Saturday, January 7

Walk on the shoulders of giants

Once in a while, I pop into this site. This is the most amazing place of all at Cambridge University. It holds the largest and most important collection of Isaac Newton. They have digitised most of his work and you can spend a ton of time, browsing what the master wrote. You are actually seeing, as much as one can, what he actually did himself, wrote on his notebooks.

Fascinating fellow.

Some examples from his waste book. for his notes.


Some of his early papers

Gives me a serious shiver down the spine to observe these pages. Wonderful, what a brain.

Friday, January 6

Services offshoring increases wage inequality

First the paper:

The effects of offshoring on wages remain a hotly debated issue. This column explores the case of UK firms between 1992 and 2004, recognising that offshoring in one particular industry may also affect labour demand in other industries. It suggests that services and materials offshoring increase the wages of high-skilled workers and decreases the wages of low- and medium-skilled workers, thus contributing to a rising wage inequality.

But this is such a d’oh research. You don't even want to think about offshoring, the idea of competitive advantage will immediately impact every industrial or service value chain. zillions of years back, when we started getting services (whether it be religious services or legal services or journalism etc. etc.) from elsewhere even within the country, this phenomena was noted. At end of the day, services are value adding aspects. Offshoring, outsourcing will obviously drive down the overall cost of services. This will mean that the cost stack will change shape and since the majority of the resource cost is at the bottom in terms of FTE, they will try to reduce that.

But, well, I suppose its good hear this.

Yet another story on Santa Claus

From here.

December 25, 2007

Op-Ed Contributor

St. Nick in the Big City


ST. NICHOLAS was a super-saint with an immense cult for most of the Christian past. There may be more icons surviving for Nicholas alone than for all the other saints of Christendom put together. So what happened to him? Where’s the fourth-century Anatolian bishop who presided over gift-giving to poor children? And how did we get the new icon of mass consumerism in his place?
Well, it’s a New York story.

In all innocence, the morphing began with the Dutch Christians of New Amsterdam, who remembered St. Nicholas from the old country and called him Sinte Klaas. They had kept alive an old memory — that a kindly old cleric brought little gifts to the poor in the weeks leading up to the Feast of the Nativity. While the gifts were important, they were never meant to overshadow the message of Jesus’s humble birth.
But today’s chubby Santa is not about giving to the poor. He has had his saintly garb stripped away. The filling out of the figure, the loss of the vestments, and his transformation into a beery fellow smoking a pipe combined to form a caricature of Dutch peasant culture. Eventually this Magic Santa (a suitable patron saint if there ever was one for the burgeoning capitalist machinery of the city) was of course popularized by the Manhattanite Clement Clarke Moore published in “A Visit From St. Nicholas,” in The Troy (New York) Sentinel on Dec. 23, 1823.
The newly created deity Santa soon attracted a school of iconographers: notable among them were Thomas Nast, whose 1863 image of a red-suited giant in Harper’s Weekly set the tone, and Haddon Sundblom, who drew up the archetypal image we know today on behalf of the Coca-Cola Company in the 1930s. This Santa was regularly accompanied by the flying reindeer: godlike in his majesty and presiding over the winter darkness like Odin the sky god returned.
The new Santa also acquired a host of Nordic elves to replace the small dark-skinned boy called Black Peter, who in Christian tradition so loved St. Nicholas that he traveled with him everywhere. But, some might say, wasn’t it better to lose this racially stereotyped relic? Actually, no, considering the real St. Nicholas first came into contact with Peter when he raided the slave market in his hometown and railed against the trade. The story tells us that when the slavers refused to take him seriously, he used the church’s funds to redeem Peter and gave the boy a job in the church.
And what of the throwing of the bags of gold down the chimney, where they landed in the stockings and little shoes that had been hung up to dry by the fireplace? Charming though it sounds, it reflected the deplorable custom, still prevalent in late Roman society when the Byzantine church was struggling to establish the supremacy of its values, of selling surplus daughters into bondage. This was a euphemism for sexual slavery — a trade that still blights our world.
As the tale goes, Nicholas had heard that a father in the town planned to sell his three daughters because his debts had been called in by pitiless creditors. As he did for Black Peter, Nicholas raided his church funds to secure the redemption of the girls. He dropped the gold down the chimney to save face for the impoverished father.
This tale was the origin of a whole subsequent series of efforts among the Christians who celebrated Nicholas to make some effort to redeem the lot of the poor — especially children, who always were, and still are, the world’s front-line victims. Such was the origin of Christmas almsgiving: gifts for the poor, not just gifts for our friends.
I like St. Nicholas. You can keep chubby Santa.
John Anthony McGuckin is a professor of religious history at Union Theological Seminary and Columbia.

Thursday, January 5

Freedom of choice doesnt mean freedom from payment

Pretty much a law of nature I would have thought. Its only humans who think that this rule can be negated. So when Ron Paul says that AIDS is primarily an illness of choice (I know there are exceptions where AIDS can be had for no fault of their own), hence their treatment should also be loaded by the market as far as the cost is concerned. See here.

The Texas congressman wrote in his book, "Freedom Under Siege," that people with sexually transmitted diseases like AIDS bear some responsibility for their condition and should not burden others with the cost of their care.

"The individual suffering from AIDS certainly is a victim -- frequently a victim of his own lifestyle -- but this same individual victimizes innocent citizens by forcing them to pay for his care," he wrote.

Asked about the comments on "Fox News Sunday," Paul said: "I don't know how you can change science." Sexually transmitted diseases are "caused by sexual activity," he said, and "in a free society people do dumb things, but it isn't to be placed as a burden on other people, innocent people."

"Why should they have to pay for the consequences?" he said.

Paul called that idea a "socialistic attitude" and said insurance companies should determine coverage. "The market should handle this," he said.

The congressman said the law certainly shouldn't deny AIDS patients coverage, but suggested they should be subject to the same considerations insurance companies make for other groups -- like smokers.

"You don't have a right to demand that somebody else take care of you because of your habits," Paul said. 

Quite right. Here in the UK where the NHS provides blanket coverage, medical treatment is withheld for many diseases for people who are obese or drink or smoke. These are choices that the chap has made, so doctors obviously and very correctly think that there is no point in providing scarce resources on people who obviously will not benefit from it. Or let them pay for it. Why should you and I pay for the choices somebody else has made? If you have the right to a choice, you also have a duty to pay for it. You cannot enjoy and then let others pay the price for it, yes?

Another example is the current breast implant scare here in the UK. So apparently the breast implant bit is faulty. And then people seem to be asking for taxpayer money to help remove them. Why? Did you ask me when you put them in? Then why am I being asked to pay for you to take them out? Or as Sean Gabb memorably puts it:

“If I had no right to fondle these breast implants when they were put in, why should I be obliged to pay for them to be taken out?”

Wednesday, January 4

Alaska’s Billion Dollar Mountain

An interesting story son. I am reminded of the book dogs of war by Frederick Forsyth. A group of mercenaries overthrow a country to gain access to a billion dollar mountain.

Anyway. The main point is luck here son. While you cannot order lady luck to appear for you, you can make your house more attractive for her by jumping at more opportunities than others and have the courage of your convictions.

Best of luck son



Alaska’s Billion Dollar Mountain - BusinessWeek

The story of one man who used a little persuasion—and a lot of luck—to win the rights to millions of tons of rare earths

By Daniel Grushkin

(Corrects location of financial adviser Hallgarten.)

The helicopter took off, the wooden city of Ketchikan slowly receded, and the mountainous rain forest approached. It was an unseasonably warm day in February 2007. Through circles of moisture on the windows the passengers watched the choppy gray ocean off the southern Alaska coast roll by underneath. In the back seat, Jim McKenzie, a 45-year-old Canadian entrepreneur with a swoop of salt-and-pepper hair, tried to relax as he stared out the window with the eyes of an excited 12-year-old. On the green edge of the horizon was the mountain he’d bought the mineral rights to, sight unseen.

Beside him sat Harmen J. Keyser, the geologist who first told him about the mountain. Keyser, a dour, blond 6-foot-6 Dutchman, was now a vice-president of McKenzie’s company. Beside the pilot sat the man who sold the rights to the mountain, a 78-year-old prospector who’d waited 50 years to make the deal.

First, McKenzie saw the forested edge of Prince of Wales Island, a sparsely populated piece of Tongass National Forest about the size of Delaware. Then he spotted his mountain for the first time—Bokan—just a shadow, then a soaring, knobby granite peak punching up through the dense spruce. On most days, Bokan Mountain hides behind mist. This day was clear. They could see scars on the mountain where prospectors had searched for uranium for half a century.

The helicopter touched down at the base of a path at the head of Kendrick Bay. The three passengers stepped out and hiked up to the open pit where the first miners had scooped out 315,000 pounds of uranium. In 1957, Climax Molybdenum (FCX) opened the pit, named it the Ross-Adams mine after the discovering geologists, spent a year digging, and left. There was still a layer of radioactive dust on the road.

The three walked up the path to a root-filled hole. Crews called it “the 700” after its height above sea level. Miners for Standard Metals had started a tunnel there in 1959. Traces of mining life remained—a collapsed shack and boxes of rock samples. The three went down to the other side of the mountain and picked through rocks on the beach at Moira Sound.

Eight mining companies had held claims on Bokan Mountain before McKenzie came, and all had closed. They were looking for uranium, and most cleared out before they ever sold an ounce of ore. Theirs was poor luck and poor timing. Based on a resource assessment performed for McKenzie’s company Ucore by Aurora Geosciences, Bokan may contain mineral deposits worth $6.5 billion. That figure is not for uranium, though, but a group of elements called rare earths.

Rare earths are crucial to modern and developing technologies but were little discussed until a temporary embargo in 2010 by China, which produces about 97 percent of the world’s supply, sparked a global prospecting frenzy. The cheaper and more abundant of these elements, such as lanthanum and cerium, catalyze reactions and “crack,” or refine, petroleum in the chemical industry. Neodymium, praseodymium, and dysprosium are used in electronics, jet engines, and missiles. “If you’re looking at a technology and you think there’s some kind of magic component to it, it’s rare earths,” says Daniel J. Cordier, a mineral commodity specialist at the U.S. Geological Survey.

There are 17 rare earth metals on the periodic table, divided between “heavy” and “light” based on their atomic weight, the heavies being far more rare and expensive. Together they’re referred to as technology metals. In the 1980s research in rare earths led to the revolution in electronic miniaturization. Scientists figured out how to fuse them with other metals to make permanent magnets 200 times more powerful than magnets made of steel alone. That allows for the tiny neodymium magnets in headphones and hard drives, and the servos that make cell phones vibrate. In display screens, yttrium phosphors create the reds, terbium the greens, and europium both the blues and reds. They’re in military technology and in electric cars, too: About two kilograms of neodymium and dysprosium make the motor run in a Prius. They’re also an important part of the green revolution. The gearbox of a 300-foot-tall, two-megawatt wind turbine contains 372 kilograms of neodymium and 60 kilograms of dysprosium. At today’s prices, those rare earths alone cost $301,680.

McKenzie’s climb up Bokan Mountain, as he tells it, came about through luck and because he was semi-retired at the time and a bit bored. During the Internet boom, when Canadians first installed cable modems in their households, he owned Mediapro, a 150-operator call center in Nova Scotia that guided new subscribers into broadband. He sold to AT&T (T) in 1999 for an amount he won’t disclose. He does say that the deal made him a multimillionaire.

McKenzie had befriended Wade Dawe, a founder of Birchpoint Capital, based in Halifax, which represented investors looking to invest in uranium. Dawe shared stories about mineral hunting, which sounded exciting to McKenzie, real hands-in-the-dirt stuff, unlike the telecom business. McKenzie eventually went to work for his friend.

Just two months into the job, in October 2006, Birchpoint sent McKenzie to the Vancouver office of Harmen Keyser, a geologist and helicopter pilot. Keyser owned mineral interests around the world; he knew his rocks. Surrounded by cardboard tubes filled with geological maps, they completed the last details of a deal for a uranium deposit at Carroll’s Hat in Newfoundland. McKenzie had been counseled by Dawe always to inquire about mineral leads. Just before leaving his meeting with Keyser, McKenzie remembered to ask, “Do you know of any other good properties?” McKenzie recalls this as his “Columbo moment,” as if he were Peter Falk surprising a murderer with his final, telling question.

Keyser paused: “I do have one.” He described a visit to an old prospector in Alaska who owned mineral rights on Bokan Mountain. The prospector was an enigma; he’d refused Keyser’s $1.7 million offer for the rights. Keyser shrugged it off—not his business. But the mystery intrigued McKenzie. Why would a man with few years left turn down the most lucrative sum he’d ever been offered?

“I’m going to go there and get to know this guy,” McKenzie said. “If I sign the deal, I’ll give you a piece of it.” Keyser accepted. He’d already spent a year trying to close a deal and had given up. He was not optimistic.

A month later, McKenzie endured the 12-hour Halifax-to-Vancouver-to-Seattle-to-Southeast-Alaska flight. The prospector met him at the airport in an old green Pontiac and brought him home. For his entire life the man had been called Red for his ginger hair. Now he was just Bob, Bob Dotson. His hair had been replaced by liver spots.

Inside his house a few miles outside the only city in the area, Ketchikan, population 8,000, Dotson sat in a La-Z-Boy while his wife, Irene, fixed coffee. He’d built the house, and the road outside, too, which he named Dotson’s Lane. He talked about the closing of both the cannery and timber mills. The only business in town came from tourists on cruise ships, which was no business at all. He had this vision, he said, that Bokan would one day become a large-scale uranium mine and bring hundreds of jobs to Southeast Alaska. But so many companies had disappointed him by pulling out before production that he’d become suspicious of mining executives and their contracts.

To close the deal, McKenzie felt he had to get to know the Dotsons. “I was willing to go down a turkey trail and not really know where it would end,” he says. “Maybe it was the situation. I did have the time to do it, but I don’t know how many people would have.”

A hierarchy exists within the mining world, and prospectors like Dotson sit at the bottom, lacking the status brought by geologists’ degrees or investors’ money. They piece together the science and the trade by themselves. To his advantage, McKenzie carried none of the industry’s prejudices. So when Dotson explained his theories about the mountain’s geology, rather than dispute him, McKenzie just wanted to know more. Within two days, he checked out of his hotel and moved into Dotson’s basement. He woke up with the Dotsons, drank coffee, and watched Fox News with them. Occasionally he whipped up eggs and sausage for the couple.

He relished Dotson’s stories about living in Alaska when it was still a territory, about being stalked by wolves in the snowy woods, about claim jumpers and gunfights and nuggets of gold. “Bob made me feel like this was treasure hunting,” McKenzie says.

The only digging they did took place in Dotson’s home office, among its 51 years of records about the mountain. They rifled through file cabinets and enormous stacks of reports. McKenzie took notes as Dotson poured over hand-drawn maps and enormous aerial photographs of southeastern Prince of Wales and Bokan. They examined piles of rocks, gravel in jars, and long transects cut from bedrock. At one point, McKenzie found an old radiation detector under some papers. He pulled it from its leather satchel. When he turned it on it began to squeal.

“Bob, this is broken,” McKenzie said.

“It’s not broken,” said Dotson, pointing to the rocks. “You’re surrounded by uranium, brother.”

Dotson explained how he’d joined the first landing party as a surveyor to stake the mineral claims on Bokan in 1955. One of the geologists, Don Ross, of the Ross-Adams mine, had found the deposit by dangling a radiation detector outside the window of a tiny Piper Cub propeller plane while he skimmed the peaks of Prince of Wales Island. When they finished surveying and staking, Dotson believed they had missed some of the uranium, and Ross let him do some exploring on his own. Following lines of radiation along the ground with his detector, he staked his own claims toward the base of the mountain.

Mining crews came and went, but they finally abandoned Ross-Adams and let the claims expire. Dotson’s site, however, remained untouched. For a half-century, between weeks at sea as a ferryboat pilot, he worked on Bokan, trying to gather enough data to attract investors. Dotson dug trenches with Irene, and later his son, Ray, and two daughters, Mary and Susie. The children grew up among the rocks. “They used to catch salamanders. They thought there were baby alligators,” Dotson said. Beneath the forest, black and tan stripes run through granite. The Dotsons used saws and rock hammers to cut inch-deep channels into these stripes for sampling. But Dotson’s radiation detector picked up more thorium, a radioactive element associated with rare earths, than uranium.

Dotson told McKenzie about rare earths, how every rocket ship and missile needed them, but he wasn’t initially that interested. He was there for uranium. China was building nuclear power plants, and the West was pushing for alternatives to fossil fuels. Dotson and McKenzie both pictured uranium from Bokan feeding that global hunger.

“Ultimately,” McKenzie says, “he just wanted someone to really care for the project.” After two weeks, Dotson agreed to lease McKenzie his claims, but to complete the deal, McKenzie had to delve into the Dotson family psyche.

The federal government allows prospectors to own no more than 10 claims without having to pay extensive fees. To avoid those fees, Dotson had split his claims among his grandson Derek and his two daughters, Susie and Mary. The sisters no longer spoke to each other and hadn’t sat down with their father in several years. It had been a long time since investors had shown interest in their claims, so the family agreed to hear McKenzie’s proposal. At 4 p.m. on a December afternoon, they all checked into a roadside motel in Mount Vernon, Wash., midway between the daughters’ homes. McKenzie and Dotson, who’d flown in together from Alaska, sat on one bed. Susie and Mary sat on the bed across from them. They negotiated for seven hours.

“Bob had put his whole life into it,” says McKenzie, “and even the kids were half raised out there.” They weren’t just debating a contract, they were trying to work out a happy ending to a family saga. They’d all spent most of their lives trying to make the mine a reality. “It’s like an American pioneer family and they’re all obstinate. That’s what makes for good prospectors,” McKenzie says. “But they’re so used to fighting that they don’t know when to stop, even when they’ve won.”

Long past nightfall, they signed a simple letter of agreement. Susie and McKenzie stepped out to smoke. Bob went for a walk alone in the dark. McKenzie wrote a check for the down payment the next morning. They agreed that Dotson would receive $320,000, Susie and Mary each $100,000. McKenzie also granted each a 2 percent royalty on the value of any ore extracted from their claims. If the mine goes into production, as expected, the family will become rich.

In the end, Ucore, a company formed by Birchpoint and now traded on the tiny Toronto Stock Venture Exchange, paid $995,000 for the entire site. Birchpoint provided C$1.65 million (about the same in U.S. dollars) of capital, and McKenzie invested C$100,000 of his own for a 6 percent share. After he signed Bokan, he invested another C$400,000 of his own money. Keyser became vice-president, and McKenzie, with no mining experience, became the chief executive officer.

That winter, when the legal contracts were settled, Keyser set out to mark the limits of their claim. To the underside of a helicopter he strapped metal stakes tagged with claim numbers registered with the Bureau of Land Management. Keyser’s crew flew the helicopter to the corners of Bokan and dropped one stake from the air at each corner, which crews then dug in properly, creating a rectangle that eventually grew into 9,421 acres. Having staked their claim, they would register it with the BLM. It is a system that has been around since the 19th century.

The following summer, McKenzie contracted a mine exploration crew to begin plumbing the veins of uranium under the mountain. They lived on a barge on the south side of Kendrick Bay, protected from the weather. Every morning and afternoon, a team took skiffs across the bay to drill holes hundreds of meters into the bedrock with a two-story-high diamond tipped drill. When one team finished its shift, another replaced it, so that the drill spun at all times. From each site they extracted a core sample, a smooth cylinder of rock used to track the passage of mineral veins. These would provide data on the concentrations of ore at different depths. With enough core samples they’d be able to project the vein’s path. By 2010, after three summers on-site, they had almost 9,000 meters of core, some scavenged from previous mine explorers, and 143 drill holes.

Concentrations of rare earths ran alongside the veins of uranium, but the uranium deposit appeared to split from the rare earths at a site on the mountain called the I&L zone, after old claim holders Irma and Lester Hollenbeck. McKenzie faced a literal fork in the road—follow the uranium vein up the mountain or chase the rare earths to the southeast. The answer became obvious in 2009, when China said it would cut rare earth exports over the next six years. “When China made their announcement it was like, ‘O.K., we’re definitely going to the southeast now,’ ” McKenzie says. “I put a press release out and we traded 6 million shares that day.”

Aurora Geosciences, Ucore’s exploration consultants, believes that there are at least 3.7 million tons of rare earths under the mountain, 40 percent of which are the more valuable heavies. They say these bundles of narrow veins, many no thicker than the length of a hand, descend at least 200 meters into the bedrock and run northwest at least 2,000 meters across. Though it appears to be a small deposit, no other verified deposit in the U.S. matches the purity of its grade. “It’s the most significant heavy rare earth deposit in the U.S.,” says Luisa Moreno, an analyst at Jacob Securities, a Toronto-based investment bank.

As with any resource play, Ucore faces a wild market. The value of the publicly traded company stood at C$72 million in mid-October and has swung with the values of the metals. Christopher Ecclestone, a mining strategist at financial adviser Hallgarten, in New York City, notes that any billion-dollar figures for the value of the minerals in the mountain neglect the massive cost of removing and purifying the ore, and can be “pretty bogus.”

“It’s just like walking into a cotton field and saying this cotton field is worth $20 million of Hanes underwear,” he says. Still, he concedes, “Ucore pulled the lever on the machine and came up with the right number of cherries.”

In September 2010, three months after McKenzie had changed the company’s name to Ucore Rare Metals, a Chinese fisherman crossed into waters contested by Japan and rammed his boat into two Japanese Coast Guard vessels before he was arrested. China retaliated by cutting off the supply of rare earths to Japan, and then the U.S. and Europe, for five weeks. China never officially announced its reasons for the halt, or that there even was one. Effectively an embargo, it accentuated what was already coming to pass. In the past five years, China has cut export quotas by nearly half, while imposing a tariff of 25 percent on the four most expensive rare earths and a 15 percent tariff on the rest. Unsurprisingly, rare earth prices have exploded, some more than twentyfold. Dysprosium, which had been $185 a kilogram on June 1, 2010, reached $2,850 on the world market in August. It has since fallen nearly 30 percent, but remains far higher than it was five and 10 years ago.

“I think it’s problematic that China, or one country, is controlling so much of the market,” says Senator Mark Begich (D-Alaska), a member of the Senate Armed Services Committee. “It’s incumbent upon us from a national defense, national security, and an economic security perspective that we recognize that we have to have a broader approach to our minerals.”

At the end of 2010 the U.S. Energy Dept. declared five rare earths to be most critical to the future of the green energy economy. Dysprosium, a metal found in high percentages at Bokan, topped the list. Congress has proposed five bills regarding rare earth metals; some offer loan guarantees for miners, others suggest stockpiling the metals. “A domestic rare earth supply is very important,” says David Sandalow, assistant secretary for policy and international affairs at the Energy Dept. “Security rests above all in diversity of supply, and domestic supplies are the most secure.”

The crisis also led to a deluge of rare earth exploration companies; in 2009 there were only a handful, “and those companies were mainly starving to death,” says Ecclestone. According to Technology Metals Research, 244 different companies have fanned out into 35 countries, searching in 381 sites in places like Greenland, the Mojave Desert, and the Australian outback. In July a team of Japanese scientists proposed vacuuming up rare earth-rich sands off Hawaii. The only problem is that they’re 11,500-20,000 feet underwater, virtually unreachable with today’s equipment.

Molycorp (MCP) owns a rare earth mine in an open pit in the Mojave Desert at Mountain Pass, Calif. The mine was closed in 2002, partly because tailings contaminated a dry lake bed with thousands of gallons of water containing thorium, and partly because China sold rare earths for less. Seven years later, Molycorp announced plans to reopen the mine, aiming to produce 19,050 tons of light rare earths oxides a year, which would make it the world’s largest producer. Though the deposit mainly contains the less-desirable light rare earths, Molycorp announced in October that it has found a deposit of heavies, though further investigation is needed to confirm whether the site has concentrations worth mining.

“The only source of heavy rare earths that the U.S. has that could come online in this decade would be Ucore’s,” says Jack Lifton, founder of Technology Metals Research. “Ucore should be able to produce 180 tons a year of dysprosium. If they get to that, they’ll be the largest producer of dysprosium outside of China—ever.” At current prices, 180 tons of dysprosium would be worth $367.4 million.

McKenzie expects to begin production in 2015, and is hoping to raise $100 million from the state of Alaska and manufacturers who need a stable supply of rare earths. He says Ucore plans to build a mine complex on Bokan, including a mill, a conveyor belt to the shore, a base camp for the miners, and a dock so that processed rock can be loaded straight onto barges.

At the close of this year’s summer season, drill crews pulled 43 more core samples from Bokan. In some ways, the operation has been easier than McKenzie expected. When the U.S. Forest Service threatened to slow drilling over road permits, a whirlwind of political support materialized. Politicians rallied around Bokan because it offers a source of good jobs. “We are at the brink of a new promise, a promise of rare earth minerals,” Alaska Governor Sean Parnell declared at a minerals summit in Fairbanks in September. “Our state is going to play a vital role to enhance our nation’s security, and in improving our nation’s economy.”

When China took over the rare earth industry 10 years ago, it also took over the associated supply chain. For U.S. manufacturers to use rare earths from Bokan, the country must rebuild industries in rare earth separation, metalmaking, alloying, and magnet production. Alaska is now weighing whether to underwrite a rare earth separation plant on nearby Gravina Island, the site of Ketchikan’s airport. Thus McKenzie finds himself selling not just the construction of a mine, but likely a $25 million to $35 million rare earths separation facility.

“What Ucore has in the ground is valuable, says Jacob Securities’ Moreno. “The question is, is it economic to remove?” Mineral exploration is an obstacle course with a finish line that most never cross. Still, McKenzie plunges ahead, perhaps optimistically, maybe naively.

McKenzie is as surprised at the results of his venture as anyone. “I didn’t think I’d get into the minerals business,” he says. “It looks like I orchestrated this brilliant move, right? But it’s just inadvertent luck.” McKenzie acknowledges that this good fortune rides on the shoulders of people who devoted their lives to the mountain.

On McKenzie’s first helicopter journey to Bokan in February 2007, after three hours at the site, the sun was low in the sky. It would be night by 4:30 p.m. at that latitude, so McKenzie, Keyser, and Dotson loaded into the helicopter and flew back to Ketchikan. Keyser would be back in a few days to finish scoping, McKenzie would return in the summer with a drill crew. The helicopter took off, and the mountain grew smaller with distance. Dotson, now in a wheelchair, frequently on oxygen, has yet to return.

Grushkin is a Bloomberg Businessweek contributor.

(via Instapaper)


Sent via iPhone. Apologies for formatting and typo errors

Tuesday, January 3

Why the American media sucks

no comment

How Russian Tycoon Yuri Milner Bought His Way Into Silicon Valley

Here is an interesting story son. The reason I liked this was that this chap wasn't afraid to strike out on his own. Seriously you don't have to follow the crowd. Just like in stock investing, if you follow the crowd you get lost. Buy when others are selling and sell hen others are buying. The contrarian strategy.

It takes courage to tell people that you wouldn't follow the standard path. But have the courage of your convictions. If you think that the path you have chosen is right, then do it. Stick with it. See mamma, she stuck to her dream despite thousands telling her no or do this or do that, and now she is a successful author.

I like the way you think. You wanted to short euro's but remember many others are also thinking the same.

But read this chaps history. Start investing in businesses. Think about starting a business with a friend. Challenge yourself son. Break new paths.

I am proud of you



How Russian Tycoon Yuri Milner Bought His Way Into Silicon Valley | Magazine

Photo: Greg Girard< 1.0) return false; window.location.href = ">

In less than two years, Yuri Milner’s fund has gone from zero equity to more than $12 billion in assets.
Photo: Greg Girard

This is my first trip to Moscow, and Yuri Milner, the world’s most successful investor in social media, is taking me to his parents’ apartment, which he bills as a typical middle-class Moscow dwelling. It’s drab Soviet brick outside. The none-too-reliable-looking elevator is encircled by a crumbling staircase. But inside, the apartment is genteel and highly recognizable to me. It’s like many you would find on the Upper West Side of Manhattan, a cramped and comfortable set of rooms without a recent paint job, filled with too many tchotchkes and way too many books. Milner’s father, Boris, is an 81-year-old former professor—a specialist, during the Soviet era, in American management practices no less—who has written or edited more than 50 books and is eager to show me all of them. Do I know, surely I do, Professor So-and-So at Ohio State or Professor So-and-So at Georgia Tech? His less garrulous mother, Betti, who lays out a table of tea and copious sweets, is a physician who practiced at the Moscow Department for Disease Prevention for almost 40 years.

The message seems clear: Milner may have invested in virtually every social media powerhouse, from Facebook to Twitter to Spotify. He might be the vanguard of an entirely new financial philosophy. He might be the most controversial money guy in Silicon Valley—sought after, feared, and derided in more or less equal measure. But at heart he is just a nice Jewish boy.

To many, Milner’s success is not just too much, too fast, but also somehow unfair.

Which might help explain—and Milner very much wants to explain himself—how it is that he has gone from investing in a macaroni factory in Moscow to upending the American technology business. I believe, too, he is trying to say his success story ought to be just as appealing as any in the Valley.

It certainly hasn’t played that way in the tight-knit club of Valley venture capitalists. In fact, the more successful Milner has gotten, and the faster he has compounded his success—beginning with his night-raid investment in Facebook in 2009 and now encompassing major positions in Zynga, Groupon, Twitter, and Spotify—the more suspect and outré he has come to seem. He’s definitely not your conspicuous non-consumption Valley billionaire.

Kara Swisher, who, with Walt Mossberg, runs The Wall Street Journal’s D Conference, one of the prestige events in the technology business, told me with arch inflection how Milner—a Vladimir Putin look-alike with a dark undershirt always peeking out of his collar—had shown up at the conference with a blonde model towering over him. (Swisher was only slightly sheepish when she found out this was his wife.)

What’s more, a whisper campaign has dogged his American adventure. Indeed, among the early backers of his investment fund, Digital Sky Technologies, was Alisher Usmanov—one of the richest men in Russia, who even other Russian oligarchs find, to say the least, a little dodgy. (Usmanov’s résumé includes alleged Kremlin associations and an overturned conviction for fraud and extortion. He also has a near-$18 billion fortune in mining, steel, and telecom, as well as the obligatory ownership stake in a British football team.)

Oh, and his house—that has not helped, either. Milner, who runs his business from a no-frills office suite in Moscow, is spending more and more time in the Valley and so has bought a place in Los Altos Hills—not just the Valley’s most expensive house but, at a reported $100 million, among the most expensive in America. (Milner is embarrassed about this and seems aware that he may have misjudged how this purchase would be seen. Anyway, he has heard that there is another US property sale that will soon trump his.)

To many, Milner’s success is not just too much and too fast in a land of too much and too fast but … but … and here people start to petulantly phumpher … somehow unfair: Here’s an outsider who has handed out money at outrageously founder-friendly terms—paying huge amounts for relatively small stakes, essentially buying exclusive access to the most desirable companies on the web! It is his outsiderness that seems most irritating and even alarming. How is it that an outsider has spotted opportunities that the Valley’s best investors missed? Does Milner’s success suggest that the rest of the world is starting to horn in on what has been, to date, as American as apple pie—the Internet future and Internet riches?

That’s why I’m here—in Russia and in his parents’ apartment—to try to figure out just what his advantage is. If he is a game changer, how exactly does the game change? I’m curious, too, about what he’s after personally: He seems to want respect from the Silicon Valley folk—but why would he? Why does he care what they think? Milner’s rise as a power-brokering investor happened so fast—his fund went from zero equity to more than $12 billion in US assets in less than two years—that his story has not had time to come out.

Russia may well be the most captivating place on earth for businesspeople, because it is purely about cause and effect. All of the power dynamics are on the surface—here’s who has the money, here’s who has the influence, here’s who controls the resources—so all you need is the gumption and savvy to take advantage of them.


After the collapse of the Soviet Union, a class of robber barons—the oligarchs—rose to control much of Russia’s vast resources. In a disorganized and corrupt process of privatization, they came to very cheaply control vast reserves of Russia’s export wealth; oil, minerals, lumber, and wheat passed from government to private hands.

A not inconsiderable point: A disproportionate number of the oligarchs are Jewish. The Jews in Soviet Russia, often kept from taking official career paths, came to thrive in the gray and black markets. Hence, they were among the only capitalists in Russia when capitalism emerged.

Milner, a half-generation younger than the first rank of oligarchs, is himself selling gray-market computers when the end of the Soviet Union arrives. He buys old DOS machines, imported or smuggled from the US, and delivers them at appointed street corners.

His father, displaying another side of Jewish business tradition and acumen—the cautious side—isn’t pleased. Milner is slacking off his studies as a physics graduate student and doing things that could get him into trouble with the authorities. His father’s solution is both predictable and a wild leap into uncharted waters: His son should get an American MBA. In 1990, Milner enrolls in the University of Pennsylvania’s Wharton School, where a close friend of his father’s is a professor.

This leap for Milner is radical in all the obvious, transformational, emotionally topsy-turvy ways that might be imagined (he is, at Wharton, a great oddity), but it is also a leap into one of the most dramatic and picaresque moments of American capitalism. It is the age of the takeover artist—Michael Milken, Carl Icahn, Ronald Perelman, Henry Kravis—and Milner falls in love with them all: “These are very romantic figures for me—and they are very American.”

Meanwhile, his own country is imploding and turning into, for some, a highly profitable free-for-all. Watching from afar in Philadelphia and filled with great envy, Milner, after Wharton and a three-year stint at the World Bank, comes back to Moscow.

He goes to work for the now imprisoned Putin enemy and founder of Yukos, then Russia’s largest oil company, Mikhail Khodorkovsky, who in the mid-’90s was in the process of devouring, some would say by extraordinary means, great parts of the Russian economy. Milner proposes to Khodorkovsky that they try a legal takeover—American style, and the first ever in Russia—of a candy company. The takeover fails (Milner writes a book about the experience, pleasing his father), and he goes out on his own. In 1998, he assembles a group of investors and buys a macaroni factory. Russia has just defaulted on its debt, and Milner figures that’s the end of the days of imported macaroni.

But macaroni is hardly the point.

Nobody in the digital world knows that the man in the Russian macaroni factory exists, but his nose is pressed to the glass. Sitting up late at night in the factory, as his cash flow mounts, Milner is focused on the US. It is the apogee of the dotcom moment, 1999, and Milner fastens onto an American business theory—and it consumes him.

The theory holds that the Internet is an advertising medium where users themselves create the vast amount of content. In other words, as Milner understands it, the same ocean of advertising revenues that have gone to traditional media might now go to the Internet, but without the offsetting costs of having to actually create content. Voilá.

“From margin standpoint,” Milner notes, “this is very magical.”

But then the bubble bursts., then the biggest Internet company in Russia, valued at its height at $100 million, crashes too.

Milner, with his macaroni cash flow, buys it on the cheap.

The gray-market Soviet hustler turned would-be Russian oligarch is now a dotcom entrepreneur.

I first meet Milner in 2009, over coffee at the Four Seasons on East 57th Street in New York, a few months after he has made a surprise investment of $200 million for a 2 percent equity stake in Facebook.

Milner is the new boy in town. He obviously knows few people, does not travel in elite technology circles, and fails most of my name-dropping tests—he doesn’t even pretend to know who he should know. Correction: Through, he does know the Goldman Sachs money guys in Russia. Indeed, Milner seems to have been almost personally inspired by the Goldman-propounded view of the BRIC countries—that capital accumulation and high growth rates in Brazil, Russia, India, and China could alter the economic balance of power in the world.

The very decision to invest in Facebook is partly the result of a gossipy Moscow dinner with the Russian Goldman guys, during which—in between pitching their investment-banking services—the bankers mention that Facebook might be looking to do a major investment round. This is just months after Lehman Brothers collapsed, with the world economy plunged into crisis. MySpace, the leader in social media, is sinking fast. Nevertheless, Milner is stirred.

What’s more, he has money in the bank. Or he can quickly get it. Milner has created a separate fund to invest in international—and especially American—Internet companies, with Usmanov taking the biggest stake. The oligarch has the money and an interest in Internet properties, including, along with, an investment in the news sites in the US and in Russia. The fund is called Digital Sky Technologies, and Facebook is its first target.

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Milner’s new house in Los Altos Hills cost a reported $100 million—making it one of the most expensive homes in the US.
Photo: 2011 Google-Imagery; 2011 Geoeye, U.S. Geological Survey.

But even at this dire international financial moment, a call from an unknown Russian, however flush he might be, to then Facebook CFO Gideon Yu seems quixotic. Yu politely expresses his lack of interest in Milner’s offer. But Milner gets on a plane, flies to California, and calls Yu from San Francisco. Yu, begrudgingly impressed, agrees to a meeting. Milner proposes a game-changing deal.

Pre-IPO investments in even high-flying tech companies that are not yet profitable usually conform to a specific pattern: A prestigious VC firm gets certain preferences when it invests (i.e., it gets its money out first should the company go public) and gets seats on the board (which means it gets a direct voice in the future of the company—almost always one that advocates an IPO as soon as possible). Milner offers something radically or foolishly different: an investment with no such preferences and no board seats. In effect, his money is like IPO money—no advantages for regular shareholders—without the burden of an IPO (the time suck of a road show, the administrative costs of being public, the short-term earnings pressure of the market).

The proposal represents, too, a philosophically new and audacious view: Once a company reaches a certain size—a billion-dollar valuation by Milner’s reckoning—its investment profile changes. It holds enough market share and has established enough brand identity that it represents significantly less risk than VCs have traditionally considered startups to have.

But that’s not how the rest of the world interprets it. Instead it’s seen as a desperate and rather vulgar deal on the one hand—Milner buying a small stake in Facebook, valuing the entire company at $10 billion—and, on the other, Facebook debasing itself by taking Russian money. Russian money! In fact, it seems rather like a desperate deal for both parties (in the midst of the banking crisis, Facebook has only two other bidders for this round—and none from the top VC tier).

The dumb money has just bought itself potentially unlimited access to what is arguably the most important company to hit the Internet in a decade. One of the fastest accelerations in digital history has just begun.

Sitting in the Four Seasons, I don’t come out and say, “Facebook has taken Russian money, so what does that tell you about the state of the industry and the state of social media? It tells you that social media is probably not such a great investment.” But it’s certainly what I’m thinking.

I pepper Milner with questions about more conventional issues: the burden of privacy concerns weighing on Facebook, the callowness of Mark Zuckerberg, the shadow of MySpace.

The Russian is not just monosyllabic but, I detect, bored. Or brooding. I am not understanding—and I am not alone in not understanding—the big picture. I am not getting that, in a matter of months, it will be clear that social media is transforming the fundamental behavior of the Internet. And I am not getting the big picture of Yuri Milner, that he has, yet unbeknownst to anyone, altered the power equilibrium of technology money.

“I have invested in four social networks. More than any other,” Milner explains.

“But that’s in Russia and Poland … ” In other words, in a market that can hardly be compared to the US.

“Same. Social is a better way to interact with digital world. It is better than search. Implications for … everything. Total change.”

And something else that I am not getting, because nobody knows it yet. Although Milner seems to have made a chump’s deal without all the protections that early-stage money is usually entitled to, for a period of time he has gotten one thing: a right of first refusal on any other Facebook stock that changes hands.

The dumb money has just bought itself potentially unlimited access to arguably the most important company to hit the Internet in a decade. One of the fastest accelerations in digital history has just begun.

More than a year later, I run into Milner in the lobby of the Ritz-Carlton in San Francisco (he hasn’t yet bought his house). Since we last met, he has raised his stake in Facebook to almost 9 percent (2.4 percent held by the Group, the rest by Milner’s investment company, DST), and he has made the obvious leap into Zynga and Groupon. If he is not yet loved by the Valley, he seems now to have come to know almost everyone there. In fact, he has become something of a ubiquitous figure, speaking at every technology conference.

“How are you?” I ask, wondering if I should suggest coffee—but Milner is often so terse that this seems a frightening thought.


“What brings you here?”

“Oh …” fading off.

His phone rings. Conversation ends. I read the answer to my question in the paper a day or so later. Google has reportedly made a $3 billion bid for Twitter, which was countered by a bid for a stake in the company from Kleiner Perkins that valued the business at $3.7 billion, which in turn was countered by a bid from Milner that valued the company at $4.2 billion. Twitter takes the Kleiner money at nearer the Milner valuation—until eight months later, when it takes the Milner money, too, although this time at an amount that values the company at $8.4 billion.

It’s the new reality of social media: Wherever something is happening you now find Zelig-like Milner. He will keep buying. Money for him is no object.

As this is all unfolding, just before Thanksgiving, Milner in his blue sweat suit is having coffee with Mark Zuckerberg at a Palo Alto Starbucks. The two have developed an easy relationship. Zuckerberg says he’s thinking about raising another billion or two. And fast. He doesn’t want the distraction; if he’s going to do it, he wants to do it in 60 days. Milner says that even for him, a couple of billion in 60 days is a lot, but he’ll deal.

Milner, not only the largest outside investor in one of the world’s most sought-after companies but, thanks to his relationship with Zuckerberg, one of its gatekeepers, cuts Goldman into the deal. This is a substantial reversal of Goldman’s usual position, in which it decides who gets to invest while mostly closing everyone else out. Goldman agrees to put in $375 million of its own capital against Milner’s $125 million and raise the rest from its standing clients. It also splits its 4 percent fee on the total money raised with Milner and, as well, splits the 5 percent fee on whatever investors gain beyond their initial investment. It is, for vaunted Goldman, an almost unheard of arrangement. And possibly for that reason—internal squabbling at the firm—the deal leaks. Last January, on the day before the offer is to be made, The New York Times‘ Andrew Ross Sorkin calls Goldman and says he’s got the story, causing great gnashing of teeth. The firm believes that if the offer is issued after a story in the Times, it might be in violation of SEC rules about marketing securities—hence, in a panic, Goldman issues the offer via email before the Times story breaks. Two things happen: Goldman’s clients clamor to invest, and the offer is immediately oversubscribed by a factor of 13, giving a dramatic preview of Facebook’s IPO strength. Within days, Goldman’s lawyers, suddenly nervous, nix it. At any rate, they nix it for Americans—but not for Goldman’s foreign clients, who, including Milner’s stake, complete a $1.5 billion round that values the company at $50 billion.

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Milner’s new house in Los Altos Hills cost a reported $100 million—making it one of the most expensive homes in the US.
Photo: 2011 Google-Imagery; 2011 Geoeye, U.S. Geological Survey.

Milner and I are once again eating breakfast at the Four Seasons in New York. It is one year since we first met at this hotel, which he uses as one of his floating offices while in the city. Now, I’m asking if he’ll cooperate on a profile for wired. He equivocates about that topic but is much more forthcoming as he discusses his own rising position in the social media revolution. It is clear that his horizons are continuing to expand—from investor to worldwide intellectual force. “I must analyze,” Milner says as he considers my request, “from what I do now, what will be the impact two or three or five years in the future. What is the statement I want to make? It is an opportunity to take a position on global scale.”

Indeed, a month later, Milner calls to tell me that he is one of six technology figures who have been chosen to brief the leaders of the G8 nations at this year’s summit in Deauville, France. It is a remarkable example of his rising profile and the amount of power he has come to wield. The G8 Internet colloquiums will include a series of high-profile speakers from among the digital elite: from the US, Zuckerberg and Google’s Eric Schmidt; from Japan, Hiroshi Mikitani, CEO of online retailer Rakuten; from France, Maurice Levy, head of ad agency Publicis Groupe, and Stéphane Richard, CEO of France Telecom. And then Milner.

Why Milner? Partly because he has so ably insinuated himself into extraordinary networks, but also because he is the only one here who has roots in an upstart economy. That gives him unique perspective. Russian president Dmitry Medvedev, in an effort to jump-start online entrepreneurialism (and distinguish himself from his predecessor, Putin), has become as anti-regulation and laissez-faire as anyone in the West. Next to his government, France, Germany, and even the US represent the hoariest conventional views. Milner is presumably here to represent non-American entrepreneurialism at its most ambitious and successful.

Milner speaks last. By the time he takes the stage, the five other digital representatives have all discussed policy and outlined the likely growth of their various businesses. Italian prime minister Silvio Berlusconi is asleep, and the other G8 leaders—David Cameron, Barack Obama, Medvedev—are distracted by their iPads. Milner gives a smart and clarifying speech about social technology. He sees networks like those created by Twitter and Facebook as steps in the development of a global brain. The entire social landscape adds up to a new collaborative consciousness that transforms the nature of information and, as well, the existing monopolies of it.

Milner may be a kind of prototype for his idea of a global brain—certainly he has achieved some sort of “global being” status. Traveling alone, or often with his wife and daughters (ages 6 and 4) and his mother-in-law, and keeping his Moscow office staffed 24/7, he seldom spends a consecutive week on one continent. Quite frequently he will do every continent, save Antarctica, in a week.

This is part of the discordant behavior that makes him an anomaly, if not a sore thumb, in his new Los Altos Hills neighborhood. Silicon Valley, despite being at the center of the digital world, is a hopelessly insular and actually rather hermetic place. Even its famous immigrant culture emphasizes joining the SV way. For all its talk of innovation, it resists almost anyone who is not part of its mainstream. Before Milner, it was even difficult to buy your way in—money in the Valley, the best money, the money that gets the best deals, always has a certain pedigree. Even New York money, not to mention money from God knows where, is regarded as lesser and suspect.

But Milner’s upstart and almost otherworldly status, while not necessarily helping him make friends with his new neighbors, has given him a new and, in many ways, disquieting advantage in the circumscribed digital world. He may be among only a handful of people who operate in multiple markets at the same time, without local infrastructure. This makes him a kind of free-floating state—a connector, a go-between, the ultimate independent player.

It is not just his access to global capital or his facility in markets where being an American is not necessarily an advantage (in the past 12 months, he has invested more than $1 billion in Chinese Internet companies) or his incredible and ever-expanding sources of intelligence in the fast-growing global digital market. No, it is simply that he likes it: He’s happiest being in transit.

And yet, of course, Milner, despite his global consciousness and peregrinations (and 25,000-square-foot Los Altos Hills home), is Russian. While in some sense he has tried to move himself from this base— went public in London in 2010, and DST is all but set on doing business in only non-Russian-speaking countries—his home and base are in Russia; until two years ago, the majority of his capital was still Russian (today, 70 percent of his capital comes from outside his country); and, one suspects, the people who can most complicate his life are Russian.

Indeed, despite his global expansion and the personal fortune he has amassed on paper from DST—2 percent annual fees on the fund’s $1 billion in capital; 20 percent on gains of more than $10 billion—he seems very much attentive to the politics of Russia. Or, perhaps more accurately, to navigating the politics of Russia, gaining distance, but not too much distance. Not getting ahead of himself. Knowing his place.

Milner’s invitation to interview him in Moscow—which arrives as though it had always somehow been expected—comes with a condition attached: that I come first to Saint Petersburg and moderate a panel at what is called the St. Petersburg International Economic Forum. Like much of Russian capitalism, it’s an insular imitation of something else—in this case, the World Economic Forum in Davos.

This is, I realize, a complicated, possibly even amusing, bit of theater in which I’ve been cast in a minor role. Milner himself is playing many parts. He is the organizer of the panel as well as one of its main draws. He is the interviewee as well as the stager of the interview. Indeed, he lays it out for me: These are the people I should call on to speak for the Russian view; this is who I should call on to speak for the American view; this for the international view; and Milner for the view in between.

The Russians on the panel include Dmitry Grishin, whom Milner has installed as CEO of, now the second-largest Internet company in Russia, and Arkady Volozh, CEO of Yandex, the largest Internet company in Russia. The Americans are Mary Meeker, a former Morgan Stanley analyst who now works as a VC at Kleiner Perkins Caufield & Byers, and Jim O’Neill, the Goldman banker who coined the term BRIC. And representing the international view are Daniel Ek, the Swedish cofounder and CEO of Spotify, with which Milner has been in the process of negotiating an investment, and Peter Vesterbacka, the roving head of marketing for Rovio, the company that created Angry Birds. (While Milner seems decidedly skeptical about the company’s claims that it will shortly be bigger than Facebook, he has discussed investing in Rovio.)

And, as well, there is Russian president Medvedev—the main point, I assume, of this whole exercise. That is, I am told that there is a good possibility that Medvedev will show up for the panel. He will appear—if he appears (but, wink-wink, he will appear)—after the panel has begun. At that juncture I have been instructed to say, “Welcome, Mr. President. It is an honor to have you join our session. May we invite you to join our panel?”

In fact, when the moment arrives, I fail to notice Medvedev’s entrance into the packed room until Milner elbows me in the ribs, with, I note, the faintest smile.

Successful people, it should not be a surprise, are often trying to explain their success to themselves as much or more than to others. As Milner takes me on a tour through his Moscow, he seems to be marveling at himself. Not at all in a prideful way. He’s almost a witness—one trying to explain and illustrate both his ordinariness and his uniqueness.

Dinner is in his apartment in the outskirts of Moscow. It’s three well-secured floors in a comfortable, almost LA-suburban-style high-rise decorated by his wife, Julia. They moved here just two years ago—part of the wide transformation in their lives—from a much smaller in-town home (which Milner has given to his nephew). Other than the sheer size of the new place, the only element that really distinguishes it is that where someone else might have crammed in a lot of artwork, Milner has crammed in video screens, each tuned to some global news outlet or real-time social media application.

Milner tells me that he didn’t quite graduate from Wharton—he was, in fact, a few credits short.

It’s here, before dinner, that Milner tells me that he didn’t quite graduate from Wharton—he was, in fact, a few credits short. It’s a pointed admission; he seems to want to clean up the record (and to point out that many successful people in the Valley never graduated, which perhaps increases his credibility!).

Dinner itself, stiff but pleasant, is partly prepared by his wife and partly a take-out buffet of hummus and tabbouleh. His two daughters, who Milner hopes will demonstrate their English, join us. They are charming if reluctant performers.

In the morning, Milner and his driver fetch me at my hotel. The first stop is his new synagogue, a tonier and more conservative temple, and with more security, than the one he grew up in. Jewishness is a pronounced theme in the tour: The Jewish boy, having some sweet revenge, has become a member not just of the Russian establishment but of the new world technology order. But sentimentality goes only so far. When I ask about just how observant he is—refraining from mentioning that his wife is obviously not Jewish—his response is piquant: “Very limited.”

He offers a yarmulke from the communal bin as a souvenir.

We chart the oligarch’s rise through neighborhoods and schools that give neither a sense of destiny nor, for that matter, much sense of the long Soviet pall that fell over half of his life. But, clearly, the fact that the pall has lifted still seems like a marvel to him. He recounts his father’s near brush with Stalin and, when we reach Red Square, recalls still with some breathlessness how he was here, with few others, when the Soviet flag was lowered and the Russian flag hoisted.

Trying unsuccessfully to cut the line to visit Lenin’s tomb, Milner sketchily outlines his own current place advising the government—appointed by Medvedev to sit on a committee that seems, by my interpretation, to be akin to the Council of Economic Advisers. Curiously, he casts this in almost pro-American or new-generation terms: The two non-politicians on this committee—he and Mikhail Prokhorov (owner of the New Jersey Nets)—are both heavily invested in the US.

Lunch is at a new Italian restaurant with a terrace that overlooks the White House, Russia’s Parliament, which in 1991 was occupied by dissidents. Milner points out the stretch of road where he was standing that day and the stretch just ahead where various other bystanders were killed. Milner retreated into this building, on top of which is the restaurant where we are now eating our quail risotto.

We decamp to Moscow State University, where he graduated with a degree in theoretical physics. Walking the small park, which counts as the campus, in front of the massive building, Milner, who was slotted into the lesser track instead of the more elite one, gives another rueful picture of the system’s slights to Jewish students and Jewish ambition.

It is hard not to read the obvious: Who would be more gobsmacked by the implications of social media—the prospect of everyone constantly talking to one another without an arbiter, mediator, or censor—than a citizen of the former Soviet Union? Likewise, who would see it as more revolutionary and valuable?

That is the singular insight that transformed Milner and through which he is transforming technology finance: It seemed worth more to him than to anybody else (at least anybody else with money).

In a way, he is to social media what Michael Milken in the mid-’80s was to many non-credit-worthy companies. Like Milken, Milner, in part through the lens of his own life’s experience, saw another level of value entirely—if the world was being transformed by social media, it was more valuable than anyone thought. And, too, if technology companies had reached a certain level of value, that was a pretty good indication of their permanence.

Accordingly, he upped the ante and put social media and himself at the center of technological development.

Indeed, there is a different or further mission. He’s more beholden, he’s more in awe, than the Silicon Valley establishment—blasè9 or cynical as any other establishment—is of its geniuses. There is always something vaguely oppositional about the relationship VCs have with the companies they invest in. They are trying to maximize their positions, to pay as little as possible and cash out for as much as possible. Milner—now the singular link between the major players of social media, Zuckerberg at Facebook, Mark Pincus at Zynga, Andrew Mason at Groupon, Jack Dorsey at Twitter, Daniel Ek at Spotify—is not thinking about individual deals but is aligning himself financially and strategically with the founders and reaping the benefits. Already, he competes with the topmost VCs in terms of personal wealth, and he is arguably now more important—Milner is setting the price.

Next year, in Scotland, Milner tells me, he will host a gathering of all the Internet companies in the world that have a valuation of more than $1 billion—he is setting the agenda, reordering the power structure.

In a sense, the elites of Silicon Valley have a good reason to be suspicious of Milner. He has stolen, or at least moved, the center of their world.

Contributing editor Michael Wolff ( wrote about the death of the web in issue 18.09.

(via Instapaper)


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