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Today's Topics
Today we're exploring:
- Lost decades - how Japan and Italy have fallen behind their economic peers.
- Facebook and Netflix are both competing for your attention, but they monetise it in very different ways.
- Hong Kong's tourism industry has quite literally disappeared in February.
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At the start of this week data emerged from Japan that showed that the Japanese economy had shrunk by 1.6% in the final 3 months of 2019. For Japan it's simply the latest chapter in a multi-decade story of deflation and economic disappointment that has seen Japan lag behind its counterparts in the G7.
In the early 1990s Japan's economy was arguably the envy of the world. Japanese companies such as Toyota, Panasonic and Sony were competing, and even dominating, their respective industries. That genuine economic success was mixed with low interest rates and loose credit -- a potent cocktail of economic forces that initially sent house prices and financial assets soaring.
Then, in late 1991, the music stopped. The bubble burst in Japan and the next decade became known as the "lost decade", where Japan's economy grew slowly -- if at all.
Even since 2000, Japan's growth has been sluggish. An aging population, the emergence of powerhouse US technology companies, cheap Chinese manufacturers and the looming spectre of deflation (an economist's worst nightmare) have all been headwinds.
What about Italy?
Italy's economy has arguably fared even worse in the last 20 years. Like Japan, Italy also has one of the oldest populations in the world. An older population can be manageable, but in Italy's case it's exacerbated because youth unemployment is almost 30%, causing a brain drain, with many young Italians seeking employment, or education, elsewhere.
Demographic issues are compounded by a general lack of business modernisation, arguably due to the culture of keeping business ownership "in the family" and a crippling public debt situation, where almost 4% of GDP is spent on interest payments. All told it's a recipe for lacklustre growth that is hard to break out of.
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Some people didn't like how we compared Tesla to other carmakers in our chart from last week, arguing that Tesla was so much more than just a car company. If you were one of those people prepare yourself as we compare a streaming company with a social media company.
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On the surface it may seem insane to compare Facebook and Netflix - and you'd be right. One is a free social media service, the other a monthly subscription to watch TV and movies - it should be insane to compare them.
And yet, Facebook has become so incredibly good at using data to advertise to its audience that they actually made more than $41 of revenue per North American user in 4Q19, ahead of the $40 that Netflix pulled in from its actual paying US subscribers.
Zooming out further and Facebook, in a strictly business sense, gets even more impressive. Netflix is set to spend $17bn on content this year. How much will Facebook spend on content? Zero of course, we're all happy to post it for free.
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Hong Kong's tourism industry has had a tough year. Towards the end of 2019 clashes had become increasingly violent between protesters and police. That political unrest was enough to put tourists off - with October visitor numbers down 44% year-on-year. At the time we argued "if the recent - more peaceful - protests are anything to go on, then Hong Kong's tourism economy might at least have a chance to stabilise in 2020".
Of course, we couldn't foresee the coronavirus. Preliminary February data has revealed that Hong Kong's tourism industry hasn't just shrunk, but virtually disappeared. Daily arrivals have fallen to fewer than 3000 -- which is almost a 99% reduction relative to last February.
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Data Snacks
1) HQ Trivia, an app that used to have millions of people answering trivia questions in a bid to win a share of a cash prize, has shutdown. The final broadcast prize of $5 was split between 523 viewers.
2) HSBC has announced it will cut around 35,000 jobs, as part of a $4.5bn cost saving programme.
3) Meghan and Harry might need a new Instagram handle for their 11.3m followers after the Queen announced they were no longer allowed to brand themselves as "Sussex Royal".
4) At the start of the year there was a 20-25 point gap between Joe Biden and Michael Bloomberg in the polls. According to fivethirtyeight, they are now tied. Looks like ads really work.
5) This video of a woman being challenged to finish the lyrics to "Shallow' has racked up 15m+ views on twitter already. A star is born.
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