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What does it mean for American innovation to be backed by oil wealth? (vicki.substack.com)
199 points by dsr12 9 months ago | hide | past | favorite | 123 comments

One thing to point out: Oil is still _huge_ when it comes to investment and sheer amount of financing available. Anything involving large-scale finance will have oil money involved in it in some way.

Frankly, even at the height of the tech boom, the tech industry has never had significant capital available compared to the oil industry. I've worked in both... Folks in tech think 100 million in capital is a lot. In oil, that doesn't even qualify as a project that needs sign-off by upper management. (The last project I managed had a ~$200 million per year budget. I was a low-level peon 5 years out of grad school in charge of it because it wasn't considered a large enough project budget-wise to give to someone experienced. There are a few caveats around this -- the discretionary budget was on the order of 10 million and the rest was fixed through long-term contracts, but still...)

Significant investments in the energy industry are measured in tens of billions per project. Profits from each of those projects are in the trillions, but spread out over 20-100 years.

As a result, a big chunk of the finance industry is directly or indirectly tied to oil. There aren't many funds that don't have money somehow invested in or sourced from the energy industry.

The problem here isn't oil but simply the power of the global elite.

I went into this article thinking "So what? The world runs on oil, and oil has a lot of money. Welcome to learning about the economy."

But yeah, it is concerning that private interests that don't share our same niceties about democracy and human rights have power over us.

ExxonMobil has a lot of revenue, but mainly because it has a huge number of people producing a huge amount of product for a huge number of people. Despite nearly 300 billion in revenue, ExxonMobil's profits aren't as big as Google's or Microsoft's or even Facebook's. (At under 7%, Exxon's profit margin is half of Starbucks, and one-sixth that of Facebook.)

In many respects, the American oil industry is the antithesis of "the global elite." It creates a product everyone uses, and provides well-paying jobs for people without college degrees. XOM's CEO, Darren Woods, isn't a billionaire Stanford grad. He's a Kansan that got his engineering degree at Texas A&M and worked his way up the ladder at the company. Exxon can't outsource production overseas, or transfer IP to Ireland, etc.

I hadn't considered this perspective before, thank you.

You willingly put up with the ‘global elite’ though.

Yeah, but I'm putting off "taking down the global elite and reworking our entire system" for next Tuesday because I've got some other things on my to-do list.

and we might fear for our lives and the lives of our children.

"willingly" is a bit of a stretch considering the difficulty of doing so, and gives off a different connontation.

Of course it’s difficult, but we all have the means to build social movements, companies or sue if we feel that there’s something terrible going on. But we all like our flights, our cars, our cheaper and cheaper phones, stable policy in the West and perceived security. It’s hard but you can go against it. Just always saying ‘it’s the elite’ and then sitting it out seems really easy to me. Everyone has a conception of injustice, it just depends on how badly you crave that justice.

Indeed. This expanded version of your previous comment is accurate. As long as people are still comfortable enough, there will be no change. Unfortunately, it takes great discomfort to motivate people to actually fight for change. (I'm like everyone, so I'm not fighting... yet?)

I do believe the internet and global communication does speed up the process, at least when people get near the tipping point. Knowing that you are not alone in your frustration does help steel people and enable connection and shared-effort. So yes, it's fucked right now, but I think it will improve measurably in the next 20 years. (It does indeed help that many of the most powerful people will die of old age within those 20 years).

Thank you. Apparently everyone on HN loves a contrarian until they see one in the wild.

You should get to work, there’s a lot of stuff to do. Of course we need to protect our precious peace and prosperity, but we also need public opinion to reflect on certain issues. And we need policy makers to implement solutions on said certain issues. We’ll get there but it’ll be really damn tiring and exhausting.

we all have the means to build social movements, companies or sue if we feel that there’s something terrible going on

That's nonsensical. We all have the potential to do such things at some point in our lives, but that is not at all the same as having the means.

Just always saying ‘it’s the elite’ and then sitting it out seems really easy to me.

So there are some people trying to build an anti-elite social movement of the sort you just said anyone had the means to build, yet you're saying they don't crave justice badly enough. I'm getting the impression that you're just saying you don't want to get onboard with anything unless it's already at the threshold of success.

Look I’m trying to build alternatives and help struggling social movements. I just don’t agree that the analysis of “it’s the elite, dumbass” is sufficiently clear eyed.

There is a tremendous amount of intertia that needs to be overcome when starting a competing company or a movement to replace any of those.

A lot of the competing companies have a large vertical integration in their field, and can refuse your supply for any of it

Of course, that’s the whole point. But you can build inertia. Take a look at Europe where there’s tremendous protesting going on regarding Climate Change, and we slowly see some change in for one, public opinion and two in policy making. It’s slow and painful and frustrating but you gotta work and not always blame the ‘global elite’. I know it’s hard to build inertia, I failed in court, I failed at building companies. But we all have to try and not put the blame on someone without doing anything.

You can try and build inertia whilst blaming the global elite too. They also did not hint about their activity in any way.

It can also in many ways to be literally impossible to compete for example due to some direct-or-not regulation.

I think it's not fair to roll the fault on the commenter either, even if it's easier to not think about it that way

Unfortunately, Europe is moving quite westward in terms of politics and ignorance. (I'll just be direct and use the word, karma be damned).

So what has happened in the US is happening elsewhere, on a delay. Fortunately, what is not on a delay is the age of the people doing the self-serving, future-burning deeds. Those people will all die within 15 years of each other. Hopefully those who are left will have a bit more sanity.

How much more apocalyptic can you get? Do you think painting an apocalyptic picture and then blaming some parts of the population on the bad parts of your picture will do anything good?

You build momentum to overcome inertia. Inertia is the tendency of things that are at rest to stay put.

I don't understand anti-elitism, given the alternative.

Please state what you think the alternative is, since you used the singular. To me, there is a range of alternatives, so it is hard to understand your objection because I don't understand what you are imagining.

One alternative is a French Revolution, part 2. Another alternative is a system of wealth, income, and inheritance taxes that helps prevent concentration of power in a few families. Another is more aggressive antitrust enforcement to reduce political power of any one company. Another is strengthening of unions. There are many others, and there are many combinations of them.

Yeah. People are scared.

There are alternatives to another French Revolution, which no one wants. (Well, no one other than the tyrants waiting in the wings who want to be the global elite.)

Why are people too scared to challenge the global élites? Because they don't acknowledge those alternatives. In my experience, it boils down to being fearful of being ruled by the people who want to be the global élites. Which would be even worse. And, hey, if I'm being honest, they're probably right about that. Thing is, that fear is blinding them to the other completely reasonable alternatives that people are putting forth.

We just need to make more noise about these other, really very low risk options. Options like taxes. Options like strengthening unions. Even out of the box options like thinking about coop type business structures. Etc.

There's more than one way to skin a cat, but we're in the happy position of not even having to skin the cat to get what we want. We just have to get people past that fear of, "Woah! look at those looneys who want to replace the élites! Better the Devil we know!".

Incrementalist low risk solutions have their place, but they are not the whole story. If you found a fire in the kitchen of your home you wouldn't just make a mental note to purchase a new fire extinguisher.

Incrementalism works great in periods of relative stability. In other contexts it can be dangerous and inhibit necessary action.

Wow, I agree and disagree. How to know when the kitchen is on fire? Most revolutions of the past 200 years have been a disaster. We live in a constitutional democracy that supports incremental improvement. The alternative is almost certainly, probabilistically, worse. Entropy and all that.

Well if you look into the kitchen and see smoke and flames then you have a fire in your kitchen...I cannot understand why you think this a difficult decision to make.

Where do you get the idea that most revolutions have been a a disaster? Your concept that only incremental improvement is valid seems counterfactual and naive. You are just dismissing anything that you do not understand out of hand without even considering it.

I think the point people are trying to make is that while revolutions can be good, most of the time they have been bad. Very bad. From the Reign of Terror, to the November Revolution, to Pinochet, to the Khmer Rouge, to Rwandans in central Africa, life has not been good for commoners during and after revolutions. (And I'm being kind by not listing the really bad ones.)

Add to all this the fact that they fail with alarming regularity, and America's collective lack of enthusiasm for that option is perfectly understandable. I mean, historically speaking, for the average person, revolutions either failed, and you were worse off. Or revolutions succeeded, and you were worse off.

It's so bad that, again, people are even a bit skeptical even of low risk options like tax reform and stronger unions. Right now, people seem to view anything that even appears to move away from the status quo as dangerous because of the admittedly horrid track record of revolutions, combined with the off the wall proclamations and actions of certain groups opposed to the élites. (Believe it or not, you don't allay peoples' fears of a reign of terror by shooting up churches and Walmarts for instance.)

The alternative is rule by non-elites. America has been an aristocratic democracy; when that aristocratic ruling culture is replaced by an anti-elitist culture, it might look worse than you think. I'd argue that the "elite" culture is less self-serving and more noble than the alternative.

You are setting up a false dichotomy: you claim the only two choices are rule by elites vs rule by non-elites. What I spelled out was a half way position -- bolstering the strength of the non-elites and weakening the grip elites have on power.

Of course it is difficult to manage precisely because most people with $1B will kick and scream if their wealth is reduced to $900M. But in theory that is what voting can help accomplish, and social movements to help people realize what they are giving up by voting into office people who despise unions and who complain that their 15% tax burden while collecting millions is too much.

I agree it isn't a dichotomy. I just don't understand anti-elitism. Note the difference between the elite and rich. Trump is the latter and won due to anti-elitism.

Define "willingly".

I agree with your main point, but capital investments in tech are getting significantly larger, and most people in "big" tech don't think $100M is all that much. Google's spent billions on self-driving cars. Many acquisitions are now in the $3-10B range (eg. Doubleclick @ $3B, GitHub @ $7.5B, Motorola @ $12.5B). A new semiconductor fab is around $8-10B.

It's still possible to start a new company with just a laptop and free time in fringe markets like cryptocurrency, VR/AR, or many SaaS markets, but many of the exciting areas in tech today - AI, robotics, self-driving cars, gaming - require very large capital investments.

Not only that, but quarter-to-quarter investors and activist hedge funds often bully companies (tech or otherwise) to issue dividends and/or conduct buybacks instead of investing for the long-run. Google and Amazon are rare cash-cows able to support earnings growth and continue to invest for the long term, and even they get pressure to spend differently.

The average cost for an offshore oil drilling rig is now about $650MM. The ones that can go really deep are even more expensive.

I didn't know they were that cheap. A new refinery starts at about $5B.

Why the moaning about nuclear power plant cost if refineries sit at a similar cost?

Refineries return that money faster.

Human lifespan is short. So things that affect one human lifespan quickly are scarier. Radiation scares people because it can kill them fast. Effects from oil and gas tend to take much longer.

What kind of things go into a refinery that form that price?

Engineering costs, inspection costs, a lot of stainless steel tanks and tubing, a lot of stainless steel valves/clamps/misc attachments, a lot of stainless steel welding that needs to be certified, redundant failsafes, various safety devices/monitoring systems, etc. I'm sure some bribes are buried/hidden in these costs as well, such as if you allow this oil refinery we'll use your construction company and you can over charge us so any payoff is legal.


In the financial world MM is used to mean million.

M is 1000 in roman numerals. MM is one million.

I think MM is 2000 in Roman numerals, no?

You are technically correct, financial dudes like roman numerals but somewhere in history someone (probably someone reeeeeally powerful) started using MM for million and thus started the trend.

Aside, swiss watches tend to have a watch maker's four on them instead of the more correct IV... and apparently there are a bunch of other variations out there[1]. Though MM is still quite stupid.

1. https://en.wikipedia.org/wiki/Roman_numerals#Variant_forms

I believe the thought behind MM is "a thousand thousand", using the roman numeral as if it were a positional digit.

Not sure how someone got the idea to do that...

Algebraically it makes sense I guess (M.M)

This is misleading though because energy projects produce returns over a much longer timescale (i.e. decades) than the typical tech project (a year or two?). In addition, the typical big tech firm is running a lot more projects than the typical large oil company (which maybe operates a count of oil fields in the hundreds). So it's very much expected that the capital investment per project will be higher in oil.

But the fact of the matter is that Google, Amazon, Apple, and Microsoft have double the market capitalization of the largest private oil companies. So yes, they're objectively better capitalized taken as a whole -- even if the typical tech project has less investment and consequently working on tech projects as a low- or mid- level employee feels smaller.

Damn and here I am spending days preparing to justify my requests for a measly $2M to $5M for project spends.

I should go be an oil boy.

Don't wish for it too much... Getting approval for any decision is like pulling teeth. As a project manager in the oil industry you still aren't the final decision maker in most cases, and even when you are, there are decision review boards/etc.

There's a _lot_ of "process" to everything in oil. It's there for a good reason, but it can get out of hand.

I once spent three months getting approval to spend $20 to order some data from the US government. It was exactly the same process that you'd go through for a $10 million purchase. (Didn't help that we were re-buying our own data from 20 years ago because we'd lost it, but that's a different story.) I billed another wing of the company at $465/hr during the entire process... I billed around $50k to get approval to order a $20 DVD with a bunch of old scanned documents on it. Things can get very strange in the oil patch sometimes...

I was at an iron works a while back where I learned that an industrial grade blast furnace was, ballpark, $100 billion. This was built 100 years ago. That day I decided I just didn’t and wouldn’t ever understand capital markets.

Off by a couple orders of magnitude. Capital cost of a blast furnace, rule of thumb, is ~$200 per ton of pig iron per year: https://www.quora.com/How-much-would-it-cost-to-set-up-a-bla...

The largest blast furnace in the world is about 5 million tons of iron per year (and was upgraded to that capacity in 2013): http://www.donga.com/en/List/article/all/20130610/406398/1/P...

...so that means the biggest blast furnace in the world has a capital cost of approximately $1 billion.

More than likely the cost (in today's dollars) of that blast furnace you're referring to is $100 million, not $100 billion.

Side note: direct reduction furnaces furnaces are usually cheaper from a capital cost perspective and can use natural gas or even hydrogen for producing steel... We may use more of this tech in the future as we move away from coal for sustainability reasons.... The US now produces about 10% of its raw iron/steel using DRI and 90% by blast furnaces and the rate of DRI growth is fantastic (going from 2 million tons in 2017 to 3.4 million in 2018, pdf page 10): https://www.worldsteel.org/en/dam/jcr:96d7a585-e6b2-4d63-b94... A few years ago, virtually no steel was made via DRI in the US. The fracking boom has changed a lot.

> I learned that an industrial grade blast furnace was, ballpark, $100 billion.

That seems like a very large number for the construction of any industrial installation. Just poking around the net the numbers I found were $220/ton of pig iron produced, and another source that claimed a $2.5b cost in 1980 and $5b today. If the $220/ton figure is accurate a $100b blast furnace would be producing 455m tons of pig iron a year. According to wikipedia a modern furnace can produce about 5-6m tons per year.

The GDP of the US in 1929 was $105B nominal and $1,109B real. So this blast furnace would have been between 10% and 100% of total GDP. That doesn't seem right.

that doesn't make any sense. the capital to build, and operating expenses, aren't anywhere near $100B (direct costs). $100M makes more sense.

Why don't you learn how the world works so you can confidently write to the intern “pls fix” because that was easy to call bs on

Comes close to an important point, and then misses it completely. The problem is not that Saudi money would get them influence at new U.S. tech companies. The problem is that Saudi money is getting pushed into "tech" companies that have unsustainable business models, and this is sucking all the oxygen (e.g. available developers) from other projects that could accomplish more.

Imagine two startup ideas. One, could be profitable, and eventually turn into a $100million company that does something useful. The other, will never be profitable, but makes promises of being worth $40billion. Which one gets the (inexperienced VC) money? The second. Which one would be a long-term bonus for the U.S. economy? The first.

That is the problem; too much money from Softbank (much of that from S.A.) pushes all the developer and other resources into goofy ideas that will end up going bust, instead of more rational ideas that could be long-term useful.

Well that just means that a rational investor would make a killing amid this chaos, wouldn't he?

So, we have to assume that for the last decade, not a single VC in the industry have been rational enough to pick up easy money everybody else is overlooking?

Well, if the available resources are being bid up by billions going into goofy ideas, then the cost to the "rational" investor has gone up. The resources for the $40billion startup didn't get created out of thin air by the Softbank money, they got taken from a finite pool, and thus are unavailable for other startups. Softbank pushed money into the startup space, but didn't add any real resources, so it just distorted the ability of the market to allocate them appropriately.

A rationale investor is not moving enough money to make a difference

The sustainable project isnt providing liquidity for 20 years if it even gets enough capital to execute at all, whereas the Softbank FOMO project will in 5 years after they are involved.

You are betting on founders and their network, not their idea.

There has been too much easy money flying around the VC world for the last 30 years that people have literally forgotten how to operate any other way. People have lived entire careers in this environment, so the rational move for them is the current status quo.

But the paradigm is shifting. Where will we end up? My money is on early 20th century style oligarchic capitalism, but that’s not a very appealing proposition for a lot of people.

> My money is on early 20th century style oligarchic capitalism

I've been enjoying the historical context in this book. I'm not surprised to be liking the book, but i'm pleased to be getting a better understanding of what the early 20th century space was like.


I wholeheartedly disagree with any decentralized approach to national economics. Not because it wouldn’t work, but because it would. Money is power only because power likes it that way. But power is power, and a decentralized monetary supply does not serve the powerful. They will attack it with every weapon they have (which is basically all of them) to ensure it doesn’t happen until they control it.

In the early 20th century, the rich owned gold mines. Once we moved off the gold standard, they simply took that wealth and put it into the fiat system by owning companies. Even if we do end up on a nominally crypto-backed monetary system, I would expect any governance (even decentralized) to favor the incumbent wealthy as much if not more than our existing system.

I look at it in a systems way. If it /doesn't/ serve those with any actual wealth to back the currency to use it then the question becomes why would anybody use it? I don't see how it could work at all even without some vague nebulous bogeyman stopping it. It brings to mind the conspiratorial "big Pharma is withholding the cure" thinking while ignoring that selling the cure would make them way more, that the long term treatment is competitive, and a cure effectively monopolizes the whole segment of drugs and treatments. The real reason cures are rare is because they are /hard/.

With large buy in from lesser concentrations of wealth it could be a "peso" at best - something used by lesser wealths to trade to their localized advantage but lacking the power of big movers.

> Even if we do end up on a nominally crypto-backed monetary system, I would expect any governance (even decentralized) to favor the incumbent wealthy as much if not more than our existing system

Because they can own all the GPUs/ASICs/whatever you'll use as proof of work / proof of stake for your cryptocurrency ?

> I wholeheartedly disagree with any decentralized approach to national economics.

do you then agree with only a centralized national economics?

what does that even look like?

I don't see how that follows. Usually what happens is that those sustainable companies are copied by another company. This is perfectly fine but then that second company uses it's access to VC money to eliminate the competition. The sustainable company will have to close shop and years later the unsustainable company will close as well. Meanwhile the VCs don't care because some unicorn investment got them 20x returns.

Why are you so sure that only one of these things is a problem?

There's a lot of Saudi fear mongering in tech media and it is not undeserved in some ways (MBS is a brutal authoritarian), but I'm not sure what interests people think the Saudis have in tech firms other than getting a return on their investment.

As bad as MBS is, it's not like he has some secret plan to spread Saudi values throughout the world. In fact, he's actually a liberalizing force in SA (economically and socially at least, although not politically). And Saudi Arabia, unlike e.g. China, isn't attempting to remake the world order to revolve around itself (and its authoritarian rulers). So while I understand the sentiment "I don't want to accept money from Saudi Arabia for my start-up because of their human rights violations", I have a hard time understanding why one would fear Saudi Arabian board members would abuse their seats for geopolitical influence purely due to the fact that Saudi Arabia has little to gain in the geopolitics department from tech companies.

Good point, could be both. But the distortion effect is the one that bothers me more, because it doesn't just impact the companies that take Softbank money, but more generally distorts the whole startup space. But sure, could be both.

Well, there's a vast oversupply of talent out there, so I don't think that investment in unsustainable business models will prevent investment in better areas. VCs will pick the business models that are most likely to succeed. If the most likely ones to succeed aren't doing well, it's because there aren't any better ones (or at least none that have been discovered or made legal thus far).

is that meant to be a sarcastic comment? there's a vast undersupply of programming talent, that's why salaries go up. people are attracted for the super expensive cities like seattle and sf because there's companies importing them.

that's basically wework vs regus

> Uber. WeWork. Flexport. Slack. MapBox. DoorDash. What do all of these hip American companies have in common, other than appearing regularly in tech headlines (and, now, being leading indicators of a tech bubble)?

> They are - or were at one point - all backed by SoftBank’s Vision Fund, an enormous venture capital fund run by Softbank, a Japanese holding company.

If many of these startups might not have reached IPO without the investments by Softbank, then maybe they don't have such a good business model after all? At least, that's my first thought after thinking what Uber and WeWork have in common.

Unfortunately most of the companies in this generation of "unicorns" are being pumped and dumped by VCs. This idea that you can buy your way to a monopoly, get large market share like Amazon and Google,then figure out how to profit from your position in the market will backfire spectacularly and public investors will have to pay for it.

“This idea that you can buy your way to a monopoly, get large market share like Amazon and Google,then figure out how to profit from your position in the market”

This idea doesn’t seem to go away. In the 90s it was the same. Whoever would sell dog food on the internet first would own the market and keep it forever. Reality turned out differently.

The scale is what changes. In the 90s it was a single website for a single product line. That model got disrupted by the "platforms" which dominate. It's unclear what is going to disrupt platforms.

Probably smaller, leaner players will disrupt things like Uber. They have way too much money to spend to be efficient.

have to is a strong statement. Public investors need not buy a single share of a mis-valued stock.

That's the problem: Approximately half of the US stock market is made up of passive funds like index trackers which make up a large percentage of American 401k and retirement plan portfolios.

As soon as a company IPOs they enter into the portfolio of millions of passive investors, who unwittingly become bagholders for companies like Uber and WeWork that have no sound fundamentals or viable business model.

The market has become very distorted due to this and a myriad of other reasons. Everyone is gunning to find the next winning unicorn lotto ticket without any regard for fundamentals in a sort of collective pump-and-dump scheme. Thankfully there was a glimmer of rationale with Uber and Lyft's failed IPOs, and I expect WeWork's will be even more disappointing.

Major market index funds do not buy into recently IPO'd stocks because such stocks are not in major market indexes. While pension funds may buy in a little, most will not because recently IPO'd stocks are considered highly volatile and thus outside the remit of their investment objectives. Everyone is not gunning to find the next "unicorn lotto ticket". Lots are, but they are a minority of the money in the equity markets. Further, the equity markets are much smaller than the debt markets (i.e. bonds) these days. Do not mistake press attention (they go after the exciting stories) for actual market activity.

Last but not least, some indexes (e.g. S&P 500) have recently changed requirements so that most tech IPOs (which usually have two classes of stocks, one "insider" class that has a lot of votes, and one "general" class that has few (if any) votes) would be ineligible (existing members of the index were grandfathered in).

Even before the IPO you have VC firms raising billion dollar funds from pension funds and endowments to pump up their donkeys. A down round doesn't really matter when you're taking a 2.5% management fee on billions of dollars.

Index funds don't move capital allocations. Active investors do.

I'm genuinely impressed with the public's judgment on this; Uber's stock is generally falling, and Slack is settling into the same trajectory.

Saudi wealth is seeking to diversify, so its using its patrimony to seek alternative income streams to oil. So good for Saudis. This fund is seeking opportunity in many places, among them SV. That’s also a good thing, for the most part. In short, I don’t see it being so negative that it comes from oil. It’s funneling research away from oil

For me it’s not the oil that’s the problem. It’s the wahabi sect of Saudi, the weekly public execution of bloggers and dissenters. The international kidnapping and torture of journalists, the constant bombing of schools and children in Yemen. It’s THAT money. I worked there on a foreign military sale contract and I saw a lot that disgusted me. The male Filipino workers told me they grow facial hair to make themselves less attractive to be raped by their male employers and employer friends. I’d walk through chop chop square on my way to get to the gold market downtown as they were power washing the blood off some feminist activist off the ground of the square (officially named Deera Square). I worked with sensitive elements of their military and am aware of indiscriminate bombing. Hell they shot down one of their own fighters when his wingman accidentally fingered the trigger while inspecting the lead plane for fuel leaks he thought he was having so you can imagine the incompetence around dropping bombs on targets, not to mention viewing Yemenis as subhumans.

Imagine if the westboro Baptists accidentally struck oil and became billionaires and tried to export that version of Christianity and we see why maybe it’s not good that they are allowed to participate in the international community and invest their money that happens to come from oil into these startups. It’s like if Epstein gave money. It doesn’t matter where it came from but from whom.

This is exactly why Saudi investment should be rejected by the first world. No different than the outrage over Epstein donations and MIT.

It’s different; it’s much worse. Epstein was retail evil. Saudi Arabia is wholesale evil. Unfortunately, human nature makes it much easier to grasp retail-level evil, so we’re much more horrified by it.

> Imagine if the westboro Baptists accidentally struck oil and became billionaires and tried to export that version of Christianity

Lemme tell a story bout a man named Fred...

Your story is quite short.

... it's a riff on the Beverly Hillbilly's Lyrics + Fred Phelps who is the leader of the church in question.

I think the perceived negative is more that it comes from the Saudis, and less about the oil per se.

I don't really disagree. America (e.g.) does some fairly disgusting things but at least we (most of us) recognize women as first-class human beings, don't throw people in dungeons and/or whip them in the public square for being critical of the government, and so on. These things are gimmes.

Assuming liberal democracy doesn't totally collapse in the near future, I wonder if a rising tide really does lift all boats—if accepting Saudi investment is the fastest and least bloody way to help those oppressed under their dogshit ass-backwards regime. Right now it almost seems like the reverse is happening.

You don’t see it as a negative that SV has received billions in investment money from a Saudi prince who had a journalist brutally dismembered in the Saudi embassy in Istanbul?

It becomes positive when the wealth is transferred and lost. If wealth is increases this isn't a good outcome.

Investments aren't simple wealth transfers.

The questions is about taking money from “Oil wealth”. It’s not about who owns the money per se. if that were the case, people would be refusing lots of money. Lots of institutions would have refused Epstein after the first indictment... but they didn’t.

> I don’t see it being so negative that it comes from oil.

I don't believe that's the actual problem. If it was Norway investing its oil money, this wouldn't be an issue. It's oil money from a state that is very much not aligned with the values SV companies claim.

I guess you and I have different ideas about SV company values! I think that SV has very lax attitudes on censorship and data collection, and frankly I think that some of these companies practices would be much better accepted by the ruling parties Saudi Arabia than in most of America

Possibly. But the values they claim are very different from the Saudi values. I'm not here to judge whether they are virtuous or not, just pointing out that the article wasn't about "oil money" as "money made from oil" but specifically about oil money coming from countries that are openly opposed to the values SV claims to stand for. I'm sure that the argument would be the same if the money SA invests didn't stem from their oil exports but from Hajj tourism.

Are those SV companies aligned with the values they claim?

Not only is Saudi oil money flowing into SV; it's also been flowing into US higher education institutes and media companies. Some ways they buy influence with that oil money: https://www.opindia.com/2016/03/money-talks-and-walks-even-i...

A lot of FUD, but no evidence that Saudi investors are using their influence to make tech companies do bad things.

If you follow the money, you'll likely find a questionable source. Americans benefit from US military raining drone strikes in other countries. By being an American citizen, are you tacitly approving drone strikes? No. By paying taxes that fund drone strikes, are you tacitly approving drone strikes? No. Taking Saudi investment is not tacit approval of their atrocities.

There's certainly a higher level of geopolitical tension there, though. I don't really know what the US could to answer (make more money?), but I don't think the tech companies themselves can do much about this, they're mostly pawns in a larger game of chess.

If the US wants to regulate these investments, then by all means. Lobby for that if you're really worried.

>By being an American citizen, are you tacitly approving drone strikes? No. By paying taxes that fund drone strikes, are you tacitly approving drone strikes? No.

To me, the answer to those questions is not as clear cut as you are portraying. My gut reaction to those questions is to answer that, yes, those attributes in a vacuum imply tacit approval.

That is not to say of course anything about guilt or moral judgement. It is relatively easy to dissuade someone from assuming that approval by speaking against drone strikes.

For an American taxpayer, absent any opposition (private or public) the tacit approval is a default assumption. Not a strong one though.

Actually, paying taxes that fund drone strikes on civilians means you have blood on your hands. I wish more people realized that...

That's a pretty unhelpfully polarizing statement for something that is a matter of opinion, or at least situational.

Suppose you are a citizen of a country (through no choice of your own) that uses public taxes to <immoral action>. Further suppose that you have no ability to influence how your taxes are spent. You have to pay taxes, but it's not at all clear that you are morally complicit for the immoral actions taken with them. You could argue "well you shouldn't pay taxes". Well, then you lose your liberty via jail or worse. Is that better than being arguably morally complicit?

And, are you putting your actions where your words are? Are you not paying your taxes, or are you accepting blood on your hands?

I am voting against politicians who are pro-war, which is sadly almost all of them.

That’s not true, you’re forced to pay your taxes by threat of violent force. It’s difficult enough to resist state-mandated injustice from outside of prison, taking your position to its logical conclusion would mean that all ethical people should be martyring themselves, which would only lead to even worse outcomes.

This article is about Saudi Arabia, not about oil per se. Link should use the proper title of the article, which is "Silicon Valley runs on Saudi - What does it mean for American innovation to be backed by oil wealth?"

I second the author's recommendation to read The Prize by Daniel Yergin. Was very illuminating.

Uber. WeWork. Flexport. Slack. MapBox. DoorDash. What do all of these hip American companies have in common, other than appearing regularly in tech headlines (and, now, being leading indicators of a tech bubble)?

The big ones bought market share by losing money?

Uber is not a "tech company". Uber is a taxi company with delusions of grandeur. WeWork is a landlord.

Uber’s lawyers would like a word with you. They aren’t a taxi company or in the business of ride sharing. Uber is a digital marketplace company.

It’s laughable how delusional they are:

>In fact, several previous rulings have found that drivers’ work is outside the usual course of Uber’s business, which is serving as a technology platform for several different types of digital marketplaces.


The apparent carelessness with which Softbank throws its money around makes sense with this revelation. It's not so different from some of the really over-the-top projects funded by oil money with respect to real estate (particularly real estate "created" in the sea).

> But, if we do some major, major rounding, and assume that the tech industry is the sum of its top companies, at $1 trillion/year, $45 billion is about 5% of the industry.

> So, what happens when 5% of any industry is controlled by parties that are not direct shareholders?

This seems like an odd comparison to force arrival at a number as high as "5%", not including the rounding. Why would you compare a single investment of $45B to annual revenue? Control would imply ownership, so I'd expect the comparison to be to the summed market cap of those companies, which is obviously higher than $1T.

Billionaires investing on "unicorns" aka buying monopolies means increasing inequality. It the whole point of their strategy.

Uber is an especially good example.

Salman knows that the future is tech, and he's doing the strategic thing by moving Saudi money into other industries and outside of the country.

“My grandfather rode a camel, my father rode a camel, I drive a Mercedes, my son drives a Land Rover, his son will drive a Land Rover, but his son will ride a camel”

TL;DR: Saudis invest in VC funds; we don't really know what specific impact that has on the funds' or recipients' behavior.

Kind of short-sighted that the US government is essentially giving the keys to AI innovation and the military (check POTUS’ latest tweets) to Saudi Arabia’s blood hungry elite. More reasons to use what remains of our democracy to change course.

Oil wealth comes with a lot of baggage.

Innovation in America is essentially dead. First VC's don't know a good product when they see one, and they won't do due diligence on new products. So, they look to the tech companies that control the markets. Second, the services the tech giants are providing result in "soft GDP" dollars. We need VC's to be more community aware, and stop chasing cotton candy. WeWork is a rent seeker that has inserted another layer into the rental arbitrage process. That does not help the U.S. economy.

What do you mean by “they look to the tech companies that control the markets”?

VC's want to keep their risks low, they are more like investment bankers than true VC's. If someone approaches them with a seemingly good idea, they will want to unload it after a development period and realize a 10:1 return. So, they will first talk with a couple of the big companies and try to "pre-sell" the concept without giving away too much of tge secret sauce. In essence, VC's are captive by the tech giants, just as are most professors, and university curriculums.

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