The Obligations of Innovation (Part 1)
The Obligations of Innovation (Part 1)
Silicon Valley is the primary catalyst in the global Innovation Economy, but all is not well.
The Shortcut:
Silicon Valley, the driving force behind the global Innovation Economy, is facing mounting scrutiny and pressure from critics and proponents alike as it nears its pinnacle of influence. Much of the criticism likely arises not from the Valley's shortcomings but from its inherent strengths. Unless the adverse outcomes of these strengths are accepted, and the strengths adapted, scrutiny will only snowball.
Read Time: 10 minutes
Introduction
Silicon Valley is just a sub-2000 square mile patch of land in Northern California, of equivalent size to the state of Delaware. A small plot of relatively unremarkable topography.
Silicon Valley is also the heart, headquarters, and catalyst for the startup ecosystem that (now) powers the US economy. Seven of the top 10 Fortune 500 companies are technology companies, and though not all were founded in the Valley, each has spiritual roots there.
Silicon Valley effectively represents an ethos that undergirds the entirety of the technology and startup ecosystem - the Innovation Economy - in California, across the US, and around the world.
Though its influence has arguably never been greater, all is not right in the Valley. Internally, we’ve seen contagious layoffs, mass employee unease, the implosion of the region’s eponymous bank, and the large-scale pullback of investor “dry powder” that will inevitably result in the closure of many venture firms.
Externally, lawmakers from both sides of the aisle have taken aim at “Big Tech” (whatever that means), while the populous has seemingly trended toward apathy or outright derision:
I’ve personally spent the past decade-plus in the Silicon Valley ecosystem (albeit from Los Angeles, with many a day trip to the Bay), and for several years I’ve witnessed a growing disconnect between the stated ethos of the Valley and its actual behavior.
On the one hand, this may just be a typical manifestation of reaching the end of a technological epoch. Using Carlota Perez’s framework here, we are probably in the “maturity” phase of the Information Technology age.
On the other, this unrest does not appear to be a simple response to macro conditions.
Instead, the very strengths and virtues that represent the Silicon Valley ethos, and which have so successfully built the technology that’s powered our economy to incredible highs post-WWII, have seemingly also created negative externalities that have not been properly addressed, individually or collectively.
That is, the Valley’s towering strengths are metastasizing.
Concentration of Talent
“I'm not claiming of course that every startup has to go to Silicon Valley to succeed. Just that all other things being equal, the more of a startup hub a place is, the better startups will do there.” - Paul Graham
Even in these post-pandemic days, in which “remote work is the best work” fantasies flit innocuously into the ether, there is tangible, measurable value in working within driving distance of Silicon Valley. It is a (largely) self-sustaining ecosystem with the highest concentration of investors, technical talent, and experienced scale operators in the world.
When a startup closes, its employees quickly migrate to other similar companies (at least until recently). When a startup exits, its newly-baked millionaires reflexively recycle portions of their wealth back into the ecosystem as angel investments, to catalyze the continuation of the startup feedback loop.
When the Valley is humming, you really can feel the energy cascading between the logo-clad high-rises. But as is often the case within insular communities, Silicon Valley suffers from an insider/outsider problem.
Bud Tribble, VP of Software at Apple at the time, described in 1981 that Steve Jobs’ charisma created a “reality distortion field”:
the “ability to convince himself, and others around him, to believe almost anything with a mix of charm, charisma, bravado, hyperbole, marketing, appeasement and persistence”.
Though he didn’t “found” Silicon Valley, Jobs has long been the industry’s paragon, a sincere and vicious figure who inspired thousands to turn their garage-initiated hobbies into fantastical technical achievements.
But this reality distortion field has metaphorically ossified over the Valley, with walls so thick that outside thoughts cannot penetrate and inside thoughts simply reverberate throughout the domed inhabitants; a beautiful, transparent echo chamber.
Within such a vessel, intellectual inbreeding mutates and morphs truths into dogmas that often contradict the initial inspirations on which these beliefs were originally based.
It’s this bubble that influences its otherwise hyper-intelligent inhabitants to publicly lament (mostly on Twitter) that members of the non-Valley tribe are out to get them.
Are there actually enemies of “Big Tech”? Sure. But it is a dereliction of duty to place the primacy of blame on others when so many of the issues here are self-wrought.
For one, we leftists in the most prominent leftist state in the union must admit that:
Large swaths of the country do not share our (often incoherent) beliefs, and this makes them neither wrong nor lesser.
Many of the beliefs we hold so dear will necessarily be seen as abhorrent when future humans study our present as their past.
Echo chambers reinforce cognitive homogeneity, an actual enemy of innovation. It’s this very mechanism that led to Palmer Luckey’s ouster from Facebook and to his further castigation by daring to create technology for the DoD.
It’s this mechanism that implicitly (and occasionally explicitly) prohibits non-liberal thought. There’s a reason why the only prominent non-closeted Republicans are wealthy enough to not care about the blowback of such an “awful admission”.
Second, Silicon Valley must acknowledge that it does, whether intentionally or not, actively harm the career prospects of non-coastal workers. Let me call out immediately that this is not some Andrew Yang-flavored “robots and AI will take all of the jobs” rant.
But Silicon Valley creates technology, and technology is a collection of tools that provide humans with far greater leverage - to literally do more with less. Technology’s job is, in the narrowest sense, to eliminate certain types of work from the human condition.
Though these results are largely net positive for humanity, they are far from equally distributed. Those unequally harmed by technological advancement are non-coincidentally heavily concentrated in so-called red states.
Even if these are just hyperbolized (and often politically catalyzed) perceptions, they are reinforced by the reality of tech’s geographic concentration on the coasts.
When oil companies dominated the top of the S&P, Valley power brokers could remain largely hidden in their NorCal fortresses, impregnable by broader societal impacts and obligations.
No longer. The spotlight is on, and it’s time to stop bemoaning the “unfair treatment” and instead learn to engage with critics large and small. The social and political benefits are obvious, but I would posit that correcting tech’s coastal myopia will yield greater fiscal returns as well.
When you’re a hammer…
“Software is eating the world”- Marc Andreessen
When Marc Andreessen originally made this quip in the before times of 2011, it was both a provocation and a call to arms1. Now, it’s simply fact.
Although the Valley originated with hardware, it is the coded abstractions sitting atop these massively scaled binary micro-switches that truly dominate technology today and are sweeping through every industry on the planet.
Software is written by (software) engineers, and this discipline thus sits atop the hierarchy of roles. It is quite rare that a new technology startup is founded without a “technical co-founder”.
Indeed, most VCs bristle at the notion of funding a software startup without an engineer in the founding team. With engineering as the alpha discipline, and with the most important roles (founders) dominated by engineers, it necessarily follows that the Valley will primarily seek out interesting technical problems to solve.
This is not always an optimal approach.
Let’s look at a contrasting set of examples within my beloved video game industry, starting with the Game Boy.
In the early 1980s, Nintendo adopted a development approach called “lateral thinking with withered technology”. That is, they institutionalized a preference for the oldest but most stable technology available, applied in a new context.
Why not cutting edge? Why adopt this black and white-adjacent (really green) screen rather than color?
It’s because Nintendo wasn’t optimizing for complexity, for the cutting edge. They weren’t optimizing for their own self-interests, for intellectual satisfaction.
No, they were optimizing for the customer experience, for “portable, reliable, affordable fun”. That is, they understood that:
A tight form factor and nuclear-resistant outer shell meant that gamers could, for the first time, bring their console experience on the go (“portable).
Older, less cutting edge components are far more stable and durable, so the device will effectively always work (“reliable”).
Cheaper components yield a cheaper device which allows more people to play (“affordable”).
Lower fidelity, non-color screens allowed for far better battery life, which enabled users to play for much longer without being interrupted, and playing more is preferred over playing less (“fun”).
Now to the polar opposite approach - Google’s Stadia. Cloud gaming2 had been toyed with for years, as both Gaikai and OnLive had launched but failed to gain traction3.
But cloud computing (horsepower, latency, and costs) had Moore’s Law-ed its way into viability in the intervening years, and Google had for 15 years successfully operated the largest video streaming platform (YouTube).
Google is a “company of engineers” that generally prefers the complex, intellectual challenges I’ve already referenced. They correctly assessed that they could technically bring down latency far enough (under 60ms) that most games would feel indistinguishable from a standard console experience.
And so they brought their “unconsole” to market with this singular innovation - low latency streaming.
How did they each fare?
The Game Boy ultimately sold almost 120M units, saved Nintendo, and frankly rescued the gaming industry from its own nuclear winter.
Google Stadia? Less than 1M units sold and shut down after a little more than three years of operation.
One could argue that the ecosystems in each time period are the actual reason for the success gap here - Nintendo launched its product into a market with effectively no competition, whereas Google had massively successful incumbents (Sony, Microsoft) to contend with.
Fair, but one could also argue the opposite - that Nintendo launched its product into a flaccid market (inflation-adjusted $8B), whereas Google launched into a massively scaled market ($92B4).
The pithy, but IMO more convincing argument, is that Google, as they often do, prioritized solving a difficult technical problem rather than an actual customer need.
Their technical myopia prevented the prioritization and building for simple customer-focused questions like:
What types of customers is this meant for- current gamers (who already own consoles) or new gamers?
Is the approach here complementary to existing consoles? Is it a replacement?
Is maintaining the transactional revenue model actually better than subscription?
What types of games are best suited (and not) for this service?
Silicon Valley’s patron saint once said:
“Technology alone is not enough—it’s technology married with liberal arts, married with the humanities, that yields us the results that make our heart sing.”
Humans are not simply technical problems to be solved, and understanding technology is not equivalent to understanding humans. Technology must be useful, not simply intellectually interesting, because technology is a means to an end, not the end unto itself.
Here the sin is one of omission not commission; the choices not made, the invisible counterfactuals, that have immeasurable yet clearly significant impact.
This is not a challenge unique to the tech industry, but given the ascendance of technology as the world’s dominant industry, coupled with the fact that software is indeed eating the world, the questions not asked - the problems not chosen to solve - have far greater negative externalities for Silicon Valley.
Silicon Valley is, unequivocally, humanity’s largest innovation engine, and if it chooses not to solve a given problem - because it’s not obviously technical, that it’s too “simple”, or that it (heaven forbid) requires interaction with other “lesser” institutions like government, education, etc - US society and humanity writ large suffers.
To Be Continued…
We’re about halfway finished with this exploration of Silicon Valley’s strengths paradoxically causing much of the current unrest in the industry. Originally a single much longer essay, I’ve instead decided to split it in two to mind your time and attention, with the concluding piece hitting your inbox next week.
And also a bit of shrewd PR maneuvering by a16z’s head of public narratives Margit Wennmachers.
The shorthand for this (now) is "Netflix for gaming". Rather than the game being powered locally, on a gaming console or PC, the game is run on centralized servers and streamed back to the player as video.
Also note that I personally founded a cloud gaming startup prior to Stadia launching, focused on mobile devices rather than as console replacements.