Deputy CEO Head of Corporate Banking Division, Bank Leumi
Mind The Tech 2019: Yifat Oron
Introduction ...
About Yifat Oron
Yifat Oron, Deputy CEO and Head of the Corporate Banking Division at Bank Leumi, has spoken publicly about the role of the banking system in Israel's technology sector. In a 2023 interview, she stated that the banking system had been "completely lacking" as part of the "startup nation" ecosystemikuha. She has also discussed the need for more talent in the tech industry, saying that Israel is "lacking thousands" of people that companies would hire if they could find them. Oron has commented on global technology trends and geopolitical dynamics. In 2019, she noted that regulators and politicians have debated whether large technology companies should be split up, with some arguing they are "too big to fail" and others that their parts would be worth more if separated. She also remarked that Israel may need to decide "who is a friend" in terms of capital sources. In 2017, she said that China's restrictions on outbound capital had caused a "significant decrease" in investment flows into Israeli tech. Oron has also emphasized the importance of unit economics in technology investing, stating that companies had "forgotten about being profitable" while focusing on revenue growth.
Transcript (19 segments)
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Yifat Oron0:00
Okay, anybody in the room is watching the series or is willing to admit they're watching the series? Oh, okay, proud. So today, actually, as a tribute to the series which has won many Emmy Awards and other things and is coming back for the last season next week on the 14th of April, we thought about providing a little bit of stories of how we think that the Game of Thrones is actually happening in the real world. And the real world Game of Thrones is a lot crazier than what we're watching on TV, and I promise not to talk about politics at all today.
So what we're claiming here is that we're having fights and wars all over the economy, technology or non-technology. Specifically, we're going to discuss a few things including, you know, the war between or the quiet war between US and China, Amazon fighting the world. We have, you know, e-commerce versus the physical retail stores, a little bit about tax wars, media wars, and last but not least, business models.
So the first major war I think that is undergoing today, quietly or less quietly, is, you know, who is going to be dominating the world? Is it going to be China or the US? Obviously, technology has become a weapon, not necessarily, you know, weapon technology, but all technology is a weapon. And there is definitely a war of who's going to have the most advanced technology.
Now I'll tell you, in terms of the Israeli tech world, we're exactly in the middle between the US and China. And we were lucky enough, we're lucky to have the US coming into Israel, investing, looking for interesting technologies, investing a lot of money for many years. But guess what? China did exactly the same, although about 15 or 20 years later. We're seeing Chinese coming to Israel, by the way, Chinese of all spectrums, all the way up to people like Jack Ma, who is a frequent visitor in Israel, coming to look for technologies, to invest in technologies, to buy technologies. Only recently, Alibaba bought a company in Israel.
And one of the things that I would like to say in this room is that I'm not sure that we Israelis can actually stay ambivalent in terms of where the money comes from. We may very soon need to decide who is a friend of ours and who we're actually dropping as a friend in order to maintain our business in one of those regions of the world. And you can imagine what I think is gonna happen, but I'm not gonna say it out loud.
The US and this sort of quieter, less quiet war, it is not really gentle, okay? So the US, in places where there are technologies, Chinese technology sitting in the nerve systems of anything that relates to the US, the US is not waiting in attacking. They're attacking, and we've seen things going on with ZTE, with Huawei, trumpeting tariffs. I mean, this is very tough. But guess what? In a war, usually both sides suffer.
So what happened after, you know, all this retaliation of the US for or against China? We're seeing the US companies actually getting hurt because, like we heard from Simpson today, the flag is made in China. Guess what? Many things are made in China. So when the US is telling the Chinese we don't want you anymore, the Chinese are showing Apple, Nvidia, and other companies how much they are important, how much their markets are very important for these companies' market shares. And actually, we've seen a very big drop in market share because of loss of revenues from this region. So, you know, it's a question who's gonna win.
Let's briefly talk about Amazon, because we can have a whole day about Amazon. I'll just say one thing: Amazon is probably taking over the world. We know this. They're already number one in online retail. I don't know if anybody can compete with them. Cloud, they're the fastest and largest cloud platform. They are the fulfillment company, the largest in the world, with distribution centers all over anywhere you can imagine. People are not aware, but media-wise, Amazon is only third after Google and Facebook, and it's larger than many others. And it's also being rumored to buy Netflix, so it's even gonna be much bigger.
What's next? You know, food, we already saw that, you know, Amazon acquired Whole Foods. Healthcare, they're taking over pharma, etc. What has happened with this war, or Amazon war against all of us, is that all kinds of other companies, by the way, large companies, were starting to feel uncomfortable on their chairs and having to do all kinds of collaborations in order to fight Amazon. And we're seeing companies like Google having to partner with others to fight Amazon. And I think this, you can believe me, this is a big deal in terms of Amazon's size.
We're hearing all kinds of statements, some of them from regulators who are saying that they're too big or too big to fail, meaning they have to split up. Others are saying they have to split up not because they're too big, just because they will be worth a lot more if they split up. So if you take, for example, their cloud business by itself, if it was a single company or separate company, it would probably be worth very close to what the entire Amazon is worth. Sorry, there's a big debate about splitting up.
What we're seeing is, by the way, a very weird situation where the European Union, which is very, you know, very aggressive with all these companies and issuing fines, they're actually saying that you... Commissioner is actually saying you don't need to split up, I'll just keep on fining you when you cross the borders. But we are hearing from US politicians, especially the Democrats, that they are requiring these companies to break up. So it will be interesting to see how it evolves.
Retail is what has winter come to retail. You know, we're seeing bloodbath in retail. We're seeing a lot more stores closing than opening. There is a question about, you know, is online retail going to surpass one day in the future the physical retail? Obviously, all the retailers' market shares are dropping. But I do want to mention, and we're seeing a lot in Israel, that although everybody looks at online retail, we're seeing a lot of investments going into physical stores, smarter, more sophisticated, maybe with less personnel, but definitely all these companies, specifically Amazon, Walmart, and others, by the way, Walmart CEO was just in Israel about a week ago, all looking for technologies to make the physical store smarter, not necessarily transform this world to the digital world.
Let's touch up very quickly on another sort of war, I call it the Battle of the Taxes. What I mean here is that, you know, I think every Western or actually non-Western nation has realized that technology is a good thing for the economy. So everybody wants all the tech companies to come and reside and have their headquarters and R&D centers within their jurisdiction. In order to get this interest, what nations are starting to do is to lower the taxes. You know, I'm better for you, you're not gonna pay taxes, come to be with me.
What has happened here was actually a downward spiral where, specifically, the European Union realized that each nation within Europe starting to compete in terms of how low their taxes are, eventually leading everybody to drop to almost zero. And guess what? They started collaborating and decided that the EU is going to act as a union and they're gonna stop this crazy war and they're gonna stop the decrease of the taxes.
An interesting thing is, and we've seen this in the US, that there was a vibe of cities wanting to attract, not countries but cities wanting to attract technology companies to their jurisdictions as well. Very quickly, people realized that bringing Amazon headquarters to your town, and I don't know if we have people here from the New York City, something, bringing Amazon to your town has a lot of implications. It has implications on the amount of money that your real estate costs, and it actually was cited that it's going to create some more inequality than what New York City already has. And the people actually kicked out Amazon. So HQ2 is not going to be in New York because the people of New York didn't want it to be here.
Very quickly on media. Media is another space where companies are fighting each other. I'll just tell you from a banker's eyes what we're seeing here is abundance of debt that these companies are taking on their balance sheet because they have to acquire more and more either content or other companies. Disney spent, you can see it on the slide, 70 billion dollars to buy media companies. It's a crazy war. And then on the side, we're starting to hear about all these video-oriented, YouTube-type companies that have very little money invested with them and are eating the world of the giant media companies.
I'm running out of time, so I'll do it quickly. In terms of business models, you know, hardware is a killer. For those of you who followed Apple, Apple is being penalized for selling a lot of hardware as opposed to having more software as revenue streams, and it's paying in their share price. What's the solution? SaaS. Everybody knows what SaaS is, almost. It's actually services survival. We think that if you don't do services, you're not going to be worth anything. Look at the enterprise value for software when you're selling it one time, you're getting a much lower multiple than you're selling it as a service. So this is obviously going to change the world.
A newcomer to this space is actually gaming with Google's new service. I tend to think that all the companies that are making money on consoles, the gaming consoles, are in a big, big problem and they have to reconsider their business model. Digital natives, those companies who were born digital or all digital without any physical space, they're taking over the world. All the unicorns, you know, they're all digital natives. It just makes sense. It's cheap, it's easy, it's intuitive. And thank God we're seeing IPOs of these things. So actually, people are going to start making money on these things. Lyft was first, all the rest of them are all digital native companies.
We had a bunch of discussions about cyber, so I don't think I need to say a lot about it. I'll just say it hasn't skipped the Game of Thrones. For those of you who watch the series, know that in the previous season, the last episode was leaked, which is a tremendous loss of money for HBO. So, you know, I just thought I'll mention it, and I hope next season they're going to keep their IP closer. And who will win the Game of Thrones? I have no idea. Thank you.