Philippa Kaur

WHEN SATYA NADELLA took over as boss of Microsoft in 2014 he started by opening Windows. Unlike his predecessors, who had kept the software giant’s crown jewel hermetically sealed from the outside world, he exposed the operating system (OS) to the breeze of competition. The firm’s other programs, which used to run almost exclusively on Windows, could now operate on other OSs, including Linux, an “open-source” rival which Microsoft had previously called a “cancer”. The manoeuvre both broadened the market for Microsoft’s software and improved Windows by forcing it to compete with rival OSs on more equal terms. In the process, it shook up Microsoft’s culture, helped it shed its reputation as a nasty monopolist and paved the way for a stunning revival that saw its market value soar above $2trn. Now the other half of the once almighty “Wintel” arrangement, whereby PCs would run on Windows software and chips made by Intel, wants to throw the windows open. The American semiconductor giant has long guarded its core chipmaking business as jealously as Microsoft did its OS. After years of product delays, misplaced technology bets and changing management, it is ready for some fresh air. “Our processes, our manufacturing, our intellectual property through our foundry services [producing processors for other chipmakers]: all will now be available to the world,” professes Pat Gelsinger, Intel’s newish boss. If successful, Mr Gelsinger’s strategy could reshape a $600bn industry at the heart of the fast-digitising global economy for the better. Failure could, in the short run, compound the chip shortages that are making life difficult for manufacturers of everything from cars to data centres. In the longer term, it could lead to further concentration of the already cosy chipmaking market, with Intel increasingly eclipsed by rivals. And it may cement Asia’s dominance of the industry, creating all kinds of geopolitical complications. Although Microsoft and Intel reside in different parts of the tech universe, they used to be structural twins. Just as Windows and Office, Microsoft’s package of business applications, were designed to work best with each other, Intel has been designing its own microprocessors and making them in “fabs” optimised for the purpose. As the tech industry has grown bigger, more diverse and more networked, this once dominant “integrated device manufacturer” (IDM) model has fallen out of favour (just as vertical integration became a drag for Microsoft as other tech “ecosystems” popped up). As with the Microsoft of old, Intel’s arrogance and insularity discouraged other chipmakers from working with it, for instance by combining chip designs. Instead they ploughed their own furrows, focusing increasingly either on designing chips (for example, AMD, Arm, Nvidia and Qualcomm) or fabricating them (notably Taiwan Semiconductor Manufacturing Company, TSMC). Intel has managed to stay closed for longer than Microsoft thanks to the boom in cloud computing, which boosted demand for pricey high-end processors that power servers in data centres where its so-called X86 architecture is now dominant. These contributed one-third of Intel’s total revenue of $78bn in 2020, and much of its $21bn in net profit. Now, though, the company is being overwhelmed by open systems like that of Arm, whose blueprints are used in most of the world’s smartphones (a market which Intel missed) and are starting to appear in data centres—and which was last year acquired by Nvidia for $40bn (though trustbusters may yet scupper the deal). At the same time TSMC took advantage of Intel’s technological and management missteps to pull ahead in both cutting-edge technology and production volume. Both TSMC and Nvidia are now worth more than twice as much as Intel (see chart), despite lower revenues and profits. Enter Mr Gelsinger, who in February became Intel’s third chief executive in as many years. He was the firm’s chief technology officer until 2009, when he was pushed out. This background—plus what he calls a decade-long “vacation from the chip industry” as the boss of VMware, a software-maker—allowed him to shake things up within weeks. Rather than split Intel into a foundry and a chip-designer, as some analysts and activist investors wanted, his “IDM 2.0” strategy doubles down on integration. Mr Gelsinger sees this as Intel’s competitive advantage. And an independent foundry arm would struggle to compete with TSMC, argues Pierre Ferragu of New Street Research, who estimates that Intel’s manufacturing costs are 70% higher than the Taiwanese firm’s.Instead, Intel is opting for a sort of virtual decoupling. The firm will make more use of outside foundries, including TSMC, to save costs but also to benefit from TSMC’s leading-edge manufacturing processes. In July Mr Gelsinger said his company intends to catch up with TSMC and Samsung in its ability to churn out top-end chips. His ambitious plan is to introduce at least one new high-end processor a year, each with smaller transistors and faster circuitry. By 2025 it aims once again to be ahead of the pack with designs that are no longer measured in nanometres but in angstroms, the next smallest metric unit of measurement, equal to one ten-billionth of a metre.At the same time, the company will offer this manufacturing magic to others by relaunching its own foundry business. In contrast to its earlier iteration, which was created in 2012 but never really took off, Intel Foundry Services (IFS) will have its own profit-and-loss statement and, soon, at least two brand-new fabs, which Intel will build in Arizona at a total cost of $20bn.Mr Gelsinger is now off on a global tour to explain and promote his new strategy, for instance at a trade show in Munich on September 7th. He will need all his enviable communication skills (another thing he shares with Mr Nadella) to convince investors. After a jump earlier this year Intel’s share price has slumped back roughly to where it was before his appointment was announced. Mr Gelsinger seems undaunted. Investors are asking two questions, he says, both fair: can Intel execute this strategy successfully? And when will this show up in earnings? “I’m OK with that.”Finding its old GroveThe answers will depend in part on whether Intel can change its culture. That means rekindling what Mr Gelsinger calls its “Grovian culture”, a reference to Andy Grove, the firm’s legendary co-founder, who is best known for his mantra that “only the paranoid survive”. It also entails shedding its insularity. “My team needs to exercise a different set of muscles,” explains Ann Kelleher, Intel’s chief technologist. Among other things, she says, it must learn how to work with external customers and use tools that are built elsewhere. Above all, though, success will be contingent on flawless execution. Cutting-edge chipmaking involves around 700 processing steps and many nanoscopic layers printed and etched on top of each other. Adding to the complexity, Intel will at last fully embrace “extreme ultraviolet lithography” (which TSMC and others have already been using to great effect). The company’s announcement in late June that it would postpone production of next-generation server processors for a few months hints at the trickiness of the task.IFS, too, faces challenges. Most analysts agree with Mr Ferragu that the foundry business cannot really compete with TSMC. This is not only a matter of costs, size and a technological lag. Intel must also persuade customers that it can overcome a built-in conflict of interest in trying to be both an IDM and a foundry, points out Willy Shih of Harvard Business School. Amid a future semiconductor shortage the company may need to decide whether to allocate capacity to its own processors or honour the contracts it has with foundry customers. Intel nevertheless hopes it can carve out a big and lucrative niche for its foundry. It is reportedly interested in beefing it up by buying GlobalFoundries, spun off from AMD in 2009 and currently owned by an Emirati sovereign-wealth fund, for around $25bn. Although the talks had stalled and GlobalFoundries filed to go public in August, they may be restarted once the smaller firm gauges other investors’ interest—and so its possible price tag.With or without GlobalFoundries, Intel pledges a new spirit of openness. It will no longer force customers to use its proprietary tools when designing their chips. More important, it will grant them access to its chip designs and the technology it has developed for “packaging” semiconductors into the chips that end up in electronic devices. Big cloud providers, such as Amazon Web Services (AWS), will be able to take the design of an Intel server processor, optimise it for their data centres and combine it with other processor designs on a single chip. There seems to be growing interest in mixing and matching, says Linley Gwennap of the Linley Group, a consultancy. AWS and Qualcomm will be among IFS’s first customers. There is also interest in doing this domestically. American politicians point to the actual pandemic-induced chip shortage, and potential threats from China, particularly to Taiwan, as reasons to worry that most chips are nowadays made in Asia. Congress is expected soon to approve a $52bn subsidy package. The European Union has even more ambitious plans. Building new fabs in Asia would be 30-40% cheaper, Mr Gelsinger concedes, “but the incentive dollars allow me to invest more and go faster” at home. That appeals to customers who are particularly sensitive about security. America’s Defence Department recently decided to use Intel’s American foundry. Attracting government money may be the foundry’s main raison d’être, observes Stacy Rasgon of Bernstein, a broker. Becoming reliant on state support risks blunting the very competitive edge that Mr Gelsinger hopes to sharpen. And as a mind-numbingly complex hardware business, Intel may find it more difficult to turn itself around than Microsoft, which benefited from the faster change that characterises the software industry. The stakes are therefore high—and not just for Intel. If the company continues to lose its edge, the result will almost certainly be further consolidation. Today’s handful of big chipmakers could eventually be whittled down to a duopoly. Even if more survive, most fabs would probably all be based in Asia (though TSMC plans to build a fab in Arizona). Around 80% of the world’s semiconductor capacity is already there, Mr Gelsinger estimates; America accounts for 15% and Europe for the rest.Only the open surviveWestern governments are not the only ones who ought to pay attention to the fate of Mr Gelsinger’s opening gambit. So, too, should today’s tech titans. Like Microsoft before it, Intel got in trouble largely because it was overprotective of its crown jewels. Others might decide that the best way to avoid such problems is to open up pre-emptively. Apple could be a less harsh steward of its App Store; Facebook could make its social network more interoperable with rivals; and Google could give phonemakers more freedom to tinker with its Android mobile OS. This could ease trustbusters’ worries—and make shareholders happier, too.For more expert analysis of the biggest stories in economics, business and markets, sign up to Money Talks, our weekly newsletter. More

CARMAKING IS sharply divided between the old and new. Recent electric-vehicle (EV) entrants, with Tesla at the forefront, command effervescent valuations largely based on being new and different. The share prices of established carmakers suggest that they will soon go out of business. Yet many of the former will probably fail and most of the latter survive. Rivian, one of the newcomers, filed paperwork for an initial public offering on August 27th and is reportedly seeking a valuation of at least $70bn, roughly the same as General Motors. Do its plans match the fizz?Listen to this storyYour browser does not support the element.Enjoy more audio and podcasts on More

THE NOTION that the modern economy lacks “good jobs” is as uncontroversial as saying that Lionel Messi is good at football. Pundits decry the disappearance of the steady positions of yesteryear, where people did a fair day’s work for a fair day’s pay. “Where have all the good jobs gone?”, wonders one recent book, while another talks about “the rise of polarised and precarious employment systems”. President Joe Biden takes after Donald Trump in promising to bring good jobs “back”. But what if the whole debate rests on shaky foundations?It certainly lacks historical awareness. Compare the current discussion with the one during America’s postwar boom. Few people back then believed that they were living in a golden age of labour. Commentators were instead full of angst, worrying about the “blue-collar blues”. They said that unionised factory jobs—the very sort that today’s politicians yearn to restore—consisted of repetitive, dangerous work which involved all brawn and no brain. Others fretted over pay. Workers “are getting increasingly frustrated by a system they think is not giving them a satisfactory return for their labours”, proclaimed a high-ranking official at America’s Department of Labour in 1970.In fact the notion that the world of work is in decay is as old as capitalism itself. Jean Charles Léonard de Sismondi, a Swiss writer who inspired Karl Marx, said that factories would turn people into drones. John Stuart Mill worried in the mid-19th century that the rise of capitalism would provoke social decay. People would focus on nothing other than earning money, he feared, turning them into dullards (just look at Americans, he warned). The rise of big business and white-collar work in America provoked a new set of anxieties. It was soon predicted that the self-made men of yore would be replaced by effete company drones who did what they were told.This is not the only reason to question today’s pessimistic narrative. By any reasonable standard work is better today than it was. Pay is higher, working hours are shorter and industrial accidents rarer.It is harder to tell whether workers enjoy their work more than they did. Gallup, a pollster, has kindly supplied Bartleby with a smattering of job-satisfaction surveys from the 1960s and 1970s. Certainly there is little to suggest that workers back then were any happier than they are today. More comparable data, also from Gallup, from the early 1990s onwards show gradually improving job satisfaction. Last year 56% of American employees said they were “completely” satisfied with their job, an all-time high. A growing “precariat” of insecure workers gets a lot of headlines. But 90% of American employees said in 2020 that they were completely or somewhat satisfied with their job security, up from 79% in 1993.If the jobs-are-bad narrative falls down on the facts, why is it so pervasive—and so intuitive? Partly it is because no one has bothered to look at the evidence. Other observers just don’t like the constant change and churn which has always been part and parcel of capitalism. More still may subscribe, perhaps subconsciously, to what Friedrich Hayek, a philosopher, called an “atavistic” view of markets. The very notion that people must sell their labour, for cash, in order to survive may violate some deeply held notion that humans are a fundamentally co-operative species, rather than a competitive one.Yet perhaps the most important reason is that people dislike acknowledging trade-offs. Mill seemed unable to square his concern about the stultifying effects of capitalism with his argument that the division of labour had massively increased living standards. People often make similar errors today. The decline of trade unions may have hurt some workers’ wages; but it is less commonly acknowledged that this has also made it easier for less “traditional” workers, such as ethnic minorities and women, to enter the labour market. Sedentary office jobs can make people fat; but people are far less likely to die on the job than they once were.A relentless focus on the problems of labour markets still has its uses. It encourages people to think about how to make improvements. The evidence suggests that on average managers have got better in recent years but clearly some firms have a long way to go. Many people are still exploited by their employers. Today’s world of work is far better than its critics would like to admit. But there is every reason to try to make it better still.For more expert analysis of the biggest stories in economics, business and markets, sign up to Money Talks, our weekly newsletter.This article appeared in the Business section of the print edition under the headline “‘Twas ever thus” More

“HI, JUST CHECKING in. Can I put in some more?” The bosses of promising startups are bombarded by such texts these days. Big funds in particular are falling over themselves to grab a piece of the tech pie (see chart). Yet one founder seems to have received more than his fair share of pitches: Ali Ghodsi, the chief executive of Databricks. And he has said yes to many. On August 31st the company confirmed that, only six months after a $1bn financing deal, it had raised another $1.6bn, valuing it at $38bn—$10bn more than after the previous round. Among the Silicon Valley cognoscenti, these numbers cement Databricks’ status as the most hyped company of the hour.The software-maker is soon likely to be known farther afield. Later this year it is expected to stage the largest-ever initial public offering (IPO) of a software firm—larger than that in late 2020 of Snowflake, its most serious rival. Alternatively, some predict, it could be snapped up by Microsoft in the largest ever software takeover. Whatever the outcome, there is substance to the hype. Databricks could become, in the age of artificial intelligence (AI), what Oracle and its databases once were in the world of conventional corporate software: the dominant platform on top of which applications are built and run.Databricks was founded in 2013 to commercialise Spark, a piece of open-source software that processes reams of data from different sources to train algorithms which then become the engines of AI applications. The firm added features, including code that makes it easier for developers to program the system as well as manage their workflow, and offered the package as a cloud-based subscription service.Yet Databricks only really took off when it added another component called “lakehouse”. It is a combination of two sorts of databases, a “data warehouse” and a “data lake” (hence the portmanteau). Both have historically been separate because of technical constraints and because they serve different purposes. Data warehouses are filled with well-defined corporate data that allow a firm to look into its past, for instance at how its sales have evolved, something called “business intelligence” (BI). Data lakes are essentially a dumping ground for all sorts of data that can reveal a firm’s future, including whether sales are likely to go up or down. Yet this separation is increasingly inefficient and unnecessary, explains Max Schireson of Battery Ventures, an investor in Databricks. “Doing BI and AI in different systems today is kind of stupid,” he notes.Firms have jumped on what Databricks offers, in particular incumbents worried about being disrupted by an AI-driven startup. Comcast, an American broadband provider, uses it to allow its customers to use their voice to select movies; ABN Amro, a Dutch bank, to recommend services; and H&M, a fashion retailer, to optimise its supply chain. Databricks now claims more than 5,000 customers and annualised subscription revenue of $600m—75% more than at the end of last year.Throwing Databricks at SnowflakeMr Ghodsi has set his sights even higher. “Ultimately, everything data should be on Databricks,” he says. He is planning on investing the newly raised capital to keep growing and become the leader in lakehouse systems. Nobody should fault Mr Ghodsi, who once taught computer science at the University of California, Berkeley, for his ambitions. Yet realising them will not be easy. Other firms are already pushing into the territory. He will probably be able to fend off the three big cloud-computing providers: Amazon Web Services, Google Cloud Platform and Microsoft Azure. Although they have more than enough resources to compete and provide integrated AI packages, they share one big problem. Firms increasingly prefer not to store all their data in a single cloud, fearing they will get stuck with one vendor. Instead, they opt for products, such as Databricks’, that run across several clouds.Snowflake is a different story. It, too, is building lakehouses. It is also taking a different approach. Whereas Databricks is adding BI to its AI platform, Snowflake, which has grown up in the data-warehouse world, is adding AI to its cloud-based BI package, meaning that their respective products will increasingly overlap. Whereas most of Databricks’ code is open-source, Snowflake’s is proprietary. And whereas Databricks has mostly stuck to a “land-and-expand” strategy, whereby small software deals grow into bigger ones, Snowflake practises a more conventional top-down sales model that focuses on big deals from the start.All this will make for a battle over the next few years. But it could be rudely interrupted if Microsoft snaps up Databricks. The software firm is already one of Databricks’ investors and co-operates closely with it. Among other things, Azure offers a version of Databricks’ platform and Microsoft uses its name in presentations about its strategy, something it rarely does with other firms. It would be a good fit. At its core, Microsoft is still a company selling tools for developers to write applications and platforms to run them on. And Databricks represents both a complement and a strategic threat: it lets data, rather than people, write the code.Databricks’ IPO is not meant to take the firm public, according to some analysts, but to put a price on it, so that negotiations can start somewhere. But the hype surrounding the company could thwart such plans. Snowflake is now worth about $90bn. If Databricks’ IPO outdoes Snowflake’s, its asking price may well be north of $100bn. And like Pinterest, a social-media firm which Microsoft considered buying earlier this year, it may become too pricey even for a company as loaded as world’s biggest software firm. ■For more expert analysis of the biggest stories in economics, business and markets, sign up to Money Talks, our weekly newsletter.This article appeared in the Business section of the print edition under the headline “The Oracle of AI” More

IN “READY PLAYER ONE”, a science-fiction novel set in 2045, people can escape a ghastly world of global warming and economic mayhem by teleporting themselves into the OASIS, a parallel universe where they can change identity, hang out and forget the miseries of everyday life. In the book, published in 2011, the OASIS is the brainchild of a gaming tycoon who has everyone’s best interests at heart. Lurking in the background, though, is Innovative Online Industries, an evil internet conglomerate that intends to take it all over and reap the rewards for itself.There are echoes of this “good v greedy” narrative in the way Tim Sweeney, founder of Epic Games, creator of “Fortnite”, an online-gaming phenomenon, talks about the metaverse. The idea is in vogue in Silicon Valley and is considered the next big thing in the internet. No one quite knows what the term means; at its most futuristic, the OASIS is a pretty good analogy for what tech utopians have in mind. For now, suffice to say that if you think you have spent more than enough time online during the covid-19 pandemic, think again. Using virtual and augmented reality, avatars and lifelike computer imagery, the metaverse will further erase the boundaries between people’s online and physical lives. Unsurprisingly, big tech is salivating at the prospect of yet more realms of human existence open to data extraction.So is Mr Sweeney, who is creating a mini-metaverse for the 350m monthly users of “Fortnite”, immersing them not just in fantasy games, but virtual pop concerts and the like. However, he is determined to stop today’s Silicon Valley elite from creaming off all the rewards from this visionary future. His ambition is for vibrant competition, fair pay for creators and economic efficiency unlike anything on the web today. How realistic—or sincere—is it?Epic, a privately held company partly owned by Tencent, a Chinese tech goliath, already depicts the creation of the metaverse as a giant-slaying contest. It is part of the backdrop for its recent courtroom battles against Apple (a verdict is expected soon) and against Google (a trial has not yet started). Primarily, the antitrust cases are about the iPhone’s App Store and Google’s Android Play Store, which Epic portrays as price-gouging fiefs, in particular taking a cut of up to 30% on in-app purchases and refusing to let developers use alternative payment-processing platforms. But in court Mr Sweeney told the judge in the Apple case that the issue was also “existential” for the creation of the metaverse. Epic’s aim, he said, was to turn “Fortnite” into a platform on which independent developers could distribute their games and other forms of entertainment online and earn more of the profits themselves. “With Apple taking 30% off the top, they make it hard, very hard for Epic and creators to exist in this future world,” he said.Both Apple and Google deny the allegations. In court, Apple countered that its commissions were an industry standard, and that it invested in creating a user-friendly environment. But it is being forced to give ground elsewhere. In a recent partial settlement of a class-action case in America Apple agreed to make it easier for app developers to contact customers about other payment methods. Then, on August 31st, South Korea passed a law allowing smartphone users to pay developers directly. Google calls Epic’s allegations baseless. Where does this leave Mr Sweeney’s vision of the new web? And how likely is it to materialise?The vision certainly looks appealing. No “mega corporation” would be dominant. Instead, the metaverse will be built by millions of creators, programmers and designers, earning a bigger share of the rewards than the tech giants currently allow. Instead of the siloed state of today’s internet, he says there should be free movement of play between gaming networks, such as Microsoft’s Xbox and Sony’s PlayStation. The cutting-edge “engines” that the gaming industry uses to make real-world simulations should be based on common standards so that they, too, are interoperable. Adding to the economic efficiency could be decentralised tools such as the blockchain and cryptocurrencies.Mr Sweeney makes no bones about contrasting such open competition with the current situation. That won’t deter Silicon Valley giants from seeking a big future role. Gaming firms such as Epic, Roblox and Minecraft are furthest advanced in bringing metaverse-like aspects to their platforms; Minecraft has a virtual library of censored press articles to encourage freedom of thought in autocratic regimes. But the tech giants are hard on their heels. Mark Zuckerberg, Facebook’s boss, believes its Oculus Quest headsets will be part of a virtual- and augmented-reality future that could supersede the smartphone. In August Facebook introduced Horizon Workrooms to its headsets, enabling workers to attend virtual meetings as avatars. Satya Nadella, Microsoft’s CEO, talks of building an “enterprise metaverse”. Doubtless they want to make the metaverse more of a walled garden than Mr Sweeney does.Load of old Roblox?As for Mr Sweeney’s apparent altruism, it is probably wise not to take it at face value. Epic and other gaming firms could plausibly one day pursue dominance of a three-dimensional internet similar to that big tech has in the two-dimensional one. As Daniel Newman of Futurum Research, a consultancy, puts it, from Microsoft in the 1980s to Apple, Google, Facebook and Amazon in the 2010s, all tech giants have started out offering unique services that consumers loved, and fought for more open competition against incumbents. Over time, as their leadership positions strengthened, their missionary zeal waned. It is hard to imagine a world, no matter how futuristic, in which this pattern does not persist.For now, the big gaming firms cannot conceive of themselves as cartoon villains. And the metaverse may indeed be too vast to be dominated by any one firm. But whatever parallel universes they build, the desire to create not just fantasy dystopias but also moats against competition is quintessentially the capitalist way. ■For more expert analysis of the biggest stories in economics, business and markets, sign up to Money Talks, our weekly newsletter.This article appeared in the Business section of the print edition under the headline “Epic’s battle royale” More

IT IS HARD work being a capitalist in a communist dictatorship. In the past few months China’s authorities have gone after big technology firms for alleged abuse of monopolistic power and the misuse of data. In the name of social cohesion they have banned for-profit tutoring and hectored companies and billionaires about their wider social responsibilities. The crackdown is reckoned to have wiped more than $1trn off the value of China’s biggest tech firms.On August 30th, the country’s video-gaming industry—the world’s largest with annual sales of $46bn—became the latest target. New rules proclaimed that, in order to “effectively protect the physical and mental health of minors”, children under 18 would be allowed to play online games only between 8pm and 9pm on Fridays, Saturdays, Sundays and public holidays.The rules are the most restrictive in the world, and will affect tens of millions of people. Around two-thirds of Chinese children are thought to play online games regularly. But the idea is not new. China has worried about what it sees as the addictive and corrupting qualities of video games for more than a decade, says Daniel Ahmad, a senior analyst at Niko Partners, which follows Asian video-gaming markets. Censors frown on things like politics and gore, requiring changes to foreign games seeking a license for sale in China. The new regulations are an update to ones passed in 2019 that limited children to 90 minutes per day of gaming, and imposed a curfew between 10pm and 8am. (On August 27th South Korea, which implemented a similar curfew in 2011, announced it would scrap its rules.)Those previous rules had loopholes. China’s “anti-addiction system” requires gamers to use their real names, and a government-issued identity number, to play online, and boots them from the game when their allotted time has expired. But children could use adult credentials to log in, and play in internet cafes that turned a blind eye to long gaming sessions. This time, the authorities seem keen to block such workarounds. Alongside the new rules were promises of tougher policing and punishments for companies found to be dragging their feet. Tencent, China’s biggest video-gaming company, has been experimenting with facial-recognition software to ensure that crafty players cannot use other people’s credentials.Despite their draconian nature, the immediate impact of the new rules was muted. Shares in Tencent and NetEase, a rival firm, dipped slightly after the announcement. That is probably because the rules are unlikely to make much instant difference to the companies’ bottom lines. Although there are thought to be around 110m gamer kids in China, they have little money to splash on new characters or virtual items. In its most recent set of quarterly results, Tencent said that only 2.6% of gaming revenue came from players under 16.The long-term consequences could be more painful. The impecunious teenage gamers of today are the young adult gamers, complete with disposable income, of tomorrow. If the crackdown is effective, says one observer, Chinese gaming giants could see their flow of new customers dry up. Western firms could suffer as well. Jefferies, a bank, flags Roblox, an American gaming platform that allows users to create their own mini-games and share them with friends, as particularly at risk. The game, which has more than 40m daily users around the world, is aimed explicitly at younger players. It launched in China in July.Another question is how far the crackdown will spread. For now, a thriving grey market links Chinese gamers to foreign firms that are unable, or unwilling, to seek an official license to sell their products in the country’s vast market. “PlayerUnknown’s Battlegrounds”, an online shooter, is reckoned to have sold around 20m copies in China despite lacking official approval. Around 50m Chinese gamers are thought to use Steam, an online shop for PC games run by Valve, an American firm, that has remained curiously unblocked by China’s Great Firewall (indeed, Chinese is the service’s most popular language). That gives them access to tens of thousands of unlicensed games, free from official nannying.The signs are ominous. In February Apple removed tens of thousands unlicensed games from the Chinese version of its app store. A stripped-down, censorship-compliant Chinese version of Steam launched in February. For now, it offers few games and has hardly any users. But if the crackdown continues, Chinese gamers may soon find the local version is all that is available.For more expert analysis of the biggest stories in economics, business and markets, sign up to Money Talks, our weekly newsletter. More

A CROWD of reporters and Hollywood types, drawn by the drama and glamour of the event, are likely to jostle to find a seat in a courtroom in San Jose on August 31st for what may be the next, perilous act for a woman once touted as the next Steve Jobs and the world’s youngest self-made female billionaire. Jury selection will begin for the fraud trial of Elizabeth Holmes, the former chief executive of Theranos, a startup which attempted to revolutionise the process of blood testing but failed spectacularly in 2016 after the press and regulators probed the company’s inflated claims. These sorts of cases usually hinge on subtle distinctions between exaggeration and outright deceit and whether such deceit was intentional. But the legal intricacies may take second place to theatrics. Will Ms Holmes take the stand in her own defence, a move fraught with risk under the spotlight of cross-examination? Will she claim “coercive control” by her second-in-command at Theranos, Ramesh “Sunny” Balwani, with whom she had an “abusive intimate-partner relationship”, according to a filing by Ms Holmes’s lawyer ordered for release by a judge on August 26th? Mr Balwani will be tried separately in January; he has denied Ms Holmes’s claims.But first will come the question of whether any juror can be found in Silicon Valley without preconceptions of guilt. Around half of the potential pool has acknowledged exposure to press coverage of the case. That is hardly a surprise. The story of Ms Holmes, who founded the company in 2003 as a 19-year-old university dropout, is an epic of Valley hubris. She brought glamour and charisma to the corporate world, adorning magazine covers as the subject of flattering features within. Her relentless promotion of her firm’s potential led to a valuation of $9bn in 2015 before its spectacular demise. The firms’ investors ignored its flawed financial performance and the dubious quality of the device it was developing, and were drawn instead by the company’s idealistic goal of making testing cheap, easy and ubiquitous.The attention lavished on Theranos seemed justified for a time. In 2015, Joe Biden, then America’s vice-president, called Theranos, “the laboratory of the future”. The company’s board included two former secretaries of state (George Schultz and Henry Kissinger), two of defence (James Mattis and William Perry), a former head of the Centres for Disease Control and David Boies, perhaps the country’s most famous lawyer. Two huge American companies, Safeway and Walgreens, agreed to distribute Ms Holmes’s products. The awareness grew with the company’s abrupt failure in 2016. Multiple books and television documentaries shone more light on Ms Holmes. A TV mini-series and a film is now reportedly in the works. ABC News will bring back a popular podcast about Ms Holmes that will focus on the trial. In many ways, such coverage is not justified by the facts of the case. Ms Holmes and Mr Balwani are accused of lying to investors, patients and doctors about the effectiveness of Theranos’s tests. But Silicon Valley’s venture capitalists are well used to over-hyped plans, though most never see the light of day. Failure rates among tech startups are high, though most do not lose as much as the $700m or so that had been invested in Theranos. The buzz over Theranos stems from more than money. Because it was involved in health care rather than, say, enterprise software or co-working facilities, any mistake could have had catastrophic consequences for a patient. The inability of Theranos to deliver on its promises was also a disappointment to those who had seen it as a way for science to improve lives. Most controversially, the case resonates because Ms Holmes looked like a woman succeeding in a male-dominated world. Her failure, say some female company founders in Silicon Valley, has made life tougher. The issue will become more prominent if Ms Holmes is convicted and sentenced to jail as in July she gave birth to her first child. That could make for a mini-series with a heart-rending finale. More

A LOBBY CAN shape the first impressions of a business. Guests at the building housing the New York headquarters of Jefferies, an investment bank, were once greeted by a section of the Berlin Wall purchased from the East German government. In the London office of Slaughter and May, a law firm, water trickles down an atrium wall into a shallow pool made of natural stone. The San Francisco home of Salesforce, a software giant, greets visitors with a 106-foot (32-metre) video wall displaying anything from soothing waterfalls to Pac-Man clips.As covid-19 shut offices around the world, those crucial first impressions were mediated by video calls. With workers stuck at home, corporate meetings—with underlings, fellow workers, clients and investors—turned almost entirely virtual. Anything that used to involve people crowding into spaces, from performance reviews to shareholder jamborees, roadshows and initial public offerings, moved to cyberspace.Since March 2020 the Nasdaq exchange in New York has held more than 150 virtual bell ceremonies. The Hong Kong Stock Exchange has conducted at least 140. The aggregate amount of time people spent on Microsoft’s Teams video-conferencing platform tripled to 45m hours a day. Zoom went from being a moderately successful startup to a verb (and, for some, a four-letter word).Now that many companies are reopening their offices and reconfiguring their work arrangements into something hybrid, they are also rethinking their approach to meetings. Love them or (more often) loathe them, powwows are an integral part of modern commerce. Managers must therefore decide which parts of remote experience, if any, they want to keep. A poll of more than 7,000 people in ten countries by Zoom found that two-thirds would prefer a mix of virtual and in-person meetings in future. As with all work that is part remote and part not, in other words, meetings’ future looks messy.Fully virtual meetings are not going anywhere. Lumi, a service which helps organise shareholder meetings, says that 90% of this year’s gatherings will be fully remote, compared with 11% in 2019. OpenExchange, a firm that provides virtual and hybrid events for companies and investors, expects to run 200,000 of them in 2021, up from 4,000 in 2019.The rampant Delta variant of covid-19, which is forcing firms to postpone their fuller return to the conference room, is one reason. But not the only one: virtual meetings allow more people to attend than if participants had to travel to distant locations. Online gatherings can also be more flexible. During the pandemic British workers scheduled meetings at times they would normally be commuting to and from work, according to research by Doodle, a scheduling service.Video conferences also seem to work just fine for many purposes. Deloitte, a consultancy, surveyed 1,000 executives in America involved in private-equity transactions and mergers and acquisitions. It found that 87% of respondents said their firms were able to close deals in a purely virtual environment. More than half would prefer to maintain this after the pandemic.But virtual get-togethers have drawbacks, too. More can be packed into a day, leading to Zoom fatigue (another phrase that has entered common parlance). They are also less likely to end on time. A study by Microsoft showed that the average meeting in Microsoft Teams lengthened from 35 to 45 minutes, compared with a year earlier (probably because they lack physical prompts such as people getting up to leave or the next group barging into the conference room for their own conclave).Hybrid meetings where some people are present in person and others dial in present a particular challenge. Most organisations have underinvested in the audiovisual technology that ensures that those dialling in are seen, heard, and do not feel like second-class citizens. In most pre-pandemic meeting rooms such considerations were an afterthought. Poor lighting and ill-placed microphones are common.Such technical niggles can be fixed with better technology and cleverer design of office space. Companies are experimenting with larger, higher-quality screens, voice-tracking cameras that follow the speaker and tools that limit background noise. Software that transcribes or records meetings is becoming standard, easing pressure on employees to attend every session. Silicon Valley giants such as Microsoft and Facebook want to take things a step further, developing an augmented-reality “metaverse”, where users anywhere can interact with one another in real time.Not everyone is convinced. Some firms are pushing back against the virtual culture. Many Wall Street bosses have taken a hardline position against remote work, including meetings. JPMorgan Chase called employees back to offices earlier than most. It is now urging its bankers to get back on planes to meet clients in person. JPMorgan’s boss, Jamie Dimon, has made its fleet of private jets available to managing directors. This summer an informal contest kicked off at the bank, with employees awarded points for face-to-face client meetings. The reward was reportedly a meal with JPMorgan’s top brass. Mr Dimon may be on to something: seven in ten respondents in Zoom’s study thought that it was important to meet clients physically.Fearful of forsaking good ideas that emerge from spur-of-the-moment meetings, many companies are reshaping their spaces to facilitate such serendipity whenever workers do deign to show up at the office. A poll of 400 international firms by Knight Frank, a property consultancy, found that more than half expect the share of collaborative spaces in their portfolios to increase over the next three years. Nokia, a Finnish maker of telecoms equipment, says that from next year around 70% of its office space will be dedicated to collaboration and teamwork. Dropbox, a cloud-storage firm, has sold its headquarters in San Francisco. Its new sites, known internally as studios, will feature larger conference rooms with versatile layouts.And whereas big majorities of people tell surveys they favour hybrid work, they clash over what this means for meetings specifically. With respect to large gatherings the clear preference seems to be for virtual settings, which 61% of Zoom’s respondents favoured, compared with 31% opting for the physical conference room. But the preferences differed by gender, with around 44% of men preferring to attend large group meetings in person, compared with just 33% of women (whom studies show to be less likely to speak up in meetings and likelier to be interrupted by men). With respect to smaller team meetings, remote workers were split evenly between wanting to join in person and preferring to do so virtually. And some countries’ work cultures look particularly averse to virtualisation: 41% of French workers insisted they would only meet in person (see chart).Some decisions will be straightforward enough. Meetings where crucial calls are made or new clients introduced will almost certainly lean in-person. When it comes to less consequential yet still important confabs, the calculation will be more complicated. One thing is certain. Many meetings will remain a pain for managers to schedule and, for many of their subordinates, a pain to attend. More