Philippa Kaur

Hermès is a byword for exclusivity. Its signature Birkin bag, one of which sold for $450,000 last year, cannot be bought from the luxury firm’s website or by simply walking into a store. There are neither ads in fashion magazines nor glossy campaigns on Instagram. For the not-so-famous, owning a Birkin can involve a years-long waiting list.Part of the reason for the wait is constrained supply, which Hermès manages with the precision worthy of its stitching. But another part is booming demand for all manner of luxury goodies. Last year net profits of Kering, which owns fashion labels such as Gucci and Balenciaga, rose by 14%. Those at LVMH, owner of Tiffany and Louis Vuitton, among other brands, grew by nearly a quarter. Hermès and Richemont, which owns Cartier, among other baubles, each saw theirs surge by more than a third. Together, the four groups raked in over €33bn ($35bn) in profits, on combined revenues of around $130bn.That, though, was before persistent inflation and rising interest rates to combat it fanned fears of a global recession. Now, as those fears intensify, luxury brands are losing their shine, at least in the eyes of investors. Luxury bosses’ unease More

A GREY RECTANGULAR building on the outskirts of San Jose houses rows upon rows of blinking machines. Tangles of colourful wires connect high-end servers, networking gear and data-storage systems. Bulky air-conditioning units whirr overhead. The noise forces visitors to shout. The building belongs to Equinix, a company which leases data-centre space. The equipment inside belongs to companies from corporate giants to startups, which are increasingly using it to run their artificial-intelligence (AI) systems. The AI gold rush, spurred by the astounding sophistication of “generative” systems such as ChatGPT, a hit virtual conversationalist, promises to generate rich profits for those who harness the technology’s potential. As in the early days of any gold rush, though, it is already minting fortunes for the sellers of the requisite picks and shovels.On May 24th Nvidia, which designs the semiconductors of choice for many AI servers, beat analysts’ revenue and profit forecasts for the three months to April. It expects sales of $11bn in its current quarter, half as much again as what Wall Street was predicting. As its share price leapt by 30% the next day, the company’s market value flirted with $1trn. Nvidia’s chief executive, Jensen Huang, declared on May 29th that the world is at “the tipping point of a new computing era”.Other chip firms, from fellow designers like AMD to manufacturers such as TSMC of Taiwan, have been swept up in the AI excitement. So have providers of other computing infrastructure—which includes everything from those colourful cables, noisy air-conditioning units and data-centre floor space to the software that helps run the AI models and marshal the data. An equally weighted index of 30-odd such companies has risen by 40% since ChatGPT’s launch in November, compared with 13% for the tech-heavy NASDAQ index (see chart). “A new tech stack is emerging,” sums up Daniel Jeffries of the AI Infrastructure Alliance, a lobby group. On the face of it, the AI gubbins seems far less exciting than the clever “large language models” behind ChatGPT and its fast-expanding array of rivals. But as the model-builders and makers of applications that piggyback on those models vie for a slice of the future AI pie, they all need computing power in the here and now—and lots of it. The latest AI systems, including the generative sort, are much more computing-intensive than older ones, let alone non-AI applications. Amin Vahdat, head of AI infrastructure at Google Cloud Platform, the internet giant’s cloud-computing arm, observes that model sizes have grown ten-fold each year for the past six years. GPT-4, the latest version of the one which powers ChatGPT, analyses data using perhaps 1trn parameters, more than five times as many as its predecessor. As the models grow in complexity, the computational needs for training them increase correspondingly. Once trained, AIs require less number-crunching capacity to be used in a process called inference. But given the range of applications on offer, inference will, cumulatively, also demand plenty of processing oomph. Microsoft has more than 2,500 customers for a service that uses technology from OpenAI, ChatGPT’s creator, of which the software giant owns nearly half. That is up ten-fold since the previous quarter. Google’s parent company, Alphabet, has six products with 2bn or more users globally—and plans to turbocharge them with generative AI. The most obvious winners from surging demand for computing power are the chipmakers. Companies like Nvidia and AMD get a licence fee every time their blueprints are etched onto silicon by manufacturers such as TSMC on behalf of end-customers, notably the big providers of cloud computing that powers most AI applications. AI is thus a boon to the chip designers, since it benefits from more powerful chips (which tend to generate higher margins), and more of them. UBS, a bank, reckons that in the next one or two years AI will increase demand for specialist chips known as graphics-processing units (GPUs) by $10bn-15bn. As a result, Nvidia’s annual data-centre revenue, which accounts for 56% of its sales, could double. AMD is bringing out a new GPU later this year. Although it is a much smaller player in the GPU-design game than Nvidia, the scale of the AI boom means that the firm is poised to benefit “even if it just gets the dregs” of the market, says Stacy Rasgon of Bernstein, a broker. Chip-design startups focused on AI, such as Cerebras and Graphcore, are trying to make a name for themselves. PitchBook, a data provider, counts about 300 such firms. Naturally, some of the windfall will also accrue to the manufacturers. In April TSMC’s boss, C.C. Wei, talked cautiously of “incremental upside in AI-related demand”. Investors have been rather more enthusiastic. The company’s share price rose by 10% after Nvidia’s latest earnings, adding around $20bn to its market capitalisation. Less obvious beneficiaries also include companies that allow more chips to be packaged into a single processing unit. Besi, a Dutch firm, makes the tools that help bond chips together. According to Pierre Ferragu of New Street Research, another firm of analysts, the Dutch company controls three-quarters of the market for high-precision bonding. Its share price has jumped by more than half this year. UBS estimates that gpus make up about half the cost of specialised AI servers, compared with a tenth for standard servers. But they are not the only necessary gear. To work as a single computer, a data centre’s GPUs also need to talk to each other. That, in turn, requires increasingly advanced networking equipment, such as switches, routers and specialist chips. The market for such kit is expected to grow by 40% annually in the next few years, to nearly $9bn by 2027, according to 650 Group, a research firm. Nvidia, which also licenses such kit, accounts for 78% of global sales. But competitors like Arista Networks, a Californian firm, are getting a look-in from investors, too: its share price is up by nearly 70% in the past year. Broadcom, which sells specialist chips that help networks operate, said that its annual sales of such semiconductors would quadruple in 2023, to $800m.The AI boom is also good news for companies that assemble the servers that go into data centres, notes Peter Rutten of IDC, another research firm. Dell’Oro Group, one more firm of analysts, predicts that data centres across the world will increase the share of servers dedicated to AI from less than 10% today to about 20% within five years, and that kit’s share of data centres’ capital spending on servers will rise from about 20% today to 45%. This will benefit server manufacturers like Wistron and Inventec, both from Taiwan, which produce custom-built servers chiefly for giant cloud providers such as Amazon Web Services (AWS) and Microsoft’s Azure. Smaller manufacturers should do well, too. The bosses of Wiwynn, another Taiwanese server-maker, recently said that AI-related projects account for more than half of their current order book. Super Micro, an American firm, said that in the three months to April AI products accounted for 29% of its sales, up from an average of 20% in the previous 12 months.All this AI hardware requires specialist software to operate. Some of these programs come from the hardware firms; Nvidia’s software platform, called CUDA, allows customers to make the most of its GPUs, for example. Other firms create applications that let AI firms manage data (Datagen, Pinecone, Scale AI) More

IN MID-MAY GERMANS were bracing for the third, and longest, national rail strike this year. Deutsche Bahn (DB) was locked in a dispute over pay with EVG, the union representing most German railway workers, including 180,000 at the state-run behemoth. At the last minute union leaders called off a 50-hour stoppage that was going to begin on the evening of May 14th. German travellers breathed a sigh of relief—and then gasped as DB failed to reinstate all of the 50,000 cancelled services. The next day roads were clogged by commuters who, worried about getting stuck at a train station, took the car instead.On May 23rd DB and the union met for a fourth round of wage talks, with no long-term resolution in sight. And labour unrest is only one of many fronts on which DB is fighting. Once a source of national pride, it has become the butt of bad jokes (“We have one about DB but we don’t know whether it will work”). In April just 70% of its long-distance trains were on time. And even that was an improvement on the whole of last year, when only 60% were punctual; the company’s (unambitious) goal is at least 80%. DB services are “too crowded, too old and too kaputt”, Berthold Huber, who sits on DB’s board, told the Süddeutsche Zeitung, a daily, this month.DB’s woes are the result of poor management, a bloated bureaucracy, political interference and years of underinvestment. In 2004 DB’s annual budget for the construction and upgrading of railway lines was cut from €4bn ($5bn) a year to €1.5bn, notes Christian Böttger of the University of Applied Sciences in Berlin. It has edged up since but last year was still only €1.9bn. This year it will be €2bn. The railway business has been bleeding money for years; in 2022 it made an operating loss of €500m. DB’s overall operating profit of €1.3bn, on revenues of €56bn, was all down to its logistics arm, DB Schenker, which has benefited from the uptick in e-commerce and now contributes nearly half of sales. Vowing to make up for the failings of its predecessors, Olaf Scholz’s newish cabinet has ambitious plans for DB. It wants to pump an extra €45bn into the network, hoping almost to double the number of passenger journeys by 2030 to around 4bn, and to increase freight volumes by 25%. This year DB is beginning to renovate and modernise 650 train stations, as well as upgrading 2,000km of tracks, 1,800 switch points and 200 bridges. It will also add another 500 people to its 4,300-strong team of security personnel, who are tasked with protecting train tracks against mischief-makers (last October DB was hit by suspected sabotage, causing the suspension of all services in northern Germany). And it is accelerating the digitisation of railway traffic, from signals and switches to digital “twins” of wagons ferrying goods.In time this may improve passengers’ lot. But not soon. This year carriages may get more packed: since May 1st Germans can buy a monthly Deutschland ticket, valid on all regional and local trains, for just €49. Delays and missed connections are forecast to be worse than in 2022, in part owing to all those upgrade works. And DB may slip into the red. It is forecasting a loss of €1bn from operations in 2023, because of the investments, as well as high cost inflation that is politically tough to pass on to travellers (who, in a further drain on DB cash, can demand compensation for all the delays). “The pretence of running an economically viable business was abandoned …long ago,” says Mr Böttger. It is all about getting more cash from the state. ■To stay on top of the biggest stories in business and technology, sign up to the Bottom Line, our weekly subscriber-only newsletter. More

ICE BATHS, infrared saunas, white-water rafting, fly-fishing, archery workshops, whisky tastings, yoga at sunrise, shooting clay pigeons, go-kart races, mountain-biking in Norway, falconry in Ireland, climbing up a glacier in Alberta, singing “Kumbaya” around a campfire. These seemingly disparate activities have one thing in common: all of them are real examples of the contemporary corporate off-site.Your columnist, a guest Bartleby, cringes at the idea of PowerPoint presentations followed by role-playing exercises and mandatory games. She prefers to let the ties with her colleagues deepen in organic ways. Still, the executive retreat has become an annual business tradition. The idea is that, by disconnecting employees from their day-to-day routine, companies can build camaraderie and foster creativity. And it has grown in importance.A splashy, exciting getaway once a year may help retain executives in a tight labour market (and is cheaper than fatter monthly pay cheques). In the era of remote work—without the thousands of micro-interactions that happen in the office—team-building trips have also gained a structural role. Suddenly, off-sites are no longer an afterthought but lodged near the heart of corporate HR strategy. Not participating is not an option; so what if co-workers end up meeting in person for the first time wearing flip-flops?It used to be barbecues and softball games. Retreats moved things a notch higher in style and expense. Just three months after Steve Jobs left Apple and started another company in 1985, he whisked his employees to Pebble Beach for their first off-site. As corporate psychology boomed in the 1990s, team-building retreats became entrenched. By 2015 Uber was reportedly offering Beyoncé $6m to perform for its employees (no, not the drivers) at a corporate event in Las Vegas (the pop star was apparently paid in the then-hot startup’s stock rather than cash). WeWork, an office-rental firm with tech pretensions, used to host raucous summer retreats around the world; employees were encouraged to dance the night away to electronic music. Given Uber’s lacklustre ride since its initial public offering in 2019, current management has gone easy on A-listers. WeWork revised its staff-entertainment policies after its party-loving founder and CEO, Adam Neumann, was forced out in the wake of its abortive IPO later that year. But the trend for the corporate getaway has, if anything, intensified. To stand out, companies try to make their retreats as bespoke and exotic as possible. Those firms that cannot afford pop stars can have an astronaut regale executives with tales of life in space—not Queen Bey, exactly, but potentially enthralling to the nerdier elements of the workforce. Many organisers opt for the great outdoors, perhaps in the belief that the sublime will unleash authenticity. Wineries around the world are now expanding to accommodate retreats featuring winemaking lessons; employees stomp grapes. A Montana ranch offers corporate clients paintball, flag-capturing and dummy-cattle-roping. Butchershop, a brand-strategy agency, held its second summit in Costa Rica; activities included zip-lining, horseback riding through the jungle and jumping off a cliff into the water. A sure-fire way for a business to make its retreat memorable is to thrust participants into adversity. Battling the elements together is supposed to foster team spirit, but zealous organisers have occasionally been known to overdo it. One large European company sent executives to the Arctic Circle in midwinter. They endured frigid temperatures for days, without a fresh change of clothes. Walking on hot coals—an ancient ritual recast as a team-building exercise—led to the injury of 25 employees of a Swiss ad agency in Zurich. It is unclear what many days away achieves, except for straining the expense budget and consuming valuable time. Returning to your desk with frostbite or burnt feet is unlikely to boost your productivity. Even if you escape injury you may have lost esteem for the co-worker who drank too much and delivered a maudlin monologue. Walking on fire with colleagues may be meant to encourage spiritual healing and to put employees and bosses on equal—and equally uncomfortable—footing. Yet it is walking through metaphorical fire which actually causes teams to bond. That happens not at a corporate retreat but after years of working together.■Read more from Bartleby, our columnist on management and work:Businesses’ bottleneck bane (May 18th)How to recruit with softer skills in mind (May 11th)A short guide to corporate rituals (May 4th)Also: How the Bartleby column got its name More

SAM ZELL called himself “the Grave Dancer”, even though, as he explained, his penchant for buying distressed assets “wasn’t so much dancing on graves as …raising the dead”. In the mid-1970s, when he coined this nickname, America’s property market was struggling. Mr Zell, who died on May 18th at the age of 81 and with a fortune of more than $5bn, had already made good money erecting and managing apartment buildings in small but growing cities. But after others cottoned on to the same opportunity, the market became saturated. Supply exceeded demand; property prices crashed. Undeterred, he bought flats, offices and retail space, often for pennies. As America’s economy boomed in the 1980s, their value soared. He danced on more graves after Black Monday in October 1987. With rents and occupancy rates falling, indebted property owners needed money, and turned to capital markets. He created a fund with Merrill Lynch, an investment bank, that raised capital from investors to buy distressed properties. Such real-estate investment trusts (REITs), which own, run or finance properties, date back to the 1960s. But it was Mr Zell who helped usher in their modern version, says Michael Knott of Green Street, a firm of real-estate analysts. Mr Zell was born to Polish-Jewish parents who narrowly escaped the Holocaust. He got his start in business early, buying Playboy magazines in downtown Chicago, where he went to Hebrew school, for 50 cents and selling them to classmates in the suburb where he lived for $3. He wore jeans to work long before office-casual was a thing, and took motorcycle-riding trips around the world with a group of friends, “Zell’s Angels”. He explained his business philosophy as “If it ain’t fun, we don’t do it.” His timing was impeccable. In 2007 he sold his office-landlord business to Blackstone, a private-equity giant, for $39bn. A year later Lehman Brothers collapsed—and the commercial-property market with it.Where would a young Mr Zell look to build his fortune today? Stephanie Wright of New York University thinks that, given his preference for easy-to-understand markets with limited competition, outdoor storage facilities could pique his interest. They are big but employ few people, meaning cities dislike them and limit their growth, even though demand remains robust. The same goes for parks of prefabricated homes, the business of the first company Mr Zell ever took public, in 1993. People still buy them, yet zoning laws restrict them. Once a house is installed on the property, homeowners rarely move it. On the rare occasions when one does, the developer still has the land and can put another home in its place.Conventional wisdom argues for staying away from the office and retail assets that helped make Mr Zell a billionaire. American malls have long been written off for dead, bricks and mortar deemed to be no match for e-commerce. In the era of remote and hybrid work, leasing activity is slowing across most big American cities even as employment continues to rise, according to CBRE, a property manager. Office-vacancy rates are increasing—to 17.8% across America in the first three months of 2023, the highest level in 30 years. Even though some upscale malls and office buildings are thriving, many older and shabbier properties look destined for obsolescence. Yet to Mr Zell those failing assets may have looked the most attractive of all. For in failure, as any grave dancer knows, lies opportunity. ■To stay on top of the biggest stories in business and technology, sign up to the Bottom Line, our weekly subscriber-only newsletter. More

One of the joys of writing about business is that rare moment when you realise conventions are shifting in front of you. It brings a shiver down the spine. Vaingloriously, you start scribbling down every detail of your surroundings, as if you are drafting the opening lines of a bestseller. It happened to your columnist recently in San Francisco, sitting in the pristine offices of Anthropic, a darling of the artificial-intelligence (AI) scene. When Jack Clark, one of Anthropic’s co-founders, drew an analogy between the Baruch Plan, a (failed) effort in 1946 to put the world’s atomic weapons under UN control, and the need for global co-ordination to prevent the proliferation of harmful AI, there was that old familiar tingle. When entrepreneurs compare their creations, even tangentially, to nuclear bombs, it feels like a turning point.Since ChatGPT burst onto the scene late last year there has been no shortage of angst about the existential risks posed by AI. But this is different. Listen to some of the field’s pioneers and they are less worried about a dystopian future when machines outthink humans, and more about the dangers lurking within the stuff they are making now. ChatGPT is an example of “generative” ai, which creates humanlike content based on its analysis of texts, images and sounds on the internet. Sam Altman, CEO of OpenAI, the startup that built it, told a congressional hearing this month that regulatory intervention is critical to manage the risks of the increasingly powerful “large language models” (LLMs) behind the bots.In the absence of rules, some of his counterparts in San Francisco say they have already set up back channels with government officials in Washington, DC, to discuss the potential harms discovered while examining their chatbots. These include toxic material, such as racism, and dangerous capabilities, like child-grooming or bomb-making. Mustafa Suleyman, co-founder of Inflection AI (and board member of The Economist’s parent company), plans in coming weeks to offer generous bounties to hackers who can discover vulnerabilities in his firm’s digital talking companion, Pi.Such caution makes this incipient tech boom look different from the past—at least on the surface. As usual, venture capital is rolling in. But unlike the “move fast and break things” approach of yesteryear, many of the startup pitches now are first and foremost about safety. The old Silicon Valley adage about regulation—that it is better to ask for forgiveness than permission—has been jettisoned. Startups such as OpenAI, Anthropic and Inflection are so keen to convey the idea that they won’t sacrifice safety just to make money that they have put in place corporate structures that constrain profit-maximisation.Another way in which this boom looks different is that the startups building their proprietary LLMs aren’t aiming to overturn the existing big-tech hierarchy. In fact they may help consolidate it. That is because their relationships with the tech giants leading in the race for generative AI are symbiotic. OpenAI is joined at the hip to Microsoft, a big investor that uses the former’s technology to improve its software and search products. Alphabet’s Google has a sizeable stake in Anthropic; on May 23rd the startup announced its latest funding round of $450m, which included more investment from the tech giant. Making their business ties even tighter, the young firms rely on big tech’s cloud-computing platforms to train their models on oceans of data, which enable the chatbots to behave like human interlocutors.Like the startups, Microsoft and Google are keen to show they take safety seriously—even as they battle each other fiercely in the chatbot race. They, too, argue that new rules are needed and that international co-operation on overseeing LLMs is essential. As Alphabet’s CEO, Sundar Pichai, put it, “AI is too important not to regulate, and too important not to regulate well.” Such overtures may be perfectly justified by the risks of misinformation, electoral manipulation, terrorism, job disruption and other potential hazards that increasingly powerful AI models may spawn. Yet it is worth bearing in mind that regulation will also bring benefits to the tech giants. That is because it tends to reinforce existing market structures, creating costs that incumbents find easiest to bear, and raising barriers to entry.This is important. If big tech uses regulation to fortify its position at the commanding heights of generative AI, there is a trade-off. The giants are more likely to deploy the technology to make their existing products better than to replace them altogether. They will seek to protect their core businesses (enterprise software in Microsoft’s case and search in Google’s). Instead of ushering in an era of Schumpeterian creative destruction, it will serve as a reminder that large incumbents currently control the innovation process—what some call “creative accumulation”. The technology may end up being less revolutionary than it could be. LLaMA on the loose Such an outcome is not a foregone conclusion. One of the wild cards is open-source AI, which has proliferated since March when LLaMa, the LLM developed by Meta, leaked online. Already the buzz in Silicon Valley is that open-source developers are able to build generative-AI models that are almost as good as the existing proprietary ones, and hundredths of the cost. Anthropic’s Mr Clark describes open-source AI as a “very troubling concept”. Though it is a good way of speeding up innovation, it is also inherently hard to control, whether in the hands of a hostile state or a 17-year-old ransomware-maker. Such concerns will be thrashed out as the world’s regulatory bodies grapple with generative AI. Microsoft and Google—and, by extension, their startup charges—have much deeper pockets than open-source developers to handle whatever the regulators come up with. They also have more at stake in preserving the stability of the information-technology system that has turned them into titans. For once, the desire for safety and for profits may be aligned. ■Read more from Schumpeter, our columnist on global business:America’s culture wars threaten its single market (May 18th)Writers on strike beware: Hollywood has changed for ever (May 10th)America needs a jab in its corporate backside (May 3rd)Also: If you want to write directly to Schumpeter, email him at [email protected]. And here is an explanation of how the Schumpeter column got its name. More

CARL ICAHN owns 1.4% of Illumina, a genomics giant with a market value of $34bn. Mr Icahn’s modest stake belies his ambition. As the elder statesman of activist investing, the 87-year-old aims to convert small shareholdings into considerable influence. Mr Icahn has nominated three directors to the board of Illumina, whose share price has fallen by 60% since its peak in 2021, in part owing to hubristic dealmaking. On May 25th, after The Economist was published, Mr Icahn’s colourful campaign against the firm’s bosses (16 letters, drawing on Shakespeare and Lincoln) will reach a climax at its annual general meeting. It is one of the hottest tickets in this year’s “proxy season”, when most American firms elect their boards of directors.After a dismal year, when activist funds lost 16% of their value as stockmarkets slumped, many observers were expecting a spring offensive. Fund managers had a busy end to 2022, taking advantage of those sunken stockmarket valuations. New corporate-governance rules introduced last September make it easier for dissident investors to obtain board seats, by compelling firms to include all nominees on proxy ballots and allowing shareholders to mix and match those proposed by the company and by its detractors, rather than pick alternative slates. “Asked in December, I would have said this is going to be a proxy season for the ages,” says Kai Liekefett of Sidley Austin, a law firm. Five months on things are, at first blush, looking less epochal. In the first quarter of 2023 the number of new activist campaigns in America was a third lower than a year earlier, according to Lazard, an investment bank. With dealmaking at its most subdued in a decade, “transactional” funds, shorter-term investors which agitate for anything from spin-offs of units to the sale of the whole company, are finding little traction. Few big-ticket fights made it to contested votes for board spots. Yet the quietude may be deceiving. For one thing, many targets, worried that the new rules favour activists, have sought a truce rather than risk a painful proxy brawl. In February Trian, an activist outfit run by Nelson Peltz, ended its battle against Disney after the entertainment behemoth presented a restructuring plan. Elliott Management, another activist giant, called off plans to nominate directors to the board of Salesforce in March, two months after the software firm appointed the boss of ValueAct, another well-known fund, to its board. This month Shake Shack, a fast-food retailer, announced a settlement agreement with Engaged Capital, a smaller activist fund. Such truces may be less entertaining for outside observers than Mr Icahn’s antics, but for the activists they are wins nonetheless. Fifteen years of rock-bottom interest rates and cheap money have created a target-rich environment. As the cost of capital rises, activists spy plenty of management teams that could do with more discipline. On May 11th Elliott revealed it owned 10% of Goodyear, a tyremaker with a market value of around $4bn, along with a plan to sell retail stores and bolster margins. Four days later the hedge fund announced a 13% interest in NRG, an $8bn energy company, calling its recent acquisition of Vivint, a home-security firm, “the single worst deal” the power-and-utilities sector has seen in the past decade. Both campaigns attempt to focus managers’ minds and streamline the companies’ operations. The share prices of Goodyear and NRG jumped by 21% and 3%, respectively, on the news of Elliott’s stakes.Activists are also pursuing larger prey. Campaigns involving companies with market capitalisations above $50bn made up a record share of activity during the first quarter of 2023. Some funds are taking aim at technology firms, which accounted for a quarter of campaigns in America last year. Tech’s retreat from the pandemic-induced boom in all things digital presents activists with an opportunity to force cost-cutting or shedding unprofitable businesses. Technology giants’ vast market capitalisations—Salesforce is worth $200bn—allow activists to deploy large sums without passing ownership thresholds that would trigger disclosures of their stakes before they are ready to launch the public-facing part of their campaigns.Not even the biggest of big tech, hitherto largely spared the activists’ rod, is safe. This month Pershing Square and Third Point, two hedge funds, revealed investments in Alphabet, Google’s $1.5trn parent company. Third Point insists its stake is not an activist campaign. It and Pershing may still benefit from the earlier efforts of TCI, another fund already on the warpath against Alphabet’s high costs and cash-burning moonshots. American activists will also increasingly export their version of shareholder capitalism abroad. In addition to large regional players, such as Cevian Capital in Europe, high-profile American fund managers have become familiar faces in the world’s business circles, making it easier for them to engage with other shareholders. Even as new campaigns in America languished at the start of the year, activity in Europe and Asia has surged.Take Japan. Many of those who picked fights there in the past, like T. Boone Pickens, a corporate raider who took on Koito Manufacturing in the 1980s, or TCI, which in 2008 dropped its investment in J-Power, an electric utility, came back bruised. Now, thanks to corporate-governance reforms over the past decade, Japan Inc has had no choice but to become more receptive. New stockmarket guidelines will go so far as to ask companies worth less than the book value of their equity to disclose their initiatives for improvement. Activists do not always prevail. On May 25th ValueAct lost a proxy battle to elect four directors to the board of Seven & i, the Japanese conglomerate which owns the 7-Eleven chain of convenience stores. This month Mr Icahn himself became the target of an activist attack. A short-seller, Hindenburg Research, claims that his listed vehicle, Icahn Enterprises, is overvalued. In response to the assault, Mr Icahn denied Hindenburg’s allegations and defended the style of investing he pioneered. Activists, he argued, “breach the walls” of badly run companies. Whether or not Mr Icahn’s own firm deserves activist treatment, plenty of others certainly do. ■To stay on top of the biggest stories in business and technology, sign up to the Bottom Line, our weekly subscriber-only newsletter. More

One of the joys of writing about business is that rare moment when you realise conventions are shifting in front of you. It brings a shiver down the spine. Vaingloriously, you start scribbling down every detail of your surroundings, as if you are drafting the opening lines of a bestseller. It happened to your columnist recently in San Francisco, sitting in the pristine offices of Anthropic, a darling of the artificial-intelligence (AI) scene. When Jack Clark, one of Anthropic’s co-founders, drew an analogy between the Baruch Plan, a (failed) effort in 1946 to put the world’s atomic weapons under UN control, and the need for global co-ordination to prevent the proliferation of harmful AI, there was that old familiar tingle. When entrepreneurs compare their creations, even tangentially, to nuclear bombs, it feels like a turning point.Listen to this story. Enjoy more audio and podcasts on More