Sequoia Capital’s free speech debate

0:02Good morning from the Financial Times. Today is Thursday, October 23rd. And this is your FT News Briefing. Tesla's profits took a major hit last quarter, and a Sequoia Capitol executive quit over a contentious free speech issue. Plus, the Trump administration has been quietly suppressing government climate change data. I'm Mark Filippino, and here's the news you need to start your day.

0:32Tesla saw its profits drop nearly 30 % last quarter. The electric car company reported earnings yesterday, and it said that its adjusted net income fell to$1.8 billion. That just missed Wall Street expectations. Tesla pointed to the costs associated with its pivot to robotics and artificial intelligence, Plus, the hit came as the U.S. ramped up tariffs, rolled back rules on vehicle emissions, and canceled tax credits for EVs. The deadline for those credits was September 30th, and consumers bought Tesla's at a record pace to get it in under the wire. But it wasn't enough to buoy the company last quarter.

1:11Tesla's share price fell in after-hours trading yesterday.

1:21A free speech debate within Sequoia Capital has bubbled over. The FT learned that the venture capital firm's chief operating officer, Sumaya Babole, resigned in August because of comments made by partner Sean McGuire. Here to tell us more is the FT's San Francisco Bureau Chief, Stephen Morris. Hi, Stephen. Good morning. So you broke this story. Tell us a little bit about Maguire and what he said. So Sean Maguire has become a very high profile and very divisive figure within Silicon Valley and American politics at large. He is a partner at Sequoia Capital, one of the largest and most storied venture firms.

1:58And this particular incident, I mean, he posts incendiary comments about a whole variety of things from far-right German politics to British elections. But in particular, he wrote something about New York mayoral candidate Zohran Mamdani in July. And he alleged he comes from a culture that lies about everything. It's literally a virtue to lie if he advances his Islamist agenda. The West will learn this lesson the hard way. Now, it should be said that Maguire did row back some of his comments online after making them, trying to draw a hard line between comments about Islam in general and Islamism, which is a more sort of aggressive political ideology within that.

2:41But still, the tone of his comments have been regarded both by the COO, other people internally, and some of his portfolio companies as Islamophobic and remain highly controversial. What about Babalai? How did she respond to these comments before she left? Well, Babalai is a practicing Muslim who has spoken very publicly about how her gender, ethnicity, and faith have shaped her career. And she was very well thought of within Sequoia as the chief operating officer, but also with some of its portfolio companies and her colleagues. She stepped down in August, very quietly, after five years at the company.

3:18But we understand our reporting shows that her decision to leave was precipitated by Maguire's social media posts, in particular the one I read out before. She basically complained to other senior partners at the firm, of which she is one of the most senior. But they declined to take action against Maguire, arguing he was just exercising his right to free speech, which is, of course, a hugely important topic for the right in tech at the moment. When we contacted Babale and Maguire for comments, both of them either did not respond or declined to comment, as did Sequoia. Now, what has been the reaction to Babale's departure inside Sequoia?

3:54Well, her departure has obviously been known about for a while, and many internally either knew that it was connected with Maguire or suspected. As I said, she's very well respected internally, and she had a good reputation among all the startups that Sequoia invests in. So there has been a big debate about this internally. Chief Executive Rolef Botha hosted an all-hands meeting to try and address the issue of free speech versus hate speech. So this really hasn't gone away, and her principled stance, I think, has resonated with many of her colleagues. Stephen, what kind of impact do you think this is going to have on Sequoia long term?

4:31Well, whilst we must point out, Maguire does have his fans both in tech and finance, including such luminaries as Bill Ackman, he is also a highly controversial figure. Sequoia value him largely because he is very smart, but more importantly, has a very close relationship with Elon Musk and as such has led early investments into SpaceX, Neuralink, the Boring Company, and XAI. So Maguire has a lot of credibility and a lot of rope from other senior executives, including the CEO, Roloff Botha, internally. But there's no doubt that this has, I would say, called into question Sequoia's backing of free speech at all costs for some of its partners.

5:12But I think more significantly, Sequoia has partners all over the world, in particular in the Middle East, many of whom also regard McGuire's comments as a bit Islamophobic. And we've quoted some of them in the story saying that this has damaged Sequoia's reputation and will hurt their ability to operate within the region. Stephen Morris is the FT San Francisco Bureau Chief. Thank you so much, Stephen. Thank you. Pleasure to be on.

5:43UK inflation unexpectedly was the same in September as it was in August. It stayed at 3.8%. Economists were expecting it to rise to 4%. That was thanks to lower prices on food and non-alcoholic drinks. The Bank of England has been struggling for months to deal with both sluggish growth and stubbornly high inflation. So yesterday's report gives them a little bit of leeway to cut interest rates. And investors are betting on it. Guilt rallied after the report came out yesterday.

6:18U.S. President Donald Trump's views on climate change are pretty well known. It's climate change. Because if it goes higher or lower, whatever the hell happens, there's climate change. it's the greatest con job ever perpetrated on the world, in my opinion. But maybe it's less well known that his administration is suppressing government climate data or that it's cutting jobs that monitor climate. I'm joined now by the FT's Eva Siao to discuss this. Hi, Eva. Hey, thanks for having me. So tell us what's been cut so far in terms of data and resources in the U.S. Yeah, so the deletion of data and also I would say censorship of content or mentions of climate change on federal websites is pretty broad.

7:03There's hundreds actually of federal websites that have scrubbed mentions of climate change, often replacing it with different wording like extreme weather. And there are also dozens of websites that have just been taken offline entirely. And aside from data, there's just widespread staff shortages. So similar to other federal agencies, there's just been a purge of probationary employees because of the Department of Government Efficiency or DOGE, but also hiring freeze, a push for early retirement buyouts. And all of this has really kind of hollowed out the core agency that monitors weather, but also does a lot of climate research, the National Oceanic and Atmospheric Administration, or NOAA.

7:49Now, Eva, you kind of got into this already a little bit, but what kind of risks does this all pose to the U.S.? So in terms of risk factors, a lot of monitoring that collects data that's used for longer term climate research is also used to inform global and also local weather forecasts. So there's a project called Argo, which is a global international collaboration, but it's basically a bunch of these robotic floats that are underwater in the ocean. They collect things like ocean temperature and salinity, and that, of course, can be used for long-term research, but also in the short-term weather forecasting.

8:26And so in terms of risk factors, this can impact things like agriculture. Sure. Farmers are very dependent on accurate predictions and any loss of accuracy around weather forecasts can really impact their costs. So it's actually quite broad. I have to imagine that these risks are not contained to just the U.S., right? Right. So I think one of the interesting things that came from our reporting is just learning how interconnected global forecasting is. And we interview this meteorologist who said that, you know, if you want to forecast things three days in advance, you need like information on the continent.

9:08But if you want to forecast longer than that, like beyond three days, you need observations over the entire planet. And so with Argo, for example, different countries have floats in different places, but the U.S. accounts for over half of the floats in the world. and there's like 4 ,000. So the loss of U.S. support for that would be pretty catastrophic for some places like Australia. Even in Europe, there are storms that develop over the Atlantic and information from North America is really important. And I think more broadly, you know, there is a lot of resiliency. Many countries have satellites, but the U.S.

9:45is a big player in just imagining the withdrawal of U.S. climate work and weather forecasting would just really degrade that resiliency. So is there anything being done to mitigate the damage? So I think there is recognition in Congress that NOAA does oversee a lot of really core and crucial functions. That being said, of course, there's other things that can bar that funding. There are a lot of third-party nonprofits and efforts that have sprung up to save federal data or restore some information about climate that's been removed. So that's definitely where like civil society has stepped in. But I think it's just incredibly difficult to fill the gap of federal money and the research that it's supported in the past.

10:33Eva Siao is a data journalist for the FT. Thanks so much for this, Eva. Thanks. Friendly reminder that if you haven't already, you should really take advantage of this deal we've got going on right now. 40 % off a digital subscription to FT.com. Just go to ft.com slash briefing sale. That's ft.com slash briefing sale. We've got a link to that in the show notes. This has been your daily FT News Briefing. Check back tomorrow for the latest business news.