Chapter Content
Okay, so, like, I wanted to talk a bit about this concept of "capital as a service." You know, it's kind of a mind-bending idea, but it's really how a lot of modern businesses operate these days. Think about when you buy a car. Are you *really* buying a car? Or are you buying, like, a three-to-five-year lease to participate in, like, the whole transportation system, the highways, the insurance, the repairs, all that stuff? It's kind of... bundled, right?
And it's the same with businesses. You think about a company like Apple, right? They're amazing at product design and development, but they're not necessarily, like, uniquely advanced in every single technology. It's the *combination* of their capabilities, the elegance, the ease of use, that really sets them apart. And those capabilities need support, things like accounting and marketing. But they can just... buy those in the market.
So, capital and labor, nowadays, they're kind of like purchased services. Like, electricity, like water. You can say Apple products are made from capital and labor, but that doesn't really tell you anything about *why* Apple is Apple, or why people line up to buy their stuff. Just buying the same amount of capital and labor as Apple doesn't mean you can make iPhones, right? It's like saying you can make an iPhone if you buy the same amount of silicon and glass as Apple. That's just… a recipe’s ingredient list, not the actual, you know, *recipe*.
Back in the Industrial Revolution, all the iron factories and textile mills were pretty similar. They hired the same kind of people, trained them the same way. The knowledge to build those things was, like, pretty widely available. But now? If you went to Apple's headquarters, you wouldn't magically know how to create, like, the next big thing. You might learn some things, get a sense of the "mysteries of the trade," but that's just the beginning. The real secret to success is having access to knowledge that *isn't* common knowledge. It’s all about the unique… the special sauce, basically.
And, you know, this leads to this idea of "capitalism without capital." Take Amazon, for example. Huge company, right? Worth billions. But they don't actually *own* a lot of stuff. They rent their warehouses, lease their vehicles. They sell goods *before* they've even paid their suppliers! They report billions in assets, but a lot of that is just accounting stuff, like the value of leased property. And "goodwill," which isn't even about, you know, feeling good about the company. It’s just, like, what they paid to buy Whole Foods.
It's not like the old days, where the factory owner, the Henry Ford type, actually *owned* the factory. That's what capitalism *used* to mean. These days, it's all "as a service." Software as a service, that’s huge now. But it's been going on for a while, housing as a service with renting. Xerox invented managed printing services. You don’t pay for the printer, you pay for the prints. Companies lease cars. You can get everything "as a service," even your gym membership. By now it’s just, like, a cliche.
And who actually *owns* all this capital, then? Well, that Amazon warehouse you see? Probably owned by Prologis, a huge real estate investment trust. Or the data centers? Maybe owned by Equinix. The cell phone towers? Specialist companies like American Tower. Even the planes airlines use are often leased from companies like AerCap. The *engines* on those planes might be owned by someone else entirely! And if you're shipping stuff from China, you're probably leasing a container from a container-leasing company like Triton and space on a ship from a company like Evergreen. Remember when the Ever Given blocked the Suez Canal? Yeah, the Egyptian government got compensation from a *Japanese* company, who owned the ship. It’s all… interwoven.
Apple's headquarters is impressive, right? But that's probably their biggest asset. Their stores? They're often renting from someone else. They have tons of cash, but they're not really investing it in the business. They're actually buying back their own shares, which is good for shareholders, but it just shows they have so much money they don't know what to do with it!
Companies now buy routine labour as a service, things like cleaning and security. And even sophisticated services, like consulting. I mean, IBM is a huge consultancy company. And Amazon Web Services provides cloud computing and all sorts of services to tons of companies. It’s actually more profitable than Amazon's retail side.
Interestingly, Amazon and Apple haven't really raised money from shareholders since their IPOs. The point of going public isn't always to get money *into* the business, but to let investors and employees cash out.
So, the role of the shareholder has changed, too. People used to buy shares for dividends, a share of the profits. But now, a lot of these tech companies don't pay much in dividends, if any. You're just hoping the stock price goes up. And that’s what fuels, sometimes, you know, speculative bubbles.
In a bubble, people aren't buying assets for the benefit of owning them, but hoping they can sell them for a higher price. Like the Dutch tulip craze or the railway mania. We've seen it with emerging market debt, the dot-com boom, the credit market expansion. There’s often some real economic basis there, but people tend to overestimate the short-term impact and underestimate the long-term impact.
You know, the 2008 financial crisis might have made people focus more on tangible assets, but it didn't really. Governments propped up the failing institutions and didn't really change anything.
We even got things like Bitcoin, a cryptocurrency with no central authority. Its utility is... debatable, let's say, outside of supporting criminality. And then there were Initial Coin Offerings, Non-Fungible Tokens, Special Purpose Acquisition Companies. Finance has never been so detached from the actual real world of production and assets. It’s all kinda crazy, if you think about it. But that’s where we are.