Thoughts in Between

by Matt Clifford

TiB 176: East India Company vs Facebook; the Medici of this century; China's tech crackdown; and more...

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The state vs big tech (1): East India Company edition

In an era of rising anxiety about the power of the world’s largest companies, it’s perhaps unsurprising that the East India Company (EIC) is on a number of commentators’ minds. The EIC is one of the most fascinating (and horrific) organisations in history: a private company that raised armies, waged war and at one point was quasi-sovereign over half a continent. William Dalrymple’s The Anarchy is the best introduction; you can hear him discuss it on the excellent The Rest is History podcast here.

Brendan Mackie has an interesting new essay in Noema magazine comparing the EIC’s state-like powers to Facebook’s today. It’s a thought provoking piece, but I’m not sure how helpful the analogy is. The way in which the two companies resemble states is very different: the EIC’s power came from its ability to deploy violence at scale within a specific territory; Facebook’s comes from a transnational “monopoly over civil society and the public sphere”, in Mackie’s words. The challenges the two raise are quite distinct.

The radical take, though, is that the solutions are quite similar: once the EIC became a grave threat to British state’s interests, it was nationalised and broken up. Although I don't advocate breaking up Facebook, I do think we tend to overstate the power of large companies relative to states. When their essential interests are threatened, governments can and will act decisively. I suspect Facebook’s strongest suit is simply that, unlike the EIC, the dimension on which it looks most like a state - the control of information - is one on which states aren’t used to competition. But it’s early days.

Bonus: Branko Milanovich compares the EIC to… Norway

The state vs big tech (2): China edition

Of course, if you want an example of a state being willing to take down its biggest companies, look no further than China, which in recent months has near systematically cracked down on its internet giants. From the cancellation of Ant Pay’s IPO to the delisting of Didi from app stores, several of China’s biggest tech success stories have found themselves the object of regulators’ wrath. But why? One explanation is that they have simply become - EIC-style - too powerful and the CCP will brook no rivals.

Noah Smith, however, in a must-read post suggests an alternative explanation: China’s government has decided that consumer internet is the “wrong sort” of tech. Instead it wants to redirect talent and capital to “deep tech” sectors that make a bigger contribution to national power and security, such as semiconductors and AI. It’s worth reading this thread by Rui Ma and this one by Lilian Li for more on how the CCP thinks about disaggregating “tech” into subsectors of varying strategic importance (see also this point from Li that these actions are actually popular in China).

As usual, Dan Wang (see TiB 28 and 109) has one of the most interesting takes. In an excellent new essay, he argues that the bigger story here is the extent to which US actions have driven the shifts in China’s industrial policy. We’ve discussed before (see, e.g. TiB 115, 134, 158, 161) the US's weaponisation of the global tech supply chain, which intensified under Trump. Wang suggests this was China’s “Sputnik moment”: it prompted government and private actors to invest in broad domestic tech capabilities. Increasingly technological sovereignty and industrial policy go hand in hand.

Who is the 21st century's Lorenzo de Medici?

Rohit Krishnan has an interesting new essay, "On Medici and Thiel" that argues in favour of "Medici-style" patronage of talented individuals at scale. The core thesis is, first, that exceptional individuals need time and space to pursue projects that have no immediate goal but might ultimately have outsized impact and, second, that the best mechanism for this is financial support from wealthy individuals. Krishnan points to the extraordinary success of the Thiel Fellowship and asks why this hasn't been scaled, by Peter Thiel or anyone else.

Long time readers won't be surprised to hear that I'm sympathetic - and, indeed, Krishnan (who I don't know) calls out Entrepreneur First as one of the closest models to what he has in mind. But not quite:

Goal orientedness is kind of the name of the game [at EF] and the grant itself is de minimis. If the program was ostensibly longer and/or more diverse in its intake this could be the very ticket!

This resonates. I think the key question is what kinds of outcomes you're looking for. If - like the Thiel Fellowship - it's primarily company building, I don't think philanthropy is necessary. A more open-ended iteration of EF might be tricky to package as a traditional LP-backed fund (our current business model), but I think for less than $100m you could build a fairly scalable (and very profitable) evergreen capital version of it.

It gets trickier if you're looking for non-company-building outcomes, like exceptional achievement in science or the arts. As we discussed in TiB 127, the VC risk/reward profile is hard to make work outside startups. It requires benefactors who are willing to measure the magnitude, not the frequency, of success, even though (unlike in VC) you can't use the upside of the wins to pay for the losses. But perhaps as tech entrepreneurs become a larger and larger share of the world's wealthiest people, power law-savvy philanthropists will become increasingly easy to find...

Quick links

  1. The chills, they're multiplying? Fascinating paper on which songs cause "chills" and why. And a playlist based on the results.
  2. Got my number. Eye opening thread on how number theorists do their research (Much more interesting and relevant than I made that sound!)
  3. Learning about learning. Long and important thread on how to improve educational outcomes among the world's poorest people.
  4. The Facebook bull case. One take on why Facebook will be the most important company in the world for the next 30 years.
  5. Hard assets. Fascinating data on how different asset classes have performed in different inflation regimes all the way back to 1945

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Until next week,

Matt Clifford

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