What Trump Did to Silicon Valley
European Straits #141
Hi, it’s Nicolas from The Family. Today, I’m reflecting on the global power shift under Trump, and how Silicon Valley is losing ground because of it.
If you’re interested in European tech (and why else would you be here 😊?), please put these two pieces on your radar:
One was written by my colleague Hugo Amsellem: he debriefs The Family’s year-long European tour and details the lessons we’ve been drawing ever since as to how to build successful tech companies in Europe: The European Tech Ecosystem Doesn’t Really Exist (Yet).
The other is my latest column in Sifted, which discusses the worrying liquidity gap in Europe and evaluates three scenarios by which we could collectively overcome it and generate eventual returns: Investors in European startups need a clearer path to exit.
The Sifted piece about liquidity generated pushback from some, including James Clark of the London Stock Exchange, so my plan is to discuss the topic with him in the coming days and come up with an updated vision in next week’s issue. Stay tuned!
In the meantime, let me make a slight detour through the US and discuss a topic I’ve been wanting to cover for a while: Donald Trump and Silicon Valley 🙀
What Trump Did to Silicon Valley
1/ Back in 2015, my wife Laetitia and I published a piece titled The Democratic Party’s Love Story With Entrepreneurs. Our view was that, together, Barack Obama and Silicon Valley were about to enact a political realignment that would secure both the Democrats’ domination of Washington and Silicon Valley’s of the world for decades to come. Just as Franklin D. Roosevelt had once designed the New Deal as a compromise with capital-intensive industries (“I give you free trade, you give me Social Security and labor rights”), Obama was throwing his administration’s support behind Silicon Valley’s interests in exchange for their support of his domestic agenda—including Obamacare. And if Obama was the new FDR, well, then Hillary Clinton was certain to be the new Harry Truman. Alas, things turned out very differently 😥
2/ At first, it looked as if Trump was bad for Silicon Valley in every conceivable way. His FCC appointees proceeded to get rid of Net neutrality. The clampdown on immigration made hiring talent more difficult. The upending of trade talks with various regions in the world made things somewhat difficult for large tech companies (like the large capital-intensive companies that had once supported the New Deal, US tech companies desperately need free trade in order to increase profits). Overall, Trump seemed to stand opposite Silicon Valley on every important tech-related issue. This is why journalists initially thought that tech companies would be out to take Trump down, a feeling that was only reinforced by the Valley’s general liberalism. Sure, some in the tech world were once attracted by pro-business conservatives like Mitt Romney. But overall, most people in the Bay Area would clearly prefer a Democratic administration.
3/ Trump had a very concrete and negative impact on particular companies. Do you remember, for instance, that the dire situation Uber finds itself in today was all kicked off because of Trump? Shortly after his election, he invited then-Uber CEO Travis Kalanick to join his new economic advisory council. It wasn’t only Uber employees who were shocked when Kalanick accepted, including some with high profiles. Uber customers, too, decided that they wouldn’t have it and started to spread the hashtag #DeleteUber—with 500,000+ accounts deleted as a result! The unexpected activist campaign triggered by Kalanick reluctantly making friends with Trump didn’t only revive Lyft, which was apparently nearing bankruptcy at the time. It also created the setting for the long string of scandals and embarrassments that ultimately resulted in Kalanick being fired by his own board a year later.
4/ It’s not only Uber; many problems at Facebook are the result of Trump’s election. People have known forever that Facebook’s model is about collecting personal data and providing access to advertisers and app developers. But Trump changed everything. As I wrote last year, echoing Tony Schwartz’s concept of “the responsive chord”, “it isn’t Facebook’s practices nor the arguments long put forward by its detractors that changed. Instead, the context changed. Donald Trump’s win increased people’s sensitivity regarding the collection and use of their personal data.” We used to be in resonance with Facebook and didn’t really care about their collecting data. Today, we’re in resonance with Facebook’s critics, and Trump contributed to this shift. (Note that, just as at Uber, Trump is also sowing discord among Facebook employees.)
5/ Nonetheless US tech companies have decided that they need to work with Trump. When it comes to issues such as Google and Facebook’s alleged “anti-conservative bias”, I think that those companies are mostly paying lip service by spending hours discussing the topic with the Trump administration—and, as once argued by Glenn Beck, it makes the conservative movement look weak anyway. What is much more serious, I think, is Silicon Valley securing Trump’s support in fights such as the one against France implementing a so-called “digital services tax”. You would think that Amazon would keep its distance after everything that has already happened (Trump’s insulting Jeff Bezos on Twitter, threatening to launch an antitrust inquiry, raising the idea of forcing it to pay higher prices to the US Post Office, etc.). But no: To my surprise, back in July, Amazon said that they “applaud[ed] the Trump Administration for taking decisive action against France.”
6/ Now there’s a case to be made that Trump contributes to solving problems by bringing chaos. For instance, he created the conditions for the global effort to reform corporate taxation and make it more compatible with the digital age. Likewise, Trump has been instrumental in shifting the conversation around climate change, simply because he withdrew from the Paris agreement and inspired global outrage. This, in a way, was the bet that Peter Thiel apparently made when he decided to back Trump in 2016: Trump would be a kind of “disruptor-in-chief” that would help unleash the power of radical change. And who is better positioned to thrive in chaos than Silicon Valley, the land of “ultimate exit” (to quote Balaji S. Srinivasan)? It’s true that chaos creates the conditions to come up with even more radical ideas and accelerate the pace in implementing them. There’s only one problem: chaos has a tendency to keep falling on those who are already in the least advantageous positions 🤔.
7/ From a global perspective, Trump is a major threat for Silicon Valley. The trade war against China, in particular, could become a great disadvantage for US tech companies. First, it looks like the Chinese market is now closed forever (even though Airbnb is still somewhat doing business there and Google has been considering re-entry). And by cutting off business relationships for fear of China’s stealing US assets, the US is abandoning the possibility of learning from the Chinese, who are racing ahead in many directions. Finally, the difficulties that Trump created for accessing US technological assets convinced the Chinese Communist Party that it needed to speed up its own efforts at building a local semiconductor industry. By waging his trade war, Trump is only hastening the rise of formidable competitors up to the top of the industry’s value chain. And you can expect Silicon Valley to lose both influence and market share as a result—not only in Asia, but also in Africa and, soon, Europe.
8/ Because of Trump, Europe is one of the many fronts on which Silicon Valley has to fight. Some would say that Europe doesn’t matter that much. But if Silicon Valley companies aren’t able to compete in Asia and Africa anymore, it means that Europe becomes even more critical for them as a market. Obama was someone who could vouch for Silicon Valley, and that made a difference because he was so admired and respected here in Europe. But with Trump, it’s a whole different story. Cultural rifts aren’t making things easier: You saw what happened when Google formed a board to discuss the ethics of artificial intelligence and the panel exploded within days, in part because a European member asked why he had to sit next to an American conservative who holds extreme views on transgender persons and immigration. And then there’s also the regulatory rift, which will only widen as the formidable Margrethe Vestager gains more power in Brussels.
9/ A second front is the American public. It has become more difficult for companies like Facebook, Google, and others to make friends with Trump while retaining the trust of their users. There’s a trend of companies being forced to take sides on political issues, which redefines what branding is all about in the Entrepreneurial Age. But in the particular case of US tech companies, it has been even more sensitive because those companies are so ingrained in the everyday life of Americans and Trump is so polarizing. You can spot the problem in the polls: Americans have become much less positive about tech companies’ impact on the U.S. And this has an impact in Washington, DC, where hostility toward Silicon Valley has become bipartisan. Republicans have never liked Silicon Valley because it’s populated with “coastal elites” and has historically been so supportive of the Democratic Party. Now Democrats don’t like Silicon Valley either (for the moment?), because it played such a key role in helping elect Donald Trump and has to make nice with his dreadful administration.
10/ The third front is Silicon Valley itself. Trump’s very presence in the White House has created considerable turmoil within large tech companies. But more generally, it seems that Trump has driven the whole of Silicon Valley crazy, dividing it into three groups. Progressives are going crazy about the administration and its actions, which leads to internal problems such as what happened at Google. Libertarians are going crazy as they're considering the resistance and are now convinced that socialism is on the march (follow venture capitalist Mike Maples, whom I otherwise admire, to see this in action). And those who are neither progressive nor libertarian are going crazy by embracing New Age well-being and turning Twitter into a platform for philosophy and spiritual development. That might be the best option indeed, because it’s become so difficult to take a stand in Silicon Valley. If you take a progressive stand, you risk alienating the Trump administration. If you take a conservative stand, you sound like a spoiled brat who just wants to pay less taxes on your billions. But remember that if you say nothing, you just increase the perception of being aloofly indifferent to the everyday problems of most Americans (not to mention the rest of the world)!
We European tech people have lost a lot in the process. We used to be on revered Obama’s side, which made it easy to build startups and challenge the status quo in the name of forward-looking entrepreneurship. Now, for better or worse, European startups are mixed up with Silicon Valley under Trump, which makes our day-to-day much more difficult. It goes like this: You have to start by excusing yourself. Then you need to explain that no, technology is not synonymous with mayhem. And you have to make clear that, unlike those in Silicon Valley, you care about ordinary people and the social contract. Maybe the struggle is ultimately a good thing, I don’t know. But I can’t escape that feeling that so much has been lost along the way.
Please scroll down for a list of articles to dig deeper into this topic.
✍️ My colleague Erika Batista asked me for tips about writing. And so I wrote a 10-point thread on Twitter to share the techniques I’ve been refining over the years. You can read it here: 10 tips to become a better writer.
🗄️ I published two new essays from the archives of my newsletter:
One is about Harvard’s Clayton Christensen and the meaning of the word “disruption”: Disruption Doesn’t Come from Research or Technology—It Comes from Entrepreneurs Solving Problems.
The other is about the shift in the investment value chain and how institutional investors are partnering with players on the ground to deploy more capital in tech companies: In Investing, Relationships Matter More than Money.
⚗️ Last week I mentioned that our HR magician Sandrine was writing a set of articles on how to develop your hiring abilities as an entrepreneur. We now have English versions of the articles ready for your reading pleasure, here and here.
Here are more readings about what I call “Valley Politics” and how it has been shifting ever since Trump’s election:
Silicon Valley’s Ultimate Exit (Balaji S. Srinivasan, Y Combinator, October 2013)
Valley Politics: The Democratic Party’s Love Story With Entrepreneurs (Laetitia Vitaud & me, The Family Papers, November 2015)
An Inconvenient Truth About Silicon Valley and Donald Trump (Jessi Hempel, Wired, December 2016)
Uber Just Put Every Tech Company In Danger (And it’s great news for progressive consumers) (my colleague Kyle Hall, The Family, February 2017)
Is Big Tech Breaking Up With the Left? (Alex Shepard, The New Republic, August 2017)
The Rise of the Phrase “Big Tech” Should Worry Silicon Valley (Will Oremus, Slate, November 2017)
Are Conservatives Trustbusters Now? (Alex Shepard, The New Republic, January 2018)
Can Big Tech Be Tamed? (Gary Kamiya, Modern Luxury, March 2018)
Facebook and the Responsive Chord (me, The Family, May 2018)
The Political Education of Silicon Valley (Steven Johnson, Wired, July 2018)
Rifts Break Open at Facebook Over Kavanaugh Hearing (Mike Isaac, The New York Times, October 2018)
The Coalition Out to Kill Tech as We Know It (Alexis C. Madrigal, The Atlantic, June 2019)
Three Years of Misery Inside Google, the Happiest Company in Tech (Nitasha Tiku, Wired, August 2019)
A tale of two elites (Martin Gurri, The Fifth Wave, September 2019)
From London, UK,