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‘You have to be a moron to think libertarianism is real’

Merus Capital’s Salman Ullah says COVID-19 highlights why Germany is an attractive place to invest


Could the coronavirus crisis — and the way different countries have responded — make Silicon Valley VCs more bullish on European startups? That’s the thesis put forward by Salman Ullah, co-founder and managing director of Merus Capital.

As COVID-19 spreads globally, he argues that countries with national healthcare — along with fiscal and monetary policies that balance the interests of citizens versus those of corporations — are better positioned to navigate the pandemic.

More broadly, investors prefer to invest in stable and resilient economies, and resilience depends on the ability of governments to respond to a crisis, let alone one on such an unprecedented scale. For investors, the strength of national infrastructure and political institutions in many European countries is a net positive — and a stark contrast to Trump’s U.S.

Germany, where Merus has already made several investments, is cited as an example of a European country that has become more attractive to Silicon Valley investors in recent years. Not only is the cost of starting up in Germany lower, but Ullah argues there’s been a “cultural shift” amongst young people who now view startups as a viable career path, while the coronavirus crisis — and the German government’s response — is making ecosystems such as Berlin and Munich even more attractive.

“Your dollar goes much further in Europe, rents are lower, everyone gets free healthcare, essentially,” says Ullah during a call. “And the level of education and expertise in computer science in particular is no better or worse than in the U.S. And I think the pandemic has just kind of reinforced that.”

In a time of such uncertainly and the economic shock that comes with that, Ullah notes that in European countries like Germany, citizens aren’t worried about the personal cost of healthcare. He also points to the way German finance minister Olaf Scholz has pledged unlimited credit for businesses affected by the pandemic alongside an expansion of its short-time work scheme, which gives support for companies that are forced to reduce working hours of their employees.

“It would appear that a country like Germany knows much better how to cope with something like COVID-19 than the U.S. does. I think it’s just a reflection of decades of investment in public infrastructure, which we haven’t had,” Ullah says.

In particular, he advises that the U.S. needs to figure out how it’s going to compete in this “new world.”

“The notion that a libertarian approach — you know, pull yourself up by your bootstraps, etc., government is bad — none of that is true. It’s just not true. And you see that now. The spread of the virus, the fact that we can’t test it, we can’t track it, very little trust in what’s coming out of the White House. And so people are left to do their own thing. And that’s very, very different from Germany.”

Ullah asserts that the libertarian Silicon Valley stereotype is actually a myth, albeit a convenient one. The only truly libertarian policy most VCs support is low or no taxes, while conversely wanting the benefits of state subsidy and government-funded infrastructure, which, he points out, is what fostered the internet and, in turn, technology startups. “There are subsidies everywhere you look,” he says, “the way they want the free market is ‘let us, in a sense, exploit arbitrage.’ ”

Unprompted, Ullah is quick to offer a caveat to his analysis, positing that he isn’t your stereotypical Silicon Valley VC. For starters, he grew up and studied in the U.K., where he was resolutely anti-Thatcher and had always been “a bit of a socialist.” He also confesses to being a daily reader of center-left British newspaper The Guardian (where this journalist got their first byline).

In other words, Ullah isn’t the libertarian-to-liberal-left convert I secretly hoped he was. Not that it makes what he says next any less chilling.

“It’s too early for me to assert this, [but] I’ll do it anyway, because I’m a venture guy: Britain is going to have one of the worst outcomes of the pandemic,” the Merus founder tells me. “And, you know, I think it leaves Italy likely second-worst [in Europe]. They’re both trying their darnedest to be just like America in the last so many decades.”

The upshot is that the coronavirus crisis could make VCs look more closely at European countries like Germany. “If you just apply a purely analytical lens, then as an investor — and most investors in venture are kind of more analytical than emotional — they’ll think to take a second look when they start digesting the data,” he says.

“They’ll say, ‘I don’t understand, I thought the U.S. is supposed to be the global superpower, and we’re better than anyone everyone else…’ I call it a Potemkin superpower. We kind of look like a superpower, but if you scratch the surface, there’s kind of nothing there.”

As an example, Ullah is baffled by the Trump administration’s military policies — specifically, his creation of a Space Force — versus healthcare, just as millions more Americans become unemployed and are left without health insurance.

“What is Space Force going to protect us from?” he says, laughing. “[Meanwhile], consumption has just collapsed and people don’t have jobs. Imagine the stress associated with that. You know, ‘I have another thing, I’m running out of healthcare.’ At the same time, the government is still fighting in the courts to overturn Obamacare. And they’re saying treatment for coronavirus is free. What are you talking about? If you’re suffering coronavirus, we’ll treat you for free. Everything else you’ll pay for. It’s absurd.”

Returning to the topic of libertarianism versus a more European approach, Ullah doesn’t pull his punches. “If you want a true free market, you should invest in Sudan,” he teases. “There you go, no regulation, free market, do whatever you want. Now, VCs don’t, right? Because it’s nonsense. You need the government to provide infrastructure, rules, clean water, electricity and an educated populace, etc. And only then can you invest.”

To that end, Ullah says Silicon Valley has a lot of great attributes, but cautions that it doesn’t exist in a vacuum. “That’s what people should understand, it’s part and parcel of a bigger thing, you know, called the U.S. of A. And if parts of the USA start crumbling, Silicon Valley won’t just continue to do what it’s doing. That’s not how it works.”

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