| SNEAK PEEK |
— Do waterspouts ever strike twice? A boating incident in Lake Maggiore in 2023 suggests yes.
— Izzy argues that the software industry is and always has been plagued by a ‘market for lemons’ problem, and that’s why the business is fundamentally two-sided.
— If the bosses of social media platforms are responsible for illicit activities organised on them, what about international hotel chains and their premises? The Marriott’s sudden and speedy exit from Warsaw hints that old norms about liabilities are being cast aside.
Dear Subscribers,
Welcome back to The Blind Spot newsletter! I want to thank you all for your patience as I took some time off this summer, making the most of my UK statutory right to parental leave.
Dario, however, wasn’t quite so fortunate. He’s been hard at work throughout, so you can expect a solid lineup of pieces from him in the coming weeks. Although, since he’s just jaunted off to Argentina, we’ll be holding some of those back for later.
As for me, those four weeks flew by far faster than expected. Fortunately, nothing significant happened while I was away…
Just kidding. The news cycle has been absolutely wild. But with our new streamlined approach, we’re shifting focus. Instead of playing catch-up, we’ll concentrate on delivering what we do best: shining a light on political stories at the intersection of finance and media that others are overlooking—whether due to ideological blind spots, biases, or the global tendency to fixate on certain themes. (Or just because the quirkiest stories have somehow slipped through the cracks.)
This week’s edition comes to you from me, Izabella Kaminska.
Send tips to [email protected] and [email protected]
| THE BIG BLIND SPOT THIS WEEK |
Waterspouts never strike twice: Except when they do.
Sleeping with the fishes: The tragic drowning of British tech entrepreneur Mike Lynch off the coast of Sicily last week sent shockwaves across the world. Exclusive to all outlets was the revelation that Lynch’s superyacht, the Bayesian — aptly named after a complex branch of mathematics — was ensnared by an unexpected marine tornado in the early hours of Monday morning. The yacht was docked 300 meters off Porticello, near Palermo, when disaster struck.
Among those confirmed dead are Lynch’s 18-year-old daughter, his renowned New York lawyer Chris Morvillo, and Jonathan Bloomer, chairman of Morgan Stanley International. In total, seven of the 12 passengers aboard lost their lives.
Strange coincidences: Yet this was no ordinary maritime catastrophe. The tragedy is riddled with uneasy coincidences. Only two months earlier, Lynch had been acquitted of all charges in what had been one of the most notorious corporate fraud cases in U.S. history. The case stemmed from Hewlett-Packard’s acquisition of Lynch’s software company, Autonomy, in 2011. Allegations emerged that Autonomy had inflated its pre-sale revenues, duping HP into paying $11.7 billion. Within a year, HP wrote down $8 billion of the acquisition’s value and pursued Lynch for fraud in court. U.S. prosecutors soon followed suit, launching a criminal case that led to Lynch’s dramatic extradition from the UK in 2023, along with Autonomy’s CFO, Stephen Chamberlain.
Throughout the ordeal, Lynch maintained his innocence, enlisting some of the world’s most formidable legal talent, including Reid Weingarten — known for defending the likes of Jeffrey Epstein, Roman Polanski, and high-profile executives from Enron and WorldCom.
But the plot thickens: Chamberlain, acquitted alongside Lynch, was killed just two days before the Bayesian went down. His death came in another freak accident — a vehicle struck him while he was jogging on a roadside in Cambridgeshire.
Spook factors: Despite the wall-to-wall media coverage, it took a few days for the press to delve into Lynch’s — and by extension, Autonomy’s — deep connections to the intelligence world. As Politico highlighted here, former intelligence officials held top positions at Darktrace, a cybersecurity company spun off from Autonomy and seeded by Lynch’s VC firm, Invoke Capital, with proceeds from the HP sale. Autonomy itself had long courted intelligence agencies, drawn to its pioneering work in extracting meaningful insights from vast, unstructured datasets — emails, web pages, news, and images alike.
Fantasist or transparent cover? Lynch, like Wirecard’s Jan Marsalek — exposed as working for Russian intelligence while orchestrating one of Germany’s most audacious financial frauds — had a well-documented love for spycraft. His obsession with James Bond was well-known, with Autonomy’s headquarters featuring meeting rooms named after Ian Fleming’s iconic villains. Adding to the intrigue, Lynch kept tanks of piranhas and often leaned into Mafia comparisons, even playfully embracing them. The Sun once reported that he created a corporate video dubbing himself ‘Big Mike,’ complete with a fedora, as though relishing the caricature.
Short-seller connection: Allegations that Lynch’s real skill lay not in Bayesian algorithms, but in Enron-esque cashflow manipulation, were not confined to Autonomy. In 2023, short-seller Matthew Earl — who famously exposed the Wirecard scandal — disclosed that his fund, Shadowfall, had taken a significant short position in Darktrace, suspecting that its revenues had been similarly inflated.
What is Darktrace? As one former Autonomy insider described it to TBS, Darktrace — born with backing from Lynch’s Invoke Capital — may “not have been a carbon copy of Autonomy, but it did feature many of the same people and could fairly be described as a reboot.”
Also noteworthy: In the years following the fallout, HP offloaded its distressed Autonomy assets to British company Micro Focus in 2017 and Canada’s OpenText in 2016. The two companies later merged in a deal valued at $5.8 billion. Meanwhile, in April 2024, Darktrace was acquired by Chicago-based private equity firm Thoma Bravo for $5.3 billion — a notable premium that likely didn’t bode well for the short-sellers.
Thoma Bravo, incidentally, was previously a stakeholder in Attachmate, which was sold to Micro Focus in 2014.
Not so freak accident? While no foul play is officially suspected in the Bayesian disaster, it is not the first time that a freak Italian weather event has struck members of the intelligence community at sea. In May 2023, a sudden storm materialised over Lake Maggiore, capsizing a houseboat named Gooduri, and claiming four lives.
As the New York Times reported, Italian press went wild when it emerged that “21 people on the boat were spies, or former spies — including 13 from the Mossad, Israel’s foreign intelligence service, and eight Italian ones.” Two of those who died belonged to Italy’s intelligence services.
It’s all so Superman III: Not to read anything into it, but we can’t help but be reminded of the 1983 Christopher Reeves Superman flick, which sees the caped crusader face off against Gus Gorman (Richard Pryor), a talented but unscrupulous computer programmer, who is hired by a corrupt tycoon, Ross Webster, to cause international mayhem by hacking banking systems and oil tankers. In one of the subplots, Webster exploits Gorman’s skills to tap into a sophisticated satellite system that has the power to conjure up target-specific tornadoes. Oh my.
DEWs (fact vs fiction): Superheroes who fly are pure fiction but the strange truth is that directed energy weapons are real. So-called DEWs have been in active military use for a number of years and use focused energy, such as lasers, microwaves, or particle beams, to damage or disable targets without relying on traditional projectiles or explosives. While they might sound fantastical, Politico reported earlier this year they’re established enough for the latest iteration of the Franco-German next-generation battle tank to feature them. According to Rand Corporation, DEW technology is currently split between High-Energy Lasers (HELs), High-Power Microwaves (HPMs) and Particle Beam Weapons (the most experimental). As yet, no credible sources can be found linking the weapons to weather manipulation — on the contrary, bad weather is said to hinder their effectiveness. But the targeted nature of the technology stands to transform the modern battlefield in the years to come, and is certainly worth taking seriously.
Catch yourself up: The following report from the Congressional Research Service has a good overview of the latest DEW tech developments. At a minimum flick through the PDF to get a glimpse of the James Bond-esque lasers that underpin the technology.
Here’s a couple that caught our eye:
Act of God: Whatever the causes of the Bayesian storm, Italian investigators will be keen to ascertain whether negligence played any role in the disaster. An investigation is already pending and is set to probe whether critical marine protocols were followed as required.
Voices from the deep: If you’re keen to learn more, Chris Morvillo, the Clifford Chance lawyer who died on board the Bayesian alongside Mike Lynch, took part in a one-hour specialist legal podcast just last week. In it he explains some of the background to the case and how it all went down. You can listen to his recollections here. Among them are the exceptional lengths prosecutors took to embarrass Lynch when they arrested him by parading him in handcuffs at every opportunity.
But a closer look reveals a much messier reality. The software industry often mirrors the chaos of unregulated construction more than the precision of a modern assembly line. For every honourable and skilled developer, there’s a swarm of opportunists, cowboy builders, and charlatans ready to exploit the unwary.
This chaotic landscape leads to a classic “market for lemons” problem, a concept introduced by economist George Akerlof (aka Janet Yellen’s husband). When there’s information asymmetry — i.e. where buyers know less than sellers — bad products (the “lemons”) flood the market, pushing out good ones. This happens because nobody can be sure which is a lemon or a peach, ensuring prices trend towards assuming everything might be a lemon. As a result, the whole market deteriorates as there is no longer a reward for quality in the market.
To explain his point, Akerlof drew on the second-hand car market and the fundamental information asymmetry between car dealers who know the history of the vehicles they are selling and customers who don’t. But the same asymmetry also applies to the software industry where a fundamental knowledge gap often exists between those who understand code — and can cut through the industry’s smoke and mirrors — and those who don’t, making them easy targets for exploitation.
The difference is that, in the software industry, lemons don’t just crowd out peaches.
Like stealthy Trojan horses, these faulty offerings can infiltrate buyers’ systems, gaining access to sensitive data, reading private communications, and even holding entire networks hostage. Unlike traditional market failures, where bad products degrade the ecosystem, software lemons — often known as vapourware in industry terms — are far more insidious. Their purpose isn’t just to poison markets; it’s to obscure the deeper dynamics at play, where the true commodity being traded isn’t the software at all, but the customer. Here, the actual value of the software becomes irrelevant — it is a mere decoy in a larger scheme where the real objective is to get your contractors into corporate systems.
This model, however, is precarious. It only succeeds as long as the customer remains unaware of the manipulation, and the financials fail to expose the true nature of the game.
One good way to mask the dynamics, of course, is to engage an aggressive sales team (think, Monorail Song) that can bolster revenues by selling a nice piece of kit. Cue the Hooli signature box from HBO’s hit show Silicon Valley:
The added advantage with a pivot to hardware is its potential to look scalable — unlike the true software “consulting” business at the heart of a two-sided model. (At least until the hardware is exposed as just another corporate beard.)
Does the Autonomy affair suddenly make more sense?
In its lawsuit, HP claimed that Autonomy engaged in a practice where it would sell hardware at little to no profit, or even at a loss, as part of deals to secure more lucrative software and service contracts. Booking those sales upfront gave rise to the impression the company was scalable, when really the complexity of its software systems ensured customers would always require consulting arrangements, exposing the business to retention risk and competition.
Such dynamics understandably make the market breeding ground for paranoia (all the more so when customers can see they’re getting ever less bang for their buck in terms of core functionality). They also explain why the sector is haunted by a systemic lack of trust and confusion over real value.
No wonder blockchain systems, with their promise to solve trust issues, have become so alluring to the industry.
Is the average person aware of how prone the tech industry is to peddling “solutions” that often introduce more security risks than they solve? Probably not. As a whole, “normies” still haven’t picked up on the Faustian bargain at the heart of the software revolution or how it has decimated “high trust” Western economy models.
Today, frankly, it’s impossible not to be corrupted by these forces if you’re working in the software industry, a reality HBO’s Silicon Valley parodied brilliantly.
In many cases, the grift is so normalised that even well-intentioned practitioners don’t recognise it when the software solution companies they’re working for are taking actual value-creating companies for a ride — usually via endless IT project delays and budget overruns.
Indeed, once you see the similarities between the software industry and a classic mafia protection racket, it’s hard to unsee them. Sure, one is legal and corporate, the other illegal and criminal — but both models rely on control, dependency, and recurring payments to maintain their dominance.
Which is probably why what goes on in Palermo, will ultimately always stay in Palermo.
| HOSPITALITY |
Marriott’s mysterious Warsaw exit: While you were holidaying, a funny thing happened in Warsaw. The Marriott group, aka the American hotel chain known for its penchant for 80s soft-focus family portraiture as lobby art, made a sudden and unexpected exit from its flagship site in Warsaw. So sudden was the move that its reservations system went down seemingly overnight.
Local press offered few clues about the motivation for the departure. But a deeper dive into recent developments suggests that long-held assumptions about hotels not being liable for illegality they are unaware of on their premises might be on the verge of breaking down. All the more so if there’s any evidence they benefit financially from the goings on.
Given ongoing attacks on social media bosses who refuse to comply with regulatory requirements to police illicit behavior on their platforms — most recently with the arrest of Telegram’s Pavel Durov in France this weekend — it would be inconsistent for authorities to let what goes on under the auspices of international hotel brands slide.
The cold war context: Situated in the iconic LIM tower just adjacent to the capital’s main railway station, the Marriott, which opened in 1989, was the first Western-managed hotel established in the former communist bloc.
Marriott was more than just a mere hotel manager, however. Together with Lot Polish Airlines and Austrian construction firm ILBAU, it was part of the consortium that helped to raise the tower in the first place. Outside capital was needed after the communists, who began building the high-rise in the 1970s, ran out of funding.
Picture the scene: It’s Warsaw in the summer of 1990. The iron grip of communism has just been loosened, and the airwaves are filled with the hopeful strains of the Scorpions’ “Wind of Change.” The cityscape remains grey and somber, but here and there, bold splashes of colour from newly arrived Western brands punctuate the streets. Solidarnosc banners flutter in the breeze, symbols of the shifting tide.
You are a 12-year-old British Polish girl, temporarily uprooted from your London life and deposited with your grandparents in the Warsaw suburbs for the holidays.
You don’t fully grasp the magnitude of what’s unfolding around you, but you sense the change. The house is constantly filled with unfamiliar faces — moustachioed men and women in padded shoulders, whispering in corners over endless cups of tea. Occasionally, you’re allowed to accompany your parents on their business trips into town. You relish these moments. It’s a brief reprieve and a chance to lose yourself among the kiosks that have sprung up around the Palace of Culture, hawking all manner of forbidden treasures. It’s also an opportunity to indulge in a small venture of your own. Though you don’t understand why Phil Collins or Michael Jackson albums are a tenth of the price they command in Our Price in London, you know this: your popularity at school can benefit from becoming a supplier. Fortunately for you, your grandad, always with a wad of cash in hand, has the means to bankroll your burgeoning import-export business.
Inevitably, at some point, your day leads you to the lobby of the Marriott. Your father — just as moustachioed as the men at home — needs to “pop into” the Lot Polish Airlines office to take care of some “interest.” Meanwhile, your mother has her own business to conduct in the café. “I’ll just be gone 10 minutes, Izuniu. Have a Coke and wait right here.” Ten minutes stretch into 30 mins, sometimes 45 mins, but you don’t mind. The Marriott is a labyrinth, full of intrigue and possibility. You ride the gilded escalators, up and down, watching the parade of people. The women fascinate you — some old, some frumpy, others dressed for a night out despite the glaring afternoon sun. You wander through the arcade, peering into boutique windows, letting your mind drift about what really goes on behind all those closed doors.
Eventually, you find yourself drawn back to the “windy lifts,” where you’re captivated by the grand, imposing painting that looms nearby. Something about it fascinates you. It reminds you of Dynasty, your parents’ favourite TV show. Who are these people? Why do they clutch those blueprints as though they hold the world in their hands? And what is it about their presence that exudes not just authority, but a kind of paternalistic benevolence and assertion of American influence and soft power? The image burrows into your mind, lingering like a song you can’t shake.
Flash forward to 2002. You’re working as a rookie reporter for the Warsaw Business Journal. Warsaw’s hospitality sector has exploded since the 90s. But the Marriott still remains a reassuring hub of activity and the go-to-meeting point for business dealings. The approving and watchful gaze of J. W. Marriott continues to keep an eye over proceedings. Now you’re the one meeting contacts in the American Sports bar, or the panoramic bar overlooking the city. But at least you’re clued up on what the dolled-up women, who are still frequenting the hotel’s bars and casino, are really up to. Nobody is shocked or appalled by the activity, by the way. It’s just, you know, normal.
Diplomacy factor: Poland’s budding capitalists may have flocked to the Marriott to exploit its proto-WeWork amenities, but it was the dignitaries and VIPs who opted to stay there who turned the hotel into a hub for international diplomacy. The fact every American president who ever came to Warsaw resided in the Marriott Presidential suite — even after much better and modern hotels were opened in the vicinity — only added to the appeal. Locals, of course, had their own theories about why American dignitaries loved to be based there — most of them linked to the building’s enhanced security, and its imposing rooftop antenna. It helped too that the building boasted the country’s first working internet and data centre.
So what’s really behind Marriott’s exit? Local reports suggest nobody, not even the tower’s owners, anticipated the move. Many noted Marriott’s operating lease still had another 20 years to run, while the Presidential suite — fresh from hosting Kamala Harris — had just undergone a very expensive refurbishment, making the move all the more confounding.
Sources familiar with Warsaw hotel revenue structures told TBS the exit was most likely linked to Marriott’s recent dispute with the tower’s Israeli owners over the American chain’s refusal to close shop during the Covid pandemic. That decision resulted in the needless burning of cash that the LIM management had to cover even as occupancy cashflows became nonexistent. When LIM requested the Marriott carry advertising on its external facades to help recoup some of those costs, the hotel group inexplicably rejected the idea.
LIM pursued the matter in private arbitration at the London Court of International Arbitration last year, telling press it had been a victim of fraud last year. Officially, the case links back to the pandemic. Unofficially, hospitality sources close to the managers told TBS, LIM objects to Marriott having failed to cut it in on many of the hotel’s lucrative “side-deals” and for obscuring the true source of many of its revenues all these years.
The Polish prosecutor’s office has since also initiated a criminal investigation based on LIM’s claims that financial embezzlement and tax fraud may have occurred.
“A very good business” Despite the building’s dated aesthetic, Polish hotel experts told TBS the site, which also features extensive office and commercial space, is considered a highly attractive asset on the market, with solid profit potential. The hotel achieved record revenues in 2023, bouncing back easily from the pandemic crisis easily. The strong fundamentals, however, make Marriott’s decision to walk away all the more bewildering.
You can’t buy this: The former owner of a rival hotel who tried to buy the LIM site about five years ago said it was unlikely the tower’s owners would have a problem finding a new brand partnership. But, he predicted, they were and remain resistant to offers to buy the site outright, adding much of the site’s value is linked to its unique ability to sneak high-profile guests in and out without detection — aided by its proximity to Warsaw’s main railway station, and its associated underground passageways.
End of an era: Such features are attractive to more than just American presidents. Pop sensation Taylor Swift, in Warsaw in August to perform her Eras tour, opted to stay in the hotel’s presidential suite just days before the Marriott announced its exit.
Swift publicity: Days before her arrival, news of Swift’s residency leaked to Poland’s state broadcaster, TVP, which is now under the control of the new Donald-Tusk-headed government. Its in-depth profile re-posted photos of the revamped Presidential suite that first surfaced in 2023, reiterating revelations about its secret passageways and adjacent rooms.
Political one-upmanship: As is normal practice in the industry, Marriott — a franchisor — is not engaged in the day-to-day management of the site. This has been taken care of by LIM ever since Marriott divested from its stake in the LIM Tower in the late noughties.
Some of Marriott’s other sites in Warsaw, such as the Courtyard airport site, are managed by Polish Hotel Holding, which happens to be linked to high-level members of Poland’s opposition Law and Justice (PiS) party.
PiS’ influence over Marriott’s management has not gone unnoticed by the ruling coalition. A scandal broke out last year when it emerged that Poland’s former deputy head of internal affairs, Maciej Wasik — a target of the new government’s purge list, who notoriously fled an arrest warrant earlier this year by taking refuge in the Polish Presidential palace — was involved in the bugging of the Courtyard Airport hotel. According to Poland’s Wyborcza newspaper, PiS had used its influence with hotel management to eavesdrop on a meeting between leading Civic Platform politicians and the leader of the Belarus opposition, Sviatlana Tsikhanouskaya.
Marriott declined to comment to Polish press about the reasons for its departure. Our emails to LIM Tower and Marriott were not answered by the time we went to press.
Bottom line: Since arbitration proceedings are private it’s hard to know how the case is proceeding. Any escalation in the Polish prosecutor’s criminal case, especially with respect to Marriott’s knowledge or beneficial status from illegal activity on its sites, risks exposing the Marriott brand to reputational damage across much of Europe. While this is not the first time Marriott has been marred by legal troubles related to potential illicit activity on its sites, or undeclared earnings, it is the first time such activity has been tied to a criminal case in Europe.
See no evil, do no evil: For years, hotel chains have eschewed liability for illegal activity that goes on their premises. The problem is, if bosses of online messaging apps and social media platforms are now being held accountable for the illegal activity taking place on their virtual platforms, it’s hard to imagine that hotels, even those operating as franchises, will be able to escape similar pressure for very much longer.
Updated to clarify that Polish Holding Hotelowy does not manage the LIM hotel.
