I am surprised and confused by the announcement that Facebook has surpassed General Electric in market capitalisation.
In my view this would explain why China has been growing at remarkable rates while the rest of the world stagnates or in most cases regresses.
America sells space i.e. nothing tangible while China sells real products.
Facebook’s business plan has nothing to do with facilitating contact between real people; it is an advertising platform, same as Google, Twitter and all of the other so called “social media”.
That institutions and investors bet their earnings and clients’ money on the ability of a company to provide nothing but advertising space is beyond me. Maybe I am missing something but I don’t see how this creates wealth. Looks like another bubble to me.
The industrial revolution started when machines made mass manufacturing possible. Most of the great fortunes of the period between the industrial revolution and the 1960’s, i.e. the period before computers, were built on manufacturing tangible products. This model is still relevant today except that the manufacturing has moved east and has been replaced by virtual products radiating from LCD’s.
The difference between west and east is that the one floats in a virtual world and the other has their feet firmly planted in reality.
This virtual world has had one nasty side-effect, it has replaced values with space.
Money has no value. It is just a series of one’s and zero’s scuttling between computers. It can be created by a simple click of a mouse. Money is just debt, and to make matters worse, virtual debt.
Nothing is real.
Advertising not only incites people to spend their money on things that they do not need, it promises a utopia where everyone can be wealthy and own lots of expensive things.
So chasing money to buy things becomes a national and international obsession. And because money has no value, people have also abandoned their values in their quest to own, well, nothing.
To perpetuate this rush into the ether world of virtualality, advertising becomes an essential component. But even armed with this valuable insight, I still cannot see how this creates wealth. Especially when wealth itself is virtual.
The Chinese being infinitely more pragmatic have not fallen for this virtual world; the wealth that they make is from manufacturing real things. They have the world’s largest cash economy. They save real money under grandma’s mattress and only buy what they need to feed, clothe and heal. This is true for the billions of everyday Chinese, and less so for the elite who find comfort and western luxury items indispensable to life.
Coming back to my dilemma;
Most, if not all of the things advertised on Facebook and on the internet for that matter are made in China. China therefore profits directly from the advertising on Facebook. The stuff advertised on Facebook is bought with virtual money, which at some point becomes real money stuffed into grandma Wong’s mattress.
We create virtual money to buy things from China who transforms the virtual money into real money and Facebook becomes richer than General Electric who make real things.
Confusing, and all I can offer to explain this is that instead of making things General Electric should try to find the secret of transforming virtual money into real money.
Or is China surreptitiously investing in Facebook to sell their stuff and make real money from virtual money?