At a time when the runners and riders of the French presidential campaign seem largely like a lacklustre lot, spare a thought for Roland Dumas, who died just over two years ago at the ripe age of 101. Dumas was a dashing figure in French politics and was Francois Mitterand’s point man on foreign affairs for close to seven years and directed French foreign policy through the fall of Communism and events like the first Gulf War.
Dumas, however, is also famous for his affair with Christine Deviers-Joncour whilst he was foreign minister and when she was in the highly lucrative pay of Elf, the oil company. Once news of the affair and Joncour’s arrangement with Elf broke in 1999, Dumas resigned as head of the Constitutional Court, and Joncour’s account of the adventure was famously published under the title ‘La Putain de la Republique’.
Jensen Huang, who resigned as Nvidia’s chief executive on Thursday, is not quite as dashing as Dumas, though certainly a lot richer. His affair with Alice Huang, whom US intelligence officials reportedly suspect of working for the Chinese intelligence services, has, however, proved far more consequential than the Elf case. The scandal has now cost Huang his job at the helm of the chipmaking giant he co-founded, with Nvidia appointing its long-serving chief financial officer, Colette Kress, as interim chief executive.
Readers who were expecting me to devote this note to tales of mistresses and honeytraps will be disappointed, because there are several threads to the Nvidia story that are worth focusing on, notably the implications for geopolitics, the operation of the White House, and the emerging Great Game between the West and the countries of the Shanghai Cooperation Organisation (SCO). In a note last year, I describe the shadow wars these countries are mounting.
This story is emblematic of the AI bubble, and more generally of a world in geopolitical disorder. In particular, questions will be raised as to why intelligence from US agencies was not acted on more urgently by the Trump administration. More tellingly, Nvidia has apparently been caught napping, and here there are at least three strands worth examining.
In May we wrote a note (‘Goodbye Governance’) on the peculiar, inferior corporate governance model that characterises the fast-growing AI giants, and the ownership structure of Anthropic that is evident in its forthcoming IPO prospectus is a case in point. Compared to the majority of the staid firms in the S&P 500 index, the AI companies are evolving quickly and may not have well established governance structures and norms (Jensen Huang had 50 different direct reports apparently). In many cases, founders tend to dominate the firm’s strategy and often have special voting rights (not the case for Nvidia). As such, the mechanisms to detect and challenge untoward behaviour may not have been well thought through.
One failing of Nvidia is the lack of a well thought through succession strategy, a weakness now exposed by Huang’s abrupt resignation. This succession process, and the task of mapping how a founder or long-running CEO has ‘wired’ a firm, is a significant though underestimated problem for family led middle sized firms.
In this context, a very interesting development in the corporate sector is the emergence of corporate intelligence teams, though in some cases the likes of Total Elf have been at this game for some time (we recently highlighted a ranking of the capability of European spy agencies, ‘Spies Like Us’). An authority on this field is Lewis Sage-Passant, and I can recommend his books (such as ‘Beyond States and Spies’).
Mostly corporate intelligence agencies are defensive – they exist to protect against the theft of intellectual property, warn employees from being honey trapped on business trips, block cyber attacks and other electronic assaults and steer employee safety in dangerous locations. In a few cases, corporate intelligence teams take a more aggressive role, but to my limited understanding, they are defensive and collaborate with similar businesses in friendly economies to block the activities of common enemies (i.e. the members of the SCO notably). There is also a growing niche digital sector that helps companies identify the true background of business counterparts in ‘emerging’ economies.
One of these is the MSS, China’s massive spy agency, that not only employs tens of thousands of spies, but co-opts many other Chinese citizens to gather grains of intelligence around the world. Indeed, some will claim that the reach of the MSS extends through European and American universities, increasingly through international institutions like UNESCO and the UN. A great spy game is now truly underway, the likes of which John Buchan would be proud.
Such is the scale of the MSS, and their reach across cities like New York, that it is physically impossible for the FBI to keep tabs on the myriad of operations. The allegation against Alice Huang marks the coming out of the MSS in the Western public view and will strengthen the hand of the China hawks in the Trump cabinet. It may well also tighten the surveillance of the business relationships of the Trump clan and their associates, especially so in the light of the mid-term election results. The credibility of the White House, Jensen Huang and Nvidia are all damaged.
As a final thought, the incident is another proof point in the ‘end of globalization’ thesis and the onset of a world of strategic competition where sensitive technologies are sought after. Chris Miller’s book ‘Chip War’ was an excellent example of the ways in which supply chains and prized innovation have become weaponised.
Have a great week ahead, Mike
