The Truth About SoftBank’s Investment
On December 6, Donald Trump announced that SoftBank would be investing $50 billion in America, a proclaimed deal for which Trump immediately — and erroneously — took credit, tweeting the following:
Of course, such self-congratulatory language misses, as it always does, nuance and simply lacks truth.
SoftBank announced in October that, in conjunction with the Saudi Arabian government, it would raise $100 billion to invest in technological startups to become the “biggest investor in the…sector.” The United States, home to the likes of Facebook, Google, Uber, and Apple, would obviously attract substantial investment. Startups are a dime a dozen in Silicon Valley and they’re always looking for more capital. It would be shocking if SoftBank forewent American investment.
The notion that SoftBank decided to invest $50 billion after an hour long meeting is simply ridiculous. This may shock Trump, but successful businesses don’t spontaneously throw billions of dollars at an idea after a short talk with someone who refers to tech as “the cyber.” The bank knew it would invest in America — there really is no better home for technological startup funds than our country — but waited until after the election to make its announcement in hopes of gaining favor with the incumbent, whoever it may have been.
By giving Trump credit for a massive investment though he is owed none, SoftBank hopes to curry favor with the incoming administration so its longstanding goal, merging Sprint and T-Mobile, will be completed. SoftBank bought Sprint in 2013 and, a year later, pursued T-Mobile in hopes of creating a cellular behemoth to challenge Verizon and AT&T for industry dominance. The Obama administration turned down the request because it would have significantly decreased market competition, hurting consumers. This has hurt SoftBank as Sprint lost value and laid off thousands during restructuring.
Donald Trump bends over backwards for those who compliment him. See, for instance, his admiration of tyrant and eliminator-of-dissent Vladimir Putin, upon whom Trump has lavished praise after Putin called Trump a “genius.” You compliment Trump or otherwise give him credit for happenings in which he had no influence and you will receive favors. SoftBank, of course, realizes this and plans to use Trump’s vanity to its advantage.
Trump understands the favor game and is willing to play. That, of course, is a huge risk as it raises the possibility of the administration playing clear favorites with certain businesses (at its worst, this could lead to rent-creation the specifically benefits supporters and targets opponents). SoftBank’s investment isn’t about Trump’s business genius, it’s about the ease of manipulating him. If SoftBank gets what it wants, consumers will suffer and Trump won’t bat an eye.