In the video below, Michael Saylor, CEO and founder of MicroStrategy (NASDAQ: MSTR ) and author of The Mobile Wave, visits The Motley Fool to discuss tech, business, and social trends as they relate to investors today.
Understanding paradigm shifts like those discussed here is a cornerstone of Motley Fool superinvestor David Gardner's own investing strategy, and it's critical to his market-thrashing returns. I invite you to learn more about how he discovers his winners -- just click here now to read more.
Michael Saylor: I started with a strong tech thesis, but I've now arrived at a geopolitical thesis. The book talks about...
There's an example from The Economist. A guy fills a truck up with Guinness Beer in Cameroon. He drives around for three days, gets stopped 37 times by the cops and they seize one third of the cargo on trumped-up charges. It's not illegal to drive a truck with beer on it around Cameroon.
The epiphany was, any time you have to do anything that involves driving down a road, complying with a local cop who will be corrupt... Half the students in Ukraine pay a bribe to go to school. If you need a teacher, if you need a human being, if you need bricks and mortar to be involved, you're going to suffer from inefficiencies which range from corruption to physics, etc.
If you can convert that -- you can't convert beer into software, that's an unfortunate thing -- but if you can convert your product or service into software, you achieve a completely different result.
Here's the geopolitical thesis. I believe that we're actually moving into a mobile mercantile network that's going to encompass 5 [billion] to 6 billion people. I believe that free trade between those 6 billion people is going to increase every year -- maybe forever, or for the next decade or two decades -- because as soon as something becomes software, it's much more freely tradable because you can circumvent all of the local constraints which were in restraint of trade.
We will see most things become mobile application networks.
Once you've got a piece of software on a network called Google or Amazon or Wikipedia or whatever, the first billion people in the world are going to control the category winner. If you win the billion people, then you'll win the next 5 billion people.
The first billion are unified in the fact that they all speak English, they all spend in convertible currency, generally dollars, and they all embrace American technology. They're probably going to come at this from an Apple or a Google point of view; as of now they are.
If you win that market, then you will win the rest. The English-language newspaper is not going to go to 2 million people; it's going to go to 500 million people or 800 million people.
I was on a beach, talking to a guy. He said, "I read your book. I own the largest textbook manufacturing company in my country, and the government just put out a tender to buy tablet computers for all the students. What should I do?"
I said, "You should sell it to anybody stupid enough to buy it." This is the danger of knowing enough to hurt yourself.
The techy guy that doesn't really understand what they're talking about would say, "Oh, let's go ahead and program software that runs on tablets to teach all this stuff." The problem is, that works if you're the biggest American textbook company. Everybody else is screwed because what's going to happen is American, English-language, dollar-denominated companies are going to be the category-killers.
If I can create a textbook that teaches chemistry or physics or calculus, it works the same in Peru, Argentina, and Brazil as it works in Romania, Russia, Turkey, Saudi Arabia, India, China; physics and thermodynamics work the same.
The cost of translating it is de minimis. It's one percent, two percent to translate something. The cost to transmit it is zero. Ergo, someone's going to write a textbook that teaches you calculus, it's going to go to a billion people, and who wants the fourth-best one? Nobody wants the fourth-best one.
What you've got is a dynamic with the mobile wave, where first I dematerialize the product, and it has no mass; conservation of energy and conservation of anything just doesn't take place.
Then I make the product magical. Now the textbook teaches me thermodynamics. I have a model simulation; I crank up the temperature, I boil the water. I change the water into mercury. I change the mercury into molten steel. I put the molten steel on Jupiter, and I boil it again, and I learn thermodynamics.
You can't do that with a paper book. You can do that with software. Once you do it with software, nobody wants to go back.
We're looking at a world that is going toward 5 billion people that speak English. They're going to spend in dollars. They're going to embrace American language, American culture, American technology, American values, American ways of doing business. If you can't win that market, you're probably not going to stay in the business.
That's the geopolitical observation.
The 6-year-old girl in Pakistan, she's going to take a tablet out that costs $100. She's going to be able to learn any language for free, without the permission of her parents, without the permission of a local mullah, without the government having an opinion, without asking the teacher's union what they think.
What language is she going to learn? She's going to learn English because you can get a job in English. Everything you do in English goes for a higher price. Ask people that live in China. You're a Chinese programmer, you make four times as much if you work for an American company and you speak English.
Everything you buy, you buy for a lower price. Every question you ask, you get a quicker answer. Go to Google. Type any query in Tamil or some random dialect. You're not going to get as good an answer as if you type it in English.
English is like the Latin of the mobile era.