Silicon Valley turning into fertile ground for a revolution
Companies and humans are now vastly unequal and the new billionaires know this is fertile ground for a revolution.columns Updated: Oct 18, 2015 23:10 IST
Steve Jobs did not ask the world what it wished to possess. He imposed his sense on it. Often, the world was moved. As he returns to public adoration through Danny Boyle’s film, Steve Jobs, there would be, once again, a recognition of the fact that in every business venture there is the Jobs way, and there is the Samsung way, which is a worship of the CEO’s buttocks-guard — the market survey.
Apple and Samsung are often depicted in pie charts as though they are competitors. But the fact is competitors compete on price. Apple then is not in competition with Samsung or anyone else. It prices itself as though it is the only one making smartphones. Millions of customers seem to think that. Samsung is in competition with everyone else, and it bleeds to price its products more modestly as though it knows it is inferior.
There is a view that the best thing about capitalism is competition but what Silicon Valley shows is that as in a socialist State so in perfect capitalist conditions, only monopolies thrive. “Actually, capitalism and competition are opposites,” writes the American venture capitalist Peter Thiel, in his wise book Zero To One.
“Capitalism is premised on the accumulation of capital, but under perfect competition all profits get competed away. The lesson for entrepreneurs is clear: If you want to create and capture lasting value, don’t build an undifferentiated commodity business.”
He makes a distinction between the evil monopolies of the socialist State that have to be more corrupt than innovative to secure a huge share of the market, and the new “creative monopolies” of Silicon Valley that have transformed the world and have been rewarded for being too good to challenge.
“Monopoly is the condition of every successful business,” Thiel says. Tampering with the famous opening lines of Tolstoy’s Anna Kerenina, he says, “All happy companies are different: each one earns a monopoly by solving a unique problem. All failed companies are the same: they failed to escape competition.”
But the fate of new capitalism is in the creation of extreme inequalities, much like a socialist State. In every genre of social-networking, there can only be one giant because once people invest all their efforts in one social network they would not want to move to a competitor, who simply has no chance to survive the network effect. Google’s search has been so good it has not had a competitor for years. Most start-ups are doomed. A fraction of the start-ups that succeed swiftly accumulate enormous value. “The biggest secret in venture capital is that the best investment in a successful fund equals or outperforms the entire rest of the fund combined.”
The humans of new capitalism are shaped by the same forces. The genius engineers and those with sophisticated university-imparted knowledge are the new Brahmins. The geek protagonist, Richard, of the brilliant television series, Silicon Valley, says, “For thousands of years, guys like us have gotten the shit kicked out of us. But now, for the first time, we’re living in an era when we can be in charge. And build empires. We could be the Vikings of our day.”
The few geniuses now probably earn more than the rest combined. The undifferentiated talents rot.
For the young it is now a matter of defeat not to be counted as entrepreneurs, not to be exuding rumours of being funded. They attend conferences on ‘disruption’ even though they have never disrupted anything in their lives, they have obeyed every instruction of their parents, and conformed to every convention, which now includes attending conferences on ‘disruption’. They know that they have to ask ‘what problem of the world can I solve?’ It appears that the greatest problem facing the globe is how to get food or grocery delivered to one’s doorstep.
The lower middleclass youth too are infected by the hysteria. They fail to notice the details, to understand the fortunes of the kind of cubs who are becoming entrepreneurs, who are “taking the bold step” — mostly, they are exactly the type who will not starve if they failed, who do not have to be bold to try their hand at the last fad.
The field is now filled with the young with ideas that they wish to pitch after ambushing a billionaire in the toilet or the elevator. They are beginning to resemble aspiring novelists — you can see the same unhappy hope and the slow despair after numerous rejections.
In Silicon Valley, the billionaires talk about two important things, among many other important things. One is Artificial Intelligence. If you pay attention it is as though they have decided that the human race cannot get better them — the tech billionaire entrepreneurs, who want to “make the world a better place” — and so the only meaningful evolution is in the arrival of a sentient machine. Another obsession is “inequality”. Companies and humans are now vastly unequal and the new billionaires know this is fertile ground for a revolution. They wonder in what form the beheading would come.
The world is already contemplating that. A “democratic socialist” in the United States wants to be president and he is drawing huge crowds. A Marxist former-finance minister of Greece is tweeting photographs of the serpentine lines of people waiting to listen to him. Some days he emerges on a BMW bike. Everybody cheers for the “cool economist”. They are too much in love with him to ask why he is on a German bike.
Manu Joseph is a journalist and the author of the novel, The Illicit Happiness of Other People. He tweets by the handle: @manujosephsan. The views expressed are personal.