Control – SF / LA

SF GiantsA belated blog after a West Coast trip which had demonstrated all the contradictions of a digital / tech industry which cannot play the “outsider” any longer – reading a recent New Statesman (“The Tech Utopia”) on a plane helped clarify.

The conversation around the WhatsApp deal had given further fuel to the increasingly bitter discussion in San Francisco on the impact of the tech boom on the city – the Silicon Valley wealth has made SF the most expensive place to rent accommodation and in the process is driving out the tolerance and quirkiness which is the hallmark of the city (see also this article on the Geneva-ification of London). Google Buses are the most visible lightning rod for this discontent.

Whilst at GDC the $2Bn purchase of Oculus Rift by Facebook became an exemplar of a particular tension – with those who had originally backed the product on Kickstarter baulking at the massive benefit the founders had realized from their community-minded initial investments (and Facebook as purchaser drawing particular ire). In the NS Laurie Penny quotes one of the original Valley techies criticizing the current wave of start ups: “I’m interested in building things, in how technology can change the world and the way we interact with each other. They’re interested in cashing out. 50% of their conversation is about finances. It’s a dramatic failure of imagination.”

But this idealism seems out of date as a wash of capital flows through the tech industry – driven by a desire to buy control (and almost at any price). The winners of the first tech boom are now seeking to rapidly embed themselves across the whole supply chain, diversifying their revenues in the process. For example Facebook’s purchase of Instagram and WhatsApp, but then also Oculus Rift? Or Google’s purchase of Nest and a raft of AI and robotics businesses.

They are joined by the traditional media corporations who purchase digital upstarts in order to remain relevant in a world which is moving too fast for them to innovate internally – I was at Maker Studios in LA the morning before they announced the $550M sale to Disney (with a further $450M earn outs), a move seeking to gain a foothold in the teen demographic which only watches YouTube (5.5Bn views per month across Maker channels).

Penny again: “At the heart of the [West Coast] tech industry is a paradox. It’s a paradox about creativity coming to terms with its place in capitalism.” US companies tend to be better at dealing with that than most others, but capitalism also tends to work in cycles.

The FT recently noted the Oculus Rift deal as an “implicit marker” for many, the insane valuation as confirmation of a new tech bubble. In recent weeks the flop of the King IPO and sharp fall in many US tech stocks may signal a peak for now – but the outsiders are still now the new insiders, and its hard to both remain idealistic and deliver shareholder value within a massive multinational corporation….

The tensions so exercising San Francisco currently will only continue to find mirrors elsewhere.

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