Dispatch №12

Korean companies have for years sought orders for more expensive vessels such as LNG carriers. Construction of LNG carriers is also a segment where Korean shipyards have a technological edge over rivals. In 2021 Korea’s LNG carrier market share was 93%. For Korean shipbuilders, LNG carriers accounted for 65% of their shipbuilding contracts in 2022. Now China is treading on Korea’s heels and trying to get its share of the pie, but it’s a long way to go. OK. Korea is fully booked for years to build LNG carriers. And what is the integral part of LNG carrier? Engines.

Trends and Companies

STX Heavy Industries and the engines for LNG carriers

War in Ukraine has impacted global gas markets. In the spring of 2022 US was talking about establishing “virtual transatlantic gas pipelines” to Europe and in the time of energy crisis liquefied natural gas (LNG) shipping capabilities become the matter of utmost importance. The consequence of war is partial exclusion of Russia from global energy markets and in theory it may lead to a total exclusion of Russian gas and oil from Western energy market. In circumstances like that you need more gas from US, Australia and Qatar. Maritime routes are mainly used to transport LNG.

The United States only began shipping LNG overseas in 2016 but has became the world’s largest LNG exporter during the first half of 2022, according to data from CEDIGAZ, surpassing longtime export leaders Qatar and Australia. Three export facilities under construction on the USA eastern coast are set to further cement American dominance of the sector when they are fully operational by 2025. Germany is planning five LNG import terminals, of 25 new floating import plants that S&P Global expects to be installed across the European Union in coming years. Greece, Italy, Ireland and the Netherlands also have planned terminals, as well as France, Finland, Estonia, Cyprus and Poland.

The crisis in Ukraine has helped several LNG companies record bumper profits this year. The export company Cheniere earned $3.8bn more in cash from its operations in the first half of 2022 compared to the same period last year, while Sempra, a gas liquifying company, has enjoyed an eightfold increase in LNG sales to Europe. LNG flows to Europe from Australia and Qatar as well.

China in its turn tries to ensure future energy supplies. In November Qatar and China agreed to a $60 billion, twenty-seven-year deal for liquefied natural gas (LNG).

Asia in general is seen as the key engine of gas and LNG demand growth. Shell expects global LNG demand to reach 700 MT by 2040. The primary driver has been growing demand in Asia; Shell predicted in 2021 that Asian countries could absorb as much as 70% of the new LNG volumes coming to the market over the next two decades.

Current policies of the Association of Southeast Asian Nations (ASEAN) member states preserve an important role for natural gas in these countries’ energy supply mix. Natural gas plays a significant role in the ASEAN economy, representing 23 percent of the overall energy supply mix and 31 percent of total installed electricity generation capacity. The industrial sector is the main driver of economic growth and gas demand growth in the region. Existing policies suggest that in 2025 natural gas will still play a major role in the energy supply mix and, consequently, the region will become a net gas importer, with imports reaching 130 bcm by 2050.

To transfer so much LNG you need more LNG carriers. And here they come.

The LNG carrier market is expected to record a compound annual growth rate, or CAGR, of approximately 3.6% from 2022-2027. Last year Qatar Energy signed its first LNG carrier charter contract with Japan’s MOL. MOL placed an order to build four LNG carriers with Hudong-Zhonghua Shipbuilding in China. The Japanese company will lease these carriers to Qatar Energy. It became the first company to sign a charter contract with Qatar Energy with regard to Qatar’s LNG project. Qatar is the world’s largest LNG producer and is in the process of dialing up LNG production at the Northfield gas field. The Middle East nation plans to expand its LNG production capacity from 77 million tons to 126 million tons by 2027.

Earlier Qatar Energy signed non-binding slot contracts for building more than 100 LNG carriers with the three Korean shipbuilders — Korea Shipbuilding & Offshore Engineering (KSOE), Samsung Heavy Industries, and Daewoo Shipbuilding & Marine Engineering (DSME). In September 2022 South Korea’s Samsung Heavy Industries (SHI) and Daewoo Shipbuilding & Marine Engineering Co (DSME) revealed a combined real order for 11 LNG carriers worth approximately $2.35 billion.

OK. Korea is fully booked for years to build LNG carriers. And what is the integral part of LNG carrier? Engines.

That finally brings us to Korean company called STX Heavy Industries.

STX Heavy Industries

STX Heavy Industries Co Ltd is engaged in plant design and the manufacturing of low-speed engines, core materials, and equipment for ships in South Korea. Its products include crankshafts, cylinder liners, turbochargers, and cargo pumps. Its shipbuilding material segment provides cargo oil pump systems, liquefied natural gas carrier insulation boxes, heavy fuel oil supply system units and purifier units.

The company’s top clients include Daewoo Shipbuilding & Marine Engineering (DSME) and K Shipbuilding, among others. Later in 2022 the company announced that it signed a contract to supply marine engines worth 13.9 billion won (about 10 million US dollars) to a Chinese shipbuilder.

Name: STX Heavy Industries Co., Ltd.
IPO: May 2009
Ticker: A071970
Exchange: KOSE
Founded: 1976 (STX Corporation)
Industry: Industrial Machinery
Sector: Capital Goods
Market Cap: $164m
Shares outstanding: 28.38m
Free-Float: 52.2%
Free-Float capitalization: $85.5m
CEO: Sun Pil Choi (since March 2020)
Employees: 146
Website: https://www.stxhi.co.kr

STX Heavy Industry is a subsidiary of the former STX Group. It was established in February 2004 and is mainly engaged in marine engines, land-use power generation engines and ship supporting business. The company was formerly known as STX Enpaco and STX Metal Co., Ltd. and finally changed its name to STX Heavy Industries Co., Ltd. in January 2013. After the disintegration of STX Group, STX Heavy Industry entered the restructuring process in August 2016.

In March 2018, STX Heavy Industries selected South Korean private equity fund (PEF) operating companies PineTree Partners and GlobalSeAH as preferred bidders respectively. Subsequently, PineTree Partners acquired its OEM business unit for 98.7 billion won (about 92.6 million U.S. dollars), accounting for about 66.1% of STX Heavy Industries’ total shares, by acquiring new shares and corporate bonds issued by STX Heavy Industries. In a later development the PE firm has reduced the shareholding rate through block deals, over-the-counter transactions with a large number of securities, and trading on the stock exchange.

Pine Tree Partners announced earlier last year that it would sell its overall remaining 47.8 percent stake in STX through a tender process. The first round, expressing interest in the company was due by December 14. STX Heavy Industries will choose a preferred bidder by February 2023, and after the final bidding, a stock purchase agreement is expected to be completed in the first quarter of 2023.

Based on a current market valuation of approximately $160+ million, the implied value of the shares of STX being sold is approximately $78.7 million.

As we can see it’s rather small company with modest market cap, but what is interesting in current global circumstances is the attention this company hets from Korean major shipbuilding players.

And we have two large competitors here.

Korea Shipbuilding and Offshore Engineering (KSOE) made a preliminary bid to acquire a controlling stake of STX Heavy Industries, a local ship engine maker. KSOE, the intermediate sub-holding company of HD Hyundai, submitted a letter of intent to buy 47.81 percent of STX Heavy Industries. Hyundai currently has an engine manufacturer within its group but said it was interested in STX to meet the rising demand for engines as part of its strong shipbuilding orderbook.

“KSOE will be able to afford the cost of acquisition with its cashable assets,” said Kang Kyung-tae, analyst at Korea Investment and Securities. “The goal of the takeover deal will be expanding its share in the growing ship engine equipment market,” explained Kang. According to Kang, Hyundai Heavy Industries, a shipyard 78.02 percent owned by KSOE, has an engine production capacity of 12 million horsepower a year, and STX Heavy Industries’ annual capacity stood at 1.3 million. “We believe that the acquisition will help meet the growing demand for ship engines, and therefore participated in the preliminary bidding,” said a spokesperson for KSOE. “By combining Hyundai Heavy Industries’ engine technology, we will be able to extend our line-up into small- and mid-sized engines.”

Following the media reports, STX Heavy Industries’ share price skyrocketed by nearly 30 percent.

Immediately after that the market learned that Hanwha Group is also entering the bidding process. South Korea’s Hanwha Group appears to be moving quickly to consolidate its position in the shipbuilding industry with reports that it joined the bidding for marine engine manufacturer STX Heavy Industries. Hanwha did not confirm that it was interested in STX, but the Korean media is reporting that Hanwha has begun a due diligence for the engine business.

Reports that Hanwha has entered the bidding for STX sent the price of the company’s stock soaring as much as 15 percent in Korea.

The expression of interest in the engine manufacturer came two days before Hanwha completed the agreement to recapitalize Daewoo Shipbuilding & Marine Engineering (DSME) assuming control from the Korea Development Bank (KDB). Hanwha, Korea’s seventh largest conglomerate said it planned to integrate DSME and expand its capabilities after the pending deal closes in early 2023. KDB had previously said the shipyard required private management and investments to expand its capabilities and technologies to meet the emerging challenges in shipbuilding. DSME is said to be one of the largest customers of STX Heavy Industries. DSME reportedly relies on STX Heavy Industries and several other engine manufacturers.

There are more bidders. Other bidders are believed to include rival Korean company HSD Engine (formerly Doosan Engine), an unknown foreign bidder as well as several private equity funds.

Why the major Korean shipbuilders are after modest STX Heavy Industries?

STX is reported to be one of only three Korean manufacturers of low-speed diesel engines, including Hyundai’s internal capability, and a third independent company, HSD Engine. Basically, it’s the only remaining small player on the market of engines of that type for Korean companies that make LNG carriers. And keep in mind that Korean manufactures hold more than 90% of that global market.

What more important is that STX builds not only a line of diesel marine engines but it is as well having grown its position in dual-fuel engines which are experiencing a rapid rise in demand.

STX Heavy Industries produces large low-speed engines for ships and power plants, and the company has a technical partnership with German engine heavyweight MAN Energy Solutions enabling it to also build and sell dual-fuel engines running on LNG and LPG.

The business is extremely attractive from a strategic point of view as shipbuilders in South Korea seek investment opportunities to bolster their marine engine-building capacity to meet the anticipated demand for greener ships.

STX Heavy Industries became the first licensee to localize a licensed 51/60DF engine, a dual fuel engine mounted on LNG (liquefied natural gas) carriers:

…As an alternative to stricter IMO environmental regulations, we succeeded in commissioning the world’s first LPG dual-fuel engine (LGIP) for G-Type ships with MAN-ES in January 2020, producing engines as demand for VLGC increases. At the current bridge point of transition to the next-generation fuel that meets the environmental regulations of IMO 2050, we are leading and responding to the radical market change by providing suitable engines such as GI and LGIP produced by our company.

In December 2019, STX Heavy Industries and MAN-ES successfully commissioned the world’s first LPG dual-fuel engine for ship propulsion (LGIP-Liquid Gas Injection Propane). The two companies signed an MOU for the LPG dual-fuel engine retrofit project, built an LPG engine production facility, and conducted R&D and type approval tests for the 6G60ME-C9.5-LGIP engine.

STX Heavy Industries has accumulated production/start-up experience and know-how in production/testing LPG engines for ships for the first time in the industry and has completed preparations for mass production of ME-LGIP. ME-LGIP engines emit 80% less harmful exhaust gas such as nitrogen oxides (NOx), sulfur oxides (SOx), and fine dust (PM) than existing ship oil, HFO (Heavy Fuel Oil), so it is possible to respond to IMO2050 environmental regulations even without installing scrubbers. Thus, firstly the application to LPG carriers is becoming standardized. The advantages of LPG fuel are eco-friendly, convenient bunkering due to easy storage and transfer, and a worldwide well-equipped fuel supply and demand infrastructure. In addition to these advantages, ME-LGIP that uses LPG can also reduce CO2 by 20 to 25%, enabling EEDI regulatory response as a bridge fuel.

The ME-LGIP engine is expected to be easier to convert into an ammonia engine (to be released in 2024), which is considered a carbon-neutral fuel in the future, than an LNG propulsion engine. So, LPG propulsion ships can also be regarded as a representative supplement to prepare for strengthened IMO2050 environmental regulations…

Investments in ships with dual-fuel engines are soaring as shipowners look at ways to future-proof their vessels while cutting their emissions at the same time. Furthermore, marine engine manufacturers are racing against the clock to develop engines that can run on alternative low-carbon and zero-carbon fuels such as ammonia and hydrogen.

More than that, there is a need to make alteration to the already sold engines. In May 2022 MAN Energy Solutions has signed a cooperation agreement with STX Heavy Industries Co., Ltd., to deliver its three EEXI (Energy Efficiency eXisting ship Index) solutions to MAN B&W-branded low-speed engines manufactured by STX HI. The goal behind the agreement is to provide STX HI customers with an EEXI solution to help accelerate the pace for EEXI compliance.

Thomas Leander, Vice President – Head of Solutions & Site Manager, MAN Energy Solutions, said: “I am happy we have reached an agreement with STX HI that will help customers become EEXI-compliant. This also means a lot to us given our commitment to helping customers meet market demands regarding decarbonisation.”

Chun-Dong Kim, Senior Vice President and Head of Engine Components & Retrofit Service Division, STX HI Said: “We are very pleased to take this opportunity to reach an agreement with MAN Energy Solutions who will provide the relevant solution for EEXI regulation while STX HI will provide a reliable solution for decarbonisation to customers. Starting with this agreement, we look forward to futher cooperation with MAN in the future to respond to environmental regulations.” IMO’s MEPC 335(76) regulation that come into force from January 2023 requires vessels already in service to become EEXI (Energy Efficiency eXisting ship Index) compliant. Products of MAN Energy Solutions meet the vast majority of shipowners’ request for a simple, economical solution that complies with the impending regulation. MAN Energy Solutions products reduces carbon emissions by restricting the maximum power – and thus, fuel consumption – produced by prime movers to a lower value than what was originally designed and certified for.

And the analysts believed it was inevitable that Hanwha and Hyundai would emerge as rivals in the industry and will try to obtain all the available on the market “greener” engine production capacities as soon as possible.

STX Heavy Industries overview of available financial results and stocks

STX, listed on the main bourse Kospi, posted 169.3 billion won in revenue and 10.9 billion won in operating losses in 2021. From January to September of this year, it had 132.1 billion won in revenue and 32 billion won in operating profit.

For the third quarter, the company reported sales was KRW 53,010.37 million compared to KRW 38,757.11 million a year ago. Net income was KRW 12,429.72 million compared to net loss of KRW 505.62 million a year ago. Basic earnings per share from continuing operations was KRW 438 compared to basic loss per share from continuing operations of KRW 18 a year ago.

For the nine months, sales was KRW 132,101.48 million compared to KRW 116,982.11 million a year ago. Net income was KRW 11,516.67 million compared to net loss of KRW 17,066.9 million a year ago. Basic earnings per share from continuing operations was KRW 406 compared to basic loss per share from continuing operations of KRW 602 a year ago.

The results may not impress much now, but keep in mind, that the company went through turbulent times and restructuring. It ended it’s ”rehabilitation” procedures only in 2019, released it’s spin-off (STX Energy Solution) in 2021 and fully engaged in “greener”engines with it’s German partner just in a past couple of years. News about Hanwha and Hyundai showing an interest in bidding for 47.81 percent of STX Heavy Industries made the stock jump 15% and 30%. Demand for LNG carriers and the “greener”engines for those ships is growing. The future looks bright for the company after the deal will be closed in February this year.

The Person

At the end of 2022 we heard the news: Berggruen Prize Jury announced its selection of preeminent Japanese philosopher and literary critic Kojin Karatani as the winner of the 2022 Berggruen Prize for Philosophy & Culture.

The $1 million award is given annually to thinkers whose ideas have profoundly shaped human self-understanding and advancement in a rapidly changing world. Karatani is the first Asian laureate of the Berggruen Philosophy & Culture Prize, a rare thinker whose ideas move across philosophy, literary theory, aesthetics, linguistics, economics, and politics — East and West; past and present. The Berggruen Prize Jury has selected Kojin Karatani for his “radically original contributions to modern philosophy, the history of philosophy, and political thinking — making Karatani’s work particularly valuable in the current era of troubled global capitalism, crisis in democratic states, and resurgent but seldom self-critical nationalism.” “Kojin Karatani is one of the most remarkable philosophers of our time. He has produced new philosophical concepts that delve into the nature of democracy, nationalism, and capitalism in an impressive ensemble where the notions of reciprocity and fairness loom large as the unifying links,” said Berggruen Jury Prize Chair Antonio Damasio.

Wow! $1 million award is given annually to philosophers!

Who is the person behind that idea?

Nicolas Berggruen is a US-based billionaire ($3.1bn) investor and philanthropist. Born in Paris, France, he is a dual American and German citizen. He is the founder and president of Berggruen Holdings, a private investment company and the co-founder and chairman of the Berggruen Institute, a non-profit, non-partisan think tank that works to address global governance issues.

Interesting people often have interesting parents, and Berggruen’s were fascinating. His father was a journalist who fled Germany in 1936 when his editor informed him that, due to his Jewish surname, he could no longer use his byline. Settling in San Francisco, Heinz Berggruen started writing art criticism for the San Francisco Chronicle, then enlisted in the American military and was stationed in Europe. When the war was over, he opened an art gallery in Paris, became close friends with Picasso. Nicolas’ mother was the German actress Bettina Moissi, who in 1948 starred in Long is the Road, the first German film to deal with the Holocaust; she married Heinz in 1960, and Nicolas was born in 1961. Before he died in 2007, Heinz donated 90 works by Klee to the Metropolitan Museum of Art in New York and sold more than 100 paintings by Picasso, as well as works by Alberto Giacometti, Henri Matisse and Klee, to the Berlin State Museums for the below-market price of $120 million. Art was the passion of Heinz Berggruen but also his vocation, and Nicolas inherited his father’s business acumen. Oliver, Nicolas’ brother, recalls playing bartering games when they were kids: “I always wondered a few hours later, ‘How did my brother end up with all these possessions?’”

Nicolas attended elementary school at the École alsacienne in Paris. He was raised Catholic, his mother’s faith. Growing up in Paris in the 1970s, Berggruen spent his time reading. He was particularly drawn to the work of French philosopher Jean-Paul Sartre and the issues of political governance. Berggruen attended high school at Le Rosey in Switzerland. He became interested in Marxism and by 15 had written a constitution for a utopian country. Berggruen refused to learn English at the time because he thought it was “the language of imperialism.” Berggruen had a rebellious nature, frequently challenging teachers on intellectual matters and eventually, he was expelled from the school for sedition. At 16, Berggruen passed his state exams in Paris before completing a baccalauréat in Paris as a candidat libre. In 1978, Nicolas moved to London, where he became fluent in English and trained under property developer and philanthropist Lord Max Rayne at London Merchant Securities, known today as LMS Capital Plc.

In 1979, 17-year old Berggruen moved to New York to attend New York University, where he obtained a bachelor’s degree in Finance and International Business in 1981. “In my teens I was interested in photography. Then I decided that I should learn something about the world of commerce. And I came to America at age 17 to escape Europe. I went to NYU—nothing better than being 17 years old and coming to New York.”

With his own savings and a modest trust fund — modest, at least, compared to what it could have been — he began investing in real estate, stocks and bonds. His father then lent him $250,000 to kick-start his investing career, and made it clear he expected to be repaid. Berggruen did well, and in 1984 he founded Berggruen Holdings, which invests internationally in real estate, media and retail. In 1988 he co-founded a fund of hedge funds which also did well; Alpha Investment Management in New York grew to about $2 billion under management before the founders sold it for an undisclosed sum to Safra Bank. Among his largest holdings today are hefty stakes in the German department store Karstadt and Burger King. He’s famous for buying bankrupt Karstadt for 1 euro in 2005, immediately injecting over 65 million euros into to the company ($83 million) and saving over 25,000 jobs. He then spent 400 million euros over the next five years on the company and brought it out of bankruptcy in 2010.

Over three decades, the investor has gotten rich by tapping his worldwide network of business contacts to find mostly small, beaten-down companies to buy, expand and sell. He negotiates many of the buyouts himself, looks for companies loaded with debt or with family owners who are looking to retire. The firms also need to have strong cash flows and defensible business models. After restructuring the company’s debt and investing in expansion, he’ll often hold it for a decade or more before selling. Berggruen has also made money with four blank-check companies: shell companies that go public and then use cash or shares to acquire an operating business. The eccentric investor has stumbled plenty too, particularly when taking detours from his buyout specialty. A foray into hedge funds produced lackluster results before he chucked the venture. And several investments in faddish businesses such as ethanol were a bust. “You make mistakes,” Berggruen says. “You learn”.

Berggruen, who has made a fortune — $3.1bn — investing mainly in real estate, for years was known as the homeless billionaire, jetting around the globe in his Gulfstream while living and working out of the world’s finest hotels. Berggruen hopscotched around the world carrying a small bag of clothing, toiletries, books and his iPhone, staying entirely in hotels: The Peninsula in Beverly Hills, Claridge’s in London, Hotel Cipriani in Venice… In an interview with Bloomberg, Berggruen stated: “I’m not that interested in material things. As long as I find a good bed that I can sleep in, that’s enough”. He says his decision to live a rootless existence wasn’t a means of dodging taxes; he says he pays them in the United States.

But eventually he did settle down having children following the 2016 births (from the same egg donor and two surrogates) of Olympia and Alexander, biological sister and brother, who are barely three weeks apart.

OK. This guy made couple of billions investing in real estate. Nothing new. And yes, of course, as many other billionaires Berggruen has signed Buffett’s giving pledge, promising to give away more than half his fortune when he dies. So why he is an outstanding and interesting billionaire?

What may be unusual about Berggruen is what exactly he has decided to do with his life and his wealth: undertake a global campaign to reform democracy and promote economic prosperity.

In the late 2000s, dissatisfied with his career in finance, Berggruen began privately studying philosophy and political theory with a couple of UCLA. professors: “Well, I started meeting with two professors at UCLA, Brian Copenhaver in philosophy and Brian Walker in political theory. And that’s how the whole thing started. The professors gave me a reading list, I read it, and then we discussed it. We spent a lot of time talking about this concept of governance, and then I thought, “Let’s take some of these concepts and apply them to the real world”.

Brian Copenhaver and Nicolas would meet on Friday afternoons, in Berggruen’s suite at the Peninsula Hotel, and they focused on three works: Aristotle’s “Nicomachean Ethics,” Nietzsche’s “On the Genealogy of Morals” and Sartre’s “Existentialism Is a Humanism.” Copenhaver says that the discussions typically lasted three or four hours and that it was “philosophical conversation as it is meant to be.” He told me that Berggruen was eager to engage with the texts but also wanted to understand why some ideas gained traction and others did not. “It’s one thing to have a theory,” Copenhaver says. “It’s another thing to have a theory that might make its way in the world.”

Copenhaver says he wasn’t paid but did ask Berggruen to donate to UCLA.

For Berggruen, the tutorials were a springboard to a new role and a new life; he now wanted to use his fortune to make a mark in the realm of ideas. The primary goal was not to promote his own thinking but, rather, to provide the money and space for others to ponder the major issues of our time. Colleagues and associates say that to the extent there was any self-interest at play, it was in Berggruen’s desire to surround himself with smart people and to have stimulating conversations. Reid Hoffman, a founder of LinkedIn and a member of the Berggruen Institute’s board of directors, says that some ultrawealthy individuals have a tendency to be “in broadcast mode,” as he describes it — they really just want to hear themselves talk and have others validate their opinions. That’s not the case with Berggruen. “Nicolas wants to have a discussion,” Hoffman says.

In 2010 donating over $100 million he founded Nicolas Berggruen Institute with the mission to develop “new ideas to shape political, economic and social institutions in an era of Great Transformations”. “We are totally independent, we can think very long term, and we can focus on key ideas that will improve humanity,” he says of the institute. “We may never get there but we are willing to take the risk”. To address these issues subsequently provided Berggruen Institute with an additional US$500 million in 2016. Berggruen has recruited so many prominent names to the institute’s roster of supporters and advisers — Eric Schmidt, Reid Hoffman, Arianna Huffington and Fareed Zakaria are among those listed on the organization’s website — that it has been described as his own personal Davos. “There’s no question that we have tried to put together a group far away from the day to day political debates, of people who may have constituencies but no longer have to get elected. They are able to discuss things privately and come up with solutions. It is very undemocratic in a classic sense in that it is elitist. But it’s not like our group suddenly has superpowers and we can do whatever we want. All we can do is have the power to suggest. That’s all we have”.

The institute employs around 30 people, has some 40 fellows worldwide and maintains offices in Los Angeles, Beijing and Venice. It publishes a magazine, Noema (ancient Greek for “thinking”), that covers politics, technology, climate change, culture and much else.

Among its many activities, Berggruen Institute puts up a $1m purse — similar to that of a Nobel Prize — every year to somebody whose work in the area of philosophy and culture have “profoundly shaped human self-understanding”. Berggruen says that the purpose of his prize is to fill a void left by the Nobel Prizes, which include the Peace Prize as well as honors for literature, medicine, chemistry and physics but not philosophy. Berggruen says his prize is “a signal that philosophy is equally important,” a point underscored by the $1 million given to the winner, approximately the same amount awarded to Nobel recipients. Antonio Damasio, a professor of neuroscience, psychology and philosophy at the University of Southern California and the chair of the Berggruen Prize jury, points that money couldn’t buy prestige and acceptance. Instead, the power of the ideas they celebrate is what gives intellectual prizes their currency. “There’s a lot of commonality,” he said. The aim of the prize, he added, was to honor philosophy in “a broad sense, not the narrow, continental sense,” and to celebrate “love of knowledge, critical knowledge.”

Berggruen is not a member of the Berggruen Prize jury. “I actually don’t think I’m qualified”. “I have a very philosophical view on this, which is a very Eastern way,” Berggruen said. “I almost feel like we humans are just vessels. I feel that way. I’m just a vessel.”

Nicolas explains his motives: “I did a lot of things that were practical but maybe not that thoughtful. After a while, I wanted to get back to my real interests—politics and philosophy. I regret I didn’t get back to them earlier. By not only learning but then by investing in the world of ideas, in the world of new ideas, I could not only learn something for me, but hopefully contribute.”

Berggruen says that he wants to “empower ideas,” with an emphasis on “courageous or creative thinking.” Tobias Rees, a German American philosopher whose work has been supported by the Berggruen Institute, suggests that Berggruen might best be thought of as a kind of latter-day Medici. He is, Rees says, a wealthy patron trying to stimulate a “philosophical and artistic renaissance or spring for our times.” In 2021, Berggruen signed a preliminary agreement to purchase the Casa dei Tre Oci on the Giudecca island in Venice, with plans to use the space to host symposia, workshops and exhibitions in partnership with major museums. In 2022, he also bought the Palazzo Diedo in the Cannaregio district, which is to focus primarily on dedicated artist commissions; the first artist-in-residence is Sterling Ruby.

Berggruen Institute stands apart from many other think tanks in that it lacks an explicit ideology and is not necessarily looking to put its own people in government. Nathan Gardels, a veteran California political figure and foreign-affairs commentator who co-founded the institute with Berggruen and serves as Noema’s editor in chief, says the organization is “more sympathetic to the left than the right” but strives to be “post-ideological.” It wants to help make democratic governments more effective and responsive.

Dawn Nakagawa, the institute’s executive vice president, says the mission of Berggruen Institute has evolved in recent years; the institute is now “a lot more unique and philosophical. The new horizon of our work is really to try to poke our nose into the unknown.” Nakagawa cites something called the Transformations of the Human project, which developed as part of the institute. ToftH, as it is known, was initially conceived by Tobias Rees, who believed that artificial intelligence and biotechnology were redefining what it meant to be human and who wanted to foster conversations among technologists, philosophers and artists about where all of this innovation is taking us as a species.

According to Nakagawa, the emphasis these days is on nurturing revolutionary ideas. “If we develop one idea that actually changes and shifts the way the world thinks, that is success,” she says. “But success may not come until long after we’re dead,” she adds, noting that “this work requires patient capital.” Berggruen, the source of that capital, seems to be very patient. He says it can take decades, even centuries, for ideas to catch on and that he is fine waiting. Transformative insights are often not “obvious or popular” at first, and some of the greatest thinkers were persecuted. “Socrates was poisoned,” Berggruen says. “Jesus Christ ended up on a cross, right? Karl Marx was exiled. Spinoza exiled. Confucius, in effect, exiled.” He says the institute needed to show some concrete achievements or otherwise “we won’t be able to engage people.” There are, however, no near-term metrics for gauging the efficacy of what he sees as its most consequential work. We live in a “super result-oriented society,” Berggruen says, but “the one area you cannot measure” is that of fundamental ideas.

Given his passion for the really big questions, it seems reasonable to wonder what Berggruen thinks of proposals to rein in the wealthy. Concerns about inequality are “very legitimate and relevant,” he says. In his view, capitalism has proved to be highly effective at raising living standards, but it is a system that gives people an incentive to excel, and a few are always going to prosper to a disproportionate degree. Rather than punishing these “outliers,” a better solution would be to let the rest of society benefit directly from their success. Specifically, he believes that the public, through a sovereign wealth fund, should be given a substantial equity stake in start-up companies. It is a form of “predistribution,” a concept popular among center-left policy wonks, and one that the Berggruen Institute endorses; the idea is to share the wealth up front, rather than trying to redistribute it after the fact. “As opposed to taking away from the outliers,” Berggruen says, “you’re giving everyone else a stake in the success of these outliers.”

Berggruen’s own beliefs on renewing democracy include a stable US-China relationship, participation without populism, addressing climate change, and instituting “universal basic capital” to ensure adequate living conditions for everyone regardless of employment status. His views of democracy call for an inclusive political culture and positive nationalism. Berggruen states: “Democracy is really about giving individuals a place in society, a voice—respect, in some ways—equality as humans. It’s also a system. It’s not every individual for themselves; it has to be society as a whole.”

Tao Ruspoli talks to Nicolas Berggruen

In 2012, Berggruen and Nathan Gardels published the book Intelligent Governance for the 21st Century: A Middle Way Between West and East. The book’s central argument is that populism and short-term thinking have hindered the Western democracies’ progress, while many authoritarian Eastern nations, China, in particular, would benefit from strengthening their meritocratic systems with the popular legitimacy that is typical of Western governments. Published in English, the book was later translated into Spanish, Portuguese, and other languages. The Financial Times named it as one of their “Best Books of 2012”. In 2019, Berggruen and Gardels published their second book, Renovating Democracy: Governing in the Age of Globalization and Digital Capitalism. The authors advocate for the restructuring of democratic government frameworks to ensure adequate living conditions for everyone. They argue that in a time where jobs are being replaced by technology, employment should not determine if a person’s basic needs are accounted for.

I don’t feel lonely or isolated. Sometimes it just feels frustrating. You don’t know what results you’re going to get. The mountains are big. Humanity has a way of progressing, but not in a linear way. If I don’t get results, at some point I may get exhausted. And if I do, I’d be happy to be doing more reading, writing and studying philosophy. At the end, the key thing is you’ve got to live with yourself. That’s the real test. Everything else is fleeting.

Berggruen acknowledges that his wealth makes him an imperfect messenger: People will simply assume that he’s just another plutocrat looking to avoid higher taxes. (He claims he is not opposed to paying more in taxes — he just doesn’t think redistributive policies will do enough to ameliorate economic inequality.) He says that because he is a billionaire, his motives tend to be viewed with suspicion and that it is hard to get his ideas judged solely on their merits. “I’ve created my own curse, and it’s my own fault.”

Billionaire that gives money to philosophers and studies philosophy himself. How about that for a change?

Books that piqued our interest over the past week

Power and Progress: Our Thousand-Year Struggle Over Technology and Prosperity

by Daron Acemoglu and Simon Johnson

A thousand years of history and contemporary evidence make one thing clear. Progress depends on the choices we make about technology. New ways of organizing production and communication can either serve the narrow interests of an elite or become the foundation for widespread prosperity. The wealth generated by technological improvements in agriculture during the European Middle Ages was captured by the nobility and used to build grand cathedrals while peasants remained on the edge of starvation. The first hundred years of industrialization in England delivered stagnant incomes for working people. And throughout the world today, digital technologies and artificial intelligence undermine jobs and democracy through excessive automation, massive data collection, and intrusive surveillance. It doesn’t have to be this way. Power and Progress demonstrates that the path of technology was once—and may again be—brought under control. The tremendous computing advances of the last half century can become empowering and democratizing tools, but not if all major decisions remain in the hands of a few hubristic tech leaders.

Amazon

Inside Vanguard: Leadership Secrets From the Company That Continues to Rewrite the Rules of the Investing Business

by Charles D. Ellis

One of the world’s largest and most trusted investing institutions, Vanguard serves over 30 million clients, manages more than eight trillion dollars, and is an influential industry disruptor. Now, Charles D. Ellis―referred to by Money magazine as “Wall Street’s wisest man”―reveals the story behind Vanguard’s rise to the top of the investing world. Provided unprecedented access to Vanguard’s leaders, Ellis explains why Jack Bogle started Vanguard and how he and his successors developed it into an investment industry disrupter that became the global leader. Ellis includes in-depth interviews with the executives and key leaders of Vanguard, clear takeaways and lessons from their experiences, a primer on ETFs, and Jack Brennan’s Leadership Principles. From the emergence of index funds to the success of exchange-traded funds, Inside Vanguard is a near-Shakespearian drama of individual human struggle and triumph.

Amazon

A Random Walk Down Wall Street: The Best Investment Guide That Money Can Buy

by Burton G. Malkiel

In a time of rampant misinformation about ways of growing your money, Burton G. Malkiel’s gimmick-free investment guide is more necessary than ever. Whether you’re considering your first 401k contribution or contemplating retirement, the fully updated, fiftieth anniversary edition of A Random Walk Down Wall Street remains the best investment guide money can buy. Drawing on his experience as an economist, financial adviser, and successful investor, Malkiel shows why an individual who saves consistently over time and buys a diversified set of index funds can achieve above-average investment results. He addresses current investment fads and critically analyzes cryptocurrencies, NFTs, and meme stocks. Malkiel reveals how to be a tax smart investor and how to make sense of recently popular investment management techniques, including factor investing, risk parity, and ESG portfolios.

Amazon

Power Failure: The Rise and Fall of an American Icon

by William D. Cohan

No company embodied American ingenuity, innovation, and industrial power more spectacularly and more consistently than the General Electric Company. GE once developed and manufactured many of the inventions we take for granted today, nearly everything from the lightbulb to the jet engine. GE also built a cult of financial and leadership success envied across the globe and became the world’s most valuable and most admired company. But even at the height of its prestige and influence, cracks were forming in its formidable foundation. In a masterful re-appraisal of a company that once claimed to “bring good things to life,” pre-eminent financial journalist William D. Cohan argues that the incredible story of GE’s rise and fall is not only a paragon, but also a prism through which we can better understand American capitalism. Beginning with its founding, innovations, and exponential growth through acquisitions and mergers, Cohan plumbs the depths of GE’s storied management culture, its pioneering doctrine of shareholder value, and its seemingly hidden blind spots, to reveal that GE wasn’t immune from the hubris and avoidable mistakes suffered by many other corporations.

Amazon

Billionaires: The Lives of the Rich and Powerful

by Darryl Cunningham

In Billionaires: The Lives of the Rich and Powerful, Darryl Cunningham offers an illuminating analysis of the origins and ideological evolutions of four key players in the American private sector–Amazon founder and CEO Jeff Bezos, media mogul Rupert Murdoch, and oil and gas tycoons Charles and David Koch. What emerges is a vital critique of American capitalism and the power these individuals have to assert a corrupting influence on policy-making, political campaigns, and society writ large. Cunningham focuses on a central question: Can the world afford to have a tiny global elite squander resources and hold unprecedented political influence over the rest of us? The answer is detailed through hearty research, common sense reasoning, and astute comedic timing. Billionaires reveals how the fetishized free market operates in direct opposition with the health of our planet and needs of the most vulnerable — how Murdoch’s media mergers facilitated his war-mongering, how Amazon’s litigiousness and predatory acquisitions made them “The Everything Store,” and how the Kochs’ father’s refineries literally fueled Nazi Germany.

Amazon

Shrimp to Whale: South Korea from the Forgotten War to K-Pop

by Pacheco Pardo

South Korea has the most remarkable of histories. Born from the ashes of colonialism, partition and a devastating war, back in the 1950s there were real doubts about its survival as an independent state. Yet South Korea did survive, and first became known globally for the export of cheap toys, shoes and clothing. Today, South Korea is a boisterous democracy, a vibrant market economy, a tech powerhouse, and home to the coolest of cultures. In just seventy years, this society has grown from a shrimp into a whale. What explains this extraordinary transformation? For some, it was ordinary South Koreans who fought to change their country, and still strive to continue shaping it. For others, it was all down to forward-looking political and business leaders, who had the vision that their country would one day be different. Whichever version you prefer, it’s clear that, at its core, South Korea’s is the story of a people who dreamt big, and saw their dreams coming true.

Amazon

Strangers to Ourselves: Unsettled Minds and the Stories That Make Us

by Rachel Aviv

Strangers to Ourselves poses fundamental questions about how we understand ourselves in periods of crisis and distress. Drawing on deep, original reporting as well as unpublished journals and memoirs, Rachel Aviv writes about people who have come up against the limits of psychiatric explanations for who they are. She follows an Indian woman celebrated as a saint who lives in healing temples in Kerala; an incarcerated mother vying for her children’s forgiveness after recovering from psychosis; a man who devotes his life to seeking revenge upon his psychoanalysts; and an affluent young woman who, after a decade of defining herself through her diagnosis, decides to go off her meds because she doesn’t know who she is without them. Animated by a profound sense of empathy, Aviv’s gripping exploration is refracted through her own account of living in a hospital ward at the age of six and meeting a fellow patient with whom her life runs parallel―until it no longer does.

Amazon

Die With Zero: Getting All You Can from Your Money and Your Life

by Bill Perkins

Die with Zero presents a startling new and provocative philosophy as well as practical guide on how to get the most out of your money—and out of your life. It’s intended for those who place lifelong memorable experiences far ahead of simply making and accumulating money for one’s so-called Golden Years. In short, Bill Perkins wants to rescue you from over-saving and under-living. Regardless of your age, Die with Zero will teach you Perkins’ plan for optimizing your life, stage by stage, so you’re fully engaged and enjoying what you’ve worked and saved for. You’ll discover how to maximize your lifetime memorable moments with “experience bucketing,” how to convert your earnings into priceless memories by following your “net worth curve,” and find out how to navigate whether to invest in, or delay, a meaningful adventure based on your “spend curve” and “personal interest rate.”

Amazon