Thoughts in Between

by Matt Clifford

Matt's Thoughts In Between - Issue #53

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The strange political economy of Softbank

It was only in October that we discussed whether Softbank Vision Fund's (see previous coverage) Saudi Arabia connections would cost it dear in Silicon Valley. Post-Khashoggi, would the world's largest venture capital fund still find willing takers or would the fact that Saudi Arabia was its biggest backer stop some founders accepting their money? A few months on, the conclusion seems pretty clear. In the last couple of weeks alone, Flexport, Clutter and Nuro have announced enormous rounds led by the Vision Fund.

It turns out that Softbank's biggest concerns are much more prosaic: unhappy investors. According to the WSJ, Saudi Arabia's Public Investment Fund and Abu Dhabi's Mubadala are unhappy with the fund's sky high valuations and unusual governance. Between them, they invested over 60% of the Vision Fund's $100bn. If they pull out, there may be no second fund, which would have big implications for the venture funding landscape.

Meanwhile, Mohammad Bin Salman, Saudi Arabia's charismatic Crown Prince - and once the darling of Silicon Valley - is happily making alliances with China (whose own entrepreneurs, unrelatedly, sound very pessimistic these days...). Outrage is a powerful currency, but one with very limited staying power, in Silicon Valley and beyond.

GDPR and global tech competitiveness

Last May, the EU's GDPR introduced the most ostensibly pro-consumer data protection regime globally (see TiB discussion here). But nine months on, the net impact seems to have been to empower incumbent tech giants to the detriment of startups:

“Since the GDPR’s implementation in May, the rank and market share of small- and medium-sized ad tech companies has declined by 18 to 32 percent in the EU, while these measures have increased for Google, Facebook, and Amazon”

As Alex Stamos argues, this has far reaching implications for the global competitiveness of different startup ecosystems. Even if you ignore the large compliance advantage of the tech giants, it puts European startups at a disadvantage relative to their US and Chinese peers. In short, US startups only worry about GDPR compliance once they've already won America; European startups have to start worrying from day one. (And British ones have GDPR and Brexit, though I’m not too worried about this, as I wrote in Wired this week)

That said, Europe's compliance disadvantage may be offset by its cost advantage. Even Sam Altman, President of famously Valley-centric Y Combinator, is tweeting that the Bay Area’s high costs mean it may no longer be the best place for startups. Do these two effects net out? My own bet is that Silicon Valley remains the best place to scale a company, but it is no longer the obvious place to start one. That's a big shift - and one reason why I believe Asia outside China is the most underrated and exciting startup ecosystem globally. Watch that space.

Is good online discourse possible any more?

As long time readers will know, I consider Slate Star Codex (SSC) one of the smartest and most interesting corners of the internet. Its author, Scott Alexander, is a particularly acute chronicler of the ongoing "culture war" (a major TiB theme) in the West. This makes his post this week on why he's removed the Culture War thread from the SSC's discussion forum on Reddit particularly pertinent. Do read the whole thing. It's a great, if depressing, explanation of how the internet ends up eating itself.

And, as Tanner Greer points out in an excellent thread, it's an interesting example of how the changing structure of the internet has influenced what kinds of conversations happen (or are even possible). As Greer notes, before Twitter and other aggregators, when the "blogosphere" was a dominant venue for online discussion, "the barriers were both higher and lower - higher for basic engagement, but lower for importance and prominence". This, Greer argues, created the incentives for higher quality discourse.

Can we go back? Or are we stuck in age of the Revolt of the Public? Greer suggests "it doesn't have to be this way", but quick wins for improving public conversation are not obvious. Paul Graham is more optimistic (the replies to that tweet are worth reading), but we may be stuck in an inadequate equilibrium. I'm very interested in funding the solution though, so if you have great ideas on the topic, do hit reply.

Quick Links

  1. BONUS link - and obligatory self-promotion: In the day job, we announced our $115m raise this week. And we have lots of roles open globally, so please do apply or share
  2. Visible everywhere but the public opinion polls. What impact has the age of Trump had on US public opinion?
  3. Designed in California. The rise and rise of tech brands (great animated graphic)
  4. The Ethiopian miracle? Is Abiy Ahmed's Ethiopia the world's great untold success story?
  5. Don't try this at home. The extraordinary "personal infrastructure" set-up of Stephen Wolfram.
  6. Pencils down. Fermi and Feynman on the power of notetaking.

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Until next week,