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Tech Caucus 2/3: Mark Cuban vs Paul Graham, and What Industries Are Ripe for Disruption?

There is now an audio version of #TechCaucus, thanks to our friends at Spokenlayer!

(Adapted from this week’s Tech Caucus newsletter. Subscribe to get the Tech Caucus in your inbox first.)

Friends,

On my new podcast, Oversubscribed with Jason L. Baptiste and Ben Parr, Jason and I discussed the impact of market volatility and how private companies avoid the IPO nowadays because the markets encourage short-term thinking instead of long-term investments. Zuck’s a business genius not only because he bought Instagram, but because he had (and still has) the voting control to pull it off. Alphabet has a similar voting structure, and it is now the world’s most valuable company. Is there a pattern?

After the Super Bowl leaves town, I’ll be heading to Los Angeles and New York City for business. Let’s hang.

Enough babbling, here are this week’s topics:

• Which Tech Company Will Dethrone Apple and Alphabet?
• The Most Promising Tech Companies Outside the U.S
• Mark Cuban vs. Paul Graham
• The Industries that Need Disruptive Startups the Most
• Which Sesame Street Character Would Be the Best VC?
• Interesting Links of the Week
• Commentary from the Peanut Gallery
• Adorable Hamsters! (sponsor)

Have questions you want me to ask the Caucus? Email me. Want to chat about this week’s newsletter? Reply to this newsletter.

1) Which Tech Company Will (Eventually) Dethrone Alphabet & Apple?

Not only does Google’s successor, Alphabet, come before Apple in the alphabet, but last week Alphabet surpassed Apple as the world’s most valuable company. That has to hurt.

As of this morning, Apple is once again the world’s most valuable company by market capitalization, but you should expect the two tech giants to duke it out for the top spot for the next few years. But just as Apple eventually dethroned Exxon in 2011 for the crown and Alphabet dethroned Apple, another company will eventually dethrone them. But which company will do it next?

This week, I asked the Tech Caucus members about exactly that — which company will eventuallyovertake Alphabet and Apple as the most valuable company (MVC)? I gave the Caucus a list of tech company options — Facebook, Microsoft, Uber, etc. — as well as the option to pick a non-tech company. And the results… well, let’s just say that the tech industry thinks Mark Zuckerberg will be its eventual king:

Nearly 50% of the Tech Caucus said that Facebook was next in line for becoming the MVC. And the members weren’t shy in their assessment that Facebook is destined to be the biggest of all time.

“Facebook is the first place that over a billion people go every day, and probably more when you include WhatsApp and Instagram. They own their own destiny now,” says one member of the Caucus.

Many of tech’s leaders mentioned Facebook’s scale as the primary reason it will be the MVC: “Alphabet is amazing of course, but I believe that Facebook will become (or at least has the chance to become) the plumbing of all human interaction. As the seven billion humans move online, nearly all of them will use Facebook.”

Sensible reasoning. Another member says that scale gives Facebook something even more powerful: data. “Facebook increasingly owns more valuable data than Google because it owns all our relationships, activities and life updates,” declares this member. “If they can figure out to properly harness that data they can essentially run the world.”

Facebook wasn’t the only winner of this poll, though. Amazon was a popular second. “Amazon will become the operating system of the home,” one member believes. Declares another: “Amazon is making itself indispensable across all age groups and will continue to be a go-to shopping platform if they continue to grow their product lines.”

Uber also made the cut with our Caucus, although it still has a long ways to go before it can overtake Apple and Alphabet. “Uber is executing very well, with room to expand into so many different parts of our lives,” one member says. Another member reiterates that “Uber is a logistics company” that can expand into the physical world in way other companies cannot. “Apple and Google both have declining phone sales growth,” this member also believes.

So while we may not know the company that overtakes Alphabet and Apple (every empire falls), what has almost universal agreement in the Caucus is that it’ll be another tech company that dethrones Apple and Alphabet. “I hate to say it, but I agree with the thesis that software is indeed eating the world,” one Caucus member almost laments. “Technology is merely an enabler. We will all be technology companies eventually.”

2) What Is the Most Promising Tech Company Outside of the U.S.?

It’s easy to lose a worldly perspective here in the Silicon Valley bubble. Great companies like SAP, Alibaba, Waze, and Skype were built outside the U.S., and the tech scenes outside Silicon Valley are thriving, thanks in part to globalization, the Internet, and no shortage of overseas ambition.

I want to make sure we recognize the great contributions that companies outside of the U.S. bring to the global tech industry, so I asked the Tech Caucus for a list of their favorite or most promising tech companies outside of the U.S. Some had no idea, because it’s hard to keep track of lots of companies when you’re running a startup. Others in the caucus are VCs and journalists though, and it’s their job to track this sort of thing.

Here were some of the tech leader’s picks for most promising non-U.S. company:

• BetaOut — “[It’s an] amazing marketing automation startup based in India.”
• Didi Kaudi, the Uber of China.
• Transferwise — “We love their service, and it seems a lot of other people do, too based on their recent $58 million round of funding.” (U.K. / Estonia)
• Taringa, one of the most popular social networks in Latin America. (Argentina)
• Smarkets — “It took a while for this betting company’s unique play to catch on, but now [its growth] is exponential. Jason Trost is an exceptional CEO as well.” (U.K.)
• ResearchGate, A platform for researchers to share papers and find collaborators. On a personal note, I used ResearchGate pretty extensively during my research for my book Captivology. (Germany)
• Maluuba, an intelligent personal assistant built in Canada.

I knew of a few of these companies, but it was interesting to learn about some of the others. I definitely will be keeping my eyes on these companies.

3) Mark Cuban vs. Paul Graham

Despite at least two Caucus members urging me to address the Kanye vs. Wiz Khalifa beef (the most important thing to happen to the Internet last week), I asked tech’s leaders about another spat: Shark Tank’s Mark Cuban vs. Y Combinator’s Paul Graham.

For those of you who aren’t up to speed, all you really need to know to catch up are these tweets:

The Tech Caucus is not about Internet fights, but both PG and Cuban bring up interesting points I’ve heard in the backchannels. 1) Is Shark Tank a good or bad thing for entrepreneurship? And 2) Has YC become elitist?

I asked the Caucus which side they took in this dispute — was it Cuban’s side and his argument that YC has become elitist and the “good old days of YC” are gone? Or did they side with PG and his argument that Shark Tank wastes entrepreneurs’ time and energy on the wrong problems.

The results? 29% of the Caucus took Mark Cuban’s side, while only 7% took PG’s side. But the real result was that 36% thought they were both right and 29% thought they were both wrong.

Where do I even begin with this one? The quotes are so juicy! Members had strong opinions on the subject, on all sides of the table. Let’s start with those who supported Cuban over Graham:

“St. Paul is not always right. He pontificates about things he doesn’t understand, like sales, marketing, and income inequality. Of course you should fix what makes your product unappealing. Duh? But to pass up an opportunity to get national exposure on Shark Tank is just plain stupid. Mark Cuban is right.”

“There is nothing more important than customers. Cuban gets that and sees Shark Tank as a platform for exposing companies to millions of consumers. PG still thinks if you build it, they will come…”

“YC needs a refresh.”

Others saw validity in Graham’s points:

“Shark Tank is an amazing platform for some companies. Many would be foolish not to take advantage of that opportunity. That said, I think Paul’s statement is really about founders’ hustle for ‘get rich quick’ schemes. If you’re relying on Shark Tank to succeed, you’ll likely be disappointed.”

But most thought that this wasn’t about PG or Cuban winning, and that each had valid points:

“This is a false dichotomy. Startups can have terrific products, but they don’t distribute themselves. This isn’t Field of Dreams and no one is Kevin Costner. Shark Tank gives startups an audience and capital.”

“Companies who are building products and don’t have any product market fit should be focusing on that. But with a little bit of P/M fit but needing audience and capital to grow, Shark Tank can be surprisingly effective.”

And some Caucus members thought both were wrong:

“The perception of YC ‘entitlement’ stems from investors being introduced to high-value entrepreneurs who are no longer willing to kowtow to an investor’s whims. Graham’s point on avoiding Shark Tank is dumb, too. Getting millions of eyes on you and your product (repeatedly due to reruns) is highly valuable. Doing Shark Tank and improving product aren’t binary. A company can do both.”

“They’re all blowhards, even Sacca. It’s hard to see how this Twitter tiff benefits anyone.”

Shots fired. Still, I think my favorite quote on the whole tiff is this one: “Everyone is just looking for an opportunity. Whether that’s on Shark Tank or at Y Combinator, you take what you can get and go for it.”

4) Which Industries Need Startups the Most?

Every week, I try to ask one question that will help entrepreneurs on their journeys to building great companies. This week, it was about choosing your market. Specifically, I asked the Tech Caucus, “What industry(s) should more entrepreneurs be starting companies in?” I asked for both the best opportunities and the industries that need disruption the most.

The responses completely varied, but there were some trends I found in the data. I’m going to start off with the industries that received multiple votes in this week’s poll:

1. Health care.
2. Insurance. “New sensors will lead to new models, which can make everything much more cost effective,” one member says.
3. Government & Government Contracting. Especially when it comes to replacing government services. This one got the most votes, by far. The thinking here is best summed up by this Caucus member: “I think there are amazing opportunities to enhance or even replace government services. Areas like inspections, safety/security, and even the interaction with local government services fascinates me. But I’d be wary of working directly with government. Instead, create something direct to the consumer and work with government once you’ve had success.”

Some additional industries from the Caucus:

• “Anything that focuses on women as the dominant consumers.” This person mentions cosmetics, home and interiors, family, and baby startups as being big needs. “Search for the legacy industries with massive incumbents and take aim,” this member advises.
• Massive but old industries. “Industries like logging, fisheries, nurseries, and mining.” They aren’t Peach, but they definitely haven’t bee changed in dozens if not hundreds of years.
• Sports tech, energy, drone-enabled services, VR also got mentions.

And finally, one Caucus member has a caution for the entrepreneurs out there. “We work on problems we know. The tech industry by and large (although not exclusively) is filled with people who have relatively well-off upbringings. We need to get more people involved in tech who try to solve problems beyond wanting to order cookies at 4 A.M.”

5) Which Sesame Street Character Would Be the Vest VC?

The final question of every Tech Caucus newsletter is always a fun one. This week, I was inspired by the announcement that Sesame Street is starting a venture fund to invest in startups that improve the lives of young children.

First of all, this news is awesome! And second, it’s a perfect opportunity to ask the question on every entrepreneur’s mind: Which Sesame Street character do I want on my board of directors?

And the winner is….

…A TIE! #TeamBertAndErnie got the same number of votes as #TeamCount. But #TeamCookieMonster and #TeamElmo made respectable showings.

I’m dividing my favorite quotes from the Caucus based on his or her team. But basically, the Caucus concluded that 1) Two investors are better than one, 2) Knowing your numbers matters as a VC, and 3) VCS WANT MORE!

#TeamBertAndErnie

• “Two different brains working together to find and evaluate founders is better than one.”
• “A balanced team helps bring out the best in investors.”

#TeamCount:

• “It’s all about the numbers. :-)”
• “The Count knows his numbers, a critical skill for every VC.”
• “We love quants… I mean growth hackers!”

#TeamCookieMonster:

• “[He has] a total fixation on more, more, and more. Clearly Cookie Monster is an all or nothing caricature of the worst of the venture capital community. A lot of people might say The Count but they would be dead wrong. VC’s don’t do math!”
• “VCs are always looking for cookies, more cookies. They will do anything for cookies. Where cookies equals dollars.”

And finally, #TeamElmo supporters had a simple argument: “Elmo is the cutest.”

I can’t disagree with you there, anonymous Caucus member.

(Image credit: Sesame Street.)

Interesting Links of the Week:

• Randi Zuckerberg, media mogul.
• This a must-read story from VC Pejman Nozad, Tech’s “most unlikely VC”, on his journey from Iran to yogurt shop to investing in Dropbox and Lending Club and starting Pejman Mar Ventures.
• Yahoo is doing what it must to fix the business, but one interesting note from its earnings was the fact that Tumblr has lost a quarter of its value.
• The iPhone 5se seems like it’s a real thing. Huh. I’ll stick with my 6+, thanks.
• The Fine Brothers, creators of YouTube’s popular “React” channel,backtracked from their trademark claims on the word “react” (yes, the word) after the Internet (rightfully) pummeled them into submission. I wrote about their PR disaster in my (quasi)weekly Inc. column if you want to learn more.
• Cruz beat Trump because he invested more into data and the ground game.
• No, Marc Andreessen isn’t buying Twitter. But it’d be hilarious if he did.
• The Lumia isn’t a thing, but the Surface totally is.
• Twitter execs have a point. Also, Twitters gets ALL the good celeb spats!
• RebelMouse’s Paul Berry explains the difference between collective density and graph density, and what it means for publishing. (Note: I’m an advisor to RebelMouse)
• YouTube Red’s first original TV shows and films are coming. I’m not optimistic (they’re late to the game), but I root for YT’s content creators!
• I am ALL for this.

Commentary from the Peanut Gallery

In last week’s Tech Caucus newsletter, I included a link to Uber’s most recentfinancials, where I exclaimed that Uber is a “motherf*cking money-making machine.” Uber made more money in Q3 2015 than it did in ALL of 2014.

My friend Scott Monty, a comms consultant and the original architect of Ford’s social strategy and presence, disagree with me:

Scott’s right — Uber is burning money faster than I could literally burn money in a garbage can. But, as I explained to him, Uber hasn’t made a profit not because it doesn’t know how (in my opinion), but because it’s simply investing so much in growing developing markets and acquiring market share before the players solidify. If Uber wanted to be profitable, I think it would take them a week to shift resources and do it.

Then again, companies that lose tons of money aren’t really doing all that well in the stock market these days.

You are not immune to its adorableness.

This week’s Tech Caucus is sponsored by adorable hamsters! Come on, I know you scrolled down here just to see this cute hamster eat a carrot. You are not immune to its charm.

Adorable hamsters: Because you secretly want a hamster companion in your life.

(You’ll understand why hamsters are this week’s sponsor on Thursday. Stay tuned! Oh, and if you want to sponsor the Tech Caucus and get in front of hundreds of CEOs… you know who to email.)

Have a question you want me to ask the Tech Caucus? Have a suggestion for a new member of the Tech Caucus or an Interesting Link of the Week? Reply to this email or email me directly.

The Tech Caucus: Mark Achler, Jason L. Baptiste, Megan Berry, Niko Bonatsos, Sarah Buhr, Vanessa Camones, Tracy Chou, Julie Crabill, Paige Craig, Don Dodge, Adam Draper, Josh Elman, Julie Fredrickson, Erin Griffith, Troy Henikoff, Daire Hickey, Ryan Hoover, David Hornik, Charles Hudson, Leila Janah, Olivia June, Richard Kerby, Aileen Lee, Loic Le Meur, Doug MacMillian, Jessica Mah, Jesse Middleton, Miyuki Matsumoto, Danielle Morrill, Nathaniel McNamara, Nathalie Nuta, Jeremiah Owyang, Chris Saad, Juan Scarlett, Matt Schlicht, Robert Scoble, Marcy Simon, Jon Swartz, Jana Trantow, Jennifer Van Grove, Kurt Wagner, Robin Wauters, Mike Weiksner, Brian Wong, Michelle Zatlyn.