Funcrusher Plus: Silicon Valley’s Disruption of Ethics

While Silicon Valley has become an undoubted source of innovation and technological progress, as recent scandals in the operations of companies like Uber and Facebook have shown, there is most certainly more to their identity beneath the surface. Much like the financiers of Wall Street, or the glut of Oil Tycoons in the dawn of the 20th century, these are a sacred class; standard-bearers of the free market and symbols of rugged individualism: fulfilling the maxim that any American could reach these levels of success with a bold vision and the grit to back them. Just as these past industries came under the scrutiny of citizens and governments alike, the tech industry is due for its time under a more watchful eye.

“The Epitome of a Stanford-Fueled Startup”

To best articulate only a few defects in the tech industry, it’s useful to look at the curious rise and fiery fall of what the Wall Street Journal called “the epitome of a Stanford-fueled startup”: Clinkle. The company, founded in 2011 by 19-year old Stanford student Lucas Duplan, attracted both peers and faculty alike, resulting in many leaving the school to work on the tech startup. Coupled with a highly successful round of funding from venture capitalists, as well as the blessing of many heavyweights in Silicon Valley, Clinkle seemed well on its way to joining the ranks of other household names. There was one problem, however: No one quite knew what “Clinkle” was. Two years of signups and promises of beta testing had amounted to, by September 2014, a phone app that was little more than a glorified digital wallet, with functionality that mimicked other existing apps. It didn’t help that while the company was in a protracted “stealth mode”, the company quietly laid off 25% of its employees. Ex-Clinkle workers anonymously reported how the young CEO lied to employees about their stock option pool, made his staff work far below the market rate while he took a six-figure salary, and not to mention had a product launch date that was constantly in flux since the company’s founding. Duplan’s penchant for extravagant displays of wealth and absurd promotional stunts ultimately spelled the company’s demise, with investors demanding for a return of funds by 2016 from the wreckage of the tech world’s darling startup.

It would be easy to take away from this story the shortcomings of a young CEO, and indeed: much of the coverage on Clinkle at the time turned Duplan into a pariah. But the startup had attracted major support in the industry, from the prominent tech venture capital firm Andreessen Horowitz to entrepreneurs like Peter Thiel. If a company under their watch could implode, it should bring pause to those who praise the tech startup culture, and perhaps call into question how exactly they receive funding. Beyond these concerns are others that were exemplified through Clinkle’s example: Employees encouraged to make sacrifices and take lower wages while CEO’s raised their own salaries; Tech companies “disrupting” existing industry spheres being a euphemism for circumventing existing laws; and at the heart of the matter, how Silicon Valley is redefining the relationship between capital and its consumers.

Live Fast, Burn Out Young

Joining the ranks of the techies populating the land from Palo Alto to San Francisco is by no means a cheap affair. As author Corey Pein reveals in Live, Work, Work. Work, Die, the life of a young tech worker is often characterized by Airbnb rentals, shared Uber commutes, and obscene work hours. In this industry, there is an enigmatic charm to the idea of working well into the night and spilling over into the weekends. Blake Robbins, a former Google intern turned tech investor, offered his experiences in the tech world in a series of tweets. On the ‘cool’ factor of working longer, Robbins says:

“Not hanging with friends and family because you’re working isn’t ‘cool.’ Burning out isn’t ‘cool.’ I promise you…your competition isn’t beating you because they are working more hours than you. It’s because they are working smarter.”

Many former interns and tech workers have echoed this sentiment, with the idea of personal sacrifice and laborious hours being integral to the identity of the Silicon Valley work ethic. One can find the most devoted followers of the tech industry recounting the stories of their idols like Elon Musk, keeping a sleeping bag near the Tesla production line, as a point of fact that their tireless efforts and sleepless nights will pay off. It doesn’t seem to deter many of these potential entrepreneurs that the failure rate often touted for startups hovers around 90% (recent studies show it to be closer to 79%). It instead serves as a sort of mantra to defy the odds, and justify the failure of those who haven’t yet made it. Rather than serve as a moment of introspection, it seems to dismiss bad behaviors and practices, and mislead startup founders on what characterizes the nature of success in this industry. As opposed to the technical merits of the product being pitched to venture capitalists, often what entices their approval is the presentation of the idea; marketing and returns trump functionality, in the self-professed nerd meritocracy.

Beyond the world of venture capital and Mark Zuckberg acolytes, factory and labor workers for these companies don’t fare much better. Amazon’s practices regarding its warehouse employees have brought this concern to the forefront in recent years; for one, Amazon doesn’t consider them its employees. Many of the hires are brought on via a partnership with temp-firms like Integrity Hiring Solutions, allowing them to avoid maintaining a permanent workforce that expects raises, good benefits, and worker compensation. This also allows a measure of control against worker disgruntlement, as, under these conditions, temp-workers cannot organize into unions, given the flux in which the company rotates workers. Amazon had put so much stock into observing an orderly continuance of its workers performance, that its Germany facility used HESS, a security subcontractor with numerous ties to Neo-Nazi organizations, as a means to intimidate and suppress the warehouse’s foreign workers. Granted, practices as overt as these appear to be few and far between, yet remain emblematic of an industry whose attitudes towards laborers is akin to the bosses of Gilded-Age factories.

Disrupting Laws and Challenging Norms

Silicon Valley and the Tech Industry at large prides itself for companies that can “disrupt” an existing market, industry, or trend. What does disruption actually mean, though? To those who throw the word around in their market pitches and high-production advertisements, it envisions themselves as the forerunners to re-writing the rules of any given market, by challenging the ways in which they operate and under-towing their operation through cheaper, simpler, or more “innovative” means. But practically speaking, as Judith Shulevitz explains, these disrupters believe in a kind of free-market absolutism that coincides hand in hand with technological growth; existing institutions, particularly publicly funded ones, are operating inefficiently; tech entrepreneurs can do it better, and for cheaper, to the benefit of the customer.

Convenience has been a driving factor in the success stories of companies like Uber, Netflix, and Airbnb. The cost of such efficiency, namely in Uber’s case, has been exploited through legal loopholes and aggressive lobbying campaigns. Beginning with its emergence in 2010 UberCab, it was “a one-click service to hire licensed, professional drivers”. This was, of course, false, as the company was neither licensed, and hired drivers that met the qualifications of simply owning a car. Beyond misleading advertisements, the company also designated its drivers as “independent contractors”, allowing them to avoid minimum wage laws, payroll taxes, health insurance, and other legal benefits. In spite of these initial hurdles, it successfully bankrolled political consultants, courting local city officials and other state actors to legitimize the company and legalize the service. Uber, like many companies before it, was using the time-honored strategy that Corey Pein sardonically refers to as “break laws first, buy influence later”.

Upend the Disruption

It’s important to take this collection of company horror stories not as separate, unrelated anecdotes, but collectively as part of a wider narrative. Stories of workers collapsing from relentless schedules, companies using surveillance software to avoid law enforcement, and startups that provide services and products that fabricate a fictional demand are the only evidence that the world of tech thrives on boom and bust cycles to succeed. While the Tech Press fawns over the latest gadgets while simultaneously Tech moguls threaten censorship against critical coverage, it would seem SIlicon Valley has maintained a stranglehold on their media image.

If any of the evidence presented here shows, coupled with the massive backlash against companies like Facebook over consumer privacy, the tides do seem to be changing. Tech Investors, writer Erin Griffith notes, have become warier over investing startups with dubious founders and bad PR. If this is the case, perhaps we won’t see another Lucas Duplan for quite some time. As investor Hunter Walk comments “It’s the exact same story of too many people with too much money. That breeds arrogance, bad behavior, and jealousy, and society just loves to take it down. Tech has now become an institution.” This institution calls for more scrutiny over a world we’ve taken for granted in the pursuit of economic progress and technological innovation. Much like the robber barons of the 20th century, or the Wall Street investors behind the 2008 crash, the Elon Musk’s and Mark Zuckerberg’s of the world are due for the same oversight and regulation that we give to many economic bubbles, that were once deemed “too big to fail”. It’s time to disrupt the disruption.

 

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