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San Francisco, August, 2015
The China Syndrome – The Black Swan Pushes Events to the Tipping Point-Maximizing Enterprise Value in the upcoming Crisis
This article has been updated to reflect the present “China Syndrome” and as it relates to the “Black Swan & Tipping Point”.   Parts of this article were published by Steven R. Gerbsman and Robert Tillman in May, 2007. To understand the future, one must understand the past and that history is a guide.

Please read, enjoy and “BE PREPARED”.

Best regards,
Steven R. Gerbsman, Gerbsman Partners and Robert Tillman, member of Gerbsman Partners Board of Intellectual Capital

The events in China of the past two weeks have illustrated how completely integrated are the world’s economies. We know that stresses are building in the world and we all see these stresses and imbalances. Based on history, we know that there will be violent and completely unpredictable resets. Nevertheless, we simply cannot predict the specific triggering events or the timing or the exact nature of such resets. As prudent business people, how do we prepare? Two books describe the process of change and our own experience suggests numerous preparatory measures that can be used to anticipate and to manage the unexpected. We have currently experienced one of the best economic times in our country’s history. The stock market, although recently volatile, is at all time highs, unemployment appears to be stabilizing, interest rates are low, money is plentiful and deal valuations are high and getting higher. There are, of course, many worrisome trends: terrorism, excessive government spending, trade deficits, high oil prices, immigration and over the longer term, such issues as an aging population and (possibly) global warming. Although problems and worries always exist, in historical terms, times are reasonably good.

The big questions for us as specialists in maximizing enterprise value are:

Will it end?

Yes. Of course. Even fundamentally healthy economies experience frequent and often violent corrections. The current world economy has evolved in many ways over the past decade. All large businesses are international. The primary economies of the world are very tightly linked together. Money is far more liquid and moves around the world with far less “friction” than it did in the past. The pace of technical change continues to increase. Nevertheless, we do not believe that the laws of history, and especially, the laws of human nature, have been repealed.

As always, “The more things change, the more that they remain the same.”

When will it end?

Unfortunately, no one knows the answer to this question. In historical terms, the current economic expansion has continued for a very long time and has survived numerous shocks, including war, a doubling of energy prices and now significant pressure on energy pricing, natural disasters, localized economic downturns, such as the bursting of the sub-prime mortgage bubble and the challenge of Iran, Russia and the Middle East. At this point in time, it appears to be “ripe” for a downturn. On the other hand, inherently unstable situations often persist for far longer than anyone could believe possible. During the 2000 Internet bubble, it seemed to us for quite some that the old rules of business no longer applied and that 25 year-old CEOs knew something us old guys did not know. When the crash occurred, we were relieved to find out that we were not so obsolete after all.

We did, however, underestimate the staying power of technically insolvent companies with broken or non-existent business models. Many of these companies had significant cash on the balance sheet (offset, of course, by significant liabilities) and investors who continued to infuse more cash far beyond the point of reason. Today, there exist immense pools of uncommitted cash, much of it in the hands of entities, such as private equity funds and hedge funds that are subject to minimal regulatory scrutiny and whose operations are obscured from the public view. In addition, the volatility of the dollar against both the Euro and the Pound Sterling makes U.S. assets potentially more expensive and foreign products cheaper. These factors tend to potentially mitigate against an economic downturn. For how much longer they will continue to do so we do not know (and if we did know, we would certainly would not tell).

How will it end?

Fast, hard and unexpectedly. Two recent books shed a great deal of light on the process:

The first book, The Tipping Point by Malcolm Gladwell describes how human behavior causes events to cascade rapidly once a certain critical mass (the “Tipping Point”) has been achieved. Examples in the business world include periodic economic ?panics? and the spread of certain technologies and products, such as personal computers, iPods, cell phones, etc. It is very difficult to predict in advance when the ?tipping point? in any situation will be reached, but history has shown that, once it has been reached, events proceed very quickly.

The second book, The Black Swan: The Impact of the Highly Improbable by Nassim Nicholas Taleb describes how highly improbable, and hence unpredictable, events periodically create massive change. The title of the book derives from the observation that the existence of even a single black swan disproves the assertion that all swans are white. Historical examples include the Fall of France at the beginning of World War II, the rise of the Internet and 9/11.

There are many obvious candidates for a “black swan” event that pushes the world economy over “the tipping point” into a downturn – a war with Iran, a nuclear terrorist attack or a worldwide bird flu or small pox epidemic, but generally, it is what you do not see that gets you. We are fundamentally optimists about the long-term prospects of the world economy. In many highly measurable ways, the world really is improving, driven by technological innovation, a lowering of barriers to trade and increasing economic integration. Nevertheless, we are old enough to have lived through many “bumps” along the road and know that such discontinuities will always occur. We believe that we will see a significant economic event sometime over the next 12-18 months, either localized to a particular sector or geographic region or globally.

Our Advice?

Before such an event occurs:

As a board member, investor or stakeholder:

  1.  Implement tight cash flow, receivables and inventory reporting so that you are alerted to problems early.
  2. Focus on the control, preservation and forecasting of CASH on a weekly, monthly and quarterly basis.
  3. Require “bottoms up” forecasting for all aspects of revenue and expense. Have the CEO and CFO defend ALL numbers.
  4. Hold the CEO responsible and accountable for Performance. If you are off the business plan/forecast, re-forecast based on the reality of “what is” today.
  5. Communicate frequently with all parties at interest. Check that the CEO is providing leadership, motivation and morale to the management team and employees.
  6. Review all companies in your portfolio. Identify and define action plans to fix weaknesses now.
  7. Utilize professional resources to assist in maximizing enterprise value, when appropriate.

When such an event occurs:

  1.  Face up to reality and act quickly. When things are going bad, waiting seldom improves them. We have never seen a board of directors act too quickly when faced with a crisis. We have all too frequently seen a board act slowly or not at all.
  2. Call for assistance early. The earlier professionals can get involved in the process, the better the potential outcome in maximizing enterprise value. Many times boards request assistance only after a company has run out of cash. Many more options exist to maximize enterprise value if a company has some running room.

About Gerbsman Partners

Gerbsman Partners focuses on maximizing enterprise value for stakeholders and shareholders in under-performing, under-capitalized and under-valued companies and their Intellectual Property. Since 2001, Gerbsman Partners has been involved in maximizing value for 89 technology, medical device, life science, digital marketing/social commerce, cyber and data security, media and solar companies and their Intellectual Property and has restructured/terminated over $810 million of real estate executory contracts and equipment lease/sub-debt obligations. Since inception, Gerbsman Partners has been involved in over $ 2.3 billion of financings, restructurings and M&A transactions.

Gerbsman Partners has offices and strategic alliances in San Francisco, New York, Boston, Orange County, VA/DC, Europe and Israel.

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GERBSMAN PARTNERS
Phone: +1.415.456.0628, Cell: +1 415 505 4991
Email: steve@gerbsmanpartners.com
Web: www.gerbsmanpartners.com
BLOG of Intellectual Capital: blog.gerbsmanpartners.com

 

The Non-Dotcom Bubble: The World’s Most Popular Startup Domains Other Than .Com

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.com is still the king of suffixes. But startups are also flocking to other domains, including .io.

Download the Q2 2015 Global Venture Capital Report

In a recent essay, Paul Graham recommended that startups should own their .com domain name or risk being considered marginal or weak. However, .com domains can be very expensive, especially for younger startups. We used the CB Insights database to analyze the trends in startup domain suffixes over time, such as the rise of the .io suffix.

Traditional .com domains still dominate amongst the more than 25,000 tech companies funded since 2010, with 20,000+ companies choosing a .com domain for a 81% share of all suffixes.

But other domain suffixes are also popular. These include .net and .co domains, which proved to be the most popular, followed by .io which saw nearly 350 funded tech companies choosing that domain. After the top 3, the list is populated mostly by more geography-specific domains such as .de (Germany), .cn (China), and .jp (Japan). Also, .tv has been used by more than 100 companies, including well-known services Twitch.tv, blip.tv, and acfun.tv. The .ly domain, often considered  a go-to suffix for Silicon Valley startups, isn’t really all that popular.

Most Popular Suffixes

With a flurry of new domains having been made available by ICANN recently starting in 2014, startups will increasingly seize the opportunity and flock to alternative domain suffixes. But many of the newest suffixes like .global are not showing up on the radar just yet.

Top non-dotcom suffixes

Among the top URLs, some have seen more growth than others in recent years.

  • The .co domain saw the largest spike, with a 93% jump in the number of new companies being funded with that domain suffix between 2013 and 2014.
  • Both .io and .in have seen steady growth, and have already reached all time highs in 2015 in terms of registrations for funded companies.
  • .net domains, while having the most funded tech companies in total since 2010 (after .com), has slowed significantly in growth, with only 61 companies being funded with that domain name through mid-August 2015.

URL popularity by year

Unique suffixes per year

The number of unique domain suffixes attached to startups in a given year saw a significant jump between 2011 and 2012. There were 116 separate domain suffixes used by startups this year through mid-August 2015, almost double the amount in full-year 2010.

Unique URLs by Year

New suffixes

It’s not uncommon to see new domain suffixes pop up when looking at startups receiving funding (i.e., suffixes that have never been attached to a tech startup before). Below are select new domain suffixes that have been funded recently as well as the companies attached to them. In 2015, we saw new startups with .soy and .world suffixes. Some are country-level geographic suffixes, e.g. .dj is Djibouti.

Select Newly Funded Domain Suffixes
Year Suffix Select Companies
2012 .global, .om, .gg, .pro bluedot.globalpinion.ggbad.gycpac.pro
2013 .dj, .ae, .bi, .sr plug.dj, propertyfinder.ae, bbs.bi, hairdres.sr
2014 .limo, .life, .works, .today loup.limo, league.life, weave.works, celuv.today
2015 YTD .ventures, .world, .soy, .pictures entangled.ventures, myeye.world, bevisible.soy, folio.pictures

 

Silicon Valley TechFlash
Benchmark VC Bill Gurley warns winds are shifting on unicorn valuations

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Cromwell Schubarth Senior Technology Reporter Silicon Valley Business Journal

Bill Gurley, a general partner at the Benchmark venture firm, sounded another alarm Thursday night about soaring valuations of VC-backed businesses.
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Bill Gurley, a general partner at the Benchmark venture firm, sounded another alarm… more

Venture investor Bill Gurley sounded another warning about the high valuations at venture-backed companies in an overnight tweetstorm on Thursday.

Volatile global stock markets are going to put pressure on CEOs at the growing crop of VC-backed businesses known as “unicorns” that are valued at $1 billion or more, the Benchmark partner said.

That is going to increase pressure to produce a profit or show how one will come, Gurley said, tweeting,”Which Unicorn entrepreneurs/CEOs are prepared for such a shift? Who can adjust quickly? Can you get to profitability on your last round? Have you even considered such a reality?”

This isn’t the first time that Gurley has warned of a pending correction in soaring valuations that profitless venture-backed companies have been getting. He predicted in an appearance at South by Southwest in March that we may see some dead unicorns in 2015.

The shift in focus by public investors to concerns over profits from excitement about rapid growth is a key reason that tech IPOs slowed dramatically since early last year. A number of venture-backed companies that had been expected to go public by now have instead raised IPO-sized funding from late-stage investors at lofty valuations.

Investment research firm CB Insights reported this week that the number of unicorns in the world has grown to 123 and they have a combined valuation of $469.1 billion. It added that their aggregate worth tops the valuation of every company on the Nasdaq 100 except for Apple, which is valued at more than $660 billion.

But LinkedIn co-founder and Greylock Partners VC Reid Hoffman argued in a blog last weekend that, while some valuations are certainly too high there, there are good reasons to believe that others will be validated eventually on Wall Street. He wrote that the term “unicorn” has created a mistaken belief that these valuations aren’t real.

“While the metaphor may put an implied cap on the number of billion-dollar companies that can credibly exist, VC firms and other investors are betting on technology, not metaphors,” Hoffman wrote in a blog posted to LinkedIn over this past weekend.

Gurley’s not buying that, though, apparently. He points to big drops in some prominent tech stocks and on Chinese markets in the past six weeks.

“The bottom line is that global tech valuation multiples are compressing (coming in). Quickly,” he tweeted Thursday night. “One might reasonably assume that this would have an adverse impact on late stage private market liquidity and valuation. I certainly do.”

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FIREFIGHTERS PAUSE as the bodies of three fallen comrades — Richard Wheeler, 31, Tom Zbyszewski, 20, and Andrew Zajac, 26 — who died fighting a wildfire in Washington state’s Okanogan County, are carried away by ambulance. Firefighters from as far away as New Zealand, along with citizen volunteers have joined tens of thousands battling wildfires across the Pacific Northwest.

You do not need them until you “need them”.  These are Firefighters, Police, Armed Forces and all that “serve and protect”.

Please take a moment to “HONOR” these men and woman and say “THANK YOU”:

  1.  Firefighters walked up the World Trade Center in 2001, when all were walking down.
  2.  Firefighters and ParaMedics are “there” when a loved one has a medical emergency.
  3.  Firefighters have been fighting wildfires in West and Pacific Northwest during the worst fire season in decades.

As a Board Member of a California Fire District, I see the dedication, commitment and sense of duty of these men and woman.  Very simply, they “serve and protect” without reservation.

May God Bless the fallen and provide comfort to their families.

with Respect and Honor

Steve Gerbsman

These are the first women to earn the prestigious Army Ranger tab

Amanda Macias

army rangers women

Capt. Kristen Griest (left) and 1st Lt. Shaye Haver (right) will become the first female soldiers ever to graduate from Ranger School on Friday, Aug. 21, 2015.

As one of the mottoes of the US Army’s elite regiment puts it, “Rangers lead the way.”

For the first time in military history, two women will graduate from the excruciating 62-day Ranger School at Fort Benning.

This week, Capt. Kristen Griest, 26, and 1st Lt. Shaye Haver, 25, will be awarded the prestigious black and gold Ranger tab along with 94 of their male counterparts.

Ranger candidates arrive for training in the best shape of their lives and survive on a meal a day and just a few hours of sleep — all the while completing some of the toughest military training in the world.

army rangersUS Army PhotoArmy Ranger candidates prepare for an airborne operation during the Ranger Course on Fort Benning, Georgia.

“Ranger School is a gut check,” Jack Murphy, a Special Operations 75th Ranger Regiment veteran and managing editor of the military-focused publication SOFREP told Business Insider.

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“… When you see another soldier wearing a Ranger tab on his or her uniform you know that you have both slogged it out through some extremely challenging training, which automatically builds a certain amount of trust in each other,” Murphy added.

Each year approximately 4,000 students attend Ranger School. Sixty percent of those candidates wash out of the course.

On April 20, West Point graduates Griest and Haver entered into the first gender-integrated Ranger School, alongside 380 men and 18 other female candidates.

Griest, a military police officer from Connecticut and Haver, an Apache helicopter pilot from Texas, completed the full Ranger course in four months.
Welcome to Ranger School

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Army Ranger candidates complete an exercise during the first phase of training.

The US Army divides the grueling course into three phases: “Benning,” “mountain,” and “Florida.”

During the Benning phase of Ranger School, which takes place in Georgia, a soldier’s physical stamina, mental toughness, and tactical skills are evaluated and fine-tuned.

On the last day of the Benning phase, Ranger candidates conduct an ardudous 12-mile march while carrying a 35-pound ruck sack — and without the luxury of drinking water. About 50% of students will pass this phase of the course, according to the Ranger School website.

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During the appropriately named mountain phase, Ranger students are sent to the northern Georgia mountains to continue to learn how to sustain themselves in adverse conditions.

“The rugged terrain, severe weather, hunger, mental and physical fatigue, and the emotional stress that the student encounters afford him the opportunity to gauge his own capabilities and limitations as well as that of his peers,” according to the US Army.

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The last phase consists of fast-paced field-training exercises in which candidates are evaluated based on their execution of high-stress raids, ambushes, and close-combat attacks.

All students must pass an intense physical fitness test that includes 49 pushups, 59 situps, a 5-mile run with a 40 minute time limit, six chin-ups, a timed swim test, a land-navigation test, several obstacle courses, three parachute jumps, four air assaults on helicopters, and 27 days of mock combat patrols.
After graduation

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Unlike their male Army Ranger counterparts, both women will not be able to apply to the 75th Ranger Regiment, the premier tier of Army special operations with its own unique set of physical requirements.

The Pentagon is scheduled to make a decision on which combat roles will be opened up to women later this year, CNN reports.

Read more: http://www.businessinsider.com/these-are-the-first-women-to-earn-the-prestigious-army-ranger-tab-2015-8#ixzz3jIW5eysg

Unknown-110 Tricks to Look 10 Years Younger

Published
August 1, 2015
Publication
Botom Line Personal
Source
Lauren ­ ­Rothman, StyleAuteur.com
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Most of us want to look as youthful and vital on the outside as we feel on the inside. But without realizing it, we may be appearing older than we need to.

Here are 10 simple things you can do that will make you look younger…

Clothing and Accessories

• Cut back on the black. Wearing all black is certainly stylish, but as you age, it can make dark circles under the eyes and facial wrinkles appear even more pronounced. It’s better to wear bright colors, which instead convey a sense of youth and vibrancy. You don’t have to cover yourself from head to toe in loud colors to accomplish this. Just add a dash of color, ideally near the face or neck where it will draw people’s attention up toward your eyes. People are more likely to consider you as an individual—and less likely to judge you based on your age—if they make eye contact with you. A brightly colored scarf or necklace is a good choice for women…a brightly colored tie, pocket square or polo shirt for men.

Alternative: If you prefer to wear muted colors, not bright ones, at least replace black garments with navy, cranberry, charcoal, brown and olive.

• Stop wearing worn garments. Teens and 20-somethings can get away with wearing threadbare or vintage clothing. But when older people wear past-its-prime clothing, it makes them seem old and past their prime, too. Once an item of clothing goes out of style or starts to show wear, it’s time to stop wearing it, at least in public.

• Buy clothes that fit the body you have today. Some people are so used to wearing clothes of a certain size that they go right on purchasing that size even as they age and their bodies change shape. Other people intentionally buy baggy clothing because they think it will hide the physical imperfections that inevitably come with age. In reality, wearing clothes that do not fit properly only calls additional attention to physical imperfections.

When you try on clothes in a store, take your usual size along with one size larger and one size smaller into the fitting room, then purchase whichever fits best, regardless of what size you thought you were. If you’re not great at gauging fit, shop with a friend who knows a lot about clothes…or ask a store employee for assistance.

Also: Women should get a bra fitting—and purchase new bras if necessary—at least once a year. Women’s bra sizes often change as they age.

• Take a look at your eyeglasses. These days, wire-frame glasses seem old and dated, which can make their wearers seem old and dated, too. Consider switching to more fashionable ­plastic frames, either black or colored. If that doesn’t fit your personality, switch to rimless glasses.

Also: If you wear bifocals (or ­trifocals), try switching to progressive lenses. These serve the same purpose but without that line across the lens that often is associated with old age.

• Avoid being too “matchy.” Carrying a handbag that matches one’s shoes was once considered stylish. These days it is associated with older women—young women tend to prefer a more casual, unmatched look. If you own sweater sets, break them up.

• Skip the turtleneck. Some people think wearing a turtleneck will hide the sagging neck that often comes with age. But turtlenecks actually call attention to the portion of the saggy neck and jowls that still can be seen.

Instead, women should consider wearing V-necked or scoop-necked shirts that visually extend the length of the neck—then add a brightly colored necklace, scarf or high-collared jacket. Men should opt for collared shirts.

Skin and Body

• Apply sunscreen to your hands. You probably already know that using sunscreen regularly on your face can help you look younger. The moisture in the sunscreen gives older, dry skin a moist, younger look, and the UV protection limits age spots and other skin damage that is associated with age.

Also, sunscreen prevents a deep-tan look, which appears old and out-of-touch in today’s skin cancer–conscious society—a light tan is fine…too dark is dated.

What many people do not consider is that sunscreen should be applied to the backs of the hands in addition to the face. Wrinkled, dry, heavily tanned or age-spotted hands can make people appear old even if the skin on their faces still looks young. Spots on the hands are one of the first signs of aging.

Men who are losing their hair or are already bald should apply sunscreen to the scalp…or they can wear a baseball cap or a straw fedora, which are stylish and youthful options. Sunburn, flaking or overall redness will draw attention to your head and make you look old.

Helpful: Recent research suggests that “broad spectrum” sunscreens that protect against UVA light, in addition to the UVB associated with sunburns, are particularly effective in combating the aging effects of the sun.

Also: Stay hydrated. Drinking eight eight-ounce glasses of water each day can help your skin maintain the moist, dewy glow that is associated with youth.

Arm_pump• Strong arm yourself. Toned arm muscles can help you look younger—but which muscles you should target varies by gender. Consider working with a trainer to learn the best exercises for you.

Women: Sagging biceps and triceps in the upper arm can make women look old. Exercising with dumbbells is the best way to tone these. Start with very light dumbbells if necessary—even two-pound weights can make a difference. Do bicep curls, hammer curls and tricep exercises several times a week.

Men: Broad shoulders help men continue to look young and powerful as they age. Bench presses and/or push-ups help here.

• Stand up straight. Hunching over makes people seem old and wizened. Sitting or standing with your back straight and your shoulders back conveys an air of youthful strength and confidence.
Tip: If you find it difficult to maintain proper posture, take a Pilates class. Pilates is an exercise regimen that ­focuses on core strength, which is crucial for good posture.

• Trim facial hair. Women should be on the lookout for long, stray hairs and pluck them.

Having a beard doesn’t make a man look old—even if the beard is gray—but having an unkempt beard does. Trim your beard at least once a week, and shave your neck and around the other edges of the beard every day.

Also: Trim nose hair, ear hair and bushy eyebrows frequently. Excess hair in these areas doesn’t just look sloppy, it is associated with old age. Ask your barber to trim your eyebrows when you get a haircut if you’re not confident in your ability to trim your own brows properly.

Source: Lauren ­Rothman, style and trend expert who has appeared on Entertainment Tonight, CNN, E! News and ABC News, among other news outlets. She is a style consultant for individuals and corporations in the greater Washington, DC, area and author of Style Bible: What to Wear to Work. StyleAuteur.com

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Just got back from China and ready to share my thoughts with you.

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Yours truly,
Captain Hoff (a.k.a. Steve Hoffman)

Running Fast in China

China
China
I just returned from a marathon business trip to China, and here are some thoughts…

▪ Chinese food in America sucks!

▪ Traffic in Beijing makes Hwy 101 look like the Autobahn

▪ Smog is out of control, so the government is making cleantech a top priority

▪ Stock market reacts like a yoyo with each new government policy

▪ Big city Chinese need to own real estate to get into the right school districts

▪ Home prices in major cities are sky high, but if you don’t own property, no mother will let her daughter marry you!

▪ Many Chinese own 3 or more condos, and they don’t even rent them out because rental prices are so low

▪ Real estate prices have peaked and are falling, so owners are cashing out and investing in startups

▪ This has precipitated a startup boom

▪ The government is fueling the boom by laying out big subsidies for startups and incubators

▪ If you want free space for your startup, China has plenty of it

▪ Valuations are sky high, as investors compete to get into the hottest startups

▪ Chinese investors prefer startup founders 30+ years old – they don’t trust the kids with their cash

▪ High tech wages now rival those in the US – the days of cheap labor are gone!

▪ Traditional businesses are on the decline

▪ Factories that were once off-shored to China are moving to Southeast Asia in search of cheaper labor

▪ The buzz word in China is “innovation” and the entire country feels they must move up the value chain to compete

▪ Copying has become a dirty word, as China pushes to develop its own intellectual property

▪ Intellectual property rights will be enforced more strictly moving forward because China needs to reward innovation

▪ The Chinese government is focused on bringing the best technologies from around the world to China

▪ Chinese work harder than anyone I know: even government officials come to work on weekends (imagine that!)

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