The Ruthless Overlords of Silicon Valley
Cox, Rob, Newsweek
Byline: Rob Cox
Facebook. Google. Zynga. They think they're saints of American capitalism. But they're really the successors to the Big Money magnates of the Gilded Age.
Silicon Valley likes to think of itself as morally exceptional. When Google went public in 2004, the Internet search company's wunderkind founders, Larry Page and Sergey Brin, penned a letter to prospective shareholders that has become the Internet industry's version of the Magna Carta. In it, they pledged that Google was "not a conventional company" but one focused on "making the world a better place." Their manifesto followed a venerable tradition in Silicon Valley (meaning the swath of technology and Internet companies based in the cities and towns between San Francisco and San Jose). A decade earlier Steve Jobs insisted that "being the richest man in the cemetery doesn't matter to me ... Going to bed at night saying we've done something wonderful ... that's what matters to me."
The newest inductees to the Silicon Valley pantheon have continued to think very well of themselves and their motives. Mark Pincus, who introduced Farmville and Words With Friends to create pleasant online distractions, embraced comparable sentiments when taking Zynga public last year: "Games should do good. We want to help the world while doing our day jobs." In the prospectus for what could be a record $10 billion initial public offering, Facebook founder Mark Zuckerberg promises that a similar philosophy will guide the social network. "Simply put: we don't build services to make money; we make money to build better services. And we think this is a good way to build something. These days I think more and more people want to use services from companies that believe in something beyond simply maximizing profits."
After the financial crisis and the great Wall Street swindles of the past few years, this all sounds refreshing. Toiling away in places with bucolic names like Sunnyvale and Mountain View, entrepreneurs create products intended to improve mankind and make the world a better place. The narrative offers an antidote to tales of bailed-out bankers collecting undeserved bonuses and job-crushing private-equity barons paying lower tax rates than their secretaries. But wishing to hold the moral high ground does not make it so--whether in industry, politics, or religion.
Though Silicon Valley's newest billionaires may anoint themselves the saints of American capitalism, they're beginning to resemble something else entirely: robber barons. Behind the hoodies and flip-flops lurk businesspeople as rapacious as the black-suited and top-hatted industrialists of the late-19th century. Like their predecessors in railroads, steel, banking, and oil a century ago, Silicon Valley's new entrepreneurs are harnessing technology to make the world more efficient. But along the way, that process is bringing great economic and labor dislocation, as well as an unequal share of the spoils. Just last week, the Justice Department warned Apple that it planned to sue the company along with several U.S. publishers for colluding to raise the price of electronic books--monopolistic behavior that would have made John D. Rockefeller proud.
"During the second industrial revolution, the economy went through major transitions, led by 50 individuals who became incredibly wealthy, leading to huge unemployment," says Joe Lonsdale, a 2003 graduate of the university founded by one of those tycoons, Leland Stanford. Indeed, Lonsdale is hoping to make his own fortune by "reinventing the infrastructure that powers global wealth" with his latest startup, Addepar. "Instead of the robber barons, today it is the technologists who are doing the destroying."
A few Silicon Valley denizens are beginning to recognize the risks inherent in combining moralistic hubris with the Internet's powers of creative destruction. At a closed-door meeting of high-tech honchos in Davos last month, Cisco Systems chairman John Chambers and Glenn Hutchins, founder of the leading investment firm Silver Lake, warned of a potential backlash. …