Silicon States

by Lucie Greene

  Tech leaders have historically spoken out in favor of net neutrality, but in the wake of recent debates, they have gone markedly quiet. In part, because many Silicon Valley giants are now too big to need it—after all, net neutrality is the principle of enabling equal access to sources, pages, and websites regardless of commercial bias. It’s about free speech, and websites, and small companies being as easy to find and use as big ones. Facebook, Google, Amazon, and Netflix are the biggest fish of all. And they are shaping the way we use the internet in ways similar to the internet providers.

  The ideological battle continues between the original “free” internet and the capitalist machine it’s become. The European Union’s decision to fine Google €2.4 billion for anticompetitive behavior in its shopping and listing services was as much about fair trade as about the kind of internet it wanted—one that is free, liberating (to small businesses), and fair. Much like the net’s original champions had in mind.

  The 1980s were significant for turning technology into a mass consumer product with the advent of personal computing. NASA and military funding fueled software development that was subsequently applied commercially. PARC, the Xerox research center founded in 1970, is credited with developing laser printers, graphical user interfaces, screens, the personal computer, and Ethernet, among other examples. PARC is indirectly connected to the launch of Apple, Cisco, and Microsoft. In 1981, IBM took on Apple with its own personal computer (with an operating system supplied by Microsoft), paving the way for an explosion in the PC market. Microsoft launched Windows in 1985 and became the dominant operating system on personal computers with Windows 3.1 in 1992.

  Leslie Berlin, a Silicon Valley historian and academic at Stanford University, tells me over breakfast in Palo Alto that the rise of venture capital was the spark that moved computing from being a specialist pursuit to something found in most people’s living rooms. Our surroundings feel apt when we chat. We meet at a slightly frayed but popular hotel restaurant; several baby boomer businessmen, clad in slacks and golfing sweaters, conduct breakfast meetings. Outside, a small army of neatly groomed millennials, sporting T-shirts, jeans, North Face vests, and branded merchandise of their respective tech employer, pound the streets, park bicycles, and sip lattes. Collectively Palo Alto is spookily, and literally, similar to the stereotype painted in Mike Judge’s hit show Silicon Valley. We are now in the heartland of this major transition of tech as specialist equipment to ubiquitous consumer segment.

  Following the rise of consumer tech, the next stage in Silicon Valley’s influence ascent was the introduction of the internet. The first World Wide Web page was launched at CERN, the European particle physics research facility, by Tim Berners-Lee in 1991, leading, says Danah Boyd of Microsoft, to a two-part Silicon Valley. One: classic business mindsets, the chip manufacturer ecosystem and hardware innovation labs synonymous with Silicon Valley’s origins, meet with Two: a new world of consumer-facing, culturally connected businesses centered on lifestyle, retail, and culture.

  “You have this new movement of upstarts and troublemakers that become part of what we understand as Silicon Valley lore. This gets born here,” Boyd says. “That group starts to shape a whole set of things that would move forward.”

  With Netscape’s Navigator, the first widely used web browser, Marc Andreessen—cofounder and a venture capitalist whose eponymous firm Andreessen Horowitz would become legendary for funding Facebook, Foursquare, Pinterest, and Twitter—arrives on the scene. “He plays an important role through to the present,” says Boyd. His firm Andreessen Horowitz, founded in 2009, spearheaded the celebritization of venture capitalists. (Venture capitalism used to be seen as a very unsexy business. Thanks to Andreessen—a figurehead for technology as a thought leader of the future—being a VC is almost as glamorous as being a startup founder.)

  The new consumer internet made for a melting pot of creativity, business, and innovation in Silicon Valley. It attracted an influx of new talent, money, and interest.

  A host of dot-coms rose up during this time, from Amazon and Napster to Google and eBay, fueled by intense speculation and increased internet access. Between 1990 and 1997, the number of American households with access to the internet rose from 15 to 35 percent. The boom gained pace after 1995 with a slew of new companies launching.

  “By 1999, we have a flood of MBAs coming in on a get-rich-quick scheme,” says Boyd. But it could only last so long. Company valuations were rising exponentially by the end of the 1990s, regardless of their inherent value or earnings or due diligence or proven business models. Dot-coms were able to launch and achieve stock market floatations without ever having turned a profit, or revenue. By 2001 the fever spiked. The ill-fated merger of America Online (AOL) and Time Warner is regarded as the tipping point in confidence, and the path to the dot-com bubble bursting. Dell and Cisco also created panic by launching large sell orders on their stocks. Investment capital dwindled fast, prompting rapid decline in startups. Companies valued at millions were worthless within months. Market value of $1.755 trillion was lost, and many of the boom-era startups folded.

  While the bubble bursting was disastrous economically, the 1990s and the dot-com boom led to important shifts in consumer behavior, which have only fueled Silicon Valley’s current ascent. During this time, internet use for a number of tasks became naturalized. We learned to use the web for shopping and seeking information; consuming content and media became commonplace. All this would prove a precursor to subsequent additions and business models. It would also create a trust in using online tools to bank, pay taxes, and share personal information.

  We also see the rise of the “PayPal mafia,” the term jokingly given to the former PayPal staffers and executives who sold it in 2002 and have since gone on to found many of Silicon Valley’s leading companies. They invested in most of the rest and, in many ways, define Silicon Valley culture today. PayPal founder Peter Thiel, X.com founder Elon Musk, PayPal CTO Max Levchin, Dave McClure, Chad Hurley, and LinkedIn cofounder and former PayPal EVP Reid Hoffman, among others. (There’s a long list.) Palantir, SpaceX, Tesla, LinkedIn, Yelp, and YouTube all sprung up in the wake of PayPal from this famously close network. The founders (many of whom are now billionaires) were propelled to celebrity status. A 2007 profile in Fortune magazine described their growing importance.

  “This group of serial entrepreneurs and investors represents a new generation of wealth and power,” the article said, adding: “In some ways they’re classic characters of Silicon Valley, where success and easy access to capital breed ambition and further success. It’s the reason people come to the area from all over the world. But even by that standard, PayPal was a petri dish for entrepreneurs.”

  In this group we see Peter Thiel, a die-hard Libertarian, champion the notion of government as interfering and slow. We also see the rising theme of going against the mainstream and being counterintuitive to innovate. (This extends to Thiel’s famed support for shunning university degrees in favor of creating companies that change society or other pursuits that are more meaningful.)

  “The PayPal mafia is a really important set of characters because they start to bring in the first wave of a finance mindset,” says Boyd. “They’re not coming in with any of the cultural history, and while they have technical jobs, they’re seeing tech as a tool to restructure an existing system through the fetishization of destruction.”

  This is a key point in the rise of Silicon Valley: the birth of “disruption” and change not as something scary, or sinister, but as something cool, desirable, and progressive—and for that terminology to be adopted en masse. It’s the birth of disrupting other businesses, and models, to make money. It’s the birth of tech determinism, a Darwinistic theme that continues to be propagated by Silicon Valley leaders: innovation should rightfully progress, evolve, and shape the world unthwarted by constraints, government, or anything else. Even if, like Uber, you’re disrupting a profitable industry, you’re predicated on c
heap non-unionized labor, and you have yet to make a profit. In fact, you’re making losses, but as long as confidence in your growth is high, you can continue to attract funding.

  The opportunity to dismantle existing outmoded industries became a cult pursuit at this point. Companies framed their mission statements with it, helped by the continued influence of The Innovator’s Dilemma, Harvard professor Clayton M. Christensen’s pivotal 1997 book that disseminated the idea of disruptive innovation. (It identified how innovations could displace market leaders by creating new markets and value networks using cheaper versions.) It’s now a mantra in Silicon Valley.

  After the 2001 devastation of the dot-com bubble, the Valley’s rebound gathered steam in the 2000s and is often attributed to the PayPal mafia described above. With the rise of these brands, and the security they provided to a shaky national economy, came the worship of technology for all, driven by the marketing of these companies. It was further propelled by the rise of smartphones as mass consumer products and the explosion of apps.

  Important launches include: Google, 1998; Apple’s comeback under Steve Jobs, 2000; SpaceX, 2002; LinkedIn, 2002; Facebook, 2004; Palantir, 2004; YouTube, 2005. Then the second wave: Twitter, 2006; Airbnb, 2008; Uber, 2009; WhatsApp, 2009; Instagram, 2010; Snapchat, 2011. This resurgence was affected, but not thwarted, by the 2008 global economic crisis. Another important date: the iPhone launched in 2007.

  This later wave was propelled by a new narrative, espoused in part by innovative communications figures like Margit Wennmachers. A new type of storytelling about Silicon Valley companies rendered them much more special than tech. The internet was more than just a way to connect and search for information. Beyond Thiel’s beloved disruption was the idealistic notion that technology could shape and change the world for the better. As these companies started to catch up with Coca-Cola, Nike, Adidas, and McDonald’s as the most powerful consumer brands of all time, they also began to believe their own hype.

  “Everything explodes in 2000–2001 [with the bubble], and what that means is that the MBAs leave, but the people who still believe that technology can actually be transformative stay,” says Boyd.

  Having cofounded the Bill & Melinda Gates Foundation in 2000, Bill Gates moved into philanthropy full-time in 2006, taking on extreme poverty and disease globally, often propelled by new technologies. Musk launched SpaceX in 2002, a commercial venture with space travel in its sights. Founders Fund was opened in 2005 for companies building “revolutionary technologies.” In 2008, the Singularity University incubator was founded by Peter Diamandis and Ray Kurzweil at the NASA Research Park in California. “We believe our world has the people, technology, and resources to solve any problem, even humanity’s most urgent, persistent challenges,” Singularity proclaims. In 2009 Google Ventures began investing in companies that “push the edge of what’s possible” in life science, health care, artificial intelligence, robotics, transportation, cybersecurity, and agriculture. “Our companies aim to improve lives and change industries.”

  “Change the world” becomes a marketing mantra, as well as a business philosophy. It leads to the next significant transition in the history of Silicon Valley. In tackling big problems while also adopting sweeping altruistic rhetoric, the Valley starts to encroach on the state’s role as world-builder, moral compass, and thought-leader.

  Gates doesn’t mark tech’s first move into philanthropy. But he does perhaps start the trend for highly visible, high-profile philanthropical work that will only continue as Silicon Valley’s luminaries make their billions and want to use their power and influence to solve the world’s problems. Gates also began Silicon Valley’s trend for combining philanthropy with commerce.

  “That’s where you start to see an interesting shift,” says Boyd. Capitalists started to view not philanthropy, she says, but market structures as the route to solving the world’s challenges. “That’s where you get that very intense, neoliberal-libertarian-capitalism combination that becomes templated as Silicon Valley.” This was also the time when social networking and blogging sites began to grow. “The cultural geeks come back and start to reimagine things, and a lot of those early social network sites, blogging and social media, were reimagined by those cultural geeks. The money wasn’t at all relevant.” They often started, she says, with an idealistic mission, but when these businesses could scale and get funding, money of course does become relevant.

  Wennmachers sees the move from military to consumer products as the biggest factor in how Silicon Valley reached its current influential status. “In the initial phase, nuclear technology was primarily built for other technologies, and it was built for the military, then it was built for the financial services, but it was always built for professionals and for sectors that were using technology in the guts of the organization.” She reflects, “It wasn’t really outward-facing. A lot of really important stuff was created that then formed the foundation for what’s happening today. Increasingly, software solutions were being applied to nontraditional sectors.”

  There’s another important change too—Silicon Valley companies became the stars, not just the facilitators. They made their own brands, not the channel or the mechanism.

  “There was a phase where software companies tried to create software to sell to traditional industries. For example, there was a whole wave of applications that would optimize the logistics for the taxi industry,” says Wennmachers. “It turned out that the taxi industry is not necessarily a sophisticated software buyer and nothing ever came from it, and then Silicon Valley companies start to go, ‘I’ll provide the entire solution, rather than relying on the traditional industry to adopt what I think might be the future.’ That’s where you get Uber and Lyft. So, as a result, a lot of the iconic new brands are coming from California.”

  The fame of these new consumer brands quickly reached an international scale too, she says. California was making America known for technology that appealed directly to the consumer. It was at this point that Silicon Valley became intertwined generally with America.

  The first result was the iPhone, which switched the balance of power from Asian countries like Japan and Taiwan to the U.S. because of the core importance of the software. “People spend a lot of time talking about the way the hardware looks, but it’s about how the hardware is integrated with beautiful software. That is the competency of Silicon Valley and, as it turns out, not of Japan,” says Wennmachers. All of a sudden, iconic companies in California burgeoned, and the Valley elevated the country economically and—perhaps more important—culturally.

  This happened in sync with technology becoming not just a daily interaction, but something even more intense: a habit, a lifestyle, a compulsion. Suddenly there was a new relationship between consumers and their tech brands.

  “The word I would use is intimacy,” says Stanford’s Leslie Berlin, who has studied Silicon Valley for twenty years. “We have an intimate relationship with these technologies that colors our sense of who we are, and that is new. That is the way that Silicon Valley has gotten under everybody’s skin.”

  Some of Silicon Valley’s famed, altruistic vision is real, some of it is whipped into a frenzy for headlines, and some of it has changed over time as these companies have moved from being the inventions of clever techies to money-making machines.

  “The fact that I now have Google on my phone and I can look up anything that’s in the Library of Congress and Wikipedia is genuinely life-changing,” says Wennmachers. The bold ambitions of some Silicon Valley companies should be encouraged, she believes. “We want it to work, because if it does, it will make for a lot of positive change.”

  This kind of genuinely innovative thinking is perhaps one of Silicon Valley’s greatest strengths. “Silicon Valley is a giant experimentation lab,” says Wennmachers. “There is a set of Silicon Valley entrepreneurs, just like there is a set of people who make movies and a set of people who pass laws, who make very lofty claims that i
t will change people’s lives for the better,” she says pragmatically. “Sometimes that’s true and sometimes it isn’t.”

  Silicon Valley companies continue to rely on soaring rhetoric, but in recent years the media has grown more critical of tech leaders and tech company behavior. Reportage now shows Silicon Valley leadership as rampant imperialists, or the architects of our automated doom. In snarkier columns, its arrogance, ambition, and tone-deafness are lampooned. But the picture is more nuanced, says Puneet Kaur Ahira, a special advisor to Megan J. Smith, America’s CTO during the Obama administration. (Ahira and Smith are both former Googlers.) Seated in a bustling Le Pain Quotidien in Manhattan in late December, beset by holiday shoppers and workers grabbing coffee, she talks about her experiences on both sides of the fence. Many of these companies were started with bold, genuine, optimistic idealism, she points out.

  “If you look at where the flow of logic started, when Larry [Page] and Sergey [Brin] founded Google, their ambition was to organize the world’s information in a useful and universally accessible way. That’s no easy task, and what they developed was magnificent in terms of a solution that’s elegant as well as intuitive. I think there’s something powerful in setting a mission of that magnitude and then actually achieving it,” Ahira says. “The fact that they satisfied the initial vision for the company meant that the bar got raised even higher. Across the tech community there is this prevailing discourse where you hear people asking each other, ‘How can we use our talent, our knowledge, our resources to turn the impossible into the possible? What pursuits are truly worthy of our time, our energy, and effort?’ The sentiment is absolutely genuine. There’s a belief that if you go after the biggest problems, the money will follow. But alongside these visions of grandeur also comes a dangerous level of arrogance and hubris.”