James Ashton: Silicon Valley was the new UK – and now China has taken its place

Agenda: Silicon Valley’s challenge was always to remain relevant in the face of China’s rise as an economic superpower

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The Independent Online

Sir Mike Moritz has never been short of opinions. The world’s richest Welshman popped up this week to remind those that hadn’t spotted it that his Silicon Valley investment firm, Sequoia Capital, is a shareholder in Alibaba, China’s internet giant, whose shares began trading in New York on Friday.

It won’t be the first time that Sequoia has made a mint from spotting an emerging tech star early. The deal that made Moritz’s name was the $12.5m he sank into a start-up called Google in 1999 that resulted in proceeds approaching $4bn six years later. Even though the firm missed out on Facebook, there’s a hatful of others – think YouTube, PayPal and Apple – commemorated by plaques in Sequoia’s headquarters.

According to Moritz, the game is changing. The war for control of the internet, waged by Microsoft, Google and others, has taken flight from the US west coast. For the next decade, advantage lies with China, with Alibaba and its neighbours. Moritz reasons they will have an easier time expanding West than Western companies getting into China.

Silicon Valley’s challenge was always to remain relevant in the face of China’s rise as an economic superpower. It used to lure the best students to Berkeley and Stanford down the road and hope they stay on. That isn’t enough any more, hence Sequoia and others trawling further afield for investments.

Time must have sped up. When I met Moritz three years ago, he said then that sinking money into China was like investing in America 80 years ago or Britain 200 years ago.

He has always favoured new frontiers, not meaning to offend by asserting he could find more investment opportunities in a single street in Palo Alto than the whole of the UK. Since then, he has found at least one here, backing Skyscanner, an Edinburgh-based travel search firm. So it seems the Chinese can’t do everything better – yet.

Until pay recovers too, it’s not time to celebrate

The backslapping over the shrinking dole queue has got to stop. Another fall in the jobless total – to a whisker over two million, a six-year low – suggests the world of work is entering a new paradigm. Yet without wage growth for the staff who agreed to cut salaries or hours to support their firm during the dark days of the recession, it is unsustainable.

There are over one million more people in work than at the start of the crisis. Adjusted for inflation, wages have fallen by around a tenth.

As Bank of England Governor Mark Carney delicately explained to the TUC conference the other week, there is a hope that this painful revaluation is a base from which the economy can grow strongly and competitively again. However effective that trade-off of lower wages for higher employment, it has not been of the workforce’s choosing.

Just as we enjoyed the wrong kind of economic recovery, there is too much of the wrong kind of work about: fewer hours, lower skills, the self-employed.

There are some positive signs. Wages have risen in some high-demand sectors. Pay deals such as BT’s 2.7 per cent point the way ahead. And recruiters such as Hays report that candidate confidence is recovering. More people are prepared to move jobs for a better deal.

Rather than applauding itself, the government must realise this jobless statistic will not in isolation win them votes in next year’s general election. When David Cameron urged business leaders to save the Union at a Downing Street drinks party earlier this month, he should have had the temerity to suggest it was time to give staff a pay rise too.

Is anything worth raiding on the FTSE?

Corporate raider Nelson Peltz might have checked out of InterContinental Hotels after the shares had a decent run, but he didn’t effect much of a shake-up when he showed up on the register a year or so back. Now he has found another target in DuPont, the American chemicals giant he is pressing to break itself up. Yet British firms have proved to be remarkably non-stick while activists are getting busy.

On Wall Street, attacking inefficiencies has been made easier by a sharp decline in poison pills and staggered boards which made it harder for newcomers to elect themselves. But I can’t believe that FTSE 100 firms are all so well run that activists can’t find an angle here. It could be that there aren’t any of the old-style conglomerates left to break up. If there are, they are the investment trusts and private equity houses for whom trading at anywhere near net asset value is often a tall order.

That would explain why Edward Bramson is charging in at Electra Private Equity, pledging to double its value, and hedge fund Elliott keeps snapping up Alliance Trust.