If the majority of your understanding of how tariffs work is from Twitter, CNN, or Fox News, I encourage you to go read Trump’s China Tariffs Hit America’s Poor and Working Class the Hardest. And, if you think China is paying the U.S. directly for the tariffs, well, no …
We have a lot of hardware companies in our portfolio so I’ve been living in the world of “what to do about tariffs” for several quarters. My fantasy at the beginning was “ignore and hope they go away.” This quickly evolved through “are there any ways around this” to land at “deal with the reality of increased cost, research, and compliance.”
It also became apparent, almost right away, that startups had a huge disadvantage over larger companies that had significant U.S. lobbying activities. We explored a few paths to engaging with the U.S. government around this and basically were told some version of “go away – you are too small and unimportant.”
Once I accepted the reality that the startups were going to have to pay the tariffs directly, that they had little control on what the tariffs would be, how and when they would change, and whether or not they’d get exemptions, I started operating under the assumption that 100% of the cost associated with the tariff would fall on the startup.
So, I started observing what other companies, especially large ones, were doing beyond the lobbying efforts of BigCo that resulted in exemptions. Would they absorb the tariff as an increase in COGS? Would they increase prices? Would they pass on the tariff to the customer?
A little more research showed what is pretty obvious in hindsight. Many BigCos are simply treating the tariff like a tax and passing it on, either directly or indirectly, to the consumer. This is similar to what is happening with state taxes, as states come up with lots of new taxes for out of state vendors, both physical and digital.
This shows up a few ways. While some companies are increasing the cost of their product to include the tariff (or even a markup on the tariff), many companies are trying to hold their price the same while passing the tariff on through other approaches.
Some companies are adding a line to their invoice called “Tariffs” and charging that to customers (I’m seeing this mostly in B2B situations). This looks like:
Product Price: $X
Total: X + Y+ Z + T
Others are including Tariffs in the Shipping line.
Product Price: $X
Shipping and Tariffs: $Y + $Z
Total: X + Y + Z + T
But the one I’m seeing the most is simply including Tariffs in the “Taxes” line, where Tariffs are considered a tax.
Product Price: $X
Taxes: $T + $Z
Total: X + Y+ Z + T
While some BigCos appear to be eating the cost of the tariff, this seems to be the exception. Startups should pay attention, and act accordingly.
If you are a hardware startup and have either seen, or figured out, a different approach, I’d love to hear about it.
I’ve been working on the Startup Visa since I first wrote about it 2009 in my post The Founders Visa Movement. After a decade, it’s clear that our federal government has broadly failed us on this front.
In 2015, I announced the Global EIR initiative to try something different. Today, I’m happy to welcome the University of Michigan to the Global EIR network. Applications are now open to become a Global Entrepreneur in Residence at the University of Michigan’s Economic Growth Institution (EGI). Interested applicants can learn more about the program, fill out an application form, and reach out to Millie Chu at Global Detroit.
For founders, this announcement means access to a startup visa, with a long runway, and a path to a green card. Global EIR founders will use their experience as founders to support EGI’s mission of helping other Michigan-based companies develop and execute growth strategies while simultaneously building their startups without worrying about their visa status.
From a broader perspective, the Global EIR program attracts international founders to Michigan. The goal of the Michigan coalition, led by Global Detroit and joined by the William Davidson Foundation, EGI, and Global EIR, is to contribute to the Detroit renaissance and demonstrate how startups are a critical part of economic growth in the 21st century. Thank you in particular to the William Davidson Foundation for their generous support to launch Global EIR in Michigan.
If you’re interested in learning more, I encourage you to look at the detailed information on Global Detroit’s site and apply. They are looking for high-growth international founders primarily in the STEM sector who have a need for an H1B visa and would like to establish their business in southeastern Michigan. Once approved by Global Detroit and EGI, the founder is offered a stipend for working part-time (10-20 hours a week) at the university, along with receiving entrepreneurial guidance and resources to help grow their business.
As of today, Global EIR has helped over 80 founders solve their visa issues. Their companies have raised $450 million and employ nearly 900 people. I’m excited by the progress being made despite frustrating inaction from Washington DC after a decade of conversation about creating a startup visa. Local action by leaders like Global Detroit, EGI, and the William Davidson Foundation is where solutions arise.
Amy and I are proud to be supporting the Global EIR program and the Global EIR Coalition. If you are interested in getting involved and bringing the Global EIR to your state, send me an email and I’ll connect you with the right person.
Recently, Amy and I hosted a conversation with Scott Wasserman, the president of Colorado’s Bell Policy Center. For those not familiar with the Bell, it is a research and advocacy organization focused on economic mobility in Colorado.
In his presentation, Scott presented a range of data about four major forces affecting our economy: demographics, public investment, technology, and inequality. As he went through his presentation, it became clear that while Colorado is home to a booming economy that many of us enjoy, there are many others in our state who are being left behind.
Several aspects of the Bell’s work stand out as concerns that all Coloradans need to grapple with. The demands of an aging population have technological, social, and financial implications. Demographics are shifting rapidly, including a growing Latino population that is not getting access to the education they need to keep our workforce competitive.
Scott presented a different look at inequality, focusing less on the gaps between the top 1% and the bottom 99% and more on what’s happening with the “middle class”. According to a report that the Bell produced with the University of Colorado, our state’s middle class is shrinking as it is unable to afford things like child care and college. Meanwhile, Colorado, which is one of the top economies in the country, has seen an increase in the percentage of low wage workers from 13% in 2014 to 22% in 2016.
Scott also called our attention to the dramatic decrease in public spending that is happening in our state. Colorado’s spending measured as a percentage of total personal income has gone down from 5.5% in 1970 to 3.9% today for higher education, public schools, and human services.
After Scott’s presentation, the group of attendees (about 50 of us) had a vibrant conversation about the implications of what Scott presented and what we can do about it. Some of our guests believed the answers to these challenges were to turn public investment around to take advantage of our strong economy to invest in the future. Other guests were reluctant to make dramatic changes in tax policy that might upset the balance that currently exists between predictable tax levels and investment.
Regardless of your political orientation, these are issues we can’t ignore. I’m grateful for the work that organizations like the Bell do, as they help us better understand issues we need to be paying attention to.
I have felt for a long time that election day in the US (by law, the first Tuesday after November 1) should be a national holiday.
In some states, like Colorado, we now have an excellent mail in ballot system, but many people still physically show up at the polls to vote. The idea of voter suppression has never made sense to me, ever since I learned about the constitution and amendments 15, 19, 24, and 26 in elementary school civics class. I just went on Wikipedia and reviewed the timeline of voting rights in the United States, which reminded me of the awesomeness of the book Fantasyland: How America Went Haywire: A 500-Year History.
At Foundry Group we’ve decided to make sure that all of our employees have the time they need to vote on 11/6 by participating in #TimeOffToVote – a nationwide effort to encourage employers to make accommodations for their employees to participate in the election. While we are a small organization, as I was told in elementary school, and a believe deeply, a fundamental component of our democracy is that every citizen gets a vote, and every vote counts. Even on my most negative and cynical days, I rejoice that I get to live in a country where this is true.
We hope you’ll consider whether participating in #TimeOffToVote makes sense for your company as well.
I knew that Dominos was paving America’s roads, but I didn’t realize they were branding them.
Farhad Manjoo has a good article in the NYT titled How Tech Companies Conquered America’s Cities. A key trope in sci-fi is that corporations will take over, well, everything. And, now that corporations are considered people (at least partially), why shouldn’t they take over?
Would it be weird if I sold sponsorship rights to my first name? “Dominos Feld” anyone? Or maybe “Amazon Feld.”
As usual, Neal Stephenson and Wiliam Gibson were (and continue to be) prescient about our future. I’m considering taking all the labels off of everything I own. And, if you are interested in sponsoring my first name, I’m open to offers and suggestions.
I’ve been consistently public, for almost a decade, about my belief that we should significantly change our approach to immigration in the US, especially for entrepreneurs. As one of the original advocates of the Startup Visa, I continue to be bummed out that our government can’t seem to figure out why this is important or doing anything productive around it.
But, I’ve been appalled the past few days, as Amy and I spend time in Germany, to watch the Trump immigration enforcement that separates children from their parents and detain the children in separate locations. While we had a joyful anniversary yesterday, I felt a bitter emotional undercurrent that upset me.
I’m lucky that I was born an American citizen. Over the years, I’ve invested in many immigrant entrepreneurs. Amy and I have supported a number of organizations that help immigrants and refugees. But when I saw Ayah Bdeir’s blog post titled Zero Tolerance for Zero Tolerance on the littleBits blog, it brought tears to my eyes.
We’ve been investors in littleBits since 2013. I’ve gotten to know and deeply respect Ayah as a leader and an entrepreneur. But I especially appreciate her as a human being. Her story is an amazing one, and she continues to be brave about her experience and the values that have come from it.
In her words:
“I know firsthand the strife of being a refugee. In 1982, my family fled my home country of Lebanon because they feared for our lives during the Lebanese-Israel war; we were welcomed in Canada with open arms. In 1989, a civil war broke out and my parents fled violence again to Canada, where we were again welcomed and allowed to live with dignity and respect. In 2006, a war broke out between Israel and Lebanon; my sister and I separated from my mom and other sisters to flee to Jordan, then the United Kingdom, then the United States.
I was 24-years-old, I was fully aware of what was going on, I spoke fluent English, and I had means to buy flights and hire a lawyer. Yet it was still a massively traumatizing experience. I cried for weeks afterwards and I remember every second vividly. The kids we are talking about today do not have any of the resources I had, and they will be scarred for life.”
The post is powerful and an example of the kind of intellectual leadership that makes me proud to know someone. She states clearly her view:
“History will judge us if we sit still and allow this to happen. Our kids will not forgive us if we don’t stand up for them. Our conscience will not rest if we allow something so basically human to appear partisan. We must speak out.”
Please read her entire post. In our current world of tweets and soundbites, I think it is even more important to read slowly and thoughtfully, especially from people who have direct experience with different situations that we are confronted with as a society.
And – if you want to help, here is a list of activist groups supporting families at the border that need your help right now.
Ayah – I’m honored to know you and get to work with you. Thank you for your very public leadership.
A law with good intentions, but horrible side effects, passed yesterday. You probably haven’t heard about it because of the brouhaha over 97,513 other things. It’s called SESTA/FOSTA and the EFF has a good summary of how Lawmakers Failed to Separate Their Good Intentions from Bad Law. Craigslist responded immediately (and rationally) by taking Craigslist Personals offline.
Oh, and as a bonus, the CLOUD Act was buried in the Omnibus spending bill. EFF has an article from six weeks ago that explains why it is A Dangerous Expansion of Police Snooping on Cross-Border Data. The CLOUD Act is an aggressive undermining of existing privacy laws, but no one really cares about online privacy or your data, right?
If you want a glimpse as to the data Facebook has on you, take a look at the analysis Dylan McKay just posted. And then, it a magic trick of epic proportions, it turns out that ‘Lone DNC Hacker’ Guccifer 2.0 Slipped Up and Revealed He Was a Russian Intelligence Officer. I’m shocked – just shocked – that something like this could be true (actually, I’m not – I’ve been saying the DNC / Wikileaks stuff was Russian hackers since the beginning, even after several friends gave me tinfoil caps to keep me safe.)
I don’t expect the Trump campaign knew anything about any of this. Well, except for the news today that showed the Cambridge Analytica’s blueprint for Trump victory. And now, the news that Trump’s new security adviser John Bolton also relied on Cambridge Analytica. Scandalous, just scandalous (well – not really – how about “predictable, just predictable …”)
If you want to understand what can happen to your Facebook data, the Cow Clicker story is both fun and instructive. I remember Cow Clicker well because it was a spoof on FarmVille. And yes, the explanation in the article is very accurate from my perspective. If you want a more mainstream explanation, How Trump Consultants Exploited the Facebook Data of Millions is pretty good.
Expect more outrage and Facebook bashing on all media channels. And lots of talking heads and discussion about what needs to be done. We might even have hearings in Congress. But my guess is that not much will change, the outrage will move onto something else (hey – what happened to North Korea?), Facebook will make a few incomprehensible changes to their security settings, and the laws that get created won’t keep up with the technology.
Ian Hathaway, my co-author for my next book – Startup Communities 2: The Next Generation – has a great blog post up titled The Amazon Bounce Back.
Colorado, specifically Denver, is in the final 20 cities bidding on Amazon’s HQ2. This open bid process is an absolutely brilliant move by Amazon for a variety of reasons.
- Enormous branding: Everyone, everywhere, is talking about Amazon. Amazon Amazon Amazon. We love Amazon.
- Absurd market information: The amount of data about each city that Amazon is getting out of this is incredible.
- Visibility into what cities are willing to offer: Amazon knows where its future leverage points are when negotiating with individual cities.
While I’m glad Denver approached it the way they did, focusing on strength and resources of the community rather than by throwing dollars at Amazon, our state government still provided plenty of financial incentives.
Amazon HQ2 could qualify for huge Colorado tax incentives. From the article:
“Colorado’s main tax incentive used to lure “Amazon HQ2” could add up to at least $458.9 million rebated back to the Seattle-based retail giant over several years and could top $860 million if the company’s HQ2 campus were to grow fast enough. The figures are based on the pay scale Amazon predicts at HQ2 and the formula for Colorado’s “Job Growth Incentive Tax Credit” program.”
Since I think the chance of Amazon actually choosing Denver is 0.0001%, I have a suggestion for the Colorado state government for when Amazon chooses someplace else.
Give 100% of the benefit (economic and otherwise) you are offering to the Denver-based business community, with special focus on high growth scaleup companies.
Steve Case has a brilliant Memo to the Cities Amazon Passed Over. Julie Lenzer explains how everyone can have a trophy, or how to make the most of NOT getting Amazon HQ2.
In the context of be careful of what you wish for some economists are now weighing in: Amazon HQ2 finalists should refuse tax breaks, say nearly 100 economists, professors. There is only going to be one city that ends up with Amazon’s HQ2. For everyone else, especially Denver, use what you were willing to do to drive real long-term economic growth and health for your city, rather than retreat in defeat.
If you are still having trouble understanding why Net Neutrality is important, Burger King has made an awesomely funny – and extremely informative – video using the Whopper as an example. It’s just brilliant.
In more serious news, the New York governor signs executive order to keep net neutrality rules after the FCC’s repeal. This follows on the heels of the Montana governor signs executive order to keep net neutrality in the state. Last year I wrote about the coming battle of states rights vs. federal rights, and this is a great example of the complexity of it.
At the same time, AT&T CEO’s net neutrality plan calls for regulation of websites. AT&T supports bans on blocking and throttling, but not paid prioritization or data cap exemptions. I think he needs to watch the Whopper video.
Apparently the GOP is working on a net neutrality bill would allow paid fast lanes and preempt state laws. According to an article in ArsTechnica the “Open Internet Preservation Act” would ban blocking and throttling but allow ISPs to create paid fast lanes. The Republican bill would also prohibit the FCC from imposing stricter regulations on broadband providers and prohibit state governments from enacting their own net neutrality laws.
There’s that pesky states right thing again. And more whoppers.
Let’s start with an awesome dog taking himself sledding.
Now, let’s move on to Bill Gates opening essay in this week’s Time Magazine (he’s their first ever guest editor) titled Some good news, for once. It’s short and powerful.
He starts out with context.
“Reading the news today does not exactly leave you feeling optimistic. Hurricanes in the Americas. Horrific mass shootings. Global tensions over nuclear arms, crisis in Myanmar, bloody civil wars in Syria and Yemen. Your heart breaks for every person who is touched by these tragedies. Even for those of us lucky enough not to be directly affected, it may feel like the world is falling apart.”
And then perspective.
“But these events—as awful as they are—have happened in the context of a bigger, positive trend. On the whole, the world is getting better. This is not some naively optimistic view; it’s backed by data. Look at the number of children who die before their fifth birthday. Since 1990, that figure has been cut in half. That means 122 million children have been saved in a quarter-century, and countless families have been spared the heartbreak of losing a child.”
He creates more perspective but quickly gets to the punchline.
“So why does it feel like the world is in decline? I think it is partly the nature of news coverage. Bad news arrives as drama, while good news is incremental—and not usually deemed newsworthy. A video of a building on fire generates lots of views, but not many people would click on the headline “Fewer buildings burned down this year.” It’s human nature to zero in on threats: evolution wired us to worry about the animals that want to eat us.”
But this line nailed it for me.
“There’s also a growing gap between the bad things that still happen and our tolerance of those things. Over the centuries, violence has declined dramatically, as has our willingness to accept it. But because the improvements don’t keep pace with our expectations, it can seem like things are getting worse.”
For the past week, Amy and I have been watching the Ken Burns documentary The Vietnam War. We finished Episode 8: The History of the World last night, and as the credits rolled and CSNY’s song Ohio played, I said to Amy, “The US and the world was unbelievably fucked up in 1970. I was five and I don’t remember anything. It’s helpful perspective on today.”
I was born optimistic and always have been. I’m going to stay optimistic about our country, our society, and our world. And I’m going to keep working hard on the things I think matter.
And yes, I’m going to read Fire and Fury: Inside the Trump White House tomorrow.