In a recent presentation to students of the Stanford School of Business, Mary Meeker (Morgan Stanley, analyst) shared two overarching themes: 1) technology has recovered post 2000 meltdown and 2) the U.S. won't lead this time.
In support of her first thesis is the following startling pattern: the leading market capitalization of the top 5 global internet companies: was $ 2B of market value at pre-2000 IPO prices, $178B of market value at the Nasdaq peak (3/10/00), $ 32B of market value at the Nasdaq trough (10/9/02) and $262B of market value as of the presentation (11/11/05).
In support of her second thesis are the following facts. South Korea is the leading provider of broadband in the world with over 70% penetration. Denmark has VoIP minutes which are larger than landline minutes. The U.S. graduates 76,000 engineers annually compared to 1,007,000 globally (with China at 352,000). The U.S. corporations, in the latest study, spend more on tort litigation than on research and development (205B vs. 184B).
While her themes are arguable, her basic information is significant. I believe that technology market values are part of the broad bubble generated by low interest rates and high hopes. I also believe that the lower technology adoption rates in the U.S. reflect the presence of more defined structural development - giving rise to much of the tort litigation costs.
The U.S. does seem to have higher profitability in most industries. As the "capitalist" leader, why does this exist? It appears that U.S. companies are generally better at constraining the ruinous rush to zero profits by regulatory constraints, by scale through M&A and by competitive discipline. Perhaps these dynamics lead to lower adoption rates of new technology, but still allow for leadership.
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