The later 20th century was not a big focus of my book, Avoiding the British Empire. I date the end of the British world system to 1914, and the beginning of World War I. The time after than is mostly one of decline. But it had peaks, and the period after 2016 will be seen as a new valley. One of the things that I did study intensely in writing the book was the distinction between “informal” and “formal” empire. The informal empire of financial power was as important, or perhaps more important than all the red bits on the map that were formally controlled by the British Empire.
If you look at it that way, then it’s clear that the European Union represented a new informal empire for Britain. Which makes throwing it away with Brexit quite nuts. I take a more in depth look at this in today’s video.
So why am I the only guy talking about this? In today’s video I connect a bunch of dots to point out that Saudi Arabia’s investment program isn’t going to help them out of their current mess. In fact that investment program is more than a bit nuts. Funds that are desperately needed to reinvent the country are being sent to some of silicon valley’s riskiest money pits. It’s possible that these investments will make some money eventually, but it isn’t what I’d call likely.
The truth is that all of this information is out there. Today’s video wouldn’t be possible without some great financial journalism done by folks at Bloomberg and the Financial Times. The FT’s “Saudi Sovereign Wealth Fund Scrambles For Resources” in particular was very useful. But this stuff is often behind paywalls, and only read by nerds like myself. This information is all out there, and it’s being acted on by serious investors. That’s why that magical city, NEOM, isn’t going anywhere, and its German CEO has already been shuffled off to another job. That’s why the Saudi-Blackstone infrastructure fund announced at the Saudi-Trump orb fest last year can’t find any other investors. The broader situation really is dire, far beyond the headline grabbing problems with Tesla and Uber.
This is a slow motion catastrophe. But it hasn’t made much of an impact on the broader consciousness yet. That’s because the Saudi PR machine is still working in high gear. Bloomberg, FT, and occasionally the New York Times will follow up on all these projects and their failings, in articles that are only read by a few tens of thousands of people. But when a new project is announced it’s in ALL the outlets, with videos, puff pieces, and endless social media placements. The more disturbing facts are all out there, and I’m proud that I got to bring them to you with today’s video.
Full disclosure: I own some Tesla stock and I’m actually pretty bullish on the company’s long-term chances. If Elon Musk can get his head on straight that is. That doesn’t mean it’s a good investment for Saudi Arabia…
I feel like markets and economics have been an underpinning of what I’ve been talking about for quite some time now. It’s been a troubling thing for me. There’s always a lot of certainty when these issues come up in political discussions, but usually almost nothing backing up that certainty. The conditions we’re looking at are always changing, and the theories that people gravitate to are some of the least proven imaginable. Economics has pretensions to being a science. But the variables are immense, and there’s really only one result.
We have one world economy, and its performance at any given time is the only thing that we have to point to, to see whether our theories are working. There is no control group. Most of the figures we rely on to measure what’s going on are little better than rough estimates, and the political consensus rarely lasts a decade. I have high hopes for the profession of economics. People are doing amazing work in the field, and the move onto the internet that our species is currently undergoing provides the possibility of real measurement (and Orwellian nightmares). I’m confident that the future is bright, but I think we all need a lot more humility in talking about the economy. Which is why I made today’s video, and why I’ll be adding to the series in the coming weeks…
One of the most important aspects of development in Saudi Arabia, and in the Gulf more broadly, is the fact that it often doesn’t happen. The Gulf countries are mostly run by monarchs, and they all have pharaonic ambitions. They want to build monuments, cities, and other great works that illustrate their magnificence. If it’s something as simple as a museum or giving a foreign university a local campus it happens. But the great ambitions that mix local development, innovation, or anything else that requires real buy-in from the people of the country, either never happen, or happen in such a small way as to make the initial announcements look ridiculous.
When NEOM, the 500 billion USD sustainable city was announced, I couldn’t help but think of the UAE’s Masdar city. It was announced with similar fanfare back in 2006. It was going to be green, it was going to be amazing, there were going to be tons of people there! Parts of Masdar did end up being built, but most of the plan was scrapped, and the Guardian now describes it as in danger of becoming a ghost town. Masdar isn’t the only hi-tech wonderland city that never was. Saudi Arabia has one too. Anybody remember King Abdullah Technology City? It was the last king’s NEOM. It was still moving along, or at least reported to be so back in 2015.
And that’s the important bit here. All of this constant churn of projects seems to be done more for a foreign press audience than to create real change in Saudi Arabia. I don’t doubt the sincerity of any of the Saudi Royal reformers, I just doubt their ability. The world press gives them a free pass on all of this. Almost none of the articles reporting on NEOM mentioned King Abdullah city or Masdar. Actually, now that Abdullah is dead, his city seems to have disappeared from the news completely. It’s clear that it’s now longer a public relations priority, and I’d guess that the 100 billion that is supposed to build that city is now quickly moving on to MBS’s NEOM. This is not a good way to run anything. But the Saudis get a pass from the world press. Today’s video, on the ridiculousness of the Saudi Aramco IPO is an attempt to push back on that a bit.
I have loved the Empire State building since I was a child. But have you ever thought about that name? “Empire State”? That’s how New Yorkers saw their state in the early 20th century. New York led the country that was going to lead the world. Parsing the exact definition of “Empire” intended in the name is a much longer topic than a blog post can cover. But that vision, of New York as a leader, went straight to the top. Al Smith, the president of the company that built the building was a former governor of New York.
This video documents how that vision has faded, and how far from national leadership the people and politicians of New York have fallen. I think I’ll have a lot more to say on this topic in future, but I wanted to briefly lay out the facts this week.
Remember the too big to fail banks? They are still a problem. I don’t know when the next crisis is coming, but it’s inevitable. Too many of the problems at the root of the 2008 crisis have never been solved. This video lays out how Dodd Frank made everything worse. But it has created a situation that won’t be improved by repeal. It’s one of those catch-22 things basically.
I love it when the environment I’m in inspires a video. San Francisco is an interesting place. There’s a ton of money everywhere, and a ton of poverty too. I’m currently in the midst of a tour of the West Coast, staying anywhere there is a free couch, and San Francisco has probably been the most inspiring city. That’s not necessarily a good thing. Market Street, where the bulk of this video is set, has a ton of history (For California). The street has seen multiple cycles of boom and bust since the mid 19th century. The current vibe is definitely boom.
A few blocks away the Salesforce Tower is currently going up. It will be the tallest building in San Francisco and the second tallest west of the Mississippi. It’s hard not to think of the “edifice complex”. Nothing signals a coming downturn like a massive new skyscraper. NYC’s Empire State and Chrysler Buildings went up during the beginning of the great depression. The buildings that ended US dominance in the Skyscraper game, Malaysia’s Petronas Towers, were finished in 1996, one year before the Asian Financial Crisis. The Burj Khalifa, the biggest of them all (so far) signaled a financial crisis for Dubai.
The Salesforce Tower ends the video, but it definitely cast the mindset for the whole thing. That and Wells Fargo’s hilariously bloated presence in downtown SF put me in mind of financial crises past and future. I don’t know when the crisis will hit. Who knows, we could be at the beginning of a great boom rather than its end. But if our banks continue to be structured the way they are, we’re going to be in trouble eventually regardless. Hugs!
This video convinced me to put together a new playlist “MFF on the Markets“. The channel tends to be a little more focused on history and geopolitics, but I’ve been a stockbroker and a corporate lawyer in my day, so I’ve got some stuff to contribute on the topics of law and markets when I can stomach it. I was surprised that the playlist came to 34 videos. Check ’em out!