Katie Prescott | The Future of Tech & Billion Dollar Scandals

0:01I'm not giving up. I am selling the building. The final season of FX is the bear. The restaurant is flooded. Everything's either going to be okay. Or not. We are outgunned and we are outmanned. We have each other. FX is the bear. The final season. All episodes now streaming on Disney+. Study and play. Come together on a Windows 11 PC. And for a limited time, college students get the best of both worlds. Get the Unreal College Deal. Everything you need to study and play with select Windows 11 PCs. Eligible students get a year of Microsoft 365 Premium and a year of Xbox Game Pass Ultimate with a custom color Xbox wireless controller.

0:51Learn more at windows.com slash student offer. While supplies last, ends June 30th. Terms at aka.ms slash college pc. Welcome to Jimmy's Jobs of the Future. Today I'm joined by Katie Prescott. She's the technology editor at the Times and she's written a fascinating book, The Curious Case of Mike Lynch, the United Kingdom's first technology billionaire. She charts his story all the way from Cambridge through to California and the sad ending of his life last year. It's a remarkable story. We also talked to Katie about what it's like being a technology journalist, where she would be starting her career if she was a journalist today, where she would be starting it if she was looking to go into technology.

1:30And we also talk about some of the cultural differences between her previous employer at the BBC and the Times as well. And I hope you enjoy listening to it as much as we did recording it. On to today's episode. Make sure you subscribe so we can continue to get bigger and bigger guests.

1:52well casey welcome to jimmy's jobs of the future he's written this amazing book um you might not be able to see the detail on the cover but i love the ones and zeros particularly in it um tell us about mike lynch who he was and how he ended up being in california having to hire bodyguards that might need to kill him it's it's an absolutely extraordinary story and i should start by saying it was a very, very difficult time to write this book in the aftermath of his tragic death and his daughter's tragic death and others on the yacht, but also his vice president of finance, Steve Chamberlain. So it has not been an easy process, I would say, putting the book together.

2:37Mike Lynch, I'd say, was a tech entrepreneur before tech entrepreneurs were a thing. He did not come from a very privileged background. His mother was a nurse. His father was a fireman. And very early on, his family realized that he was extraordinarily bright. And he always loved technology. Even at school, he started a very early business in music. He, I should say, was not a sort of typical tech geek. He always had lots of mates. He was really into the music scene. In the 80s, when the tech and music worlds were integrating, he started a very early synthesizer, for example, with a mate from school.

3:19He got a scholarship to a private school and ended up at Cambridge where he studied science. And unlike a lot of people in his generation who at that time were going into the city, when Thatcher was in power, the Big Bang was happening, people were making tons of money, he wanted to stay on and continue his vocation in tech. So he stayed on to do a PhD, but all the while had this music technology company that he'd started with his friend going on in the background. And I really enjoyed researching this part of the book, actually, because it was a joy to sort of look at the UK tech sector really as it was taking off.

4:02This was a time when computers were coming to the fore, Time magazine put a computer on its front cover as its sort of person of the year. It was really changing the world. And he rode the wave of that. And he started his first businesses in somewhere called the St. John's Innovation Centre in Cambridge. It was probably a book in itself actually uh full of startups at a time when kind of tech incubators which are so common now just didn't really exist in the uk and it sounds like a fun scrappy sort of place where everyone was trying to get their businesses off the ground and hustling in the world of tech and just trying out a whole bunch of things and that's how his businesses really started so one of his first companies was a fingerprint recognition scanner for the police at a time when they were having to look for fingerprints manually.

4:57It was particularly difficult for Mike Lynch because he was born without fingerprints. So his peers said, it was one thing you couldn't get him to test the technology. He couldn't be used to test it. And then he founded his business, Autonomy, which was a search engine for corporates. So he'd come from this kind of pattern recognition background, which is hence the fingerprint searching. And he turned that to looking for patterns in words.

5:32It's such a long story, do you want me to carry on? I just sort of... Well, it's the amazing bit where he could have invented Google. He always... Yeah. So one of the things that came up in my research that he kept saying to people is autonomy could have been Google in terms of searching for information. But he said he was advised by tech analysts at the time that going a consumer route wasn't the way forward. And so they pivoted to corporate search. He did incredibly well in the dot-com era. He floated the business three times in 99 and 2000 in Europe, in America, and finally here in the UK. And that propelled it into the FTSE 100 because it was at the height of the dot-com boom.

6:14So you've got this tiny company based in the St. John's Innovation Centre in Cambridge in the FTSE 100 with this boss in his 30s. It was really quite an extraordinary time. And one of the amazing things in that where I read it was like it got almost 4 billion valuation and it only got 150 employees, right? We think of that as quite a modern kind of thing, but actually this is 25 years ago. Yeah, well, and it's the parallel that everyone's drawing at the moment, right? Between what's going on in AI and what happened in the dot-com boom. But that really pushed him to the forefront of everyone's attention.

6:48He was the kind of young, cool tech entrepreneur in town with this company that a lot of people, frankly, at the time didn't properly understand, having spoken to some of his early investors. But at the time, people thought, right, this is the future. So that was, I say, what brought him to everyone's attention in the 2000s. And he won CBI Entrepreneur of the Year and that sort of thing. And what did the business do? It searched for patterns in information. So rather than looking for keywords, it would do something far more sophisticated in order to find the information that people needed. And it synthesized what was called unstructured data.

7:32So rather than things that were in neat spreadsheets, it would allow you to sift through emails even voicemails to find what you needed so almost like first ai companies that would sort of talk about now with llms using machine machine learning yeah and people who worked with him at the time said that was really their goal they just the compute power wasn't quite there to do that yeah so sort of fast forward 10 years or so he sells the the business in what is kind of almost record time of due diligence of like 14 to 20 days I think it was yeah I mean it's it's it's a banana story so in that 10-year period um autonomy and particularly Mike Lynch had a very difficult relationship with the city of London um and that's something that started I think quite early for Mike after the floats of the business There were several analysts who looked at the numbers and the accounts and said, we think there's something wrong here.

8:33He always disputed that and even ended up banning one of them from some of his analyst meetings. And I just say that to set the context for what happened later. So as you say, fast forward to 2011, Hewlett-Packard approached autonomy and ended up buying it after 18 days of due diligence. Much of which, as people told me, would mean they were actually having to go and find information within that time. So a ludicrously short period to get under the skin of a company. Particularly one, I would say, where accounting issues and questions over the accounts had been raised quite publicly by analysts in the city.

9:21$11 billion, huge amount of money, left Mike with a billion dollars and others at Autonomy very wealthy as well. It was a marriage I would say that was always doomed to failure. You've got this quite scrappy Cambridge business that is run, and I always run it very proudly, like a startup, merging with Hewlett-Packard, one of Silicon Valley's oldest companies, which had 300 ,000 people in it, and was described to me a bit like the civil service. service. And there was an almost immediate culture clash. And this was made worse because the boss, the German boss of Hewlett-Packard, who'd made the decision to buy Autonomy, was fired almost immediately after the sale happened.

10:11Which meant, clearly, that the champion of this deal was no longer there. Now, he was replaced by a woman called Meg Whitman, who'd been in charge at eBay. And it's fair to say that Meg and Mike did not get on at all. She really didn't like the way he ran the company. And after a period where he failed to tell her that the business wasn't going to make the sales that it was expected to, very, very last minute, she decided to fire him. So things went sour pretty quickly. And then not long after that, a whistleblower came forward from the autonomy side and started talking about issues with autonomy's accounting.

10:59And I should say as well, a whistleblower had already come forward in 2009, although had received a payoff. And so this wasn't made public. And then Hewlett Packard accused Mike Lynch of fraud very, very publicly. In fact, they made the announcement to the press before telling him. Yeah, that seems pretty extraordinary to kind of behave. And so then it goes to court. And I appreciate this is where it sort of gets really complicated. And I felt like I was almost reading a law book. Well, it is a legal saga. It's an accounting saga. it's a city saga and it's an entrepreneurial saga this book really.

11:41Yeah, which is and I have to say when right at the beginning about it being for sort of different cases I remember my head thinking I'm not sure I'm going to follow all this kind of next bit. Broadly I did but I think I mean you tell the story the way that you wanted to but I was just really struck by that sort of the final case as it were which is in California in the pandemic. Yeah, he's extradited out there. And he's barely got any chance of winning, right? Like his 0.5 % chance. And then there's sort of the most amazing kind of comeback story. A quick thanks to Octopus Energy for supporting this episode.

12:24Now, a lot of people know about Octopus for their home energy products. I have recommended people switch them for years. But what you might not know is that they are now rolling out more products across home and businesses from solar panels, EV chargers, heat pumps. So if you're thinking of upgrading your home or business and you are a Jimmy's Jobs listener, you can ping Jimmy at octopus.energy and get the very latest deals and insights. And if you're already on the journey with Octopus, leave us a comment or a message. I'd love to hear how it's going with their wider products. All right, back to the episode.

12:56The final case, as it were, which is in California in the pandemic. Yeah, he's extradited out there. And he barely got any chance of winning, right? Like his 0.5 % chance. And then there's sort of the most amazing kind of comeback story. So the fraud allegations, so the fraud accusations, I should say, sparked more than a decade of litigation, of which still it hasn't been resolved. I mean, there are lawyers right now gathered in the rules building in the city trying to work out how much the Lynch estate should pay Hewlett-Packard in damages. Because if we start with the first case, which was the civil trial here in the UK, a high court judge found for HP.

13:50So HP sued Mike Lynch and his chief financial officer, Sir Siobhan Hussain. And two years to come to a verdict. but went through all of the transactions that were brought up by HP and found for HP. After this extraordinarily complex, extensive trial in which Mike Lynch was on, was testifying, was giving evidence for a record number of days. And the judge, Mr. Justice Hildyard said it would probably be what he thought was one of the most complex cases in English legal history. At the same time that was going on, Sufshavan Hussain, the chief financial officer, was out in America and he was sent to prison after a criminal trial for fraud that was prosecuted by the Department of Justice.

14:37All the while that this was going on, I think it sort of makes your head spin, but Mike Lynch was fighting extradition to the states. Once the result of the civil trial had come in here, Priti Patel signed the warrant for his extradition. And then he had this horrible experience of being flown out to the US in chains to face a criminal trial under the same judge, actually, who tried the case for Sushivan Hussain. He was acquitted, as was his vice president of finance. And a lot of people have tussled with that and asked why that was. How could he be found so categorically guilty, or the judge have found so categorically for HP.

15:26I've had to learn a lot about legal terminology, I have to say, doing this bit of a minute. How could that be the case here? And then there's such a different verdict in the US. There's a different balance of proof, right? Sorry, in terms of it's beyond reasonable doubt in a criminal trial and then it's on the balance of probabilities in a civil trial. I think you've got also a high court chancery judge who's very experienced in accounting here. going through it all. And then it's obviously very different when you're talking about a jury trial. Yeah. And a lot of US jury trials are about showmanship.

16:02And then I think you also explain it that Lynch's legal team had had a huge amount of experience of what was being said by all the witnesses by the time it got to his trial. It was a little bit, you know, like, what do you call it? Groundhog Day. because the same witnesses testified in every single trial. So they had learned a lot from that. But still, it was a surprise to everyone when he was acquitted. And I don't say that because people had necessarily decided the outcome in advance. But if you think with the verdict here, the verdict against his CFO, the Financial Reporting Council, which is the accounting watchdog here, had fined Deloitte over their audit of autonomy's accounts.

16:48Things looked pretty bad. Yeah. But also is that the information couldn't be used in the different cases, right, as well, which was an interesting sort of... Well, some of it is interesting. They couldn't sort of take the verdicts from one another, but they were in the civil trial using some of the testimony in the criminal trial. Right. Okay. Yeah. Yeah. Yeah. Because these things were going on in parallel. Yeah.

17:16It's just the most kind of extraordinary story. And then lots of people will have sort of read about then the kind of, it almost becomes mainstream news if it had been sort of quite a business story and so on, but with the tragic events last year. Yes. So shortly after the acquittal, Mike Lynch came back to the UK and was celebrating his victory on his yacht, along with his wife and his daughter, Hannah, but also Chris Mavillo, who'd been his attorney from Clifford Chance throughout this entire period. I mean, he joined forces with Chris almost immediately as the fraud was announced, and his wife, and Jonathan Blumer, who had been the chair of his audit committee at Autonomy towards the end of Autonomy's life, as I call it before it was bought by HP, and his wife and various others.

18:07And they had just found out that the Vice President of Finance, Steve Chamberlain, had been hit by a car while he was out running in Cambridgeshire, which is the bizarre thing about this horrible, horrible tragedy and the ending to this story. And they were just about to go home, back to the UK. and they were moored with a storm brewing. They were moored around the corner from Palermo, the capital of Italy, Sicily, sorry, where they were flying home from. And at about three in the morning, the boat was hit by a gust of wind and knocked over in 15 seconds. Yeah.

18:50And you tell the story in an amazing way. I was listening to it last night because there were some survivors from it. Yes, yes. So his wife survived horribly. His daughter, who was just about to go to Oxford, died, as did Chris Mavillo and his wife, Neda, and Jonathan Blumer, and his wife, Judy, and the chef on board the yacht, Ricardo Thomas. So, yes, his wife survived, and two of the other friends who were on board, and their partners, and the crew. It was partly because they were on debt trying to sort things out when it capsized. And what have you kind of learned, and I suppose this kind of tees into your sort of broader job, but what do you think sort of motivated Lynch and what motivates tech entrepreneurs at different stages of their career?

19:53I asked a lot of people who knew him this. He never stopped. It was never enough. If you look at his career, even after Autonomy, he started a fund called Invoke and invested in new businesses. And those included Darktrace, which sold last year for many billions, a company called Luminance, which was very early in legal tech. And if you look at the approach he took to his trial, which was to absolutely persevere doggedly when many people would have just settled. These sorts of cases don't normally come to trial. It's really striking that this came to such a massive trial here in the UK. So, he was always completely driven and focused by achieving the next thing.

20:53I think he was always, I mean, the book is called The Curious Case of Mike Lynch. He was always a curious person. He clearly always adored technology. And so, even when he was running a successful business, he was challenging his team to explore new sorts of tech. And really interested in what the next thing would be and the next trend. Yeah. And I hope that comes across in the book. He could be a really difficult character. People who worked for him talked to me about the trauma of working under him. I think because he was so driven and expected perfection. Yeah. It could be incredibly, incredibly difficult.

21:36Someone close to him said to me, you know, he never forgot the scars of a battle with Mike. he made quite a few enemies along the way but he would never give up and I hope that also comes across in the book too yeah definitely he also has this really interesting love of fixing old things as well which I always found quite sweet and so when he buys his place in Suffolk and he fixes an old sort of water wheel and learning how things work as well so from his early days and he talked in his trial about how he would break up his parents alarm clock and try and work it work out to put it together whether that's completely true or not but i don't know but it certainly explains this sort of love of understanding how how things work and as you say never not always just wanting the latest gadgets and gizmos he loved old cars exactly bought his his estate in suffolk and wanted to restore it as it would have been using old techniques.

22:40Yeah. Which is not always this sort of like the love of history and something not always associated necessarily with technology. Well, time we had this kind of bizarre London office in Piccadilly on St. James's Square in the Queen Mother's old house. The sort of warren of wood panelled rooms, which is completely removed from where most tech companies at the time, you know, were going, which was Shoreditch. yeah yeah um yeah and silicon roundabout um what um

23:12there's so much sort of legacy and that's one of the things i found so interesting about the book is obviously there's all the sort of people that he worked with that are still sort of you know out in the world building things etc but yeah there's almost a sort of paypal kind of mafia style element to it it's interesting you use the word mafia because that was always a joke within autonomy that that him and his his top brass were a bit like the mafias yes it is very hard to cover tech in this country i would say without coming across a lot of mike lynch's legacy and that's people who worked for him at autonomy early on in the book i write about the people who did really well out of the autonomy floats he gave people stakes in the company at a time when that was very uncommon in british business and then when you look at the companies that he founded in the wake of the HP Autonomy cataclysmically dreadful merger that fell apart so quickly, FeatureSpace, Darktrace, Luminance, and investment in Saphir Genetics, they were really early AI investments before AI was cool.

24:18Yeah, yeah. That's cool. Good way of putting it. Because there's an amazing point in the story where they're in California in the trial, etc and dark traces sold right so he sort of gets this massive windfall yeah yeah huge cash injection to kind of keep going because that's part of the reason why a lot of these things don't come to court right is it just costs so much to do yes and he spoke about that a lot when he came back from california victorious in one trial and that's really important to note you know a lot of the interviews he did at the time he talked about this this great victory but the reality was he was coming back to find out how much money he would have to pay Hewlett-Packard from the civil case.

25:02And we now know that was 700 million pounds is what the judge ruled earlier this year. And we'll wait to see what the final outcome is, if HP gets its way and gets the interest on that as well. Yeah, well, that'll be, yeah. This is a story that really hasn't got a neat ending to it at all. and it's got, as I said, a horrible book to write in many ways because of the tragedy around it. Yeah. But also there are all these threads that we're still waiting, for example, to find out what happened on the boat. We've had the first report from the British maritime authorities, but there is an investigation going on in Italy and another one here.

25:42Yeah. And we need to have the final report as well. Yeah. It's a story that keeps on going. Yeah. And it's obviously horrible for those left behind. Yeah. Absolutely. Well, let's talk a bit more about your sort of broader job. And there's sort of, I suppose it sort of segues into it, but kind of just the UK tech ecosystem generally, and just what your take of it is at the moment. I was struck by Nick Clegg at the Times tech conference recently, talked about investment in the UK that's happening and sort describing all these data centers as not much more than sheds etc um shackles are really off knick leg aren't they so you probably went for it yeah he did but i just think it's it it is just so interesting in terms of where the uk lies now what more we kind of need to do and it would just be great to get your kind of overview of it all i am so excited about the uk tech scene and i feel really really privileged to be covering it so i got the job at the times in may 22 chat gpt launched in november 22 and it's just been a whirlwind since then i mean it was a little bit before because obviously we had the whole crypto boom and everything else but um it has gone bananas and it's quite difficult sometimes uh covering tech from london i feel the distance from Silicon Valley.

27:10But I also feel like here, we have so many of the big players, and it's often their second biggest home outside San Francisco. And we've got some incredible homegrown businesses too. If you look at the likes of Wave driverless cars based in King's Cross, Eleven Labs. I mean, you'll be very aware of that in the podcasting space. They are just incredible. and they're here. And it's amazing that the UK is considered third in the world after the US and China for AI. So I'm really excited to see what's happening here. The ecosystem has just developed so much from when Mike Lynch was operating at the start of his career.

27:53It's just unrecognizable. Quite, because it used to be this point, but I think there's still quite an element of this, of that UK startups can't scale up as much. Yes, and I think that's still the case. Certainly I found when I was writing the book, there were tons of themes that my peers back in the 90s were writing about that apply today in terms of investment in tech, in terms of US companies coming in and buying British tech businesses. It's notable that Autonomy sold to Hewlett-Packard, Darktrace sold to a US private equity firm. That hasn't gone away. I was looking at a story this week. so there's a VC fund called Atomico which does an annual report into the state of European tech and they said 0.007 % of assets under management from UK pension funds go into VC.

28:42This is still just absolutely minute whereas you've got the Ontario Teachers Pension Fund investing pretty heavily here. And do you think that would be one of the things that could make the biggest difference right? I mean, it seems to be something that's talked about a lot. Yes. And they're trying to change it. So I think that having homegrown capital is really important, especially at the moment where everyone's obsessed with sovereignty and ownership over tech. Actually, the fact that we've always got to turn to the US or the Middle East becoming more common becomes a little bit problematic when you want to keep control of your technology um and what do you think is a promising company that people might not have heard of in the uk what do we not talk about enough um it's hard okay so there's a company called nscale do you know nscale i know a little bit so i think maybe maybe it's not too under the radar but it was just it really jumped out for all of us tech journalists when during the state visit and president trump brought the the broligarchy en masse over to the state banquet yeah we're just we're just kind of unheard of really um that we got a press release from the department of technologies which listed actual these investments from microsoft and nvidia and linked to them all was this hitherto unknown company called Nscale, which is an AI infrastructure company, which is growing really quickly, but still hasn't filed accounts with Companies House, is that new.

30:19So I think they are one to watch in the next few years, for sure. And what is it they do? Build AI infrastructure using, as far as I can see, funds from the tech giants, which just comes back to that point about ownership, which I've been writing quite a lot about at the moment, that actually the feeling from governments, but also from big tech, is that countries want to have control over their own infrastructure. And so the appetite perhaps for just purely investing and running assets from overseas is dying a bit. Yeah. And we'll get your advice later about journalism. I think it's almost more interesting to kind of get your advice on a young person wanting to go into technology, right?

31:08And let's say they're non-technical, right? Because I appreciate that sort of like... Well, that's a hard question. I know, but I... Study quantum. Yes, exactly. But I guess it's... Because I'm sort of around 2011, I'd been working for a couple of years at that point and I was like, just got to get more involved in the sort of this tech thing, right? But very difficult to sort of navigate, partly because it's all so new and a lot of those kind of like traditional status markers of grand offices and you know the banks and the city which had sort of you know so much more kind of like illustrious and part of heritage it can be just quite difficult to sort of navigate the technology world so i just guess you must get sort of friends come to you for advice for their largely their children like that's why i seem to spend a lot of time um but yeah well like what what would your kind of advice be if somebody wanting to build a career I love that you mentioned offices, by the way, because Google's Landscraper is going to open soon, which is that sort of enormous skyscraper lying on the ground, hence a groundscraper in King's Cross, which has a swimming pool in the middle of it, talking about fancy offices.