Drift Signal (Nicolas Colin)

The Agenda 👇

* Launching a podcast with Laetitia Vitaud. This week’s guest: Leslie Kern 🎧

* Software will eat construction, too—one day

* Turning incumbents into tech companies

* The main difference between Europe and America

* And no, it’s not about more or less regulation

* The Family Affairs feat. Mathias Pastor

* My podcast conversation with Mehdi Yacoubi

🎙 As I announced last week, my wife Laetitia Vitaud and I have decided to launch an English-speaking podcast series together and to syndicate it across a network of newsletters. That includes Building Bridges, the mothership for this series, as well as Nouveau Départ (our French-speaking family media operation, where transcripts will be published in French), Laetitia’s own Laetitia@Work about the future of work, outlets to be launched in German and Spanish, and European Straits, of course, since it’s all promoting a European point of view on global affairs.

* We have an impressive series of interviews coming up with Laetitia as a host (including with James Crabtree, Vaughn Tan, Bruno Macaes, Mariana Mazzucato, Hilary Cottam, and many others), and I’ll take my turn hosting in a few weeks! Stay tuned 😎

The inaugural episode, which you can listen to by clicking above 👆, is a fascinating conversation between Laetitia and Leslie Kern, a Canadian author whose book Feminist City: Claiming Space in a Man-made World (2020) we both found particularly inspiring.

* Leslie is an associate professor of geography and environment and director of women's and gender studies at Mount Allison University in Canada.

As Laetitia wrote last week,

With the pandemic and much political, economic and social chaos, 2020 generated lots of questions about cities, urban life, and activism. Many people wonder whether cities still have a future. I’m sure they do. But maybe more so if they are “feminist cities”. And that’s why Leslie Kern’s ideas are even more relevant than ever.

She is “proud to call [herself] a feminist geographer”. Twenty years ago, people may have mocked the idea that geography could be sexist or feminist. Today more people understand that urban planning does indeed have consequences on gender equality, and that we need to take more diverse points of view into account to make housing and infrastructure better for all.

It’s a conversation that resonates a lot with topics I’ve been exploring for a long time: urbanization, how jobs concentrate in densely populated areas, why that’s correlated with software eating the world, and why it calls for inventing a new social safety net for all those workers in proximity services. Leslie’s vision of “feminist cities” isn’t that different from the one I developed in my book Hedge, in which designing institutions for service workers in large cities was a central idea.

(Credits: Franz Liszt, Mephisto Waltz, S.514-extract from the album Miroirs by Jonas Vitaud, NoMadMusic.)

💻 Why Software Has a Hard Time Eating Construction 🏘

One promise of the Entrepreneurial Age is that innovation brings better products to more people for lower prices. And yet some industries resist that formula. In an industry like healthcare, that’s because the end user isn’t actually usually in a position to choose or even fully understand their care. In an industry like construction, it’s because there’s a large portion of SMBs in the value chain, with both those providers and end users being quite resistant to standardization.

At one time, I thought that could perhaps be an opportunity for the emerging tech giants. Google’s purchase of Nest back in early 2014 could have been the first step toward a full-stack construction operation, with Google lowering prices by pushing builders into adapting their practices in order to be part of a “Google Builders” network.

Needless to say, that hasn’t happened yet. But startups around the globe are still trying to crack the prefab puzzle, especially now that COVID-19 is playing its recognized part in accelerating emerging trends. There have been labor shortages in construction for years, a situation that’s only becoming more acute during the pandemic.

I got into the details in Why Software Has a Hard Time Eating Construction.

📲 Rebooting Businesses for the Entrepreneurial Age

Back in the early days of The Family, we were always thinking about different ways to kickstart the European startup ecosystem. One idea centered on how to turn legacy businesses with known assets into modern companies using technology to deliver the top-notch services that customers are now accustomed to. We even went through a long due diligence process on a major Paris-based retail franchise to see if it was possible.

The thing we realized, though, was that such an operation actually crosses three different streams in today’s financing world: buyout firms, turnaround firms, and venture capital firms. And since each of those specialities exist independently of one another, it’s not exactly clear how one can acquire the backing to pull off a true reboot.

I was reminded of this while listening to a recent podcast discussion with a prominent value investor who goes by the pseudonym of Modest Proposal on Twitter, where the subject was how to grow tech-driven business models in “heterogeneous services” industries such as on-demand home services.

Read more in Rebooting Businesses for the Entrepreneurial Age.

🛣 Europe Is a Base, America Is a Destination

If you want to quickly see one big difference between the mental picture we all have of Europe vs. the US, just ask yourself one question: How many Europeans do you know who moved away to live in the US for a significant amount of time, and how many Americans do you know who have moved away to live in Europe (or elsewhere)?

If you’re like me, the first number is pretty big, while the second is quite low. And after 30 years of closely studying the US, I think that the concept of a base vs. a destination explains a good deal. Europeans know that they can leave Europe to go pursue opportunities elsewhere, always having a base to return to whenever they want. But Americans have already reached their destination, with internal immigration being the only option available on their mental map.

Still, things are changing. The US is becoming less welcoming to immigration, which drastically changes its historical positioning. It also will affect long-term economic growth, as countries that are less open to new arrivals soon find themselves in a demographic trap. And some of the “escapism” that Americans tend to indulge as a response to having reached their destination is becoming quite alarming, even dangerous as they play the “Trump and an autocratic state” game.

You can keep going in Europe Is a Base, America Is a Destination.

👮‍♂️ Fewer Regulations in America?

One thing that the US certainly doesn’t lack, and which we’re likely to see coming into action in the wake of next Tuesday’s Election Day, is lawyers. And the legal profession is at the heart of a very common misconception, namely that there are fewer regulations in the US than there are in Europe.

In fact, the US simply has produced more lawyers per capita than virtually any other country, and so Americans see it as normal to have a lawyer navigating the maze of regulations for them (a maze that changes depending on which of the 50 states you’re dealing with!).

This wasn’t always the case. In fact, it was in the 1970s, that moment marking the turn toward global free trade, the supposed deregulation of the Reagan era, and financialization when the US began producing more and more lawyers, from the roughly 300,000 who were around in 1970 to over 1.2M by 2010! Needless to say, it would seem that if the US really was a freedom paradise unencumbered by regulations, the country wouldn’t be producing all those lawyers.

I go further into the discussion in Fewer Regulations in America?

Sounds interesting? Subscribe to European Straits and let me know what you think!

⚠️ My colleague and fellow director at The Family Mathias Pastor just announced a new series of talks with inspiring founders, called The Family Affairs. He explained the thinking behind it all and talked about his first three guests in his Substack publication Published Draftshere.

🎧 I was pleased to be invited onto the podcast of Mehdi Yacoubi, co-founder of Lifetizr. We took a look back at why I wrote my book Hedge, the current geopolitical context, the great fragmentation and more —listen to it directly on Apple Podcasts.

From Adieu to Old America (April 2020):

I love the US as a nation and it’s still hard for me to accept the fact that we Europeans and Americans don’t have much in common anymore. Even worse, I have invested quite a lot of time and resources over the past 20 years in getting to know the US better, figuring out how the US and Europe can complement each other, and developing a network on the other side of the Atlantic. So when things happen that point to that whole investment now becoming worthless, I have both losses to recoup and wounds to lick.

All recent editions:

* Fewer Regulations in America?—for subscribers only.

* Europe Is a Base, America Is a Destination—for subscribers only.

* Rebooting Businesses for the Entrepreneurial Age—for subscribers only.

* Why Software Has a Hard Time Eating Construction—for subscribers only.

* Value Creation Is The Key To Everything—for everyone.

* Does Every Country Need Their Own DARPA?—for subscribers only.

* On Trains and Geography—for subscribers only.

* Round 2 on Liquidity & Exits—for subscribers only.

* Is Going Global Still a Thing?—for subscribers only.

* Venture Capital Is Hard—for everyone.

European Straits is now a 5-email-a-week product; all essays are subscriber-only (with rare exceptions). Join us!

From Normandy, France 🇫🇷

Nicolas

The Agenda 👇

* James Crabtree on India, Asia, and Singapore 🎧👆

* Important books about America

* Speaking of America, what will become of it?

* Lessons from Ant Financial’s IPO having been squashed

* The rise of protectionism—in different shapes and forms

* A daily newsletter for entrepreneurs by The Family

Today I’m sharing the second episode of the podcast series syndicated with my wife Laetitia Vitaud’s Building Bridges and our French-speaking media operation Nouveau Départ: a conversation between Laetitia and James Crabtree, author of the landmark book The Billionaire Raj 🇮🇳

Frequent readers of this newsletter will remember that I chronicled James’s book in a past edition about What’s Happening in India? The same focus on the rise of Indian tech is present in this podcast, alongside many other topics such as how the pandemic has impacted India and life in Singapore, where James lives with his family.

I’m all the more eager to share this conversation as my relationship with James was initiated more than one year ago when I visited Singapore, all thanks to our mutual friend (and James’s former colleague at the Financial Times) John Thornhill, and our very first conversation was on exactly the same topics: the rise of India, life and Singapore, and Asia in general on the global stage.

Please listen to the podcast by clicking on the player above 🎧👆 (or downloading it into your favorite podcast app), then share it, and let me know what you think!

🇺🇸 A Reading List on America

The polls had barely closed on Tuesday when it was already clear that while Donald Trump may end up being defeated, there wouldn’t be an overwhelming victory for Joe Biden. This quickly led to a cottage industry of “What’s going on in America” op-eds, which, of course, didn’t do much to really clarify the situation.

However, that doesn’t mean that insights aren’t available. So I went back into my Evernote to resurface a few of my favorite articles and books that I feel provide the most insight not only on the American psyche, but also the political realignments that are sweeping through the world as it passes into the Entrepreneurial Age.

From Polish populism to small-town America to global geopolitics, I think there’s not only something for everyone in the list, but also that they are sources that are extremely complementary. And at the very least, they can provide a deeper dive than we’re accustomed to getting from our daily Twitter feed (although I have enjoyed the joyscrolling that started once the race was called for Biden on Saturday).

Find it all in A Reading List on America 📖 

🌎 What Becomes of America (and the World)

History is full of crises and rebirths; one of the lingering questions from the 2008 crisis has been what, exactly, happened to the rebirth? Despite the recovery of global stocks, lingering resentments and the sensation of stagnation and missed opportunities abound.

One theory is that Barack Obama came along too early in the cycle, and thus was unable to be the truly reconstructive figure that the crisis required. That lack of true reconstruction explains the ability that Donald Trump exhibited in driving further wedges between people, both in the United States and around the globe.

Now, with Joe Biden having won the election, the question remains: Could he become the reconstructive figure that a crisis calls for? No one would accuse him of being a radical, certainly; but then again, that label wouldn’t have been affixed to FDR in 1932, either.

I delve into what history says about what comes next in What Becomes of America (and the World) 🤔

🐜 Jack Ma’s Future  

I’ve spent quite a bit of time lately thinking and writing about IPOs, as have many others. We all see how IPOs act as a powerful part of a healthy entrepreneurial ecosystem, providing liquidity and rewarding everyone from founders and investors to employees and even pensioners. As such, the planned Ant Financial IPO, which was on track to be the biggest of all time, was highly anticipated.

But apparently the CCP has a different take on things. Following Ant co-founder Jack Ma’s speech calling for an overhaul of China’s financial system, the IPO was halted, a move that for now appears to be indefinite. For those of us who dream of having tech giants such as Ant emerge from our local geographies, it’s a development that’s nothing less than astounding.

Still, like so much that happens in China it’s difficult for outsiders to know exactly what is going on or what the future holds. But given the CCP’s grip over policy throughout the country, it’s clear that they won’t allow anything, whether a popular entrepreneurial figure or the biggest IPO ever, to derail their strategy for China’s development.

I discuss all this and point to some insightful resources in Jack Ma’s Future🔮

🛡 You’re The Protectionist!

There are many uncertainties in today’s economic and political forecasts, but one trend is quite clear: protectionism is back. Countries around the world are rewriting the rules of global trade, both in terms of specific country-to-country relationships (such as the US vs. France, playing out in big tech vs. big wine) and in more general positions (China’s actions to encourage its industrial development).

But while the rising tide of protectionism may be clearly visible, the reasons behind it are much more muddled—even, and perhaps especially, for the countries installing these new policies. There are a few with a clear-eyed view of why protectionism can help their economies; but there are many doing it either in response to longstanding geopolitical relationships or simply because everyone else is doing it.

As the history of economic development tells us, those latter two reasons are not advisable. Successful trade policies are always the result of an accurate understanding of where one’s industrial capacities lie, and so many countries today are fooled by memories of or wishes regarding their country’s place in the world.

I look at some countries that are seeing clearly and some that are headed down the wrong path in You’re The Protectionist!😤

Sounds interesting? Subscribe to European Straits and let me know what you think!

⚠️ It would be difficult to find any business on the planet that hasn’t been affected by COVID-19, and my firm The Family is no different. As early as last March, we saw that moving 100% online was a necessity, as the large in-person events we’ve had over the past 7 years aren’t going to be possible anytime soon. But moving 100% online is also an opportunity to truly expand to become an entity that boosts startups no matter where they’re located.

* In particular, we realized that today, contrary to back in 2013 when Alice, Oussama and I founded the firm, we now have access to top-notch investors from around the globe, meaning that the fundamental requirement for having a successful Demo Day is now in place.

* In this context, we’re working toward the first batch that will go through the new, improved, 100% online version of The Family. And to count that down, me and my fellow directors (Alice, Oussama, Balthazar and Mathias) are writing a daily newsletter, where each day one of us relates a startup lesson that we’ve gleaned over the past years.

* We’ll send 5 editions a week (one by each of us) over the course of 7 weeks—that is, until Christmas 🌲 If you’ve already received the first two editions, great! If you haven’t, you can read them (and subscribe) at The Family Substack. 

From Is Trump Still in the Flow? (September 2020):  

The flow has very much to do with people wanting to get rid of Trump and his erratic approach to the presidency. This is how I interpret Biden winning the Democratic nomination: US voters are just exhausted; they don’t aspire to Elizabeth Warren’s grand plans or Bernie Sanders’s socialist revolution as much as to simply turning the page and seeing Trump gone.

All recent editions:

* A Reading List on America—for subscribers only.

* What Becomes of America (and the World)—for subscribers only.

* Jack Ma’s Future—for subscribers only.

* You’re The Protectionist!—for subscribers only.

* The Gig Economy. IPOs in Europe. Silicon Valley Politics. Countries Are Different.—for everyone.

* Each Country Is Different—for subscribers only.

* Debriefing Our IPO Panel—for subscribers only.

* Inflection Points in Silicon Valley Politics—for subscribers only.

* IPOs: Will the Next Generation of Founders Choose to List in Europe?—for subscribers only.

* Feminist Cities w/ Leslie Kern. America. Rebooting Businesses. Construction.—for everyone.

European Straits is a 5-email-a-week product, and all essays are subscriber-only (with rare exceptions). Join us!

From Normandy, France 🇫🇷

Nicolas

The Agenda 👇

* Building Bridges with Bruno Maçães 🎧

* Can America cling to its technological lead?

* SaaS startups are everywhere

* Who will historians be writing about in thirty years?

* Spotlight on The Family’s portfolio company Fairmint

* Recruiting From Anywhere

On the most recent episode of Building Bridges, my wife Laetitia Vitaud spoke with political scientist and former Portuguese minister Bruno Maçães, whose inspiring writing about the state and future of the world makes frequent appearances here in European Straits 🌐

* Bruno is one of the few thinkers who studies both the United States and China in great depth, while also having the perspective of a native European. Therefore he’s a must-listen when it comes to geopolitics and how things are likely to develop in the future!

🎧 Listen to their conversation by clicking on the player above, or at the source right here.

🇺🇸 America As a Technological Champion

Last week, I talked about a coming age where we see America as a technological laggard. As expected, that thesis generated some pushback, including from good friends (and more importantly, excellent thinkers!) like investor and author Bill Janeway. 

The subsequent discussion revolved around questions of basic research and tinkering, the latter of which has had a long history on the American continent (and the former, not so much).

* In the 19th century, America’s technological advances didn’t come from advanced scientific research. Rather it came from tinkerers operating far from Europe’s cutting-edge research labs. It was only following World War II and during the Cold War that basic research became a fundamental part of United States history thanks to massive government funding through the likes of DARPA and a growing network of higher education.

Now, though, the question is whether that tinkering tradition will continue, particularly in a world where America no longer stands as a shining beacon for immigrants coming from anywhere and everywhere. But there is a significant advantage that the US has today that it didn’t in the 19th century, namely its place as a financial powerhouse.  

👉 I revisit the discussion in America As a Technological Champion.

🏭 SaaS Is the New Manufacturing (Round 1)  

During the past five years, one category in the startup world has really stood out: Software as a Service (SaaS). These are all the companies building tools that truly fit the Entrepreneurial Age, for a simple reason: they make it easier for people to become entrepreneurs and harness the power of tech.

In some ways, it’s a bit of a problem now, because as startups move into more tangible industries and face different regulatory regimes, much of what we’ve become accustomed to with SaaS startups is being applied in industries where it doesn’t make nearly as much sense.

Still, SaaS certainly isn’t going away—indeed, it’s only destined to grow larger as we advance further into this new era. I’m even wondering whether SaaS companies would serve the same role as did manufacturing over the previous two centuries: a key value creator that, even though it employs a minority of the workforce, drives the development of both our economies and our social contracts.

👉 I start the discussion in SaaS Is the New Manufacturing (Round 1)

🧙‍♀️ Where Are America's Wise Men & Women?

While history is not just a question of Great Men, there are certain people occupying certain positions at certain times that end up having an outsized impact on what happens next. Walter Isaacson and Evan Thomas wrote about a group of these people who shaped American ideas and actions when it came to facing the Soviet Union following World War II in their 1986 book, The Wise Men.

Having read it earlier this year (and almost 35 years later, it still holds up!), I’m now considering the opportunities inherent in any new presidency—particularly one coming after the upheaval that has been President Trump. Specifically, I’m wondering who those key actors today might be. And given both history and current events, I do hope that they will be people with real business experience.

Why? Because business tends to be much more able than the government to establish a long-term direction. Whereas every change at the top of government can indicate a sharp turn in how a given country will act, people at the helm of a business know that the goal is improving on what came before without completely overhauling everything. Let’s face it: a business-inspired consensus could provide some much needed stability in these politically perilous times.

👉 I looked at who these people were and might soon be in Where Are America's Wise Men & Women?

📈 Why Don't Uber Drivers Own Shares? Now They Could

As someone who has worked on a daily basis with early-stage entrepreneurs for over 7 years now, I can say just how difficult it is to sometimes see where founders are really heading. Sometimes you don’t know the market at all, sometimes you learn about problems you didn’t even dream could exist… It’s a constant learning process.

And then sometimes there’s a startup that becomes very obvious, very fast. That’s the case with Fairmint, one of our portfolio companies, which is focused on providing a new way for entrepreneurs to fund their growing businesses. Along the way, they’re also solving one of the conundrums of today’s investing world: how to easily give all of a company’s stakeholders a shot at benefiting from the upside?

We know that the beating heart of companies like Uber, Airbnb, and Reddit are drivers, hosts, and commenters, respectively. Yet while those stakeholders benefit from the value they contribute to adding, there really isn’t a way for them to access the growing value of the companies themselves.

* Fairmint’s new CAFE—continuous agreements for future equity—can do exactly that, opening a whole new realm of possibilities both for growing a business and sharing its benefits with anyone who is interested. 

👉 I went further into why Fairmint could be a truly game-changing company in Why Don't Uber Drivers Own Shares? Now They Could (which is accessible for everyone 🤗)

Sounds interesting? Subscribe to European Straits and let me know what you think!

🏝 On Wednesday Dec. 2, my firm The Family will be hosting our next online Summit event, this time focusing on Recruiting From Anywhere. Since moving 100% of our operations online, both internal and external, we’ve been developing events to help entrepreneurs manage the changes brought on by the COVID-19 pandemic, including Summits on Fundraising, Working From Anywhere, and Customer Experience.

* This time we’ll have experts giving the behind-the-scenes of what it really takes to effectively recruit when both talent and company can be located anywhere, never meeting IRL. Tickets are free, sign up here.

📖 With my fellow Directors, our daily newsletter sharing startup lessons is still counting us down towards Christmas. If you’ve missed any of them, lately we’ve covered:

* Why you should always Wait until the money is in the bank account.

* Signposts for When should you raise?

* The perils of selling too soon and learning to eat Risk for lunch. Reward for dinner.

* The need to Always be closing... on Zoom.

From 🇺🇸 A Reading List on America (November 2020):

I first heard about Bruno Maçães from the team at Stripe Press. They told me there was this guy that was writing interesting things about the West and the growing rift between the US and Europe. I immediately jumped in to learn more, and discovered that the bulk of Bruno’s work so far was in fact about China. I bought and read his first two books, The Dawn of Eurasia and Belt and Road, and eventually met him in Beijing when I visited the city in 2019 and he was spending a year there studying China from the inside.

All recent editions:

* Why Don't Uber Drivers Own Shares? Now They Could—for everyone.

* Where Are America's Wise Men & Women?—for subscribers only.

* SaaS Is the New Manufacturing (Round 1)—for subscribers only.

* America As a Technological Champion—for subscribers only.

* Joe Biden's In. Understanding Capitalism. Customers Doing More.—for everyone.

* America As a Technological Laggard—for subscribers only.

* Why Local Businesses Can Thrive in the Entrepreneurial Age—for subscribers only.

* Your Customers Are More Than Their Collective Purchasing Power—for subscribers only.

* Accounting for Capitalism—for subscribers only.

* The Billionaire Raj w/ James Crabtree. A Long Week in the USA. Jack Ma and the CCP. Protectionism Back in Style.—for everyone.

European Straits is a 5-email-a-week product, and all essays are subscriber-only (with rare exceptions). Join us!

From Munich, Germany 🇩🇪 

Nicolas

The Agenda 👇

* Mariana Mazzucato on how to create value post-COVID-19

* We need to turn gig work into good work

* Tony Hsieh’s legacy in Las Vegas

* Why is Brexit happening, exactly?

* A prelude to “11 Notes on Silver Lake”

* Next week: The Family’s Go-To-Market workshop

* More insights for entrepreneurs from The Family

The latest Building Bridges podcast is out, featuring one of the world’s most in-demand economists: UCL professor and founder of the Institute for Innovation and Public Purpose, Mariana Mazzucato. My wife Laetitia spoke with her about her previous books on the relationship between entrepreneurship and the state and how we assign value to things, as well as the ways in which the world can build back better in the wake of the COVID-19 pandemic. 

You can listen to their discussion using the player above, or by following this link: Rethinking the State 🎧

📳 No, Gig Workers Are Not Your Servants

For years, there has been an argument floating around that tries to shame users of the gig economy into not participating in it. But it’s a flawed argument that is actually quite destructive, as it presupposes that it’s impossible to turn gig economy jobs into good work via an upgraded social contract. As I’ve been arguing for years, including in my book Hedge, this simply isn’t true—and the history of factory jobs proves it.

The fact is that the gig economy provides vital services to many middle-class households, acting as a powerful mechanism in the fight against what Elizabeth Warren calls the “two-income trap”. And it’s also true that the resistance of such service jobs—in restaurants, ride hailing, human services, and many more—to Taylorism meant that they have long remained poor quality, and it’s no surprise that workers accustomed to the steady jobs in factories are reluctant (at best) to shift into those sectors.

But once again, the answer isn’t in shaming those who are using products that provide better, much-needed personal services. The answer is in upgrading our social contract and taking advantage of the entrepreneurial opportunities afforded by today’s increasingly powerful technologies. In doing so, a productivity surplus can be generated, one that matches (or exceeds!) the surplus generated by Taylorism during the 20th century.

👉 I went further in No, Gig Workers Are Not Your Servants.

😔 Tony Hsieh’s Other Legacy  

Over the past week, the tech world has been mourning the passing of Tony Hsieh. As CEO of Zappos, Tony was one of the few that really redefined what e-commerce could be, to the point where the undisputed king of that arena, Amazon’s Jeff Bezos, bought Zappos back in 2009 and left Hsieh in charge, apparently expressing a desire to learn from how he achieved his radically customer-focused growth.

There was another project that Tony devoted himself to that greatly interested me a while back, when Alice, Oussama and I were thinking about what it takes to develop a tech ecosystem in a given location: the Las Vegas Downtown Project. His goal was to revive an area that had been largely abandoned as Las Vegas developed along the Strip, relocating Zappos headquarters there and pushing to build a community that embraced not just like-minded tech people but also local stakeholders.

It’s not an easy task, as many cities around the globe can attest. Sure, the Las Vegas project is largely seen as a success. But there were certain factors linked to how life in the US is organized that could have made it easier to pull off there than in a European city such as London or Paris.

👉 Read more about a man who left a mark on virtually everyone he met in Tony Hsieh’s Other Legacy.

🇬🇧 First Manufacturing, Then Financial Services, Then Brexit, Then What?

It’s hard to believe given what the world has gone through over the past four years, but Brexit was voted through prior to Donald Trump winning his term in the White House. Today, Trump is on his way out (slowly but surely 😉), but Brexit is still up in the air, with negotiations dragging on and the prospect of no-deal looming large.

And really, perhaps that shouldn’t come as a surprise. If we look at Britain’s history, it’s clear that Brexit came along as a new solution to a recurring problem: How can the UK continue to find the productivity gains that have made it prosper over the past centuries? That savior role was played by manufacturing during the Industrial Revolution, an empire of trade during the 19th century, and financial services at the dawn of the 20th century.

Unfortunately for the UK, times have drastically changed. The world is pulling back from globalization; over-reliance on financial services has widened an inequality gap that in turn has created many very angry voters; and the EU seems entirely disinclined to leave its banking apparatus in a country that has made clear its desire to go its own way.

👉 I looked at why Brexit appears so clearly anachronistic today in First Manufacturing, Then Financial Services, Then Brexit, Then What?

💼 On Jerry Neumann’s Productive Uncertainty (Round 2)

Silver Lake has been on my radar for some time, and I’ve decided to use its example as I push forward with my “11 Notes” series. That’s just one more effect that reading Jerry Neumann’s “Productive uncertainty” essay had on me: his thesis, together with some of Bill Janeway’s thinking, can serve as a productive framework for understanding Silver Lake and today’s private equity environment.

At its heart, the uncertainty that drives the bets made in venture capital is generally anathema to private equity investors, who see their job as properly assessing risk, with uncertainty being a direct contributor to losing money. In this context, how can private equity participate in the portion of the economy where most profits are currently being made, i.e. the tech sector? 

Well, Silver Lake is making moves to deepen its exposure to the sector. And my suspicion is that there’s something important here for European startups. There could be a way to mitigate uncertainty due to the more fragmented markets that they’re aiming at, while also opening up new funding possibilities beyond traditional venture capital.

👉 I keep “working in public” on this topic in On Jerry Neumann’s Productive Uncertainty (Round 2).

Sounds interesting? Subscribe to European Straits and let me know what you think!

🏝 Next Wednesday will bring the latest in my firm The Family’s online workshops, this time focusing on Go-To-Market. The Entrepreneurial Age is bringing forward lots of tools to help make entrepreneurship easier, but one simple fact always remains: you have to find, nurture, and grow your customer base. No matter how good your product is, that’s a challenge.

* This is a 2-hour workshop featuring my fellow directors Oussama, Balthazar and Mathias discussing errors to avoid, B2B and B2C strategies for bringing your product to people and more, including networking time with your fellow participants. Tickets are free, sign up here.

📖 And as you’ll have likely noticed over the past few weeks, my fellow The Family directors and I are sharing startup lessons as we move towards the end of the year and the beginning of our newest batch of startups in January. Over the past week we’ve covered:

* A critical social topic for founders: Diversity is not an option.

* Understanding one big distinction in a common piece of startup advice: Blindness is bliss, ignorance a curse.

* Thinking long-term when it comes to fundraising: In fundraising, trust comes before FOMO.

* Why entrepreneurs shouldn’t be worried about competition: Competition doesn't kill startups.

From Industrial Policy: China Gets It, We Don't (October 2020):

China is doing everything right [when it comes to industrial policy]: they have the drive from both a government focused on building and very large downstream tech companies that are racing ahead of the technological frontier. They also have the means to invest in basic research and the Communist Party providing a capacity to coordinate the efforts between the private and public sectors and ensure that the direction is clear for everyone (and that it serves China’s strategic interests relative to the rest of the world).

All recent editions:

* On Jerry Neumann’s Productive Uncertainty (Round 2)—for subscribers only.

* First Manufacturing, Then Financial Services, Then Brexit, Then What?—for subscribers only.

* Tony Hsieh’s Other Legacy—for subscribers only.

* No, Gig Workers Are Not Your Servants—for subscribers only.

* What to Make of Low Interest Rates—for subscribers only.

* Remote Work. Stories. Opportunities in Asia. Productive Uncertainty. Low Interest Rates.—for everyone.

* On Jerry Neumann’s “Productive Uncertainty” (Round 1)—for subscribers only.

* Another Round on Expanding in Asia—for subscribers only.

* European Tech’s Forgotten Stories—for subscribers only.

* Around the World w/ Bruno Maçães. America's Strength. SaaS. The New Wise Men. Democratizing Upside.—for everyone.

European Straits is a 5-email-a-week product, and all essays are subscriber-only (with rare exceptions). Join us!

From Munich, Germany 🇩🇪 

Nicolas

The Agenda 👇

* A conversation with Vaughn Tan on his book The Uncertainty Mindset

* Why automation creates more jobs than it destroys

* Learning from the best in capital allocation

* My 10 most read paid essays this year

* A retrospective of my work on business strategy

* More insights for entrepreneurs from The Family

🎄 Merry Christmas 🎄 My wife Laetitia Vitaud’s latest guest on the Building Bridges podcast was Vaughn Tan, author of The Uncertainty Mindset. After spending years visiting the kitchens of some of the world’s most innovative restaurants—a voyage that started with a meeting with José Andrés and went on to include restaurants like Noma—, Vaughn developed some key insights on how organizations can confront one of the key features of the Entrepreneurial Age: uncertainty.

His discussion with Laetitia spans the differences between “risk” and “uncertainty”, balancing efficiency and innovation, and how his “Does this seem fun?” approach to life has led to a vibrant path, taking him from Google to Harvard to France.

👉 Listen to the podcast using the player above, or on your favorite platform: Apple and Spotify 🎧

🤖 Automation Creates Jobs: Here's Proof!

As subscribers to this newsletter, you’ve also seen some of the other gigs that I’ve launched over the recent period, including the Building Bridges initiative (seen above featuring Vaughn Tan)  that I work on with my wife Laetitia. One key thing for us from the beginning of the project was needing to make sure we automated as many tasks as possible, since we both have full-time jobs that keep us very busy.

And in truth we do automate much of what goes into producing and sending out the podcasts, for example by using tools that automatically produce a transcript of each podcast discussion. These SaaS tools are quite robust, and yet we’ve found that the work doesn’t end there. 

Indeed, as we’ve automated more and more aspects of production, we keep finding new jobs that then subsequently need to be done. Taking the transcript example again, once the SaaS has worked its magic we still need to go through that text, correct it for context and readability, and then have it translated (since we’re trying to reach as many European audiences as possible). These tasks, being quite delicate, require human intervention—and so we’ve found that our automation process really does create even more jobs to be done!

👉 I outline how we’ve developed our process in Automation Creates Jobs: Here's Proof!

💰 Every Successful Business Has Two Financial Loops  

Most people’s thought process regarding a given business doesn’t go beyond the simple relationship of supply and demand: customers want a product, and the business is there to provide it. On the other hand, few people think about the financial loop underlying a McDonald’s hamburger—yet even with billions and billions served, we can say that the business hasn’t been built on just the beef itself.

In fact, businesses that are successful over the long term almost always have two financial loops that nourish each other. One is the short-term ‘trading’ process that generates free cash flow. The other, oftentimes hidden from customer view, is found in the long-term game of doing ‘capitalism’. This involves finding ways to insert capital into the value chain in order to enjoy increasing returns to scale.

For an entrepreneur, it’s important to understand how your business can build up those two interacting loops. There are many examples from which to take inspiration: the aforementioned McDonald’s and its real estate division, Goldman Sachs and the shift from advisory to investing, and of course Warren Buffett’s Berkshire Hathaway and its legendary “insurance float”.

👉 Read more about effective capital allocation in Every Successful Business Has Two Financial Loops.

📖 My 10 Most Read (Paid) Essays This Year

It’s always interesting, as a writer, to see which pieces resonate the most with one’s audience. One benefit of taking a break at the end of the year is going back into the data and seeing which articles were most read and shared (and which ones weren’t 😢).

My first ‘vacation edition’ this year consisted of the list of my most read paid essays this year. There isn’t necessarily a pattern in terms of topics: they cover everything from liquidity and exits to my own methodology for writing about investment opportunities.

The one pattern I do note is that all of the most-read essays came from the latter half of this year. And I suppose that goes to show that the real key to pulling more eyeballs to a given topic is simply having a growing subscriber base. So check them out, and hopefully one or two could give you that extra push to become a paid subscriber in the new year!

👉 I link to them all in My 10 Most Read (Paid) Essays This Year—curation accessible to everyone.

💼 Shifting Patterns Across Industries

I’ve long been interested in how certain patterns are seen over and over again as the current paradigm shift impacts individual industries. Some industries shifted earlier than others, as seen with music and advertising changing earlier than, say, construction and healthcare. But that simply means the framework that was revealed in those earlier industries can now be used to predict the future of the late-comers.

It’s a topic I’ve been writing about for over 5 years now, as it touches so many aspects of doing business in the 21st century, ranging from management to customer care to corporate finance. And I’ve been very pleasantly surprised to see how a framework that I first developed to explain the music industry can be applied to education, wealth management, restaurants and more.

And it’s in those industries that have resisted (relatively speaking) the transition to the digital age where I believe my framework can be most useful to budding entrepreneurs. After all, there are still many opportunities out there waiting to be seized by ambitious entrepreneurs 😉

👉 I included quite a few resources in Shifting Patterns Across Industries—curation accessible to everyone.

Sounds interesting? Subscribe to European Straits and let me know what you think!

🎄 We’re almost to Christmas, which means The Family’s daily newsletter has almost completed its advent journey. We’ve been sharing a daily startup lesson in preparation for the start of our newest batch of startups in January. Over the past week my fellow directors and I have talked about topics including:

* Fate is everything.

* Tech care.

* It’s ok to sell.

* Send. That. Update.

* It takes a community to beat toxicity.

From On Jerry Neumann's “Productive Uncertainty” (Round 1)

Jerry Neumann is an infrequent but consequential blogger. His 2015 article Power Laws in Venture is a must-read in the venture capital world. More recently, he’s expressed his interest in the concept of uncertainty as a potential cornerstone for rebuilding the discipline of business strategy. However it was difficult to dig into the details of his thinking since he effectively stopped publishing for several months—basically the entire period during which the world has been struck by COVID-19.

All recent editions:

* Shifting Patterns Across Industries—for everyone.

* My 10 Most Read (Paid) Essays This Year—for everyone.

* Every Successful Business Has Two Financial Loops—for subscribers only.

* Automation Creates Jobs: Here's Proof!—for subscribers only.

* The mirage of deep tech. Bob Dylan. Atomico on Europe. Building IRL bridges. Selling short.—for everyone.

* Shorting Companies in the Transition—for subscribers only.

* Infrastructure and Growth—for subscribers only.

* On Atomico’s 2020 State of European Tech Report—for subscribers only.

* Five Trends Revealed By the Music Industry—for subscribers only.

* Reinventing the State w/ Mariana Mazzucato. The gig economy. Brexit. Silver Lake. Tony Hsieh and Las Vegas.—for everyone.

European Straits is a 5-email-a-week product, and all essays are subscriber-only (with rare exceptions). Join us!

From Munich, Germany 🇩🇪 

Nicolas

The Agenda 👇

* Laetitia Vitaud interviewing Andrew Scott about the “new long life”

* What this newsletter, European Straits, is about in 10 ideas

* What’s coming in 2021: podcasts, a book club, and more

The new episode of the Building Bridges podcast, brought to you by Laetitia Vitaud, is an inspiring conversation with Andrew Scott about the topic “Age Isn’t Destiny”. Let me quote Laetitia:

I discovered Andrew’s work (and that of his co-author Lynda Gratton) a few years ago when I read their book The 100-Year Life: Living and Working in an Age of Longevity. This book influenced my own work profoundly as I became more and more convinced that increased longevity and the ageing of the population play a huge part in shaping the future of work.

The second book they wrote together was published in 2020. The New Long Life: A Framework for Flourishing in a Changing World is as good as the first. It offers a more practical roadmap for individuals and governments. Adapting to the age of longevity involves all the dimensions of our lives (love, leisure, family life, savings, training, health...). It would be much too shortsighted to be content with just forcing people to postpone retirement.

🎧 You can listen to the whole conversation by using the player above or, if you prefer, on Apple Podcasts or Spotify.

I’m lucky to have engaged subscribers who contribute with quite a lot of feedback. For newcomers, however, what this newsletter is all about can sometimes be a bit unclear: What’s this “Entrepreneurial Age”? How does viewing it from Europe make a difference? Is it even relevant for non-Europeans? 

For a long time, the whole thing didn’t even have a title! It was just a channel through which I shared personal thoughts about entrepreneurship, finance, strategy and policy—all in connection with my work as a director of my firm The Family.

But as time passed, a few recurring themes, ideas and concepts emerged, and I finally realized that it all revolved around two things:

* It’s about our economy shifting from the Fordist Age (that of the automobile and mass production) to the Entrepreneurial Age (that of ubiquitous computing and networks).

* And it’s about providing a European perspective on this shift—one that I find is missing from the global conversation about tech startups and venture capital 🇪🇺

These, however, can take us in many different directions, and so as we’re entering a new year I thought I would highlight ten ideas that recur in my work 👇

1/ A transition from one paradigm to another

I’ve been describing the current period as a “revolution”, “transition”, or “paradigm shift” since at least 2012. But it was only a few years later, thanks to my friend Bill Janeway, that I discovered the inspiring work of economist Carlota Perez. Absorbing Carlota’s thinking helped me better understand what’s going on in the world from an entrepreneurial perspective. In short, it goes like this:

Every 50-70 years, a technological revolution brings about a new techno-economic paradigm—that is, a new approach to consumption, production and work. It starts with a scientific breakthrough, then it’s accelerated by a financial bubble that eventually bursts, giving way to what Carlota calls the “deployment phase”: the new paradigm gradually spreads out across every dimension of the economy, revealing a new way of life which then requires building a new socio-institutional framework that makes life better for everyone.

Carlota’s system inspired me so much, it now shapes my thinking in every dimension. Here’s an example (although I hadn’t yet settled on Babak Nivi’s concept of the Entrepreneurial Age at the time): 

2/ More power on the outside

How can you sum up the Entrepreneurial Age in just one sentence? Quite simple:

In the Entrepreneurial Age, there’s more power outside than inside organizations. 

I expanded on that big idea (which has remarkably stood the test of time) in many essays across the years, including this one written in 2018 for the Global Drucker Forum:

What exactly is the nature of that outside power? Today’s power is vested in the mighty “multitude”—the billions of individuals who are now equipped with powerful computing devices and connected with one another through networks.

And it inspires a lesson in strategy and management that every corporate executive needs to keep in mind: the businesses that succeed in the digital economy are the ones that realize how power has been redistributed outside of their organizations.

The winners are not the companies who use the most technology. Rather, they are the companies that best use technology to harness human power, which in turn fuels growth and generates profits.

3/ It's the same pattern across every industry

Most of what I know about how industries are transformed by the current paradigm shift I learned while studying the music industry in 2009. I wrote about it here:

Studying the music industry taught me almost everything I know about a legacy industry shifting to the Entrepreneurial Age. It all started in 2009.

At the time, I was working in Paris in the French ministry of finance. My boss at the Inspection générale des finances (a kind of in-house consulting firm that works exclusively for ministers), knowing that I was interested in technology, offered me a position as the co-chief of staff of a task force formed to ‘save’ the music industry in the face of online piracy.

Then I started to look elsewhere and I realized the same kind of change was happening in every single industry, albeit at a different pace depending on the presence of tangible assets and hardened regulations. This realization led to designing a general framework that I laid out in The Five Stages of Denial (2016). It became the foundation for all my subsequent work on business strategy in the Entrepreneurial Age, which I recently compiled in Shifting Patterns Across Industries. 

4/ Capital allocation is key

One big problem in the tech world is that too many people are interested in the technology and not enough people pay attention to what, according to me, really matters when it comes to building successful tech companies: things like design, marketing, sales—and, yes, capital allocation.

I discovered the importance of capital allocation while studying the deformation of industry value chains in the context of the paradigm shift. What I realized is that the tech companies that win excel at capital allocation—case in point: Amazon. Meanwhile, the incumbents that lose do so because they use the wrong financial tools—which Clay Christensen once called “innovation killers”. I wrote about it in Finance: The Secret Key to Becoming a Tech Company (2018):

Now all corporate CEOs and CFOs should adopt Bezos’s playbook. If they don’t want to wake up one morning leading the next GE or Toys “R” Us, they need to take the initiative, focus on the transition as a financial challenge, and redouble their efforts at actually tackling that challenge. No more hackathons, open innovation b******t, or learning expeditions in Palo Alto, Shenzhen, and Tel Aviv. It’s time to finally open the playbook of corporate strategy in the Entrepreneurial Age and translate it into straightforward and convincing financial terms.

You can discover a compilation of all my writing regarding capital allocation here: All About Capital Allocation. 

5/ There's a difference between risk and uncertainty

Why is capital allocation so critical? Mostly because the shift to the Entrepreneurial Age confronts every company, whether new entrant or incumbent, with widespread uncertainty. The problem is that our entire financial reasoning revolves around the notion that allocating capital is about managing risks or hedging against them. And yet there’s a profound difference between risk and uncertainty, as I’ve recently understood thanks to authors such as Vaughn Tan and Jerry Neumann.

I first wrote about it in 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.

If you’re interested in this topic, I strongly recommend listening to the podcast conversation between Vaughn Tan and my wife Laetitia here.

You can also review a collection of my essays about risk and uncertainty here: All About Risk and Uncertainty.

6/ Venture capital is diffracted

Venture capital matters because it’s the approach to funding businesses that best deals with the uncertainty of our time. Indeed the fact that we’re about midway through the current paradigm shift explains why traditional venture capital is growing in relative terms within the financial services industry. 

* But there’s another trend at work that has raised my interest: other segments of the financial industry are emulating venture capital more and more.

This whole phenomenon is what I call The Diffraction of Venture Capital (July 2020):

Traditional VC ([Carlota Perez’s] “financial capital”) was fine for funding the installation of the Entrepreneurial Age. But now that rudimentary form of financial capital is in the process of expanding, diversifying, and specializing, which gives birth to a whole new financial services industry whose goal is to serve an ever increasing number of tech companies across various geographies and industries. This marks the rise of “production capital”—and this is causing the current diffraction.

You can discover everything I have written on the topic here: All About Diffracted Venture Capital. 

7/ The world is fragmenting

Diffraction on one hand, fragmentation on the other: not entirely unrelated to the paradigm shift is the fact that the world economy is less and less global—what I call The Great Fragmentation. 

* The fact that crossborder frictions are bound to increase matters a great deal for tech entrepreneurs and investors. We tech people need to understand what’s going on: the Great Fragmentation is happening for both geopolitical reasons and the fact that software is eating the world, entering industries that are structurally more local than global.

It especially matters from my European perspective because this represents an opportunity more than a threat for local tech ecosystems in Europe. The more fragmented the world is, the easier it is to grow local tech champions without necessarily competing with the likes of Tencent or Facebook.

* Of course, those successful tech companies that benefit from the Great Fragmentation won’t have a shot at dominating at a global scale; but if such domination has become impossible in general, growing at the continental level is still an optimum—and it’s the new framework within which European tech people must now build.

Read more about it all in All About the Great Fragmentation.

8/ Industrial policy matters

“Industrial policy” is the not-so-fancy word to suggest that governments have a role to play in supporting businesses during the paradigm shift. That’s even more true in a fragmented world where it’s more about every country for itself, so why shouldn’t the government try to make a difference?

The problem is that, like everything else, industrial policy needs to be reinvented for the new age. It can’t be the same policy that contributed to rebuilding Europe after World War II or developing the economies of South Korea and Mainland China from the 1970s onward. A new industrial policy needs to be invented for the Entrepreneurial Age: one that fits the new techno-economic paradigm as well as a more fragmented world economy, to which we’re still not accustomed.

These topics are a frequent focus of this newsletter, you can enjoy an overview here: All About Industrial Policy.

9/ Institutions matter, too

One outcome of a successful industrial policy is the building up of good institutions—ones that support ambitious entrepreneurs while making sure the economy is as inclusive and sustainable as possible. What I see, considering the most recent waves of tech companies entering new industries, is that institutions matter a great deal. In fact, you need institutional innovation by the government, civil society, and the business community itself for tech startups to have a shot at toppling incumbents! 

It’s especially true in Europe for at least two reasons.

* One, Europe is lagging behind in embracing the new paradigm, therefore it’s now catching up at a stage when it’s less about financial speculation (we’re not in the 1990s anymore) and more about institutional innovation, as seen in industries such as transportation, financial services, agriculture, healthcare, and construction.

* Second, for reasons that are both institutional and cultural, the European approach is less focused on the prowess of individual entrepreneurs and more focused on how society needs to change in every dimension. It makes Europe slower when it comes to radical change. But you could argue it’s getting there, albeit with a more multi-dimensional approach.

Institutions are more than regulations: sometimes, it’s simply about precedents, best practices, and customary behavior, and I’ve written about many aspects of them—from the social safety net in my book Hedge to regulating industries in Regulating the Trial-and-Error Economy (2016) to antitrust in this 2018 article published in Forbes.

10/ The view's better from Europe

To this day, the broader history of tech companies is dominated by two nations: the US and China. For a long time, many people even thought it was only about the US. But now that the tech landscape is polarized, it’s become critical to understand what’s happening on both sides: Americans invest a great deal in learning more about China, and the Chinese have been practicing Jiang Zemin’s “go out” policy for quite some time now, learning everything they can from the countries that are racing ahead.

We Europeans have an advantage here: we’re exactly midway between the two from a geographic perspective, and we’re not really sure if we want to pick a side. This provides us with a unique view on the state of technology at the global level, and I’m a firm believer that analysis conducted from Europe can be useful, not only for Europeans themselves, but also for those who, either in the US or in China, are engaged in this race for global tech domination.

I don’t find that there are many newsletters out there offering this perspective for a worldwide audience, and with European Straits, I’m humbly trying to fill that void 😉

If you want to dig deeper, have a look at All About the US-China Rivalry 🇨🇳🇺🇸.

And if you’re not a subscriber yet, please consider today’s special offer: £99 for an entire year instead of £150! It’s on until next Sunday (January 10) ⏰

Just a few words about the coming expansion of European Straits. On top of the essays and syndicated podcasts, this is what I’m about to launch in the coming week:

* My own podcast, with the primary focus of interviewing non-Europeans on technology and startups in Europe. It will be published here, alternating with the Building Bridges podcast.

* A book club: I intend to share insights and thoughts about a book I’ve read at least once a month—only for paying subscribers, though.

* And many other things that are still in preparation for 2021.

Don’t forget that you can also find me in Sifted (where I write two columns a month), Nouveau Départ (in French 🇫🇷—with my wife Laetitia), Capital Call (where I curate what European venture capitalists think, in their own words, with my friends Willy Braun, a cofounder of Daphni, and Vincent Touati-Tomas of Northzone), and in my firm The Family’s newsletter, where I write the occasional short essay for ambitious tech entrepreneurs around the globe.

From European Startups as an Asset Class (February 2020):

Asset allocators are following a known and safe playbook by overlooking European startups (like Christensen’s integrated steel companies). But that then becomes an opportunity for new (disruptive) allocators (Christensen’s minimills) who are willing to make an early bet on these “lesser” startups, grow from there, and then eventually compete with established players for the best, most lucrative deals at the high end of the startup market in Silicon Valley.

All recent editions:

* A Few Notes on Israel 🇮🇱—for subscribers only.

* COVID-19: A Retrospective—for subscribers only.

* All About Industrial Policy—for everyone.

* All About Capital Allocation—for everyone.

* All About the Great Fragmentation—for everyone.

* All About Risk and Uncertainty—for everyone.

* All About Diffracted Venture Capital—for everyone.

* All About the US-China Rivalry 🇨🇳🇺🇸—for everyone.

* The Uncertainty Mindset w/ Vaughn Tan. Automation creating jobs. Financial loops. Industries shifting. Most read essays.—for everyone.

* Shifting Patterns Across Industries—for everyone.

* My 10 Most Read (Paid) Essays This Year—for everyone.

European Straits is a 5-email-a-week product, and all essays are subscriber-only (with rare exceptions). Join us for £99 instead of £150 (until Friday, January 8)!

From Munich, Germany 🇩🇪

Nicolas

The Agenda 👇

* Nina Goswami on how to make progress on the diversity front

* A fascinating take by Sajith Pai on the Indian startup scene

* McKinsey shifting from the market economy to capitalism

* Do startups really want rich (European) people’s money?

* After war comes inflation—and then the stock market collapses

Diversity isn’t an easy topic in many industries, and the tech/VC worlds are certainly no exception. There are, however, a growing number of resources that really can help, and I think that the latest episode of Building Bridges can be included in those.

🎧 My wife Laetitia Vitaud sat down to talk with Nina Goswami, the BBC’s Creative Diversity Lead and head of the 50:50 Project. 50:50 is dedicated to creating content that accurately reflects our world, with significant lessons for why diversity makes good business sense.

You can listen to their whole conversation in the player 👆 above, here on the Building Bridges website, or on Apple or Spotify 🎧

🌏 A Great Writeup About India’s Startup Scene

In the context of the world’s ongoing fragmentation, understanding individual countries is all the more critical. Over the past few years, I’ve done a series of dives into the situations in the UK, Israel, Italy, Switzerland, China, and many more. In that effort, I’ve danced around India’s startup ecosystem a bit, but it remains a country where I’m always on the lookout for intelligent takes from real insiders.

That’s why I was so pleased to come across Sajith Pai’s article, The Indus Valley Playbook, on LinkedIn. Sajith traces India’s tech history all the way back to the original dotcom bubble, when the situation largely played out as it did in Europe: a tiny ecosystem finding itself wiped out and eventually needing to start again virtually from scratch, not having built up enough strength to withstand the bubble bursting.

There are many insights to be found in the article, which I encourage you to read in its entirety. From the stark division existing in India’s consumer market to the false sense that many of us have regarding the potential to use English as a means of accessing the broader Indian population, the viewpoint of an experienced VC like Sajith provides significant value for both investors and laypeople simply trying to better understand how India works.

👉 And of course, I also noted some other highlights that relate to Europe in A Great Writeup About India’s Startup Scene.

🌀 McKinsey’s Financial Loops  

A writer can never be entirely sure of which piece will really strike a chord in their readers—it’s only visible in retrospect. My first article focusing on McKinsey demonstrated exactly that, becoming one of my most-read pieces ever. Its popularity has led me to continue digging into the McKinsey case, which is why a tweet signaling the consulting firm’s foray into acquiring SaaS companies caught my eye.

As a firm, McKinsey is firmly in the market economy, as defined by Fernand Braudel. You’re buying something at one price (in McKinsey’s case, consultants) and selling it at another (to their clients for specific missions). Being in the market economy doesn’t prevent you from building a massively successful business, but it does keep you within a certain realm, given the lack of increasing returns to scale.

But by using some of its profits to acquire SaaS companies, McKinsey is redirecting part of its efforts into capitalism, where deploying capital in the right area can allow you to enter the realm of increasing returns to scale. Software companies can generally aim for much higher returns since at a certain point they can continue adding customers and generating more revenues without increasing their costs. Will McKinsey be able to pull off such an integration, melding their consulting culture with the tech culture found in the SaaS industry?

👉 I look at why the answer is “maybe” in McKinsey’s Financial Loops.

🎩 On Rich People and Startups

If you look closely at the world’s global savings glut, you’ll certainly find that a lot of money is sloshing around European pockets. Yet very little of that cash is today being allocated to the asset class of startups, and some people want that to change. After all, there are all those stories about Jay-Z and Ashton Kutcher investing in startups; so why not Gerard Depardieu?

But there’s a lot of pushback from people in the European tech ecosystem, people who should ostensibly want more investments made in startups and who are yet very against seeing Europe’s rich entering the startup game. The reason is evident if you’ve been involved in startups for long enough: the traditional investment attitude driving most of Europe’s HNWIs is incompatible with the new behaviors needed to be successful in startups.

This is why it’s so important to distinguish between mature vs. immature startup ecosystems. In Silicon Valley, the ecosystem has developed to the point where it’s the startup founders and professional investors who can dictate terms to LPs, even those individuals worth hundreds of millions of dollars. In Europe, founders are still struggling to build up their knowledge and capabilities, meaning that they’re overly susceptible to toxic influences coming from bad investors.

👉 I look at both sides of the argument in On Rich People and Startups.

📖 War, Inflation, and the Stock Market

The inspiration for the most recent edition of European Straits came from one of my favorite sources: my subscribers! One of them recommended Adam Fergusson’s When Money Dies, a study on inflation in post-WWI Germany. From its opening pages, the book points to a problem that has some troubling implications for today’s world: Germany’s excessive use of debt in propping up its economy, as contrasted with Britain’s use of higher taxes on industries that had benefited from the war effort.

Unfortunately, it’s quite evident that today’s decision-makers find it easier to rely on debt, particularly in this low-interest-rate environment, rather than taking on the political and social minefield of raising taxes. And there are some ways in which that could turn out to be OK—assuming that those higher taxes on the winners come into play eventually.

There are more and more voices, however, who don’t think the situation will be kept in hand, with some people worrying specifically about the stock market and the impact that the abundance of cheap capital has on it. Legendary investor Jeremy Grantham recently published his take on why this long bull market has now turned into a massive bubble, to his eyes one of the largest in history—wow!

👉 I delve further into some very scary questions in War, Inflation, and the Stock Market.

Sounds interesting? Subscribe to European Straits and let me know what you think!

From Women and The Family (March 2018): 

We have a much better grasp of the many tools and methods that can be used to promote diversity and gender equality. In this recent article about behavioral economics, my wife Laetitia Vitaud discusses how social science helps us to spot patterns that contribute to discriminating against women and correct biases so as to promote them instead. In another, What If Women Learned to Ask?, she explains how managers can avoid courses of action that so many times entrap women on the losing side of professional opportunities.

All recent editions:

* War, Inflation, and the Stock Market—for subscribers only.

* On Rich People and Startups—for subscribers only.

* McKinsey’s Financial Loops—for subscribers only.

* A Great Writeup About India’s Startup Scene—for subscribers only.

* The EU as a VC. DeepTech Is Complicated. Making Vaccines Work. Haven Failed. Inflation.—for everyone.

* Will Inflation Make a Comeback?—for subscribers only.

* Why Did Haven Fail?—for subscribers only.

* A Few Thoughts About Vaccines and the Healthcare System—for subscribers only.

* DeepTech: Many Roads May Lead There, But There’s Only One Rome—for everyone.

* My Worldview in 10 Ideas—for everyone.

European Straits is a 5-email-a-week product, and all essays are subscriber-only (with rare exceptions). Join us!

From Munich, Germany 🇩🇪 

Nicolas

The Agenda 👇

* Hilary Cottam’s inspiring map for reinventing the welfare state 🎧

* My latest column in Sifted: remote work as the new frontier on the labor market

* What quant investor Jim Simons reveals about capitalism on financial markets

* My take on GameStop, and how the little guys took on large hedge funds

* Lessons shared by my friend Ben Robinson on business strategy

* Why Geoffrey Moore’s Crossing the Chasm still matters for startup founders

🎧 The most recent Building Bridges podcast is out, featuring Hilary Cottam, author of Radical Help. I first wrote about Hilary’s book back in 2018 (in Le Monde, no less!), remarking that,

For Cottam, the solution isn’t to reform the current system but rather to invent a new one. She believes that the most important question is how to correct the original sin of the welfare state’s transactional nature, whereby it does not take into account the relationships between individuals themselves. The fact is that most people are surrounded by a group, whether large or small, of family and friends. But this group is in no way an actor within the social protection system. We are covered individually, but the system does not take into account the other individuals to whom we are connected.

Needless to say, I find her approach fascinating, and highly recommend giving a listen! Use the player above or go listen on Apple Podcasts or Spotify 🎧

⚠️ In my latest Sifted column, I talk about a big opportunity that governments—including that of the EU—could take advantage of: the acceleration of remote work and the need to adapt institutions to facilitate remote work for both employers and employees. Of course, even with institutional changes there will still be significant questions that remain, such as wage rates based on location. But if governments confront issues such as payroll taxes, social security, and labor law in a way that turns remote work from an HR headache into a banal fact of the 21st century economy, it could provide a real competitive advantage in terms of economic development.

👉 Read the whole column on the Sifted website: Remote work: HR nightmare?

🐳 Doing Capitalism in Financial Services (Round 1)

Given that it deals with, well, capital, you’d think that financial services would be a place where capitalism naturally has the upper hand on the market economy. Yet much of the industry really does exist in the simple logic of ‘buy low, sell a bit higher’. And that is about as simple a definition of the market economy that one can have.

For a long time, there weren’t many (if any) spaces where you could insert capital into the financial services production process in order to escape to the promised land of increasing returns to scale. Even today, it’s not that easy—just ask any startup founder who’s trying to find the right business model that can unlock that door, whether in financial services or elsewhere.

In this edition, I provide some early notes on a book I’ve been reading recently, Gregory Zuckerman’s The Man Who Solved the Market. It shows how traders back in the latter half of the 20th century started to have ideas about how financial services could move from the market economy into capitalism, but also how those often brilliant minds had to wait until digital technology caught up and made it all possible.

👉 I look at why the industry is still very much within that transition, highlighting the story of Jim Simons’s Renaissance Technologies, in Doing Capitalism in Financial Services (Round 1).

👑 Everyone Wants To Be a Capitalist  

The one thing I’m quite sure of regarding the GameStop story is that we haven’t seen the end of it yet. One reason why is because it has been driven (even without falling into the facile idea of “little guys vs. hedge funds”, which has been pretty well shown to not be the case) by the ‘multitude’: those billions of networked individuals who can now exert power in the Entrepreneurial Age.

It shouldn’t be a surprise that many members of the multitude were drawn towards trading over the past year. After all, while much of the world’s market economy has been effectively halted by COVID-19, it’s been only too evident that the capitalist side of things has been doing quite well. That left a ripe environment for what my friend Martin Gurri calls “The Revolt of the Public” to make its way to the heart of Wall Street (which, as it turns out, is located less in Zuccotti Park and more in Bloomberg terminals 😉).

In the end, it’s not simply that barriers to information have been taken away. It’s that without those barriers, the multitude is able to coordinate in ways that were never before possible. It’s no guarantee that ‘the people’ will win against hedge funds; but at the very least, it’s a guarantee that there’s a new player in the game who must be accounted for.

👉 I give my contribution to the financial story of the week in Everyone Wants To Be a Capitalist.

♛ Ben Robinson on Business Strategy

With The Family’s current batch of startups, we hold regular private meetups with entrepreneurs, operators and investors who can provide key insights on various aspects of building an ambitious business. This past week, I invited my friend Ben Robinson of Aperture to join us to discuss one of my favorite topics: business strategy.

Specifically, we talked about how business strategy is no longer only for big corporations, but can also function as a guiding principle from the very earliest of stages. Having strategy ready to serve as a kind of guide can even be critical in the early days, since a startup is necessarily dealing with a high level of uncertainty on a daily basis. 

The areas where strategy can come into play are many: from choosing your market to structuring operations, from building your brand to properly valuing engagement. Each area may require its own approach and have its own lessons to learn; but if you have a clear and coherent strategy in mind, it can serve as the unifying link between them all.

👉 I  provide ten highlights from the talk in Ben Robinson on Business Strategy.

💼 A Few Notes on Crossing the Chasm

One feature of many business books is that you don’t really need to read the whole thing to understand the key point. That could sound like a critique, but the truth is that many of those key points really are important, and I’m often grateful that they’re out there circulating, even if the book itself might not lend itself to a second reading (or even a complete first reading).

Geoffrey Moore’s Crossing the Chasm is one of those books for me. The framework that Moore develops, clearly outlining various customer segments and what drives their purchasing behavior, is highly valuable for an entrepreneur. Knowing which niche you’re focusing on at the moment, and then later figuring out how to adapt your sales pitch for the next group you’re targeting, is critical. After all, if you’re not speaking to people in a way that understands their behavior, you aren’t going to get very far in selling to them.

And I think there’s something there that might be a universal trait of great entrepreneurs: they always seem to understand exactly what category their interlocutor belongs to, and thus they know how to sell their product. So while a young entrepreneur needs to learn thousands of things in hundreds of different domains, I’d still say developing that particular skill would be a good one to focus on!

👉 I cite some other thinkers as well in A Few Notes on “Crossing the Chasm”.

Sounds interesting? Subscribe to European Straits and let me know what you think!

From The Networked Welfare State (November 2018): 

The digital transition allows Hilary Cottam to bring forward her vision with a great deal of optimism. Thanks to digital tools, the idea of inventing a networked welfare state isn’t just a utopia, but instead a promising possibility. The digital world connects individuals, circulating information between them and calling on them to contribute where needed to better cover and help the others. It doesn’t require one to renounce national solidarity, but rather to realize that individuals covered by the welfare state can form an active network rather than a passive queue in front of an office door.

All recent editions:

* A Few Notes on Crossing the Chasm—for subscribers only.

* Ben Robinson on Business Strategy—for subscribers only.

* Everyone Wants To Be a Capitalist—for subscribers only.

* Doing Capitalism in Financial Services (Round 1)—for subscribers only.

* London & Paris Together. Business Strategy. Peak Bay Area. Lobbying Regulators.—for everyone.

* A Founder’s Handbook for Lobbying the Government—for subscribers only.

* Away From the Bay Area—for subscribers only.

* Business Strategy at a Small Scale—for subscribers only.

* The New Entente Cordiale—for subscribers only.

* Gender Equality w/ Nina Goswami. India. Financial Loops. Rich People. War & Inflation.—for everyone.

European Straits is a 5-email-a-week product, and all essays are subscriber-only (with rare exceptions). Join us!

From Munich, Germany 🇩🇪 

Nicolas

The Agenda 👇

* Bill Janeway’s vision of the state of the world 🎧

* Should investors partner with corporates in their efforts at reinventing themselves?

* Jeff Bezos is stepping down. A few thoughts on his life and legacy.

* Lessons shared by my friend Martin Schmidbaur on communications.

* Jerry Neumann’s “productive uncertainty”: Tesla as a business case.

🎧 I recently sat down for a conversation with Bill Janeway, an economist, faculty member at Cambridge University, and author of the landmark book Doing Capitalism in the Innovation Economy.

* It’s a book that really has had a profound influence on me—basically containing everything you need to know about how venture capital came to be and why it’s so relevant today in the context of the transition to the digital economy.

Bill’s long career in venture capital, primarily with Warburg Pincus, and his academic work let him comment on today’s economy from both a business and an institutional perspective. And I consider myself, and the world at large, really, to be quite lucky that he is also such an affable person and generous with his time and thinking.

Our conversation spanned how he’s experienced the very strange year that was 2020, his thesis regarding the retreat from hyperglobalization, the consequences of Joe Biden’s election on America, the world at large, & the tech industry specifically, how he sees Europe’s future, and much more.

👉 Listen to our podcast by using the player above or go listen on Apple Podcasts or Spotify 🎧

🎊 Co-Investing in Corporate Reinvention

I’ve never hidden my skepticism regarding corporate venture capital, that idea that somehow corporations can invest in outside startups as a solution to their need to innovate and find new business models. I’m skeptical because the alignment of interests is oftentimes non-existent, if not impossible, and as someone who works with early-stage founders on a daily basis, I’ve often seen it quickly turn into a case of ‘be careful what you wish for’.

A different approach to that same problem, however, could be having outside investors such as PE or VC firms brought into a corporation’s internal efforts at reinventing themselves. This is similar to what was seen with KKR’s investment in Bertelsmann, which led to the successful development of BMG Rights Management in the music industry.

I like this idea because unlike corporate venture capital, it’s an approach that can much more easily align the two parties’ interests. Because both have their own (significant) strengths, finding and working toward a shared goal becomes much more viable. And I wonder if my readers have any other examples that come to mind of similar experiments, whether successful or not?

👉 My interest in entrepreneurial investing continues in Co-Investing in Corporate Reinvention.

🧗 11 Notes on Jeff Bezos  

The big piece of news in the tech world last week was that one of the contenders for greatest CEO of all time, Jeff Bezos, would be stepping down at Amazon later this year. Bezos will become Amazon’s Executive Chairman, handing the reins over to the man who’s built up Amazon’s increasing returns on the Southern Side of the business, current CEO of AWS Andy Jassy.

I’ll admit that coming up with an “11 Notes” for Jeff Bezos wasn’t particularly hard, as his 25+ year reign at Amazon has provided more than enough material for anyone who enjoys thinking about how businesses can be built and run. From his ability to allocate capital, to control his shareholders and even his decision to base the company in Seattle, he’s given a master class on being a CEO.

Of course, the one thing that pretty much everyone knows about Bezos is his obsession with constantly improving the customer experience. Yes, that made him an extremely difficult taskmaster (as Steve Yegge recounted brilliantly regarding the birth of AWS), but it also allowed him to create the first hybrid tech giant. And yet he still managed to find time to drive Donald Trump absolutely crazy 😉

👉 Read more in 11 Notes on Jeff Bezos.

📸 Martin Schmidbaur on Communications

As I mentioned last week, part of our work with The Family’s current batch of startups is having conversations with effective operators, and I was glad to recently have my friend Martin Schmidbaur of Milltown Partners come in to talk about communications. Similar to business strategy, one could question the need for early-stage founders to think about communications; but also similar to strategy, there are multiple reasons why it’s a useful practice from the very beginning of a founder’s journey.

That’s because PR and communications both benefit from one thing: practice. In terms of communications, founders need to tell their story over and over; they need to pitch their company to customers, investors, people on the street; they need to learn what resonates and what doesn’t. And in terms of PR, founders should be trying to build relationships, which will always have much more value when you want to announce something than a bland ‘press release’ that will stay in a journalist’s inbox for about as long as it takes them to hit ‘delete’.

Martin also had several key insights that will serve founders well as their companies grow and scale. For instance, he talked about the importance of making sure that your communications serve actual and current business goals. And he noted that you need to constantly pay attention to what’s working today. After all, a few years ago labeling your solution as the ‘Uber for X’ was quite effective; today, that’s certainly not the case, and it could even be quite counterproductive!

👉 I share more of what Martin said and some related thoughts in Martin Schmidbaur on Communications.

🎢 Does Elon Musk Master Productive Uncertainty?

The standard answer for what venture capitalists are seeking is “exponential returns”. That’s why software businesses that look capable of providing increasing returns to scale by reaching a point where they can add more and more customers without expanding their costs are widely considered the holy grail.

More and more, however, we’re seeing venture capital supporting businesses that don’t necessarily have those fantastic returns at the top end. In fields such as AI, consumer goods, hardware, biotech and more, exponential returns are expected less in terms of a business model, and more in terms of an overall market that’s growing exponentially.

Tesla is an excellent example. Car manufacturing can enjoy increasing returns… to a certain point. Elon Musk knows this, which is why he continually pulls on other levers (social media, surfing technological trends like cryptocurrencies, etc.) to increase the value created at Tesla by boosting the overall market for electric cars. And no matter what one might think of Tesla’s current valuation, it’s undeniable that Musk has had an incredible personal impact on the growth of that market, which by all indications is about to grow exponentially.

👉 I go for another round inspired by Jerry Neumann’s concept in Does Elon Musk Master Productive Uncertainty?

Sounds interesting? Subscribe to European Straits and let me know what you think!

🇫🇷 In addition to European Straits, I also publish Nouveau Départ, a French-speaking media with my wife Laetitia Vitaud, dedicated to commenting on the pandemic and the paradigm shift it’s contributing to accelerating (the shift to the Entrepreneurial Age 😉).

We typically send one editorial and an interview to everyone each week, and then two conversations between the two of us on timely topics that are for subscribers only. Here are the topics we’ve covered recently in these “À deux voix” conversations:

* Jeff Bezos : sa vie, son oeuvre

* Logement : tout ce qui change avec la pandémie

* GameStop : la révolution sur les marchés financiers

* 🇺🇸 Joe Biden et le monde 🌐

* Pandémie et démographie

🦢 Also, my fellow directors and I at The Family have resumed our daily newsletter, aiming at providing early-stage founders with timely and sound advice. Check out this recent edition by my colleague Balthazar de Lavergne: Ecosystem velocity is key.

From DeepTech: Many Roads May Lead There, But There's Only One Rome (Bill Janeway, January 2020): 

The “deep technology” that has continued to enrich and extend the digital environment has emerged both from established incumbents (Amazon’s suite of cloud resources, for example) and from startups (from Salesforce to Databricks); the “Division of Innovative Labor” identified by my friends at Duke suggests that startups take on more of the “exploration” risk while incumbents, take on more of the “exploitation” risk, often by acquisition.

All recent editions:

* Does Elon Musk Master Productive Uncertainty?—for subscribers only.

* Martin Schmidbaur on Communications—for subscribers only.

* 11 Notes on Jeff Bezos—for subscribers only.

* Co-Investing in Corporate Reinvention—for subscribers only.

* The New Welfare State w/ Hilary Cottam. Remote Work. Business Strategy. GameStop. Jim Simons.—for everyone.

* A Few Notes on “Crossing the Chasm”—for subscribers only.

* Ben Robinson on Business Strategy—for subscribers only.

* Everyone Wants To Be a Capitalist—for subscribers only.

* Doing Capitalism in Financial Services (Round 1)—for subscribers only.

* London & Paris Together. Business Strategy. Peak Bay Area. Lobbying Regulators.—for everyone.

(Credit: Franz Liszt, Angelus ! Prière Aux Anges Gardiens—extrait du disque Miroirs de Jonas Vitaud, NoMadMusic.)

European Straits is a 5-email-a-week product, and all essays are subscriber-only (with rare exceptions). Join us!

From Munich, Germany 🇩🇪 

Nicolas

The Agenda 👇

* Toni Cowan-Brown’s insights on overcoming cultural differences 🎧

* What 32 editions of Capital Call reveal about venture capital in Europe

* Why AI is overrated and companies might prefer to serve their users well

* How to reflect on your startup’s expansion in the US, with Dominic Jacquesson

* Why startups in the consumer goods industry are embracing vertical integration

🎧 The most recent Building Bridges podcast is out, featuring Toni Cowan-Brown, a San Francisco-based NationBuilder alumnus and content producer who works at the intersection of tech and politics. I admit I discovered Toni quite recently, listening to an episode of Another Podcast (a podcast she’s co-hosting with Benedict Evans) about “Is Europe a Market?”—a topic that’s very much in sync with this newsletter!

* One example, among many, of what struck me in the Another Podcast episode: how difficult it was for Toni to market NationBuilder in Europe! In the US, it’s introduced as “software and community for leaders”. But when the company decided to expand in Europe, Toni was the one in charge of explaining that such a value proposition was impossible to convey in both Germany and France—in the latter because ‘leader’ is a word that simply doesn’t have a French equivalent, and in the former because, well, the official translation for ‘leader’ is... ‘Führer’ 😨

Then I said to my wife, Laetitia Vitaud “This person, Toni, should definitely be a guest on Building Bridges”, to which Laetitia replied: “I know, and by the way, we’re already in touch”. So it goes, and it’s a fascinating conversation which I urge you to listen to as it highlights so many topics I’m used to covering in European Straits: cross-cultural frictions, Europe as an integrated region, the relationship and (many) differences between the US and Europe, and where Silicon Valley is headed after a full year of pandemic.

As Laetitia wrote on the Building Bridges website,

Toni is a true European at heart (albeit with a British passport) who’s lived and worked in San Francisco for a few years. She’s one of those few people who loves to compare and confront cultures the way I do. Perhaps it’s why we just couldn’t stop talking!

She used to work for a startup called NationBuilder which develops software for political campaigns. (She was in charge of its European expansion). And she continues to see herself as being at “the intersection of tech and politics”.

At this intersection we had a long chat about how she experienced the pandemic in San Francisco, her view of the US healthcare system and how the Valley was impacted by everything that happened in California and the world in 2020.

And so be prepared to learn about many things: what it’s like doing business across the Atlantic in the tech sector; what it’s like to be a British citizen growing up in Brussels; why Toni feels more European than ever even though the UK has now officially left; why conversations between women are different and why that’s hard to process if algorithms are biased toward men; and what it’s been like to go back and forth between the US and Canada during a pandemic.

👉 Listen to Laetitia and Toni’s conversation using the player above or on Apple Podcasts or Spotify 🎧

🇪🇺 What I Learned Curating 32 Editions of “Capital Call”

As you know, the drive behind this newsletter is my conviction that “working in public” is both important and beneficial. It’s similar to what we at The Family tell entrepreneurs about putting their solution into the hands of actual users: it’s the only way to get the real feedback that lets you constantly iterate toward an ever-improving product.

Capital Call, a weekly newsletter that I curate with Willy Braun of Gaia Capital Partners and Vincent Touati-Tomas of Northzone, is meant to amplify what startup investors throughout the European ecosystem are saying and to thus encourage that “working in public” ethos. In doing so, the whole community can better understand what’s happening across the continent, and hopefully keep pushing the quality level ever higher.

We’ve been publishing Capital Call for almost an entire year, and so I wanted to take a look back at the numbers to see what they revealed. One interesting aspect, for example, was that while there is indeed a marked gender imbalance in terms of who is publishing content (less than one-third of those featured in Capital Call are women), that imbalance was actually quite small considering the industry’s ongoing issues of diversity. And in terms of emulation, it is all to the better if more women in the VC industry can be showcased as they publish their thoughts!

👉 I break the numbers down in What I Learned Curating 32 Editions of Capital Call.

🤖 A Business Perspective on AI 

Regular readers know that for me the foundational idea of the Entrepreneurial Age is that there’s more power outside than inside organizations. This is why businesses today have to make a pact with the multitude, all those individuals equipped with powerful computing devices that allow them to connect with one another via powerful and wide-reaching networks. The strength of the multitude means that businesses today are in constant fear of a potential “revolt of the public”, to use Martin Gurri’s term.

The need to perpetually maintain one’s good standing with the multitude is a key reason why businesses today are so interested in AI. Instead of relying on the fickleness of the crowd, businesses are drawn to the idea that by using AI and the right data sets, they’ll be able to once again escape to a world in which they can rely on machines rather than networked individuals.

But is AI really a viable option? The amounts being invested are becoming more and more incredible as time goes on; at some point the question must be asked if it isn’t a better idea to just continue working diligently to strengthen a mutually beneficial alliance with consumers, rather than hoping machines can one day provide the leverage necessary to thrive.

👉 I pose several other questions, including one on antitrust, in A Business Perspective on AI.

🌐 Dominic Jacquesson on International Expansion

The final “Friday Strategy” workshop with The Family’s current batch of startups hosted Dominic Jacquesson, VP Insight and Talent at leading VC firm Index Ventures. Dominic has led several Index initiatives over the past few years, namely a campaign promoting better practices when it comes to employee equity, and recently a handbook for European founders wanting to expand to the US.

This latter topic was the focus of our discussion last week, and Dominic’s experience and close relationship with founders has let him develop an expansion taxonomy, the four categories of companies when it comes to how they approach expansion both in terms of go-to-market and team. Still, he was careful to note that these categories don’t necessarily give companies wanting to expand internationally a simple step-by-step framework to follow.

One key aspect that he did emphasize, though, was just how much a successful international expansion depends on the founders and how they decide to operate throughout the move. For early-stage investors, understanding founders’ motivations and willingness to pick up and move (since that’s often what it will take, at least for some members of the founding team) is critical when evaluating how a startup’s story could play out.

👉 I also note one area where we have differing opinions, namely the Great Fragmentation and how it will affect cross-border business, in Dominic Jacquesson on International Expansion.

☕️ Upstream Value in Consumer Goods

One startup in our current batch is Spaō, a company offering a superfood alternative to your morning coffee. As I recently talked with Charles, Spaō’s founder, I was intrigued by a turn our discussion took, namely on the possibility of a consumer goods company to be valued like a tech company—assuming it can pull off the feat of controlling its entire value chain, from sourcing materials at the top to owning the relationship with the consumers at the bottom.

This is interesting because in some ways it goes against much of the history of capitalism, which for a long time could be seen as a history of vertical disintegration. Companies long sought ways to find outside providers to take over various aspects of the value chain, maintaining control over what were understood to be key leverage points while avoiding the trap of becoming too bulky and overweight.

The idea of the Entrepreneurial Age now providing at least the possibility of reversing that trend is intriguing indeed. By taking control over each aspect of the value chain and relying on constantly improving technology, in a field such as consumer goods a company could manage to build a structure that remains agile while also capturing profit margins at each level of the chain!

👉 Still, there’s a lot that goes into making it there, some of which I discuss in Upstream Value in Consumer Goods.

Sounds interesting? Subscribe to European Straits and let me know what you think!

🦢 Those of you who regularly read this space know that we directors at The Family send a daily newsletter focused on startup mentality and lessons. Over the past week, we’ve covered:

* Every startup ecosystem’s need for a first wave of determined founders, by me.

* The future of online events and how we’re organizing Demo Day, by Mathias.

* The underrated importance of loving your niche, by Balthazar.

* How startups can hunt for scale from anywhere, even Martinique, by Alice.

* And the importance of practicing entrepreneurship as something active and alive, rather than just a theory, by Oussama.

💰 I’d also like to point your attention toward this superb eight-part video series about Venture Capital in the 21st Century by Bill Janeway, brought to you by the Institute for New Economic Thinking. 

🇪🇺 Finally, it’s still time to register for the Building Tech Ecosystems in a Distributed World event by Sifted, Dealroom, and European Startups and to attend the session I’ll be participating in at 4:15pm CET with Kim-Mai Cutler of Initialized, Gerard de Graaf of the European Commission, and Pat Wilson of the State of Georgia. Here’s where you can save your seat: HOPIN.

From Thoughts on Value Chains, and Why You Really Need To Get a 'Grip' (June 2020): 

Value chains are here to stay if you realize they’re all about connecting raw resources at the top and a job to be done at the bottom. The boundaries between them might be blurred by software eating the world, tech companies turning into giant conglomerates, and multi-sided businesses becoming the norm. But you need to see beyond the hype and the complexity and realize there is still such a thing as value chain analysis.

All recent editions:

* Upstream Value in Consumer Goods—for subscribers only.

* Dominic Jacquesson on International Expansion—for subscribers only.

* A Business Perspective on AI—for subscribers only.

* What I Learned Curating 32 Editions of “Capital Call”—for subscribers only.

* Clubhouse in Europe. All About Angel Investing. Vaughn Tan on Uncertainty. SPACs.—for everyone.

* Some Quick Notes on SPACs—for subscribers only.

* Vaughn Tan on Uncertainty—for subscribers only.

* “Be Patient” | A Conversation About Angel Investing w/ Pascal Levy-Garboua (Parts 1 and 2)—for subscribers only.

* The Digital Economy w/ Bill Janeway. Reinvention. Bezos. Musk. Communications.—for everyone.

European Straits is a 5-email-a-week product, and all essays are subscriber-only (with rare exceptions). Join us!

From Munich, Germany 🇩🇪 

Nicolas

The Agenda 👇

* Rachel Kowert on why we should let children play video games 🎧

* What becomes of consumption in the Entrepreneurial Age

* Everything I ever wrote about the delivery business

* Indie.vc is closing shop, but I’m sure they’ll be back at some point

Our children spend too much time staring at screens—at least, so “they” say. The debates around screens have only intensified in the context of the COVID-19 pandemic. Lockdowns and school closures have contributed to increasing screen time at all ages, adding fuel to parents’ worries as well as to the debates among researchers.

* My first reaction, nonetheless, is skepticism. The debate around screens certainly didn’t wait for the pandemic to come to the forefront. We’ve always wondered whether our children aren’t passing too much time in front of the TV, too much time in front of the computer, too much time on their phones, too much time playing video games.

The same fears even existed prior to the invention of screens. As my wife Laetitia Vitaud notes in her conversation with American research psychologist Rachel Kowert on the Building Bridges podcast, at one point we were saying that some children (and here we can include Laetitia’s own mother’s experience) were spending too much time reading books, instead of being outside playing with the other kids!

Where do these debates come from? These days, they’re nourished by various articles suggesting a link between time spent playing video games and rising violence in our societies. Another factor are best-sellers by authors such as Nicholas Carr, who ask whether the internet isn’t working to make us all a bit stupider. And then, a few years ago people were debating the ways in which some Silicon Valley personalities raise their children. Even if these people owe their fortunes to the time that we all spend looking at the screens they’ve dreamed up and using the apps they’ve developed, it would seem that some forbid their own children from using screens!

* But once again, this kind of “revelation” left me skeptical. To me, the journalists writing about the subject tended to pass into generalities quite quickly thanks to the anecdotes found in a few particular cases. Before turning the decisions a few billionaires make in banning (so they say) screens for their children into an example to follow, shouldn’t we wait to see what happens to those children once they’ve become adults? (And, at any rate, can we really extract many lessons in terms of childhood education when starting from a sample that is in no way representative of the rest of society?)

The reality is that there doesn’t seem to be any causal link between screens or a lack thereof during childhood and later experiences as an adult. I myself was largely deprived of television when I was a child; we did have a TV set in the house, but besides the fact that it was in black-and-white (the 1980s!), it was shut up in a cupboard, only making an appearance for a few very specific shows.

When I later met my wife, she explained to me how she had passed a great deal of time during her childhood and adolescence in front of the TV set. And if we look at her success in terms of schooling and professional life, it would be difficult to draw the conclusion that time spent watching television will be a problem later on! And if I look back on my own experience, I’d be hard pressed to say that I somehow did better than Laetitia, and certainly not because I was kept far from the TV during my childhood.

Beyond that, one essential lesson I’ve seen with my own experience as a parent is that there’s nothing that makes young children happier than imitating their parents (with the means at their disposal, of course). If the parents spend most of their time in front of a screen, which is the case for both Laetitia and me, then you can easily predict that the children will do the same.

Children’s mimeticism goes much further, though. A screen doesn’t have one single use: we can use it to learn new things, to discover new information, to watch films and TV shows, to talk with friends, to try to gain social clout. This is why it’s important to never underestimate kids: if they see their parents spending lots of time in front of a screen, they’ll want to do the same; but they’ll also imitate their parents and try to spend that time in more or less the same ways. 

It’s always a good idea for parents to learn to ignore splashy, alarmist headlines and instead take a clear look at what they themselves are doing: what example are they setting for their kids? And on this specific subject, it’s right to not worry. The serious research on the subject shows that there’s no link between screen time (for example, playing video games) and individual fulfillment. That’s exactly what Rachel Kowert explained in detail with Laetitia in the interview of this episode of Building Bridges.

👉 Listen to Laetitia and Rachel’s conversation using the player above 👆 or on Apple Podcasts or Spotify 🎧

💐 The Future of Consumption

My Thursday deep dive last week looked at a topic that is a central part of many discussions taking place these days: on the environment and climate change, social justice, the relationship between work and personal lives, and simply the arrival of the new paradigm brought on by the Entrepreneurial Age. Just as production patterns are changing, our consumption patterns, in terms of both goods and services, are also changing quite dramatically.

* Using my “11 Notes” format, I looked at various aspects of what exactly is changing. This includes blurred lines between production and consumption, the shift in power as consumers become part of the multitude, new definitions of quality, and the impact of data that lets consumers better understand their own behavior.

The key takeaway for startup founders is that we’re still directly in the middle of a shift that is remaking the entire economy. Changing consumption patterns create a feedback loop that is only becoming more and more powerful, reaching into every corner of our everyday lives. This is also a cautionary tale for any legacy businesses and institutions, who are running out of time to apply the old adage of “Adapt or die”. 

👉 Read the details in The Future of Consumption. 

🚴‍♀️ All About Delivery 

On Friday, I curated an edition focused on one of the industries that has clearly accelerated during the pandemic: delivery. Restaurants, groceries, e-commerce… they’re all predicated on the very detail-oriented and labor-intensive (for the moment) world of delivery.

* My own writings on the subject date back to 2015, and it’ll come as no surprise that a large part of that was looking at the development of Amazon. But that really was just the beginning, and not just for new players. While several major retailers have been unable to make the transition to the Entrepreneurial Age, there are also quite a few others, including Target and Best Buy, that are far from giving up in the battle for consumers’ hearts and dollars.

One interesting thing to note is that delivery is one of the few areas where a European champion has acquired a major US-based player, with Just Eat Takeaway’s purchase of Grubhub last summer. Having a business grown in Europe win out over one developed in the US is a happy moment indeed, and one that can serve as encouragement for the current and coming generations of European entrepreneurs.

👉 Discover the implications in last week’s ‘Friday’s Digest’: All About Delivery.

📈 Funding Profitable Businesses

It was a sad day in the venture capital world recently when a bold yet obvious experiment in finding different ways to fund businesses, Indie.vc, announced it was closing down. Part of Tim O’Reilly’s AlphaTech Ventures, Indie.vc was dedicated to funding businesses that arrived at profitability much earlier than traditional VC-funded companies—an example that I often cited of how the venture industry was diffracting and experimenting with new ways of investing capital.

* Unfortunately, the Indie.vc example seems to be (for the moment) an example of how innovation can run up against obstacles coming from many different directions. In their case, it wasn’t a problem relating to returns, per se, but rather reluctance on the part of Indie.vc’s own limited partners to have exposure to those kinds of businesses rather than more traditional VC-compatible companies. Put simply, institutional LPs weren’t enthusiastic about steady smaller profits when compared to the possibility of exponential returns.

I do wonder, however, if this isn’t more of a pause for Indie.vc (or other efforts following a similar path) rather than a complete cancellation. After all, the wildly hot markets, both public and private, that investors are currently enjoying when it comes to tech companies will, at some point, cool off. And at that point the lessons learned by Tim, Bryce and the rest of the team at Indie.vc could prove quite attractive indeed.

👉 Get more details on how it all happened in Funding Profitable Businesses. 

Sounds interesting? Subscribe to European Straits and let me know what you think!

🕹 Want to dig deeper into video games? Read my wife Laetitia Vitaud’s latest edition of Laetitia@Work, published last Thursday: Video Games: my new frontier?

Also have a look at my colleague Younès Rharbaoui’s excellent edition of Chasing Paper on the topic: 10 Thoughts on the Gaming Industry 🎮 (June 2020) 

🇫🇷 You’d rather listen to our (=Laetitia and I) conversations in French? Give the latest editions of Nouveau Départ dedicated to Tout comprendre sur la crise au Texas 🤠 Notre nouveau projet : "La Flamme et le vent" 🔥 Vaccins : pourquoi les États-Unis vont-ils si vite ? 💉a try.

🚀 My latest contribution to my firm The Family’s newsletter is about the impossibility of knowing if your business will be scalable or not at the early stage. Have a look: The quest for scale.

🦊🦁🦢 Finally, don’t miss the latest installments of The Family’s newsletter:

* Vote for entrepreneurs!  (Alice Zagury)

* The explosion of weirdness (Mathias Pastor)

* The rise of the software conglomerates (Balthazar de Lavergne)

* Thinking patterns (Oussama Ammar)   

All recent editions:

* Funding Profitable Businesses—for subscribers only.

* All About Delivery—for subscribers only.

* The Future of Consumption—for subscribers only.

* More About SPACs. The 'K-Shaped' Recovery. Crypto Digest. A Tribute to Texas.—for everyone.

* We All Need a Lone Star State—for subscribers only.

* All About Crypto—for subscribers only.

* How Governments Can Deal With the 'K-Shaped' Recovery—for subscribers only.

* Europe & Silicon Valley w/ Toni Cowan-Brown. Capital Call. AI. International Expansion. Consumer Goods.—for everyone.

* Some Quick Notes on SPACs—for subscribers only.

* Vaughn Tan on Uncertainty—for subscribers only.

European Straits is a 5-email-a-week product, and all essays are subscriber-only (with rare exceptions). Join us!

From Munich, Germany 🇩🇪 

Nicolas

The Agenda 👇

* Global investor Chris Schroeder about startups in the Middle East and beyond

* Today’s column in Sifted: would Stripe have succeeded without Silicon Valley?

* A deep-dive into the future of consulting, inspired by the book (and movie) Moneyball

* A curated list of all my past writings related to companies going public

* A Q&A with a research firm about how governments are faring in the Entrepreneurial Age

This week I’m delighted to share a conversation I had with Chris Schroeder, an American entrepreneur, global investor and author of the book Startup Rising about the thriving entrepreneurial ecosystem in the Middle East. Chris and I met 2 years ago when I was visiting Washington, DC, where he lives, all thanks to my friend Ian Hathaway (co-author of The Startup Community Way with Brad Feld).

Chris, Ian, and I share a deep interest in entrepreneurship as a global phenomenon, specifically the fact that as technology becomes available across the globe, founders can succeed not only in Silicon Valley, but in every entrepreneurial ecosystem that’s emerging on the global map. Chris was led to write his book (whose first edition dates back to 2013) after attending a startup event in Dubai where his mind was blown by the sheer scale and passion of the startup community he encountered there.

* His background was also a contributing factor, however. Before becoming an entrepreneur in the media industry and later focusing on investing in startups around the world, Chris worked as a staff member for then-Secretary of State James Baker, right when the world was undergoing the most radical transformation in our lifetime. He criss-crossed the world with his boss, practically witnessing the fall of the Berlin Wall, the collapse of the Soviet Union, the first Gulf War that the US waged against Iraq and Saddam Hussein’s brutal regime, and many other (incredible) things.

As he tells me in our conversation, Chris emerged from this experience with an unapologetic global outlook and a deep interest in what is happening in the rest of the world. It was only a matter of time before this interest converged with his passion for entrepreneurship, and now he’s one of the best experts and practitioners I know when it comes to knowing entrepreneurial ecosystems and working with founders based all over the world—a rather unusual positioning for an American.

I hope you like this podcast! If you want to dig deeper into Chris’s thoughts and works, check out his newsletter as well as his book, now in its second edition, Startup Rising: The Entrepreneurial Revolution Remaking the Middle East.

👉 Listen to my conversation with Chris using the player above or on Apple Podcasts or Spotify 🎧

The latest headline-grabbing fundraising round happened this week, with global payment company Stripe raising $600M in a round that values the business at $95B.

Founded by the Irish brothers Patrick and John Collison, Stripe is an example of a startup with European roots that has found success in the US and is now aiming directly at Europe as its second base (and key market). Those European roots have put a big question out there: Can a European startup follow a Stripe-like path to success, but without the (long) detour in the US?

👉 Read it all in Could a Stripe today succeed without Silicon Valley?

⚾️ Moneyball in Consulting Services

My Thursday deep dive last week looked at how an industry that has never enjoyed increasing returns to scale, namely consulting, could perhaps find new business models in the Entrepreneurial Age that would allow for those higher returns–even in the face of their clients’ desire to pay less while simultaneously demanding more of them than ever before.

Building and/or working at a successful consulting services firm was long one of the easiest ways to get rich, particularly during the latter half of the 20th century. Clients were willing to pay very high fees, fresh talent was continually knocking at the door, and since one of the services you were providing was plausible deniability for the client in case things went wrong, nobody was particularly upset if they did.

But now all of that has changed. Since 2008, clients aren’t willing to pay exorbitant fees anymore; talent has much better options for building an exciting career (not least in the startup world); and both clients and the public-at-large are starting to really hold consulting firms to account for both their advice and who they provide it to. So the question is looming larger and larger: Can the industry find new approaches that allow it to move from the market economy to doing capitalism?

👉 Read the details in Moneyball in Consulting Services (free for everyone!)

💸 All About Companies Going Public 

On Friday, I curated an edition that is a critical part of developing startup ecosystems and successfully investing in tech companies: IPOs and other methods of taking a company public. The reason why it’s so important is because it directly relates to injecting liquidity into the system. Without companies going public, you can have a lot of value being generated, but that value won’t contribute much to increasing the velocity of money flowing within the system.

I started writing more frequently about this topic back in 2019, when the market for taking companies public was still stagnating and where the one big potential IPO–WeWork–turned into a catastrophe. Since, quite a bit has changed, as the IPO market loosened up, several key companies went public via direct listings, and the SPAC craze arrived as well.

No matter how it’s done, it’s clear that a critical step in the development of the European tech ecosystem will be finding ways to generate the liquidity that arrives by taking companies public. Doing so will provide a big boost in creating a self-sustaining virtuous circle, with founders, employees, and investors encouraged to utilize their gains to invest in the next generations of startups, and the public at large seeing that there is indeed a great deal of value being created and realized all around them.

👉 Dive into the journey in last week’s ‘Friday’s Digest’: All About Companies Going Public.

🏛 Government in the Entrepreneurial Age

I recently sat down for an interview regarding how governments are adapting to the digital age. It’s not necessarily an easy topic, as there can be a real disconnect between how governments frame their efforts and advances and how things are actually changing in the everyday lives of citizens and residents.

I saw that gap, for example, while living in the UK for five years. Although the UK is relatively strong at communicating regarding their desire to innovate via technology and digitize services throughout the country, the truth is that I still found myself often having to wait in line, or bring a printed document to a particular office, or wait for a password to be delivered by post, etc. And while many governments try to explain this away in the name of “privacy” (or even, in the case of a country such as France, “equality”), the end result for the user continues to be one that comes up very short and only inspires more mistrust in citizens who don’t believe the government can deliver what they really need.

So what would an advanced government look like, digitally speaking? In my eyes, it needs to fulfill three key demands that every individual now has with the arrival of the Entrepreneurial Age: being convenient, customizable, and responsive.

👉 Read the full Q&A in Government in the Entrepreneurial Age. 

Sounds interesting? Subscribe to European Straits and let me know what you think!

📺 We at The Family are now hosting a weekly show, In Good Company—two directors at a time. I was a co-host in the latest two editions, where we were with Christoph Janz, a founder & partner of the seed VC firm Point Nine Capital, and then John Thornhill, the innovation editor at the Financial Times and cofounder of the pan-European startup outlet Sifted. You can watch the videos here:

* In Good Company w/ Christoph Janz (hosts: my colleague Balthazar de Lavergne & me)

* In Good Company w/ John Thornhill (hosts: my colleague Alice Zagury & me)

🇫🇷 Latest podcasts (in French) with my wife Laetitia Vitaud on our family media operation Nouveau Départ: Enfance : les transitions de la famille 🧒 Médias : la nouvelle génération 🗞 Productivité : pas de recette miracle 😵

🚀 My latest contribution to my firm The Family’s newsletter is about the critical difference between customers and clients—and why it matters for founders: It’s better to serve customers than clients.

From European Startups as an Asset Class (February 2020): 

There is now a plurality of models when it comes to growing tech giants (Silicon Valley, China, Southeast Asia, the Middle East, soon Africa), and so there’s no reason why Europe can’t discover its own, different way. Another argument, echoing Christensen’s theory of disruptive innovation, is that Silicon Valley is doing so well that it’s bound to be disrupted by rising entrepreneurial ecosystems (and their happy investors) elsewhere in the world.

All recent editions:

* Government in the Entrepreneurial Age—for subscribers only.

* Moneyball in Consulting Services—for everyone.

* All About Companies Going Public—for subscribers only.

* Playing Video Games w/ Rachel Kowert. Consumption. Delivery. Profitability.—for everyone.

* Funding Profitable Businesses—for subscribers only.

* All About Delivery—for subscribers only.

* The Future of Consumption—for subscribers only.

* More About SPACs. The 'K-Shaped' Recovery. Crypto Digest. A Tribute to Texas.—for everyone.

(Credit: Franz Liszt, Angelus ! Prière Aux Anges Gardiens—extrait du disque Miroirs de Jonas Vitaud, NoMadMusic.)

European Straits is a 4-email-a-week product, and all essays are subscriber-only (with rare exceptions). Join us!

From Munich, Germany 🇩🇪 

Nicolas

The Agenda 👇

* Author Kelly Hoey on what becomes of personal networks in the digital age

* Apply to On Deck Catalyst ten-week remote program

* Europe is sliding behind. Here are 10 potential reasons as to why.

* Stripe continues to impress: a curation of all I’ve written about them

* Can seed funds and accelerators work together? Views differ

I’ve long called the current period ‘the age of computing and networks’:

* The ‘age of computing’ because we are all equipped with a growing number of digital devices whose computing power is increasing exponentially.

* And ‘the age of networks’ because we use these devices (our computers, our smartphones) mostly to connect with one another.

Many online connections with other individuals are implicit and invisible. For example, we’re connected to one another when we read reviews posted by other customers before buying a product on Amazon. Or take our daily habit of asking Google questions, which are then analyzed to suggest, in real time, better ways to pose those questions. This is possible because we are connected in a network whereby each individual’s contribution helps to improve the Google search engine for all. 

What happens to personal networks—which, contrary to the examples above, are formed consciously and explicitly—in a world where interconnectivity is the norm? Things change on various fronts.

* First, the ability to connect everyone together tends to devalue individual connections. In the past, having someone’s business card had a lot of value. It indicated that you had met that person and that they had judged you to be trustworthy enough to share their contact information. Today, however, that same information is available to everyone via LinkedIn. The business card has thus lost its economic value, as well as its symbolic value. It takes much more than a business card to indicate that someone has entered the inner circle.

At the same time, developing a relationship with another person no longer implies that you’ve met that person ‘in real life’. Twitter has gotten us used to the idea of having interesting conversations with people we’ve never actually met. And for the past year, the pandemic and the difficulties in moving around have further anchored the idea of getting to know one another from a distance.

What will happen to all these long-distance relationships once the pandemic is over? Will we go back to how things were, returning to our old network of acquaintances who all live nearby? Or will we continue developing these relationships regardless of physical distance, using more and more apps that let us connect more and more easily with others? It’s not just Facebook, LinkedIn and Twitter anymore, but also TikTok, Discord, Clubhouse—and others that we haven’t discovered or even invented yet.

This latter hypothesis is what Balaji S. Srinivasan foresaw in his 2013 article Software is Reorganizing the World (in Wired). For him, the Internet is less about nourishing relationships that initially developed in the real world, and more about developing new relationships with people that we may eventually meet IRL later, only then perhaps deciding to live near one another. Balaji gives the example of Silicon Valley: a location where people (entrepreneurs, investors, operators) go to live because they first connected with one another via the Internet and then later decided to use the San Francisco Bay Area as the place to meet up and work together at building tech companies.

* In that regard, it’s clear that the pandemic has changed things. With it, we’ve learned how to build companies remotely, a shift that devalues the idea of collecting everyone together in Silicon Valley in order to succeed. But that, of course, won’t impede individuals who connect with one another from deciding to move to a given area based upon other shared affinities.

All in all, the economy of personal networks was upended by both the digital transition and the pandemic. Kelly Hoey, author of the book Build Your Dream Network: Forging Powerful Relationships in a Hyper-Connected World, discusses the new state of networks with my wife Laetitia Vitaud in the latest episode of the Building Bridges podcast.

👉 Listen to Laetitia’s conversation with Kelly using the player above 👆 or on Apple Podcasts or Spotify.

⚠️ On Deck Catalyst is a ten-week remote program for young leaders who want to solve the world’s most pressing problems and take an unconventional path to building their career. The curriculum includes:

* Deep dives on how startups work: what core positions look like day-to-day and why that role is important to the business.

* Learning the ins and outs of founding and investing in companies alongside the best in the industry.

* Speaker sessions from Keith Rabois, Aileen Lee, Jack Altman, and others as part of the Leaders and Protégés track, an in-depth look into mentor and mentee relationships, and a launchpad for eventual success.

* How to create your own opportunities—make roles that previously didn’t exist at any startup you join, launch a startup from scratch, or break into the world of venture capital.

⏰ Their next cohort kicks off on June 5. You can apply here before May 4th. Applications will be reviewed on a rolling basis.

📉 10 Hypotheses As To Why Europe Is Lagging Behind 

For all the debates about Europe and how it’s doing, one indicator certainly shows that things aren’t going swimmingly: GDP per capita, which is going in the wrong direction in multiple key European countries. But why is this happening? How is it that in the last 20 years, the average French, English, Italian citizen is getting noticeably worse off than many of their global counterparts?

Observers posit various hypotheses, some of which I find more convincing than others. For example, I don’t think that Europe is necessarily slow in adopting technology, and I also don’t think that the problem comes down to an excess of regulations. 

Still, it’s undeniable that something’s going on, and identifying the proper hypotheses as to why it’s happening is critical to turning things around. Europe would certainly benefit from taking a more outward-looking view on business, using the entire world as its stage rather than remaining within the borders of the EU. And given the current repositioning that the US is undertaking, not least because of the chaos that grew out of the Trump White House, there could be an opening for Europe to rediscover industrial policy levers–so long as those levers match the requirements of the Entrepreneurial Age.

👉 Read on in 10 Hypotheses As To Why Europe Is Lagging Behind.

💰 All About Stripe

The big news in the startup world last week was Stripe’s new fundraising round which brought the tech giant’s valuation to $95B. The company’s rapid rise since its founding back in 2010 by Irish brothers Patrick and John Collison is part of the process of constructing the foundations of the digital economy, in Stripe’s case by focusing on payments.

But beyond the eye-popping valuation and inevitable musings about when the IPO could occur, Stripe is definitely worth knowing more about, quite simply because of what it reveals about that ongoing digital construction process. Namely, the Entrepreneurial Age is showing just how much larger markets can be when they’re truly digital, with returns on invested capital getting much, much higher than ever was the case in the 20th century.

So while companies such as Visa or Mastercard did quite well for themselves in processing payments, their reach was necessarily restricted by physical constraints (credit cards, payment terminals, phone lines, etc.). In shrugging off those constraints thanks to digital tools, Stripe, on the other hand, is playing a different game indeed.

👉 Dive further into fintech with All About Stripe.

🏎 Accelerators vs. Seed Funds

As entrepreneurship spreads throughout the globe, more pressure builds throughout the system. One of the places where that is most felt lately is early-stage investing. More and more money is flowing as investors attempt to back startups that might turn into tomorrow’s tech giants.

That led London- and Tel Aviv-based investor Gil Dibner to recently question whether the accelerator model was doomed, given the multiplication and increased sophistication of seed funds like his Angular Ventures. Indeed, this new generation of seed funds now competes for some of those same early percentage points in a startup’s cap table, with a proven ability to add as much (if not more) value than accelerators.

I think that Gil’s idea of conflicting interests between seed funds and accelerators is accurate, although I don’t think the conclusion is necessarily that accelerators don’t have a part to play. For one, accelerators still have some advantages that seed funds don’t, including one that we at The Family treasure: the ability to work with many more founders since their entry into The Family doesn’t involve us signing a hefty check. Another important nuance is whether it’s about a mature entrepreneurial ecosystem or one that is still in its infancy—and where the toxicity requires as much help as possible at the pre-seed stage.

👉 Think more about the ongoing shift in Accelerators vs. Seed Funds.

Sounds interesting? Subscribe to European Straits and let me know what you think!

🇫🇷 The latest podcasts (in French) with my wife Laetitia Vitaud on our family media operation Nouveau Départ: Le piège du couple à deux carrières 👫 Singapour, cette cité-État érigée en modèle 🇸🇬

🚀 My latest contribution to my firm The Family’s newsletter is a tribute to Jeff Bezos (and Kevin Kwok): Learn to draw flywheels.

🎧 I was invited by Odin for a one-hour conversation with their founder Patrick Ryan. You can listen to it, and read the transcript, here: Building an Entrepreneurial Ecosystem.

From Fixing Today's Economy Is About Humans, Not Technology (November 2018):

Today’s power is vested in the mighty “multitude”—the billions of individuals who are now equipped with powerful computing devices and connected with one another through networks. And it inspires a lesson in strategy and management that every corporate executive needs to keep in mind: the businesses that succeed in the digital economy are the ones that realize how power has been redistributed outside of their organizations. The winners are not the companies who use the most technology. Rather, they are the companies that best use technology to harness human power, which in turn fuels growth and generates profits.

All recent editions:

* 10 Hypotheses As To Why Europe Is Lagging Behind—for subscribers only.

* All About Stripe—for subscribers only.

* Accelerators vs. Seed Funds—for subscribers only.

* Investing Across the World w/ Chris Schroeder. Stripe. Consulting. IPOs. Digital Government.—for everyone.

* Government in the Entrepreneurial Age—for subscribers only.

* Moneyball in Consulting Services—for everyone.

* All About Companies Going Public—for subscribers only.

* Playing Video Games w/ Rachel Kowert. Consumption. Delivery. Profitability.—for everyone.

European Straits is a 4-email-a-week product, and all essays are subscriber-only (with rare exceptions). Join us!

From Munich, Germany 🇩🇪 

Nicolas

The Agenda 👇

* Bloomberg columnist (and writer, and Twitter extraordinaire, and owner of rabbits) Noah Smith on Europe in the Entrepreneurial Age

* Why investors shouldn’t shun Deliveroo, in Sifted

* Software is eating the world, but can we facilitate its digestive capacities?

* A business’s defensibility is what investors are most interested in

* US tech companies have Delaware. But what’s Europe’s equivalent?

First of all, it’s now official: my wife Laetitia Vitaud and I have decided to merge our respective podcasts under one single brand, Building Bridges. From now on, we’ll take turns interviewing inspiring guests about the state of our fragmenting world. The resulting podcast will be syndicated across this newsletter, Laetitia’s own Laetitia@Work, and the Building Bridges hub on Substack.

🐰 Today, I’m pleased to share a new episode of Building Bridges in which I interview Noah Smith, an opinion columnist at Bloomberg and writer at Noahpinion, which I highly recommend subscribing to since it covers so many topics that resonate with this newsletter—from economic development to immigration to the current paradigm shift to industrial policy to economics in general.

My idea was to focus the conversation on Europe, and indeed Noah has many insights to share. One of them, which I find particularly compelling, is the idea of “optimal fragmentation”. There was a time, in the 19th century, when Europe actually benefited from being a fragmented continent. Britain, Germany and France were of roughly equal sizes; the world was the stage on which their rivalry played out; and the technology of the day made it so that each could grow their national industrial champions and claim to be part of the club of the more advanced countries.

* Today, the situation in Europe is very different, however. The advanced technologies of the day (computing and networks) call for growing corporations whose scale far exceeds the size of any European market. And because they have realized fragmentation isn’t much of an advantage anymore, European countries have been trying to join forces under the umbrella of the European Union—alas encountering many frictions and obstacles along the way.

Here are the other topics I discussed with Noah:

* The various places he’s lived, including Texas, Japan, New York, and the Bay Area—and what specifically attracted him to Japan, where he spent 5 years in total.

* Industrial policy: what it is, why it is so difficult to design and implement during a paradigm shift, and how Europe has been performing on that front.

* Texas and its (so far) failed attempts at catching up on Silicon Valley: it’s all about non-compete clauses, urban sprawling, and universities.

* Where to look for inspiration: Noah shared his assessment of how various European countries are doing and what other regions in the world we should all study.

* Finally, I made sure to ask Noah about his pet rabbits, and he shared the reasons why everyone should consider adopting their own—tl;dr, “they’re like clumsy, vegetarian cats”.

👉 Listen to my conversation with Noah using the player above 👆 or on Apple Podcasts or Spotify.

⚠️ While the European IPO market hasn’t necessarily been as hot as its US counterpart, one tech company has plans to go public as early as TODAY: Deliveroo. Unfortunately, it seems that investors are a bit skeptical, as the floatation is meeting strong headwinds.

* I believe the bear cases against Deliveroo are a bit shortsighted, however. Just like Uber before it, investors will be well-served to remember that Deliveroo’s total addressable market isn’t restricted to food delivery, but instead the entire realm of things that people want delivered to them–both now and in the future.

And that’s not all; read the whole thing here: Deliveroo: Is It Worth It? 👀

💊 An Investment Thesis: Help Software Digest the World 

For years, Marc Andreessen’s thesis about “software eating the world” was a solid one indeed–and in general, it still is. But for investors looking at the industries that are still early in the process of being eaten, it’s clear there are quite a few in which software alone can’t finish the job. In ‘hard’ industries that are heavily tangible, whether due to personnel needs, physical infrastructure, complex regulations, or whatever else, software sometimes runs up against problems in digesting its meal.

This has been the case (so far, and to varying degrees) in industries such as energy, agriculture, construction, and space. But just because these industries are more difficult for software to consume, that simply means that there’s more opportunity for startups to arrive with solutions that are designed to facilitate the arrival of more and more software. 

To give you one of the most evident examples of how this can occur, the iPhone was so revolutionary not because of what it brought to communications, but because of how it quickly enabled software to extend much, much further into our lives. This wasn’t just because the iPhone brought its own software and hardware into the equation, but because it also directed all that power into being a vehicle for all the software that developers around the world could dream up. In effect, the iPhone served as a digestive pill, making it much easier for software to keep right on eating.

👉 Dive deeper in An Investment Thesis: Help Software Digest the World.

🏰 All About Defensibility

The idea of a company creating a ‘moat’ is nothing new. In the 20th century, businesses were able to do so through various means, whether by investing in physical infrastructure, building privileged relationships with key players, or encouraging politicians to enact regulations that just so happened to make it extremely difficult for anyone new to come along and push their way into the game.

In the Entrepreneurial Age, some of the methods for digging moats, or erecting ‘barriers to entry’, have disappeared completely (physical infrastructure in, say, the music industry), changed (access to key players is still needed, but it’s much easier to contact someone via email than by phone or an in-person meeting), or stayed much the same (tech giants certainly aren’t above lobbying politicians to make things difficult for newcomers, such as we’ve seen with the GDPR regulations in Europe).

Given my interest in business strategy, it should come as no surprise that my attention has quite often turned to ideas of moats and how companies can incorporate defense strategies while still concentrating on growth and increasing returns. So this past week, following further reflection inspired by Gil Dibner of Angular Ventures, I pulled together a set of resources on the topic.

👉 Remember that we don’t build moats, we dig them, while reading All About Defensibility.

🇪🇺 Where’s Europe’s Delaware?

A while back, I and my colleagues at The Family were excited to support the #NotOptional campaign, led by our friends at Index Ventures. Given the importance of employee equity in growing a thriving startup ecosystem, we’ve been similarly disappointed to see more recently that the enthusiasm the campaign generated hasn’t turned into beneficial changes in Europe’s corporate laws—yet, at least.

So I started thinking about how tech startups in the US have the good fortune to be able to incorporate in Delaware, why that is, and whether or not a jurisdiction in Europe could take on that same role. And let’s just say that while I don’t think it to be an impossible feat, it is true that it takes more than simply changing some laws and regulations.

Indeed, one of the key aspects as to why Delaware is so attractive for incorporation is the case law that has been developed in the Delaware Court of Chancery during the course of more than 250 years. And no country in Europe would be able to provide that immediately, but… does that mean that no one is willing to even try? 

👉 Find out more on why the attempt is needed in Where’s Europe’s Delaware?

Sounds interesting? Subscribe to European Straits and let me know what you think!

🇫🇷 The latest podcasts (in French) with Laetitia on our family media operation Nouveau Départ: Ces 20% de diplômés qui se détachent (interview w/ Jean-Laurent Cassely) 🎓 Le foyer à l'épreuve de la longévité ⏰ 

🚀 My latest contribution to my firm The Family’s newsletter is about the hybrid nature of every tech company: Every business has two sides.

From Will Fragmentation Doom Europe to Another Lost Decade? (January 2020):

Here’s an enigma: historians teach us that fragmentation is what made Europe strong and prosperous in the past. So why is that long-time asset now a liability? To understand the reasons, we need to go back in time. In Guns, Germs & Steel, Jared Diamond explains why fragmentation once helped Europe rise as the main Eurasian power at the expense of China, which was much more monolithic than fragmented Europe and thus depended on the (occasionally stupid) decisions of a single sovereign.

All recent editions:

* Where’s Europe’s Delaware?—for subscribers only.

* All About Defensibility—for subscribers only.

* An Investment Thesis: Help Software Digest the World—for subscribers only.

* Growing Your Network w/ Kelly Hoey. Europe. Stripe. Accelerators vs. Seed Funds.——for everyone.

* Accelerators vs. Seed Funds—for subscribers only.

* All About Stripe—for subscribers only.

* 10 Hypotheses As To Why Europe Is Lagging Behind—for subscribers only.

* Investing Across the World w/ Chris Schroeder. Stripe. Consulting. IPOs. Digital Government.—for everyone.

European Straits is a 4-email-a-week product, and all essays are subscriber-only (with rare exceptions). Join us!

(Credit: Franz Liszt, Angelus ! Prière Aux Anges Gardiens—extrait du disque Miroirs de Jonas Vitaud, NoMadMusic.)

From Munich, Germany 🇩🇪 

Nicolas

The Agenda 👇

* Author Diana Lind on the future of housing 🎧

* Is Amazon left-wing or right-wing? Actually, it’s a bit of both

* Will the gig economy get its social contract? I’ve written so much on that topic

* As proven by successful vaccination campaigns, you shouldn’t centralize everything

Today’s episode of the Building Bridges podcast is a conversation between my wife Laetitia Vitaud and Diana Lind, author of the remarkable Brave New Home: Our Future in Smarter, Simpler, Happier Housing.

We all sense how housing is a cornerstone of our social contract. In most countries, a house is many things at the same time: a shelter for one’s family, but also an investment for old age as well as collateral against which we can borrow and consume.

* As a result, we shouldn’t be surprised by the following: on one hand, the shift to the Entrepreneurial Age is a direct challenge for housing as we know it; on the other hand, it’s very difficult to change anything in housing because it’s so ingrained in our culture, our collective psyche, and our social contract.

The pandemic has been revealing in this regard. With many schools closed and many people stuck at home, there has been a widespread realization that the housing market doesn’t really match our needs and expectations anymore.

* The model of a single-family home, which became dominant during the post-war period, is ill-designed for today’s economy. Two-income households, longer life expectancy, less predictable careers, more and more jobs (whether high-skill or low-skill) concentrated in urban areas: all of these call for a dramatic upgrade of the housing market and our very conception of ‘home’.

It so happens that history is the most fertile ground there is to help us broaden our perspective when it comes to housing. By going into the past, we can see that communal housing, short-term rentals for highly mobile workers, and multi-generational households were the norm in the vibrant cities of the 19th century. What if those are a frontier we should try and (re-)explore?

Indeed, in her landmark book Brave New Home, Diana Lind acts as a guide to the history of housing and reveals that what we take for granted is in fact very recent and very dependent on a specific cultural and political context. Thus our vision of housing is also much more precarious than many people assume. It could very well be that the pandemic, as an accelerant of the shift to a new techno-economic paradigm, marks the end of housing as we know it—and the beginning of a new approach to providing shelter, investing in assets, and living together in our more urban world.

👉 Listen to Laetitia’s conversation with Diana in the latest episode of the Building Bridges podcast using the player above 👆 or on Apple Podcasts or Spotify.

📦 Amazon’s Strange Politics 

The past few weeks have seen some heated commentary regarding Amazon and a union drive at its Alabama fulfillment center. As someone who supports both a strong social safety net and admires Amazon’s performance as a company, I understand how people can be surprised at the contrast: Amazon has generally progressive cultural and political legacy, but now it’s taking a turn toward defending its interests as a now highly labor-intensive business.

Amazon’s position is unusual indeed. When we step back, most businesses in the past have moved being labor-intensive to being capital-intensive industries, becoming able to produce just as much, if not more, with a smaller and smaller workforce. On the other hand, very few corporations have gone the other way like Amazon, and this might explain the company’s strange politics.

In any case, it’s clear that balances must be struck. There are industries in which capital is unable to replace labor, for instance in proximity services where many workers are on the front lines interacting with many customers. And then there are industries in which capital can exist on its own, creating a highly stratified world of a few haves and many have-nots. And so the question is there: can we as a society (and Amazon as a company) have the best of both worlds?

👉 I reflect on the current situation and capitalism’s politics in Amazon’s Strange Politics.

🚲 All About the Gig Economy

Reflecting on labor-intensive industries and the spectacle of the Deliveroo IPO led me to think that collecting together resources on the “gig economy” could be quite timely. I started by noting, however, that I don’t particularly use that term (except with the associated quotation marks) since I think it’s about much more than that, namely the entire world of flexible work powered by tech platforms.

My first writings in English on the topic date back to 2015, when I wrote an article in Foreign Affairs with my friend Bruno Palier. A year later I talked about it as part of one of my most read pieces ever, “Enough With This Basic Income B******t” and then it became a critical part of the research and material for my 2018 book on building a social safety net for the Entrepreneurial Age, Hedge.

Throughout, I’ve been convinced that the move to a more entrepreneurial economy will carry with it the rise of the gig economy, simply because of the ability for information to move more and more quickly among interested parties. This is also what underlies the growing need for an upgraded social safety net, which was a key part of discussions around the Deliveroo IPO.

👉 Read on about what is needed to make flexible work good work in All About the Gig Economy.

⛪️ What Should Be Centralized?

In my home country of France, which has just headed back into another lockdown period, the headlines over the last few days have centered on the opening of new mass vaccination sites. Yet in the US, which has been one of the fastest at vaccinating its citizens, such mass vaccination sites have been largely abandoned in favor of distribution through the vast network of local pharmacies.

It got me thinking about how organizations manage the balance between their centralized and decentralized levels. I don’t believe that it’s so simple as positing centralization vs. decentralization as a general theory; every organization has elements of both, and so the real question is how to optimally distribute assets, functions and risks between the two.

A big challenge is that the functions that are optimally centralized (or decentralized) in the age of computing and networks are not the same ones that were optimally centralized (or decentralized) in the age of the automobile and mass production. As such, many organizations are struggling to reshuffle things, especially when they are trapped in a centralizing mindset such as that which dominates France’s government and institutions.

👉 I also tested out a new format for gathering these ideas together in What Should Be Centralized?

Sounds interesting? Subscribe to European Straits and let me know what you think!

🚀 In my latest contribution to The Family’s daily newsletter, I comment on Deliveroo’s IPO and lessons that early-stage founders can draw from it: Three lessons to keep in mind about your (future) IPO.

🇪🇺 A few weeks ago, I wrote a column in Sifted about the difficulty that Europe has in growing successful companies in the social media space. It inspired interesting counterpoints earlier this week:

* Sameer Singh, an angel investor with Atomico, also took to Sifted to share a convincing Blueprint for building social media giants in Europe.

* Sarah Guemouri, a Senior Associate at Atomico, expanded on Sameer’s thoughts on Twitter:

* Then Akhil Gupta, a startup founder based in Bangalore, offered an inspiring comparison with building social media companies in fragmented India:

From Solving the Housing Problem: Hunters and Settlers (March 2018):

One way to mitigate problems on the housing market would be drafting zoning rules that favor the constant mingling of hunters and settlers, rather than doing the opposite (as they currently do). There wouldn’t be a crisis of suburban housing if suburban areas were attractive for hunters—which they aren’t. Likewise, there wouldn’t be a crisis of urban housing if it was easier to settle in such areas.

The stakes are high. New legal frameworks should make it possible to harness technology and achieve a radical upheaval of the way of life for both adventurous hunters and settling families—in each case at every level of the income ladder. If they fail to accommodate both populations, the danger is for every large city to be inhabited only by very rich hunters and very old settlers.

All recent editions:

* What Should Be Centralized?—for subscribers only.

* All About the Gig Economy—for subscribers only.

* Amazon’s Strange Politics—for subscribers only.

* Discussing Europe (& Rabbits 🐰) w/ Noah Smith. Deliveroo. Delaware. Defensibility. Software Digesting the World.—for everyone.

* Where’s Europe’s Delaware?—for subscribers only.

* All About Defensibility—for subscribers only.

* An Investment Thesis: Help Software Digest the World—for subscribers only.

* Growing Your Network w/ Kelly Hoey. Europe. Stripe. Accelerators vs. Seed Funds.—for everyone.

European Straits is a 4-email-a-week product, and all essays are subscriber-only (with rare exceptions). Join us!

(Credit: Franz Liszt, Angelus ! Prière Aux Anges Gardiens—extrait du disque Miroirs de Jonas Vitaud, NoMadMusic.)

From Munich, Germany 🇩🇪 

Nicolas

The Agenda 👇

* Economist and blogger Tyler Cowen on everything Europe 🎧

* Founders, investors, and governments: all can contribute to upgrading regulations—in Sifted

* We need to learn to solve ‘hard’ problems when building startups across borders

* I’ve written so much over the years about the difficulty of crossing borders: here’s an overview

* Joe Biden is about to bring the reform of corporate taxation to the finish line

Today’s episode of the Building Bridges podcast is my conversation with Tyler Cowen, an economist, director of the Mercatus Center at George Mason University, blogger at Marginal Revolution, and host of the podcast Conversations with Tyler.

I first met Tyler back in 2019 when my colleague Zineb Mekouar and I spent a few days in Washington, DC to promote my book Hedge and to connect with John Dearie’s Center for American Entrepreneurship. We had lunch with Tyler and his colleague and co-author Alex Tabarrok in a Chinese restaurant near George Mason University. Most of our conversation that day was about exchanging ideas and impressions about the relative situation of America, Europe, and the rest of the world.

Since then I’ve kept reading everything I could find about the political situation in the US, the state of the transatlantic relationship, and recently how COVID-19 was impacting the distribution of power and wealth across the world. Then last year, I realized something: Americans are, by far, the most inspiring contributors to this conversation—yet alas they’re mostly speaking about America, leaving the rest of the world untouched, uncommented on, almost undocumented!

In this context, how about launching a podcast series in which I’d interview American thinkers, but having them focus the conversation on Europe?

Fast forward to today: my 2020 idea has morphed into the Building Bridges podcast which I’m co-hosting with my wife Laetitia Vitaud. The value proposition of our podcast is to provide a platform for anyone who has interesting ideas to share with our vast community of “unapologetic globalists” (to quote my recent guest Chris Schroeder).

* Not everyone that’s part of this roster has much to say about Europe. But whenever I catch one who does, I make sure to focus our conversation on that very subject—and I must say Tyler is one of our recent guests who has the most to say and to share about the Old Continent!

And so if you’re interested in Europe, economics, libertarianism, or the prospects of various other regions in the world, I urge you to give my conversation with Tyler a listen. Here’s what you’ll hear:

* What Tyler likes and dislikes about Europe, and the various countries he’s lived in or traveled to here (which is most of them!).

* Why he thinks Europe is one of the least fragmented regions in the world—which is the exact opposite of how I view Europe!

* Why Americans should be present and invest in India if they want to retain some influence in the future.

* What advice he would give to young Europeans and young Americans who want to prepare themselves for our coming world.

* Why he expects Europe to remain a wealthy and prosperous region, despite, well, everything. And many, many more interesting topics and ideas.

👉 Listen to my conversation with Tyler in the latest episode of the Building Bridges podcast using the player above 👆 or on Apple Podcasts or Spotify 🎧

⚠️ In Sifted this week, I take up a problem that most startup founders find extremely difficult to navigate: regulatory barriers and how to lobby regulators for updated standards that take our now-digital economy into account.

* As more startups move into industries such as finance and healthcare that are (for good reason!) quite highly regulated, founders and investors both need to step up their game in terms of effectively interacting with regulators. And on the other side, regulators—especially in Europe—need to realize that upgrading the regulatory framework can be a competitive economic advantage that boosts value creation.

Read it all in my column: Lobbying: it’s high time startups up their game.

🏗 Building Startups Across Borders 

Last Thursday, I took on a topic that I consider critical for everyone interested in European tech: how startups can build their business across borders. It’s a subject that my firm The Family is interested in both for our startups (since our reason for existing is to help ambitious entrepreneurs grow the best companies possible) and for ourselves (since we knew from very early on that in order to achieve that goal, we ourselves needed to expand beyond our beginnings in Paris).

So from experience, both that of our firm and that of our startups, I can tell you that it’s not easy. And it’s made even harder by the general lack of good information available on the topic. It made me realize something: despite our perception of the economy being global, not many companies have actually succeeded in being truly multi-geography. In turn, that means that the number of people who have been on the ground doing it successfully is quite low.

Yet such hands-on experience is critical when it comes to the “hard” problems which companies face when trying to do business across borders: corporate structuring, employee equity, work contracts, proper accounting, etc. There is a real dearth of open source knowledge on these topics, and this essay serves to open a new stream of content that we at The Family want to produce for founders facing these problems. By the way, the essay is free for everyone!

👉 I do hope you’ll read the whole thing (and welcome any thoughts you may have) in Building Startups Across Borders.

🚪 All About Crossing Borders

My own writings on startups’ attempts to grow across borders and the issues they run up against have mainly discussed the “soft” problems relating to culture, language and the like. These were the subjects of some of the earliest long-form essays that I wrote when The Family switched to producing all of its content in English back in 2015.

More recently, these topics have focused on fragmentation, both in Europe and around the world in general. As I’ve become more familiar with different ecosystems around the world, it’s striking just how many founders, whether they’re in India, Spain, or wherever else (that isn’t the US or China), are facing very similar problems.

My real question now is which countries are going to step forward and make things easier for their local champions to expand across borders? This obviously becomes a question of industrial policy, and so perhaps it is no surprise that the most enterprising countries so far seem to be smaller ones that recognize the opportunity presented in the shift to the Entrepreneurial Age: Estonia, South Korea, and Israel, for example.

👉 The potential reading list was quite long this week in All About Crossing Borders.

🌐 A New Corporate Tax

For several decades, the global tax structure (or lack thereof) has been the cause of many grumblings in many places, with the associated noise only getting louder as software has continued to eat the world. But for all the talk about “double Irish with a Dutch sandwich” and headlines about corporations paying no taxes on their profits, there has been very little actual change in corporate tax codes.

That may be ending, however, with a new proposal for a global minimum tax coming from the Biden administration. Following on the heels of a Trump administration attempt to have companies repatriate profits via a lower corporate tax rate, the Biden administration’s proposal benefits from a multilateral approach (as opposed to a change affecting the US only) and a context in which corporations, including many tech companies, are facing mounting PR problems over their lack of tax contributions despite soaring profits.

Of course, as always, the road is long and nothing is finalized yet. And in terms of the outlook for Europe, such changes likely won’t put more tax dollars into the coffers–unless European companies, and specifically startups, can start to create and realize more value right here on the continent.

👉 I put together a quick 30-point outline of the situation in A New Corporate Tax.

Sounds interesting? Subscribe to European Straits and let me know what you think!

😓 In my latest contribution to The Family’s daily newsletter, I share a few pieces of advice for founders about how to raise funds for their startup: Fundraising is hard.

🇫🇷 We’re resuming our bi-weekly podcasts with Laetitia on Nouveau Départ (in French) for paying subscribers: check out yesterday’s edition on Suppression de l'ENA : une mesure populiste ?

From A Founder's Handbook for Lobbying the Government (January 2021):

Many founders have a naive view of government, thinking that a 10-minute meeting with some cabinet minister will help them see the light, letting the problem be solved once and for all. After all, how can any government official be against progress?

In reality dealing with regulators is hard, and there’s no magic bullet. But I now have a lot of experience dealing with startups in The Family’s portfolio, and after hundreds of hours spent advising them on the best approach, I realized there are recurring themes and approaches that have all been validated in action. I’ve tried to organize them all into a coherent 10-point list.

All recent editions:

* A New Corporate Tax—for subscribers only.

* All About Crossing Borders—for subscribers only.

* Building Startups Across Borders—for everyone.

* Reinventing Housing w/ Diana Lind. Amazon's Politics. The Gig Economy. Centralization.—for everyone.

* What Should Be Centralized?—for subscribers only.

* All About the Gig Economy—for subscribers only.

* Amazon’s Strange Politics—for subscribers only.

* Discussing Europe (& Rabbits 🐰) w/ Noah Smith. Deliveroo. Delaware. Defensibility. Software Digesting the World.—for everyone.

European Straits is a 4-email-a-week product, and all essays are subscriber-only (with rare exceptions). Join us!

(Credit: Franz Liszt, Angelus ! Prière Aux Anges Gardiens—extrait du disque Miroirs de Jonas Vitaud, NoMadMusic.)

From Munich, Germany 🇩🇪 

Nicolas

The Agenda 👇

* My wife Laetitia Vitaud spoke with author Ian Leslie about conflicts and disagreements 🎧

* Apply to On Deck Angels, an eight-week fellowship for top angel investors

* Sharing my experience restructuring my firm The Family during the pandemic

* I’ve been writing about corporate taxation in the digital economy since...forever

* Everyone’s obsessed with Tiger Global. My take on a key feature of their model: velocity

Today’s episode of Building Bridges is Laetitia’s conversation with Ian Leslie, a former ad man and author of the recently published Conflicted: How Productive Disagreements Lead to Better Outcomes.

Ian first emerged on my radar three years ago when I read an inspiring article he wrote about the future of advertising and brands in a more digital economy. I started to follow him on Twitter and then signed up to his excellent newsletter The Ruffian. When he tweeted that he was spending a few days in Paris, I had my colleague Kyle Hall interview him on stage at our then-flagship office in Paris.

And when he more recently announced that he was about to publish a new book, I told Laetitia she had to have him as a guest on the podcast and ask him about why he thinks conflicts can be a good thing.

* I hope you’ll enjoy Laetitia and Ian’s conversation on conflicts, disagreements, and how they can lead to better outcomes. A rather timely topic!

Here’s what Laetitia wrote on the Building Bridges website:

Like a lot of other animals we humans respond to threat with two tactics: fight or flight. Either we become very hostile or we do everything we can to avoid any kind of argument. But both these reactions are completely dysfunctional. The internet isn’t helping: social media are designed to turn what could be productive exchanges into useless cockfights in a public arena.

The counterintuitive truth is that we need conflicts to move forward and live and work together more happily. Conflicts can bring us closer. “Couples and teams are happier when they are in the habit of passionate disagreement. Conflict can draw people together.” That’s why the author devotes the second half of the book to his 10 “rules of productive argument” to help us get better at disagreeing with others.

Establish a relationship of trust with the other person, accept them for who they are, try and make them feel good about themselves, consider that you might be perceived as “weird” by the other person, be curious about their point of view and actually listen to what they have to say...and above all else be real and honest when you interact with them.

The stories told in the book and the insights shared show this guide to productive disagreement is indispensable reading.

👉 Listen to Laetitia’s conversation with Ian in the latest episode of the Building Bridges podcast using the player above 👆 or on Apple Podcasts or Spotify 🎧

⚠️ On Deck Angels (ODA) is an eight-week fellowship for top angel investors looking to hone their investing craft through community, tactical workshops and deal flow.

* ODA addresses topics such as: mental models and investing frameworks, establishing a track record, adding value post-investment, and learning how to build an angel brand.

Some of the founding fellows include Dan Romero, VP of Coinbase; Michael Vaughan, COO of Venmo; and Ann Ferracane, founder of Patch Ventures.

Interested in joining ODA? Learn more and apply here.

🏗 Restructuring The Family 

As I’m sure you know, writing this newsletter isn’t my only job at The Family (or at least, I hope you assumed that! 😉) Over the past year, a large part of my time has been taken up by a major restructuring of our firm—one that, although not prompted by COVID-19, was immediately and drastically affected by the broader economic context of the pandemic.

It has been a rather complicated operation. Restructuring a business is something that’s relatively simple in theory and even in the steps to be taken, but quite difficult to actually execute. In no small part that’s because each step requires you to remain absolutely faithful to the plan, even when faced with difficult and/or deteriorating relationships with creditors, suppliers, employees that are let go, etc.

When done well, though, restructuring is a real opportunity to not only get the business onto more solid ground, but also to double down on everything that works well in your organization. You get a better view of which outsider providers are doing a great job (and which ones aren’t), your team can make faster decisions, and your management can refocus on the big picture. In doing so, remember that none of it is simply an end in itself: your goal isn’t survival, it’s to make sure the business can thrive, positioning itself to execute on a sound strategy over the coming years.

👉 I gave subscribers a peek behind the curtain in Restructuring The Family.

🚪 All About Taxation in the Digital Economy

As noted last week, the Biden administration’s push for international coordination on corporate taxation could finally produce results in a field that has been slow to adapt to the digital age. The lack of results certainly hasn’t been due to a lack of interest, however, and there is a rich bibliography for anyone wanting to dive further into the topic of how corporate taxation is and could be structured.

My own writings on this specific topic date back to a report that the French government commissioned from me and Pierre Collin, a respected tax judge, back in 2013 (my participation in that report came following the publication of L’Âge de la multitude with my friend Henri Verdier in 2012). The report was then followed with many (more accessible) articles on the topic, in outlets ranging from Forbes to Politico EU to The Family’s own publication on Medium.

More recently, I’ve directed my attention specifically at how corporate taxation impacts startups and startup ecosystems. Indeed, these aren’t simply questions about how to tax profits; corporate taxation is also critical in subjects such as rewarding employees for value creation through equity sharing, enabling a remote workforce, and generally building startups across borders.

👉 Go further on a topic that I really do find quite fascinating in All About Taxation in the Digital Economy.

🌐 Velocity in Venture Capital

Much talk in the VC world lately has been about hedge fund Tiger Global’s move into venture, with Founders Fund’s Everett Randle’s in-depth article on the topic serving as an excellent base for discussion. For me, this discussion is related to several recurring themes in this newsletter: the diffraction of venture capital, the fact that returns go down as predictability goes up, and new quantitative/indexing methods for deploying capital in venture.

In yesterday’s edition, I concentrated on one characteristic that has its role to play in each of those trends: the velocity with which money flows in the venture space. To keep it short, the idea is that by increasing the speed at which money moves from one hand to another, you can create more value in the economy, even without increasing the quantity of money in the system.

Now, in today’s low-interest-rate world, we know that there is in fact an increasing amount of money in the system. Nonetheless, the lesson remains: by not having money locked up for long periods of time (for example, in the decade that can easily mark the time between a startup’s founding and an IPO) and utilizing methods such as secondary sales from Series B and beyond, startup ecosystems can avoid stagnation and create more value through faster positive feedback loops.

👉 I went deeper into how to use money efficiently in Velocity in Venture Capital.

Sounds interesting? Subscribe to European Straits and let me know what you think!

🌤 A while ago I mentioned my involvement in the project to create a new moral political economy by the Center for Advanced Study in the Behavioral Sciences (CASBS) at Stanford University.

I haven’t been there for a while for obvious reasons, but the pandemic hasn’t slowed down Margaret Levi and her colleagues in advancing the cause. They’ve just published a new website, Fairer Tomorrow, which I highly recommend visiting so as to have a glimpse of all that it takes to make the most out of the current shift:

The COVID pandemic continues to disrupt almost everything that enables us to learn, work, play, and thrive. It also magnifies numerous vulnerabilities and deficiencies that affected governments, economies, and societies well before its onset.

As we envision and, eventually, forge together our lives after the pandemic, we do ourselves a lasting disservice by returning to the pre-pandemic status quo. Instead, we can move toward a new political economic framework that serves a more prosperous, equitable, and human-centered society. A good way to start is through exploring lessons we already have learned and ideas we have generated during the pandemic.

That is the core concept motivating Fairer Tomorrow: Solutions to the Issues Highlighted by COVID, a website presented by the Center for Advanced Study in the Behavioral Sciences (CASBS) at Stanford University. Specifically, it is a product of the Center’s flagship program, “Creating a New Moral Political Economy,” led by CASBS director Margaret Levi.

⎈ In my latest contribution to The Family’s daily newsletter, I share a few pieces of advice for founders about the unique position they’re in: You're the one in control.

🇫🇷 More podcasts with Laetitia on Nouveau Départ (in 🇫🇷)! Check out yesterday’s edition on Faillites d'entreprises : une tempête à venir ?  as well as last week’s episode on La solitude : l'autre pandémie. Also make sure to give a listen to my conversation with Rogervoice founder Olivier Jeannel about making the world a better place for people with a hearing disability: Rendre le monde plus accessible. 

From Cancel Culture: A Systemic Explanation (July 2020): 

It’s a matter of scale. If it’s me that’s caught in a public controversy regarding tech in Europe or French politics, I can write conciliatory DMs to the three people who are my most fervent contradictors and find some room for agreement.

On the other hand, a “famous and powerful” person such as Andrew Sullivan simply can’t deal with the thousands of Twitter users who are shouting insults at him—not only because he’s not used to being on an equal footing with the rest of us, but also because it’s practically impossible to exchange 1-on-1 messages with literally thousands of angry people on the Internet.

In this case, what choice do such personalities have (apart from reflection and contrition, which doesn’t really fit their character) except to wage an all-out war and risk cancellation?

All recent editions:

* Velocity in Venture Capital—for subscribers only.

* All About Taxation in the Digital Economy—for subscribers only.

* Restructuring The Family—for subscribers only.

* Around Europe w/ Tyler Cowen. Lobbying. Startups Across Borders. Biden's Global Tax Reform.—for everyone.

* A New Corporate Tax—for subscribers only.

* All About Crossing Borders—for subscribers only.

* Building Startups Across Borders—for everyone.

* Reinventing Housing w/ Diana Lind. Amazon's Politics. The Gig Economy. Centralization.—for everyone.

European Straits is a 4-email-a-week product, and all essays are subscriber-only (with rare exceptions). Join us!

(Credit: Franz Liszt, Angelus ! Prière Aux Anges Gardiens—extrait du disque Miroirs de Jonas Vitaud, NoMadMusic.)

From Munich, Germany 🇩🇪 

Nicolas

The Agenda 👇

* I spoke with Lillian Li, writer at Chinese Characteristics, about everything Chinese tech 🎧

* What if Daniel Ek buys Arsenal? My latest column in Sifted

* Bill Janeway’s insights about balancing power between founders and investors

* Curating a comprehensive reading list about founder control in a company

* We all have something to say about the football Super League. A thread.

Today’s episode ofBuilding Bridges is my conversation with Lillian Li, a former venture capitalist in Europe who now writes the highly successful newsletter Chinese Characteristics.

I’m not really sure how our paths initially crossed, but I discovered Lillian’s work about technology in China in the course of last year—first on Twitter, and then through the insightful and enlightening essays on Chinese tech companies published on her acclaimed newsletter Chinese Characteristics.

* I had all the reasons to dive in. I think China is a critical area on the global map, one that none of us can afford to ignore. And I think that tech entrepreneurship is one of the things that make China matter even more. On the other hand, we Westerners have to be humble when it comes to China: it’s a very large and diverse country, with a culture that’s very different from ours, and where people speak a language that’s extremely difficult for most of us to master.

Needless to say I had to have Lillian on the podcast: as someone who grew up and worked in Europe, she can relate to the kinds of questions we’re facing on this side of the world; but as a native of China who went back there last year, she has the unique ability to share the details and nuances that elude most of us who are seeking to understand how China is positioning in the Entrepreneurial Age.

Here are the topics Lillian and I covered in our 45-min. conversation:

* Why she decided to go back to China, how life in China compares to that in the UK in the context of the pandemic, and her assessment of China’s economic prospects.

* What makes tech entrepreneurship in China different from that in the US or Europe, and what European entrepreneurs can learn from their Chinese counterparts.

* Why Westerners should focus less on powerful Chinese individuals and more on systems and institutions if they really want to understand what’s happening in China.

* What really happened in the runup to Ant Financial’s interrupted IPO and her explanation of the setbacks encountered by Jack Ma following the fateful speech he made in October 2020.

* The sources she recommends for all who want to learn more, including Rui Ma’s podcast Tech Buzz China and the book China's Economy: What Everyone Needs to Know by Arthur R. Kroeber. 

👉 Listen to my conversation with Lillian in the latest episode of the Building Bridges podcast using the player above 👆 or on Apple Podcasts or Spotify 🎧

⚠️ In my latest Sifted column, I’m taking on a story that many people have commented on during the past week or so: the football Super League.

* The angle I explore is an interesting development following the disastrous announcement and ditching of the plan after only 48 hours: the fact that Spotify CEO Daniel Ek is now looking to buy the famed Arsenal club in London (which I’m familiar with because I used to live not far from there in the Borough of Islington).

It’s a development that, in my eyes, could signal European tech having reached a new level. It could also contribute to several positive developments in the European tech ecosystem over the coming years.

👉 Read it all in Sifted: Would Daniel Ek buying Arsenal be a game changer for European tech?

⚖️ Bill Janeway on Who Should Be in Control 

One of the joys of writing this newsletter is that it gives many occasions to hear feedback and enter discussions with people whom I greatly admire. And Bill Janeway certainly fits into that category, which is why I was happy to have his pushback on my position that it’s a good thing when founders can keep control over their companies. Even better: he agreed to let me share his thoughts with you.

So this edition, which I sent for free to everyone, is simply the text of Bill’s responses during the conversation that we recently had. It’s well worth your time: not only does it provide a crystal-clear understanding of how a venture capital investor can evaluate the developments and various risks occurring in their portfolio, it’s also rich in sources and examples that go deeper into the subject.

I’d also note, before sending you to read the whole piece, that Bill is a great example of the insight one can get from an investor who has developed clear theses on the world in which they’re living. The mantras that he’s developed, such as “corporate happiness is positive cash flow” and “all entrepreneurs lie”, are direct and revealing, serving as useful signposts while evaluating a given situation.

👉 I stepped back to give Bill’s thoughts center stage in Bill Janeway on Who Should Be in Control.

💪 All About Founders Being in Control

My conversation with Bill has obviously been at the top of my mind, and so for the week’s curated readings I went back into everything related to founder control. As Bill also pointed out, there’s nothing particularly new in this debate, as evidenced by one of my earliest writings on the topic (in 2016), which focused on the case of young entrepreneurs back in the 1950s.

And perhaps the continued existence of the debate is simply an indication of how complicated the question is. Indeed, it’s a topic that touches on a wide variety of issues, ranging from the search for product-market fit to crossing the chasm to building a company in the face of both risk and uncertainty.

For entrepreneurs who are still in the early stages of building their company, it’s critical to be aware of the tradeoffs that can come with accepting investors into your cap table, and the terms that will govern the involvement of those investors. This is especially true for anyone looking to build a startup across borders, as choices made early on can have outsized impacts on your options further down the road.  

👉 Refine your view on the topic using the sources in All About Founders Being in Control.

⚽️ A Thread on the Super League

It’s rare to see such a rapid, high-profile explosion as that which occurred with the ill-fated announcement of a new football “Super League”. There have been numerous articles looking in detail at what happened, but I wanted to put things into a particular perspective that I believe is fundamental to the Entrepreneurial Age: namely, how the people behind the Super League forgot that football was one of the first industries to truly shine a light on the power of the multitude, thanks to the implicit contract clubs form with their fans.

Football clubs have long been able to translate the power of their local fan base into benefits for the club and its owners. What was lost in the planning of the Super League was that those fans also can turn their power against the club itself, particularly in a situation where there seems to be a significant downside for them, given that the existence of the Super League would have rendered meaningless the outcomes of its elite clubs’ matches against their many historic national rivals.

Still, despite football having been early in sealing a compact with its multitude of fans, the sport itself has in many ways remained in the old paradigm of mass production, especially in its fascination for live TV audiences. That’s proving all well and good for now, but I wonder where the tipping point in the football value chain is, and how owners and investors will make money when technology has displaced many of the players upon which the sport relies?

👉 I put my two cents into one of the big business stories lately in A Thread on the Super League.

Sounds interesting? Subscribe to European Straits and let me know what you think!

🏎 Matthias Hilpert, a seasoned tech investor based in Berlin, just launched a book titled Fast Forward to help founders master the discipline of B2B sales. It includes testimonials from two of our portfolio founders, Nicolas Dessaigne of Algolia and Firmin Zocchetto of PayFit. Discover the book here: Fast Forward: Accelerating B2B sales for startups.

🔍 In my latest contribution to The Family’s daily newsletter, I share a few pieces of advice to help founders identify good investors—ones that are decisive and supportive: Only deal with good investors.

🇫🇷 More podcasts with Laetitia on Nouveau Départ (in 🇫🇷)! Check out yesterday’s edition on Après Merkel : une chancelière verte ? as well as last week’s episode on Travailleurs / entreprises : la distance se creuse. Also make sure to give a listen to Laetitia’s conversation with Denis Pennel about the competing interests of consumers and workers: Le consommateur, ennemi du travailleur ?

From Europe Is a Developing Economy (October 2019):

The most interesting trend in global tech these past few years isn’t anything that’s been happening in the US. Rather, it’s the rise of tech companies in China. Like many Westerners, I had long been uninterested in what was happening in Mainland China. I thought it was too far away, too different, and all happening in the impenetrable language that is Mandarin.

But I changed my mind following Alibaba’s IPO in 2014. That moment triggered my interest, leading me to watch The Crocodile in the Yangtze, a movie that tells the story of Alibaba beating eBay on the Chinese market. I then read many books and articles, met many experts, and even had the opportunity to travel there twice: to Shanghai in 2017 and then to Beijing, Wuhan, Shenzhen, and Guangzhou earlier this year with my colleague Emilie Maret. Today, I’d say that the idea of China as a tech superpower has become widely acknowledged. But that doesn’t make the country any less interesting.

All recent editions:

* A Thread on the Super League—for subscribers only.

* All About Founders Being in Control—for subscribers only.

* Bill Janeway on Who Should Be in Control—for everyone.

* Productive Disagreements w/ Ian Leslie. Restructuring. Taxation. Velocity in VC.—for everyone.

* Velocity in Venture Capital—for subscribers only.

* All About Taxation in the Digital Economy—for subscribers only.

* Restructuring The Family—for subscribers only.

* Around Europe w/ Tyler Cowen. Lobbying. Startups Across Borders. Biden's Global Tax Reform.—for everyone.

European Straits is a 4-email-a-week product, and all essays are subscriber-only (with rare exceptions). Join us!

(Credit: Franz Liszt, Angelus ! Prière Aux Anges Gardiens—extrait du disque Miroirs de Jonas Vitaud, NoMadMusic.)

From Munich, Germany 🇩🇪 

Nicolas

The Agenda 👇

* My wife Laetitia spoke with author Deborah Copaken about healthcare in America 🎧

* Fragmentation has long been a downside for Europe. Can it make us more productive?

* There’s a lot to learn from institutional investors and how they allocate capital

* There are many problems to solve before Europe can attract foreign talent

Today’s episode of Building Bridges is my wife Laetitia Vitaud’s conversation with Deborah Copaken, a best-selling author and screenwriter who shared her experience with the healthcare system in America.

I’ve been writing about economic security almost forever, insisting on the importance of providing a well-functioning safety net to foster a more entrepreneurial society. For more on that, see my book Hedge as well as this compilation of related essays: All About the Gig Economy.

Indeed, the idea of widespread instability is an integral part of what the Entrepreneurial Age is about. The lifespan of companies is getting shorter and shorter due to the acceleration of technological change; corporations have less ability to provide their employees with stability; in turn, these employees decide to break free and go on the hunt, enjoying the upside of flexibility from a worker’s perspective.

What Deborah Copaken reminds me in her conversation with Laetitia is that this kind of instability determined many of her career choices as a woman working in the media industry in the US. Because the US provides affordable healthcare only to those who are employed in a steady job, at many times in her life she had to give up on what she really wanted to secure access to proper healthcare coverage. And because she’s a woman, she’s also experienced the sexism of the healthcare system at every turn.

Deborah’s story is the perfect illustration of the point I make in Hedge: creators, like innovators, need a better safety net to work their magic! In a world of instability, this net is what makes risk-taking possible.

Deborah and Laetitia’s conversation is a must-listen. In addition to just how critical economic security is so that people can move forward and take more risks, you will also hear about:

* Being part of the writing team of the popular Netflix series Emily in Paris, and drawing on Deborah’s own experience of cross-cultural issues to enrich the script.

* What it was like for Deborah to live in Paris for a time when she began her career as a photojournalist—and the sexism she has had to fight ever since in the media industry.

* What it’s like to have to deal with the US healthcare system when your life's in danger and you need thorough examinations and emergency procedures.

* The reality of a life on the edge and having to deal with multiple risks and constraints at every turn—as is too often the case for people who embrace creativity as a career.

👉 Listen to Laetitia’s conversation with Deborah Copaken in the latest episode of the Building Bridges podcast using the player above 👆 or on Apple Podcasts or Spotify.

🇪🇺 Productive Fragmentation 

Here’s an idea that matters in Europe: creating spaces where people can come together, regardless of their ‘native’ culture and language, in no way negates the individual experiences of any given country. Nor does the idea of pooling resources mean ending in-group competition; indeed, finding the right balance among these various needs is key to what we can think of as ‘productive fragmentation’.

I’ve been reminded of this quite often lately, in contexts ranging from Netflix’s excellent Drive to Survive series about Formula One to my recent podcast discussion with economist Noah Smith. While Europe certainly has the fragmentation part of the equation down, it hasn’t found the proper way to use that fragmentation to encourage value creation in the Entrepreneurial Age.

That doesn’t have to remain the case, however. When I spoke with Chinese Characteristics writer Lillian Li about the situation in China, she noted the high degree of internal competition and decentralized autonomy there, with Beijing competing against Shanghai and Shenzhen and more for talent and results. That competition, however, tends to end with one proven winner, suggesting that fragmentation is an advantage when starting businesses, before eventually being reined in during the scaling up phase. Could Europe find a new configuration in which that is possible?

👉 I try to bring a complicated and broad topic into better focus in Productive Fragmentation.

⏳ All About Multi-Asset Allocation

While retail investors grab the headlines (as we saw with the Gamestop saga, for example), institutional investors are a better indicator of where things are headed over the long term. Indeed, their job is allocating vast amounts of money across various asset classes, including stocks, bonds, commodities, foreign currencies, real estate, hedge funds, private equity—and, yes, venture capital. Therefore it’s a very good idea to keep an eye on how they’re directing those capital flows.

Today, there are several levers that can be pulled, especially in Europe, in order to facilitate the growth of venture capital by making it a more attractive part of a multi-asset strategy from an institutional perspective. Israel’s Yozma program is a good example of how to do it well, while numerous Asian countries have had their own approach. One key, no matter what a given country decides, is to remember that it is critical to provide viable ways to show that liquidity is coming.

👉 Delve into the history of the subject as well as the current state of affairs in All About Multi-Asset Allocation.

🧲 Attracting Talent in Europe

In our times of transition, it’s only natural for people to move about in search of opportunity. Yet for all the talk about how nomadism is growing as a viable option, moving from one place to another is still very difficult, particularly for anyone who isn’t all on their own.

And so while many, including policymakers, recognize the potential benefits that can come from having talent choose their city or country as a new place to live, very little attention is paid to the real issues that block people from moving. These aren’t just related to administrative technicalities such as a visa; instead, the most difficult ones are related to very practical needs such as finding a home, opening a bank account, even getting a cellphone.

In Europe, there is also the language issue, since there are very few places where speaking English in the workplace is the norm, to say nothing of one’s daily life dealing with schools, shopping, interactions with neighbors, etc. While none of these problems are insurmountable, they are all critical and they all build upon one another. Solving the question of how to attract more talent will mean going far beyond quick administrative fixes, and towards a much broader buy-in on the part of society at large.

👉 My Tuesday thread this week sprang from a podcast discussion with Laetitia, resulting in Attracting Talent in Europe.

Sounds interesting? Subscribe to European Straits and let me know what you think!

🛠 In my latest contribution to The Family’s daily newsletter, I highlight an overlooked discipline in the startup world: product management. Check out A key part of your startup team.

🇫🇷 More podcasts with Laetitia on Nouveau Départ (in 🇫🇷)! Check out yesterday’s edition on Économie du football : la transition ? ⚽ as well as last week’s episode on Nomadisme en famille : pas si facile ! Also make sure to give a listen to Laetitia’s conversation with Marylène Patou-Mathis about the prehistory of women: La femme préhistorique gagne à être connue. 

From The Bright Future of Craftsmanship (September 2018): 

What does the future hold? If the key to individual happiness is no longer a work contract, then we must reinvent what work is about, and Laetitia thinks it should revolve around the values and principles of craftsmanship—autonomy, responsibility, and creativity. Hence the title of the book: Du Labeur (“From Labor...”, which denotes routine, alienation, and pain)... à l’ouvrage (“...to Craftsmanship”, which is all about self-determination, fulfillment, connections...and uncertainty). The norm used to be about being alienated along assembly lines while enjoying “the bundle”. Tomorrow, the norm might be about working on our own, just like craftsmen, yet being connected to others through networks.

All recent editions:

* Attracting Talent in Europe—for subscribers only.

* All About Multi-Asset Allocation—for subscribers only.

* Productive Fragmentation—for subscribers only.

* Chinese Tech w/ Lillian Li. Founder Control w/ Bill Janeway. Daniel Ek, Arsenal & the Super League.—for everyone.

* A Thread on the Super League—for subscribers only.

* All About Founders Being in Control—for subscribers only.

* Bill Janeway on Who Should Be in Control—for everyone.

* Productive Disagreements w/ Ian Leslie. Restructuring. Taxation. Velocity in VC.—for everyone. 

European Straits is a 4-email-a-week product, and all essays are subscriber-only (with rare exceptions). Join us!

From Munich, Germany 🇩🇪 

Nicolas

The Agenda 👇

* I spoke with The Diff’s Byrne Hobart about basically everything 🎧

* My latest Sifted column is about university spinouts—and Europe lagging behind

* Yahoo is slowly disappearing from sight. I wrote a new episode in my ‘11 Notes’ series

* As software eats the world, founders have to tackle tangible stuff: a few ideas on the matter

* Do you think journalists depict tech as the bad guy? What if we have the context to blame?

Today’s episode of Building Bridges is my conversation with Byrne Hobart, a hedge fund alumnus and investor who now writes the popular newsletter The Diff.

I have Eugene Wei to thank for recommending Byrne Hobart’s newsletter The Diff early during the lockdown in 2020. Byrne was already on my radar somewhat, so I jumped on the occasion and immediately subscribed to the extraordinary, dense, 5-email a week product that is The Diff.

I’m still enjoying it almost one year later because it spans the many different topics I’m interested in, from finance to economic development to industry deep dives to country focuses—with a few powerful recurring ideas and all the depth & breadth we should be looking for in our everyday reading. Should I mention that Byrne’s has become one of the most popular paying newsletters on Substack?

Before you go and explore The Diff, however, listen to the podcast 🎧 My contribution is just a few short questions, with Byrne sharing his thoughts at length on the following topics:

* Why he moved from New York to Austin, Texas during the pandemic, and what it’s like to homeschool your kids like he and his wife have been doing for months.

* His professional journey, what led him to write a newsletter, and whether writing on a regular basis makes him a better investor.

* Why he thinks The Social Network by David Fincher is the most important movie of all time—regardless of accuracy.

* The difference between hedge fund managers and venture capitalists, and what the latter could learn from the former.

* Why America’s financial system makes the country so strong and resilient, including from a global perspective.

* Why there are many things in common between a country that’s developing and a company that’s growing—and what happens at the end of that process.

👉 Listen to my conversation with Byrne Hobart in the latest episode of the Building Bridges podcast using the player above 👆 or on Apple Podcasts or Spotify.

The spark for my Sifted column this week was an op-ed in the Financial Times by Airstreet Capital’s Nathan Benaich centered on the poor performance of European universities when it comes to spinning out successful startups. Nathan’s opinion dovetails with my own, which is that European universities create too many administrative frictions, slow entrepreneurs down rather than speeding them up, and generally have the wrong idea of how startups can benefit the university and its researchers. This is a mentality problem, but perhaps one that can be rectified with a bit of history and a desire to do better.

👉 Read my column here: Universities should serve startups, not the other way around.

😢 11 Notes on Yahoo 

News came last week that what’s left of Yahoo is being sold to a private equity firm. Although it’s certainly not much of a household name anymore, Yahoo was one of the Internet’s early tech powerhouses, and there are many interesting aspects of its history that can illuminate both where we’ve been and where we’re headed. So many, indeed, that I dedicated this ‘11 Notes’ edition to the company.

For example, the different approaches taken by Yahoo and Google show the stakes in increasing quality in the face of increasing scale, as Yahoo’s emphasis on curation led to their being left behind at an exponential rate as the number of web pages exploded. Then there is Yahoo’s relationship with Asia, from an early expansion to a complicated situation in which its investment in Alibaba ended up being worth more than Yahoo itself (creating some awkwardness in terms of the company’s tax burden).

In the end, Yahoo may also become notable as being one of the last of those born in the dotcom era to disappear–with the others either long gone (Myspace, Netscape) or in no danger of leaving the stage anytime soon (Google, Facebook). Whether due to failures in leadership, missteps in international expansion, a missing connection with end users, or simply a large combination of factors, Yahoo’s presence over the past 30 years certainly merits reflection on its legacy in the Entrepreneurial Age.

👉 I went through it all in 11 Notes on Yahoo.

🛠 All About Stuff That’s Tangible

As software eats the world, it’s needing to digest industries that are more and more heavily marked by tangible goods. I was reminded of this recently as one of tech’s latest success stories, Peloton, was hit hard by the need to recall a large number of their connected treadmills. Peloton’s stumble shows how producing hardware impacts a company’s strategic positioning and its returns on invested capital.

My longtime readers know that one of the key elements guiding my thinking on this topic has been Amazon, as it bucked the trend of the early Internet era by going directly into the highly tangible, low-margin world of retail. Now, with online commerce having become firmly entrenched, much attention has been turned to manufacturing, where there is an entirely different equation to solve regarding building a business and making profits.

All in all, the need to confront the world of tangible things led me to my conviction that, as software eats the world, it’ll be needing help–digestive pills, if you will, to help it along. I believe that there are many opportunities for startups to grow in that field, and am excited to see how it will change the field of what many refer to as ‘deep tech’.

👉 Dig into the abundant food for thought in All About Stuff That’s Tangible.

🌬 The Media and the Context

For the past few years, there has been a growing sense (especially in the US) that tech has become the bad guy. But as a European, I’d sheepishly note that this seems to be one field in which our tech scene has the lead over the Americans: in Europe startups have long been characterized by many, including journalists, as threatening incumbents, destroying jobs, and not complying with regulations.

We at The Family have always had to work within this kind of antagonistic framework, whether directed at the startups in our portfolio or our firm itself. I myself ended up being sued for libel after saying the owner of the most powerful taxi company in Paris (G7) was a “gravedigger of innovation” (I did, however, win the case 😉). 

Thus having a different perspective than many in the US, I believe a bit of startup wisdom can be applied here. Namely, we know that finding product/market fit is a key inflection point, because literally everything in the startup changes: what was true before is no longer true, and what was useless or even damaging before can become a very smart move. Many in the tech world need to grapple with the fact that startups, and the tech world in general, have passed that inflection point, and as such their relationship with the media must be reinvented.

👉 My Tuesday thread notes some other key changes in The Media and the Context.

Sounds interesting? Subscribe to European Straits and let me know what you think!

🔥 Next Tuesday, The Family is hosting the First-Time Entrepreneur Summit, as founders tell the real story of what happens when you take the leap and start building. The full program and free tickets are available right here.

👀 In my latest contribution to The Family’s daily newsletter, I suggest founders be cautious as they seek advice from sources across the Atlantic: Read the context.

🇫🇷 More podcasts with Laetitia on Nouveau Départ (in 🇫🇷)! Yesterday’s edition was on Basecamp et la politique au travail, and then there’s last week’s episode on Les hunters et les settlers : nomadisme, 2ème partie. Don’t forget to give a listen to Laetitia’s conversation with Patricia Wendling about remote working: Télétravail : a-t-on tiré les leçons de la pandémie ?

From How Fred Terman Turned Stanford Into an Entrepreneurial Powerhouse (July 2020):

As pointed out by Steve Blank, Frederick Terman inspired the entire Stanford startup community with an obsession for building what customers want (echoing Paul Graham’s famous words). This is why, as stated by this great article in Scientific American,  to this day “Silicon Valley is [still] dominated by what we call the “need seekers,” companies that focus on discerning their users’ actual needs, both spoken and unspoken; figuring out how to meet those needs; and then getting the necessary product or service to market as fast as possible.”

And Terman designed and operated a self-sustaining system, with a flywheel turning so fast and churning out successful tech companies at such a high rate that it became a perpetual entrepreneurial machine, supporting the rise of many generations of highly successful tech companies—from Fairchild Semiconductor in the late 1950s to Robert Noyce and Gordon Moore’s Intel in the 1970s, Apple and Atari in the 1980s, Netscape in the 1990s, Google in the early 2000s, and then the likes of Facebook, Airbnb and Uber.

All recent editions:

* The Media and the Context—for subscribers only.

* All About Stuff That’s Tangible—for subscribers only.

* 11 Notes on Yahoo—for subscribers only.

* Economic Insecurity w/ Deborah Copaken. Productive Fragmentation. Multi-Asset. Talent.—for everyone.

* Attracting Talent in Europe—for subscribers only.

* All About Multi-Asset Allocation—for subscribers only.

* Productive Fragmentation—for subscribers only.

* Chinese Tech w/ Lillian Li. Founder Control w/ Bill Janeway. Daniel Ek, Arsenal & the Super League.—for everyone.

European Straits is a 4-email-a-week product, and all essays are subscriber-only (with rare exceptions). Join us!

From Munich, Germany 🇩🇪 

Nicolas

The Agenda 👇

* Laetitia spoke with historian Anton Howes about innovation and the Royal Society of Arts 🎧

* My essay published last week about the categories of ‘Diffracted Venture Capital’

* A Twitter thread lamenting politicians botching the vaccination campaigns

* Thumbs up/down for last week: female VC partners, university spinouts, the Paris ecosystem

* Five of my tips about how you can become more productive

There are a few institutions in London that no one interested in innovation can afford to miss, and one of them is the Royal Society of Arts (RSA). I’m not sure how my wife Laetitia and I first crossed paths with the many great people working there, but at some point we were quite engaged with the community.

* My first encounter, I think, was when I met Anthony Painter within a Fellowship we both participated in at the Oxford Internet Institute. Then on several occasions Laetitia and I were invited to contribute to the RSA’s Center for the Future of Work: see one of my contributions here, and Laetitia is now a member of the RSA Future of Work Advisory Board. Finally, following a co-optation by the late Miranda Bertram (who was my public speaking coach at the time), Laetitia and I both became Fellows of the RSA sometime in early 2018.

These are all the reasons I was amazed to discover that Anton Howes, the author of the newsletter Age of Invention, which I had been following with great interest from the beginning, was in fact the RSA’s ‘historian in residence’, and working on a book that has since been published: Arts and Minds: How the Royal Society of Arts Changed a Nation. Needless to say, when Anton and I recently interacted over Zoom (via the Entrepreneurs Network), I immediately followed up to ask him if he would be a guest on our Building Bridges podcast.

* He graciously agreed, and Laetitia interviewed him a few weeks later. Below is what she wrote on the Building Bridges website 👇

Anton Howes is fascinated with the process of invention and what fuels it. I recommend his Substack newsletter, Age of Invention, which is full of interesting pieces about “the origin of patents”, “the birth of the business corporation”, and the maritime technology of the late 16th century.

His current research focuses on why innovation accelerated in Britain in the 18th century, i.e. why the Industrial Revolution happened there and not elsewhere:

One of my key findings is that innovation is a practice that spreads from person to person. I argue that people became innovators because they adopted an improving mentality - and that Britain experienced an acceleration of innovation because its innovators were committed to evangelising that mentality further.

I asked Anton why Britain became the cradle of the Industrial Revolution, if it could have happened elsewhere, who were the entrepreneurs of that time, what motivated them, and what Britain’s institutional recipe was. And of course he talked about the RSA, this “extraordinary society that has touched all aspects of British life”:

From its beginnings in a coffee house in the mid-eighteenth century, the Royal Society for the Encouragement of Arts, Manufactures and Commerce has tried to improve British life in every way imaginable. It has sought to influence how Britons work, how they are educated, the music they listen to, the food they eat, the items in their homes, and even how they remember their own history.

If Britain prospered the way it did, it’s because it developed powerful institutions—norms, best practices & organisations like the RSA—to sustain that prosperity. That history is full of lessons for today as it helps us to understand how innovation works and how we can encourage it.

👉 Listen to Laetitia’s conversation with Anton in the latest episode of the Building Bridges podcast using the player above 👆 or on Apple Podcasts or Spotify.

💸 Diffracted Venture Capital: The Categories

The shift to the Entrepreneurial Age means many positions are being shuffled around, some moves being made earlier in the cycle, some later. One of the industries in which the ongoing shuffle has become quite evident lately is investing, as we’re seeing what used to be a relatively straightforward activity (‘venture capital’) become quite diffracted: VCs expand the scope of their operations and non-VCs push into areas where previously they would have never dared roam.

In a changing environment it’s a good idea to have a map to understand the lay of the land. But before that map can be made, we need accurate categories to describe the ways in which VC is being diffracted; to that end, I used last Thursday’s essay to begin listing the categories I’ve been noticing lately.

These categories are quite diverse, ranging from large-scale indexing (similar to what is being done on the stock market) to revenue-based financing that has emerged with the maturation of the SaaS model. That diversity is also reflected in the types of players involved, from traditional private equity firms to solo capitalists. All in all, it’s a signal that we really are in a world where startups can tackle virtually any industry, especially those that were previously seen as too difficult to break into. And it’s also a signal that there’s a growing need for ‘digestive pills’ that can help software continue eating the world 😋

👉 Read the whole Diffracted VC: The Categories (unlocked for everyone 🤗)

😀 The lack of female VCs in Europe was already pointed out in my What I Learned Curating 32 Editions of Capital Call, and Willy Braun and Vincent Touati-Tomas and I have built a Twitter list to try and have a more comprehensive view. Sifted is now adding firepower to the effort!

🙂 I once wrote that we needed more controversies if we ever wanted Europe to make progress on the tech front. Well, we just had a good one—on university spinouts! Check out Air Street Capital’s Nathan Benaich’s initial op-ed in the FT, my own contribution in Sifted, and this follow-up by Nathan, responding to Alice Gast, President of Imperial College London:

😏 In my essay on The Future of Wealth Management (April 2019), I was wondering if innovation in helping rich people staying rich would contribute to ending upward social mobility. As written by Chris Giles in the FT, we’re very far from it: Relax: trust fund kids are not taking over the world.

😐 In these times of botched vaccination campaigns in continental Europe, there’s a lot of talk about how startups could help governments deliver better public services. I liked this a lot—by Chris Yiu, of the Tony Blair Institute. Also, there’s this in Fortune: Investing where the government is falling short.

😒 Dragos Novac of the (excellent) Sunday CET wrote a whole section on the French entrepreneurial ecosystem and the fact that repeat founders tend to stay as far from it as possible. I couldn’t help but send him my views on the matter, which he quoted (with my permission) in his latest edition:

I think the most critical issue is the cultural and political inward-lookingness (for lack of a better word).

The key to early success in France is to pay tribute to the powers that be: bad angel investors, bad VCs, Bpifrance (the government's investing arm), corporates, even cabinet members (they'll invite you for dinner or events if there's local buzz about your startup), and of course Macron himself. At this point, you may have the impression that your startup is successful but:

* your cap table is a nightmare

* everyone in the company speaks French

* you're failing at international expansion

* in general, you're resting on your laurels

There are very few French founders who are aware of this trap. And those who are are in for a lot of pain, because France will make you pay for your desire to escape and look beyond its borders 😞 (and it'll be impossible to attract international talent anyway, so succeeding at outgrowing France usually means relocating elsewhere, typically the US).

😖 You may have noticed the recent controversy about Antonio García Martínez being abruptly fired from Apple because (?) of a few paragraphs in his (highly praised) semi-fictional book Chaos Monkeys. I don’t know Antonio well (we merely have friends in common), but I feel very sorry for what just happened to him—see my previous writings on related matters: cancel culture and workplace politics.

🏋🏻‍♀️ In my latest contribution to The Family’s daily newsletter, I reveal all my secrets for getting better at what I do everyday 😉 How to be more productive. 

🇫🇷 Nouveau Départ (in 🇫🇷): yesterday’s edition was on Qu'est-ce que la culture d'entreprise ? and last Thursday’s was on Taiwan : nouvelle ligne de front ? Also give a listen to my conversation with Thibauld Favre, CEO of our portfolio company Fairmint, about everything crypto: Tout sur les cryptos. 

From Munich, Germany 🇩🇪 

Nicolas

The Agenda 👇

* I spoke with Emily de La Bruyère about industrial policy in China—and how it’s a challenge for the West 🎧

* My Sifted column this week is about Tiger Global and the many deals they’re doing in Europe these days

* Thumbs up/down for last week, as well as recent news.

I first discovered Emily de La Bruyère, a US-based analyst focused on industrial policy in China, through Jordan Schneider’s ChinaTalk podcast. What she had to share was so enlightening I even dedicated an entire edition to it, Industrial Policy: China Gets It, We Don't (now accessible for all).

The key idea that stood out in Emily and Jordan’s conversation was the following:

What matters today is the applications of science and technology––the sort of networks you build with it.

For example, your ability to deploy telecommunications. It’s not that you got the patent; it’s that you’ve got its application internationally.

To do that, what matters is capturing scale and being able to build and deploy. If that’s what you’re going for, it’s okay to have a slight lag in when you get the patent and when you get the really cutting edge, as long as you can apply it to scale to the most people efficiently.

The Chinese orientation appears to be focusing on that rather than on basic R&D, which creates this tremendous asymmetry vis-à-vis the U.S. and really vis-à-vis the entire global system because there’s just a different competition underway.

And that absolutely changes how the U.S. can or should respond to the extent that this is a scientific and technological contest because it’s not a matter of just pouring resources into basic research: it’s about competing for applications.

Emily and I are following up on that in this new episode of the Building Bridges podcast. I was especially interested in her idea that the current industrial competition between nation states at the global level is happening in two dimensions:

* One is about securing control of essential resources, especially energy sources, which fosters a traditional zero-sum competition from a geopolitical perspective.

* But then there’s another dimension, which is about controlling networks and the data that flows  through them—which gives rise to a very different kind of competition globally.

I find that there’s no better lens to understand the current rivalry between the US and China in the tech space and beyond. In addition to these, Emily and I discuss the following points:

* How she ended up focusing on industrial policy in China, and what it’s like to study China from a distance, all based on open source material.

* Why international standards matter from an industrial policy perspective, and why it’s about much more than a spy game between great powers.

* What advice Emily would give if she joined the Biden administration to advise the US President on America’s competitiveness on the global stage.

* Why the West remains a thing, and why the US is better off counting on Europe as a strong ally as networks and data redraw the global map of power.

* Why we shouldn't rely on a Cold War framework when reflecting on the state of the world, and why all of this matters for entrepreneurs building companies on the ground in Europe.

👉 Listen to my conversation with Emily de La Bruyère in the latest episode of the Building Bridges podcast using the player above 👆 or on Apple Podcasts or Spotify.

⚠️ My column today in Sifted asks a few million (billion?) dollar questions: How is hedge fund Tiger Global’s blazing arrival on the EU tech scene going, and what will happen to the companies it’s investing in when today’s macroeconomic context of enormous amounts of capital reverses?

* It’s a fascinating example of how venture capital is being upended by the arrival of major players from other financial realms. I’m very curious to see how VCs that are active in Europe, especially tier-1 firms, react to this kind of unconventional investor, both now and in the future. 

👉 Read it all in Tiger Global: What happens when ‘normal’ returns? 📈📉

😀 Nathan Benaich of Air Street Capital is at it again! After an op-ed in the FT about European universities’ bad practices when it comes to spinning out startups (which in turn prompted my own Sifted column on the topic), he just shared the longer, more detailed version on his firm’s blog: 

* Related: Bessemer Ventures’s Gaby Goldberg’s thoughts about Stanford University and its relationship with the VC industry: After a decade of VC influence at Stanford, what’s next?

🙂 About that, an account of my previous writing on deep tech startups, a common friend recently introduced me to Massimo Portincaso, the chairman of Hello Tomorrow and a co-author of this recent report: The Deep Tech Investment Paradox: a call to redesign the investor model (highly recommend).

😏 My colleagues at The Family and I have long been convinced that European founders should focus on ‘hybrid’ startups bringing technology to traditional industries. Well, Roy Bahat and James Cham of Bloomberg Beta came up with a name for exactly that: “hot-swap startups”.

😐 Cryptos: there are booms, and then there are busts. But beyond  that, as I’ve argued many times in the past, there’s a dynamic that’s bringing about many innovations when it comes to network protocols, software architecture, and the financial system. My colleague Younès Rharbaoui, CFO at The Family, wrote about the implications in the realm of corporate finance: The DeFi Frontier.

😒 Corporate venture capital is a tough nut to crack, between the conflicting goals and the bad practices when it comes to leading investments and rewarding those who are in charge. Here are some nuances in Institutional Investor: Families Make Corporate VC Investments Better, Research Shows.

* Related: Check out this article about tech companies such as Stripe, Netflix, and Carta setting up their own CVC funds: Complements and Constraints. 

😖 Trump did a lot of bad things, and some of the things he broke may be beyond repair. But a positive aspect of his legacy is his ability to inspire engagement on the liberal side, be it on climate change, racial justice, or building liberal institutions in general (via Byrne Hobart): 2016: The Turning Point.

😴 I didn’t contribute to The Family’s daily newsletter this week, but make sure to check out my colleagues’ posts: Employee-friendly fundraising (by Balthazar de Lavergne) and 399 ideas that didn't work (by Oussama Ammar).

🇫🇷 Nouveau Départ (in 🇫🇷): yesterday’s edition was on Warren Buffett : une introduction🤑 and last Thursday’s was on Écriture : nos histoires & nos conseils📝 Also give a listen to Laetitia’s conversation with Fabienne Broucaret: Télétravail : le bon environnement💻.

From Industrial Policy: China Gets It, We Don't (October 2020): 

I don’t think you can understand China’s industrial policy if you don’t realize that it’s all pulled forward by the impressive growth of the Chinese tech giants. First, you need the downstream companies discovering new models and new usages and exploring new markets; then you can invest up the stream so as to ensure your nation’s competitive advantage in cutting-edge technology.

This doesn’t necessarily have to be consumer-facing companies. Back in the 1960s in the US, it was the military and the goal was to prevail over the Soviet Union. More recently, in the case of Huawei in China, we’re talking about a company that needs technological assets to deploy telecommunication networks rather than serving consumers. But whatever it is (public or private, consumer or enterprise), you need that direction provided from down the stream.

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(Credit: Franz Liszt, Angelus ! Prière Aux Anges Gardiens—extrait du disque Miroirs de Jonas Vitaud, NoMadMusic.)

From Normandy, France 🇫🇷 

Nicolas

The Agenda 👇

* Laetitia spoke with author and Financial Times columnist Simon Kuper about what cosmopolitanism means these days 🎧

* Thumbs up/down for last week, as well as recent news.

* All in all, this week’s a short one 😉

My first memory of Simon Kuper is a column he wrote in November 2013 in The Financial Times about The great middle-class identity crisis. It made a deep impression on me, as we had just started The Family in Paris. The structural shifts impacting the middle class that Simon had written about were the very same I was witnessing working with early-stage startups.

* By definition, a paradigm shift is all about a changing representation of the world, and a corollary is that we often lack words to describe what we do and who we are.

Here’s an excerpt from Simon’s foundational column:

That’s been the middle-class experience for ever: people have a professional identity. We are what we do. We choose professions that suit our identity, and then those professions enhance our identity… But that era is ending. With the economic crisis and technological change (robots are taking over the world), ever fewer of us have satisfying jobs or stay in the same profession for life. People are ceasing to be their jobs. That is forcing them to find new identities.

Over the years, I kept quoting this column over and over, including in my book Hedge (about designing a new social contract for the Entrepreneurial Age):

Today the vast majority of people in the West still identify as middle class. But the very concept of the middle class has evolved through time. When I grew up in the 1970s and ’80s, the cardinal value of the middle class was stability. Most people had a fixed place in the world and defined themselves through what they were doing in life.

As for today, being part of the middle class looks more like the main character in Steven Soderbergh’s Magic Mike: laboring during the day as a construction worker, making money as a stripper in night-clubs and private parties, and steadily describing himself as an “entrepreneur”.

As in the case of Magic Mike, gone is the sense of economic security that provided middle class workers with a clear identity. Now we live in a world where job situations are unclear. People are no longer certain about what the future holds or even what their occupation is. Is Magic Mike a construction worker, a stripper, or an entrepreneur? Nobody knows, and so he is forced to decide for himself—in what the Financial Times columnist Simon Kuper calls the “great middle class identity crisis”. 

All these years, I had no idea that Simon was in fact so close to my world: he had been living in Paris the whole time; he is married to Pamela Druckerman, whose best-selling book French Children Don't Throw Food (Bringing Up Bébé in the US) was often mentioned in French society (we can only rejoice in a book that makes the case that we French are better at raising children). And we’ve had common friends, such as the historian Patrick Weil.

* Then, more recently, my wife Laetitia read Pamela’s latest book There Are No Grown-Ups: A Midlife Coming-of-Age Story, after which she came to me and said “These people are like us in so many ways! We should really try and connect with them.”

Well, now it’s done: Laetitia just interviewed Simon, and I’m set to interview Pamela in just a few weeks. Below is what Laetitia wrote about her conversation with Simon on the Building Bridges website 👇

For this new episode of the Building Bridges podcast, I’m happy to share my interview with Simon Kuper, a British author, Financial Times columnist, and cosmopolitan intellectual whose latest book The Happy Traitor deals with the story of a British spy, George Blake, who defected to the Soviet Union.

Simon lives in Paris but is about to move to Spain with his family for a new experience of cultural immersion. We talked about building bridges across cultures, his multicultural life and identity, multilingualism, mobility… and a few other fascinating subjects (including football).

Many years ago, he moved from London to Paris surreptitiously because he thought his life had become “too comfortable” and he needed a bit of foreignness to make things more challenging. Thus he became a working-from-home pioneer, paving the way for future generations of mobile workers in search of foreign adventures.

Born in Uganda, raised in the Netherlands, educated in the UK, Kuper is convinced there’s no point in learning a language badly and sticking to superficiality. Instead you should go for excellence:

If you do learn a language, go for excellence. If you have children, immerse them in it from birth. Wall Streeters sending their kids to Mandarin-speaking preschools may be hilarious, but they are choosing the most efficient route (…) A multilingual person can be multiple people, inhabiting multiple worlds. As the linguist Nick Evans wrote, “we study other languages because we cannot live enough lives. It’s a multiplier of our lives.”

Incredibly productive during the pandemic, he has worked on multiple books. His latest book The Happy Traitor was published a few months ago. It deals with George Blake, “a one-man Netflix series, whose life tracked many of the dramas of the 20th century”:

When the 98-year-old double agent George Blake died in Moscow on Boxing Day, my biography of him was long since ready. (…) A Briton raised in the Netherlands, he was a teenage courier in the Dutch resistance, joined the British secret services, converted to communism while a prisoner in North Korea and became a spy for the KGB. He then sent dozens of agents working for Britain to their deaths. His crime so shocked Britain that when he was finally unmasked, in 1961, he was given the longest sentence in the country’s modern history — only to escape in a jailbreak so spectacular that Alfred Hitchcock spent his final decade trying to turn it into a film.

👉 Listen to Laetitia’s conversation with Simon Kuper in the latest episode of the Building Bridges podcast using the player above 👆 or on Apple Podcasts or Spotify.

😀 Foreign languages  are a topic I wrote about in the past (here and here), always mentioning the terrible thing that is dubbing foreign movies in the local language. Well, there’s room for progress: Can A.I. help Hollywood dub The Rock into another language? This startup thinks so.

🙂 I was pleased to be intermittently involved over the past years in the project A New Moral Political Economy led by Margaret Levi and Federic Carugati at Stanford University’s CASBS. The whole effort has now turned into a book, a free version of which is available until June 8 on the Cambridge University website (via Tim O’Reilly): A Moral Political Economy: Present, Past, and Future.

😏 In 2019 my colleagues and I hosted new media analyst (and CIA alumnus) Martin Gurri in Paris and London to discuss his book The Revolt of the Public. We’re now 7 years after the first edition of the book, and Martin just wrote a short sequel: The Establishment Strikes Back—For Now.

😐 The cloud is a good thing because it makes computing cheaper for businesses, right? Not so fast, write Sarah Wang & Martin Casado of Andreessen Horowitz in The Cost of Cloud, a Trillion Dollar Paradox. It explains why large companies such as Dropbox have moved away from AWS.

😒 More Dominic Cummings! Long gone are the days when he was tackling the challenge of reshaping the British state. Now that that state has utterly failed countering COVID-19, Cummings tried to explain to Parliament why: read details here and Ian Leslie’s commentary here. 

😖 Is it 2020 all over again? Now that many think the pandemic is over, people in the West have stopped taking precautions, even though they’re not vaccinated. It might lead to a new wave of infections, this time affecting primarily young people: Covid-19: UK in early stages of third wave - scientist.

🦊🦁 My colleagues’ posts in The Family’s daily newsletter this week: The courage in choosing (by my colleague Alice Zagury) & What's changed in entrepreneurship? (by my colleague Oussama Ammar). 

🇫🇷 Nouveau Départ (our small French-speaking media operation): give last week’s edition about Royaume-Uni : le parti travailliste est-il fini ?  a listen; also check out Laetitia interviewing Judith Aquien about La grossesse : nouvelle frontière du féminisme.

From What Language Should Startups Speak? (November 2019):

I’ve long been obsessed with foreign languages. I grew up speaking only French, then had hours of useless language classes in high school. Later, I got rather serious with learning German. And now I obviously can speak and write in English, but I often have to pause to reflect on how best to convey my thoughts; I make the occasional mistake (which my colleague Kyle is kind enough to correct when it’s in written form); and I’ll never be able to speak with a perfect accent, which is a shame (and a bit of a mystery—why are accents so difficult to erase?).

Maybe I could have done better. It’s true that I never lived outside France until the age of 21, and my family never travelled much. Yet several relatives have always lived abroad. And as I grew up, my grandfather Xavier, a devout Catholic, was dutifully learning Italian from his home in Normandy so as to be able to read L'Osservatore Romano and to listen to Radio Vaticana! So I didn’t lack role models—people close to me who were mastering foreign languages.

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(Credit: Franz Liszt, Angelus ! Prière Aux Anges Gardiens—extrait du disque Miroirs de Jonas Vitaud, NoMadMusic.)

From Munich, Germany 🇩🇪 

Nicolas

The Agenda 👇

* I spoke with investor Saul Klein about European tech and the New Palo Alto 🎧

* My latest column in Sifted is about the capital deployed in grocery delivery startups

* Thumbs up/down for last week, as well as recent news.

I’ve been connected to Saul Klein for quite some time, because he was a partner at Index Ventures when the VC firm invested in my firm The Family in 2013. But I really got to know him after I moved to London in 2015. His name simply kept coming up as the person I should meet.

* Someone even told me “Saul is the London version of you”. I must say I’m lagging far behind in terms of track record, but it’s true Saul and I have many shared interests: not only startups, but also ecosystem building, the geography of entrepreneurship and venture capital, and the many (and overlooked) interactions between the worlds of tech and policy.

There’s a reason Saul’s name is mentioned so often in London, indeed. He was present at the creation of the contemporary UK tech system, as the founder of Lovefilm and an active angel investor. He then joined Index Ventures, arguably the most accomplished European VC firm, as a partner, before founding his own firm, LocalGlobe, with his father Robin Klein—another prominent figure in London tech.

* In between, Saul was also instrumental, as a cofounder, in launching projects as diverse and impressive as Seedcamp (one of Europe’s most successful seed funds), Zinc (a mission-driven firm that aims to tackle societal challenges), and Newton (a training program for VCs, LPs, angels, accelerators, and tech transfer officers worldwide).

Needless to say he and I talked quite a lot over the years about many tech-related topics. Our conversation in this podcast, however, is focused on something that really stands out in my view: LocalGlobe’s investment thesis, which I wrote about in On Trains and Geography (October 2020), 

Part of Saul’s investment thesis is that his firm should invest in tech startups within a 4-hour train ride from London—which includes cities as diverse and interesting as Cambridge, Manchester, Paris, Brussels, and Amsterdam. Here are his arguments:

* 4 hours is far from being a random number. It’s enough time to reach a given destination without being away from the office for too long. You can travel 4 hours to your destination, have a 2-hour meeting, and then travel back to sleep in your own bed, back with your team the next morning. (A bit extreme, but it’s doable.)

* You can actually be productive when traveling by train. Not only is it easier to get an Internet connection when on a train (either through wifi or 4G), but traveling by train also comes with many fewer interruptions than traveling by plane.

* Finally, Saul’s is a bet on the future. From what he told me, he expects plane travel to be less and less tolerated in a business context due to climate change, and at some point governments could decide to revisit the whole cost structure (from tax and other perspectives) so as to make planes more expensive...and trains cheaper.

A key implication of this thesis is that tech people in London and Paris, which despite Brexit are still well connected by the Eurostar, can work on building The New Entente Cordiale 🇬🇧🇫🇷 (in reference to a famous episode in the history of European diplomacy): merging the two ecosystems into one, building on each city’s relative strengths and advantages and ultimately building what Saul calls the “New Palo Alto”. It’s a compelling vision which, I believe, really deserved an in-depth conversation!

In the podcast we also touch upon the following:

* How Saul came to work in tech, what he saw in the growing London ecosystem over the years, and his vision of venture capital as a business.

* LocalGlobe’s office, Phoenix Court, and why Robin and Saul decided to settle in the London ward of Somers Town.

* David Ben Gurion’s lesson on innovation, and why Europe, long a frontier market, is finally becoming an emerging market.

👉 Listen to my conversation with Saul Klein in the latest episode of the Building Bridges podcast using the player above 👆 or on Apple Podcasts or Spotify.

(For unknown reasons, the sound is rather bad on my end (microphone saturation) but I did as much as I could to mitigate it, and Saul’s doing most of the talking anyway 😉 Enjoy!)

Even within a generally hot fundraising environment, one sector has stood out in the EU tech scene lately: grocery delivery. Some might look at it as just another part of a broader bubble, but I think there’s something else going on: namely, investors have realized that the narratives that dominated just 5 years ago, such as that around Uber’s presumed destiny as a global leader, have not come to pass. As such, they’ve seen that there’s room in various markets for great companies—and grocery delivery is one sector where that is being borne out.

👉 Read it all in my latest column for Sifted: How much is too much when investing in grocery delivery?

😀 A new essay by Jerry Neumann about uncertainty in entrepreneurship! It’s a topic I covered a lot in the past, and this time it’s been prompted by a guest post by Bill Janeway in my own newsletter. Go and read Jerry’s Embracing Uncertainty in Entrepreneurship Pedagogy.

🙂 The Great Fragmentation, as illustrated by… football. Europeans and Americans still see Asia as the market they need to conquer so as to scale up their business. I still think there’s something there, but in football it’s not working so well: Football’s relentless search for the ‘Asian fan’

😏 There’s this idea of the “Red Queen hypothesis”: the fact that in the Entrepreneurial Age, constant innovation is mandatory if a business wants to stay in the game and not go bust. Here’s an illustration: Microsoft stumbling with Skype and missing the COVID-19 opportunity that Zoom ultimately seized.

😐 Remember the passion economy? I wrote about it here. And you might know that the craft beer movement has long been the most analyzed case study in that field. Alas it seems to not be going so well at the moment: Britain’s craft brewers forced to confront sober reality. Also read this in-depth piece.

😒 Here’s an in-depth discussion by The Economist on how and why Europe is lagging behind in the global corporate world, all accelerated by the shift to the Entrepreneurial Age. Sad, but definitely worth a read (contrasting with Saul’s optimism): Europe is now a corporate also-ran. Can it recover its footing?

😖 Last year I wrote about startups tackling the challenge of making construction cheaper, faster and more convenient. Well, the flagship company in that space, Katerra, just filed for Chapter 11, which I think will mark an acceleration of the shift 🤔 Read it all in Axios.

🦁 My colleague Oussama Ammar’s post in The Family’s daily newsletter this week: How do you know when your startup idea has failed?

🇫🇷 Nouveau Départ (our small French-speaking family media operation). Check out my conversation with writer Gaspard Koenig about spending half of 2020 crossing Europe on horseback 🏇 and the liberal tradition in France: La liberté après la crise.

From Notes on Britain in the Entrepreneurial Age (June 2020):  

It took the financial crisis to change the situation in the recent period. So many bankers lost their jobs and were suddenly deprived of the perspective of getting rich quick that they had to consider founding a startup—which, although ridden with uncertainty, can generate great wealth. Hence a certain archetype on the London tech scene: the former banker attracted by the hype in financial services who then jumps to the next big thing (startups) and successfully raises capital from his (it’s almost always a “his”) former colleagues with a clean-cut business plan backed up by detailed spreadsheets 😅 (This is made all the easier because the infamous EIS, despite its obvious flaws, hedges angel investors against any downside.)

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(Credit: Franz Liszt, Angelus ! Prière Aux Anges Gardiens—extrait du disque Miroirs de Jonas Vitaud, NoMadMusic.)

From Munich, Germany 🇩🇪 

Nicolas

The Agenda 👇

* Laetitia spoke with author and speaker Sophie Wade about everything future of work 🎧

* A new “Long Read” format: first up on the list is Formula 1 🏎 (in progress)

* Thumbs up/down for last week, as well as recent news.

For the latest episode of the Building Bridges podcast, Laetitia interviewedSophie Wade, a speaker, writer (and podcaster) about the future of work, who is the author of the bookEmbracing Progress: Next Steps for the Future of Work. Here’s what Laetitia wrote on the Building Bridges website:

Sophie was born in England but now she lives and works in the US. She lived in many countries before that, therefore she has a multicultural approach to the subject that I was especially drawn to. She worked as a consultant with numerous executives and acquired a broad, deep knowledge of work-related issues, such as corporate culture, recruiting talent, leadership, transformation and now “hybrid work” and how to make it right. We talked about all these subjects that are part of my own daily research too. She is adamant: working with empathy is the future!

What’s the most unexpected work-related transformation brought about by the pandemic? What does “hybrid” look like? What are the challenges associated with it? How do we make the workplace more inclusive in this day and age? How should leadership evolve? How does one change their mindset to become “future proof”? And how much of all this talk about the future of work is determined by culture? What can intercultural comparisons teach us?

A few years ago she published this book titled Embracing Progress in which she presents empathy as the solution to a lot of the problems faced by organisations. When it comes to leadership, for example, the battle between ego and empathy is the single most decisive battle. It involves “shifting identity and choice”:

The “ego” of the emerging brand of leadership is not the “command and control” type of autocrat that this word has evoked in the past. Now, it’s more about empathy—creating an environment based on trust and respect—in order to engage the workforce and improve employee ego, stimulating self-awareness and self-worth. Ego here is also about the company’s identity, the values and purpose that the leadership aligns with.

When leaders understand the identity of their company and the workers that comprise it, leading people is more about engaging and guiding them. Values echoed by the leaders of a company offer a clear and more “natural” direction for the workforce to follow in their own actions, relating to everything from daily tasks to long-term goals and career planning.

👉 Listen to Laetitia’s conversation with Sophie Wade in the latest episode of the Building Bridges podcast using the player above 👆 or on Apple Podcasts or Spotify

As announced a few weeks ago, soon I will relaunch the long-form 10- or 11-point essays that many of you have enjoyed in the past. It will be occasional (I expect a monthly frequency on average, in addition to the weekly edition) and will cover a broad range of topics related to the Entrepreneurial Age, viewed from Europe.

The one I’m working on at the moment is “11 Notes on Formula 1” 🏎

Like almost everyone I know, I’ve been watching and enjoying Netflix’s Drive to Survive. It pushed me to go much deeper: going down the rabbit hole of F1 YouTube, listening to related podcasts, speaking a bit with experts I’m connected with, such as former podcast guest Toni Cowan-Brown, and realizing that a lot of what’s happening in the F1 world resonates with what we tech people have become accustomed to.

Below is the provisional list of notes I’m currently drafting:

* A manufacturer’s championship. You may primarily know about the drivers, but it’s the cars that make all the difference—and the various manufacturers taking part in the competition are required to design and build key parts of the car themselves.

* What about the drivers? Yes, they’re very popular, extremely competitive, and certainly accomplished athletes—but the harsh truth is that, contrary to other disciplines in motorsports (again, it’s a manufacturer’s championship), they’re only as good as their cars.

* The role of regulation. F1 provides the perfect illustration of the concept of a “neck-and-neck firm”—a business which, when confronted with pressure and challenges, doubles down on innovation. This is exactly how the best teams react to the FIA tightening regulations.

* An entrepreneurial ecosystem. Did you know that there is such a thing as Motorsport Valley? It’s located around Oxfordshire and the Midlands in England, and its very existence explains why Britain is the core of F1 (notwithstanding the occasional French term: grand prix, parc fermé).

* The importance of process knowledge. Usually when there’s such a thing as an entrepreneurial ecosystem, the pieces fit together thanks to people passing process knowledge from one to another. This is a very important feature in a manufacturing world such as F1’s.

* The importance of feedback loops. In an ecosystem in which process knowledge makes all the difference, it is absolutely critical for a firm to intensify said knowledge and circulate it as quickly as possible on the inside. This explains the downfall of certain teams recently.

* The dependence on the supply chain. There are many innovations that don’t endure in F1 because it’s impossible for the manufacturer that’s trying to race forward to force innovation on suppliers up the stream. As is often the case, the first-mover advantage is a myth!

* And then there’s Ferrari. It’s different in many respects, obviously because it’s located in Italy rather than the UK, but also because it’s strengthened by its position as a full-stack manufacturer that builds both the engine and the chassis—and its domestic base of supporters (the tifosi).

* The audience. F1 was a fringe discipline in the sporting world until a guy named Bernie Ecclestone forced it onto everyone’s small screen. It made the sport accessible to literally billions and radically changed the business equation. But what about the transition to social media?

* We need to talk about the US. Just like football (well, soccer), F1 is extremely popular all around the world, except for the US (whose audience seems to be more interested in disciplines such as NASCAR and IndyCar). Why is that? And can we expect changes in that regard?

The 11th note is always a reading list, of which I’m happy to share an extract here to tide you over (thanks to Toni for most of these links 🤗):

* Britain's Motorsport Valley – the home of Formula 1 (Lawrence Barretto, BBC, June 2013)

* Business lessons from Formula One (Alessandro Marino, ResearchGate, October 2015)

* The Top 50 F1 drivers of all time, regardless of what they were driving (Mike Hanlon, New Atlas, May 2016) 

* Being a Formula 1 Tire Supplier Takes Far More Than You Ever Imagined (Máté Petrány, Road & Track, September 2016) 

* Business isn't rocket science; it's formula 1 (Rafael Aldon, VenturesOne, March 2018)  

* The game changed and they didn't: The true cause of Williams' decline (Dieter Rencken, RaceFans, March 2019)

* The Motorsport Valley®: The biggest hub of motor racing in the world (Williams Johnson, Medium, July 2019) 

* Driving Growth: 5 Marketing Lessons From Formula 1® Racing (Yannick Bikker, Start it up, August 2019)

* Idée fixe 4.1: Formula One (Toni Cowan-Brown, Idée Fixe, June 2020—see also part 2 & part 3)

* Engineers, not racers, are the true drivers of success in motor sport (The Economist, October 2020)

* F1 - the plane that never takes off (podcast—Toni Cowan-Brown & Benedict Evans, Another Podcast, November 2020)

🎧 Also I plan to invite Toni back on the Building Bridges podcast to go through the whole discussion with her, so expect more than one round on this fascinating topic and its relationship to tech startups.

😀 Sajith Pai’s in-depth writeup about India’s entrepreneurial ecosystem made a big impression on me a few months ago (and I wrote about it here). Sajith just published another great essay about an entirely different matter: 'Exhaust Fumes', or, Understanding Startup Valuations.

🙂 Here’s a phenomenal Twitter thread by Steven Sinofsky, formerly at Microsoft, about the emergence of remote work and the future of work in general:

😏 Sometimes you read an article and learn a new word or concept that you can then put to great and frequent use. Today it’s “toxic positivity”, which comes from Sophie Lawson via Ian Leslie (in this case, about women’s football). I immediately thought about the Paris tech scene. Everything’s going well there, right? Especially with all those unicorns lately. Well, no, everything doesn’t always go exactly well, and it would go better if it was possible to say so, which it isn’t—and that’s “toxic positivity” for you 😨

😐 I’m always on the lookout for interviews with Marc Andreessen, not least because they’ve gotten so rare recently. But here’s a recent and VERY bizarre one (which Tyler Cowen says is authentic): The Dubrovnik Interviews: Marc Andreessen - Interviewed by a Retard.

😒 I wrote a long-form essay about Y Combinator last year. Some of the latest news about it centers on the apparent internal tensions around what can and can’t be said by members of the founder community. Here’s an overview in TechCrunch: Does what happens at YC stay at YC?

😖 I already mentioned Katerra last week—the SoftBank-backed company that was supposed to disrupt construction and is now bankrupt. Here’s a long inside look by a former employee (via Byrne Hobart)—interesting strategic deep dive: Another Day in Katerradise.

🦁 My colleague Oussama Ammar’ post in The Family’s daily newsletter this week, quite simply a book reading list for the summer: Summer is coming! 📚

From 11 Notes on Goldman Sachs (May 2017): 

What’s remarkable is how much Goldman Sachs enables innovation with specific features when it comes to design and architecture. First, there’s the managerial legacy of John Whitehead, a key contributor to making more room for innovation through scientific management and designing virtuous financial incentives for employees. Second, there’s the strong, cohesive culture that enables the retention of talent and more fluid communication: together these make it easier for the firm to move toward unknown territories. Third, there’s the preference for innovation rather than entrenchment every time that Goldman Sachs is facing danger or uncertainty. In that regard, Goldman Sachs is really what Philippe Aghion calls a “frontier firm” or a “neck-and-neck firm”, one for which “competition may increase the incremental profits from innovating, and thereby encourage [innovation] aimed at ‘escaping competition’.”

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(Credit: Franz Liszt, Angelus ! Prière Aux Anges Gardiens—extrait du disque Miroirs de Jonas Vitaud, NoMadMusic.)

From Munich, Germany 🇩🇪 

Nicolas

The Agenda 👇

* I spoke with Nils Gilman of the Berggruen Institute about intellectual history and the state of the world 🎧

* Thumbs up/down for last week

* Thread of the week: about productivity and work-life balance

* A new essay by Younès Rharbaoui about “time-variant business models”

For the latest episode of the Building Bridges podcast, I interviewedNils Gilman, who leads the research program at the Berggruen Institute, a think tank based in Los Angeles and Beijing.

Nils and I met in February of last year at Tim O’Reilly’s Social Science Foo Camp. We had an initial discussion in which I discovered that I had read his book Mandarins of the Future, an intellectual history of modernization theory—the framework designed by the US government in the 1950s and 1960s to offer countries in the Global South a capitalist path to prosperity. For several years now I’ve been interested in everything that relates to economic development, the global economy, and America’s role in the world. Therefore it was easy for Nils and I to connect and exchange ideas!

Indeed, Nils’s expertise in intellectual history was one reason why I wanted to have this interview with him. As software is eating the world, there’s necessarily much focus on entrepreneurs and the companies they build. What people don’t realize, however, is how much beliefs, perceptions, frameworks and, more generally, ideas determine the direction in which our economy is headed as we shift from the Fordist Age of the 20th century to today’s Entrepreneurial Age.

* A new paradigm, after all, is nothing more than a new representation of the world. It’s not the world that changes as much as the way we see it—and the words we use to describe it!

In this regard, I was very interested in the part of the conversation in which Nils describes the interactions and differences between “modernization theory” (the framework he discusses in his book), the strategy that was actually implemented by successful Asian countries such as Taiwan and South Korea in the 1970s, the neoliberal “Washington Consensus”, and the relevance of it all in today’s world. 

* As it turns out, there’s a collective job to be done: the world might only change slowly and at the margins, but our representation of it needs a radical upgrade!

And then there’s more to our conversation. On top of being a historian, Nils has had a career that spans across very different worlds and disciplines: the tech industry, in which he spent several years some time ago; national security, a field in which he co-founded a consulting firm in the wake of 9/11; and higher education, in which he once served as chief of staff to the Chancellor of UC Berkeley.

* Today, Nils puts his experience and knowledge to great use in tackling problems as head of research at the Berggruen Institute, focusing not necessarily on the most pressing problems of our time (like climate change), but rather on problems that are so elusive that we don’t even have the right words or frameworks to analyze them and understand them—as is the case with the declining legitimacy of democratic systems, for instance.

All in all, there was some very broad ground Nils and I could cover, and one hour wasn’t nearly enough. In our conversation, we also discuss the following:

* Nils’s birth in Denmark, his fluency in the language, and what it was like to discover that he speaks Danish “like the Queen” (which is not necessarily meant as a compliment).

* Why criminal organizations excel in arbitraging our cross-countries differences in legal norms and moral values—a phenomenon he calls “deviant globalization”.

* The respective positions of the US, China and Europe on the global stage, and the challenges that each region must tackle if it wants to succeed moving forward.

* Why the current transition calls for a new social contract and why Nils, along with his colleague Yakov Feygin, thinks we must build a new “mutualist economy”.

Here are the various ways in which you can dig deeper into Nils’s work:

* His book Mandarins of the Future: Modernization Theory in Cold War America (2007). 

* The (excellent) magazine Noéma, published by the Berggruen Institute, of which Nils is the deputy editor. 

* A few works by him that I liked a lot: The Twin Insurgency (The American Interest, 2014). The Official Future Is Dead! Long Live the Official Future! (The American Interest, 2017). The Long Shadow Of The Future (w/ Steven Weber, Noéma, 2020). Governing In The Planetary Age (w/ Jonathan Blake, Noéma, 2021). Who Controls The Past Controls The Future (Noéma, 2021). 

* His newsletter Small Precautions and, of course, his Twitter account—a place where he’s very active and doesn’t hold back.

👉 Listen to my conversation with Nils Gilman in the latest episode of the Building Bridges podcast using the player above 👆 or on Apple Podcasts or Spotify 🎧

😀 I loved this recent Bloomberg article by Karl Smith about the radical shift that’s happening in the US housing market. In short, the market has been made more liquid by tech companies such as Zillow and Opendoor. The ‘downside’ is that houses get more expensive (liquidity premium!) and, more and more, only institutional investors can afford them—which is why renting might be the future.

🙂 More interviews with Marc Andreessen! Here’s one (in written form) with Noah Smith (who was my guest on the podcast a few weeks ago), another (audio) with Patrick O’Shaughnessy as part of the Invest Like the Best series, and a third one (written form) by Antonio García Martinez of The Pull Request. Enjoy!

😏 About the Diffraction of Venture Capital, I was interested in this Financial Times article about Baillie Gifford, a Scotland-based investment firm that makes tech-related bets on public markets. It’s interesting for two reasons: it’s made in Europe, and it’s happening on public markets—far away from the small, opaque and illiquid world of traditional venture capital.

😐 A new chapter in the series “Our Elite Is Failing Us”. Martin Gurri, the author of The Revolt of the Public and once a guest of mine at The Family in 2019, published a new essay about scientists not being better than the rest of the elite in sharing information and interacting with the public. Read it here: The Enemies of the Open Society - Discourse. 

😒 Wealth anti-management. A few years ago, I asked myself a question: if the wealth management industry keeps innovating, does that mean that wealthy families will stay wealthy forever? (Read my answer in The Future of Wealth Management.) In fact, however, there are many reasons why wealth evaporates over time. Here’s one: Rich professionals are scammers' favourite targets.

😖 We’ve seen this in Europe: the harsher the US gets on its own tech companies (see my column last week in Sifted), the more legitimate European democratic governments feel in implementing tough regulations that apply to the tech sector in general. Well, now it’s happening in authoritarian countries, too: Facebook, Twitter Critics in US Are Giving Ammunition to Authoritarian Leaders.

🕰 My colleague Younès Rharbaoui has a new edition of his Chasing Paper. Taking its impetus from the new series Loki, he thinks about how companies prosper by exploiting the potential of cross-border and/or time-sensitive arbitrage to discover business models that nobody thought were possible. Check it out (and the examples, including our own The Family) in Time-variant business models. 

From Marc Andreessen's Latest Lesson in Strategy (August 2018): 

The deepening of strategic thinking is always a sign of the maturity of a techno-economic paradigm. In his masterful The Lords of Strategy, Walter Kiechel tells the story of the big thinkers who revealed the complex secrets behind corporate success in the 20th century. But there are striking differences between the past age of the automobile and mass production and the current Entrepreneurial Age when it comes to strategy. Many of those can be found in the discipline itself, which has been radically reshuffled. Some differences also exist in the speed and ways strategic thinking is reaching maturity.

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From Munich, Germany 🇩🇪 

Nicolas

The Agenda 👇

* Laetitia spoke with Bloomberg Beta’s Roy Bahat about everything future of work 🎧

* My latest column in Sifted is about publicly traded VC firms in Europe

* Thumbs up/down for last week

* Recently unlocked essays from the European Straits archive

For the latest episode of the Building Bridges podcast, Laetitia interviewed our friend Roy Bahat, an SF-based venture capitalist with Bloomberg Beta and an inspiring leader on the future of work. Here’s what she wrote about their conversation:

For this new episode of the Building Bridges podcast, I’m excited to share my interview with Roy Bahat, who as the Head of Bloomberg Beta has been “obsessed with how we make work—the thing we do with more waking hours than any other—better”. He’s been an inspiration for me at least since I watched this video in which he speaks about two key drivers for workers: “Stability and dignity”.

Roy is used to making short, insightful and actionable pieces of content about work, careers, entrepreneurship and personal development. I recommend his series of to-the-point #thisisnotadvice interviews which you can watch on Twitter. They cover a wide range of topics like “Should I mentor someone and, if so, how do I do it?”or “How can I be the type of founders that VCs want to fund?”.

But I confess I wanted more time with him. I wanted to hear him in a longer format so he could tell his career story, what it means to be a VC specialised in the future of work and so we’d still have time left to speak about the future of work and how we can prepare for it. I’m so grateful he accepted!

As he explains in this podcast, he hadn’t planned to become a VC, let alone one who focuses on the future of work! But after doing tons of reading, talked to thousands of people and given the subject a lot of thought, you could say he’s become quite the expert. (More exactly, he’s reached that level of expertise where you become humble again. It’s a bit like Japanese martial arts: when you reach the highest level, you can wear a white belt again like a beginner!)

I simply love how he adresses the most simple yet profound questions. Here’s how he sums it all up neatly on his LinkedIn profile:

I've had a messy, hand-wringy career (in non-profit, professional services, city government, big media, video games, academia, day-zero startup, investing), where I was never hired for any job for which I was qualified (including starting a company, where I guess I sort of co-hired myself and was still unqualified). Only later did I realize the one thread that tied it all together -- making work better.

In 2013, Bloomberg L.P. gave me the opportunity to turn my obsession with the future of work into my job when we created Bloomberg Beta. I believe the fastest way to make change is to build extraordinary technology companies (and, these days, machine intelligence companies in particular).

We talked about a lot of things, including feminism and why it’s important to embrace it. Among the many themes covered were also the skills of the future. How do you make yourself “futureproof” in a fast-changing world? I asked him because in his book Futureproof, NYT journalistKevin Roose thanks Roy profusely for the inspiring conversations he had with him. (Check out this article I wrote about the book.) Here’s Roy’s conclusion:

How do we prepare? Most of the past thinking about preparation for the future that I learned growing up what “point preparation”—”here’s what the world’s going to be like: prepare yourself for it” (…) But if you believe that the pace of change is going to be more rapid, then learning is the most essential skill, rapid reinvention… In the tech world, I call this being the CIO of your own life… constantly looking for new tools and trying to integrate them and experiment with them. Another one is setting your own priorities. We don’t learn in school that this is a skill. The third one is the scientific method applied to everything around us. If the world is going to keep changing, scientific method is our best way of understanding how.

👉 Listen to Laetitia’s conversation with Roy Bahat in the latest episode of the Building Bridges podcast using the player above 👆 or on Apple Podcasts or Spotify.

Normally when we talk about startups and IPOs, it’s in the context of which VC firms have won a big payday after making a bet on a company that grew large enough to go public. In my Sifted column this week, I look at a situation that reverses the roles a bit: VC firms that themselves go public, raising money from public markets and thus giving access to VC performance to a wider swath of investors. While it’s still a relatively rare occurrence, I believe we’ll see it happening more and more, all part of venture capital taking a more central role in the financial services industry.

👉 Read more in Startups IPO. Why shouldn’t VCs?

😀 Lots of interesting discussions recently over turning traditional companies into tech companies. It’s a topic I’ve covered a lot (see All About Shifting Patterns Across Industries). More recently I was interested in Dealroom’s report about Corporate Innovation in the Entrepreneurial Age and the latest episode of Another Podcast w/ Toni Cowan-Brown & Benedict Evans, about digital transformation 🎧

🙂 A while ago I wrote about the opportunities that European founders should pursue in Asia: read Should European Founders Look to the East?, as well as Martin Pasquier’s reaction in Another Round on Expanding in Asia (both unlocked). It turns out one of our portfolio companies, WeMaintain, just applied the playbook: Are Asian markets the secret to European proptech success?

😏 Lego is one of the most fascinating companies around—especially from a European perspective! Last year I contributed to covering it with my 11 Notes on Lego. More recently, there were lots of echoes in the media about their move to recycle plastic and turn the legendary bricks into more environmentally-friendly stuff. See Lego's lesson in innovation (Financial Times).

😐 I didn’t comment much on the Chinese Communist Party celebrating its 100th anniversary, but you can definitely find many pieces of background history. Here are some that are worth your attention: China’s Leaders – from Mao to now (The Guardian); The Chinese Communist party: 100 years that shook the world (The Guardian); and my own Primer on the Chinese Communist Party (unlocked) 🇨🇳 

😒 Andy Jassy has now succeeded Jeff Bezos as Amazon’s CEO. You can read related articles in the Financial Times, the Wall Street Journal, and Bloomberg, as well as my own 11 Notes on Jeff Bezos (unlocked). Also read this illuminating blog by Steve Blank about what happens when the visionary founder passes the baton: Why Tim Cook is Steve Ballmer and Why He Still Has His Job at Apple. 

😖 Maybe it’s simply me succumbing to the gloom that accompanies the never-ending COVID-19 pandemic, but I find that the awareness of climate change and its catastrophic consequences has gone up to eleven, and it’s definitely affecting everyone’s morale. Have a look at this in the FT: How to cope with the climate apocalypse. And this, by the ever-gloomier Umair Haque. And this about Europe. 

📚 Since the paid version of European Straits has been discontinued, I’m gradually unlocking the entire archive so that everyone can read and share. It’s not systematic in any way, but rather I unlock essays when they’re relevant and I want to quote them either here or on social media.

Here are the ones that you can now discover if you weren’t previously a paying subscriber:

🇬🇧 Notes on Britain in the Entrepreneurial Age (June 2020) 

💰 Notes on Revenue-Based Financing (July 2020) 

🇨🇳 A Primer on the Chinese Communist Party (September 2020)

🌏 Should European Founders Look to the East? (October 2020) 

🇨🇳 Industrial Policy: China Gets It, We Don't (October 2020) 

🏗 Why Software Has a Hard Time Eating Construction (October 2020) 

🇪🇺 European Tech's Forgotten Stories (November 2020)

🌏 Another Round on Expanding in Asia (November 2020) 

🗺 Business Strategy at a Small Scale (January 2021)

🇮🇳 A Great Writeup About India's Startup Scene (January 2021)  

👨🏻‍🦲 11 Notes on Jeff Bezos (February 2021) 

🕰 "Be Patient" | A Conversation About Angel Investing w/ Pascal Levy-Garboua (Part 1 & Part 2) (February 2021) 

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From Munich, Germany 🇩🇪 

Nicolas

The Agenda 👇

* I spoke with Toni Cowan-Brown about everything that’s changing in F1 🎧

* Thumbs up/down for last week

I’m very happy to publish what will be the last episode of the Building Bridges podcast this season: a wide-ranging conversation with Toni Cowan-Brown about the fascinating world of Formula 1 🎧

Toni is the first repeat guest on Building Bridges, since Laetitia already interviewed her a few months ago about being a European in Silicon Valley. Being a Nation Builder alumnus, Toni’s main focus is the intersection of tech and politics. She’s currently the publisher and/or co-host of several inspiring lines of content, including her personal newsletter Idée Fixe; the podcast Unapologetic Women, which she co-hosts with Sorcha Rochford; and the podcast Another Podcast along with Benedict Evans.

As I explain in my opening, my personal story with Formula 1 can be divided into two parts. The first was my growing up in 1980s & 1990s France and cheering for 4-time world champion and local hero Alain Prost. Prost’s popularity was such at the time that I was watching as many races as I could and knew quite a lot about the teams, the rules, and obviously the drivers.

But then Prost retired after winning his fourth world championship in 1993, and like most of France I became bored and disengaged from Formula 1. In fact, I stopped following the sport altogether until I discovered Netflix’s (excellent) Drive to Survive earlier this year—effectively a 28-year gap between being a Prost cheerleader and enjoying the popular Netflix series about current seasons!

Hence my very first question to Toni: What has happened in Formula 1 over the past three decades? Quite a lot, it turns out, between the evolution of the power unit, the constant shortening of the pit stops, and many other things that you’ll discover if you listen to the podcast.

In our conversation, Toni and I cover the following topics:

* What matters the most, the car or the driver? Hint: it’s both, and so much more!

* Why spec series (that is, series in which cars are all the same) are the best opportunities for women to break into motorsports.

* Why the UK is the core of the Formula 1 world, and all about Motorsport Valley, a small area in England where (almost) all the teams are headquartered.

* Why Formula 1 teams are the best illustration of French economist Philippe Aghion’s concept of a “neck-and-neck firm”. 

* What the Formula 1 overlords are doing to try and win the interest of the American audience—including Drive to Survive, which has been tailored for the US.

* Why Formula 1’s weird (and sometimes dark) politics is being turned upside down thanks to social media (hello, Lewis Hamilton!).

* Who and what you should follow if you want to dig deeper and engage with the sport.

👉 Listen to my conversation with Toni Cowan-Brown in the latest episode of the Building Bridges podcast using the player above 👆 or on Apple Podcasts or Spotify.

Also here are a few videos that Toni mentions in our conversation:

* Jos Verstappen F1 Pit Fire (full) (1994)

* Formula 1 documentary | Pit Stop in Two Seconds (December 2019)  

* Lewis Hamilton’s eyes get fully open when F1 V10 sound blasted past behind (December 2020)

* Over 4 Minutes Of Bono Coaching George Russell Team Radio 2020 Sakhir GP (December 2020) 

And don’t forget to check out some of Toni’s other works on Formula 1:

* A 3-part essay about Formula 1 as part of Toni’s newsletter Idée Fixe: part 1 (the basics), part 2 (the driver or the car?), part 3 (sponsorship & big tobacco).

* A conversation with Benedict Evans (Another Podcast): F1, the plane that never takes off 🎧 

* An episode of Unapologetic Women about athletes becoming activists 🎧

😀 The Dealroom team is doing an excellent job, along with Sifted and the European Commission, on documenting European tech and outlining the challenges it needs to tackle to get even better. After an excellent report on Corporate Innovation in the Entrepreneurial Age, they’ve just released another great report on Startup Cities in the Entrepreneurial Age 👉 Read it all here 👀

🙂 Our friends at Stripe recently launched a product called Stripe Tax—which, as you can guess considering the company and the product’s name, is about helping startups and small businesses comply with differing tax rules when doing business across borders. Read all about it here. Also, this:

😏 The piece I wrote last year about the future of construction featured a French entrepreneur, Pascal Chazal. Interesting that Pascal’s insight was that retail chains would take the initiative in disrupting the housing market, and now there’s this: John Lewis plans to build 10,000 rental homes.

😐 Everyone is finally awakening to the idea that venture capital is eating financial services. It’s a phenomenon that I call The Diffraction of Venture Capital (see this list of curated links on the topic), but now it’s made its way into the Financial Times: The new world of venture capital.

😒 There was a debate recently about Western European VCs writing (much) more than their counterparts in Central & Eastern Europe. Fortunately, Marcin Szelag, a VC investing from Poland, is remedying this with his newsletter CEE Venture Rounds Review. Keep writing, Marcin!

😖 I once wrote about investors needing to switch from a country risk paradigm to one focused on widespread uncertainty. The examples I used were Brexit and the CCP’s crackdown on Hong Kong. But this is also relevant: Didi Crackdown: Wall Street Should Have Seen the Regulatory Risks Coming.

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

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.

Sign up for European Straits if you don’t want to miss the next issues—starting again in September 🤗

(Credit: Franz Liszt, Angelus ! Prière Aux Anges Gardiens—extrait du disque Miroirs de Jonas Vitaud, NoMadMusic.)

From Normandy, France 🇫🇷 

Nicolas

The Agenda 👇

* Chris Bruntlett talks about cycling in cities in the latest episode of the Building Bridges podcast

* A complementary reading list on the future of urban transportation

* Thumbs up/down for last week, and a few unlocked articles from the archive

Here’s my investment thesis in a few bullet points:

* we long thought that the only playbook to build tech companies was that of Silicon Valley;

* but then China opened our eyes to the existence of a very different playbook;

* since these two radically different playbooks co-exist, maybe there are many others;

* in particular, there must be such a thing as a European playbook, which we still have to discover.

When I voice this thesis, people immediately jump to the next round of questions: What’s this uniquely European playbook? What makes Europe different from the US and China? What are our strengths and how can we Europeans play on them?

This, I must say, is the holy grail of investing in Europe. Any investor with a deep understanding of what makes Europe unique has an edge over US competitors and any locals that don’t know how to do anything other than to emulate Americans.

* Plus, learning to differentiate your approach to the market in Europe is good training for doing the same in the many other regions in the world where successful tech companies are now growing at a fast pace. Again, the key to success in venture capital at the global level is not to replicate the same approach everywhere, it’s to understand the local context and adjust investment decisions accordingly. It’s true in Europe, but it’s also true in Southeast Asia, the Middle East, Latin America, Africa, and elsewhere.

But still, what about Europe? One of my findings is that the best way we Europeans can learn about ourselves is by asking outsiders what they think, whether they’re from the US, Asia or other parts of the world.

* Another finding is that what Americans, in particular, admire the most about Europe is our cities: their density, their vibrancy, the quality of their infrastructure, the beauty of their architecture, and generally how rewarding and convenient life can be when you live in a large European city.

If you follow that path, a key to understanding Europe’s entrepreneurial potential is to get a better understanding of what makes its cities different—whether that’s housing, retail, healthcare, proximity services, transportation, or any other aspect of urban life. And since I came to this realization, a big part of my thinking as a European investor has been focused on cities: what makes them different from cities on other continents, and what unique opportunities can be seized by European entrepreneurs as a result?

All of this is why I was especially interested to listen to my wife Laetitia Vitaud’s conversation with Chris Bruntlett, a cycling enthusiast, the Marketing Manager at the Dutch Cycling Embassy, and, together with his wife Melissa Bruntlett, author of several books about urban mobility. Chris is a Canadian who moved to the Netherlands specifically because he was attracted by the Dutch urban way of life and what makes it so unique: the key role that bicycles play in day-to-day transportation. As Laetitia wrote on the Building Bridges website,

When you look at the infrastructure decisions made in the Netherlands in the 1970s, you see that they were designed as very democratic and inclusive infrastructures: the old use them, people with disabilities use them, so do families with children. Cycling is cheap. And it has the potential to transform our (work) lives for the better.

👉 You can listen to the whole conversation between Chris and Laetitia by using the player above 👆 or on Apple Podcasts or Spotify.

As a complement to the Building Bridges podcast with Chris Bruntlett, please enjoy this reading list on the future of transportation in cities:

* This is the year a major European city will ban cars from its centre (Martin Mignot, Wired UK, January 2020)

* 11 cities that have joined the car-free revolution (Adele Peters, Fast Company, January 2020)  

* Coronavirus: a huge push for cycling to work (Robert Wright, The Financial Times, May 2020)

* Bikes starting to push cars out of cities thanks to COVID-19 (Florence Schulz, Euractiv, May 2020)

* Now is the moment for European cities to get a move on and leave cars behind (Emily Brooke, Sifted, May 2020)

* Cities Have a Small Window to Save Themselves From Cars (David Zipper, Slate, May 2020)

* Why We Need Feminist Cities (podcast w/ Leslie Kern—Laetitia Vitaud, Building Bridges, October 2020)

* Mass Transit Is the Way to Get Cities Moving Again (Lionel Laurent, Bloomberg, July 2021)

* Welcome to the 15-minute city (Natalie Whittle, The Financial Times, July 2021)

* The Gender Divide in Transport Is Starting to Crumble (Carolynn Look and Elisabeth Behrmann, Bloomberg CityLab, July 2021)

* How to end the American dependence on driving (Gabby Birenbaum, Vox, September 2021)

😀 After 10 years in Paris (from 2006 to 2015) and then 5 years in London (from 2015 to 2020), my family and I have been experimenting with escaping from the big cities, moving from London to rural Normandy at the start of the global pandemic, and then from Normandy to suburban Bavaria in November of last year. Read a few related ideas in my Household Finance in the Entrepreneurial Age. 

* Another interesting experience of escaping the Big City has been that of my friend Stefano Bernardi, an investor who’s been living in the Dolomites (from San Francisco) for several years, and has now launched a project named Trento Remote to provide everyone with the opportunity to join him in this experience. Read Stefano’s announcement here: Launching Trento Remote: a curated batch for remote mountain living ⛰

🙂 They did it again! Our friends at Index Ventures have been at the forefront of pushing for simpler, better approaches to granting stock options to employees of European tech startups, most notably with the #NotOptional campaign about which I wrote in my 2019 essay Why Employee Equity Matters. Now the very same team has launched a powerful tool to help early-stage founders plan and execute on bringing their early employees in as shareholders. Check it out here: Index Ventures OptionPlan.

😏 A recurring theme of this newsletter is the transition from the Fordist Age, which was dominated by manufacturing, and the Entrepreneurial Age, which is dominated by tech companies. A recurring objection from my readers concerns today’s equivalent of the working class: what will replace those steady, high-quality jobs that manufacturing used to provide? Well, it seems we now have the answer—it’s Amazon: Amazon’s New ‘Factory Towns’ Will Lift the Working Class.

😐 If you want further proof of that trend, just consider how hard Amazon and Walmart are competing on the labor market, as suggested by this article: Amazon and Walmart are Winning the Labor Market Wars. It’s good news for workers, as they can play on the competition so as to obtain higher wages and better benefits. It’s bad news for many other employers in proximity services, who now have to renounce treating workers like crap. Not sure what kind of news it is for us consumers, though! 

😒 Luckily for workers at Amazon and Walmart, their jobs tend to be located far away from the dense and expensive metropolitan areas. On the other hand, many workers in proximity services continue to suffer from unaffordable housing and/or long commutes because not enough has been done to build housing over the past decades. It’s a problem that’s at the core of the current malaise within the Western middle class (and beyond!), and hopefully one that can be solved in time. Read more in  Sam Bowman, John Myers & Ben Southwood’s The housing theory of everything.

😖 I admit defense industry contracts between France and Australia has never been at the top of my interests. But last week’s cancelling of such a contract in favor of Australia’s partnering with the US and the UK caused such a stir that I had to pay closer attention to the whole thing and its implications from a geopolitical perspective. For a glimpse into how the French reacted to the setback, read Rory Medcalf’s What does the new Aukus alliance mean for global relations? And for more in-depth analysis and commentary, follow Bruno Macaes’s Twitter account:

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From Munich, Germany 🇩🇪 

Nicolas

The Agenda 👇

* The Building Bridges podcast: a conversation with Azeem Azhar on his book Exponential 🎧

* My latest Sifted column about French startups raising money like never before

* Thumbs up/down for the last weeks

* A list of recently unlocked essays from the archive

📓 What a journey! My first encounter with Azeem Azhar, writer of the Exponential View newsletter and author of the recently published eponymous book Exponential, happened on Twitter a few years back, right after I had settled in London with my family. At the time, I think Exponential View was in its infancy and Azeem was still writing a regular column for the Financial Times.

* We exchanged messages on Twitter about the future of trade unions—which ended up inspiring me with the idea of “exit unions”, discussed here and here, as well as in my book Hedge.

And that is how the connection was made. I believe Azeem and I have only met once IRL, but we’ve kept reading each other, and then Azeem invited my wife Laetitia Vitaud and me to contribute one of the summer editions of Exponential View, which we dedicated to... the future of workers’ rights and trade unions in the platform economy. You can read it here: EV #179 Platforms & workers.

* More recently, Laetitia was a guest on Azeem’s own podcast, an episode dedicated to discussing craftsmanship as the best paradigm to imagine the future of work. Here’s the link: Technology and the New World of Work 🎧

It was only logical that with Azeem publishing a book (his first!), he had to be a guest on our own Building Bridges podcast. Here’s what Laetitia wrote about their conversation:

The pandemic provided us with ample evidence about our being ill-equipped to grasp exponential change. At the beginning of each new wave of contamination, policy makers fell into the same cognitive trap. They ignored exponential growth at the beginning. The early points on any exponential curve look so unimpressive at first that everybody (except for epidemiologists or financial experts) will fail to pay attention to it. So people aren’t ready to adapt to exponential change.

At school, classes are often taught as if Google and Youtube didn’t exist. Our tax systems largely ignore the specifics of our digital economy and fail to properly grasp the value created by digital giants. Labour unions fail to target the growing precariat of our day and age. More people fall through the cracks of the safety net we designed for the industrial age. Even the way we measure and analyse economic value is more and more beside the point. The list could go on and on…

That’s why I was particularly satisfied to find out that this gap had been given a name: the Exponential Gap. In [his] must-read book titled Exponential, Azeem explains that in our Exponential Age, technological change is exponential whereas institutional change is only linear, which results in a fast-growing gap between the two.

👉 You can listen to Azeem and Laetitia discussing the advent of the Exponential Age using the player above 👆 or on Apple Podcasts or Spotify.

Bonus: For those who prefer to listen to French, Laetitia and I will discuss Azeem’s book in the next “À deux voix” episode of our Nouveau Départ podcast, to be published tomorrow. Time to subscribe to our French-speaking platform 🇫🇷

🇫🇷 Last week was quite big for French startups, with a handful of them announcing unprecedented megarounds over the course of just 48 hours. This is the topic of my latest column in Sifted, published this morning, in which I make two points:

* Yes, the French entrepreneurial ecosystem is starting to compound, with the first generation of successful entrepreneurs finally paving the way for the next generations, following a process well documented by analysts of successful entrepreneurial ecosystems.

* However, we should be wary of a typical French trait known as “toxic positivity”: the idea that everything is going well, everyone is doing things right, and France will inevitably grow its own tech giants—like it once grew landmark companies like LVMH, L’Oréal or Air Liquide.

Put simply: there’s no guarantee that because a country was among the most advanced in a given paradigm (that of the Fordist Age), it will remain so in the next one (the Entrepreneurial Age). French founders have to keep pushing, looking outward, and connecting with the rest of the world.

👉 Read more in It's been a record year for French Tech; what's next? 🇫🇷

😀 Echoing my early discussions with Azeem about the future of trade unions, here’s a fantastic contribution by Li Jin (alongside Scott Duke Kominers and Lila Shroff), recently published in Harvard Business Review. This niche topic has become a global conversation, effectively in sync with profound transformations on the labor market. Read more in A Labor Movement for the Platform Economy.

🙂 A gem I discovered: Tyler Cowen on reading fast, reading well, and reading widely. You might remember Tyler being a guest on the Building Bridges podcast a few months ago (here 🎧). He’s known as one of the most effective and efficient readers there is. In this article, discovered via Trevor McKendrick, he explains his approach to books and to absorbing what’s in them. 

😏 This tweet was my most popular in recent memory: worth reading the thread, and the article that’s linked in it—a discussion between George Kankou Denkey and Howard French about urbanism in Africa:

😐 I call it “The Great Fragmentation”. David Halpert of Prince Street Capital calls it “Digital Decolonization”. And this article published in Bloomberg discusses an interesting variant, which they call “Westlessness”. Give a read to “Westlessness” Is the Word if the Old Established Alliances Fall Apart:

While it lasted, the West — not in an ethnocentric but in a normative sense — made the world, on balance, a better place. Its ongoing fragmentation therefore bodes ill for stability and peace. The U.S. should keep trying to salvage this West, even as others, like the U.K. and Australia, are wise to draw up a Plan B. But ultimately it’s the Europeans who have to decide what they want — and then do what it takes to become credible.

😒Another one along the same line: Who needs expats? (from The Economist). It discusses trends that I already covered in my 2015 essay The Power of the Tongue: English in the Digital Economy, and I’d like to share this fascinating quote:

This speaks to a broader economic shift that has dented the need for expats. Once upon a time they used to be the ones able to facilitate access to foreign capital and know-how, often from Western sources. Now money is abundant and the most exciting business opportunities are emerging markets doing business with other emerging markets, particularly in Asia. You don’t need a Westerner to show you how to do that. The world they understand is no longer as relevant.

😖 For a few weeks, everyone was wondering if the fall of Chinese real estate behemoth Evergrande would precipitate a global financial crisis. It appears China tackled the matter and prevented the situation from degrading further. The whole episode was an opportunity to learn more about real estate in China as well as the (mostly negative) role it plays in economic development. I loved this essay by Noah Smith (paywalled, but worth subscribing!): China's real estate trilemma 🇨🇳

China’s government now has to decide what to do, and quickly. It doesn’t lack for policy options. The problem is that there are a number of competing concerns here, and figuring out which to prioritize is not an easy problem. Basically the three concerns are: 1. Short-term economic growth; 2. Middle-class wealth; 3. Long-term productivity growth and structural economic transformation. Let’s talk about all three of these goals, and why China probably can’t accomplish all of them at once.

📚 I unlocked two more essays from the European Straits archive recently:

⚖️ Principles for Capital Allocation (April 2020) 

👾 Unai, VR, and the Hardware Lottery (September 2020)

And here’s the whole Twitter thread including all unlocked essays since last June:

Sign up to European Straits if you don’t want to miss the next issues 🤗

From Munich, Germany 🇩🇪 

Nicolas