At the Upfront Summit this past week, there was an electric interview of Fred Wilson led by well-researched and artful Dan Primack of Fortune Magazine that ended up making news. The newsworthy moment was when Fred expressed his view that companies like Uber should go public. The video of the interview will be available this week and I will talk more about it then because the interview covered so many great topics
- Is it a bad thing when public stocks get eviscerated (given USV has a few that have)?
- Why could blockchain be a foundational technology that yields many great companies?
- Do you need to be technical to be a great VC?
- Why AI is an important technology and investment area
- And there was a great discussion about generational change at Venture Capital firms handled so well by Benchmark & Sequoia and how Fred is thinking about it.
But back to the blockbuster - Fred's emphatic response that founders have a responsibility to go public and that liquidity is good for all stakeholders (employees, investors & the company). I agree whole-heartedly with Fred. But I'd also like to add one further thought. I actually believe being public offers a long-term competitive advantage for the best-run companies (and Darwin deals with those that aren't meant to be special long-term).
The reason I enjoy reading so much about history & politics is that I find it gives you more context for thinking about organizing principles in life. One such brilliant book was Civilization by Niall Ferguson (which I'm told was also made into this two-part TV series I haven't seen). In it he makes the case for why the West has come to dominate the world. He takes on the question of why China, with its vast population and resources and the Ottoman Empire, which clearly had a dominant position over the West, crumbled.
Of course you should read the book so I don't bastardize his arguments but two (of the six) guiding principles come down to competition and science. He argues that the European landmass, without barriers for protection, was locked into constant warfare the forced organized populations to be well armed in offensive and defensive capabilities and sciences that would constantly make improvements in things like medicine (to increase population) and food technologies (to feed the masses) and so forth.
The competitive nature of these populations and ultimately countries meant that while each was always vulnerable as societies they progresses much better and faster than the autocracies of China and Turkey.
Leading me back to Churchill. I look at the mess that is the United States political system and can't help but wonder what kinds of investments we could make in infrastructure, education and sciences if we had more alignment. At times the great progress of China feels like something to envy. But in my core I believe that the self-healing nature of our internal struggles and competition produces a system that is more resilient and self-healing. Just look at our rebound from the financial crisis of 2008 as something that I feel proud of as an American. Our country heals - even if we have much work to do in order to make this widely distributed.
Worst system. Except for everything else.
I saw one of my favorite authors - Jared Diamond who wrote a MUST READ book called Collapse (amongst other must reads) - speak recently. He was talking about the things about the US political system that worried him - mostly the level of animus in the US Congress and it's inability to make compromises leading to incrementalism. But he also had an optimistic note about the US that I had never consider.
He basically pointed out that the federal nature of the US governance system produces 50 individual experiments. Each state gets to pass local laws and its neighbors and eventually the nation can copy their lead (or avoid their mistakes). He gave the example of California passing a law allowing one to make a right-turn at a red light after stopping first. It was the first state to do so and it was considered heresy but it proved effective in reducing congestion and didn't prove to be dangerous, as many had assumed. So it was ultimately emulated across the country.
He also spoke about bad experiments like Sam Brownback's in Kansas where he has taken supply-side economics and social program defunding to extremes to what many believe will be grave consequences. He points out that when systems fail in one state others can learn from the mistakes and avoid the consequence. Plus, neighboring states must compete for workers to pay taxes, corporate jobs and investments. This is likely a great deal of our success in the US.
So back to Uber. And not just Uber - a growing cohort of startup executives who believe it would be better to avoid the scrutiny of public markets. I understand the urge. I understand that it's easier not to have to report financials and provide transparency to the world. I get that it's easier to make big bold moves with investments, staff, product innovation, capital raising and hiring/firing without being second guessed. I get the mindset that dealing with the obtuse nature of the public markets is a pain.
But I ask you. Would you rather by the Chinese Ming Dynasty (or even modern China, let's be honest) and the Turkish Ottoman Empire with its seemingly easy ability to make decisions and control outcomes or the messy, imperfect, self-correcting United States?
I think history's lessons tell us that public scrutiny and competition favors the harsh realities of the public spotlight with its trials and tribulations over the easy of autocracy, control and cloaked decision-making. Of course my argument isn't about one company, Uber, who is just the leading company in size/scale/capital raised but rather for a generation of great companies that I believe long-term will prosper more from being public than remaining private.