The Dreamers in the Valley

Silicon Valley has lost its charm. From being a darling of the political class it has slowly morphed into the most dangerous public enemy. That attitude is shared across the entire political spectrum, but nowhere is it more pronounced than with the couple of Democratic Party frontrunners: Senators Elizabeth Warren and Bernie Sanders. Their accusing finger pointing at the omnipotent one-percenters equates that menacing bunch with the Valley, its success and, more importantly, its capitalism. Given that overt hostility, one would expect to find the most passionate critics of the current socialist revival among the infotech industry leaders. And there are a few, such as Mark Zuckerberg, the founder and CEO of Facebook, but only because of his being explicitly singled out. Yet, the pages of many prominent newspapers are full of exposes and opinion pieces supporting the claim to the contrary. The public data showing where the donations from the Valley are going provides additional support to the written word. This is a highly irrational behavior. It is not. The high-tech revolution of the late 90s has, as all revolutions do, abandoned its original ideals with its greed for power and success turning against its spirit.

The last ten years has seen the rise of many internet companies that have become household names: WeWorks, Uber, Lyft, AirBnb, Pinterest, Tesla, just to name a few. They do very different things. However, there are a few peculiar aspects of those enterprises that makes them very similar. For one, they are not businesses in the common sense of the word. They don’t make money. They do spend a lot of dollars, at times billions of them per quarter. But they have no real plans to make profits in the future. Hence, as business enterprises they have been absolute failures. But that is not the only aspect of their business models that unites them all. Not least importantly, they claim their products make our societies better, healthier, and colder (as far as global warming is concerned). When you listen to the founders and CEOs of those companies, you realize they are not talking about places that generate profit, give people employment, and engage in philanthropy. Instead, they are talking about their companies as the force of the good, the executive arm of progress. 

Anyone familiar with the rhetoric employed by the architects of the socialist experiments of the past hundred years will find those words horribly familiar. The early years of the Soviet state, and its Five Years Plans in particular, were an excellent example of how to create business models that would employ many people, burn a tremendous amount of money, have no sustainable future and yet declare its raison d'etre to be the progress of humankind and the creation of a more just and equal society. The leaders of the Soviet industrialization efforts sounded exactly like many leaders of the Valley of today. Their inspirational speeches directed at the masses of young workers (currently a favorite employee category of the Valley) urged the naive for more personal sacrifices and promised a better world soon to come. Were one to replace the communist ideals of yesteryear with the sustainable future and stock options of today, one would realize that agitprop has not died; it has become less strictly ideological. 

What Elizabeth Warren and Bernie Sanders are proposing is not very much different from the approaches the Valley is taking to further its pseudo enterprises. Warren and Sanders are talking about scale, a favorite term among internet founders and CEOs. As current Valley thinking holds, to succeed, one needs to build something everyone uses. It doesn't matter a bit if the company loses money each time such usage takes place, because somehow, perhaps in a distant future, a miracle will occur and the sum of all losses will add up to a cumulative profit. With the proposals coming from the two Democratic candidates, whether the Green New Deal or Medicare for All, the claim is that at the end the money will materialize against all known rules of economics. And as with many hot companies of today, one does not even have to prove the simple arithmetic behind the proposals: even if no money is ever made, the world, as a result, will become a much better place. In Liz and Bernie, the Valley is sensing kindred spirits: leaders with bold ideas, deployed at scale, with unlimited funding and unburdened by consequences. If everyone gets an almost free ride, buys an electric car below its manufacturing price, and gets food delivered below the price of the food itself, then why not have free healthcare and get electricity from thin air? Once money stops being an issue, all issues disappear. 

Visiting Vladimir Lenin back in 1920, H. G. Wells found the leader of the Bolshevik coup talking about connecting remote villages of Russia to the power grid. Mesmerized by the leader of the Proletarian Revolution, the author called him “The Dreamer in the Kremlin.” But one man’s dream is a nightmare for the millions. As the Valley, together with senators Warren and Sanders, dream of a new world where the good is deployed at scale, almost everything is free, the power is green, and cars are electric, let us hope their wild imagination remains in the confines of hyper-growth companies and the speeches of the primary season.

Silicon Valley has lost its charm. From being a darling of the political class it has slowly morphed into the most dangerous public enemy. That attitude is shared across the entire political spectrum, but nowhere is it more pronounced than with the couple of Democratic Party frontrunners: Senators Elizabeth Warren and Bernie Sanders. Their accusing finger pointing at the omnipotent one-percenters equates that menacing bunch with the Valley, its success and, more importantly, its capitalism. Given that overt hostility, one would expect to find the most passionate critics of the current socialist revival among the infotech industry leaders. And there are a few, such as Mark Zuckerberg, the founder and CEO of Facebook, but only because of his being explicitly singled out. Yet, the pages of many prominent newspapers are full of exposes and opinion pieces supporting the claim to the contrary. The public data showing where the donations from the Valley are going provides additional support to the written word. This is a highly irrational behavior. It is not. The high-tech revolution of the late 90s has, as all revolutions do, abandoned its original ideals with its greed for power and success turning against its spirit.

The last ten years has seen the rise of many internet companies that have become household names: WeWorks, Uber, Lyft, AirBnb, Pinterest, Tesla, just to name a few. They do very different things. However, there are a few peculiar aspects of those enterprises that makes them very similar. For one, they are not businesses in the common sense of the word. They don’t make money. They do spend a lot of dollars, at times billions of them per quarter. But they have no real plans to make profits in the future. Hence, as business enterprises they have been absolute failures. But that is not the only aspect of their business models that unites them all. Not least importantly, they claim their products make our societies better, healthier, and colder (as far as global warming is concerned). When you listen to the founders and CEOs of those companies, you realize they are not talking about places that generate profit, give people employment, and engage in philanthropy. Instead, they are talking about their companies as the force of the good, the executive arm of progress. 

Anyone familiar with the rhetoric employed by the architects of the socialist experiments of the past hundred years will find those words horribly familiar. The early years of the Soviet state, and its Five Years Plans in particular, were an excellent example of how to create business models that would employ many people, burn a tremendous amount of money, have no sustainable future and yet declare its raison d'etre to be the progress of humankind and the creation of a more just and equal society. The leaders of the Soviet industrialization efforts sounded exactly like many leaders of the Valley of today. Their inspirational speeches directed at the masses of young workers (currently a favorite employee category of the Valley) urged the naive for more personal sacrifices and promised a better world soon to come. Were one to replace the communist ideals of yesteryear with the sustainable future and stock options of today, one would realize that agitprop has not died; it has become less strictly ideological. 

What Elizabeth Warren and Bernie Sanders are proposing is not very much different from the approaches the Valley is taking to further its pseudo enterprises. Warren and Sanders are talking about scale, a favorite term among internet founders and CEOs. As current Valley thinking holds, to succeed, one needs to build something everyone uses. It doesn't matter a bit if the company loses money each time such usage takes place, because somehow, perhaps in a distant future, a miracle will occur and the sum of all losses will add up to a cumulative profit. With the proposals coming from the two Democratic candidates, whether the Green New Deal or Medicare for All, the claim is that at the end the money will materialize against all known rules of economics. And as with many hot companies of today, one does not even have to prove the simple arithmetic behind the proposals: even if no money is ever made, the world, as a result, will become a much better place. In Liz and Bernie, the Valley is sensing kindred spirits: leaders with bold ideas, deployed at scale, with unlimited funding and unburdened by consequences. If everyone gets an almost free ride, buys an electric car below its manufacturing price, and gets food delivered below the price of the food itself, then why not have free healthcare and get electricity from thin air? Once money stops being an issue, all issues disappear. 

Visiting Vladimir Lenin back in 1920, H. G. Wells found the leader of the Bolshevik coup talking about connecting remote villages of Russia to the power grid. Mesmerized by the leader of the Proletarian Revolution, the author called him “The Dreamer in the Kremlin.” But one man’s dream is a nightmare for the millions. As the Valley, together with senators Warren and Sanders, dream of a new world where the good is deployed at scale, almost everything is free, the power is green, and cars are electric, let us hope their wild imagination remains in the confines of hyper-growth companies and the speeches of the primary season.