To put that in perspective, this is more than a successful high-street retailer such as Next or Dixons, or six times as much as Body Shop. And for that money, what do you get? You don't buy the cars or the tracks. You certainly don't buy the drivers, and they don't come cheap. What you would be buying is the brand, which happens to be owned by a single individual, Bernie Ecclestone, who built it up and now wants to sell it to the public.
What makes this brand so valuable is the global television rights. In TV terms, Formula One is an astonishingly successful phenomenon. Its 400 million viewers worldwide put it third only to the Olympics and the World Cup, which in any case only take place every four years. And a high proportion of those viewers are precisely those that TV companies find hardest to attract: young and middle-aged up-market men. As the TV industry moves into the digital age, with the prospect of a thousand or more channels, how on earth will the companies find things that have sufficient global clout to cut through the cacophony of the airwaves and attract the attention of the viewers? Answer: by buying rights to things like Formula One.
And all prospective investors would get would be rights: no factories, no shops, no physical stocks, no physical products, very few staff. It is the ultimate global weightless business, a business where the product can be reduced to string of digital computer signals, flashed round the world, and hundreds of millions of people will buy it.
This is the future - in the sense that international trade will increasingly be in intangibles. Of course there has somewhere to be a physical entity. There have to be tracks, cars and drivers in the case of Formula One, just as there have to be TVs on which to watch the Grand Prix, or for that matter personal computers on which to use the software pumped out by Microsoft. But the real value - or at least much of it, for as this paper reported yesterday there is a row between Formula One and the racing car constructors over the way the spoils should be split - is intangible.
If you bridle at the idea that world trade will increasingly be weightless, consider this. Alan Greenspan, chairman of the US Federal Reserve Board, recently pointed out that the weight of US output now is little higher than it was 100 years ago, but its value in real terms is 20 times higher. Or consider a Toyota car built in the UK. The physical item has not been shipped across the oceans; the international trade is in the design and marketing, for those are the elements that have moved from Japan to Britain.
The idea that firms where the main value is in royalties or rights should be traded on the stock market is not at all new. Much of the value of pharmaceutical companies lies in their patents, and once key patents expire the companies have to hope they have other winners in the pipeline. Much of the value of publishers is in their backlist rather than in new titles. But Formula One is perhaps the most extreme example of value lying just in an idea.
Expect in the future economic competition becoming more and more in the ability of countries to generate ideas like this. Manufacturing technology crosses national boundaries in a matter of weeks, for virtually all physical products can be taken to bits and "reverse engineered". You can gain an advantage for a while by having a brilliant product, but not for long. In any case, once the word gets round that you have a brilliant design team, expect that team to hive itself off. Why should the team work for mere salaries when it can become a business in its own right, sell to a whole string of different manufacturers, and maybe even float itself as a unit at some future date?
There is a practical moral here. It is that economic prosperity for advanced, developed nations will depend not so much on the ability to make things, but more on the ability to generate ideas that can then be sold to the world. It means that originality, flair, entrepreneurship, maybe even cussedness, will be increasingly prized.
You see, all advanced developed countries are becoming the same. We will all educate people to high standards, we will all have access to the highest technology, we will all be able to raise money on the global capital markets on the same terms, and we will all have low inflation. Even our political ideas are becoming the same: compare Blair and Clinton, or look at the way privatisation has swept the world. So what differentiates us? The answer partly lies in our cultures, and in particular our ability to generate and exploit new ideas. Formula One is by no means a new idea, for people have been racing cars for more than a century, but it has been brilliantly exploited.
Indeed, coming up with ideas is only half the trick; the other half is to build businesses out of them. The key measure of the economic vitality of a nation will be the number of business start-ups. Some day we may even reach the stage where bright undergraduates achieve status not by getting a First, but by running a successful business in their spare time. Chances are that most of those businesses will weigh nothing; and just a tiny number will be worth a lot.Reuse content