Avoid Trump-cosis, and ask “what will rational people do”
Many folks I know are driving themselves crazy watching Trump, raving about his actions, and speculating about what he will do next. I do not recommend this – obsessing about a lunatic is neither good for your health, nor productive. On the other hand, I do believe that some solace and insight can come from thinking about how rational folks may respond to the US as it now is.
There were two extremely significant things that happened late this week that you may have missed that illustrate my thesis and provide some real insight into two important innovation trends.
The real state of the US
The unknown known is what Mr. Trump will do. He is erratic and unpredictable, with no clear strategy other than self-aggrandizement.
The known known is that the United States is a very deeply, bitterly divided nation.
There are legions of people harping about Trump as a fascist and demagogue. Of course, it is important to remain vigilant about potential authoritarianism, but personally, I think that the analogy to the 1930s is unhelpful. Both because of his temperment and the resistance to him, Trump is more likely to be ‘shambolic than apocalyptic’.
Thus, when I look at US politics today, I think that the best analogy is “the 1960s”. Disputes between the “left” and “right” (evidenced by massive ‘authoritarian, status-quo preserving’ resistance to change from one half of the public, and the other demanding change with increasing ferocity) consumed almost every aspect of US life. And don’t forget, Nixon won an election in 1968, premised on re-asserting order, control, and increasing the fighting in Vietnam.
Now, as then, Americans are focused on these internal conflicts, and are likely to remain so for quite some time. Just as during Vietnam, massive amounts of US energy will continue be devoted to zero-sum, ‘winner takes all’ partisan internal wrangling, which of course leaves it little time for them to meet all but the most acute challenges from outside.
Responses by rational foreigners
Rational people outside the US will respond, not to irrational tweets, but to the real state of the US and the unpredictability of its president.
Germany and Japanese military spending will rise – especially on cyberwarfare
Trump has repeatedly expressed disdain for NATO. He has (probably correctly) indicated that a number of NATO countries should pay more for their own defence.
Three of the NATO countries that spend the least on defence are Canada, Germany and Japan. And yet, the Germans should be scared silly by the Russians, and the Japanese likewise by the Chinese. Faced with an untrustworthy ally in the US, I expect that the Germans and Japanese will rapidly start taking more of their own defence in hand.
Sure enough, today’s Guardian newspaper contains clear statements to this effect from Angela Merkel (“We need to invest more in our defensive capabilities”) and from the retiring President of Germany, Joachim Gauck (“Germany is ready to be more active in world affairs”). These were not spontaneous utterances, and this is a huge deal.
And thus, my first prediction: Trump will cause the re-militarization of Japan and Germany, this re-militarization will be significant, and it will be weighted towards tech.
Japan is the third largest economy in the world, Germany the fourth. Combined, their economies are nearly the size of the US. Both are much bigger and richer than Russia (as well as far better governed, better educated and more innovative). Of course, if these two countries start ‘punching at their own weight’ in defense, the era of clear US pre-eminence is over.
In both Japan and Germany, because of who their foes are, and because it is more palatable to spend money on software engineers than tanks and fighter jets, they will start by investing very heavily in cyberwarfare capabilities (This is not the nonsensical Big Brother ‘terrorist in ever pot’ spying-on-ourselves that we have wasted so much money and liberty on since 9/11. Cyberwarfare is about fending off attacks from the likes of China and Russia, and equally importantly, developing offensive capabilities.) Hence, the second half of my first prediction: Japan and Germany will become world leaders in spending on cybersecurity.
Sadly, I am not predicting that the Canadian government will recognize that it can kill two birds with one stone by increasing our defence spending and focusing our innovation policy on cyberwarfare. This is a real shame, as this will be a highly attractive area for growth, commercialization and export for the next generation. Alas, I think we will miss this boat and choose an unfocused barrage of mushy ‘nicer’ things for our innovation policy, to much less effect.
Suddenly, the US is not nearly as attractive for foreign talent
On Thursday, Travis Kalanick, the CEO of Uber stepped down from President Trump’s business advisory council. This is massively significant for what it reveals about the strains Trump creates for US tech companies. CEO’s don’t resign from this sort of ego-stroking wank for no reason.
When Trump enacted his travel ban, in a truly epic piece of poorly executed governance, on a Friday night without warning, planning, consultation, or even briefing members of the legislature, a number of protests erupted at US airports. In support, NYC taxi drivers called a temporary strike, refusing to pick up passengers from JFK. Uber responded by ending surge pricing, which (rightly or not) was viewed by many as indicating that Uber supported Trump and was hostile to the protests. Quickly a protest against Uber (#deleteUber) spread on social media, with an estimate 200k people deleting their Uber accounts over the weekend.
The usual narrative seems to be that Kalanick resigned because of this wave of customer anger. But I doubt that is the real reason. I bet that he resigned because Uber risked massive talent drain, with its very expensive, highly mobile workforce threatening to fission quickly.
Uber’s workforce is quite remarkably diverse (including the CTO, who is a Vietnamese-American and a CFO in the US on an HB-1 visa). Many of its senior leadership have come from Google, Apple and Facebook. It is safe to assume that they are very expensive and highly mobile folks. They have come to Uber not to build ‘a taxi hailing app’ (which is pretty basic thing, and done), but to be on the frontlines of the battle to build the infrastructure for ‘autonomous vehicle hailing’ and everything that goes with it, from mapping to AI. This is one of the biggest deals in tech, and a race between Google, Apple, and every major car company is well underway.
There is no possible way that Uber can compete with Google and Apple if its HR recruitment is saddled with the perception that the company supports Trump. None. If Uber is perceived as being pro-Trump, it will lose the war for talent, and thus it will lose the war for autonomous vehicle hailing before it even starts in earnest. That, I think, is why Kalanick stepped down from Trump’s advisory council so quickly, and what this episode illustrates is how the stark divisions in US society threaten to weaken the US tech industry’s stature as the employer of choice for mobile foreigners.
Few people remember that until the 1980s, the epicenter of the US venture capital world was Boston, not Silicon Valley. There were a few relatively small things that shifted momentum (including California’s hostility to enforcing non-competition covenants on employees), but the effect of these small things compound over time, and ultimately Silicon Valley rose far above Boston. Trump’s election will not cause a flood of Americans to move to Canada. But it will cause a flood of foreigners who either are, or were, considering studying or working in the United States, to reconsider. Trump’s election decreased Silicon Valley’s attractive pull on foreign talent – how much it has decreased remains to be seen, but it has decreased. Of course, even just a slight decrease in attraction on talent from outside the US will have significant long term effects on its pre-eminence.
Canadians in tech should be assertive and aggressive in touting our virtues to take advantage of this dip in Silicon Valley’s attractiveness. There are other places to do technology, but there are very few countries in the world as well positioned and well-governed as Canada so we should try to win an unfair share.
Some people are already on the ball. Here, for instance, is the Rotman School of Business (UoT) offering to help scholars affected by the travel ban (I found out about this via the blog of a prominent libertarian American economist, Tyler Cowen, Marginal Revolution).
Every university, tech company and government in Canada should be doing the same thing, worldwide, looking to recruit the best and brightest. And, first and foremost, we should work to keep or repatriate great Canadian talent.