Category Archives: Politics

China’s Crypto Ban and the Road to Total Control

You just went to a protest marking the anniversary of the Tiananmen Square massacre. You were scared, but you went. You wore a mask and took a winding route home. No one could have seen you.

You arrive home to your Hong Kong apartment and decide to check your bank account. Did the rent get deducted yet?

But when you log in, you see the balance has gone from 21,000 yuan to zero.

A notice appears to contact your local Party office.

This is the future China wants to bring about. Its tools:

1) The social credit score
2) The digital yuan
3) The banning of cryptocurrencies other than the digital yuan

Today, China banned bitcoin and all other cryptocurrencies. All, that is, except its own digital yuan, which debuted this spring.

It wasn’t hard to see this coming. China banned cryptocurrency mining earlier this year. This is part of a long term trend toward total control under Xi Jinping.

China’s government has cracked down hard on tech companies, Hong Kong dissidents, and even seemingly random targets like celebrities.

What’s next? About five years ago, China’s government created a social credit score. Any action that upsets the government, from farebeating to protesting, can have dire consequences. One may be unable to get a loan, a job, or access the internet.

After the crypto ban, the next logical step for China’s dictatorship is to ban cash and all non-digital yuan. Then, all money is electronic, traceable, and centrally controlled.

Step out of line, and your life savings could be gone.

It’s a dark, dystopian future. But I strongly suspect it’s coming.

We in the United States and the rest of the free world should guard against any such thing being done here. I will be wary of attempts to ban cryptocurrencies or cash as paving the way for similar control. Control that has no place in a democratic society.

More on China tech:

China’s Real Goal in Tech Crackdown: A Regimented, Obedient Society

How China’s Tech Industry Dies

China Is Crushing One of Its Most Innovative Companies

Photo: “1984” by jason ilagan is licensed under CC BY-ND 2.0

If you found this post interesting, please share it on Twitter/Reddit/etc. using the buttons at the bottom of the page. This helps more people find the blog! 

Save Money on Stuff I Use:

Amazon Business American Express Card

You already shop on Amazon. Why not save $100?

If you’re approved for this card, you get a $100 Amazon gift card. You also get up to 5% back on Amazon and Whole Foods purchases, 2% on restaurants/gas stations/cell phone bills, and 1% everywhere else.

Best of all: No fee!

Fundrise

This platform lets me diversify my real estate investments so I’m not too exposed to any one market. I’ve invested since 2018 and returns have been good so far. More on Fundrise in this post.

If you decide to invest in Fundrise, you can use this link to get your management fees waived for 90 days. With their 1% management fee, this could save you $250 on a $100,000 account.

iHerb

The only place I buy vitamins and supplements. I recently placed an order and received it in less than 48 hours with free shipping! I compared the prices and they were lower than Amazon. I also love how they test a lot of the vitamins so that you know you’re getting what the label says. This isn’t always the case with supplements.

Use this link to save 5%! 

Misfits Market

My wife and I have gotten organic produce shipped to our house by Misfits for over a year. It’s never once disappointed me. Every fruit and vegetable is super fresh and packed with flavor. I thought radishes were cold, tasteless little lumps at salad bars until I tried theirs! They’re peppery, colorful and crunchy! I wrote a detailed review of Misfits here.

Use this link to sign up and you’ll save $10 on your first order. 

Why is the SEC Threatening Coinbase?

The SEC has threatened to sue Coinbase Global, Inc. over its plans to introduce a crypto lending product called Coinbase Lend :

The U.S. Securities and Exchange Commission has told Coinbase Global Inc (COIN.O) that it plans to sue the cryptocurrency exchange if it goes ahead with plans to launch a programme allowing users to earn interest by lending digital assets, Coinbase said.

Coinbase was working with the SEC prior to the surprise lawsuit threat, per CEO Brian Armstrong:

Why is the SEC Doing This?

It’s not every day that the SEC privately threatens a lawsuit against a major American corporation. What is the SEC’s motivation here? From Cointelegraph:

The Commission could have a reason for not being forthcoming with information related to cryptocurrency lending products and this stance could be related to upcoming enforcement actions against the interests of BlockFi.

If the SEC is preparing to go after BlockFi and other players in the crypto lending scene then perhaps responding to Coinbase’s request for guidance might have constituted revealing its enforcement playbook prematurely.

Behind the Crypto Lending Boom

Behind the rush into crypto lending: incredibly low interest rates. Whether you look at bank deposits or treasury bonds, returns on safe assets are well below the rate of inflation.

Coinbase planned to offer 4% interest in its Lend product.

Is the SEC Right?

It seems likely to me that Armstrong is wrong in saying his Coinbase Lend program isn’t a security, and thus need not comply with typical securities laws. Banks have an exception from these laws when they pay interest on an account.

But Coinbase is not a bank. So it’s hard to see how this product isn’t a security.

SEC Shenanigans

That said, I think the SEC’s behavior here is extreme and bad for American business. If the SEC has determined that Lend is illegal, they should tell Coinbase that. At least Coinbase could move on to other projects.

Instead, they’ve left Coinbase in regulatory limbo. They don’t know if their product is legal or not, they don’t know what the SEC’s standard is, and they can’t launch anything without being sued.

This is a recipe for stagnation, not innovation. How can American businesses compete in the global economy when regulators won’t work with them?

As part of its threats to Coinbase, the SEC is even digging into private citizens:

Apart from the threat of legal action, a move seemingly out of left field from the Commission’s usual approach to enforcement, the SEC also asked Coinbase to provide customer details from its Lend waitlist.

On what authority are they doing this? And what are they planning to do to those prospective customers?

Keeping investors safe has its place, but bringing business to a standstill and snooping on average Americans isn’t part of it.

The SEC needs to clean up its act.

More on tech:

How Solana Could Wipe Out Visa and MasterCard

What if Everyone on Earth Had Super Fast Internet for $1?

China’s Real Goal in Tech Crackdown: A Regimented, Obedient Society

Photo: “775208327GB00106_TechCrunch” by TechCrunchis licensed under CC BY 2.0

If you found this post interesting, please share it on Twitter/Reddit/etc. using the buttons at the bottom of the page. This helps more people find the blog! 

Save Money on Stuff I Use:

Amazon Business American Express Card

You already shop on Amazon. Why not save $100?

If you’re approved for this card, you get a $100 Amazon gift card. You also get up to 5% back on Amazon and Whole Foods purchases, 2% on restaurants/gas stations/cell phone bills, and 1% everywhere else.

Best of all: No fee!

Fundrise

This platform lets me diversify my real estate investments so I’m not too exposed to any one market. I’ve invested since 2018 and returns have been good so far. More on Fundrise in this post.

If you decide to invest in Fundrise, you can use this link to get your management fees waived for 90 days. With their 1% management fee, this could save you $250 on a $100,000 account.

iHerb

The only place I buy vitamins and supplements. I recently placed an order and received it in less than 48 hours with free shipping! I compared the prices and they were lower than Amazon. I also love how they test a lot of the vitamins so that you know you’re getting what the label says. This isn’t always the case with supplements.

Use this link to save 5%! 

Misfits Market

My wife and I have gotten organic produce shipped to our house by Misfits for over a year. It’s never once disappointed me. Every fruit and vegetable is super fresh and packed with flavor. I thought radishes were cold, tasteless little lumps at salad bars until I tried theirs! They’re peppery, colorful and crunchy! I wrote a detailed review of Misfits here.

Use this link to sign up and you’ll save $10 on your first order. 

China’s Real Goal in Tech Crackdown: A Regimented, Obedient Society

China’s government has just launched the latest salvo against its own technology industry:

China on Monday issued strict new measures aimed at curbing what authorities describe as youth videogame addiction, which they blame for a host of societal ills, including distracting young people from school and family responsibilities.

The new regulation, unveiled by the National Press and Publication Administration, will ban minors, defined as those under 18 years of age, from playing online videogames entirely between Monday and Thursday. On the other three days of the week, and on public holidays, they will be only permitted to play between 8 p.m. and 9 p.m.

This is likely to have a substantial effect on major Chinese tech companies like Tencent and NetEase, leaders in videogames. The new regulation is the latest development in a crackdown on companies in ride sharing, food delivery, educational tech, and more.

I see two major issues with this crackdown:

Economy

If you can have your business regulated out of existence at any time, you might not start one. And if you do, it will be a lot harder to attract investors.

Tech companies rely on venture capital to grow. That funding is already beginning to dry up. No wonder the number of Chinese companies reaching $1 billion valuation (“unicorns”) is falling off a cliff:

I invest in American startups regularly. There is zero possibility I’d invest in a Chinese one. The odds of the government one day deciding your industry is bad for “social stability” are just too high.

Without capital, Chinese tech companies will wither.

Society

Imagine the U.S. government telling you, “Sorry Timmy, you can only play video games from 8 to 9pm on weekends. Oh, 7 is better for you? Well too bad.”

In the context of a free society, this is unthinkable. In China, the government is taking on the role of a parent. It’s another step to totalitarianism, where the government controls all aspects of life.

And China’s crackdown goes way beyond tech:

Zhao Wei, one of China’s most prominent actresses, saw her presence mostly scrubbed from the country’s internet overnight. Her fan page on Weibo, China’s heavily censored version of Twitter, was shut down. Movies and television shows she starred in — some going as far back as two decades ago — were taken off streaming platforms, with her name also removed from the cast lists.

On Chinese social media, some comments said the crackdown was reminiscent of the Cultural Revolution, a decade of political and social turmoil between 1966 and 1976 during which arts and culture were restricted to promoting party propaganda.

It was not immediately clear why Zhao was targeted.

The message from Xi Jinping is clear: he wants the people quiet and obedient. Anyone who stands out for any reason, be it an actress or a tech tycoon like Jack Ma, will be dealt with.

If you’re in China now, I urge you to emigrate. This will not end well.

More on China and tech:

China’s Tech Crackdown Means Economic Decline

China Is Crushing One of Its Most Innovative Companies

How China’s Tech Industry Dies

If you found this post interesting, please share it on Twitter/Reddit/etc. using the buttons at the bottom of the page. This helps more people find the blog! 

Photo: “Chinese Soldiers in The Forbidden City – Beijing, China” by Patrick Rodwell is licensed under CC BY-NC-ND 2.0

Save Money on Stuff I Use:

Amazon Business American Express Card

You already shop on Amazon. Why not save $100?

If you’re approved for this card, you get a $100 Amazon gift card. You also get up to 5% back on Amazon and Whole Foods purchases, 2% on restaurants/gas stations/cell phone bills, and 1% everywhere else.

Best of all: No fee!

Fundrise

This platform lets me diversify my real estate investments so I’m not too exposed to any one market. I’ve invested since 2018 and returns have been good so far. More on Fundrise in this post.

If you decide to invest in Fundrise, you can use this link to get your management fees waived for 90 days. With their 1% management fee, this could save you $250 on a $100,000 account.

iHerb

The only place I buy vitamins and supplements. I recently placed an order and received it in less than 48 hours with free shipping! I compared the prices and they were lower than Amazon. I also love how they test a lot of the vitamins so that you know you’re getting what the label says. This isn’t always the case with supplements.

Use this link to save 5%! 

Misfits Market

My wife and I have gotten organic produce shipped to our house by Misfits for over a year. It’s never once disappointed me. Every fruit and vegetable is super fresh and packed with flavor. I thought radishes were cold, tasteless little lumps at salad bars until I tried theirs! They’re peppery, colorful and crunchy! I wrote a detailed review of Misfits here.

Use this link to sign up and you’ll save $10 on your first order. 

China’s Tech Crackdown Means Economic Decline

Imagine you’re running a marathon. You’ve led the whole race. But a strong runner is coming up on your right. The finish line approaches.

Suddenly, there is a loud “crack.” The other runner has been shot in the head. You win.

This is essentially what has happened to the Chinese tech sector in recent months. The Chinese government has cracked down on major companies like Alibaba, Didi Chuxing, and Meituan. It has also regulated its substantial ed tech sector out of existence.

China used to be the US’s leading competition in technology. Now it looks like an also-ran.

Leaders of Alibaba and Didi angering Xi Jinping is one reason for the crackdown. Another appears to be China’s desire to refocus from software to hardware. The Party seems to think microchips, batteries and advanced materials are critical to economic leadership, while consumer software is a distraction.

One problem: semiconductors and most other manufacturing industries are a lot less profitable than software companies like Alibaba or Didi. And all of China’s net job growth since 2012 has been in services, not manufacturing.

Even with that growth, well educated Chinese youth often struggle to find decent jobs. Severely curtailing one of the most vibrant sectors of the economy will only make it worse.

China has lost sight of what those microchips and batteries are supposed to do: run software! They are not ends in themselves.

What’s more, the threat of sudden crackdowns will make it harder for all Chinese companies to raise money and grow. Maybe the hammer is landing on tech now, but investors will wonder, “Who’s next?”

More on China:

HOW CHINA’S TECH INDUSTRY DIES

CHINA’S TECH ELITE IS RUNNING SCARED

CHINA IS CRUSHING ONE OF ITS MOST INNOVATIVE COMPANIES

Photo: “Vice President Xi Jinping” by nznationalparty is licensed under CC BY-NC-ND 2.0

If you found this post interesting, please share it on Twitter/Reddit/etc. using the buttons at the bottom of the page. This helps more people find the blog! 

Save Money on Stuff I Use:

Amazon Business American Express Card

You already shop on Amazon. Why not save $100?

If you’re approved for this card, you get a $100 Amazon gift card. You also get up to 5% back on Amazon and Whole Foods purchases, 2% on restaurants/gas stations/cell phone bills, and 1% everywhere else.

Best of all: No fee!

Fundrise

This platform lets me diversify my real estate investments so I’m not too exposed to any one market. I’ve invested since 2018 and returns have been good so far. More on Fundrise in this post.

If you decide to invest in Fundrise, you can use this link to get your management fees waived for 90 days. With their 1% management fee, this could save you $250 on a $100,000 account.

iHerb

The only place I buy vitamins and supplements. I recently placed an order and received it in less than 48 hours with free shipping! I compared the prices and they were lower than Amazon. I also love how they test a lot of the vitamins so that you know you’re getting what the label says. This isn’t always the case with supplements.

Use this link to save 5%! 

Misfits Market

My wife and I have gotten organic produce shipped to our house by Misfits for over a year. It’s never once disappointed me. Every fruit and vegetable is super fresh and packed with flavor. I thought radishes were cold, tasteless little lumps at salad bars until I tried theirs! They’re peppery, colorful and crunchy! I wrote a detailed review of Misfits here.

Use this link to sign up and you’ll save $10 on your first order. 

China’s Tech Elite Is Running Scared

China’s government has launched a severe crackdown on its leading tech companies. Didi Chuxing, the equivalent of Uber, has been removed from app stores and ed tech companies are now required to be nonprofit, likely wiping out their investors.

A major index of Chinese tech stocks is down over 40% since February, even as US tech stocks climb:

China’s tech elite is responding by placating the government however it can, including a rapid increase in philanthropy in response to government messages that it expects bigger donations from the rich.

But it doesn’t stop there. Alibaba has been under intense pressure from the Chinese government since founder Jack Ma criticized some aspects of its performance, which led to his disappearance for several months. Alibaba has since created a special app to promote “Xi Jinping thought”.

China’s top entrepreneurs are also looking for an escape hatch in case their appeasement of the government doesn’t work. Interest from wealthy Chinese in moving abroad is increasing amid the government crackdown.

Sudden donations, new Communist dogma apps, and quiet plans to leave…these are acts of desperation.

I see a couple results from China’s crackdown:

1) Major businessmen in tech and other sectors are distracted. They’re worried about appeasing the government and/or emigrating, not building their core business. This will harm the prospects of their companies.

2) Would-be entrepreneurs are discouraged. Why start a company when it can be so easily appropriated?

3) Investors are discouraged for the same reason as # 2.

China is rapidly strangling its economic golden goose. The only question is, who will pick up the pieces?

More on China:

CHINA IS CRUSHING ONE OF ITS MOST INNOVATIVE COMPANIES

HOW CHINA’S TECH INDUSTRY DIES

CHINA IS KILLING ITS TECH INDUSTRY

Photo: “Vice President Xi Jinping” by nznationalparty is licensed under CC BY-NC-ND 2.0

If you found this post interesting, please share it on Twitter/Reddit/etc. using the buttons at the bottom of the page. This helps more people find the blog! And please leave your comments at the bottom.

Save Money on Stuff I Use:

Fundrise

This platform lets me diversify my real estate investments so I’m not too exposed to any one market. I’ve invested since 2018 and returns have been good so far. More on Fundrise in this post.

If you decide to invest in Fundrise, you can use this link to get your management fees waived for 90 days. With their 1% management fee, this could save you $250 on a $100,000 account. I will also get a fee waiver for 90-365 days, depending on what type of account you open.

iHerb

The only place I buy vitamins and supplements. I recently placed an order and received it in less than 48 hours with free shipping! I compared the prices and they were lower than Amazon. I also love how they test a lot of the vitamins so that you know you’re getting what the label says. This isn’t always the case with supplements.

Use this link to save 5%! I’ll also get 5% of however much you spend, at no cost to you.

Misfits Market

My wife and I have gotten organic produce shipped to our house by Misfits for over a year. It’s never once disappointed me. Every fruit and vegetable is super fresh and packed with flavor. I thought radishes were cold, tasteless little lumps at salad bars until I tried theirs! They’re peppery, colorful and crunchy! I wrote a detailed review of Misfits here.

Use this link to sign up and you’ll save $10 on your first order. I’ll also get $10.

How to Get Internet to Cuba

Amid deepening poverty, escalating COVID cases and a lack of vaccines, Cubans are doing something very brave: protesting against the Communist dictatorship in the largest demonstrations in six decades.

I can’t even imagine how afraid they must be, but they’re out there. And activists need to be able to coordinate with each other. The Cuban government knows this, so they’ve taken a cue from dictatorships in Iran, Myanmar and elsewhere: restricting the internet.

Cuba’s government has disrupted access to WhatsApp, Facebook, Instagram, Telegram and YouTube, per London-based watchdog NetBlocks. These disruptions have gone on for over a week so far and show no signs of ending.

As an American with a love of freedom and a background in tech, I thought I’d research some options for our Cuban friends:

  • Alternative social platforms: Twitter is not yet blocked, although it could be at any time. Less used video platforms like Vimeo or Dailymotion are also available.
  • Privacy tools: VPN’s continue to work, as does Signal, the encrypted messaging app used by Edward Snowden. This could be a superb WhatsApp alternative. Tor is a great option for browsing. It’s available for desktop or mobile in a convenient browser form. It routes data through many servers, making your traffic untraceable. Unlike most VPN’s, Signal and Tor are free. I use them myself.
  • Satellites: Not viable. These need ground infrastructure that Cuba doesn’t have and their government won’t allow.
  • Balloons: Much discussed and a great potential solution, but I fear the implementation will take too long to be of use to Cubans. These balloons exist today, cost in the tens of thousands (chump change to the US government), and float in international airspace. They could be positioned over international waters as well.

    Cuba would be taking an extreme step to shoot them down, if they could even accomplish it. And in any case, we could always launch many, many more.

If anyone knows of any good charities working on these issues, please leave a comment at the bottom of the page. I’d be happy to contribute to any good effort in this area.

Patria y vida, amigos!

More on tech:

CHINA IS CRUSHING ONE OF ITS MOST INNOVATIVE COMPANIES

INSIDE A STARTUP ACCELERATOR DEMO DAY

CHINA IS KILLING ITS TECH INDUSTRY

Photo: “Project Loon balloon” by douglas_coldwell is licensed under CC BY 2.0

If you found this post interesting, please share it on Twitter/Reddit/etc. using the buttons at the bottom of the page. This helps more people find the blog! And please leave your comments at the bottom.

Save Money on Stuff I Use:

Fundrise

This platform lets me diversify my real estate investments so I’m not too exposed to any one market. I’ve invested since 2018 and returns have been good so far. More on Fundrise in this post.

If you decide to invest in Fundrise, you can use this link to get your management fees waived for 90 days. With their 1% management fee, this could save you $250 on a $100,000 account. I will also get a fee waiver for 90-365 days, depending on what type of account you open.

iHerb

The only place I buy vitamins and supplements. I recently placed an order and received it in less than 48 hours with free shipping! I compared the prices and they were lower than Amazon. I also love how they test a lot of the vitamins so that you know you’re getting what the label says. This isn’t always the case with supplements.

Use this link to save 5%! I’ll also get 5% of however much you spend, at no cost to you.

Misfits Market

My wife and I have gotten organic produce shipped to our house by Misfits for over a year. It’s never once disappointed me. Every fruit and vegetable is super fresh and packed with flavor. I thought radishes were cold, tasteless little lumps at salad bars until I tried theirs! They’re peppery, colorful and crunchy! I wrote a detailed review of Misfits here.

Use this link to sign up and you’ll save $10 on your first order. I’ll also get $10.

China Is Crushing One of Its Most Innovative Companies

Didi Chuxing, or “Honk Honk Taxi”, was one of the greatest success stories of Chinese tech. Founded in 2012, it broke out just months later by providing rides during a heavy Beijing snowstorm. A regular taxi was impossible to get, but Didi came through.

After that, the company was on the fast track. It raised over $23 billion in funding from major venture firms like Softbank and beat Uber to dominate the Chinese market. So when the time came to go public this summer, markets had every reason to cheer.

Just sixteen days later, things look a lot different. Here’s what Didi’s stock has done:

Investors are down 15% in just two weeks, a disappointing debut. Meanwhile, Didi’s offices are flooded with Chinese state security agents:

China sent regulators including state security and police officials to Didi Global Inc.’s ride-hailing business on Friday as part of a cybersecurity investigation, the latest development in a regulatory saga that has gripped China’s tech industry.

Regulators from government units including the Ministry of Public Security, the Ministry of State Security, the Cyberspace Administration of China, the Ministry of Transport and Ministry of Natural Resources will be stationed at Didi starting Friday for the investigation, the cyberspace administration said in an online statement.

Potential outcomes include financial penalties, suspensions of business licenses and criminal charges.

Imagine if, shortly after its IPO, FBI and CIA agents raided Uber headquarters. This is exactly what’s happening to Didi.

Didi may not have adequately disclosed the concerns the Chinese government had about its security practices. That, and substantial investor losses, set the stage for a tsunami of shareholder lawsuits. Indeed, a class action suit has already been filed against Didi.

I see Didi being increasingly distracted by heavy pressure from the authoritarian Chinese government along with cascading lawsuits in the US. Even if the company survives, they’re distracted and ripe for disruption.

There is no evidence Didi has actually done anything improper with user data. But the Chinese government doesn’t like any information passing outside its borders, and companies are required to make disclosures to IPO in the US, so Didi is now under fire from a powerful and dictatorial government.

Another company had its IPO on the same day as Didi: SentinelOne, a California-based cybersecurity startup. Here’s how they’ve done since:

Up 4% with no regulatory problems: a situation Didi can only dream of.

If one Chinese company after another comes under the Communist thumb, and investors suffer as a result, why wouldn’t the venture funding go to the SentinelOnes rather than the Didis? Even in today’s hot market, there are always more startups than there is funding. Chinese companies, with their unique regulatory risks, are likely to be the last in line.

China has generated amazing innovation, but those days may be coming to an end.

Have a good weekend everyone!

More on tech:

HOW CHINA’S TECH INDUSTRY DIES

CHINA IS KILLING ITS TECH INDUSTRY

INSIDE A STARTUP ACCELERATOR DEMO DAY

Photo: “crushed can” by subsetsum is licensed under CC BY-NC-ND 2.0

If you found this post interesting, please share it on Twitter/Reddit/etc. using the buttons at the bottom of the page. This helps more people find the blog! And please leave your comments at the bottom.

Save Money on Stuff I Use:

Fundrise

This platform lets me diversify my real estate investments so I’m not too exposed to any one market. I’ve invested since 2018 and returns have been good so far. More on Fundrise in this post.

If you decide to invest in Fundrise, you can use this link to get your management fees waived for 90 days. With their 1% management fee, this could save you $250 on a $100,000 account. I will also get a fee waiver for 90-365 days, depending on what type of account you open.

iHerb

The only place I buy vitamins and supplements. I recently placed an order and received it in less than 48 hours with free shipping! I compared the prices and they were lower than Amazon. I also love how they test a lot of the vitamins so that you know you’re getting what the label says. This isn’t always the case with supplements.

Use this link to save 5%! I’ll also get 5% of however much you spend, at no cost to you.

Misfits Market

My wife and I have gotten organic produce shipped to our house by Misfits for over a year. It’s never once disappointed me. Every fruit and vegetable is super fresh and packed with flavor. I thought radishes were cold, tasteless little lumps at salad bars until I tried theirs! They’re peppery, colorful and crunchy! I wrote a detailed review of Misfits here.

Use this link to sign up and you’ll save $10 on your first order. I’ll also get $10.

How China’s Tech Industry Dies

The Chinese Communist Party has launched a severe crackdown on the technology industry:

  • Didi Chuxing, the Chinese equivalent of Uber, had its app removed from all Chinese app stores shortly after its US IPO
  • ByteDance, parent company of TikTok, shelved its IPO plans under regulatory pressure. Its CEO has resigned.
  • Over 30 tech companies have been hauled in for meetings with regulators
  • Ant Group, a financial company founded by Jack Ma that would’ve been among the largest IPOs in history, had its IPO in China cancelled after Ma criticized authorities

This crackdown makes it nearly impossible for Chinese companies to list their shares in the US, removing one of the main ways that venture capitalists cash out. This will cause venture firms to shy away from investing in Chinese companies.

Why does this matter? Let’s take a look at how venture funding works:

1) Company makes product
2) Company pitches investors
3) Investors give company money
4) Company uses money to hire engineers and make a better product, and…
5) Acquire users through ads and/or building their sales team. Next…
6) With more users and revenue, company comes back to VC’s to raise more money at a higher valuation. Then, they do more of 4-5
7) After repeated rounds of VC funding, the company either gets acquired or goes public. VCs cash out.

But Chinese companies cannot go public in the US for the forseeable future, and even a listing in China may not be possible, as Ant Group proved. And if the Chinese authorities think a US listing brings security risks, surely the acquisition of a Chinese tech firm by a US company would be even riskier and thus also off limits.

What does that leave in terms of exits? Acquisition by a Chinese tech company, which means a lot fewer and smaller potential acquirers. The only other option is an IPO in China, providing the company doesn’t offend anyone. But the Chinese stock market is just 1/4th the size of the US one, so the payoff may be much smaller.

No exit means no investment. For VC firms, the exit is the entire point!

Unlike in China, firms in the US and elsewhere will be able to choose whatever exit is the most lucrative. That means they’ll be able to raise venture capital much more easily. That money will let them hire the best engineers, build the best products, and acquire tons of customers, leaving Chinese firms in the dust.

A couple of years ago, I thought the Chinese technology industry might overtake the US. I don’t think that anymore. With the government’s hand ever heavier, I see Chinese technology falling further and further behind.

The Chinese people have proven they have the skills to compete. But will their government let them?

More on tech:

CHINA IS KILLING ITS TECH INDUSTRY

WHY I JUST INVESTED IN GAUGE, THE BEST WAY TO SELL YOUR CAR

WHY I JUST INVESTED IN CRAFTER, MAKER OF THE MOST BEAUTIFUL ARTS AND CRAFTS KITS IN THE WORLD

Photo: “Vice President Xi Jinping” by nznationalparty is licensed under CC BY-NC-ND 2.0

If you found this post interesting, please share it on Twitter/Reddit/etc. using the buttons at the bottom of the page. This helps more people find the blog! And please leave your comments at the bottom.

Save Money on Stuff I Use:

Fundrise

This platform lets me diversify my real estate investments so I’m not too exposed to any one market. I’ve invested since 2018 and returns have been good so far. More on Fundrise in this post.

If you decide to invest in Fundrise, you can use this link to get your management fees waived for 90 days. With their 1% management fee, this could save you $250 on a $100,000 account. I will also get a fee waiver for 90-365 days, depending on what type of account you open.

iHerb

The only place I buy vitamins and supplements. I recently placed an order and received it in less than 48 hours with free shipping! I compared the prices and they were lower than Amazon. I also love how they test a lot of the vitamins so that you know you’re getting what the label says. This isn’t always the case with supplements.

Use this link to save 5%! I’ll also get 5% of however much you spend, at no cost to you.

Misfits Market

My wife and I have gotten organic produce shipped to our house by Misfits for over a year. It’s never once disappointed me. Every fruit and vegetable is super fresh and packed with flavor. I thought radishes were cold, tasteless little lumps at salad bars until I tried theirs! They’re peppery, colorful and crunchy! I wrote a detailed review of Misfits here.

Use this link to sign up and you’ll save $10 on your first order. I’ll also get $10.

China Is Killing its Tech Industry

Major news over the holiday weekend as the Chinese government required all app stores in China to remove the Didi Chuxing app. Didi is the Chinese equivalent to Uber, and dominates shared rides in the country, along with a major presence abroad:

China has ordered app-store operators to remove the app of Didi from their stores, the latest as tension escalates between the nation’s largest ride-hailing giant and local regulators. The app has disappeared from several stores including Apple’s App Store in China, TechCrunch can confirm.

The nation’s cyberspace administration, which unveiled the order on Sunday, said Didi was illegally collecting users’ personal data.

Existing users can continue the use the app for now, but new signups are blocked. This comes just days after Didi raised billions in an IPO in New York, perhaps angering the Chinese government.

The claim of data violations seems specious. Didi’s CEO, Li Min, denies that any data is handled improperly or passed to the US.

This is part of a broader crackdown on China’s technology industry:

  • Alibaba Group fined $2.8 billion shortly after CEO Jack Ma criticizes the Communist Party
  • Fintech giant Ant Group, also founded by Jack Ma, has IPO cancelled
  • Bitcoin miners forced to shut down and are racing to move their servers elsewhere, including the US, as the Chinese government prepares to launch its own competing digital currency
  • A Chinese billionaire, many of whom are in the technology industry, dies every 40 days on average, often in suspicious “accidents” and “suicides.” Some are simply executed.

What is this doing to China’s technology industry? The damage is reflected in a massive decline in the number of “unicorns,” or startups reaching $1 billion valuation, in China. Meanwhile, the number of unicorns in the US is skyrocketing and the tech industry as a whole is hotter than ever.

China’s overall economy has also trended sharply downwards in recent years:

The Communist Party doesn’t want any competing power centers, and the Chinese tech industry, with its wealth and control of information, is perhaps the biggest alternative power center left.

But the industry needs freedom to experiment and exchange ideas, and a stable climate without the constant threat of fines, shutdowns and imprisonment. Entrepreneurs can find that here in the US, along with abundant funding. And I think you’ll see more and more of them making that jump.

More on technology:

7 COMPANIES HAD 3 MINUTES EACH TO PITCH US. THIS IS WHAT HAPPENED.

INSIDE A STARTUP ACCELERATOR DEMO DAY

UNICORNS ARE BEING MINTED FASTER THAN EVER

If you found this post interesting, please share it on Twitter/Reddit/etc. using the buttons at the bottom of the page. This helps more people find the blog! And please leave your comments at the bottom.

Save Money on Stuff I Use:

Fundrise

This platform lets me diversify my real estate investments so I’m not too exposed to any one market. I’ve invested since 2018 and returns have been good so far. More on Fundrise in this post.

If you decide to invest in Fundrise, you can use this link to get your management fees waived for 90 days. With their 1% management fee, this could save you $250 on a $100,000 account. I will also get a fee waiver for 90-365 days, depending on what type of account you open.

iHerb

The only place I buy vitamins and supplements. I recently placed an order and received it in less than 48 hours with free shipping! I compared the prices and they were lower than Amazon. I also love how they test a lot of the vitamins so that you know you’re getting what the label says. This isn’t always the case with supplements.

Use this link to save 5%! I’ll also get 5% of however much you spend, at no cost to you.

Misfits Market

My wife and I have gotten organic produce shipped to our house by Misfits for over a year. It’s never once disappointed me. Every fruit and vegetable is super fresh and packed with flavor. I thought radishes were cold, tasteless little lumps at salad bars until I tried theirs! They’re peppery, colorful and crunchy! I wrote a detailed review of Misfits here.

Use this link to sign up and you’ll save $10 on your first order. I’ll also get $10.

Meet New Jersey’s Biggest Polluter

Along the New Jersey Turnpike, it comes into view: a massive complex of tanks, smokestacks, and tangled pipes. This is New Jersey’s biggest polluter: the Phillips 66 Bayway Refinery.

The Phillips refinery releases far more toxic chemicals than anywhere else in the state, and more than twice as many as the runner-up (another refinery). Some of these chemicals may cause cancer.

Where do these chemicals go? Into poor communities in surrounding Linden, NJ:

“We live in a very low-income neighborhood, so we’re advocating for food, and shelter and everything else. I don’t believe we can get to the point where we’re able to advocate for the smells or the chemicals that are released in the air,” she said.

Despite its staggering environmental toll, the plant employees just 800 people and, even at full capacity, produces only 155,000 barrels of gasoline daily. This is less than 0.05% of the gasoline the US uses every day.

Even those far from New Jersey may have cause for concern: the plant sits two miles from Arthur Kill, the waterway that separates Staten Island from the Garden State and feeds into the Atlantic Ocean. I shudder to think what could happen in a natural disaster, to say nothing of a man-made one. Indeed, the refinery had to shut down prior to Hurricane Sandy.

We have a dangerous plant in the middle of one of the most densely populated places in the country, leeching out toxins. Its damage falls disproportionately on the poor and nonwhite. Its economic impact is modest.

Perhaps it’s time for a change?

More on New Jersey:

If you found this post interesting, please share it on Twitter/Reddit/etc. using the buttons at the bottom of the page. This helps more people find the blog! 

Save Money on Stuff I Use:

Fundrise

This platform lets me diversify my real estate investments so I’m not too exposed to any one market. I’ve invested since 2018 and returns have been good so far. More on Fundrise in this post.

If you decide to invest in Fundrise, you can use this link to get your management fees waived for 90 days. With their 1% management fee, this could save you $250 on a $100,000 account. I will also get a fee waiver for 90-365 days, depending on what type of account you open.

iHerb

The only place I buy vitamins and supplements. I recently placed an order and received it in less than 48 hours with free shipping! I compared the prices and they were lower than Amazon. I also love how they test a lot of the vitamins so that you know you’re getting what the label says. This isn’t always the case with supplements.

Use this link to save 5%! I’ll also get 5% of however much you spend, at no cost to you.

Misfits Market

My wife and I have gotten organic produce shipped to our house by Misfits for over a year. It’s never once disappointed me. Every fruit and vegetable is super fresh and packed with flavor. I thought radishes were cold, tasteless little lumps at salad bars until I tried theirs! They’re peppery, colorful and crunchy! I wrote a detailed review of Misfits here.

Use this link to sign up and you’ll save $10 on your first order. I’ll also get $10.