Letter From London . . .
After a whirlwind trip to New York and a visit with the Wall Street Journal I popped back to San Francisco for a couple of days before heading back out again to London.
Party season . . .
I came back so I could catch a couple of key events such as Vivek Ranadive's Christmas party at his newly built Atherton home. This is a phenomenal bachelor mansion for the CEO of Tibco, and it took about four years to build. I had fun checking it out its vastness in the company of Forbes reporter Kym McNicholas [Please see Kym's excellent "How to Obamafy your business."] It was also great to see reporter Carolyne Zinko from the San Francisco Chronicle.
I was thinking that the mansion might make for a great reality TV show if it were filled with five Silicon Valley CEOs!
The next day M.R. Rangaswami was hosting the annual Sandhill.com Christmas party. M.R. told me that he was considering canceling the party because of the poor economy but decided against it because he'd had a good year and it was creating jobs for waiters, kitchen staff, and hotel employees at the Intercontinental Hotel in San Francisco. Part of the evening entertainment was a marvelous performance by Mrs Rangaswami and her colleague Sarah Holzman performing a classical piece. They are both members of the very talented The Laurel Ensemble.
The trouble with compelling content . . .
The next day I was off to London. My 21 year old son Matt was over and gave me a ride to the airport. There was a little bit of drama because his BMW's radiator cracked wide open just before we got to the airport. When we stopped at the passenger drop-off clouds of coolant were billowing out from under the hood. Fortunately AAA was soon on the scene, and two airport employees, both BMW aficionados, stopped by and gave Matt recommendations to an excellent BMW mechanic nearby in San Bruno.
The Virgin flight was quite packed and my hopes for empty seats beside me were dashed. Never mind, the in-flight entertainment was very good. Unfortunately, it was so good that I neglected trying to take a nap, and before I knew it we were landing. That's the problem with compelling content it distracts you from what you should be doing.
Cheshire Cheese lesson for the media . . .
My trip to London is to catch up with my family and friends. It's also a chance to catch up with some of my journalist colleagues. One of the best opportunities is the annual Christmas party at Ye Olde Cheshire Cheese, a pub in Fleet Street. The party is organized by PR firm SourceWire and it usually pulls in a lot of journalists. But this year, although there were many familiar faces, there many more that didn't turn up. I don't know if this was because of the continued problems that the UK media industry.
Fleet Street is where much of the UK newspaper industry was once collected, but many of the newspaper companies moved to less expensive quarters in London's docklands.
There might be a lesson to be learned from Ye Olde Cheshire Cheese. The pub's structure dates back to 1667, rebuilt after the massive fire of London in 1666. If the pub can be restored from its ashes, then the UK newspaper industry can probably do the same.
I heard that The Independent, one of the large national UK newspapers, is considering moving to an Internet only edition. That must mean that the financial pressures on the other newspapers must also be heavy. I wish The Independent good luck with the move, it is going to be very challenging to build a business from online revenues. Figuring out a way to support quality media through online revenues is one of the most important challenges on the Internet. If The Independent, or for that matter, any other newspaper can figure it out then we all benefit.
High Street casualty . . .
The economy in Britain is very bad even though the London bars and restaurants are heaving with people. It is difficult to see the effects of a recent massive jump in job losses and predictions for more job losses in 2009.
There are many business bankruptcies but none more shocking than the closure of Woolworths. These are the original "dollar" stores, selling everything from household goods, to toys, to birthday cards, and more, and they hold a special place in most people's memories.
As a child I was always thrilled to visit these emporiums of many things at prices that my pocket money could afford. There is/was a "Woolies" in the middle of nearly every high street in Britain. For my family and friends, the demise of Woolies has brought home the meaning of the economic crisis far more than the closure of banks and financial institutions.
The cure for excessive spend and borrow is . . .
As in the US, there are many attempts to boost the UK economy with bail outs, cuts in sales taxes, etc. But there is also plenty of irony that abounds as economists berate the British for borrowing too much, and spending too much, yet the government policy is to borrow and spend its way out of the recession.
Britain is under the same deflationary pressures in assets that are affecting the US. One way to counter deflation is to print money and to create inflation. That's because deflation is incredibly damaging to an economy. Things costs less tomorrow so why buy today? With inflation it is potentially an economic stimulus because it is better to buy today than tomorrow. Here is a quick explanation from 1933 (Hat tip DK Matai and ACTA Open.)
Avoiding this tipping point . . .
The problem with trying to head off deflation by printing money, also known as quantitive easing, is that inflation can quickly get out of control and create a situation known as hyperinflation. There are accounts of hyperinflation during the German Weimar republic in the 1930s when people used wheelbarrows full of money to go shopping for groceries. A current example is Zimbabwe, which has an incredible 2.4 billion per cent per month hyperinflation. The tipping point into hyperinflation can happen very quickly.
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Ye Olde Cheshire Cheese is one of the few pubs in London that can justify the 'Ye Olde' in its name. It was well known in the 17th century and many pubs have previously occupied this site, one of them, the Horn Tavern is recorded in 1538. The earliest incarnation was a guest house belonging to a 13th century Carmelite Monastery, the pub's vaulted cellars are thought to belong to that building. The pub was destroyed in the Great Fire of 1666 and rebuilt the following year.
The original American F.W. Woolworth Company and related businesses:
F. W. Woolworth Company was the original USA-based chain of five and dime stores.
Foot Locker, the current name of the company after its change in focus to athletic clothing.
Woolworths Group PLC is the owner of the Woolworths chain of high street shops in the UK (originally part of the F.W. Woolworth company, but separate since 1982).The UK stores went into administration in November 2008.
Central banks may soon resort to their most powerful weapons against deflation: the printing press and the “helicopter drop” of money. It is a time for which Ben Bernanke, chairman of the Federal Reserve, has long prepared. Will this weaponry work? Unquestionably, yes: used ruthlessly, it will eliminate deflation. But returning to normality thereafter will prove far more elusive.
How to avoid the horrors of 'stag- deflation' By Nouriel Roubini
As inflation soars, the state keeps issuing bigger notes -- Z$10 quintillion, anyone? -- but even then, with bizarre exchange rules, it's hard to figure out what, if anything, they're actually worth. By Robyn Dixon December 20, 2008