Over the weekend, a list of numbers flashed across our screen as we were doing our research. In particular, I was reading through the Economist magazine and got some interesting data from different articles. Instead of presenting a view right away, let's see what we saw:
Google does 4 billion searches a day --- we mean EVERY day. (Compare: the world population is about 7.6 billion)
The big tech companies today provide about US$280 billion worth of "free" service a year to the public. Think Search, Maps, Instant messages…. (Compare: In Hong Kong, if you can maintain a profit of roughly about $3M a year, you can go public.)
The top 3 technology companies in Silicon Valley has a combined market capitalization over US $1 trillion (yes, 12 zeros) ; yet they only employ around 137,000 people. (Now please compare that to the Big 3 in auto industry in 1990 --- GM, Ford and Chrysler, which had a market capitalization of US $36 billion and employed 1.2 million people.)
Average life span of the S&P 500 companies is only 18 years nowadays. (Compare: Back in the late 50's, they were 61 years before vanishing.)
Now, have you heard of the "elephant graph"? (See below. The x-axis is the percentile of people in terms of wealth and the y-axis is the growth of any sector of people in a 20 year span from 1988 to 2008.) Essentially, the "elephant graph", as used by economist Branko Milanovic, illustrated how people's wealth grew in a 20 year span for different percentile of the world population.The graph shows that people who had been able to enjoy growth in wealth in the past 20 years have either been the rich in the advanced nations (the top 1% percentile of global population, Point C) and the median sector (mostly due to the rise of the Chinese and Indian populations, Point A). Those who have done reasonable in the world in the past, the top 20% folks (mostly from advanced nations, Point B) have not really seen any growth for a jaw-dropping 20 years. And, the shape of the graph looks like an elephant; hence the name the "elephant graph".
So, what are we saying? Now we are no economists, ….
But, as China is entering into a more matured growth phase, will we see a hump in the median sector down the road? Who else could be the growth engine?
Let's do some simple math, with the top companies not engaging in manufacturing and yet commanding an even more dominant share in the economy, fewer people will for sure control and drive the economy. The Top 3 auto in the 90's was worth $37 billion employing 1.2 million people. Today, the top 3 Silicon Valley tech companies today are worth $1 trillion employing 137,000 people. Crazy math here, but does it not mean that in the old days, each person in the "top" industry commands about $30,000 in economic "expectation" (o.k. We have substituted market capitalization to expectation by the public). And it is about $7,300,000 per person in the top 3 tech companies today?
On top of that, technology companies are a newer specie. It is not clear how long they last. It does really feel like the great wild west. Winners take all and losers get none. Moreover, for tech guys, winners are not guaranteed perpetuity. Think Nokia and Blackberry. Perhaps, this is one of the reasons why a lot of entrepreneurs opt for selling their ventures once they receive certain value rather than hanging in there and fighting another round. On top of that, there is a strong incentive for the incumbent to buy startups for technologies and talents. Business schools around the world teach people that mindset actually.
Pundits for sure can drive a myriad of conclusions from different angles. However, here are a few of our thoughts:
Manufacturing: It is really difficult to engage a large workforce without manufacturing (logistics or service industries of course can be another area which employs a lot of people). Unfortunately, we cannot fit too many Disney lands in a city or even a continent. Yet, manufacturing is not sustainable in the long run without technologies, research and development and probably brand awareness. And, if technologies are one of the most important keys, what can we do? How can we leverage technologies really to benefit the mass, especially if the current sentiment is not to engage in manufacturing? And, think of the Pearl River Delta region in China. We already have a lot of manufacturing. Does it make most sense from a macro point of view to do both pure software kind of technology with the purpose of enabling more manufacturing? If Tesla can be manufactured in an expensive California city, as long as we can create value and demand, Southern China will be perfect. So, what do we need? Brand awareness? Technology superiority fight? Patent Protection? We have always loved the Tesla story. (By the way, we admit that this is not the end yet. Who knows given the production challenges and ever shifting consumer taste…). It seems that we have quite some ingredients already, and lacking just a few spices. Come on guys… Let's use our collective wisdom to fill that gap. Once the manufacturing is dead, it takes a lot of effort and time to get them back. Manufacturing, in our humble opinion, is a must for a vast region. Without which, we can never close the wealth gap. (By the way, people have been arguing that manufacturing is really the back rock of a sustainable economy for a long time. We are just echoing the obvious.)
Open Source software: In the above mentioned passages, we never quite talk about this. Here is our simple thought. In the $ per person economic value hypothesis, we have ignored the open source phenomenon. Open source is by definition free. So, there is no market capitalization of an open source software to speak of. Yet, without open source software, we will not see a majority of the companies we see today. From the simple programming languages to the operating systems to the application packages, they are all free and have allowed start-ups to build products. Where would we be if iOS or Andorid could not ride on the Linux platform? Where would we be if programming languages are proprietary? Since open source software platform are mostly done by volunteers/universities/companies without direct real revenue, we cannot assign $ per person directly. Then, this is the trillion dollar question: If a region does not get involved in Open Source actively, how can they develop the culture of innovation and instinct of technology directions? How can they generate massive number of talents? And, really, if the companies in the region are only "taking" and not "giving", how can they be a technology leader? And, without being a technology leader can they then transfer the know-how and enable cooler technology which hopefully can benefit more people? You cannot be a society which just "download" and never "upload" if you want to be a leader. It is not quite possible to attach a direct economic value to a piece of software such as UNIX and Linux. But, we sure don't think you can have someone develop a system such as iOS or Android without the insights and talent pools. And, without the likes of an iOS and Andorid, how can you build a factory that dominates the mobile phone manufacturing and command a premium.
On "elephant graph":
On the importance of manufacturing:
· 谷歌一天做 40 億次的搜索 --- 我們的意思是每一天。 （比較：世界人口約76億）
· 矽谷各大科技公司目前每年給公眾提供約US $ 280億的“免費”服務。想想“搜索”﹑“地圖”﹑“即時消息”......。 （比較：在香港，如果你能每年保持盈利約 $3M，你可以去上市。）
· 前3大矽谷技術公司擁有總市值超過US $ 1萬億（是的，12個零）﹐但他們只僱用約137,000名專業人員。 （現在請比較，1990年汽車業的三大巨頭︰通用汽車公司﹑福特和佳士拿，市值只有US $ 360億，卻僱用了120萬人。）
· 今天標準普爾500強企業的平均壽命僅18年。 （比較：在50年代，他們是61年。）
你聽過“大象圖表”嗎？ （見下圖。 X 軸是人們的財富分佈; y 軸是1988-2008年這20年來的財富增長）。從本質上說， “大象圖表”是經濟學家布蘭科·米拉諾維奇，用來分析世界不同人口的財富在20年的跨度是如何增長。圖表顯示，大增長來自發達國家的富裕人士（C點）﹐以及來自主要是中國和印度的中產階級（ A點） 。可是在發達國家的中產或高中產階層 (B點）﹐竟然在過去20年沒有任何增長。大象圖表的结論是財富只會越來越不均等。由於形似大象﹐故被取名為“大象圖表”。
讓我們做一些簡單的數學。今天頂級企業雖不從事生產但卻有驚人的經濟影響力。在90年代3大汽車的市值是370億卻有120萬名從業員。今天，前3大矽谷高科技公司價值1萬億卻只僱用137,000名專業人員。那是不是說從前的三大汽車公司每人只值$ 30,000的經濟期望（O.K. 我們用大眾經濟期望代替市值）﹐今天三大矽谷巨頭每人卻是值730萬? 每人的價值多了很多但人數卻也少了很多。
比方說，我們可大力在一些區域發展一些有利產品獨特性的軟件﹐然後把它們用在產品上並在南中國生產。想想電動車公司 Tesla特斯拉﹐居然可以在昂貴的加州生產﹐因為它有利用獨有的技術 - 最好的軟件和最好的電源技術。 如果 Tesla 特斯拉都能在昂貴的加利福尼亞州製造，只要我們能創造價值和需求，中國南方將是完美的。那麼，我們需要什麼？品牌意識？技術優勢？專利保護？我們總是喜歡 Tesla 特斯拉的故事。 （順便一提，我們承認這可能不是一個永恒的成功故事。誰能估計將來的生產挑戰和不斷轉變的消費者口味...）。看來，我們已經有相當的成分條件，只缺乏些香料。來吧！就讓我們用集體智慧來填補這一空白。一旦製造業消失是需要大量的精力和時間才能讓它們回來。製造業，以我們的愚見，是一個區域必須的。沒有它，我們永遠不能縮小貧富差距。