We live in interesting times. Many of my colleagues who are part of the tech world are simultaneously optimistic and nervous. The current business, tax, economic, and regulatory environments have combined to make this a great time to be in this market: values are high, capital is plentiful, customers are receptive, the market is large and booming. But it’s clear that some politicians around the world are contemplating policies that could mess it up.
So here are four thoughts for those in the US, UK, EU, China and elsewhere:
1. Keep borders open.
Technology is global — and to benefit consumers it needs to stay that way. This is not only a US issue. And it’s not just about IBM, CISCO, Oracle, and Intel or about Facebook, Amazon, Apple, Microsoft, Netflix, Snap, and Alphabet (Google). It’s also about firms such as Funding Circle (UK), Stripe (Ireland), Ant Financial (China), Samsung (Korea), Nokia (Finland), Thomson Reuters (Canada), and others that need access to international markets. If politicians close markets to others, there will be repercussions. And that will hurt us all.
2. Focus on smarter regulations.
Getting more coordination among agencies would help too. We know that open borders does not mean unfettered ones. We need reasonable rules to — among other things — ensure security; enforce contracts; protect intellectual property rights; reduce corruption; and protect the weak, unsophisticated, and unwary. But the complexities of multiple conflicting regulations administered by competing bureaucracies makes the system more challenging to navigate and expensive without commensurate benefit. A moratorium on new regulations alone doesn’t help — it just solidifies the status quo. And we certainly don’t want regulations that stifle innovation (see #3) or reduce access to talented labor (see #4).
3. Support net neutrality.
In our business we advise a fair number of mid-sized companies that are owned by early investors and entrepreneurs. Many of these companies are “upstarts” — some of which are looking to combine streaming content with technology to disrupt the established order. Eventually, many of these firms expect to become buyers or sellers — or to raise capital — and that’s where we come in. The value of these firms to potential investors or buyers is based not only on what they have accomplished so far, but also on their opportunity to grow significantly further. In that context, we watched with interest the recent federal appeals court action regarding net neutrality. We’re not neutral.
The major cable and telecom companies — firms like AT&T and Comcast — argue that the forces of capitalism should rule. They believe that regulations that would keep them from blocking, throttling, or giving “fast lanes” to some content providers but not others violate their rights and keep them from making money. They assert that the government has no right to force a bookstore to promote all books equally and no right to bar that bookstore from featuring some books but not others, and that the same approach should apply to them. The new FCC Chairman and the administration in DC seem to agree.
We are capitalists, and where there is true competition, we would agree with the position of the big ISPs, too. But in too much of the world, we see that ISPs are not like bookstores — they have conspired with politicians to ensure that they are the only way to get some streaming content to the ultimate users. They are de facto regional monopolies that have the ability to make or break a content provider. Amazon, Disney, Google, Netflix, or Facebook (as examples) may be able to pay the ISPs to facilitate faster streaming content, but how will that impact the next upstart that cannot pay? Further, many of the ISPs are themselves content providers as well as content deliverers. What the big Telcos and ISPs seek is unfettered monopoly pricing power. In our view that approach has the potential to harm many an upstart — and thereby negatively impact investor and buyer demand and values for affected companies.
The revolution in streaming content is just beginning. Let’s let it go and see what develops. Long live net neutrality.
4. Cherish smart, industrious immigrants.
The US leads the world in tech innovation in part because the US has access to a talented multi-cultural labor pool. Five of the six winners of Nobel Prizes affiliated with US universities in 2016 were foreign born. At least half of the privately held start-up firms valued at $1 billion or more worldwide were founded by immigrants. That doesn’t mean politicians should ignore the challenges of immigration. It does mean that we should encourage global policies that allow the most talented individuals to work where they can be the most productive — whether that be their home country or someplace else. All politicians should want to find ways to retain those immigrants who may become the next Sergei Brin (Russia – Google); Elon Musk (South Africa – eBay, Tesla, SpaceX), Jerry Yang (Taiwan – Yahoo!); Vivek Ranadive (India, TIBCO); Pieter Thiel (Germany – PayPal); or Jan Koum (Ukraine – What’s App). Cherish smart immigrants — don’t denigrate them.