Between rapidly increasing income inequality, soaring corporate profits, and shrinking employee wages, it’s no wonder capitalism has taken a beating in public discourse of late. When a 700-page economics book on wealth disparity becomes the number one bestselling book on Amazon, you know there’s something in the air.
So where does Silicon Valley fit into the anti-capitalist movement? At a local level, the debate has hinged on the perceived unfairness of commuter buses that use public stops to ferry workers from San Francisco to Mountain View, or on accusations that large tech firms are to blame for sky-rocketing rent prices. (The surge of well-paid tech workers into San Francisco is really only one of many factors contributing to higher rent).
On a national scale, however, does Silicon Valley, with its comparatively lean operations, its capacity to take down incumbents, and the value its products create for consumers, provide a better model for American capitalism than, say, the huge corporations that rose to prominence in the last century?
Mike Maples, Jr., managing partner at Floodgate and our guest at last night’s PandoMonthly in San Francisco believes so.
“I think that there are two ways of looking at capitalism,” he told Sarah Lacy, “a pessimistic way and an optimistic way. I think the pessimistic way of looking at capitalism is that a capitalist is someone who aggregates capital and who leverages it in an organized form to pollute the system.”
The pessimistic view is winning, Maples says, referencing Thomas Piketty’s best-selling, “Capital in the Twenty-First Century” and George Packer’s “The Unwinding.”
“Pretty soon politicians get bought off, they don’t allow innovations to happen like Lyft or Tesla dealerships in New Jersey or Texas, things like that, pretty soon capitalism works against freedom and for the benefit of organized wealth. That’s the pessimist view.”
So what’s the optimistic view? Let me guess: It has something to do with technology bettering everyone’s lives.
“The optimistic view goes something like this,” Maples says, “that the awesome power of Moore’s Law and Metcalfe’s Law ensures that we will have a world of great abundance. And the abundance of digital technology and its ability to advance the standard of living will offset organized money if we the people choose to take capitalism back. And so to me it’s kind of about taking back capitalism.”
But is capitalism any safer in the hands of the Silicon Valley elite? At best, you have people like investor Ron Conway* who are finding that free market solutions to national issues like gun safety are much harder to achieve than expected. Lacy echoed this sentiment to Maples, countering, “Some of the people who articulate the positive side of capitalism I think are overly naive and hopeful about free markets.”
Then at worst, you have gargantuan tech firms like Google that, the bigger they grow, the more they start to resemble the corporate incumbents they sought to dethrone, engaging in secret wage theft agreements and getting entrenched in the federal government’s military and surveillance apparatuses.
In spite of this, Maples remains optimistic, pimping one of his investments, Chegg, which seeks to make textbooks more affordable for students, as an example of “capitalism done right”: It creates value for consumers across the country (not just the New York/California “wine-sippers” as Maples calls them), it brings more efficiency to a wasteful market, and (hopefully, eventually) makes profits for the company that are put back into the economy.
Sounds pretty great. But can a country full of venture-backed technology companies really make the country more economically equal? If corruption and cronyism in some of the biggest tech firms in the Valley is any indication, the new boss might be the same as the old boss.
Watch Maples discuss capitalism and Silicon Valley:
*Ron Conway is an investor in Pando
[photo by Brad Jonas for Pando]