Peter Thiel, never one to keep a low profile, made his most recent set of waves with reports that he is prepared to decamp from Silicon Valley to more benign haunts in Los Angeles along with several of his companies. His rationale, according to a piece in the Wall Street Journal, is that the Valley is now a politically intolerant culture, left-leaning in the extreme and to the exclusion of any contrarian viewpoints; any culture so unable to consider alternative viewpoints, the thinking continues, will stifle innovation. Thiel also is among the voices warning that the Valley is unprepared for a coming tsunami of regulations from Washington, which will undermine its ability to lead tech’s next wave.
Over the past decade, Thiel has proven to be a news magnet. He gets attention in the tech world much as Donald Trump gets attention in the political realm. Thiel speaks without a filter, often makes outrageous comments, and takes positions at odds with the elite, most notably his full-throated endorsement of Trump and a keynote at the Republican National Convention when most of the technorati were card-carrying NeverTrumpers.
In this case, though, Thiel’s criticisms are themselves newsworthy. He may be an imperfect messenger, but his message had best be heard.
The size and scale of technology companies now surpasses that of most of the industrial, energy, and finance companies that dominated the American economy during the 20th century. The Valley’s close-knit groups of funders, founders, CEOs and listed companies seem to think they can remain both insular and dominant without either government or social backlash. That was always far-fetched, and is now utterly absurd. It’s one thing for renegades to re-invent the operating system for society. But once those renegades become the rulers, the rest of society will—and should—demand a greater say in how these technologies and services shape our lives and consume our time, energy, and money.
Once upon a time—and in Valley-land, there is a once-upon-a-time—the tech ecosystem represented not just a small group of companies and funders, but also a relatively small slice of the nation’s economy. The early years of Apple, HP, and Intel may be looked at fondly and mythologized. But as recently as 1985, there was only one Valley company in the top 100 of the Fortune 500 list: Hewlett-Packard at number 60. Xerox, based elsewhere but with a strong research presence in Palo Alto, was number 38. IBM, based in New York, was then the largest tech company in the world. It clocked in at number 6, and its rigid corporate culture and focus on selling to other corporations were seen as the antithesis to the Valley’s startup, counter-cultural vibe.
Even with the internet boom of the 1990s, the ethos of the Valley could rightly claim to be separate, new and different, propagated by a band of misfits and upstarts, libertarian and utopian. Companies such as HP were more corporate and traditional, but the predominant meme was not just liberal and left, but dismissive of government, avid about a future where technology liberated all, and seemingly bemused by the vast wealth that these new products and services generated.
Today, however, some of those companies are more dominant than even the robber barons of old. At his apex, the oil billionaire J. Paul Getty was the richest man in the world, worth about $11 billion, inflation adjusted. Today, there are 53 tech billionaires in California alone, and 78 in the United States; Jeff Bezos, Bill Gates (both of course in Seattle), and Mark Zuckerberg each have fortunes in excess of $50 billion. Peter Thiel has an estimated $2.5 billion.
That changes the equation, which Thiel implicitly realizes in his warning of coming regulation. It’s not just the personal fortunes, but the companies’ sheer scale and reach. Facebook connects nearly half the world’s adults, even if you adjust for inactive users. Google and Facebook together are a virtual duopoly for online ad sales; Amazon (again, not technically in the Valley but part of the equation) is racing ahead in e-commerce and cloud services; Salesforce, less mentioned because it is largely business-to-business, has established a preeminent market position with its sales-and-management software; Google’s YouTube is the entertainment hub for millennials and tweens. This list could go on for pages and would only further illuminate just how dominant these firms have become. Add in the coming waves of artificial intelligence, with smart homes just the beginning, and the arc is for these companies to reach ever-deeper in our personal and professional lives.
That’s why there is and will be an even greater pushback against the idea that a small group of companies and executives can reap vast rewards, dictate the architecture of the online, cloud, AI, and robotic worlds and maintain an insular, parochial and narrow worldview marked by groupthink.
For all of the libertarian gloss and utopian leanings, there are strong resemblances between today’s tech culture and the elites who dominated finance, business, and politics at the turn of the 20th century. Those elites had their moment as cultural icons, followed by intense pushback, vilification and then regulation. J.P. Morgan was lauded for single-handedly bailing out the financial system from the Panic of 1907; barely five years later, he was hauled in front a congressional committee headed by Arsene Pujo of Louisiana, questioned about his leadership of a dark and secret “money trust” cabal and cast as the villain of elite wealth who was defrauding the American people.
In his unartful way, then, Thiel is warning that the Valley’s tech elites are arrogantly unprepared for what’s coming. The government is eyeing them for the same reason robbers target banks: that’s where the money is. Tech will have an opportunity to shape the likely regulation, but only if it acts, rather than reacts, and offers real solutions that take the concerns of both government and citizens more seriously.
Where Peter Thiel lives is of at best marginal import to anyone but him. But his warning should be heeded now, while the Valley still has a chance to steer a new course and before the joystick is seized by others.