Corporations are eclipsing nations
Editor's Letter: Corporations are eclipsing nations
He was an old man by then. Blind, living in the ruins of his palace, what was once his empire in tatters around him. A contemporary described Shah Allam II, emperor of the Mughals, as a “wretched King of shreds and patches." By 1803, Allam's kingdom was particularly threadbare. His old enemy, the British East India Company (EIC) had bested him once again, capturing Delhi.
The EIC was a formidable foe, an organization such that the world had not yet seen. Established in 1599 with a charter from Queen Elizabeth I, then in her mid-60s and heavily daubed with signature white-lead, the EIC was a private company founded to pilfer and trade the riches of the East. In that aim, it was given a broad mandate, able to "wage war" according to its corporate documents, something it did almost immediately by capturing a Portuguese vessel on its inaugural journey in 1602. Greater corporate violence would follow, particularly once the EIC made inroads in India. Amassing a private army of 260K men, double that of England's own military at the time, the EIC succeeded in forcing a young Shah Alam to privatize the operations of his empire, surrendering administration and tax-collection of Bengal, Bihar, and Orissa to the corporation. Forty years later, it finished the job, ripping the last of Allam's riches from the Shah's gnarled fingers. By then, the EIC had spread across the world, tendrils touching the new American colonies and China, further East. This was a different sort of company. It was a corporation as a state, a "meta-state," richer and more powerful than many nations, including at some points the country that had birthed it. Though the English parliament later sought to curtail the EIC's power, by then it was too late: the company had the funds to buy off politicians, protecting its influence through capital. That insinuation ensured that Parliamentary legislation served the EIC's shareholders as much or more as they did the British body politic.
The EIC bears more than a passing resemblance to the tech giants of the current era. Over the past decade, companies like Apple, Amazon, Facebook, and Google have reached a scale rarely seen since the EIC loaded ships with spices. In size, they already eclipse the economy of many countries. With a 2019 revenue of $296.27B, Amazon surpassed the GDP of Portugal, Greece, and Qatar. So too, Apple. Google exceeded Hungary, Huwait, and over 100 others.
This ascent has been aided by the lenity and ineptitude of (many) nations themselves, courting favor through tax allowances, bickering along polarized party lines, postponing digital transformation, and legislating at the pace of a pre-internet era. Soon they may even surpass superpowers like the United States in influence. In some ways they already have.
Thomas Jefferson wrote “The care of human life and happiness, and not their destruction is the first and only legitimate object of good government." Over the past three months, the US has demonstrated an inability to protect the health of its citizenry, failing to deliver basic services in the pandemic. In its baldness and viciousness, the death of George Floyd hammered home the scandalous condition of the republic. It is little wonder that in 2019, just 4% of Americans said they had a "great deal" of faith in Congress. It must be lower now.
Companies are stepping into the vacuum of power. While the the US government has dithered, unable to orchestrate mass testing or effective collaboration between state healthcare systems, Amazon has become even more of a public utility. The fact that a short outage this Thursday made major news is indicative of its importance.
We are one nation under Bezos. So, too Zuckerberg, Cook, Pichai, and to a lesser extent, Musk and Dorsey. Beneath them is a cohort of minor kings, barons of meta-dominions. This week saw several of those men expand their reach and further showcase the emerging frailty of the state.
Beyond a rare moment of weakness illuminating their necessity, Amazon was reported to be sniffing around autonomous vehicle company, Zoox. If completed, it would move the company closer to total domination of shipping and logistics, further edging out UPS, FedEx, and even the US Postal Service. USPS, a government agency, is already susceptible to Bezos' power: the organization subsidizes Amazon's packaging costs to avoid losing its biggest customer.
Like many of us may have, Musk spent much of Saturday watching the SpaceX launch. Though a magnificent achievement, the Crew Dragon's voyage represents yet another encroachment. What was once the sole purview of NASA is in the hands of a private business.
Facebook will hope a new coat of paint will aid their quest to build the internet's reserve currency. Zuckerberg's fingers are crossed that renaming the company's digital wallet "Novi" will help create distance between that service and the broader Libra coalition. Facebook is at pains to portray the latter as an independent organization to earn regulatory approval.
Zuckerberg was also entangled in the debate that raged around Twitter's decision to label some of the President's tweets for their lack of veracity, and incitement to violence. Whatever side of the debate on which you land, the fact that a sitting President sees fit to issue an executive order to narrow the powers of social media platforms indicates the wariness with which one state observes the other.
This is not a paean to a lost public sector, the ghost of some glorious apparat. We should be glad, in some instances, for these meta-states. If Musk were not hellbent on sending humans back into orbit, it may be some time until American soils hosted such an endeavor. If Bezos were not so dogged in his empire-building during pandemic, it is unlikely Americans would receive the necessities they need. We should expect his company to be the most effective way to disseminate vaccines when they become available.
But even if there is some good done, let us be under no illusions. These are also the companies that will, and do, manipulate and surveil us. A king is a king whether they set sail beneath the pennon of the Union Jack, or a smiley-faced logo. We should know what we are losing, what we are becoming.
That was the question Horace Walpole, a writer, asked in the 18th-century. He was disgusted by the influence wielded by the East India Company, the success they'd had overrunning and buying the levers of political power.
"What is England now?" he asked. "[It is] a sink of...wealth, filled by nabobs...a Senate sold and despised."
As the nation-state fails in its basic duties to keep its people safe, as companies begin to take on power beyond their original form, it may be time to echo Walpole and ask: What is America now?
In other news...
This was a busy week at Generalist HQ (aka, my living room chair).
A follow-up to the first issue of the S-1 Club was released on Thursday, indicating that the community of public market aficionados was bullish about Pexip, before the bell. Those that followed their gut and went through the trouble of finding a way to buy shares on the Oslo Stock Exchange would have enjoyed a pleasant couple weeks, with plenty of opportunities to exit with a +50% profit. We'll be turning our attention to Vroom next, a used car marketplace poised to list in June. Expect our analysis on Thursday. As a note, this will be the last version sent out to the broader Generalist audience. While I think of all of these features as part of the Generalist family and the lovely, curious community at its core, I want to ensure that each of you only receives the information you'd like. To that end, if you would like to keep receiving S-1 Club reports, sign up by following the button below.
The first edition of RFS 100 dropped a day later. We shared ideas from investors at USV, NEA, and Schematic Ventures, plus thoughts from founders like James Beshara (Tilt, Magic Mind), and Sib Mahapatra (Branch). For the reasons mentioned above, next Friday's edition will not be sent to the broader Generalist audience. If you haven't already, I'd encourage you to sign up and join the party.
Finally, I interviewed Domm Holland, CEO of Fast, for The Prologue, a Generalist feature. (No change there.) I shared that news on Twitter, soliciting questions from others on the platform. A number of Generalist readers wrote in. Thank you for that. With that in mind, I'll plan to keep up this practice for future interviews. If you'd like to stay up to date and contribute questions for future guests, please connect with me here.
Brief
Why patriots protest, according to Julian Barnes
The markets loved the Spanish Flu, too
This is Samuel Gompers' world, we're just living in it
Out of stock: a teeny-tiny elliptical machine
"Digital Narnia's" remote voting policy
Did Charlamagne...exist?
Jobs at Expa, DoorDash, Amazon, and Type One Ventures
More record breakers
Overheard
"The greatest patriotism is to tell your country when it is behaving dishonorably, foolishly, viciously." — Julian Barnes, Flaubert's Parrot
Good news
Economic disaster is not pre-destined
If the coronavirus continues its impersonation of 1918's Spanish Flu, the economy may not crater to the extent expected. Contrary to popular belief, the US stock market during that period fared rather well, improving during the outbreak, with a Dow Jones index growing 10.5% in 1918 and 30.5% in 1919. The latter represented the Dow's 9th best year between 1915 and 2019.
Government: The Game
The UN has come out in support of a new computer simulation that allows governments to visualize the impact of policy decisions on their populous. "Policy Priority Interference" takes into account existing budgets, and draws on previous governmental initiatives to model the effect of investing in education, or launching green energy policies, for example. Hopefully it will lead to more data-driven decision-making.
1000 words
Samuel Gompers, founder of the American Federation of Labor, summarized the face of corporate America rather well. Speaking in the 1880s, he said, "The man who has his millions will want everything he can lay his hands on and then raise his voice against the poor devil who wants ten cents more a day."
According to recent research from Larry Summers and Anna Stansbury, the victory of the Gompers' metaphorical millionaire explains many of the significant economic trends of the last forty years. While the orthodoxy is that the increase in monopoly power explains the falling share of national income workers have received, Summers and Stansbury argue the decline of unions like the one Gompers founded is the likelier explanation. Whereas 1/3 of private-sector workers belonged to organized labor in the 1950s, just 6% do today. That fraction earns a much lower premium than previous generations of union workers received.
Even working at a large, profitable company does not provide the same benefits. The ability for workers to share in profits as a share of net value added has also fallen. While labor once received ~11% of net value added, share fell below 6% by 2016. Based on this data, and the rest discussed, Summers and Stansbury argue that policies should be instituted to benefit workers: "It raises issues about the extent to which corporations should be run solely for the benefit of their shareholders.”
Signal
As Peloton's pandemic-assisted ascent dominates headlines, other companies have quietly climbed in the spinning company's wake. Cubii, a provider of miniature elliptical machines that sit beneath a desk, is one such winner. The company has seen a sharp spike in interest with searches peaking from mid-to-late April.
Relaxe, a provider of folding treadmills favored by one of this newsletter's readers, appears to have undergone a similarly stratospheric rise. From relative obscurity, the company hit fresh highs over the past week.
With users investing in new hardware, and gyms one of the last places likely to return to normalcy, Peloton and the at-home fitness space may have plenty of road ahead.
Long tail
"Digital Narnia"
That's the nickname Estonia has earned for its tech-savvy, according to the country's former President, Toomas Hendrik Ilves. The country has fared well during the pandemic thanks to established online infrastructure that allows citizens to order prescriptions, request sick leave, receive medical care, and apply for governmental aid. If an election were to take place, citizens could simply vote online. An example of what could be.
Tracking bracelets, usually used to monitor those under house-arrest, are being rebranded as Covid safety devices to enforce social distancing. Governments have expressed an interest. More here
Previous pandemics have left lasting legacies. The acceleration of virtual tailwinds may define the current crisis. More here
5G BioShield
Britain's consumer protection agency is moving to stop the sale of "anti-5G" devices made by BioShield Distribution. The company promises the device "provides protection for your home and family, thanks to the wearable holographic nano-layer catalyser." Cybersecurity experts found the £339 key to be nothing more than a USB.
To add legitimacy to their message, coronavirus conspiracy theorists like those behind Corona.film interleave the opinions of reputable scientists with blatant mistruths. More here
Older adults may be up to 7x more likely to spread misinformation online. More here
Cities will survive
Reports touting the death of the metropolis have been greatly exaggerated, to paraphrase Mark Twain. The coronavirus has caused many to peer with disgust at the density of urban centers, recast as overcrowded and germ-filled. But many cities have fared well during the current crisis, including Seoul, Hong Kong, Taipei, while less dense conurbations like Buffalo, Detroit, and Indianapolis have suffered. In that respect, density may not be the enemy in and of itself. Instead, cities of the future should embrace "good density," reclaiming streets designed for automobiles to allow people to live in close quarters, without overcrowding.
The virtual metropolis of Animal Crossing served as the venue for Ramadan celebrations. More here
Cities may survive, but airlines are preparing for rough weather. Southwest's CEO is predicting a "brutal low-fare environment." More here
Detour
According to a recent article in Scientific American, lockdown is distorting our sense of time. In particular, days seem to move more slowly for most of us. That phenomenon, accompanied by the rise of conspiracy thinking, makes it the ideal time to revisit one of history's boldest conspiracy theories: the Phantom Time Hypothesis.
Posed by German historian Heribert Illig in 1991, the Phantom Time Hypothesis argues that nearly 300 hundred years of history were entirely fabricated. Inspired by the paucity of archaeological evidence between AD 614 - 911, Illig asserts the events of that period might have never really occurred, the consequence of an elaborate conspiracy between Holy Roman Emperor Otto III, Pope Sylvester II, and Emperor Constantine VII. To Illig's mind, these potentates cooked the calendars so that their rule might align with the year 1000 AD. Accordingly, Illig believed the Dark Ages, and figures like King Charlamagne, were entirely made-up.
If Illig's theory were right (rational actors agree it isn't), that would mean we're living in the year 1723.
Jobs
Partnerships Manager - AWS - NYC - Apply here
PM, New Business - DoorDash - NYC - Apply here
Investment Operations - Cambridge Associates - DC - Apply here
VC Associate - Navitas - Chicago - Apply here
Chief of Staff - Dandy - Austin - Apply here
Principal - Expa - SF - Apply here
Business Development - Tencent - SF - Apply here
Corporate Development - Chegg - SF - Apply here
VC Principal - Lewis & Clark - St. Louis - Apply here
VC Intern - Type One - Remote - Apply here*
*Time sensitive with only a 72 hour application period. Roughly 36 hours have elapsed, by my count.
Puzzler
What common English verb becomes its own past-tense by rearranging its letters?
One for the wordsmiths this week. As always, all guesses welcome and clues given to those curious enough to message.
If last week's winner's circle was a crowd, this week's was a merry horde. A whopping 17 readers earned their laurels with Matt W first across the finish line. He was followed by Sam P, who is on something of a roll having provided the right answer three weeks in a row. Both Abhinav S and Jimmy S built on their success last week to make it two in a row. Blake N, Justin A, Santhosh N, Pyramus, Stephen C, Olutade O, Steven V, Arnold G, Kayla P, Amit S, Guilherme F, and Mercedes C completed the impressive set. For a refresher, the riddle is listed below.
If 4 + 2 = 26, 8 + 1 = 79, and 6 + 5 = 111. Then, what is 7 + 3?
The right answer? 410, the result of subtracting 3 from 7 and adding 3 to 7. That answer follows the same pattern as the other equations. Congratulations to every last one of you.
Thank you for reading. If you enjoyed today's edition, consider sharing The Generalist with the friend most willing to enjoy the concept, if not the application, of Phantom Time. May your Sunday be sunny and serene.
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