Latest / The Dutch Investors / #56 | New rules of competitive advantages and competition | Moats & Marathons w/ Jeffrey Towson

Transcript

#56 | New rules of competitive advantages and competition | Moats & Marathons w/ Jeffrey Towson · The Dutch Investors

• 0:00
  SPEAKER_00: In today's episode, one of our most requested guests so far, with close to 3 million LinkedIn followers, having lunch with Buffett twice, talking and visiting hundreds of different companies from the likes of Tencent, Alibaba, Xiaomi, Pindu Oduo, and many more.
• 0:18
  SPEAKER_00: I'm honored and excited to introduce Jeffrey Towson.
• 0:22
  SPEAKER_00: He's a consultant and analyst with a very unique perspective, thanks to his extensive experience living and working in China.
• 0:31
  SPEAKER_00: He's a real expert in understanding businesses, business models, competitive advantages, particularly how they navigate the digital age.
• 0:41
  SPEAKER_00: He also works with executives and investors, taking them on tours to visit companies in China.
• 0:48
  SPEAKER_00: He helps management teams with the difficult transition to the digital age by helping them define the marathon they are running and the mode they need to build, ensuring they are positioned to be stronger in the future.
• 1:02
  SPEAKER_00: Jeffrey has authored several books, including the One Hour China book.
• 1:06
  SPEAKER_00: He's also known for his Modes and Marathon series, where he spent nearly a decade focused on one key question.
• 1:12
  SPEAKER_00: How do you build and measure a competitive advantage in a digital business?
• 1:19
  SPEAKER_00: The series comes from his observation that while digital can destroy some competitive advantages, it also creates new opportunities.
• 1:28
  SPEAKER_00: Enjoy today's conversation with Jeffrey Towson.
• 1:50
  SPEAKER_01: I think it's something like Richard Feynman, the old famous physicist, he wrote a book or he had his book titled The Joy of Figuring Things Out.
• 1:59
  SPEAKER_01: Because he spent his whole life just doing physics problems.
• 2:01
  SPEAKER_01: And even on his deathbed, he was just doing physics math in the bed.
• 2:05
  SPEAKER_01: And he just said there's a tremendous joy to just figuring something out.
• 2:09
  SPEAKER_01: I think there's some of that.
• 2:12
  SPEAKER_01: Yeah, you can invest at the same time.
• 2:13
  SPEAKER_01: Okay, you figure it out, then you invest.
• 2:15
  SPEAKER_01: But I think a lot of it's just the satisfaction of figuring something.
• 2:19
  SPEAKER_01: Oh, I got it.
• 2:19
  SPEAKER_01: I got it.
• 2:20
  SPEAKER_01: I know what's going on yeah.
• 2:21
  SPEAKER_01: Something weird, something nice going on there, I think.
• 2:24
  SPEAKER_01: I don't know.
• 2:25
  SPEAKER_00: I've never heard of the book.
• 2:26
  SPEAKER_00: I'll I'll have to check that out afterwards.
• 2:29
  SPEAKER_01: Yeah, a lot of physic a lot of value investors, for some reason they like Richard Feynman.
• 2:35
  SPEAKER_01: Which is weird, I think, because they can't, you know, I make fun of them for this, because I'm not, I mean, I actually was a physics person.
• 2:42
  SPEAKER_01: So they're like, oh yeah, I like Richard Feynman, Mike.
• 2:44
  SPEAKER_01: How do you know he's better than the other physicists?
• 2:47
  SPEAKER_01: And they don't.
• 2:48
  SPEAKER_01: I'm like, you can't read the math.
• 2:50
  SPEAKER_01: Like, so you're just taking other people's word for the fact that he's better than the that's not a really a value investor way of doing things, really.
• 2:58
  SPEAKER_01: Right?
• 2:59
  SPEAKER_01: Like, that's not how you're supposed to operate.
• 3:01
  SPEAKER_01: Uh, they're they're kind of big into him for some reason the last couple years.
• 3:05
  SPEAKER_00: Yeah.
• 3:05
  SPEAKER_01: I don't know.
• 3:06
  SPEAKER_00: Well, anyway, uh, Jeff, uh, can I call you Jeff?
• 3:09
  SPEAKER_00: Is it is it Jeffrey?
• 3:11
  SPEAKER_00: Yeah?
• 3:11
  SPEAKER_00: Yeah, Jeff's fine, yeah.
• 3:13
  SPEAKER_00: It's it's it's great to meet it's great to meet you and uh have you come on the show and talk about investing uh your Motes and Marathon books, uh, but also your book, uh, What Would Ben Graham do?
• 3:24
  SPEAKER_01: That book kind of disappeared.
• 3:25
  SPEAKER_01: I'm not sure what I think about that book, really.
• 3:27
  SPEAKER_01: I think it's right.
• 3:29
  SPEAKER_01: I'm just not sure it's usable.
• 3:31
  SPEAKER_01: What do you mean?
• 3:32
  SPEAKER_01: That book is basically the Prince Awalid playbook, right?
• 3:36
  SPEAKER_01: I just took apart all the deals I've ever seen him do.
• 3:39
  SPEAKER_01: I looked at all his history because he's amazingly successful, super successful.
• 3:43
  SPEAKER_01: But it's all sort of value-added private deal making.
• 3:48
  SPEAKER_01: And I think it's accurate.
• 3:49
  SPEAKER_01: I think it actually summarizes what he does, which I don't think anyone had ever done before.
• 3:55
  SPEAKER_01: But I mean, most people can't do that.
• 3:57
  SPEAKER_01: Like they don't have the funds for that, they don't have the structure for that.
• 4:00
  SPEAKER_01: Most people are picking stocks and stuff.
• 4:02
  SPEAKER_01: Anyone can do that, so it's it's not like private equity people can probably use it.
• 4:07
  SPEAKER_01: I'm not sure it's usable, but outside of a small group of people.
• 4:11
  SPEAKER_00: Yeah, I mean, the same goes for the Motes and Marathons books.
• 4:15
  SPEAKER_00: I would say it's probably less useful in 10 years from now, maybe.
• 4:19
  SPEAKER_00: Yeah, that's a problem.
• 4:20
  SPEAKER_00: Some aspects, but that's just the way the world works right now, and we'll talk about it, I suppose, as well.
• 4:26
  SPEAKER_01: I'm gonna rewrite all of those starting in a month because I I think I'm about 30 to 40 percent wrong in retrospect.
• 4:33
  SPEAKER_01: Like, one, they have to be updated.
• 4:35
  SPEAKER_01: Two, I there's like 30 like I disagree with now, which I didn't before, so I'm I'm gonna kind of delete some stuff.
• 4:43
  SPEAKER_01: That's interesting.
• 4:45
  SPEAKER_00: Yeah.
• 4:46
  SPEAKER_00: Well, anyway, I I appreciate you taking the time uh out of your day to do this.
• 4:50
  SPEAKER_00: I know you're a busy, busy person.
• 4:53
  SPEAKER_00: Um, and uh yeah, I just wanted to let you know, as a listener to your podcast as well, that uh I really enjoy it and I I l I I listen to almost every single one I I believe so far.
• 5:06
  SPEAKER_00: Sometimes it goes a bit above my head, sometimes it goes uh pretty deep, but uh I'm trying to just take it all in and learn from it.
• 5:14
  SPEAKER_00: So thanks.
• 5:15
  SPEAKER_01: No, I appreciate it.
• 5:16
  SPEAKER_01: It means a lot, actually.
• 5:17
  SPEAKER_00: All right.
• 5:18
  SPEAKER_00: Well, you've written several books, perhaps for the listeners that don't know.
• 5:22
  SPEAKER_00: So, what kind of books did you write and why did you write them?
• 5:27
  SPEAKER_01: It's kind of two buckets.
• 5:29
  SPEAKER_01: The first one was just called the One Hour China Book, which was me and uh senior partner at McKinsey China, really the person who founded the office in China in 1995.
• 5:39
  SPEAKER_01: And we wrote this simple little book to explain China business to people who are really smart but really busy.
• 5:46
  SPEAKER_01: So I you can read it in an hour.
• 5:48
  SPEAKER_01: It's probably an hour and a half, but it's close to an hour.
• 5:51
  SPEAKER_01: That did well, which was, you know, in book terms, but you know, doing well in books is pretty, you know, it's not not all that.
• 6:00
  SPEAKER_01: That one did well.
• 6:01
  SPEAKER_01: So we've done a couple of one-hour China books.
• 6:03
  SPEAKER_01: We've updated it, we've got another one coming, I think.
• 6:06
  SPEAKER_01: And then the one I kind of really went off was called the Motes and Marathons series, where this is really where I just, I mean, I almost spent 10 years on this.
• 6:16
  SPEAKER_01: I I literally just focused on one question.
• 6:19
  SPEAKER_01: How do you build and measure a competitive advantage in a digital business?
• 6:23
  SPEAKER_01: Because there were all these people running around saying, hey, digital wipes out moats.
• 6:28
  SPEAKER_01: There's no such thing as competitive advantage anymore.
• 6:31
  SPEAKER_01: Things are too fast, things are too dynamic.
• 6:33
  SPEAKER_01: I'm like, have you seen Google?
• 6:35
  SPEAKER_01: If that's not a moat, what is like, no, it's changing how they work and it's destroying some, but it's creating others.
• 6:43
  SPEAKER_01: And most businesses are becoming digital.
• 6:46
  SPEAKER_01: Not all of them, but most businesses are becoming digitized.
• 6:50
  SPEAKER_01: So the lessons from the purely digital creatures in moat building, and you can apply that to businesses that are going digital.
• 6:57
  SPEAKER_01: So, and I spent about 10 years, um, I don't know, well, maybe eight years writing to sort of reverse engineering every investment I could find that Warren Buffett ever made.
• 7:09
  SPEAKER_01: Every Tom Russo, Mario Gabella, all the classic big investors, reverse engineering the moats, and then sort of combining that with digital thinking and sort of, okay, here's my short list.
• 7:20
  SPEAKER_01: This is how I think this game works.
• 7:21
  SPEAKER_01: And that's uh yeah, that's so that's moats and marathons, which is basically you have to pick a moat you're building and you have to pick a marathon in digital that you're running.
• 7:29
  SPEAKER_01: That turned into seven or eight little books.
• 7:31
  SPEAKER_01: I'm probably gonna rewrite those, but yeah, it's it's kind of a textbook, which is not as readable.
• 7:38
  SPEAKER_01: And then I partnered up with my same friend from McKinsey, and we wrote a short version, just called the One Hour Motes and Marathons book, which was just a short little book that sort of summarizes that.
• 7:49
  SPEAKER_01: You know, because most people aren't gonna read eight little books.
• 7:51
  SPEAKER_01: I mean, basically it's a textbook altogether on this subject.
• 7:54
  SPEAKER_01: So we came up with a little ones.
• 7:56
  SPEAKER_01: So that they're kind of in that category.
• 7:57
  SPEAKER_01: And you know, the nice thing is they kind of overlap a lot.
• 8:01
  SPEAKER_01: Because if you're studying competition, well, the most competitive companies in the world are in China.
• 8:07
  SPEAKER_01: It's, you know, it is the most ruthlessly competitive environment.
• 8:11
  SPEAKER_01: So it's a good petri dish to study competition because stuff happens real fast.
• 8:16
  SPEAKER_01: And I would argue that at least half of the world's best digital companies are probably now in China.
• 8:23
  SPEAKER_01: So, you know, Tencent, WeChat, Alibaba, Bite Dan.
• 8:27
  SPEAKER_01: So there's a lot to study.
• 8:29
  SPEAKER_01: So it was a pretty good petri dish for that.
• 8:31
  SPEAKER_01: So those two subjects kind of nicely overlapped.
• 8:33
  SPEAKER_01: You said you live in uh in Asia right now?
• 8:36
  SPEAKER_01: Yeah, I'm mostly on the ground in China.
• 8:38
  SPEAKER_01: That's where I spend most of my days.
• 8:40
  SPEAKER_01: And then I fly out to Europe, uh increasingly flying out to the US, usually doing consulting engagements, talks.
• 8:48
  SPEAKER_01: I was a lot in Brazil over the last couple years, which I I mean, it's like you you and your podcast, you look up one day to see where are people listening from?
• 8:57
  SPEAKER_01: And I go, what are all these people in Brazil listening for?
• 9:00
  SPEAKER_01: Like, really?
• 9:01
  SPEAKER_00: Yeah, emerging, right?
• 9:02
  SPEAKER_02: Yeah.
• 9:03
  SPEAKER_01: Suddenly there was like a lot of listeners in Brazil, which was nice, but didn't exactly see that coming.
• 9:09
  SPEAKER_01: So I spent some time down there work talking with companies.
• 9:12
  SPEAKER_01: They have some good digital businesses in Brazil, actually.
• 9:16
  SPEAKER_00: Yeah, well in Latin America, there are a couple interesting ones, and uh, I think it's uh it's it's it's a little similar to India, I suppose, where lots of new digital companies are coming up, but they're not quite there yet, I guess.
• 9:30
  SPEAKER_01: No, I mean I don't really do India.
• 9:31
  SPEAKER_01: It's a whole universe that I haven't.
• 9:33
  SPEAKER_01: I mean, I I know China, but it took me a good 10 years on the ground to get comfortable.
• 9:39
  SPEAKER_01: And then Southeast Asia, where I spend a lot of time.
• 9:42
  SPEAKER_01: Those are kind of my two.
• 9:44
  SPEAKER_01: Outside of that, okay, Latin America, I I can dabble.
• 9:47
  SPEAKER_01: India, you can't dabble in India.
• 9:49
  SPEAKER_01: No, like you don't want to bounce in and out of India.
• 9:52
  SPEAKER_01: Oh, I found a good stock.
• 9:54
  SPEAKER_01: It's like you really want to spend five years on the ground before because it's complicated there.
• 10:00
  SPEAKER_01: Vietnam, there's good digital companies.
• 10:02
  SPEAKER_01: It's not that complicated.
• 10:04
  SPEAKER_01: A smart investor can figure out Vietnam pretty quick.
• 10:07
  SPEAKER_01: Uh, but India, yeah, I've never dabbled in India.
• 10:10
  SPEAKER_01: I got enough geographies.
• 10:12
  SPEAKER_00: Do you think it's necessary to understand the Chinese or Asian consumer in in general, or do you really have to go there or live there before investing in any of these companies?
• 10:23
  SPEAKER_00: What's your what's your feeling about that?
• 10:26
  SPEAKER_01: It depends a little bit.
• 10:27
  SPEAKER_01: It depends how complicated the business is.
• 10:30
  SPEAKER_01: I mean, in one sense, looking at a geography, it's no different than looking at a new industry.
• 10:37
  SPEAKER_01: If you're a retail person and you decide I'm gonna start understanding media because media and retail are kind of combining, okay, you know that's gonna take some study, right?
• 10:48
  SPEAKER_01: You're not gonna do that in a week or a month, but you also kind of know you can do it.
• 10:53
  SPEAKER_01: You know if you put the time in, you're gonna get pretty good in media over time.
• 10:57
  SPEAKER_01: Like every investor kind of knows the process.
• 10:59
  SPEAKER_01: China for a lot of businesses is the same.
• 11:02
  SPEAKER_01: If you're looking at retail in China, you can figure that out.
• 11:06
  SPEAKER_01: It's gonna, it's not, it's retail, right?
• 11:09
  SPEAKER_01: Now, if you're getting into hospital operations and the supply chain, okay, then you're deep in the state capitalist weeds.
• 11:17
  SPEAKER_01: That's that's a lot harder to figure out.
• 11:20
  SPEAKER_01: The industrial side is very black box, very hard to figure out.
• 11:24
  SPEAKER_01: But the other stuff, yeah, you can figure that out.
• 11:26
  SPEAKER_01: So you could look at companies there, you can figure out Alibaba.
• 11:29
  SPEAKER_01: Sure, why not?
• 11:30
  SPEAKER_01: The other thing I tell people is like, look, you can't really avoid China anymore.
• 11:35
  SPEAKER_01: If you're doing auto, BYD is coming your way.
• 11:37
  SPEAKER_01: What are you gonna do about that?
• 11:40
  SPEAKER_01: Yeah, so the idea that I'm gonna invest in European auto, well, I best I better study BYD and X Pung and Xiaomi.
• 11:48
  SPEAKER_01: So these Chinese companies, if you're studying Facebook, oh, guess what?
• 11:51
  SPEAKER_01: TikTok's coming.
• 11:52
  SPEAKER_01: So you can study the impact of these companies in your own market, which you probably have to do.
• 11:59
  SPEAKER_01: Uh, even in regular stuff, CPG, you know, pop mart is like rocking and rolling this year everywhere in the world, mini so is everywhere.
• 12:09
  SPEAKER_01: So, this idea that you're gonna avoid Chinese companies, I think you can avoid the Chinese market, but probably not Chinese competitors.
• 12:16
  SPEAKER_00: Yeah, I I remember when uh I think this is this is a long time ago, I think uh 10-15 years ago, uh close to 10, I suppose.
• 12:25
  SPEAKER_00: And uh I bought my first Xiaomi phone, and I remember everybody looking at me crazy because um it was very cheap back then, uh they're pretty expensive now, but they were around 200 euros, 300 euros back then.
• 12:38
  SPEAKER_00: Um, but it was such a good phone compared to like the iPhone and the Samsung phone, and now the Xiaomi, I mean, the the culture of Xiaomi.
• 12:48
  SPEAKER_00: I've studied the business not as extensively as you have, probably, but I mean their innovation and just their I mean they build cars now, their phones are like exceptional.
• 13:01
  SPEAKER_01: They built cars like it was nothing.
• 13:03
  SPEAKER_01: I've been writing about Xiaomi for a while.
• 13:05
  SPEAKER_01: I mean, I don't they they come in at this sort of economy value level, right?
• 13:11
  SPEAKER_01: Like they don't make top-tier phones, they make sort of mid-priced products, but they have a whole ecosystem.
• 13:18
  SPEAKER_01: But the team behind Xiaomi, you know, Lei Jun and his team, they've been together since 1995.
• 13:25
  SPEAKER_01: I mean, this is this is like, you know, there's certain teams I always say, like, you should be you should know who to be afraid of in life.
• 13:33
  SPEAKER_01: Competing with that team is like competing with Jeff Bezos.
• 13:36
  SPEAKER_01: Like, you sure you want to go up against that guy?
• 13:39
  SPEAKER_01: Like, he's hardcore.
• 13:41
  SPEAKER_01: That's the Xiaomi team.
• 13:43
  SPEAKER_01: So when they say, I actually wrote, I'll pat myself on the back a little bit.
• 13:46
  SPEAKER_01: When Xiaomi announced, you know, 2019, they said we're going into EVs.
• 13:52
  SPEAKER_01: And I kind of wrote, I said, look, if there's anyone that's gonna surprise you, it's this team.
• 13:56
  SPEAKER_01: Like, because everyone's like, oh, they're not gonna do it.
• 13:58
  SPEAKER_01: You know, Apple couldn't do it, blah, blah, blah.
• 14:00
  SPEAKER_01: Mike, look, if anyone's gonna be the dark horse that nobody saw coming, it's this team.
• 14:05
  SPEAKER_00: So, how is that possible that a company like Apple, with all its dominance and its expertise, is not able to build a car, and a company like Xiaomi is.
• 14:15
  SPEAKER_01: I mean, the easiest thing is you point the finger at the management team.
• 14:19
  SPEAKER_01: Xiaomi, you know, they have resources, right?
• 14:22
  SPEAKER_01: They have obviously their big players, but they don't have Apple level resources.
• 14:26
  SPEAKER_01: They don't have 200 billion in the bank or whatever it is.
• 14:29
  SPEAKER_01: Um, and I actually asked them, I went and visited their smart factory up in uh Beijing a couple months ago.
• 14:36
  SPEAKER_01: And I sat down with their team and I kind of asked, like, when did you actually make the decision you were gonna do EVs?
• 14:41
  SPEAKER_01: And I think they said 2020 or maybe 2021, the decision was made.
• 14:46
  SPEAKER_01: I said, okay, how long till you broke ground on your factory?
• 14:50
  SPEAKER_01: They're like 2023.
• 14:51
  SPEAKER_01: How long did it take to build?
• 14:53
  SPEAKER_01: 18 months.
• 14:54
  SPEAKER_01: The factory's huge.
• 14:56
  SPEAKER_01: It's huge.
• 14:56
  SPEAKER_01: Like you built this thing in 18 months, yeah, yeah.
• 14:59
  SPEAKER_01: And then your car started coming out mid-2020, 150,000.
• 15:04
  SPEAKER_01: Yeah.
• 15:04
  SPEAKER_01: I mean, the speed is like that's now.
• 15:09
  SPEAKER_01: You can operate at that speed in China in manufactured products in a way you can't anywhere else.
• 15:14
  SPEAKER_01: If you want to, you know, if you want your own smartphone, we can have you build your own smartphone in Shenzhen and you can make 100, 200 copies and send them to your friends.
• 15:25
  SPEAKER_01: We can do that in two weeks.
• 15:26
  SPEAKER_01: The ecosystem there for manufacturing, design, product design, scaling it up, build, you know, it's really remarkably fast.
• 15:35
  SPEAKER_01: Can't do that in the US at all.
• 15:37
  SPEAKER_01: So that's part of it.
• 15:39
  SPEAKER_01: But otherwise, just the team.
• 15:40
  SPEAKER_01: And the car's cool and it's selling like, I mean, anyone can spend a lot of money and build, but to spend a lot of money and build something in a sector you've never been in and then to make it knock it out of the park in terms of sales, right?
• 15:55
  SPEAKER_01: That's the part that's anyone could have made the management decision.
• 15:59
  SPEAKER_01: We're going in, we're writing the big checks.
• 16:01
  SPEAKER_01: Facebook said they're going into metaverse, right?
• 16:04
  SPEAKER_01: Spent the money, changed their name, product flopped.
• 16:09
  SPEAKER_01: Xiaomi didn't flop, they knocked it out of the park.
• 16:12
  SPEAKER_01: Like, that's the sign of a good management team.
• 16:14
  SPEAKER_01: When you can jump into a new sector and knock it out, Elon Musk does that, right?
• 16:19
  SPEAKER_01: Sector to sector, every time he jumps into some random new thing, the ball goes over the fence.
• 16:25
  SPEAKER_01: Like, all right, I don't know how that happens, but he's done it like five times now.
• 16:29
  SPEAKER_01: Uh Xiaomi's the same, they keep knocking the ball over the fence.
• 16:32
  SPEAKER_01: So Apple, when's the last time Tim Cook and that team created anything?
• 16:38
  SPEAKER_01: Have they ever created anything?
• 16:41
  SPEAKER_01: Steve Jobs did, right?
• 16:43
  SPEAKER_01: But then he passes away and it's like, okay, I guess you got earbuds.
• 16:47
  SPEAKER_01: Okay.
• 16:48
  SPEAKER_01: And yeah, there's a button on the side of the iPhone, okay.
• 16:52
  SPEAKER_01: And I guess the watch, but man, it's been a long time.
• 16:56
  SPEAKER_01: Like, they don't seem to be able to innovate, at least at the product level.
• 17:01
  SPEAKER_01: I would argue that, you know, I saw this funny video where it was um TikTok or something, and it was a review of the new iPhone 16, and then it was like it was like a fake review, but it's like, yeah, we're here reviewing the iPhone same 16.
• 17:14
  SPEAKER_01: Now, the iPhone same 16, you'll notice it has a button that we didn't see on the iPhone same 15.
• 17:19
  SPEAKER_01: And it was just a straight face like ad, but they just kept saying iPhone same 16.
• 17:24
  SPEAKER_01: That's pretty good.
• 17:24
  SPEAKER_01: But this is a different, yeah.
• 17:25
  SPEAKER_01: I'm like, that is kind of on the nose a little bit.
• 17:27
  SPEAKER_01: Yeah, I mean, this is when you get into tech.
• 17:30
  SPEAKER_01: You know, I love the business models because I think it's really interesting, but so much of it is just the people, and there's a big difference between an A team and a B team.
• 17:40
  SPEAKER_01: So Xiaomi's an A team, like, definitely.
• 17:43
  SPEAKER_01: Tencent, Alibaba, Bite Dance, Pinduo Duo, all A teams.
• 17:49
  SPEAKER_01: Like, there's a lot of strong management in China who've been doing these tech serial entrepreneurs for 25 years now.
• 17:59
  SPEAKER_01: Yeah, they're pretty impressive.
• 18:01
  SPEAKER_00: I mean, you have the privilege, I guess, but maybe because you also live close to those companies and the headquarters, you have perhaps the ability to visit or talk to some of the management.
• 18:14
  SPEAKER_00: Somehow.
• 18:15
  SPEAKER_00: How would someone uh living in the United States or Europe assess whether a management team is a B tier or A tier?
• 18:24
  SPEAKER_00: Is it just based on what they did previously or looking at the Yeah?
• 18:29
  SPEAKER_01: I I think you have, I mean, we we do tours, we we take executives and you know investors out to China and we we we do visits to companies, but everyone always wants to talk to management.
• 18:41
  SPEAKER_01: And I'm like, look, I can't always deliver that.
• 18:43
  SPEAKER_01: Sometimes I can, but sometimes I can't, right?
• 18:45
  SPEAKER_01: You know, it's a request.
• 18:46
  SPEAKER_01: Sometimes they say yes and no.
• 18:47
  SPEAKER_01: I meant I put it in two buckets.
• 18:49
  SPEAKER_01: Like, I put it in, okay, how good are you at your track record?
• 18:55
  SPEAKER_01: Like, what did you say you were gonna do in your annual reports in 2020, 2021, 2022?
• 19:01
  SPEAKER_01: I just look back what you said you were gonna do.
• 19:03
  SPEAKER_01: Did you do it?
• 19:04
  SPEAKER_01: Right?
• 19:05
  SPEAKER_01: Or did it just kind of disappear from the next 10K?
• 19:09
  SPEAKER_01: You know, remember last year you were talking about this?
• 19:11
  SPEAKER_01: It doesn't seem to be mentioned at all.
• 19:13
  SPEAKER_01: Did you deliver, right?
• 19:16
  SPEAKER_01: So you look at the track record in terms of what management said they were gonna do and what they did.
• 19:21
  SPEAKER_01: That's you know the most important.
• 19:23
  SPEAKER_01: But then you got to put sort of in a second bucket, which is okay, but how hard is what you're doing?
• 19:29
  SPEAKER_01: Like some things are really, really hard, right?
• 19:33
  SPEAKER_01: And I don't think you can judge moving from one tech paradigm to another, you know, when you go from PC to smartphone and from smartphone to cloud, very few businesses, even with the best management teams, can jump from one tech paradigm to the other.
• 19:49
  SPEAKER_01: It just doesn't happen.
• 19:50
  SPEAKER_01: Microsoft was awesome on PC, they missed mobile, but then they came back and got cloud, right?
• 19:57
  SPEAKER_01: So you don't want to judge them too harshly based on, you know, the problem they were dealing with at the time.
• 20:05
  SPEAKER_01: So someone like Alibaba, okay, I can assess your management team.
• 20:10
  SPEAKER_01: And the truth is e-commerce in China and outside of China where they're operating is pretty stable.
• 20:17
  SPEAKER_01: It's not turning itself on its head.
• 20:20
  SPEAKER_01: It's, you know, people are buying sneakers and clothes.
• 20:23
  SPEAKER_01: So I can sort of judge you pretty clearly.
• 20:26
  SPEAKER_01: But, you know, these AI situations and these changing, you know, it's a being a tech CEO is incredibly difficult over the long term.
• 20:35
  SPEAKER_01: Very few really good CEOs last and get it right, you know, for two consecutive paradigms.
• 20:43
  SPEAKER_01: They often miss.
• 20:44
  SPEAKER_01: Baidu, I think Baidu has a nice long track record, but they missed, right?
• 20:48
  SPEAKER_01: They were very good on PC at search, and then they tried a bunch of stuff for 10 years.
• 20:53
  SPEAKER_01: Food delivery, business services, didn't work.
• 20:57
  SPEAKER_01: Looking for growth.
• 20:58
  SPEAKER_01: Then the world turned, and now AI is big, and it turns out they're really perfectly positioned for AI.
• 21:04
  SPEAKER_01: Now they're doing great.
• 21:05
  SPEAKER_01: I wouldn't blame them for the fact that they had 10 years without much growth, because I think they were just in an inc, they had a difficult hand, right?
• 21:16
  SPEAKER_01: So you kind of gotta.
• 21:18
  SPEAKER_01: If you're looking at Coca-Cola, I don't have to do that second bit at all.
• 21:22
  SPEAKER_01: I'll just look at the track record, look at the statements, look at the incentives, things like that, but you know, cocaine changing.
• 21:29
  SPEAKER_01: Tech is pretty hard.
• 21:31
  SPEAKER_01: Makes sense.
• 21:31
  SPEAKER_00: Yeah.
• 21:32
  SPEAKER_00: Did I did I see a picture of you sitting with Buffett during uh dinner?
• 21:36
  SPEAKER_00: How did that happen?
• 21:37
  SPEAKER_01: I had a couple.
• 21:38
  SPEAKER_01: I sat with him twice.
• 21:39
  SPEAKER_01: Yeah, that was me being crafty.
• 21:41
  SPEAKER_01: I got a little bit of game.
• 21:43
  SPEAKER_01: I was uh teaching at Peking University, and I brought a group of students out from Peking University to Omaha to have uh, you know, he had used to have these events, they've stopped this now, where he would meet with, you know, eight or ten schools over lunch and he would answer questions, you know.
• 22:00
  SPEAKER_01: microphone.
• 22:01
  SPEAKER_01: But I was the only person to bring people out from China.
• 22:04
  SPEAKER_01: In fact, the only school he's ever met with from China was was my students.
• 22:08
  SPEAKER_01: And uh he's very interested in China.
• 22:10
  SPEAKER_01: So after he gave a talk, he came and sat at our table.
• 22:13
  SPEAKER_01: And uh yeah I sat next to him for two to three hours just chatting and I asked everything I'd ever wanted to ask.
• 22:21
  SPEAKER_01: And uh then it happened again.
• 22:23
  SPEAKER_01: Like what you know the funny thing about talking to him is it's actually kind of hard because everything you talk about he knows more than you.
• 22:35
  SPEAKER_01: So anything you say like oh you know we have this car we're looking at in China Xiaomi he knows more about cars than you do than any you know so everything you say you're kind of like you don't want to say too much because you know he's actually being quite nice but he's like yeah that's wrong or you know he's he's too smart about too many things.
• 22:54
  SPEAKER_01: So I focused on China and healthcare which I kind of know better probably it's probably the only area.
• 23:01
  SPEAKER_01: But he he was no he was great we we sat there for several hours and yeah that was kind of and then we did it again like a year later brought people out ended up sitting next to him for a couple hours and after that I was kind of done because it's like look I'm never going to top this no you know that what am I gonna do it again?
• 23:21
  SPEAKER_01: No this is as good as it gets and you know we're not gonna end up being although I it is funny to get an email from him that freaked me out like you open up your email and it's like Warren Buffett.
• 23:33
  SPEAKER_01: Warren his assistant wrote it he probably didn't but still that freaked me out a little bit because I was kind of the China connection a little bit um so anyways that was a couple years but he's he's sort of the next year he dialed all that back when he turned I think 86 or so they basically stopped a lot of his stuff he stopped it I think that's just stage of life so they started recording everything he'd ever said and compiling databases as opposed to doing more meetings.
• 24:01
  SPEAKER_01: So yeah it was pretty awesome you know it freaked me out a little bit I met with some of his companies in in Omaha like uh you know the jewelry store and the retailer and the furniture mart and all that and all the CEOs and his gem reminders always say he's way smarter than everyone thinks he is they say like his memory's unbelievable he knows he remembers absolutely everything right I say okay and so I was sitting with him and you notice this very quickly that he starts throwing out little comments that like it's weird.
• 24:35
  SPEAKER_01: Like student asked him Chinese student says you know you bought this stock in in 1970 I don't know what stock it was it wasn't a well known one you bought the stock in 1970 and you know you sold it as six months later why did you sell and he just starts going he's like well we didn't actually start buying in 1970 we started buying in November of 1969 and we were paying 23 and then in February the price went up to like 26 27 I'm this is not exact but this is about what he was doing.
• 25:04
  SPEAKER_01: You know and then we end up selling out in May at about that and and it's like how in the world do you possibly know that that's not normal at all and he keeps doing stuff like that.
• 25:14
  SPEAKER_01: You know you you and Bill Gates are friends how did you you know you said you met at dinner he's like yeah we met on a Tuesday like it was Tuesday night I was heading how do you know it's a Tuesday he keeps throwing little things like that out and you're like are you autistic?
• 25:28
  SPEAKER_01: Is that what's going on?
• 25:29
  SPEAKER_01: Because it's not normal to remember details like that.
• 25:33
  SPEAKER_01: And all his CEOs I talked to said the same thing.
• 25:36
  SPEAKER_01: He can just pull facts out from 20 years ago.
• 25:39
  SPEAKER_00: Yeah so something's a little yeah he he's got something special going on in his brain that I don't think is just he's I don't know if he's got perfect recall or something or maybe he's a little on the spectrum as an educator I've I've studied highly gifted kids quite well and uh he does strike me as one of them so I wouldn't be surprised and autism is often in the same bucket as uh being highly gifted yeah yeah I I think it's a trick actually I think like I used to work for the Saudi prince in the Middle East the$30 billion man and he was you know he's a prince he's Saudi so he's wearing the kutra and the you know the beads and all that and so he comes across very strange and he's a billionaire he's on his massive jets so people think he's very strange or different he's actually just he's a regular guy he's just very very effective but he's not genius smart but he's very smart but he gives the appearance right people think he must be different.
• 26:38
  SPEAKER_00: I think Buffett's the inverse I think because he's presented as this good old boy from Omaha you know like this classic Midwestern you know fella that it kind of hides the fact no he's actually quite strange like it's the inverse of Awali like there's he in his mind he's quite different um but you don't see it because I'm coming out to Omaha we're having steaks you know kind of good old boy no I I think he's actually far stranger maybe than at least I knew in a good way it means very he's super friendly and kind super friendly and sweet but definitely something's going yeah he's interesting yeah well but Buffett is all about modes and in your Motes and Marathon books you talk about how to win and succeed especially in digital business now in today's day and age most if not all businesses have to go digital somehow I think you just upset that there are just a very few that perhaps don't looking back a hundred years ago having a massive supermarket was a pretty big mode now you could just order food online and get it delivered in Shenzhen with a drone on your doorstep or whatever what has changed in the competitive landscape since the internet technology and AI came along are are the old modes still there are they disappearing what are your thoughts on that?
• 28:08
  SPEAKER_01: Some are I just make checklists so I in the book I basically say look there's kind of two checklists well three but two you got to think about competitive advantage and you got to think about barrier to entry.
• 28:19
  SPEAKER_01: And those often get conflated but they're different.
• 28:22
  SPEAKER_01: A competitive advantage is cook versus Pepsi versus Dr.
• 28:26
  SPEAKER_01: Pepper right you're all in the market these are your rivals but for some reason the smaller colas can't take down the big boys even after a hundred years so you have a competitive advantage against a rival that is an ongoing thing right so Coca-Cola would have that barrier to entry is a barrier against a new entrant you know this is Virgin Cola jumping into soda.
• 28:52
  SPEAKER_01: Now it turns out Coca-Cola doesn't have a barrier to entry at all it's actually quite easy to enter the Cola business come up with a soda do some marketing put in that's what Virgin did so there's no barrier to entry but Virgin got destroyed because Coca-Cola used their competitive advantage.
• 29:09
  SPEAKER_01: So those things are a bit different.
• 29:11
  SPEAKER_01: Other advantage other advantages like some businesses have a big barrier like telco networks before you can offer service as a telco network in the United States or Europe you know before you can make one dollar of revenue you have to have coverage across the whole region which means you got to have your towers and all there is a huge first step before you can make even one dollar.
• 29:33
  SPEAKER_01: So there's a big first barrier to jump.
• 29:36
  SPEAKER_01: It's mostly a cost barrier sometimes it's a technology barrier sometimes it's a difficulty barrier.
• 29:41
  SPEAKER_01: But in that case, okay, telco networks have a big barrier hard to enter and then once you get in you actually have a competitive advantage as well where you can outspend your rivals on RD marketing and some other things.
• 29:54
  SPEAKER_01: So yeah you want to separate those two buckets and those line up nicely with Porter's five forces.
• 30:01
  SPEAKER_01: You have rivals and you have new entrants right you also got to think about substitutes.
• 30:05
  SPEAKER_01: Digital most of the digital stories you hear digital's very good at wiping out barriers it's very good at coming up with the Silicon Valley loves this.
• 30:16
  SPEAKER_01: Silicon Valley is always about let's come up with a new tech that lets a small company do what only the big companies used to be able to do.
• 30:25
  SPEAKER_01: Instead of building Walmarts all over the country which is expensive and logistics hubs, let's do e-commerce that lets you just sell directly so a lot of the digital stuff we talk about is wiping out the barrier but not the competitive advantage.
• 30:39
  SPEAKER_01: It used to be to start a tech company you had to buy a ton of servers and a couple million dollars up front well now you can just use Amazon cloud.
• 30:46
  SPEAKER_01: So that barrier is gone.
• 30:48
  SPEAKER_01: So a lot of the actions there when you look at competitive advantages the main ones are still mostly there switching costs everyone likes to talk about network effects truth is most companies can't get network effects it's you know if you're Amazon you can get them but most businesses that's not an option everyone can get switching costs and switching costs can be on the consumer side you have to be a little bit gentle because you're basically introducing friction.
• 31:18
  SPEAKER_01: You're making it hard for someone to switch to someone else well consumers don't like that.
• 31:23
  SPEAKER_01: You kind of got to be soft about it.
• 31:25
  SPEAKER_01: So Timu, Shein they're all very good at creating sort of soft switching costs, loyalty programs, membership points, creating daily habits.
• 31:37
  SPEAKER_01: They're very good at getting you to stay in their business in sort of a soft way.
• 31:41
  SPEAKER_01: And it turns out digital is exceptionally good at creating habits.
• 31:46
  SPEAKER_01: Like the old school habit would be you put sugar and caffeine in a can you put it in vending machines all over the street and you know people see a vending machine they get a cue they go buy the soda they drink the coke they get a little nice taste that's a habit.
• 32:00
  SPEAKER_01: You do it every day it becomes a habit but it costs you money you got to do the marketing you got to do the vending machines well Facebook is very good at creating habits in your brain how many times do you open WhatsApp, WeChat, TikTok, Twitter too often they have built sort of amazing digital habits into your brain well that's a type of switching cost for the most part.
• 32:25
  SPEAKER_01: It's got some other stuff.
• 32:27
  SPEAKER_01: So it turns out software is incredibly good at hacking the mind of people and it can keep you you know dopamine hits that you get from things like you know envy, jealousy, Facebook, switching costs, all that stuff habit formation there's a software is incredibly good at hacking the human mind.
• 32:47
  SPEAKER_01: So on the demand side of competitive advantage there's a lot going on you can do.
• 32:54
  SPEAKER_01: On the supply side which is where companies used to live we are a big company we have more production so we can make tables cheaper than our competitor that's a supply side competitive advantage economies of scale economies of scope things like that.
• 33:08
  SPEAKER_01: We can get economies of scale and things like RD spending marketing but definitely digital is shifting the game from the supply side to the demand side you know the simplest explanation is like we're going from a world of limited supply where if you controlled the supply you could be powerful.
• 33:30
  SPEAKER_01: We have we're the biggest department store we're the biggest supermarket now we're going to a world of unlimited supply of everything more videos than we could ever watch more songs more sources of entertainment more products more endless age of abundance in an age of endless supply the whole game's on the demand side who can control eyeballs so that's where the big competitive advantages are now built.
• 33:56
  SPEAKER_01: But most companies have a mix of both actually you kind of need both for it to work you need a supply side and a commit a demand side.
• 34:02
  SPEAKER_01: So that's part of it competitive advantage is changing and then barriers to entry are also changing we're getting new types.
• 34:07
  SPEAKER_01: Elon Musk has a pretty good barrier to entry in autonomous driving.
• 34:12
  SPEAKER_01: Turns out it's pretty difficult to replicate that it's expensive and it's difficult.
• 34:18
  SPEAKER_01: It's not just spending the money you can spend a lot of money trying to invent a drug may not work.
• 34:24
  SPEAKER_01: You know some barriers they're not about the money spent they're about how hard is this autonomous driving is pretty hard and it takes a lot of money and it takes time.
• 34:33
  SPEAKER_01: So that's a barrier time, difficulty and money.
• 34:37
  SPEAKER_01: Autonomous driving that sort of intelligence capability that's a barrier for now we'll see how long it lasts so anyways you want to sort of break it into frameworks and then you just assess how digital is changing it.
• 34:51
  SPEAKER_01: And you just do it granular I just have lists here's the competitive advantages here's the barriers let's just see what this new tool is impacting.
• 35:00
  SPEAKER_01: Oh it doesn't hit that one it doesn't hit that one oh that one's getting hit good this company's in trouble but you're fine Starbucks you're you're in good shape don't worry about it digital is not a problem for you you know you're a media company like cable yeah you're in trouble so I just do it systematically that's it's just frameworks.
• 35:16
  SPEAKER_00: All right and you talk about modes being dynamic and not binary um I think I've heard you say that a couple times what do you mean by that?
• 35:25
  SPEAKER_01: It used to be if you had a competitive advantage it could last you know 20 years.
• 35:30
  SPEAKER_01: Heinz ketchup Coca-Cola Coca-Cola has been the number one soda cola since like 1920 like think of all the tech changes that have come and gone and nobody can take down the soda company in like a hundred years.
• 35:45
  SPEAKER_01: Nobody can take down the soda company certain things are but generally speaking moats are less you'll hear people say the thing that like competitive advantages in moats last eight years now.
• 35:58
  SPEAKER_01: I don't really buy that number but I agree with the fact that they're they're they're less than they used to be the number one you know the common way you take down a competitive advantage is you had meant a technology that disrupts it.
• 36:09
  SPEAKER_01: Right?
• 36:10
  SPEAKER_01: Well tech is coming fast.
• 36:11
  SPEAKER_01: So what you really want to do is you want to want to sort of live in this world of serial moat building.
• 36:16
  SPEAKER_01: When I work with companies you know CEOs I always ask like okay what marathon are we running in digital and what moat are we building such that in one to two years you're gonna be stronger than you are today.
• 36:29
  SPEAKER_01: Life should get easier for you in two years than it is today.
• 36:32
  SPEAKER_01: And it shouldn't get worse, which could happen.
• 36:35
  SPEAKER_01: You want to crystallize what that looks like this is the moat you're you need to build this is the operating activities you need to find that's what we'll call the winning that's what winning looks like but in two years we do it again and we say look you've got a good moat it's being disrupted in part by this so you have to build another one and build another one but the building process never stops.
• 36:57
  SPEAKER_01: You're building a new one you're widening your current one you're accepting that one is being disrupted so we'll we'll preserve it as long as we can but we know it's going.
• 37:06
  SPEAKER_01: Right?
• 37:06
  SPEAKER_01: So you're just you could call it serial modes you could call it just perpetual building but the alternative to that strategy and that's a difficult strategy we're always building we're always reinforcing our castle well the alternative is to have no castle and in a world of endless competition that is a very difficult way to live in the digital world you do not want to not have a moat it is too many competitors.
• 37:34
  SPEAKER_01: It's brutal so yeah if you're in software if you're in digital you got to have a moat or some kind or it's you know most software companies don't make any money most apps on your phone you didn't pay for you know those are the companies that don't have moats they give everything away from authors I write books.
• 37:53
  SPEAKER_01: Books don't make any money a little bit not much right it's a good activity it's a good thing to do but it's not a profit making venture so yeah you don't want to be in a digital business without a moat but you keep building and rebuilding in real that's just the game.
• 38:08
  SPEAKER_00: So what kind of organizational structure or culture supports building a moat in digital?
• 38:16
  SPEAKER_01: Yeah that's interesting I mean people like to talk about digital natives like companies that are born digital Amazon and Amazon very famously has its team structure you know we got agile teams we've got three levels we're very sort of horizontal and the teams are very independent and they sort of organically do things right it's like an amoeba it naturally grows to wherever the opportunity is it naturally fixes things.
• 38:44
  SPEAKER_01: Most traditional businesses aren't like that they're hierarchical they are you know we got factories all over India and Middle East and we have a CEO and vice presidents and with the chain of command and we need to you know our game is not to be amoeba like and adaptive our game is to be efficient well that's hierarchy.
• 39:05
  SPEAKER_01: Okay depending on what business you're in you may be different degrees of those two pictures generally if you're doing e-commerce you're kind of 50-50 because yes your user interface your app you want it to be sort of amoeba like to always find new things to do new new tools new features fixing pain points you know that's Amazon but you're also building a whole network of warehouses and smart logistics and robots well that's top down hierarchy right and your game over here is efficiency so they're kind of 50-50 but when you talk about moats that's almost always top down motes don't emerge by happenstance they don't you can buy do the amoeba thing and you can come up with a cool product that nobody saw in fact it's pretty common right WhatsApp was not supposed to be a messenger they just kind of discovered it but when you when you sort of architect your strategy this is the moat we're building this is the marathon we're running that has to come top down and you have to sort of enforce it I always say like look great machines don't assemble themselves.
• 40:16
  SPEAKER_01: Airplanes don't happen on their own.
• 40:19
  SPEAKER_01: You know you got to sort of design the ship and that's kind of what I do with CEOs is talk okay let's and then you got to sort of so you want a lot of the innovation and adaptation to be bottom up in a company but you want the moat and the marathon and the key strategy you know that's the hill we're gonna conquer right over there.
• 40:36
  SPEAKER_01: That's top down.
• 40:37
  SPEAKER_01: So that that's usually where I work it's good because most people aren't usually sure.
• 40:42
  SPEAKER_01: They think they kind of know but they aren't really sure.
• 40:44
  SPEAKER_01: So that's where a guy like me comes in.
• 40:46
  SPEAKER_01: Yeah look this is all I do is study motes in businesses that are digital or going digital.
• 40:50
  SPEAKER_01: So yeah you kind of got to be sure about those big questions.
• 40:56
  SPEAKER_00: I've always wondered the the following I'm invested in Tencent myself through a holding company process the Dutch holding company and of course I want them to win and succeed long term.
• 41:06
  SPEAKER_00: That's good for me as a shareholder.
• 41:08
  SPEAKER_00: Now let's say a startup comes to you and says we want to compete with VTAT for example how would you even start what sort of advice would you give to a startup trying to well I mean it seems kind of impossible or I mean ByteDance did it.
• 41:28
  SPEAKER_01: Tencent the problem with 10 cent is I like 10 cent.
• 41:30
  SPEAKER_01: It's so complicated it's almost like a different level of analysis.
• 41:34
  SPEAKER_01: Studying 10 cents almost like studying a country the business it's not you know if you're studying Coca-Cola okay I got it it's a simple product I can understand the products and the markets and 10 cents you got like all these different products and services and it's crazy big and oh it's politically active in the sense of it's so big and important in China that it's gonna have interactions with the state and you know it's almost like studying a country.
• 42:01
  SPEAKER_00: Yeah perhaps even too big to fail.
• 42:04
  SPEAKER_01: Yeah too big to fail is different than too big to profit or something you know you can be big and important and who knows what's going to happen.
• 42:11
  SPEAKER_01: But yeah obviously it's a one of a kind giant doesn't really have a comparable but if you take it apart business by business which I've done in some of their businesses very impressive like soup gaming business is a juggernaut WeChat's a juggernaut the management creates a new home run every three to four years they knock one right out of the park like QQ gaming weChat financial services I mean so you got top tier management but you know anyways that one's cool um I forgot what your question was about uh if a startup came to you and they wanted to compete yeah I mean that you you know you gotta look at I'm not a startup guy so let's you know VC is a different playbook right you're disrupting but in China we actually do see people take on the big boys and win fairly regularly in a way we don't see in the US so Pindu Aduo comes out of nowhere and knocks Alibaba and JD back on their heels everyone thought e-commerce was kind of a done deal like okay two giants dominate everything Pindu Aduo just knocks them back and jumps in takes pretty good market share ByteDance comes in and does TikTok and you know their other programs and ByteDance and Tencent are basically competing for the same eyeballs right both businesses are about eyeballs on screens which they then monetize by advertising so every hour someone spends on TikTok in China they're not spending on WeChat or Tencent Gaming or Tencent Music or online literature right so they're kind of competing in that regard.
• 43:54
  SPEAKER_01: And you know when you're a hot startup in China and you're getting traction usually the big Always come to you, 10 cent Alibaba, and they say, We'd like to invest in you.
• 44:03
  SPEAKER_01: And it's kind of the offer you can't refuse.
• 44:06
  SPEAKER_01: We'd like to, you know, your DD, your Qui D, we'd like to invest in you.
• 44:11
  SPEAKER_01: If you don't say yes, we're gonna invest in your competitor, and then we're gonna shift traffic to them on WeChat.
• 44:16
  SPEAKER_01: How do you compete with that, right?
• 44:18
  SPEAKER_01: So usually these companies, DD was invested in by which one?
• 44:22
  SPEAKER_01: 10 cent.
• 44:23
  SPEAKER_01: I'll Qui D was the other one.
• 44:25
  SPEAKER_01: Usually all these companies, they they kind of have to join a team.
• 44:30
  SPEAKER_01: ByteDance didn't agree to any of that.
• 44:32
  SPEAKER_01: They said, nope, we're gonna stay independent.
• 44:35
  SPEAKER_01: We're gonna be our own.
• 44:36
  SPEAKER_01: And uh they did it.
• 44:38
  SPEAKER_01: They rose up and now they're a major.
• 44:40
  SPEAKER_01: So Pindu did this.
• 44:42
  SPEAKER_01: Well, Pindu was strategically tied with Tencent.
• 44:45
  SPEAKER_01: So they they had kind of had a foot in that team.
• 44:48
  SPEAKER_01: But yeah, we see that in China.
• 44:50
  SPEAKER_01: We see a lot of innovation, a lot of uh the market.
• 44:54
  SPEAKER_01: I mean, I kind of said this earlier.
• 44:55
  SPEAKER_01: Like, if you're gonna study competition, China's a really good place because it's so dynamic.
• 45:01
  SPEAKER_01: Um, you know, when's the last time Uber had a major, well, actually, they have Waymo, but let's say Airbnb, you know, Expedia.
• 45:11
  SPEAKER_01: Like the consumer side of digital in the US is so stagnant and boring.
• 45:17
  SPEAKER_01: It's it moves a lot in China and Asia.
• 45:20
  SPEAKER_01: So we do see that, but you know, that's a whole different type of strategy.
• 45:25
  SPEAKER_01: I don't usually look at that.
• 45:27
  SPEAKER_01: I look at company A versus B versus C in an industry.
• 45:31
  SPEAKER_01: So they're already there or they've got a barrier, but the strategy to break into a business is different.
• 45:38
  SPEAKER_01: That's uh that's a kind of a different playbook.
• 45:42
  SPEAKER_01: So we do see it in China, but that's pretty rare.
• 45:44
  SPEAKER_01: You got to change consumer behavior, which is usually quite difficult and expensive.
• 45:49
  SPEAKER_01: But yeah, by the way, we've seen it.
• 45:51
  SPEAKER_01: Changing technology opens the door.
• 45:54
  SPEAKER_01: Chinese automakers were trying to get into auto forever, not doing very well, and then EVs come on and they saw it like an open door and they jumped in.
• 46:03
  SPEAKER_01: Now they're you know they're kind of dominant in five years.
• 46:06
  SPEAKER_00: In um competing in China is uh pretty different than what you just said in the US or Europe.
• 46:12
  SPEAKER_00: Now, Google, for example, is banned in China.
• 46:15
  SPEAKER_00: Well, they didn't technically got banned.
• 46:17
  SPEAKER_01: Technically, they left, but yeah.
• 46:20
  SPEAKER_00: Really?
• 46:20
  SPEAKER_00: Okay.
• 46:21
  SPEAKER_01: Well, they refused to change their search results under order or whatever, and they technically left or closed.
• 46:29
  SPEAKER_01: I don't think they weren't, I don't think they were ever technically banned, but you know, that may be a distinction without a difference.
• 46:35
  SPEAKER_00: So why are some companies kicked out or banned in China while others are allowed to sell there?
• 46:43
  SPEAKER_00: And does that hurt any of those businesses?
• 46:46
  SPEAKER_00: For example, I I can imagine Tesla has to change a lot of what data they collect or what they Yeah, that's interesting.
• 46:54
  SPEAKER_01: It's um, you know, the US in particular has really changed its tune on this.
• 47:00
  SPEAKER_01: Like, you know, ten years ago the tune was YouTube and Facebook are locked in China, can't use them.
• 47:07
  SPEAKER_01: That's not fair.
• 47:09
  SPEAKER_01: Okay.
• 47:10
  SPEAKER_01: Now China would say we are very pre I'm making this up, but we are protective of our sovereignty and our culture, and information is a big part of that.
• 47:21
  SPEAKER_01: Now, someone say, Oh, you're just it's political censorship.
• 47:25
  SPEAKER_01: Maybe that's true to a certain extent.
• 47:27
  SPEAKER_01: They would also say, no, it's cultural as well.
• 47:29
  SPEAKER_01: We don't allow nudity, we don't allow blood in video games, we don't allow a lot of things because we don't want foreign companies impacting our culture.
• 47:39
  SPEAKER_01: Okay.
• 47:40
  SPEAKER_01: That was the argument 10 years ago.
• 47:42
  SPEAKER_01: Now would you listen to like Trump saying we need to ban TikTok in the US?
• 47:46
  SPEAKER_01: Well, why?
• 47:47
  SPEAKER_01: Well, because this is content being controlled by China and it's changing how people think in the US.
• 47:55
  SPEAKER_01: Well, isn't that the argument China gave for YouTube 10 years ago?
• 47:59
  SPEAKER_01: Kinda.
• 48:01
  SPEAKER_01: So there is this idea of information sovereignty that, and I I actually agree with this.
• 48:09
  SPEAKER_01: Like, I don't think people in Palo Alto should determine what a journalist in Malaysia can write or say about a Malaysian cultural issue or in a Malaysian election.
• 48:21
  SPEAKER_01: I think all those decisions should be made locally.
• 48:24
  SPEAKER_01: Um, you know, we can call that data nationalism or information stuff.
• 48:28
  SPEAKER_01: But I I don't, you know, I don't have much in common with fairly far-left woke progressive culture of San Francisco.
• 48:36
  SPEAKER_01: So why are they determining what people can say in Indonesia and whether nudity is allowed on nudity?
• 48:42
  SPEAKER_01: Why are they involved in that?
• 48:43
  SPEAKER_01: So there's this idea of that, which I generally agree with, and I think China was actually probably ahead of the curve in protecting their culture or at least keeping it more sovereign in terms of information flows and media and content.
• 48:58
  SPEAKER_01: Now, there's other things going on there, but that's part of it.
• 49:01
  SPEAKER_01: So, in that sense, it's kind of the same.
• 49:03
  SPEAKER_01: And you could say the same argument when it comes to, say, let's say, strategic industries.
• 49:09
  SPEAKER_01: In retrospect, was it a good idea for the United States to offshore all of its manufacturing over the 25 years?
• 49:16
  SPEAKER_01: Well, if you're making socks and footballs, that's fine.
• 49:20
  SPEAKER_01: Semiconductors was probably a mistake.
• 49:22
  SPEAKER_01: They got to bring that back now.
• 49:24
  SPEAKER_01: Turns out having everything, but this is strategic technology that runs everything, and you can't make it yourself, right?
• 49:31
  SPEAKER_01: Okay, that was a mistake.
• 49:33
  SPEAKER_01: Uh, what about telco manufacturing, digital infrastructure?
• 49:38
  SPEAKER_01: Now, what about steel?
• 49:39
  SPEAKER_01: What about you could see there's a handful of industries where bringing those back in and protecting them from foreign competition is probably a good idea.
• 49:48
  SPEAKER_01: And China does that.
• 49:50
  SPEAKER_01: The US is now starting to do that in a way it didn't do it before.
• 49:54
  SPEAKER_01: So that's kind of, I think, a reasonable argument.
• 49:58
  SPEAKER_01: Now, the flip side to that argument is if you do all of that stuff, you're not helping your domestic companies, you're gonna make them weaker.
• 50:06
  SPEAKER_01: The protection is gonna make them weak, and they won't be able to compete head-to-head in Brazil, right?
• 50:13
  SPEAKER_01: And there's there's a lot of history to that that's true.
• 50:17
  SPEAKER_01: China has actually been fairly good at we are gonna protect certain industries and activities domestically from foreign competition, but we're not gonna do it in a way that doesn't make them weak.
• 50:27
  SPEAKER_01: They're still gonna have to compete.
• 50:29
  SPEAKER_01: And that's by and large happened.
• 50:31
  SPEAKER_01: But if you go to say Brazil, um, I think it you could argue that the tariffs and the protection for domestic industries has weakened the competitors such that they are there's few of them that can compete on the world stage effectively.
• 50:46
  SPEAKER_01: So, how do you do that sort of industrial policy protectionist game in a way that doesn't hurt you long term?
• 50:53
  SPEAKER_01: I don't know.
• 50:54
  SPEAKER_01: China's pulled it off.
• 50:55
  SPEAKER_01: I think you could argue Japan has pulled it off.
• 50:58
  SPEAKER_01: You know, their companies do well internationally, but they're kind of protected at home in certain ways.
• 51:03
  SPEAKER_01: So, yeah, that that dynamic, I'm not convinced the U.S.
• 51:07
  SPEAKER_01: can do this, to tell you the truth.
• 51:08
  SPEAKER_01: My standard little joke is everyone talks about a democratic free market versus more an autocratic state capitalist market.
• 51:18
  SPEAKER_01: Let's say China versus the US.
• 51:19
  SPEAKER_01: I'm more con I'm more convinced that smart versus dumb government is the key dimension that matters.
• 51:25
  SPEAKER_01: Okay, China has state capitalists, but they're really, really smart.
• 51:28
  SPEAKER_01: They're really good at what they do at the government.
• 51:31
  SPEAKER_01: Venezuela has state capitalists, they're not very bright.
• 51:34
  SPEAKER_01: Like, so I kind of think the smart versus dumb is the primary distinction, and then the other one's maybe the second one.
• 51:41
  SPEAKER_01: Um, and I'm not, you know, I come from California.
• 51:44
  SPEAKER_01: The government of California is not known for being real smart.
• 51:48
  SPEAKER_01: In fact, they're known for one fiasco after the next, the train to nowhere.
• 51:53
  SPEAKER_01: You know, it's nobody thinks the smart people are in Sacramento.
• 51:58
  SPEAKER_01: So uh I'm I'm a little suspect.
• 52:00
  SPEAKER_01: But yeah, the that whole dynamic's really interesting to see.
• 52:03
  SPEAKER_01: I think Europe has some good questions there.
• 52:05
  SPEAKER_01: Like, has the why aren't the European digital companies sort of competing on the national stage in in a lot of areas?
• 52:13
  SPEAKER_01: And I don't know.
• 52:14
  SPEAKER_01: I'm not I don't know anything about that sector, but there is a bit of a gap there that's a little conspicuous in, let's say, digital.
• 52:22
  SPEAKER_00: I can tell you.
• 52:22
  SPEAKER_01: Yeah, I figure you you're the expert, I don't know, but Europe is good at one thing that is regulating.
• 52:29
  SPEAKER_00: And I saw this uh this I saw this little joke that over the past 10 years, while everybody is working on technologies and AI, you see this image of like uh robe robots in China, and on the other side, Europe has designed a way that the like the yeah, the bottle cap thing they came up with, yeah.
• 52:49
  SPEAKER_00: The bottle cap that doesn't fall off when you open it, you know?
• 52:52
  SPEAKER_00: It's so it's ridiculous.
• 52:54
  SPEAKER_00: Just and companies are just not in Europe, they're not like incentivized to innovate.
• 53:00
  SPEAKER_00: Yeah, there's many problems.
• 53:02
  SPEAKER_00: I do think, however, that for the first time in a long, long time, now that America is pushing us away, they are feeling the need to become more yeah, focus more on capitalism, let businesses innovate and run, don't regulate everything, and work together and learn from China, especially.
• 53:25
  SPEAKER_00: And uh, I think that is what is happening more and more, but we'll see.
• 53:28
  SPEAKER_01: I don't know.
• 53:29
  SPEAKER_01: One of the questions I think about is do you really want to work this hard?
• 53:32
  SPEAKER_01: Like, you want to work at China level, really?
• 53:34
  SPEAKER_01: Six days a week, seven days a week, all morning, all night.
• 53:39
  SPEAKER_01: Does Europe really want to do that?
• 53:42
  SPEAKER_01: Do I really want to do that?
• 53:44
  SPEAKER_01: Would I want to probably not?
• 53:45
  SPEAKER_01: I mean, part of it's you know, free market and all that, but part of it's just like China and a couple other places in the world are just fueled with ambition.
• 53:54
  SPEAKER_01: They are just hungry.
• 53:55
  SPEAKER_01: And, you know, there's a good book written about China called The Age of Ambition.
• 53:58
  SPEAKER_01: I think that hits it on the head.
• 54:00
  SPEAKER_01: They want to be the world's best car companies, they really do, and they're willing to sacrifice everything to do it.
• 54:06
  SPEAKER_01: Work to seven days a week, fine.
• 54:08
  SPEAKER_01: Everybody.
• 54:10
  SPEAKER_01: I'm not sure, you know, French really want to do that.
• 54:13
  SPEAKER_01: I think part of America does, and I think another part doesn't.
• 54:17
  SPEAKER_01: And uh, you know, Thailand and Southeast Asia where I spent a lot of time, they have a really nice life.
• 54:23
  SPEAKER_01: And why would you work six to seven days a week?
• 54:26
  SPEAKER_01: You can't beat China, anyways, they're ten times bigger, so you know.
• 54:30
  SPEAKER_01: Do you really want to be a superpower?
• 54:32
  SPEAKER_00: Yeah.
• 54:33
  SPEAKER_01: Because it's a lot of work.
• 54:35
  SPEAKER_00: I always think about the um I heard someone explain that think about two people in a cage.
• 54:42
  SPEAKER_00: The one has nothing to lose, the other one has everything.
• 54:45
  SPEAKER_00: Nine out of ten times you you know who's gonna get out of the cage.
• 54:50
  SPEAKER_01: Yeah, I almost think there needs to be a second strategy.
• 54:53
  SPEAKER_01: Like, like, let's not be a superpower, but let's not be a vacation destination either.
• 55:01
  SPEAKER_01: Let's let's be let's do a middle path somewhere.
• 55:04
  SPEAKER_00: Somewhere in the middle.
• 55:05
  SPEAKER_01: We're gonna advance, we're gonna do well, we're gonna compete in certain areas.
• 55:08
  SPEAKER_01: We're not going, we're not playing the China versus the US game.
• 55:12
  SPEAKER_01: I mean, it's insane.
• 55:13
  SPEAKER_01: Who wants, you know, you want to work seven days a week forever?
• 55:16
  SPEAKER_01: No, let's it's almost like there needs to be another path, but I don't, it's out of my area.
• 55:21
  SPEAKER_01: The smaller company countries, I think, have it easier because they know it's not possible.
• 55:26
  SPEAKER_01: Ecuador knows it's not gonna be a superpower, they know they're not gonna be a tech leader, so they focus on other stuff.
• 55:32
  SPEAKER_01: But Europe's kind of like, you could.
• 55:35
  SPEAKER_01: It's possible, right?
• 55:37
  SPEAKER_01: If you want it.
• 55:40
  SPEAKER_01: I don't I know very little about what's going on there.
• 55:43
  SPEAKER_00: Yeah, fair.
• 55:44
  SPEAKER_00: I was hoping to get your thoughts on uh Taiwan because some of us are uh fascinated by the semiconductor industry.
• 55:50
  SPEAKER_00: Yeah, TSMC.
• 55:54
  SPEAKER_00: If you are allowed to talk about it, and otherwise we'll just skip it.
• 55:58
  SPEAKER_00: What what is your opinion on like uh the China-Taiwan risk or um yeah, I was I mean, I I kind of I've been you know meeting with Huawei for years, 10 years, something like that.
• 56:10
  SPEAKER_01: And so I I generally know kind of what a little bit what's happening, and and I remember seeing sort of their their new chips coming out, you know, three, four months ago.
• 56:20
  SPEAKER_01: And they came up, you know, if you're familiar with this, they come up with their new Ascend chips, right?
• 56:25
  SPEAKER_01: Which are not as powerful as Nvidia at all.
• 56:28
  SPEAKER_01: However, they sort of have a cloud architecture they've created where they're clustering chips together and then they're using math to connect them.
• 56:37
  SPEAKER_01: And they basically showed that like we can pretty much get close to NVIDIA level high-end chips by just using our other, we use we'll use several lower level chips and we'll tie them together in clusters in these data centers, and we'll get our you know, level.
• 56:53
  SPEAKER_01: And I got a pretty good heads up a couple months ago that they were the rumors they were coming close to NVIDIA level.
• 57:00
  SPEAKER_01: And then, you know, the government is very much like, we don't want NVIDIA to be in China anymore, not even the age 20s, because the supply chain has been weaponized against us.
• 57:11
  SPEAKER_01: So why would you know we got to get off this?
• 57:13
  SPEAKER_01: Which is smart.
• 57:14
  SPEAKER_01: So, you know, that world is really kind of changing like right now, where we're gonna see close to viable alternatives to the US tech supply chain.
• 57:26
  SPEAKER_01: You got you gotta look at all the levels, right?
• 57:28
  SPEAKER_01: It's you gotta go semi doctors, you gotta do programming language, you gotta go all the way.
• 57:33
  SPEAKER_01: They seem to be, China seems to be playing at every level.
• 57:37
  SPEAKER_01: The ASML thing is a bit of a question mark.
• 57:40
  SPEAKER_01: Um, the foundry is a bit of a question mark, SMIC.
• 57:44
  SPEAKER_01: Because I don't know what's going on inside.
• 57:46
  SPEAKER_01: Nobody was talking to anybody.
• 57:48
  SPEAKER_01: Like, and I don't know anybody who knows.
• 57:51
  SPEAKER_01: And every time I ask, they're like, nope, can't tell you anything.
• 57:53
  SPEAKER_01: Okay.
• 57:54
  SPEAKER_01: But it appears to be there close to replicating the whole US tech stack in AI, the same way DeepSeek kind of did it against OpenAI.
• 58:04
  SPEAKER_01: Like they just came up with very clever ways to mostly replicate what OpenAI did at a fraction of the price by just being clever.
• 58:12
  SPEAKER_01: This is kind of the same idea.
• 58:15
  SPEAKER_01: So, you know, what is that going to mean?
• 58:17
  SPEAKER_01: I don't know.
• 58:17
  SPEAKER_01: It's uh uh one of the questions I could kind of think about is it's clear that China's building its own tech stack.
• 58:24
  SPEAKER_01: They have to, right?
• 58:25
  SPEAKER_01: You can't be dependent on the U.S.
• 58:27
  SPEAKER_01: for your tech stack because they've weaponized it against you.
• 58:31
  SPEAKER_01: Right?
• 58:31
  SPEAKER_01: And the U.S.
• 58:32
  SPEAKER_01: government is very open about our goal is to slow the economic and technological advancement of China.
• 58:39
  SPEAKER_01: You know?
• 58:41
  SPEAKER_01: It's kind of a gangster thing to say.
• 58:43
  SPEAKER_01: Like, really, we do.
• 58:45
  SPEAKER_01: You're not saying they're attacking, you're just saying you wanna you kind of want to slow them down or retard their advancement.
• 58:52
  SPEAKER_01: That's not exactly a liberal value to to hurt other people's economic progress in this world.
• 58:59
  SPEAKER_01: Uh, but it's clear that like China's building its own tech stack, the US has its tech stack, and that includes TSMC, right?
• 59:08
  SPEAKER_01: And includes ASML.
• 59:10
  SPEAKER_01: SML, ASML, yeah.
• 59:12
  SPEAKER_01: Um okay, but what's the rest of the world gonna do?
• 59:16
  SPEAKER_01: What's Malaysia gonna do?
• 59:17
  SPEAKER_01: Well, it seems like they're pretty comfortable buying technology from China.
• 59:21
  SPEAKER_01: Data centers in Southeast Asia are coming out of China.
• 59:25
  SPEAKER_01: The number one infrastructure as a service cloud company in Asia, outside of China, is Alibaba.
• 59:33
  SPEAKER_01: It's not Azure, AWS, or Google Cloud.
• 59:37
  SPEAKER_01: So we're seeing other parts of the world sort of pick and choose.
• 59:42
  SPEAKER_01: And you know, China to its credit keeps leading with our stuff is cheaper and it's all open source.
• 59:48
  SPEAKER_01: So you can see everything.
• 59:51
  SPEAKER_01: And it works with everything, like no proprietary, whatever.
• 59:55
  SPEAKER_01: So there's a lot of incentive to adopt that parts of that system in certain areas.
• 1:00:01
  SPEAKER_01: Do we know what everyone, I think people kind of know where Asia's headed, Latin America, unclear, but Europe is obviously the big question.
• 1:00:10
  SPEAKER_01: What tech is Europe gonna adopt?
• 1:00:13
  SPEAKER_01: Is it gonna follow the US line?
• 1:00:16
  SPEAKER_01: Everything, you know, the US is definitely gonna argue you should not be buying your chips from there.
• 1:00:21
  SPEAKER_01: You should be only buying these chips, you should not be buying your data centers from them.
• 1:00:24
  SPEAKER_01: That's kind of what happened with Huawei when the U.S.
• 1:00:26
  SPEAKER_01: came in.
• 1:00:27
  SPEAKER_01: And Europe was about to install sort of a Huawei um, you know, base network, and it was all go.
• 1:00:34
  SPEAKER_01: They made the decision, everyone decided, and then a year later the U.S.
• 1:00:37
  SPEAKER_01: convinced them to reverse 100%, like 180 degrees, and they said, okay, we're not using it anymore.
• 1:00:42
  SPEAKER_01: It's just kind of highly political.
• 1:00:44
  SPEAKER_01: So that'll be interesting to see this whole data art, you know, this whole tech stack, how that's gonna play out in the rest of the world.
• 1:00:50
  SPEAKER_01: I think we know China and we know the U.S.
• 1:00:52
  SPEAKER_01: U.S.
• 1:00:52
  SPEAKER_01: government just took a stake in Intel.
• 1:00:54
  SPEAKER_01: That was weird.
• 1:00:54
  SPEAKER_00: Well, they didn't buy it, they just get it.
• 1:00:57
  SPEAKER_01: They just got it.
• 1:00:58
  SPEAKER_01: And they they announced it, like, oh, you know, this is good for the American people.
• 1:01:02
  SPEAKER_01: Now you own them like a tech.
• 1:01:04
  SPEAKER_01: I'm like, I'm pretty sure I'm not gonna get it.
• 1:01:06
  SPEAKER_01: I'm pretty sure you own it.
• 1:01:08
  SPEAKER_01: I don't think citizens are gonna get anything from this.
• 1:01:11
  SPEAKER_01: The American people, I don't know Intel.
• 1:01:13
  SPEAKER_01: I'm like, no, I think the government owns Intel.
• 1:01:15
  SPEAKER_01: I don't think it's me.
• 1:01:17
  SPEAKER_01: Am I gonna get dividends?
• 1:01:18
  SPEAKER_01: No, I don't think so.
• 1:01:19
  SPEAKER_01: So yeah, I don't quite know what they're doing in that regard.
• 1:01:23
  SPEAKER_01: But that might just be Trump being Trump.
• 1:01:26
  SPEAKER_01: Like, but yeah, that's uh that's very interesting.
• 1:01:30
  SPEAKER_01: I think this this new semiconductor thing, the A, you know, the architecture for AI compute is seems to be where we're they're going head to head, right?
• 1:01:42
  SPEAKER_01: China seems to have it's an alternative version to what NVIDIA and TSMC are offering, right?
• 1:01:48
  SPEAKER_01: You don't need to buy all these A100s, H100s.
• 1:01:51
  SPEAKER_01: You can buy our system.
• 1:01:52
  SPEAKER_01: It's a lot cheaper and it it's 80%, 90% is good.
• 1:01:56
  SPEAKER_01: You know, that was the Deep Seek model.
• 1:01:57
  SPEAKER_01: I know people using Deep Seek everywhere.
• 1:02:00
  SPEAKER_01: Europe, Latin America.
• 1:02:03
  SPEAKER_01: It's just as good and it's way cheaper.
• 1:02:06
  SPEAKER_01: And it's downloadable and open source.
• 1:02:08
  SPEAKER_01: And yeah.
• 1:02:08
  SPEAKER_01: So that that's gonna be an interesting little free.
• 1:02:11
  SPEAKER_01: I think it's happening this year.
• 1:02:12
  SPEAKER_01: I just think the news hasn't come out yet.
• 1:02:14
  SPEAKER_00: On what?
• 1:02:15
  SPEAKER_01: On where exactly this Chinese architecture is in terms of its capabilities.
• 1:02:22
  SPEAKER_01: I don't think people have said out loud, but there's rumors that it's it's right up there with the H1.
• 1:02:27
  SPEAKER_01: I keep asking, people keep telling I don't know, and I couldn't tell you if I knew.
• 1:02:30
  SPEAKER_01: But that's clearly what they're doing.
• 1:02:32
  SPEAKER_01: You know, I wrote an article recently, which was just a little rant, basically about how the U.S.
• 1:02:37
  SPEAKER_01: government broke NVIDIA's monopoly.
• 1:02:39
  SPEAKER_01: Nvidia had the world's greatest monopoly, like it may be the greatest monopoly of this century.
• 1:02:44
  SPEAKER_01: You have a 100% global monopoly on high-end semiconductors, GPUs that you need to do AI.
• 1:02:51
  SPEAKER_01: You're unstoppable.
• 1:02:52
  SPEAKER_01: You've got network effects, it's massive.
• 1:02:55
  SPEAKER_01: There's no alternatives anywhere.
• 1:02:57
  SPEAKER_01: The market cannot take this business.
• 1:02:59
  SPEAKER_01: The only entity that can take this business from you, turns out, was the U.S.
• 1:03:04
  SPEAKER_01: government.
• 1:03:05
  SPEAKER_01: They forbid NVIDIA from selling its chips to China, which is a hundred billion dollar a year market.
• 1:03:12
  SPEAKER_01: And uh they created a big old open space for a competitor to jump in, which they did.
• 1:03:17
  SPEAKER_01: And now they've kind of lost, now they're down to about 50% of their previous.
• 1:03:21
  SPEAKER_01: They used to have about, I don't know, was that 80s or 90%?
• 1:03:25
  SPEAKER_01: They now have only 50% of the market of China, what they used to have, something like that.
• 1:03:30
  SPEAKER_01: So, you know, the their monopoly got broken.
• 1:03:35
  SPEAKER_01: The US government did it.
• 1:03:36
  SPEAKER_01: No competitor could have ever done it, probably.
• 1:03:38
  SPEAKER_01: Now they've all jumped in and they're, you know, they're scaling up and they're capturing the China market.
• 1:03:43
  SPEAKER_01: You get the China market, you're big enough to compete globally.
• 1:03:46
  SPEAKER_01: So bad news for Jensen.
• 1:03:48
  SPEAKER_01: He really kind of doing well, obviously.
• 1:03:51
  SPEAKER_01: But yeah, he he he kind of had his monopoly broken.
• 1:03:54
  SPEAKER_00: Yeah.
• 1:03:56
  SPEAKER_00: Yeah, we'll see how that all plays out.
• 1:03:58
  SPEAKER_00: Kind of funny and uh interesting to think about.
• 1:04:02
  SPEAKER_00: Can I can I ask you uh a couple more questions regarding AI, perhaps?
• 1:04:06
  SPEAKER_00: Sure.
• 1:04:07
  SPEAKER_00: Yeah.
• 1:04:08
  SPEAKER_00: Um, one of the most requested questions, it's a pretty simple one, but I'll start with a build-up question.
• 1:04:15
  SPEAKER_00: The word AI is used basically everywhere.
• 1:04:19
  SPEAKER_00: You see it in the supermarkets on your phone.
• 1:04:22
  SPEAKER_00: I see it on my fridge.
• 1:04:24
  SPEAKER_00: I even believe my toothbrush nowadays has uh AI.
• 1:04:28
  SPEAKER_00: So, what exactly does it mean to have artificial intelligence and what makes AI different from other technologies?
• 1:04:37
  SPEAKER_00: Why are people so excited about AI?
• 1:04:41
  SPEAKER_01: Yeah, I mean, I think it was it was clearer before, right?
• 1:04:44
  SPEAKER_01: When five years ago, when people talked about AI, they were talking about predictive AI, right?
• 1:04:50
  SPEAKER_01: Let's look at all the data and do a lot of statistical analysis and figure things out.
• 1:04:56
  SPEAKER_01: Right?
• 1:04:56
  SPEAKER_01: That was AI.
• 1:04:58
  SPEAKER_01: Uh, not what we're talking about mostly today.
• 1:05:00
  SPEAKER_01: And there's a good book about that called prediction machines.
• 1:05:04
  SPEAKER_01: And this is business use cases, not the technology, but what you can use it for in business.
• 1:05:09
  SPEAKER_01: And they, you know, they basically argued that that AI, predictive AI, was basically cheap and fast prediction.
• 1:05:17
  SPEAKER_01: You know, it used to be, and the analogy is, you know, before they had computers, everyone did everything by hand with math and you know, little mechanical calculators.
• 1:05:27
  SPEAKER_01: That's computation.
• 1:05:29
  SPEAKER_01: The computer created cheap and fast computation.
• 1:05:33
  SPEAKER_01: Suddenly you could compute everything dirt cheap, right?
• 1:05:36
  SPEAKER_01: Everyone's got their spreadsheets, everyone's got their calculators, everyone's got their computation.
• 1:05:40
  SPEAKER_01: So the cost of compute dropped dramatically, and therefore you could use it in everything.
• 1:05:45
  SPEAKER_01: You know, it used to be if you had a business, you had to have a hundred people out back, you know, doing your books with pencil and paper, you know, and doing little math abacus.
• 1:05:55
  SPEAKER_01: Well, now you're looking back, and there's eight people, and you know, they're using the computer.
• 1:06:00
  SPEAKER_01: Computer or whatever.
• 1:06:01
  SPEAKER_01: So predictive AIs allows you to predict what's going to happen in the same way that that compute enabled you to do cheap computation.
• 1:06:10
  SPEAKER_01: So if you want a market study, you can just run the numbers.
• 1:06:13
  SPEAKER_01: You don't need to.
• 1:06:14
  SPEAKER_01: And really what you're doing is you're creating a substitute to people.
• 1:06:17
  SPEAKER_01: So instead of hiring an analyst to predict about the market, you just feed the data into AI and it'll tell you if you change this, you'll most likely do better.
• 1:06:27
  SPEAKER_01: You know, when an Uber or Didi driver picks up a ride and drops them off, it immediately recommends to them why don't you go three blocks and wait there?
• 1:06:36
  SPEAKER_01: We predict you'll get a ride there if you go.
• 1:06:39
  SPEAKER_01: Well, that's the AI making a prediction.
• 1:06:41
  SPEAKER_01: So before it was that, that was pretty easy to understand.
• 1:06:46
  SPEAKER_01: Then you get to generative AI, which is, you know, very weird to think about.
• 1:06:52
  SPEAKER_01: It starts out of, you know, if you write six words, we can predict the seventh word.
• 1:06:57
  SPEAKER_01: I like milk.
• 1:06:58
  SPEAKER_01: I am going to the store to buy another bottle of blank.
• 1:07:02
  SPEAKER_01: And it predicts the words milk.
• 1:07:05
  SPEAKER_01: Right?
• 1:07:05
  SPEAKER_01: That's what it does.
• 1:07:06
  SPEAKER_01: It predicts the next word.
• 1:07:07
  SPEAKER_01: And who knew that that type of technology capability can evolve into generative AI where create an image for me of a dolphin wearing a pink hat and it can do it.
• 1:07:24
  SPEAKER_01: Right?
• 1:07:24
  SPEAKER_01: And it's the same process effectively.
• 1:07:27
  SPEAKER_01: Predict the next word.
• 1:07:28
  SPEAKER_01: Well, in this case, image or pixel, but generative AI falls out of that, which you could argue is cheap and fast generation.
• 1:07:38
  SPEAKER_01: Generate a poem, generate an article, generate a book report, generate, you know, and it makes it cheap and fast, just like prediction became cheap and fast, just like compute became cheap and fast.
• 1:07:49
  SPEAKER_01: And the primary substitute for generation of content is people.
• 1:07:54
  SPEAKER_01: So I can give a tool to someone and say, write me a report on the Vietnam market, and generative AI can do it in 15 to 20 minutes.
• 1:08:03
  SPEAKER_01: And it's good.
• 1:08:04
  SPEAKER_01: Maybe it's not a complete substitute, but it's good.
• 1:08:07
  SPEAKER_01: So you get into generation of text, generation of audio, generation of images, generation of video.
• 1:08:13
  SPEAKER_01: Yeah, and then it just kind of goes from there.
• 1:08:14
  SPEAKER_01: So you could say it's cheap and fast content generation.
• 1:08:17
  SPEAKER_01: And now there's a new book out by a very smart man named uh Sanji Chaudari.
• 1:08:23
  SPEAKER_01: He's sort of one of the bigger thinkers on platforms.
• 1:08:26
  SPEAKER_01: And he argues that AI is basically collaboration and coordination in a way we couldn't do that before.
• 1:08:33
  SPEAKER_01: So AI lets us sort of collaborate uh very easily with other people and make connections that we could never make before.
• 1:08:40
  SPEAKER_01: The example would be Airbnb is in the connections business.
• 1:08:45
  SPEAKER_01: It connects someone looking for a home with someone who's posting a home.
• 1:08:49
  SPEAKER_01: And we could never find each other otherwise.
• 1:08:52
  SPEAKER_01: But by Airbnb, it enables the connection and then we collaborate.
• 1:08:59
  SPEAKER_01: We basically do a transaction.
• 1:09:01
  SPEAKER_01: And Airbnb does that.
• 1:09:03
  SPEAKER_01: And it standardizes it and scales it up.
• 1:09:05
  SPEAKER_01: And you know, you're in the coordination cost business.
• 1:09:08
  SPEAKER_01: It turns out that's pretty rare that there aren't that many interactions we can do that way because most interactions can't be standardized.
• 1:09:15
  SPEAKER_01: Most interactions are messy.
• 1:09:17
  SPEAKER_01: Most interactions don't have cells in a spreadsheet where you can do matching.
• 1:09:23
  SPEAKER_01: Information is unstructured, it's videos and conversations and things like that.
• 1:09:28
  SPEAKER_01: So generative AI is good at enabling collaborations that way.
• 1:09:33
  SPEAKER_01: Where, you know, the example he uses in his book, which I thought was good, is if you're building a huge building, office tower, you will have the designers, they're a team, they all work together.
• 1:09:44
  SPEAKER_01: They have their own way of working, their own language, their own skills, their own expertise, their own data logs and how they see things.
• 1:09:52
  SPEAKER_01: You'll have the engineering team, they have different skills, different expertise.
• 1:09:56
  SPEAKER_01: They work a certain way, they keep their data in different ways.
• 1:09:59
  SPEAKER_01: You'll have the plumbing team, you'll have the construction team, you'll have the government regulations team, you'll have the sales and marketing team.
• 1:10:06
  SPEAKER_01: Those five groups, for them to work together and make the building, you got to do a lot of phone calls and meetings and reports.
• 1:10:14
  SPEAKER_01: There is no standardized digital interface like Airbnb that lets them all collaborate.
• 1:10:20
  SPEAKER_01: Generative AI can do that.
• 1:10:22
  SPEAKER_01: It can bounce between all five parties, see their data in different formats.
• 1:10:27
  SPEAKER_01: They could be speaking different languages, French, German, whatever.
• 1:10:30
  SPEAKER_01: It can bring them all together and oversee the coordination of the whole project.
• 1:10:35
  SPEAKER_01: So that's a type of coordination we've never seen before.
• 1:10:38
  SPEAKER_01: That's kind of interesting to think about.
• 1:10:40
  SPEAKER_01: So those are kind of the three buckets I'm thinking about a lot: prediction, content generation, and coordination.
• 1:10:48
  SPEAKER_01: Um, looking for business use cases that work and change a business or not, as opposed to being interesting in theory, but I can't see it in businesses.
• 1:10:57
  SPEAKER_01: I want to see it in businesses scaled up.
• 1:11:00
  SPEAKER_01: Then it's real, not a pilot.
• 1:11:02
  SPEAKER_01: There's pilots everywhere, you know.
• 1:11:05
  SPEAKER_00: Do you think from your personal experience and living in China, is AI used or designed differently in China compared to the United States, for example?
• 1:11:16
  SPEAKER_00: I feel like China is much more focused on like embedding AI in practical use cases or physical products, while Western society is more like software focused.
• 1:11:29
  SPEAKER_00: Is that just me?
• 1:11:30
  SPEAKER_01: Yeah, there's probably a couple of distinctions, but I mean it's hard to know in general.
• 1:11:33
  SPEAKER_01: But you can definitely say, look, there's a lot more focus on manufacturing and industrial, because they have all the manufacturing.
• 1:11:40
  SPEAKER_01: There's no factories in California, right?
• 1:11:43
  SPEAKER_01: So, you know, half the world's industrial robots are in China.
• 1:11:47
  SPEAKER_01: All the drones come from there.
• 1:11:49
  SPEAKER_01: All the, you know, so obviously there's a lot of industrial use cases, and manufacturing is sort of number one.
• 1:11:55
  SPEAKER_01: Yeah, so they're gonna look at that for sure.
• 1:11:58
  SPEAKER_01: Uh, but if you were to say, look at banking, I'm not sure if the US or China is ahead.
• 1:12:03
  SPEAKER_01: Probably similar.
• 1:12:04
  SPEAKER_01: I don't think one is necessarily ahead.
• 1:12:06
  SPEAKER_01: B2C use cases, it's probably pretty even.
• 1:12:10
  SPEAKER_01: But one of the arguments people say often is China's much better at sort of execution and application.
• 1:12:19
  SPEAKER_01: They're faster.
• 1:12:20
  SPEAKER_01: US is maybe a bit better at invention.
• 1:12:22
  SPEAKER_01: I don't know if that's true.
• 1:12:23
  SPEAKER_01: People say that.
• 1:12:24
  SPEAKER_01: I don't know how you'd measure that.
• 1:12:26
  SPEAKER_01: I definitely look at when I look at China for AI, I'm looking at B2C use cases, e-commerce, video, content generation, instant delivery, things like that.
• 1:12:39
  SPEAKER_01: I'm looking at manufacturing because it's logistics a bit, because the logistics is is really pretty advanced there.
• 1:12:47
  SPEAKER_01: And then maybe transportation, trains.
• 1:12:50
  SPEAKER_01: Uh they're very China's very good at sort of infrastructure, roads and bridges and trains and high-speed rail and airports.
• 1:12:57
  SPEAKER_01: They build those things like they're nothing.
• 1:12:59
  SPEAKER_01: So they're better at deploying infrastructure and sort of upgrading it with digital tools.
• 1:13:03
  SPEAKER_01: I think they're better than you know than anywhere at that, probably.
• 1:13:06
  SPEAKER_01: So those are kind of the four I look at.
• 1:13:09
  SPEAKER_01: I don't really know what's going on in healthcare or financial services in China very much, or the US for that matter.
• 1:13:14
  SPEAKER_00: That's fair.
• 1:13:15
  SPEAKER_00: If you if you had to uh guess, do you think we're in some sort of AI bubble with all the hype we're we're seeing?
• 1:13:23
  SPEAKER_00: Is it really like it is very effective?
• 1:13:26
  SPEAKER_00: I mean, we're seeing the use cases and companies are saving lots of money and need less employees, especially in like certain boring repetitive tasks.
• 1:13:36
  SPEAKER_00: So, what do you think about the AI bubble?
• 1:13:38
  SPEAKER_01: Or yeah, I'm not sure I even buy the whole, I'm not even sure bubbles exist.
• 1:13:43
  SPEAKER_01: Like people say this booms and bust bubbles.
• 1:13:46
  SPEAKER_01: I mean, I've spent half my career in the Middle East in China, and we just call that progress.
• 1:13:54
  SPEAKER_01: Okay, we're gonna, you know, build a big city in 10 gen, and it's a whole new part of town, and guess what?
• 1:14:01
  SPEAKER_01: You know, you built it and it's 80% empty.
• 1:14:03
  SPEAKER_01: Well, go city, go city, you know, and the real estate prices crash, bubble.
• 1:14:08
  SPEAKER_01: Really?
• 1:14:09
  SPEAKER_01: Because I come back five years and it's all full.
• 1:14:11
  SPEAKER_01: I think that's just how I don't think progress is like here's your supply and here's your demand, and we go.
• 1:14:18
  SPEAKER_01: I think it's more like this.
• 1:14:20
  SPEAKER_01: I think that's kind of the nature of progress, is a series of booms and busts in an upward trajectory in technology and things like that.
• 1:14:30
  SPEAKER_01: So, you know, we're always seeing booms and busts in Asia for lots of stuff.
• 1:14:35
  SPEAKER_01: You know, okay, maybe the equity equity holders take a hit.
• 1:14:38
  SPEAKER_01: Maybe the debt gets restructured.
• 1:14:39
  SPEAKER_01: I was in Dubai when it was packed, and then I was in Dubai the year after, 2008, when it was empty.
• 1:14:45
  SPEAKER_01: Come back five years later, Dubai's rocking and rolling.
• 1:14:48
  SPEAKER_01: Was that a bubble?
• 1:14:50
  SPEAKER_01: Or does that kind of depend on what time frame you're thinking about?
• 1:14:55
  SPEAKER_01: In a 10-year time frame, none of these things are bubbles, probably.
• 1:14:59
  SPEAKER_01: But anyway, so that's kind of a weird concept for me.
• 1:15:03
  SPEAKER_01: I don't quite know if I buy it.
• 1:15:05
  SPEAKER_01: What's interesting about the AI thing, like, is you do seem to get an immediate, like, if you're building apartment buildings, you can lose your shirt.
• 1:15:13
  SPEAKER_01: These AI tools do seem to save money immediately.
• 1:15:16
  SPEAKER_01: There's like an immediate financial benefit.
• 1:15:19
  SPEAKER_01: If you adopt Gemini or OpenAI and start having your finance team and your lawyer team and you know, your back office use this stuff, you save money immediately.
• 1:15:29
  SPEAKER_01: Like, that's kind of nice when you have this massive investment thing going on, but you see immediate cost benefits.
• 1:15:36
  SPEAKER_01: But that's not usually the case, right?
• 1:15:38
  SPEAKER_01: Like, so yeah, there's definite cost, you know, savings immediately for businesses.
• 1:15:44
  SPEAKER_01: So that's kind of good.
• 1:15:46
  SPEAKER_01: But yeah, it's probably um let's let's call it like an overspending.
• 1:15:52
  SPEAKER_01: You know, you're building more capacity than you need because everyone's afraid of getting left out.
• 1:15:58
  SPEAKER_01: So, you know, are we gonna end up with too many data centers?
• 1:16:01
  SPEAKER_01: I don't know.
• 1:16:02
  SPEAKER_01: I haven't looked at the numbers, but I would assume so.
• 1:16:04
  SPEAKER_01: Isn't that the way it is?
• 1:16:05
  SPEAKER_01: I mean, isn't that isn't that how new industries get created?
• 1:16:08
  SPEAKER_01: It's not a linear process of building supply steadily along with demand.
• 1:16:13
  SPEAKER_01: When new businesses are I don't know.
• 1:16:15
  SPEAKER_01: I I assume the the venture capital people probably all know these numbers, and they probably all know at what point they're getting out.
• 1:16:23
  SPEAKER_01: They're gonna ride the initial wave and then they they're gonna start selling out some shares at a certain point when the wave subsides.
• 1:16:31
  SPEAKER_01: So yeah, there is probably, let's call it a down phase coming, but I don't know.
• 1:16:36
  SPEAKER_01: I never really look at those numbers.
• 1:16:37
  SPEAKER_00: A lot of big companies are kind of, I'm not from the IT world myself, but in conversations with people at large European firms, for example, a couple American ones, I often hear the same complaint that they're kind of stuck juggling multiple systems that don't really talk to each other.
• 1:16:53
  SPEAKER_00: Some even switch to what seems like worse software just because it integrates better with some other tool they're already using.
• 1:17:00
  SPEAKER_00: Yeah.
• 1:17:01
  SPEAKER_00: Now, with the rise of AI, especially large language models that they kind of thrive on data, unified clean data, do you think this push towards integration could disrupt like lots of software?
• 1:17:17
  SPEAKER_01: Do you need to integrate it?
• 1:17:18
  SPEAKER_01: I guess is the question.
• 1:17:20
  SPEAKER_01: If you buy the argument that generative AI is a collaboration and coordination tool, that's like sitting on your computer and you got your browser and you got a bunch of tabs open.
• 1:17:30
  SPEAKER_01: Maybe you have LinkedIn, maybe you have your email, maybe you have Slack open, whatever.
• 1:17:35
  SPEAKER_01: Those things don't interact with each other.
• 1:17:36
  SPEAKER_01: Like they're separate.
• 1:17:38
  SPEAKER_01: You know, that's kind of what we do as humans.
• 1:17:40
  SPEAKER_01: We flip between, you know, we're the ones who integrate them.
• 1:17:42
  SPEAKER_01: We flip between the tabs.
• 1:17:44
  SPEAKER_01: I'm buying my plane ticket on tab two.
• 1:17:46
  SPEAKER_01: I'm booking my hotel on tab three.
• 1:17:48
  SPEAKER_01: I need a, you know, I'm gonna go see some tourist sites, so I'm watching YouTube on tab four.
• 1:17:55
  SPEAKER_01: We're the coordination agent in that it's humans flipping between browser tabs.
• 1:18:01
  SPEAKER_01: AI can flip between browser tabs just like us.
• 1:18:04
  SPEAKER_01: It can look at the booking thing, it can look at the hotel thing, it can look at the tour packages, it can look at the YouTube videos, and then it can, I just talk to the AI and say, plan my trip to Singapore, and it does it all.
• 1:18:16
  SPEAKER_01: So, you know, this idea of AI as a coordination tool is kind of interesting.
• 1:18:22
  SPEAKER_01: That's one.
• 1:18:22
  SPEAKER_01: You know, I don't know.
• 1:18:23
  SPEAKER_01: It's hard to know how these things are playing out.
• 1:18:25
  SPEAKER_01: Like it's all speculation.
• 1:18:26
  SPEAKER_01: I kind of look for use cases where I can see it working.
• 1:18:29
  SPEAKER_01: So e-commerce is great, productivity tools are great.
• 1:18:33
  SPEAKER_01: Outside of that, I'm not totally sure what to look at yet.
• 1:18:35
  SPEAKER_01: Cloud tools are obviously great, AI plus cloud is really working.
• 1:18:39
  SPEAKER_01: Alibaba just released their numbers yesterday.
• 1:18:41
  SPEAKER_01: Their AI business within cloud was triple-digit growth for the quarter.
• 1:18:46
  SPEAKER_01: So that's real.
• 1:18:47
  SPEAKER_01: We can see the revenue.
• 1:18:48
  SPEAKER_01: The other stuff, is it gonna wipe out SaaS companies?
• 1:18:52
  SPEAKER_01: I don't know.
• 1:18:53
  SPEAKER_01: The SaaS companies are panicked, that's for sure.
• 1:18:55
  SPEAKER_01: You can see Salesforce and them, you know, leaning into AI really aggressively.
• 1:19:01
  SPEAKER_01: Yeah, Adobe.
• 1:19:03
  SPEAKER_01: You know who I kind of respect?
• 1:19:04
  SPEAKER_01: I kind of I respect uh Google.
• 1:19:06
  SPEAKER_01: Like, like they kind of missed generative AI, right?
• 1:19:10
  SPEAKER_01: The Transformer paper came out of Google, and then they kind of missed it, and then they hit the panic button because it turns out Chat GPT is a mortal threat to search.
• 1:19:22
  SPEAKER_01: And it that's totally true.
• 1:19:23
  SPEAKER_01: I can't think of the last time I did a search.
• 1:19:26
  SPEAKER_01: Like, I bet I'm down 85%, 90% in terms of just search queries that I do.
• 1:19:32
  SPEAKER_01: I'm always just chatting with an AI to find what I want.
• 1:19:37
  SPEAKER_01: Really?
• 1:19:38
  SPEAKER_01: Yeah, I mean, I rarely use search engines anymore, and I used to use them all the time.
• 1:19:41
  SPEAKER_01: So yeah, they were like they identified it as a mortal substitute, you know, threat, a substitute to their prime cash engine.
• 1:19:50
  SPEAKER_01: And they pivoted very quickly.
• 1:19:52
  SPEAKER_01: And now Gemini's great.
• 1:19:54
  SPEAKER_01: Like Gemini, I would argue Gemini's the best one, probably.
• 1:19:58
  SPEAKER_01: I I think that's for the me the one I I use the most, and the tools are amazing.
• 1:20:03
  SPEAKER_01: That was a pretty good um management response to what happened.
• 1:20:07
  SPEAKER_01: Kind of helps when you have hundred, you know, when you have whatever, 100,000 engineers.
• 1:20:11
  SPEAKER_01: You know, it's a lot easier to respond.
• 1:20:13
  SPEAKER_00: Like, yeah, but still, they they kind of face the innovators' dilemma where I mean they aren't really monetizing it as effectively as the advertising, so we'll see how that plays out.
• 1:20:24
  SPEAKER_01: It may not, it just may not be as profitable.
• 1:20:27
  SPEAKER_00: Yeah, maybe.
• 1:20:29
  SPEAKER_01: You know, there's a lot of great stuff in this world.
• 1:20:31
  SPEAKER_01: Books used to be nice and profitable, daily print newspapers used to be cash machines.
• 1:20:37
  SPEAKER_01: Now there's no way to make money in any of those businesses.
• 1:20:40
  SPEAKER_01: Like, you can you can take that apart all day long.
• 1:20:44
  SPEAKER_01: There's no profits to be found, as far as I can tell.
• 1:20:46
  SPEAKER_01: Like, maybe the Wall Street Journal, one newspaper.
• 1:20:49
  SPEAKER_01: Actually, Warren Buffett said that to me.
• 1:20:51
  SPEAKER_01: Like, um, well, that was the class.
• 1:20:53
  SPEAKER_01: He kind of said, There's like 2,000 daily newspapers in the U.S.
• 1:20:58
  SPEAKER_01: How many do you think are viable in terms of financial?
• 1:21:02
  SPEAKER_01: They have a digital model that's financially viable.
• 1:21:06
  SPEAKER_01: And he said the answer was two.
• 1:21:08
  SPEAKER_01: There's only two that he'd seen.
• 1:21:10
  SPEAKER_01: Like it was Wall Street Journal and New York Times, and all the rest are just struggling to try and find some profits in this business.
• 1:21:18
  SPEAKER_01: There may not be any.
• 1:21:20
  SPEAKER_01: That may be it for like, you know, Chat GBT may never be.
• 1:21:24
  SPEAKER_01: No, I actually think it is.
• 1:21:25
  SPEAKER_01: Like, they're already starting to put advertisements in the results of your query, right?
• 1:21:32
  SPEAKER_01: They're they're baking it into the that doesn't seem very hard to, you know, let's put an advertisement within the answer.
• 1:21:39
  SPEAKER_01: So, you know, but is it gonna cover the cost for these things?
• 1:21:42
  SPEAKER_01: I don't may not be.
• 1:21:44
  SPEAKER_01: Books have never made money again.
• 1:21:46
  SPEAKER_01: Like, it's no money in books anymore.
• 1:21:48
  SPEAKER_01: A little bit.
• 1:21:49
  SPEAKER_00: Well, Jeff, if it doesn't make any money, perhaps you should stop writing books.
• 1:21:53
  SPEAKER_01: The yeah, I I'm I'm bitching about that because it's fun.
• 1:21:56
  SPEAKER_01: But no, I think there's um I've actually done podcasts on this.
• 1:22:01
  SPEAKER_01: Like, you know, there's a lot of things in this world that have tremendous value.
• 1:22:06
  SPEAKER_01: It's not the same as economic value.
• 1:22:08
  SPEAKER_01: I think, you know, this is Charlie Munger.
• 1:22:09
  SPEAKER_01: Like, books are one of the greatest consumer products ever.
• 1:22:13
  SPEAKER_01: Like, I can learn, I can read everything Ben Franklin learned in his entire life, all his knowledge.
• 1:22:20
  SPEAKER_01: He wrote it up.
• 1:22:21
  SPEAKER_01: I get access to his entire life for$4.
• 1:22:25
  SPEAKER_01: Like, that's unbelievable.
• 1:22:27
  SPEAKER_01: Right?
• 1:22:28
  SPEAKER_01: What a good service that is.
• 1:22:30
  SPEAKER_01: The value proposition is pretty good.
• 1:22:33
  SPEAKER_01: The customer value, the user value is off the charts, the economic value, no.
• 1:22:38
  SPEAKER_01: And I would say it the same thing.
• 1:22:39
  SPEAKER_01: Like, I really love writing books.
• 1:22:41
  SPEAKER_01: I think it's I think it's uh like an important activity to do it like for a guy like me.
• 1:22:46
  SPEAKER_01: But monetizing it, no.
• 1:22:47
  SPEAKER_01: The way you do it is the way I do it, is if it's not a standalone business or product, it works quite well.
• 1:22:54
  SPEAKER_01: If you pair books with consulting, it works beautifully.
• 1:22:59
  SPEAKER_01: Right?
• 1:23:00
  SPEAKER_01: But as a standalone product, no.
• 1:23:02
  SPEAKER_01: I used to be involved in the running of a couple shopping malls, and you know, I would see the numbers every month.
• 1:23:08
  SPEAKER_01: We didn't make any money on the food court.
• 1:23:09
  SPEAKER_01: Food court was you know, it was nothing.
• 1:23:12
  SPEAKER_01: You know, the department stores, the anchor stores made a lot of money on Marks and Spencer.
• 1:23:16
  SPEAKER_01: Okay, it doesn't mean food court's a bad business.
• 1:23:19
  SPEAKER_01: It just means you got to pair it with the anchor stores.
• 1:23:21
  SPEAKER_01: Then it's a nice business.
• 1:23:22
  SPEAKER_01: And in fact, you need the food court to draw people in to have food and then go to the Marks and Spencer where you make your money.
• 1:23:28
  SPEAKER_01: It's kind of the same.
• 1:23:29
  SPEAKER_01: Like books paired with consulting are a really nice business model.
• 1:23:34
  SPEAKER_01: Uh McKinsey does that, right?
• 1:23:36
  SPEAKER_01: They do a lot of publishing, a lot of reports.
• 1:23:38
  SPEAKER_01: So there's good ways to do it.
• 1:23:40
  SPEAKER_01: But as a standalone product service, a lot of really good stuff doesn't make sense.
• 1:23:46
  SPEAKER_01: You know, kids' playgrounds in the McDonald's or in the center of shopping malls don't make any sense, but they make sense in a shopping mall.
• 1:23:54
  SPEAKER_01: So I see what you're saying.
• 1:23:55
  SPEAKER_00: Yeah.
• 1:23:55
  SPEAKER_01: Yeah.
• 1:23:56
  SPEAKER_01: You got to kind of look at it at the right level.
• 1:23:57
  SPEAKER_01: Then it then it may or may not make sense.
• 1:23:59
  SPEAKER_01: Food delivery is an interesting one.
• 1:24:01
  SPEAKER_01: You see all these companies in China, they're all going after food delivery and insta-commerce right now, which is, you know, you can buy a sweater at 10 p.m.
• 1:24:09
  SPEAKER_01: on a Saturday night, and someone will pedal up within 15 minutes and give you your sweater, which I did.
• 1:24:15
  SPEAKER_01: It was 8 p.m.
• 1:24:16
  SPEAKER_01: on a Saturday night.
• 1:24:17
  SPEAKER_01: And economically, it's not a good business, really.
• 1:24:20
  SPEAKER_01: It's okay, it ain't good.
• 1:24:22
  SPEAKER_01: But in terms of consumer mind share and keeping customers engaged, and then you cross-sell to them your profitable stuff, it makes a lot of sense.
• 1:24:31
  SPEAKER_01: That was in the Alibaba numbers yesterday.
• 1:24:33
  SPEAKER_01: They talked about why they're going after InstaCommerce, even though they say it's, you know, I think it's break-even at best.
• 1:24:39
  SPEAKER_00: So what is something?
• 1:24:41
  SPEAKER_00: I mean, you live there, you have a front row seat of what's happening.
• 1:24:46
  SPEAKER_00: You you visit these businesses, you see what's happening behind the scenes, maybe even.
• 1:24:50
  SPEAKER_00: So, what is something that is happening, uh, particularly in China, that people from Europe or the US should know or think about for the coming years or decades?
• 1:25:01
  SPEAKER_01: There's usually kind of a process like like we knew mobile payments were big in China in 2014.
• 1:25:08
  SPEAKER_01: The rest of the world really didn't know about mobile payments back then, and they didn't know that China was really good at this.
• 1:25:13
  SPEAKER_01: Like it was kind of shocking when it happened several years later.
• 1:25:16
  SPEAKER_01: Now everyone kind of knows, like, oh, mobile payments, yeah, China was really good at that.
• 1:25:20
  SPEAKER_01: So there's kind of um an awareness um process.
• 1:25:24
  SPEAKER_01: Like the stuff I think the rest of the world's not aware of yet.
• 1:25:29
  SPEAKER_01: Smart cities is probably a big one, which is China's really good at infrastructure.
• 1:25:36
  SPEAKER_01: When they say they're gonna build 100 airports on time, on budget, they get built on time, on budget.
• 1:25:42
  SPEAKER_01: It's pretty amazing.
• 1:25:43
  SPEAKER_01: They're very good at trains, roads, highways.
• 1:25:46
  SPEAKER_01: Well, if you're good at digital and you're good at infrastructure, it's not that hard to do smart infrastructure where there are sensors in the roads, there are sensors in every parking lot, the traffic is moved around in real time based on where the congestion is, where certain lanes of the road switch direction depending on time of day or what's going on, the whole system becomes dynamic.
• 1:26:11
  SPEAKER_01: There are water sensors for pollution, there's air pollution sensors, cameras everywhere, obviously.
• 1:26:18
  SPEAKER_01: That can all be managed in real time.
• 1:26:21
  SPEAKER_01: You know, there's sensors in all the garbage cans, not yet, but a lot of them, that tell you when all the garbage cans are full.
• 1:26:29
  SPEAKER_01: So the dump trucks no longer take the same route every single day.
• 1:26:33
  SPEAKER_01: They get routed to where the cans are full.
• 1:26:37
  SPEAKER_00: That is crazy.
• 1:26:38
  SPEAKER_01: Like a lot of city services are just kind of blanket, you know, the buses take the same route every day.
• 1:26:45
  SPEAKER_01: The garbage trucks take the same route every day, the water system and pressure goes out the same every day, right?
• 1:26:52
  SPEAKER_01: It's all just sort of one size fit.
• 1:26:54
  SPEAKER_01: Well, now you can manage, you can sort of dynamically manage it.
• 1:26:58
  SPEAKER_01: You know, why do we have broadband in downtown on Saturday night?
• 1:27:03
  SPEAKER_01: Nobody's there.
• 1:27:04
  SPEAKER_01: So the base stations reroute the available bandwidth to other parts of the city because it knows nobody's in the buildings at 10 p.m.
• 1:27:12
  SPEAKER_01: downtown.
• 1:27:13
  SPEAKER_01: So the bandwidth and the internet speeds get rerouted.
• 1:27:17
  SPEAKER_01: So we're seeing a lot of interesting stuff like that.
• 1:27:20
  SPEAKER_01: And the way you think about it is the cities like smart infrastructure, sensors, gathering data, reactive to some degree.
• 1:27:31
  SPEAKER_01: The next layer is people with their phones.
• 1:27:34
  SPEAKER_01: That's part of the ecosystem, too.
• 1:27:36
  SPEAKER_01: So you can start to build apps that run on the whole thing.
• 1:27:40
  SPEAKER_01: Like if you see a broken manhole cover, take a picture and send it in, and we'll give you three points, which you can redeem at JD.
• 1:27:48
  SPEAKER_01: Suddenly, every broken manhole cover in the city, the armies of people with smartphones are ticked.
• 1:27:55
  SPEAKER_01: So they become sort of part of the ecosystem of the smart city.
• 1:27:58
  SPEAKER_01: You can have culture.
• 1:28:00
  SPEAKER_01: Cultural games, you can have food festivals, you can have security, let's have all the cameras tracking.
• 1:28:06
  SPEAKER_01: You can't be a thief in China anymore.
• 1:28:08
  SPEAKER_01: You will get caught so fast.
• 1:28:10
  SPEAKER_01: So the whole thing becomes almost like an operating system.
• 1:28:14
  SPEAKER_01: Like, could I write a mobile app to run on Shanghai?
• 1:28:18
  SPEAKER_01: I don't know.
• 1:28:18
  SPEAKER_01: But it's starting to look like an operating system.
• 1:28:21
  SPEAKER_01: So this whole thing is really interesting.
• 1:28:23
  SPEAKER_01: And Shenzhen, um, because Huawei's there in Tencent, and then Hanzhou because Alibaba, like the Hanzhou City Brain, which routes ambulances and police in real time.
• 1:28:38
  SPEAKER_01: Um, that's been active since like 2016, 2017, something like that.
• 1:28:42
  SPEAKER_01: So smart cities are like this big cool thing with a lot of concerns.
• 1:28:49
  SPEAKER_01: But you could basically sell that as plug-and-play hardware plus software to Nairobi.
• 1:28:56
  SPEAKER_01: You want us to make Nairobi smart?
• 1:28:59
  SPEAKER_01: Well, here's all the hardware, here's all the software.
• 1:29:01
  SPEAKER_01: We'll just plug it in, turn it on, you're good to go.
• 1:29:04
  SPEAKER_01: That's interesting.
• 1:29:05
  SPEAKER_02: So smart cities is definitely on the thing.
• 1:29:08
  SPEAKER_02: I kind of can't believe that is what what's happening.
• 1:29:10
  SPEAKER_00: And we live in such technologically advanced countries that I can't even imagine this happening here.
• 1:29:19
  SPEAKER_01: Yeah.
• 1:29:20
  SPEAKER_01: That one's, I mean, that a lot of what I just said, that's 50% speculative on the way, but a lot of it's real today.
• 1:29:27
  SPEAKER_01: But that's kind of what people, you know, you can you can kind of see it, and I don't see anything that will stop it.
• 1:29:32
  SPEAKER_01: So it's not there yet.
• 1:29:34
  SPEAKER_01: But you know, it used to be a problem in China, like there was a lot of factories that would pollute.
• 1:29:40
  SPEAKER_01: So the air quality was quite bad.
• 1:29:42
  SPEAKER_01: And you can't tell when a factory's discharging into the air at night.
• 1:29:46
  SPEAKER_01: You you don't know which factory did it.
• 1:29:48
  SPEAKER_01: Well, now they just have drones flying around, and I think they can pretty much identify anybody discharging into the air anytime.
• 1:29:56
  SPEAKER_01: So you can catch everybody now.
• 1:29:58
  SPEAKER_01: Discharging into the rivers, you can catch that into the sewer system.
• 1:30:01
  SPEAKER_01: It came from that building.
• 1:30:03
  SPEAKER_01: So a lot of this is really traffic congestion, pollution, air pollution, security and safety and police, obviously.
• 1:30:10
  SPEAKER_01: And so that one's pretty neat.
• 1:30:12
  SPEAKER_01: I think smartphones will see another jump up in China.
• 1:30:15
  SPEAKER_01: I think the apps are getting better.
• 1:30:16
  SPEAKER_01: They're all 5Gs.
• 1:30:18
  SPEAKER_01: I mean, China's already moving past 5G.
• 1:30:20
  SPEAKER_01: You know, it's 5G now.
• 1:30:22
  SPEAKER_01: It's 6G is on the horizon.
• 1:30:24
  SPEAKER_01: But 5G has been deployed for a while now.
• 1:30:26
  SPEAKER_01: Everyone's phone has it, covers everywhere.
• 1:30:30
  SPEAKER_01: So that lets you do things like virtual gaming where you just put on little glasses and you can do online VR.
• 1:30:37
  SPEAKER_01: You know, there's lots of cool little uses of that.
• 1:30:40
  SPEAKER_01: So I think smartphones and smart devices will jump to the next level soon.
• 1:30:46
  SPEAKER_01: Smart car, smart glasses, smartphone, all connected by G, probably.
• 1:30:52
  SPEAKER_01: So that that gives you a speed that lets you do stuff that's pretty crazy.
• 1:30:56
  SPEAKER_00: Yeah.
• 1:30:56
  SPEAKER_00: Eventually, smart people with brains, uh brain implants.
• 1:30:59
  SPEAKER_00: Who knows?
• 1:31:00
  SPEAKER_01: Yeah, I don't really know about that stuff.
• 1:31:02
  SPEAKER_01: I see the clips, but it kind of seems real.
• 1:31:05
  SPEAKER_01: Yeah, it's funny how all this stuff seems crazy.
• 1:31:08
  SPEAKER_01: And then a week later it's like, okay, I guess that exists now.
• 1:31:12
  SPEAKER_01: I guess robots can dance now.
• 1:31:14
  SPEAKER_01: I I didn't know they could do that a week ago, but apparently they can all dance real good.
• 1:31:19
  SPEAKER_01: You just show them a video of some humans dancing, they watch it and then they do it.
• 1:31:23
  SPEAKER_00: If you want to see some unbelievable things happening in China, you just got to follow your LinkedIn.
• 1:31:28
  SPEAKER_00: I mean, I just saw the light pollution and some of the trains they're building, and just it's incredible.
• 1:31:33
  SPEAKER_01: Yeah, that's my little I just I have lots of China.
• 1:31:36
  SPEAKER_01: I just post them up there and it's like, hey, there's a they don't have this in the West, which I kind of think is a mistake, is light shows because all the buildings are covered with LEDs in the downtown areas, and then they have like strobe beams coming out.
• 1:31:49
  SPEAKER_01: Then they have drone shows, right?
• 1:31:51
  SPEAKER_01: All the lighted drones in the city with the lights, and now they have the fireworks in as well.
• 1:31:57
  SPEAKER_01: So the light show is like the drones are all like making Steph Curry walking in huge form, and the fireworks are going off at the same time, and it's all synchronized, and then the city's shooting, like it's all one thing.
• 1:32:11
  SPEAKER_01: It's really awesome.
• 1:32:12
  SPEAKER_01: Um, I don't know what the point is, but it's fun.
• 1:32:15
  SPEAKER_01: So the drone shows are crazy.
• 1:32:18
  SPEAKER_01: That's pretty neat.
• 1:32:19
  SPEAKER_01: The robots running around doing all these.
• 1:32:21
  SPEAKER_01: You can order a cup of coffee.
• 1:32:23
  SPEAKER_01: Like, I always just order a cup of coffee from the driver.
• 1:32:26
  SPEAKER_01: Like, I'm I'm real lazy about this.
• 1:32:27
  SPEAKER_01: Like, I've literally in in Shanghai, I've done this like in my hotel, the coffee place is across the street.
• 1:32:34
  SPEAKER_01: I've literally ordered and had it delivered because I can't be bothered to cross the street.
• 1:32:40
  SPEAKER_01: Like, I even feel bad about that.
• 1:32:42
  SPEAKER_01: Yeah.
• 1:32:43
  SPEAKER_01: You should.
• 1:32:44
  SPEAKER_01: The driver comes walking across the street, and I come down to pick it up in the lobby.
• 1:32:48
  SPEAKER_01: Um, you can get coffee delivered by drone now.
• 1:32:52
  SPEAKER_01: Not it's not widespread or anything.
• 1:32:54
  SPEAKER_01: These are just, you know, little piloted things, right?
• 1:32:58
  SPEAKER_01: But I'm gonna probably have coffee delivered by drone next time I go back.
• 1:33:02
  SPEAKER_01: Just is is that a great solution?
• 1:33:05
  SPEAKER_01: No, and it's probably not gonna last very long, but it's fun today, so we'll we'll play with it a little bit.
• 1:33:11
  SPEAKER_01: Um yeah, the coffee guy walked across.
• 1:33:14
  SPEAKER_01: He was even laughing when he came and handed it to me.
• 1:33:18
  SPEAKER_00: What are you doing, Jeffrey?
• 1:33:19
  SPEAKER_01: He's like, What are you doing?
• 1:33:20
  SPEAKER_01: I'm like, I don't want to cross the street.
• 1:33:23
  SPEAKER_00: You paid extra for it, I suppose.
• 1:33:25
  SPEAKER_01: Yeah, well, that's the thing.
• 1:33:27
  SPEAKER_01: Delivery, and this is like a big deal in Asia, actually, which everyone knows the manufacturing is big.
• 1:33:34
  SPEAKER_01: The low-cost labor enables a lot of stuff that you can't do anywhere else.
• 1:33:39
  SPEAKER_01: Delivery services.
• 1:33:41
  SPEAKER_01: You can get someone to come, you know, fix your air conditioner for nothing on an app.
• 1:33:47
  SPEAKER_01: You can get someone to come, you know, teach Spanish to your kid for nothing.
• 1:33:52
  SPEAKER_01: You can get coffee delivered like it's nothing.
• 1:33:54
  SPEAKER_01: I can get a sweater delivered at 10 p.m.
• 1:33:57
  SPEAKER_01: on Saturday night, all that stuff, which is really awesome.
• 1:34:01
  SPEAKER_01: You gotta have a low labor cost and you need a certain density of people in a city, which Asia has.
• 1:34:08
  SPEAKER_01: Asia has very dense cities, you know, people per square kilometer is very high.
• 1:34:13
  SPEAKER_01: So we get a lot of stuff out here that you don't really get in Europe or the US.
• 1:34:18
  SPEAKER_01: Uh, food delivery costs nothing.
• 1:34:21
  SPEAKER_01: I mean, it's I shouldn't say nothing.
• 1:34:23
  SPEAKER_01: That's a little it's a dollar.
• 1:34:24
  SPEAKER_01: You know, cup of coffee's 70 cents to have it delivered, 80 cents.
• 1:34:30
  SPEAKER_01: So I would say nothing, but it's it's so cheap, it's like okay.
• 1:34:34
  SPEAKER_00: Yeah, it's six times.
• 1:34:36
  SPEAKER_00: I mean, it's six six dollars a year for just uh what is it, three kilometers maybe?
• 1:34:41
  SPEAKER_01: There's all these really cool apps you can do in China, like that we don't have in the West.
• 1:34:45
  SPEAKER_01: Like if you leave your phone like in a restaurant, there's you know, there's an app, someone will go and get your phone and bring it to you.
• 1:34:52
  SPEAKER_01: If you go to a bar, you cannot drive if you have any alcohol in your system in China.
• 1:34:56
  SPEAKER_01: Like it's no, absolutely not.
• 1:34:58
  SPEAKER_01: So there's a service, and you just you know, you call someone and a dude comes cycling up on a little foldable bicycle.
• 1:35:05
  SPEAKER_00: Heard of this dude.
• 1:35:06
  SPEAKER_01: The foldable bicycle goes in the trunk and he drives you home in your car.
• 1:35:10
  SPEAKER_00: Incredible.
• 1:35:11
  SPEAKER_01: I've never used that one.
• 1:35:12
  SPEAKER_01: I've seen it done.
• 1:35:14
  SPEAKER_01: Um there's a lot of stuff like that that we we just don't have the equivalent of that.
• 1:35:19
  SPEAKER_01: In um you want to hire a bunch of people to you know play video games for you and and get your character leveled up and get you some weapons.
• 1:35:28
  SPEAKER_01: You can just buy the weapons directly from people because there's people that just spend their days playing video games, and you know, you can buy the weapons from them.
• 1:35:35
  SPEAKER_01: There's all this crazy stuff like that.
• 1:35:38
  SPEAKER_01: Yeah, that's a that's a bit of a thing that we kind of have the best of all worlds, where we have all the digital tools, we have a huge consumer base in highly dense cities, we have manufacturing right down the road, and we have low-cost labor.
• 1:35:56
  SPEAKER_01: So we can do a whole lot of stuff that you really it's hard to do other places.
• 1:36:00
  SPEAKER_01: You can do it in like Mexico City, you can do it in Southeast Asia, but you know, not really in the US or Europe.
• 1:36:06
  SPEAKER_01: It doesn't really work out.
• 1:36:07
  SPEAKER_01: So maybe it won't, you know, maybe maybe labor will go up and that'll change, but yeah.
• 1:36:12
  SPEAKER_01: Yeah, we we kind of get we're a little spoiled in that regard.
• 1:36:16
  SPEAKER_00: Before um, uh I mean, I think uh my team will get very angry if uh if I don't ask you a couple well-known or perhaps lesser-known, preferably publicly listed companies you particularly like, not necessarily from like an investment standpoint, but also just as a like a case study, an interesting company to study and learn from.
• 1:36:37
  SPEAKER_00: Perhaps a couple names?
• 1:36:39
  SPEAKER_01: Yeah, a couple I keep an eye on that I don't think too many other people do.
• 1:36:43
  SPEAKER_01: Um, I think Baidu is very interesting.
• 1:36:46
  SPEAKER_01: I look for companies with real competitive strength, right?
• 1:36:50
  SPEAKER_01: Like, I don't know how to beat that company.
• 1:36:53
  SPEAKER_01: No, it's not a hundred percent, but Baidu, given the pivot to AI, they were really the first when AI hit and Chat GPT hit.
• 1:37:02
  SPEAKER_01: They were the first in China to pivot hard into generative AI, and it's because the founder and CEO, he's an AI guy.
• 1:37:09
  SPEAKER_01: You know, I've talked about this online.
• 1:37:10
  SPEAKER_01: Like, he was doing algorithm research in the 90s in the US, and I think his filing, his patent filing was what Sergei and you know the Google team used to create PageRank.
• 1:37:25
  SPEAKER_01: I think when they founded Google, they actually cited his work as something they did, right?
• 1:37:30
  SPEAKER_01: That's the same guy.
• 1:37:31
  SPEAKER_01: So when he's been doing AI for 25 years, and he pivots, he was already building his own chips, his own tech stack, the whole thing.
• 1:37:40
  SPEAKER_01: So Robin Lee and and Baidu are incredibly well positioned for AI, and they're only focused on China.
• 1:37:48
  SPEAKER_01: They're not, they're doing industrial and other use cases in China.
• 1:37:52
  SPEAKER_01: So they're building a feedback loop between applications and their usage in China and the intelligence of the models.
• 1:38:00
  SPEAKER_01: That's China specific.
• 1:38:02
  SPEAKER_01: That's impressive.
• 1:38:03
  SPEAKER_01: So Baidu is definitely on my short list.
• 1:38:05
  SPEAKER_01: Trip.com, C trip.
• 1:38:07
  SPEAKER_01: If you haven't used trip.com, and now it's better, it's trip outside of China, it's C trip within China, Xiajiang.
• 1:38:13
  SPEAKER_01: The trip outside China is pretty good.
• 1:38:16
  SPEAKER_01: It's better than Expedia, it's better than booking, it's better than Agoda, but the C trip within China is fantastic.
• 1:38:23
  SPEAKER_01: It's got content and video and influencers and train booking.
• 1:38:27
  SPEAKER_01: I mean, they make Expedia and these other OTA companies look like they're moving in a snail space.
• 1:38:33
  SPEAKER_01: I think they're fantastic.
• 1:38:35
  SPEAKER_01: Uh, I use that's all I use when I book my trips.
• 1:38:37
  SPEAKER_01: Now I used to use others.
• 1:38:38
  SPEAKER_01: I stopped, I only use C Trip and Trip is a more limited version of it that's outside of China.
• 1:38:46
  SPEAKER_01: So I think that's a great product.
• 1:38:47
  SPEAKER_01: And it has all it has a lot of the things we like to see in a digital business model.
• 1:38:52
  SPEAKER_01: It has global network effects, it has pretty good profitability in hotels.
• 1:38:56
  SPEAKER_01: You know, Airbnb is a pretty spectacular business model.
• 1:38:59
  SPEAKER_01: So the closer anything gets to Airbnb, the better, right?
• 1:39:02
  SPEAKER_01: They've got global network effects, long tail of housing options.
• 1:39:06
  SPEAKER_01: Um, Trip is interesting in that regard.
• 1:39:08
  SPEAKER_01: So I keep an eye on that one.
• 1:39:10
  SPEAKER_01: JD is pretty interesting.
• 1:39:12
  SPEAKER_01: I think no, they've been around for a while.
• 1:39:15
  SPEAKER_01: They're they're not as sort of well known as Alibaba, they weren't sort of as sexy as Pitt New Aduo.
• 1:39:21
  SPEAKER_01: But, you know, the founder, Richard Leo, he's back in the driver's seat now.
• 1:39:27
  SPEAKER_01: And they kind of just stick to the basics of e-commerce.
• 1:39:31
  SPEAKER_01: You know, they center on logistics, they're working pretty aggressively in China.
• 1:39:36
  SPEAKER_01: They're expanding their e-commerce outside of China, which they didn't do before.
• 1:39:40
  SPEAKER_01: Their Ochama, which is in Europe, is interesting.
• 1:39:44
  SPEAKER_01: And they're taking their logistics business international as a B2B service.
• 1:39:50
  SPEAKER_01: Uh, so they're, you know, that I think they're off the radar.
• 1:39:54
  SPEAKER_01: They're they're a pretty strong business model.
• 1:39:56
  SPEAKER_01: But that said, e-commerce in China is not as stable as it is in the West.
• 1:40:02
  SPEAKER_01: So, you know, people can gain and lose market share in China in a way we don't see with Amazon.
• 1:40:09
  SPEAKER_01: So it's not quite as stable of a, you know, it's not the powerhouse business model, doesn't get you as much stability there as it does, say, Amazon.
• 1:40:18
  SPEAKER_01: So though those are, I think, three worth looking at.
• 1:40:21
  SPEAKER_01: The one in South Korea is also kind of um coupon.
• 1:40:26
  SPEAKER_01: Koupong in South Korea, to me, it just looks like a version of JD.
• 1:40:31
  SPEAKER_01: It looks like a single province version of JD, which people say it looks like Amazon, which it kind of does, but I think it's closer to JD.
• 1:40:38
  SPEAKER_01: Doesn't look like Alibaba, that's a different business model.
• 1:40:41
  SPEAKER_01: I don't know as much about coupon.
• 1:40:42
  SPEAKER_01: I don't follow South Korea too closely.
• 1:40:44
  SPEAKER_01: Any others.
• 1:40:45
  SPEAKER_01: A lot going on in Vietnam.
• 1:40:48
  SPEAKER_01: A lot of digital companies popping up in Vietnam, kind of doing their own thing.
• 1:40:53
  SPEAKER_01: Vietnam looks a lot like China in 1995.
• 1:40:57
  SPEAKER_01: Very aggressive, very ambitious, a lot of sort of new e-commerce businesses popping up, or new digital businesses popping up.
• 1:41:05
  SPEAKER_01: So I'm kind of keeping an eye there, but that's also not really my market.
• 1:41:08
  SPEAKER_01: Sort of South Korea and Vietnam are on the side of my attention.
• 1:41:12
  unknown: Yeah.
• 1:41:13
  SPEAKER_00: I always like to end with something our listeners can walk away with, perhaps even apply tomorrow, or today, maybe.
• 1:41:20
  SPEAKER_00: What would be one of your I mean, number one lessons or tips you'd want them to understand or be aware of?
• 1:41:29
  SPEAKER_01: In what?
• 1:41:30
  SPEAKER_01: In uh investing, business, life, what's the it doesn't matter.
• 1:41:34
  SPEAKER_00: I mean, the good thing about investing is it it it applies to everything in life, whether it's psychological or it has to do with money or investing, business, business models, modes, doesn't matter.
• 1:41:45
  SPEAKER_01: I'm not really I'm not a professional investor, so I don't, you know, professionally I do consulting and sort of analysis of business.
• 1:41:53
  SPEAKER_01: That's not the same as being someone who manages money, right?
• 1:41:55
  SPEAKER_01: So I don't, I shouldn't know, you shouldn't listen to me on that.
• 1:41:57
  SPEAKER_01: That's not my day job.
• 1:41:59
  SPEAKER_01: Business analysis, competitive analysis, that's kind of where I live.
• 1:42:02
  SPEAKER_01: Any lessons there?
• 1:42:04
  SPEAKER_00: Perhaps something they should look at, something important.
• 1:42:07
  SPEAKER_00: I mean, some some of the people we talked to said that most people don't look at incentives enough.
• 1:42:12
  SPEAKER_00: Some people don't understand the business model well enough, don't invest in what you don't understand, things like that.
• 1:42:19
  SPEAKER_01: Yeah, that's um I mean definitely don't don't you gotta you you gotta play with stuff, right?
• 1:42:27
  SPEAKER_01: I play with Gen AI tools all the time.
• 1:42:30
  SPEAKER_01: You know, I'm hanging out in the mall in China all the time.
• 1:42:34
  SPEAKER_01: I'm booking, you know, I reading reports in 10Ks is fun, right?
• 1:42:41
  SPEAKER_01: It really is a good time.
• 1:42:42
  SPEAKER_01: I enjoy doing that.
• 1:42:44
  SPEAKER_01: You don't want to get too much in love with that.
• 1:42:46
  SPEAKER_01: Like, you know, I try to be on the ground as much as possible, talking to people, you know.
• 1:42:50
  SPEAKER_01: You know, Ben Graham is reading annual reports all day.
• 1:42:54
  SPEAKER_01: Philip Fisher, you know, is scuttle butt going around talking to people.
• 1:42:59
  SPEAKER_01: That's probably an area of my own life I don't do enough of.
• 1:43:02
  SPEAKER_01: Just talking with customers, talking with competitors, talking with employees at companies.
• 1:43:06
  SPEAKER_01: You get a lot of good information there.
• 1:43:08
  SPEAKER_01: I probably don't do that enough.
• 1:43:09
  SPEAKER_01: I enjoy sitting reading 10Ks too much.
• 1:43:13
  SPEAKER_01: So I think that's one, and I would say that's doubly or triply true once you move into a developing economy.
• 1:43:20
  SPEAKER_01: You don't want to believe too much what you see written on a piece of paper about China.
• 1:43:26
  SPEAKER_01: You really don't.
• 1:43:27
  SPEAKER_01: It's um it's not that accurate.
• 1:43:30
  SPEAKER_01: It's much more accurate in the US and Europe.
• 1:43:32
  SPEAKER_01: You're better off talking to people.
• 1:43:33
  SPEAKER_01: You gotta do both, but yeah, you gotta be pretty suspect of anything written on a piece of paper.
• 1:43:39
  SPEAKER_01: Another piece of advice I think is I try to keep in mind, always make sure you have at least two or three pieces of information to collab sorry, correct collaborate?
• 1:43:53
  SPEAKER_01: What am I trying to say?
• 1:43:54
  SPEAKER_01: Corroborate, corroborate anything.
• 1:43:57
  SPEAKER_01: So when someone says, oh, the revenue of this company is X, okay, how can we find another source that corroborates that?
• 1:44:06
  SPEAKER_01: You know, I'll go into stores in China and just sit there with a you know and count the number of people coming in for an hour and then figure out the you know, guess the purchase and sort of do revenue estimates, things like that.
• 1:44:17
  SPEAKER_01: Because, but I'll never take anything as one number.
• 1:44:21
  SPEAKER_01: Every, as far as I'm concerned, every number is fake until I see a second or third source for it.
• 1:44:25
  SPEAKER_01: Because there's there's a lot of fake information coming out of developing economies.
• 1:44:29
  SPEAKER_01: So I always do that, which is why I don't look at areas like industrial very much, because you don't really know what's in those contracts.
• 1:44:37
  SPEAKER_01: But I can tell you how many people came into a Starbucks coffee in Beijing.
• 1:44:41
  SPEAKER_01: I can check it, but I can't do that on a lot of B2B stuff, so I don't do that.
• 1:44:47
  SPEAKER_01: That's probably good advice for China.
• 1:44:48
  SPEAKER_01: Like that would be a decent takeaway.
• 1:44:51
  SPEAKER_01: Never trust any number unless you can verify it by at least one other source.
• 1:44:55
  SPEAKER_01: Assume it it's incorrect, because it statistically it's probably true.
• 1:44:59
  SPEAKER_00: I think that's a great one.
• 1:45:00
  SPEAKER_00: Yeah, just look for context.
• 1:45:02
  SPEAKER_00: At least two confirmation, yeah.
• 1:45:05
  SPEAKER_01: You know what's good is actually import export numbers.
• 1:45:09
  SPEAKER_01: Because you can check the numbers on both sides.
• 1:45:12
  SPEAKER_00: Yeah.
• 1:45:13
  SPEAKER_01: Yeah.
• 1:45:13
  SPEAKER_01: You can see the export and the import numbers.
• 1:45:15
  SPEAKER_01: That's actually a pretty useful one.
• 1:45:17
  SPEAKER_00: Well, Jeffrey, I mean, thank you so much.
• 1:45:19
  SPEAKER_00: I didn't I didn't mean to take away uh two hours of your time, but uh, I still have so much more to ask.
• 1:45:25
  SPEAKER_00: I can sit here for many more hours.
• 1:45:27
  SPEAKER_00: But maybe next time.
• 1:45:29
  SPEAKER_01: Yeah, anytime.
• 1:45:30
  SPEAKER_00: All right, well, I'll I'll keep you uh up to that.
• 1:45:33
  SPEAKER_00: I really do appreciate you coming on, sharing your insights and opinions, and uh hopefully we can stay in touch and uh have a wonderful day.
• 1:45:41
  SPEAKER_00: Thank you so much.
• 1:45:41
  SPEAKER_01: All right, thank you.