I have to say I'm surprised by the take on Gurley's talk. I get why it was a rousing speech to give at a conference but I think an intellectually honest analysis of it would make it clear that it was a fairly specious overall talk. If you disagree, would love to know why but the things that stood out to me:
- The talk is premised on a sleight of hand/logical fallacy where he points out a few examples of egregious regulatory capture and then makes the argument that *all* of Washington is bad...that's just a very basic form of a bad argument
- There are obviously lots of good examples of regulation out there and again, not even a passing mention of any isn't a real argument (something Larry Summers had to correct him on)
- The lack of seriousness was made even more clear when it came down to what to do...which was a kind of hand-wavy "maybe more transparency?" position...but a lot of people have been stuyding, fighting and working on regulatory capture for decades and there are a lot of ways to combat it, including probably the most popular one which is preventing single companies from getting so large they can significantly influence regulators by themselves through money or market power
It was a rousing talk...but not a serious one and surprised to see you give the unsupported, larger claim (all of Washington sucks) such intellectual credence.
I have spent my entire career working on innovation. Some of that with a major defense contractor. I have gone through waves of heavy DC engagement. And no DC engagement.
1) I have never met a Senator, President or Congress person curious to understand the core nature of an innovation. I have had serious conversations with probably 10 Senators, 30 Representatives, 1 President, and many regulators.
2) I have been screwed over by every politician I thought I trusted.
3) I saw other politicians conspire to destroy Chu's agenda (democrat politicians) when he was DOE head because they saw him as naive.
So, I admit I have failed to understand how politicians work.
In the end, government's role is really not to drive innovation. It is to normalize innovation once it emerges. For example, let railroads innovate, but at some point standardize the gauge of track once dominant design is settled.
The opportunity is ultimately an optionality challenge. Optionality is an information arbitrage. As Hayek stated in "Use of Knowledge in Society" the coordination of resources for economic innovation is best done through entrepreneurs close to the signal.
Probably the best thing innovators can do is educate the political class on how real innovation occurs. So that politicians and government can stay out of its way. The natural rate of innovation wants to be higher. And will happen quicker in every state, as it did in the 50s, if we remove the barriers to the optionality.
I am really unsure what role government plays in making this happen other than doing harm to slow it down.
Love “play to win” the sentiment, and the objectives wrt nuclear etc. I’m a bit confused about the premise though - especially wrt Gurley’s statement.
1) If anything, the reason Silicon Valley has done so well has been due to low interest rates. That’s a result of specific government policy designed to benefit investors and encourage risk-taking at the expense of other economic goals. This isn’t to take anything away from the valley’s visionaries, operators and investors. But if they’re the surfers, the interest rate environment was the wave.
2) Aren’t Big Tech companies some of the largest and most powerful lobbyists in DC?
3) I was under the impression that much of the foundational technology of the internet was funded by the government. Although maybe that’s overstated urban legend?
In any case, it seems to me that DC has been very good to Silicon Valley.
ps
Unrelated, but while I’m here: weekly dose of optimism is such an amazing contribution to the universe 👍🏿❤️🤌🏿
Packy, I certainly agree, and am reminded of that often when I hear my more enthusiastic friends who have such anger in their voices, that I see they have floated too far from the shores of common sense.
But I also have the feeling this whole process--on both sides-- is being governed by some natural law, glimpsed only fragmentally by us, but having something to do with increasing population density.
What does not help our side is the tendency of Silicon Valley to come up with flamboyant leaders--Celebrities=Targets of Jealousy. (I'm very petty, and have always thought jealousy drives a lot of our elected representatives demanding regulation, rather than altruistic concern for public safety.)
And you obviously feel that genius should be rewarded---Jeeesh, question that assumption!
I agree in principle with much of what you wrote, but I think your circle is a little too narrow in this area. Many Americans love the idea of the tools created by Silicon Valley being used for efficiencies, cost reductions, and "miracle" leaps forward. But there are not many that are eager to see Google, Meta, Amazon be the actual implementers and gain more "capture" over information about our lives. They do not want to see the people who are already incredibly wealthy (and therefore have more power already in our political system) get even more power and be able to implement regulatory capture for themselves. A VC funded company in these areas achieving critical mass would likely enrich the same people who would benefit from one of the existing "Big Tech" companies doing this themselves.
Also, your tribalism comes across shrill. I've been in crypto for 8 years now, and agree that Elizabeth Warren does not understand the potential of crypto. But if you read her books or listen to her speak you can understand her position and turning her into a boogeyman is just ridiculous. I'm sure portraying opponents of nuclear as unproductive nobodies probably gets you likes on Twitter/X, but it both minimizes the opposition (that beat nuclear in Illinois) and glosses over their objections. Neither of those outcomes helps nuclear (or any other topic move forward).
Great post! Another great book that opened my eyes to regulatory capture was Mancur Olson's Rise and Decline of Nations (https://www.amazon.com/Rise-Decline-Nations-Stagflation-Rigidities-ebook/dp/B0B8DZH8P3/). His major thesis is the comment you made around the incentives for a small group are so much higher than the cost to challenge for a large group and that this compounds over time and leads to major dysfunction in a society.
Is your "Silicon Valley" including the same FB/Meta that ruined elections? The Amazon that ruined local businesses and is destroying the environment with the "same day delivery" concepts?
Are you telling me that we should feel bad for people (or worse hope they will be delivering our utopian future) that have used billions for ego projects (biggest yacht in the world anyone?) ?
For better or worse, Bill Gates made philanthropy a big part of his life.
You'll excuse me if I am a little skeptical about putting my future and hopes into an industry that at this point is mostly built on plundering the free resource of private data of individuals and profiting from it. When they finally put a stop to that or find a way to properly compensate for its use, maybe I will root for them.
Until then ... they need to be reined in just like every big corporation out for the benefit of their shareholders at the expense of everything else.
Note the 9 companies are internet companies; Silicon Valley is *also* the electronics manufacturing and equipment companies. The sum of these 2 sums is $291m - only a bit lower than pharma.
Secondly, outright lobbying is only one of the ways by which companies influence DC. Revolving door board and executive seats - i.e. Twitter's pre-Musk heavy ex-FBI contingent as well as similar 3 letter agency presence in Meta and Google and what not. Uber's employment of Plouffe. Stamos as part of the disinformation industrial complex. Board seats for ex-politicians and ex-bureaucrats ranging from (I invented the internet) Gore to Regina Dugan to the many 3 letter agency types in cyber security companies. The tech execs that went into government like Eric Schmidt and the DIAB. I am quite certain there are many more.
Then we have tech cooperation with DC - ranging from the aforementioned disinformation industrial complex/censorship to Palantir's outright dependence on government contracts.
Isn’t a form of regulatory capture to limit the regulations on your business? When I hear AI companies — well-financed ones — talk about limiting regulations on the industry, I imagine lots of money changing hands to ensure that regulations are limited.
Regulatory capture can be rationalized during Bobby's first term - it is the center plank and roofbeam of his platform. https://days.to/election-day-in-us/2024 411 days to go. Let's make sure it happens.
Greenwashing nuclear. How can anybody surmise that stored or buried nuclear materials can safely be stored for millennia. They can’t. That evidence doesn’t exists. And failure will cause more deaths in the long run than the death we’re counting now in our little slice of time is nothing compared to the half-life of nuclear waste. Nuclear has less than a century of history, and yes there are a few images of nuclear accidents. This is context collapse at its worst. A “few” in maybe a 75-year nuclear history is a false measurement when you project millennia forward. Less than one year ago, we were worried about the Russians occupation of a nuclear power plant. Can anybody predict terrorism, geopolitical events, wars, earthquakes, tsunamis with any accuracy or assurance for millennia? There are thousands of tremors or minor earthquakes each year. Burying nuclear waste “deep in the earth” sounds like a safe long-term solution. The nuclear facility near San Louis Obispo is but one example of the arrogance of the nuclear power culture. It sits near one of the fastest moving geological faults in the world. Its reaction to a report outlining the dangers of this nuclear plant and why it should be decommissioned? It applied for a 25-year extension of it commission. This is not an unusual serious discounting of nuclear power dangers. Give me a break. Nobody can guarantee the safety of stored nuclear materials for millennia. Cripes, the world might forget where it’s buried. By the way, how about that buried nuclear waste leaching toward the Columbia River in Washington State. Again, a very short history of disasters, areas of Japan and Russia that are unlivable, Japan announcing the planned dumping nuclear waste into the ocean with no forewarning, no discussion. A nuclear cloud floating over Europe, which had to call the Russians to ask what was happening. Greenwashing millennia forward is arrogant and irresponsible, showing a callous disregard for generations of people who haven’t even been born. Cripes.
Regulatory capture is only possible with collusion. So that tells us we are up against a colluding force.
That said, we have been working on a way to fix all of this and more for the past 2 years ("we" at The Society of Problem Solvers"). It is apparent to us that we cannot fight this capture head on. So, we need to make new systems that make the old ones obsolete - or in this case plug into their old systems and fix them with decentralization and transparency. Understanding this takes a little effort and it starts by using Human Swarm Intelligence to harness the Wisdom of the Crowd. For short, it is called "swarming." Scientists and medical fields looking to form decentralized systems need to be part of this and understand this. And anyone who wants to fight collusion and regulatory capture does as well. If you are unfamiliar, please start your journey here, and stay tuned:
As mentioned, the Silicon Valley industry as we know wouldn't exist without government investment or outright creation. The early government contracts weren't due to chance or circumstance, it was alignment of the military industrial complex's interest and the relationships of those in the Valley.
Long-time reader and first time commenter.
I have to say I'm surprised by the take on Gurley's talk. I get why it was a rousing speech to give at a conference but I think an intellectually honest analysis of it would make it clear that it was a fairly specious overall talk. If you disagree, would love to know why but the things that stood out to me:
- The talk is premised on a sleight of hand/logical fallacy where he points out a few examples of egregious regulatory capture and then makes the argument that *all* of Washington is bad...that's just a very basic form of a bad argument
- There are obviously lots of good examples of regulation out there and again, not even a passing mention of any isn't a real argument (something Larry Summers had to correct him on)
- The lack of seriousness was made even more clear when it came down to what to do...which was a kind of hand-wavy "maybe more transparency?" position...but a lot of people have been stuyding, fighting and working on regulatory capture for decades and there are a lot of ways to combat it, including probably the most popular one which is preventing single companies from getting so large they can significantly influence regulators by themselves through money or market power
It was a rousing talk...but not a serious one and surprised to see you give the unsupported, larger claim (all of Washington sucks) such intellectual credence.
I have spent my entire career working on innovation. Some of that with a major defense contractor. I have gone through waves of heavy DC engagement. And no DC engagement.
1) I have never met a Senator, President or Congress person curious to understand the core nature of an innovation. I have had serious conversations with probably 10 Senators, 30 Representatives, 1 President, and many regulators.
2) I have been screwed over by every politician I thought I trusted.
3) I saw other politicians conspire to destroy Chu's agenda (democrat politicians) when he was DOE head because they saw him as naive.
So, I admit I have failed to understand how politicians work.
In the end, government's role is really not to drive innovation. It is to normalize innovation once it emerges. For example, let railroads innovate, but at some point standardize the gauge of track once dominant design is settled.
The opportunity is ultimately an optionality challenge. Optionality is an information arbitrage. As Hayek stated in "Use of Knowledge in Society" the coordination of resources for economic innovation is best done through entrepreneurs close to the signal.
Probably the best thing innovators can do is educate the political class on how real innovation occurs. So that politicians and government can stay out of its way. The natural rate of innovation wants to be higher. And will happen quicker in every state, as it did in the 50s, if we remove the barriers to the optionality.
I am really unsure what role government plays in making this happen other than doing harm to slow it down.
Love “play to win” the sentiment, and the objectives wrt nuclear etc. I’m a bit confused about the premise though - especially wrt Gurley’s statement.
1) If anything, the reason Silicon Valley has done so well has been due to low interest rates. That’s a result of specific government policy designed to benefit investors and encourage risk-taking at the expense of other economic goals. This isn’t to take anything away from the valley’s visionaries, operators and investors. But if they’re the surfers, the interest rate environment was the wave.
2) Aren’t Big Tech companies some of the largest and most powerful lobbyists in DC?
3) I was under the impression that much of the foundational technology of the internet was funded by the government. Although maybe that’s overstated urban legend?
In any case, it seems to me that DC has been very good to Silicon Valley.
ps
Unrelated, but while I’m here: weekly dose of optimism is such an amazing contribution to the universe 👍🏿❤️🤌🏿
Packy, I certainly agree, and am reminded of that often when I hear my more enthusiastic friends who have such anger in their voices, that I see they have floated too far from the shores of common sense.
But I also have the feeling this whole process--on both sides-- is being governed by some natural law, glimpsed only fragmentally by us, but having something to do with increasing population density.
What does not help our side is the tendency of Silicon Valley to come up with flamboyant leaders--Celebrities=Targets of Jealousy. (I'm very petty, and have always thought jealousy drives a lot of our elected representatives demanding regulation, rather than altruistic concern for public safety.)
And you obviously feel that genius should be rewarded---Jeeesh, question that assumption!
Hi Packy,
I agree in principle with much of what you wrote, but I think your circle is a little too narrow in this area. Many Americans love the idea of the tools created by Silicon Valley being used for efficiencies, cost reductions, and "miracle" leaps forward. But there are not many that are eager to see Google, Meta, Amazon be the actual implementers and gain more "capture" over information about our lives. They do not want to see the people who are already incredibly wealthy (and therefore have more power already in our political system) get even more power and be able to implement regulatory capture for themselves. A VC funded company in these areas achieving critical mass would likely enrich the same people who would benefit from one of the existing "Big Tech" companies doing this themselves.
Also, your tribalism comes across shrill. I've been in crypto for 8 years now, and agree that Elizabeth Warren does not understand the potential of crypto. But if you read her books or listen to her speak you can understand her position and turning her into a boogeyman is just ridiculous. I'm sure portraying opponents of nuclear as unproductive nobodies probably gets you likes on Twitter/X, but it both minimizes the opposition (that beat nuclear in Illinois) and glosses over their objections. Neither of those outcomes helps nuclear (or any other topic move forward).
Cheers.
Long time reader, first time commenter.
Great post! Another great book that opened my eyes to regulatory capture was Mancur Olson's Rise and Decline of Nations (https://www.amazon.com/Rise-Decline-Nations-Stagflation-Rigidities-ebook/dp/B0B8DZH8P3/). His major thesis is the comment you made around the incentives for a small group are so much higher than the cost to challenge for a large group and that this compounds over time and leads to major dysfunction in a society.
Is your "Silicon Valley" including the same FB/Meta that ruined elections? The Amazon that ruined local businesses and is destroying the environment with the "same day delivery" concepts?
Are you telling me that we should feel bad for people (or worse hope they will be delivering our utopian future) that have used billions for ego projects (biggest yacht in the world anyone?) ?
For better or worse, Bill Gates made philanthropy a big part of his life.
You'll excuse me if I am a little skeptical about putting my future and hopes into an industry that at this point is mostly built on plundering the free resource of private data of individuals and profiting from it. When they finally put a stop to that or find a way to properly compensate for its use, maybe I will root for them.
Until then ... they need to be reined in just like every big corporation out for the benefit of their shareholders at the expense of everything else.
The notion that Silicon Valley is "far away" from Washington DC is risible.
Let's start with outright lobbying: https://www.washingtonpost.com/technology/2022/01/21/tech-lobbying-in-washington/
According to the above: 9 companies spent $70m in 2021. This is hardly "far away".
To put this $70 million in perspective: the largest lobbying spend is pharma at ~$350M - but the 2nd biggest spend is "Electronics Manufacturing and Equipment" @ $221m: https://www.statista.com/statistics/257364/top-lobbying-industries-in-the-us/
Note the 9 companies are internet companies; Silicon Valley is *also* the electronics manufacturing and equipment companies. The sum of these 2 sums is $291m - only a bit lower than pharma.
Secondly, outright lobbying is only one of the ways by which companies influence DC. Revolving door board and executive seats - i.e. Twitter's pre-Musk heavy ex-FBI contingent as well as similar 3 letter agency presence in Meta and Google and what not. Uber's employment of Plouffe. Stamos as part of the disinformation industrial complex. Board seats for ex-politicians and ex-bureaucrats ranging from (I invented the internet) Gore to Regina Dugan to the many 3 letter agency types in cyber security companies. The tech execs that went into government like Eric Schmidt and the DIAB. I am quite certain there are many more.
Then we have tech cooperation with DC - ranging from the aforementioned disinformation industrial complex/censorship to Palantir's outright dependence on government contracts.
Clearly a lack of research occurred here.
Isn’t a form of regulatory capture to limit the regulations on your business? When I hear AI companies — well-financed ones — talk about limiting regulations on the industry, I imagine lots of money changing hands to ensure that regulations are limited.
As a Haverford College grad, loved the shoutout for the trails!
On Exactitude in Science
https://kwarc.info/teaching/TDM/Borges.pdf
On Exactitude in Science
https://kwarc.info/teaching/TDM/Borges.pdf
Regulatory capture can be rationalized during Bobby's first term - it is the center plank and roofbeam of his platform. https://days.to/election-day-in-us/2024 411 days to go. Let's make sure it happens.
Greenwashing nuclear. How can anybody surmise that stored or buried nuclear materials can safely be stored for millennia. They can’t. That evidence doesn’t exists. And failure will cause more deaths in the long run than the death we’re counting now in our little slice of time is nothing compared to the half-life of nuclear waste. Nuclear has less than a century of history, and yes there are a few images of nuclear accidents. This is context collapse at its worst. A “few” in maybe a 75-year nuclear history is a false measurement when you project millennia forward. Less than one year ago, we were worried about the Russians occupation of a nuclear power plant. Can anybody predict terrorism, geopolitical events, wars, earthquakes, tsunamis with any accuracy or assurance for millennia? There are thousands of tremors or minor earthquakes each year. Burying nuclear waste “deep in the earth” sounds like a safe long-term solution. The nuclear facility near San Louis Obispo is but one example of the arrogance of the nuclear power culture. It sits near one of the fastest moving geological faults in the world. Its reaction to a report outlining the dangers of this nuclear plant and why it should be decommissioned? It applied for a 25-year extension of it commission. This is not an unusual serious discounting of nuclear power dangers. Give me a break. Nobody can guarantee the safety of stored nuclear materials for millennia. Cripes, the world might forget where it’s buried. By the way, how about that buried nuclear waste leaching toward the Columbia River in Washington State. Again, a very short history of disasters, areas of Japan and Russia that are unlivable, Japan announcing the planned dumping nuclear waste into the ocean with no forewarning, no discussion. A nuclear cloud floating over Europe, which had to call the Russians to ask what was happening. Greenwashing millennia forward is arrogant and irresponsible, showing a callous disregard for generations of people who haven’t even been born. Cripes.
Regulatory capture is only possible with collusion. So that tells us we are up against a colluding force.
That said, we have been working on a way to fix all of this and more for the past 2 years ("we" at The Society of Problem Solvers"). It is apparent to us that we cannot fight this capture head on. So, we need to make new systems that make the old ones obsolete - or in this case plug into their old systems and fix them with decentralization and transparency. Understanding this takes a little effort and it starts by using Human Swarm Intelligence to harness the Wisdom of the Crowd. For short, it is called "swarming." Scientists and medical fields looking to form decentralized systems need to be part of this and understand this. And anyone who wants to fight collusion and regulatory capture does as well. If you are unfamiliar, please start your journey here, and stay tuned:
https://joshketry.substack.com/p/human-swarm-intelligence-the-most
The framing kind of bothers me.
As mentioned, the Silicon Valley industry as we know wouldn't exist without government investment or outright creation. The early government contracts weren't due to chance or circumstance, it was alignment of the military industrial complex's interest and the relationships of those in the Valley.