An Incomplete Apology For Silicon Valley

Wherein I write poorly of why someone is not entirely right and possibly in the wrong

With reference to the following article:

The article isn’t in whole wrong. The way the author approaches the issue is too simplistic. Let’s address some of his points.

Let’s unpack what was said here. Steve Silberman observes that aundromats are shutting down in his neighborhood. Rohit Jenveja, who helps build Google’s email platform, says that this is because startups like Washio are killing the need for laundromats. He’s wrong on a couple levels here.

Jack Smith IV helpfully points out that Rohit works for Google to get the blood of his intended readership boiling. The tone set therein unloads a truck full of salt onto the rest of the article. Biased article anyone?

The need for laundromats isn’t going away. Silicon Valley isn’t elevating every San Francisco resident to an income bracket that allows for on-demand laundry, just a select few. For everyone else, they’re stuck doing their laundry the traditional way, waiting hours in a laundromat, a stack of quarters in hand.

Indeed, the need for laundromats isn’t going away. But I wonder if Jack is familiar with economy of scale. Is it inconceivable that as Washio (a rather unfortunately named startup) gains traction that the cost per pound or articles of clothing might drop sufficiently that even lower income brackets might finally be free of the monotony of doing laundry? Surely Jack would agree that the “traditional way” could be improved upon. And yet where will that improvement if not from enterprising 20 or 30 or 40 year olds? The government? Maybe if Trump is elected.

So why are San Francisco laundromats actually closing down? Two reasons: real estate and the tech boom. There is a shortage of housing in San Francisco, which is a problem exacerbated by the boom in startups and the influx of highly paid employees. The rich want homes, and they’re willing to buy the poor out of them.

There is no easier straw man than the “tech boom”. A casual gloss over articles covering the social problems that plague San Francisco will make the following certain. That the tech boom is the harbinger of all evil and lucifer come again. Nowhere is mentioned the economic impetus for such, and nowhere is mentioned the hundreds of billions of dollar of economic activity generated by the despised tech boom.

And unfortunately, prices are a signalling mechanism in the market. Ceteris paribus, if demand for housing goes up due to an increased number of jobs and entrepreneurs, then prices will increase. Suppliers of housing, whoever they are, will respond accordingly. If there is a significant demand for luxury housing, then it will be built where the economics work out. If there is a significant demand for affordable housing, then it will be built where the economics work out. This is the how things works (aka regulated capitalism) agreed upon by most of the world post-1989.

And this is the way it is with many Silicon Valley startups. The services are designed to nurture the needs of those who can afford to use them.

Jack welcomes us to tautology-land, where the obvious bears repeating and the plain deserves extended explication. Is there a service, company, or firm out there that targets users who cannot afford to use them? At least Jack stays away from the absolute and uses the qualifier many: is this an admittance that there are startups that are actually *gasp* good? Props to you Jack.

Laundromats, buses, trains, restaurants, health insurance — we share these things precisely because it benefits society as a whole to participate, even when we are not individually always actively benefiting.

Spot the one that doesn’t belong! (hint: it’s restaurant)

…Wait, is that not the point of the neat little list? Since when did restaurants “benefit society as a whole to participate”? What is even meant by that?

Jack implies that there is a need for an institution that collects a portion of the income of the citizens of a nation in order to provide those goods and services which in private hands wouldn’t be as efficiently provided. Oh, we already have that? It’s the government.

Businesses have always been at war to replace one another in a constant struggle to provide a better quality of life. It’s always been an organic ecosystem, but technology, like a steroid, has injected a fuel into this ecology that’s causing rapid flux. Titanic businesses like Kodak are replaced by tiny startups like Instagram in a handful of years, and Uber is swallowing the cabs of the world — both public and private — whole. The question is: When we have all of these new, boutique services, who will benefit?

Thank you for the sweeping generalisations. Let’s just address the concrete points.

If Uber were not more efficient as a service, it would fail to undercut taxis and fail as a business. It would not be the behemoth it is today. Last I checked, the pursuit of economic efficiency (with a corollary of productivity) has been driving force behind economic growth. Unless of course Jack doesn’t think growth is terribly important.

And let’s try to answer Jack’s rhetorical question. He implies that only the “wealthy young elites” will benefit. I disagree. Let us see concrete examples. A high tech approach to healthcare. A lofty goal to revolutionise the leviathan. And in their words, “we provide health insurance to many families who now have health insurance for the first time.” Another take on the eyewear industry. Started by wealthy young men. Donates one pair of sunglasses to nonprofits for every pair sold. Certainly more socially impactful than the monopoly that is Luxottica.

But these are too easy! They have social impact goals outright. Let’s try a harder one. Fairly well known company. No social impact goal as far as I know. Provides equipment that helps define modern productivity. What do I mean? Jack might have used their laptop or tablet or phone or desktop in writing his story and getting his voice heard. Or maybe he used Microsoft, Lenovo, etc. In which case replace the link with the appropriate big-tech-firm. Oh and Tim Cook plans to donate his accumulated wealth to charities.

I’ve seen too many articles slathering unadulterated venom over the Silicon Valley and over tech as a whole. It’s as if the valley exists only to make peoples’ lives worse. In addressing the many social issues in San Francisco, the author needs a nuanced approach. He needs to consider what would’ve been if the tech industry hadn’t blown up the way it did (called diff-in-diff in econometrics). He needs to differentiate between correlation and causation. In short, he needs a good dose of statistics. And finally, he needs some solid data, modelling, and therefrom infer reasonably. And then he can talk sensibly about the thing.

Oh and as an addendum.

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