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First up was a school on the BBC News site, which you picked up on and sent across. And that is the fact that Apple, which is now something like two point three trillion dollars worth of market capitalisation, is more valuable than the entire FTSE 100, which is the top 100 companies in the London stock market.

And the implications of that. And two point three trillion dollars.

And they’re significantly larger than in actual fact that the FTSE 100, I think the FTSE 100 was a total capitalisation of all of the companies in the FTSE 100 is something like is sopped two trillion. I think it’s like one point four, one point five, something along those lines. So it’s not only bigger. It’s it’s not quite twice the size, but it’s getting there. And what the implications of some of that is like, what’s what’s your take on that?

Yeah, it’s it’s impressive. So then the article goes on and on, makes a good comparison that it’s due to the fact that there are more heavily weighted in the US stock market, the tech companies or tech stocks. So in the U.S., you have all the fans that are doing extremely well and those are increasing in valuation like five, six, eight time falls this year. They have been doing all the financial engineering as well, like splitting top stocks on this and that. There is a lot of, you know, hype we’re seen in London. There are they made the analogy on being that stock is shaped like a dinosaur. You know, they’re the old fat, slow moving eat oil companies, which are doing really bad because almost no tech company that them. Maybe they’re arguably them most.

Take tea company was Ocado, which is these online supermarket, which is great, but it’s not comparable with other tech companies because of its cumming’s of scale.

So so you first of all, it only operates in the U.K., I think, but also in an online supermarket, Youssouf, have logistics. It’s not A, purely software. B, sense like Google or Apple has significant income from software. So of Netflix and so on. Then you have the old telcos like Vodafone, which have not innovated at all compared to Netflix. Yes. So it’s all even if you go into the to market with Tesla in the US, which is doing extremely well. So you have nothing comparable in the UK which left that. So I’m I’m also I’m surprised on the pace that Apple is growing. We talked on our previous episode. It took them like 40 years to get to one trillion and then I think one year or two to get to two trillion.

And now is a two point three trillion. So who knows?

Of course, all these go the pandemic in increased adoption.

So so it pushed people to buy more of these high performing devices called mobile phones or computers or any other tech gadget. So, yeah. But also software in general. Yeah.

So tech companies are the big beneficiaries. I have always struggled to understand why the US and probably China, of course, as well have all these concentration of tech companies and there is not not such thing in Europe. What do you think of that?

I think. I think.

It’s to do with. Well, I think there’s like there’s inertia, so once you have Silicon Valley, for example, is there is the classic, like, tech area in the U.S.. Right. So I think I think it’s true to say that, you know, even within the U.S. itself, there are specific hubs of tech entrepreneurship. So it’s mainly Silicon Valley with a little bit of Boston, Massachusetts area and a little bit little bit New York possibly. And like so Boston, Massachusetts, is to do with the universities that are around that neck of the woods, M.I.T., et cetera. New York, because it’s the financial centre of the country. And then Silicon Valley, Silicon Valley was and was traditionally the was the place where sort of semiconductor manufacturing originally started in the 50s and 60s. And the reason part the reason why it started there was the fact there was a lot of well, there’s a lot of spare land at that point. So you could create like large warehouses relatively easily and factories and things of that nature. But it was also where defence contractors in the U.S. were set up. So a lot of the original semiconductor companies were spun out of a company called Fairchild Semiconductor, which is one of the Fairchild was one of the large sort of defence contractors in the US and they in these sort of 40s, 50s. And so once you’ve got that sort of starting point of innovation happening in a particular area and much of the, you know, much of the original growth in tech was to do with semiconductors. Right. And so once you had these sort of sister and brother companies set up close to each other, then you had that sort of there was a reason for everyone to go there and to start if you wanted to start a semiconductor business or anything in that neck of the woods. And it made sense for you to set up next door to people who were doing it because they’d be your customers, they’d be your suppliers, et cetera. And then once that inertia starts running, then, you know, that’s where you want to go. So once that was there, that’s that’s where the venture capitalists set up because that, you know, you needed money to start these businesses. So they set up there. So if you want to set up a business and raise money to do it, then it makes sense for you to go there to do it because you could visit them in person and set up next door. And it just made the holes of human communication is easier when you’re adjacent to the people that you want to communicate with. And I think that, like, once that ball gets rolling, it’s like a snowball, right? Once it gets rolling, then it just keeps on going and keeps them going. And I think if you want to set up in opposition to that, in inverted commas, I’d like to say, for example, in Europe, Europe has tried, I think various like little, you know, governments of various sorts have tried attempts to sort set up their equivalent of Silicon Valley. But in essence, you’re fighting against somewhere which already has an existing inertia.

But then. You also you can’t compete on the same thing. So, for example.

You know, it was semiconductors, which like drove much of this kind of like growth and innovation in the first place. So there’s there’s no point trying to set up some separate semiconductor thing because they would beat you. They would have to be really strong reasons for somewhere to choose you in new and unproven place over somewhere where there’s always loads of engineers and existing people, whatever. So people have tried to do it in different areas of innovation. So, for example, when the UK, Oxford and Cambridge, the two universities that have, you know, were regarded and they have a lot of research occurring, there’s a sort of a mini kind of Silicon Valley type thing set up around Oxford and Cambridge, where there’s lots of industries. And and much of that has to do with like bioengineering and biopharmaceuticals. And so there have been efforts to set up. It’s just the fact that bio bioengineering, bio pharmaceuticals are not anywhere near as large or comparable to semiconductors, all now, you know, competing in general, software in general. China, obviously, I think.

China was because of offshoring outsourcing.

So a lot of large US technology manufacturers were able to compete to compete on price by outsourcing, manufacturing of certain elements of their production line to China. And all that happens is that China just rolled up, again, vertical integration. They started out Dell is a good example. So Dell, you know, got enormous by manufacturing and selling computers pieces. And they started off by subcontracting Chinese factories to create individual elements for them, other boards or individual components for their thing. But then over time, those factories over in China, in Shenzen and Shanghai and places like that expanded what it is that they created to the point where they then created the whole motherboard and p.c and then they created it. And in the end, the entire piece was manufactured out in China. Dell became just a shell company that sold this bit of equipment that was completely outsourced, generated by that. But as soon as you get to that point, then all of the expertise and production capacity for that kind of stuff now exists in China. And so they can then start selling it under their own brand. Right. So Lenovo and all of those kind of companies came out of that ability of all these factories who are set up there. They’re sitting there saying, well, hang on, we’re making this entire thing. It’s just we’re sticking it Dell sticker on the front of it and shipping it. And the Dell are making the majority the margin. We’re making a small margin. They’re making a large margin. Why don’t we just undercut their prices for exactly the same bit of kit and put our label on it instead and grab some of that additional margin? So China, again, as has competed on the basis of concentration. So you’ve got these large areas of China which specialise in the creation of manufacture of particular things. So in Shenzen, it’s very much like electronics and semiconductors and things like that. And I think the same is true, actually, of semiconductors, like semiconductor manufacturing has now moved. Is now done almost entirely out of Taiwan. So you got TSMC, which is the main sort of global fab for semiconductors. Intel was was always the sort of other main semiconductor manufacturer. But they’ve really struggled in that sort of latest shrinks. You know, every time computer chips performance improves, it’s the shrinking of the size of the transistors on the chips that they’re creating. And it’s gotten to the point now where Intel really struggling. They’re talking about outsourcing all of their manufacturing. And again. So it’s all going to TSMC. So it’s it’s like a winner takes all competition when you get to that kind of globalisation.

So, yeah. So essentially, you mean. So you need the ecosystem. So you need a critical mass of qualified engineers. So you are saying that the defence but also NASA. I think it was a big presence in California so soon, a critical mass of qualified engineers. You need money and then that creates, you know, that look. But what do you think about the government role? Because that as an example, for example, you were saying, OK, Silicon Valley kickstarted from all these, you know, the Gorham government somehow, maybe by accident, but somehow they call a role because all that they you know, they set up all these defence and NASA licence factories or structures or whatever logistics into a concentrated area.

And also, they have been popular for training, you know, for they could work with the private sector a lot. Lots of innovation came from our pine in the U.S. as well, which if the U.S. companies were like, you know, early adopters of those technologies, it was very useful for them.

Or in the case of Tesla Day or Space X, they hired, you know, the astronauts or engineers from NASA. And they Kawar NASA gave them awarded them like billions in contracts, you know. So, yeah, I mean, that’s one way of looking at it. So they do get involve the government at some point. And we, you know, in many ways they can actually they can help test us well with financing before on down. We like, you know, green fund or whatever or tax relief on the new China. You can. So they it’s very well known that they have been highly protective of their economy. And you will say, oh, that’s not fair. But maybe the government needed to protect their growing companies or expertise from the US companies got just going and buying them all.

And for example, going back to Europe, deep mined one of their most advanced artificial intelligence, combining maybe in the world.

Maybe the top one was Google came and just acquired it fly by for 500 million, which is not a nowadays. It’s not a lot of money. And I recall some Chinese government officials saying that he was highly surprised that the UK government let that happen so that they should have incubated the government to have invested and incubated the mine to be as large as possible. You can call working with the government. It’s agencies that are so.

Yeah, I’m not saying, you know, you should be like China and, you know, like overly protective, but I definitely, definitely think I think the government needs to get involved and to support, but need to be proactive on that. Maybe Europe has these problems that they are not. I mean, he still is not a one country, you know, policy in Europe. They’re very divided, although they’ve been doing unions great as far as a concept. They have probably highest quality of life for lowest inequality. But when it comes to innovation, it’s like they are milking the cow, you know? And probably they they should they shouldn’t be think thinking that that’s going to last forever. So I think the Army needs to get involved. I don’t know how, but I definitely think it’s necessary. Yeah, well, now they in the UK, now that The Break-Up from the EU, they have been committing to, you know, the satellite one. One way we saw that thing we talked before. So it was 500 million that one of two rescue that company. So I think it can make a big difference. But we’ll leave it open. I mean, now the gap is huge. So, yeah, we’ll be hard to much if you don’t get any policy to.

Yeah, I think I mean, we we don’t have the answers, and I don’t think anyone has the you know, there isn’t a definitive answer to any of this. I think it’s it’s a very, very subtle it’s a complex system. Right. So it’s very hard to know if you sort of tweak it, tweak your setting over here in a dial over there. What sort of long term effects of that are going to be? Because there’s so many into competing things. And also there is like competition. Right. You know, if you do something over here, then America could change its regulations. China could change its regulations the way it approaches. And so it’s so it’s a very sort of complicated system, I think. I think fundamentally, you know, I’m a capitalist at heart.

I think that the.

That the the government. Government intervention, I think, is important. But I think that no government will be willing to actually you have to have short term pain for long term gain. In this instance, like, for example, you know, take Ireland, for example. If one way of encouraging this kind of stuff is like by having massive tax breaks and having sort of open immigration policy and things like that that basically enable a particular class of industry to happen. And the issue there is is you have to you you as the government have to play the game of, OK, we’re basically saying we are going to. Give these things to this industry in general and not take any, you know, massively limit the tax that we take back out there. Industry for a long period of time until it gets set up and solidified enough that we can then start ratcheting the taxi taxation back up to normal levels, whatever that might be for the industry, without then scaring them off again. And. Governments only lost, you know, it’s different in different parts of the world, but let’s say a four year term or a five year term, and so the government that instituted that policy doesn’t get to enjoy the the winnings of it because the winnings occur 20 years down the line. Right. So. The time horizons that they’re operating in is like, OK. How do we win the next election in five years time? Not, you know. Course, people have got an eye on like. Yeah, they’ll be a better country in 20 years time or whatever it might be, but it’s you know, that the driver for that just kind of isn’t really there.

Yeah, I agree. We. We’re proud capitalism. That’s no doubt. It’s complex. So we’ll just leave it open and let’s see what what.

Let’s let’s conclude we that we don’t know death. I like silly things though. Yes, I know. This is. I mean, you know, macroeconomics, et cetera, is interesting. And it’s you know, it’s a background that you have to bear in mind.

So, you know, you may think that this doesn’t has very little application to you as a small business owner or somebody is trying to get something off the ground. But this is the broader picture in which you’re operating. And so having an idea of what’s going on, why it’s going on, where things might be going can be helpful to your decision making.

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