This week we do a deep dive into how China’s tech sector is building replacements for many US-sourced technology products and seeking true independence from the US as a supplier.
- Don’t Underestimate China
- Facebook’s “Dirty Work”
- Automation and Capitalism
- Venture Capital Performance
- You Can’t Ignore Crypto Any Longer
- Startup of the Week
- Tweet of the Week
My Master’s thesis, way back in 1980, focused on the economic certainty that no empire can avoid being replaced by the next upstart. Capitalism is relentless in enabling money to flow, across borders, to whoever can produce the needs of humanity most efficiently.
For the past two decades, that money has been flowing to China, and the pace has been accelerating. The inevitability of being replaced, experienced by the UK in the last century, is compounded and accelerated when the upstart has an enormous home market and a growing middle class that can spend on new items like cars and homes. The US had this advantage against the tiny UK, and China has it over relatively tiny America.
There is a popular myth in Silicon Valley that the US can slow or possibly reverse this outcome due to its superior ability to invent new things. This myth is both delusional on the facts (see China’s modern cities for proof) and on the scale of Silicon Valley’s total addressable market compared to the world economy. Add the revenues of the top US companies together, and it is a small fraction of global GDP. The big numbers are all driven by raw materials, manufacturing, government spending. Even if the US monopolized technology, it would not reverse these global structural trends.
Once this context is grasped, it becomes farcical that the US wants to become China’s enemy. The world’s largest market would be cut off and hard to regain. This week we feature a story by Cheng Ting-Fang and Lauly Li from Nikkei Asia, writing from Taiwan. They spell out how China has already begun to prepare for independence from sources of technology originating from the USA.
They report that in response to US trade sanctions things are changing:
“The result has been an unprecedented flourishing of chip-related companies within China. Dozens of Chinese companies, with specializations mirroring U.S. incumbents in key areas from ion implantation to etching, have sprung into prominence over the past few years, accelerating as the state realizes the enormity of the self-sufficiency project.”
And then go on to document, in great detail, the specifics. It is a must-read for anybody who wants to understand the next 20 years in technology.
A recurring theme in That Was The Week is the role of social media in policing speech. We are not fans of bans or cancellations. So the result of the FaceBook oversight boards’ deliberations into the ban on ‘you know who’ caught our attention. The purpose of the Board was to make recommendations to the management and board on such matters. They declined and recommended that Facebook themselves make rules, publish them and then execute them. They did so while cautioning that banning speech permanently may not be a sustainable decision. My reading between the lines tells me that they are no fans of the man banned, but neither are they fans of bans. I agree.
Don’t Underestimate China
US-China tech war: Beijing’s secret chipmaking champions
How Washington’s sanctions boosted China’s semiconductor sector
The Most Dangerous Place on Earth
America and China must work harder to avoid war over the future of Taiwan
The test of a first-rate intelligence, wrote F. Scott Fitzgerald, is the ability to hold two opposing ideas in mind at the same time and still retain the ability to function. For decades just such an exercise of high-calibre ambiguity has kept the peace between America and China over Taiwan, an island of 24m people, 100 miles (160km) off China’s coast. Leaders in Beijing say there is only one China, which they run, and that Taiwan is a rebellious part of it. America nods to the one China idea, but has spent 70 years ensuring there are two.
Facebook’s “Dirty Work”
Oversight Board to Facebook: We’re Not Doing Your Dirty Work
The decision on Trump is the clearest indication yet that the board does not want to be Facebook’s flunky.
Nick Clegg Steers Facebook’s Trump Decision — The New York Times
Nick Clegg, a former deputy prime minister, has shaped the company’s handling of Donald Trump at every turn.
Facebook’s Oversight Board upholds ban on Trump. At least for now.
The panel faulted the social network for making a hasty decision without clear criteria and told Facebook to reevaluate the decision within six months.
www.washingtonpost.com • Share
Automation and Capitalism
How automation could turn capitalism into socialism
There can be no doubt that automation is the future of work. There’s plenty of debate as to what extent AI will displace workers in the near and far future, but the general consensus is that blue collar work is an endangered species.
Venture Capital Performance
Why Institutional Investors Should Double Down on VC
Dan Malven of 4490 Ventures says VC firms’ outperformance is much more broadly distributed than previously understood.
Half Of All VCs Beat The Stock Market — AVC
There has been this narrative about investing in VC funds that you have to get into the top quartile (25%) or possibly the top decile (10%) in order to generate good returns. I have heard that for as long as I have been in VC and probably have written it here a few times. Well, […]
Inside Rounds Hit Record $30 Billion as Investors Double Down
Venture capitalists may be getting too comfortable with marking up their own portfolios.
The number of inside rounds, or VC deals in which only a startup’s previous investors participate, reached a high of over 1,000 in the U.S. last year and could top that record by the end of 2021, according to data provided to The Information by research firm PitchBook. In total, VC firms invested a record $30 billion in inside rounds in 2020, up 15% from 2019.
www.theinformation.com • Share
Selling — AVC
I like to think of the investing discipline as composed of three key modes of operation. Buying — Figuring out what you should buy and what you should not buy. There are many strategies that work here but my favorite is buying things that others are not buying. And my preferred reason for “others not […]
You Can’t Ignore Crypto Any Longer
Venture Behemoth Andreessen Horowitz Targets $1,000,000,000 for New Crypto Investment Fund
Venture capital giant Andreessen Horowitz is reportedly planning to establish a new billion-dollar fund that is geared toward the growing crypto ecosystem. London-based news outlet Financial Times cites four people familiar with the matter who say that the new fund aims to raise between $800 million to $1 billion to invest in cryptocurrencies as well […]
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Goldman Sachs internal memo unveils new cryptocurrency trading team
Goldman Sachs formally kicked off the cryptocurrency trading era on Wall Street.
- The bank informed its markets personnel that a newly created cryptocurrency desk had successfully traded two kinds of bitcoin-linked derivatives, according to an internal memo obtained exclusively by CNBC.
- The crypto team exists within the firm’s global currencies and emerging markets trading division, reporting to Goldman partner Rajesh Venkataramani, who wrote the memo.
- Goldman said it is also seeking to broaden its market presence by “selectively onboarding” crypto trading institutions to expand offerings.
eBay Exploring Crypto Payments for 187 Million Buyers
E-commerce titan eBay says it is open to adding crypto payments to its platform as the emerging asset class attracts more attention. In a new CNBC interview, eBay chief executive Jamie Iannone says the company is always looking to add new payment options for its users. “One of the great things about our managed payments […]
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Institutional managers hold a record $13.9B worth of Ethereum
Weekly inflows into Ethereum investment products continue to grow, according to the latest CoinShares report.
Dapper Labs-backed NFT avatar platform raises $65M in funding
Avatar developers Genies are set to launch an NFT marketplace on Flow later this year after closing a Series B funding round with $65 million.
Come for the NFT, stay for the Collectible
“NFTs have literally taken over my entire mind and soul. I’m obsessed. It’s all I think about.”
Paris Hilton, crypto expert
For those of you who need a primer on Non-Fungible Tokens (or NFTs), click here for a good overview from the Verge.
In Q1 2021, NonFungible.com reported that a record $2 billion worth of NFTs were sold, the first time that over a billion dollars of NFTs have ever transacted in one quarter. That number represented an eye popping 134 times year-over-year growth, and 22 times quarter-over-quarter growth.
Those are certainly impressive stats about the rising demand for NFTs. But they become even more impressive when you consider that sales of 3 of the 5 largest NFT marketplaces (NBA Top Shot, Nifty, Rarible) weren’t even included in NonFungible’s analysis. And neither were off chain sales (i.e. transactions not conducted on the Ethereum Blockchain) which would have added the single largest NFT transaction ever: Mike “Beeple” Winkelmann’s $69 million NFT art sale.
Filecoin Launches Decentralized Storage Service for NFTs
NFT.Storage, a new service created by Filecoin and Pinata, aims to preserve the integrity of non-fungible tokens.
Startup of the Week
Sotheby’s Accepting Bitcoin For A Banksy
276-year-old fine arts auction house Sotheby’s International is open to bitcoin payments for a Banksy piece estimated to fetch $3 million to $5 million during an upcoming sale.
“What better combination to introduce crypto than an iconic Banksy painting,” Sotheby’s CEO Charles Stewart told CNBC. The winner of the auction, which will be held on May 12, can choose to pay in USD or ether as well.
The painting, titled “Love Is In The Air,” is one of Banksy’s best known works and its subject matter, which depicts a masked figure in the midst of throwing a bouquet, has some countercultural overtones that appear to mesh with Bitcoin’s own.