The world’s new crucible

October 26, 2010

The theme of this year’s Quebec City Conference, a gathering of some of the world’s pre-eminent private-equity investors and venture capitalists, is innovation and globalization. Chrystia was in attendance earlier this morning and interviewed one of the event’s keynote speakers: Glenn Hutchins, co-founder of Silver Lake Partners, a $14 billion private-equity firm that focuses on the technology sector.

Hutchins’ remarks focused on the shift of economic power from the U.S. to China. He noted that as long as China grows much faster than the United States, multinational corporations will shift more of their business there. But his other insight was that for the first time businesses are tailoring products to the Chinese consumer rather than just selling the Chinese products developed for American consumers:

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It used to be that to be a global company you had to forge your business model in the crucible of competition in North America–potentially Europe, but usually North America–where you define your business model, define your product set, define your customers, and then once you were successful there took it outside the world and essentially sold the same products and services to a strata of groups and people around the world who can consume it.  Today what you’re seeing is companies that are growing up–we talked a little earlier about Huawei being a very good example, but there are many, many others–whose business models are being forged in the crucible of competition in the emerging markets.

Hutchins gave an example from the mobile phone industry to illustrate his point. Americans are willing to pay upwards of $400 for Blackberries, iPhones, and other all-functional smartphones, but emerging-market consumers tend to spend only $20 on mobile phones. Instead of following the integrated business model of RIM or Apple, mobile-phone makers are forced to develop a new model that uses many small workshops across the developing world to keep phones both cheap and customizable.

Staying on the topic of mobile phones, Hutchins called the rapid development of mobile wireless broadband the “biggest technology trend of our lifetimes.” The technology revolution that took off with the PC and Microsoft, continued with the network and Cisco, and grew to include the internet and Google, has reached a new phase with today’s mobile phones. He gave some numbers to make his point:

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Twenty-five or thirty years into the PC trend there are about a billion PCs in use in the world today. There are about 1.5 billion television sets, about 1.2 billion telephones. I think there are only 2 billion bank accounts.  There are already 5 billion subscrpitions to wireless handsets just in the nascent days of this.  So it’s three to five times the size of the addressable market of these technology trends that are twenty-five to thirty years in penetration.  It’s enormous potential.

Posted by Peter Rudegeair

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The Tea Party is not raising the issue of income inequality and the rise of the super rich. They somehow think they can get there, too. They are worried about losing some of their income to others they believe are less deserving and further down the economic ladder. There is no Tea Party without Obama. The Tea Party is worried about Obama redistributing money from the middle class to people of color in the underclass. If you read their (Tea Party) policies, they are acutally quite similar to the Washington Consensus. Low taxes, fewer regulations.

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