Three counterintuitive 2023 predictions about Musk, SFB and even Kraft •

Bradley Tusk — who spent his early profession in Democratic politics and later turned a marketing consultant and lobbyist for personal firms battling regulators — spends a lot of his time nowadays as a enterprise capitalist. However whereas Tusk is a generalist, he insists he isn’t excited by simply any startup; his experience, he says, is on the intersection of tech and regulation, and his agency provides essentially the most worth to startups in sectors the place altering rules are certain to change the dimensions of the chance they’re chasing.

As a service to Tusk Ventures’s present portfolio — and a sort of calling card for potential founders — Tusk yearly places collectively some ideas concerning the modifications he sees coming over the subsequent 12-month interval. As a result of he’s usually confirmed proper on reflection, we hopped on a name with him late final week to debate a few of his many 2023 predictions, and these three stood out to us particularly, so we thought we’d share them right here.

1) Main CPG manufacturers begin promoting hashish merchandise, wiping out a whole lot of hashish startups that have been working within the relative shadows. Right here Tusk is, discussing why:

Huge manufacturers [sell] alcohol the entire time and hashish, many individuals would argue, is a much less dangerous substance than alcohol. We’ve acquired this actual disconnect between the near two-thirds of the states and the federal authorities, the place hashish is authorized recreationally and medicinally. But it’s on Schedule 1 on the DEA [along with] heroin and meth and cocaine . . . which actually doesn’t make a whole lot of sense, particularly as states hold legalizing it totally.

President Biden has mentioned, ‘Let’s take away this from Schedule 1.’ As soon as that occurs unexpectedly every kind of interstate commerce that thus far has not been allowed will open up. So that you’ll be capable to have actual banking, trucking of [plants] throughout state strains, promoting . . . All of the issues {that a} regular, actually large firm — a Kraft or Unilever and Anheuser-Busch or Philip Morris — would possibly interact in, they’ll’t actually do beneath the present system, however as soon as the federal restrictions are loosened, then unexpectedly it opens up for them.

One [question I’ve asked cannabis founders over the years is] how are they going to compete with Unilever? Why would Unilever select to purchase them versus simply burying them? And more often than not, the reply is they’ll’t [compete]. They’re actually simply racing in opposition to the clock, hoping the federal authorities doesn’t really do the appropriate factor. However I feel as soon as hashish goes off Schedule 1, and I don’t know if it occurs in six months or two years, large firms will get into the sport [because] there’s cash to be made. And a whole lot of hashish startups that have been extremely valued or overvalued or that traded at actually excessive multiples on the Canadian inventory change are going to really feel a whole lot of ache.

2) As a substitute of drive additional crypto regulation, Sam Bankman-Fried and the abrupt implosion of FTX really winds up enjoying a minor position in any new rules that get enacted (although Tusk does assume we’ll see extra regulation on the state and federal stage within the subsequent 12 months). Right here’s Tusk:

When the FTX factor blow-up began occurring, my take was, ‘Okay, that is going to result in a whole lot of very harsh crypto regulation that will probably be dangerous for the sector, as a result of SEC chief Gary Gensler has been pushing for this for a very long time and it hasn’t occurred but as a result of crypto may be very in style amongst a whole lot of precise actual folks.’ I assumed FTX would give him the duvet to maneuver very aggressively in opposition to the trade as an entire.

In a bizarre means since then, because the story will get crazier and crazier and simply increasingly like Sam Bankman-Fried was only a legal mastermind who was defrauding folks out of tens of billions of {dollars} and [that this debacle] just isn’t one thing particularly associated to crypto per se, it really shifts the argument once more. It [shifts from], ‘This entire trade is uncontrolled’ to ‘this particular person was uncontrolled.’ It’s virtually gotten so excessive that it’s really serving to [tamp down talk of overregulation].

3) Twitter finally ends up costing Musk way over the $44 billion he and his buyers paid for it . . .

What Musk did is according to issues that we’re seeing throughout the cultural zeitgeist proper now, which is on this world with 24/7 media protection and social media exercise, the individuals who really want consideration and might’t get sufficient of it simply must hold doing increasingly outrageous issues to attempt to get it proper. We noticed that with Donald Trump. We noticed that with Kanye West. And the principle purpose why Musk purchased Twitter is so that folks could be speaking about him, simply as we’re proper now. From that standpoint, I believe he’s achieved his objective.

What worries me for him is once you take a look at the market cap of Tesla, for instance, it’s considerably larger than Toyota or Normal Motors, firms that promote much more automobiles. Tesla makes an important automotive and so they’re rising and it’s okay for them to lean into the long run. However the differential between what [Tesla] most likely ought to be valued at and the place it’s valued is that Elon Musk hype and pixie mud. He managed to create such a picture of being thus far sooner or later and so a lot better than everybody else that basically drives retail funding within the inventory. The identical is true of SpaceX. Whereas that’s nonetheless a personal firm, I noticed a chunk yesterday saying that it’s now valued at $140 billion, [yet] there’s no means SpaceX might be [worth] $140 billion given its income. So his genius in some methods is that he manages to create this notion that what he’s doing is so revolutionary and so distinctive, and that solely he can do it; it drives large quantities of worth and funding towards his firms.

The actually large threat with Twitter is that each time he does one thing actually excessive profile and public, he places that popularity on the road. He has taken over Twitter, which nobody has actually ever discovered the right way to make it a profitable enterprise, and now it’s in his palms. And thus far, the concepts that he’s put on the market don’t sound that new or attention-grabbing to me; they really feel like variations of issues that folks have already accomplished earlier than in numerous methods. And if he doesn’t succeed with Twitter, the query is, does it puncture the balloon for Tesla, and SpaceX and all his different initiatives? He might have paid $44 billion for Twitter, however finally, this might price him $100 billion or extra if there’s a threat that Tesla and SpaceX and different firms that he owns lose worth as a result of he’s uncovered as being a mere mortal.

 . . . and no, it doesn’t create nice alternatives for startups seeking to capitalize on the chaos at Twitter, per Tusk. Extra right here:

There’s simply not an important income mannequin for all of this to start with. To make issues worse for them, I nonetheless assume that there’s a threat ultimately that Part 230 of the Telecommunications Decency Act does get modified or repealed. Proper now, it exempts platforms from legal responsibility from content material posted by the consumer, so I can defame you on Twitter, and you might sue me personally however you couldn’t sue Twitter. And in consequence, Twitter, Fb, all of the platforms, their actual financial incentive is to maneuver towards adverse and poisonous content material, as a result of as a lot as we hate it, that drives eyeballs and drives clicks and thus drives promoting charges and income. So successfully, the dearth of legal responsibility by the platforms is making a world the place the web must be as poisonous and terrible as potential.

But when [we repeal] Part 230, it’ll be so much like what occurred with the tobacco firms starting within the Nineteen Eighties, the place unexpectedly they have been weak to litigation and began receiving these multibillion-dollar judgments, and in consequence, they felt actual financial ache and needed to lastly come up with their [marketing practices] as a result of it was costing them extra money than in any other case. Proper now Fb pays the little fines that it will get from the FCC, as a result of finally, they make a lot cash pushed by adverse content material. Repealing Part 230 would change that.

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