The Russian Connection
The establishment of the ID High Tech Research Institute moved forward at a rapid pace. Its physical location was settled on a five-story building near the Android headquarters in Redmond, registered under the ID Group's name. As expected, the previous owner of the building had been Microsoft. Completed less than five years earlier, the structure was practically new and presented no operational issues. There was also more than enough space to install the specialized equipment required for advanced technological research. The only shortage was personnel, but with Yoo Jae-won's unwavering determination, bringing the facility online would not take long.
"The real problem is funding," Yoo Jae-won muttered while staring at the balance displayed on his monitor. Yet the figure on the screen contradicted his words, showing a substantial sum. This was hardly surprising—the ID Group's cash flow remained exceptionally strong. Revenue from Android 1.0 and ID Office poured in daily, while ID Software's Doom, though no longer enjoying its launch-day frenzy, had become a steady seller with consistent sales. Additional revenue streams from various businesses continued to generate reliable income.
The sole underperformer was Aegis Shield, the copy-protection system. Once machines capable of duplicating an entire disk's magnetic state appeared, the protection was effectively cracked. With no companies willing to adopt a broken system, Aegis Shield's sales had plummeted.
Despite the impressive earnings, massive outflows were equally numerous. The workforce inherited from Microsoft had dramatically increased personnel costs, and the global launch had triggered over ten million dollars in promotional and marketing expenses. On top of that, Yoo Jae-won's various ventures—including the founding of ID High Tech and the assembly of the Russian headhunting team—were rapidly consuming the profits.
"We've spent a lot, so now we need to earn even more." He was fully aware of the spending. It was time to start replenishing the ID Group's thinning accounts. From an objective standpoint, however, the group's financial position remained very healthy. While expenditures were high, income was keeping pace. Credit rating agencies like Moody's would likely assign the group an Aa3 rating or better.
In any case, this next move was too large for him to handle alone. He connected to ID Investment's Vice President Vincent Greenhill via ID Talk and began the conversation.
"What's the Nikkei index at right now?"
"Yesterday's closing price was 25,114 yen."
This time, Yoo Jae-won had set his sights on Japan. The Japanese bubble of the 1980s was legendary. The Nikkei, which had hovered around four to five thousand points in the late 1970s, had surged past 39,000 at the peak of the bubble. The distortion wasn't limited to stocks. Real estate prices had risen even more dramatically. At the height of Tokyo's land-price explosion, people had joked that selling all the land in Tokyo would leave enough money to buy the entire United States—with change left over.
Those days were about to become ancient history. The market-leading stock index had already reversed into decline, and Tokyo real estate—the core of the bubble economy—was poised to collapse starting this year. This marked the beginning of the so-called Lost Decade, Japan's long-term recession. Which meant the timing for shorting the Nikkei was perfect.
"It dropped to the 21,000-yen range a month ago before rebounding. So the Nikkei, huh? Looks like Japan's your target this time, boss."
"That's right. Japan. And once again, we're betting on a decline."
Later, economists and historians studying ID Investment's moves would likely label it a firm founded by pessimists. After all, both the Nikkei position and the large-scale investments to come would be bearish bets. It didn't matter. As long as the money came in, the direction of the bet was irrelevant.
"Buy large volumes of put options on the Nikkei above 24,000 yen. Especially when it crosses 25,000, go in heavy."
Yoo Jae-won then laid out the various signs pointing to an imminent Nikkei crash, with the core factor being the collapse of real estate prices. Companies and individuals had typically used real estate as collateral for loans. When property values plummeted, the collateral would no longer cover the debt, triggering mass defaults. Banks that had extended those loans would fail, setting off a chain reaction that would drive Japan's overall growth rate into negative territory. If the national growth rate turned negative, the Nikkei would have no chance of holding steady—it would crash repeatedly.
While it was impossible to profit from stocks in such a freefall, there were instruments designed to make money from declines. Futures trading was the prime example. Hadn't Yoo Jae-won himself turned a legendary 88x profit by betting against oil futures last year? The Nikkei index also had abundant futures products. Moreover, Japan was an OECD member with an open investment market, making it easy for large sums of capital to enter and exit.
"Understood. How much are you planning to invest?"
Vincent Greenhill accepted the decision. At first glance, it might seem like blind obedience, but it wasn't. He had complete faith in Yoo Jae-won's investment instincts, proven during the oil futures trade. Additionally, as Vice President of ID Investment, Vincent had independently researched the Japan situation. He was authorized to invest up to ten million dollars per quarter on his own—forty million dollars annually. While he bore responsibility for results, Yoo Jae-won never questioned his methods. This freedom had prompted Vincent to study not only the U.S. stock market and oil futures but also the situations in Britain and Japan. His analysis of Japan closely aligned with Yoo Jae-won's: the collapse of the peaked real estate market would accelerate economic stagnation.
"Let's move three billion dollars this time. We'll maintain the short position until next summer."
"Whoa. That's an enormous amount. Understood."
Yoo Jae-won's first oil futures investment had been one hundred million dollars—an already massive sum. Now the stakes had grown thirtyfold. Still, Japan's securities exchange was the world's second-largest after Wall Street, easily capable of absorbing three billion dollars.
"That takes care of Japan. How's Hollywood looking these days?"
"Hollywood, sir? Don't tell me you're planning to invest in movies as well?"
"That's right."
Movies were an excellent investment vehicle, embodying the high-risk, high-reward nature of investing more clearly than almost anything else. If a film bombed, investors could lose their entire stake. Conversely, a blockbuster could return several times the original investment. Beyond financial gains, Hollywood offered intangible benefits—image marketing through film. Placing ID Group's cutting-edge products in the hands of characters would serve as powerful advertising. Subtly improving Korea's image, Yoo Jae-won's homeland, would also make operating in American society easier. The film industry was closely tied to IT advancements as well, particularly in visual effects like CGI.
Vincent might find the sudden mention of Hollywood odd, perhaps even suspecting that the vigorous young chairman had developed an interest in Hollywood stars. There was no such personal motive. This was purely about earning money and building a positive image.
"Understood. I'll contact the Hollywood distributors and look into available investment opportunities."
Vincent's reply was perfectly professional.
"Good. Keep me updated as things progress."
With that, Yoo Jae-won finalized the new investments.
September 1991 passed without any notable incidents for Yoo Jae-won. October, however, began with promising signs.
"Chairman! Excellent news!"
It was a message from Mikhail Ivanov, appointed head of the scouting team for the ID High Tech Research Institute. The appointment had largely been due to his superior English skills among the three candidates. Unlike previous communications, this message hadn't arrived by phone. It had come through ID Talk, the ID Group's primary communication tool. A large ID High Tech branch office had been established in Moscow, equipped with the latest computers and high-speed data networks. This allowed real-time communication using cutting-edge internet technology. The cost had been surprisingly low—Russian real estate prices were in a dismal state, enabling them to secure far more impressive offices at roughly one-tenth the American price. Expensive items like the latest PCs, however, couldn't be sourced locally and had to be shipped from European branches.
The scouting team, built at such great expense, had been silent until now. Today, it seemed, they had finally made their first catch.