Bradley Tusk — who spent his early career in Democratic politics and later became a consultant and lobbyist for private companies struggling with regulators — today spends most of his time as a venture capitalist. But while Tusk is a generalist, he insists he’s not interested in any startups; His expertise lies at the intersection of technology and regulation, he said, and his company brings the most value to startups in areas where regulatory change is inevitable. will change the size of the opportunity they are pursuing.
As a service to Tusk Ventures’ existing portfolio — and a sort of calling card for potential founders — every year, Tusk gives some thoughts on the changes he sees coming. take place over the next 12 months. Because he is often proven right in retrospect, we jump on a call with him last weekend to discuss some of his 2023 predictions, and these three were particularly striking to us, so we thought we should share them here.
1) The big CPG brands started selling cannabis products, wiping out a lot of the cannabis startups that were operating in the shadows. Here’s Tusk, discussing why:
Big brand [sell] alcohol all the time and marijuana, many would argue, is a less harmful substance than alcohol. We’ve had this real disconnect between nearly two-thirds of the states and the federal government, where marijuana is recreationally and medicinally legal. However, it’s on Time to donate 1 at DEA [along with] heroin and meth and cocaine . . . this really doesn’t make much sense, especially as countries continue to legalize it outright.
President biden said, ‘Remove this from Schedule 1.’ Once that happens all of a sudden all kinds of interstate commerce that has so far not been allowed will open up. So you will be able to have real banking, trucking [plants] through status lines, ads. . . All the things that a really big, normal company — Kraft or Unilever and Anheuser-Busch or Philip Morris — can get into, they can’t really do under the current system, but once the restrictions are in place. the federal government is loosened, then all of a sudden it’s open to them.
One [question I’ve asked cannabis founders over the years is] How will they compete with Unilever? Why did Unilever choose to buy them instead of just burying them? And most of the time, the answer is they can’t [compete]. They’re really just racing against time, hoping the federal government isn’t really doing the right thing. But I think once cannabis comes out of Schedule 1, and I don’t know if that’s going to happen in six months or two years, the big companies will come into the game. [because] have money to be made. And a lot of cannabis startups that are either overvalued or overvalued or traded at really high multiples on the Canadian stock market are going to feel a lot of pain.
2) Rather than push crypto regulation further, Sam Bankman-Fried and the sudden boom of FTX really play a small role in any new regulation being enacted (although Tusk do think we will see more regulation at the state and federal level in the next 12 months). Here is Tusk:
When the FTX explosion started happening, my opinion was, ‘Okay, this is going to lead to a lot of very harsh crypto regulation that won’t be good for the sector, because the SEC director Gary Gensler has been promoting this for a long time. it’s been a long time and it hasn’t happened yet because cryptocurrencies are very popular with a lot of real people.’ I thought FTX would give him a very aggressive move against the industry as a whole.
In a strange way since then, as the story gets crazier and crazier and more like Sam Bankman-Fried is just a criminal mastermind who is defrauding people of tens of billions of dollars and [that this debacle] it’s not something specifically related to cryptocurrencies in itself, it actually changes the argument again. It [shifts from], ‘This whole industry is out of control’ to ‘this person has lost control’. It’s almost become so extreme that it’s actually useful [tamp down talk of overregulation].
3) In the end, Twitter cost Musk much more than the $44 billion he and his investors paid for it. . .
What Musk has done is in line with what we’re seeing in today’s cultural ideology, which is in this world with 24/7 media coverage and social media activity. who really needs attention and can’t get enough. have to keep doing even more wacky things to try to get it right. We’ve seen that with Donald Trump. We saw that with Kanye West. And the main reason Musk bought Twitter was to get people talking about him, just like we are today. From that point of view, I doubt he’s achieved his goal.
What worries me for him is that when you look at Tesla’s market capitalization, for example, it’s significantly higher than Toyota or General Motors, which sell more cars. Tesla makes a great car and they are evolving and they can look to the future. But the difference between what [Tesla] should probably be appreciated and where it is appreciated is the hype of Elon Musk and the fairy dust. He has managed to create such an image of the distant future and a lot better than others, which really drives retail investment in stocks. The same is true for SpaceX. Even though it’s still a private company, yesterday I saw an article saying it’s currently valued at $140 billion, [yet] there’s no way that SpaceX can [worth] $140 billion for its revenue. So his talent in a way is that he manages to create the perception that what he’s doing is very innovative and very original, and only he can do it; it drives a huge amount of value and investment in his companies.
The really big risk with Twitter is that every time he does something really famous and public, he puts that reputation first. He took over Twitter, which no one had really figured out how to turn into a successful business, and now it’s in his hands. And so far, the ideas he’s come up with don’t seem new or interesting to me; they feel like variations of things that people have done before in different ways. And if he doesn’t succeed with Twitter, the question is will it puncture the ball for Tesla, SpaceX, and all his other projects? He may have paid $44 billion to Twitter, but this could end up costing him $100 billion or more if it risks losing Tesla and SpaceX and other companies he owns. valuable because he’s just an ordinary person.
. . . and no, it doesn’t create a great opportunity for startups looking to capitalize on the chaos at Twitter, according to Tusk. More here:
There isn’t one great revenue model for all of this to begin with. To make matters worse for them, I still think there is a risk that Section 230 of the Telecommunications Regulations Act will eventually be changed or repealed. Right now it exempts platforms from liability for user-posted content, so I can defame you on Twitter and you can sue me personally but you can’t sue Twitter. And as a result, Twitter, Facebook, all platforms, their real economic engine is to turn to negative and toxic content, because how much we hate it, that drives eyeballs and drive clicks and thus drive ad rates and revenue. So the lack of liability of the platforms is creating a world where the internet has to be as malicious and horrible as possible.
But if [we repeal] Section 230, it would be very similar to what happened to tobacco companies starting in the 1980s, when they were suddenly vulnerable to litigation and began to receive Billionaire casesand as a result they feel real economic damage and end up having to take their fortune [marketing practices] because it cost them more money than the other way around. Right now, Facebook will pay the small fine it received from the FCC, because in the end, they make a lot of money from negative content. Repeal of Section 230 will change that.
