Silicon Valley has an obsession with 'obliterating' the competition - and Washington may not be equipped to deal with it
Aaron P. Bernstein/Reuters
- Jay Friedman is the president of the Goodway Group, a digital media company.
- In this opinion piece, he writes that the Department of Justice isn't equipped to fix the culture of Silicon Valley, even with the recent antitrust investigation opened.
- Silicon Valley, he writes, is obsessed with "obliterating" the competition, directly at odds with American anti-trust rules. There are also numerous examples of questionable ethics.
- But Washington has also been tepid in its approach, indemnifying Facebook and imposing a low (for Facebook) fine of $5 billion.
- Visit Business Insider's homepage for more stories.
With the DOJ recently opening an antitrust investigation into big tech, the government is trying to take on Silicon Valley and fix it at its core. However, I don't believe this is a problem the government is equipped to fix. Silicon Valley is steeped in a grow-at-any-cost culture, which the government will find challenging to overcome due to its own flawed culture.
Let's begin with Silicon Valley. For years people were confused because Amazon's stock was soaring, but the company had yet to turn a profit. The rules had changed. Stock prices weren't based on price-to-earnings ratios, but instead what Peter Thiel refers to as "escape velocity," when companies grow so big, so fast, that others in their competitive set can't keep up and eventually fall away.
However, we have rules in the US specifically to prevent companies from growing so big that competition is no longer promoted or protected, namely the Sherman Anti-Trust Act. The Silicon Valley cultural obsession with achieving escape velocity and obliterating the competition is permanent, though. It's not an obsession that is present during the early years of a startup but then fades. It's an obsession that is part of these companies' cultures forever.
It's often thought that Silicon Valley's legend began at Xerox PARC, where the best and brightest cranked out numerous inventions we still appreciate today. While the legend may have begun at Xerox, I believe the culture began when Apple visited Xerox and borrowed/stole (depending on who you believe) the idea of the computer mouse for Apple's newest computer.
These questionable ethics continued when Bill Gates and Steve Jobs met, and Microsoft later used a graphical user interface eerily similar to what Jobs had shown him. Too coincidental, Jobs alleged in court filings years later.
These weren't one-offs or extreme examples, though. This is Silicon Valley's culture. Do we remember when Google was mapping its Street View product, only to be found stealing mountains of people's personal emails and documents from their home Wi-Fi networks and called it a "mistake?" Or when Amazon "partnered" with Toys 'R' Us to bring toys to the fledgling e-commerce site, only to make this a decision that later contributed toward their bankruptcy? Perhaps the worst example of growing at any cost is Facebook's Cambridge Analytica scandal. Here, another nation likely influenced the outcome of the US's 2016 presidential election - surely one of the nation's most sacred representations of freedom.
What has prevented the US government from acting and taming this behavior?
The US ranks 22nd on the Corruption Perception Index, which is surprising to many. This is important because Washington will certainly think twice before biting the hand that donates to them before regulating big business. But other nations might not fear regulating. For example, Australia, ranked 13th in the CPI, recently announced plans to rein in Facebook. The EU, with a number of countries like the UK and Germany ranking higher on the CPI, has also been far more aggressive in fining the U.S.'s largest tech companies with Margaret Vestager at the helm.
A primary example of the way this Washington culture manifests to (in)action is the $5 billion fine Facebook recently received. While the sum is more than their Q1 2019 earnings, the fine doesn't leave a lasting mark. Buried in the fine print, this fine indemnifies Facebook for any and all claims prior to June 12, 2019.
A $5 billion fine will not change the culture of Silicon Valley. It would take a fine more in the range of $100 billion, given to multiple companies, to force a change like this.
Recently, the Business Roundtable convened to try to push back against shareholder primacy and declare their company's purpose is to serve all stakeholders including customers and employees. Will this really be the case in Silicon Valley, though? The root issue here persists until Silicon Valley and Washington can both make a fundamental change. I don't see either, much less both, happening any time soon.