Three counterintuitive 2023 predictions about Musk, SFB and even Kraft
Bradley Tusk, who started his career in Democratic politics but later became a lobbyist and consultant for private companies fighting regulators, now spends most of his time as a venture capitalist. Although Tusk is a generalist in his approach, he insists that he isn’t interested in any one startup. His expertise is at the intersection between tech and regulation and his firm adds most value to startups in areas where changing regulations will alter the size of the opportunity.
Tusk Ventures’s portfolio is a calling card for potential founders. Every year, Tusk compiles thoughts about the changes that he sees in the next 12 months. We believe he is often right in retrospect. I jumped on a phone call We met with him last week to discuss his 2023 predictions. These three stood out to me so I thought we’d share them.
1) Major CPG companies start selling cannabis products, eradicating many cannabis startups that had been operating in the relative shadows. Here Tusk explains why:
Big brands [sell] Many people believe that cannabis is less harmful than alcohol. There is a real disconnect between nearly two-thirds the states and federal governments, where cannabis can be legally used medicinally or recreationally. It’s still happening. Schedule 1 At the DEA [along with] heroin, methamphetamines, and cocaine . . This doesn’t make much sense, especially since states continue to legalize it.
President Biden he said“Let’s take this off Schedule 1” Once that happens, all interstate commerce that has been prohibited will be allowed. You’ll be able have real banking and trucking. [plants] across state lines, advertising . . . All the activities that a normal, big company like Kraft, Unilever, Anheuser-Busch, or Philip Morris might engage in, they are not allowed to do under the current system. However, once the federal restrictions have been removed, it becomes possible for them to do so.
One [question I’ve asked cannabis founders over the years is] How will they compete with Unilever? Why would Unilever buy them instead of just burying them. Most of the time, they can’t. [compete]. They are really racing against time, hoping that the federal government won’t do the right thing. But I believe that once cannabis is removed from Schedule 1, I don’t know if that happens in six months, or two years, then big companies will be able to get into the game. [because] There is money to be made. Many cannabis startups that were overvalued or highly valued, or that traded at very high multiples on Canada’s stock exchange will feel a lot more pain.
2) Instead of driving further crypto regulation Sam Bankman-Fried, and the abrupt implosion FTX actually wind up playing a minor part in any new regulations that are enacted. Though Tusk is a strong supporter of this), Does I believe we will see more regulation at both the federal and state levels in the next 12 month. Here’s Tusk:
My initial reaction to the FTX scandal was to say, “Okay, this is going be a lot more harsh crypto regulation that will cause problems for the sector because SEC chief Gary Gensler had been pushing for it for a long while and it hasn’t happened yet because cryptocurrency is very popular among a number of actual real people.” I thought FTX would give Gensler the cover to take a very aggressive stance against the entire industry.
Strangely, the story has become more bizarre and more frightening. It seems that Sam Bankman-Fried was a criminal mastermind who defrauded people of tens to billions of dollars. [that this debacle] It is not a crypto-related issue per se. Instead, it shifts the argument. It [shifts from]It’s almost as if it’s actually helping. [tamp down talk of overregulation].
3) Twitter ends-up costing Musk much more than the $44billion he and his investors paid. . .
Musk’s actions are consistent with the cultural zeitgeist. In this world of 24/7 media coverage, people who truly need attention and can’t stop trying to get it right have to do more outrageous things. That was what we saw with Donald Trump. That was what we saw with Kanye West. Musk bought Twitter so people would talk about him as much as we do right now. I think he has achieved his goal.
He is worried about the fact that Tesla’s market cap is much higher than General Motors or Toyota, which are companies that sell more cars. Tesla makes a great vehicle and they are growing so it’s fine for them to look into the future. But there is a big difference between what? [Tesla] It should be valued at the same price as other stocks. The Elon Musk hype and pixie powder are what make it worthless. His image of being far ahead of the rest and superior to everyone else is what drives retail investment in the stock. SpaceX is the same. Although it’s still a private company I saw yesterday that it was valued at $140 billion. [yet] There’s no way SpaceX can be. [worth] Its revenue was $140 billion. His genius is in that he creates the perception that his work is innovative and unique. This perception drives enormous amounts of value and investment towards his companies.
Twitter has a huge risk because he can make a big deal of himself and put his reputation at risk every time he does something very high-profile and public. He has now taken control of Twitter, which has never been a profitable business. The ideas he has put forth so far don’t seem that innovative or interesting to me. They feel like variations on things people have done before in different ways. If he fails to succeed with Twitter, the question becomes, “Does it puncture the balloon” for Tesla, SpaceX, and all his other projects? Although he may have paid $44billion for Twitter, it could end up costing him $100billion or more if Tesla, SpaceX, and other companies he owns lose their value as he is exposed as a mere mortal.
. . . Tusk says that it doesn’t provide great opportunities for startups to capitalize on the chaos of Twitter. You can read more here
There isn’t a great revenue model to support all of this. To make matters worse, I believe that Section 230 of Telecommunications Decency Act will be changed or repealed eventually. It exempts platforms from liability for content posted by users. I can defame someone on Twitter. You could sue me personally, but you couldn’t sue Twitter. Twitter, Facebook, and all other platforms have an economic incentive to promote toxic and negative content. This is because, as much as we love it, it drives clicks and advertising rates, and revenue. The lack of liability on the platforms is creating an environment where the internet can be as harmful and as horrible as possible.
But what if? [we repeal] Section 230 will be much like the case of the tobacco companies in the 1980s. They were suddenly vulnerable to litigation and began receiving these notifications. Multibillion-dollar judgmentsThey felt economic pain and had no choice but to get their hands on their money.[[Marketing practices]Because it was costing them more than normal. Facebook will pay the FCC the few small fines it receives, as they make so much money from negative content. This would be changed if Section 230 was repealed.
I’m a journalist who specializes in investigative reporting and writing. I have written for the New York Times and other publications.