Selling China Short
buckle up - Beijing
Hedge fund investor and stock short-seller, James S. Chanos, has grown enormously wealthy by foreseeing the crash and burn of once high-flying companies like Enron, Tyco International and Boston Market, then betting against them. Through his New York-based fund Kynikos Associates, he manages $6 billion and counting, and is reportedly one of the most successful investors to come out of the recession.
He’s now calling out China, Inc. for its steroid-pumped economy and Beijing for its possibly cooked books, and I’m having a little déjà vu moment. It doesn’t take much scraping below the surface to uncover a whole lot of things that don’t add up with the country that everyone seems to be relying on to lead the world into a bigger and brighter future.
As China struts its newly demolished and rebuilt image out for the rest of us to admire, the one vestige of its past that could severely hinder its future, is its lock on communication.
In the last century, brick and mortar business was the driving force of the world economy. Whoever had the most locations and walk-in customers won. Now, businesses grow without real estate, and a country that restricts social media phenomenon like Twitter and Facebook, blocks independent web sites and strictly controls news, entertainment and advertising is not a leader, it’s a hindrance to growth at best, or a train wreck waiting to happen.
Chanos calls it “Dubai times 1000 – or worse.” I say he could be on to something.
** January 19, 2010 update - Excerpt from Thomas L. Friedman’s New York Times op-ed column (in reference to Chanos and, more recently, Google’s exit from China):
John Hagel, the noted business writer and management consultant argues in his recently released “Shift Index” that we’re in the midst of “The Big Shift.” We are shifting from a world where the key source of strategic advantage was in protecting and extracting value from a given set of knowledge stocks — the sum total of what we know at any point in time, which is now depreciating at an accelerating pace — into a world in which the focus of value creation is effective participation in knowledge flows, which are constantly being renewed.
“Finding ways to connect with people and institutions possessing new knowledge becomes increasingly important,” says Hagel. “Since there are far more smart people outside any one organization than inside.” And in today’s flat world, you can now access them all. Therefore, the more your company or country can connect with relevant and diverse sources to create new knowledge, the more it will thrive. And if you don’t, others will.
