A new breed of technology investors is rising in the modern economy. Rather than aiming for short or medium term profits, these techno utopians are chasing after radical technological improvements with unpredictable consequences. They’re broadly optimistic that progress will be positive, new capabilities will let us overcome the problems that are sure to arise, and that profits will come eventually. This big sky approach to investment is very different from my own fundamentals focused investing style. But I have to admit, I admire their risk-taking swagger.
We have more than a few of these types in the US. Elon Musk, Jeff Bezos, and Mark Zuckerberg come quickly to mind. But there are some huge players overseas who most Americans have never even heard of. For example, Japanese billionaire Masayoshi Son has built his telecommunications and software company, SoftBank, into a massive conglomerate. Now he’s spinning the profits from SoftBank into his new Vision Fund for investing in right-risk, high-potential start-ups.
The Vision Fund is venture capital on steroids. Only a few VC firms have more than $5 billion in assets, but Vision Fund has over $100 billion. Vision Fund also pressures investment targets to accept several times more capital than they want, or face the prospect that Son will channel its billions to competitors. This strategy is succeeding in bringing together an impressive portfolio of companies.
From virtual reality, and advanced microchips, to artificial intelligence and bioinformatics, Vision Fund is collecting a broad array of “frontier technologies” into one collaborative family of companies. Son clearly hopes to turbocharge the development of these technologies by combining massive amounts of capital with compelled-cooperation among portfolio companies.
I’m excited to see how these advanced technologies will change the world, and I’m also a little worried. They say that necessity is the mother of invention. Could too much capital, too early, actually reduce the creativity and performance of these startups? This grandiose investment style is probably also inflating tech valuations and helping drive a global technology bubble, which could bring us all an unpleasant surprise later.
I also worry that these huge funds are amassing too much political and economic influence. For example, Vision Fund used its $10 billion stake in Uber to pressure them to leave the India market. This move reduces competition among Son’s other portfolio investments in ride hailing companies like Grab (Singapore) and Ola (India). It’s a move toward international monopoly power — great for shareholders, and less wonderful for consumers.
That said, I’m definitely excited to watch how these moonshot projects play out, knowing that it’s not my money at risk. Most of those bets will fail, and the winners will need to be massive successes. I’m happy to remain a humble traditional investor — earn a good return, build our brand, and help develop the communities where we invest — while other more radical investors try to drag us all into the future. It will be an interesting ride.