Jeremy was featured on TFC Stock Geek-Out to discuss tech stocks and their profitability.
Jeremy Au: (00:00:00)
I think at some level you have to add minimum belief that it's already working somewhere.
Anthony Ong: (00:00:11)
Hey, coconuts! Welcome back to another episode of TFC Stock Geek-Out. You know, today we have somebody really interesting. We have Jeremy here. He's a founder, he's an operator. He knows how to run a business, but he went to the other side of the table, turned to that side, and is now a VC. So, you know, he's seen both sides of it, but, he's well-versed in the capital markets, well-versed in private markets. And you know, we want to talk to him today here, and he's a very special guest. It's really to talk about industry, right? You know, we've heard so much about tech, whether everybody wanted to invest in tech last year, up to November and everybody doesn't want to invest in tech this year, right?
Because tech is dead and we go back to commodities and all that. So, hi Jeremy. Welcome. Thanks for taking the time to do this.
Jeremy Au: (00:00:52)
Hi Anthony. It's a pleasure to be here. A little about myself. I'm a VC of Monk's Hill Ventures, investing in founders who will transform millions of lives across Southeast Asia.
I'm also a former founder who's built two companies, one was bootstrapped, one was venture funded. And then I've also, run the Brave Southeast Asia Tech podcast, which is a global top 10% podcast at www jeremy.com, where we focus on, you know, founder community resources and stories about personal leadership stories across Asia. So happy to be here.
Anthony Ong: (00:01:22)
Yeah, thanks. And, I mean, I listen to a few podcasts of yours. They're great, right? It's a lot. I mean, we are very investing focused here, but on your side, you know, it's really a lot about the stories about the people and then about the companies, right? Which really provides a different lens, but I think for today's episode itself, we just wanted to talk a bit about tech, right? And I think this is maybe a bit that interests people or confuses people sometimes, because we talk about tech. But it's everything from, Google and Facebook. Sorry, Meta, can never get used to that, but you know, Meta, Apple kind of tech to, like CloudFlare, CrowdStrike, cybersecurity to, well, even earlier stage ones like Uber, which is really a transport company and all that. So can you give us a bit of your thoughts on what you think about the different type of tech stocks and how we can kind of split them into categories that makes it a bit easier to apply different mental models to each of these?
Jeremy Au: (00:02:17)
Yeah. So the most basic question is "what is a technology stock?" And that's interesting because if you look at almost all of the public stocks today, they're all built on technology, right? You know, you obviously have P&G.
Jeremy Au: (00:02:29)
Unilever, these are consumer package good companies that are using technology day in, day out.
Anthony Ong: (00:02:34)
Jeremy Au: (00:02:34)
Right? They're using manufacturing for the goods. They obviously use the internet to call the need themselves. And of course, you know, they're built on fundamental technologies like electricity and wireless and you know, security, there's a whole bunch of different things that lets them build what you have to do. All the way to even Raytheon, right? Which is defense technology, right? Which is about building bombers and missiles and it's very technology for, you know, the company's mostly all engineers and people who work with engineers in terms of manufacturing. And of course we have companies that we start to think of more as tech today, so Patenteer would be example for forward deployed engineers with, you know, US government, all the way to Meta, or Apple, which is doing some level of hardware plus software or combination or portal, all the way to more recent entrance, right?
So we look at Grab and Bukalapak and a whole bunch of companies that are more techish, right? And so I think we just had to be thoughtful when we say technology, stock. You know, we're actually talking about the fact that the past 200 years of seeing these continuous waves of technological innovation and each wave of innovation is creating a new wave of companies, right?
I mean, I always tell people like General Electric, right? It used to be publicly traded, used to be the number one, and it's called General Electric because they were built on one technology alone. It was called electricity, right? And they were like, "Great, we forgot electricity. Let's make electric power plants, electric lines, electric transmission, electric power microwaves, electric, locomotives."
They're even trying to make electric cars right back then. And so, General Electric is basically like this. What's the matter of this day, which was very clearly a technology company. And now we look at them as a defensive, conservative stock. And so I think there's an interesting dynamic today that is an interesting time for us to be investing in technology, in the future, and the stocks that represent that future.
Anthony Ong: (00:04:25)
Yeah. I guess, you know, in a nutshell, my impression of it, if you're talking about technology today, it's really internet-enabled businesses, in that sense, right? So, you know, you're absolutely right. Every time humanity has made a leap forward, it's always a small technological process, right? Even zooming back to the agricultural ages, being able to mold plow fuels, using animals, so that was a technological leap. And, electricity itself was obviously a huge technological leap, together with the steam engine and all of that.
But I think in recent times, at least because of the way that we have been progressing, what we seem to categorize as tech, tends to be internet-linked right? Or internet-enabled. So we think about things like Grab, which is internet, taxi booking in a very, very rough sense. Of course, they do a lot more than that. But yeah, I think that that's a good way to think about it. So, is there anything you'd like to tell us more about, I guess the different types of tech or how we can kind of think about, or analyze this sector generally?
Jeremy Au: (00:05:24)
Yeah. And I think today when we think about tech, I think there are two parts of it, and this is what we're starting to unpack. The first part is the ways of technological adoption. And the second is the prior history of the business model before they went public, or they got listed for public activity.
And so what I mean by that is when we think about technology stuff, we often, what implies that they're built on multiple ways of technology. And these are all from what is now historical. We think as a given the stuff that is starting to mature or is relatively mature. So stuff that is barely coming out, right?
And so we see all these companies, always, and always innovating, disrupting themselves, trying to change. So for example, we saw Facebook. They were very much what I call, some people like to call them Web 1.0, or 2.0 depending how charitable they are. But a concept is like social networking, et cetera. But they made the leap to not only do you know, desktop Facebook, but also use mobile devices. And now they're entering the VR and Metaverse. So, they're kind of like trying to keep in touch with that. You see the same for Apple, right? They started out desktops, then they went on to, phones and iPods, and then now they're going down to even, in future, exploring cars and AR or VR glasses, depending on the rumor.
So they're also catching up with issue of technology adoption. And even we just mentioned Grab, it's not just the fact it's an internet company, but also the cons fact that consumers have smartphones to be able to call grab when they're standing out in the rain. And these consumers are no longer in America. These consumers are in Southeast Asia. So Southeast Asia, people now have the GTP per capita to have the phones and the mobile access to a taxi service. And so I think that's the tricky part when we say technology company is, one mass technology company is that I persons defensive stock or mature in a company.
And so I think we use the word technology sometimes to also code for what we call exciting or the future or disruption. And that's why I say mass baking as well. So I think you always sort watch out a little bit, but you use the word technology stock because you know, you're like, " are you trying to sell me something", "are you try to sell me stock", or, you know what you don't like? You start saying like, okay, this is a mature stock. This is a growth stock. This is something that has good free cash flow to someone that's not, right? And so, I think you just said be tough about word technology. There so many companies that are using technology today, right?
I think the second part, I think where we commonly use the word technology, is I think the concept that it has been ventur- backed or that it has been cash flow negative, or that it has been doing a high net cash burn, it's not yet profitable. It's not spitting out free cash flows before it went public.
And maybe when they have gone public, they may still not be free cash flow positive. And so what's interesting is that, that's very novel, actually. And what we mean by that is that, say up to 20 years ago, you know, if you are on a public markets and you are losing money, you better have a really good reason as a CEO to explain why you're doing so.
You're like, you're investing to enter new geography, a new vertical. You're fighting competitors and those were the decisions that, primarily decided the fact that you had high free cash flow, you got more, cause you're paying on dividends or people bullishing you, and if you had low to negative, then you had a lower stock price, right?
But what's different is that the world in terms of the globalization, the open borders, the rate of venture capital in the private markets, the quality of founders today who are having that mindset, not just within the local market, but within multiple markets or even across the world, means that it's now possible to build billion dollar companies or hitting that hundred million of revenue, uh, within 10 years or 15 years, which was just not possible. I mean, during World War II. Right after it, it was impossible. World War I, between World War I, World War II, you have been totally pinched by both sides. And before World War I, there's a whole bunch of was that made it such that companies had to be built very slowly, steadily, with a lot of contractions in between due to geopolitical risk.
Jeremy Au: (00:09:16)
But now, these companies are just going from straight, from zero to a hundred million dollars of revenue and then they enter the market, public markets because they might need more capital or they want to get exit liquidity for their prior shareholders that have been part of the right, and the market gets to choose, right? There are still companies that are tech companies, that were net burn for the time they're private and then they positive by the time they list and shown, they're able to be positive. And there are still companies that are still negative even when they list on the market, right?
And the public market, in a former case, gets to decide and say, "Okay, they're now casual, positive, what do we expect the future growth to be"? But there's a new set of technology companies where they're burning cash and required a capital retail investors. And so, so far to do one more round, 1, 2, 3, 4 more years of that burn. But they feel confident to do so, and I think that's a really interesting dynamic for retail investors and everybody else. To be like, "okay, I know how to value P&G versus Unilever versus even a mature tech company like Google or Facebook that have been profitable". But how do I value a company?
For example, like Snapchat, which only recently posted its first positive free cash flow in ages right after so many years it's been on public markets versus companies like Grab, or Bukalapak, or GoTo slash the merchant Gojek or Tokopedia. How do we even think about understanding the financials?
Anthony Ong: (00:10:44)
I mean, there's a lot of interesting points there. I thought the skill one was really interesting and that's kind of the beauty of this leap in technology, right? Being the internet, it's just everything is inherently global now. Winning the local market just sometimes, or winning a global market can be about the same effort as winning the local market, or just a bit more effort. So, you know, that's, I think an interesting thing that this level of technology or this wave of technology adoption has kind of spurred in, in terms of companies, expanding and having to, and being able to reach higher amount, higher valuations.
I remember, I think when I was back in uni, probably 12 years ago, being a unicorn, like one big valuation was a magical thing, right? And now it's that you have unicorns everywhere. Not really everywhere, but you know, there's a lot more of them now, definitely. But I think I want to dive in a bit deeper with you about, the stage of markets and how companies come to mark public markets earlier, right? So, you know, we were talking about markets changing slightly from 10, 20 years ago used to be companies that were making money, right? Had positive earnings, and that's why PE ratio is important to buffer and all of that because they were all making money, right? And now we have moved slowly towards, well, we don't really need that to have earnings.
Do they have free cash flow, right? That's one. And, and in last year's spec boom, last year, spec boom and even more of that, you went even earlier than that, right? You went to pre-revenue, sometimes even pre-product companies. They just had an idea. They have a few patterns. They haven't built anything and they have listed right via spec or something else.
So, two questions. One is how much of this is really VC-pushed in the sense that, well, VCs kind of need an exit. So, there we go. And the other is, is this really an a good way of dealing with public markets and in a sense, putting a VC hat on, how should we think about companies that are maybe at the earlier stage of their growth path, but have somehow come to public markets?
Jeremy Au: (00:12:41)
Yeah. It's not uncommon, to some extent, for example, if you look at a biotech world, right? I think we see a lot of drug candidates, companies that are researching a certain drug profile, they've hit FDA stage one, stage two, you know, in terms of their clinical validation about whether it's safe for humans, whether there's efficacy, and I think it's still quite a long road for them before they go public.
But it's interesting that the public still gets to trade on them today, and there's a large number of retail investors that just spend their time investing in the biotech space and reading the public reports about, their drug. And the reason why that happens is because that historically hasn't been too much private market funding for these companies, but also what is known for everybody is that these drug companies are actually good acquisition targets, right? In terms of, for Pfizer and the larger global pharma companies, they effectively have a global license and monopoly on the ability to produce that drug or candidate once it's been proven out.
And so I think retail investors can invest with the knowledge that if they succeed in profiling the right company and so on, so forth, then, larger companies gonna take over and scale that 10X or a hundred X. You know, that's how you have, for example, COVID vaccines were very much built on that same mRNa technology that was listed on public markets. You couldn't get exposure to it before Covid. And then, if you are right, you, not only help save the world by giving them liquidity, but you also were able to scale and also make bank right as like, you know, that technology in some sense was replicated by Pfizer to go there and then, you had Moderna, and everybody was doing it, right? And so I think there's an interesting dynamic where, I think there's a good example of technology or companies that just were not profit-making, but providing great outcomes at the year day for folks, right? And, I think what's interesting is that, that same thinking has now permeated the technology enabled or software as a service, or cybersecurity, whatever we wanna call it.
But this new technology verticals where I think the management team is coming up and saying, "Hmm, you know, we do have a plan to global regional domination." And these are the science that shows that it works, that's validated and audited. And these are the things we have to believe together and we need this capital to make it happen.
Jeremy Au: (00:14:58)
I think my advice for folks who are thinking about doing this is to be thoughtful about it because I think differentiating between what is historical fact or what's historical financials. It's very, very clear and actually very distinct from what the management is sitting down saying that this is what we need to believe together.
And I think one of the big issues is that I think the classic retail investors just kind of like takes the whole thing and they say, oh, I treat this the same way. Warren Buffet, Berkshire Hathaway talks about the companies, right? And you're just like, whoa, hold up. They say they're gonna win in Let M, but they have not yet in Let m or they are fourth place in the end, right?
And then, you can't take that the same level is the larger hypothesis or belief point that you have to assess yourself independently. And I think there's a big piece. I still remember when I used to be on a bus in California. And I remember when I was sitting in the front and then I just started talking to the stranger beside me. And you know, he shared about how he's retired, he's part of the Sierra Clubs and he invested this technology company called Tesla. And you know, he really believed in this. It's gonna save the world and it's gonna be great.
And I looked at him and I was just like, I mean, at that time I didn't have much capital to invest anyway, but I was just like, isn't it in the news for just losing a lot of money and not being able to produce the skill. And he was just like, "Yeah, but you know, Elon Musk has a plan and he's explaining exactly how he's gonna do it."
It's time, luxury. And he's done it already. Now, he's gonna do mass market, mass premium, then he's gonna do mass, and he's gonna do trucks or SUV. And then I was like, well, he's proven on the luck side, but he hasn't proven mass premium or mass category. It's a totally different level of scale.
And the truth is everybody was kind of laughing at, if you pull out the reports, I mean, are the public statements by companies and CEOs that were running public automobile companies were, I think rightfully skeptical and saying like, hey, you know, there's a difference between what they produce, which is 10,000 cars. There are millions of cars that we make today, right? But you know, the truth is, my fellow passenger on the bus, watching the view of California go by between Ali and San Francisco, he was right and he paid off. And I hope he held that position because, he made bank.
Anthony Ong: (00:17:11)
Yeah. Well, he probably doesn't need to take a bus anymore if he held under that position.
Jeremy Au: (00:17:15)
Exactly right? So, I think that's the thing, right? It's like, there's a lot of great reward because the same level of growth rate that they accepted between the time they were private to the time they went public, if they got it able to keep growing and even to transition to free cash flow. That double assumption is really the crux for why people wanna invest in growth technology stocks. It's because they're saying like, you can keep up or keep up most of the initial velocity momentum, and you're able to eventually spit out that free cash flow from the whole business.
And that takes a lot of thinking, more deep thinking than if you were to invest in something that has been relatively predictable CPG cycles or you know exactly how it's gonna perform in times of high inflation or high interest, right? And those are very different environments.
It could be a high interest, low inflation, it could be low interest, high inflation, it could be high interest, high inflation, and you actually know how CPG goods companies are gonna perform. And you also know how all the gas companies are gonna perform because they've really gone through several super cycles of it. So it's interesting for all of us to figure out growth tech together.
Anthony Ong: (00:18:19)
Yeah. So, just maybe delving a bit more into growth tech before we go into the other aspects. You know a lot, that's a lot of things to consider, right? You know, a lot of times it's really the blue sky thinking, this is how we are gonna get there and you've kind of missed out a hundred steps, a hundred things they need to go right along the way for them to get there. But, you know, I think in your estimation at least, what would be the more interesting or the more key factors to think about when we're evaluating these type of companies? Is it something like product market fit? Is it something like founders? Because you want them to be able to build a following in the social media agent and get account cult-like, or belief in the markets. That's probably the nicest way to put it. Or is it something else?
Jeremy Au: (00:19:04)
Yeah, well, you know, several things to watch out for is, I think you have to look at, first of all, the company, right? Historicals, right? So how's that performance been? The financials a top down basis, but yet, I think try your best to really go down one or two levels deeper or three levels deeper, which is how's it performing on a vertical basis? How's it performing on a geographic basis? Which areas are they performing well in and which areas are they investing in, and areas that they are competing or trying to catch up, right? And by the time they go public, often these companies are in multiple geographies, multiple products.
And so it's really important for you to have that tear to really understand how is lifetime value and custom acquisition cost performing in this market, versus another market, versus that third market. And what you're trying to look for, adding at a deep level is, I think at some level you have to add minimum belief that it's already working somewhere. And that's hard because, the truth is Tesla was making it work for a very small number of cars, and I think that's what my fellow bus passenger just saw, right? It's like immediate work for luxury and the ability for him to make it work is a function of the team's capability to execute and a conviction they're able to repeat that for mass premium and mass and keep going, right? And, that was just a really tough decision to make, right? Vice versa, you know that companies, for example, where you have exposure to these companies via mezzanine deals, right? Or on a private market, so we could have access, for example, the Space X, right?
And, you know, it's a very similar company, same founder, very different vertical. And again, you can see that it worked, right? You know, I mean they fall so many times, the rockets get exploding, right? So it just did not work, alright? But I think if you dive deeper into it, you could be like, yeah, even though for 10 of them, they all exploded, they all exploded a little bit later than everybody else, the previous ones before. Because, they figure out something, some component, et cetera. And I think this goes to the second point, which is kind of really about a category, right?
So what about a category? Does it land itself to network facts, learning curves, economies of scale, economies of scope, government subsidies, low competition, high bears to entry? And I think that's why people are so excited about SpaceX, for example. It's just that, right now, as of 10 years ago, the only people who could launch rockets were like, the Russians, the Americans, and the Chinese, pretty much, right?
Anthony Ong: (00:21:27)
Yeah. It was a government activity, right? It wasn't a private activity.
Jeremy Au: (00:21:30)
Exactly. Right? And so, what they were kind of saying is like, if we can make this reusable, we can make costs drop by order of 10 order, order of hundred. Heck, you know, some estimates go down to order thousand because if you factor in a cost that your cost are per satellite, to make a satellite yourself is also dropping, right? Last time, you had to make a giant one, then you can make it micro. Now, you can make it nano. So, your satellite is getting smaller and smaller. So, for the same level utility, the cost to launch is actually dropping by orders of magnitude. So, you know, that's an incredible market to go after because then, you're just saying like you're competing against government-backed conglomerates. And these are relatively more heavy weight, they're slower to react. There are certain belief points. So, to SpaceX, it was like, we can do that.
And of course everybody was like, well, the companies aren't not good enough, even today. And they were like, because there isn't enough cargo, even though it can make it cheap, nobody's gonna, you know, is it passengers, etc?
And SpaceX was like, well, we'll make our own global starlink internet service because you know we have it and we have a new product category. And then everyone was like, oh my gosh, it's genius, right? Because you know, if you've got cost and then internet, and then suddenly you're fighting all the telcos around the world who are not going to service the Midwest, and it's not gonna service the central Asia, to some extent, it's not gonna service you in the jungles, or Borneo. These are things that're not really gonna service the same level or magnitude that you would in an urban area, right?
And so, it's a huge disrupt of technology. And then, this opened up another billion dollar category for themselves. And the truth is they can continue building a whole bunch of different billion dollar, total adjustable markets, and they have a huge advantage. Cause for anybody else, you and I can't enter it because you and I could potentially compete with online food ordering service because it's actually quite easy to make the app today. You could probably make the app for a thousand dollars off the shelf and go find restaurants a list, and promise them low commission. But you and I can't build a space rocket ourselves because it's gonna go boom, right? And even moreso, today, the world, the rocket space industry is out due to current political components.
Chinese space industry is primarily for the Chinese business or consumer market. So you know, SpaceX pretty much has the whole western world or whatever you wanna call that as the lowest cost launch provider. So, it's going to be incredible growth story on the public markets as they kind of like add that more and I think the public will love it.
Anthony Ong: (00:23:57)
Yeah. I mean, it's just kind of, wait, SpaceX hasn't been listed?
Jeremy Au: (00:24:00)
No, they have not been listed yet, but you know, it's nice to be part of it as an investor. So, we are all kind of waiting, and we're just waiting. We think it's gonna be an incredible growth story.
Anthony Ong: (00:24:08)
Yeah, I think, well, mezzanine, anything, if we can underwrite the risk, cause it's gonna be great returns.
Jeremy Au: (00:24:14)
Well, there's a lot of risks, you can be mezzanine, and financial. There a couple friends who did that and some people are mezzanine and education tech in China. And more of them, unfortunately.
You know, the shot is lost and then you have a lot of capital locked up for an unknown period of time for when they can eventually go public. And the reason why I share this story is because it shares what the last stage of capital is kind of thinking about how they should be prepared to go out to public.
Anthony Ong: (00:24:38)
Yeah. And I think that's about right. And to be honest, especially with the SPAC boom, there have been a lot of companies that have come public, which might not necessarily have come public 10 years ago. And I'm thinking about companies like, I don't know if you're familiar, Otonomo, which is this connect-the-vehicle data provider. So they take data from a vehicle, they clean it up, they sell it off to have fleet management and all of that. They have like 500,000 in revenue, but got a billion dollar valuation on public markets due to fro and then all of that. And when you are looking at companies like this, part of it is seeing what the best case is, which is what management is telling you and part of it is going well, but is this really true? And digging a bit deeper to see whether the market dynamics and as you have pointed out, their ability to execute whether that has actually come to the form, right? Because if it's all dreaming and they haven't actually managed to sell or managed to build too much, then that's a bit of a red flag even if they have a decent valuation now. Yeah.
So, that's really interesting and it's a nice, I guess, private inside lens into public markets due to the type of companies that they were talking about, but maybe just a bit more on the more developed part, public entities in that sense, more developed than Grab, for example. So, I feel grab is still kind of mid stage because they have built a business, they have obviously won a few markets. They are entering to more markets to try to win them, and they have tried to build out new product lines with their FinTech and all that, but, they're still a bit cash negative, I think, from the last earnings report. So there's some evidence of execution, but they need a bit more to go. But what about something like Meta, right? They won a wave, so they won social media for a bit and now they're getting challenged on social media. User growth is slowing, and they're trying to find the next big thing, right? Is it kind of the same lens in the sense that for the next big thing, where we are trying to open up another 500 billion market? There is going to be a lot of underwriting of risk, a lot of ability to try to hold your nose and accept those valuations, and accept that dreaming in that sense or accept that, well, positive thinking. Or is it something else? And can we get a bit more safety from things like, they do have an existing business that's very willing to, that spends up tons of free cash flow. That, that builds up their cash capability and, and they have obviously want something, so it's very exciting and they have a good track record and it might win again.
Jeremy Au: (00:27:08)
That's a million-dollar or even a billion-dollar question. You know, the truth is that Facebook has one, not just one way of technology, but multiple ways of technology, right? It's obviously one social networking.
In terms of the Facebook side, there's also one Instagram, right? Which is about photo sharing. You also one with WhatsApp, right? Which is the defecto status quo outside a message and WeChat. And I think they're betting a lot on Meta, Metaverse, but, maybe an hour of saying it is VR, virtual reality. Now, truth is I've been an early adopter of VR. I have the Google Cardboard, I have the first situations of each of these headsets and I think for example, personally, I believe VR is a huge thing. I think the technology is getting there. It's a fundamental basis. For example, what is it based on, right? I think it's a concept of , can you squeeze in better processing power right into goggles, like how to wear it on your face? But also can you have cheaper displays and screens over that. And the weird thing is that as long as there isn't like a spiky supply or demand shock to micro tripps, you know, and these hardware in China and Taiwan figures cross, um, you know, the truth is that these VR headsets are only gonna get better and cheaper over time. It's just a function of time. And I always tell people all the time, and they're like, oh, you know, VRSs are never gonna work, et cetera. And I'm like, that's like people shitting on radio back in the day and became super popular. And then there's like black and white TV.
Anthony Ong: (00:28:42)
Yeah, people shitting on the internet.
Jeremy Au: (00:28:43)
Yeah, exactly. People used to shit on black and white TV. It was like, the real world is more fun than black and white TV. And then TV is a billion dollar company and the colored TVs came. And then suddenly, TVs became monitors and laptops, right? In terms of like there and the streaming media. And people were like, why use the computer? I mean, my parents used to be like, Jeremy, stop playing Utopia and the kingdom-building game, turn base and don't play StarCraft and Warcraft. Go outside and play. And I was like, yeah, I'm happy to pay 50 bucks, et cetera.
And that's a billion-dollar e-gaming industry that's there today. Right? Is this built on the fact that people move from black and white televisions to color televisions, and from color televisions to monitors with games they could play, right? And so that's a billion dollar category now. And my point of view is that VR or 3D, the concept of 3D, is really the promise there. And I think there's a huge amount of value that's gonna be unlocked in terms of a whole category. However, it is unclear whether it's gonna be, for example, the hardware manufacturer that captures that value or whether it is the applications that capture that value. So for example, we talk about e-gaming. Who wins?
I mean, for example, people have tried to look at, obviously, hardware. They're all commoditized competition. They are kind of like airlines, right? So everybody's fighting and, obviously, they are strong billion dollar companies today. But also to some extent you could say that their approach is to be low cost producers of great hardware, right? And that gets economies to scale. That's how they win the market versus, you know, I think there have been people who try to, for example, buy, invest in sports teams, eSports teams, for example. And those have not turned out well because unlike a football team or a soccer team, the rules keep changing.
So in other words, when you are in golf or in football or so forth, these associations, these organizers, actually you could say you always have the ability to create your own federation or your own competition. You see that in golf, right? And that creates a certain level of healthy tension where the organizers, autonomous, or whatever you wanna call that, the brackets are obviously extracting a stake of it or take of the licensing the video so forth, but they don't have the power. And so, the teams are able to extract their value and so you can invest in football teams and so, so forth. But I think when it comes to eSports teams, the problem is that they're so coded to the game, right? And the game has so much power in the sense that it can change the rules, it can change the characters.
It's getting boring. They change the matter. And so the teams can't get out, they can't go to a lower cost league, they can't go to a lower cost geography. So, they end up being the suppliers of talent and moments to the real flywheel, which is the publishers, right? Which is like Blizzard activation, which has been acquired by platforms that try to be all in ones.
Microsoft is kind of like, oh you know, we don't see this as a very small acquisition. And you're like, whoa, wait a moment. This is a hardware all-in-one combo we're streaming. They have, you know, you have game pass on, you have Minecraft, you're gonna have Blizzard and all these other folks. It's an incredible asset. And so historically the hardware, now they're becoming hardware and software plus games, I'm just giving an example, example, right? And so if you want exposure to e-gaming as a category, you'll be like, maybe you buy Microsoft, right? You know? Because you know in the past you'll be like, oh, I'll buy something else.
But now maybe it says, Microsoft. Is that crazy? And so maybe like Facebook or Apple, they also have their bets on augmented reality or virtual reality. And then, they're adding other stuff like Metaverse, but it's the concept of monetization, transactions, community.
I personally find it very hard to bet against it. I personally believe in it. I personally say it's a billion-dollar category, but what I would say is, now, I'm clear who will capture the value within that ecosystem. So, that's interestingto find out.
Anthony Ong: (00:32:45)
Yeah, I think that that's the interesting point, right? So there's really two, I mean if you're talking about the next phase and of course all of these develop on waves of technology. I mean, if you remember six, seven years ago, it was Google Glass, which had this whole furor, which was really AR glasses and then Facebook has a matter has with Ray Ban now, but things have changed and obviously technology has gotten better, and society has become a bit more accepting as well. So sometimes, it's just the right product at the wrong time.
Jeremy Au: (00:33:11)
Oh, for sure. But you know, I always remember that, I don't remember, but over 10 years ago, I think there was this viral post on Reddit and all the various memes, and it was about this. It showed a picture of a Chinese or Asian tourist in this place, and she was using a selfie stick, basically a long pole, and that stick was a phone and she was holding up and taking a photo of herself by herself.
And then everybody was like laughing at her as if they say like, oh, this woman is forever alone, this person doesn't know how to do it, this person is like forever lonely, this person's low class, this person has no friends. But she was Cassandra. She was the future that you would make, that smartphones or plus selfie stick would become not only popular, but the norm, right? In that we would actually create phones with two cameras now, one at the back and one at the front. I mean, it's crazy. In the past, they used to call the camera that, that's like the front, right? Because, it's like the front of the camera is this, right? And then now, you have two things. But she was a hit of a type. She was like the early adopter who crushed it. This little middle-aged Asian auntie crushed it. Right.
Anthony Ong: (00:34:25)
Yeah. But I guess one of the first. Just unfortunate that she wasn't there to capitalize on the whole trend when it became mainstream. So, I think that's one. It's timing. And the other is economics. And in terms, by that, I mean kind of like market structure, where in the last round with our current mega tech companies that they have all managed to become platforms, become gatekeepers, extract a certain surcharge. We don't wanna call it a tax on people who wanna use that platform for being the biggest.
But of course, that's Google as well, you know? And I guess the battle for the Metaverse is who is the dominant platform? But this also presupposes that it is the same type of market structure. That means that platforms win, which might not be the case, so I think that there's a lot, and it goes back to us, talking about earlier stage companies are going, this, well, not terrible, but this is exciting. But there's also a lot of unknown, you kind of have to think about the risk and then think about your analysis slightly differently.
Sorry, one, I know we're running a bit late. One last question for you. You know, I think a lot of the way the big pack behemoths have come up right now is that they have really had one good or really key product and then expanded into various verticals and increasingly, they just affect more and more of life, right? I mean, that's obviously Amazon with AWS. And like Alexa with home and they're in Prime TV and all of that. And it seems as if, even every company seems to be following that playbook now, right? So C has gaming, they have eCommerce, and they have, well, now they have C Capital and everybody's just trying to grow in different verticals.
Do we see that? Do you kind of see that as a good thing in a sense? And because we are kind of expanding out of their core expertise, right? That's one. Especially if you're early, earlier stage and they haven't really worn their first key market. And so I think one is, is this necessarily a good thing? And two is, when a company tells us, oh, we are gonna expand this, that is gonna be great. We are going to unlock another 500 billion in 10. How much skepticism should we put into that?
Jeremy Au: (00:36:34)
Yeah. You know, is it operationally a good thing? Is it financially a good thing? Is it societally a good thing? Operationally, yes it's a good thing because they have to be competing all the time, right? They're competing against not just the incumbents that they're probably articulating on, benchmarking themselves against, but they're also trying to stay ahead of the thousands of fastball Ubers that are behind them, right?
I mean, Uber had to fight DD, and Grab, and Gojek at the same time, and lift in this core market. And so, there's a huge race. Honestly, if you think about it, where even if you figure out the technology or the business model, doesn't mean they get a lot of time.
Because you know what we, as capitalism, or that whole order of things, the grand bargain a little bit here, is that you have to, fight to survive, and you fight to do so, and you get rewarded financially by the stock market as well as in terms of profits, the shareholders, to keep that whole flywheel going.
And if you don't, someone else will do it for you. And that's called creative destruction, right? Yeah. Which is that if you don't do it, someone else is gonna do it eventually because the shareholders incentivize the fine and invest in someone else who is gonna be able to achieve that growth. And so, operation is a good thing because these companies are designed to grow. They're designed to become more efficient. I . Think the financial shareholders or investors that they talk about is your conviction in the team's ability to execute that. And that's actually a very difficult thing to judge because obviously, they historically may not have had a lot of exposure to the press.
They may be rented too young,. They may not necessarily have a prior history of looking at or leading other public companies. And truth is, a lot of these founders and executive teams have historically built and run companies that have been private, and I mean, not necessarily clear about how to, for example, operate in terms of a public company.
There's a lot of additional public compliance requirements that slow the company down. And lastly, obviously, they may not necessarily have the great finance leaders, etc., to be able to clearly articulate their story well. So to stock market, right? And so the truth of the matter is, you know, they address as many technology growth stocks that are obviously maybe overperforming in terms of the public performance versus the actual metrics. But there are just as many companies, from my perspective, that are underperforming their actual growth potential in a fundamental metrics and execution capability because the team hasn't been able to best articulate their vision, or the market has not yet come to understanding what a true value of that technology disruption and innovation is.
And lastly, I think society is a good thing, right? Because basically what I was saying is for over, you know, a hundred thousand years, humans basically had the same GDP per capita, had the same energy consumption. In other words, we ate berries, we killed rivals we could hardly chase.
And you know, the truth is, over the past couple hundred years, has there been a tremendous improvement in obviously our living standards, our health, our sanitation, and all of that has been predicated on technology, right? The technology of electricity, steam power, cars, all that stuff.
Heck, you know, burning dinosaur group to power all those devices. All that has been based on, retail and shareholders and investors investing in promising technology, and companies are promising to capitalize in ways ahead and do that. And the net effect of that, even though some stocks rise and fall and some stocks take faster to rise and fall and some stocks have that long, super, from our perspective, indomitable, right? Like General Electric was indomitable for a long time from the time of electricity, right? It's kind of crazy if you think about it. The net effect of that is that all of us benefit because the market is saying, let's experiment and figure out what's the most productive use of this capital in terms of technology. And in inverse, if the technology investment is not productive on net effect, we'll pull out the investment, it'll sharpen the stock price. And so, that is humongous for all of us. And that's why we're making more progress on VR, on longevity, on pharmaceuticals than we did in the next 10 years.
We're making more progress in them than we did over the past 10 years because the rate of tech adoption, the rate of that technological changes is accelerating, and things that we used to think were impossible, things that we used to think that we would never go back to the moon, right? Because it was way too hard.
People used to write that. They say, we'll never go back to the moon cause it's too hard. And people say like, we're never gonna do nuclear fusion because it's too hard. But now things that were too hard are just starting to fall down like flies. And I think we're entering a new age. Human endeavor powered by the public stock markets, and whether you make money or not, there's another question altogether. But you know, it's tremendous that we —
Anthony Ong: (00:41:21)
Well, hopefully, you have a better life, even if you don't really.
Jeremy Au: (00:41:23)
Exactly. You know, you are incentivizing founders and VCs and governments to invest in the future.
Anthony Ong: (00:41:30)
Cool. I think that's a nice way to end it, actually. Did you have anything else you wanted to add before I let you go?
Yeah. You know, I'd love to add that if you found this conversation fun, and you wanted to hearmore, do feel free to go to www.jeremyau.com to learn more, because what we do is we profile Southeast Asia tech leaders' journeys across Southeast Asia. So you know, Singapore, Malaysia, Thailand, Indonesia, Vietnam, Philippines, and you know, we're looking at founders, operators, executives, venture capitalists, angels, but I think we're just looking at identifying and building the future, and how to stay human while we get there.
Nice. All right. We'll put in a show note so definitely people can check it out. But thanks for your time, Jeremy.
Jeremy Au: (00:42:13)
Thank you so much.
Anthony Ong: (00:42:14)
Thank you. Bye.