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theatlantic.com 29-12-2022 The End of the Silicon Valley Myth – By Brian Merchant The companies that define our digital lives have hit a wall.
The dramatic, multidimensional implosion of Meta; the nuclear train wreck of Elon Musk’s Twitter; the momentous labor uprising against Amazon—it wasn’t just an unusually disastrous year for America’s biggest tech companies. It was a reckoning.
The tech giants that have shaped our lives, online and off, over the course of the 21st century have at last hit a wall. Amazon, Alphabet, Microsoft, Meta, and Apple all saw their valuations fall, sometimes precipitously. Many slashed their workforces; at least 120,000 tech workers lost their jobs this year. The myth of the genius founder, which insulated so many of these giants from so much criticism for so long, was debunked before our eyes.
These companies, launched with promises to connect the world, to think different, to make information free to all, to democratize technology, have spent much of the past decade making the sorts of moves that large corporations trying to grow ever larger have historically made—embracing profit over safety, market expansion over product integrity, and rent seeking over innovation—but at much greater scale, speed, and impact. Now, ruled by monopolies, marred by toxicity, and overly reliant on precarious labor, Silicon Valley looks like it’s finally run hard up into its limits.
Call it the improbable paradox of the modern tech giant. Some of the most powerful, profitable, and expansive companies in human history—associated at least nominally with wide-ranging innovation—are stuck. They’re failing utterly to create the futures they’ve long advertised, or even to maintain the versions they were able to muster. Having scaled to immense size, they’re unable or unwilling to manage the digital communities they’ve built. They’re paralyzed when it comes to product development and reduced to monopolistic practices such as charging rents and copying or buying up smaller competitors. Antitrust investigations beckon. Their policies tend to please no one; it’s a common refrain that antipathy toward Big Tech companies is one of the few truly bipartisan issues.
You can just feel it, the cumulative weight of this stagnation, in the tech that most of us encounter every day. The act of scrolling past the same dumb ad to peer at the same bad news on the same glass screen on the same social network: This is the stuck future. There is a sense that we have reached the end of the internet, and no one wants to be left holding the bag.
How these companies respond to this troubled new era will have major repercussions. This is why throughout 2022, we’ve been pitched a mishmash of virtual- and augmented-reality projects and “metaverse” concepts. It’s why the tech giants that preside over today’s toxic online communities are now promising to force them onto our faces. It’s why there’s brewing resentment among certain tech-industry heavyweights who believe they’ve seen their visions stymied. It’s why others are jumping ship, leaving massive planks of online infrastructure open to acquisition and further disarray.
There’s a palpable exhaustion with the whole enterprise, with the men who set out to build the future or at least get rich, and who accomplished only one and a half of those things.
The most obvious example of tech’s quagmire, of course, is Twitter. From his overinflated bid to buy the company for a price that doubled as a weed joke to his catastrophic tenure as CEO, Elon Musk and his tortured dalliance with the social network was the most-watched tech saga of the year. By November, Musk had slashed half the staff and reinstated some of the site’s most controversial banned users, including the neo-Nazi Andrew Anglin and former President Donald Trump. He used his new perch to promote right-wing conspiracies, to mock nonbinary people and Anthony Fauci, and to suspend journalists. Advertisers balked and paused spending on the platform. Prominent users sent farewell tweets. Now, at the end of the year, amid lawsuits, potential Federal Trade Commission and European Union law violations, a shriveled staff, and a mounting pile of unpaid bills, Twitter’s future is very much in question.
But the relentless Musk/Twitter drama shouldn’t overshadow the conditions that allowed it to erupt in the first place: The platform has been in a state of arrested development for a long time. It has struggled to add users and to keep toxic content, abusive accounts, and disinformation off its platform. It’s popular among a subset of people—especially comedians, journalists, and politicians—but it hasn’t turned a profit since 2019, and even then, profit-turning was a rarity. It’s posted a loss in eight of the past 10 years.
Twitter has always presented itself as a crucial online public square. If that were the case, why was Twitter’s board so quick to hand over the keys to a notoriously thin-skinned and often malicious troll? The answer is as simple as it is cynical: “The proposed transaction will deliver a substantial cash premium, and we believe it is the best path forward for Twitter’s stockholders,” Bret Taylor, Twitter’s independent board chair, said in a press release. The money saw the writing on the wall and got out while the getting was good. They knew what a mess Twitter was and perhaps even had the sense, like many of us do, that the era of social media may be ending altogether.
The company, we were reminded this year, has long been dysfunctional. In August, when Twitter’s former head of security, Peiter “Mudge” Zatko, submitted a whistleblower complaint alleging major vulnerabilities at the company, he described a security culture so lax that at any given time, an employee could access a U.S. senator’s account with no oversight. Foreign-intelligence agents, he claimed, could and had infiltrated Twitter’s inner ranks with ease. Zatko blamed Twitter’s executives for placing profit over safety and for running, as he said, “a company that was managed by risk and by crises, instead of one that manages risk and crises.”
The revelations echoed those that wracked Facebook the year before, when Frances Haugen alleged that the world’s largest social-media network had, among other things, allowed regimes to use the platform to fan ethnic violence.
The big social networks are stuck. And there is little profit incentive to get them unstuck. That, after all, would require investing heavily in content moderators, empowering trust and safety teams, and penalizing malicious viral content that brings in huge traffic. Instead, Musk’s Twitter opted to no longer enforce a policy against COVID misinformation, or Facebook’s “cross-check” system that shielded valuable high-profile users from moderation. Rather than drafting and implementing robust policies to address toxicity, harassment, and user security, the networks’ leadership has opted, essentially, to ignore the problems. Twitter’s founder Jack Dorsey up and bailed, first as CEO in the fall of 2021, then from the company’s board altogether this spring.
Meta’s CEO, Mark Zuckerberg, has apparently become so disillusioned with reality that he decided to try to invent a new one, and to shovel us all into it. For example: When Meta held its Connect conference in October to showcase its progress on the metaverse, the stars of the show were, well, legs. That lone syllable quickly became a comic shorthand for the entire event: Meta’s big breakthrough, after a year and $15 billion spent trying to build its metaverse, was that its pixelated cartoon avatars had pixelated appendages now. (The mockery that followed was especially acute after it turned out that Meta had even faked the legs.) The bluster did accomplish what the company’s metaverse was built to do in the first place, though: distract us from the fact that Facebook’s user growth has slowed to a crawl, that the platform is losing ground to TikTok, and that it’s mired in controversy and moderation woes. With each passing day, Facebook’s metaverse aspirations look more like a Hail Mary fantasy, a beleaguered CEO’s escape attempt to a 3-D virtual world where he might leave behind the misery of his dull 2-D version.
The company has lost hundreds of billions of dollars in value this year. It laid off more than 11,000 people, or 13 percent of its staff, in November.
It’s not just social media that’s in decline, already over, or worse.
In September, when Apple held its annual iPhone-launch event, few were surprised when its newest models were nearly identical to the past dozen or so. And just weeks before, news broke that the Department of Justice was considering a sweeping antitrust lawsuit against the tech giant for anticompetitive practices. As its mighty iPhone sales figures have plateaued and its business has grown more conservative—it hasn’t released a culturally significant new product line since 2016’s AirPods—Apple has begun to embrace advertising.
Over the summer, Apple began allowing companies to buy ads on the front page of the App Store. In October, reports surfaced that Apple was exploring ads for its TV+ service too. “Apple Is an Ad Company Now,” Wired declared. Meanwhile, the company is squeezing more out of the developers who rely on the App Store to distribute their work, reaping profits at a margin that in 2019 was alleged to be an eye-watering 78 percent.
But Apple isn’t alone in its monopoly-growth pangs. Google continues to be the world’s largest ad company and rakes in nearly 60 percent of its business from search listings. It makes money from its YouTube ads and cloud business too, but its fundamentals remain largely the same as a decade ago. Yet as Google has consolidated its monopoly, the quality of its flagship search product has gotten worse. Result pages are cluttered with ads that must be scrolled through in order to find the “‘organic”’ items, and there’s reason to think the quality of the results has gotten worse over time as well. (Internet users delighted in sharing reports that young people are turning to TikTok and Instagram instead of Google to search the web.) YouTube, meanwhile, is facing many of the same policy quagmires as Facebook and Twitter, especially when it comes to content moderation—and similarly failing to meaningfully address them.
Like Apple, as its core product—search—has been seeing revenues level off for a while now, Google has behaved less like the tech innovator of its mythology and more like a monopoly of world-swallowing corporations past. It has thrown its weight around to ensure that it dominates the digital-ad marketplace and turned further toward Goliath-scale rent seeking, both in its own app store, Google Play, and in the expansion of its Cloud business. As a result, Google, too, is facing antitrust action from the Department of Justice—little surprise, given that it controls the world’s dominant search engine, web browser, and mobile-device operating system all at once. Google’s quest for new revenue streams has led it to a place where so many of the once-idealistic tech giants seem to have wound up—at the Department of Defense. In December, the Pentagon announced that it had extended a $9 billion DOD contract to Google—along with Oracle, Amazon, and Microsoft—to help build a “tactical cloud.”
Keep in mind that Amazon makes the bulk of its profits—when it turns them—from its Amazon Web Services cloud-internet business. Despite Amazon’s behemoth size and e-commerce imprint, its margins on its retail business are thin—last quarter, it logged a loss. Amazon has expanded relentlessly on the back of AWS profits, low consumer prices, and what amounts to systematic worker exploitation. Now that growing numbers of its workers across the nation are standing up and organizing, its equation is in jeopardy. It’s little surprise that the company has opposed the Amazon Labor Union and continues to contest the result of warehouse workers’ historic vote last April to unionize at a Staten Island fulfillment center. In November, in response to a National Labor Relations Board complaint, a federal court ordered Amazon to cease and desist its practice of “firing employees for protected activities.”
Some of Amazon’s most famous projects and products also hit spectacular walls this year. Back in March, we learned that Amazon’s prototype delivery drones kept crashing in test flights; one even started a forest fire in Oregon. Alexa, Amazon’s ubiquitous virtual assistant, is apparently losing billions of dollars a quarter—enough to be deemed a “colossal failure” by a former employee—and was the division hit hardest when the company began slashing thousands of jobs this past fall. (Amazon’s CEO announced that more job cuts were coming in 2023 too.)
Aside from renting out more access to its web infrastructure, Amazon’s road to perpetually expanding profits lies in opening more fulfillment centers and working more employees to the bone using sophisticated and punitive surveillance and productivity systems—a proposition that is running up against a rising labor movement, a tight employment market, and a public that supports union drives at Amazon by overwhelming margins.
What a grim outcome for the internet, where the possibilities were once believed to be endless and where users were promised an infinite spectrum of possibility to indulge their creativity, build robust communities, and find their best expression, even when they could not do so in the real world. Big Tech, of course, never predicated its business models on enabling any of that, though its advertising and sloganeering may have suggested otherwise. Rather, companies’ ambitions were always focused on being the biggest: having the most users, selling the most devices, locking the most people into their walled gardens and ecosystems. The stuckness we’re seeing is the result of some of the most ambitious companies of our generation succeeding wildly yet having no vision beyond scale—no serious interest in engaging the civic and social dimensions of their projects.
So it’s fitting that Elon Musk has come to dominate the conversation about the tech sector at the moment it’s most sharply fallen short of its lofty promises. Silicon Valley has always been built on the mythology of the heroic founder, and few come more thoroughly shrouded in myth than Musk—and this was a year in which that mythology unraveled.
Musk was once the actual inspiration for the cinematic Iron Man: He was believed by many to be a superhero capable of creating electric cars, sending rockets to Mars, and delivering the future to all of us. Now he’s the thrashing, bullheaded avatar of Big Tech in the 2020s: unfathomably rich and powerful but also lodged in the mud, amplifying toxicity and discord, and at distinct risk of entering a sustained decline.
Or take Elizabeth Holmes, whose unicorn start-up Theranos was once a darling of Silicon Valley, and who was sentenced in November to more than 11 years in prison for defrauding investors about her company’s technology, which never worked. Or Sam Bankman-Fried, the erstwhile crypto wunderkind and champion of effective altruists who was embraced by the Democratic Party, and who promised to help usher in the age of cryptocurrency with his exchange, FTX, and to work to improve the lives of future humans everywhere. He ends the year bankrupt, out on bond, and accused of multiple counts of fraud. Customers may never get back the money they entrusted to Bankman-Fried’s collapsed exchange. So perhaps it’s not just Big Tech but the very model that engendered it—in which a visionary is entrusted with millions to invent the future, with scant oversight—that has hit a wall.
There’s an air of irony that, as we close out the year, the latest buzzing industry trend is automated image and text generation. Tools such as OpenAI’s DALL-E and ChatGPT use huge neural networks to try to assemble new-looking products from massive expanses of old data that has been vacuumed up from the internet as Big Tech has made and managed it—images, articles, and posts created in service of feeding the platform incentives of the Web 2.0 monopolies.
It’s telling to see who is most excited about these tools: founders and investors. Some of the images have gone viral, but there’s already an accompanying weariness and plenty of pushback from working artists and illustrators. And no matter how wondrous, it’s seemingly only a matter of time before these platforms get bought or cloned by the giants, or turned into some onerous subscription-fee service that will steamroll the human creators of the source material. This is Silicon Valley again making a show of preparing to devour its own tail.
Somewhere in here, Big Tech’s AI generators seem to be insisting, amid the last internet we spoiled, that there has to be something new. Something we can use. They shouldn’t be so certain.
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