One shortage we have written about regularly – and again this week – is the shortage of microchips. Everything comes with chips these days, from cars to coffee machines to computers, and the squeeze is being keenly felt by manufacturers and could explain why my efforts to source a new printer earlier this year were met with frustration. It is interesting that this particular shortage has garnered more attention than any other – the pandemic revealing just how dependent on technology we appear to have become, to the extent that threats to our connected future seem existential – more so, it seems, than a roof over one’s head.
Technology certainly appears to have become even more of a special case in the eyes of investors this year, hardly surprising given the performance of the FANMAGs or whatever you want to call them now. First-quarter results from some of the tech giants this week only underscore their appeal further – unstoppable cash-generating monsters with the deepest and widest economic moats you’ve ever seen. But if you want to own them, you’ve got to cough up a hefty price.
There is, beyond the backdrop of financial repression, a reason why such shares are flying, and why it is often bemoaned – including by myself – that the UK lacks a similarly attractive technology industry. The recent Hill review suggests someone has been listening, with proposed reforms that would appeal to exactly the type of companies the Nasdaq does so well. But, so far, we haven’t ventured far beyond food delivery – it is unlikely that a ‘D’ will rise to further complicate the high-tech acronym. Or an ‘O’ for that matter.
What makes a technology company is a question we have been grappling with for some time in the office, long before the Deliveroo IPO, as more and more companies attempted to reposition themselves to capture the tech trend. The mere mention of technology can turn even the most hardened investor gooey-eyed, but it is just a word. As Steve Jobs, founder of the biggest technology company the world has ever seen, once put it: “Technology is nothing. What’s important is that you have faith in people, that they’re basically good and smart — and if you give them tools, they’ll do wonderful things with them,” he said. “Tools are just tools. They either work, or they don’t work.”
If we think about tools rather than technologies, then technology is all around us and has been for millennia. Deliveroo’s bicycles were cutting-edge in 1817; the barcode revolutionised retail in the 1960s but never made retailers technology companies. Cement, plasterboard, screws are all technologies, even if we don’t think of them that way – that the companies selling them do not attract a technology premium is that like all technologies they have become commoditised. But they can still be very attractive businesses, and bricks remain just as important as clicks. So perhaps instead of asking what is a technology company, we should continue to judge all companies on their own merits – lazy labels like technology or ESG may mislead, but the numbers shouldn’t lie.
