09/03 China raises statistics criteria for economic indicators

Xinhua News Agency, March 9, 2011

China's National Bureau of Statistics (NBS) on Tuesday announced adjustments to the decade-old method it uses to measure the country's production and investment indicators, saying the changes would help improve the accuracy and timeliness of statistical data.

Beginning January this year, China had revised up the statistical threshold of "large-scale" industrial enterprises to measure only those with an annual business income above 20 million yuan (3.04 million U.S. dollars), from the previous 5 million yuan (about 761,000 U.S. dollars), when compiling industrial production data, the NBS said in a statement on its website.

For fixed-asset investment data, China will survey projects with total investments of more than 5 million yuan, up from the previous 500,000 yuan, while bringing projects in rural areas into the statistical count, NBS said.

Enterprises that are above the new statistical criteria will be surveyed one-by-one, while those under-criteria companies will be calculated by sample surveys, NBS added.

The previous monthly economic indicator of "urban fixed-asset investment" has been replaced by "fixed-asset investment (excluding rural household investment)" to include those investments in rural areas, according to NBS.

"The revisions are important moves by the statistics departments to improve the accuracy and effectiveness of statistical data in accordance with the new changes in our country's economy," the statement said.

Further, the State Council, or China's Cabinet, has approved the revisions in statistical criteria, according to the statement.

NBS had used the current methods to measure China's key economic indicators since 1998 when the country's gross domestic product (GDP) was only 7.9748 trillion yuan, compared with 39.8 trillion yuan (6.05 trillion U.S. dollars) in 2010.

According to NBS data, the number of projects with fixed-asset investments of more than 500,000 yuan jumped to 661,000 in 2010 from 159,000 in 1997 when the previous statistical criteria was first applied.

Meanwhile, the number of large-scale enterprises with their annual business incomes above 5 million yuan more than tripled to 434,000 from 165,000 in 1998 when China began using the previous statistical method.

"Though the number of fixed-asset investment projects was down using the revised criteria, the impact on the total investment volume figure was limited," said an NBS spokesman.

Using the new 5 million-yuan criteria to calculate the fixed-asset investment indicator, the project number was down by 23.5 percent, though the total investments dipped only by less than 2 percent, said the spokesman.

For measurement of industrial production indicators, the 20 million-yuan new statistical criteria reduced the number of targeted enterprises by 40.6 percent in 2009, but the country's industrial value-added output growth data was down by only 2 percent, business income data down 3.4 percent, assets down 5.5 percent and profits down only 1.3 percent, according to NBS.

NBS is due to publish the two indicators and other key economic data, such as consumer price index, producer price index, retail sales figures and industrial value-added output growth for February on Friday.

06/03 Matchmaking for Web Start-Ups and Investors

March 6, 2011
By MALIA WOLLAN

SAN FRANCISCO — For Naval Ravikant, the problem with investing in start-ups boils down to coffee.

“I got really tired of coffee meetings,” said Mr. Ravikant, 37, a technology entrepreneur turned investor. So burned out, in fact, that he bought the Web address idontdocoffee.com. When start-up companies looking for financing request in-person meetings, they get a reply from the e-mail address naval@idontdocoffee.com.

“I thought, we’re dealing with Internet start-ups here, there has got to be a better, more efficient way to evaluate them than to do thousands of coffee meetings,” Mr. Ravikant said. “Coffee should be the last step, not the first.”

So in February 2009, Mr. Ravikant and Babak Nivi, a fellow investor and start-up mentor, started AngelList, a networking Web site that substitutes endless pitch meetings with Internet-based matchmaking.

AngelList, akin to online dating sites, allows eager start-up companies to pair up with investors looking to buy into the next Twitter or Facebook. More than 1,300 investors have already joined the site, including about 400 venture capitalists. The rest are angel investors, the name given to those who buy a stake of a company with their own money.

On average, more than 20 start-ups from all over the world join the site every day, and about 200 companies have been financed. Mr. Ravikant and Mr. Nivi vet the investors before they are allowed on the site, which is free to join for both investors and start-ups and has become hotter in Silicon Valley than many popular start-ups.

The site combines deal-making with social network profiles to make it “one of the most innovative things that has happened in venture capital in the last five years,” said Dave McClure, an angel investor and founding partner of 500 Startups, a Silicon Valley technology incubator.

Mr. McClure is one of the most active investors on AngelList’s site, writing checks for up to $250,000 to dozens of start-up companies, including $100,000 recently to forrst.com, an online community for Web designers.

Not everyone shares Mr. McClure’s enthusiasm. Some Silicon Valley venture capitalists have voiced concern that AngelList adds more fuel to an already overheated start-up market. Among the site’s detractors is Bryce Roberts, co-founder of O’Reilly AlphaTech Ventures and an investor in Foursquare. He recently wrote a blog post detailing why he had deleted his AngelList account, saying the site created an environment where “angels feel compelled to invest for fear of missing the boat everyone else is getting on.”

His post started an online skirmish among prominent angel investors, venture capitalists and bloggers. “AngelList does allow people who are not knowledgeable to jump into deals they perceive to be hot because certain influential investors are involved,” said Mr. McClure. “But that’s no different than any other trading environment. If Warren Buffett invests in a stock, it moves the stock. Is that a reason not to use the stock exchange?”

The market for start-ups is clearly heating up. In 2010, venture investments grew for the first time since 2007. Investment in early stage companies grew 15 percent from the year before, the first growth since 2007, according to the National Venture Capital Association.

“We’re in a golden age of start-up innovation because the cost of starting a company has crashed through the floor,” said Mitch Kapor, the founder of Lotus Development and a longtime angel investor. “There is a huge flood of new companies; so many you can’t possibly find all of them on your own.”

Mr. Kapor recently invested $50,000 to $200,000 in several companies he had found on AngelList, including fundly.com, an online fund-raising platform that raised $2 million through AngelList.

As for Mr. Ravikant, he sees AngelList enabling start-ups from a wider geographic range to find the capital needed to build their companies. It is expensive for a start-up in Chile or Estonia, for example, to get coffee with an angel investor in Palo Alto, Calif.

If some small start-ups fail along the way, and many undoubtedly will, that is no reason for concern, Mr. Ravikant said. “What is the harm if a bunch of rich, old people are writing checks to a bunch of young kids to go build start-ups and pursue their dreams and maybe create the next Twitter?” he said.

“Worst-case scenario, it is a very efficient wealth-transfer scheme,” he said. “Best case, it is the engine that is going to fuel small-business job creation.”

Mr. Ravikant has been on both the investor and the start-up side, and his allegiances are unquestionably with the start-ups. After growing up with little money in Delhi, India, and then New York, Mr. Ravikant started learning computer programming languages as a teacher’s assistant at Dartmouth, where he also delivered newspapers and washed dishes in the cafeteria to pay his way through college.

“I’m always rooting for the small guy,” he said. “Call it a Napoleon complex, call it the underdog, call it growing up as a poor, fat, immigrant kid. I never like to see the entrenched powers win.”

After moving to Silicon Valley, Mr. Ravikant helped create a handful of companies including epinions.com, a product review site, and vast.com, a classifieds site. He also invested in companies like Twitter, Foursquare and Jambool, a payment system for mobile applications that Google bought last year.

AngelList now operates out of a one-room office in a multistory building full of one-room technology start-ups in South of Market, a popular neighborhood for technology businesses in San Francisco.

In recent weeks, AngelList witnessed its biggest investor frenzy yet, over a company called Green Goose, which bills itself as a “real-world game platform.” Green Goose makes tiny motion-sensing stickers that attach to everyday objects like running shoes or pill bottles. The sensors upload real-time data when an object is used.

Two angel investors committed $100,000 to Green Goose’s founder, Brian Krejcarek, after listening to him describe his product on stage at a start-up conference in San Francisco. “AngelList went nuts,” Mr. Krejcarek said. “I got a hundred-some e-mails from interested angel investors.”

Within days, Mr.Krejcarek had hand-picked about a dozen investors and raised $500,000. “I’ve been eating ramen noodles for the last two years,” said Mr.Krejcarek, who moved to Silicon Valley last week after completing the investment round. “I’d been pounding on doors over and over again without too many people listening, so the sheer volume of really qualified, interesting angel investors reaching out to me was overwhelming.”

Mr. Ravikant says that is not an unfamiliar story but the happy ending still does not include coffee. “We have a collection of liquor bottles in our office because companies stop by all the time and say, ‘Thank you, you got our financing done,’ ” he said. “They don’t know how to thank us so they pay us in liquor, cookies and cupcakes.”
March 7, 2011

From ‘End of History’ Author, a Look at the Beginning and MiddleBy NICHOLAS WADE
Human social behavior has an evolutionary basis. This was the thesis in Edward O. Wilson’s book “Sociobiology” that caused such a stir, even though most evolutionary biologists accept that at least some social behaviors, like altruism, could be favored by natural selection.

In a book to be published in April, “The Origins of Political Order,” Francis Fukuyama of Stanford University presents a sweeping new overview of human social structures throughout history, taking over from where Dr. Wilson’s ambitious synthesis left off.

Dr. Fukuyama, a political scientist, is concerned mostly with the cultural, not biological, aspects of human society. But he explicitly assumes that human social nature is universal and is built around certain evolved behaviors like favoring relatives, reciprocal altruism, creating and following rules, and a propensity for warfare.

Because of this shared human nature, with its biological foundation, “human politics is subject to certain recurring patterns of behavior across time and across cultures,” he writes. It is these worldwide patterns he seeks to describe in an analysis that stretches from prehistoric times to the French Revolution.

Previous attempts to write grand analyses of human development have tended to focus on a single causal explanation, like economics or warfare, or, as with Jared Diamond’s “Guns, Germs and Steel,” on geography. Dr. Fukuyama’s is unusual in that he considers several factors, including warfare, religion, and in particular human social behaviors like favoring kin.

Few people have yet read the book, but it has created a considerable stir in universities where he has talked about it. “You have to be bowled over by the extraordinary breadth of approach,” said Arthur Melzer, a political scientist at Michigan State University who invited Dr. Fukuyama to give lectures on the book. “It’s definitely a magnum opus.”

Dr. Melzer praised Dr. Fukuyama’s view that societies develop politically in several different ways, followed by selection of the more successful, rather than marching along a single road to political development. “It’s the kind of theory situated between the hyper-theory of Marx or Hegel and the thick description that certain anthropologists and historians aim at,” he said.

Georg Sorensen, a political scientist at the University of Aarhus in Denmark, also called the book a magnum opus, saying that it provides “a new foundation for understanding political development.” It is neither Eurocentric nor monocausal, but provides a complex, multifactor explanation of political development, Dr. Sorensen said. “In terms of discussing political order this will be a new classic,” he said.

Dr. Fukuyama burst into public view in 1989 with his essay “The End of History,” a title widely misunderstood to mean that no major turning points in history would occur in future. In fact the essay concerned the evolution of human societies and the belief by Hegel and Marx that history would be fulfilled when the ideal political order was achieved — the liberal state, in Hegel’s view; communism, in Marx’s.

Unlike some scholars who flame out after a single brilliant book, Dr. Fukuyama has produced a steady and wide-ranging body of work, delving into sociology with his book “Trust” (1996) and into biotechnology with “Our Posthuman Future” (2003). He is also unusual in combining academic theory with a practical interest in economic development. He is a frequent consultant to the World Bank and other agencies.

He has a political dimension, too, and is often associated with the neoconservative movement. He signed a letter after the Sept. 11 attacks urging President Bush to overthrow Saddam Hussein. But by 2006 he had become a critic both of the invasion of Iraq and of the neoconservative movement, which he said he could no longer support.

In an interview at the Johns Hopkins School of Advanced International Studies in Washington, where he was attending a conference on synthetic biology, Dr. Fukuyama said he had written his new book as “the primer I wished I had had when I started in political science.” He has grounded it in biology because he does not share what he sees as the “great hostility in many social sciences to take aboard information from the natural sciences.”

The book traces the development of political order from the earliest human societies, which were small groups of hunter-gatherers. The first major social development, in Dr. Fukuyama’s view, was the transition from hunter-gatherer bands to tribes, made possible by religious ideas that united large numbers of people in worship of a common ancestor. Since a tribe could quickly mobilize many men for warfare, neighboring bands had to tribalize too, or be defeated.

Warfare also forced the second major social transition, from tribe to state. States are better organized than tribes and more stable, since tribes tend to dissolve in fighting after the death of a leader. Only because states offered a better chance of survival did people give up the freedom of the tribe for the coercion of the state.

Much of Dr. Fukuyama’s analysis concerns how states develop from tribes. This transition, in his view, is affected by geography, history, and in particular by the order in which the different institutional components of the state are put in place. Depending on the order of events, several very different kinds of state emerged in China, India, the Islamic world and Europe, and even within Europe there have been several major variations on a common theme.

“We take institutions for granted but in fact have no idea where they come from,” he writes. Institutions are the rules that coordinate social behavior. Just as tribes are based on the deep-seated human instinct of looking out for one’s family and relatives, states depend on the human propensity to create and follow social rules.

Dr. Fukuyama emphasizes the role of China because it was the first state. The Qin dynasty, founded in 221 B.C., prevailed over tribalism, the default condition of large societies, by developing an official class loyal to the state rather than to family and kin.

Tribalism did not disappear in Europe until a thousand years later. It yielded first to feudalism, an institution in which peasants bound themselves to a lord’s service in return for his protection. So when kings emerged, they seldom acquired absolute power, as did rulers in China, because they had to share power with feudal lords.

Another impediment to absolute rule in Europe, in Dr. Fukuyama’s telling, was that the concept of the rule of law emerged very early, largely because of the church’s development of canon law in the 11th century. So when strong rulers started to build states, they had to take account of the emerging codes of civil law.

Europeans then developed the unusual idea that it was the law that should be absolute, not the ruler. In pursuit of this principle, the English Parliament executed one king, Charles I, and deposed another, James II. This proved a durable solution to the problem of building a strong state, yet one in which the ruler was held accountable.

Other European countries developed institutions similar to those in England but failed to achieve a sustainable balance of power between the ruler and the elites. In France, the nobility rebuffed the state’s efforts to tax them, so the burden fell increasingly on the peasantry until it became intolerable, leading to the French Revolution. In Hungary, the elites were so powerful that they denied the king the authority to devise an adequate defense. The Hungarian Army was annihilated by the Mongols at the battle of Mohi in 1241 and again by the Ottoman Turks at the battle of Mohacs in 1526.

Of the European powers, only England and Denmark, in Dr. Fukuyama’s view, developed the three essential institutions of a strong state, the rule of law, and mechanisms to hold the ruler accountable. This successful formula then became adopted by other European states, through a kind of natural selection that favored the most successful variation.

Though institutions are the basis of the modern state, the instinct to favor family never disappears and will reassert itself whenever possible. To create a loyal administrative class, Dr. Fukuyama said, some states took the extreme measure of destroying the family, in a variety of original ways.

The Chinese emperors instituted a special cadre of eunuchs who had no family but the state, and came to be trusted more than the regular administrators. Pope Gregory VII in the 11th century imposed celibacy on Catholic priests, forcing them to choose between the church and the family.

Islamic rulers created a class free of family ties with the remarkable institution of slave soldiers. Young boys would be taken from mostly Christian families, often in the Balkans, raised as Muslims and as slaves, and trained as soldiers. The system, despite its oddity, was highly effective. The Mamluks, one of several versions of these military slaves, defeated the Mongols and ousted the Crusaders. The institution decayed from the very danger it was designed to prevent: weak sultans allowed the soldiers’ sons to succeed their fathers in office, whereupon the soldiers’ loyalty reverted to their families instead of the state.

Without taking human behavior into account, “you misunderstand the nature of political institutions,” Dr. Fukuyama said in the interview at Johns Hopkins. Such behaviors, particularly the faculty for creating rules, are the basis for social institutions, even though the content of institutions is supplied by culture. Dr. Fukuyama sees the situation as similar to that of language, in which the genes generate the neural machinery for learning language but culture supplies the content.

Institutions, though cultural, can be very hard to change. The reason is that, once they are created, people start to invest them with intrinsic value, often religious. This process “probably had an evolutionary significance in stabilizing human societies,” Dr. Fukuyama said, since with an accepted set of rules a society didn’t have to fight everything out again every few years. The inertia of institutions explains why societies are usually so slow to change. Societies are not trapped by their past, but nor are they free in any given generation to remake themselves.

Just as institutions are hard to change, so too they are hard to develop. “Poor countries are poor not because they lack resources,” Dr. Fukuyama writes, “but because they lack effective political institutions.” The absence of a strong rule of law, in his view, is “one of the principal reasons why poor countries can’t achieve higher rates of growth.”

So does the inertia of institutions mean it is futile for the United States to try to impose democratic government on countries that have never had it, like Iraq and Afghanistan? “It’s extraordinarily difficult to create institutions in other societies,” Dr. Fukuyama said. “If you impose rules people don’t have commitment to, they don’t take. On the other hand, Japan and Korea and China itself have adopted foreign institutions at great variance with their own and have made use of them.”

The first volume of “The Origins of Political Order” ends with the 18th century. A second volume will bring the story to the present day. In conversation Dr. Fukuyama makes clear that the modern liberal state is still in his view the end of history.

The Chinese political system, since it has no way of holding its rulers accountable, is in the long run unstable, in his view. “The Chinese have reasonably good technocratic leadership. They can move faster than a democracy and cut through interest groups. But that leaves them vulnerable to bad emperor problems. They think the last bad emperor they had was Mao,” he said.

Dr. Fukuyama says he has been at pains not to write Whig history, in which the past is presented as an inevitable progression toward liberal democracy. He describes the many different states that arose in Europe in order to make clear that the English path was only one among many. Indeed the road to democracy was wholly unexpected.

“My argument is that the rule of law comes out of organized religion, and that democracy is a weird accident of history,” he said. “Parliaments in Europe had legal rights, and it was a complete historical accident that the English Parliament could fight a civil war and produce a constitutional settlement that became the basis of modern democracy.”

In a parallel universe with no feudalism, European rulers might have been absolute, just like those of China. But through the accident of democracy, England and then the United States created a powerful system that many others wish to emulate. The question for China, in Dr. Fukuyama’s view, is whether a modern society can continue to be run through a top-down bureaucratic system with no solution to the bad emperor problem. “If I had to bet on these two systems, I’d bet on ours,” he said.