Foreword

It is Time to Build the Greatest of Time Machines

This is a story about Time Machines.

No, dear reader, you did not stumble upon the science fiction aisle at the bookstore. You are, however, holding a chronicle of the hunt for their closest earthly cousins.

In this timely book, Winston Ma and Paul Downs bring to light the oft mysterious world of transformative technology startups and the burgeoning sovereign wealth funds who invest in them. Together, these constitute a group of builders and investors who have emerged as two of the biggest forces reshaping the world as we know it. Their origins are diverse, but their evolution has many parallels. And their future, and ours, is intertwined in more ways than anyone anticipated.

Over a nearly two-decade career in tech and investing, I have come to appreciate that every great technology startup is in fact a Time Machine, the fruit of a tribe of mad-genius progenitors intent on hurtling us into the future. Most fail, and almost all are unprecedented by popular opinion. When they succeed, however, they famously remake whole industries for a generation or two.

As this book goes to press, seven of the ten largest companies on earth by market capitalization are tech giants domiciled in the United States and China: Apple, Microsoft, Amazon, Alphabet, Facebook, Alibaba, and Tencent. Even a decade ago, that list would have been significantly varied to include energy, financial, and industrial leaders such as Exxon, ICBC, GE, and Citi. Today, the only non-tech companies in the top-ten are Berkshire Hathaway, Visa, and Johnson & Johnson.

Largely ignored by Wall Street after the 2000 Dotcom Bust, these startups managed to thrive with the quiet backing of a new generation of investors, themselves often startup founders who took pride in being founder centric. There was, and is, a strong element of community spirit among the best founders and their funding partners - you paid the favor forward, and in turn found yourself working with kindred spirits conspiring to brilliantly pull forward the future. There exists an equal measure of what one might call constructive paranoia, that no matter how successful one's enterprise might become, there is always lurking a competitor that mustn't be underestimated. After all, the venerable Microsoft and Apple had to be completely reinvented before they could take their spots on that list. Amazon, for its part, is famously obsessed with "Day 1". As founder Jeff Bezos emphasized in his 2016 shareholder letter, "Day 2 is stasis. Followed by irrelevance. Followed by excruciating, painful decline. Followed by death. And that is why it is always Day 1."

Much has changed already for those who would build to last.

As Peter Thiel pithily outlined in Zero to One, today's tech markets are defined above all by a winner-take-all dynamic. Victory belongs to the "last-mover", the first company to innovate and get something "just right", which almost never is the first company to enter the category. At the zenith, the sum of the value of all the competitors in a given category often adds up to less than that of the dominant leader. And what's more, it takes at least a decade to incubate and mature such winners.

As a result, today's winners are seemingly more mature, definitely much larger, and yet imbued with an awkward, permanent adolescence that belies their power. Gone are the shotgun IPOs and retail market boomlets. They've been replaced by vast sums of private capital fleeing depressed interest rates for the promise of enduring growth. And once successful, each of these champions begets well-funded corporate treasuries and large cohorts of successful employees, both of which become engines to fund yet another generation of transformative ideas.

Today's tech leaders are also more global, both in their reach and in their origins. Silicon Valley might host an outsized proportion of startups, but it is increasingly a state of mind divorced from location. And here lies a bigger story. For tech startups are scarcely the only time machines in this chronicle.

Before a teenaged immigrant journey that took me to Canada, and eventually to Silicon Valley, I grew up in what felt very much like a Time Machine. 1980s Abu Dhabi was at its core a startup city on a single-minded mission to pull the future forward as fast as humanly possible; where nothing was constant save rapid change and growth. As the best founders will attest, progress cannot happen without taking risk. Success depends on the unlikely combination of vision, focus, skill, drive, and endurance. And on being right. It was so for Abu Dhabi.

Once a small oasis dependent on pearling, Abu Dhabi transformed in the span of just a few decades into one of the world's most modern city-states. Hailing from India, I found myself living between two very different worlds: An ancient, deeply spiritual native land whose industrious people champed at the bit of the License Raj; and a bustling metropolis that seemed to arise from nowhere, its own economy the marriage of nature's gifts, global talent, and its leader's vision.

Similar dynamics unfolded elsewhere, both presaging and following Abu Dhabi's journey: Post-War Japan and South Korea, Lee Kuan Yew's Singapore and its neighboring Asian Tigers, and of course China under Deng Xiaoping. Each was rebooted into a startup mode designed to inspire a whole society to pull the future forward. As with startups, there were spectacular successes among the countries who tried; and yet many more failures. At the peak of their transformative journeys, each of these successes were defined by a strong sense of mission and competent execution that transcended governments and led to widespread prosperity. And once successful, each of these economic champions beget well-funded national treasuries and large pools of sovereign capital designated to sustain that prosperity for generations.

But more prosperity comes with a price. The cost of short-term incremental growth is rising due to greater competition within well-established industries; and low-hanging yields have been obliterated by a decade-long program of financial repression across the developed world. The economies who worked so hard to "arrive" into the developed world have found that they, and those whom they joined, are both faced with the Sisyphean paradox of constant and disruptive change. Further, as a country or company evolves into "developed" status, it becomes inured to set ways of doing things, comfortable in its newfound financial prowess and shockingly vulnerable to insurgents better able to harness the next generation of competitive innovations.

Meanwhile, even as low-hanging yields disappear, competitive pressures within tech mean that the next generation of blue water innovation often involves the transformation of healthcare or materials science, or of physical goods and services employing software and automation. These concepts embody a higher level of risk and complexity, and an intrinsically longer gestational period than traditional software or consumer Internet companies. An investor cannot harness these innovations and their associated equity premia unless it develops a capability to assess novel ideas from first principles and is able to underwrite productive risk capital with the time horizon appropriate to each project. This is what classic venture capital firms like mine are designed to do, mainly because they are small and nimble.

But, as Winston and Paul ably show, it is this reality that has caused the sovereign funds - large, long-term, and naturally defensive organizations - to remarkably evolve into some of the most prolific and capable investors in transformative technologies.

The underlying irony, unsurprising to my venture investor's gaze, is that several of the most capable funds are themselves startups, often mirroring the national developmental dynamic that begat them. Some, like Mubadala of Abu Dhabi or CIC of China, are young, dynamic organizations that simply didn't exist before 2002. Others, like Temasek of Singapore or CDPQ of Quebec, date from the 1960s and 70s but, much like the Microsoft and Apple of recent years, have been imbued with a progressive leadership that "gets it". The net result is that my peers in venture capital, who fifteen years ago would likely not have recognized any of the major sovereign funds save a few who made passive fund investments, find themselves happily partnered with them in everything from cancer therapy to cybersecurity, microsatellite constellations to nuclear fusion.

It would seem, therefore, that we are at an "End of History" moment in the growth of tech champions and sovereign investing, the categories and winners declared and enthroned.

But history is unkind to the complacent monarch.

In February 2020, the novel coronavirus pandemic definitively ended the remarkably smooth bull market that started in March 2009. Finance ministries and central banks worldwide unleashed a formidable fiscal and monetary fusillade. These acute measures can help in the near-term and potentially stanch bleeding in the financial economy. But the virus has exploded an economic neutron bomb across the real economy. Infrastructure is seemingly intact, but there are few humans in sight. Because of lag effects from the shock, widespread human suffering, continued epidemiological risk, and the general inability of supply chains to easily bounce back, this book will appear in a year where there is nary a...