Initial thoughts on what the 2020 election means for you

A memo to all our companies and founders

Tusk Ventures
Tusk Venture Partners
13 min readOct 23, 2020

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As you may have heard, the 2020 Presidential Election is nearly one week away and, if 2020 has been any indication, anything can happen. In the midst of a number of unusual events — from a global pandemic to civil unrest — we’re bracing for an Election Day (or month) unlike anything we’ve ever seen before.

By definition, your work with us means you face regulatory, legislative and political challenges and opportunities. But as we’ve learned over the last four years, politics has managed to find its way into every aspect of our lives — no one business or industry can escape it.

While you may not have signed up to be a political analyst, each of you run businesses and organizations in the real world and that means you are thinking through what this election means for you and your companies in both the short and long term.

This memo is a very initial attempt to help you answer, “what do the next few months mean for me?” To be clear, we are not macro-economists, and this memo is not designed to answer global questions about the markets or foreign policy. Instead, it provides an outline for what to expect and an overview of some of the issues we work on with each of you.

We will update this based on the election results, but now is the time to start thinking about the potential impacts on your business.

The three scenarios…

The true lesson of the last four years is that no one knows anything. But barring anything truly unheard of, there are at least three likely scenarios we can expect for the outcome of this election:

● Joe Biden wins. (Brings stability)

● Donald Trump wins. (More uncertainty)

● We’re in limbo until December and the outcome is decided in the courts. (Even more volatility)

I. If Biden wins…

Joe Biden is clearly the candidate of Silicon Valley.

The assumption is that simply having a stable, steady presence in the White House would be a big improvement over the chaos of the last four years. That’s a reasonable and safe bet. It’s also fair to assume that the restrictions Trump has imposed on immigration will mainly be lifted, giving tech access again to the international talent it needs. However, a Biden victory isn’t all smooth sailing for tech.

Biden’s appointees to the Department of Labor and the National Labor Relations Board are likely to believe that sharing economy workers should be classified as full time employees; this would be a stark reversal from the Trump administration, which has been signalling that it will issue rules favorable to gig economy companies.

Teamster objections to autonomous trucking may keep a federal regulatory autonomous framework on the shelf for four more years, although infrastructure spending in an expanded stimulus could provide valuable infrastructure support for the industry. If Biden cuts spending on the military, many of the lucrative contracts the Valley enjoys from services and products ranging from weaponized drones to cloud computing could all be squeezed.

An Attorney General appointed to satisfy the far left could complicate antitrust matters. Although one might expect the recent charges against Google to be placed on the back-burner, a progressive Department of Justice could maintain the pressure on Google, and even double down on other FAANG companies. Similarly, both Trump and the progressive wing of the Democratic party have rattled sabers around narrowing the scope of Section 230. Anti-Big tech populism is not restricted to one side of the political spectrum.

And as the political zeitgeist keeps moving to the left, and as Kamala Harris positions herself as the putative nominee in 2024 (assuming Biden only serves one term), anti-tech rhetoric may become a required part of her daily vocabulary.

Depending on the potential changes in party in both Congress and the White House, there could be a significant shift in terms of how the CARES Act funding would flow in a Biden Administration. Biden has been very vocal about his interest in running a similar play to the American Recovery Act of 2009 where he oversaw the $800 billion in federal spending — with huge amounts of money going directly to states to help offset their dwindling budgets (notably around education).

A return to normalcy still easily outweighs all of these risks, but a Biden win will pose more than its share of challenges.

II. If Trump wins…

Given Biden’s lead in the polls, a Trump win is getting harder and harder to imagine, but it’s possible hidden Trump voters come out of the woodwork as they did in 2016, particularly given the noted increases in voter registration in key swing states like Pennsylvania and Florida.

If Trump does hang on, it means more of the same. The House will remain controlled by the Democrats, meaning that the chances of compromise legislation on any major issue are between slim and none (Trump will occasionally faint towards working with Pelosi on an infrastructure bill or prescription drug reform but that’s just posturing).

Trump will continue to exercise his executive authority to make changes unilaterally, and with a more favorable Supreme Court, executive authority will continue to fill the vacuum in policy-making at the federal level. This is good news for healthcare innovators (whether in telemedicine or cost sharing), as the Trump team has signalled its policy interest in working aggressively to reduce healthcare costs and increase transparency.

Trump’s position on immigration will only harden, with deportations becoming even more prevalent. His behavior and tweets will remain erratic, causing some whiplash in the markets. The risk of a wealth tax disappears with a second Trump term, and tech avoids seeing stalwarts of the Democratic Socialists of America elevated to cabinet positions, but overall, it’s difficult to envision many people in business wanting four more years of any of this.

III. We’re in limbo until December and the outcome is decided in the courts (even more volatility)

This option may be the least likely, but is certainly the worst of the three. As we’ve seen over the last few months, a number of unexpected events (pandemic, wildfires, USPS, etc) have exposed nearly every major flaw in our current election system.

The COVID-19 pandemic forced a majority of states to offer mail-in voting during the primaries and many states are still struggling with the technical and logistical challenges associated with implementing a widespread vote by mail program. Polling places have also been hit hard by shortages in poll workers, many of whom are older and/or retired Americans who have opted not to volunteer to avoid contracting the virus. To make matters worse, tech companies are bracing for the likelihood that one campaign will declare victory online before election results are decided.

This all means we’re facing a very real possibility that it could be days, or even weeks, until we learn who won the election and companies should prepare accordingly. The closest thing we have to compare to is 2000 when hanging chads in Florida triggered a recount and the Supreme Court ultimately decided the election five weeks later. By the end of November that year, the S&P 500 had plunged close to 10% and the NASDAQ had plummeted 19%.

It’s clear that Wall Street wants a winner and the biggest issue in this scenario will be the uncertainty it brings across the board. Businesses need to think through what increased volatility means for them and brace for it.

If Congress doesn’t reach a deal on a stimulus before Election Day, there’s little chance one will pass before the end of the year. If the crisis goes on long enough, and the unemployed don’t get relief, the recession will deepen and ultimately turn into a true depression.

IV. If the Senate flips…

While most eyes are on the presidential race, companies should be focused on the Senate races too. For big tech, this is the danger scenario.

Legislation to bring internet-wide privacy rules to the United States, repeal Section 230 of the Communications Decency Act, enact new antitrust rules and more will start moving through committee day one of the new Democratic administration (in addition to infrastructure and environmental/ energy legislation).

Is it realistic that Congress will enact an entire regulatory structure on privacy laws and repeal Section 230 and pass new antitrust legislation all within two years? No. But every one of those items is now on the table and given the headlines of the last week, this is becoming a more bipartisan issue by the day.

However, this is only bad if you’re Facebook or Google or another company valued at hundreds of billions of dollars. For new tech companies, Congressional action could mean opportunity to compete, to innovate, to build products and services without immediately being squashed by one of the giants. So while a Democratic Senate is unquestionably bad for big tech, it’s not necessarily bad for tech overall.

The Key Issues

What about the Ballot Initiatives?

While most of the excitement and media attention around the 2020 election cycle focuses on the Presidential election, and in a far distant second the battle for the Senate, there are other races and initiatives that matter too. Here are a few we are watching:

I. Proposition 22 (California)

California’s Proposition 22, Uber/Lyft/DoorDash’s attempt to unwrite AB5, is one of the most expensive ballot initiatives in history, with a total of more than $200 million spent (with 90% of this coming from the pro-tech side). There is not a ton of reliable polling on the initiative, and September polling suggests that this race will be close to call. But the outcome of this initiative will have national repercussions on the ongoing fights over worker rights and the proper classification of gig economy workers.

If Prop 22 wins, Uber and Lyft will portray the win as a validation for the “third-way” model, and as proof that California’s AB5 was a classic example of progressive overreach. This argument will be well-received in moderate states, where the AB5 model was already cause for significant concern. Proof of voter acceptance will likely make it easier for states like Illinois or Colorado to pass similar legislation, which could start a national trend favorable to on-demand providers. The fight won’t be done in California, though, as the state Legislature will likely return with a vengeance to find other ways to enforce the rights of workers.

If Prop 22 loses, Uber and Lyft will have to decide if they can really abandon California. They will also have to go on the defensive nationally, as their labor force will be emboldened to chase further gains in states like New York. Although this sounds like a doomsday scenario, a close loss will likely not be as bad for on demand providers as one might think — most states won’t look at a close race in progressive California as validating AB5, and even if Uber and Lyft lose at the ballot booth, they will be back in the California Legislature next year trying to pass legislation to reopen in California. We predict that they won’t like the terms they receive, though.

II. Illinois Graduated Income Tax

Another of this year’s most hard-fought and expensive ballot initiatives is the Illinois fight to adopt a progressive income tax. Illinois now has a flat-tax structure, and the constitutional initiative needed is being portrayed by both sides as a form of millionaire’s tax (actually $275,000aire’s tax, where the numbers shift). Governor J.B. Pritzker, who is depending on the tax to avoid impossible budget decisions, has spent more than $56 million of his own money to support the initiative, and Citadel’s Ken Griffin has spent more than $46 million of his own money to oppose it. Like Prop 22, this initiative is a toss-up (last Friday supporters of both sides told us they thought they were losing).

While this issue hasn’t gotten that much ink outside of Illinois, the issue has national implications for two reasons. First, Illinois’s initiative follows New Jersey’s millionaire’s tax as the second major state to balance the COVID budget deficits by taxing the wealthy. If the Illinois tax fails, governors across the country will be paying attention and will look elsewhere for stopgap revenues. If it passes (which will require a 60% supermajority), expect more tax proposals to pop up. The other major question raised is pension reform. If the graduated tax initiative fails, assume that the price for both sides finding enough revenues to support the state will be long overdue reforms to the pension system. These reforms could spur similar efforts in other poorly funded pension systems.

III. Cannabis (and Psilocybin) legalization

Four states (AZ, MT, SD, and NJ) have placed measures on the ballot to legalize recreational cannabis. Although polls are tightening in Arizona (where measures have failed in the past), the overwhelming odds are that these initiatives will pass in at least three states. More importantly, there has been only token opposition in each state (in all four states, proponents are outspending opponents by at least 10x).

The takeaway from these initiatives is that legal cannabis is increasingly becoming seen as a non-issue. Particularly given the amount of revenue over realization that Illinois has experienced in its first year of recreational legalization, we should see further legalizations in larger states like New York and Pennsylvania as a means to solve budget gaps.

On the fringes, the trend in favor of recreational drug legalization is being pushed even further in the State of Oregon and in Washington DC, where citizens have introduced a ballot initiative in favor of psilocybin (hallucinogenic mushroom) legalization. Oregon would be the first state to allow legalization, and like cannabis it would start in the medicinal context, but Denver, Santa Cruz, Ann Arbor, and Oakland have previously decriminalized.

We expect Washington will likely decriminalize as well, having already suffered through a worse four-year long bad trip than mushrooms could potentially offer, but we believe that the polling indicates that medicinal legalization in Oregon is at least one ballot cycle away. If we are wrong and proponents win in Oregon, expect the start of a new legalization movement.

The Future of Cities — and Their Budgets

So much of the startup ecosystem has revolved around the rise of cities following the 2008 Great Recession. Density, interconnectivity, and high cost of living created endless opportunities across nearly every industry. Now, cities are facing severe budget crises like never before, rising crime, and continued difficulty in containing the virus. Nowhere is this more true than with our home base of New York City.

Cities may be down, but they’re not out. They will still be essential for a strong American economy and will continue to hold allure for immigrants, young people, and businesses seeking to be centrally located.

But what a recovery looks like — and how long it takes — is directly tied to who is president in January. This is more of a clearcut reality than most other policy areas.

I. If Biden wins…

That’s the collective exhale of every big city mayor in the country you’ll hear on Nov. 4th. The chances of a massive stimulus package with direct aid to cities and states is likely. That means keeping teachers and firefighters employed, trash collection functional, and investments in mass transit somewhat on track. It won’t completely make up for deficits, but it will allow urban areas to power through without having to make draconian cuts.

Further, immigration restrictions will also be loosened. This will help with population growth in urban areas and further investment in small businesses in neighborhoods that many current residents do not necessarily think to reside in.

It may also mean more room for far-left mayors and legislators to pursue a progressive agenda that isn’t directly tied to the day-to-day survival of the municipality. Think bans on facial recognition, further regulation of police departments, a focus on environmentally efficient buildings.

II. If Trump wins…

Cities are going to have a tough go of it with the president already labeling many top-tier cities as “anarchist” jurisdictions. Under tremendous budgetary constraints, many cities will have to cut services, and therefore jobs, which will fuel the unemployment crisis. Expect an increased exodus to the suburbs or smaller metropolitan areas where there are more job opportunities.

To compensate for the lack of federal aid, states and cities will increasingly look to increase taxes (income, gas, property, etc). and other revenue raising ideas. Well-known ideas include marijuana legalization and sports betting. Other opportunities may include the selling of public land, congestion pricing for private vehicles, and stricter enforcement on gig workers so that companies pick up the tab on worker’s compensation.

President Trump’s administration will also seek to impose its will on city operations. Just as they attacked “sanctuary cities,” they will likely play an active role with law enforcement and further invest in police departments throughout the country. That may mean more money spent on prisons, gear for police officers, and a relaxing of new civil rights laws that have cropped up over the past few years in different states and cities.

III. If the outcome is undecided…

Cities will be left in the lurch for however long the instability goes for. Some may be forced to make budget decisions in the meantime based on their legislative calendars. Still, they’ll continue to hold out hope for federal funds as long as they can. Indeed, no politician wants to be the one to fire public workers. There are almost always political incentives in place to kick the hard decisions as far down the road as possible.

Keep in mind…

Political activism is here to stay. The general public is more engaged than ever before — meaning your employees, customers, investors and opponents are all paying attention to what happens on November 3. Concerns over labor rights and mass unemployment, racial injustice, and climate change are going to continue to dominate the public’s thinking for some time to come. The rise of QAnon won’t simply disappear. Turning a blind eye to social issues will be a failed stakeholder relations strategy.

Four years ago, people may not have remembered to vote or known what “Prop 22” meant. But in today’s world, many companies have given their employees Election Day off and Prop 22 has become the most expensive ballot measure in California’s history.

If companies thought they could escape politics before, they’re in for a rude awakening. Don’t be caught off guard — if 2020 has been any indication, anything can happen.

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Tusk Ventures
Tusk Venture Partners

Helping the next generation of great startups navigate the political, regulatory and media hurdles that come with challenging an entrenched industry.