Philippa Kaur

In one corner is Mark Zuckerberg: 39 years old, five foot seven inches and, if his selfies are to be believed, a wizard at jiu-jitsu. In the other corner stands Elon Musk: 13 years older, six inches taller and considerably heavier, with a special move known as the walrus (“I just lie on top of my opponent & do nothing”). The two billionaires have agreed to a cage fight, with Mr Musk saying on June 29th that it might take place at the Roman Colosseum.The bout may never happen. Neither the Italian government nor Mr Musk’s mother seems keen. But the new-media moguls are simultaneously limbering up for a more consequential fight. On July 6th Meta, Mr Zuckerberg’s firm, will add a new app to its suite of social-media platforms. Threads, a new text-based network, bears a remarkable resemblance to Twitter, the app that Mr Musk bought last October for $44bn. The rumble in Rome may be all talk. But an almighty social-media smackdown is about to begin.Mr Musk’s eight months in charge of Twitter have been bruising for many parties. About 80% of the nearly 8,000 employees he inherited have been laid off, to cut costs. Amid a glitchy service, users have started to drift away, believes eMarketer, a research company (see chart). The introduction on July 1st of a paywall, limiting the number of tweets that can be seen by those who do not cough up $8 a month, may repel more. Advertisers have fled in even greater numbers: Twitter’s ad revenue this year will be 28% lower than last, forecasts eMarketer. All this has hurt investors. In May Fidelity, a financial-services firm, estimated that the company had lost about two-thirds of its value since Mr Musk agreed to buy it.From this chaos, the clearest winner has been Mr Zuckerberg. By 2021 his business had become synonymous with privacy invasion, misinformation and bile—so much so that he changed its name from Facebook to Meta. He then irked investors by using his all-powerful position at the firm to pour billions into the metaverse, an unproven passion project that still looks years away from making money. On July 4th two years ago he attracted ridicule after posting a video of himself vaingloriously surfing a hydrofoil while holding an American flag. It was hard to find anyone in Silicon Valley more polarising.Now it is not so difficult. Mr Musk’s erratic management of Twitter makes Mr Zuckerberg’s stewardship of Meta look like a model of good governance. And although Twitter’s new freewheeling approach to content moderation has delighted some conservatives—including Ron DeSantis, who launched his presidential bid in a glitch-filled live audio session on the app, and Tucker Carlson, who started broadcasting on Twitter in June after parting ways with Fox News—liberals find it increasingly hard to stomach. Mr Musk remains more popular than Mr Zuckerberg among Americans (who also fancy him to win the cage match), according to polls from YouGov. But as the controversies at Twitter have rumbled on, and as politicians have turned their fire on another social app, the Chinese-owned TikTok, Mr Zuckerberg’s approval rating has quietly risen to its highest level in over three years.Meta now sees an opportunity for another, commercial victory. Various startups have tried to capitalise on Twitter’s travails, with little success. Mastodon, a decentralised social network with a single employee, said that by November it had added more than 2m members since the Twitter deal closed. But people found it fiddly and by last month it had 61% fewer users than at its November peak, estimates Sensor Tower, another data company. Truth Social, Donald Trump’s conservative social network, has failed to gain traction, especially since Mr Musk steered Twitter rightwards. The latest pretender, Bluesky, faces the same struggle to achieve critical mass.Meta’s effort, Threads, has a better chance. For one thing, cloning rivals is what Meta does best. In 2016, as Snapchat’s disappearing posts known as “stories” became popular, Mr Zuckerberg unveiled Instagram Stories, an eerily similar product which helped to keep Instagram on top. Last year, as TikTok’s short videos became a threat, Meta rolled out Reels, a near-identical video format that lives within Instagram and Facebook. It too has been a hit: in April Mr Zuckerberg said Reels had helped to increase the time spent on Instagram by nearly a quarter.Threads also has a head start in achieving scale. Unlike Reels, it will be an app in its own right. But it will let those with an Instagram account use their existing login details and follow all the same people with a single click. Some 87% of Twitter users already use Instagram, according to DataReportal, a research firm, so most now have a near-frictionless alternative to Twitter. Will they bother to switch? For some, it may be enough simply to have a network that is “sanely run”, as Meta’s chief product officer put it recently. Others will need a shove. By announcing a paywall just days before Threads’ launch, Mr Musk may have provided one.Twitter’s business is tiny by Meta’s standards, with barely an eighth as many users as Facebook, the world’s largest social network. In 2021, the last year before Mr Musk took it private, Twitter’s revenue was $5.1bn, against Meta’s $116bn. And with those meagre earnings come big problems. Few platforms attract as many angry oddballs as Twitter. In recent years Meta has shied away from promoting news, which brings political controversy and seems not to delight users; in Canada it has said it will stop showing news altogether, in response to a law that would force it to pay publishers. News is a big part of what Twitter does. There are two reasons why Mr Zuckerberg may think Threads is nevertheless worth the headache. One is advertising. Twitter has never made much money out of its users because it knows little about them. Between half and two-thirds of those who read tweets are not even logged in, estimates Simon Kemp of DataReportal. Many registered users are “lurkers”, who view others’ feeds but seldom engage. Meta, by contrast, already knows a lot about its users from its other apps, so can hit them with well-targeted ads in Threads from day one. And the brand-focused advertising that works best on Twitter would complement the direct-response ads that Facebook and Instagram specialise in. Threads “feels very complementary” to Meta’s current portfolio, says Mark Shmulik of Bernstein, a broker.Meta’s other possible motive relates to large language models, which ingest text from the internet to produce human-like responses in artificial-intelligence (AI) apps like ChatGPT. This technology places More

IN THE TECH war between America and China, the Western power has been more aggressive of late. Last year President Joe Biden’s administration laid out harsh restrictions limiting Chinese artificial-intelligence (AI) firms’ access to American technology. America has also been coaxing allies to follow its lead. On June 30th the Netherlands, under pressure from the White House, said it would restrict the sales of some chipmaking kit to China: ASML, a Dutch maker of the world’s most advanced lithography machines, will from now on sell Chinese customers only low-yield devices for etching cutting-edge chips. On July 4th the Wall Street Journal reported that the American government may be preparing to curb Chinese use of American cloud-computing services, which allow Chinese AI firms to circumvent America’s earlier bans by taking advantage of the cloud provider’s high-end processors without owning chips of their own. China’s communist authorities had so far responded to this barrage of tats with a single, relatively meagre tit: in May it barred some Chinese companies from using memory chips made by Micron, a company from Idaho. But on July 3rd it brought out a bigger gun, saying that it would impose export controls on gallium and germanium, two metals used in high-end semiconductors. The new export controls will come into effect on August 1st. Unlike the Micron ban, which has little impact beyond one American chipmaker’s top line, restrictions on the sale of chip metals could reverberate across the global chip industry. China supplies about 80% of the world’s gallium and germanium. America may source as much as 50% of its germanium supply from China, according to Jefferies, an investment bank. An all-out ban could disrupt the production of a wide range of existing products, including chips, screens, fibre-optic gear and solar panels. It may also stymie the development of next-generation technologies. Chipmakers hope gradually to replace the silicon used in most processors with gallium nitride or silicon carbide, both of which can handle higher voltages. Gallium and germanium may also be useful in electric vehicles, nuclear energy and other devices, including weapons. The Chinese move comes at a delicate moment in Sino-American relations. Despite their respective tech manoeuvres, in recent months both sides have also been talking of stabilising relations. Janet Yellen, America’s treasury secretary, is expected to arrive in Beijing for talks in the coming days. That visit would follow a meeting in Washington in May between China’s and America’s commerce secretaries, and a trip to China in late June by Antony Blinken, America’s secretary of state, in which he briefly met Xi Jinping, China’s leader, and other senior officials. China hawks in Washington may argue that China’s bite is weaker than its bark. Like some of the American restrictions, China’s new rules would require exporters to seek government approval and export licences and the Chinese government may well grant these quite freely: after all, a total ban would hurt Chinese exporters, who sell a lot of germanium and gallium to American customers. But Mr Biden should make no mistake. China is showing that it will not roll over—and that it can strike back. Expect an increasingly evenly balanced tit-for-tat. ■ More

HYDROGEN IS THE most abundant element in the universe and a vast source of clean fuel. For investors, it is an equally rich source of hype. As parts of the world get a bit more serious about tackling climate change, hydrogen has emerged as an important part of global decarbonisation efforts. Over 1,000 hydrogen projects are under way worldwide, more than 350 of which have been announced in the past year. They are expected to result in some $320bn-worth of investments by 2030. Venture capitalists and buy-out barons poured $8bn into hydrogen ventures last year, up from just over $2bn in 2020 (see chart 1). On July 7th Thyssenkrupp Nucera, a pioneering manufacturer of electrolysers, giant machines used to make hydrogen by stripping it from oxygen in water, is expected to list in an initial public offering that could value the firm at nearly $3bn. The IPO is backed by a Saudi sovereign-wealth fund and BNP Paribas, a French bank. All this frenetic activity is prompting worries of an H2 bubble akin to an earlier one in the 2000s, which ended in tears for the investors who had ploughed money into such projects. Signs of excess are certainly there. An index of listed hydrogen firms has underperformed America’s S&P 500 blue-chip benchmark over the past year, while displaying a volatility worthy of the gas (see chart 2). ITM Power, a long-standing British electrolyser-maker, ousted its boss last September after repeatedly failing to meet promises for expansion. In October the founder of Nikola, an American startup developing hydrogen-powered lorries, was convicted for misleading investors. Even prominent hydrogen boosters acknowledge that things have become frothy. Olivier Mussat, boss of Atome, a British firm planning to make fertiliser from hydrogen produced using excess hydroelectric power in Paraguay, worries that “a lot of people have been selling ‘hopium’.”In fact, the problem with today’s boom may be not that there is too much money chasing hydrogen but too little. Deep decarbonisation requires much bigger investments. The International Energy Agency, an official forecaster, reckons that clean hydrogen should comprise roughly a tenth of final energy use by 2050, up from a thimbleful today. To achieve net zero carbon emissions by 2050, another $380bn will need to be invested in hydrogen by the end of this decade, on top of the $320bn announced so far. Happily for the planet, there are reasons to think that the latest investment cycle may be different, even if some investors get their fingers burned. Unlike 20 years ago, when the hype was whipped up by enthusiasm for cars fuelled by hydrogen, this time the focus is on emissions-intensive industries such as steelmaking, cement and long-haul transport, which cannot be decarbonised by electrification alone. Governments, especially those elected by increasingly climate-conscious Western societies, are trying to help bootstrap the industry into existence with generous subsidies. And market forces are blowing away some of the hydrogen froth without snuffing out the business as a whole. David Giordano of BlackRock, a giant asset manager with big hydrogen bets, says that the hydrogen business is ripe for “a useful correction”. The reason a clean-hydrogen industry is taking so long to get off the ground has to do with another aspect of the element’s chemistry. Because it is highly reactive, it scarcely exists on Earth in its free state and is instead bound up in molecules with other elements, chiefly carbon (in natural gas and other hydrocarbons) and oxygen (in water). Extracting the stuff from those molecules requires energy and can itself emit carbon—either because stripping hydrogen from hydrocarbons leaves carbon behind or because hydrocarbons are burned to power the splitting process. Today huge quantities of dirty hydrogen are produced from natural gas, primarily for use in making ammonia, a compound of hydrogen and nitrogen that is the main ingredient in artificial fertilisers.To clean things up, any carbon released in making hydrogen from hydrocarbons would need to be mopped up and stored. If done with tight emissions controls, this “blue” hydrogen, as energy nerds call it, would dramatically reduce CO2 emissions (though not eliminate them completely). The environmentally superior alternative is to crack water into hydrogen and oxygen using electricity that is completely carbon free, from either renewable sources (“green” hydrogen, in the sector’s colour-coded lingo) or nuclear power (“pink” hydrogen).Cleaning things up is, however, expensive—and getting more so as rising interest rates raise capital-intensive hydrogen projects’ costs. The difficulties in sourcing critical minerals and other vital components have led many firms to fall behind on expanding capacity. Getting enough renewable power is another bottleneck. Benoît Potier, chairman of Air Liquide, a French industrial-gas giant, says his firm’s planned 200 megawatt (MW) mega-project for making green hydrogen in Normandy is all set to go but cannot secure a large-enough power-purchase agreement for renewables (though a pink version may go ahead by tapping into France’s plentiful nuclear power). Bernd Heid, a hydrogen consultant at McKinsey, reckons that “optimism bias” had led promoters to issue over-enthusiastic production targets based on a cost of capital of 8-10%, which now looks rosy. Rising capital costs have prompted Mr Heid to revise the unsubsidised production costs for making hydrogen from renewables up by $2 since last year, to between $4.50 and $7 per kilogram.Still, if the industry is encouraged to grow rapidly, Mr Heid’s fresh forecast predicts that a kilogram of blue or green hydrogen can be made for between $2.50 and $3.50 without subsidy by 2030. That is beginning to look competitive with the stuff derived from natural gas, which is today made profitably at a cost of less than $2 per kilogram—especially if governments get more serious about pricing carbon properly.H to growAnd rapid growth is a distinct possibility. Esben Hegnsholt of BCG, another consultancy, expects the manufacture of electrolysers, fuel cells (which combine the inputs of hydrogen and oxygen to produce electricity and water vapour) and other hydrogen-economy gear to mature quickly. Companies are finding ways around supply bottlenecks. America’s Plug Power, an integrated firm that makes clean hydrogen, electrolysers and fuel cells, has entered a partnership with Johnson Matthey, a British chemicals and green-tech firm with access to the rare metals required for hydrogen production in electrolysers and for electricity production using fuel cells.This is helping viable clean-hydrogen projects come on line. In Port Arthur, Texas, Air Products, another industrial-gas firm, is turning the previously dirty hydrogen used at a big refinery run by Valero into blue hydrogen, with the captured CO2 fed into a pipeline for sale to industrial customers. In Puertollano, an hour by train from Madrid, Iberdrola, a Spanish energy giant, runs a 20MW electrolyser, one of the world’s biggest machines of its kind, using power from its local solar farm. A fertiliser plant next door pays for the clean hydrogen, which replaces the dirtier kind it previously used to make ammonia. Accelera, the clean-energy division of America’s Cummins, a maker of conventional engines, operates a 20MW renewables-powered hydrogen facility in Quebec. Amy Davis, Accelera’s boss, reports that customers with net-zero commitments are willing to pay more for clean hydrogen. Valero and Iberdrola are illustrative of the industry’s newfound level-headedness. It is increasingly clear that hydrogen makes much more sense in some areas than others. RMI, an American think-tank, calculates the emission-reduction potential of low-carbon hydrogen in a variety of sectors and finds that electrification is a much better choice in passenger cars, which fuelled a brief hydrogen boom 20 years ago, or home heating. A review of 32 studies published in the journal Joule also found that heating homes with hydrogen is less efficient and more resource-intensive than using electrical heat pumps.Instead, argues Martin Tengler of BloombergNEF, a research firm, the right place to start is by supplying clean hydrogen to sectors that already use dirty hydrogen today, such as in ammonia for fertiliser, methanol for the chemicals industry and oil refining. Perhaps 100m tonnes a year of it is made today from fossil fuels for this purpose. Next, it makes sense to promote hydrogen in areas where few decarbonisation alternatives exist, like steelmaking, shipping and long-term energy storage (where batteries’ tendency to lose charge makes them less useful)—not least because deep-pocketed incumbents in those industries also bring talent, money and business skills that the hydrogen economy needs. In May Felipe Arbelaez of BP, an oil giant pushing into hydrogen, told the World Hydrogen Summit in Rotterdam that the sector’s efforts should first go after industrial applications, which he said were “much easier than, say, using hydrogen for heating homes”. This fresh realism comes against the backdrop of another positive trend. Hydrogen is receiving strong policy support in rich countries. Europe took an early lead in kick-starting the industry. The EU’s latest climate package promotes the use of hydrogen in hard-to-decarbonise industries. Its plans to more than halve greenhouse gas emissions by 2030 include ambitious targets for hydrogen produced using renewable energy. America, for its part, is showering billions of dollars in subsidies. President Joe Biden’s administration is drawing up the final eligibility criteria for a handout of $3 per kilogram for clean hydrogen. Combined with America’s bountiful reserves of renewable energy and cheap natural gas, that means the country could become a low-carbon hydrogen production and export powerhouse. A handful of other countries with similar competitive advantages, from Australia and Norway to Chile and Saudi Arabia, are also promoting the industry. In March Air Products and ACWA Power, a Saudi utility, finalised a $8.5bn deal for a mega-project in Saudi Arabia to make hydrogen-related fuels. A lot of things still have to go right for the hydrogen business to live up to its perennial potential. European industry bosses already grumble that the new EU rules are too cumbersome and too hung up on green hydrogen. If written too strictly, the upcoming American eligibility criteria could throttle investment and, worries Andy Marsh, Plug Power’s chief executive, hinder the hydrogen industry for years. If handed out too freely, meanwhile, for example by allowing unlimited amounts of fossil-intensive grid electricity to power electrolysers, subsidies could do more harm than good. Analysis from Princeton University suggests that hydrogen made from water with dirty power could generate more greenhouse gases than hydrogen made directly from fossil fuels. If the policymakers and investors are not careful, billions of dollars may yet end up in dead-end applications. Despite a recent turn to electric vehicles, Toyota has not pulled the plug on passenger cars powered by hydrogen fuel cells, which look unlikely to be competitive with battery-powered wheels. Siemens Energy, a German engineering giant, plans to start making electrolysers at a big new factory in Berlin soon but for now workers are still mostly assembling conventional turbines capable of being modified to burn hydrogen instead of natural gas. The domestic gas industry has persuaded the British government to encourage trials of hydrogen for home heating, prompting one lobbyist to crow, “Christmas has arrived early, hydrogen friends!” Money spent on dubious applications leaves less for the vital ones in genuine need of support. A leading hydrogen advocate in Washington whispers: “It really makes me nervous that business models that don’t serve a greater purpose may get funding and win out.”Karim Amin of Siemens Energy defends his firm’s strategy of selling hydrogen-burning turbines as a useful step in the transition to cleaner energy. But he accepts that “of course there are better ways of using hydrogen than burning it in a gas turbine”. Policymakers, too, are displaying a welcome dose of realism. After a recent U-turn, for instance, the German government will now allow imports by pipeline of blue hydrogen made from natural gas in Norway. “This is a real dawn for hydrogen,” sums up Mr Hegnsholt of BCG, hopefully—even if, “like the sunrise, it will take longer than people think.” ■ More

Your columnist was in Riyadh in 2016 when Muhammad bin Salman, wearing robes and sandals, announced his Vision 2030, aimed at ending what the crown prince described as the kingdom’s addiction to oil. Saudi Arabia’s de facto ruler talked of selling shares in Saudi Aramco, the world’s biggest oil company, to fund a giant sovereign-wealth fund (SWF), worth $2trn, to invest in diverse non-oil industries. He would be its chairman, benefactor and mastermind. It was heady stuff, even if some of it sounded unhinged in a hidebound autocracy like Saudi Arabia. The most striking thing occurred later when a palace official invited Schumpeter to a café. Young men and women sat without head coverings, flirting openly. The rule-breaking atmosphere was electric. Listen to this story. Enjoy more audio and podcasts on More

Nothing turns on management theorists more than conflicting incentives. (If the idea of an aroused management theorist has ruined your breakfast, sorry.) They ruminate on financial motives—the adverse impact that individual bonus schemes might have on team collaboration, say. They churn out studies and books on the competing interests of shareholders and the executives who act on their behalf. Listen to this story. Enjoy more audio and podcasts on More

Christian Bruch always More

Lee kun-hee embarked on a world tour in 1993 to take stock of Samsung, the firm he inherited from his father. Finding its televisions and other electronics languishing on shelves, he decided to remake Samsung’s image. “Change everything but your wife and your children,” he told employees. One thing that didn’t change, according to a ruling by the International Centre for Settlement of Investment Disputes (icsid), is the close relationship between such chaebol, family-run conglomerates that form the backbone of South Korea’s economy, and the government.Listen to this story. Enjoy more audio and podcasts on More

American technology barons occasionally bemoan the lack in the West of “super-apps”, multifaceted online platforms offering a variety of different services. But the global interest in the business model belies the difficulties facing existing super-apps in Asia.Their recent performance has disappointed (see chart). Collectively, the market capitalisation of Singapore’s Sea and Grab, South Korea’s Coupang and Kakao, Japan’s Rakuten, and the parent company of India’s Paytm has declined by around 60% since the end of 2021. None of the firms is the same; they each make money from a blend of mobile gaming, social media, e-commerce, ride-sharing and financial payments. What they have in common is an aspiration to bundle together a variety of services which complement one another on one app. They had hoped hoping to emulate Chinese companies, such as Tencent’s WeChat and Alibaba’s Alipay, which pioneered the business model.But the newer Asian super-apps have been put under huge pressure by a rapidly changing environment. Funding, which was once cheap and plentiful, has dried up, making ambitious growth plans harder to finance. James Lloyd at Citigroup, a bank, notes that China’s super-apps started with a core of profitable and engaging businesses (e-commerce for Alipay and social media in the case of WeChat), which other services were built around. Outside China, few firms have balanced both significant scale and earnings in a similar way.Kakao, a South Korean firm, most closely fits the bill. Unlike most Asian would-be super-apps, it has been reliably profitable. Yet its share price has declined by 8% this year. Because the company is dominant on its home turf, it is running out of room for further domestic growth. Its ride-hailing arm has a market share in South Korea of as much as 90%, by some estimates. The firm wants to raise the international share of its revenues from 10% today to 30% by 2025—but such global expansion comes at a cost. At other firms the funding squeeze has inspired ambitions for profitability, which inevitably comes at the expense of previous plans for rapid expansion. GoTo, an Indonesian super-app, created from the merger of Gojek, a ride-hailing company, and Tokopedia, an e-commerce firm, was expected to appoint a former banker, Patrick Walujo, as CEO at its shareholder meeting on June 30th, after we published this. Mr Walujo has stressed that his aim is to make the company profitable.One Asian consumer-tech firm has bucked this year’s trend. The share price of Paytm, a would-be Indian super-app based around digital payments, has rallied by around 60%. The stock is still less than half of its all-time high, reached shortly after it floated in November 2021, and the firm has yet to make a profit. Nonetheless, its rising share price may reflect something companies elsewhere in Asia lack: a single, large and growing domestic market to work with. Whether that potential for scale proves enough for a more sustainable future for Paytm has yet to be seen. The idea of a company using a single platform to offer a variety of services to consumers has an intuitive appeal. But after more than a decade of discussion about the coming dominance of super-apps, many of the Asian firms are still struggling to find a balance between size and profitability. With no end in sight to higher funding costs, a speedy recovery for these one-time darlings of tech investors is hard to foresee. ■To stay on top of the biggest stories in business and technology, sign up to the Bottom Line, our weekly subscriber-only newsletter. More