Big Tech is cut off from the real world
The public worries about the economic and social effects of technology
by: Rana Foroohar

Have we reached a market top in technology stocks, and in particular those of the Fangs: Facebook, Amazon, Netflix and Google? That is the question many investors are asking, not only because their valuations seem so rich, but also because it seems Big Tech has become the new Wall Street — the prime target for a populist backlash in a world increasingly bifurcated, economically and socially.

When US president Donald Trump is tweeting about Amazon avoiding sales tax (incorrectly, not that it ever stopped him) you know the trend has reached critical mass. Meanwhile, the industry continues to generate its own terrible PR: see the most recent complaints from numerous women about sexual harassment by tech investors.

What is most interesting is that Silicon Valley remains in a cognitive bubble, reluctant to engage with legitimate public worries over monopoly, privacy and tech-related job disruption — not to mention its own culture.

When I ask most techies about these concerns, reactions tend to range from defensive to naive to clueless: “Politicians don’t understand the Valley”, or “Universal basic income will make work irrelevant” — or, worst of all, the patronising smile or exasperated look that says: “You’re not a tech insider, and thus you just don’t get it.”

It all seems too familiar. I am old enough to have lived through one big boom-and-bust tech cycle. Indeed, I worked for a high-tech incubator in London from 1999 to 2000, when venture capitalists would hire journalists to scout “pan-European B-to-C media deals”, a sign of froth in the market if there ever was one.

Levels of hubris today are similar, but more pernicious, given that the largest technology companies have become the systemically important institutions of our day. Like the big Wall Street banks, they hold vast amounts of money and political power and even greater troves of data. Facebook has more users than China has people. Yet unlike Lloyd Blankfein, the Goldman Sachs chief executive, they are not joking when they say they are doing God’s work.

Silicon Valley operates more or less exclusively on the notion that it is making the world more free and open, despite growing concerns that social media has eroded democracy and predatory algorithms are targeting the weak and vulnerable, in the same way that pre-crisis predatory lending did.

The Valley has clearly moved far, far away from its hippy, entrepreneurial roots. Big Tech chief executives are as rapaciously capitalist as any financier, but often with an added libertarian bent in which anything and everything — government, politics, civic society, and law — can and should be disrupted.

“Demos — society itself — is often viewed as being ‘in the way’,” says Jonathan Taplin, a professor at the USC Annenberg Innovation Lab in California, and the author of Move Fast and Break Things, which tracks the evolution of the Silicon Valley political economy.

Frank Pasquale, a University of Maryland law professor and noted Big Tech critic, cites a telling example of this attitude. “I once had a conversation with a Silicon Valley consultant about search neutrality [the idea that search engine titans should not be able to favour their own content]. And he said, ‘We can’t code for that.’ I said this was a legal matter, not a technical one. But he just repeated — with a touch of condescension — ‘Yes, but we can’t code for it, so it can’t be done’. The debate would be held on the technologist’s terms, or not at all.

All this reminds me of the cognitive bubble that financiers were in before (and in many cases after) 2008. Like the tech industry today, finance did a good job of using its money and political power to hold the debate over reform hostage to its own interests. Policy conversations were made as complicated as possible to keep “insiders” in control, even though the simple questions — is the financial system helping the real economy and society or not? — were often the best and most important.

Cognitive capture of decision makers was rife, because financiers and regulators lived and worked in the same echo chamber. Many bankers I knew seemed befuddled about why people were so angry with them. No wonder — they had never met any ordinary people before.

All this is true when it comes to Big Tech today. “Silicon Valley talks mainly to itself,” says Vivek Wadhwa, a software entrepreneur and fellow at Carnegie Mellon University. “It’s all about connections here, and nobody wants to take on the big issues for fear of offending someone important.”

Indeed, too many attempts at public “engagement” just end up making Silicon Valley executives seem more, rather than less, out of touch (think not only of Uber’s epic mistakes, but also of more subtle examples such as Mark Zuckerberg’s rambling, 6,000 word letter addressing the topic of fake news).

The public worries about the economic and social effects of technology, and those worries are not going away. Some investors are even baking them into the valuations.

“Big Tech and Silicon Valley have been among the most politically insulated sectors in the S&P 500, while financials and energy have been among the most closely scrutinised. Investors would be well-advised to think about how these roles may reverse in the current administration,” read a note from Strategas Research put out last week. Fang executives should take heed.

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