PayPal and Square skate to where Musk’s puck is headed
At the beginning of October, Jack Dorsey finally convince the board of his payments company Square to back a purchase of 4,709 Bitcoin at a value of about $50million at that time, $75million as I write.
Within a couple of weeks, PayPal announced support for paying with Bitcoin.
Earlier in 2020, Square’s CashApp, which allows users to quickly send money to each other for free, saw revenues from Bitcoin beat USD revenues.
But what’s all this got to do with Elon Musk? Growth.
To talk about growth, let’s take a fully-grown service like Facebook; it’s enormous, everyone is on it. The only people I know not on it are my kids, but at some point they will inevitably become users of a Facebook product. Our kids are latent, potential ad-clickers.
But how can Facebook grow much more beyond new children being born?
Facebook’s total addressable market is, eventually, every single person on the planet. Eventually because it’s growth is limited by the availability of an adequate internet connection, electricity and language, which will eventually improve in the rest of the world.
As such, Facebook is probably investing in understanding cultural norms, religion, translation, foreign infrastructure projects, microgrids, recycling devices and a “lightweight” website.
And the event in eventually? Well that’s Elon Musk’s doing. Stick with me.
Most of the world’s potential web users reside in Africa, India and its neighbours, rural China and South America. But let’s focus on Africa.
Africa has the fastest growing population of all the continents and is expected that 1 in 3 people will be African by 2100, depending on how their growth changes current habits. By 2050, the population is expected to reach 2.5bn.
Growth is likely to change due to the impact of education on girls. In 2000, only 34% of girls enrolled in primary school, which increased to 81% in 2015, and educated girls tend to have fewer children.
Girls with no formal education, on average, have 6 children; this falls to 4 if they complete primary school and to 2 if they complete secondary school.
Despite making up half the population, women account for just a third of GDP, so educating women will add significantly to the economy, and what they learn is likely to increasingly come through a screen, outside school.
More than half of all Africans are farmers, but the land is worked manually and farming only contributes 15% to GDP. Modernising farming would free people to move up the value chain into information work.
It’s easy to see how enterprising activity and the bustle of street trade and local markets could move online, fostering micropreneurs, but this depends on infrastructure: internet connectivity and electricity, and there are severe shortages today.
There is also another problem: negligent governance and corruption.
Although most countries are democratic today, there is always the threat of ethnic uprisings or mismanagement of monetary policy leading to hyperinflation.
In 2008, inflation in Zimbabwe hit 79bn% a month. This extraordinary situation was brought about by a string of disasters rooted in Robert Mugabe’s land reforms in the early 90s, printing money to finance wars as well as sanctions from Western governments. This all led to a banking crisis and citizens lost trust in government transparency and the value of their own currency. They also had no trust in any new currencies issued by the same government.
In South America today, Venezuela is in the midst of its own hyperinflation crisis. During this time the country has become the third largest adopter of cryptocurrencies.
https://blog.chainalysis.com/reports/2020-global-cryptocurrency-adoption-index-2020
And here’s where Elon Musk comes in. The entrepreneur’s two largest companies Tesla and SpaceX are working on innovations with profound ramifications for the developing world and the GDP of the internet.
Tesla’s solar and energy storage technology will bring electricity to parts of the world that need it most while SpaceX Starlink will provide high-speed web access. And with it comes YouTube, Khan Academy, Alibaba, Shopify, and PayPal and Square, and Bitcoin.
Microgrids will likely pop-up in local areas, sharing the cost of the PV panels and a battery (which doesn’t have to be a Tesla product) and a Starlink router.
These nascent web users won’t initially have much money to spend online compared to their Western counterparts, so return on advertising by Western companies won’t be so attractive, but for payment companies, we’re talking billions of small transactions and a vast and eager pool of entrepreneurs, and growth, lot’s of growth.
Who will be the African Jack Ma and what’s her big idea? And what new markets and types of jobs will be borne of these innovations?
