Silicon Valley Reckons With Its Political Power

The industry had a monumental 2016, but now it has to deal with the Trump disruption.

Silicon Valley Reckons With Its Own Political Power

On Sept. 12, 2016, there was a momentary realignment in the constellation of global business. For the first time, the five largest public corporations in the world by market capitalization were all technology companies: Apple, Alphabet, Microsoft, Amazon.com, and Facebook. The celestial anomaly lasted only seven weeks, because of the rise in oil prices and natural vicissitudes of the stock market, which eventually propelled ExxonMobil and Berkshire Hathaway past Facebook and Amazon. But it’s easy to conclude that a portal had opened briefly to the future—a future in which Silicon Valley dominates everything.

Like so much of 2016, the moment surprised a lot of onlookers. But while it was a bad year for prognosticators, it was by and large a very good year for high tech. If you put aside exploding Samsung smartphones, the massive hacks at Yahoo!, fake news on Facebook, and all the business implications of a Donald Trump presidency, the tech industry produced some astounding results in 2016—and not just of the financial variety.

In January, the Alphabet division DeepMind announced it had developed a computer program capable of beating the best human players in the intricate Chinese board game Go. In April, after repeated failures, SpaceX successfully landed an unmanned rocket on a drone ship floating in the Atlantic Ocean. In August, Uber’s self-driving cars hit the road in Pittsburgh; two months later, Microsoft said computers were transcribing speech as quickly and accurately as humans. And in December, Amazon announced it had conducted its first commercial delivery via drone, sending a set-top box and some popcorn to a customer near Cambridge, England.

Each advance carried the whiff of corporate stagecraft, but taken together they suggested the inexorable migration of software and machine intelligence into the real world, where they’re destined to transform industries and augment or replace people. “When properly deployed, machines can now outthink humans,” says Chamath Palihapitiya, a venture capitalist and former Facebook executive. “This was not a concept that was well-defined even back in 2015.”

Big business used to be shielded from Silicon Valley’s full impact by the industry’s boom and bust cycles. Yet despite repeated predictions of doom by skeptics, this time no tech bubble has popped, after eight years of robust growth. The Bloomberg U.S. Startups Barometer, a measure of the overall fitness of private technology companies, which considers factors such as venture capital investment and mergers and acquisitions, is up 14 percent since the beginning of the year, a sign of relative health.

Some stars have fallen (blood-testing company Theranos, anyone in app-enabled food delivery), but if anything, the pump is primed for more tech company dominance and more rapid change. The few initial public offerings this year are likely to be followed by a slew in 2017, with a planned Snapchat IPO in the spring leading the way for other candidates such as the music service Spotify and cloud companies Dropbox, Cloudera, and Okta. Making the soil even more fertile, anxious older companies stand ready to snatch up these upstarts. We’ve seen the beginning of this, with Unilever buying Dollar Shave Club for $1 billion in July and Walmart acquiring wobbly e-commerce upstart Jet.com for $3 billion in August, among other deals.

Technology’s transformation of society actually seems to be speeding up. And now we know where it all leads: to the 25th floor of Trump Tower, and a central spot in the national dialogue over an evolving economy, with all its accompanying winners and losers.

“Tech Gods to Tower!” blared the Drudge Report just as Tim Cook, Jeff Bezos, Larry Page, and 10 other tech executives somberly passed the press gantlet to meet with the president-elect. The changes wrought by tech may not have been among the top voter grievances, but they’re certainly destined to get there. Technology creates massive opportunities but has a deflationary impact as employers do many times the work with substantially fewer employees. (Consider that Alphabet employs 962 people per $1 billion of revenue, while Ford employs 1,427 per $1 billion.) So naturally, the chieftains of Silicon Valley have come to be viewed not only as agents of innovation but also of destruction, capable of undermining a comfortable, Middle American way of life.

Trump’s election was the ultimate wake-up call for Silicon Valley. In a way it largely wasn’t before, the tech community in 2016 was asked repeatedly to grapple with its broader role in society—not only with the secondary effects of its products but also its own easy characterization as a villain in an age of displacement and stagnation. “It’s very telling that Trump happened over the tech industry’s almost unanimous objection,” says Eric Ries, author of The Lean Startup and the founder of the Long-Term Stock Exchange, a company that aims to create incentives other than immediate profits for public corporations. “We were so confident that our preference would win out that we did not take an all-hands-on-deck attitude. The result has been regret and soul-searching.”

This was most evident in the dust-up over fake news, which revealed once again the flaws in the thinking behind “neutral platforms,” which treats all content equally as long as users find it engaging. Silicon Valley’s instincts when it comes to taking responsibility for the impact of these technologies have often been bad. “I think the idea that fake news on Facebook … influenced the election in any way is a pretty crazy idea,” said Mark Zuckerberg at an industry conference after the election. The statement was widely derided, considering the mind-blowing readership for such stories, and in mid-December Facebook reversed course and introduced measures to combat fake news, including partnerships with fact-checking websites such as Snopes.com and PolitiFact. (German lawmakers are currently considering a law that would fine Facebook €500,000, or $520,000, each time a fake news post isn’t deleted within 24 hours.) Zuckerberg’s comment also called to mind other tone-deaf tech proclamations, such as Alphabet’s Page opining that in a future with capable robots, people could simply work less, or Uber’s Travis Kalanick talking happily about getting rid of the “other dude” in the car (aka the cabbie) to keep fares low.

Technologists are ascendant now, and in the year ahead the Valley will have to refine both its rhetoric and beliefs, particularly with a president who’s predisposed to turning companies into targets of populist animus. That extends to how it collects and protects its customers’ data. Companies such as Alphabet and Facebook built enormous businesses out of gathering every piece of digital miscellanea about their customers to better serve them content and ads. As we’ve already seen from candidate Trump’s criticism of Apple after it resisted helping to unlock the iPhone used by the terrorists in the San Bernardino, Calif., attack a year ago, President Trump is likely to grab for that data and think little of liberty and privacy when they’re seen as obstacles to national security. “A president who prides himself on changing all the rules and throwing away the established norms is going to look at that data trove and correctly say, ‘if I had that data I would do a better job securing the nation,’” says Orion Hindawi, chief executive of data security company Tanium.

Silicon Valley is engaged in many idealistic pursuits, such as creating tools to treat disease, finding better ways to care for the elderly, and improving car, train, and air travel. But it can’t mistake these noble efforts as solutions for the real negative side effects of its dominance. For years it was fashionable, even necessary, for tech companies to be an agnostic conduit for all flavors of web traffic, news, ads, and politics. It’s now apparent, in demands that they pledge to refuse to build a Muslim registry, for example, that the old neutrality will no longer fly. This is the price of primacy: Silicon Valley is going to have to take a stand.

Before it's here, it's on the Bloomberg Terminal.
LEARN MORE