Facebook’s Libra, Or, The End of Silicon Valley Innovation
I’ve always been fond of definitive breaks and the sense of clear beginnings and ends that come with. They almost never hold under scrutiny, but make for good conversation. The most outrageous that comes to mind (and therefore one of my favorites) is when the historian Charles Jencks proclaimed that Modernity itself ended at 3:32 pm on the 15th of July, 1972. It was at this precise time that the iconic mass housing project of Pruitt-Igoe at St. Louis, Missouri was demolished. With it, the vision of Modernism had been reduced to rubble. While notably less dramatic, we have just witnessed another break, this time in the form of a highly significant but equally underwhelming product announcement by Facebook: Libra. The beginning of Facebook’s new currency marks the end of Silicon Valley as the global centre for tech innovation.
What was Silicon Valley? In the 1960s, it was known for turning silicon into microchips, printing circuit boards and other technologies for the electronics industry. But the story of Silicon Valley would not remain one of manufacturing. Over the decades, Silicon Valley would turn into what designer John Maeda calls an “ecosystem of innovation”. Less a place of industry than of ideas. A hub for Schumpeterian ‘creative destruction’ directed at all things digital. For decades, Silicon Valley has provided the vision of our technological future and was a natural home for those in the business of ‘disruption’. Zuckerberg’s coastal migration in the early days of Facebook would become a pattern that extended well beyond the United States. Competing innovation hubs, such as London’s ‘Silicon Roundabout’, only added to the aura of the American original.
For a long time, the contours of Silicon Valley have been changing. It’s entrepreneurs and inventors rarely look to ‘make it’ on their own and instead imaging being bought up by the major platforms. Much of the venture capital that underpins smaller startups operates with this assumption. For their part, having lost the capacity to innovate the larger players have turned to hoovering up ideas from others. Buying up ideas and prototypes is a Machiavellian strategy, as much about killing off potential competitors or preventing existing ones from getting access as about potential product development.
On Tuesday the 18th of June, 2019, Facebook announced a new major product, Libra, which they expect to launch in 2020. While it’s too early to tell if Libra will be a success or failure, it’s certainly a big deal. Facebook will be able to slip this currency offering (and the related Calibra wallet) into its existing product suite, taking full advantage of its position as a platform provider. Via the Libra Association, Facebook has amassed an impressive number of relevant partners (Visa, Mastercard, Spotify, Uber, Coinbase, Kiva, Vodafone), partners which also anticipate a number of use scenarios for the currency after it launches. Libra is also based on blockchain technology, once considered revolutionary in its own right.
On the landing page of the Libra Association website, Libra’s mission is offered: “Reinvent Money. Transform the Global Economy. So people everywhere can live better lives.” Libra well may transform economies, and there’s certainly a chance it will incrementally improve the lives of some people. Reducing the costs of remittances can make a real difference. It’s the first bit of this mission I can’t swallow: Reinvent Money. This is precisely not what Facebook are doing. While there are novelties to how Libra has been set up, institutionally speaking, and I’m sure the underpinning blockchain implementation contains more, the larger vision and actual product are decidedly meh. Libra is derivative. Certainly not the stuff one might expect from an “ecosystem of innovation”. Why? If one looks around, there are, of course, always precursors and competitors. M-Pesa is an obvious case in point and Google and Apple have their own related offerings, among others. But to understand Libra, we need to look to China and specifically to WeChat Pay. Tencent launched WeChat Pay in 2014, although the company had been experimenting with payments (such as QQ Coin) for many years. Built on top of the WeChat messaging system, WeChat Pay interfaced with messaging as well as the various ‘mini programs’ (think apps within apps) that are a feature of WeChat. Through what Finn Brunton has called the ‘chatification’ of money, users of WeChat Pay can conduct many routine financial activities through the app. New subscriptions, food delivery, purchasing travel tickets, paying bills, transferring money, ride-hailing, donations, shopping… you name it, all available within the WeChat app environment.
Isn’t this precisely what Facebook is attempting to do with Libra? Besides money transfer, this is what Facebook has to say about future use scenarios for Libra: “And, in time, we hope to offer additional services for people and businesses, like paying bills with the push of a button, buying a cup of coffee with the scan of a code or riding your local public transit without needing to carry cash or a metro pass.” In time? Let’s be clear, Facebook’s future vision is something that Tencent has already been offering to a billion Chinese people for five years. Reinvent money! For many years the tech industry had a fairly settled distribution of activities: ‘Designed in California, assembled in China’, as they say. On the 18th of June, 2019, this distribution was reversed. Whatever else becomes of Libra and Facebook’s maniacal attempt to become the bank for everyone and everything, we should remember the 18th of June, 2019 as the day Silicon Valley declared its own ecosystem of innovation bankrupt.
