China: We All Need New Glasses - European Straits


The Agenda 👇

  • China is still of interest, but we need better vision
  • Stripe emerges as Apple’s mighty disruptor
  • Everyone wants to be a VC (cont’d)
  • Has Silicon Valley destroyed US politics?

When Looking East, Everything Is Blurry

I’ve been interested in Mainland China since 2014 (Alibaba’s IPO), and I’ve traveled there twice over the past three years. Alas, these days everything that I’ve learned needs to be revisited to account for the new context of a Second Cold War. Nothing that we once took for granted regarding China and its relationship with the rest of the world seems valid anymore.

The forced upgrade is difficult for me, both intellectually and psychologically, as I have testified in My Personal Journey with China 🇨🇳 Like many with an interest in China, its economy, and its politics, I have to deal with a cognitive dissonance that has become unbearable. There’s still so much to be learned from China, especially for us Europeans. But on the other hand, well, China is definitively drifting away.

The whole context makes me particularly ambivalent about the TikTok ban and its consequences (incl. a potential deal with Microsoft). I am willing to listen to people that I respect, such as Tim Wu, who recently wrote that, despite Trump being an instrument in the matter, a TikTok ban was long overdue. Yet at the same time, I’m standing by what Scott Kupor wrote here:

Is It Stripe vs. Apple Now?

Apple has a special place in the shrine of large tech companies dominating today’s economy. In many respects, it stands apart from the many players that are much more focused on software: you could say that Apple is more a manufacturer of high-tech devices than a tech company per se. On the other hand, Apple’s story and culture make it the ultimate “Silicon Valley-style startup”, to quote Marc Andreessen.

Can such a company be disrupted? Well, things haven’t been going so well recently. Sure, the market cap is impressive (2 trillion—yes, you read that right), and Tim Cook is a formidable CEO and a great person. But many threats have come to light recently, from the new Cold War between the US and China, the EU Commission brandishing its antitrust stick, and the battle with Epic.

As I argue in Monday’s edition, my view is that the App Store as we know it doesn’t have long left to live ⏱ From my experience, including as a startup founder, what really made the difference with Apple’s marketplace was that it made it possible for developers to monetize software and content. So now that secure/seamless payments are commoditized, most notably by Stripe, Apple needs to reposition itself:

Larger players are fed up with Apple having that grip over their users’ experience. Mark Zuckerberg recently said so: Apple Has A “Stranglehold” On Your iPhone.Apple itself is much larger than 10 years ago, which brings greater scrutiny by the authorities, jealousy from its rivals, and a greater willingness of smaller players to call them out.

Bonus reading: Stripe: The Internet's Most Undervalued Company (Packy McKormick, Not Boring)

Venture Capitalists Writing Memos

Every professional in financial services will tell you that financial knowledge can only be acquired through (painful) experience. You can learn how to calculate a DCF and an NPV while in business school. But there’s only one thing that can eventually turn you into a great financier: trial, and error, and error. Only when you’ve lost money many times do you have what it takes to make sound decisions.

What happens then when venture capital represents a fast-growing segment of the financial services industry? One consequence of VC expanding as an industry is that more and more people want to become tech investors. On the other hand, the current environment doesn’t make it possible for many people to cut their teeth making actual investment decisions as part of a VC firm.

This is why many initiatives want to make it possible for anyone to learn VC, whether on their own or within a network of like-minded individuals who also want to join the party. One example is GoingVC; another is the scout programs that are now all over the place; a third example (🇫🇷) is Baby VC, which you can check out here. My own modest contribution is A Memo About Writing Investment Memos 👀

Valley Politics (Season 3)

I used to be interested in politics. Now I’m tired of it. But I still find myself taking a look at what’s happening—at least in the countries that I know well (and where politics is decipherable, which eliminates China). One of those countries, obviously, is the US. And a key player in US politics these days is the tech industry in general, and Silicon Valley in particular.

Back in 2012-2016, my thesis was that Silicon Valley would help Democrats secure a long-term advantage over Republicans and invent a new social contract for the Entrepreneurial Age (the topic of my book Hedge). Then I had to come to terms with the fact that Trump has outplayed Democrats in turning technology (and Silicon Valley) into a political asset.

As I wrote back in December 2019, I think Silicon Valley has lost a lot in the process. Indeed, these days there are signs that many players there are determined to do what it takes to get rid of Trump. Congress is one setting in which Big Tech and Democrats have started to get the ball rolling again. Kamala Harris becoming Biden’s running mate was a clear signal that things are getting serious.

Further reading on US tech companies in the Entrepreneurial Age:

🎧 Back in July, I reviewed Brad Feld and Ian Hathaway’s excellent The Startup Community Way. Yesterday Gonz Sanchez released the episode of the Seedtable Podcast in which he talks with Ian about writing, coaching, complexity economics, and what it takes to grow a startup community. Listen to it, then share on Twitter: Startup Communities as Complex Adaptive Systems.

🇫🇷 Some of you might prefer following my work in French 🇫🇷, especially with more of a policy/societal perspective. In this case, I recommend having a look at Nouveau Départ, a freemium newsletter/podcast that I launched in April with my wife Laetitia Vitaud to compensate for (some of) the French media’s shortcomings during the pandemic: Tout sur Nouveau Départ (🇫🇷)

From Country Risk in an Uncertain World (July 2020):

In the past you could confine your business within the limits of the vaguely global part of the economy in which risks could be assessed and managed. Today, the Great Fragmentation is destroying even that “globaloney” corner—starting with Britain, Hong Kong, and even the US—and forcing everyone to realize that uncertainty, not risks, rules the world economy now.

And in case you missed it:

As I wrote earlier this week to everyone that’s signed up, European Straits is now a 5-email-a-week product—and from now on all essays are subscriber-only (with rare exceptions). You can still subscribe for one year with a 20% discount by clicking here (to be redeemed by tonight—September 2!) 👇

From Normandy, France 🇫🇷