engi­neers per year than the entire world com­bined. How­ev­er, I’d like to point out that Chi­nese tech com­pa­ny Aliba­ba was the biggest IPO in Wall Street his­to­ry. Aliba­ba is com­mon­ly cit­ed as the cre­ator of what is now called the “social cred­it sys­tem.” For more infor­ma­tion see the book The Tao of Aliba­ba.

    Posted by Magnificat | October 22, 2023, 8:10 pm
  2. So long Tik­Tok and hel­lo Patri­oTok! That’s kind of news we got fol­low­ing the pas­sage of a new US law that either forces the sale of Tik­Tok’s par­ent com­pa­ny out of Chi­nese hands or bans the app entire­ly in the US. The law isn’t in effect yet, and exten­sive court chal­lenges are expect­ed that could delay its imple­men­ta­tion.

    But the fact that the law passed at all is still a very big deal, with impli­ca­tions that could be play­ing out for years to come. Impli­ca­tions that extend beyond US/Chinese rela­tions. After all, as many are ask­ing, why just tar­get Chi­na? Aren’t there plen­ty of oth­er gov­ern­ments with far worse human rights track records? What about, for exam­ple, the exten­sive pres­ence of Sau­di or UAE mon­ey in the US tech­nol­o­gy space?

    Well, as we’re going to see, Chi­na isn’t the only coun­try get­ting some form of ‘spe­cial treat­ment’ when it comes to access to US tech­nol­o­gy mar­kets. In fact, Sau­di Ara­bia and the UAE are already get­ting spe­cial treat­ment, albeit spe­cial cod­dling. And it’s being done in the name of coun­ter­ing Chi­na’s ris­ing tech prowess. Yep, Sau­di and UAE mon­ey is pour­ing into Sil­i­con Valley...in the name of coun­ter­ing Chi­na.

    And there’s one par­tic­u­lar UAE tech­nol­o­gy that has cor­po­rate Amer­i­ca all aflut­ter: Aiden Insight, the per­sona of a tool called Board­Nav­i­ga­tor that was cre­at­ed by UAE AI firm G42. The idea appears to be to allow this AI tool to not only engage of over­sight of the board by also assist in strate­gic deci­sion-mak­ing. We are told this kind of tool will appar­ent­ly made pos­si­ble because of con­tin­u­ous data analy­sis and eth­i­cal and com­pli­ance mon­i­tor­ing.

    But G42 isn’t devel­op­ing this tech­nol­o­gy on its own. Board­Nav­i­ga­tor was built with Microsoft­’s Azure Ope­nAI ser­vice, in coop­er­a­tion with Microsoft. And in what we are told was a “first of its kind agree­ment”, Microsoft recent­ly announced a $1.5 bil­lion invest­ment in the firm, but with var­i­ous con­di­tions intend­ed to place US gov­ern­ment secu­ri­ty con­cerns. Con­cerns that appear to pri­mar­i­ly have to do with whether or not G42 was using Chi­nese tech­nol­o­gy. As part of the agree­ment, G42 removed all Chi­nese tech­nol­o­gy and also agreed to use Microsoft­’s Azure cloud com­put­ing plat­form for its AI ser­vices.

    Adding to the absur­di­ty of sit­u­a­tion is the fact that the G42 chair­man, Sheikh Tah­noon bin Zayed Al Nahyan, hap­pens to be the broth­er of UAE pres­i­dent Mohammed bin Zayed Al Nahyan (MBZ). This is a good time to recall the sig­nif­i­cant, and still large­ly under­ap­pre­ci­at­ed, role MBZ played in the 2016 US elec­tion on behalf of the Trump cam­paign. For exam­ple, there the August 3, 2016, meet­ing in Trump Tow­er with Erik Prince and George Nad­er and Psy Group founder Joel Zamel offer­ing the Trump cam­paign Psy Group’s elec­tion influ­enc­ing ser­vices, they report­ed­ly told the Trump team that this offer was on behalf of both MBZ and Sau­di Prince Mohammed bin Salman bin Abdu­laz­iz al-Saud (MBS). Also recall how MBZ per­son­al­ly broke diplo­mat­ic pro­to­col when he made a secret vis­it to Trump Tow­er in Decem­ber of 2016 with­out inform­ing the Oba­ma admin­is­tra­tion of this vis­it. And then there’s the whole Dark­mat­ter affair, where the UAE not only hired three for­mer NSA hack­ers but deployed them in a glob­al hack­ing cam­paign that includ­ed the tar­get­ed of US cit­i­zens and US-based com­put­ers. So as we see all these efforts seem­ing­ly tak­en due to con­cerns about Chi­na’s abil­i­ty to tech­no­log­i­cal­ly med­dle in the inter­nal affairs of the US, keep in mind that the chair­man of G42 is the broth­er of some­one who not only med­dled in the 2016 elec­tion but got away with it. It’s not like the US gov­ern­ment did­n’t have this evi­dence. But there was no impulse to act on that evi­dence. Instead, the impulse was to ignore it and con­tin­ue to direct all blame towards Rus­sia. What kind of fears should MBZ have about abus­ing the incred­i­ble intel­li­gence made avail­able through G42 giv­en that the US gov­ern­ment was appar­ent­ly unwill­ing to act on that wide­ly report­ed 2016 med­dling?

    So at the same time the US is seem­ing­ly try­ing to divorce itself of Chi­nese built tech­nol­o­gy, Sil­i­con Val­ley is steadi­ly being turned into Saudi­con Val­ley and UAE-built AI tech­nol­o­gy is being co-devel­oped with Microsoft to sit in on cor­po­rate board meet­ings. And part of the ratio­nale for the embrace of Gulf tech invest­ments is coun­ter­ing the threat of Chi­na. That dement­ed state of affairs is a big part of the con­text of the new­ly passed Tik­Tok ban:

    Asso­ci­at­ed Press

    Tik­Tok has promised to sue over the poten­tial US ban. What’s the legal out­look?

    By WYATTE GRANTHAM-PHILIPS
    Updat­ed 11:01 PM CDT, April 24, 2024

    NEW YORK (AP) — Leg­is­la­tion forc­ing TikTok’s par­ent com­pa­ny to sell the video-shar­ing plat­form or face a ban in the U.S. received Pres­i­dent Joe Biden’s offi­cial sig­noff Wednes­day. But the new­ly mint­ed law could be in for an uphill bat­tle in court.

    Crit­ics of the sell-or-be-banned ulti­ma­tum argue it vio­lates Tik­Tok users’ First Amend­ment rights. The app’s Chi­na-based own­er, ByteDance, has already promised to sue, call­ing the mea­sure uncon­sti­tu­tion­al.

    But a court challenge’s suc­cess is not is not guar­an­teed. The law’s oppo­nents, which include advo­ca­cy orga­ni­za­tions like the Amer­i­can Civ­il Lib­er­ties Union, main­tain that the gov­ern­ment hasn’t come close to jus­ti­fy­ing ban­ning Tik­Tok, while oth­ers say nation­al-secu­ri­ty claims could still pre­vail.

    For years, law­mak­ers on both sides of the aisle have expressed con­cerns that Chi­nese author­i­ties could force ByteDance to hand over U.S. user data, or influ­ence Amer­i­cans by sup­press­ing or pro­mot­ing cer­tain con­tent on Tik­Tok. The U.S. has yet to pro­vide pub­lic evi­dence to sup­port those claims, but some legal experts note that polit­i­cal pres­sures have piled up regard­less.

    ...

    IS A TIKTOK BAN UNCONSTITUTIONAL?

    That’s the cen­tral ques­tion. Tik­Tok and oppo­nents of the law have argued that a ban would vio­late First Amend­ment rights of the social media platform’s 170 mil­lion U.S. users.

    Patrick Toomey, deputy direc­tor of the ACLU’s Nation­al Secu­ri­ty Project, said a Tik­Tok ban would “sti­fle free expres­sion and restrict pub­lic access” to a plat­form that has become cen­tral source for infor­ma­tion shar­ing.

    Among key ques­tions will be whether the leg­is­la­tion inter­feres with the over­all con­tent of speech on Tik­Tok, notes Elet­tra Biet­ti, an assis­tant pro­fes­sor of law and com­put­er sci­ence at North­east­ern Uni­ver­si­ty, because con­tent-based restric­tions meet a high­er lev­el of scruti­ny.

    ByteDance had yet to offi­cial­ly file a law­suit by late Wednes­day, but Biet­ti said she expects the company’s chal­lenge to pri­mar­i­ly focus on whether a ban infringes on these wider free-speech rights. Addi­tion­al lit­i­ga­tion involv­ing TikTok’s “com­mer­cial actors,” such as busi­ness­es and influ­encers who make their liv­ing on the plat­form, may also arise, she added.

    COULD TIKTOK SUCCESSFULLY PREVENT THE BAN IN COURT?

    Tik­Tok is express­ing con­fi­dence about the prospects of its planned chal­lenge.

    ...

    Still, the future of any lit­i­ga­tion is hard to pre­dict, espe­cial­ly for this kind of case. And from a legal per­spec­tive, legal experts say it can be dif­fi­cult to cite polit­i­cal moti­va­tions, even if they’re well-doc­u­ment­ed, as grounds to inval­i­date a law.

    The bat­tle could also string along for some time, with the poten­tial for appeals that could go all the way to the Supreme Court, which would like­ly uphold the law due to its cur­rent com­po­si­tion, said Gus Hur­witz, a senior fel­low at the Uni­ver­si­ty of Pennsylvania’s Carey Law School.

    HOW MIGHT THE GOVERNMENT RESPOND TO THE CHALLENGE?

    TikTok’s legal chal­lenge won’t go on with­out a fight. The gov­ern­ment will prob­a­bly respond with nation­al-secu­ri­ty claims, which were already cit­ed promi­nent­ly as the leg­is­la­tion made its way through Con­gress.

    Toomey main­tains that the gov­ern­ment hasn’t met the high bar required to prove immi­nent nation­al-secu­ri­ty risks, but some oth­er legal experts note that it’s still a strong card to play.

    “One of the unfor­tu­nate and real­ly frus­trat­ing things about nation­al-secu­ri­ty leg­is­la­tion (is that) it tends to be a trump card,” Hur­witz said. “Once nation­al-secu­ri­ty issues come up, they’re going to car­ry the day either suc­cess­ful­ly or not.”

    Hur­witz added that he thinks there are legit­i­mate nation­al-secu­ri­ty argu­ments that could be brought up here. Nation­al secu­ri­ty can be argued because it’s a fed­er­al mea­sure, he added. That sets this sce­nario apart from pre­vi­ous­ly unsuc­cess­ful state-lev­el leg­is­la­tion seek­ing to ban Tik­Tok, such as in Mon­tana.

    But nation­al-secu­ri­ty argu­ments are also vul­ner­a­ble to ques­tion­ing as to why Tik­Tok is get­ting spe­cif­ic scruti­ny.

    “Per­son­al­ly, I believe that what Tik­Tok does isn’t that dif­fer­ent from oth­er com­pa­nies that are U.S.-based,” Biet­ti said, point­ing to tech giants rang­ing from Google to Ama­zon. “The ques­tion is, ‘Why ban Tik­Tok and not the activ­i­ties and the sur­veil­lance car­ried out by oth­er com­pa­nies in the Unit­ed States?’”

    IF THE LAW IS UPHELD, COULD THERE BE WIDER RAMIFICATIONS?

    Still, legal experts note that there could be reper­cus­sions beyond Tik­Tok in the future.

    The mea­sure was passed as part of a larg­er $95 bil­lion pack­age that pro­vides aid to Ukraine and Israel. The pack­age also includes a pro­vi­sion that makes it ille­gal for data bro­kers to sell or rent “per­son­al­ly iden­ti­fi­able sen­si­tive data” to North Korea, Chi­na, Rus­sia, Iran or enti­ties in those coun­tries.

    ...

    “There’s real rea­son to be con­cerned that the use of this law will not stop with Tik­Tok,” Toomey said. “Look­ing at that point and the big­ger pic­ture, ban­ning Tik­Tok or forc­ing its sale would be a dev­as­tat­ing blow to the U.S. government’s decades of work pro­mot­ing an open and secure glob­al inter­net.”

    ———–

    “Tik­Tok has promised to sue over the poten­tial US ban. What’s the legal out­look?” By WYATTE GRANTHAM-PHILIPS; Asso­ci­at­ed Press; 04/24/2024

    “But a court challenge’s suc­cess is not is not guar­an­teed. The law’s oppo­nents, which include advo­ca­cy orga­ni­za­tions like the Amer­i­can Civ­il Lib­er­ties Union, main­tain that the gov­ern­ment hasn’t come close to jus­ti­fy­ing ban­ning Tik­Tok, while oth­ers say nation­al-secu­ri­ty claims could still pre­vail.”

    A court chal­lenge is assured at this point. What is far from assured is the out­come of that chal­lenge. Some see First Amend­ment free speech argu­ments as pow­er­ful enough to pre­vail, but it’s hard to assume nation­al-secu­ri­ty argu­ments won’t ulti­mate­ly win the day. Espe­cial­ly with this case like­ly to make it to the con­ser­v­a­tive-dom­i­nat­ed Supreme Court:

    ...
    For years, law­mak­ers on both sides of the aisle have expressed con­cerns that Chi­nese author­i­ties could force ByteDance to hand over U.S. user data, or influ­ence Amer­i­cans by sup­press­ing or pro­mot­ing cer­tain con­tent on Tik­Tok. The U.S. has yet to pro­vide pub­lic evi­dence to sup­port those claims, but some legal experts note that polit­i­cal pres­sures have piled up regard­less.

    ...

    Among key ques­tions will be whether the leg­is­la­tion inter­feres with the over­all con­tent of speech on Tik­Tok, notes Elet­tra Biet­ti, an assis­tant pro­fes­sor of law and com­put­er sci­ence at North­east­ern Uni­ver­si­ty, because con­tent-based restric­tions meet a high­er lev­el of scruti­ny.

    ...

    Still, the future of any lit­i­ga­tion is hard to pre­dict, espe­cial­ly for this kind of case. And from a legal per­spec­tive, legal experts say it can be dif­fi­cult to cite polit­i­cal moti­va­tions, even if they’re well-doc­u­ment­ed, as grounds to inval­i­date a law.

    The bat­tle could also string along for some time, with the poten­tial for appeals that could go all the way to the Supreme Court, which would like­ly uphold the law due to its cur­rent com­po­si­tion, said Gus Hur­witz, a senior fel­low at the Uni­ver­si­ty of Pennsylvania’s Carey Law School.
    ...

    But as experts warn, should the nation­al-secu­ri­ty argu­ments pre­vail, and ByteDance is forced to sell or pull out of the US mar­ket, the issue will be far from set­tled. Instead, the ques­tion will implic­it­ly be raised as to why tar­get ByteDance but not the myr­i­ad of oth­er for­eign firms freely oper­at­ing in the US and gath­er­ing all sorts of poten­tial­ly sen­si­tive data about US cit­i­zens. Why just Chi­nese firms?

    ...
    Toomey main­tains that the gov­ern­ment hasn’t met the high bar required to prove immi­nent nation­al-secu­ri­ty risks, but some oth­er legal experts note that it’s still a strong card to play.

    “One of the unfor­tu­nate and real­ly frus­trat­ing things about nation­al-secu­ri­ty leg­is­la­tion (is that) it tends to be a trump card,” Hur­witz said. “Once nation­al-secu­ri­ty issues come up, they’re going to car­ry the day either suc­cess­ful­ly or not.”

    Hur­witz added that he thinks there are legit­i­mate nation­al-secu­ri­ty argu­ments that could be brought up here. Nation­al secu­ri­ty can be argued because it’s a fed­er­al mea­sure, he added. That sets this sce­nario apart from pre­vi­ous­ly unsuc­cess­ful state-lev­el leg­is­la­tion seek­ing to ban Tik­Tok, such as in Mon­tana.

    But nation­al-secu­ri­ty argu­ments are also vul­ner­a­ble to ques­tion­ing as to why Tik­Tok is get­ting spe­cif­ic scruti­ny.

    “Per­son­al­ly, I believe that what Tik­Tok does isn’t that dif­fer­ent from oth­er com­pa­nies that are U.S.-based,” Biet­ti said, point­ing to tech giants rang­ing from Google to Ama­zon. “The ques­tion is, ‘Why ban Tik­Tok and not the activ­i­ties and the sur­veil­lance car­ried out by oth­er com­pa­nies in the Unit­ed States?’”
    ...

    Also note how the bill that con­tained the ByteDance ban also has a pro­vi­sion about ban­ning the sale of “per­son­al­ly iden­ti­fi­able sen­si­tive data” by data bro­kers to North Korea, Chi­na, Rus­sia, Iran or enti­ties in those coun­tries. In oth­er words, those coun­tries will just have to buy this infor­ma­tion from the sec­ondary mar­ket­place. But, again, why just those coun­tries and not all sorts of oth­er unde­mo­c­ra­t­ic regimes like the gov­ern­ment of Sau­di Ara­bia?

    ...
    The mea­sure was passed as part of a larg­er $95 bil­lion pack­age that pro­vides aid to Ukraine and Israel. The pack­age also includes a pro­vi­sion that makes it ille­gal for data bro­kers to sell or rent “per­son­al­ly iden­ti­fi­able sen­si­tive data” to North Korea, Chi­na, Rus­sia, Iran or enti­ties in those coun­tries.
    ...

    And that ques­tion about, ‘why just Chi­na?’ brings us to the fol­low­ing Vox report from May of last year about the flood of Sau­di mon­ey into Sil­i­con Val­ley over the last decade. A flood that’s only expect­ed to explode in com­ing years. And while part of the rea­son this flood has been so wel­comed by the US investor com­mu­ni­ty and gov­ern­ment has to do with the rel­a­tive drop in ven­ture cap­i­tal (VC) fund­ing as a result of the pan­dem­ic, we’re increas­ing­ly hear­ing anoth­er rea­son for the embrace of Sau­di tech fund­ing: as a means of coun­ter­ing Chi­na:

    Vox

    How Sau­di mon­ey returned to Sil­i­con Val­ley

    All the ways Sau­di Arabia’s cash pow­ers tech star­tups and ven­ture cap­i­tal.

    By Jonathan Guy­er
    May 1, 2023, 5:30am EDT

    Jonathan Guy­er cov­ers for­eign pol­i­cy, nation­al secu­ri­ty, and glob­al affairs for Vox. From 2019 to 2021, he worked at the Amer­i­can Prospect, where as man­ag­ing edi­tor he report­ed on Biden’s and Trump’s for­eign pol­i­cy teams.

    It was in late March that Sil­i­con Val­ley decid­ed that it’s no longer shame­ful to accept mas­sive invest­ment dol­lars from Sau­di Ara­bia.

    “The more I think about it, the more Sau­di almost feels like a start­up,” Adam Neu­mann, the WeWork founder, told the audi­ence of the Mia­mi con­fer­ence host­ed by the king­dom.

    Ven­ture cap­i­tal­ists Ben Horowitz and Marc Andreessen were pumped up, too.

    “Sau­di has a founder. You don’t call him a founder, you call him, ‘His Roy­al High­ness,’ but he’s cre­at­ing a new cul­ture, he’s cre­at­ing a new vision for the coun­try, he’s got a very excit­ing plan to exe­cute, and the peo­ple in the coun­try are fired up to do it,” said Horowitz.

    The whole scene at the Mia­mi event, which was host­ed by an off­shoot of Saudi’s sov­er­eign wealth fund, would have been unimag­in­able four and a half years ago.

    In Octo­ber 2018, Prince Mohammed bin Salman bin Abdu­laz­iz al-Saud, or MBS as he’s often called, was deter­mined by the CIA to have ordered the killing of jour­nal­ist Jamal Khashog­gi. Though Sau­di Ara­bia had been a finan­cial sup­port­er of Sil­i­con Val­ley, the killing led some Amer­i­can investors to speak out against MBS. That month, bold-faced names can­celed their atten­dance at Davos in the Desert, a giant event in Riyadh host­ed by the Future Invest­ment Ini­tia­tive Insti­tute, a non­prof­it linked to the Pub­lic Invest­ment Fund, the sov­er­eign wealth fund of Sau­di Ara­bia and the spon­sor of the Mia­mi con­fer­ence.

    But five years lat­er, the Future Invest­ment Ini­tia­tive Insti­tute, which is essen­tial­ly MBS’s pri­vate think tank, is host­ing investors, CEOs, and for­mer gov­ern­ment offi­cials at events in Sau­di Ara­bia and the Unit­ed States. The lat­est one in Mia­mi fea­tured guests like Jared Kush­n­er, Steve Mnuchin, and Semafor cofounder Justin Smith, along­side the may­or of Mia­mi. The event even drew out some celebri­ties, includ­ing DJ Khaled and A‑Rod, and is sched­uled to return to Flori­da next year.

    A few days after the Mia­mi event, Sau­di Ara­bia pub­lished the names of dozens of ven­ture cap­i­tal firms, buy­out funds, real estate investors, and star­tups that it’s fund­ing in the US and inter­na­tion­al­ly. The Pub­lic Invest­ment Fund’s ven­ture arm, San­abil, is putting $2 bil­lion a year into prod­ucts we con­sume and tech we ben­e­fit from. It has direct invest­ments in Bird scoot­ers and AI star­tups Vec­tra and Atom­wise. Plus there’s indi­rect mon­ey going through oth­er ven­ture funds into com­pa­nies includ­ing Cred­it Kar­ma, Git­Lab, Red­dit, and Post­mates, as well as the pop­u­lar run­ning shoes brand On or the mil­i­tary-tech dar­ling and Pen­ta­gon con­trac­tor Anduril.

    Among the pre­vi­ous­ly undis­closed firms that had received Sau­di funds: Andreessen Horowitz, whose port­fo­lio com­pa­nies include Instacart and SpaceX.

    Two weeks lat­er, San­abil added major investors Tiger Glob­al and Peter Thiel’s Founders Fund to its list of invest­ments. Invest­ment pow­er­house Sequoia also was added to that list and then a week lat­er was removed, with Sequoia Chi­na, a sep­a­rate legal enti­ty, tak­ing its place.

    ...

    But Amer­i­can ven­ture cap­i­tal­ists might not care as much about optics these days. Cap­i­tal mar­kets are tight­en­ing in the US and Europe, which means there’s less mon­ey to go around in gen­er­al. Mean­while, the Biden admin­is­tra­tion is soft­en­ing its stance on Sau­di Ara­bia and even part­ner­ing with the king­dom on the Mid­dle East broad­ly as well as ener­gy pol­i­cy and eco­nom­ic ini­tia­tives. There’s also a sense of urgency as China’s prowess as a tech com­peti­tor height­ens. The con­ver­gence of these fac­tors means that many new com­pa­nies and estab­lished invest­ing groups have turned to Sau­di Ara­bia.

    Vox reached out to the 60 ven­ture cap­i­tal and buy­out firms and 19 star­tups that San­abil has said it’s invest­ed in to ask a sim­ple ques­tion: How does this invest­ment align with your com­pa­ny or firm’s val­ues? None of them want­ed to pro­vide a com­ment.

    ...

    How Sau­di Ara­bia became a start­up coun­try

    Back before 2018, it seemed like every­one in Sil­i­con Val­ley was tak­ing Sau­di invest­ments.

    Though the king­dom was long under­stood as author­i­tar­i­an, Sil­i­con Val­ley was excit­ed about the prospect of the young deputy crown prince known as MBS. He offered a reform­ing vision that New York Times colum­nist Tom Fried­man tout­ed as “more McK­in­sey than Wah­habi,” and called “his pas­sion for reform authen­tic.”

    MBS’s hyped-up rep­u­ta­tion earned him a rous­ing wel­come to the West Coast in June 2016 and April 2018. That includ­ed face time with Jeff Bezos, Bill Gates, and Mark Zucker­berg as well as exclu­sive vis­its to the head­quar­ters of Apple and Google.

    Dur­ing those two years, MBS poured at least $11 bil­lion into US star­tups, mak­ing it the industry’s largest sin­gle investor. Uber received $3.5 bil­lion from Sau­di Arabia’s Pub­lic Invest­ment Fund in 2016, after board mem­ber and for­mer Oba­ma advis­er David Plouffe trav­eled to the king­dom. Elec­tric car com­pa­ny Lucid received $1 bil­lion and Mag­ic Leap, the VR head­set com­pa­ny, got $461 mil­lion through the fund.

    Dozens of oth­ers received mas­sive dol­lars through the Soft­Bank Vision Fund, which was fund­ed through about $45 bil­lion from Saudi’s Pub­lic Invest­ment Fund. Soft­Bank is a Japan­ese tele­com giant and multi­na­tion­al con­glom­er­ate that gave cap­i­tal life­lines to star­tups like Door­Dash, Slack, and WeWork. Through the first Vision Fund, Neumann’s WeWork received $4.4 bil­lion, Door­Dash got $680 mil­lion, and Slack ben­e­fit­ed from a $250 mil­lion fund­ing round led by the fund. Even Wag, the dog-walk­ing app, got $300 mil­lion The Wall Street Jour­nal called the scale of invest­ments “unprece­dent­ed.”

    While peo­ple in tech may have tak­en stances against Sau­di behav­ior, they weren’t exact­ly declin­ing mon­ey from the Vision Fund, accord­ing to Mar­garet O’Mara, a his­to­ri­an of Sil­i­con Val­ley at the Uni­ver­si­ty of Wash­ing­ton.

    ...

    Around that time, MBS had announced his intent to build a futur­is­tic Sau­di desert enclave called Neom. It would be a place for the young roy­al to show off his extrav­a­gant wealth through cut­ting-edge tech­nolo­gies and osten­si­bly sus­tain­able design at a grand scale, thanks to $500 bil­lion from the Pub­lic Invest­ment Fund. Now under con­struc­tion, the urban exper­i­ment includes a 110-mile-long city of sky­scrap­ers called the Line, ski resorts and tourist beach­es, and “cli­mate-proof agri­cul­ture,” among oth­er extrav­a­gant gim­micks, designed by star­chi­tects. It’s all come under crit­i­cism for evict­ing indige­nous res­i­dents, being waste­ful to con­struct, and for con­tain­ing poten­tial­ly dystopi­an ele­ments of a sur­veil­lance state built into Neom’s “smart city” infra­struc­ture.

    In Sep­tem­ber 2018, Open AI co-chair Sam Alt­man, Marc Andreessen, Apple design­er Jony Ive, and for­mer Uber CEO Travis Kalan­ick all joined Neom’s board.

    The Khashog­gi killing hap­pened the fol­low­ing month, and much of Sil­i­con Val­ley pub­licly stepped back from MBS. Alt­man pub­licly resigned from the board, and Ive’s name dis­ap­peared from it. Stars from Google and Uber dropped out of the Octo­ber 2018 Davos in the Desert con­fer­ence. The investors who did attend shield­ed their name tags from the press in atten­dance to avoid the embar­rass­ment of sup­port­ing a ruler accused of order­ing a bru­tal mur­der, though over time influ­en­tial busi­ness peo­ple start­ed to trick­le back.

    ...

    How star­tups got com­fort­able with Sau­di invest­ments again

    A com­bi­na­tion of fac­tors has brought Sau­di Ara­bia back into the fold.

    Can­di­date Biden on the cam­paign trail pledged to make MBS a pari­ah, but as high oil prices test­ed his glob­al poli­cies, the pres­i­dent trav­eled to Riyadh and gave the prince a first-bump in July 2022. It was an embar­rass­ing about-face that showed that it was okay to do busi­ness with the coun­try. So if Pres­i­dent Biden can’t quit Sau­di Ara­bia, why would Sil­i­con Val­ley?

    For all of the crit­i­cism com­ing from Con­gress and cor­ners of the Biden admin­is­tra­tion about Sau­di human rights, the US has large­ly con­tin­ued to approve major sales of mil­i­tary tech­nolo­gies and weapons to Sau­di Ara­bia. This Amer­i­can pol­i­cy deci­sion has giv­en com­pa­nies top cov­er and per­mis­sion to fol­low.

    ...

    Giv­en the vicious poli­cies that MBS has pur­sued, includ­ing domes­tic crack­downs and a dis­as­trous war in Yemen, there are real per­ils.

    “Amer­i­can busi­ness­peo­ple: Tread care­ful­ly. This is a coun­try that does not respect human rights or the rule of law. And if you get involved, you have to be mind­ful of who your part­ner is,” says Michael Pos­ner, a pro­fes­sor at NYU Stern School of Busi­ness, who pre­vi­ous­ly served as Obama’s top human rights leader in the State Depart­ment. “It is a repres­sive gov­ern­ment that sti­fles dis­sent, that arrests its crit­ics, that doesn’t val­ue free expres­sion. The list goes on and on.”

    Mean­while, the cred­it crunch and lack of liq­uid­i­ty in mar­kets in the US and Europe have made invest­ments from Sau­di Ara­bia wel­come. “The fire­hose of mon­ey that came into tech over the last decade is now being tight­ened quite a lot,” says O’Mara. So, many large ven­ture firms, with hyper-scaled assets under man­age­ment and inter­na­tion­al aspi­ra­tions, have turned to the Mid­dle East sov­er­eign funds for the some­times hun­dreds of mil­lions of dol­lars they need to fund per cycle.

    The struc­ture of such invest­ing, where­in ven­ture firms in prac­tice don’t dis­close their lim­it­ed part­ners — that is, where the mon­ey comes from — gives firms like Andreessen Horowitz, 500 Glob­al, and Gen­er­al Atlantic some plau­si­ble deni­a­bil­i­ty, or at least dis­tance from, their Sau­di sov­er­eign wealth invest­ments. And that gives their port­fo­lio com­pa­nies even fur­ther dis­tance and offers up the pos­si­bil­i­ty that the start­up founder can sim­ply stay in the dark about where the mon­ey comes from.

    Anoth­er impor­tant fac­tor is that Chi­na is invest­ing heav­i­ly in advanced tech­nolo­gies, and in response, Wash­ing­ton has cen­tered much of its hawk­ish rhetoric on coun­ter­ing China’s influ­ence world­wide. Sil­i­con Val­ley is start­ing to view Chi­na Chi­na through such a lens, too. Some US investors, who are com­mit­ted to back­ing star­tups that would ulti­mate­ly bol­ster US nation­al secu­ri­ty and qual­i­ta­tive edge, say that Sau­di Ara­bia is the less­er of two evils at a moment when they see the Chi­na threat as par­tic­u­lar­ly acute.

    “There are times in his­to­ry when we have the lux­u­ry to mor­al­ize and stand up for cer­tain val­ues, and there are times when you don’t have that lux­u­ry and you have to make com­pro­mis­es,” says Jake Chap­man, man­ag­ing direc­tor of the Army Ven­ture Cap­i­tal Cor­po­ra­tion. In fact, a num­ber of US mil­i­tary orga­ni­za­tions and intel­li­gence agen­cies have launched their own invest­ment arms.

    ...

    The art, film, and media indus­tries have also fol­lowed this trend line on Sau­di Ara­bia. The mon­ey is so ubiq­ui­tous that even Vox is touched by it. Penske Media Cor­po­ra­tion received in 2018 a $200 mil­lion invest­ment from the Sau­di Research and Media Group, which is close­ly linked to MBS. Penske became a minor­i­ty share­hold­er in Vox Media, this site’s par­ent com­pa­ny, ear­li­er this year.

    The vast dis­tri­b­u­tion of Sau­di mon­ey reach­es some unlike­ly investors. San­abil, the Pub­lic Invest­ment Fund’s ven­ture arm, released such a long list of investees on its web­site in April, and has con­tin­ued to add sev­er­al more news-mak­ing firms there, that that it was dif­fi­cult to con­cep­tu­al­ize the scope. Iconiq, the fam­i­ly office for many ultra-rich tech peo­ple, includ­ing Mark Zucker­berg, Sheryl Sand­berg, and Jack Dorsey, was also on the list. So was the Peter Thiel-backed Valar cap­i­tal invest­ing group and Sil­ver­lake, a pri­vate equi­ty firm whose port­fo­lio of com­pa­nies includes name brands Airbnb, Dell, and Way­mo.

    It gets even more com­pli­cat­ed. The fact that Khashog­gi was a Wash­ing­ton Post colum­nist has led to a stand­off between MBS and the own­er of the paper, Jeff Bezos, whose phone was report­ed­ly hacked by the Sau­di crown prince. Yet an ear­ly-stage ven­ture firm that Bezos backs, Vil­lage Glob­al, is one of the recent­ly revealed recip­i­ents of Sau­di ven­ture dol­lars.

    “There’s no way you could found a start­up in this VC com­mu­ni­ty and not be behold­en to MBS or some­one one step away from him,” said anoth­er tech CEO, who asked to stay anony­mous to main­tain ongo­ing rela­tion­ships.

    The moral haz­ards of Sau­di Arabia’s invest­ments endure

    The Future Invest­ment Ini­tia­tive Insti­tute held anoth­er gath­er­ing at the Pierre Hotel over­look­ing Cen­tral Park Man­hat­tan last fall, where net­work­ing investors and NGO-types buzzed past the col­or­ful murals of the Rotun­da Room. Teams of comms spe­cial­ists chore­o­graphed TED-inspired pan­els being live-streamed, quick­ly pack­ag­ing them into memes and high­light reels, and Jared Kush­n­er strode by with an entourage.

    ...

    Though Sil­i­con Val­ley once wres­tled with the moral impli­ca­tions of Sau­di dol­lars after the killing of Khashog­gi, tech investors have clear­ly moved on. Horowitz, for instance, has been tak­ing founders from its port­fo­lio com­pa­nies back and forth to what Horowitz described as a “start­up coun­try.” And some wor­ry that the poten­tial invest­ments that might emerge from nur­tur­ing rela­tion­ships through trips like these could help erase the stig­ma of the journalist’s mur­der.

    Expect more vis­its. At the Mia­mi forum, the Pub­lic Invest­ment Fund’s gov­er­nor said it’s like­ly to grow from $650 bil­lion today to $1 tril­lion by 2025 and up to $3 tril­lion by 2030. With lend­ing severe­ly tight­ened in US and Euro­pean bank­ing sys­tems, the finan­cial and invest­ing out­look for Amer­i­can VCs is dis­tress­ing.

    The return of US star­tups court­ing Sau­di mon­ey also rein­forces a cer­tain nar­ra­tive that MBS has cre­at­ed for him­self — that he’s a reformer. The crown prince likes to high­light the splashy imple­men­ta­tion of pol­i­cy changes such as allow­ing women to dri­ve, the open­ing of cul­tur­al spaces like movie the­aters, and host­ing major sport­ing events.

    But, far beyond the killing of Khashog­gi, the human rights sit­u­a­tion in Sau­di Ara­bia is abysmal. Exe­cu­tions have dou­bled under MBS, and many polit­i­cal pris­on­ers remain incar­cer­at­ed with­out due process.

    Though Sau­di Ara­bia has not been able to re-attract star pow­er to the Riyadh sum­mit that appeared in 2017, the year before Khashoggi’s killing, that may be begin­ning to change. MBS seems to know it’s bet­ter to stay on the side­lines, and the crown prince is so influ­en­tial that he doesn’t need to be in the spot­light. It’s more effec­tive to have Ben Horowitz and Adam Neu­mann praise his vision for Sau­di Ara­bia.

    ...

    ———-

    “How Sau­di mon­ey returned to Sil­i­con Val­ley” By Jonathan Guy­er; Vox; 05/01/2023

    “But Amer­i­can ven­ture cap­i­tal­ists might not care as much about optics these days. Cap­i­tal mar­kets are tight­en­ing in the US and Europe, which means there’s less mon­ey to go around in gen­er­al. Mean­while, the Biden admin­is­tra­tion is soft­en­ing its stance on Sau­di Ara­bia and even part­ner­ing with the king­dom on the Mid­dle East broad­ly as well as ener­gy pol­i­cy and eco­nom­ic ini­tia­tives. There’s also a sense of urgency as China’s prowess as a tech com­peti­tor height­ens. The con­ver­gence of these fac­tors means that many new com­pa­nies and estab­lished invest­ing groups have turned to Sau­di Ara­bia.

    The tor­rent of Sau­di mon­ey flow­ing into Sil­i­con Val­ley isn’t just dri­ven by the sec­tor’s rapa­cious appetite for VC mon­ey. There’s a nation­al secu­ri­ty angle jus­ti­fy­ing it all: Chi­na’s emer­gence as a major tech­no­log­i­cal com­peti­tor. Sau­di mon­ey is being cast as a kind of finan­cial bul­wark against a ris­ing Chi­na. At least that’s the spin deployed in recent years to brush off crit­i­cism about mak­ing the Sau­di gov­ern­ment — which has one of the worst human rights records on the plan­et — the biggest Sil­i­con Val­ley investor over the last decade, with all indi­ca­tions of those invest­ments dra­mat­i­cal­ly increas­ing in com­ing years. As one anony­mous tech CEO blunt­ly put it, “There’s no way you could found a start­up in this VC com­mu­ni­ty and not be behold­en to MBS or some­one one step away from him.” Sil­i­con Val­ley trans­for­ma­tion into a Sau­di sub­sidiary is just fine because all that Gulf mon­ey will help the US fend off Chi­na, accord­ing to this ‘nation­al secu­ri­ty’ nar­ra­tive:

    ...
    MBS’s hyped-up rep­u­ta­tion earned him a rous­ing wel­come to the West Coast in June 2016 and April 2018. That includ­ed face time with Jeff Bezos, Bill Gates, and Mark Zucker­berg as well as exclu­sive vis­its to the head­quar­ters of Apple and Google.

    Dur­ing those two years, MBS poured at least $11 bil­lion into US star­tups, mak­ing it the industry’s largest sin­gle investor. Uber received $3.5 bil­lion from Sau­di Arabia’s Pub­lic Invest­ment Fund in 2016, after board mem­ber and for­mer Oba­ma advis­er David Plouffe trav­eled to the king­dom. Elec­tric car com­pa­ny Lucid received $1 bil­lion and Mag­ic Leap, the VR head­set com­pa­ny, got $461 mil­lion through the fund.

    ...

    The struc­ture of such invest­ing, where­in ven­ture firms in prac­tice don’t dis­close their lim­it­ed part­ners — that is, where the mon­ey comes from — gives firms like Andreessen Horowitz, 500 Glob­al, and Gen­er­al Atlantic some plau­si­ble deni­a­bil­i­ty, or at least dis­tance from, their Sau­di sov­er­eign wealth invest­ments. And that gives their port­fo­lio com­pa­nies even fur­ther dis­tance and offers up the pos­si­bil­i­ty that the start­up founder can sim­ply stay in the dark about where the mon­ey comes from.

    ...

    “There’s no way you could found a start­up in this VC com­mu­ni­ty and not be behold­en to MBS or some­one one step away from him,” said anoth­er tech CEO, who asked to stay anony­mous to main­tain ongo­ing rela­tion­ships.

    ...

    Expect more vis­its. At the Mia­mi forum, the Pub­lic Invest­ment Fund’s gov­er­nor said it’s like­ly to grow from $650 bil­lion today to $1 tril­lion by 2025 and up to $3 tril­lion by 2030. With lend­ing severe­ly tight­ened in US and Euro­pean bank­ing sys­tems, the finan­cial and invest­ing out­look for Amer­i­can VCs is dis­tress­ing.
    ...

    Also note the indi­vid­ual who is explic­it­ly mak­ing the case that the US does­n’t have the ‘moral lux­u­ry’ of turn­ing down Sau­di invest­ment mon­ey because coun­ter­ing Chi­na is more impor­tant: Jake Chap­man, man­ag­ing direc­to­ry of the Army Ven­ture Cap­i­tal Cor­po­ra­tion. So in case it was­n’t clear, yes, the US army for­mal­ly endors­es this flood of Sau­di VC mon­ey into the US tech space:

    ...
    Anoth­er impor­tant fac­tor is that Chi­na is invest­ing heav­i­ly in advanced tech­nolo­gies, and in response, Wash­ing­ton has cen­tered much of its hawk­ish rhetoric on coun­ter­ing China’s influ­ence world­wide. Sil­i­con Val­ley is start­ing to view Chi­na Chi­na through such a lens, too. Some US investors, who are com­mit­ted to back­ing star­tups that would ulti­mate­ly bol­ster US nation­al secu­ri­ty and qual­i­ta­tive edge, say that Sau­di Ara­bia is the less­er of two evils at a moment when they see the Chi­na threat as par­tic­u­lar­ly acute.

    “There are times in his­to­ry when we have the lux­u­ry to mor­al­ize and stand up for cer­tain val­ues, and there are times when you don’t have that lux­u­ry and you have to make com­pro­mis­es,” says Jake Chap­man, man­ag­ing direc­tor of the Army Ven­ture Cap­i­tal Cor­po­ra­tion. In fact, a num­ber of US mil­i­tary orga­ni­za­tions and intel­li­gence agen­cies have launched their own invest­ment arms.
    ...

    And note how Sil­i­con Val­ley lumi­nar­ies like Sam Alt­man and Marc Andreessen were more than hap­py to join the board of Neom, the bizarre high-tech planned Sau­di city that dou­bles as a tem­plate for a dystopi­an sur­veil­lance state. It sure is an inter­est project for Sil­i­con Val­ley to be all aboard on, giv­en all the alarms over apps like Tik­Tok fuel­ing Chi­nese sur­veil­lance:

    ...
    Around that time, MBS had announced his intent to build a futur­is­tic Sau­di desert enclave called Neom. It would be a place for the young roy­al to show off his extrav­a­gant wealth through cut­ting-edge tech­nolo­gies and osten­si­bly sus­tain­able design at a grand scale, thanks to $500 bil­lion from the Pub­lic Invest­ment Fund. Now under con­struc­tion, the urban exper­i­ment includes a 110-mile-long city of sky­scrap­ers called the Line, ski resorts and tourist beach­es, and “cli­mate-proof agri­cul­ture,” among oth­er extrav­a­gant gim­micks, designed by star­chi­tects. It’s all come under crit­i­cism for evict­ing indige­nous res­i­dents, being waste­ful to con­struct, and for con­tain­ing poten­tial­ly dystopi­an ele­ments of a sur­veil­lance state built into Neom’s “smart city” infra­struc­ture.

    In Sep­tem­ber 2018, Open AI co-chair Sam Alt­man, Marc Andreessen, Apple design­er Jony Ive, and for­mer Uber CEO Travis Kalan­ick all joined Neom’s board.
    ...

    Final­ly, note how the list promi­nent US investors hyp­ing Sau­di invest­ments as events orga­nized by the MBS think-tank, Future Invest­ment Ini­tia­tive Insti­tute, includes Jared Kush­n­er and for­mer Trump Trea­sury Sec­re­tary Steve Mnuchin. Keep in mind that in the final months of the Trump admin­is­tra­tion, Mnuchin tried, as Trea­suryt Sec­re­tary, to force the sale of ByteDance. Four year lat­er, he’s putting togeth­er investors to acquire ByteDance should the US ulti­mate­ly force the sale, which is a reminder that this emerg­ing ‘no Chi­nese tech allowed’ dou­bles as a great shake­down oppor­tu­ni­ty for the well-con­nect­ed:

    ...
    The whole scene at the Mia­mi event, which was host­ed by an off­shoot of Saudi’s sov­er­eign wealth fund, would have been unimag­in­able four and a half years ago.

    In Octo­ber 2018, Prince Mohammed bin Salman bin Abdu­laz­iz al-Saud, or MBS as he’s often called, was deter­mined by the CIA to have ordered the killing of jour­nal­ist Jamal Khashog­gi. Though Sau­di Ara­bia had been a finan­cial sup­port­er of Sil­i­con Val­ley, the killing led some Amer­i­can investors to speak out against MBS. That month, bold-faced names can­celed their atten­dance at Davos in the Desert, a giant event in Riyadh host­ed by the Future Invest­ment Ini­tia­tive Insti­tute, a non­prof­it linked to the Pub­lic Invest­ment Fund, the sov­er­eign wealth fund of Sau­di Ara­bia and the spon­sor of the Mia­mi con­fer­ence.

    But five years lat­er, the Future Invest­ment Ini­tia­tive Insti­tute, which is essen­tial­ly MBS’s pri­vate think tank, is host­ing investors, CEOs, and for­mer gov­ern­ment offi­cials at events in Sau­di Ara­bia and the Unit­ed States. The lat­est one in Mia­mi fea­tured guests like Jared Kush­n­er, Steve Mnuchin, and Semafor cofounder Justin Smith, along­side the may­or of Mia­mi. The event even drew out some celebri­ties, includ­ing DJ Khaled and A‑Rod, and is sched­uled to return to Flori­da next year.
    ...

    As we can see, a grow­ing por­tion of the tech won­ders gen­er­at­ed by Sil­i­con Val­ley are going to be Sau­di-fueled tech won­ders in com­ing years.

    But Sau­di Ara­bia is far from the only US ally with a high­ly ques­tion­able human rights record and lots of cash to invest. For exam­ple, check out the lat­est AI tech poised to shake up not just cor­po­rate over­sight but cor­po­rate strate­gic deci­sion-mak­ing: AI bots built by G42, a new UAE AI firm recent­ly infused with $1.5 bil­lion in invest­ments from Microsoft:

    Axios

    AI shakes up cor­po­rate boards

    Ryan Heath, author of Axios AI+
    Apr 23, 2024 -
    Tech­nol­o­gy

    AI is forc­ing cor­po­rate boards to change how they oper­ate, with the most aggres­sive com­pa­nies appoint­ing AI bots as observers to their boards and putting tech at the cen­ter of their board strat­e­gy work.

    Why it mat­ters: The world’s largest com­pa­nies are increas­ing­ly obsessed with AI — men­tion­ing it repeat­ed­ly in 2024 earn­ings calls — but most boards lack the exper­tise to effec­tive­ly guide AI strate­gies.

    ...

    The big pic­ture: The pace of AI inno­va­tion is push­ing exec­u­tives to devel­op AI strate­gies quick­er than they have for pre­vi­ous new tech­nolo­gies, and boards are now part of that wave of change.

    Case in point: One of the UAE’s most valu­able pub­lic com­pa­nies, Inter­na­tion­al Hold­ing Com­pa­ny, has appoint­ed Aiden Insight to its board as an “AI observ­er.”

    * Aiden Insight is the per­sona of a tool called Board­Nav­i­ga­tor, cre­at­ed by G42 — the Gulf region AI com­pa­ny that recent­ly obtained a $1.5 bil­lion invest­ment from Microsoft.

    * Board­Nav­i­ga­tor was built with Microsoft­’s Azure Ope­nAI ser­vice, in coop­er­a­tion with Microsoft, G42 said in a state­ment.

    How it works: G42 promis­es that Aiden Insight will pro­vide “real-time insights to inform dis­cus­sions and guide deci­sions” dur­ing busi­ness meet­ings, which it says is pos­si­ble because of con­tin­u­ous data analy­sis and eth­i­cal and com­pli­ance mon­i­tor­ing.

    * The tool com­bines a com­pa­ny’s own data with exter­nal mar­ket trend data to offer advice, and G42 says it works best for ener­gy, health, finance and tech­nol­o­gy com­pa­nies.

    ...

    Dri­ving the news: The Nation­al Asso­ci­a­tion of Cor­po­rate Direc­tors cre­at­ed a 24-mem­ber com­mis­sion April 16 to devel­op AI prin­ci­ples to guide its 23,000 or so mem­bers who sit on boards.

    ...

    * “It’s crazy for a board to [still] get updates every 90 days with PDFs when pre­dic­tive AI can spot a rev­enue issue two weeks into a quar­ter,” Steve Singh, man­ag­ing direc­tor of Madrona Ven­ture Group, told Axios.

    * Singh, who is also a board mem­ber at Clari, a rev­enue man­age­ment plat­form used by exec­u­tives and boards, said: “Soon with gen­er­a­tive AI, agents will be work­ing on the board­’s behalf, prod­ding a com­pa­ny’s rev­enue lead­ers. The board will add a per­ma­nent lay­er of ana­lyt­i­cal val­ue to the orga­ni­za­tion.”

    Between the lines: Experts sug­gest that, thanks to AI and oth­er tech-dri­ven trends, exec­u­tives need to hear from their boards more fre­quent­ly, rather than once a month or every three months.

    Yes, but: All this accel­er­a­tion of board work could blur the lines between a com­pa­ny’s oper­a­tional man­age­ment and board over­sight.

    * Seat­ing an AI bot on a board also rais­es nov­el ques­tions about lia­bil­i­ty for the AI’s actions. Alis­sa Kole, man­ag­ing direc­tor of advi­so­ry firm Gov­ern Cen­ter, argues that respon­si­bil­i­ty lies with the AI’s devel­op­ers, “effec­tive­ly upend­ing the entire con­cept of board lia­bil­i­ty insur­ance.”

    Flash­back: 45% of respon­dents to a 2015 World Eco­nom­ic Forum tech­nol­o­gy sur­vey pre­dict­ed the first AI board direc­tors would appear by 2025.

    The bot­tom line: Exec­u­tives and their boards will need to work in tan­dem to spot and seize AI oppor­tu­ni­ties — and some of those con­ver­sa­tions will be with AI agents.

    ———–

    “AI shakes up cor­po­rate boards” by Ryan Heath; Axios; 04/23/2024

    The bot­tom line: Exec­u­tives and their boards will need to work in tan­dem to spot and seize AI oppor­tu­ni­ties — and some of those con­ver­sa­tions will be with AI agents.”

    Cor­po­rate boards need to learn how to incor­po­rate AI into their over­sight and deci­sion-mak­ing process­es and, con­ve­nient­ly, they’ll do so via con­ver­sa­tions with AI agents. That’s the par­a­digm shift appar­ent­ly being embraced by cor­po­rate Amer­i­ca. AI is at the future of cor­po­rate over­sight and strate­gic deci­sion-mak­ing. That did­n’t take long. And now we get to find out what hap­pens when cor­po­rate boards are just kind of fol­low­ing the lead of their strate­gic AIs. Who will ulti­mate­ly be liable for AI-led dis­as­ters? We’ll find out:

    ...
    Yes, but: All this accel­er­a­tion of board work could blur the lines between a com­pa­ny’s oper­a­tional man­age­ment and board over­sight.

    * Seat­ing an AI bot on a board also rais­es nov­el ques­tions about lia­bil­i­ty for the AI’s actions. Alis­sa Kole, man­ag­ing direc­tor of advi­so­ry firm Gov­ern Cen­ter, argues that respon­si­bil­i­ty lies with the AI’s devel­op­ers, “effec­tive­ly upend­ing the entire con­cept of board lia­bil­i­ty insur­ance.”
    ...

    And note the par­tic­u­lar AI agent that is being seen as a promi­nent exam­ple of this trend: The UAE’s Inter­na­tion­al Hold­ing Com­pa­ny appoint­ed Aiden Insight to its board as an “AI observ­er”. Aiden Insight just hap­pens to be the per­sona of a tool called Board­Nav­i­ga­tor, which was cre­at­ed by G42, a Gulf region AI com­pa­ny that received a $1.5 bil­lion invest­ment from Microsoft. So the cut­ting edge exam­ple of a cor­po­rate AI board mem­ber is an AI being devel­oped by a UAE com­pa­ny in part­ner­ship with a Sil­i­con Val­ley giant:

    ...
    Case in point: One of the UAE’s most valu­able pub­lic com­pa­nies, Inter­na­tion­al Hold­ing Com­pa­ny, has appoint­ed Aiden Insight to its board as an “AI observ­er.”

    * Aiden Insight is the per­sona of a tool called Board­Nav­i­ga­tor, cre­at­ed by G42 — the Gulf region AI com­pa­ny that recent­ly obtained a $1.5 bil­lion invest­ment from Microsoft.

    * Board­Nav­i­ga­tor was built with Microsoft­’s Azure Ope­nAI ser­vice, in coop­er­a­tion with Microsoft, G42 said in a state­ment.

    How it works: G42 promis­es that Aiden Insight will pro­vide “real-time insights to inform dis­cus­sions and guide deci­sions” dur­ing busi­ness meet­ings, which it says is pos­si­ble because of con­tin­u­ous data analy­sis and eth­i­cal and com­pli­ance mon­i­tor­ing.
    ...

    It’s quite a remark­able devel­op in cor­po­rate affairs. And only a mat­ter of time before we start hear­ing about how the AI bots are the most influ­en­tial voic­es in the board­room. And as the fol­low­ing Reuters report points out, Microsoft­’s $15 bil­lion invest­ment in G42 did­n’t hap­pen in vac­u­um. Steps were tak­en to pla­cate US gov­ern­ment con­cerns. Of course, those con­cerns appear to have large­ly been over whether or not G42 was using any Chi­nese tech­nol­o­gy in their oper­a­tions:

    Reuters

    Microsoft to invest $1.5 bil­lion in Emi­rati AI firm G42 for minor­i­ty stake

    By Reuters
    April 16, 2024 3:24 AM CDT
    Updat­ed

    DUBAI April 16 (Reuters) — Microsoft (MSFT.O), opens new tab is invest­ing $1.5 bil­lion in Unit­ed Arab Emi­rates-based arti­fi­cial intel­li­gence firm G42, giv­ing the U.S. giant a minor­i­ty stake and a board seat, allow­ing the two to deep­en ties amid the glob­al bat­tle for tech dom­i­nance.

    ...

    The part­ner­ship comes amid Wash­ing­ton’s efforts to hob­ble Bei­jing’s tech­no­log­i­cal advances, with the Unit­ed States adding four Chi­nese com­pa­nies to an export black­list for seek­ing to acquire AI chips for Chi­na’s mil­i­tary. The Unit­ed States has also been con­cerned over deep­en­ing ties between Chi­na and the Gulf states, includ­ing the UAE.

    Amid U.S. con­cerns over its rela­tion­ship with Chi­nese busi­ness­es, G42 had divest­ed its invest­ments in Chi­na and began the lengthy task of pulling out Chi­nese hard­ware, accept­ing con­straints imposed on it by the Unit­ed States to work with U.S. com­pa­nies, it said in Feb­ru­ary.

    Microsoft and G42, in sep­a­rate state­ments on Tues­day, described their assur­ances to the U.S. and UAE gov­ern­ments as a first of its kind agree­ment to ensure the secure, trust­ed and respon­si­ble devel­op­ment and deploy­ment of AI. Microsoft said it was bind­ing. The size of the stake Microsoft was tak­ing was not dis­closed.

    Abu Dhabi sov­er­eign wealth fund Mubadala and Amer­i­can pri­vate equi­ty firm Sil­ver Lake hold stakes in G42, whose chair­man, Sheikh Tah­noon bin Zayed Al Nahyan, is the UAE Nation­al Secu­ri­ty Advi­sor and a broth­er to the pres­i­dent.

    Microsoft Pres­i­dent Brad Smith, who will take a seat on G42’s board, said: “We will com­bine world-class tech­nol­o­gy with world-lead­ing stan­dards for safe, trust­ed, and respon­si­ble AI, in close coor­di­na­tion with the gov­ern­ments of both the UAE and the Unit­ed States.”

    The New York Times said the deal places a series of pro­tec­tions on the AI prod­ucts shared with G42, includ­ing an agree­ment to strip Chi­nese gear out of the Emi­rati fir­m’s oper­a­tions. G42 will cease using Huawei tele­com equip­ment, which the U.S. fears could pro­vide a back­door for Chi­nese intel­li­gence agen­cies, the paper said.

    G42 and Microsoft said they would joint­ly bring advanced AI and dig­i­tal infra­struc­ture to coun­tries in the Mid­dle East, Cen­tral Asia and Africa.

    The two com­pa­nies have col­lab­o­rat­ed mul­ti­ple times over the last year, and G42 said it would use Microsoft­’s Azure data cen­tres as part of its AI infra­struc­ture to boost region­al adop­tion.

    G42’s Chief Exec­u­tive Peng Xiao pre­vi­ous­ly worked for com­pa­ny owned by Emi­rati cyber­se­cu­ri­ty firm Dark­Mat­ter, which hired for­mer spies and was con­tract­ed by the UAE cyber secu­ri­ty agency.

    ...

    ———–

    “Microsoft to invest $1.5 bil­lion in Emi­rati AI firm G42 for minor­i­ty stake” By Reuters; Reuters; 04/16/2024

    “Microsoft and G42, in sep­a­rate state­ments on Tues­day, described their assur­ances to the U.S. and UAE gov­ern­ments as a first of its kind agree­ment to ensure the secure, trust­ed and respon­si­ble devel­op­ment and deploy­ment of AI. Microsoft said it was bind­ing. The size of the stake Microsoft was tak­ing was not dis­closed.”

    A first of its kind bind­ing agree­ment. That’s how Microsoft and G42 are tout­ing their new­ly announced assur­ances made to the US and UAE gov­ern­ments to address secu­ri­ty con­cerns over their joint devel­op­ment of AI agents. Assur­ances that seem­ing­ly had hys­te­ria over Chi­na as a pri­ma­ry con­sid­er­a­tion. G42 had to not only agree to use Microsoft­’s Azure cloud servers for the AI infra­struc­ture but also remove any Chi­nese hard­ware from its oper­a­tions:

    ...
    The part­ner­ship comes amid Wash­ing­ton’s efforts to hob­ble Bei­jing’s tech­no­log­i­cal advances, with the Unit­ed States adding four Chi­nese com­pa­nies to an export black­list for seek­ing to acquire AI chips for Chi­na’s mil­i­tary. The Unit­ed States has also been con­cerned over deep­en­ing ties between Chi­na and the Gulf states, includ­ing the UAE.

    Amid U.S. con­cerns over its rela­tion­ship with Chi­nese busi­ness­es, G42 had divest­ed its invest­ments in Chi­na and began the lengthy task of pulling out Chi­nese hard­ware, accept­ing con­straints imposed on it by the Unit­ed States to work with U.S. com­pa­nies, it said in Feb­ru­ary.

    ...

    Microsoft Pres­i­dent Brad Smith, who will take a seat on G42’s board, said: “We will com­bine world-class tech­nol­o­gy with world-lead­ing stan­dards for safe, trust­ed, and respon­si­ble AI, in close coor­di­na­tion with the gov­ern­ments of both the UAE and the Unit­ed States.”

    ...

    The two com­pa­nies have col­lab­o­rat­ed mul­ti­ple times over the last year, and G42 said it would use Microsoft­’s Azure data cen­tres as part of its AI infra­struc­ture to boost region­al adop­tion.
    ...

    And, again, note the pedi­gree of G42 chair­man Sheikh Tah­noon bin Zayed Al Nahyan: he’s the broth­er of UAE president/crown prince MBZ. Recall the role MBZ played in the 2016 US elec­tion on behalf of the Trump cam­paign. For exam­ple, there the August 3, 2016, meet­ing in Trump Tow­er with Erik Prince and George Nad­er and Psy Group founder Joel Zamel offer­ing the Trump cam­paign Psy Group’s elec­tion influ­enc­ing ser­vices, they report­ed­ly told the Trump team that this offer was on behalf of both MBS and MBZ. Also recall how MBZ him­self broke diplo­mat­ic pro­to­col when he per­son­al­ly made a secret vis­it to Trump Tow­er in Decem­ber of 2016 with­out inform­ing the Oba­ma admin­is­tra­tion of this vis­it. And then there’s the whole Dark­mat­ter affair, where the UAE not only hired three for­mer NSA hack­ers but deployed them in a glob­al hack­ing cam­paign that includ­ed the tar­get­ed of US cit­i­zens and US-based com­put­ers. So the chair­man of G42 is the broth­er of some­one who not only med­dled in the 2016 elec­tion but got away with it:

    ...
    Abu Dhabi sov­er­eign wealth fund Mubadala and Amer­i­can pri­vate equi­ty firm Sil­ver Lake hold stakes in G42, whose chair­man, Sheikh Tah­noon bin Zayed Al Nahyan, is the UAE Nation­al Secu­ri­ty Advi­sor and a broth­er to the pres­i­dent.

    ...

    G42’s Chief Exec­u­tive Peng Xiao pre­vi­ous­ly worked for com­pa­ny owned by Emi­rati cyber­se­cu­ri­ty firm Dark­Mat­ter, which hired for­mer spies and was con­tract­ed by the UAE cyber secu­ri­ty agency.
    ...

    Well, at least the US won’t have to wor­ry about too many more UAE-spon­sored hack­ing cam­paigns. Or at least US cor­po­ra­tions using G42’s AI in their board­rooms and giv­en access to all of the details of how the com­pa­ny is oper­at­ing won’t have to wor­ry. They’re going to be hand­ing the data over any­way. Not that such wor­ries were there in the first place. Instead, all the wor­ries are ded­i­cat­ed to the threat of Chi­na. A threat so great that the US had to turn to Sau­di Ara­bia and the UAE to counter it. All as part of a glob­al exis­ten­tial strug­gle to uphold the ideals of democ­ra­cy and human rights, of course.

    Posted by Pterrafractyl | April 25, 2024, 8:54 pm

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