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Readers who waste as much time as I do on YouTube may have also experienced the sensation of having an unwanted video thrust upon you by the website’s algorithm, only for you to end up rather enjoying it and then watching the whole thing. This happened to me earlier this week and the programme in question was a short documentary from 1982 about Japan.
Filmed at the start of a booming decade for Japan and already over 30 years into the country’s post-war ‘economic miracle’, it is remarkable to watch the unbridled optimism with which the Land of the Rising Sun is presented by an Australian narrator.
“The most interesting exhibit is Japan’s greatest natural resource: the Japanese people,” says the narrator, as the camera pans across a future technology exhibition. “Energetic, highly trained – they more than any other nation anticipate and accept technological change. They believe it will look after them. They face the future without fear.”
Surely nothing will stand in their way?
One industry which the documentary highlighted as set to offer a new export boom for the country was robotics. This has actually panned out. Roughly half of all global industrial robot exports come from Japan today, something we see in the portfolios of Japan-focused trusts like Schroder Japan (SJG) and JPMorgan Japan Small Cap Growth & Income Trust (JSGI).
One of the arguments made for Japan’s success in robotics is essentially that ‘necessity is the mother of invention’. With a shrinking and increasingly elderly population, Japan needs robots to undertake labour that humans used to. The documentary takes another angle. Japan, the narrator tells us, produces 2.5x as many science and technology graduates as Germany and the UK combined. Japan’s greatest natural resource is the force behind its success.
Interestingly, this is an argument we see made a lot today by China bulls. In 2020, China had 3.6m graduates in science, technology, engineering, and mathematics (STEM) subjects. This was the highest in the world by far and far in excess of what the US, France, Germany, and the UK combined produced. The country also had the highest proportion of its overall student body (41%) enrolled in STEM subjects.
It is hard to make the case that this is a bad thing. As Fidelity China Special Situations (FCSS) Manager Dale Nicholls noted in the presentation he gave to Kepler Trust Intelligence readers at the end of last year, many technology companies in China are now world leaders. For instance, FCSS holding an autonomous vehicle company pony.ai is on par with or perhaps even superior to its peers elsewhere in the world.
On the other hand, there may be something to be said for the system in which you operate as a STEM graduate that determines just how economically impactful you end up being. To take another example, Russia produces a huge number of STEM graduates and has the second-highest proportion of its student body studying STEM subjects globally.
And it is noteworthy that Google, WhatsApp, and PayPal all have founders that were born in the Soviet Union. The founder of UK-based XTX Markets, very possibly the most profitable company in the world today on a per employee basis, was as well. So too were the two founders of Revolut, which may be the UK’s most valuable fintech. Russia has also produced several world-leading tech companies, like Yandex and VK, which don’t really have any competitors outside of the US and China. Google even tried to acquire Yandex at one point and its arguable that its indexing technology is actually superior to the Silicon Valley firm’s.
However, the two founders of Yandex, one of whom has passed away, both left Russia. The original founder of VK had the company effectively stolen from him by the government. He has since left the country and founded Telegram, which is now the third-most used messaging application after WhatsApp and China’s WeChat.
The point here is that Russia may have a great education system for STEM subjects but most of its successful students make their money outside of the country. Those that did stay and built companies have also ultimately followed a similar path.
China is not Russia and crackdowns on the tech sector by the former appear to have been reigned in. Nonetheless, there are still warranted fears that, even if China does produce a lot of clever university graduates, they won’t be given the space needed to thrive in the future.
In contrast, it will be interesting to watch India – the country that produces the second-largest number of STEM graduates in the world. Even if some may find flaws in the country (as you would with any), India is a democracy and it is hard to see the sort of corporate land grabs or seemingly arbitrary crackdowns on companies there that we see in other parts of the world.
Mobius Investment Trust (MMIT) manager Carlos Hardenburg noted at one of our events last year that he has never seen so much enthusiasm for the country’s prospects in the 30 years he has been investing there. Perhaps we can expect a YouTube documentary about how employees at Indian startups face the future without fear in the next couple of years.
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