I have been devoting substantial time and attention this year to understanding bitcoin and the blockchain, and meeting with the start-ups and established institutions seeking to apply these technologies to the financial markets. In this I am hardly alone.

While I find the invention of a new currency independent of central bank control and possessing inherent inflation protection to be mildly interesting from an intellectual perspective, I believe the distributed ledger architecture of the blockchain will be the more important development over the longer term.

Those of us who have spent time operating in emerging markets, have no problem wrapping our brains around the creation of new currencies and the desire to somehow limit the discretion of local central banks to print money. Bitcoin, despite its current (and, in my view, temporary) scaling limitations is a compelling solution for governing transactions among counterparties who do not trust one another. In fact, one of the design objectives of the currency was to solve a relatively esoteric problem in computer science known as the “Byzantine Generals” problem.

It is beyond my ability and certainly the interest of most of the readers of this blog to delve too deeply into this byzantine thought experiment. At its simplest, the challenge is to devise a reliable communications protocol which will allow a group of generals from Byzantium, each in charge of a separate army, to coordinate an attack on an enemy city when not all of the generals can be trusted to act in unison. Exactly why the bitcoin-based blockchain solves this dilemma of reaching a consensus to attack (at least in the absence of a traitorous majority), I will leave to the experts (see e.g., The Byzantine Generals Problem –
http://research.microsoft.com/en-us/um/people/lamport/pubs/byz.pdf).

While much of the modern financial system can seem byzantine to the outsider, there is no real lack of trust, at least as far as clearance and settlement transactions between creditworthy counterparties in regulated markets. Thus, much of the overhead of the bitcoin-based blockchain is not needed for transactions between trusted counterparties. However, I find it deeply ironic that many banks exhibit just the sort of mutual suspicion exemplified by the Byzantine Generals problem when they come together in various consortia to study and potentially implement blockchain solutions.

It is a sublime form of recursive loop that the very financial institutions that will end up not needing the complete bitcoin-based blockchain to transact among themselves, act like Byzantine generals when trying to decide how much each institution should do alone to further its own blockchain efforts and how much to do jointly.

It is issues like these in finance, strategy and computer science that sustain my interest in FinTech.

It was bound to come to this. At the intersection of sound bite politics and celebrities who are famous for being famous, comes Donald Trump, comb-over and mouthpiece extraordinaire.

There are so many amusing angles from which to criticize Mr. Trump, it is difficult to know where to begin. I start with The Donald’s business record, upon which he stakes his claim to Presidential competence. It would not be unfair to summarize Mr. Trump’s platform as: “I am a billionaire, I’m a great businessman, therefore I will be a great President.”

The record is less convincing.

Donald Trump has allowed companies bearing his name to be driven into bankruptcy five times (Trump Taj Mahal in 1991, Trump Plaza in 1992, Trump Hotels & Casino Resorts in 2004, and Trump Entertainment in 2009 and 2014). These were not minor oversights; these were major insolvencies stiffing creditors and harming ordinary workers. Mr. Trump has repeatedly boasted in his books of how he has outsmarted his lenders: “I figured it was the bank’s problem, not mine. What the hell did I care? I actually told one bank, ‘I told you you shouldn’t have loaned me that money. I told you the goddamn deal was no good.’ ”(As requoted New York Times, Dec. 4, 2008). Perhaps, he will similarly forewarn the American electorate. Perhaps, he already has.

Of course, I may have misunderstood The Donald’s claim to Presidential competence. Perhaps, it is based on his proven ability to negotiate debt relief with his lenders. Beijing and other US creditors you’ve been warned.

Then there is the amusing and elusive question of just how rich is Donald Trump. An issue Mr. Trump has put into play by consistently overstating his wealth and allegedly petitioning Forbes magazine to raise its estimates of his net worth. I find it amusing because every sane wealthy person I know works equally hard so as NOT to be included on the variety of published “Rich Lists.” Numerous publications in addition to Forbes have attempted to come up with an accurate estimate of Mr. Trump’s net worth (see, e.g., Bloomberg Politics, Jul. 28, 2015;, Vox, September 2, 2015: “Donald Trump isn’t rich because he’s a great investor. He’s rich because his dad was rich”). None has placed his wealth within 50% of The Donald’s claims.

Since I readily agree that amassing wealth should not be a job qualification for serving as Commander-in-Chief, perhaps The Donald’s more subtle argument for Presidential competence consists of his ability never to let the facts get in the way of a good story when negotiating with adversaries or the media.

Given their repugnance, I should at least register my disgust with Mr. Trump’s comments about Mexicans, women and war heroes like John McCain. As Republican Party leaders have come to realize, these are not fringe groups to cede to the Democrats in national elections.

Given the historic importance of immigration to the United States, a further word on immigration policy is warranted. Over the relatively short history of the Untied States, our country has benefited greatly from successive waves of immigration. This has added to the social diversity of our nation, the strength of our economy and the quality of the sciences, arts and culture. Over the long run it is difficult for economic growth to significantly outpace population growth as Japan and Europe now attest. Finally, openness to immigration is deeply bound into the story of our nation, from its creation narrative of founding founders seeking freedom to millions of productive citizens who have been drawn to that beacon which stands in New York Harbor and proclaims ““Give me your tired and your poor,..”, etc.

So, looking beyond the hair and the bombast, what are we to think of The Donald? There is only one answer. Like The Real Housewives of New York, The Jersey Shore or the Kardashians, Donald Trump is a brand. Everything he says and does, including repeatedly running for President, is an exercise in brand building. Whatever wealth he has amassed comes not so much from actually building real things, as from inheritance and licensing his name to real builders who want a short-hand way to publicize that their apartments feature gold-plated bathroom fixtures.

As for The Donald’s chances to advance past the silly season of American Presidential politics, no one has better described the situation than Obama adviser, David Axelrod: “In a parlance Trump would appreciate: We’re still in the swimsuit competition. It gets harder in the talent rounds.”

I for one, would rather see any member of the Kardashian family, the former Bruce Jenner included, in a swimsuit.

This is admittedly, even for me, a strange existential question. Perhaps this is not so unusual. We tend to be interested in the things we spend a lot of time on — thus are born hobbies. In my case, as attested in these pages,that drives me to write about my family, media and technology, financial markets, music, books, soccer, cycling and tennis.

My interests also include major global cities and the airplanes and airports that link them for us. It should therefore come as no surprise that I eagerly awaited the report by the Airports Commission requested by the British Prime Minister and chaired by Sir Howard Davies (https://www.gov.uk/government/organisations/airports-commission).

First, I should declare an interest. I’m a huge fan of Sir Howard, having known him through his roles heading the FSA and the LSE in London and, more recently, chairing the Risk Committee of the Morgan Stanley Board. Knowing the political sensitivity of the question of adding runway capacity at Greater London airports, I worried that the Commission was being asked to do the impossible — make the case for a badly needed third runway at Heathrow to provide cover for both Conservative and Opposition MPs who had campaigned on the promise not to build another runway.

London is the crossroads of international business and finance, and Heathrow Airport is the second busiest airport in the world after Dubai. Nonetheless, Heathrow has only two runways, while less busy international destinations such as Paris (CDG), New York (JFK) and Frankfurt (FRA) operate four runways each. Even Boston, a former colonial outpost, has four major and two minor runways.

One might think it would therefore not take an intellectual heavyweight like Sir Howard and his commission to figure out that Heathrow might need a third runway. Nor is this a new issue. During the eight very happy years my family and I lived in London, I was visited at least annually by a series of committees, panels and agents all earnestly studying and “taking soundings on” the very same issue. While I do not minimize the environmental impact of air travel, nor the potential health effects and nuisance of constant overflight, most modern cities have figured out a way to balance these factors and compensate residents who must leave their homes or live with airplane noise and pollution. When asked my opinion, I always replied that there was perhaps a legitimate question as to whether Heathrow should build a fourth runway before 2050, but certainly not whether such an important gateway already operating at peak capacity needed a third runway.

British eccentricity (or perhaps air traffic control prowess) may explain why Heathrow should operate with one fewer runway than the international standard, but not two fewer. In fact, until the building of Terminal 4, Heathrow actually had three runways (although in fairness the long-lost third runway was less than fully useful as it ran across the two remaining parallel runways).

So I applaud the Davies Commission for having had the common sense and political guts to recommend a solution that the last several governments should have figured out on their own.

The resignation this week of the talented Dick Costolo ‎ as CEO of Twitter raises the question of whether a mere leadership change at the company is needed or a complete product, strategy and investor relations re-think.

First, I need to declare that I’m a huge fan of Twitter the service. It is a brilliantly efficient event capture, news dissemination‎ and comment amplification system. While in Twitter’s early days I did not immediately get the importance of 140-character publishing, I‘ve come to view it as an indispensable service. I also don’t find Twitter difficult or confusing to use as many complain.

Twitter, the company, has also been very successful by almost every measure other than comparison to Facebook. With 300 million active monthly users, close to $2 billion in run-rate revenues and a $24 billion market capitalization, Twitter is hardly a failing company. So what is the problem and why change CEO?

The problem is precisely its peer comparison group and the early stage of its monetization strategy. While Twitter is a media business, it is not a mass market (read down market) display ad platform. As my friend and media savant, Eric Hippeau, has observed Twitter deserves a much higher CPM than Facebook due to the value of its influencer user base.

Moreover, unlike Facebook, YouTube, Pinterest or Instagram, Twitter is the professional news platform of the future. As I have written recently in these pages, Twitter is the platform on which professional journalists, algorithms and, increasingly, sensor feeds in an IOT world combine to define what is newsworthy. Thus, at least some of Twitter’s current market value should be based on the option value of the company becoming the Reuters or Bloomberg of the future.

Finally, and most pragmatically, if Twitter’s new CEO cannot convince the market that it should be valued as that courageous one-of-a-kind innovator without peer group, a quick sale to Google would appear the surest route to value. Google could combine the company with Google+, possibly even segmenting the service into both traditional professional-grade Twitter and a more Facebook-like Google+ consumer version.

Whoever takes over from interim and former CEO Jack Dorsey will have the unenviable task of balancing advice from three former Twitter CEOs on the board. Perhaps they should each be limited to 140 characters per board meeting. ‎

When Twitter’s first quarter results were inadvertently released early, investors did not learn about the disappointing results from Bloomberg, Reuters or another traditional news source. Selerity, a six year-old start-up, obtained the scoop. Nor was this a story of intrepid reporting or carefully developed inside sources; it was Selerity’s powerful web crawler which located the Twitter results while they momentarily appeared on a public website. While no stolen inside information was involved, Twitter’s shares fell over 20% as Selerity clients benefited from the news.

As CEO of Reuters and then Thomson Reuters from 2001 through 2011, I was very proud of the Reuters news service, and remain so today. However, in my later years at the company I began to worry about the long-term viability of breaking financial news via humans rather than machines. This is not to say that journalists and editors no longer have an important role to play – only that these roles have changed. Experienced professionals are needed now more than ever to provide context and judgment and to break the occasional M&A story, but even at the largest wire services such as Reuters, reporters are unlikely to be positioned everywhere that news happens around the world.

My long association with a leading news agency prompts me to often ask myself the ontological question, “how do we know if something has happened in the world?’ The casual consumer of news might respond that the story would appear on CNN or CNBC. The more informed news junkie might respond that the television news services would likely pick up the story from the AP, Dow Jones or Reuters. However, these news agencies are unlikely to have journalists pre-positioned where the relevant events are unfolding in the world – at least at first.

These days, it is far more likely that news is first “reported” on Twitter, Baidu or another social feed. Not only are social media users spread all over the world, but many are armed with increasingly powerful cameras to record the breaking news.
It is ironic that it was Twitter’s quarterly results that were scooped by Selerity, since Twitter itself is becoming the world’s primary event-capture and news dissemination network. Services such as Dataminr and Banjo use sophisticated algorithms to analyze Twitter and other feeds to identify breaking news and assess its significance, and Dataminr, in particular, has seen strong sales on Wall Street.

The prominence of machine-reported news will only increase with the torrent of sensor-created data that will be created by the internet-of-things and the growing sophistication of the algorithms that will be needed to extract the signal from all this noise. Professional journalists will also remain important, but some will need to redefine their roles from breakers of fast moving news to providers of context, analysis and insight.

Full Disclosure: I am a shareholder of Dataminr, Selerity and Thomson Reuters.

Last week I gave a series of talks at the Ambrosetti Finance Forum in Lake Como Italy. In addition to being a beautiful location to enjoy the arrival of Spring, the old world charm of the Villa d’Este was the perfect backdrop to discuss the differences between European and US venture capital.

Twice a year, the Italian-based Ambrosetti firm gathers government ministers, central bankers, academics and business leaders to discuss topics of relevance to Europe and the world. The March session is typically dedicated to an examination of relevant issues in finance, with no fewer than three former Italian Prime Ministers and Finance Ministers in attendance.

While the highlight of the conference for me was a discussion on the Greek recovery plan (or lack thereof) which featured Mario Monti, the former Prime Minister of Italy, and Yanis Varoufakis, the current Finance Minister of Greece, I tackled the more manageable topic of why do we see a substantial difference in venture capital returns between the US and Europe.

Perhaps not unlike the debate over Greece’s potential exit from the Euro, there is much mythology surrounding the difference between VC returns in the US and Europe. Numerous political, cultural and psychological explanations have been advanced, but there has been limited empirical research.

The most rigorous study I could find was a February 2008 paper co-authored by three European academics that analyzed comparative venture returns in the US and Europe. (See Hege, Ulrich and Palomino, Frédéric and Schwienbacher, Armin, Venture Capital Performance: the Disparity Between Europe and the United States (February 8, 2008). Available at SSRN:http://ssrn.com/abstract=482322 or http://dx.doi.org/10.2139/ssrn.482322 (Hereinafter, the Hege Study)). The Hege Study analyzed data from 147 European VC-backed companies and 234 American ones for the period 1997 through 2003 and concluded that “US venture capitalists generate significantly more value with their investments than their European counterparts.” And that the performance gap “is statistically highly significant and very large in economic terms.” (Hege Study, p.2).

Hege et al. concluded that European firms underperform because they (1) do not increase funding to the good performers in their portfolios in contrast to the American practice; (2) use syndication less effectively than American VCs; (3) are less specialized (not focused primarily on early-stage investments); and (4) include fewer corporate co-investors.

These conclusions are interesting, but do not in my mind fully explain the performance gap. This is not to suggest that Hege et al. got it wrong, but that there may be other more subtle cultural factors at play that do not reveal themselves in the limited data set. What follows are my intuitions, rather than data-driven conclusions, based on my personal experience of 50+ early stage investments on both sides of the Atlantic over the last 30 years and countless VC and corporate investments in my years at Reuters.

I see the following picture:

First, I agree with the Hege Study that the American tendency to kill underperforming companies earlier and redeploy the capital and labor to the winners is a significant explanation of the difference in overall returns. However, this alone does not explain why US firms take such bolder action.

I believe part of the answer lies in a continuing strain of risk aversion in Europe. This is not, as some have suggested, because European investors or entrepreneurs are not bold or brave enough. Rather, I believe it stems from their rational estimation of the high penalty for failure in Europe. For example, business bankruptcy is not seen in the same light on both sides of the Atlantic. While I believe that we Americans are perhaps too accepting of stiffing creditors in bankruptcy, Europe maintains a deeply rooted view that bankruptcy represents a moral failing not just a business one. Speaking in Italy, I was reminded of the tradition of the “banca rotta” – literally the breaking of the workbench of insolvent moneychangers to mark those who should be shunned.

I also believe that there remains a discomfort in many parts of Europe with the unconstrained workings of free market capitalism and, hence, an irresistible government urge to micro manage the market in start-up financing. This dirigiste tendency seeks to create Silicon Valley-like start-ups by decree rather than allowing the at times chaotic Invisible Hand of the market to rule. Thus, near my home in France, the well-intentioned French government created a technology center that they dubbed “Sophia Antipolis.” A well-chosen name, ample tax subsidies and other regulatory actions, but in the end a home for big companies like Texas Instruments in which to open a satellite office rather than a hotbed of entrepreneurial activity.

Finally, rigid labor laws make it very difficult to launch a true start-up in many parts of Europe. If I am not free to eliminate a job once created, I will not create that job as it is in the nature of venture investing (and all business for that matter) not to expect a 100% success rate for each initiative. This last point is obviously related to the discussion above on the high penalty for failure in Europe.

I have been quite critical of European venture capital in these remarks, but I must admit that conditions on the ground seem to be changing. First, there has been an explosion of start-up activity in Northern Europe, centered in London/Cambridge, Berlin, Estonia and Finland. Second, there are now world-class venture funds based in Europe such as Index Ventures, and not simply London and Munich branches of US powerhouse firms.

Finally, there is no reason why European entrepreneurialism should follow the US model. Perhaps European commentators have been overly self-critical for not replicating Silicon Valley in Europe, while overlooking the truly great indigenous entrepreneurism of German Mittelstadt companies and Italian and Spanish family firms. The goal should not be to replicate one particular model; the goal should be to unleash entrepreneurial drive and innovation and resulting job and wealth creation in whatever form is locally achievable.

I hope I will be invited back to Como to watch this progress.

I was so outraged and offended by the recent attacks in Paris and by the series of beheadings and burnings by ISIS that I have felt unable to write about these painful subjects. Oddly, it was President Obama’s comments last week at the National Prayer Breakfast that encourage me to break my silence. At this now ritualized annual reaffirmation of faith, the President commented on the string of savage attacks saying: “Lest we get on our high horse and think this is unique to some other place, remember that during the Crusades and the Inquisition, people committed terrible deeds in the name of Christ.”

This attempt to root the current wave of terrorist cruelty in the broader historical context of violence committed in the name of religion was viewed as poorly timed by the mainstream media and as yet another example of the President’s leftist moral relativism by conservatives. While I question the continuing relevance of a national prayer breakfast for a nation dedicated to the separation of church and state in its constitution, I share the revulsion of all those with a moral conscience, religious or secular, towards the perversion of an established religion to justify atrocities such as those perpetrated by ISIS and its followers.

President Obama’s critics on the Right vilify the President for equating Islamist violence with atrocities committed by other religious zealots such as the Crusaders. His critics on the Left assail the hypocrisy of supporting established modern religions such as those attending the National Prayer Breakfast while failing to see that it is inherent in all religions to be intolerant to the point of violence towards apostates.

I have a different perspective. While not religious myself, I deeply respect the true religious feelings of others and defend their right to practice and express their beliefs, whether in the majority or not. I also recognize that we live in a special time that makes comparison to earlier religious practices an unreliable guide. When zealous Christians went on the Crusades in the 12th and 13th Centuries, they travelled to places separated by geography and development from whence they came, with little regular means of communication. Today, we live cheek by jowl with different communities joined by Internet, immigration and jet travel in a way that assumes that all parts of the world are equally developed and share a modern sense of ecumenicalism.

Much of the media-savvy violence perpetrated by ISIS and other terrorists exploits this very connectedness of the modern world. While the establishment of a caliphate is an ancient idea, the production of slick YouTube recruitment videos, replete with slo-mo and night vision footage, seeks to inflict the maximum outrage and terror. The question it forces us to confront is how can we co-exist or fight evil perpetrated in the name of religion in a world in which immigration, Internet and travel make it impossible to ignore? President Obama is not wrong (he simply chose a poor time) to compare modern Islamist violence with that of prior religious extremists. He just failed to explain how much harder it is today to ignore and co-inhabit a world in which there are large communities that have not advanced beyond proselytizing by the knife.

So what can be done to protect Charlie Hebdo, Jyllands-Posten, Salman Rushdie and other brave voices from attacks out of the 12th Century? Neither drones nor smart bombs will protect these true freedom fighters. We instead require a 20-year strategy that certainly includes strong policing and electronic and other intelligence, but also requires education, job creation and prison reform for those at greatest risk of radicalization. It is satisfying on a primal level to take vengeance for the slaughter of an innocent journalist or aid worker. However, it will neither bring her back nor prevent all future murders. Track and contain those we have already lost to violence, and educate, support and employ those who can still be integrated into the larger political community. If we do not rise to this challenge we are destined to be tous Charlie.