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The Disrupters

from the magazine

The Disrupters

Silicon Valley elites’ vision of the future Winter 2017
California
Economy, finance, and budgets

In just ten years, Facebook built a global empire that surpassed General Electric in market value—and did it with just 4 percent of the Old Economy giant’s workforce: 12,000, compared with 300,000. Whatsapp, a recent Facebook acquisition, managed an even more impressive wealth-to-labor ratio, with a $19 billion value and just 55 employees. Combined, both companies reach roughly one-sixth of humanity. Facebook’s entertainment colleague just to the south, Netflix, crushed Blockbuster’s mammoth national network of 9,000 stores and 60,000 employees with its more nimble workforce of just 3,700 employees. It’s easy to see why: for just $10 a month, Netflix consumers could enjoy an unlimited video library larger than any of Blockbuster’s retail shops, without ever having to find their car keys. Blockbuster filed for bankruptcy protection in 2010.

Blockbuster’s fate has been duplicated many times. The Silicon Valley economy has caused massive disruption of traditional business and business models—in the process, making a relatively small cadre of brilliant engineers staggeringly wealthy. Until now, these dislocations, while profound, have been reasonably manageable. But in the years ahead, a vast new range of technological innovation—from self-driving cars to robots—may make the disruptions we have seen so far look tame. In this coming world, driven by innovation and powered by individual brilliance, what role will “normal” employees and small-business owners have?

I sought to learn how the tech elite would answer these and other questions, and how they think more broadly, by polling dozens of start-up founders and conducting interviews with a handful of notable billionaires. To my knowledge, mine is the first representative opinion poll of tech founders, thanks to connections I made during my time directing political writing for the Valley’s premier tech blog, TechCrunch. At the time, TechCrunch owned an exhaustive, user-generated database of start-up founders and investors, called Crunchbase. It was an insider’s source for all things tech—the Wikipedia of Silicon Valley. I obtained the e-mail addresses of every founder and cofounder in the database and got many of them to answer a long battery of political and psychological questions, on everything from their thoughts on human nature to energy policy. To ensure that the sample wasn’t biased by my own connections, I randomly e-mailed thousands of founders on the list. A total of 147 founders made it into my final sample. I supplemented my randomized sample with direct outreach to a few billionaires and household names in tech (such as the founder of Craigslist, Craig Newmark, who isn’t a billionaire but did create one of the most widely used websites in the world).

As far as the future of innovation and its impact on ordinary people, the most common answer I received in Silicon Valley was this: over the (very) long run, an increasingly greater share of economic wealth will be generated by a smaller slice of very talented or original people. Everyone else will increasingly subsist on some combination of part-time entrepreneurial “gig work” and government aid. The way the Valley elite see it, everyone can try to be an entrepreneur; some small percentage will achieve wild success and create enough wealth that others can live comfortably. Many tech leaders appear optimistic that this type of economy will provide the vast majority of people with unprecedented prosperity and leisure, though no one quite knows when.

My aim in conducting this survey was to discover and report on the long-term economic vision of tech leaders, who are beginning to take on a broader role as public leaders. As such, I explore here two main themes. The first is the economic ideal of the elite and how their technologies shape their vision of an entrepreneurial yet unequal society. The second is Silicon Valley’s uniquely pro-government political ideology and how it feeds into its solution for the displacements that automation and transformation will cause: a universal basic income.

Illustrations by Walter Vasconcelos

Silicon Valley has a grandfatherly reverence for its living legends, and Paul Graham is one of them. Named one of Businessweek’s 25 “most influential people on the web,” Graham sold his company to Yahoo in the late 1990s for the equivalent of roughly $50 million in stock (a monumental achievement at the time). He then cofounded Y Combinator, a kind of Harvard University for start-ups, which houses aspiring tech founders in an incubator program that prepares them to raise capital, build management teams, and develop companies. Y Combinator has helped start more than 900 firms, including Reddit and Airbnb.

Graham’s blog is highly regarded, but when he dipped his feet into the contentious inequality debate, things got awkward. Inequality is something of a taboo subject in the Valley. Rarely do I hear technologists talk about how they feel about the subject in public. Many take a pessimistic view of most of the workforce. And they fear what will happen when they build robots that can perform most jobs much better than the average human.

Graham, not one to shy from the truth, decided to air these beliefs. He said that it is the job of tech to create inequality. He continued, “I’ve become an expert on how to increase economic inequality, and I’ve spent the past decade working hard to do it. . . . You can’t prevent great variations in wealth without preventing people from getting rich, and you can’t do that without preventing them from starting startups.”

Few notable Silicon Valley figures disagreed with Graham’s premise that growing inequality was inevitable and that nothing should be done to slow it down. Instead, they criticized how he wrote about the topic. “Yes, income inequality exists and yes, it’s a natural consequence of capitalism, and other forms of government are decidedly worse than capitalism because they inefficiently create and allocate resources,” agreed tech investor Mark Suster. “But the celebratory nature of today’s conversation felt tone deaf.”

To understand whether Graham’s response was representative, I added questions about inequality to my poll of tech founders. I added them late in the poll’s run, so the sample size is small (about 12 to 14 founders), but because the questions produced such a clear consensus, the data are informative.

I asked: In an economy where income was perfectly allocated by how much wealth each worker contributes, would this world be very equal or unequal? All respondents said that a meritocracy inherently leads to an unequal world. “Very few are contributing enormous amounts to the greater good, be it by starting important companies or leading important causes,” explained one founder. “An uninspired population is a stagnant population,” wrote another. “Inequality breeds creativity and fosters motivation to change one’s situation. Mass change starts with one person inspiring another.”

I then asked what percentage of wealth would be held by the richest people in a perfect meritocracy. Roughly eight of 12 respondents said that 50 percent or more of all income would go to the top 10 percent. This worldview is exceedingly common in Silicon Valley. Tech executives often praise so-called 10xer engineers—an elite class of worker ten times more productive than average workers. That is, tech is obsessed with the highest performers within an already-selective class. The phrase is so common that in my old neighborhood, the Mission District in San Francisco, Red Bull advertises that its caffeine-laden beverage turned “10xers” into “100xers.”

Understanding these frank beliefs on inequality is an important step in placing Silicon Valley’s common policy solutions in context with its goals. For instance, tech founders express broad support for increased “equality of opportunity” for every American. When it comes to giving people of all backgrounds a better shot at working for a Google or an Apple, tech founders sound supportive. For instance, in response to a lack of ethnic and gender diversity at tech companies (all of which are about 80 percent male and about 60 percent Asian or white), the industry has directed cash toward programs that teach coding to underprivileged communities. One of the largest recipients is Code.org, an industry-wide initiative to give computer-science education to every American high schooler.

But when you ask donors whether Code.org or other diversity initiatives will reverse the overall trend of growing economic inequality, they demur. At a Code.org launch event in 2013, I asked LinkedIn cofounder Reid Hoffman what the impact would be if everyone learned coding. “It’s not that everyone will have the skills for a high-performing job,” he said. Instead, Hoffman claimed that mass computer literacy would help many more people make meaningful inventions that would benefit their companies and communities. But the upshot was clear: most of Silicon Valley’s charitable initiatives, especially education, engineer a world of vast inequality. This fact is foundational to the high-skilled world. To paraphrase a common saying in the Valley: inequality is a feature, not a bug.

Eatsa opened with a bold premise: the chain could reduce the cost of healthy food by automating its workforce.

How, exactly, does information technology increase inequality? By promoting superstars. For example, 17-year-old Michael Sayman had a dream summer in Silicon Valley. While other interns around the country were busy making coffee and sorting mail, Sayman was posting selfies with the likes of Mark Zuckerberg and Tim Cook. Sayman is a perfect example of what the economist Sherwin Rosen called the “superstar economy.” Rosen’s prescient 1981 paper predicted that “the phenomenon of superstars, wherein relatively small numbers of people earn enormous amounts of money and dominate the activities in which they engage, seems to be increasingly important in the modern world.” The theory goes that, as information technology allows employers to become immediately aware of top talent that can serve millions of people at scale, they’ll all rush into a bidding war for this small slice of extraordinarily gifted people.

Sayman built a viral game, 4Snaps, that snagged an impressive 500,000 users. The unexpected success helped the prescient young coder start paying family bills when he was just 13. Barely after hitting puberty, Sayman was inspired by Steve Jobs’s announcement in 2010 that Apple would be opening up a novel thing called an “app store,” available to anyone who wanted to submit his or her own programs. Sayman’s school didn’t teach computer programming, so he taught himself through free online tutorials. Andrew McAfee, an MIT economist and expert in the long-term social impact of automation, describes online courses as “diamond finders”—platforms that enable people of great ability in unlikely places to reach their full potential. For McAfee, economic trends accelerated by Internet products leave less room for people of mediocre ability or motivation.

Many industries seem to be following the superstar trend. Since the 1980s, the share of concert-ticket revenue going to the top 1 percent of artists has skyrocketed, from 26 percent to 56 percent. “The music industry is a microcosm of what is happening in the U.S. economy at large,” wrote Alan Krueger, former chair of the President’s Council of Economic Advisers, in a working paper. “We are increasingly becoming a winner-take-all economy, a phenomenon that the music industry has long experienced.”

Earlier this year, I attended the high-profile opening of Eatsa, a fast-food restaurant in San Francisco’s “start-up” neighborhood, the South of Market (SoMa) district. Rarely does the promise of discounted food attract so many highly paid professionals. But this was no ordinary restaurant. Eatsa opened with a bold premise: the chain could radically reduce the cost of healthy food by automating most of its workforce. No humans manage the front counter. Everything is managed in a brightly lit, Apple-store-style open-floor layout, with tablet kiosks lining the walls to take orders. Bowls of fresh quinoa are deposited in futuristic cubbyholes, where translucent screens with real-time graphics tell customers when their custom-made bowls are ready.

For now, a kitchen staffed with real people makes each quinoa bowl by hand, but Eatsa keeps them out of sight because it’s trying to design a restaurant where customers are comfortable never interacting with another person. Eventually, Eatsa is looking to automate more and more of its staff, including cooks. The economies of the model are clear: in a neighborhood known for $20 meals, Eatsa offers lunches starting at around $7. “Technology plays an important role in improving the speed, convenience, and efficiency of our experience. By making things as efficient as possible, we can offer a great price now for a high-quality product,” cofounder Scott Drummond told me.

Eatsa opened not long after the city passed a new minimum-wage law, aimed especially at the service and hospitality industry. Though Drummond is careful with his words, this law doesn’t concern his team as much as it does other struggling San Francisco restaurants because Eatsa doesn’t employ nearly as much low-skilled labor. If Eatsa’s design works, it’s likely that other restaurants could license its technology to avoid the impact of minimum-wage laws. Eatsa’s model represents a long-term trend in mass automation, as technology begins to shift more low-skilled workers into part-time or independent contract work—what’s becoming known as the “contingent” workforce.

Where will this increasing automation leave most people? “Most of us just want a good old-fashioned industrial-era job,” admits McAfee. Yet such jobs will be harder to come by, and such people will play a smaller role.

Mark Zuckerberg’s politics are difficult to pin down. He rarely talks about them publicly but agreed to make the press rounds in 2013 while promoting his immigration-reform agenda. During a rare public interview at the famed Newseum, The Atlantic’s then-editor, James Bennett, asked Zuckerberg point-blank how he identifies politically. Zuckerberg gave a less than satisfying answer: “I’m pro–knowledge economy,” he said, with a smile.

Indeed, the young billionaire doesn’t have easily categorizable beliefs. He’s certainly a Democrat: Zuckerberg is an open and generous donor to Barack Obama, Hillary Clinton, and a few lucky senators, such as New Jersey’s Cory Booker. Yet he is avidly pro–free market. In a thinly veiled protest against Donald Trump and Bernie Sanders in summer 2016, Zuckerberg posted to his millions of followers a rant against anti-trade and anti-immigrant populism, “fearful voices calling for building walls and distancing people they label as others, for blocking free expression, for slowing immigration, reducing trade and, in some cases around the world, even cutting access to the Internet.” Remarks like these often get Zuckerberg and other Silicon Valley leaders branded as antigovernment libertarians. They’re seen as fiscally conservative and socially liberal billionaires who just want to be left alone to solve the world’s problems.

But that doesn’t explain the tech elite’s politics at all. Contrary to popular opinion, most of Silicon Valley is not a libertarian ATM. The tech industry is overwhelmingly Democratic. In 2008, 83 percent of donations from the top Internet firms went to Obama, not John McCain. Many of the Valley’s household names, including Google’s then-chairman Eric Schmidt, personally helped Obama in both presidential campaigns. Republicans rarely get much money or talent from the Valley.

And it’s not just Democratic elected officials: the tech elite also support major liberal policies. Sixty-three percent of all donations from start-up founders and investors went to liberal-leaning causes. Travis Kalanick, founder of Uber, who once had a picture of Ayn Rand’s Atlas Shrugged for his Twitter avatar, has publicly stated that he supports the Affordable Care Act’s individual mandate. Google is an aggressive backer of clean-energy policy. The company withdrew support for the pro-free-market group, the American Legislative Exchange Council, after discovering that it was distributing messaging that questioned global warming. “They’re just literally lying,” Google’s Schmidt said. “Most of Silicon Valley, most of the executives, tend to be Democrats,” tech billionaire Peter Thiel, who supported Donald Trump in the 2016 presidential race, told me.

Yet Silicon Valley’s reputation as a haven for small-government activists isn’t entirely off base: the Valley does support some staunchly libertarian ideas, and the tech elite are not typical Democrats. They don’t like regulations or labor unions. For instance, Bill Gates and Mark Zuckerberg have both given hundreds of millions of dollars to charter schools and supported policies that would allow public schools to fire teachers more readily and dodge union membership. Big tech lobbyists are also strong supporters of free trade. According to Maplight, several telecommunications companies have lobbied for the Trans-Pacific Partnership (TPP) trade deal that union groups and many Democrats oppose.

So what explains the rather odd mix of support for Democratic positions and hyper-capitalistic policies? What I discovered through my survey was that Silicon Valley represents an entirely new political category: not quite liberal and not quite libertarian. They make a fascinating mix of collectivists and avid capitalists.

On the capitalistic side, tech founders were extraordinarily optimistic about the nature of change, especially the kind of unpredictable “creative destruction” associated with free markets. Philosophically, most tech founders believe that “change over the long run is inherently positive.” Or, as Hillary Clinton supporter and billionaire Reid Hoffman told me: “I tend to believe that most Silicon Valley people are very much long-term optimists. . . . Could we have a bad 20 years? Absolutely. But if you’re working toward progress, your future will be better than your present.”

That is, the tech industry’s obsession with innovation is, at its core, a belief that the future gets better. Change is evolutionary. The more things change, the more companies fail—and, alas, the more people get fired—the more we learn how to do things better. As a corollary, they also believe that the government should be run like a business. The “problem with government orgs is they don’t really have an incentive to innovate or improve processes, services, and customer experience, and they are run very inefficiently. If they were run in more of a private-market environment, like start-ups, they could have better ROI and deliver better service for all. Competition is a healthy way to encourage that,” one anonymous respondent in my poll wrote. This explains Zuckerberg’s and Gates’s support of charter schools. Theirs is a move to make public schools more like charters—a different focus from a libertarian vision of simply privatizing the education system. The tech elite want to bring the essence of free markets to all things public and private. Using traditional American political categories, this would land them in the Republican camp.

But Silicon Valley philosophically diverges with libertarians and conservatives in a key way: they aren’t individualists. When the libertarian icon Rand Paul began his early run for president in 2015, in San Francisco, he expected to be greeted like a hero. During the rally that I attended, Paul got rousing applause for railing against mass government spying. But when Paul asked, “Who is a part of the leave-me-alone coalition?” expecting to hear cheers, the room went silent. “Not that many, huh?” he nervously asked.

Indeed, in my survey, founders displayed a strong orientation toward collectivism. Fifty-nine percent believed in a health-care mandate, compared with just 21 percent of self-identified libertarians. They also believed that the government should coerce people into making wise personal decisions, such as whether to eat healthier foods. Sixty-two percent said that individual decisions had an impact on many other people, justifying government intervention. Former New York mayor Michael Bloomberg, a businessman-turned-politician who instituted regulations on soda consumption because the adverse health effects were costing the state money, exemplified this kind of thinking. “I feel [government] encouraging or even incentivizing positive behaviors is supportive, and thinking that personal decisions in health don’t affect others is myopic,” wrote one anonymous tech founder in my poll. That is, tech founders reject the core premise of individualism—that citizens can do whatever they want, so long as they don’t harm others. In the collectivist philosophy, nearly everything we do has an impact on others, justifying government involvement in many aspects of our lives. Hence, the tech industry is heavily populated by what might be called pro-capitalist collectivists.

So if Silicon Valley doesn’t value liberty the way libertarians do, or fairness the way liberals do, what does it value? The tech people I interviewed valued contribution above all. When Steve Jobs’s biographer, Walter Isaacson, asked the iconic inventor about his principal motivation, Jobs responded: “Just letting each person have creative tools to fulfill his or her potential. That’s what we’re trying to do here.”

In Silicon Valley, unearthing the latent talent of each individual is the top priority. For technologists, this means making tools that enable people to create new ideas and distribute them. For the state, this means a role as an investor, rather than as a regulator. Instead of stifling capitalism, the state accelerates the promise of capitalism by heavily funding education, welcoming high-skilled immigrants, and paying for breakthrough scientific research.

But what is government’s role as it concerns those who can’t be entrepreneurs? As the Valley elite see it, it’s to tax the wealthy—and give everyone else lots of cash. A number of Silicon Valley luminaries, including Facebook cofounder Chris Hughes, have begun investigating the possibility of a government-provided universal basic income. A no-strings-attached mass cash transfer will ensure that no matter what happens in the future, everyone will have a reasonable income. Y Combinator is investing millions of its own charitable dollars in a first-of-its-kind universal basic-income experiment to see how poor residents in Oakland respond to an unconditional cash transfer. “I think one of the reasons that inequality feels so unfair is that there are people really truly suffering,” said Y Combinator president Sam Altman, explaining why he supports the basic income. “People have some innate sense of what is absolutely fair: health care, enough to eat, a place to eat, things like that. If you can do that, and then give people equality of opportunity on the upside. I hope that will feel fair to people.”

In other words, Altman says, we shouldn’t try to regulate our way to stopping the inevitable rise of inequality but instead raise the quality of life for everyone. Basic income, he believes, will allow many more people to contribute something unique to the world. “I think there are new novelists who are right now driving for Uber who could contribute more to the sum output of humanity; there are great artists, there are people who just have new ideas about how to build communities that make people happy, that have nothing to do with tech or start-ups at all but are currently not able to do what they want to do,” he said.

How would such a massive new entitlement be paid for? Altman hasn’t calculated the costs, but it comes down to more taxes—taxes paid largely by the super-successful, like the innovators in Silicon Valley. “You give this money to a lot of people,” he says. “Most fail at whatever they do, and some are these wild outlier successes. And if you can enable a lot of people to take a swing, most will fail and some will generate incredible economic value. And, tax the fuck out of that and do more basic income.” Thus, the government serves an essential purpose in not only helping people become “wild outliers” but ensuring that such success gets more widely shared throughout society.

Over the last few decades, technology leaders and entrepreneurs have emerged as some of the most prominent figures in American life, and Silicon Valley has become a byword for innovation, brilliance, and futuristic thinking. But while millions of Americans know the most famous names and the most prominent companies, and we all use the products, the broad philosophy and long-term economic vision of Silicon Valley remain little understood. As tech leaders move to the forefront of economic and public policy, Americans should understand better how they think—especially since their goals and conclusions tend to separate them from earlier generations of business leaders. In many respects, their vision represents something new. Whether it is something that Americans as a whole will embrace and support remains to be seen.

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