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.
🌏 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.
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.
My Worldview in 10 Ideas—for everyone.
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From Munich, Germany 🇩🇪