This blog post represents my personal views, and should not be taken as those of Cake Invest.
On January 20, 2017, we will bid farewell to the first African-American President, a man of vision, integrity, dignity and generous spirit, and witness the inauguration of President Trump. It is impossible not to react to this moment with anything less than profound anxiety. This almost puts the toblerone fiasco into perspective.
For the party of Abraham Lincoln, Trump is a profound embarrassment. The folly of the masses has overtaken the wisdom of crowds. Trump’s manifesto was hollow on content but overflowed with hyperbole and bombast. The campaign mirrored the EU referendum, marked by intense polarisation and absence of civility. ‘Political integrity’ - words which repel each other like similar ends of a magnet, has lapsed for a generation.
However, let’s set aside the political polarity and consider what Trump’s presidency could mean for one vital section of the economy - tech startups, both in the US and in the UK. Here’s my take from reading a number of articles, and my own thoughts.
Investment There is a maelstrom of uncertainty as many investors did not anticipate this outcome, and if there is anything that investors hate, it is uncertainty. However, some of the best companies have been created in times of economic turmoil, and, because of that, some of the best startup investments have been made in times when everyone was risk averse.
I am certain that investors will continue to invest in disruptive tech startups where their innovative value proposition offers product-market fit. While the financial markets may be volatile, there is no correlation between startup success and strong financial markets. Investors who understand what makes a startup an investible proposition will continue to act accordingly and be rewarded over the long term for doing so.
That means entrepreneurs looking to raise money in the coming months may have to wait it out and be conservative with cash as the senses settle, possibly hampering near-term growth, preserving cash and find a way to survive. But a great startup is a great startup. Startups encourage an equilibrium shift towards investment-driven growth, that wont change.
Entrepreneurial attitudes Entrepreneurs don’t confuse uncertain times with a lack of opportunity. If you were excited about your business two weeks ago, you should be excited about your business today, but don’t be blind about the macro environment you are operating in. It’s going to be choppy for a bit.
It would be unfathomable to think that someone who has been in business all his life is going to do anything that would hurt businesses and that the pendulum will swing to more realistic and sensible policies.
The platform business models, online businesses, Blockchain, crypto currencies – there is no reason why startups in these domains should not move forward. They are global businesses that know no borders, and innovation will continue to drive opportunity.
The US is the most entrepreneurial tech country in the world, and will keep producing Teslas, Googles, Amazons, Apples, Kickstarters, Twitters, Facebooks on the back of disruptive entrepreneurial thinking and behaviours. The globalisation of capital (in contrast to labour) means that when growth falters capital can go elsewhere, and equally, success will pull cash towards them.
Business ethics Startups fail, we all know the low probability of success and the cash burn of startup failures. No one sets out to fail, no one sets out to lose the cash and confidence of investors.
However, Trump’s behaviour - setting up businesses, letting them fail, using bankruptcy laws to avoid taxes, then setting up another business somewhere else – is the perfect symbol of the immoral asset-stripping form of ‘old style’ capitalism.
Tackling inequality and promoting opportunity should be a central objective of economic policy, for economic reasons every bit as much as social reasons. Startups offer an opportunity to reconnect a company with society, and instil a sense of broader obligation, rewarding value creation over value extraction.
Most startups operate with a strong community ethos, most startup founders are driven by making a difference, not money, money is the applause not the objective. Trump is not an entrepreneur as I would define one, he lacks the humility and operates to the indulgent capitalist stereotype of winner takes all as long as it is me.
Economic policy encouraging startup ventures While Trump was vague about his platform on the campaign trail, the broad strokes with which he painted his economic policy don’t bode well for the broader tech community. Trump is definitely a problem for that model. His economic policies are focused on punishing China for its trade abuses and returning manufacturing to the US.
If Trump moves ahead with his plan to impose steep tariffs on goods manufactured in China (rolling back more than twenty years of economic policy focused on increased economic interdependence), it won’t bode well for any US tech businesses that relies on the global supply chain and a global customer base – as most tech businesses, both in the US and UK, do.
Enabling free movement and diversity of labour markets Beyond tariffs, making tech products more expensive (and hypothetically forcing companies to return their manufacturing to the US), Trump is likely to have a significant impact on the issue of immigration, the free movement of labour and diversity in the workforce – all key drivers of startup growth.
Silicon Valley has made a huge push to support and expand the H-1B visa system, which enables talented workers from overseas to remain in the US and give them a path to a green card while filling the demand for highly skilled jobs. Trump said he would eviscerate that system.
For tech startups, the H-1Bs are a high-tech iteration of the message of compassion inscribed on the Statue of Liberty — Give me your tired, your poor, Your huddled masses, yearning to breathe free - except they’re highly educated, highly skilled workers rather than huddled masses yearning to be free.
It’s not the robots that are the problem Trump’s not a tech guy, that much we know. He also doesn’t know his economics. Robert Solow, the emeritus MIT economist, researched and developed a model which shows that around 80% of economic growth is down to technological progress, leaving capital and labour driven growth by the wayside.
I worry that for the sake of creating more American jobs, Trump might somehow slow tech, including self-driving technologies. Trump promises to bring back manufacturing jobs, but robots won’t let him. I don’t think he understands the tectonic shift that AI and robotics have reshaped the economy, and it's not reversible. Indeed, robotics have already helped reduce reliance on labour overseas for US manufacturers in automotive, electrical and electronics industries.
If manufacturing returns to US per his aim, jobs aren’t coming with it in high numbers. Automation has left workers in developing nations without employment, and the US like other developed economies faces the same challenge. Startups creating interesting robotics that stand to replace jobs from people, both in the UK and US, will continue to attract seed and venture funding.
It’s not just startups innovating with AI and robotics, large brands like Nike and Adidas have shed staff and embraced robotics, for example 3-D printing of shoes. Large agricultural business deploy drones in the field and major companies like Amazon and UPS rely heavily on robots for logistics and warehousing.
And the robots aren’t getting dumber. Advances in VR and AI promise to make robots and the software-brains inside of them even more competitive with people. It is not the robots that are the enemy, Donald.
Curating and enabling entrepreneurial flair Trump reserved some special vitriol for the folk from Cupertino. He called for a boycott of Apple’s products over its encryption stance following the San Bernardino shooting and bombings.
He had harsh words that harnessed his distrust of China to announce his plans to quite literally make Apple manufacture its products in the US: We’re going to get Apple to build their damn computers and things in this country instead of in other countries. Tim Cook, a composed and thoughtful man responded in an articulate and reasonable manner to this threat. Just imagine how Steve Jobs, a more abrasive character, would have taken up the challenge.
While it remains unclear if these comments form part of Trump’s policy on technology and business, his rhetoric will be of concern to Apple. In response to that uncertainty, Cook told employees to be confident that Apple’s North Star hasn’t changed.
Tim Cook’s leadership message in response to Trump’s threats was an example of the stark contrast to be made of intelligent liberalism against Trumps thoughtless populist sound bites: Our company is open to all, and we celebrate the diversity of our team here in the United States and around the world regardless of what they look like, where they come from, how they worship or who they love.
He’s also focused on Jeff Bezos and Amazon - If I become president, do they have problems, he said back in February, taking specific issue with Bezos’ purchase of The Washington Post and his support for Clinton, and for swaying political influence to benefit himself and Amazon. For his part, Bezos reserved Trump a special (one-way) ticket on one of his Blue Origin rockets.
While Trump was vague about his platform on the campaign trail, the broad strokes with which he painted his economic policy don’t bode well for the broader tech community. Sam Altman, president of startup incubator Y Combinator, and Shervin Pishevar, co-founder of Hyperloop One, even suggested that California secede.
This leaves the US tech industry in an uncomfortably uncertain position. Total contributions to the Clinton campaign from the Internet industry came in at 114 times the level they did for Trump. High-profile figures in US tech such as Zuckerberg, Benioff and Hoffman, all took unusually public anti-Trump stances. The notable exception was Peter Thiel, the billionaire PayPal backer and Silicon Valley's resident contrarian.
However, it was Dave McClure of 500 Startups, a startup accelerator and seed fund – who made his feelings known on stage at Web Summit, which perhaps showed the schism potentially opening:
We provide communication platforms for the rest of the f------ country and we are allowing s--- to happen. It's a propaganda meeting. Even if people aren't aware of the s--- that they're being told, if they're being told a story in fear, if they're being told a story of 'other,' if they're not understanding that people are trying to use them to get into f------ office, then yes, a------ like Trump are going to take office. And it's our duty and our responsibility as entrepreneurs, as citizens of the f------ world, to make sure that s--- does not happen. This s--- will not stand, and you've got to fight for your rights and... stand the f--- up!
Quite how a flawed personality, a populist billionaire, a hotel developer, won election as POTUS, for a country seen as a ‘beacon of hope’, based on his manifesto, defies analysis. We can only believe that the driving force of passion for entrepreneurship and innovation, from economic, technological and sociological perspectives, carries enough momentum against the voices of the Trumpkins.
Outgoing President Obama today visits Athens as part of his ‘farewell tour’, partly to talk about democracy in the place in which it was born. There's a lot for us all to consider. In Ancient Greece, not far from the Acropolis, populist speakers used to rouse crowds with the promise of action against the state's enemies.
Those speakers were known as demagogues. You have to wonder whether or not that will remind the outgoing president of the man who will succeed him. In turn we have to hope that Trump gets educated in the business of technology and the technology of business, to enable our tech startup cultures to continue to thrive, and that any economic policies do not constrain because of a flawed, stale and utterly misguided set of ideological principles.