Silicon Valley is Holding Us Back
We need to wake up to the lies tech companies have told us
The cult of the entrepreneur and the belief that Silicon Valley is the hub of national, if not global, innovation has dominated the national discourse for so long that many have lost their ability to critically assess the actions of major technology companies and whether they truly provide the benefits they claim. While there was a period when Silicon Valley generated a positive output and innovations that transformed our lives, that time has largely passed. Instead of being scrappy innovators, major tech companies have become the very conglomerates they once claimed to oppose, and, as a result, their actions are doing more to hold us back than to propel us into the future.
That doesn’t mean they don’t have a vision for the future. Their fantasies, including individualized on-demand transportation and trains in vacuum tubes, sound ambitious on the surface, but the deeper they’re assessed, the clearer it is to see that the futures they envision are severely limited by their elite desires and their lust for the sizeable profits that only monopoly can generate.
In their quest to maximize profit and shareholder value, “don’t be evil” has been replaced with a relentless campaign for low corporate tax rates, massive corporate welfare schemes, and the application of “innovative” thinking to devising complex methods of tax avoidance. It is no longer new technologies that are transforming our societies, but the greedy initiatives of some of the largest companies in the world.
Profit Before People
As with any capitalist enterprise, the primary beneficiary of major tech companies are their shareholders and the prime directive of their executives is to maximize profitability — though that’s not the message presented by the fawning tech press or even mainstream media organizations which have lost any ability to critically assess as their dependence on those very companies has grown.
We are wrongfully told that tech conglomerates are uniquely innovative among American and global businesses, and that this level of innovation is only possible due to the free-market system and the financing made available by billionaire-backed venture capital firms. But this narrative ignores the true source of most innovation and the degree of public funding that goes to those very companies.
There’s no debating the telecommunication revolution brought on by the iPhone, but the notion that Apple is responsible for the innovation in every new feature added to the phone is questionable, at best. Many of the core technologies in the iPhone were not developed by Apple, but with public research money, including GPS, microchips, optical storage, communications satellites, touchscreen displays, and, of course, the internet. Even Siri, Apple’s voice assistant, was developed with government funding. Apple’s design team may deserve credit for refining some of these innovations and putting them in a nice glass or aluminium container, but the real innovation is happening not due to private funding, but thanks to the government.
And that’s not even the whole of it. Government funding doesn’t just finance the development of the technologies which generate massive private profits, but the companies themselves. Venture capitalists rarely make investments at an early stage, and will sometimes even wait to see if the company can get government funding before considering an investment. Apple itself got early stage financing from the US government’s Smart Business Investment Company and the development of Google’s search algorithm was funded by the National Science Foundation. Elon Musk, anointed by the tech press as the new Steve Jobs, has built his companies on government subsidies, which were calculated at $4.9 billion in 2015.
On top of subsidies for their operations, Silicon Valley companies also command huge tax breaks and subsidy packages when they set up facilities around the country. The frenzy over Amazon’s second headquarters has been all over the news in recent months as cities and states competed over who could offer Amazon the most to locate its new facility in their jurisdiction — but that’s just one example of a much larger problem. Since 2000, Amazon has received more than $1.1 billion in subsidies to set up facilities across the United States, creating jobs which pay so little that its workers often still have to apply for food stamps — Amazon is just adapting the Walmart model to ecommerce. Apple, Google, Facebook, Microsoft, and Amazon have all received massive corporate welfare packages to set up warehouses and data centers, coming to an average of $2 million per job created; while the cost to taxpayers of courting Chinese electronics manufacturer Foxconn to build a factory in Wisconsin is approaching $4.5 billion.
And how do tech companies respond to all the support they receive from government? By pushing for less regulation and lower tax rates, backed by marketing campaigns designed to erase the role of the public sector in their success. In recent years, the primary goal of Apple CEO Tim Cook hasn’t so much been to improve the product line, but rather to slash the corporate tax rate and lower the rate on overseas profits to please shareholders — and, thanks to Trump, he’s finally achieved it. Even as corporate profits are at record levels, corporate taxes as a percentage of the total tax take has already declined from 33 percent in 1952 to 10 percent in 2013, and will now drop even further. Hardly any of the investment announcements made since the tax plan was passed include new spending; the savings to massive corporations will be spent on stock buybacks, executive compensation, and shareholder dividends instead of innovation and job creation.
Counter to the dominant narrative about Silicon Valley, major tech companies are not uniquely innovative and their success is not a result of private investment. Public support has been core to their success at every stage, and even as some of the largest companies in the world, they continue to receive huge subsidies and tax incentives from every level of government. But what about the innovations they champion? The truth is that they are not nearly as emancipatory as the companies claim, but are rather designed to benefit their core products and lock people into their product ecosystems.
Self-Serving Products
The marketing language used to promote the products and services of major tech companies positions them as world-altering innovations that will improve our lives in ways never before imagined. Google CEO Sundar Pichai is the latest in a long line of Silicon Valley leaders to do just that, saying in an interview that artificial intelligence would have “more profound” implications for society than the discovery of fire or the invention of electricity.
The actual products released by these companies fail to live up to Pichai’s bold statement. It only takes a minimal degree of critical assessment to see how the innovations of major tech companies are designed to cement their industry dominance, push for further privatization, and even get in the way of sorely needed infrastructure investments.
Take Amazon, for example, where every new product and acquisition is in service of the goal of capturing a greater share of consumer spending by locking customers into their ecosystem. The average Amazon customer spends $1,000 annually, while Prime members spend $1,300 and Echo owners spend $1,700. Amazon bookstores offer online prices to Prime members, while non-Prime customers have to pay list price; and Prime members get exclusive discounts at Whole Foods. The goal is to make it so people never have to shop outside Amazon, and Prime is the cage that traps them.
But Amazon isn’t the only one. Apple’s new products are all about augmenting the source of most of its profits — the iPhone — and locking people into the product line. The more Apple products one uses, the more benefit they get from iCloud and features like Handoff; while its new headphones have a special chip making them work better with iPhones and Macs, the Apple Watch requires an iPhone, and the HomePod will only work with Apple’s music offerings. Facebook and Google do something similar, launching free digital services to gather more data to better target ads and increase its control of ad dollars. Together, the two companies were expected to get more than 63 percent of U.S. digital ad spend in 2017.
However, Silicon Valley can also use the language of innovation to complicate real improvements because they won’t get the profits and the proposed development conflicts with their personal tastes. Elon Musk is the best example of this. After building his Tesla vehicle company, he’s been trying to complicate the push for improved public transit and trains for several years in the name of “individualized transportation.”
His Hyperloop proposal was published in 2013, after California voters had approved the state’s high-speed rail line, but before construction began. The proposed construction costs for Hyperloop were far lower than high-speed rail and its speed much faster, but later assessments found the costs to be widely understated, the design would make passengers nauseous, and it would carry far fewer passengers — and that’s putting aside the fact that it was a mere proposal, not a technology that had been proven and continually improved over the course of several decades. But that didn’t matter to libertarians and conservatives who immediately seized on it as another argument to cancel the high-speed rail project.
A similar story has played out with public transportation. Los Angeles voters have approved more than $120 billion in funding for transportation projects over the next 40 years, some of which are now having their timelines moved up to be ready in time for the Olympics in 2028. But Musk has proposed his own solution through which he promises to fix congestion and allow people to stay in their cars: a series of tunnels below Los Angeles which vehicles would enter through street-level elevators to be transported on skids to their final destinations. Only a fool could consider this a realistic proposal, but again, it worked on a subsection of people whose minds have been captured by the cult of Musk.
Musk’s privileging of “individualized transportation” over more collective solutions should come as no surprise. Not only does he want an auto-centric transportation system to persist and electrify so Tesla can reap the profits, but his comments on public transportation that “there’s like a bunch of random strangers, one of who might be a serial killer” makes it pretty clear he fears being around regular people. His solutions, like those of many tech evangelists, are examples of what transportation consultant Jarrett Walker calls “elite projection,” namely “the belief, among relatively fortunate and influential people, that what those people find convenient or attractive is good for the society as a whole.” However, rarely does what works for the wealthy also benefit everyone else — as Musk’s transportation proposals illustrate. Both Hyperloop and his system of auto tunnels would not serve the masses, but would be transportation solutions for an upper tier of users.
End Tech Supremacy
It’s long past time for people to realize that if Silicon Valley was ever looking out for the greater good, that is no longer the case. The priority of tech leaders is not to invent products that improve the lives of the maximum possible number of people, but to maximize profits, and by extension the wealth of their shareholders. Social responsibility has been sidelined by a quest for monopoly that would see major tech companies expand to control the maximum possible share of the economy and our lives, not just digitally, but increasingly also in the physical world.
The bulk of innovation does not come from the research and development branches of Apple and Google, but is funded by the government. Private companies only take over when the prospect of profitability has been proven, ensuring that the gains of public innovation are privatized, and are thus captured by those at the top of the income scale.
Silicon Valley entrepreneurs promote the notion that the government cannot create wealth, while benefiting from public research, receiving billions in corporate welfare, and promoting a path of development that puts their interests ahead of those of the majority of people. That cannot be allowed to continue. Antitrust must be enforced to end the domination of major tech companies, ensure the benefits of public innovation are collectivized, and allow people to define their own futures instead of having the future imposed on them by tech giants.
