Tag: China

The Ground Is Shifting For Tech (More Than We Realize)

From anti-immigration and de-globalization to tech org restructuring and vertical SaaS headwinds, Tech is staring at a drastically different world going forward.

Was chatting with a VC friend earlier this week where we were discussing the US-India corridor and what the future looks like for cross-border SaaS from India.

During the convo, I ended up saying this – “I can just feel that the ground seems to be shifting in a big way for tech and most people aren’t fully recognizing it”. Btw, I repeated this line to my better half the next day in some other context too.

It just feels like a lot is changing at the same time, both macro and micro, and we as tech workers caught up in the daily grind of keeping the ship afloat in our businesses and personal lives, aren’t fully realizing how big some of these shifts are and how they will massively impact our futures.

Consider this laundry list of things unfolding as I write this (sorted from macro to micro, but in no particular order of importance):

1/ Military conflicts

As the world barely came out of Covid, it’s now faced with multiple global conflicts – Russia-Ukraine, Israel-Hamas, Red Sea, and now Iran has frikkin’ fired missiles at Pakistan (who would have thought?).

In the medium to long term, we are also staring at other potential standoffs like China-Taiwan, China-Japan, India-China, and more fronts in the Middle East.

While they might seem distant, these geopolitical tensions can have an indirect economic impact, especially on inflation and cross-border activity.

2/ Social tensions

The Israel-Hamas conflict is seeing side effects on the streets in the US. Who would have thought that top Ivy League campuses like Harvard would see active anti-semitism tensions?

This tension has powerful political and economic actors at the center and therefore, can have a second-order yet decisive political impact, especially with the 2024 Presidential elections around the corner.

3/ Anti-immigration

The US is dealing with a massive illegal immigration problem, with videos of thousands of people crossing the border via wall breaches going viral. Even other developed countries like the UK and Canada are dealing with a major rise in immigration.

In times of weak macros, high inflation, and a rising perception of hardship, I expect immigration to be a major election issue this year, particularly in the US.

Source: Ruchir Sharma (Rockefeller International)

4/ De-globalization

Candidly, I have been a big beneficiary of massive tailwinds of globalization starting in the early 2000’s. Many of the companies I worked for in India served US customers. The venture firm I worked for had US LPs. I moved to the Bay Area and became a global expansion operator. My startup had a distributed team across 4 countries.

At present, it definitely feels like these globalization tailwinds have weakened considerably. I am reading about Indian founders struggling to get US visas, the EU clamping down on migration, and China falling out of favor in terms of global trade and people movement.

If these tailwinds continue to weaken, this is a massive change in a key assumption that underlies the career plans of many global tech workers, especially those from emerging markets. To get a sense of this, check out this awesome thread on X that shares how Indian Masters students in the US will struggle to find jobs this year.

5/ The decline of China

China has come out in the open as an overtly aggressive competitor to the West. At the same time, Xi is executing a drastic socio-economic reset domestically that has decimated an earlier-vibrant tech sector. Noted economist Ruchir Sharma recently cited how in its peak years, China used to attract ~$100Bn of FDI in a single quarter, and now, its FDI has de-grown in Q3’2023.

I remember being in awe of China’s infra, talent and execution focus while working at Alibaba. That just seems like a dream now. I never imagined that I would read headlines about 21% unemployment and disillusioned youth in an energetic economy like China.

What are the repercussions of this? As Western companies pull out investments from China, this is an opportunity for other emerging markets like India and SEA to capture parts of this supply chain being diversified.

Source: Ruchir Sharma (Rockefeller International)

6/ Higher Interest Rates

From operating in a near-zero interest rate environment for more than a decade since GFC, the Fed has now executed the steepest interest rate ramp ever.

When the cost of capital is low, an economic party begins. Public stocks appreciate given the denominator effect. People borrow more so housing demand goes up and homeowners feel richer. Companies lever up and aggressively invest in physical infra and talent.

At the same time, investors start searching for higher yields given low risk-free rates, thus boosting illiquid-high-return asset classes like venture capital and private equity.

While this post-GFC ZIRP party was in full swing, Covid took it to a new crescendo courtesy of additional QE and stimulus packages. As everyone in the party reached peak highs, a neighbor (inflation) called the cops (Fed), and the party abruptly ended (interest rates rose from 0.25-0.50% in Mar’22 to 4.75-5.00% in Feb’23).

While the highs of the ZIRP party have been gradually coming off through 2022 and 2023, who knows what the long-term impact of this prolonged loose monetary policy will be? Millennials like me have largely worked and grown up in ZIRP, creating our goals, expectations, and lifestyles according to what we saw. Are we ready to re-configure our lives in this new era of higher interest rates?

7/ Tech org restructuring

The recent Big Tech layoffs in the Bay Area are much more significant than many people imagine. For the last 15 years, this compact region has been used to massive jobs getting created by default, salaries rising on auto-pilot, and major equity upsides being captured by RSUs and options. Forget layoffs, anyone working in the Valley since 2010 has only seen an era of multiple job offers and compensation ramps.

This scenario seems to be changing at a highly disruptive rate. Elon catalyzed it by doing deep RIFs in X, including eliminating entire functions altogether. Across mid and large tech companies, am now seeing orgs getting drastically flatter, classic white-collar functions like product management, ops, program management etc. either getting extremely lean or even going away altogether.

I fear that unless a tech worker can either build (code) and/ or sell, they will struggle to see adequate demand for generic tech ops skillsets. At the minimum, this will reflect in drastically restructured compensation packages.

8/ Rise of AI

I am lucky that as a venture investor, I get to see cutting-edge products before the world has even heard of them. From what I am seeing in terms of AI-powered products, both infra and application layer, I fear that many jobs as we know them will get automated away rapidly.

  • Individual developers and software dev shops have already started using AI for testing and debugging code. This was a job typically done by entry-level IT services talent in offshore centers like India.
  • Making creatives for digital ads and other low-complexity design tasks are being automated away rapidly.
  • Google has been drastically cutting down on its ad sales team, expecting a lot of that work to get automated by AI.

Ever since I entered tech in 2011, I have seen engineers be the kings both in startups and big companies. While outstanding engineers will always be gold, the last decade saw even mediocre engineers with basic skill sets reap massive financial rewards mainly due to the supply-demand imbalance.

As we enter the age of AI agents, I am not sure if this will be the case going forward. PS: for more insights on how the AI landscape is playing out, check out my AI Musings series – #1 How The Odds Are Stacking Up?, #2 OpenAI DevDay and #3 LLMs for Beginners.

9/ Bitcoin becomes legitimate

The biggest news of 2024 already is the SEC green-lighting Bitcoin ETFs (see my post ‘Bitcoin ETFs and The Challenges of Digital Gold‘). From being an edgy piece of technology for innovators in 2013, to being discovered by early adopters like myself in 2017, hitting all-time-highs in 2021, then seeing large-scale frauds like FTX in 2022, the SEC suing Coinbase in 2023, and now, getting recognized by the same SEC as a mainstream asset class – whew, who would have thought?

Again, I don’t think most people realize the significance of this move. Over a decade, pure, grounds-up, community-driven adoption of Bitcoin by common people has created a new asset class, helped it travel from Silicon Valley to Wall Street, and forced the regulator to recognize it.

What does Bitcoin going mainstream say about our current monetary systems? Will it change the balance of power between the wealth hoarders (Boomers) and the wealth aspirers (Millennials and Gen Z)? With cash fading away globally in various respects, is this the dawn of pure Internet money? Are there going to be any other ripple effects of the expected mainstream adoption of Bitcoin going forward?

I feel these are open questions with massive implications for who will hold wealth and power over the coming decades.

10/ Startup and VC shakedown

The last 2 years have been the most turbulent for the startup ecosystem since GFC. Venture financing in the US has been on a major downward slide, from ~$348Bn in 2021, to ~$242Bn in 2022 and then, another estimated 30% drop to ~$171Bn in 2023. Startup shutdowns have hit all-time highs, and given the drastic reset in public market comps, valuations in both early and growth-stage financing have drastically come down.

Source: Carta

As recently as Q1 2022, just 5.2% of new fundings on Carta were down rounds. In Q3 2023, that figure was 18.5%, continuing a nine-month stretch in which nearly one out of every five rounds raised by startups resulted in a decreased valuation.

Carta

This shakedown is reflected in the VC ecosystem too. A major Boston-based VC firm OpenView with $2.4Bn in AUM abruptly shut down in Dec’23. More recently, hard-tech VC firm Countdown Capital wound down operations, stating the following reason – “funding industrial startups is not inefficient enough to justify our existence, and larger, multi-stage venture firms are best positioned to generate strong returns on the most valuable industrial startups”.

Source: Altimeter

I believe that the 2023-25 vintage of startups will be built with very different philosophies, fundamentals, and capitalization strategies. In parallel, the 2020-21 vintage startups will need drastic re-wiring that in most cases, might just not be possible, leading to large-scale write-offs (read my post: Cheetah in the Rainforest: 2021 Vintage of Venture).

Another related view that I recently posted on X – “access to capital was widely considered a competitive edge but it now looks like a view that should be carried with contextual caveats eg. applicable only in low cost of capital macros and in specific types of startups like those with network effects”.

11/ Vertical SaaS headwinds

Within the venture landscape, I wanted to do a quick double-click on vertical SaaS.

With weak macros and the rise of AI, most point SaaS solutions have seen intense customer headwinds over the last 3 years. Startups selling to other startups have been hit particularly hard (many YC companies fall in this category), given the customers themselves are doing brutal cost-cutting.

Enterprise customers too, have been under pressures of layoffs and reducing general opex, hence creating push-back on the per-seat pricing model. See this prescient thread from David Sacks in late’2022 when SaaS was bottoming out.

Source: All-In Podcast

Based on anecdotal conversations, am also seeing many customers now focusing on reducing software fragmentation and trying to consolidate tech stacks to bring down costs and complexity. In a sense, this seems to be a move away from buying a portfolio of unbundled SaaS solutions, and towards buying bundled software that addresses multiple use cases from the same vendor. In fact, I feel there is an understated opportunity here for startups with strong PMF to really push up their ACVs by solving multiple use cases for customers.

The biggest question mark is on the future of Covid-boosted products. Hopin, one of the poster children of the era, sold for peanuts to RingCentral. Point SaaS products in productivity, sales enablement, and workflows accelerated in 2020 but with the current customer behavior, it remains to be seen if they are vitamins or painkillers, and whether their differentiation and value to customers is strong enough to justify their independent existence.

Closing thoughts…

It’s probably the January-effect but this week got me organically thinking and connecting the dots on all that is unfolding in the world right now. The venture investor in me is part-excited for all the new opportunities this change is going to bring with it, and part-concerned for how both myself as well as existing portcos need to navigate this massive change.

Having adaptability and a growth mindset is going to be key. I have a strong resolve to be on the right side of this change, and also working to transfer this conviction and learning to the founders I work with.

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Geo-economic themes for 2019 & beyond

Recently, I came across two talks by Ruchir Sharma (Head of Emerging Markets and Chief Global Strategist at Morgan Stanley), where he outlined some key geo-economic themes for 2019 & the upcoming decade (Asia Society, NDTV). While I am a big Nassim Nicholas Taleb fan and as a result, don’t care much for macro-predictions or extrapolations by economists, I do like to follow Ruchir’s work mainly because: 1) he presents really interesting data sets, which I can use to draw my own conclusions/ implications, and 2) he is someone who deeply covers both the East and the West. I do think it’s important for both founders and early-stage investors to at least keep an eye on global geo-politico-economic themes as they do impact tech businesses over the long term.

Here are the top 10 themes as presented by Ruchir. I find the supporting datasets particularly fascinating and therefore, have included their snapshots from the NDTV video. Am also including ‘MY TAKE’ for each theme, at least wherever I have a strong view.

  1. Peak America — Is America’s Decade Coming to an End?

This decade has clearly been America’s — as per Ruchir, while the US economy is ~25% of global GDP, its stock market cap is ~55% of global stock market value. Over last decade, while most major stock markets globally have given flat or minimal returns, the US stock market has tripled in value and is at a 100 year high compared to rest of the world.

Interestingly, Ruchir has identified a trend wherein every decade has some sort of a global economic theme that dominates investor interest. However, that theme never gets repeated in the following decade. As per his analysis, the US has ‘peaked’ in both economic and financial terms, and therefore, could see a slowdown starting 2019 and spilling over to the next decade.

MY TAKE: Clarifying the time frame being considered for this analysis is really important. In the short-term — yes, I would agree with Ruchir. With what one sees on the ground (excess liquidity all over, over-optimism at large, tech stocks bull run), it does seem like we are near or at the peak of the economic cycle and over next 24 months, various indicators will definitely tighten. However, over the long term (10yrs+), I continue to be extremely bullish on the US, mainly because of my belief in its inherently-entrepreneurial & innovation-driven economic and social fabric. My personal view is — US will continue to attract global knowledge talent for several decades to come (irrespective of political cyclicality), will lead in IP-driven innovation & deep-tech, and will surely be one of the leaders of whatever wave(s) that happen next (crypto, blockchain, AI & beyond).

2. Rise of Anti-Bubbles

Ruchir defines ‘Anti-Bubbles’ as countries where, despite healthy economic indicators, their GDP is surprisingly, lesser than the market cap of some of the top US tech companies. This, to him, doesn’t make sense. He feels that once the current tech wave slows down, the Anti-Bubble markets that have been unfairly neglected in favor of US tech stocks, will start seeing huge capital inflows.

Just to give a sense of how much global investors have been prioritizing US tech stocks over entire countries — India’s total GDP is less than the FAANG combined market cap.

MY TAKE: ‘Anti-Bubbles’ is a very interesting concept. While I understand where Ruchir is coming from in macro-economic terms, I think there is a larger point here — to me, technology is changing the very nature of the way our world operates & is segmented. Concepts like defined nation-states, insular GDPs, trade borders etc. are being disrupted right in front of us. To keep pace, traditional economic metrics and analysis methods also need to evolve to correctly reflect the updated realities of how markets, economies and societies are going to operate going forward. That’s where the gap is right now!

3. Why Global Interest Rates Can’t Rise Much

Global debt has risen from ~2x GDP in 2000 to >3x in 2018, with China borrowing the most since the 2008 crisis. Given these high debt levels, global interest rates can’t rise beyond a certain level, as central banks need to avoid large-scale repayment failures.

MY TAKE: No particular comments.

4. De-globalization

Trade as a % of global GDP has come down from ~60% in 2008 to ~55% in 2018. There has been a backlash against globalization all across the world this past decade, with protectionism on the rise across countries. Most notable example is the ongoing trade war between US & China.

Interestingly, there are a bunch of Asian countries that are benefiting from this trade war, including Vietnam & Bangladesh. US companies are now shifting their backend supply chains from 100% China, to diversified across multiple manufacturing centers, especially in SE Asia.

MY TAKE: I have a few specific inputs on this theme:

A) Globalization is beyond the control of politicians. Beyond creating short-medium term barriers, they can’t fight the power of technology (the Internet) and stop global citizens from interacting & trading with each other. The real issue is — how do governments create policies to ensure that all sections of society benefit from globalization. Stopping globalization is not the answer, ensuring equitable distribution of its fruits definitely is!

B) The geo-political trend of countries standing up to China is going to get even stronger in coming years. Given China has an openly aggressive international posture politically, economically and militarily, I expect its disputes with rivals such as US, India, Japan, Korea & certain countries in SE Asia to continue.

C) As China transforms its economy from manufacturing-based to consumption-based, countries such as Vietnam, Thailand, Bangladesh and India really stand to benefit from global companies diversifying-out their procurement from China.

5. The Anti-Establishment Wave

There is a clear trend of right-wing political parties coming to power across multiple countries. Interestingly, the average age of world leaders has also steadily been going up.

MY TAKE: No particular comments.

6. Fiscal Indiscipline Rising Everywhere

Global avg. Fiscal Deficit as % of GDP has gone up from ~2.25% in 2013 to ~3% in 2019(P). Case in point is India, where farm loan waivers have increased massively since 2016.

China spends 3x of India in terms of capital investments. While India has focused on waivers & subsidies at the cost of govt. spending on infrastructure, China has doubled down on investments & capital spending to drive growth.

MY TAKE: No particular comments.

7. India Still a One-Engine Economy

India’s growth is primarily driven by domestic consumption. As per Ruchir, it’s hard to consistently grow at 8%+ just with a consumption-based economic engine. Like China, India needs an investment-based engine as well, to complement consumption.

Another concern related to India— with rising consumption, household debt is also rising significantly.

MY TAKE: India’s consumer story is probably one of the most attractive investment areas in the world. Most startup activity is also in this space, be it eCommerce, payments, entertainment or food delivery.

Personally, I wouldn’t worry too much about the household debt situation as current debt levels are still far below developed markets and also, India has a strong savings culture that counter-balances the debt issue.

As a tech founder & investor, I would like other sectors of India such as enterprise software, manufacturing, agri etc. to also catch up with consumption, in terms of growth & investment attractiveness.

8. Growing ‘Tech-lash’

Tech has been the least regulated space across the globe, particularly in the US. This is changing now, as lawmakers realize the impact of these technologies and the need to study & better regulate them.

MY TAKE: Personally, I welcome constructive regulations that make tech companies more responsible towards consumers on issues such as privacy, harassment, data security, financial scams etc. The power of tech in our lives is only going to grow; it would be foolish to assume that it can be left unbridled. In fact, clear, non-ambiguous and forward-looking regulations will create a more sustainable environment for emerging technologies such as blockchain & crypto, AR, VR etc. to flourish.

9. Next US-China battle Will be All About Tech

MY TAKE: Frankly, the only country giving serious competition to the US in new-tech is China. Having developed a walled-garden Internet ecosystem that has spawned local giants (Alibaba, Tencent, Baidu etc.) rivaling the likes of Google & Facebook in scale & market cap, China is now focused on becoming an AI leader. I believe issues such as weak IP protection, outrageous data control and walled-off ecosystems, combined with an aggressive international political stance at a country level, will lead to significant headwinds for Chinese companies looking to expand globally. This is where US tech companies will continue to have an edge, followed by players from the EU, India and SE Asia.

10. King USD No More

The dollar has had a fantastic ride over last few years, backed by solid economic & financial performance from the US. Ruchir feels that the USD has peaked and will get weaker going forward.

MY TAKE: am no currency expert so have no comments :).

To Conclude:

My big takeaway from Ruchir Sharma’s top 10 themes for 2019 is that we are at or near the top of the economic cycle in the US. Excess liquidity & tech has been the main driver of this decade-long bull cycle, and given natural cyclicality, could see a cool-down period over next 12–36 months (which would be good for everyone, I think). In the short term, makes sense to proactively manage for this potential upcoming volatility by diversifying, both from a career and personal finance perspective. Personally, I continue to be a long-term bull on the US, primarily because of my confidence in its inherent entrepreneurial innovation engine & continued ability to attract the best global talent.

China has had a fantastic last decade domestically; however, I see major headwinds for it from a globalization perspective. Having seen its tech prowess, talent pool and national focus from close quarters, I wouldn’t discount China’s ability to pull another growth rabbit out of its hat (similar to manufacturing in the 90s and Internet-consumption in the 2000s). Maybe AI?

India continues to have a strong domestic consumption story, and will continue to chug along. It’s a democratic and highly heterogenous country — given fragmentation & high degree of local complexity across multiple elements, it’s hard to see it growing at China-like levels (which can only result from a China-like centralized political system). Which is fine, as India will continue to grow sustainably & by-consensus. Ideally, would like to see the Indian economy unlock one more major engine of growth — enterprise software for the world? Domestic manufacturing? Commercial use of space?

Overall, looks like we are in for an interesting 2019, and the decade ahead!

Source: all data snapshots are from Ruchir Sharma’s NDTV interview.

Thanks Jack Ma — the teacher, the founder, the sage!

Jack Ma with 18 co-founders in his apartment in Hangzhou, 1999

Source: Business Insider

Ah…the end of an era! Alibaba officially announced that one year from today, Jack Ma will hand over Chairmanship of the Group to current CEO Daniel Zhang. Am sure it’s a surreal moment for all Aliren (Alibaba ‘citizens’) — it’s almost impossible to imagine Alibaba without Jack. Everyone is so used to his inspirational speeches, his grand entries in the Annual Party, even his magic tricks at the event :). Xixi campus in Hangzhou (Alibaba HQ) reverberates with Jack’s vibe. His vision, leadership, persistence, sacrifice & personal charm has built Alibaba into a $500Bn digital behemoth over last 18 years, and as he says, the company has only just turned an adult :).

As a Founding Team member of Alibaba’s Globalization Team, I have had the privilege of working closely with Alibaba senior management at the Group level and through this experience, had the opportunity to directly & indirectly, imbibe Jack’s values. As Jack puts his 12 month succession plan into motion, here are some of the things I have learned from him:

  1. Embrace change — one of the key corporate values of Alibaba, Jack completely personifies it. The way he has maneuvered Alibaba from a B2B marketplace in the late 90s, to going D2C via Taobao (which eventually killed eBay in China), then launching Tmall as a branded marketplace, building an ‘enabler’ stack of Payments (Ant Financial), Logistics (Cainiao) & Cloud (Alibaba Cloud), taking Alibaba global over last 5 years — Jack stands for ‘change’. He always says that one needs to be constantly learning. And that in the age of rapidly evolving tech, no one can be a domain expert for long; everyone needs to keep continuously learning & evolving.
  2. Today is tough, tomorrow will be tougher, but day after tomorrow will be beautiful. The problem is, most people will die tomorrow — an evergreen quote that has always resonated with me. Building a disruptive company and creating true value takes time. In this era of dramatic distraction, grit & perseverance will separate the great companies, teams and professionals from the rest. Through this elegant quote, Jack keeps reminding us of this amazing competitive advantage that each of us can practice.
  3. Thinking really long term…like ‘102 years’ long term — one of Alibaba’s vision elements is to be a company that is around for 102 years. Why 102? ‘Cos from inception, that means lasting across 3 centuries or to put it in another way, impacting the lives of 3 generations of users. What an outstanding way of looking at business…and life! How many of us actually think like this, when conceptualizing a new product or launching a fresh BU. This is the ultimate benchmark for a b-plan approval :).
  4. ‘Building’ talent is more important than ‘hiring’ talent — Jack’s philosophy on talent is simple. Instead of hiring the most-pedigreed, the most proven talent, hire talent that is hungry and build them into stellar leaders. A very different way of looking at people that turns the problem on its head, from a hiring lens to a people development lens.
  5. Fighting for the ‘small guy’ — riding on the back of China’s manufacturing revolution, Jack started Alibaba with the aim of leveraging the Internet to connect Chinese sellers to the world. Since then, the SMB has always been a key focus area in Alibaba’s strategy, be it helping them reach consumers directly via Taobao, access loans via Alipay, or cost-effective cloud services via Alibaba Cloud. Jack has always fought for the ‘small guy’ and whatever his new adventure will be, I am sure he will continue this fight.
  6. Globalization — while China has always remained close-walled and insular, surprisingly, Jack has always thought global. Probably because he was an English teacher in the years when the language was extremely rare in China. He got his inspiration to start an Internet company when he visited the US on a trip. Alibaba.com, the first Alibaba product, was a global B2B marketplace. While still running essentially a Chinese company in the mid-2000s, he had the vision and audacity to try and raise money from Silicon Valley (ultimately getting a strategic investment from Yahoo, which turned out to be pivotal for the company). Post the IPO in 2014, Jack pushed for Globalization as a key pillar of Alibaba’s operating strategy, resulting in investments like Lazada in SEA, Paytm in India, getting brands from EU and N.A. into China via Tmall Global etc. Having been a part of these initiatives, every day I have felt amazed and enamored by Jack’s global thinking. As he says “Alibaba is a global digital company that just happened to be born in China”. Personally, I find his vision to enable buyers and sellers from anywhere in the world to transact with each other (via what he calls the Electronic World Trade Platform or eWTP) extremely compelling and inspiring!
  7. Culture & Ethics over KPIs — Chinese Internet companies are known to be extremely KPI focused and driving ruthless execution to achieve them. At Alibaba, Jack has always emphasized putting integrity, ethics and culture over KPIs. The company is by no means perfect, but having a leader who continuously puts values above just getting results at any cost, is a breath of fresh air in the tech business.
  8. Believing in the power of Women + Youngsters — Jack has spoken about this a lot at public forums. Having grown up in India and now working in Silicon Valley, it’s so heartening for me to see an extremely high proportion of women colleagues in our HQ. Also, few people might know this, but Alibaba has a very high number of women in senior leadership levels across BUs. Something that other venture ecosystems across the world can learn from.
  9. Keeping the team together — Jack started Alibaba with 18 other co-founders. Most of them were nobodies at that time, doing simple jobs, no fancy qualifications, no stellar pedigrees. Yet, Jack saw something in them. Most of them went on to start multiple BUs within Alibaba, lead thousands of people and play key exec roles. Most of them stuck around with Jack for many, many years (a few have retired in last few years) and even today, co-founders like Lucy, Jane and Trudy continue to function as operating CXOs. I don’t know how Jack did it but keeping the band together over so many ups-and-downs is to me, one of the defining reasons behind Alibaba’s success.
  10. Do the right thing — the most powerful mantra given by Jack. One that makes even the most complicated decisions, look much simpler. A mantra that can break any deadlock, guide any strategy, & help win over markets…and people. Always…do the right thing. This is Jack’s legacy that will stay with me forever!

Thanks, Jack, for all you have done and keep doing for the world. For starting Alibaba and for using the power of the Internet to connect Asia to the world. For making entrepreneurship ‘noble’, rather than just ‘cool’. And…for being a sage, a believer in these crazy, cynical times. Wishing you the very best for your next Chapter!

In God we trust; all others bring the Mary Meeker Report

Mary Meeker has released her (now world-famous) 2018 Internet Trends Report. This annual ritual, btw, is a killer marketing move implemented by KPCB for several years now. Nothing goes further than strong, original content, in cementing the brand of a venture firm.

There are several articles already out there that summarize this report (TechCrunch has done a nice, quick-and-dirty capture of key highlights here). However, as I was reading the report, I tried to connect the dots between the data and analysis presented in it, and my own experiences/ world-view. Here are the portions, and consequent implications, that I find interesting enough to highlight here:

1. It’s a two-horse race…and China is here to stay!!

Here’s why I am LONG on China (and large Chinese tech companies). Also, why I choose to live in the US and why I have strong belief in the entrepreneurial fundamentals of this country…

2. ‘Tech’ is in everything!

25% of US public market cap is pure technology. Today, every major company has become a “tech’ company in some sense. Each of us is impacted by tech companies, either as a user, employee or shareholder. There is just no excuse for anyone to not follow tech/ not have a point of view on it, irrespective of whether you directly work in the space or not!

Sidenote: below is the reason why US is still the top destination to build a tech company (in my view, it’s #1 from a holistic perspective). Can’t think of many other markets (barring China) that have both thriving private markets that take on venture risk, and robust public markets that give exits.

3. The era of conventional ‘jobs’ is over — gig economies are taking over!

The Industrial Revolution had created the concept of 9-to-5 jobs, with each worker bringing structured and specialized skill-sets to the table. With tech-led automation, this paradigm will cease to exist soon.

The Internet (followed by the ‘decentralized’ economy in coming years) has turned the world into an interconnected marketplace. In the future, citizens will be expected to contribute their unique value (creative or innovation led in most cases) into this marketplace via flexible ‘gigs’, with majority of tasks automated via tech and lot of human bandwidth freed up.

Sidenote: in the era of these new gig-based paradigms, a key challenge facing Millennial parents today is — how to think about skilling and the concept of a ‘career’ for their kids 20–30 years into the future? Also, what does this mean for school and university education? Topic for another post…

4. Forget your bad cell connection…as long as you have wifi!

During my startup days driving global GTM for a mobile search company, we had gotten a Nielsen study commissioned to understand behavior of Indian mobile users. This is in pre-Reliance Jio days, wherein data speeds were really slow (mostly 2G, 3G was a luxury). An interesting insight from the study was digital consumption in India being driven by wifi, rather than mobile data. In fact, the state-owned telco BSNL had enabled pan-India wifi connectivity, which led to the Internet boom in the country starting 2010. Looks like that trend is still driving global Internet access.

Sidenote: Even in the US market, Laptop/ Desktop usage is by no means, dead (see chart below). Though its share of daily hours spent has reduced from ~58% in 2012 to ~35% in 2017, it’s still a meaningful number in absolute terms and has held steady at ~2 hrs per day over last 5 years.

5. The world needs to discover the magic of QR Codes (ala China)

From my Alibaba/ Ant Financial experience, it wasn’t a surprise to me that 60% of everyday transactions globally are digital. However, only a 4% share for QR Codes was surprising. The world needs to discover their magic…soon. In fact, I have always wondered why this technology is so under-exploited in the US. Alipay has used QR Codes so beautifully to make China virtually cash-less (and Paytm is following a similar strategy in India).

BTW, this is what happens when a market adopts QR Codes…look at this frikkin’ curve!

6. Smartphone OEMs are in a race-to-the-bottom

0% growth in new smartphone shipments + ASPs coming down every year = a shitty industry. OEMs are in for a tough time. Non-Chinese OEMs are pretty much gone anyway. I see lot of startups doing distribution deals with OEMs — beware of hitching your wagon to an “unstable” engine.

Also, as I recently upgraded to the new iPhone X (which, btw, looks and feels eerily similar to my 1st iPhone in 2010; talk about Steve Jobs nostalgia), the first thought that crossed my mind — I can’t believe we are still using these devices. Don’t you feel the same way?

7. eCommerce is yet to inflect…even in the US!

As Prof. Scott Galloway says in this video (which you should definitely watch anyway; it’s about how Grocery is the next vertical likely to be disrupted by eCommerce in the US), 20% online retail penetration is typically the ‘tipping point’ in any vertical. US eCommerce penetration, even with Amazon & Walmart.com & other horizontals & other verticals & other marketplaces, is still only ~13%!! In my view, online can easily become at least 40–50% of the total retail market in major economies. Imagine the headroom for growth that still remains.

8. Amazon needs to have ‘Google Search’, Google needs to have ‘Amazon Prime’

This is probably the most interesting chart from the report. Google has dominated the ‘top-of-funnel’ across pretty much every use case for >15 years. Over last few years, eCommerce has become a dominant use case, resulting in the rise of Amazon. In fact, the company has become so ubiquitous that at least for product searches, it has now displaced Google as the search & discovery starting point (see chart above). With Alexa, this is going to become even more powerful. The same phenomenon has played out in China, wherein consumers prefer Taobao over Baidu as the primary top-of-funnel app, especially due to social commerce features.

Google needs deep commerce integrations to keep its search use case meaningful. At the same time, consumers will have high expectations from Amazon in terms of product search capabilities, especially on Alexa. I see their paths crossing a lot in coming years.

9. Globalization will be the acid-test for Chinese Internet companies

China is a huge market (both scale & monetization) — so immense that some of the most valuable Internet companies in the world today (eg. Alibaba) have been built purely on a domestic user base. The next 10 years will be interesting, as these companies have set out on the path to globalize (as a Founding Team member of Alibaba’s Globalization Team, I have had courtyard seats to this game). If these efforts succeed, China will shape the future of this planet in an unimaginable way (rivaled only by the entrepreneurial, innovation-driven DNA of the US).

10. 294 slides, and not a single one dedicated to India?

Barring a few mentions in some charts and tables, there was pretty much no analysis presented on India in this report. This is even more interesting, given the recent acquisition of Flipkart by Walmart for $16B, making it the world’s largest eCommerce acquisition by deal value ever.

With an economy growing at ~7% annually and a large mobile Internet user base that will soon rival that of China, combined with the likes of Amazon, Walmart, Softbank, Tiger Global and Naspers doubling down on it, India is definitely the 3rd digital consumer horse behind US and China. Though behind by a fair distance, it offers a great 10–20 year bet and an option that global majors definitely need to buy into while it’s relatively cheap. The key is whether these strategics & financial investors have enough patience to last in what is probably the world’s most complex & demanding market.

Note 1: I have consciously not written about other, more mainstream trends covered in the report (rising video consumption, emergence of voice, messaging apps continuing to grow, data as a key lever etc.) as they are more obvious and widely talked about anyway.

Note 2: Interestingly, the report doesn’t talk about Blockchain & Crypto much (barring a slide on Coinbase growth). If interested, check out my previous post on this topic.

Disclaimer: the above views are personal and don’t represent those of any organization I am part of.