Two items to discuss today:
#1. Facebook. We rarely take victory laps at DataTrek, mostly because we adhere to the old trader’s aphorism that preaches humility: “Instead of yelling you should be selling.” The second half of that saying, by the way: “Instead of crying, you should be buying.”
Over the last few weeks we’ve repeatedly highlighted the fleeting popularity of the “Delete Facebook” movement by looking at Google search volume trends for the phrase. After a brief spike, they retreated quickly. Our take: Facebook was going to be just fine.
Yesterday’s earnings report and conference call showed that was the case. The stock rallied 9% today. Victory lap over.
#2. On to a very important issue: gender equality in global tech.
A recent New York Times article highlighted the practice of Chinese tech companies hiring young attractive women to be “programmer motivators”.The piece described their role as “part psychologist, part cheerleader” and some part (based on a photo) masseuse to the mostly male workforce that writes code. No prizes for guessing who gets paid more…
You can read the article here: https://www.nytimes.com/2018/04/24/business/china-women-technology.html
In fairness, it is not hard to find data that shows Chinese tech companies afford women more opportunity than US firms. Here’s a notable recent piece from The Atlantic: https://www.theatlantic.com/technology/archive/2017/11/women-china-tech/545588/
On a human rights level, the argument for equal opportunity for all people is obvious.
On an economic and capital markets basis, however, it is essentially the only issue that matters. Here’s how we come to that conclusion:
- The race to develop the next wave of world-changing technology comes down to 2 countries: the US and China. Europe should be in the mix, but it either sells its startup stars too early (DeepMind to Google, for example) or lacks entrepreneurial infrastructure (London, the one exception, isn’t enough to shift the calculus here).
- For better or worse, Tech centers on the visionary individual more than the team. Mark Zuckerberg, Sergey Brin and Larry Paige, Jeff Bezos, the late great Steve Jobs, the mostly retired Bill Gates… It is virtually impossible to name a super cap US tech stock that didn’t start in one person’s brain.
It is the same in China. Ma Huateng started Tencent in 1998 around a messaging app. Jack Ma, unable to get a job at Kentucky Fried Chicken, pulled together $20,000 and started Alibaba. Robin Li started Baidu in 2000. All are now among the richest people in the world.
- Success, both for individual companies and in the race between the US and China, therefore comes down to how many truly useful innovations bubble up in the form of individuals with great ideas. The payoffs are huge and asymmetric – the last 10 years of stock market returns shows that well enough. Miss one or two, and there’s no prize for second place.
- Mao Zedong once said, “Women hold up half the sky”. Whichever country does a better job harnessing their talents will end up with much more than half the economic profits and resultant global leadership.