Elliott Ng

I am Five of Eleven, Tertiary Adjunct of Unimatrix Tnooz

Earlier this year, I was inducted via a set of secret geek travel blogger rituals into Tnooz as a Node.  The name is reflective of Chief Editor (or shall I say, Prime Node) Kevin May’s sense of humor and futurist leanings.  Presumably, the power of Nodeship is to harness all of the wisdom of each individual writer/blogger/contributor into a greater collective understanding of travel.  Therefore, I have added my own distinctiveness to the Tnooz Collective.

photo source: aboutwomyn.com

My latest post:  interview with Eva He about upcoming China TDS 2010

I had a chance to briefly interview Eva He, the editor of TravelDaily.cn and organizer of the China Travel Distribution Summit, about trends to be discussed at China TDS.  Since she briefly brought up the issue of Google, I asked her what she felt about the sense of an unfair playing field for foreign companies. This was most recently expressed by Jeffrey Immelt, CEO of GE.  Here are his comments reported in the Wall Street Journal:

It’s getting harder for foreign companies to do business there, he told Italian business leaders. “I really worry about China,” the FT quotes him as saying. “I am not sure that in the end they want any of us to win, or any of us to be successful.”

Immelt was apparently giving vent to the growing anger among international businesses who believe that China is engaged in a systematic effort to siphon off their technology, and then turn that technology around and use it against them in China and overseas.

He should know better than anybody: GE has been handing over technology in everything from rail locomotives to antipollution equipment to gain access to the domestic Chinese market.

For international multinationals, technology transfer has long been the quid pro quo of landing deals in China.

Foreign businesses have meekly gone along with this arrangement because they assume that since the biggest markets in everything from wind turbines to mobile phones have moved to China, you have to be in the country if you want to be No. 1, No. 2 or even No. 3 in the world. Without scale, global businesses can’t be industry leaders, they can’t remain on the frontiers of technology, and they become more vulnerable to competition. But scale means that you’ve got to be in China.

That calculation gives China enormous bargaining power.

Yes it does.  Compared to aerospace and internet search engines, travel has some great characteristics that make it a better industry for foreign companies to go into:

1. Unlike aerospace and internet search, travel is not a national security or sensitive industry.  Internet search is media, and media is a national security industry.  Foreigners have a hard time understanding that.  Based on reading the works of other people, namely Richard MacGregor’s The Party (banned in China), my impression is that Xinhua is an arm of the government that performs the functions  of BOTH the Associated Press, AND the CIA (or whoever in the US government does domestic “open source” (public source) analysis).  The press serves to keep Party members informed and is an important check-and-balance against the management reporting received directly through the Party and the government.   But all the juicy stuff is not for public distribution through news outlets.  Internet search and news portals are a critical tool to shape popular opinion and I’m surprised the government doesn’t try to control it even further…since it is a national security industry.
2. Travel is also inherently cross-border. In order to help the domestic tourism industry flourish, you need to support outbound tourism as well.  Only then will providers and consumers taste international service standards and demand that of the domestic industry.  It is not possible to be too mercantistic in tourism:  try to attract inbound tourism dollars but prevent outbound tourism from happening.
3. Travel is a strategic pillar of the latest 5 year plan. I haven’t seen the actual documents that reference this, but it has been widely quoted by both Chinese officials and Western travel industry people (WTTC, Amadeus) so this implies that there is National level support for travel development.

Honestly, I sympathize with Jeffrey Immelt and he is expressing a reality that most companies discuss international but see no benefit on expressing publicly.  The even greater truth is that business is hard for ALL businesses in China, not just foreign businesses.  The only businesses that get advantages are the large state-owned or state-supported enterprises that have a plug-and-play relationship into the Party through some kind of sponsorship.

Resistance is futile.  You will be assimilated.

Now, I must go back to my regeneration chamber.

Google’s pending $700 mm acquisition of ITA Software is probably the most important deal of the year in travel distribution.

I have friends at Google and have eaten lunch at their campus.  In order to get a visitor badge, you have to sign a Non-Disclosure Agreement.  TANSTAAFL.  Since I’ve casually chatted about this topic with some of my friends at Google I need to be careful not to share insights derived from those conversations.

But I can share that I’m thinking a lot about this and if you’re involved in online travel or travel distribution, you should be too!

ITA Software’s QPX product provides flight availability and fares to virtually all the American online travel agencies (OTAs) and metasearch sites (e.g. Kayak, Bing).  Google had to be after something that it couldn’t get with just a commercial deal with ITA.  What is it?  Hmmm.

Here’s what I think:

1. Google wants to create a new travel search experience that will consume massive volume of QPX queries
2. Google wants to invest heavily in performance (speed) at scale
3. Google wants direct access to data that ITA doesn’t usually share, maybe historical
4. Google wants to tackle international and hotels faster.

Imagine a world where the marginal cost of flight queries are free, and mining historical flight data can also be free.  I think we can all imagine that some great customer experiences that can come out of this.

Flight metasearch players are at risk.  Kayak and Bing need to build a brand fast, get direct sources of traffic, and continue to innovate faster than Google.  The global GDS (Sabre, Travelport, and Amadeus) will be forced to price more aggressively.  No one will want to single source from Google/ITA, so Expedia will invest in its own Best Fares Search capability, and startups like Everbread and Vayant will get some deals done.  To compete with Google’s own offering, Kayak and Bing will need to consume more queries, and ITA will need to honor “most favored nations” status with existing customers, so price/query is likely to go down, but total cost might go up for flight metasearch players.

Some other insightful people on this topic:

• More on this subject on Tnooz (including some insightful comments from Forrester’s Henry Harteveldt and PhoCusWright’s Lorraine Sileo)
• Analysis from my fellow Tnooz nodes (Stephen Joyce, Timothy O’Neill-Dunne, Tim Hughes, Glenn Gruber, and Alex Bainbridge) and Rick Seaney of FareCompare
• Exceptional analysis by Henry Harteveldt
• A strategic travel technology perspective from Norm Rose.

I’m not a flight expert, but I hear ITA doesn’t have global coverage and there could be opportunities to tackle emerging regions well as ITA is bogged down in merger integration.

I’ve been given the honor of moderating a panel at China Travel Summit (aka China Travel Distribution Summit or China TDS) in Beijing 9/15-16.  TravelDaily.cn has convened a smart, high-level group of people in China Travel. One of them is Gregg Brockway, founder of TripIt, profiled here on CNReviews.

As a moderator and media partner of the event, I can access a 10% discount off of the current rate of RMB 3800 from the event.  Use the code “CTS555? when you register and you should get a $50 discount, or 10% off.  Use this link: http://www.traveldaily.cn/go/74.html (There are even deeper discounts available for hoteliers and airlines but you have to contact TravelDaily.cn directly.  I’d be pleased to make the intro.)

I’m never as good at keeping in touch with people directly as I’d like.  So I created a email newsletter for my friends who share some interest  for the China travel industry.  Right now, it is about 90-100 people.

If you’re interested in the topic and want to get an email about 4-6 times a year, please sign yourself up.  If I don’t know you, I’ll get in touch to introduce myself.  I reserve the right to remove people from the list!

Placeholder post for me to record my thoughts and reflections on 2009.

Some quick, stream of consciousness thoughts:

Q1

US economy continued to stagnate.  The stock market hit a low in March.  After the famous Sequoia Startup RIP presentation we put plans in place to shut down our Beijing R&D team.  I took the lead on the overall plan for the company.  It was the right thing to do but it was extremely unfun because the team was doing many great things and our Beijing R&D operations fed my interest in China-related activities.

Went to China February 22 – March 4 (or so).  Took two half-days off to tour Chinese contemporary art galleries with RedBoxStudio and Maya Kovskaya.  Still haven’t written about those 2 amazing half-days.

Q2

April. TravelCom in Atlanta.  We announced that we hit 1 mm UV/month.  I also picked a social media fight with TravelPost and Kayak.  Fortunately, that ended well, with a little bit of media coverage we wouldn’t have had, and everyone ended up staying friends.  Meanwhile we are making huge progress with our UpTake Blog Network and our idea to create Travel Insights 100.

On my China side projects, CNReviews was rebooted and reimagined by Kai Pan, my new lead editor and partner.  We also start getting contributions from BloggerInsight, which are invaluable for providing some more business-related content.

Q3

UpTake continued to do extremely well, but in part because of seasonality of travel traffic.  I took time off to attend a few conferences:  Gnomedex, Conde Nast World Savers Congress and the Clinton Global Initiative Annual Meeting.  Finally decided to move on to pursue my interests in China and social media.  Yen and I started making plans quietly for my departure.  Everyone on my staff is past the 2 year mark, and doing a great job, so no guilt over leaving.

Q4

Left UpTake in October.  Announced my departure.  Yen wrote a very nice farewell post as well.  But then get pulled back into the PhoCusWright preparations.

In other matters, I spoke at AAMA Entrepreneurs workshop about lessons learned from my startup experience.  Led a case study at Plug & Play University with Professor Tom Kosnik.  Was on two panels at Rethink Hawaii: one on China and the Internet, the other on Fast Pitch.  Coached a Stanford E145 team called “Midnight Love.”

In November, attended PhoCusWright Conference.  Spoke at PhoCusWright at the “Blogger Town Hall” meeting.  Blogged about travel innovation.

Bummed out that I couldn’t attend CNBloggerCon this year.  Anyway, it was in a remote cave (in Lianzhou) somewhere in Guangdong Province near the Hunan border.  Amazing they had Wifi, but the location was chosen because it was not likely that authorities would shut down the conference.  In previous years, it was in Guangzhou (2008), Beijing (2007), Hangzhou (2006), and Shanghai (2005).  CNReviews sponsored the conference and we sent Kai and Min Guo there to cover it.  But Kai didn’t choose to write anything about it.  Rebecca MacKinnon did.

China trip: Dec 1-11 (or so).  Attended China Travel Distribution Summit and was quite honored to be sitting on the same panel as guys like Fritz Demopolous of Qunar.com, Ivan Zhang of Kuxun.cn, and Hao Wu of DaoDao.com.  I’ve know Fritz for a while and am always impressed by what he has accomplished, and his humble but intellectually assertive demeanor.  Someone said that they consider Fritz to be 70% Chinese.  That’s something to aspire to.

Return to California.  Spent the holidays at home, with Karen’s relatives coming to celebrate Christmas with us.  Dress up as Santa Claus for the first time.

I’ll be headed to China tomorrow and staying there until November 19.   My work at UpTake has caused me to be terribly out of touch with many of the people that I met with and worked with in China prior to getting involved in UpTake.  So I wrote a quick update on myself at CN Reviews.

More details on my China trip and itinerary are on CN Reviews.  The exact travel dates are on that post, so if you’re in China at the same time and want to meet up, contact me and lets see if we can make it happen!

I provide a short update on what I’ve been up to at that post.  I also wrote a longer update at my new VisualCV, an online resume product that I’m testing out because of their partnership with The China Business Network, which I’m informally advising.

Via niubi on Twitter I discovered an excellent post from John Maudin’s Thoughts from the Frontline entitled “Who’s Afraid of the Big, Bad Bailout?” (credit: John@FrontlineThoughts.com).  You need to sign up for his newsletter to see the entire article but it is well worth the read.  Here’s an except that helps to explain the whole credit crisis and how subprime mortgages, RMBS, CDOs, and credit default swaps (CDS) all fit together:

Dear Joe,

I understand your reluctance to vote for a bill that 90% of the people who voted for you are against. That is generally not good politics. They don’t understand why taxpayers should spend $700 billion to bail out rich guys on Wall Street who are now in trouble. And if I only got my information from local papers and news sources, I would probably agree. But the media (apart from CNBC) has simply not gotten this story right. It is not just a crisis on Wall Street. Left unchecked, this will morph within a few weeks to a crisis on Main Street. What I want to do is describe the nature of the crisis, how this problem will come home to your district, and what has to be done to avert a true, full-blown depression, where the ultimate cost will be far higher to the taxpayers than $700 billion. And let me say that my mail is not running at 10 to 1 against, but it is really high. I am probably going to make a lot of my regular readers mad, but they need to hear what is really happening on the front lines of the financial world.

First, let’s stop calling this a bailout plan. It is not. It is an economic stabilization plan. Run properly, it might even make the taxpayers some money. If it is not enacted very soon (Monday would be fine), the losses to businesses and investors and homeowners all over the US (and the world) will be enormous. Unemployment will jump to rates approaching 10%, at a minimum. How did all this come to pass? Why is it so dire? Let’s rewind the tape a bit.

We all know about the subprime crisis. That’s part of the problem, as banks and institutions are now having to write off a lot of bad loans. The second part of the problem is a little more complex. Because we were running a huge trade deficit, countries all over the world were selling us goods and taking our dollars. They in turn invested those excess dollars in US bonds, helping to drive down interest rates. It became easy to borrow money at low rates. Banks, and what Paul McCulley properly called the Shadow Banking System, used that ability to borrow and dramatically leverage up those bad loans (when everyone thought they were good), as it seemed like easy money. They created off-balance-sheet vehicles called Structured Investment Vehicles (SIVs) and put loans and other debt into them. They then borrowed money on the short-term commercial paper market to fund the SIVs and made as profit the difference between the low short-term rates of commercial paper and the higher long-term rates on the loans in the SIV. And if a little leverage was good, why not use a lot of leverage and make even more money? Everyone knew these were AAA-rated securities.

And then the music stopped. It became evident that some of these SIVs contained subprime debt and other risky loans. Investors stopped buying the commercial paper of these SIVs. Large banks were basically forced to take the loans and other debt in the SIVs back onto their balance sheets last summer as the credit crisis started. Because of a new accounting rule (called FASB 157), banks had to mark their illiquid investments to the most recent market price of a similar security that actually had a trade. Over $500 billion has been written off so far, with credible estimates that there might be another $500 billion to go. That means these large banks have to get more capital, and it also means they have less to lend. (More on the nature of these investments in a few paragraphs.)

Banks can lend to consumers and investors about 12 times their capital base. If they have to write off 20% of their capital because of losses, that means they either have to sell more equity or reduce their loan portfolios. As an example, for every $1,000 of capital, a bank can loan $12,000 (more or less). If they have to write off 20% ($200), they either have to sell stock to raise their capital back to $1,000 or reduce their loan portfolio by $2,400. Add some zeroes to that number and it gets to be huge.

The letter goes on with more examples and makes the case for action.  Unfortunately, the House Republicans voted the bailout bill down.

I’m remembering Alicia Titus today. My prayers and thoughts are with her family.

She was on my team at Netcentives in 1999, and then left to learn photography and ultimately to become a flight attendant based in Boston for United Airlines. She was on United Airlines flight 175 when it crashed into the World Trade Center at 9:03 am EST / 6:03 am PST (full timeline of events on Wikipedia).

Every year I try to drop a quick note on her guestbook at her tribute site, SweetAlicia.org. I also posted about her on the then Kango (now UpTake) blog here.  Pat Jenkins at UpTake also posted on September 11 Memorials around the country.

Here’s a few pictures of Alicia from SweetAlicia.org:

While Alicia was Netcentives and worked on my team, it wasn’t until after she died that I realized that there was a lot I didn’t know about her. The crazy dot-com bubble days, where I felt like Keanu Reeves in Speed trying to keep the bus from exploding, wasn’t conducive to really spending time with people and building deeper relationships. Anyway, on 9/11 I often read her tribute site and other tribute pages like this one on BrokenHeartTrading.com and on Sep11Memories.org.

During this past year, I found an old waterproof film camera that I had failed to develop over the years. I developed it and found pictures of Alicia and my other team members on one of my most memorable offsites. I uploaded a those old Netcentives Offsite Photos from 1999 onto Flickr.

In the photo below, Alicia is 3rd from the right:

In the photo below, Alicia is 5th from the left:

In this photo below, Alicia is #2 from the left:

You come into contact with so many people in your life.  Seasons come and go.  There are so many people in this picture that I care about and consider friends, and yet we’ve lost touch.  Paul Erlicht, Deann Fairfield Work, Bethany Selland, Jonathan Blatt, Ashwin Verma, Tom Harvey, Lisa Cross.  And that’s just the people that decided to go surfing at that offsite.  It was a blessing to work with so many amazing people during that season of my life.

9/11 and Alicia reminds me to make an effort to go one level deeper in getting to know people, beyond the normal course of business.   I wish I had done so with Alicia.

Remembering her on this day.

I used FriendVenn to look at who I subscribed to vs. who subscribed to me. Use at your own risk because you need to put in your FriendFeed password into the app.

I then went through and added some people that I know or wanted to follow that I wasn’t subscribing to, and also pruned some people that I was subscribed to for no reason that also wasn’t subcribing back to me. I didn’t really scrutinize the 90 reciprocal subscriptions.

Here are the results:

You have 229 subscriptions and 181 subscribers. Here’s how they break down:

James Fallows has been blogging from the ‘jing about the security preparations in the capital.

His blog seems to be down and I was only able to retrieve stuff via Google’s cache. I’ll paraphrase and quote extensively from his post.

Fallows received an email from a person that he seems to suggest is ethnically Chinese and now a citizen of a Western country, and has some familiarity with defense matters. The main point of this person is that the central government is taking extreme security measures because they have limited intelligence on the real threats that might be there, so they can’t afford to take chances.

Here’s the email (heavily paraphrased by me to avoid duplicate content detection, in case some patriots shut down the original site):

I don’t want to an apologist for what the government has done to itself. But the reality is that their system is not prepared to deal with the range of threats that they might face when the opening date arrives.

The country does not yet have the kind of early-warning methods that are in place like those like the leading countries in the West. These Western countries have real-time monitoring abilities, can analyze traffic patterns, etc. Therefore, they get an early-warning when a storm is on the horizon.

Despite all this talk of all the human “James Bonds” who are working for them abroad, they just don’t have the same capabilities of the Western system. An example is the riots related to T1b-t. There was not good intel, preparation, or any way to really spin-control the situation after it happened.

Bottom line: less than 4 weeks until opening date. Recommendation: create a PR and security SWAT team to handle collateral damage like press visas being denied. However, this team would really need to understand the West. There doesn’t seem to be any awareness from the central government or city government that “they are over their heads”.

Not sure I agree with the assessment. Its possible that internal bureaucratic infighting and CYA behavior may be creating a dynamic where the most conservative people are winning and the most “cosmopolitan” people who understand the collateral PR damage are being silenced or forced to go along for the ride.

I think examples of that can also be found in the US handling of Homeland Security during this post-9/11 era. And we have the benefit of the best intelligence gathering apparatus in the World by far. That doesn’t preclude bureaucratic agencies outside of the No-Such-Agency to overreact or to react in a much less nuanced way that the intelligence agency could presumably equip them to act.

There is also the need to mask the precision of the intelligence. Enemies can detect intelligence capabilities by observing the resulting response to their actions. This action-response feedback loop can allow enemies to develop a sense of intelligence capabilities and then try to find ways to avoid detection. So a “blunt” vs. “fine-grained” approach may also have the benefit of preventing the enemy from seeing what intelligence capabilities there actually is.

I tend to think the easiest explanation is the bureaucratic effect of everyone playing CYA. So there may be large numbers of human analysts and even intelligence gathering systems that are gathering information, and “defanged” because of bureaucratic power in other powerful agencies. However, intelligence is also probably very closely held and not shared broadly with all other agencies, so therefore the information being shared between agencies may be pretty “blunt” and thus resulting in pretty “blunt” directives.

This could then result in enemies underestimating the true intelligence capabilities.