Crimes, Misdemeanors – and Business As Usual
Move fast and break things. Do more faster. These are the mantras that the tech industry, particular those in Silicon Valley, cut their teeth on. Competition is fierce and timing (first to market) – and perception (category killer: think Google and Facebook) – is everything. So is it a wonder that Uber has drawn so much scrutiny and criticism for its practices lately? On all fronts, it seems.
“Has Uber Gone Too Far this Time? Is Uber involved in a Smear Campaign,?” asks Michael Spencer on LinkedIn, referring not only to former Uber employee Susan Fowler’s blog on the sexual harassment she encountered at the company, which was not unique to her but instead, fairly widespread in Uber’s frat boy culture, according to Caroline Fairchild on LinkedIn.
Then there’s the Google patent infringement lawsuit, which is alleging that Uber is using stolen technology which it acquired through its purchase of Otto, to advance its own autonomous-car development (A Stray Email Caused Google’s Waymo to Sue Uber and Otto Over Stolen Tech).
The Things We Think and Do Not Say
This past week, not unlike Jerry Maguire, Mark Zuckerberg issued a mission statement, with some 5700 words on the goals of Facebook. To refresh your memory, there has been some speculation of late as to whether or not the Facebook founder is preparing a presidential run, presumably in 2024, but now it seems, he has decided that, instead, he wants to rule the world. According to Mashable, with his manifesto, Mark Zuckerberg just said he wants Facebook to save the world. Same difference.
Facebook has certainly been under the microscope lately. Between the so-called fake news (we say ‘so-called,’ as while Macedonian teenagers might have posted misinformation, news sources that don’t necessarily follow lock-step with the world view of the Silicon Valley/global elite were also conveniently lumped into this category and even the ethics of Facebook’s chosen outside fact-checkers are called into question) and streaming suicides, murders and gang rapes, Facebook has become a veritable online Roman Coliseum.
As Zuckerberg discusses the evolution of peoples from tribes to cities to nations, he’s no doubt considering that that’s the progression of Facebook as well, which is in parallel to the global community that Silicon Valley would like to see, with national boundaries as a leftover of a bygone or disappearing era, and isn’t Facebook, after all, a global community without boundaries? The social network does not suffer under the inconvenience of national barriers.
The New Pathway to Exits
Silicon Valley is fond of exits – isn’t a meaningful exit the dream and endgame of every investor and entrepreneur in tech? You have to admire – or shake your head in total disbelief at – Silicon Valley, when it comes to what they’ve managed to accomplish: namely, disrupt a number of industries, as well as the basic principles of economics and business, to get to those astronomical exits, whether or not they were real, or just so much smoke and mirrors.
When Twitter launched in 2006 and started picking up steam after its debut at SXSW the following year, they had no revenue model, but the company’s investors assured us that there would be a revenue model by 2009. Then came the IPO in 2013 and, as The Wall Street Journal noted, “The San Francisco-based company raised as much as $2.1 billion and ended the day with a market capitalization of about $25 billion. That made the six-year-old company bigger than more than half of the firms in the S&P 500 and larger than well-known brands such as Kellogg Co. and Whole Foods Market Inc.”
That was then and this is now, and the company is now worth well under its IPO price and as Bloomberg News notes on the eve of three-year-old Snap going public, Snap’s IPO to Be Haunted by Twitter and GoPro. As MarketWatch warns, Snap’s cost of revenue has exceeded sales for two years, and could grow more. Which is Silicon Valley newspeak for the company is losing money, in case you’ve never read George Orwell’s 1984 and evidently, we don’t know what the hell they’re teaching out there. As for Twitter’s revenue model (what to speak of the fact that the company is hemorrhaging users), we’re still waiting.
The Founder’s Guide to the 2017 Investing Landscape
Esther Dyson hit it spot on when she said that there are too many entrepreneurs out there, and way too many who don’t know the fundamentals of how to work and/or build businesses properly. Many young entrepreneurs have never worked for a company, or may have worked briefly for a startup that may or may not have gotten traction/funding, and that’s not the same as working for a company that is not dependent on funding – nor are you likely to learn the fundamentals of building a true, sustainable business that way.
We talk to investors all the time and count some as being among our closest friends/longest-standing acquaintances, and they tell us things – provided that they’re shared anonymously – that they would not ordinarily share with entrepreneurs. We’re going to share some of that information with you here and, for the record, with the prior consent of those investors, and a special thanks to Veronica Guzman of WAM Ventures, who did give us permission to mention her name, for her comments and insights.
Many founders – especially first-timers – believe that pitching to investors is a panacea. Note to self: we do attend many accelerator demo days and one investor recently told us that he was writing checks to companies he had met through the accelerator, which is why he goes to demo days: to suss out good companies. Mind you, he was writing those checks to companies he had met through the accelerator three years prior, and not that day. He had been keeping a watchful eye on them, and now that they were ready (meaning, had traction/customers/sales), he was all in. A company that has nominal revenues and has only been in business a few months is asking for major disappointments, if getting funded is their goal at that point, another investor recently noted. “Advisors are telling them to pitch angels this way,” Veronica noted.
The Innovator’s New Dilemma
It has been 10 years since the iPhone first appeared, and when it did, people frankly didn’t know what to make of it. . According to Quartz, “When Steve Jobs stood on the stage 10 years ago today at the MacWorld Expo in San Francisco’s Moscone Center, he started out by saying he was launching three new devices: “An iPod, a phone, and an internet communicator.” In fact, of course, they were a single device—the iPhone, which would lift Apple’s fortunes to unprecedented heights.” Of course, it was so novel, to many it was also the Blind Men and the Elephant.
Then there’s the new innovator’s dilemma, wherein one can innovate just so much, before one is in danger of running out of ideas, in which case, it’s a long-standing tradition in Silicon Valley to simply steal from a competitor, as in the case of Instagram Stories (Instagram’s shameless Snapchat knockoff is doing marvelously well) “Instagram Stories closely mimics Snapchat—users can broadcast short videos to their followers, which disappear 24 hours after getting sent out,” says Quartz. “Upon its launch, Instagram CEO Kevin Systrom said he felt no shame about playing the role of copycat. In an interview with TechCrunch at the time of its launch, he admitted that Snapchat “deserve[s] all the credit” for the concept, adding that copying ideas remains somewhat of a tradition in Silicon Valley. “Gmail was not the first email client. Google Maps was certainly not the first map. The iPhone was definitely not the first phone. The question is what do you do with that format?” Systrom said.”
The iPhone may not have been the first mobile phone, not was Facebook the first (essentially) phone book, but it was not a copycat. If there was one thing that Steve Jobs could do brilliantly, it was to think outside of the dispenser. With larger companies swooping in and literally stealing ideas from smaller players, is it game over? Even the iPhone is losing market share, as we’ve mentioned previously.
The Emperor’s New, New Clothes
The establishment of any new Industrial Age always brings with it the loss of jobs, or a shifting of them, at the very least, and technology is no exception. But the tech sector did come up with an ingenious solution for certain people who found themselves somewhat disenfranchised or in need of some quick cash: the sharing economy, which gave us the Taskrabbits, Airbnbs and Ubers of the world. Task-related solutions are one thing, but when it comes to a platform like an Airbnb, which enables one to rent out one’s abode for short term stays and a bit of dosh and which has blossomed into quite a cottage industry (pun unavoidable), it can become somewhat of a more thorny issue, and it’s not only due to regulations in certain cities around the world (Airbnb’s plan to compromise with cities as regulatory challenges pile up).
Tech has always had a bit of an ‘us versus them’ brashness to it, and again, Airbnb is the perfect example, disrupting the hospitality industry – and rental market – in ways that the founders, who started by renting out an air mattress and hence the name, had not foreseen. But given technology’s (and its investors’) insatiable appetite for more, more, more, at this stage in the game, as technology and platforms outgrow the startup phase and become seven- and eight-figure businesses, buyer – or renter – beware: it’s only ever really a matter of time before our so-called fellow conspirators become ‘them.’
According to Quartz, Airbnb is no longer the nice guy of the sharing economy. “For almost a decade, Airbnb has stuck carefully by that message, while maturing from a scrappy startup into the world’s fourth-most valuable private tech company. On paper, Airbnb is worth $30 billion, as much as Marriott International, the world’s largest hotel chain. At the same time, the company brands itself to hosts, guests, and investors as a champion of the middle class.”
Tech, Disrupted
Silicon Valley Has an Empathy Vacuum, according to Om Malik, whom we know personally (although it’s been a while) and for whom we’ve always had great respect, and who, in our opinion, was being kind, or at least diplomatic. “There is a new economic system emerging that is based on consumer capitalism, that innovates ways to eliminate friction of consumption — goods, services, and more than anything else, content — but is doing everything it can to diminish the consumer’s ability to afford the consumption,” says Malik. In explaining the results of the Presidential election (which shocked the tech sector and which we are not going to get into), said Malik, “Globalization is a proxy for technology-powered capitalism, which tends to reward fewer and fewer members of society.”
Tech loves to disrupt and disintermediate. At the same time, it disenfranchises, and people noticed. Except for those people in the tech bubble, and note that he did not say ‘problem:’ he said ‘vacuum.’ They’ve clearly dissociated from the world outside of their monoculture – a word often associated with Silicon Valley, although ‘cultural hegemony’ might be a bit more accurate, but we’ll let that one sit.
Tech’s language bubble may be part of the problem: It might help if we stop referring to people who utilize tech as users or the product and remember that they’re the customers, plain and simple, whether the product itself is free or not. Whether it’s investors or advertisers who are paying the bills, it’s still about eyeballs, which are almost always attached to people/customers, who are ultimately the reason why someone is paying your bills.
How to Get Luckey in Silicon Valley
That’s not a typo. We’re referring to Oculus co-founder Palmer Luckey and bear with us…
Silicon Valley is often referred to as a monoculture, and it’s something of a misnomer, as lately especially, it’s gone well beyond that. True, it’s basically a one-industry town, but in order to work in that industry, you also need to be of a certain mindset – and political bent. Of course, all are entitled to their opinions, and all well and good, even in Silicon Valley – as long as you move along lockstep with the accepted opinions.
Republican and staunch supporter of a certain candidate for President Peter Thiel comes to mind who, as a gay man, an immigrant and an extremely successful serial entrepreneur and investor, was practically a poster child for success/diversity/acceptance in Silicon Valley – until he expressed his political views and turned out to be – gasp – supporting a supposed homophobic xenophobe for President, who invited him to speak at the party’s convention – and Thiel accepted! Oh, wait, isn’t Thiel both homosexual and foreign-born? Never mind. Not all things have to track. Let’s stay on point here.
Trust, Transparency and Totalitarianism
Don’t look at us: Mark Zuckerberg started it.
Last week, The Guardian published a piece entitled Facebook and Google: most powerful and secretive empires we’ve ever known, and, considering the power and reach of the platforms, they’re not merely tech companies: more accurately, they are perhaps two of the most powerful nation-states in the world at the moment and given how ubiquitous they are in our lives, they arguably wield more power/have a larger reach than any corporation or government that the world has seen, to date. As Ellen P. Goodman and Julia Powles state in the piece, “We call them platforms, networks or gatekeepers. But these labels hardly fit. The appropriate metaphor eludes us; even if we describe them as vast empires, they are unlike any we’ve ever known. Far from being discrete points of departure, merely supporting the action or minding the gates, they have become something much more significant. They have become the medium through which we experience and understand the world.
“As their users, we are like the blinkered young fish in the parable memorably retold by David Foster Wallace. When asked, “How’s the water?” we swipe blank: “What the hell is water?”