industrial ge

Empires of the Mind

9th January 2016. Monday

Founded 124 years ago by none other than the greatest inventor of all, Thomas Edison, GE has been and continues to be a giant. This Fortune 500 company spans a huge range of high value products and straddles the world markets in its reach. Power & Water, Oil and Gas, Aviation, Healthcare, Transportation and Capital which cater to the needs of Financial services, Medical devices, Life Sciences, Pharmaceutical, Automotive, Software Development and Engineering industries.

GE market capitalization (value of the company at the stock markets) was crossed by a company founded in 2004. Not just GE, in 2015, Facebook became more valuable than even Walmart and JP Morgan; poster boys in their own time.

In our own backyard Flipkart is valued around $7 billion, Paytm at $5 billion. They were not even born a decade back, hardly own any assets and do not employ the amount of people traditional businesses did. These business empires are different from what has been. The world has been permanently altered.

In the 19th Century empire meant power. Military power. Like the British, French & Portuguese companies which did business and got revenues from all the countries it occupied backed by its military strength.

Next, empires came up in commodities- oil, steel, gold, coal etc. Slowly empires came up in high end manufacturing, electronics, automobiles, office automation, computer hardwares etc.

The last few years what I see happening reminds me of what Winston Churchill said in his address at Harvard University in 1943. “The empires of the future will be empires of the mind.”

Facebook is the worlds largest media company and publishes no content of its own. Google gets the maximum advertisement revenue but has zero content of its own. Uber is the worlds largest taxi company but owns zero cars. Airbnb does the maximum room night bookings for travelers but owns no properties of its own. Alibaba is a giant retailer but owns no inventory. YouTube is viewed more than TV channels put together but unlike a channel, it makes no content of its own. The worlds largest music retailer is ITunes and this year they have sold $20 billion and Apple keeps 30% so $6 billion is their revenue. They produce no music of their own.

Uber is valued at $51 billion, Airbnb $25 billion. At over $350 billion Facebook jostles with Alphabet to cross Microsoft, Berkshire Hathaway and Apple at the valuation turnstiles.

TCS, Infosys, Wipro, HCL these high valued companies in India have no assets. These are all products of the human mind! Narayan Murty once famously said, “ Infosys’ assets walk out of the company every day at 5pm.”

Earlier availability of capital was a challenge for an entrepreneur today angels and seed capital and venture capitalist run cheque book in hand looking for an idea they can bank roll. Earlier 20 somethings worked for 50 somethings. Now it is the other way round. The new billionaires are in their twenties or early thirties.

An idea. That’s all it takes today. Empires are no longer built by might or capital but by ideas. Ideas that change the consumers experience. Empires of the mind indeed.