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Politico
14-03-2025
- Business
- Politico
5 questions for author Catherine Bracy
With help from Alfred Ng Happy Friday, and welcome to The Future in 5 Questions. This week we talk with Catherine Bracy, a civic technologist and CEO of the advocacy group TechEquity whose new book, 'World Eaters: How Venture Capital Is Cannibalizing the Economy,' is getting attention for its provocative argument that the structure of venture capital – the financial engine of the tech industry — has a distorting effect not just on companies and their values, but on American society overall. With Elon Musk currently running a startup-style disruption playbook on the federal government itself, she talks to DFD about the puzzling opacity of private tech giants, how 'moneyball for startups' could improve the economy — and the very disappointing device in her pocket. (You can also hear her on this recent POLITICO Tech podcast.) This interview has been condensed and edited. What is one underrated big idea right now? I would say, something like moneyball for venture capital. Technology itself is valueless, and the thing that gives it its potential to do harm or to create opportunity is the economic structure in which it's created. People should know that the way that investors are incentivizing their companies is to be the biggest they can possibly be, because that's how they create the financial return that they have promised to investors. The playbook for doing that is a bulldozer effect. Speed is goal, not efficiency. I think we see that with the way that Elon is moving — sledgehammer, not scalpel. That's a strategy. It's not a mistake. And all the fallout from that is a cost that is borne by the rest of us. So those companies skirt regulations. They exploit workers. They ship products that aren't good enough or that, you know, have risks to the customer. They do rugpulls. It attracts grifters. I came to believe, by the end of my research, that we were missing out on a ton of great innovation and financial gain by ignoring companies that were only kind of naturally able to hit doubles or triples instead of grand slams. And that in areas like housing and other areas of the economy that I care a lot about, either they were ignoring the right solutions, or they were forcing some of those companies to shape-shift. And that was because the investors are chasing power law returns, I think, to the detriment of the economy. What is a technology that you think is overhyped? Well, that's the thing about VC — everything is overhyped, right? It's like that joke: You can be underwhelmed, or you can be overwhelmed, but you can never be like, appropriately whelmed. And I feel like that's true in VC. Nothing is ever appropriately hyped. But if I'm giving my cheeky answer, I would say I have been really disappointed with the iPhone. I've been an Android girl since day one. I got my first Google phone in 2008, and I've been on Android ever since, and then my friend group shamed me into getting an iPhone so that I would no longer be a green bubble. And I came in thinking this was going to be like, so much better. And it's so much worse. So my spicy take is that the iPhone is really overhyped. What could the government be doing in regard to technology that it is not? I've actually got two answers to this. The first answer is to force more transparency for private capital markets and private companies. I think it's kind of a farce at this stage that companies that are as large and valuable and critical to the financial system as Stripe or OpenAI don't have the same reporting requirements as companies that are much smaller, but in the public markets. And then on the tech policy side, where I do my day job, we're working on a lot of regulation in California to set standards around the deployment and development of AI. A lot of the stuff that we're worried about AI doing in the world is actually already illegal, or there are laws to enforce that behavior, but they're very difficult to enforce when AI is perpetrating them. So we need to properly resource enforcement agencies, empower enforcement agencies and breathe life into them so that there are real, practical methods for people to enforce their rights against AI. What book most shaped your conception of the future? I've been thinking a lot since the election, and about what kind of economic system we will build after whatever this is that we're living through. How do we envision something that is positive about what we can build after? The first thing I did was kind of try to ground myself in history, and so 'The Rise and Fall of the Neoliberal Order,' by Gary Gerstle, has been very helpful in thinking through the grand sweep of how economic systems are created and political economies spring up around them, and what that means for how we got to where we are now, but also what it means for what we might build in the future. And I have found a lot of solace in the very optimistic and heartfelt vision that Natalie Foster laid out in her book 'The Guarantee,' which really points out that, while we think about these things — this sort of utopian idea of what you know, how the abundance economy could work for everybody — there are things we have already accomplished over the last 10 years that point us in the right direction. And then it's not all just fantasy and imagination. What surprised you the most this year? I feel like the cliche answer is the election results. Now, I feel like I shouldn't be surprised by anything. But I've been a little bit surprised by how transparent the Silicon Valley right has been about their goals and methodologies. Elon Musk is nakedly blitz-scaling his way across the federal government, and it's just a very literal interpretation of Silicon Valley's methodology as brought to government. I thought they would be more subtle about that. Maybe I shouldn't have been as surprised as I was. But, you know, here we are. HUAWEI BANNED The Chinese tech giant Huawei's lobbyists are banned from the European Parliament's premises until authorities wrap up a bribery investigation into the company. POLITICO EU's Max Griera reported Friday that Huawei is at the center of a corruption scandal linked to its lobbying in Brussels. The company had nine people registered to enter the European Parliament according to its most recent records in October, and the ban applies to all of the government's premises. Authorities so far have raided 21 addresses in Brussels, Flanders, Wallonia and Portugal, and made several arrests. CALIFORNIA'S PRIVACY COP GETS A NEW CHIEF The California Privacy Protection Agency announced a new executive director: Tom Kemp, a Silicon Valley-based investor who has advocated for the state's privacy regulations in the past. POLITICO's Tyler Katzenberger reported exclusively in today's California Decoded that the tech entrepreneur will lead the agency starting on April 1. He will replace Ashkan Soltani, who left in January. In his Q&A, Kemp said he wants to help Californians exercise their privacy rights, saying there's a disconnect between people worried about their data privacy and people taking action to protect it. POST OF THE DAY THE FUTURE IN 5 LINKS Stay in touch with the whole team: Derek Robertson (drobertson@ Mohar Chatterjee (mchatterjee@ Steve Heuser (sheuser@ Nate Robson (nrobson@ Daniella Cheslow (dcheslow@ and Christine Mui (cmui@
Politico
13-03-2025
- Business
- Politico
Is a billion-dollar tech fine really a tariff in disguise?
With help from Alfred Ng President Donald Trump, newly friends with a host of Big Tech CEOs, has launched a transatlantic broadside against European tech regulations, complaining that the EU's suite of tech laws amounts to rigging the global game against a lucrative U.S. industry. 'Whether you like them or not, they're — they're American companies, and they shouldn't be doing that,' he told an audience at Davos. 'And that's — as far as I'm concerned, it's a form of taxation.' His comments echoed complaints by tech leaders, notably Meta chief executive Mark Zuckerberg, who has urged Trump to stop Brussels 'screwing with' American industry, and called the EU's competition law 'almost like a tariff.' Their rhetoric raises a new question with big implications for global trade: Are the EU's tech fines actually …. a tariff? It sounds semantic, but the argument has real implications for both Europe and America as they navigate a new trade relationship with Big Tech at the center. The first big consequence was Trump's Feb. 21 memorandum zeroing in on European tech regulations as 'overseas extortion.' Though it stopped short of literally calling the EU fines a tariff, the document carefully laid the groundwork for a trade fight, arguing that the continent's tech laws are unfair taxes that merit retaliatory tariffs – a strain the transatlantic relationship hasn't faced before. Trump's actions are designed to shake up a global order in which Europe has become the world's de facto tech regulator — with a suite of competition, safety and privacy rules enforced largely by fines against major tech firms. Companies that break the EU's General Data Protection Regulation (GDPR) can be fined up to 4 percent of global revenues. The bloc's competition rules (including the tech-focused Digital Markets Act) have even larger penalties of up to 10 percent of revenues. A recent report by DLA Piper finds that regulators in Brussels have issued over $6 billion in GDPR fines between 2018, when the law came into force, and the beginning of 2025. The biggest penalties have been handed out to the American tech giants. Meta was hit with a $1.3 billion fine in 2023 for breaching the EU's data protection laws. Google has been fined more than $8 billion for breaches of antitrust rules, including a record setting $4.7 billion in 2018 (later trimmed down), while Apple has been handed a back-tax bill of $14 billion. Whether those are just 'fines,' or actually a form of tariff or tax, seems rhetorical. But it has legal implications in global trade. Since 1998, the World Trade Organization has agreed that there should be no tariffs on digital trade. The moratorium has been renewed every two years since then (although it is becoming increasingly difficult to get WTO members to support it). The European Commission, for its part, defines a tariff as 'a tax on the import or export of goods between countries' — so the line is very blurry between Zuckerberg's invocation of tariffs and Trump's complaints about 'a form of taxation' on a cohort of companies that are nearly all American. Some analysts argue that EU fines aren't tariffs, and if Trump uses tariffs to fight back against them it could set a dangerous precedent. Fines for breaching EU laws are 'not tariffs in any way,' said analyst Varg Folkman at the European Policy Centre. 'I can understand them [Trump and tech bosses] seeing it that way, but it's a stark distortion of what the reality is. 'These are fines stemming from legislation on how we regulate our digital market and digital services. And these are fines for companies registered in the European Union as well, who are not following those laws,' he added. Folkman warned that considering these fines to be tariffs could have 'very wide repercussions,' as the Commission comes under pressure to back off enforcement of its newest digital rules to appease Trump. 'This is EU legislation, they have been fined under EU laws. At some point, the law is the law, and if you start using that as a bargaining chip you are undermining yourself in future situations,' he said. Stephen Woolcock, visiting associate at the London School of Economics international trade policy unit, sees it differently. In the broad sense, he says, the fines are a newer version of a trade barrier. 'Are fines or other policy measures equivalent to tariffs? The short answer is yes, because most of the efforts in trade policy for the past 20 years, if not longer, have been trying to remove regulatory barriers to trade, divergences in regulatory policies,' he said. That equivalence hasn't been especially relevant, however, because the EU and U.S. have generally agreed to deal with their trade issues in bilateral negotiations rather than Trump-style unilateral moves. 'In the past it's been possible to resolve these issues internationally in large part because of U.S.-European cooperation,' said Woolcock. Will the EU bend? Perhaps not: 'I don't think diluting our own tech regulation is really high on the list of things that the EU is willing to offer,' said Niclas Frederic Poitiers, research fellow at think tank Bruegel. He also envisioned calling the president's bluff. 'Trump seems to think that tariffs are this enormous leverage over the rest of the world, but we've seen with Canada and Mexico that he backtracked very quickly,' he said, noting that in the end, securing EU procurement of American weapons or gas might be more tempting for Trump than fighting for tech companies. META'S ROLLOUT Meta will begin testing a new fact-checking model called Community Notes across its platforms on March 18. CEO Mark Zuckerberg announced this initiative shortly before President Donald Trump's inauguration in January. Conservatives had criticized Meta's prior fact-checking program as an attack on free speech, with House Judiciary Committee Chair Jim Jordan calling the decision to end it a 'commitment to free speech.' Instead of relying on third-party fact-checkers to counter false information on Facebook, Instagram and Threads, Community Notes relies on contributors to add context to posts. 'We expect Community Notes to be less biased than the third party fact checking program it replaces, and to operate at a greater scale when it is fully up and running,' Meta said in its announcement. The initial rollout is only for the United States, but the company intends to make it global. A RUSSIAN OFFENSIVE Pro-Russian groups are using cryptocurrency to fund 'state-sponsored terrorism' in Europe, POLITICO EU's Anotaneta Roussi and Laurens Cerulus report. The groups offered cryptocurrency payouts to court people through the social media site Telegram to carry out acts of sabotage and vandalism, according to the report. The EU High Representative for Foreign Affairs and Security Policy Kaja Kallas said these attacks against Europe have been on the rise, calling it a 'war that is going on in the shadows.' POST OF THE DAY THE FUTURE IN 5 LINKS Stay in touch with the whole team: Derek Robertson (drobertson@ Mohar Chatterjee (mchatterjee@ Steve Heuser (sheuser@ Nate Robson (nrobson@ Daniella Cheslow (dcheslow@ and Christine Mui (cmui@
Politico
12-03-2025
- Business
- Politico
China throws money after tech, while Trump pivots away
With help from Alfred Ng As the world's two biggest economies race to dominate technologies of the future, like artificial intelligence and quantum computing, they're betting on opposing industrial strategies. China just previewed a new state VC fund, intended to support startups focusing on cutting-edge fields like semiconductors, quantum, AI and renewable energy, with an eye-popping target of $1 trillion yuan, or roughly $138 billion. President Donald Trump, meanwhile, used his first address before Congress to attack America's largest attempt at directly investing in high-tech manufacturing. He called for lawmakers to undo the CHIPS and Science Act, the 2022 law that has been pouring some $50 billion into rescuing the domestic semiconductor sector. 'China is dialing its industrial policy up to 11 while the U.S. is rolling back its industrial policy,' is how Gerard DiPippo, the acting associate director of the RAND China Research Center, put it. The conventional wisdom lately has been a little different. For a while, it looked like America was re-embracing high-tech government intervention. The CHIPS Act and the Inflation Reduction Act, another signature Biden-era policy that Trump wants to repeal, represented a return to industrial policy on a scale the U.S. had not seen in decades. Trump himself ordered the creation of the U.S.'s first sovereign wealth fund, an ill-understood idea that he's said could invest in state-of-the-art manufacturing hubs and may be closer to what China has in mind. But in the broader sense, U.S. tech policy largely amounts to assuming the private sector will carry the ball. More structured, long-term government investments have been subject to powerful political winds that can change from administration to administration, and recently even month to month. Trump's upcoming budget request is expected to make major cuts to the science agencies that conduct basic tech research. And his U.S. sovereign wealth fund — first suggested by former President Joe Biden last fall — is still a purely 'look into it' proposal. Meanwhile, China plows forward with a strong emphasis on industrial policy — one that, on tech, actually dates over a full decade. Its ongoing 2015 'Made in China 2025' plan was designed to upgrade its manufacturing of high-tech goods and achieve self-sufficiency in the most critical supply chains. The dueling statements last week were a striking reminder of the persistency gap between Beijing's continuous, state-backed policies versus the U.S.'s more fragmented and sometimes reactive market-driven approach, said Kyle Chan, a researcher at Princeton University who writes the popular newsletter 'High Capacity' on industrial policy. Consistency matters a lot in certain industries like semiconductors, where factories cost so much that some chipmakers bet their entire future when they plan a new investment. China's semiconductor-specific war chest, known as the 'Big Fund,' goes back to 2014 and started spending its third installment in January. There's no true U.S. counterpart to Chinese industrial policy. 'The closest equivalent would be maybe DARPA or In-Q-Tel, which supports the intelligence community, but those are dealing with much smaller investments,' said Will Rinehart, an economist specializing in tech policy at the American Enterprise Institute. 'Just generally speaking, the U.S. doesn't have equivalently sized, government-owned investment funds.' At times, it has seemed to inch closer in recent years. The Obama Department of Energy extended large loans to startups like Abound Solar and the controversial Solyndra to help them bring advanced green technologies to market. Biden's ability to get CHIPS passed with bipartisan votes marked a notable shift among Republicans, a party that traditionally balked at industrial policy as inefficient government interference. Will Trump's reversion make a difference? That hinges on broader questions, like whether industrial policy even works — and what it means for two vastly different countries to make it work. Compared to other advanced economies, the U.S. has historically been the most averse to any consistent use of industrial policy. 'The U.S. is a market-oriented, commercially-oriented system. China is increasingly actually a national security and capacity-oriented system,' said DiPippo. 'We're playing different games, and that means the rules are different, and it's hard to say who wins if you're both playing by different rules.' The effectiveness of industrial policy depends, too, on the technology in question. For AI, the U.S.'s leadership in the best models and chips largely came from the private sector. Even China's notable win — DeepSeek, the powerful-and-cheap new AI model — is no obvious poster child for industrial policy. 'There might have been some sort of broader support in terms of data access,' said DiPippo. 'But it seems like they were just a scrappy firm that had some really good engineers.' The difference could matter more in industries like chip manufacturing and quantum computing, where national security implications may require long-term investments to arrive faster than the market demands. That's where some Republicans continue seeing a role for subsidies — as recent hesitancy toward Trump's demands to repeal Biden-era laws shows. Trump's approach hasn't exactly been a model of free-market thinking, of course: Like Biden, he has used federal power as a tool to drive economic outcomes. Unlike Biden, his favorite lever is tariffs, which he treats as a blunt force to get desired policy outcomes out of chipmakers like TSMC, 'for free' as he says. While it may be where the comparison ends, that tactic to prod the private sector into action is one similarity the two countries still appear to share. 'There's a very strong, almost like parallel between what Trump is trying to do and how he's trying to do it, and honestly, what China's whole sort of industrial policy approach has been,' Chan said. 'Use your greatest asset — which is access to your market — to bring foreign companies, to bring your own companies and keep them within your own borders.' TAPPING THE BRAKES The California Privacy Protection Agency fined Honda $632,500 in a settlement resolving alleged unfair data collection practices, as my colleague Tyler Katzenberger reported from Sacramento this morning. The agency claimed Honda made it difficult for customers to opt out of having their data sold or shared with advertisers in violation of state law. Along with the fine, Honda agreed to make it easier for owners to opt out, and is required to consult a designer to review its methods for privacy requests. The settlement marks the first time California went after an automaker, but the industry has found itself under the microscope as of late over how it handles people's data. Texas and Arkansas sued General Motors for alleged privacy violations, while the Federal Trade Commission banned the company from sharing drivers' data to consumer reporting agencies for five years. Cars over the last decade have quietly become a major source of data for companies to collect and sell, siphoning information on a car's location, a person's phone contacts, and even the air pressure in the tires. Digital Future Daily took a look at this trend and the potential data risks back in 2022. CRYPTO RULE HEADED FOR REPEAL A crypto regulation requiring financial transparency may soon be revoked after the House voted to repeal it Tuesday. The Biden-era rule required certain cryptocurrency brokers to report digital asset transactions to the Internal Revenue Service and collect customer information, which supporters said would provide more visibility into unreported transactions, POLITICO's Bernie Becker reported. The House voted 292-132 to repeal the rule, and it is headed to the Senate for final action before it goes to President Trump's desk, who is expected to sign it. POST OF THE DAY THE FUTURE IN 5 LINKS Stay in touch with the whole team: Derek Robertson (drobertson@ Mohar Chatterjee (mchatterjee@ Steve Heuser (sheuser@ Nate Robson (nrobson@ Daniella Cheslow (dcheslow@ and Christine Mui (cmui@
Politico
11-03-2025
- Business
- Politico
The defense industry has SXSW surrounded
With help from Alfred Ng South by Southwest is underway in Austin this week, the 37th edition of the tech, music and film festival. This year, however, is the first since SXSW ended sponsorships from the U.S. Army and weapons makers. The defense industry had been attending the conference since it became a linchpin of the global tech-conference circuit — a relationship that abruptly ended last year, after attendees protested the U.S. Army sponsoring last year's events while America backed Israel in its war in Gaza. That doesn't mean the defense sector has disappeared from Austin. On the contrary: Austin has become a near-split screen, as multiple defense tech confabs have sprung up to make the increasingly lucrative connection between innovation and the armed forces. Tectonic Defense, a publication focused on defense tech, hosted a new two-day conference on March 10 and 11. Austin4America launched for the first time late last week. They joined more established meetings including Space and Defense Innovation and 'Disruptive Defense' powered by the Pentagon's Defense Innovation Unit, AFWERX and NAVALX. It's a physical manifestation of a rift over the role of the American tech industry: Should Silicon Valley, with a long history of counterculture West Coast politics, keep its innovation separate from the military? Or does the industry have a patriotic or even profit imperative to contribute to the armed forces? The question is gaining new energy as tech leaders ally themselves with the Trump administration, and as veterans of defense startups like Palantir and Anduril join the administration. For years, with progressive values ascendant in Silicon Valley, military connections to the mainstream tech industry became increasingly fraught. In 2018, employee protests at Google drove the company to withdraw from Project Maven, which was intended to use AI to analyze drone footage at the Pentagon. This year — as tech companies tack to the political right, that dustup seems like ancient history. In February, Google dropped its commitment not to use AI for weapons. Before the policy change, SXSW had long served as a place where the two worlds met. South by Southwest started in 1987 as a music gathering, and tech was added to the offerings almost a decade later. Nick Barbaro, one of the founders of SXSW, said the military was involved early; 'they had Army bands coming here from our second and third year,' he said. But last year, sponsorship by the Army drew a backlash. Dozens of artists withdrew from the festival to protest U.S. support for Israel's assault on Gaza, which was sparked by a deadly Hamas attack on Oct. 7, 2023. In response, the festival announced it was 'revising our sponsorship model' and said 'the US Army, and companies who engage in weapons manufacturing, will not be sponsors of SXSW 2025.' Barbaro said, 'there were a lot of mixed feelings about how we ought to deal with that. I don't personally think there's anything wrong with the Army being here as a sponsor, but the timing was very poor. It was right as Gaza was happening.' The decision was 'disappointing,' said Lt. Col. Jamie Dobson, spokesperson of the Austin-based Army Futures Command that focuses on ensuring that soldiers 'remain at the forefront of technological innovation and warfighting ability.' Her organization sent reps to three of the four alternate conferences: Tectonic, Austin4America, and Space and Defense. 'The relationship for us is critically important. It's not just that we want to do business. We want the relationship with them because tech is evolving so quickly that we can't just buy what they're selling today. We want to know what they're planning three generations down the line, she said. Now, as the defense tech ecosystem is forced out of SXSW, it is growing. One roundup by Distinctive Edge Partners, which organizes Space and Defense Innovation, found more than 100 panels spread across 18 venues handling defense and space, with the vast majority having nothing to do with SXSW except timing. Newly founded Tectonic Defense held its event over March 10 and 11. Industry speakers included reps from Palantir, Anduril, General Catalyst and Skydio; the military sent speakers from an alphabet soup of agencies and offices, including DARPA and the Defense Innovation Unit. Disruptive Defense, convened by the Defense Innovation Unit at the Pentagon along with NAVALX and AFWERX, drew more than 3,000 people to its sixth annual meeting, a spokesperson said. A third defense tech summit called Austin4America started this year as well— specifically because SXSW had kicked out the military, founder Luke Fischer told DFD. He said about 1700 people signed up 'with a large number' attending. Barbaro, the SXSW co-founder, said the bifurcation was not total. 'Our relationship with the Army has not gone away,' he said. 'We're not banning them.' There's cross-pollination; several South by attendees planned to attend outside defense events as well, he said. Still, Barbaro said the status quo, where his festival can focus on tech and culture while defense and weapons take the stage elsewhere is 'probably the best result for us.' As the two threads spin out separately in Austin, some tech figures are actively trying to tie them back together. Bryce Mitchell, an Air Force veteran and an MBA student at Stanford University, said he co-founded the university's DEFCON Student Network last year to bridge between tech and defense, and he said the war in Ukraine had proven that Silicon Valley must serve U.S. security interests. He told DFD he wasn't attending SXSW, but he saw its stepping away from the military as out of date. 'In some ways Silicon Valley has passed its Project Maven moment,' Bryce said. 'Those days are behind us.' TIKTOK'S JOBS REPORT FOR TRUMP In a not-so-subtle appeal to President Trump, TikTok released an economics report Tuesday highlighting the platform's benefits for American businesses. The report, which POLITICO's Gabby Miller first covered in Morning Tech, found TikTok has helped about 75% of small businesses grow and benefited 4.7 million U.S. workers. It also noted that about two-thirds of survey respondents felt that a TikTok ban would hurt businesses. TikTok commissioned the study from Oxford Economics, and sought to provide context on the app's role in the American economy. The report comes as the company attempts to ward off a ban in the United States by touting its security measures meant to ensure U.S. data doesn't end up in China, and that it boosts the economy. TikTok has also invested in ad campaign that included a Super Bowl commercial. Trump gave TikTok a reprieve from the ban in January, but has not indicated whether he will extend the deadline again as he's encouraged an American buyer for the popular social media platform. UKRAINE DID IT? REALLY? Cybersecurity experts aren't buying Elon Musk's claims that a cyberattack against his social media platform X came from Ukraine. Musk claimed without providing evidence that IP addresses linked to the attack originated in Ukraine. Cybersecurity experts from the United Kingdom and Ukraine pushed back on Musk's claims, POLITICO EU's Sam Clark reported on Tuesday. The rebuttals noted that if the attempts were a distributed denial-of-service attack (DDoS), it would leverage large networks of computers from around the world, making IP address origins irrelevant. Clark also reported that a pro-Palestinian group claimed responsibility for the cyberattack. POST OF THE DAY THE FUTURE IN 5 LINKS Stay in touch with the whole team: Derek Robertson (drobertson@ Mohar Chatterjee (mchatterjee@ Steve Heuser (sheuser@ Nate Robson (nrobson@ Daniella Cheslow (dcheslow@ and Christine Mui (cmui@
