Why foreign investors love Boston

0:02Good morning from the Financial Times. Today is Thursday, June 4th, and this is your FT News briefing. Saudi Arabia is making some changes to focus inward, and Netflix says goodbye to its co-founder. Plus, international investors, they're shipping up to Boston. Workforce talent is really the shining star that brought Boston to the top of our list this year. I'm Mark Filippino, and here's the news you need to start your day.

0:43Saudi Arabia's sovereign wealth fund is making big changes at some of its portfolio companies. The Public Investment Fund, or PIF, is replacing foreign executives with local hires. Some examples include the manufacturing company Elat and biopharma group Lyfera. Why the change? Well, after a decade of spending a ton globally, PIF is shifting its focus to domestic projects. It's all part of Saudi Crown Prince Mohammed bin Salman's ambitious plan to diversify his country's economy away from oil revenues. One PIF executive also said, back in April, that big upcoming events like the 2034 World Cup caused the country to shift priorities.

1:31Reed Hastings is officially leaving Netflix after its annual shareholder meeting today. He co-founded Netflix in 1997 as a DVD rental service. Remember DVDs? Well, he moved on from discs, and over the next three decades, he grew the company into the world's largest streaming platform. Hastings stepped down as CEO in 2023, but stayed on as chairman of the board. I've got with me John Foley, who's the head of the FT's Lex column and recently wrote about Hastings' legacy. Hi, John. Hi, thanks for having me on. Good to have you. So what was Hastings' approach during his tenure at Netflix? So Hastings is a real rule breaker, and that has come through in a few different ways.

2:11One is that Netflix has basically rewritten the rules of how we consume media. It's the one to be in online streaming, but it also has done things like, you know, release movies without going through the traditional cinema channels, making blockbuster series like House of Cards, Squid Game, but also dropping them in one go so views don't have to wait from week to week. And that's basically changed the rules of the game. But he also changed the rules in other ways. Hastings has created this culture which is very unique to Netflix. It's notoriously intolerant of mediocrity. He has this metric that he talks about called talent density, which is the idea that you should maximise the number of really good people in your team and sort of get rid of the rest.

2:49He talks about running companies on the edge of chaos. So it's all about kind of flying by the seat of your pants and going with your instinct, which for most companies would be very uncomfortable. And certainly in Britain would have people clutching their polls in no time at all. Yeah, I'm assuming that this got him some critics along the way. You know, he didn't always make friends. Yeah, so the way we think about it is that Hastings is an incredible leader, but he really has been an icon of the terrible governance that Times has characterized this company. So Netflix repeatedly ignored shareholder votes, asking for reforms in the way that it manages its shareholder democracy.

3:25Just recently, shareholders voted to oust its lead independent director, and the company basically just ignored them. But despite that, or some people might argue because of it, Netflix has done really well, and its shares have been a really good investment. If you bought them 10 years ago, you've made eight times your money back. So shareholders are going to miss him, but governance aficionados may not. Well, that actually brings me to my next point. Where does Netflix stand now that Hastings heads for the exit? Yeah, he's leaving at a really interesting time because streaming is obviously still going great, but it faces new threats from companies like YouTube owned by Google.

4:03YouTube is outperforming Netflix on what they call net promoter scores, which are a kind of sign of consumer intent to view. So YouTube is doing really well. We also have an industry that's being reshaped by at least one enormous merger. So Paramount Skydance is buying Warner Brothers Discovery for about$111 billion. So that's going to create a new, very mighty rival to Netflix. So it remains to be seen how Netflix is going to fend off that challenge. But it has fended off challenges before. Don't forget that Hastings pivoted this company away from DVD rental, which was a dying business, into the business that we see today.

4:35So the question is whether, with him no longer there, his successors, Ted Sarandos and Greg Peters, can pull off the same kind of revival. Yeah, can it continue to reinvent itself? You know, the thing that I think about when I think about Netflix is, here's this company that was born out of the dot-com bubble. That did reinvent itself. And it reminds me a lot of the era that we're in right now where tech stocks once again seem overvalued. I mean, what does Netflix's journey tell us? So it's true that there are companies that died and companies that survived. And Netflix is one of the survivors.

5:09I think Netflix does one thing really, really well. And if we look across Silicon Valley right now, we see a lot of companies that are trying to do lots of different things. You look at Meta Platforms, which owns Facebook. Mark Zuckerberg, the founder, has in the past sunk billions of dollars into his metaverse project, which really didn't go anywhere. So there is risk to trying to diversify away from what you're good at. Netflix has so far been really good at sticking to its knitting. John Foley is the head of the FT's Lex column. Thanks, John. Thanks.

5:45Every year, the FT and our parent company, Nikkei, rank the best U.S. cities for foreign multinationals to do business. And the 2026 Investing in America winner is Boston. Now, Boston is a bit of a departure from the usual type of city that wins this thing. It doesn't have cheap land and low taxes. Its success is instead driven by human and intellectual capital. Here to break down what that means is Ian Hodgson. He's a data reporter for the FT. Hi, Ian. Hey, how's it going? Doing well. So I've spent some time in Boston. Tell Tell us more about why it won. What do we mean when we say human and intellectual capital?

6:25Yeah, I mean, workforce talent is really the shining star that brought Boston to the top of our list this year. And this workforce capital really means a highly educated workforce, a large portion of your population being in that working age spectrum, and an atmosphere of educational institutions, startup companies, where innovation is really happening. And, you know, one stat really stood out to me is that one in four dollars of biopharma VC funding in the U.S. goes to Massachusetts companies. And for a relatively small state, you know, it's the second highest share in the country behind California.

7:03Right. I mean, in addition to Harvard and MIT, you've got dozens of other universities, including Tufts, Northeastern, and my alma mater, Boston University. So what else did Boston score well on? So Boston actually scored very well across the board. And I think that's one of the reasons why it came up as our winner this year. I mean, workforce and talent is its star, but foreign business needs, being close to a major port, having a large international airport, openness and diversity. Boston scores incredibly well on having a diverse population base that speaks a wide variety of languages. And one of the places that Boston also scored really well is our new energy resilience category.

7:43So that measures things like how much gas increased during the war in Iran, how many people in your community actually rely on their car to get to work, and on the energy grid side, how many days per year your grid is down, barring the most extreme events. Okay, so we've been singing Boston's praises. What are some of the challenges the city faces in attracting foreign investment? Right. The biggest thing that anybody will tell you when you talk about Boston is the cost of living. Cost of housing is among the worst in the country. Baseline energy costs there are fairly high. Food costs are fairly high.

8:23You know, the people I've talked to have said, you get a great quality of life living in Boston, but you do pay for that quality of life. And housing stock is the biggest issue. And that's something, you know, when we talk to the mayor, when we talk to the governor of Massachusetts, that's really something that they're focused on remediating over the next few years. So like I said, in the past, cities and low-cost, low-tax states have typically topped this list. The past three winners were Miami, Florida, Houston, Texas, and Tampa, Florida. Why did things change this year, Ian? So part of it is our new category, energy resilience.

9:01But most of it comes from changing our methodology a little bit, talking to companies, and the feedback we got on previous years was that the workforce and talent component really was a major thing that companies were looking for when they were choosing where to locate. And so we moved our scaling a little bit more towards that category. And of course, as soon as you put more weight on workforce and talent, Boston shoots up the rankings. It all comes down to talent right now. People want to be where the best talent is and where the centers of innovation in this country are. If you want to read the entire Investing in America rankings, we'll have a link to that in the show notes.

9:42Ian Hodgson is a data reporter for the FT. Thanks, Ian. Thank you.

9:51Before we go, Americans seem to hate AI data centers more than anyone else in the world. That's according to a global poll conducted by a research group called Public First. It found that just 26 % of Americans supported more data center build-outs. That was the lowest rate of support among 15 large countries. The U.S. is home to almost all the leading AI companies, and they are expanding their operations in the country fast. Now, while Americans aren't too hot on AI data centers, Nigerians seem to have a penchant for them. Nigeria is the country most enthusiastic about more data center construction.

10:2874 % of people there believe in building more AI infrastructure.

10:36You can read more on all these stories for free when you click the links in our show notes. This has been your daily FT News Briefing. Check back tomorrow for the latest business news.

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