Sunday, May 14, 2017

Actually good Silicon Valley critiques?

Scott Alexander has a post with some pretty spectacular smackdowns of Silicon Valley's more exuberant critics. Some excerpts:
While Deadspin was busy calling Silicon Valley “awful nightmare trash parasites”, my girlfriend in Silicon Valley was working for a company developing a structured-light optical engine to manipulate single cells and speed up high-precision biological research. 
While FastCoDesign was busy calling Juicero “a symbol of the Silicon Valley class designing for its own, insular problems,” a bunch of my friends in Silicon Valley were working for Wave, a company that helps immigrants send remittances to their families in East Africa.. 
While Gizmodo was busy writing that this “is not an isolated quirk” because Silicon Valley investors “don’t care that they do not solve problems [and] exist to temporarily excite the affluent into spending money”, Silicon Valley investors were investing $35 million into an artificial pancreas for diabetics. 
While Freddie deBoer was busy arguing that Silicon Valley companies “siphon money from the desperate throngs back to the employers who will use them up and throw them aside like a discarded Juicero bag and, of course, to themselves and their shareholders. That’s it. That’s all they are. That’s all they do”, Silicon Valley companies were busy inventing cultured meat products that could end factory farming and save millions of animals from horrendous suffering while also helping the environment.
Alexander then goes on to look at a bunch of venture-funded startups, and concludes that most of them are either run-of-the-mill computer-related businesses, or idealistic save-the-world type of stuff, not goofy overpriced trinkets.

Alexander's post is an entertaining and timely reminder that most of the tech industry's more ardent critics are probably just using the Valley as a misplaced whipping boy for their general frustration at the larger problems of the American economy. When you live in daily fear of losing your $40,000/year job, skate on the verge of bankruptcy from overpriced medical bills, lose your house to a bailed-out bank, and realize every day that you make less than your parents did, seeing some high-flying computer whiz getting handed $10 million or $50 million seems to just rub salt on the wounds. (Also, Silicon Valley badboy Peter Thiel sued Gawker out of existence, so Gawker-derived outlets like Gizmodo and Deadspin may have a bit of a chip on their shoulder about that.)

Alexander's post asks the right question, which is "What could Silicon Valley be doing to make the world better, that it's not currently doing?" The answer is: Probably not a lot. There are a few excesses here and there, but by and large, these are just people doing the best they can, trying to both make a buck and make the world a better place. They just happen to have gotten luckier than most over the last few years.

The American public, unlike the writers Alexander spotlights, believes in the tech industry. Gallup tracks the favorability ratings of U.S. industries. The "computer industry" is the second most favorable (behind restaurants), with an enormous positive-minus-negative gap of 53 points, and the "internet industry" comes in at #7 with a positive-minus-negative of 29 points. This stands in stark contrast to pharmaceuticals and health care, both of which garner significantly negative ratings.

In other words, angry Gawker writers and pugilistic lefty bloggers to the contrary, most Americans love the heck out of tech. But OK, just to play devil's advocate, suppose we did want to criticize Silicon Valley and not end up looking foolish. What would actually non-silly criticisms look like? Here are some candidates:

1. Silicon Valley culture is still too sexist.

I haven't worked in the tech industry, so I can't speak to this personally. Female friends' anecdotes range from "Oh my God, it's so sexist" to "I don't really see any sexism". And my male friends in the industry - who are, of course, a highly selected set - almost all try to go out of their way to create a supportive, inclusive, fair environment for women. But it's hard to deny that at some companies like Uber, there is a pervasive culture of sexism. And surveys say that sexism is still fairly common in the industry, though not overwhelmingly so. Since employment at the less sexist companies is limited, that means if you're a woman looking to work in tech, there's a good chance you're going to be forced to take a job at one of the more sexist ones, and endure unwanted sexual advances, lack of promotion, casual slights regarding your technical competence, etc. Female founders also probably have extra difficulty getting funding.

How could Silicon Valley mitigate this problem? One way is for non-sexist tech industry leaders to speak out more aggressively against workplace sexism. Just let everyone know it isn't OK. Another way is for venture capitalists to hire more women (some are doing this already). But I suspect that a lot of the change will have to come from big established companies like Google, Apple and Amazon. Big institutions are probably better at creating female-friendly cultures, are more susceptible to public pressure, and have a larger profit cushion to allow them to make deep organizational changes. 10-person startups are too busy trying to survive the month to examine their gender attitudes, and closely held behemoths like Uber are generally less transparent and accountable than their public counterparts. So I expect the big public companies to lead the way.

2. Silicon Valley is late coming out with the Next Big Thing.

Tech venture financing is a hit-driven business - a few big wins make up all of the returns. VC funding is tiny compared to private equity or hedge funds - a few tens of billions per year - but three out of five big companies got their start with venture financing.

But it's noticeable that really huge successes, at least as measured by stock performance, seem rare in recent years. Facebook seems like the last really successful behemoth to come out of the Valley and it went public five years ago. Twitter's stock is down by half since its IPO more than 3 years ago, it hasn't managed to branch out beyond its core product, and it remains plagued by Nazis and bots. LinkedIn did well in the markets but was acquired last year by Microsoft. Stuff like Groupon and Zynga flamed out.

Meanwhile, the current crop of behemoth candidates seem like they could be on shaky ground. Uber, despite being valued in the tens of billions in private markets, still hasn't made any money, and if its pricing power doesn't improve it might never turn a profit; meanwhile, it's plagued by scandals, dysfunction, and an exodus of talent. Snap doesn't seem to be very ambitious as a company, and might already be getting outcompeted by Facebook even as it continues to lose money. The only real contenders for post-Facebook behemoths seem to be Netflix, which actually went public long before FB and only recently became an entertainment giant, and Tesla, whose long-term success remains to be seen.

This doesn't mean VCs themselves aren't making good returns. How much money venture funds are making depends on how you measure it, and is often something that isn't known til years after the fact. A VC fund's return on any company depends not just on where the company ends up, but on how much the VC paid for it.

But it's possible that the frontiers of technology are shifting toward capital-intensive things that favor large established players with deep pockets and long investment horizons. Machine learning, for example, might favor big companies with lots of data over plucky startups in their garages. If that's true, it would mean that tech is becoming a more mature, sedate industry - at least for now.

Anyway, I guess this only sort of counts as a "criticism", since if this is true there's not much anyone can do. Also, it was 8 years between Google's IPO and Facebook's, and 7 years between Amazon's and Google's, so I'd give it at least a few more years before we get impatient.

3. Peter Thiel is an evil man.

In the tech industry, there's a culture of not criticizing anyone publicly. I like that culture, but I'm not part of it, so I'm free to say that Silicon Valley badboy Peter Thiel looks like a bad guy. I'm kind of neutral on the Thiel vs. Gawker war - Gawker definitely had it coming, but having rich people be able to sue newspapers out of existence due to personal feuds seems like a scary precedent. But Thiel's support of Trump, his habit of making a buck off of government surveillance, and his promotion of nasty political ideas combine to make him the closest thing America has to a comic-book evil mastermind. Thiel's sort-of-reactionary ideas are confined to a small minority of techies, but the Valley's friendly culture means that even those who disagree with him are out there publicly singing his praises. I certainly wouldn't mind if tech industry people got more vocal about disagreeing with Thiel's values.

4. Silicon Valley is too blase about disruption.

Economists are rapidly learning they were wrong about something big - the economy is not as flexible and dynamic as many had assumed. People who lose their careers, to globalization or automation or regulation or whatever, often never find anything as good. Retraining has proven to be much harder than economists had hoped. Americans are moving less, too. Basically, a lot of people who lose their career jobs have crappy lives forever after.

It's not clear what Silicon Valley companies could do about this problem. If the frontiers of technology are shifting from things that complement human skills to things that substitute for human skills, or if technology is widening the skills gap and making inequality worse, it's not clear whether the boardroom decisions of Google, Amazon, etc. can do anything to alter that trend. No one really knows how much of tech progress is intentional, and how much just sort of happens automatically.

But it would be nice to see big tech companies actually worrying about this out loud. So far - and this is based on anecdote - there seems to be a general presumption in the tech industry that displaced workers will just find something better to do. It would be nice to see tech execs grapple more explicitly with the emerging realization that many displaced workers will in fact not find something better to do, but will sink into a lifetime of low-paid service work, government welfare, and unhealthy behavior.

Even if tech companies can't actually do anything about this problem, it would be nice to see more acknowledgment that the problem is real and significant.

5. Tech might be in the middle of a bust.

Venture financing is falling, indicating that some of the enthusiasm of 2013-2015 might have been overdone. But even if this continue, and tech has a bust, this is just not that worrying. Even if tech startups turn out to be overvalued, it represents almost zero danger to the U.S. economy or financial system. The dollar amounts are small, and stock in closely held tech companies is not a big percentage of any normal person's wealth. If a bunch of unicorns go bust, the vast bulk of the pain will be felt by tech workers and investors themselves, not by the broader public. So this criticism, while potentially true, is just not that big a deal.

There, you have my list of potentially valid critiques of Silicon Valley. Notice that this is pretty weak tea. #2 might not be anything the Valley could change at all, #5 is no biggie, and #3 and #4 are mostly just a matter of optics. Only #1 represents anything real and substantive that the tech industry could definitely be doing differently. All in all, Silicon Valley represents one of the least objectionable, most rightfully respected institutions in America today.


  1. Anonymous2:17 PM

    1. There is a sexism problem in the tech industry, but it's not obvious it's much worse than a lot of others. Sexism is a societal problem, not a Silicon Valley problem.
    4. SV is too much in love with disruption, but much of the rest of society is too intolerant of it. The descendants of people who traveled thousands of miles in miserable conditions to find new jobs in a new world aren't willing to look outside their own neighborhoods and their old occupations.

  2. What about monopoly? Monopoly is pretty much the business strategy in tech industry. Startups don't even try to hide it. It's called network effect or something similar. With monopoly comes economic rent and excess and then abuse of power.

    1. They just want to be a monopoly in the sense they want to be the first ones, not in the rent-seeking way. Kinda like Apple had a quasi-monopoly in the smartphone market until something truly competitive came along. (Not until Android 4 if you ask me)

  3. The future is (largely) low paid service work. The rest will be creative, discoverers, and inventors. There are no economies of scale in labor.

  4. The HBO show Silicon Valley does a wonderful job of skewering the pomposities of SV. Should have a photo of Thomas Middleditch at the top.

    Whenever I have the wonders of venture capital and investors mansplained to me by the likes of mainstream economists I always think back to the epic housing bubble and financial crisis. Private investment is awesome! Unicorns!

  5. Noah, I would preface these and other "silicon valley is X" with some disclaimer as to what your own experience is. You only see a slice. For example

    "In the tech industry, there's a culture of not criticizing anyone publicly."

    Is patently false. In fact, I would say there is a culture of more open criticism than in other industries, especially of leaders. Were you not around during the Bill Gates is an evil borg session in the early 2000s? Did you not hang around Slashdot as the flame wars raged vigorously? You must not realize how much the founders of SUN & Oracle were openly hated and mocked. But they were mocked for their arrogance towards customers and their business practices. Not for their sex life or religion.

    In terms of problems with silicon valley, I think discrimination is a real problem, but by far the biggest problem is age discrimination, not sex discrimination. After age, race discrimination is #2, especially as there are many foreign born people in leadership positions who bring their racism with them. E.g. X has a lot of chinese in leadership positions who don't like to promote Indians or blacks, etc.

    I think being blase about disruption is right on, and it goes to the same principles of worshipping youth, worshipping "winners", worshipping intelligence, and not having a lot of compassion for the losers, the disrupted. But then again, I don't think this is the responsibility of the industry but of government, and tell me how much compassion Wall St has.

  6. Anonymous10:15 PM

    Instead of dueling anecdotes, the question that needs to be explored is whether the valley is more juicero than artificial panceases or whatever. Charitably, deadspin, de Boer et al think it's mostly juicero. Alexander thinks mostly world changing stuff.

  7. Re: Slowing of VC funding.
    When the Donner Party gets going this summer maybe my one link to Sequoia Capital will come and I can get and idea of what is going on there. Some time ago they were focusing on India and China.

  8. Regarding the evilness of Peter Thiel, you forgot he wants to consume the blood of babies in order to gain immortality.

    I'm not joking.

  9. Great article Noah, thanks. While I don't disagree that there is sexism in the sex industry, I'm inclined to believe is one of the less sexist professions in the knowledge work universe. We know this on some level, if somebody were to try to pitch a modern version Mad Men based on tech instead of advertising, I think a lot of people would say that nerds aren't that bad.

  10. "4. Silicon Valley is too blase about disruption ... the economy is not as flexible and dynamic as many had assumed. People who lose their careers, to globalization or automation or regulation or whatever, often never find anything as good."

    If this is a legitimate criticism of Silicon Valley, the same ought to be leveled at the political class a hundred times over (after all, dealing with this is their job).

    In my view, this is the the root cause of the intense dissatisfaction with traditional political elites throughout the developed world. To the extent politicians even acknowledge the problem, their solution is to stick our heads in the sand and pretend we can return to the past.

    Actual political leadership would consist of acknowledging that tech-driven disruption isn't going away and then proposing policies to help people better cope with the negative effects of that disruption without giving up its benefits.

  11. David J. Littleboy11:08 AM

    My proposed number 6: Silicon Valley is too enamored of AI.

    The ideas being used are all pretty old (e.g. multi-layer neural nets, AKA "deep learning", which sounds cool until you realize that you've heard that term, and no others, over and over and over again for several years now) and have known problems (look up Gary Marcus for discussions of this by someone trying to fix the problems with AI as AI).

    What's actually happening is that we now have vast amounts of computational resources available and are looking for things to do with it. IBM had to build a special-purpose chess chip (and use over 14,000 of them) to play world-champion class chess back in 1997, but now a high-end PC or smartphone can do that with one chip. Google's Alpha uses 1500 or so of that level of processor to play world-class Go. (As a Go and Chess player and Comp. Sci. type who has thought about this since the 1970s, I assure you that it is beyond amazing that the Monte Carlo Tree Search algorithm finds good moves in Go. But MCTS isn't AI, it's computation.)

    There's an intellectually significant question here, namely what do these amazing computational resource allow us to do and why. But Silicon Valley loves AI hype, so this question isn't getting talked about.

    (There's an economic irony here: the computational capabilities of the individual chip largely peaked out about 10 years ago, but because of that peaking out, Google can make a server farm in which they have a zillion cabinets with hundreds of state-of-the-art chips in each cabinet and not have it go out-of-date in a couple of years. (During the years from 1989 to 2006 or so, individual chips became roughly 20,000 times more computationally powerful (Intel 386 to Intel i7), so any chip you bought in that period was hopelessly slow 3 years later.)

    1. What's actually happened is that we didn't have the computational resources to engage in AI, and now we do. Small neural nets are about as intelligent as a flatworm. Huge neural nets need large amounts of computational power behind them. Gosh, now that we have computing hardware comparable to the hardware of a human brain, we are starting to get results comparable to those of a human brain.

      Intelligence is not some magical thing that only neurons in human brains can do. It is computation. A huge, vast amount of computation.

      And AI is getting hyped precisely for what it is enabling. Ubiquitous natural language recognition. Language translation. Answers to practically any question at your fingertips. Better organized and interactive medical data. Self driving cars. And this is the low-lying easy fruit.

      Googles cabinets of chips still become obsolete every few years.

      Silicon valley is about automating mental human tasks. And now we have a new set of logical tools, and the hardware to back them up, to automate a bunch of tasks we couldn't before.

  12. Anonymous11:26 AM

    I think calling #4 "mostly just a matter of optics" undersells it a little. This situation is a direct result of much of what SV does. It is by no means all SV's fault, and it's not entirely clear what the industry can do about the problem, if anything. But I still think the tech sector should grapple with the social implications of what it does, and this one is a biggie.

    ikti also raises a very good objection: most of the really successful SV firms are de-facto monopolies.

  13. But it's noticeable that really huge successes, at least as measured by stock performance, seem rare in recent years. Facebook seems like the last really successful behemoth to come out of the Valley and it went public five years ago. Twitter's stock is down by half since its IPO more than 3 years ago, it hasn't managed to branch out beyond its core product, and it remains plagued by Nazis and bots. LinkedIn did well in the markets but was acquired last year by Microsoft. Stuff like Groupon and Zynga flamed out.

    lol u forgot Uber, Tesla, Snapchat, WhatsApp, Instagram, and many others

    1. lol u literally didn't read the paragraph following the one you quoted

  14. It is interesting how the new SV Congressional representative Ro Khanna is attaching himself to the progressive wing of the Democrats, usually the kind of people Smith and mainstream center left economists like to hippie punch.

  15. "If I were any more of a Peter Thiel fan-boy I'd have to do something awkward, like start a fan-club."

    --Scott Alexander (quote from my memory, not verbatim).

    1. Anonymous2:22 PM

      Yeah I like Scott Alexander but I disagree with him on Thiel and he's a little too comfortable with techno-libertarianism generally.

  16. "They just happen to have gotten luckier than most over the last few years."

    A bunch of people who have been working hard to educate themselves and figure out how to combine the latest research and platform products into innovative new products just "got lucky". How odd that those who build infrastructure seem to stumble upon luck.

  17. Sexism: The thing to keep in mind about any kind of inequality is this: we must ensure that any roadblocks to equality of opportunity are removed. But we must not try to force equality of outcome. If we do the latter we begin to divide the world up into oppressed an oppressor classes rather than respond to individual good or bad behaviours. The individual is the correct level of analysis. When quotas are introduced it can lead to resentment as A players are forced to hire B players who then hire C players and so on. People start to feel that merit is not rewarded and so become cynical. There was a book that brought down the soviet union that few know of, it helps understand the hidden risks on these matters, read "The Gulag Archipelago." It was smuggled out of prison camps. Stalin killed 10x more than hitler, we rightly would exclude nazis from power, but do not have the same concern for marxists.