The Case for Techno-Optimism (#7)

Ben Robinson: Our guest for this podcast is Ian Stewart, who is best known for being one of the founders of WIRED, but it’s probably not an understatement to say that Ian has turned his hand to almost anything and everything. A photographer, a sailor, an Olympic volleyball player, Ian has lived all over the world including a long spell in China and has worked across a range of sectors — media of course, but also technology, fund management, the charity sector, and most recently academia. The challenge we have with interviewing Ian isn’t running out of things to say, but instead knowing where to begin. So Ian, maybe we could start you off by asking you what you like about living here in Switzerland.

Ian Stewart: Well, first of all, Ben, thank you for having me and it’s nice to be back in downtown Geneva where it reminds me of my time in Paris. The best thing about living in Switzerland is that everything works. It’s a place where obviously it’s physically beautiful and for someone who likes sports, it’s a great place to be based. It’s also central in Europe. I often say that New Zealand where I’m from is very much like Switzerland because it’s a small country with a large foreign population where there’s a lot of farmers and farms and sheep and cattle. The only difference between New Zealand and Switzerland is that Switzerland is surrounded by an ocean of people, whereas we’re actually surrounded by an ocean of water. Otherwise I find it a very comfortable place to live.

BR: Comfortable isn’t the same adjective as exciting. Do you miss the excitement of living in San Francisco or Beijing?

IS: You’re absolutely right. We tried at various attempts to get our 25 and 28 year old daughters interested in living in Switzerland, but they wouldn’t think of it. They are the big city kids that I grew up as and there is a certain lack of buzz. There are certain things happening here. The engineering and certain sectors of finance and pharma and certain areas of Med Tech are growing and booming, and that makes for an interesting environment for an investor or someone who’s an entrepreneur. But for a lot of the stuff that I do, which is consumer focused and technology focused, there isn’t much happening here, but it’s the center of Europe. It’s an hour to Paris, it’s an hour to London, and it’s an hour to Venice. It’s not hard to get around, and as a base at someone at this stage where I spend more time advising and investing, and less time actually founding or driving, it’s an okay place to be.

BR: A lot of people say that Switzerland could be the Singapore of Europe i.e. an open economy on the periphery if you like, of a large trading block that would become the sort of gateway and the concentration point for information flows into that block. Is that the government vision for Switzerland? Is that your vision for Switzerland? Is that a viable vision for Switzerland?

IS: I think there are big differences. Switzerland is not part of the EU, therefore there are constraints for trading goods and services across the border. In addition, Switzerland is comfortable and the population is not worried about anything in particular and that makes them less hungry. Singapore is the opposite. Not only is it part of the ASEAN region and has been accepted as a financial center hub for a number of years, decades now and therefore has a very clear position amongst its neighbours, it’s also worried about them all the time. Singapore is the smallest member of ASEAN. It’s a tiny physical country and it’s surrounded by very large neighbours who occasionally get into conflicts with themselves and each other. More themselves than each other. There are obviously cultural issues and religious issues that create tensions in and have created tensions in Malaysia, Thailand, Indonesia and the Philippines and that worries Singapore and I think that sense of concern helps create a nationalistic fervour and drives energy into innovation, which isn’t necessarily the case yet. People are comfortable in Switzerland. They’re happy in Switzerland. There isn’t that same drive, and again, as I said, Switzerland not being part of a clear trading block means there are barriers to using Switzerland as a base for innovation and new.

BR: Is Singapore still as hungry as it was because clearly it has found material well-being, standards of living have increased a lot. Is Singapore still as hungry as it was?

IS: The short answer is I believe so. The tension and concern about its neighbours has not dropped over the last 30 years. If you look at the incidences of problems in near neighbours, they’ve actually risen, not fallen as their time since independence for some of them has elapsed. So that tension still exists. Within Singapore itself, there are obviously tensions to do with the mixed races there, the relationship with China, the relationship with Hong Kong. Hong Kong, of course, their position has been radically changed since the handover to the Chinese and obviously more recently, and I think all of this plays into concerns about stability in the region for Singaporeans. So yes, I still think they are hungry and I still think they have this sense of I need to do things now rather than wait.

I come from a branch of economics where I believe that smaller systems work better than bigger systems, and that’s true of companies or countries. I think there are efficiencies of scale up to a certain size, but I think most things seem to grow beyond that and become lumpy and inefficient.

BR: To come back to Switzerland, two questions. Firstly, is it a mistake to not be part of the EU and to try to chart a different course? And then secondly, is it okay to be a comfortable nation? Can Switzerland as a comfortable nation continue to be as prosperous as it is?

IS: I think it’s dangerous to be comfortable. I’m all in favour of Intel who said that the appropriate attitude towards building anything is to be paranoid all the time. I think applied paranoia is a healthy attitude. So that question first it’s better not to be too comfortable because everything in life is attrition. So I wouldn’t assume that everything you have now you will have in 50 years’ time or 100 years’ time.

The first question is a political question. I come from a branch of economics where I believe that smaller systems work better than bigger systems, and that’s true of companies or countries. I think there are efficiencies of scale up to a certain size, but I think most things seem to grow beyond that and become lumpy and inefficient. So I’m not a big fan of the vision of the United States of Europe.

Europe as a loosely knit, coherent Federation of independent States makes a lot of sense to me. If there was a way to get to a point, and at some at one point at the beginning of the Brexit process, I was wondering if that would be an example so that they created a tiering system within Europe and went back to the original 1957 idea of a looser Federation of Independent countries. I thought that would be good, and then maybe being part of that made sense for smaller countries, but given the United Federalists stance of Macron and others to create a United States of Europe supposedly to compete with China and the US, I think I’d stand back and watch for a while.

I think small is good for reacting to change, and in general the fact that we’re small, the fact that we have governance systems that are devolved, the fact that tertiary education system that deals with some of the challenges we’re talking to are quite good. I think it means that Switzerland’s probably in a good place. So I’m not worried about Switzerland as a country given the changes. On the contrary, I think it’s probably well placed to do it.

BR: Given that it’s difficult to be Singapore without being part of the European Union, and given that you wouldn’t advocate for Switzerland joining the European Union, what is the economic model for Switzerland and with 8.5 million people, can it continue to be a very wealthy, prosperous, fast-growing nation? What’s the model?

IS: So Switzerland has a bunch of things going for it first of all. Central location is amazing. All right, so borders notwithstanding, being in the middle of everything makes a lot of things simple — meetings, transport exchanges are all easy from here. Its governance system works. It has this nice devolved governance for a lot of the things that make the Swiss system function, which I like. I’m not so sure that’s great for education because it’s slightly too much variation in education across cantons and communes, but in many other things it works really well. Its attitude towards taxation of foreign organizations, its attitude towards foundations and the set-up of both head offices and non-profit organizations is healthy. I don’t think Switzerland has many challenges. I guess what I’m saying to you is I don’t think Switzerland needs to be the Singapore of Europe. I don’t think it’s necessary.

I do think that there are things that we have to be aware of. I think there are things that are going to be challenges for Switzerland going forward and there is an issue both related to the EU plus what’s happening east of here, which may give Switzerland some concern at some point. Switzerland has been under a great attack from the taxation departments of a whole bunch of countries. The loss of the banking secrecy, whilst a good thing in some governance ways has been harmful in revenue ways, but I think that was always going to happen. It was just a question of time. So honestly I think Switzerland’s weathered pretty well some of the waves that have been crashing upon it over the last few years. So I’m not concerned about Switzerland.

Now if you want it to be a burgeoning, booming start-up center, that’s another question. I think as I said, there are challenges, because there’s no single home market because there aren’t many investors who’ve built successful companies to come back and become examples for the younger entrepreneurs. We don’t have that ecosystem here. The venture capital system is full of advisors and accountants and lawyers rather than entrepreneurs. I think that’s a problem, but I don’t think Switzerland as a whole will suffer because of that. There’ll just be that problem with the start-up ecosystem. That will always be a problem.

BR: I agree with you there’s very adaptive ecosystems in Switzerland, but if you believe that we’re going through a paradigm shift, are the incumbent organizations in Switzerland going to be capable of delivering the same growth and prosperity this country, or if a new generation of companies is needed? Is this Swiss environment suitable for building new companies and a sufficient number of new companies for Switzerland to prosper in the new era?

IS: If we break that question down, there’s three bits to it. One is to define what exactly the changes are, so that we know within what context we’re trying to judge the country’s ability to work within it. The second is the issue about new companies, and the third is the issue about existing companies and their ability to transition. If I deal with the first question first, the two main challenges facing forward are digital and loosely being labelled SDGs now. The SDGs are simply one way of shorthand of talking about it but concerned about environment, concern about waste, concern about the oceans and the rise in consumer populist icons that then seem to do a good job of driving activity change. Digital change plus concerns about our consumption model in general I think the two big drivers, and of course you’ve also got China and Africa and other things and immigration, but there’s a fair number of things and I think the two key things, unlike them, a lot of people think it’s China and immigration, I think digital and concerns about the consumption model I think are going to be bigger problems going forward.

Now within that context, Switzerland has a reasonable education system and has two very good tech schools. It has an awareness and appreciation for the need for adaptation to issues, and I think therefore that it’s not a better environment for people to think about these things. Actually doing them is something else. I do think there’s a problem with digital competence in the C-Suite level in Swiss large corporations. I think that’s a challenge, but that’s a challenge everywhere. That doesn’t put Switzerland at a lower standing than anyone else because of that.

I do think we originate a lot of good technology and technology ideas here. It’s just the market’s not big enough necessarily to create the companies here or run them from here, and the UK suffers from this as well. Right. The universities produce really good IP and good science, but practical implementation tends to happen in the US where a bigger home market makes it possible to try things out and make things work before they take them abroad or anywhere else. So I think Switzerland does have good science and it does have reasonably adaptable businesses. I don’t think it’s a problem. I don’t think it’s a bigger problem than it is for anywhere else. In terms of relative position advantages vis-a-vis the other countries, I think being small is helpful. I think being able to make decisions quickly is helpful. I think to be able to change their mind quickly is helpful.

If you look at the problems, just the mechanical problems of getting Brexit sorted out, everybody needs to agree for a change to happen. It’s very hard to do anything in that respect. We had the 30th anniversary of the world competitiveness report at IMD last week and it was pointed out that the country doing terribly well when we first issued it 30 years ago was Japan, and if you look at where Japan is now, it suffers from the same problem. It’s a small country, but it has big companies. It’s hard to change direction. Institutions are hard to change. So I think small is good for reacting to change, and in general the fact that we’re small, the fact that we have governance systems that are devolved, the fact that tertiary education system that deals with some of the challenges we’re talking to are quite good. I think it means that Switzerland’s probably in a good place. So I’m not worried about Switzerland as a country given the changes. On the contrary, I think it’s probably well placed to do it.

BR: Because it’s inherently small and adaptive.

IS: And smart and hardworking. Yeah. All of those things. The risk is political if there’s a war somewhere. Being small is not good in those circumstances, but it’s also smack in the middle of Europe so physically it’s hard to get to.

I also thoroughly enjoyed my time at business school, so it was a great year and it gave me tools that I didn’t have before, but more particularly gave me a sense of the world, which I didn’t have before. […] it was really the contextual stuff that I got out of the school, which was cool, more than the tools itself. I got a picture of the world. I came out understanding how the world worked and that was terribly useful.

BR: So if I’m not wrong, the thing that brought you to Switzerland in the first place was attending IMD, the business school in Lausanne, and I think that it was through IMD that you met Louis Rossetto and Jane Metcalfe, your two co-founders at WIRED. Is that right?

IS: Indirectly, yes. For a period of time I was a photographer from leaving university where I did Math, Particle Physics and Computer Science. I was a photographer for 10 years. In the last three or four years of that, I was in Paris and while I was in Paris, I worked for People Magazine, the American People Magazine, and photographed American celebrities in Paris and French celebrities and starlets and things, and the editor of People Magazine in Paris, Kathy Nolan was a great friend and still is. When I went off to business school to try and see if I could connect the two sides of my brain, the creative side and the logical side. It meant that for me, I was trying to find a way to marry the idea of business and business building. I’d been exposed to it from my years as a photographer with the fact that I was essentially a writer and a photographer at the time and wanted to create something, so I was already in that mind frame when I went to business school.

When I came out, Kathy contacted me. A friend of hers, Jane Metcalfe then, Ducette now had a sister who had a relatively new partner, Louis, and they had a magazine in Amsterdam at the time called Language Technology, which talked about of all things at that stage, machine translation, which isn’t a terribly sexy subject. Wasn’t a terribly sexy subject then, is more of a sexy subject now because it’s one of the facilitators for machine learning and AI, but Louis had used the technology as a way to talk about the world in ways that I hadn’t seen before. If I hadn’t been to IMD and done the MBA, I don’t think I would have been of use to them. I’m not sure Kathy would have suggested to Lane and Jane that they met me, so I think that IMD was certainly the catalyst for that. I also thoroughly enjoyed my time at business school, so it was a great year and it gave me tools that I didn’t have before, but more particularly gave me a sense of the world, which I didn’t have before.

And then as we realized that other technologies were coming along and as we became aware of the work of Marc Andreessen and his team at the National Center for Supercomputing of America in Chicago, we realized that there are a whole bunch of technologies happening and we all got very excited about how much the world might change because of that and we were really convinced that it would be changed, and I can tell you that no one else was at the time. Very few people were at the time and I think that’s what drove it.

BR: Did it succeed in fusing the right and left sides of your brain together?

IS: It helped a great deal. It allowed me to use both sides in trying to solve problems while I was at school, and I use the same attitudes of problem solving when I came out, but a lot of it was context understanding. My father was a political economic journalist at the New York Times, so we’d had discussions about how the world work when I was a kid, but in my own working life I was either just doing science or I was just taking photos and writing. IMD gave me a sense of the connections between government and society and companies and then finance and then marketing, all the rest of it. So it was really the contextual stuff that I got out of the school, which was cool, more than the tools itself. I got a picture of the world. I came out understanding how the world worked and that was terribly useful, and I think that’s what made me useful to Louis and Jane.

When we launched and through that period, Louis was always the editorial voice. He was the driver. It was his thing, and Jane was sales, front of house, advertising and more on the generating revenue side, and I was, I think my internal title was dollars and cents. I worried about money and people and processes. So I was the suit.

BR: Okay, so we know how you met Jane and Louis, and how did the idea come together? How did you know, how did you perceive that there was a gap for a magazine like WIRED?

IS: We met in 1988. That’s four and a half years before Wired launched and at that time Language Technology, as I said, was a really cool but slightly bizarre magazine talking about how machine translation would change aspects of society. So the attitude of WIRED, which was how technology impacts society rather than talking about the technology was already in Language Technology. As Louis and I talked things and we became friends instantly because we had similar attitudes and stuff, Louis, just to be clear … and I had also been an editor and Louis had also done an MBA, but in the balance of roles as it went forward, Louis was clearly the stronger editorial voice and I ended up doing more of the business stuff, at least at that stage, and I was helpful, I guess I think he said so himself in reorganizing the business model and the business plan, but Language Technology was the start. It then became something called Electric Word as desktop publishing came along and Louis realized the impact it would have on the ability of new voices to create platforms for messaging… desktop publishing was a very big deal to Louis.

And then as we realized that other technologies were coming along and as we became aware of the work of Marc Andreessen and his team at the National Center for Supercomputing of America in Chicago, we realized that there are a whole bunch of technologies happening and we all got very excited about how much the world might change because of that and we were really convinced that it would be changed, and I can tell you that no one else was at the time. Very few people were at the time and I think that’s what drove it. But we also realized together that you couldn’t do an English language magazine talking about world change from Amsterdam in the European market with all the languages that were there, and it became clear that WIRED needed to … well the new project expanded from Language Technology then Electric Word and then became a project which we called internally Millennium, needed to move to somewhere in the US and San Francisco of course was the obvious place since a lot of the work was taking place there. There was also good sources of venture capital. There was a lot of tech companies there and WIRED found its name and its home in San Francisco and we launched January 1993 with Issue 1. So that was four and a half years after Louis, Jane and I met.

there was enough demand that when it hit and because the product didn’t disappoint, we started receiving subscription checks to the tune of a thousand a week – where each check was I think $45 so that’s $45,000 a week coming in. We couldn’t rip those envelopes out fast enough, grab the checks and run down to the bank, and that’s what kept us going when we ran out of money after the first edition.

BR: So this is interesting because again, if I’m correct, I understood that you basically threw everything at the first edition, so much so that if it hadn’t actually had some decent pickup and some people subscribing to it, that you would have run out of money before you could have issued the second edition.

IS: It’s true. It’s partly true because we didn’t have very much money. Throwing everything isn’t difficult when you don’t have very much.

BR: I suppose it’s been turned into one of those sort of, you know, urban tales that — –

IS: No, but it’s largely true. It’s largely true. We had raised through basically a friends and family round, including Nicholas Negroponte of the MIT Media Lab who took money out of his own pocket rather than the fund he was a GP on. I’m not sure he told his wife about that.

BR: He probably did later.

IS: I think later when it was fine. It worked out fine, but so we raised a total of 250,000 US dollars. That’s nothing.

BR: Yeah, to put into a new magazine in those days.

IS: In those days, we assumed we needed basically 4 million to launch a magazine because it usually took you two years, maybe more to get break-even. So you needed enough runway to last that long. We had $250,000 and in addition we were using an eight color press, the most expensive press in the world. A lot of people would argue that wasn’t necessary. I think Louis’ argument and I saw it work, was that the more reasons people have to talk about the magazine, the more communities get interested in it and the more people talk about it. So we had this 8-color press. We had an extremely expensive print run and cost process in spite of the fact we were doing everything in desktop publishing, which saved costs elsewhere, and that meant that most of that 250,000 disappeared in the first month, and yes, we would have gone bankrupt if certain things didn’t happen, and we didn’t actually get Issue 2 out in February. It came out in late March.

BR: So you now teach entrepreneurship at the IMD business school. Is this a launch strategy that you would advocate for others? Because arguably it’s not counter-intuitive because the new world is one where in most markets you’re trying to trigger network affects, demand side economies of scale and you need a big bang because you’re trying to solve the chicken and egg problem. So at the risk of having sort of slightly over thought it, would you advocate for big launches and throwing everything at it trying to kick-start network effects?

IS: Sometimes. I think it depends on what it is you’re doing and I think it depends how dependent you are upon the timeframe. In our case publishing timeframe meant that we’re supposed to get Issue 2 out pretty soon after Issue 1, and if you have to take time to raise money, it’s a bit difficult. I think it depends. I think sometimes it’s good to have a big bang launch and other times you need to make sure there’s enough money in the bank to pay for Issue 2, or months 2 salaries and so on. So I’d have to say in general, no, but we were lucky. The thing that saved us were subscription checks. Now it’s important to understand that in the United States people didn’t, in those days, I think it’s still true, they didn’t subscribe to magazines because there were these massive magazine stores where everything that was being published in the country you could see on the shelves. You could pick and choose and you could have different things every month.

In the UK where my magazine experience, my publishing experience had happened, the stores were tiny because real estate was expensive and so the average store didn’t carry all the titles. So the only way to be sure that a niche new title was there was to subscribe because the news agent wouldn’t necessarily carry it every month. So we were not expecting subscriptions in the US but there had been such a pent up demand for it. Louis and Jane had been walking the streets of all over the US, Madison Avenue and publishing houses and the tech companies for two years before the launch, because Electric Word, we shut that down two years before we launched WIRED, and we had developed an awareness of what was going on. So by the time we actually launched it, we also had some crazy inexpensive bus poster campaigns, which people are very excited about.

But there was enough demand that when it hit and because the product didn’t disappoint, we started receiving subscription checks, which we just hadn’t expected to the tune of a thousand a week, where each check was I think $45 so that’s $45,000 a week coming in. We couldn’t rip those envelopes out fast enough, grab the checks and run down to the bank, and that’s what kept us going when we ran out of money after the first edition long enough so that we could raise external funding to get a few more issues paid for, but we were still scrambling. I mean, even the round we did in March wasn’t anywhere near enough to get us going through the two year cycle. It was nowhere near 4 million. It was a few hundred thousand more, but it kept us going for a few more months and that was because we weren’t a technology company. We were a magazine company talking about technology, so all the venture investors we were talking to would have been delighted to support us if we’d been developing our own tech, but had no interest in someone talking about it.

Now it changed a little bit later when we started developing Hotwired our search engine and the various other digital components and then it became easier to raise money and to hire people, but when we were just a magazine, no one cared. The consumers cared, fortunately and our subscriptions and readership just shot up and we won an American Advertiser Magazine Award in our first year, which is unheard of. So the product was good. We did super well with the product, but we should have died month one.

BR: I suppose it’s difficult sometimes as an entrepreneur to attribute success in part to luck, but do you think you had luck around this whole area of subscriptions because clearly in markets where subscriptions are prevalent, there’s a barrier to enter it because you’ve got to displace other people’s subscriptions. But maybe the lucky break was that since there wasn’t a subscription model in the US and you kind of introduced it, was that the lucky break?

IS: It did exist. It just wasn’t common, as common as it is in Europe. We’re certainly lucky and I have to say I’m a big believer in admitting that luck plays a role in everything. I remember A Tipping Point, the book talks about how it was fortunate that certain people were at a certain part of San Francisco at a certain time when a certain school was doing things and Rank Xerox was doing certain things, so Xerox Labs and their Xerox Park. So I think luck does play a role in everything. Who is it who did that study, was it last year of the top venture capitalists on Sandhill Road? So the home of venture capital outside of San Francisco, and the percentage of, even the best VCs of their success rate was really small. It was 5 to 10% because there were so many things that can make a company fall over even when you’ve got the right team and the right idea and the right money, and there’s a lot of things that you have to get through to make it work, and so, yeah, luck helps. Now I love the — — is it the Gary Player story where he was being interviewed after a big tournament and the interviewer said something about, gee, that was a lucky shot on the 15th, an eagle which gave him a two point lead and he won by one, and he was a little taken aback by the comment and his retort, well-rehearsed by other people now, is that “it’s a funny thing. He said, I find that the harder I work, the luckier I get”. So luck with a bit of effort and an ability to recognize the lack is terribly important, but yes, I think luck played a part in our surviving that first year.

BR: And then the stuff that isn’t luck. Can you bottle that up? Can you teach that to entrepreneurs?

IS: We try. We try as investors. We try as some mentors. We try as teachers. I think there are things you can do to increase someone’s probability of success. I’m afraid. I do believe that there are certain characteristics of being pig-headed and, and a believer in what you’re doing and wanting to convince everybody that really are either born or learned from family. The nature-nurture argument is not one I want to get into, but it’s certainly before you get to school and before you learn it at university or business school about how to do things. So no, I think there are certain personal characteristics that make it much more likely you’re going to succeed. Having said that, there are exceptions to everything…

BR: What would you say are the personal characteristics that positively correlate with success?

IS: Pig-headedness is one.

BR: Is there a better way of putting that? Maybe…

IS: No, I don’t have a better way than saying pig-headedness. I think here’s the thing. Personal drive, salesmanship, the ability to sell something. I’ve seen good companies with reticent CEOs fail and I’ve seen not very good companies with an inferior product do really well because the guy who’s leading it can convince anybody in the room, can carry a room and can lead people from front. So I think, pig-headedness and salesmanship are two very useful characteristics. I actually think they’re more important than anything else. Now you can learn finance. You can learn marketing. You can learn management. You can learn a whole bunch of other stuff. But I think pig-headedness and salesmanship are hard to learn from scratch.

BR: Let’s get back to WIRED. I mean, it’s famous for many reasons, but I think to my mind at least it’s most famous because it was so prescient in predicting the extent to which the internet would have an impact on society and on business. I mean, you coined a lot of the language that we use about the internet today. So forgive me if I’m wrong, but I think crowdsourcing was a term you came up with, the long tail, vaporwave. I think these are all words or terms that were originated from WIRED. So my question is how were you able to foresee so well what was coming, and secondly, what was it like to be in San Francisco at the time that the new economy or the foundations of the new economic model were being built?

IS: It was tons of fun. Louis has been threatening to write a book about the beginning of WIRED for a long time and hasn’t. He wrote a fiction book called Change is Good, which I recommend people read about. I think it’s about a week and a half in the life of a company putatively like WIRED or a technology firm, but it’s fiction, but if you know the period at the time, there is a lot of real things and real people in that. I think it was a time like … the second question first. It was a time of huge energy. There are all sorts of things going on and San Francisco became a place that attracted people to it, so our being in San Francisco helped. The three of us actually had similar interests in that we all had technology in our backgrounds.

Louis and I had both done a business degree and we were both media fans. In his case it was consuming television on Saturday mornings as a kid where he says he learned more from Saturday morning television than he learned from school, and for me, my father was a journalist, my mother was a magazine fanatic and so I grew up loving print. So we were naturally disposed towards being interested in the impact of technology upon media in general and then the world as an extension came from that. But Louis was absolutely the core driving voice in that. But then once we were in San Francisco, we became this lighthouse and people came towards us. We had a fabulous team. You know, Kevin Kelly was on board pretty quickly. John Battelle became a managing editor, but also a lot of the writers in the region, both fiction and nonfiction writers were attracted to us because we were the first place that took that attitude.

Now there were other magazines around at the time. They were either more business oriented or more new era world oriented, a little bit more about lifestyle than they were about how the world worked. We were, I guess grounded in practical things, but very excited about real change and we attracted to us fantastic writers so that helped us. The core team, the core editorial team was Louis as editor, Kevin as executive editor and Jane, but John Battelle as Managing Editor and that was the core which helped us manage our environment, but we had the best writers in the world come to us. It was just fabulous. Editorial meetings were tons of fun. The stuff was either all over the wall or all on the floors, but the discussions in the rooms on the surface was just, it was amazing. I didn’t spend enough time there. I was out trying to do business deals in the UK and elsewhere, but every time I came in, the place was just tremendously exciting. So it was great fun. It was a roller coaster for all the business and other reasons and that we messed up our IPO and other things, but it was just tremendous fun. I never felt that that period was work. Never.

BR: When you look back at that period and the kind of companies that were built at that time, was it obvious that they were going to be the giants that they have become? So I guess one example right from the very beginning that was, I wouldn’t say dismissed by public markets but where the full potential of the company wasn’t immediately appreciated would be something like Amazon. Right? So back then, given the extent to which you guys understood the new world, and I’m just going to quote you from the first edition, a line that I read from the first edition, which is so, so prescient. “The digital revolution is whipping through our lives like a Bengali typhoon” written in 1993 so did you know that Amazon, for example, was going to be such a big company?

IS: Louis is really good at those lines. Louis created the best strap lines in the world. He was able to create imagery in a single sentence, which is glorious. The answer is yes and no. We could see what was going on. We could feel what was going on, but it’s never easy to pick winners even if you know what you’re doing. So I’m not sure I could have told you which of the people we met was going to be driving this forward in a massive way. But then I would qualify that by saying the same thing that every investor, every investor who’s lost and made money over a period of time says. It’s not the idea and it’s not the company. It’s the people. It’s the individuals, the drivers. Are they pig-headed and can they sell something? So I think Jeff, it was evident from the beginning that he had this drive, although selling books online wasn’t the sexiest idea around at the time. There were lots of other sexier ideas.

But if I look back and think about the people we met and the individuals concerned, it’s a bit like I think, someone said to me yesterday, he was an Italian, a successful entrepreneur and investor. He said that he can tell when things are happening, waves are happening, but he knows from personal experience it’s hard to choose which, so he just invests in all 30 in a sector and he knows that some of them will do really well and if the sector is good, most of them will do okay, but it’s very hard to choose the best even if you think you’ll know what you’re doing. I would have biased my choices if I had any money, which I didn’t in those days and invested in probably some of the better ones. But I also know now that the right thing to do would have been to invest in a whole bunch because it’s hard to tell who the winners are going to be.

Remember that Amazon has done a bunch of turns left and right and up and down since that starting point, and that ability to change direction and develop new ideas and create a culture within his company that encourages exploration and trying new things is what has enabled him to become and create what he’s done today. Jeff was kind enough to turn up at our party last year. We had a 25th anniversary party in San Francisco organized by Conde Nast, in October last year, and Jeff turned up personally with his retinue and celebrated with us, which was pretty nice.

BR: And when you think about Amazon, for example, and some of the other companies at that time that would go on to change the world, but that potential hadn’t yet been spotted by public investors. Do you think we can draw a parallel between what’s happening today, i.e. the disconnect between private valuations and public valuations and the difficulty companies are having traversing from private to public ownership?

IS: The principal difference with today’s market and the problem they create for themselves is that the private market is holding onto the companies longer. That’s partly because there’s so much money available. The cash available in the private equity space now is just extraordinary and so because they can avoid scrutiny, avoid public market scrutiny and because it’s an easier process to go through, a lot of companies choose to continue growing from private market sources. What that means though is a lot of the growth that the companies can experience both in revenue and therefore value takes place before they go public and the result is visible in the public markets in the fall of a great many of the IPOs over the last two years, because too much of the value has already been captured within the private equity space and the public debt markets simply don’t offer the upside that they used to. It’s too late in the cycle. That’s a big issue with public market appreciation of the start-ups that are coming to market today. I think they’ve been held in the private markets too long.

BR: So you think there’s the principal disconnect, which is …

IS: I think there’s too much money in the private equity sector and they’re holding on to the companies too long. In the old days, there was a limited amount of money in the venture capital sector and nobody got an exit until it went public, so there was a hunger to flip the company, if you will, give it its money, get it to a point where it was earning enough revenue, although in some cases in the 1990s of course, none of these companies had revenue and were already going public. You were only liquid when the IPO had happened and so people want to be liquid as soon as possible. I think partly there was a sense that things were a bit crazy and valuations were a bit nuts. So the sooner you got out in the public sphere, the sooner you could get out of the investment.

BR: Just to press you on that with a couple of real examples then. So we think about some of the companies that have come to market and where they haven’t seen the normal post-IPO pop like Uber for example and Lyft, those might fit into the phenomenon that you’re talking about, which is where most of the value creation happened before they went public.

IS: Or at least a large chunk of it, which means there’s less leftover and there may be more for these companies, but at the moment the market doesn’t think so.

BR: But if we think about another example like WeWork, is that the same issue that all the value creation happened where it was private or is that just an isolated case, or is that an example of where what public investors are looking for is different from what private investors are looking for? Maybe a business model question.

IS: So I think there’s a couple of things. First of all, I do agree there’s a bit of a bubble in the venture side at the moment in general, in the same way there was through the ’90s. I think it’s more disciplined than it was. I think people are more careful. But yes, there’s the same sort of… well there’s some of the irrational euphoria that was taking place in the ’90s is also taking place now. But I think there’s more learning. They’re more smart. There’s more professionalism in the companies and we’ve learned to scale much better. If you look at some of the companies that come out, valuation aside, the ability to scale a model is stronger than it was 20 years ago. So you have to be impressed at the way Uber has grown across markets, across countries, notwithstanding challenges in China and elsewhere, but those are as much cultural business issues as they are anything else. A lot of things about how we build companies today are better.

But yes, there are issues when it comes to the discipline that is imposed by a public market and the scrutiny of the press and investors and analysts commenting everyday about how well a company is doing. In the private sector, no one comments so that’s partly why valuations can get pumped up in a closed room setting in the private markets, and why you get, I think overvaluations of companies before they become public. WeWork is a different case though. WeWork had some of the same advantages of being in the private space and therefore being able to push valuations without necessarily the analyst and/or public market scrutiny that they would have had if they’d been public earlier, and so that was a benefit of course for anybody riding that train or that rollercoaster up until the recent IPO fiasco, and I think it really is a question of how you view things.

There are questions, of course. Many people have written about how they don’t understand how WeWork could describe themselves as a technology company when it’s a real estate play. There are technology components. There is a start-up company component within the environment. There’s a lot of support for start-ups. WeWork also ends up with equity in many of the companies that they support, but in essence it’s a real estate play, and so the valuation that they were aiming for was based on all comparables in the space too high, and again within the private market space where you’re only convincing a bunch of people in to two boardrooms — in this case, Japan and Saudi Arabia — it was okay for a while. You didn’t have a whole bunch of other people questioning an IPO document for two months prior to a launch to set a price, and it was clear when they started talking to intermediaries and potential institutional investors about their model based on true numbers that there wasn’t going to be support in the public market space.

I think one of the things we didn’t talk about enough was what that would do to politics, the ability to become isolated within a political sphere because there was no longer an editorial voice deciding what was and was not appropriate within either a newspaper, a magazine or on television.

BR: To change directions slightly here because the internet has disrupted lots of businesses, a lot of industries, and clearly one of those industries that it disrupted was the industry in which you worked, the media industry, and it did so by lowering distribution costs so that anybody could publish anything and reach anybody, and the economics as a result were completely changed, and so the question I guess is did you foresee this and is that one of the reasons why you sold WIRED when you did?

IS: It didn’t have an impact on our selling. That was purely a function of problems with our IPO because we were supposed to go public and the fact that having set a spending schedule and an investment schedule, assuming that influx of money from the IPO, we suddenly found ourselves with a cash problem very, very quickly and had to take what we called vulture capital money to stop us going belly up when the IPO didn’t work.

The IPO story is another story in itself, so we actually no longer had full control of the company from that point forward. So our timing and our decisions were not entirely our own. There was a battle inside the firm for the two years following that until we eventually sold. So no, it wasn’t a question of market timing and thinking, oh, media is changing. On the contrary, we thought we had a model and we thought we had an understanding of how multi-channel communications both for readers and for advertisers and for other third parties who might get involved. We thought we had an image of how that might work that would have carried us forward through what eventually became the downturn in the beginning of 2000. But yes, on the question of what we saw and what we didn’t see. We saw some of the things. I don’t think we saw all of them.

We talked about the fact that obviously, and it was part of the original idea when desktop publishing came along, but then when online media came along and there was almost zero…certainly zero marginal cost of producing an article and almost a very low cost to actually creating a platform which you could publish. That was obviously something we talked about a great deal. We also started to talk about literally the fact that actually it put more power in the hands of the consumer than the publisher because search allows you to search for anything. So if you’re mad keen on fly fishing and you can’t get a fly fishing magazine, you can find everything you want to know about fly fishing online. I think one of the things we didn’t talk about enough was what that would do to politics, the ability to become isolated within a political sphere because there was no longer an editorial voice deciding what was and was not appropriate within either a newspaper, a magazine or on television.

The fact that anybody could publish anything meant you got extremist views — North, South, East, West — which were absent from general media, and it meant that the consumer no longer had someone editing for them. It also meant that you could read only what you liked because it was very rare. It would have been impossible for publication to only published extremist views around the world. In those days, the cost would have been prohibitive. Online you could do that. So suddenly people found themselves happily in their information ghettos only reading what they wanted to read, only conversing with people who agreed with them, and that polarization, which was one of the two big causes of polarization in the media today, I don’t think we talked about enough. The second is the advertising click-through.

BR: Yeah, I was going to say, even where you have publications that still have editors, there’s been a general move to sensationalism anyway because in an effort to attract eyeballs in an industry that’s funded by advertising, there’s the general sort of move to sensationalist and debasement of truth. So what you’re saying about the fact that anybody can publish anything leads in general to sensationalism, but also within organizations that still have editors, there’s a move to sensationalism as well.

IS: Sadly so. Even within good media and the mechanics of it, people don’t always understand, and again, in the old days, you not only had an editor decide what was worth putting in the paper, but they also decided what was on the front page and what went on the op-ed page and how the magazine was or newspaper was balanced. So whether they were left wing or right wing, whether they were a North or South paper in terms of development…

BR: What do you mean by North and South?

IS: So the North is traditionally the term was used for the developed nations versus the South developing nations, whereas left and right across the political spectrum. Whichever part of your particular spectrum you sat on, you decided what you thought was appropriate and you genuinely got rid of dross and you generally did fact checking and you generally created a reasonable quality product.

BR: Reasonably balanced.

IS: Yes. Now, some of it was entertainment oriented, so News of the World in the UK and The Post in the US and other places. There were magazines and newspapers which were particularly aimed at essentially sensationalism even before the internet came along. So they existed beforehand. What you’re talking about is the impact of click through. In the old days, the Times of London used to sell its advertising at 3,000 pounds a full page, and the Financial Times used to sell its advertising at 27,000 pounds a full page. That difference was because of the readership. We could define the readership based on who our subscribers were. Subscribers filled in a form and we knew more or less who they were. Telling the advertisers who our subscribers were was enough to justify the 27,000 pounds. That’s not enough anymore. They want to know, did they actually look at the article?

Did they click through to see the article? It’s not enough to say, give us the money for every page we put in our newspaper or online periodical because we’ve got great readers. The advertisers want to know did they look at it now. If you have to make sure that they looked at it, you want to make sure they look at it. To make sure they look at it, it’s hard to avoid tweaking the headline. It’s hard to avoid the words that are slightly more sensationalist. It’s hard to avoid if you’re ability to pay bills at the end of month is dependent upon advertisers saying yes because your readership has clicked through. It’s hard to avoid skewing and that’s unfortunately what’s happening in traditional media today.

BR: How worried are you about that as a media person, and also how do we get back? Can we set the clock back? Is the genie out of the bottle, and because I suppose if you’re an optimist, you might say that in the immediate reaction to Donald Trump’s election, you saw a big spike in the number of people subscribing to publications like the New York Times, like The Economist. Do you think its readers were starting to appreciate the importance of fact checking and started to appreciate that the truth costs money?

IS: I’m generally an optimist. I think one of the things that characterized — -one of the things at our birthday party last year with Conde Nast in San Francisco when Anna Wintour was on stage and asked us, had they done a good job of stewarding our magazine since they bought it, and was there a big difference between the magazine now and before? Louis’ response quickly was that the big difference was optimism.  When WIRED launched, we were optimistic about what the new technologies would do for our world, for our societies, about the positive things. Today, if you read articles about technology anywhere in the world in WIRED and elsewhere, there tends to be this concern — concern about privacy, concern about abuse, concern about all sorts of things. So it’s a very negative world. The two differences were optimism versus pessimism and I still remain optimistic. Everything comes in waves and there are all sorts of things that will eventually change. Certainly I start to see whether it’s on YouTube or whether it’s in certain small media, an attempt to tread a middle road, to define what really is news rather than opinion and then show what the opinions are and reflect both sides. Louis and I talked about the timing for a return to the center for whoever wanted to produce centrist media.

At the moment, the biggest market, the market you would logically launch an English language medium in would be the US because it has the biggest English language home market, but the space is still occupied by the television stations. They still garner a very big chunk — I’m not sure of the numbers anymore. I’m out of date — but they still collect a bigger chunk of the advertising revenue than the audience they attract with support. So their percentage of viewership is down to X percent and I think they’re earning one and a half to two X, whatever the numbers actually are, and the reason for that is it’s much harder to duplicate that by buying up a whole range of alternative media. It’s an easy way to get to a broader audience very quickly, and that advertising revenue is hard to attract until they go.

So if the three big broadcasters in the US fail, then I think you’ll see people jumping into the center again with alternative, both online and offline media combinations, and as I said, I already see an interest among friends and online for people to have something which isn’t so polarized. How much of that will remain, how much of this we’ll go back to the center and how many of us will prefer to sit in our left and right bubbles is too hard to say, but no, generally I’m an optimist and I see this as just waves and I see it actually as an opportunity for someone who wants to do something more balanced.

BR: And what’s the equivalent of Europe of the cable stations? Who occupies the center ground and who needs to be displaced in order to put in place sort of digitally upgraded centrist voice?

IS: The first thing to say is, of course is Europe isn’t Europe. It’s a whole series of countries and I hope it never becomes the United States of Europe because I like the difference of countries and food and cultures and attitudes and approaches and even governance. But within that environment you’ve got a whole bunch of different things. So the Swiss for example, had that vote. It was a year and a half ago about whether to keep funding central media and as someone who is interested in the idea of creating new media, you might’ve expected me to vote against it to clear the ground so that you could create something of value because it’s clearly a costly exercise to have a national news organization that transmits in three languages, but I didn’t, I voted for it because it provides national coherence. It provides a center ground basis for news that the US doesn’t have anymore, and there are other countries that are the same. The BBC is not bad. Every country in Europe has different national news stations and private organizations, so non-government supported that I think do a better job of holding middle ground than elsewhere at the moment.

BR: Is truth a public good? If we define public good as an economist would define a public good, i.e. something which is generally good for the public and if you create a bit like street lighting, whatever, it’s difficult to exclude other people from using it once created, and also it doesn’t diminish with more usage. So if it’s a public good and public goods are generally provided by government, would you advocate for the truth to be provided by governments? I can see how already framing it in that way could lead to a slippery slope, but where do you stand on that and the question of governments providing some level of public information?

IS: So governments are still collections of people and people are flawed and people have their views. I think allowing any one group — government or private or social or religious or political — to have the monopoly on truth or monopoly on the idea that they are the truth isn’t necessarily healthy for society. I also don’t think truth is easy to define. No matter what people say, everything is opinion to a degree, and I think truth is found by triangulation. So I think the right thing to do if you’re trying to have a society in which people are given information, which allows them to work out what the truth is to have multiple voices, but clear and fair and reasonable arguing the point and then we work out what’s truth in the middle. Very hard to find absolute truth, either in current media or in history, because it’s always written by someone with a point of view.

BR: Just want to go back slightly because you said that you’re an optimist, and one of the big differences between WIRED as it was and WIRED as it is now is around optimism.

IS: Optimism about the application of technology.

BR: Exactly because we would say that, I don’t think this is our term, but you’ve got this tech backlash, which is in general a lot of voices in society have said that tech is a bad thing. Tech is taking us in the wrong direction.

IS: I’m surprised people aren’t talking about the new Luddites yet.

BR: Yes. The neo-Luddites. Yeah, so my question to you is, I like you am an optimist and I think if you stopped believing that society’s getting better, then that’s when you get Donald Trump. That’s when you get Brexit, and so my question to you is, what’s the positive narrative that we should be injecting around tech? Could you make that for us in a very sort of short, pithy statement, if that’s not putting you under too much pressure?

IS: Let me do the easy stuff first. I’m of course a subscriber to the notion that tools are tools and it’s all about who uses it rather than the tool itself, and so there’s very little in technology. In fact, I can’t think of anything in technology which is normatively bad or frankly normatively good. It all depends on who ends up picking it up first and using it first, and so our perceptions about how things are affected by how someone uses it, and in the case of Facebook and Cambridge Analytica having a clear and open story about one company misusing, and it’s both Cambridge and Facebook in allowing them to use the data. That one story very quickly made people worried and that worry has stayed because we haven’t seen a lot of evidence to the contrary that our data is being protected in any way.

So we are in an environment where, because it’s early, because some people on the not-so-good side, are faster at adopting something and then other people on the good side, again, — let’s define those things some time over a drink — are faster at adopting something, you have this wave of good and bad in application of technology. The reason I’m generally an optimist has nothing to do with the technology. It’s that generally I think people are good. So if you imagine it’s a wave of people going backwards and forwards, some bad people, some good people trying to make use of technology and there’s a lot of these than the only thing overarching that is if you think there are more bad people in the world, then it’s going to be generally negative. If you think there are more good people in the world, it’s going to be at some point generally positive, and because I think generally people are at heart good. I’m not worried about the technology because it’s neutral and eventually the number of good users is going to outweigh the number of bad users.

BR: Want to move to China? Because having lived there for so long, we’re very interested in hearing your perspective about China, and maybe we could start by trying to create a link between the conversation we’re having around media and China because one of the big differences we note between the Chinese internet model and the US internet model is that the US internet model is really predicated on advertising revenues and the Chinese one isn’t because the Chinese one is really built on micropayments. Which model do you think is more sustainable and don’t really want to get in the route of value judgment, but which model do you think is better?

IS: So first of all, I would question the initial premise.

BR: Ha, ha. You’re not allowed to question the question.

IS: There is advertising in China and there are micro-payments in the American system. So Amazon wouldn’t have survived if there wasn’t the ability to purchase things and some of the Chinese models wouldn’t survive if there wasn’t the availability of advertising to promote products on third party sites. So they both exist. But you are right that there are clear differences between the two models and they are as much based on cultural and economic contexts as they are in actual business model analysis. There was a great need for access to product, especially in regions outside the big cities which online suppliers provided in China. China is itself a massive market with very great differences between the poor areas and the rich areas, the areas that are more rural versus more city, because not all the rural are poor and not all the cities are rich. So that context means that certain things are more attractive to consumers than others.

Also there’s control of certain things. So much of the American, the beginning of the internet and the usage was about news and information and that’s heavily controlled in China, and so there wasn’t the space to attract news or enter information or enter entertainment oriented. There wasn’t the space allowed by the government to allow these companies to build, to DOE and some of the others notwithstanding. So it really was a transaction oriented market from the beginning, because information was controlled. So it’s the cultural and economic context and the governance context of the country which defined what business models were used first, and I don’t think either one is better. I think they’re both interesting. It does mean that the Chinese are greatly advanced on some of the eCommerce stuff compared to us because they just did that sooner and did it better and they have low tech with interesting high-tech components in it.

Now the telephone industry was fascinating when I first went there in the year 2000, 2001, 2002 when I saw very low tech telephones doing things that our smartphones weren’t doing yet, and that’s because that was the demand for transactions, for money, for payments and so on. So I don’t think you can say one is better than the other. I just think that they came at it from two different directions and there will be components of both going forward in both environments.

BR: If we believe that, again, coming from different directions, the US internet model is one where free speech is potentially under attack and the Chinese model where free speech was depressed, but where potentially there’s a big fight to open it up, how tenuous is free speech in the internet?

IS: It’s a good question. One of the reasons that we have the craziness on the internet in the United States is because it’s free speech, so people can say anything, which means you get all sorts of garbage at either end of the political spectrum, and that’s unfortunate for those people who are unable to judge whether it’s garbage or not, but it’s the fact that free speech is there that actually gives us the problems. Some would argue that the Chinese control would have never allowed that and therefore you wouldn’t get the polarization in politics that the US has if they had the Chinese model. Having said that, it’s also very clear that carefully stated and carefully presented, there is much more free speech in China now because of the internet than there was. It’s done in sometimes it’s an allegory. It’s done very carefully also. It’s very clear in spite of the increase in the monitoring of the internet that’s taking place in China and it’s constantly increasing both through applied machine learning and also people, they have also gotten looser in some areas. So it’s possible to be critical of certain things in China, which weren’t possible 15 years ago, and so there’s an interesting play. If you watch what they stamped down on and what they allow, it’s interesting and partly it’s because there are certain things that they would want to change in regions and by having the people talk about it rather than the government provides a push which is acceptable within the Chinese political sphere, which otherwise might be resisted by local governance in the region. So there are things going on which are interesting, but it is again a question of where each one started and what was allowed by the governing principles of the country at the time that defined where we’ve ended up. I’m not worried about free speech per se for the same reasons I’m not worried about the application of the internet in general because I think there are good and bad uses of it.

I do think what we need to do is provide a way for people to navigate. We talked a little bit earlier about the missing editorial role in traditional media. I think that’s starting to be played by individuals on the internet. So if I monitor, I still monitor Chinese media, both English language and Chinese language, but my Chinese language is not as strong as some, and so I have friends who have now built their businesses on monitoring Chinese media and providing external views for third parties, and I think that’s going to continue on, and those individuals act as editors because they provide a sense of what is sensible, what’s not and what the extremes are saying, and I think these independent editorial voices which allow us to navigate either languages we don’t know, but potentially subject matter or political areas where we’re a bit fuzzy on I think is a plus. And I think that’s the return of editorial guidance in the absence of a structure only possible because on the internet you can have independent revenue streams.

BR: And you think if we extend that analogy, this would be the equivalent of like having a blue tick on Twitter. These are people that have been independently verified as trusted sources.

IS: The problem with the blue tick is that Facebook decides who gets it and who doesn’t, and there are people I know who deserve one that don’t have one, and there are people I think don’t deserve when they do have ones, and Facebook’s decision about who gets the blue tick seems extraordinarily arbitrary at times, and also Facebook remember is driven largely by communities. If you read the legal text as I always do on these things, it’s community guidelines that decide as much as it is Facebook individuals, and if you get a very vocal community, whether it’s the religious community or an angry community, they can drive policy on Facebook because Facebook just simply doesn’t have enough staff to monitor it. So I don’t think it’s like the Facebook model. I think it’s more like the buyer ratings on Amazon or eBay or Taobao because the consumers themselves rate it, and it’s like book ratings. Although again, you get manipulation of book ratings, but…

BR: How would that get round this sensationalist problem, which is the things that get most read today are the most sensational? How would you get consumers to bid up sources based on their accuracy?

IS: So the sensation problem occurs when you’re going for mass numbers, absolute mass numbers. If you’re providing an editorial service, you’re not going to attract the mass people because they’re not interested. So the only people are gonna come to you are those people interested in editorial voice, and so in the first instance, you’ve naturally selected because of what you’re offering as a service. The others don’t care. They don’t want to look at it. But if you start providing a service, which is editorial, so you’re not writing, you’re not reporting, you’re just saying what’s worth reading and what’s not and why. You may be gathering the opinions around a particular area in a way that makes it understandable to people. That’s a worthwhile service and people are going to say yes, I liked it or yes, we don’t and if you offer example slightly biased towards one way or another, it’s going to be evident in the ratings very quickly. If you’re biased towards the left, the left is going to love you and the right is going to hate you. If your comments, negative and positive, are balanced, it’s a pretty good indication you’re doing a good job. I think in a subset, it’s mass media that suffers from the trolls and the noise and the inherent bias in trying to attract mass numbers. If you start to do it in a more segmented way, I think the problem is less.

BR: Do you foresee a world where everything is smaller?

IS: I do think we’re going to get segmented media. Yeah, definitely. In a sense, we already see this in consumer groups. Not in a big way yet. I expected to see more by now. I would have expected Facebook to be niched more than it has been and we still all use Facebook even though we complain about it, if nothing else as a means to review the media that we’ve signed up for. But yes, I expect more niche media to take over groups from the big mass media and that doesn’t mean they’ll die. It just means that we’ll have some niche media as well.

I, for example, one of the first media groups I look at in the morning is CNBC because it is business focused and because the headlines there are more attuned to the investments I have made and other things I want to worry about. And then I go to more general media afterwards and I have a bunch of things like that. There are even things I paid for. I’m a racing sailor and there’s not very many sources of racing sailor news available, so I subscribe and pay for the ones that are of interest to me. I think they’ll be more of that.

BR: You think there’s a future for you in the local newspaper you’re helping?

IS: I think there’s definitely a future for local news. I think there’s a future for niche news. The concept that we used to talk about in the magazine world is addiction. You want to be able to generate addiction on the part of your subscribers because they need to have that issue every month. They need to have that buzz of whatever the subject matter is that you’re talking about that they can’t get as well from anywhere else. Whether you’re able to do that depends on staffing and management and all the other things that go into building and keeping a company around, but I absolutely think there’s a market for it.

BR: Going back to China, the big news at the moment is Hong Kong, the Hong Kong riot. What’s your interpretation of the Hong Kong riots within a Chinese context? Because I suppose the simple lead for us is this is the autocracy of China under attack, but I think it’s probably much more nuanced, if you really understand that region.

IS: It’s complicated, of course. The 1987 agreement, which turned into the 1997 signature and handover between the British government and the Chinese government created a period of 50 years during which Hong Kong was supposed to have a semblance of independence, but it was always clear from the beginning that as soon as China was in control that they assumed it was going to be a transition of a time, not a 50 years on their own and then click… be part of China. The 50 years was hoped to give Hong Kong time whilst China evolved. At the time of the handover, China was much more closed than it is now post, but it was still much less the China of today, much less developed, and so there was the hope that, at the time when Hong Kong became fully part of China, that the transition will be less painful.

Clearly there are concerns. There have been concerns for some time, but they were elevated by one particular case. The notion that a Chinese citizen would be taken to China, extradited to China for prosecution that worried locals and is not an unreasonable concern, and China allows us certain leeway for certain places because they’re outside the boundaries. By the same token, they can’t be seen given it’s a big country and hard to manage to accept too much from anyone space cause they’re worried that would spread. And Hong Kong has a special case because of this arrangement and because it’s on a different side of the border and because Hong Kong’s position is clearly special within China, within Asia, but there’s a limit to what they’ll accept and the violence is, it’s a risk for Hong Kong. It’s a risk for Hong Kong’s people in general because at some point it becomes embarrassing and Chinese government doesn’t like embarrassment.

I’m surprised It looked like they were gonna come across the border with tanks a few weeks ago and it didn’t happen. So wise voices prevailed and it didn’t escalate in that way and they are patient so we’ll see what happens. It’s a tricky situation

BR: but do you think what’s at play is simply democracy in Hong Kong or do you think it’s also about wealth inequality and other issues that maybe aren’t talked about as much?

IS: All politics has all those elements mixed in. There are components that are economic based. I remember writing in my Master’s thesis about the fear that Hong Kong Chinese had during the handover talks that they weren’t gonna be able to make their money and get out before the Chinese came in. That sense of the big force across the border has always been there in Hong Kong. It’s part of what’s driven creativity and development there. Same is true in Singapore with its neighbours. I think all of these things are built into the Hong Kong question. I think it’s very hard to separate these things out, but as in anything which starts as one issue, people jump on board. Sometimes it’s noisy people who like breaking down walls. That’s not helpful and it’s dangerous for Hong Kong.

BR: Where do you stand on the question of economic growth in China? It’s clearly been an economic miracle, but some people argue that it’s a miracle that’s been sustained through a lot of cheap government debt over the last few years. Is China due or about to have a slowdown, and is it already having a slowdown that maybe isn’t being recorded as such?

IS: Suddenly the numbers that the government publishes both on its growth where we believe they understate it by the way, even at its peak and at the current level where maybe they’re overstating it need to be taken with a pinch of salt and usual external analysis and yes, clearly there is a slowdown already taking place and yes, part of the growth that took place and development took place was essentially free money, but not just from the government. It came from overseas. There’s a huge amount of foreign direct investment, which fuelled the growth that took place. There’s also a natural growth. You had hundreds of millions of people moving from farmland into the cities. You had the most Darwinian business environment you can imagine, where people who had not had the freedom to build economic models in their countries suddenly could, and there was this fierce, fierce, constantly fierce battle.

Foreign businessmen, friends of mine talked about in the nineties and later and even today about how fierce the competition is there. They were talking about how the Chinese companies treated them. But actually it’s how the Chinese companies treat each other. So it is a really quite Darwinian business environment, and I think that remains even with the slow down. Now a number of people have for some time been predicting a crash, and I, for one, am surprised that we haven’t had a bigger correction since. I’m sometimes surprised and sometimes not. They have very, very good bureaucrats, very, very good technocrats both trained in China and abroad, and they’re very, very good at managing complexity, and so maybe this, there is clearly a larger proportion of nonperforming loans within the local banks than is being declared, and the assumption has always been that the growth would eventually build within those areas to the point where the empty buildings would get filled and the empty highways would get filled and that, you know, if you’re patient enough, the holes would get filled by people moving in and growing and that the economy in general would grow and the developed population would grow, and the middle class would grow as it has done dramatically over the last 20 years. So in general, I’m not worried about Chinese growth. Yes, there’s probably going to be a correction. Will it be hard or soft? Hard to tell. Just super hard to tell.

BR: And you’re not worried that the trade war with United States is heaping an extra level of sort of exogenous pressure that will be difficult for these technocrats to manage?

IS: In a word, no. It’s a more nuanced answer than that. First of all, let’s say that I think that the complaints that the Americans and others have had about Chinese rules for engagement in China are warranted. IP control, which industries you had to have a local partner in and what they were able to do and the imposition of JV rules and so on, all of these things created a bias in favour of both China and Chinese companies, but that’s kind of what you’d expect since everybody wanted the market. So I’m not sure it’s unreasonable that they did this.

By the same token, it’s not unreasonable that people want to now reset the boundaries. China is no longer a developing country. A lot of things have happened and so to want to reset the rules I think is not unreasonable at all. The manner in which you do it as another question, and there are obviously issues about diplomacy or the lack of it, which might cause some concern, but the timing of it from the American point of view was the right thing. It’s only now with China in some sense of where growth is a little bit shaky and we are wondering about hard landing, soft landing. The US are taking advantage of that to try and get this change happening. So from the US government point of view, we’re leaving aside the manner in which it’s being done. It’s not an unreasonable approach and it’s not unreasonable timing.

From the Chinese side, I think it’s problematic only if it spreads to being a global issue. The US is one portion of its exports and exports are only one portion of the GDP of the market. I think if China decided that it didn’t care, it could probably play this long game for a long, long time and just refuse to sign anything and they’d be fine. So I don’t think at the margin the American pressure is enough to create a much bigger problem than they already have because the problem they have is significant. There’s the second question, which is the issue of the acceptance of the Chinese government amongst the Chinese population and many people have written about how people are willing to accept a lot of the things that government decides because the country is in a position where everybody can now make money. Everybody can do well. There’s an opportunity for everybody.

BR: So a tacit agreement…

IS: Yeah, so as long as opportunities remain then everybody says fine. It’s just the government. It’s the way they are. If that opportunity decreases, if people feel that they’re unhappy with governance and they can’t get out of whatever situation they’re in, they can’t do better and have their children lead better lives. Everybody in China lives for their children. Well actually they used to. That’s changing. I think that might cause issues which are as much political as they are economic.

BR: And is that the one thing that would cause China to change direction and change its relationship with the rest of the world? What do you think it might happen now with the existing pressure in the trade war?

IS: I’m not sure that any of this makes China change. The Communist party has a long history and a clear structure. Chinese governments through history have always had long memories and patience. I don’t think external factors are going to make China change. I think if China changes, it’ll be internal factors.

BR: If the future of the global economy is built on new digital network businesses and those businesses are coming out of China and the US and notably not out of Europe at least for the time being, what is the future of Europe?

IS: So it’s true. There was a chart that went around the internet had those big red balls on the left hand side, which represented all the Chinese tech companies and then the medium sized blue balls on the right hand side which represented all the American companies, second Chinese tech companies, so at 10 sentences and all the rest of it, and there’s this tiny collection of little yellow balls in the middle of which was European tech companies.

And so looking at it that way, it doesn’t look great for Europe, but that’s innovation and that’s the companies that are driving new models in the world. There’s a whole bunch of other stuff that goes on in incumbents and it’s not just development of technology that’s important, but how you use it. So since a lot of what I foresee about the application of tech in the future is thinking of it as a utility that permeates different components of your business, I think that Europe’s position isn’t necessarily disastrous because it’s not developing all the pioneering companies in this space. It will be disastrous if it’s not able to adjust its existing businesses, and so I would look closely at management, senior management in big incumbent companies to see what digital awareness there is. I do this already when I’m making investment decisions.

So public market investment decisions, I review the C-Suite in every company that I look at and I’m trying to find out if there’s anybody at that top level, that top layer so Chief Executive immediately below and then below that who is strongly digital aware for whatever reason. I look at their background, I look at their CVs, I look where they have been, I look where they studied, trying to assess whether or not, I think they have people who can make the decisions necessary when they’re made propositions either by third parties or their own staff. I think that’s one critical factor. It’s not the only factor of course, but it’s one critical factor for deciding whether I think a company is likely to succeed or not.

So it’s hard to answer your question. I don’t think it’s possible to answer your question just on the basis of where the pioneering has been done. There’s no question there’s more pioneering being done in both China and the US than in Europe, and that’s unfortunate, but it’s a function of smaller markets, lots of different languages, our approach to funding, the availability of previous entrepreneurs to feed back into the new entrepreneur community. There are lots of reasons why Europe is not leading in the space, but that doesn’t mean it can’t do well with the technology. It still has a lot of smart graduates. It still has a lot of smart business leaders. If they’re able to adjust, if business models are able to adjust, it could do fine. I do think that adjustment is easier in smaller countries than in the bigger countries, but we’ll see.

BR: I think we’re going to have to get you back for part two if you would be kind enough to come back, because there’s a whole section that we didn’t cover off around entrepreneurship in the social sector and all the great work you’ve done amongst others, WheelsPlusWings, but I’m going to ask you to finish with your assessment of the extent to which the social sector can take advantage of some of these same trends in digitalization and so on, and also the extent to which it’s realistic to think you can mesh entrepreneurship with the social sector.

IS: I’ve been a great fan of something called the Global Social Venture Capital competition and the implications of the competition for a number of years. I was a judge at London Business School in London and what it did, what the competition did, I think it’s based in the US and Wharton and North-western are the universities involved. Although I am out of touch now so I don’t know where it is at the moment, but it was the notion… It was a competition for business schools particularly to encourage MBA teams to solve social problems with the business model. I call them non-self-funding charities because the notion of social venture has so many fuzzy definitions, you have to define it every time you use it. So I think of it as self-funding charities, an organization which is totally organized around doing good, not just tangentially that happens to pay for itself.

I think that the guiding parameters of having to make sure that the thing makes money or doesn’t lose money and ennobles everybody involved in the process, which is a terribly important part. I’m a big believer in this, in the old notion of teaching a man to fish rather than giving them a fish because you teach them something which they can use to generate wealth for themselves or at least generate a living for themselves. That’s much nobler than having people rely on charity. I’m not a big fan of charity.

All the social projects that I’ve involved with over the last 15 years, I’ve been trying to make them self-funding rather than relying on the founder having to spend all their time with their hand out, begging for money to give to the right cause. I absolutely see a role. In fact, I think it’s the future of do good for people who want to try and change the world, coming from entrepreneurship background to understand how to build organizations from scratch, to understand how to lead people in a direction, to understand how to generate both funding and revenue in a marketplace that solves problem. I think it’s just a question of focus and I think we’re at a time when people are more aware. I know that the younger generation, Gen Z and the millennials are already attuned to that notion. At least a lot of them are. I have two daughters, now 28 and 25. The older one has her own sustainable food venture in London. She’s just going through her A Round.

BR: What is the company called? We’ve got to give it a shout out.

IS: Nibs etc. Nibs etc. is what it’s called. She takes fruit pulp from high quality fruit producers in and around London who would normally throw that away and turns that into really scrumptious snacks and granola and crackers and other things, so it’s a great approach to food waste, but the products themselves are actually yummy, so that’s nice. She was always a chef right from a very young age. Her problem at the moment is an interesting problem. She can sell more than she can produce. Everybody loves the product and the story is one that works well and she is someone who can sell well. The issue is production. She doesn’t have enough hours in the day with the staff she has to produce enough to sell what she can sell. She has orders coming in from companies for distribution within company buildings that she can’t fulfill. So she’s trying to find a sub-contractor at the moment, and of course the sub-contractors… she’s too small for them. So she’s at that space where she’s too big to manage with her staff so she’s hiring people, but too small for the subcontractors to produce for her, but you know, it’s a classic consumer product problem and it’s a good problem she has to face.

BR: It’s a problem that other entrepreneurs can solve for. It’s a Shopify for the consumer goods sector…

IS: Yes, and then the issue here is she needs a certain quality. Yeah. They also have to produce it a certain way. She’s very much… she’s consistent about ethics and values throughout the value chain of her business, which is the approach that I take to businesses and how I try to corrupt MBA students today is to have them think about all the components of the value chain, not just the end product nor the sourcing of funding.

So that’s Chloe and she’s doing amazingly well with this, and the second daughter is in private equity, and in a space which is a worthy space, which I won’t go into, so I think the younger generation already understands that you can apply business understanding and entrepreneurial methods to solving social problems, and I think that’s a big plus for all of us. The issue is the rest of us.

BR: I don’t even know where to begin to try to summarize this and maybe I won’t even try to summarize it other than to say, this has been brilliant. I knew it would be wide ranging. I knew it would be fascinating, but I didn’t realize I was going to be left feeling this upbeat about technology, future of the world and how younger generations are going to save us. So thank you very much, Ian. Thank you very much for your time and hopefully we can have you back on again.

IS: My pleasure. Happy to be here and yes, if you’d like more than that, I’m happy to come back.

BR: Thank you very much.