WEBVTT - The Bankrupt Billionaire 0:00:04.400 --> 0:00:07.800 Welcome to Tech Stuff, a production from I Heart Radio. 0:00:12.039 --> 0:00:14.840 Be there and welcome to tech Stuff. I'm your host, 0:00:15.000 --> 0:00:18.520 Jonathan Strickland. I'm an executive producer with I Heart Radio 0:00:18.560 --> 0:00:21.079 and a lot of all things tech, and I want 0:00:21.120 --> 0:00:24.080 to start this episode with a little bit of a story. 0:00:24.600 --> 0:00:29.480 Back in January, I attended ce S with a small 0:00:29.520 --> 0:00:33.040 team of audio and video crew. This in itself was 0:00:33.080 --> 0:00:36.239 pretty unusual, as in the previous years I had just 0:00:36.760 --> 0:00:39.440 gone to c e S all by myself. I was 0:00:39.479 --> 0:00:42.040 shooting a ton of videos every day, both for How 0:00:42.080 --> 0:00:46.360 Stuff Works, my former employer, and the Forward Thinking video series. 0:00:46.400 --> 0:00:48.920 But one thing that caught my eye while I was 0:00:48.960 --> 0:00:53.040 there was a concept car called the f F zero one. 0:00:53.920 --> 0:00:58.200 The car looked super sleek, really futuristic, kind of a 0:00:58.240 --> 0:01:02.720 mix between a spaceship and the Batmobile. The cockpit could 0:01:02.800 --> 0:01:07.040 hold one whole person, had a glass roof and racing 0:01:07.160 --> 0:01:10.760 bucket style seat, had a fin that extended from the 0:01:10.840 --> 0:01:13.840 back of the cockpit along the length of the rear 0:01:13.880 --> 0:01:18.200 of the car. And yeah, it was a crazy looking thing. 0:01:18.319 --> 0:01:20.800 Rather than a steering wheel, it had a steering yoke 0:01:21.319 --> 0:01:24.360 and you would plug a smartphone into the center of 0:01:24.360 --> 0:01:27.600 the yolk. And it create a little display there. Likewise, 0:01:27.600 --> 0:01:31.119 the dashboard had, you know, several digital displays built into it, 0:01:31.480 --> 0:01:34.040 and it had kind of this sleek wrap around appearance. 0:01:34.240 --> 0:01:36.200 To get in and out of the thing, the cockpit 0:01:36.280 --> 0:01:38.759 would open along the top and you have to kind 0:01:38.760 --> 0:01:41.880 of scrabble over the side again, kind of like a 0:01:41.959 --> 0:01:46.039 race car. And according to the reps who were talking 0:01:46.120 --> 0:01:49.640 up the concept car to the attendees, uh, the the 0:01:49.720 --> 0:01:53.680 idea was this vehicle could if it were operational it 0:01:53.840 --> 0:01:57.160 was not, it could go from zero to sixty miles 0:01:57.200 --> 0:02:01.720 per hour or arounds per hour in about three seconds, 0:02:02.120 --> 0:02:04.880 and it would have a top speed of two hundred 0:02:04.880 --> 0:02:08.840 miles per hour or about two kilometers per hour or 0:02:08.880 --> 0:02:11.960 maybe even more. And it had a total output of 0:02:12.080 --> 0:02:16.000 one thousand horsepower. The approach this company was taking was 0:02:16.120 --> 0:02:21.119 pretty interesting too. The chassis, the representatives explained, was kind 0:02:21.120 --> 0:02:25.320 of a modular thing, and an electric motor would provide 0:02:25.320 --> 0:02:27.960 the power needed for the drive train with a motor 0:02:28.000 --> 0:02:31.200 position near one of the four wheels, and you could 0:02:31.280 --> 0:02:34.799 add electric motors and batteries to the chassis to boost 0:02:34.800 --> 0:02:38.840 the vehicle's performance. So the F zero one that we 0:02:38.840 --> 0:02:41.360 were looking at, the one that was on display was 0:02:41.400 --> 0:02:44.840 to have four motors, one for each wheel, which would 0:02:44.840 --> 0:02:49.359 give the car such impressive specs, well, impressive theoretical specs, 0:02:49.400 --> 0:02:53.320 because like I said, it wasn't actually operational. The car 0:02:53.480 --> 0:02:56.720 was pretty much checking all the boxes for a concept car. 0:02:57.040 --> 0:03:02.720 It was sleek, beautiful, technologically advanced, and absolutely impractical. But 0:03:02.840 --> 0:03:07.119 concept cars are not meant to be production vehicles. Their 0:03:07.240 --> 0:03:10.560 platforms for showing off different ideas, and some of those 0:03:10.600 --> 0:03:15.320 ideas might find themselves in slightly more modest vehicular designs 0:03:15.320 --> 0:03:18.760 in the future. The modular chassis was really the selling 0:03:18.760 --> 0:03:22.079 point for the company. With that approach, you could theoretically 0:03:22.200 --> 0:03:26.320 use the same basic chassis for lots of different models 0:03:26.360 --> 0:03:30.280 of vehicles. A simple city vehicle might only need one 0:03:30.320 --> 0:03:33.040 electric motor it's not going to get a super high 0:03:33.040 --> 0:03:36.840 speed and just needs to be efficient, and suv that 0:03:36.880 --> 0:03:39.600 could go off road might need all four electric motors 0:03:39.680 --> 0:03:43.040 to provide the torque necessary to go over the terrain. 0:03:43.760 --> 0:03:46.640 But with this you know, business model, the company could 0:03:46.640 --> 0:03:51.360 potentially be extremely nimble when it came to producing different vehicles, 0:03:51.400 --> 0:03:54.760 assuming that it could actually get things off the ground. Now, 0:03:54.800 --> 0:03:57.080 the name of the company showing off this car was 0:03:57.120 --> 0:04:00.560 New to me, it was Faaraday Future and had only 0:04:00.600 --> 0:04:03.600 been around for a couple of years, quietly working on 0:04:03.640 --> 0:04:06.680 the design. Everyone at ce S could see that the 0:04:06.760 --> 0:04:09.520 company was aiming to compete with Tesla for the future 0:04:09.520 --> 0:04:12.120 of electric vehicles that you know, had a lot of 0:04:12.200 --> 0:04:17.000 style to them. But today's episode isn't just about Faraday Future. 0:04:17.240 --> 0:04:20.480 In fact, it's more about the man who provided a 0:04:20.480 --> 0:04:23.839 lot of the financing to Faraday Future for several years, 0:04:23.839 --> 0:04:26.599 a man who was running other businesses at the same 0:04:26.640 --> 0:04:30.120 time while also taking on the full time job of 0:04:30.200 --> 0:04:35.200 avoiding creditors in China, and a lot of what we'll 0:04:35.320 --> 0:04:37.880 learn will sound really familiar to those who listened to 0:04:37.880 --> 0:04:41.160 my earlier episodes about Ponzi schemes and so so on. 0:04:41.200 --> 0:04:43.880 Although I want to be straight with you guys here, 0:04:44.160 --> 0:04:48.600 while the various incarnations of this man's businesses have been 0:04:48.640 --> 0:04:52.560 described as kind of being Ponzi schemes, I think that's unfair. 0:04:52.640 --> 0:04:56.200 I think it's different, um, and I'll get to why. 0:04:56.520 --> 0:04:58.880 But today we're going to explore the story of the 0:04:58.960 --> 0:05:03.719 bankrupt billion an air entrepreneur, jiahuit Ting. He was born 0:05:03.839 --> 0:05:07.000 in the north of China in the Shanshi province, it's 0:05:07.040 --> 0:05:09.800 a place filled with historic buildings dating back more than 0:05:09.839 --> 0:05:12.320 a thousand years. In fact, that has more historic buildings 0:05:12.360 --> 0:05:15.719 than any other province in China. The main industry in 0:05:15.800 --> 0:05:19.160 Shanshi is coal mining, so it sounds like a really 0:05:19.240 --> 0:05:23.440 unlikely spot for a billionaire tech entrepreneur to emerge, but 0:05:23.560 --> 0:05:29.239 that's kind of what happened. Jahuiting studied finance and administration 0:05:29.320 --> 0:05:32.440 while he was in school, and at twenty two years old, 0:05:32.440 --> 0:05:35.159 he got a job working tech support for the province's 0:05:35.240 --> 0:05:38.880 tax office. But he wasn't there for a year before 0:05:38.960 --> 0:05:43.279 he quit his job to found his own technical consultant company, 0:05:43.320 --> 0:05:46.680 and he became something of a serial business startup guy. 0:05:47.360 --> 0:05:49.720 As then he founded a lot of companies, and all 0:05:49.760 --> 0:05:53.719 this stuff gets really complicated and intertwined with one another, 0:05:53.800 --> 0:05:57.120 which is one of the running themes and running problems 0:05:57.320 --> 0:06:01.040 of this story. I'll try to stick with one company 0:06:01.080 --> 0:06:03.400 as much as I can for the sake of simplicity 0:06:03.440 --> 0:06:06.640 before switching to another, but as you'll learn, there's some 0:06:06.680 --> 0:06:10.200 crossover going on here that makes things really messy. However, 0:06:10.279 --> 0:06:14.480 let's talk about his first company. It was two thousand 0:06:14.560 --> 0:06:20.799 two and Jiah formed a wireless telecommunications company called Sinotel Technologies. 0:06:21.480 --> 0:06:24.279 It's a bit challenging to pull up a lot of 0:06:24.440 --> 0:06:28.279 really detailed information about companies in China, but from what 0:06:28.400 --> 0:06:31.240 I can gather, the company started off as being a 0:06:31.400 --> 0:06:35.200 handset distributor, so essentially it was in the retail business 0:06:35.240 --> 0:06:38.200 of selling phones that were made by other companies in 0:06:38.240 --> 0:06:43.880 the Chinese market. This business evolved significantly. In two thousand six, 0:06:44.160 --> 0:06:47.680 cin Hotel formed a subsidiary company called x Bel Union 0:06:47.720 --> 0:06:52.400 Communication Company Limited, which was a wholesale distributor for electronic 0:06:52.440 --> 0:06:57.360 parts and systems for telecommunications companies. So now his clients 0:06:57.400 --> 0:07:01.799 weren't just you know, the average citizen, but actual telecommunications 0:07:01.839 --> 0:07:04.960 companies themselves. By two thousand and eight, the company's main 0:07:05.040 --> 0:07:09.200 business was quote the provision of network infrastructure solutions to 0:07:09.320 --> 0:07:13.200 tell cos, which involved the design, installation, and enhancement of 0:07:13.280 --> 0:07:16.760 indoor and outdoor wireless coverage so as to provide or 0:07:16.880 --> 0:07:21.120 enhance wireless signals for mobile users end quote. Now to me, 0:07:21.720 --> 0:07:25.040 that sounds like the company was helping big telecommunications companies 0:07:25.080 --> 0:07:29.480 in China build out infrastructure like cell towers and signal boosters, 0:07:29.520 --> 0:07:32.280 but I could be wrong about that. In two thousand 0:07:32.280 --> 0:07:36.120 and seven, the Singapore Stock Exchange began listing Sin Hotel 0:07:36.200 --> 0:07:39.480 Technologies on that market, and it would trade at a 0:07:39.480 --> 0:07:43.640 few cents per share for years until fifteen, when Jah 0:07:43.680 --> 0:07:47.720 and his sister in law gen Wrong offered to buy 0:07:47.720 --> 0:07:51.560 outstanding shares at nine point eight Singapore cents per share 0:07:51.840 --> 0:07:53.920 in an effort to take the company off the public 0:07:53.960 --> 0:07:58.080 market and return it to being a privately owned company. 0:07:58.680 --> 0:08:01.600 Ja hinted at this possible ability in the two thousand 0:08:01.720 --> 0:08:05.400 fourteen annual report for Sin Hotel, and that report stated 0:08:05.440 --> 0:08:08.320 that CINATEL had been facing a few challenging years in 0:08:08.320 --> 0:08:12.400 a row. According to Jah's letters to shareholders, CINATEL was 0:08:12.440 --> 0:08:16.640 seeing lower revenues, resulting in a net loss for the company. 0:08:16.760 --> 0:08:21.600 His explanation was that the Chinese telecommunications companies were cutting 0:08:21.640 --> 0:08:26.680 back on costs, so CINATEL was making fewer sales because 0:08:26.720 --> 0:08:32.960 telecommunications companies weren't budgeting for their services anymore. And in addition, 0:08:33.120 --> 0:08:37.120 Jah said that the telecommunications companies weren't really great at 0:08:37.200 --> 0:08:41.560 keeping up with payments or as he said quote in addition, 0:08:41.720 --> 0:08:44.839 we experienced a longer collection cycle as our tel co 0:08:45.040 --> 0:08:48.920 customers delayed payment due to their internal restructuring process end 0:08:49.000 --> 0:08:52.679 quote so it wasn't looking so hot. So what was 0:08:52.760 --> 0:08:55.000 up with the move to take the company private? Again, 0:08:55.840 --> 0:09:00.920 we frequently focus on private companies going public. Going public 0:09:01.000 --> 0:09:03.839 can raise an enormous amount of money for a company, 0:09:03.840 --> 0:09:07.520 but it comes with its own costs. Being publicly traded 0:09:07.600 --> 0:09:11.360 means having to follow more regulations and meet expectations of 0:09:11.360 --> 0:09:15.200 financial analysts. It also means having to disclose stuff such 0:09:15.200 --> 0:09:18.920 as revenue, costs, profit or loss. And if your goal 0:09:19.200 --> 0:09:21.400 is to get some bigger company to swoop in and 0:09:21.440 --> 0:09:24.160 acquire your company, that is way easier to do with 0:09:24.200 --> 0:09:28.720 a privately held organization than a publicly traded one. In 0:09:28.720 --> 0:09:33.560 this case, Jaw was also facing another tough reality. Sinotel 0:09:33.720 --> 0:09:38.000 shares had lost value for three straight years. The Singapore 0:09:38.000 --> 0:09:41.080 Exchange put the company on a watch list, meaning that 0:09:41.160 --> 0:09:44.280 it was actually in danger of being delisted from the market, 0:09:44.600 --> 0:09:47.040 which would also be a huge blow. All right, so 0:09:47.080 --> 0:09:49.920 I'm gonna switch gears for now, but Cinateel will pop 0:09:50.040 --> 0:09:52.760 up again. Before we get to the end of this episode, 0:09:53.160 --> 0:09:56.320 I want to talk about another company that Jaw founded 0:09:56.400 --> 0:09:59.600 in two thousand four, so two years after he founded Cinateel. 0:10:00.160 --> 0:10:03.760 This one was called Leshai Internet Information and Technology a 0:10:03.920 --> 0:10:07.719 k A. L t V l E t V. This 0:10:07.800 --> 0:10:10.640 company would be the one that would turn Jaw into 0:10:10.720 --> 0:10:13.800 a billionaire, though then itself is something I'm going to 0:10:13.880 --> 0:10:18.160 have to explain more a bit later because it's complicated. 0:10:19.000 --> 0:10:22.640 The early core business of lead TV was streaming video. 0:10:23.040 --> 0:10:26.320 Three years before Netflix would offer a streaming video platform, 0:10:26.840 --> 0:10:30.520 Jaw was doing it with Lee TV. The service partnered 0:10:30.559 --> 0:10:33.840 with Chinese film and television companies, and in time job 0:10:34.040 --> 0:10:38.200 would launch a sister company called le Shai Holding Beijing 0:10:38.240 --> 0:10:41.800 as the source for media that would then publish over 0:10:41.880 --> 0:10:44.760 at Lee TV. So, in other words, he started making 0:10:44.840 --> 0:10:48.800 original series and films very much the way Netflix would 0:10:48.880 --> 0:10:52.760 later on. The service has multiple ways for customers to 0:10:52.920 --> 0:10:57.200 watch content, so there are subscription models like Netflix, but 0:10:57.280 --> 0:11:00.920 there are also add supported versions kind of like Hulu, 0:11:01.160 --> 0:11:04.680 and there are pay per view options. For the first 0:11:04.679 --> 0:11:08.280 few years, it was hard to get customers. According to 0:11:08.320 --> 0:11:12.040 the Verge, it quote wasn't particularly popular in China for 0:11:12.160 --> 0:11:15.640 most of its existence end quote. But when that popularity 0:11:15.679 --> 0:11:19.280 did take off, things really started to get hectic. Exactly 0:11:19.320 --> 0:11:22.640 when that happened is still kind of beyond me, as 0:11:22.679 --> 0:11:25.880 finding information about Chinese companies here in the US is 0:11:26.000 --> 0:11:29.120 really really tricky, and many of the sources I found 0:11:29.600 --> 0:11:33.520 didn't always seem entirely reliable. So rather than include something 0:11:33.559 --> 0:11:36.720 that's just you know, poorly sourced or wrong, I'm just 0:11:36.760 --> 0:11:40.280 gonna say I don't know when it really took off, 0:11:40.920 --> 0:11:44.760 but certainly by fourteen, the same year when CINATEL was 0:11:44.840 --> 0:11:49.280 in big danger, Jah had reached billionaire status thanks to 0:11:49.480 --> 0:11:53.160 Lee TV. Jah had ambitions of heading up an entire 0:11:53.240 --> 0:11:57.760 conglomerate worth of businesses. When Lea TV began to perform well, 0:11:57.800 --> 0:12:00.440 he began looking at ways to expand in to other 0:12:00.559 --> 0:12:05.080 tech fields like smartphones and smart TVs and eventually cars 0:12:05.880 --> 0:12:09.319 Leshi Internet Information and Technology would hold its I p 0:12:09.480 --> 0:12:13.680 O on the Chinese stock Market in and spoiler alert, 0:12:13.880 --> 0:12:18.040 last year, the Chinese Stock market delisted the company as well. 0:12:18.120 --> 0:12:21.200 Learn things have just not gone so well for all 0:12:21.240 --> 0:12:25.280 these organizations over the last few years. Jaw's vision was 0:12:25.320 --> 0:12:28.880 that he was going to create an empire, or more accurately, 0:12:29.000 --> 0:12:33.280 an entire ecosystem. The goal was to control the hardware, 0:12:33.640 --> 0:12:37.320 the software, and the content, making a sort of one 0:12:37.360 --> 0:12:40.520 stop shop for all your tech needs. And so he 0:12:40.600 --> 0:12:44.760 formed a brand called Lee Echo with the Echo standing 0:12:44.800 --> 0:12:48.640 for ecosystem or ecosystem if you prefer. The parts of 0:12:48.679 --> 0:12:56.640 that ecosystem included smartphones, TV, electric vehicles, sports content in general, 0:12:57.080 --> 0:13:02.040 online finance, and cloud or internet tech chnology. Now, depending 0:13:02.040 --> 0:13:05.440 on which source you're looking at, Lee Echo became the 0:13:05.520 --> 0:13:09.439 all encompassing brand name, or it existed kind of side 0:13:09.440 --> 0:13:12.600 by side with other Jia enterprises. It's a bit hard 0:13:12.640 --> 0:13:15.599 to suss out. And making this even more difficult is 0:13:15.640 --> 0:13:19.120 the fact that sometimes one of jaws companies would purchase 0:13:19.200 --> 0:13:23.160 a division from a different one of his companies. So, 0:13:23.240 --> 0:13:27.720 for example, sin Hotel Technologies had as a subsidiary a 0:13:27.760 --> 0:13:31.800 company that was called x Bell Investment. The purchasing party 0:13:31.960 --> 0:13:37.600 of that particular division was drumroll please, Lee Echo. Now. 0:13:37.720 --> 0:13:41.559 That happened in when Sinotel Technologies was going through that 0:13:41.720 --> 0:13:45.079 rough patch of consecutive annual losses that I talked about earlier, 0:13:45.360 --> 0:13:48.400 and so part of the way Jaw offset the enormous 0:13:48.400 --> 0:13:51.040 amount of money that the company was hemorrhaging at the 0:13:51.080 --> 0:13:54.040 time was to sell off a subsidiary to one of 0:13:54.080 --> 0:13:57.160 his other companies, to bring in some cash and shift 0:13:57.200 --> 0:14:00.359 the money around a bit, and most importantly, to maintained 0:14:00.400 --> 0:14:04.000 control of that subsidiary, just under a different corporate structure. 0:14:04.679 --> 0:14:08.200 And this kind of illustrates how things are a bit 0:14:08.440 --> 0:14:12.040 wild west way out east. We have to remember that 0:14:12.280 --> 0:14:16.880 prior to nineteen seventy six, China's economy was entirely dominated 0:14:16.920 --> 0:14:21.080 by state run enterprises. As China was and is a 0:14:21.120 --> 0:14:25.040 communist country where the state owns the means of production. 0:14:25.520 --> 0:14:28.720 But maud Ze Dong, the chairman of the Communist Party, 0:14:29.040 --> 0:14:32.360 died in nineteen seventy six, and since that time the 0:14:32.440 --> 0:14:37.680 country has gradually embraced some aspects of capitalism, with a 0:14:37.720 --> 0:14:41.960 sort of uneasy relationship between the government and private enterprise. 0:14:42.480 --> 0:14:46.200 Many companies are largely or entirely owned by the government, 0:14:46.640 --> 0:14:50.000 and since the Chinese government has taken a more hands 0:14:50.040 --> 0:14:54.040 on approach in private enterprise within the country, probably because 0:14:54.080 --> 0:14:57.760 of a healthy fear that without direct control, these companies 0:14:57.760 --> 0:15:01.360 could get powerful enough to challenge government authority. And I 0:15:01.400 --> 0:15:06.520 can't imagine where they got that idea anyway. The reason 0:15:06.640 --> 0:15:09.800 I mentioned that is the financial industry in China is 0:15:09.840 --> 0:15:13.600 a bit more loosey goosey than in western nations, and 0:15:13.640 --> 0:15:16.600 part of that is because of the tenuous balance between 0:15:16.640 --> 0:15:21.920 capitalism and communism. This fragile arrangement includes how companies raise 0:15:22.040 --> 0:15:25.400 money from investors and secure loans, and all of that 0:15:25.480 --> 0:15:27.960 will be really important for the rest of our story. 0:15:28.360 --> 0:15:31.440 So after we take a break, I'll talk more about 0:15:31.600 --> 0:15:35.400 the Chinese stock market, because that's going to play a 0:15:35.440 --> 0:15:38.880 pivotal role in how jaws fortunes have fared over the years. 0:15:39.200 --> 0:15:42.040 And I'll talk about jazz companies and how they became 0:15:42.120 --> 0:15:44.880 something like a shell game with Jaw attempting to keep 0:15:44.920 --> 0:15:47.120 all the shells moving to hide the fact that you know, 0:15:47.200 --> 0:15:49.960 none of them actually had a p underneath them. If 0:15:49.960 --> 0:15:51.920 you don't know what I'm talking about, the classic shell 0:15:52.040 --> 0:15:55.480 game is when you have like three nutshells and a 0:15:55.600 --> 0:15:58.800 single dried p and you put the P under one 0:15:58.800 --> 0:16:01.040 of the nutshells, and you shuffle them around a bit, 0:16:01.040 --> 0:16:02.640 and you ask your mark to pick which of the 0:16:02.720 --> 0:16:05.520 nutshells has the P under it. Except you ditch the 0:16:05.560 --> 0:16:09.760 p ages ago you're no sucker. That's what marks are for. Well, 0:16:09.800 --> 0:16:11.960 when we come back, I'll talk a bit about how 0:16:12.040 --> 0:16:16.600 Jaws companies were kind of doing this, whether intentionally or otherwise, 0:16:16.880 --> 0:16:19.760 and how Faraday Future comes into the picture. But first 0:16:20.200 --> 0:16:30.120 let's take a quick break. I mentioned a bit before 0:16:30.120 --> 0:16:33.080 the break that I would explain about how Jacques became 0:16:33.160 --> 0:16:37.360 a billionaire and how it's complicated. Well, the reason it's 0:16:37.360 --> 0:16:40.960 complicated is because a lot of jaws wealth is tied 0:16:41.040 --> 0:16:44.160 up with his stock ownership of his various companies, like 0:16:44.160 --> 0:16:47.560 how much of the companies he personally owns, which means 0:16:47.600 --> 0:16:50.680 the amount of wealth he has depends in large part 0:16:50.920 --> 0:16:54.760 on the value of those companies and by extension, the 0:16:54.840 --> 0:16:58.400 stocks of those companies. So let's talk about the Chinese 0:16:58.520 --> 0:17:02.720 stock markets. The Shanghai Stock Exchange traces its history to 0:17:02.760 --> 0:17:05.880 the nineteenth century, but that history also has a big 0:17:05.920 --> 0:17:09.159 old gap in the middle. After the Communist Revolution in 0:17:09.240 --> 0:17:13.000 China in nine, the stock exchange went by by for 0:17:13.240 --> 0:17:17.919 about four decades. It would reopen in along with it 0:17:18.040 --> 0:17:22.840 came a new stock exchange called the Shenjen Security Exchange. Alright, 0:17:22.880 --> 0:17:26.640 so we all know about the stock market, I'm guessing, 0:17:26.800 --> 0:17:29.479 but let's kind of go over some basics. We know 0:17:29.560 --> 0:17:32.280 that you can buy shares or stocks in the company, 0:17:32.320 --> 0:17:36.880 and that these stocks ostensibly reflect the value of that company. 0:17:37.000 --> 0:17:40.040 But let's dive into that a little bit further. So 0:17:40.160 --> 0:17:42.960 a share is, when you get down to it, a 0:17:43.119 --> 0:17:46.240 piece of ownership of a company. So if a company 0:17:46.240 --> 0:17:50.160 were to issue one hundred shares and those shares represented 0:17:50.240 --> 0:17:53.720 one of the ownership of the company, and then you 0:17:53.800 --> 0:17:56.719 bought one of those shares, you would own one percent 0:17:57.040 --> 0:17:59.800 of that company. If you had bought ten shares, you 0:17:59.800 --> 0:18:02.480 would own ten percent of that company, and so on. 0:18:03.160 --> 0:18:06.840 When the company makes a profit, it distributes that profit 0:18:06.920 --> 0:18:10.560 among shareholders, and it could do so in cash, which 0:18:10.560 --> 0:18:13.240 means you would get a payment equivalent to your percentage 0:18:13.240 --> 0:18:16.160 of ownership of the company. So if you owned one 0:18:16.200 --> 0:18:19.240 percent of the company and the company generated a profit 0:18:19.280 --> 0:18:22.000 of one thousand dollars that it was going to distribute 0:18:22.000 --> 0:18:24.760 to its shareholders, boom, you would get a ten dollar 0:18:24.920 --> 0:18:28.919 check and you keep the stock. So as long as 0:18:28.960 --> 0:18:32.399 the company is making a profit, so do you. Another 0:18:32.440 --> 0:18:35.960 way that companies can pay out profits is in share dividends. 0:18:36.400 --> 0:18:39.399 This is when a company, instead of sending out cash, 0:18:39.880 --> 0:18:43.720 pays its investors with additional shares of stock. So let's 0:18:43.760 --> 0:18:46.280 say you had ten shares in the company and you 0:18:46.320 --> 0:18:48.919 get a ten percent dividend because the company has hit 0:18:48.960 --> 0:18:51.480 a profit. Then the company pays it out and shares. 0:18:51.880 --> 0:18:55.040 Now you've got eleven shares. You get an additional share 0:18:55.080 --> 0:18:58.040 because of that dividend. A company might do this in 0:18:58.119 --> 0:19:00.399 order to keep more of its own cash on hand, 0:19:00.560 --> 0:19:03.960 so it's giving you extra ownership of the company rather 0:19:04.000 --> 0:19:08.240 than you know, doling out cash. But this also comes 0:19:08.240 --> 0:19:10.960 with the danger of diluting the stock. There are a 0:19:10.960 --> 0:19:13.760 couple of other methods for distributing profits, but that's enough 0:19:13.800 --> 0:19:18.040 for us right now. The stock price itself is supposed 0:19:18.080 --> 0:19:22.640 to reflect the value of the company. Hypothetically, it reflects 0:19:22.680 --> 0:19:25.200 the amount of money we expect that company to make 0:19:25.240 --> 0:19:28.280 in profits over a given amount of time, and the 0:19:28.320 --> 0:19:31.119 more likely the company is going to rake in profits, 0:19:31.760 --> 0:19:34.840 generally speaking, the higher the share price, or the more 0:19:34.920 --> 0:19:37.760 shares of stock the company will issue. One way to 0:19:37.840 --> 0:19:40.760 keep stock price down so that the average person can 0:19:40.760 --> 0:19:45.119 still invest is to issue more stocks. Because the value 0:19:45.119 --> 0:19:47.439 of the company is supposed to remain the same. You 0:19:47.520 --> 0:19:50.200 can't double the value of a company by doubling the 0:19:50.280 --> 0:19:52.800 number of stocks out there. Instead, if you double the 0:19:52.840 --> 0:19:56.640 number of stocks, then the price of individual stocks will 0:19:56.720 --> 0:19:59.440 be cut in half, so that the value of the 0:19:59.440 --> 0:20:03.520 company and being preserved. This is a very very basic 0:20:03.600 --> 0:20:06.480 way of explaining this. So if you take the number 0:20:06.480 --> 0:20:09.760 of stocks that a company has issued out, and you 0:20:09.880 --> 0:20:13.440 take the price per individual share of stock, and you 0:20:13.520 --> 0:20:16.359 multiply those together, you get yourself a rough estimate of 0:20:16.440 --> 0:20:19.680 the value of a company. But here's the thing. This 0:20:19.760 --> 0:20:23.359 doesn't always match up with reality. For example, the recent 0:20:23.480 --> 0:20:26.680 Game Stop story comes to mind. The stock price has 0:20:26.720 --> 0:20:30.120 been all over the place. It was around twenty dollars 0:20:30.160 --> 0:20:32.800 before the Wall Street Mets crowd really jumped on it, 0:20:33.160 --> 0:20:35.920 and then it hit around five hundred dollars per share 0:20:36.040 --> 0:20:39.000 at its peak. But as I record this, the price 0:20:39.119 --> 0:20:42.360 is now around sixty four dollars per share, and that's 0:20:42.359 --> 0:20:45.720 a pretty wild ride. And obviously we all know the 0:20:45.800 --> 0:20:49.960 Game Stops value has not changed that dramatically that quickly. 0:20:50.320 --> 0:20:54.280 That would be impossible unless Game Stops executives were to say, hey, 0:20:54.280 --> 0:20:57.680 it turns out the land we purchased, complete with mineral rights, 0:20:58.200 --> 0:21:00.679 is sitting on top of a literal gold mine, and 0:21:00.720 --> 0:21:04.480 then later said, also, it turns out that any percent 0:21:04.520 --> 0:21:07.960 of that gold has disappeared. So while a stocks price 0:21:08.040 --> 0:21:11.280 is supposed to reflect the value of a company, sometimes 0:21:11.359 --> 0:21:14.360 it's more accurate to say that it reflects the perception 0:21:14.560 --> 0:21:18.399 of a company's value, which is something that can change quickly. 0:21:18.640 --> 0:21:21.560 The actual company value when you really get down to it, 0:21:21.600 --> 0:21:24.159 doesn't change that fast, but our perception of it can 0:21:24.240 --> 0:21:28.320 change very quickly. So if enough people jump on that bandwagon, 0:21:28.640 --> 0:21:31.560 it can boost the stock performance even more and you've 0:21:31.560 --> 0:21:36.199 got yourself speculation going on. That's when investors aren't necessarily 0:21:36.240 --> 0:21:39.880 so much interested in investing in a company long term 0:21:40.000 --> 0:21:42.840 because they believe in it. They're more interested in kind 0:21:42.840 --> 0:21:44.919 of placing a bet that they're going to get a 0:21:44.920 --> 0:21:48.560 big payoff by buying stocks low and selling them high, 0:21:48.640 --> 0:21:51.680 because that's the other way you make money from stocks. 0:21:51.960 --> 0:21:54.800 You can make money by holding onto stocks and just 0:21:54.920 --> 0:21:58.600 collecting dividends, or you can make money by selling off 0:21:58.800 --> 0:22:01.160 shares of stock that you will own if you got 0:22:01.160 --> 0:22:04.000 in when a company is doing really well and the 0:22:04.080 --> 0:22:06.920 share prices have grown, or your number of shares has 0:22:07.000 --> 0:22:10.920 increased dramatically, or better yet both, then you can cash 0:22:10.960 --> 0:22:14.160 out and pocket the profits. Now, the reason I explain 0:22:14.359 --> 0:22:16.240 all of this to you is because we have to 0:22:16.280 --> 0:22:20.560 remember the stock exchanges in China were very young when 0:22:20.640 --> 0:22:24.120 Jah was making these companies, and the opportunities to invest 0:22:24.240 --> 0:22:27.240 in stuff in China and to profit from it were 0:22:27.359 --> 0:22:31.600 rare before that. Happened. Investment represented a way of getting ahead, 0:22:31.840 --> 0:22:36.160 something that otherwise wasn't much of an option in China. 0:22:36.320 --> 0:22:40.119 In two thousand eight, the entire world was plunged into 0:22:40.280 --> 0:22:43.159 an economic recession. Now, don't worry, I'm not going to 0:22:43.240 --> 0:22:46.320 go into all the reasons why that happened. But China 0:22:46.440 --> 0:22:48.280 was no exception, and there was a bit of a 0:22:48.320 --> 0:22:51.399 reckoning in the Chinese stock market. And one of the 0:22:51.440 --> 0:22:54.080 things that Chinese government did was to take a very 0:22:54.280 --> 0:22:58.200 bold approach to promoting the stock market. So the idea 0:22:58.400 --> 0:23:02.520 here was that China as a nation would benefit from 0:23:02.680 --> 0:23:06.920 a robust stock market. So the messaging wasn't really, hey, 0:23:07.119 --> 0:23:09.560 invest in the stock market and make money and improve 0:23:09.640 --> 0:23:13.800 your situation, which is a much more kind of individualized approach. Now, 0:23:13.960 --> 0:23:16.920 the message from the Chinese government was, let us push 0:23:17.040 --> 0:23:20.280 China to glory by investing in these companies, which will 0:23:20.359 --> 0:23:23.560 elevate us all and push China to its rightful place 0:23:23.680 --> 0:23:27.879 in world powers. Kind of a more patriotic perspective and 0:23:27.960 --> 0:23:32.159 one that reflected the communist philosophies, which is not necessarily 0:23:32.200 --> 0:23:34.920 a bad thing, mind you, but it's very different from 0:23:34.920 --> 0:23:37.480 how we perceived stuff like the stock market here in 0:23:37.520 --> 0:23:40.240 the West, where it tends to be more about specific 0:23:40.280 --> 0:23:44.520 companies and increasing the wealth of investors. The messaging was 0:23:44.560 --> 0:23:47.520 going out to the entire population of China, and so 0:23:47.560 --> 0:23:51.520 the Chinese stock markets saw a flood of new investments, 0:23:51.560 --> 0:23:55.760 mostly coming from individual investors. Now that's in contrast with 0:23:55.960 --> 0:23:59.879 most other stock markets, where the individual investors represent a 0:24:00.040 --> 0:24:03.359 more modest percentage of the overall trades on the market. 0:24:03.840 --> 0:24:07.840 Most of the trading is going between big investment companies 0:24:07.880 --> 0:24:12.280 dealing in thousands or millions of transactions. In China, the 0:24:12.400 --> 0:24:17.000 drive was overwhelmingly coming from the common Chinese citizen. But 0:24:17.119 --> 0:24:20.080 many of those investors didn't have very much savvy when 0:24:20.119 --> 0:24:23.560 it comes to analyzing a company's value and making good 0:24:23.600 --> 0:24:27.840