Corporations Are People, Too

S3: One other way to solve the problem, Felix, would be something we’ve I think discussed before, which is change zoning laws. Right, so that in the suburbs you can build multifamily units that you can rent out because there’s just something unintuitive and renting out big houses versus renting out apartment buildings. To me, like it just seems better to have the apartment buildings. And I know there’s all kinds of NIMBY activism right now to get more, you know, to change zoning laws, get more apartment buildings in the suburbs and make

S1: not just the suburbs. Look at Los Angeles. They’ve done an amazing job of changing the zoning law to basically allow everyone with a back garden, which is a lot of L.A., to build little units back there, which they have actually like redesigned units. You can just plump in your back yard and create a new rental property and you can rent out to anyone you like. And that was illegal up until very recently. And now they’re positively encouraging it. And so, yeah, that like just increasing density, changing zoning and more generally just increasing supply. You know, any anything which creates new construction is a good thing. And we’re you know, we think it’s [unintelligible]. This infrastructure bill will help on that front.

S3: And also more if you made education a federal thing instead of a local thing and we somehow magically improved the US education system. So it’s not so dependent on where you live. I think that would magically solve a lot of problems as well. So someone to get on that.

S2: But the most important question, Felix, should I sell my home now?

S1: You should sell it to BlackRock and then lease it back through a sale leaseback, Yinka, and then invest it all in Bitcoin.

S1: Let’s go international because there’s another boom. I want to talk about, the news hook here is Grab, which is a big e-commerce company based in Singapore but active in a lot of Asian markets, is going public and it’s going public in a SPAC because, of course, everything is SPAC these days at a thirty six billion dollar valuation. And that is massive for a SPAC. Suddenly we are very interested in booming tech in emerging markets. And Yinka, as the Rest of World person here, you get to tell us what the latest is. I know you’ve been looking at this in Africa.

S2: Yeah, I know. We look well, like the name says, the rest of the world, that everything outside of Silicon Valley in Europe. But, yeah, there is a there’s a boom. And I’m kind of cautious about the word boom because I feel like sometimes these things are just their natural growth. They’ve been going on for a while. It’s just that what I think is surprise people is how much investment has been going on regardless of the pandemic, even as these some of these economies have struggles. Right. You see the numbers that they haven’t got the vaccines, the economies are shut down, the informal economies and then unicorns are being created, you know, in the middle of these supposedly terrible situations. And that’s because investors are thinking, obviously, not just about the short term, but definitely the medium and long term that many of these markets need these new digital companies to help build our favorite word at the moment, infrastructure, sort of a systemic infrastructure which introduces financial services to people for the first time. But there are millions and millions of unbanked people who need to move money around the. To pay for things in new ways away from the traditional cash systems, particularly in Africa, where some of the center’s tech help centers like Lagos and Nairobi have become especially hot right now because investors from Silicon Valley, as well as local investors and from China, are coming into these markets to get some of these startups up and running. Most recently, Flutterwave companies started just five years ago, less than five years ago, had $170 billion dollars investment, which valued its over a billion dollars. So one of the first sort of luckily totally locally homegrown unicorns. But it’s not just being far away.

S1: There’s been there’s been many more. And the question which I have is, as a veteran of the big wave of foreign investment in Latin America in the 2000s, is there’s something possibly harmful about this, that what we’re doing. You said this is infrastructure and you said this is foreign investment. This investment from China is investment from Silicon Valley. This is investment from big VC companies around the world, which basically means that the core technological infrastructure of much of Africa and much of the emerging markets is going to be wind up being owned by American VCs effectively and or China. And is that something we should be worried about?

S2: That’s a definitely a conversation that’s happening now. A lot of there is some concern your investors own the IP. And I think in some cases, the one thing I want to call it a pushback is that so much about the technology is it’s more about building the systems. Right. What’s more important, because the technology that’s used today might not be what you use it down the road. It’s really about building systems forward over which people can work and that does anyone really own a system for which people, the relationships, the business relationships that people build over time, they work through this company and work through the technology used today. But more importantly, this is where nothing exists right now, so to speak. Right. Other than cash payments. So it might be flat away today, but down the road, there’ll be other companies as well helping to build on the rails that these companies are building.

S3: But I was wondering, like when these young companies, the fintech companies, as they go public, they’re coming to the U.S. to to IPO and things like that

S1: The Grab IPO is going to be in the United States. And presumptively, I think, you know, the United States has is seen as the market for where very fast growing companies go public. We recently had the Deliveroo IPO in London. And London was like, we get a big tech IPO and we’re really excited about this. And it absolutely follows it. And it was a complete disaster, a disaster. And that and it reminded me of when when Rocket Internet went public in Germany. And that basically killed everyone’s hope of any tech companies ever going public in Germany. This one, I think, is going to kill anyone’s hope of these markets existing in in the UK, which basically leaves the US and maybe China. I don’t think you’re going to see a lot of publicly listed technology companies, you know, on the Nairobi Stock Exchange.

S2: No, because those markets are too shallow. Right. And if you’re an investor comes over from Silicon Valley, come even if you are a Kenyan investor or a Nigerian investor, you know, this is the reason you put your money into it, frankly, is that they might IPO in these much wealthier markets and you’ll get X times your return. The other thing to be clear about with these companies is many of them are actually incorporated in Delaware. Right. Because that’s the only way they can get investments in the first place. So they kind of have the US, they have you know, they have the markets and the customers all in in these African cities or Asian cities, South East Asian cities. But indeed, a lot of the finance is running through through the US.

S1: And so what that means is if they wind up, you know, being successful in making lots of profits and they’re going to wind up paying 20 percent of that. Twenty eight percent of their profits to the United States rather than to their home governments or what feels like their home government.

S2: That could be extremely controversial. Right? I don’t know. That would necessarily be the case because they would probably make the case that most of their profits are actually made in these countries. But we don’t quite know how this rule would work.

S1: No, I mean, like, I was being slightly facetious there, but the fact is that everyone who’s investing in these countries is investing in the hope and expectation that they. Will ultimately dividend back out more money than they put right in. And we definitely saw that in Latin America. You know, there were billions and billions of dollars going into Latin America. And then they started flowing out and people got very upset and it caused a lot of political problems. And you wind up with systems like you have in Mexico, where the three largest banks, in fact, the four largest banks, if you include Wal-Mart, are all foreign owned. And that feels like you just don’t have control over your own infrastructure and your own financial system. And I don’t think anyone in Mexico is particularly happy about that.

S2: One of the things I think is interesting is that a lot of the local money, particularly a country like Nigeria, where there’s lots of oil money, that’s lots of sort of wealthy people, they just kind of sat on the sidelines and watched this happen. Right. And it’s not that very few of the sort of traditional big money people from the country invested in these tech companies. They kind of watch the thought. I don’t know what these young people are doing and have you. And I think as they start to see these companies get these valuations and get these this investment, you’re going to see more local money come into it as they also feel they need to take part. And that’s kind of the hope as against just watching, as you very rightly both point out that when it comes from outside and therefore ultimately you didn’t what you’re describing as, you know, Nigerian or Kenyan companies. So that’s the hope in the long term that you’re going to see a lot more big because there is local money at the sort of level, you know, like sort of low stakes kind of money. But those things for wealthy people, but ultimately not the big sort of, you know, who’s Africa’s richest man, Dangote, come in and put 10 million dollars into something. And that’s kind of what needs to happen next.

S1: Let’s have a numbers round, I want to start off this one with mine, which I’m going to do 120 billion, which is my prediction for the valuation in dollars of Coinbase when it goes public on Wednesday. I don’t make a lot of predictions on this show, but I thought I might stick my neck out a little bit. It’s a very fast growing Bitcoin company. Obviously, that fast growth is going to come to an end if Bitcoin stops going up at the current rate of speed, which it has to do eventually. But there’s just so much excitement and buzz around it. I think we’re going to see a completely, insanely enormous valuation for Coinbase on Wednesday. So we’ll talk about that a little bit next week. But it could easily, if it does come in at 120 billion dollars, it could actually wind up being bigger than Goldman Sachs.

S2: I saw a tweet that Square does more transactions or something in Bitcoin than Coinbase does something like something like four point six billion versus Coinbase is one point one.

S1: It’s amazing how how small a lot of these things are. I put this in my newsletter this week. Stripe just raised money at a ninety five billion dollar valuation. Yes. And they have about 400 billion dollars of transactions per year that they process, which 400 hundred billion is a lot of money. But there was a hilarious little footnote in the JP Morgan annual report that just came out saying, oh, did we mention we do eight trillion dollars of payments per day? Like, wow, it’s just a whole other universe. Yinka, do you have a number?

S2: Yes, my number is five million and it is five million calls a day. And it’s a number that came from a really fun story we had in the world.

S1: I love this story, by the way, and it’s definitely the missed call. So the mythical story they use missed calls as a method of communication. It’s been around for a long time. It’s mostly in India. Right. But it’s slowing down. Fifty five million is what it is now or what it used to be,

S2: not five million is what it was at its peak. And it was basically I think the thing was fascinated by this story, as you say, filters. They built a whole business around this idea that when data is really expensive, Internet data is really expensive in India, or at least expensive to the average person. People had a habit of of making calls just to let you know, you know, hey, I’m about to come to your house and I’ll let it ring twice and then put the phone down. And then, you know, I’m coming around this guys. So that saw this opportunity and they turned it into this business, which did about one hundred million dollars, its peak of just. You dial this number and you’ll ring a couple of times and then it will send you the latest cricket scores or it will send you celebrity messages of all of a sudden, you know, this will generate revenue for them.

S1: It’s an arbitrage because you making a call that doesn’t connect doesn’t cost you anything. And you receiving a text message also doesn’t cost you anything.

S2: Yes, actually,

S3: I really don’t understand what - how this company makes money. Am I what am I missing here? I don’t get it.

S1: Sorry. Because the people sending the cricket scores pay the company money to be able to reach all of these millions of customers that they wouldn’t otherwise be able to reach.

S3: Thank you. OK

S2: The story is called Don’t Pick Up, The Rjse and Fall of a Massive Industry based on missed calls. It's by Atul Bhattarai, at Rest of the World.

S1: Emily, what is your number?

S3: My number is very self-serving. So we have a yard with lots of trees. And this year, friends of our family offered to tap our maple trees and help us get maple syrup.

S1: Oh, nice.

S3: Yeah. And so we did it and we got it looked like a ton of stuff. But then when it comes down to it, I think maybe we got a quart of maple syrup from our own trees. Very cool and so totally unrelated. I was talking to a man in Vermont who owns like a maple farm and manufacturing plant and my number is 50 percent. He told me his maple production is down 50 percent this year because it was a it’s been a weird spring where there was like a cold snap. So it cut the season short. And he warned me that we are on the precipice. This is a quote. We’re on the precipice of the worst maple season in decades. And I was I felt so wonderful that I had made this wonderful.

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