Following up on Past European Straights Topics
European Straights, 2020-07-17
The Great Decoupling. The 2nd Cold War started with the erection of the Great Chinese Firewall. It most likely violated WTO rules, but it was ignored as there was $ to be made in non-tech sectors (Inv Banking, manufacturing).
Silicon Valley. Much of the current stock market’s performance is explained by the US tech giants growing outside the US.
For EU it doesn’t make sense to sever all ties with China. There’s a lot to be learned (how to have large local tech firms). Geopolitics and global supply chains are to be used, not ignored.
Tesla is not the next Amazon: its cash flow per share (the key Amazon metric) looks anything but.
R&D in large corporations repeatedly gets underfunded (investors don’t value it): employees may just walk away, or it’s simply faster (and almost risk-free) to buy firms with the needed technologies.
o This is not exactly correct, because the number of new startups is low. The % of staff walking away to start their firm is ~1%.
o Treat them well and pay some more – and they’ll stay and deliver.
The source of innovation is big firms, not small ones (true, some new firms are based on innovation, but it’s not a rule).
o Small firms are more visible, though, even though the odds are massively against them.
o Small firms are not necessarily young. Young companies have an advantage of still having their founders with stronger strategies and better understanding of how the pieces evolved.
Technical risk. Nice example: Zoom, spending heavily on sales/marketing, but much less - on R&D. Sometimes it’s not possible to assess the risk of “can it be built” without prior reference example.
Remote work and taxes. Hedge funds are looking to obtain tax advantage for having their staff work remotely. (what do the employees think?)