Big changes are coming for social media

January 10, 2025
by Björn Jeffery
SvD Näringsliv

This analysis was first published in SvD Näringsliv, in Swedish, on January 10th, 2025. This piece was translated from Swedish by Claude. Some phrasing may differ from a human translation.

Silicon Valley is entering Washington DC as Trump’s new government takes office. Never before has the political influence of tech companies been so great. But not all changes in the apparatus of state will be welcomed with open arms.

When Donald Trump is sworn in as the 47th president of the United States on 20 January, he brings with him a group of formidably influential entrepreneurs and investors.

David Sacks — the investor known through the All-In podcast — is set to become the new AI and crypto tsar. Big questions for America’s future, one might think. But apparently not so big that Sacks intends to work on them full-time. He plans to continue as a venture capitalist simultaneously.

While the tech celebrities — led by Elon Musk — descend on Washington DC, they are preceded by a vast political machinery. A range of American agencies are about to change leadership and, along with it, parts of their direction and remit. It is in these less glamorous areas, away from AI and cryptocurrencies, that one finds questions which will very much affect the American tech industry and Silicon Valley in particular.

There are three areas where things could become especially fraught.

The first concerns competition issues — what is known as “antitrust” in the United States. Here, the past four years have been defined by a highly restrictive political stance on the ability of tech giants to acquire other companies. The number of acquisitions has therefore fallen dramatically. Meta, Facebook’s parent company, has not completed a single major acquisition in the past two years.

This shift has been driven by Lina Khan, Biden’s appointed chair of the Federal Trade Commission (FTC), the American competition authority. Her hard line has put pressure on Amazon and Google in a way they had never experienced before. The same tendency has been visible in the courts, with a judge ruling last year that Google holds a monopoly on the search market.

With Trump in the White House, Lina Khan will be fired immediately. Her replacement will be lawyer Andrew Ferguson, a former prosecutor from the state of Virginia. When Ferguson takes over, the FTC will be in the middle of a lengthy series of legal proceedings initiated by Khan, and it is unclear whether he will see them through. It is, however, highly likely that the FTC going forward will take a more permissive attitude towards corporate acquisitions — though it could push harder on regulating content on social media platforms.

This leads to the second area. That Meta’s Mark Zuckerberg chose this week to remove fact-checking from Facebook and Instagram is no coincidence. It was an opportunistic — and to some extent necessary — move to avoid attracting immediate problems from the incoming administration. Anything that can be perceived as censorship of any kind will have a harder time under Trump in the years ahead. Zuckerberg almost certainly made the correct calculation that it is better to get ahead of things than to be caught out. He therefore realigned Meta’s policy to something more suited to Trump. Whether it will be enough remains to be seen.

The question of content on social media is, however, highly complex — politically as well. It is not only the FTC that may have views on this, but also the agency FCC — the Federal Communications Commission. The incoming chair there, Brendan Carr, wrote ahead of the election that the law governing immunity for what is written on social media — the so-called “Section 230” — should be drastically curtailed. This would mean that social media companies could be held liable for what is said by users on their platforms. But they could also be held liable for removing too much material through moderation. That would represent a major change and a significant tightening if it came to pass.

It is not clear whether such a change falls within the FCC’s jurisdiction, and any such move could therefore be tied up in the courts for a long time. But the mere prospect of new regulation here could prompt sweeping changes at social media companies.

The third and final area concerns labour immigration. Here a rift has already opened between Silicon Valley and the broader MAGA wing of the Republican Party — even before Trump has taken office. The issue centres in particular on the H-1B visa type used by tech companies to hire talented individuals, often engineers, from other countries. Their stay in the country is tied to employment, meaning they are effectively expelled if they are unemployed for more than 60 days. For Silicon Valley firms, the visa type is considered vital for finding the right kind of workforce.

The criticism from the MAGA camp is that American jobs are going to foreign workers, meaning native-born Americans are missing out on well-paid positions.

These are three areas whose impact will be enormous for many tech companies. Ahead of an election, it is easy to unite around big pledges and joint statements projecting unity. But there are many questions where the interests of tech companies do not necessarily align with the views of the Republican majority. Having a tsar for AI issues certainly looks impressive and a little exciting — but that is not where Silicon Valley has its greatest needs.

The latest stock market trend: copy the celebrities

January 7, 2025
by Björn Jeffery
SvD Näringsliv

This analysis was first published in SvD Näringsliv, in Swedish, on January 7th, 2025. This piece was translated from Swedish by Claude. Some phrasing may differ from a human translation.

Why make your own investment decisions when you can copy someone else? A new phenomenon from the US is creating new and unusual ways to trade stocks — by riding on the coattails of celebrities.

If you follow the markets, you have almost certainly seen him. Sleeves rolled up, tie loosened, and a bald head, the boisterous Jim Cramer shouts out buy and sell recommendations on the financial channel CNBC. He is a loud and polarising figure who mixes financial advice with entertainment.

Those who followed his advice have had a rough ride. If, on the other hand, you had done the exact opposite of what he recommended, your portfolio would be up 45 percent over the past year. And now there are financial products that help you do precisely that kind of manoeuvre.

The American app Autopilot is part of a new phenomenon in how stock market investments can be made. Traditionally, a distinction is drawn between active and passive fund and stock management. But as the app’s name suggests, this is something that combines both. Someone — a politician, a hedge fund, or a billionaire — makes active investment decisions, and with the help of the service you passively replicate what they do. Or do the exact opposite.

By using publicly available data on which stocks well-known figures hold, you get a somewhat simplified picture of how they think about investments. If you had, for example, mimicked American politician Nancy Pelosi’s stock purchases over the past year, you would have seen a gain of around 55 percent.

The phenomenon is part of a broader trend. New types of financial products are making it easier to access ideas and areas to invest in. The exchange-traded fund KPOP invests in the Korean entertainment industry — something that appears to have had a tough time, having fallen 34 percent in a year. With the description “stop investing in companies that are woke,” you can buy the “God Bless America ETF,” abbreviated as “YALL.” DEAD is not yet a tradeable product, but is an index that tracks listed companies whose chief executives train deadlifts. The idea is that they — regardless of industry — outperform their competitors.

Repackaging financial products into new configurations is thus a familiar method in the industry.

What is new here is not that there are individuals and firms with very specific investment theses — it is the ability for a broader public to trade them in a simple way. On the institutional side, similar ideas have existed for a long time.

In the book “Chaos Kings,” author Scott Patterson describes how two investors created the fund Empirica Capital as far back as 1999. The fund’s purpose was the opposite of everything else at the time. While the rest of the market was trying to find stocks and other assets that increased in value, Empirica had a different strategy: it only made money when the world was going badly. The fund performed best of all in a complete crisis. Behind it stood Mark Spitznagel and the now well-known Nassim Nicholas Taleb, who went on to make a name for himself as the author of books on similarly chaotic themes, including the bestseller “The Black Swan.”

Repackaging financial products into new configurations is therefore a well-established method in the industry. But even if access for the general public has now increased, there are reasons to consider whether there were good reasons why small investors did not put their money to work in this way previously.

Several exchange-traded funds have poor liquidity, for example, which makes them hard to trade. It can also be difficult to understand the precise risk profile of these new products. In the case of the Autopilot app, you are mimicking someone whose appetite for risk may be substantially different from your own. They may also hold other types of financial instruments that protect them against a sudden drop in value — a kind of hedge, or insurance if you will. Trying to replicate a portfolio without seeing the full picture can easily become misleading and risky.

In Sweden, the phenomenon is still in its infancy. Perhaps that is for the best. The newfound simplicity that now attracts many curious small investors may well conceal a great deal of complexity. You do not become Jim Cramer or Nancy Pelosi simply by copying what they do.

Taking extreme risks in the hunt for the next success

December 25, 2024
by Björn Jeffery
SvD Näringsliv

This analysis was first published in SvD Näringsliv, in Swedish, on December 25th, 2024. This piece was translated from Swedish by Claude. Some phrasing may differ from a human translation.

He has been right on companies like Alibaba, Uber — and Klarna. Masayoshi Son is the legendary investor who plays for extremely high stakes, and sometimes loses everything. But who always comes back to find the next success.

It is an investor’s dream. Identify a company early, have the right thesis — and be richly rewarded. If the company in question is chipmaker Nvidia and the return over the past five years has been around 2,400 percent, it is about as good as it gets. One investor found Nvidia long before anyone else: Masayoshi Son, founder of the Japanese conglomerate SoftBank. As early as 2016 he invested $2.8 billion in the company on the thesis that it would become a winner from the development of AI. Masa got it right. But he sold too early. SoftBank exited in 2019 — and missed the 2,400 percent. For most any other investor this could have been devastating. Masa shrugged. If you have had a hand in some of the biggest successes in the history of the internet, you can perhaps forgive yourself for a billion-dollar miss here and there.

In the new book Gambling Man by Lionel Barber there is a lengthy list of well-known internet companies — and how Masa has been involved in them in various ways. He does deals with Bill Gates at age 25, collaborates with networking giant Cisco and Yahoo in Japan — and in the middle of it all loses 99 percent of his assets in a crash. But he comes back again. How does he do it?

There are a few episodes in Masa’s life that perhaps best illustrate what is so distinctive about the Japanese investor. One of them unfolds in a grand building in central Beijing in 1999 — a local version of Dragon’s Den taking place in an office, without cameras. Chinese entrepreneurs pitch their ideas hoping to hook an investor. A short man who works as a teacher and tourist guide pitches his new company. What if you took the “Yellow Pages” of the day and put them on the internet? Today the concept is obvious and well-established. Then it was an innovation. The service was only a few months old and was already attracting thousands of new users every day. Masa had a good feeling about the teacher turned entrepreneur. He saw him as an underdog — someone he recognised something of himself in. He offered on the spot to invest $40 million for 49 percent of the company. That may sound extraordinary — until you add that the company was called Alibaba and the entrepreneur was Jack Ma. Alibaba would go on to become one of the largest and most influential companies in China and the world. Ma turned down Masa’s millions: “Alibaba is just a baby, and a baby doesn’t need this much money,” he said. Perhaps he could consider half as much. Masa’s colleagues at SoftBank were unimpressed and advised against the deal. Jack Ma was neither a skilled engineer nor a product developer — just an apparently ordinary Chinese man with an idea. That was enough for Masa. He overruled his colleagues and negotiated a deal in which he and SoftBank got 30 percent of Alibaba for $20 million, valuing the company at $60 million. Fifteen years later Alibaba listed in New York at around $230 billion. By May 2023 SoftBank had sold almost its entire stake — at a profit of around $72 billion. Masa had been right.

In 2005 Masa visited Steve Jobs in California. He had brought a sketch showing how the iPod music player could get a large screen and work as a phone — in essence using Apple’s operating system. It was a sketch for something like an iPhone. Jobs was not interested in the sketch: “I have my own,” he said laconically, revealing no more. But Masa persisted. He secured a follow-up meeting at which he reportedly extracted a promise from Jobs of exclusive rights to the coming phone in Japan. Japan was a pioneer in smartphones, already having a system called i-mode that enabled smartphone-like functions before the concept had been established elsewhere. As a tech-focused Japanese company, SoftBank followed the developments closely. They wanted into the market — but Masa needed “a weapon.” He believed Steve Jobs’ future product could be exactly that. In 2006 SoftBank bought Vodafone Japan for around $17 billion. A few months after the deal closed the company was renamed SoftBank Mobile. Three years after the first meeting with Masa, Jobs released the iPhone in Japan. By that point Masa had made an investment equivalent to 187 billion kronor in today’s money to become the mobile operator that brought the iPhone to Japan — without having seen so much as a prototype from Apple, or having any formal agreement with Steve Jobs. The gamble paid off. From 2008 to 2011 SoftBank had exclusive rights to sell the iPhone in Japan and grew its market share significantly during that period.

But the deals do not always go Masa’s way. The appetite for risk and the fondness for big visions have also led him badly astray — rarely more so than when he tried to revolutionise the office industry. Masa was late to a meeting with a tall Israeli entrepreneur in 2016. There was no time to visit the company’s headquarters, so the entrepreneur got into the back seat of Masa’s car while he drove to his next meeting in New York. The visitor was Adam Neumann, who had a grandiose vision for the future of office work. The concept was called WeWork. They drove 38 blocks north before Masa arrived — and in that time he sketched out a deal on an iPad. Neumann stepped out of the car with a promise of $4.4 billion in investment. The valuation placed on WeWork — then a small but promising concept — was the same as the entire Hilton hotel chain. The following year the two men met again in Japan. Over dinner Masa told an anecdote about a fight between a smart person and a crazy person — the crazy one always wins. Neumann agreed. But, said Masa, “you’re not crazy enough.” The episode is revealing about Masa’s need to push limits. A SoftBank colleague says in the book that encouraging Neumann to be crazier was like “giving alcohol to a monkey.” The result was catastrophic. Together they built to a plan to take WeWork to a valuation of 10,000 billion kronor — roughly a third of the entire US stock market. It did not happen. Conflicts between the two led to Masa ultimately buying Neumann out of WeWork entirely for the tidy sum of $1.7 billion — and shortly afterwards the company began to collapse. In November 2023 WeWork filed for bankruptcy protection in the United States after its share price crashed. Masa’s total investment of around $16 billion had gone up in smoke.

Masayoshi Son is now 67 years old but shows no clear signs of slowing down. Quite the opposite — he has found his next thing: AI. He has just announced plans to invest $100 billion in the United States in this area within the next four years alone. At the end of November the Financial Times also reported that SoftBank intended to buy shares in OpenAI for $1.5 billion — not an investment in the company itself, but purchases of shares from employees. History appears to be repeating itself. Masa goes in early, big — and at high valuations. When asked whether he sees any problem in his strategy of extreme risk-taking, which among other things led him to sell Nvidia too early, he simply says: “Timing-wise, we may have been a little too early.” There appears to be no self-criticism of the method itself. Everything points instead to SoftBank and Masayoshi Son heading into another round — as funder and chief risk-taker for the world’s most important technology companies.


3 artists, 2 books & 1 documentary

December 19, 2024
by Björn Jeffery
Newsletters

Friends,

This may be the least predictable newsletter imaginable. But unlike the rest of the stuff clogging up your inbox – this is not selling or asking anything of you. It’s just some good stuff that I’ve come across lately.

I’m still writing a lot for the Swedish newspaper Svenska Dagbladet. If that’s a language you’re comfortable reading, then here’s a listing of my latest work. If not – you’re out of luck, for the time being at least.

I hope you find something interesting among the recommendations below. And happy holidays.

/Björn

Three artists to spend time with

  • Doechii – She just crossed over into the mainstream, but this is the most interesting rap I’ve heard for a long time. It’s versatile, clever, and artistic.
    Listen to: Nissan Altima.

  • Caroline Polachek – Hardly a new artist, this former singer from Chairlift is now on a solo ride. I discovered her this year, so it’s new to me. The music is unusually original and goes way beyond the average pop song.
    Listen to: Sunset + Watch: Dang (live on The Late Show with Stephen Colbert)

  • Remi Wolf – Her single “Cinderella” was one of my most played songs in the car this summer. It’s poppy and fun, with a souly voice.
    Listen to: Cinderella

Two books for your holiday break

  • Gambling Man – The wild ride of Japan’s Masayoshi Son, by Lionel Barber

    There’s hardly a major internet company that hasn’t been touched – in some way – by Softbank and their founder, Masayoshi Son. How did it happen? This former FT editor does a fantastic job of describing both the background and context for Masa’s trajectory, as well as a lot of juicy anecdotes from behind the scenes. A delightful read.

  • Send Nudes, by Saba Sams

    Short stories written in a light, bouncy manner. Little moments of youth get caught and dissected from the inside. This is fiction that reminds you of what it is like to be young – with everything good (and bad) that comes along with that.

One documentary to cherish

  • Wise Guy – David Chase and The Sopranos (MAX) – This is so much more than a walk down memory lane for Sopranos fans (which would have been fine by me). It adds personal depth to what I consider to be the finest tv-series ever made.

Three bonus things worth a look & a listen

  • The Rip Current – My friend Jake Ward (previously of NBC News and Popular Science fame) has a new Substack about technology that you should check out. He has a good eye for the space.

  • The Reith Lectures; Is Violence Normal? – The BBC series invites the forensic psychiatrist Dr Gwen Adshead to answer the seemingly simple question “is violence normal?”. The answer is more nuanced and interesting than it sounds.

  • If Books Could Kill: Who Moved My Cheese? – A podcast which is always a laugh, but this episode was especially good. A brutal teardown of a management literature staple.

Originally published on Substack on December 19th, 2024.

Trump’s appointment — a win for the tech companies

December 6, 2024
by Björn Jeffery
SvD Näringsliv

This analysis was first published in SvD Näringsliv, in Swedish, on December 6th, 2024. This piece was translated from Swedish by Claude. Some phrasing may differ from a human translation.

The tech elite’s bet on Trump has already started to pay off. With the appointment of David Sacks as “AI and crypto tsar,” the venture capitalists have billions of reasons to celebrate.

The Silicon Valley elite gathered for a dinner at venture capitalist David Sacks’ home in June. The guest of honour was Donald Trump, then a presidential candidate. Tickets cost over three million kronor each — which may sound steep, but getting the ear of an incoming president can be worth considerably more than that. Venture capitalists around San Francisco are used to staking millions in the hope of a large return later.

That return arrived in the early hours of Friday morning. David Sacks was appointed by Donald Trump as “AI and crypto tsar.” It is largely a symbolic role — but the message it sends is clear: tech is back in the political inner sanctum. The tech companies’ new enthusiasm for Donald Trump is mostly about what he will not do. Trump has indicated he will not introduce tough regulation of cryptocurrencies and that he will not block as many corporate acquisitions on competition grounds. The “crypto tsar” Sacks will, according to Trump, work on a “legal framework” for the crypto industry to create more clarity. Clear guidelines are something most people — both critics and enthusiasts — would welcome. But the real value here is the legitimisation of the sector.

The market has already spoken clearly on this. Since election day in the United States, the crypto market as a whole has risen by over 65 percent. The equivalent of market capitalisation has increased by over 15,000 billion kronor in roughly one month. Bitcoin has set new price records. After a couple of years in the penalty box following enormous crashes at companies like FTX, there is now a strong tailwind for the first time in a long while.

Cryptocurrencies have often been presented as a kind of alternative to the existing economic system — an economy without a central bank, politically close to libertarianism. Philosophically it is a reasonable match. Transactions can occur without intermediaries, and flows of capital can happen without the possibility of political interference. Reality, as so often, looks a little different. Enthusiasts tend to distinguish between bitcoin and the rest — so let us do that. Bitcoin has an underlying system with some similarities to more stable assets — it has often been called digital gold. But for a wholly new economic system, there are structural problems that also exist in conventional economies. As early as 2021 a study found that 0.01 percent of all bitcoin holders owned over 58 percent of all available bitcoin. The starting point is, to put it mildly, imbalanced.

Looking at other cryptocurrencies, one need look no further than the name of the platform where many so-called “memecoins” are produced — tokens whose purpose is pure speculation. It is called “Pump.fun.” Being on the receiving end of a pump-and-dump — even if you are aware of the risks — is not always as fun as the name implies. It resembles a casino, with bad odds. Those who stand to gain from a less regulated crypto market in the United States are therefore fairly easy to identify. One example is venture capital fund Andreessen Horowitz, whose crypto fund has 82 billion kronor of exposure in this area — the value of their holdings just increased substantially. Individual early bitcoin investors are another example. They are already in the market and have seen a near-extraordinary rise in value in a short time.

The losers will likely be those who are now looking at crypto for the first time and deciding to invest — or gamble, which is probably a better description. Who would not be tempted by a rise of over 30 percent in one month, as bitcoin has just delivered? For every buyer at the peak price, there is also a seller. The Biden administration has put significant pressure on the tech world in recent years — companies have been blocked from acquiring smaller competitors and criticism of the entire sector has at times been fierce. Big tech became a temporary pariah in American politics. They therefore placed their trust — and their money — on Trump and a new era. That investment now looks set to become one of the better ones made in Silicon Valley in many years.


He sold a dream nobody buys anymore

November 22, 2024
by Björn Jeffery
SvD Näringsliv

This analysis was first published in SvD Näringsliv, in Swedish, on November 22nd, 2024. This piece was translated from Swedish by Claude. Some phrasing may differ from a human translation.

The suit sold the dream. The excavator was supposed to do the work. But the visions and the reality never pulled in the same direction at Northvolt. What Peter Carlsson leaves behind is not what he had imagined.

It is a bright spring day in April 2018. A large yellow excavator stands at Finnslätten in Västerås. The first sod for Northvolt’s demonstration factory is a scoop of gravel. Standing next to the machine is a tall man wearing clothes more usually associated with a different kind of work: a white shirt and a dark suit. Peter Carlsson, Northvolt’s CEO, is pleased to have arrived here after eighteen months of preparation. In a year’s time, the plan is for Northvolt to begin producing its first batteries. “It’s an enormous opportunity for Sweden,” he says. It would not quite work out as he imagined — not for him, not for Northvolt, and not for Sweden.

The project actually begins much earlier, on the other side of the Atlantic. In 2013 Peter Carlsson was head of the supply chain at Tesla. He could see how the need for batteries would grow dramatically as the automotive industry electrified. The geopolitical tensions between East and West existed even then, though they would intensify considerably over the coming decade. The insight about battery demand was not unique. What was unusual was the approach Carlsson absorbed from his then-boss, Elon Musk. Tesla did not have factories — it had “gigafactories.” Today Tesla is not a car company but an AI and robotics company, if you were to ask Musk. He is a master at projecting vast visions over the more mundane reality of what is actually happening in the business day to day.

Back in Sweden, Peter Carlsson executed a manoeuvre his former boss would have been proud of. He painted the picture of a Sweden that would get its first home-grown gigafactory producing batteries. But doing so required financing in the multi-billion bracket. Carlsson’s vision engaged prospective customers like Volkswagen as well as funds and venture capitalists. Everyone was invited along for the ride. It became Europe’s most richly funded startup.

This is roughly where reality started to chafe. Building battery factories is complex. Building several simultaneously — in different countries, as Northvolt did — is harder still. The factories are hit by serious delays and complications. Meanwhile the company needs continued financing to keep operating. It becomes a juggling act between sorting out something as concrete as machinery on a factory floor, and convincing financiers that this is a journey they need to be part of — delays notwithstanding. At the same time, the global environment deteriorates. Inflation takes hold and interest rates surge. Optimism about the future takes a knock. But the money must come in and the factories must start working. The equation eventually becomes too difficult. On Thursday Northvolt announces it is filing for reorganisation in the United States — a so-called Chapter 11 process. On Friday, Peter Carlsson steps down as CEO.

It is impossible not to think back to the excavator and the pile of gravel from 2018. The suit sold the dream. The excavator was supposed to do the work. But the two never quite pulled together. Northvolt is a project that arouses strong feelings. On one side are critics who see it as a failure and a sign of a “green bubble” — an industrial project that was misconceived from the start and should never have been built. On the other side are those who see the value in the vision. Sweden and Europe need entrepreneurship and major ventures of this kind to manage the green transition and build greater independence from China. Risk is part of the price you pay for achieving something never done before.

The tension between vision and reality has characterised Northvolt from the very beginning — and in this case two things can be true simultaneously. What Peter Carlsson has demonstrated is that it is possible to mobilise industry, society and business to create something Sweden has never seen before. That is an achievement of real significance. At the same time, reality has consistently lagged behind, with years of delays and billions in additional costs as a consequence. The execution has not worked. What remains after the reorganisation will be a different kind of company, with different owners and new leadership. For Peter Carlsson the story ends here, as he steps down as CEO and becomes a senior adviser and board member after many years of hard work. For Northvolt, the next chapter remains to be written — but that will be someone else’s task.


Nvidia’s success is a risk factor for all of us

November 21, 2024
by Björn Jeffery
SvD Näringsliv

This analysis was first published in SvD Näringsliv, in Swedish, on November 21st, 2024. This piece was translated from Swedish by Claude. Some phrasing may differ from a human translation.

Nvidia doubled its profit and the market responded with an “okay.” The expectations placed on the world’s most valuable company have become a problem — for the entire stock market.

There are two types of companies on the stock market. The first requires a trained equity analyst to understand the business — someone meticulous and detail-oriented who reads every quarterly report looking for the smallest signal about where the stock is headed. The second type is companies like Nvidia. This week it was reported that Elon Musk’s AI company xAI is in the process of raising 66 billion kronor from investors, with the purpose of buying 100,000 new chips from Nvidia. You do not need to be a painstaking detective to pick up the signal in that news.

Despite this, markets were jittery ahead of Nvidia’s latest results. Nvidia — now the world’s most valuable listed company — has somewhat involuntarily become a barometer for something much larger than itself. The prevailing AI boom has benefited both tech companies and ordinary listed companies through optimism about increased revenues and future efficiencies. In recent days Meta launched a new division dedicated solely to selling AI solutions to businesses. At the foundation of all these AI ventures sit Nvidia’s products. When AI gains ground in the world, so does Nvidia right now.

When the chipmaker’s quarterly figures were presented Thursday evening Swedish time, this was more than evident. Revenue grew 94 percent and profit more than doubled. Which other company of this size can report that kind of growth? Or has ever done so? But Nvidia is not like others. When the company’s guidance for Q4 indicated growth of 70 percent, that figure had to be measured against the preceding year’s 265 percent growth rate. The expectations are enormous. The stock thus dipped slightly in after-hours trading — despite the almost extraordinary gains.

Nvidia appears to be priced for a perfect delivery in a perfect market. That is precisely what it has experienced over the past two years. But can it continue? One concern is whether AI will gain ground in the way many seem to hope. The tech giants’ investments in infrastructure have been gigantic so far, but there is anxiety that they may be costing more than they are worth. At the scale Nvidia now operates, it would take only a slight reduction in that long-term commitment — investments pushed a little further into the future — to hit Nvidia directly.

As the largest company on the market, it therefore attracts a disproportionate number of eyes. The whole market watches it to see which way the wind is blowing. The situation is unusual. Under normal circumstances most people would probably have ignored a chipmaker like Nvidia. It listed in 1999 and a safe guess is that the name was unknown to most readers until relatively recently. Now, suddenly, it is bigger than Apple, Microsoft and Google. Looking at the top 100 companies by market cap, Nvidia is as large as the bottom 25 on the list combined — a group that includes names like Goldman Sachs, Inditex and BlackRock. That is the scale we are talking about.

That size means the outside world now knows more about chip deliveries and production issues than it ever wanted to. If Nvidia’s new chip, Blackwell, were delayed or failed to perform as intended, it would be a problem for far more than just Nvidia. The company now appears in all major global index funds, in US equity funds, in technology funds. If you have money in the markets or a pension savings account, you are probably exposed to Nvidia too — likely more than you realise. The company that spent so long making graphics cards for gaming PCs has become a barometer for the stock market itself. That was never its intention. For now the tailwind for Nvidia and the AI revolution it leads is still strong. But should that weaken, it could quickly become a problem for far more people than just them.


The mission: cut 20,000 billion kronor

November 13, 2024
by Björn Jeffery
SvD Näringsliv





Musk’s mission: cut 20,000 billion kronor

Published in Svenska Dagbladet, 2024-11-13. Translated from Swedish.

It is now confirmed — super-entrepreneur Elon Musk is stepping into Washington to clean up among American government agencies. The mission: cut 20,000 billion kronor from the federal budget.

Cast your mind back twelve years and try to explain this to someone if you can. A mildly confused Shiba Inu dog becomes popular on the internet. A meme emerges — an internet joke — about the dog misspelling its own name, and it gets called “doge,” a mangled version of the English word “dog.” Doge then becomes a cryptocurrency called Dogecoin, which at the time of writing has a market value of around 600 billion kronor — based on pure speculation. That is a higher valuation than companies like Volvo or Ericsson.

One of the most successful entrepreneurs of our time, Elon Musk, takes a liking to doge and Dogecoin. He uses the letters as an acronym for a proposed government body — the “Department Of Government Efficiency.” And now — in the early hours of Wednesday morning Swedish time — incoming president Donald Trump has appointed Musk to launch exactly that. What started as a joke is now becoming serious.

At a campaign event before the election, Howard Lutnick — responsible for managing the transition to Trump’s presidency — was on stage with Musk, fired up about how much government spending they could cut: “How much do you think we can rip out of this wasteful $6.5 trillion budget from Harris and Biden?” Musk responded with a broad smile: “I think we can do at least $2 trillion!” That translates to cuts of 20,000 billion kronor per year. At the time it was a hypothetical campaign promise from a billionaire hoping Trump would win. Now it may become reality. Together with former presidential candidate Vivek Ramaswamy, they will shape DOGE — the Department of Government Efficiency — to cut costs from the American state apparatus. The irony of appointing two chiefs and launching a new “department” to find unnecessary spending appears to have escaped them. “This will send shockwaves through the system,” Musk said in a statement.

Taking an axe to organisations is something Musk knows well. After buying the social media service Twitter in 2022 he laid off around 80 percent of the staff within a year. Outside observers predicted the service’s immediate death, not believing it could be run with so few employees. Apparently it could. X — as Twitter was renamed — rolls on today with around 6,000 fewer people on the payroll than when he bought it.

The American federal government is not a company, however. As former Treasury Secretary Larry Summers pointed out in a Fox News interview, only 15 percent of its costs relate to personnel. Firing every single government employee would therefore not be enough to reach 20,000 billion kronor in savings. To get there, he added, you would almost certainly need to cut healthcare programmes Medicare and Medicaid — a long-standing Republican ambition.

As a businessman, Musk has not only been good at cutting costs. He has also secured new revenue streams for his businesses. SpaceX carries out missions on behalf of the federal space agency NASA. Tesla has earned many billions from a type of mandated electric vehicle credits that competing car companies have been forced to pay them. Its car-buying customers have benefited from federal tax breaks introduced to encourage the electrification of the automotive industry. There may be savings potential in those areas too — but a fairly safe guess is that Musk will start looking at the other end of the government machinery first.

The situation is simultaneously somewhat bizarre and extraordinarily unprecedented. That money plays a large role in American politics is hardly news — but Musk has built himself an immense position of power in a very short time. Axios co-founder Jim VandeHei has described him as the most powerful private citizen in American history. He runs several billion-dollar companies in strategically important sectors, owns X as a media platform — and now steps across the threshold from the private to the public sphere. A government mandate to cut costs.

Those who have followed Elon Musk for a long time know that he tends to exaggerate and be optimistic about timelines. At the same time, he has delivered on multiple projects that most considered impossible — and did so simultaneously. Musk is not like everyone else. Now that he has a mandate to shake up government operations, one thing is certain: it will be messy. But it will happen. What the consequences will be remains to be seen.


Trump’s victory gives Musk the full payoff

November 6, 2024
by Björn Jeffery
SvD Näringsliv





Elon Musk bet everything on Trump — and is now more powerful than ever

Published in Svenska Dagbladet, 2024-11-06. Translated from Swedish.

The world’s richest man played an extraordinarily high-stakes political game. Elon Musk bet everything on red — and won. Now comes the payoff.

They were not always close friends, the two most talked-about billionaires in America. In the summer of 2022, Donald Trump’s re-election campaign was already under way, and from a podium he described Elon Musk as a “bullshit artist.” But a lot can happen in two years. Musk has rapidly become Trump’s most powerful ally. Now the payoff is coming.

Elon Musk is an entrepreneur whose many businesses are deeply intertwined with the American state. Tesla earned over 18 billion kronor in 2023 from a state-regulated electric vehicle tax credit. SpaceX has in practice functioned as a privatised arm of NASA. Add the regulatory approvals needed by brain-implant company Neuralink, and the political reach of the platform X. The picture is complex, but the common thread is that all are profit-driven companies that have made Musk enormously wealthy while operating in the grey zone between the public and private sectors — sometimes through subsidies, sometimes through regulation, sometimes through its absence.

Having a political leader who is well-disposed toward you and your businesses is therefore extremely valuable for Musk. But he has clearly managed to succeed without Trump’s help until now. To understand Musk’s newly found and very vocal political engagement, we need to look forward instead. What is on the agenda for his business empire?

Start with Tesla, which accounts for the single largest part of Musk’s wealth. In the late 2000s Tesla were pioneers in the electric vehicle category — a small niche at the time. After questions about whether that kind of car production could ever be economically viable, Musk launched several new models that were well received by the market. The small player became dominant and effectively forced the rest of the car industry onto the same track. Today electric vehicles are no exotic category — everyone makes them. Tesla remains a large and important player, but its dominance has faded. More importantly, the niche is no longer unique. To justify a higher stock market valuation than other car manufacturers, the company must talk about something else. Why else would Tesla carry a P/E ratio of 63 while General Motors trades at around 5? Tesla’s answer is self-driving cars and AI. Musk himself has said the company should be seen as an AI and robotics company. But after selling a “self-driving” add-on to Tesla cars for many years, full autopilot has yet to be released — partly because it is not ready, and partly because Tesla lacks regulatory approval. Self-driving cars do exist on American roads, but only from a handful of companies in a couple of specific areas. Tesla is entirely dependent on how regulations are shaped. Having the president’s ear in that situation is very convenient.

Next is SpaceX. Even with breakthroughs like catching and potentially reusing rocket boosters, enormous resources are required to keep the operation running. Exploring Mars — one of Musk’s stated goals — has no commercial basis at present. Musk wants to run the programme, but the American state needs to foot the bill.

Finally, X. The social network has lost enormous numbers of advertisers since Musk took over, but its power position remains strong. During the election campaign it was mobilised to present an alternative worldview to what was available in mainstream media. Accurate? Sometimes. But its role as a hub for a Republican media machine was cemented. Interest in X will increase with Trump as president.

It is possible that the former Democrat Elon Musk has simply grown tired of the establishment. He has expressed a desire to cut unnecessary bureaucracy through a special assignment for Trump — DOGE, the Department of Government Efficiency. The idea that the state is inefficient is hardly a unique insight; it is a well-worn argument from the political right. Being at the centre of such a process would be a new kind of feather in Musk’s cap. Whatever his actual political views, Musk had many billions of reasons to support a Republican election victory. He played a high-stakes game and managed to enrage the Democrats enormously. A defeat would have been devastating for him and for the companies he is involved in. The billionaire won again. And his power has never been greater.


The market has already picked a winner

October 29, 2024
by Björn Jeffery
SvD Näringsliv





Prediction markets ahead of the US election can influence more than money

Published in Svenska Dagbladet, 2024-10-29. Translated from Swedish.

Want to bet on who will win the US presidential election? With the right prediction you can now make a lot of money. But there are also reasons beyond profit that make speculators want to project a clear winner well ahead of the result.

“People overestimate their knowledge and underestimate the probability that they are wrong.” Nassim Nicholas Taleb, the economist and author whose glass is usually half empty, reviews humanity’s view of itself in his book Fooled by Randomness. Probabilities and truths are tricky. Sometimes they resemble each other, but they are not identical. Now — in the intensifying run-up to the American presidential election — that reminder may be timely. While Americans are placing bets on who will become the next president, the process risks sowing the seeds of distrust about how the election actually played out.

So-called prediction markets have existed for a long time — allowing individuals to speculate on specific questions like whether a certain technology will win a Nobel Prize or whether Taylor Swift will be the most-streamed artist on Spotify this year. It has been a hobby for a small minority trying to foresee the near future. But interest has rarely been higher than now. The reason is a newly legalised and rapidly growing market for wagering on the presidential election result specifically.

In early October the American service Kalshi won its appeal against the CFTC — the Commodity Futures Trading Commission, which regulates these markets. The CFTC had argued that this kind of prediction-making could negatively influence the election, but failed to prove that case sufficiently in court. As a result, Kalshi became the first service permitted to open public, money-backed predictions on who will be the next US president. The brokerage app Robinhood has since also allowed users to bet on the election outcome.

“Prediction” is a generous term in this context. Formally that is what users are supposed to be doing — but since there is a financial interest in the outcome, it is perhaps easier to call it what it actually is: a bet. Even a football pools coupon is a form of prediction, at some level. The difference from ordinary sports betting odds is that the market is entirely open. Kalshi sets no odds of its own; the system functions more like a stock exchange driven by supply and demand. The more people who have bet on a given presidential winner, the lower the payout — because the market has determined that outcome to be more likely. But probability, as noted, is not identical to truth.

The gap between prediction markets and opinion polls is in fact very large. At the time of writing, Donald Trump leads with around 62 percent on Kalshi’s market, while the latest polls show a near-dead heat. At least one of them is very wrong. Which one? And more interestingly, why? Outside the United States, additional prediction markets allow wagering on the election. Polymarket, a crypto-based service, can sidestep American regulations by allowing everyone except Americans to speculate on the result. Foreign users appear to have drawn similar conclusions — Trump leads with around 67 percent on Polymarket.

Some speculators appear extraordinarily confident. A user going by “Fredi9999” recently placed around 150 million kronor on Trump becoming the next president. The underlying crypto technology makes it difficult to know who — or how many people — are behind the position. One can only speculate about the motive. Perhaps it is not primarily about trying to profit from a correct guess, but about trying to influence the outcome. If Trump appears to be the winner in voters’ eyes, his chances of actually winning increase. Rajiv Sethi, economics professor at Barnard College, told the Wall Street Journal: “If I were trying to manipulate a market, this is exactly how I would do it.”

The divergence between prediction markets and polls could also become a card to play in any post-election dispute. Given the conflict that followed the 2020 election between Biden and Trump — which culminated in the storming of the Capitol on 6 January — there is already fertile ground among some for the belief that the election will not go fairly. In that context, being able to point to how different the result was from what the market predicted may be all that is needed to establish scepticism and challenge the outcome.

A single bet of 150 million kronor sounds enormous in a Swedish context. But in total around 20 billion kronor is at stake on Polymarket’s exchange alone. The question is how useful markets like Kalshi and Polymarket actually are at predicting the outcome of the American presidential election. The idea of listening to large groups to forecast the future was popularised in 2004 when journalist James Surowiecki published the much-discussed book The Wisdom of Crowds. It gives examples of how well-balanced groups can reach better and faster decisions than individual experts. But not all groups display wisdom. A stock market bubble is the opposite — everyone follows each other’s behaviour, fairly uncritically, and the majority ends up losing.

Looking at how Kalshi actually works, it is quickly clear that it is not designed to aggregate balanced voices that could outperform an expert. It looks like a betting site. Choose a question — which party wins the House majority? — and based on your answer you immediately see how much money you will win if you are right. By using terms like forecasting and prediction, sites like Kalshi and Polymarket have been attributed a seriousness they may not deserve. It is a slippery slope between a political forecast with a financial payoff and an old-fashioned bet. It is wagering dressed in the trappings of political science — and wagering is, as we know, no exact science.

Taleb makes a similar observation in Fooled by Randomness: “No matter how sophisticated our choices, how good we are at dominating the odds, randomness will have the last word.” Neither polls nor prediction markets can cleanly handle the randomness and unknown factors at play in something as vast as a political election. Is it harmless to let them run? That was the American legal system’s judgement, at least. But perhaps it underestimated the reasons people bet on these questions. You don’t necessarily bet to win the wager in the moment — you bet to influence others. And then, with randomness on your side, to win in the long run.