Macau’s Judiciary Police (JP) busted a new operation last week that they reportedly have never seen before. A spokesperson for the police force, Ho Chan Nam, said during a press conference last Friday that law enforcement had arrested four people following the discovery of an illegal gambling website data center in the city, the first ever to have been uncovered. Criminal enterprises seem to be the preferred activity of the Lao family, as those arrested are linked to another Lao, who had been arrested in Zhuhai earlier this year. 

The Lao family allegedly set up a data center and a base of operations in Macau in order to launch illegal gambling websites and mobile apps. It isn’t clear how long the business had been in operation, although police believe it was in business for at least four years, and the JP indicated that it could have made over $12.5 million since it began. Rumors of the family-led gang first came to light in May when the JP received a tip from the Public Security Bureau (PSB) in mainland China that it had uncovered intelligence showing the gang’s existence. The family was reported to have been developing offshore casinos and smartphone gambling apps, trying to hide its headquarters in Macau.

That tip led the JP to launch an investigation that ultimately resulted in raids on five companies in Macau’s Nape area, as well as residential apartments in Taipa. During the raids, law enforcement found the evidence they needed, identifying online gambling websites, product development, computers and at least one server. The base of operations was scrubbed by data forensics, who determined that the computer network was linked to over 12 local and overseas data points. There were reported to be at least 40 websites operational. 

The investigation is going to continue to determine how extensive the operations were, but police have already determined that the group targeted a list of countries that includes Cambodia, the Philippines and Thailand, and possibly others. The gang had even created how-to videos and live broadcasts to teach viewers how to gamble. 

Kevin Kelly, founding editor of Wired magazine, said something profound about innovation. The nature of an innovation,” he said, “is that it will arise at a fringe where it can afford to become prevalent enough to establish its usefulness without being overwhelmed by the inertia of the orthodox system.” Innovation is a big risk. It might not work. It might waste capital, and so it is never adopted by the mainstream outright, which has to compete mainly through volume and size rather than cleverness. Innovation is almost always tested first on the fringes of an industry, and once its usefulness becomes obvious, only then will it be adopted by the mainstream.

This reality presents a disturbing problem in today’s world. The fringes of almost every industry are under attack. Lockdowns, shutdowns, capacity limitations, they are all taking a sledgehammer to small business all around the world as Big Business like Amazon, Apple and Google take over. Small business though is the incubation grounds for human progress. As more of our lives come under the purview of these behemoth businesses – and I cannot think of a single person who does not rely acutely on all of three of the above companies – humanity increasingly resembles a hive. There are a few queens, and the rest of us are drones.

It’s not just tech. Daniel Oliver of Myrmikan Research notes that before the pandemic response was unleashed, two thirds of American restaurants are supplied by a single company, Sysco Foods. Four companies control half the food retail sector. Since 1950, the number of chicken producers has fallen 98%. Nearly 90% of soft drinks are controlled by 3 companies. None of this is natural or inevitable though, and that’s a good thing. It all has to do with the exceptionally low cost of capital, extremely low and even negative interest rates that small business has no access to because they do not have the economies of scale in order to qualify for wholesale funding.

We all know the same thing is happening in the gaming industry as well, the most obvious example being the strongest European market, the United Kingdom. Consolidation and rollup in the gaming sector has proceeded at an alarming pace over the last 5 years as real interest rates have fallen to negative. Still, in a paradoxical way, gaming has an inherent advantage over almost any other industry when it comes trends of capital concentration. That is, Big Government is not a perfect friend to Big Gambling as it is with, say, Google, Facebook, Apple or Amazon.