🔮 Web3 go-to-market; VC; chip shock; an exciting new planet++ #359
Hi, I’m Azeem Azhar. I convene Exponential View to help us understand how our societies and political economy will change under the force of rapidly accelerating technologies.
Today’s edition is supported by our knowledge partner, McKinsey & Company.
Software can only solve so much. Companies fall into a trap in viewing technology as a panacea, says Google’s Neil Hoyne, author of Converted: The Data-Driven Way to Win Customers’ Hearts. “[Companies] were saying, ‘With software, this will unlock all of our data.’” A new interview with Hoyne explains why it’s not that easy.
🎙This week on the podcast
I spoke to author and journalist Sebastian Mallaby about a subject close to my heart: venture capital. Sebastian has spent five years researching and writing a brilliant book on this field, The Power Law. We discussed how venture capital has accelerated technological progress, what separates the best VCs from the pack, and why the venture model isn’t going away any time soon (more on that below…).
The near future
🚧 Clearing the chip blockage
What caused global chip shortages starting in the middle of 2020 to arise? In a new report, Julia Hess and Jan-Peter Kleinhans point to two colliding demand shocks. The first was, of course, the growing demand for kit as we rapidly switched to homeworking. The other was increased stockpiling of chips by Chinese tech firms as they prepared for the rollout of more restrictions by the US.
The characteristics of the chip industry make it particularly vulnerable to such shocks. Making a chip is complex: it can involve up to 1,500 individual steps and take up to six months from start to finish. It can also involve many intermediary processors – all of which depend on transnational supply chains. The cost and complexity of chip fabs also means they are built with conservative levels of excess capacity.
Julia and Jan-Peter’s report drills into more nuanced aspects of the supply shortage. Making this critical industry more resilient to shocks will be challenging – it will involve hugely increased investment in reserve capacity and eliminating bottlenecks across the supply chain. This raises the question: who will pay?
Elsewhere in chip news: Nvidia’s attempted takeover of ARM has failed amid regulatory challenges. Semiconductors are just too important for economic and national security. But this week the GPU giant overtook Meta Platforms (Facebook) in market cap.
💡 Web3 MOs
Maggie Hsu outlines a “go-to-market” framework for Web3 projects. Different types of projects require different approaches, and have distinct key metrics. As these tactics begin to mature, common operating models will unfold themselves. One idea is for a generalizable legal framework for IP-based non-fungible tokens that could be used to catalyse drug development.
Meanwhile, the US legislators are moving towards regulating crypto. EV member Kevin Werbach, one of the leading experts on the matter, testified before Congress this past week in a hearing on the risks, regulation and innovation of digital assets. Kevin’s testimony can be accessed here. He shared with our Exponential Do community, that “[the] hearing was quite encouraging for development of crypto regulation in the U.S. The Senators from both parties recognized the need for government action — e.g. digital asset exchange oversight to address cybersecurity, financial crime, and fraud. The industry representatives did as well. We’re not all in agreement about specifics, and it’s extremely difficult for significant legislation to get through the U.S. Congress these days, but at least we seem to be moving toward problem-solving rather than sloganeering.”
See also: Another major investor could soon throw its weight behind the metaverse. The head of South Korea’s $200bn sovereign wealth fund has his eye on the metaverse, according to Bloomberg.
If venture capital is so good, why is there so little of it?
Earlier this week I was talking at a breakfast at the House of Lords. Not my usual venue, but I was invited by EV reader John Romeo to discuss some of the ideas from my book. John is super-thoughtful and a great convener—and the historic view over the Thames is hard to beat.
One of the questions that came up was from a very experienced fund manager, who asked why there was so little appetite for venture capital in the UK. It is something I have puzzled over for a while, and is actually part of a broader question: why is there so little venture capital in general?
To unpack that, we need to answer the following questions:
Is there really not much venture capital?
Is there really “not enough”?
Why isn’t there more?
Let’s tackle them one at a time.
Is there really not much venture capital?
According to the consultancy PwC, investors, ranging from sovereign wealth funds to rich families to the middle class and pension funds, held assets totalling about $279 trillion in 2020. Of these, $111 trillion were “assets under management”, that is, under the purview of the asset management industry, of which venture capital is a part. That is trillion with a TR: the four commas club.
By contrast, total venture capital assets under management run somewhere between one and two trillion bucks. Yes, despite last year’s record-breaking investment rates, which exceeded $693 billion, according to our friends at Dealroom, venture capital represents less than 1% of global assets.
Venture capital is so teeny-tiny in the scheme of things that it is often bundled with “private equity”, a completely different type of strategy.
How much venture capital ought there to be?
There are a number of different lenses through which we can look at this question. More than three-quarters of the value created by public companies on the Nasdaq stock market since 1995 has been created by firms who received some form of venture capital.
🔒 The rest of today’s commentary is open to members of Exponential View.
Dept of our climate future
In every Sunday edition, we track key metrics that tell us a little about our shared climate future. We’re experimenting with different formats, so they may vary from one week to the next.
We have invited EV member Marshall Kirkpatrick to curate stories about our climate future in this section every week.
“It’s been another potentially transformative week around the world ,” Marshall says. “Large and small actions will compound, each aspiring to be one of the positive tipping points that Exeter University scientists called for in a recent paper exploring how such key occurrences could be facilitated. As they wrote, ‘Transforming towards global sustainability requires a dramatic acceleration of social change. Hence, there is growing interest in finding ‘positive tipping points’ at which small interventions can trigger self-reinforcing feedbacks that accelerate systemic change.’” Perhaps you can add a potential tipping point of your own to the mix this week.
🇫🇷 National policies: France will make a major investment in 6 to 14 new nuclear power plants in a “renaissance” of its nuclear industry, as well as extensive new investments in solar and wind, all to drive toward a carbon neutral nation by 2050. Renewable energy transition analyst Kees van der Leun argues that the wind and solar parts of the plan will ultimately prove more impactful than the nuclear parts of the plan and deserve a lot more attention than they are getting.
😋 Food news: China’s newest Five Year Plan calls for investment in alternative proteins, such as cell-cultured meat, synthetic egg analogs, and recombinant proteins. As the world’s largest consumer of meat and eggs, a major contributor to climate change, China’s move is being called “one of – if not the – most important policy actions in the history of alternative proteins.”
🥒 Relatedly, the US Department of Agriculture announced it will spend $1 billion on “climate smart commodities” and regenerative agriculture this year. Also, a new study from the World Resources Institute found that messages printed on menus encouraging people to “join a movement of people choosing foods with less impact on the climate” roughly doubled the percentage that chose plant-based meals.
Short morsels to appear smart while waiting for your new car
💥 Researchers at the JET Nuclear Fusion centre have shattered the record for energy produced by emerging technology. Using the magnetic confinement approach , their tokamak reactor managed to create 59 megajoules over 5 seconds, more than doubling the previous record.
🌶️ Researchers use machine learning to make fruits and vegetables tastier.
🤔 In other AI news, AI OG Andrew Ng is calling for “data-centric” solutions to big AI problems.
🤩 Astronomers have spotted a third planet orbiting the star closest to the sun. It’s likely smaller than Earth, and could have oceans of liquid water harbouring life.
🛰️ As many as forty of the 49 Starlink satellites launched by SpaceX could burn up after being affected by a geomagnetic storm.
👌 Sociolinguists have identified a new dialect unique to young Londoners: Multicultural London English.
Four months after a running injury, I am coming to the end of my rehab… and it’s great to be back on the road!
What you’re up to – notes from EV readers
A great friend of EV’s, Stephanie Hare, has her first book out later this month. “Technology Is Not Neutral: A Short Guide to Technology Ethics” is available for pre-orders.
Abhishek Gupta and his team at the Montreal AI Ethics Institute published the 6th volume of the State of AI Ethics Report.
Michael Christen and his team are launching the Streamlit app, an agent-based model for social teamwork.
To share your projects and updates, fill out your details here. Because of space constraints, we prioritise updates from paying members and startups I have invested in. (You can become the former by subscribing, if you have not already, and the latter by getting an intro to me via a trusted contact.)
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