Understanding Hyper-Politicized China (Tech Strategy – Podcast 176)


This week’s podcast is about the current hyper-politicization of all things China. It’s my take for assessing what it means.

You can listen to this podcast here, which has the slides and graphics mentioned. Also available at iTunes and Google Podcasts.

If you’re interested in talking digital strategy and transformation for your business, contact us at TechMoat Consulting.


Related articles:

From the Concept Library, concepts for this article are:

  • Role of the State

From the Company Library, companies for this article are:

  • n/a

Photo by Nick Fewings on Unsplash

——–transcription below

Welcome, welcome everybody. My name is Jeff Towson and this is the Tech Strategy Podcast where we analyze the best digital businesses of the U.S., China and Asia. And the topic for today, how to think about hyper politicized China. Basically business and investment related to China in a super hyper politicized age. It’s very different than it was seven or eight years ago, completely different. And I thought I’d sort of go through how I think about this. I was at a fun dinner last night, and I mean, this came up multiple times by people, focused mostly on investment, Southeast Asia, China, places like that. And we did talk about this a lot, and I realized, you know, it is a question. I think a lot of people just don’t quite know how to think about it. I mean, you read the news, you read what’s coming out of the US, you kind of read Wall Street, Washington DC’s all over it. I mean, there’s a lot of macro and political, geopolitical aspects to this now, at least in the press. And so I thought I would kind of talk about how I see it. So that’s kind of the point of today. Now some housekeeping stuff. If you are interested in going to China for a tech tour. We’re gonna be doing that in October and November. And one of them’s gonna be a quick two day trip, which is gonna be more appropriate for startups, more appropriate for probably people in Southeast Asia. The other one’s much longer. If you’re interested in either of those, the full week trip versus the, you know, shorter quick visit really, give me an email, reach out to me on LinkedIn, or you can go over to techmoconsulting.com. You’ll see the full trip is there, the week plus trip. But reach out if that’s of all interest and let’s see other stuff. Tecmo Consulting, we are focusing on how to help companies grow in terms of their digital business, their digital activity, how to innovate faster, how to protect against disruption, which is a big thing. If that’s interesting to you, go over to Tecmo Consulting. You can check it out there. There’s also a free email sign up there. You can put your name on the list. We’ll send you some stuff. Yeah, if that’s interesting, give us a call. Otherwise, with that, oops, I forgot the disclaimer. Sorry. Nothing in this podcast or in my writing website is investment advice. The numbers and information from me and any guests may be incorrect. The views and opinions expressed may no longer be relevant or accurate. Overall, investing is risky. This is not investment, legal or tax advice. Do your own research. And with that, let’s get into the content. Now there’s only really, I guess, one concept for today, which is if you go over to the concept library on jeffthousen.com, you’ll see one of the factors we have written about for a long time is how to think about the role of the state. Now people usually say government, I don’t say government, I think about the state because it’s not just the government, it can be political parties, it can be princes and people like that, it can be military, it can be state controlled or state directed or state owned enterprises of various types. I mean there’s actually a lot you can put under that umbrella. And I think that’s a lot of what people don’t understand when they think about China. They kind of know how to think about the role of the state in Germany or the US, although that’s getting, let’s say, fuzzier than it used to be. China tends to be viewed, especially for people who come from developed, let’s say, Western countries. China tends to be more confusing in that regard. It’s dramatically overemphasized. almost everything that, you know, when anyone in New York talks about China, the media especially, it always begins with, well, what’s the government doing? We don’t really think that way in China. I mean, sometimes it can be a factor, but sometimes it’s not at all. So I think it’s overemphasized and there’s a lot of just lack of understanding of how it works, which is not unreasonable. It is different. So role of the state. We’ve written kind of a lot about that. We wrote about that in a book called the One Hour China Consumer Book, where we really put out frameworks for how to think about it and specific checklists you can go through. I really liked that book, The One Hour China Consumer Book. It didn’t sell at all, but it was like my favorite one, which those things tend to go hand in hand, actually. The more I like the book, the less it sells. Anyways, that’s kind of the concept today. I’ll come up. I’ll come against that a couple ways. You can think about this, look at that book if you want, look at the website, go to the concept library. But yeah, that seems to be a lot of this. And in the absence of understanding, nonsense just has a free run because people don’t know how to separate what’s bogus versus what’s real because they don’t know. That’s a lot of what’s going on. Okay, so that’s, I guess, the concept for the way, I put that under the realm of an external fact. I tend to look at markets and industries first, and then I tend to look at companies where I spend about 70% of my time, which is commercial interactions between customers and between companies. That’s how I look at business. And then outside of that, I have a couple external factors that can change that. One would be government, one would be changing technology, one would be changing customer behavior. That’s kind of how I’ve always broken it down. My checklist, that’s how I do it. Anyways, so at the dinner last night, Thank you for the invitation, by the way. That was absolutely fantastic. A lot of fun. And this kind of came up, like, how do you think about China? Is all this media stuff real? What is the US government doing? Does it matter? What about the China tech? I mean, there’s a lot just sort of floating around there. And I mean, for those of you who’ve been listening, I’ve been ranting more than I do normally, because the quality of the discussion about China… especially out of the US, and I’m an American, so I’ll point a finger at the US, is so stupid. It’s so ignorant and uninformed and filled with sort of bombast and hyperbole. Like, I think Jeffrey Sachs said it the best. It’s like listening to school children. It’s, you don’t even know how to engage because it’s like, it’s all wrong. Like, I don’t even know what you’re talking about. So yeah, that’s. kind of been growing in the last several years. I’ve ranted about this a little bit, these China will collapse narratives, which is basically just click bait. You wanna get clicks, put up a YouTube video that says China will collapse. Peter Zian does this, I think you know what I think about him, if you’ve listened to this. Ben Shapiro, who’s like a conservative political commentator, he put up a video a couple weeks ago saying basically, don’t worry about China, it’s gonna die or something. One, you don’t know anything about this too. So it’s the clickbait thing. Like, I don’t know. I don’t understand it. It’s been going on for 20 years. You can go back to Gordon Chang’s book in 2000, 2001, The Coming Collapse of China. I mean, it’s just everywhere. So anyways, you have this sort of rising tide of ignorance and bombast. So I’ve been going on that, but let’s sort of put that aside, because that’s just people going for clicks, as far as I can tell. I think there’s three things you should think about, and separate these into buckets. Number one bucket is geopolitical stuff, which is real. The US government is doing things. It’s good to understand what they’re doing. That’s sort of bucket number one. There’s a lot of macro trends. When people do the China will collapse nonsense, usually they end up pointing to four or five macro trends and say, ah, see four macro trends, therefore it’s gonna collapse, which is bogus. But there are a couple macro trends that matter, that are real, you can track them and you should keep an eye on them. So that’s bucket number two is macroeconomic trends. And then number three, we’ll talk about, I’ll just talk about how I take it apart, what I focus on. So let’s put it into three buckets. So let’s start with the first one, geopolitics. Not really my area. That said, I think I know more than most of the people I listen to TV talking about this stuff. So I don’t think I’m an expert, but I don’t think they are either, most things. Okay, first thing about the geopolitics. Yeah, there’s a lot of big stuff happening. China is very, very big and very complicated. So it’s not easy to understand. It takes time. And geopolitics kind of gets painted with a broad brush. OK. In the US, I’ll talk about the US. They are definitely the leader in what I would describe as a bipartisan, without any real dissent. agreement and attempt by politicians, U.S. government, U.S. security state, to restrain and in many ways to bring down China. Now China has been saying this forever and most people like, yeah they’re not, no the U.S. like, you know, maybe they come, they’re competitors, but they’re not trying to restrain them and bring, they are absolutely doing that now. It is a full court press. The technology supply chain is being systematically hit. Semiconductors, manufacturing, design, access to operating systems. Now they’re going after things like AI. Now they’re going after investment into certain areas. I mean, it is systematic. The tech supply chain has been a big issue for four to five years. investment into China is a new thing they’ve sort of gone after in the last couple months. You can’t invest in these types of companies. You can’t, you know, and that could be investment of capital, can be investment of people. If you’re an American citizen, you can’t work in semiconductors in China anymore. Absolutely cannot do it. So there’s that. So the sort of the investment bit, there’s the tech supply chain has a big, big bit. And the US has sort of been bringing along allies, you know, sometimes coercively, sometimes pretty brutal methods along with this. So you see this ongoing thing of trying to get, let’s say, Japan or South Korea into various initiatives out of the U.S. You know, this has been playing out in semiconductors a little bit where they’re trying to get Korea to basically go along with what the US and Taiwan are doing. And they’re kind of dodgy on that. Anyway, so you see them trying to sort of blurring allies into all of this. I think that’s all real. I think it’s all unnecessary. But there is a dominant narrative. It is ramping up. It’s worth keeping an eye on. And we’ve actually, we’ve seen versions of this before. We’ve seen the US government be very aggressive with companies. They’ve never tried this on a company of, I’m sorry, on a country of China’s size. You know, for all the talk about, oh, China’s can, you know, has a lot of trade and it needs semiconductors and whatever. And it’s a $17 trillion economy. You can do quite well on your own as a $17 trillion economy. you know, you maybe won’t be as big. So no, this idea that you’re gonna force something to happen, it’s not like it was with Japan in the 90s or some other countries we can mention, or what’s going on with Russia right now. Anyways, so okay, that’s real. I don’t understand it, I’m not in this world. It doesn’t make any sense to me. I don’t see what it’s accomplishing. And the media kind of is amplifying this, I think. I think a lot of the US media, here I’ll rant a little bit. I think a lot of the US media is effectively state-run media. I think it is just the government party line and narrative across the board. You know. That’s an opinion. You can think I’m wrong on that. It’s I think Americans and I’m an American, so I’m not throwing stones. I think are some of the most propagandized people on the planet. I think there is there are these common narratives that come out of various places, often the government, and they are uniformly accepted. Zelensky is a hero. Now, he may well be a hero. But I think the fact that like almost all Americans believed that in one week, even though they had no idea who he was or where Ukraine was on a map, that’s to me is symptomatic of a very effective, let’s call it propaganda or narrative machine or something like that. Now he may actually be a hero. I don’t know. I just know that all Americans believed it almost immediately. Okay. So we’ve got the China thing happening coming out of the U S we’ve got a population that. either believes it, supports it, or doesn’t know what to think. Okay, that’s all real. And none of that means that China, the government, the politics, none of that means they shouldn’t be criticized. None of that means they aren’t doing something that is worthy of, you know, very vocal criticism. That could be true as well. I’m just saying I don’t think it’s coming from a position of real understanding. I think it’s a narrative that’s amplified without much understanding underneath it. I think there is a lot of valid criticisms, but I don’t see it. Now maybe it’s there. So anyways, we’ll put that in bucket number one. And I would take that bucket number one, we’ll call that the geopolitics and sort of media narrative. And a lot of the sort of investor sentiment, people are hearing this and they don’t quite know what to make of it. Can we invest? Can we not invest? Should we put money to work? How is that going to be viewed from an investment perspective? I think that is all kind of wrapped up into this story, much of which is not real. But. You know, if it impacts the multiples of companies trading on Wall Street, then that part’s kind of real, even if it’s not necessarily true. So we’ll put all that into one bucket, the geopolitical aspects, the media narrative and the overall investor and business perception that is being created. Bucket number one. All right. Let’s go to bucket number two. which I think is more real. Well, I shouldn’t say real. Yeah, I’m gonna say more real. I think the first one, I don’t believe a lot of it’s true. But, you know, things don’t have to be true to be important. Bucket number two, these things I think are real. These are macroeconomic factors that matter, that are real, that investors and business people should pay attention to. I basically, you know, if you look at, I would put these into three buckets. Well, really two. The first one is slowing growth. That’s real. Right. GDP growth across the board. Um, you know, 2010, the big argument when we were talking about China was. It’s too much growth. It’s 10%, 12%. Back then it was, it was 20 years of 10 to 15% GDP growth. And the big discussion was how do we cool this thing down? It’s too much. It’s driving inflation. Um. Okay, well now that’s not the case. Growth is slowing, partly because the economy is very, very big now. The US, let’s say $22 trillion GDP, 2022 numbers, China’s $17 trillion, EU is $16-ish. Those are the three major economies of the world. The next one down is Japan. I think, what is it, five trillion? I mean, it’s a big step down. So those are the three economic engines of the world. China’s one of them. It’s number two. And the big difference between those is when you look at, okay, what is the growth rate? You know, US, 2%, 3%, EU, bit less than that. China has been 10% but it hasn’t been that for a long time. What are the real GDP growth numbers? I don’t really know. I don’t think anybody really knows. If I had to guess, I’d put it at three to 7%, somewhere in that range. But we kind of break it apart. Okay, that growth is slowing. We can see it. And that’s coming from a couple factors. Historically. The GDP growth of China was export driven. You sell everything, you’re the world’s factory, all that cash comes home. The cash ends up going in bank accounts. Historically and still till today, the four major state-owned banks had a very small return on deposits. They were basically using people, you didn’t really have anywhere to put your money. You’re doing exports, you’re selling toys into Walmart, all the money comes home, cash inflows. Businesses and people would put their money in the bank and they only had a couple places to put their money. They could buy real estate, so people owned tons of houses and condos. They could put their money into the state-owned banks or you could put it in the stock market, which was kind of the Wild West for a long time. The money that went into the banks got a very, very tiny return rate. And those state-owned banks would then loan money to do infrastructure projects. So it’s like Chinese consumers for really 30 years have been subsidizing infrastructure investments done by state-owned banks. And those state-owned banks would make loans overwhelmingly to state-owned entities, which would then build roads and bridges and shopping malls and whatever. Okay, that’s been the way for a long time and they got a pretty good, and then in addition to that, there was foreign investment. But China never really took on foreign debt. Like, you know, when you go back to say 1985, and there would be these charity drives for Africa, you know, they’d have them on TV if you’re in the US, give to Africa and they’d show very, very poor, you know, desperate children. All during that time, 1985, China was poorer than Africa. but they never borrowed money from abroad and they never even allowed charity from abroad. They did their business, they brought the cash home, they saved and they invested, they didn’t borrow. So even today, there’s very little foreign debt as a percentage into China. So it was that domestic savings and investment plus domestic debt, right? So there was a lot of debt, but it was domestic. Okay, you put that money, you build a lot of roads, you build a lot of highways, you build airports, you build infrastructure, and you get GDP growth as a result. Well, the returns on that have been going down. You know, adding the fifth airport doesn’t get you the return on GDP that the first and second one did. So that trigger, that lever, is not getting the results as it used to be. They’ve been racking up domestic debt to keep that going for about the last 10 years. So the debt has been growing significantly, domestic debt, not foreign help. So that’s been one lever of GDP growth. Exports is another one. And then the one everyone’s counting on is consumer growth, consumption growth. Right? That’s true, it’s been growing. It’s much more now than it was five years ago. I don’t know the numbers off the top of my head. I think it’s 20%, something like that, 20 to 30%. Don’t quote me on that. But it’s gone up significantly as a percentage of GDP. But it’s still not that big. So overall, and then this is when you start hearing that China will collapse narrative because people will point to demographics and they’ll say, oh, China’s getting old. and they over counted their numbers and people aren’t having kids and the demographic curve is not looking good and that’s true, right? So that all feeds into this slowing GDP growth story, aging, low birth rate, things like that. And I basically agree with all of that. I think… If it’s a seven trillion, people used to say Chinese economy would double by about 20, 35, because the US economy GDP per capita is about $60,000 per person. China’s about 13,000. South Korea is about 30,000. So if China can just go from 13 to say 24,000 GDP per capita, they will double their GDP, which takes them from 17 to 34 trillion dollars. So people used to think about that. And I basically think that’s going to happen. But everyone is sort of readjusting their GDP growth curves for China. It’s going to be slower than we thought. I’ll tell you why I don’t think that’s that big of a deal. So that’s kind of macro factor number one that matters. Macro factor number two is the debt. Yes, they’ve been racking up the debt domestically over the last 10 years. It’s pretty huge. The people I sort of follow for that question are an economist named Michael Pettis who teaches at Peking University Used to be down the hallway from me. He’s the smartest guy. I know about this. He’s on Twitter He writes these wrong long tweets about Chinese economy He’s written books about it, which I honestly don’t understand more than half of them I follow them him. I follow Goldman Sachs. I follow McKinsey What do they think about the debt load versus the cash? That’s a significant question, and it’s worth keeping an eye on that. Now, okay, so those two points are real for macro. Are those dramatically different than what we see in Japan? Not really. Aging population, very old population, big, big debt. Is it different than what we see in Italy? Italy’s are getting very old very quickly. Different than the US. Well, demographics in the US look better. Okay, so. We see the same story in other countries. Maybe China is a more extreme version, maybe not. So those are important to keep an eye on. Those are pretty much the factors I pay attention. Now a factor I don’t pay attention to, which gets a lot of attention on YouTube, is real estate. because they say, oh my God, a real estate developer is going bust. Oh my God, there’s a real estate bubble. Yes, there is. There is always a real estate bubble in China. Always. Usually at the regional level, real estate is its own crazy world. It’s it’s the national sport of China is real estate. People store their wealth there. There’s a lot of trading activity going on there. It is not a supply demand picture. I mean, that’s part of it, but there’s a lot more going on. And there has always been bubbles. They come and go pretty much every year or two, and they’re usually at the local level, like, oh, Tianjin has a ghost city. It’s gonna collapse. No, no, they do. People took their write-offs and so on. So, oh, there’s Evergrande is in trouble. Oh, you know, that is just… The way I think about that is China deals with real estate bubbles the same way Hong Kong deals with hurricanes or typhoons. They live in a part of the world where there’s typhoons every year. So everyone in Hong Kong understands how to deal with typhoons. They build the buildings a certain way. They have levees that are very strong. Everybody knows what to do when the typhoon rolls through Hong Kong. They’re used to it. That’s kind of how I think about China with real estate. Everybody knows this happens. The government knows at every level. The investors know, the families know, the business. Everybody knows. And they’re kind of used to it. And it’s been going on for a long, long time. Hurricanes and typhoons are not a problem for Hong Kong the way they were for, say, New Orleans. Because New Orleans wasn’t used to them. So it was a surprise, and the levees broke, and New Orleans flooded. That’s generally how I keep an eye on it. I don’t worry about it too much. But yeah, people talk about it a lot. And that’s as much as I’ll say about that. But no, I don’t generally pay attention to it. It doesn’t generally bother me. Okay, that’s factor number two. Macroeconomic factors I think are important. Let’s go to sort of, I’ll give you my framework for how I think about all this. Now I’m generally looking at a couple factors and when I’m looking at a business, I’m looking at a couple factors. And these are, this applies to non-digital, but more digital. And this is very much like Warren Buffett, sort of identify great companies, hold them for the longer term, right? It comes out of that thinking, not trading in short-term opportunities. So first thing I look for is, okay, I’m looking for a long-term trend that I can sit on. Five years, 10 years plus. Okay, so that’s the growth number. and I’m looking for a very large economy with a long-term secular growth trend. China has that. Now, smaller economies can get you, you know, often get you bigger growth, Vietnam booming. But it’s the larger economies that get you the more stable long term growth like the United States. And I think China is in there. But within those two factors, is it big and what would be a good growth rate? I care more about it being large, I’m looking for a large, complicated. stable economy, $17 trillion, you know, US. Okay, what would be a growth rate I’d be looking for? I’d be looking for two to 5%. Over 10 years, because that’s gonna, I’m looking for compounding, basically. You know, you look at the Brazilian economy, it’s got some size to it, it’s not anywhere this big, but the growth rate is all over the map. You know, the GDP pops one year and then it shrinks the next two years. So when you look over 10 years, you don’t see any significant increase in the GDP. I mean, it’s there, but it bounces around to compound, which the U S economy has been compounding and Chinese economy has been compounded. You need stable points on the board year after year, such, I mean, if you have a couple of down years, you lose your compounding China. If you look at their GDP growth over 30 years, it is a compounding curve. it looks exactly like the share price of Berkshire Hathaway. So does the US economy, by the way. So I’m looking for large stability and then I’m looking for reasonable growth that is consistent. So when people start talking about, well, what about the Chinese growth rates, not 10%? It’s like, I’m very happy with three to 6%. And by the way, I’m not really even looking at the overall economy. I’m looking at certain sub-sectors. that I think are gonna have long-term trends. And within that, usually the consumer purchasing and consumer spending is what I’m looking at most because I can get the greatest visibility in it. If you’re looking at sort of B2B industrial purchases, it’s very hard to know what are in those contracts. It’s a bit of a black box. But I can track the wealth of Chinese families, middle class. I can see it rising. I can go to the Walmart in Shanghai, and I can see everyone flooding the aisles every weekend. I mean, I can see it. And if a company is sort of BSing it, like Lucky and Coffee was, I can go down and sit in the Lucky and Coffee’s, which I did for a day, and just counted people. And I’m like, I don’t see them. So I generally focus on B2C. I’m looking for long-term growth because I’m trying to capture a compounding curve. And for those of you who have listened to me for a while, I’m very bullish on the middle class of China, and I’m very bullish on the middle class families, not individuals, families. I’m very bullish on middle class families of Southeast Asia, of South Korea, of Taiwan, Singapore, Malaysia. So it’s not just the spending, I’m looking at the family structure. I’m looking for two parents, two kids, four grandparents, like usually they’re living next door. I’m looking for that family unit because that builds wealth. I mean, it just does. And I see, I mean, that’s China all the way. If you teach, I mean, I teach in China, right? I am always impressed with the students. I mean, they’re phenomenal. They’re fantastic. They’re all moving. They’re all super focused on education. They’re all super focused on being a builder or professional career or getting smarter or being bilingual. It’s just a given that everyone’s bilingual. So that’s kind of the factors I’m looking for. So that’s sort of number one. I’m looking for that longer-term secular trend. We wrote a book called the One Hour China book that talked about six mega trends. And we basically looked for six mega trends in China that will show up on the bound on the income statements of companies. So it has to show for us to pay attention. It has to be a 20 year trend that shows up in the revenue line or the cost line. And we have to see lots of big companies that have been built on this trend and it’s got to be stable. And one of those was just consumer spending. Another one was sort of lots of money. One was the manufacturing scale. One was urbanization. But that’s what we’re looking for. Okay, so that’s sort of factor number one I start with. I’m looking for the trend to ride. Number two, I’m looking for high quality companies that are gonna benefit from that. I’m not looking for a thousand mediocre companies selling chicken. to rising Chinese consumers or families. No, no, I’m looking for two to three companies that have an oligopoly on a certain part of consumer spending. So I’m looking for that, I mean, that’s Buffett 101, right? I’m looking for someone who’s not just gonna have stable market share and… have a lot of durability against that trend. I’m also looking for them to inordinately profit from it because they’re sitting in a position of sustainable competitive advantage. And this is where I tend to get very optimistic about China because the companies are so good. These are some of the best companies in the world. That’s just not my opinion. That’s Charlie Munger. That’s a lot of people. The management tends to be very good. It’s got Western quality management, often a lot stronger because the market is more ruthless and it kind of makes you stronger. They are just hot beds of innovation. I mean, things move so quickly and e-commerce is so good and it’s so much better than Amazon now and TikTok and all. I mean, it is just like, you’ve got these high quality companies, you’ve got tremendous innovation, you’ve got great management, and you’ve just got to get lots of ambition. I mean, Elon Musk was asked about this a week or two ago. And they said, someone asked him a good question. They said, well, I saw the video. I think it was recent. They said, you know, you have Tesla in China and the U.S. How do you compare those two? That’s an interesting perspective. And his answer was, well, you know, Tesla in the US is not emblematic of US business. It’s very much an outlier in terms of the degree of innovation and how hard people work. I mean, the engineers that work at Tesla are all in. They are not going home at 5 p.m. on Friday. Right. So in the US, Tesla is definitely an outlier. It’s not base case. So he said, that’s true. But even comparing that, Tesla China is more. innovative and ambitious than even chess. And that’s been my experience. The companies are just, and that’s not because, oh, they’re smarter, no, it’s because you have to be. It is a far more ruthless environment. You have to move faster. Working six days a week is a given. It’s usually, when people say 996, it’s usually 997. Most of these companies are there on. Sunday you go to Airbnb in Silicon Valley. They are not there on Saturday the Alibaba people are It’s just the nature of it. So crazy levels of ambition Very strong companies and all of these companies are good in them Not all a lot of them are very impressive, but they have a secret weapon Their secret weapon is they have access to a very large domestic economy So before TikTok went international, it was already huge in China. Before these EV companies are now going into France and Germany, which they’re doing right now, they were already getting big in China. You know, before… that gives them, especially the smartphones, they got very big in China and then they just rolled into Southeast Asia and they rolled into India and they could basically take those economies, those markets at a loss forever because they have this cash engine back home in their back pocket. So you put those things together and it’s kind of watch out. I mean, watch out. Tmoo is doing great, but it’s part of Pin Duo Duo, which has been rocking and rolling in China for seven years, eight years. Most of the smartphone makers are doing great. The TV manufacturers are doing great. So it’s a very powerful combination. And it was watched for electric vehicles to really shock the world in the next year. Anyway, so that’s sort of Factor number two. Virtually everything I talk about on this podcast is there. China, Southeast Asia, to a lesser degree the US. Okay, those are the first two factors. Third factor, last factor, what I focus on. Once I get that picture, then I try to assess the political or other external risks. Typically I’m thinking about domestic political issues like government action. I look a little bit about the US. Most of the US stuff, I mean I’ve talked about this before, I mean I’ve gone through the regulations on e-commerce that came out of China in the last couple years and I was very, very impressed. I thought it was very thoughtful. Not stupid at all. And then I look at the regulations that came out of Canada recently. you know, blocking all the news is cut off Facebook in Canada and Australia. These are the stupidest things I’ve ever seen. Well, not I’ve ever seen, but very stupid. Um, so the domestic stuff seems to be relatively now it could change. So you don’t know, but I mean, I’m watching and so far it looks pretty reasonable to me. There’ve been a couple of moves that got, that I thought were out there. The education technology sector got really crushed. Uh, that was a bit shocking that happened. I’m not sure they would do that again. I think there was a lot of backlash on that. But we don’t know. I mean, this is an external factor that to some degree is unpredictable. And then I look at the ones out of the US. I haven’t seen anything that concerns me so far with what the US is doing related to China, but we’ll see. Anyways, that’s kind of my, and then I’ll also look at technology change, which is what all my books are about. When a certain technology changes, how does that change a company? That’s what I focus on. I focus on the intersection of competitive advantage and tech. How does this new digital tool impact the moat of that company? That’s kind of my question. Anyways, that’s it, that’s kind of my focus. So I’m looking for a secular trend that I can count on that’s gonna create wealth. I’m looking for companies that are gonna be able to extract that wealth from a position of competitive advantage. And then I’m looking to have a… an estimate of any external shocks that could change that, political or technology. That’s kind of what I do. Okay, my framework, I guess last point. So based on that, what countries do I focus on? Obviously I focus on mainland China. I do. And… But not all of it. I mean, I don’t do healthcare. I don’t do a lot of industrial. I do e-commerce, I do media, I do consumer. I like restaurants, not as a business, but I like the sector. Retail’s interesting. So certain sectors I focus on and I’m pretty bullish on. Certain parts of Asia as well. Vietnam, South Korea, Taiwan, Singapore. Malaysia, Thailand, I keep a close eye on. I don’t really look at the Philippines that much. Everyone points to Indonesia. I still don’t see many companies to focus on yet, but that’s definitely area I’m focused on. And then the US, certain subsectors, digital companies, obviously. Outside of that, I sort of have a couple question marks. I keep an eye on Brazil. I keep an eye on Turkey more and more. I keep an eye on Germany more and more because I like the industrial aspect. India is obviously the biggest question mark. I think it’s too complicated for me to dabble in. Maybe I will at some point, but understanding India, that to me is a five-year adventure. Understanding Turkey is not. China took me a good… five years on the ground before I really felt like I had it. Now I’ve been there, I don’t know, 16 years, something like that. Anyways, that’s kind of how I focus. But mostly I’m looking at digital businesses or companies going digital. Okay, I think that’s kind of what I wanted to go through. Yeah, it’s um… I’ll try to keep the ranting to a minimum. But I do go off every now and then because it just drives me crazy. Which is unproductive, but what are you going to do? Anyways, that is the content for today. And yeah, I’m pretty bullish. Do I think China is going to be a significantly larger economy, more prosperous, more developed, more innovative five years, ten years from today? Absolutely. Like I’ll put that stake in the ground anytime now maybe it’ll be a little less on the GDP growth than I thought. Maybe it’ll be a little bit more in other sectors but I’ll put a stake in the ground on that. Yeah. Anyways that’s the content for today. Any fun stuff this week I can point to? Not really. I’m going to Singapore in two days. Just a quick trip down there, that’s going to be a lot of fun. I love going to Singapore. Plus it’s a, you know, it’s a quick little flight, which is always appreciated. Uh, no real plans there. I’m going to visit some tech companies. I’m going to be at the Lazada event. They have sort of their big annual event for merchants and brands that are on Lazada. So I mentioned this before, I’m going to interview the CTO on stage and, uh, I’m going to then I think. behind the scenes, I’m gonna interview the CEO for Lazada, who’s a really fascinating company, really interesting company. I think that’s worth keeping a close eye on. So that’ll be this Wednesday, Thursday, that’ll be great. Any fun stuff? Oh, here’s a recommendation. I turned on this show on Netflix called Mask Girl. Excuse me. That is the craziest show. Like, it is, it’s about a, it’s a South Korean, like, started out as a drama about a woman who’s not very attractive, so she puts on a mask and she dances online, and… And then it turns into like a horror movie and then a murder movie. And it’s got about eight episodes and every episode it’s like, it’s a completely different show. Like everyone you liked in one episode, well they’re all gone the next episode. Like they’re dead or something. So it’s like eight separate little movies stuck together. It is just, anyways, it’s really fun to watch but it’s crazy. It’s pretty interesting. Anyways, that’s a recommendation. Okay, that’s it for me. doing well. Talk to you next week. Bye bye.


I write, speak and consult about how to win (and not lose) in digital strategy and transformation.

I am the founder of TechMoat Consulting, a boutique consulting firm that helps retailers, brands, and technology companies exploit digital change to grow faster, innovate better and build digital moats. Get in touch here.

My book series Moats and Marathons is one-of-a-kind framework for building and measuring competitive advantages in digital businesses.

Note: This content (articles, podcasts, website info) is not investment advice. The information and opinions from me and any guests may be incorrect. The numbers and information may be wrong. The views expressed may no longer be relevant or accurate. Investing is risky. Do your own research.


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