We’re learning that Japan’s Nippon Steel is acquiring US Steel for $14.1 billion after the Pittsburgh-based entity gave up on the heat of steely-fire competition, and put itself up for sale. This transmutational fading of US Steel is nothing ordinary because of the heritage of this firm.
When you read about the men who built America, this company has a “chapter”. When the United States overtook the United Kingdom at the end of the 1890s, the Americans wanted a pillar upon which they could scale a virtuoso industrialization vision. Two men – JP Morgan (the banker) and Andrew Carnegie (the industrialist) – decided in 1901 to establish US Steel. The company became a catalyst as America industrialized. Simply, US Steel was a fulcrum of America’s 20th century economic dominance.
When I went to interview at Carnegie Mellon University for a faculty job, the dean took me to a building. He explained how Carnegie designed some campus buildings with a steel roll in mind, just in case if the educational vision fails, he could convert all to a plant. As a faculty, you would see that he created that university in the likeness of his industrialization playbook: tons of technical components. CMU is ranked #1 or #2 in AI, autonomous systems, computer science and computer engineering in US.
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By 1917, the largest publicly traded company in the United States was US Steel. It was also the largest company in the world by market cap. Of course, its success began to change its relevance. Yes, fifty years later, in 1967, the largest recorded company in the US was IBM. Later, it was GE in the early 1980s. Today, we have knowledge companies like Apple and Microsoft running the show.
In all these cases, we can learn of one thing: accelerating destruction. Simply, generations of companies prepare nations for the next phase, and if they succeed, most times, they fade in relevance. When US Steel powered America, its success produced infrastructure companies like IBM and Intel which then provided automation and computing capabilities for GE across industries. GE organized America in many ways, seeding pillars which enabled modern knowledge firms like Apple and Microsoft to blossom.
The next generation of largest American companies will feed on the success of Google, Microsoft and Apple. I posit that native and new species of AI companies will rule the markets by 2050.
Bringing it home to Nigeria: Nigeria will not transmute to the next level until companies like Dangote Cement, BUA Foods or new ones (our US Steel) and Glo, MTN or new ones (our IBM, GE) have done their foundational jobs. Upon their catalytic pillars would Nigeria build a foundation for shared prosperity. But since they have not got the job done, they remain. But if they excel, one day they will fade like US Steel which has done its job and can now retire to Japan!
And by that I mean the old sectors continue to operate, but they do not drive the next conversations. Today, you still need steel companies and the like, but they do not anchor our daily conversations in America because while what they do remain important, they’re not as pioneering as before, to refresh the economy, and set new economic transformational orders. But woo to nations without them, nonetheless.
Yes, due partly to their market caps and the profit margins, they seem overlooked before market makers, with clear evidence that even though you need them, they cannot be the next big thing as their time has passed. If you doubt that, go and try to acquire Apple (assuming you can do that), and you will see how America will react. But US Steel can go Japanese, and America can live with that reality.
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Comment 1: I think you may be missing a certain perspective. The companies that are setting the stage for the next set of companies are the banks and the telcos. In the future, banking might not be a service just by itself, it would be as a service, bundled with other services and offered by large non-banking corporations. You might get a similar experience with telcos as well. The companies with the largest market cap at that point will no longer be banks and telcos.
My Response: ” The companies that are setting the stage for the next set of companies are the banks and the telcos” – I do not consider Nigerian banking catalytic because they do not take up big projects like seaports, airports like the American peers do. In my piece, US Steel was co-founded by a banker. Until you can tell me what major project a Nigerian bank has funded in Nigeria (except trade services, import and export), they do not make my analysis.
So, I do not buy your “The companies that are setting the stage for the next set of companies are the banks and the telcos” because even if a bank has the highest valuation in NGX, it means nothing for Nigeria’s economic transformation, until they start funding catalytic projects.
My response does not mean you cannot be right and myself wrong. But looking at banking today in Nigeria, it is unlikely. A bank funded US Steel (Nigeria’s equivalent is Ajaokuta Steel). Can our banks fund Ajaokuta? The banks have decided how they operate and they have the rights considering our inflation and FX challenges, and there is no path for any bank to fund anything that lasts more than 6 months! If I own a bank, I will not do otherwise in Nigeria!
We’re learning that Japan’s Nippon Steel is acquiring US Steel for $14.1 billion after the Pittsburgh-based entity gave up on the heat of steely-fire competition, and put itself up for sale. This transmutational fading of of US Steel is nothing ordinary because of the heritage of… pic.twitter.com/tpF3Q50krj
— Ndubuisi Ekekwe (@ndekekwe) December 18, 2023
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We are still at the stage where cement company is the posterchild of our economic advancement. I cannot add food company because it’s not really big, the product range isn’t advanced, still rudimentary anyway. Please don’t add telcos to conversation, telcos are not productive on themselves, they are simply enablers, just like the banks. What products do MTN and Glo manufacture or create that you go out there to buy? None! Once we model or project wrongly, everything continues to falter.
Looking at our pitiful stage of economic development, we can try to do something worthwhile in food manufacturing, I don’t mean farming more cassava and rice here, but learning how to create advanced food related products at scale; we currently have none. All the talks about Aliko Dangote being specially favoured are because we still do not realize how embarrassing our productivity is across board, so we keep majoring on minors, bickering on small things while the big tasks remain untouched.
We don’t have a banking industry that performs banking services yet, so, part of our invention and innovation will still pass through learning and mastering how to create and deploy capital at scale.
Above all, an education system that can power economy.