🌌 Reshaped #17
Tech and racial discrimination, tax policy conflicts, urban redesign, the future of space, gig-acquisitions and much more
Welcome to a new issue of Reshaped, a newsletter for those who do not want to miss a thing about the huge transformations of our time.
This is a different kind of special issue. During the long weekend we had the chance to enjoy in Italy, I have written an essay about the securitization that will transform how we fund and perceive the startup ecosystem both in the US and the rest of the world. Many analysts have dedicated excellent pieces about the emergence of venture debt, but few of them tried to imagine a world where VCs do not retain anymore a monopoly over the startup-financing model. I did my best to explore this area.
However, I decided not to publish the essay in this issue. I think that our attention should be entirely focused on what is happening in the US right now. As a human being, I have my own opinions, doubts, and emotions about the events occurring in Minneapolis and the rest of the country. But I will keep them private. The purpose of this newsletter is to provide relevant content, and my opinions about these events are far from relevant in this case.
Hence, instead of my weekly essay, today you will find a brief list of the best pieces I have read about the death of George Floyd and the protests that followed. In the very subjective ranking of the most important topics in life, the innovation economy is far behind justice and equality. And, today more than ever, being consistent with that ranking is a personal priority.
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News
💵 Softbank will launch a $100 million fund dedicated to financing ventures led by people of color (Axios). Many American banks will engage in similar initiatives, while VC firm Andreessen Horowitz will introduce the Talent x Opportunity Fund (TxO) to support founders that are kept out of the traditional funding schemes (TechCrunch). Time will say if this is the first step towards a more equal VC industry.
🚲 Facebook and PayPal invested in Indonesian ride-hailing startup Gojek (CNBC). This is just another sign of the growing interest in the gig-intensive world of food delivery, seen as a struggling but potentially promising industry where to invest cash excess. This trend is also generating some signs of competitive clashes as Uber is facing European competition in its attempt to purchase Grubhub (CNBC).
✊ After his decision not to follow Twitter in labeling Donald Trump’s posts, Mark Zuckerberg had to face strong internal protests from Facebook employees (The New York Times). However, Big Tech seems to be prepared to battle united against the threat of Donald Trump removing Section 230 benefits for social media companies (The Washington Post).
💻 The US semiconductor industry is heavily lobbying for more national investments in local production, which will be more and more relevant if the current cold war with China will evolve negatively in the near future (The Wall Street Journal). However, SMIC, the largest Chinese chipmaker, is ready to raise $2.8 billion to boost its international competitiveness (CNBC).
🥁 ZoomInfo went public in the largest IPO of the year, raising $935 million through the emission of 44 million shares (Forbes). The company, which offers B2B services for sales teams, has strongly benefited from the pandemic.
🔎 Donald Trump will launch an investigation on tax policies of nine countries and the EU, which have announced stricter rules for Big Tech (The New York Times). New trade conflicts might emerge as a consequence of countries trying to bring transparency and fairness in how digital services are taxed. However, with tariffs and other trade restrictions, the US risks losing crucial international support in the much more important conflict with China.
🔥 Understanding the protests
As anticipated in the introductory section, I dedicated the core of this newsletter to list some of the best pieces I have read during the week about the death of George Floyd, the protests that followed, and the root causes of both. The only criterion for selection was the English language.
Evan Hill, Ainara Tiefenthäler, Christiaan Triebert, Drew Jordan, Haley Willis, and Robin Stein, 8 Minutes and 46 Seconds: How George Floyd Was Killed in Police Custody (The New York Times). This article (and especially the video it contains) is a perfect starting point to understand the dynamics of the death of George Floyd.
Annie Lowrey, Defund the Police (The Atlantic). Despite the provocative title, the article suggests stronger spending on welfare and social justice (avoiding crime) and less on police militarization (reacting to it).
Tom Nolan, Militarization has fostered a policing culture that sets up protesters as ‘the enemy’ (The Conversation). This article further explores how police militarization created a wall with society.
Michael Shank, How Police Became Paramilitaries (The New York Review of Books). Another piece on the militarization of the US police, more from a historical perspective.
Kojo Koram, Systemic racism and police brutality are British problems too (The Guardian). A review of how police militarization and the growing divide with society is not only an American problem.
Afua Hirsch, The racism that killed George Floyd was built in Britain (The Guardian). A provocative column with a similar thesis.
Aarian Marshall and Arielle Pardes, Tech Companies Denounce Racism. Will Silicon Valley Change? (Wired). The article raises a fundamental question: will the Silicon Valley go beyond tweeting to fight racial inequality and discrimination?
Lauren Hepler and Emily Birnbaum, ‘Time to be brutally honest’: Tech’s reckoning on race and power has arrived (Protocol). Similarly, this article examines the hidden relationship between tech and racism.
Charlton McIlwain, Of course technology perpetuates racism. It was designed that way (MIT Technology Review). A fundamental critique of how technology contributes to perpetuating social inequalities.
Danez Smith, Crying, Laughing, Crying at the George Floyd Protests in Minneapolis (The New Yorker). A must-read for Europeans struggling to fully understand the magnitude of this social crisis.
Claudia Webbe, It’s Time for International Solidarity with Minneapolis (Tribune). Curiously, this is not at the core of the debate in Europe yet: how will we react to our own phenomena of racism?
An Uprising Reader (Dissent). This is a collection of past articles and essays on the topic of racial discrimination.
Inderjeet Parmar, George Floyd protests show how the US has retreated from its position as a world leader (The Conversation). The author reads the current event through the lenses of international relations and American imperialism.
Akwugo Emejulu, George Floyd: why the sight of these brave, exhausted protesters gives me hope (The Conversation). Another piece that links Trump’s idea of America with the “exhaustion” of minorities.
Jericho Brown, To win justice for George Floyd, we need the rage that abolished slavery (The Guardian). A column to understand what kind of emotional factors can contribute to the success of protesters.
Glenn Greenwald, What is the Goal of the Protests, and Which Tactics are Morally Justified and Strategically Wise? (The Intercept). Very interesting conversation to understand to what extent social protests are justified.
The black-white wealth gap is unchanged after half a century (The Economist). A historical perspective to understand the socio-economic roots of the current events.
Stephanie Mencimer, I’ve Lived in DC for 3 Decades and Covered Dozens of Protests. This One Is Profoundly Different (Mother Jones). It was evident from the very beginning that something was different this time: the article explains why it is.
Alternative perspectives
💰 On The Week, Ryan Cooper argues that the startup system, which burns billions in the quest for a scalable business model, is ruining the price information mechanism that makes markets efficient. The lack of good investment opportunities and the excess of liquidity have awarded money-losing ventures with no clear paths towards profitability. They can afford unsustainable pricing tactics that unfairly challenge incumbents. The current trend, reshaped by the coronavirus emergency, could further exacerbate this phenomenon.
Stock markets are back to near-record highs despite the fact that unemployment is near Great Depression heights, and sales in most economic sectors are collapsing. The Federal Reserve is blasting the plutocrat class with cheap credit, and private capital apparently sees little better return than stocks. The combination of dimwitted investors (especially the Saudi royal family, which has poured billions into the venture capital toilet) and fast-talking founders promising a quick return on impossible business models will surely persist so long as the plutocrats are swimming in money with nowhere to go. Consumer adaptations and small business competitors going out of business will likely mean in the short term that many of these companies can succeed in their goal of grabbing greater and greater market share. But that won't do anything to fix the fact that their customers, most of whom are struggling even more than they were before, love and use the services because their prices don't reflect what it actually costs to provide them.
🥡 On The Markup, Adrianne Jeffries explains why food delivery apps might be economically unsustainable as they rely on a business model that struggles to provide value for all parties involved. Even during the coronavirus lockdowns, these startups have not outperformed as expected — even if, as highlighted in the News section, there is a growing interest of Big Tech in this business.
The big issue with the business model, which the pandemic has only exacerbated, is how apps generate the bulk of their revenue: charging high fees to small restaurants. The big four depend on charging between 10 and 30 percent to independent restaurants and small chains, said Matt Newberg, a food industry consultant and founder of the trade publication Hngry.tv. Big chains get a better deal because their name recognition brings new customers to the platforms, he said. […] Meanwhile, the delivery apps have been trying to market themselves as an aid to struggling restaurants. “I still get barrage after barrage of emails, you know, telling me about how great this promotion is they’re running,” says Andrew Martino, owner of Ghost Truck Kitchen. “But you know, all the fine print isn’t beneficial to restaurants. It’s all beneficial to the apps.”
🌃 On Curbed, Alissa Walker writes that the post-pandemic redesign of our cities should be aimed at reducing urban inequalities resulting from how spaces are designed, allocated, and managed.
If the coronavirus has made anything clear, it’s that cities cannot be fixed if we do not insist on dismantling the racial, economic, and environmental inequities that have made the pandemic deadlier for low-income and nonwhite residents. Yet many prominent urbanists have simply tweaked the language from their January 2020 tweets and fed them back into the propaganda machine to crank out COVID-tagged content, perpetuating the delusion that all cities need are denser neighborhoods, more parks, and open streets to magically become “fairer.” […] Any changes that cities make to public space right now should be to stop people from dying and support essential workers. Creating more parks and plazas won’t create a safe place to be outside if certain residents will be harassed by police—or threatened by their fellow residents—for using them. Turning sidewalks into restaurants ends up privatizing space, limiting who has access to what was previously a public right-of-way. Opening a handful of streets for one type of user doesn’t mean that those streets are open for everyone.
Other readings
📚 On Aeon, Amanda Rees provides a detailed analysis of using history to predict the future, especially by applying mathematical methods to evaluate historical cycles. Very recommended reading.
🚀 On The Verge, Loren Grush explores what the SpaceX successful launch means for the International Space Station. A similar analysis appeared on The Economist, which focuses on the new opportunities for permanent routes to the station.
🍌 On The New Yorker, Robin Wright analyzes the current state of the US democracy to explain why Trump’s America risks being closer to a banana republic than an open democracy.
📹 According to the Financial Times, VCs are exploring the benefits of virtual due diligence, which could improve the inclusiveness of the industry.
But other VCs said that digital due diligence could provide a level playing field for entrepreneurs who are not located near a tech cluster or a big city where financiers congregate.
🦠 A chart from The Economist shows that there is a positive correlation between democracy and the capability to effectively respond to an epidemic.
Thanks for reading.
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Have a good weekend!
Federico