Hi, it’s Nicolas from The Family. Here’s a Friday Reads edition accessible only to paid subscribers. The goal is to direct your attention to various things you should care about.
Today’s Agenda 👇
Maybe private equity is the solution to Europe’s liquidity problem
Following up on topics I covered over the recent weeks
A comprehensive reading list on the ‘Great Fragmentation’
These days I’m working on private equity, in the narrow sense of the term—that is, buyout firms rather than venture capital firms. The end goal is to write an “11 Notes on Silver Lake”, to be published in a few weeks. In the meantime, I’m collecting my thoughts as to why private equity could be the key to the problem with late-stage liquidity in Europe.
This is a hypothesis I first voiced while having lunch a while back with a friend who’s an investment banker in Paris. This is what he replied (essentially):
No way. PE guys wear suits and ties; tech guys wear hoodies. There’s simply no way those two groups can do business together.
I thought it was too simplistic, and so I decided to retest the idea in a column published by Sifted about Investors in Europe need a clearer path to exit, hoping it would trigger some reactions (it didn’t—at least not specifically on the PE part):
Despite the recent uptick, IPOs are getting scarcer in the US, too. And so how have US venture capitalists managed over the last 10 years? By supporting the rise of an alternate ecosystem of secondary investments, which has seen mutual funds, hedge funds, large private equity funds, and various special purpose vehicles take over and provide early, sizeable returns.
Since then, I’ve been collecting articles, reading books, and talking to many people in the know, and I’m starting to collect my thoughts. The result is the following essay, which is obviously a first round. Read it if you’re interested in late-stage financing! If not, move on to the next section 🤗
Here the idea is to follow up on the topics covered in recent editions. It’s based on your feedback and includes additional sources that I have discovered since then.
Investing post-COVID-19. I wrote several pieces about this over the past three months, from a tech perspective obviously. Check them out if you haven’t: Long/Short In a World Eaten by Software; Asset Allocation In a COVID-19 World. Then a few days ago, Goldman Sachs published The Great Reset: A Framework for Investing After COVID-19. Definitely worth a read!
The ‘Great Fragmentation’. I’ve been writing about it a lot, notably here and here. Last week I decided to double down in Sifted because I think COVID-19 only accelerates that trend. There’s been pushback from Dragos Novac here, which prompted this week’s main edition. (Also see this discussion on Twitter.) For context I highly recommend this article by Bruno Maçães: The Attack of the Civilization State.
Facebook. There had already been several editions of European Straits dedicated to Facebook: Why I’m Leaving Facebook (Sort of) and Enough With the Facebook Bashing. This week’s Monday Note was about Facebook at a Crossroads. To follow up on the discussion I highly recommend Can Duruk’s The Silicon Oligarchy. Also, Chris Cox is (unexpectedly) back as chief product officer.
Consulting. Many readers have been interested in recent pieces related to consulting (here and here). One of them pointed out this article by the late Clayton Christensen: Consulting on the Cusp of Disruption. I admit I didn’t know it, although I do know Christensen’s ideas about consulting, voiced in this inspiring podcast with Business Insider’s Henry Blodget.
The stock market is a never-ending story. For a full explanation of what might be going on, here’s what I wrote in January: What’s Happening With the Stock Market? And here are recent articles that I found especially enlightening: Why are stock prices going up when the economy is in ruins? Here’s some helpful context and Stock Market Has Almost Always Ignored the Economy.
Uncertainty is the most important concept if you want to understand the Entrepreneurial Age. My cofounder Oussama Ammar and I are using it as the foundation for writing The Entrepreneurial Investor. Jerry Neumann also thinks that it’s a cornerstone for reinventing corporate strategy. Have a look at this piece by Barry Ritholtz: Markets Hate Uncertainty But It's Always Been That Way
Remote work. In reaction to this, Kenny Fraser, a subscriber to this newsletter, initiated an interesting discussion over email about the future of offshore professional services: will remote work be the end of existing providers, or will it bolster their businesses? For context, read Pankaj Ghemawat’s work on The Indian IT Services Industry in 2007. (By the way I will write about India soon—a lot is happening there!)
Germany. My colleague Erika Batista (who recently left The Family) introduced me to Matthias Hilpert, a Berlin-based investor who has conducted very interesting research on how large German corporations (on the DAX) compare with their US and Chinese counterparts when it comes to allocating capital to innovation. We featured Matthias’s work in this week’s Capital Call. Discover the whole thing here.
Reinventing incumbents. This was another dominant topic over the past weeks in European Straits. Read these two pieces if you haven’t: here and here. The following Bloomberg article offers a good discussion of why it’s better to implement radical innovation on the outside (in this case big oil companies venturing into renewable energy): Big Oil Can Help Renewable Energy With Spinoff Stocks.
As always, please don’t hesitate to reach out if you want to pursue the discussion or if you’d like me to dig deeper into one of the questions above 🤗
This Wednesday, the free edition of European Straits was dedicated to The ‘Great Fragmentation’: What It Means for Investors.
Here’s the related comprehensive reading list:
Semiglobalization and Competitive Strategy (Pankaj Ghemawat, Harvard Business School, March 2003)
Why the World Isn't Flat (Pankaj Ghemawat, Foreign Policy, October 2009)
Unicorns: Why This Bubble Is Different (William H. Janeway, Forbes, May 2015)
The Digital World Is Not a Flat Circle (me, The Family Papers, October 2015)
The Retreat from Hyper-Globalization (William H. Janeway, WTF?, November 2016)
Who is paying for the global city? (Janan Ganesh, The Financial Times, August 2017)
Is it time to declare the end of globalisation? (James Crabtree, The Financial Times, July 2019)
The Return of Geoeconomics (Michael Lind, The National Interest, October 2019)
Weaponized Interdependence (podcast & transcript—Henry Farrell, Conversations with Tyler, October 2019)
Globalization Is Ending. Here’s How to Prepare for What’s Next (Neil Shearing, Barron’s, October 2019)
Big Tech in a Fragmented World (me, European Straits, November 2019)
Corporate elites are overlooking deglobalisation (Rana Foroohar, The Financial Times, December 2019)
Weaponizing the Economy (Daniela Schwarzer, Berlin Policy Journal, January 2020)
Will Fragmentation Doom Europe to Another Lost Decade? (me, European Straits, January 2020)
The Great Technology Shift -- China and The Rise of the Rest (Christopher M. Schroeder, Christopher’s Newsletter, February 2020)
How will coronavirus impact on globalization? (Harold James, World Economic Forum, March 2020)
Globalists May Soon Become an Extinct Species (A. Gary Schilling, Bloomberg, March 2020)
Get Ready, A Bigger Disruption Is Coming (Pankaj Mishra, Bloomberg, March 2020)
Global Innovation, Local Regulation: Navigating Competition Rules in the Digital Economy (Christine S. Wilson, US Federal Trade Commission, March 2020)
Asia must brace for new age of protectionism (James Crabtree, Nikkei Asian Review, April 2020)
Future of Our Global Economy: The Beginning of De-Globalization (Alexander Jung, Spiegel, May 2020)
Navigating Deglobalization (Mohamed A. El-Erian, Project Syndicate, May 2020)
Making the Best of a Post-Pandemic World (Dani Rodrik, Project Syndicate, May 2020)
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From Normandy, France 🇫🇷