Will the Innovation Economy Thrive or Suffer Under a Second Trump Presidency?

In heady times of breakneck political and technological change, two things are clear: one, that a second Donald Trump presidency brings a new level of uncertainty to the innovation economy; and two, that innovators will find opportunity in this uncertainty, as they always do.

What might the new administration mean for the innovation economy, including artificial intelligence and sustainability? The Batten Institute for Entrepreneurship, Innovation and Technology at the Darden School of Business took a closer look.

Tech

The tech-heavy NASDAQ composite jumped 3% (to an all-time high) the day after Trump was elected. Was this an electoral certainty bump or an actual endorsement of the outcome?

Probably a bit of both.

Tech CEOs rushed to applaud Trump – on megadonor Elon Musk’s X platform – in some combination of earnest congratulations and enlightened self-interest.

Tim Cook (Apple), Jeff Bezos (Amazon), Sam Altman (OpenAI), Satya Nadella (Microsoft) and other heavy hitters joined in. “We are in a golden age of innovation and are committed to working with his administration to help bring the benefits to everyone,” Alphabet CEO Sundar Pichai said in a post that mirrored other Big Tech leaders.

The calculus driving this herd mentality is clear: Come out early in the hope of securing a seat at the tech policy table or averting government scrutiny. But a public congratulation to curry favor isn’t necessarily the same as full-throated support.

As Trump’s agenda takes shape, will he cross a red line for any of these leaders? Will customers and/or employees demand accountability of them, as they did at major tech companies who had contracts with Immigration and Customs Enforcement during his first term?

Trump openly disdains regulation and intervention in the private sector. There’s a sense in Silicon Valley that his administration will be friendlier to M&A and less inclined than President Biden’s to put Big Tech under the microscope (Google, which he beefed with in his first term, may be a notable exception). We’ll likely see a change in posture for the Securities and Exchange Commission and Federal Trade Commission towards tech (Lina Khan and Mark Zuckerberg out, for example; TikTok and Bitcoin in). But the incoming president tends to operate within a “what-have-you-done-for-me-lately” frame, which makes the prediction game perilous.

We should also closely follow the administration’s approach to H1-B visas. H1-Bs are key to how American firms have built proficiency in technical areas that are in high demand but short supply. Will H1-B holders be swept up in mass deportation efforts? Will Trump curb new ones as he makes good on his promise to close the borders?

AI

Trump’s stance on AI is a bit of a black box, though new bestie Musk has often sounded the alarm and predicted that Singularity – the prospect that advances in computing will rival, and maybe even overtake, human capacity – is right around the corner.

It will be virtually impossible to put the AI genie back in the (black) box, though. Darden professor Raj Venkatesan, who teaches and researches tech marketing, notes that “growth and Investment in AI is a matter of competitiveness for the U.S. government. There will be a need to balance national security issues with individual privacy, bias and misinformation. It will be a challenging tradeoff for any government.”

In navigating this tradeoff, fellow Darden professor Dennie Kim, an expert in AI and web3, is “concerned that the administration goes too far in its anti-regulation stance.”

“AI regulation is not about the technical aspects, but more about the potential and very present human impacts. We regulate lots of things that have the potential to cause harm to humans, and the U.S. needs to lead the global conversation around this,” he adds. “Trump should not simply take a hands-off, do-whatever-you-want approach. Draw some lines so that we can disagree, debate, and, as a country, become better informed about the very real issues that we are facing due to the uncertainty surrounding this technology.”

Crypto

After a time in the wilderness (looking at you, FTX and Terra), crypto is being taken seriously again thanks to Trump’s public embrace (check out this episode of Darden’s “Good Disruption” podcast for a deep-dive). Polymarket recently put a 57% chance that Bitcoin will go to $100,000 in 2024 (up from only 17% the week before the election), and a greater than 1-in-4 chance that Trump will create a national Bitcoin reserve in his first 100 days.

“The Trump administration is generally going to be seen, at least in the short term, as a massive victory for proponents of blockchain technology and cryptocurrency,” Kim says. “Perhaps more importantly, Republicans in Congress have been leaders advocating for the U.S. to be more favorable to the growth of this part of the industry, and the results in the House and Senate will likely impact this even more than the president. As rapid development of AI continues, it is vital for there to be parallel development of technologies, such as blockchain, that can serve as important complements and safeguards to generative AI.”

Entrepreneurship and Innovation

According to Darden adjunct professor Jim Zuffoletti, “Facing uncertainty is a central challenge and an essential strength of entrepreneurs who will innovate both because of political and social changes and despite them as well. Fostering entrepreneurs is an evergreen opportunity for any administration.”

Indeed, promoting startup activity is bipartisan. Kamala Harris made startups a central part of her economic platform, proposing a tenfold increase in tax breaks (to $50,000) for small business expenses. It seems likely that Trump will embrace some form of similar incentive.

Either way, it’s safe to assume there will be an increase in exits and in venture capital funding in anticipation of a friendlier regulatory environment.

But the true indicator of entrepreneurial health in our economy is about much more than whether Sand Hill Road is buzzing. That’s just the top of the food chain in search of unicorns; the reality is that less than 1% of startups ever get VC funding. The tech exec and investor class that has cozied up to Trump may take the administration’s eye off the ball in promoting the real driver of growth when it comes to entrepreneurial activity: what Darden professor Saras Sarasvathy calls the “Middle Class of Business.” These are smaller and less flashy, but enduring companies that “foster robust communities, create value for stakeholders, create jobs and last long enough to give an entrepreneur a good life.”

Sustainability

If a second Trump administration follows the playbook of the first, significant cuts to Environmental Protection Agency and Department of Energy budgets loom. Many may not realize the vast investments that the U.S. government put into the commercialization and scaling of clean technologies. More than $145 billion has been appropriated by the Biden administration on climate efforts through the Inflation Reduction Act, though just how much will be committed by the end of the year is uncertain as well as Trump’s approach to any remaining funds. The question is whether this investment provides the momentum for markets to take over as the newly appointed administrator and the president-elect talk about deregulation and new drilling for fossil fuels.

Becky Duff, director of thought leadership and research initiatives at the Batten Institute, and co-author of The Decarbonization Imperative with Darden professor Mike Lenox, says the electric vehicle industry is an example of a disruptive technology that has become established enough to be durable.

Every major manufacturer is now selling at least one model and global sales have grown from 4% of new sales in 2020 to 18% in 2023. The price of an EV now directly competes with gas-powered vehicles.

“Rolling regulations and incentives back in the U.S. may slow the EV wave but not kill it,” Duff notes. “The concern lies in whether the private sector will step in and continue to build out the charging infrastructure needed to support EV growth.”

While the economics look good for continued solar and wind growth, the simple act of shutting down the pipeline of new clean generation projects (hundreds are in the queue, including offshore wind projects), and rolling back investments in energy storage and grid modernization could stall growth in the U.S.

“The newfound interest in small nuclear in response to the rise in datacenters, fueled by the insatiable need for data by AI, might be supported by the incoming administration,” she adds.

Here again, the presence and influence of Musk, CEO of Tesla, is a wildcard. Under his leadership of the newly created Department of Government Efficiency, it remains to be seen if he will cut funding to the Department of Energy programs that have helped clean technologies scale and commercialize.

Garriott is executive director of the Batten Institute for Entrepreneurship, Innovation and Technology.