Having covered the past triadic by alluding to the main components of the BS in terms of one’s existential value, I’m now moving to a new series, entitled “Startups & Sovereigns”. Recently, I’ve been thinking specifically about why and how we speak about citizens and markets (even though they are the same thing), specifically in relation to how the historical roles of the public and private have both evolved alongside technological advancements, and what it will look like in the future. This will be another triadic (3 is a great framework to think within), according to the chosen subject matters as below:
On Sovereignty i.e. Scalability vs Scale: The private sphere has begun to eat into the metaphysical territory that has historically belonged to the realm of governments. Governments and nations hold a special place in their respective nations as they have been the largest organization of that particular territory that emerged within the political backdrop of that milieu, armed with the civic responsibility of taking care of the basic needs of the individuals, groups and communities that fall within its purview, in this case, sovereign jurisdiction. As the largest organization in the nation, they enjoyed economies of scale, and therefore was not only willing (by the constitution) but also able to exercise its oversight on its citizens. With the proliferation the internet, this historical luxury of scale has been gradually challenged by private players - not because of inherent scale, but inherent scalability. Scalability, coupled with increasingly improving unit economics given a business model that has found product-market fit, has proven to achieve scales far greater than governments could ever espouse. Key question: how relevant and irreplaceable are governments? TBC
On Public Service i.e. SaaS vs Taxes: As a way of funding the public service, governments and nations employed a system of taxation upon their citizens, in order to effectively provide so-called public goods - goods that are not necessarily provided by free market forces, but is indispensable to civilization and would benefit everybody, and therefore should be paid by everybody. Some examples are roads, utilities, education. The absolution of this Keynesian premise (i.e. the private market can never provide every good efficiently) is of course untenable - if not, we would not witness the phenomena of privatization or nationalization of organizations. The point, however, is that ‘taxation’ from the public-esque goods being provided by private platforms (e.g. next-day last mile logistics by Amazon Prime, instant bill payments by Go-jek, online tertiary education by Coursera). In fact, in many ways, in our world today, SaaS services with a freemium models actually provide public goods more freely than our traditional notions of public goods (e.g. how we use Google Suite for housekeeping, Facebook for latest news updates, Discord for communication). Key question: How relevant and irreplaceable are taxes? TBC
On Productivity i.e. Venture Capital vs Institutional Education: The education system of every nation has two main responsibilities - firstly, to inculcate values in the electorate proximal to its constitution so as to instill patriotism as a means of mitigating the risk of losing political power, and secondly, to train the masses to become productive members of society as a means of creating further value via a resource-efficient nation. The first is capping downside risk, the second is capitulating on upside potential. No matter how much technology develops, it would take a stretch of imagination to replace the first responsibility; however, venture capital can possibly take a few slices of the pie from the second. The education system conceived in the pre-/industrial age was methodologically conceived to efficiently produce wage laborers for the incumbent capital owners - this is because the access to capital was an ultra-private market only privy to heritage and nobility. However, as startups develop we have also seen the ultra-private market dominated by family offices and private equity funds, slowly seeking for both financial and strategic opportunities with better returns, thereby increasing allocation further into venture capital funds for exposure to technology. In a somewhat unintentional political sense, this LP-GP trickle-down effect has lowered the barriers of entry to the access of capital, essentially democratizing capital for the masses. A hundred years ago we could never have conceived of a plebeian pitching a startup business idea to Rothschild and getting funded for it, but increasingly now, we have seen ambition-driven middle-class youths receive seed funding from boutique accelerators/incubators/VCs. Key question: How relevant and irreplaceable is the education system? TBC
Will be going through each of the 3 points in full over the next few weeks. Stay tuned! Happy to hear from all of you, as always.