Valley of the Gods

by Alexandra Wolfe

  Meanwhile, other health tracking companies were coming under the radar of the US Food and Drug Administration. A few, such as Fitbit, the fitness tracking device, were getting FDA scrutiny. They laid out the guidelines for “low-risk devices” and specified that it could not be advertised to cure insomnia or anything else, but only to promote general wellness. Devices of this nature, said the FDA, couldn’t be a threat to customers’ safety. Ad claims had to be as vague as possible. Sleep management was okay to suggest, but curing sleeplessness? Proud’s company was one of many that had reached a certain size and could become a threat to the existing industry, therefore attracting the attention of the government regulators.

  • • •

  Heather Podesta was sitting in the lobby of the Sheraton New York Times Square Hotel, waiting to meet with Hillary Clinton’s staff. She had long been cozy with the Clintons: her ex-husband, Tony Podesta, was also an established lobbyist in his own right, and her brother-in-law John Podesta had once been President Bill Clinton’s chief of staff and now was running Hillary Clinton’s 2016 campaign for the Oval Office. But these days actual politics was merely a footnote in her daily life—working for tech companies was far more lucrative.

  With a shock of grey hair swirling through her salt-and-pepper bob, and wearing bright-red lipstick, she stood out in the lobby so much that John Podesta’s eyes went right to her as he walked into the hotel. A number of Clinton staffers followed suit, acknowledging that they’d soon see her at the meeting that afternoon.

  But for now, Heather, forty-six, was talking about the egg lobby. She was in the middle of fighting it—on behalf of the tech industry. In the past year, she had made over $7 million from lobbying, and hundreds of thousands of that had come from tech companies such as Snapchat, Zocdoc, Fitbit, and SpaceX. She was also representing a new food-tech company called Hampton Creek, whose product Just Mayo was enraging the egg lobby because it didn’t contain eggs, yet claimed to be mayonnaise. In their view, nothing labeled “mayonnaise” should be egg free. To help argue its case, the egg lobby had hired “mommy bloggers” to spread rumors saying that Just Mayo wasn’t safe, wasn’t really mayo, and was a threat to the farmers of the United States.

  Podesta was gearing up to prove that this technological mayo was, in fact, the real thing. If it tasted like mayo and looked like mayo, she argued, it was none of the egg people’s business. And wouldn’t there be a legislator who might rather have the backing of the tech industry than the egg industry? After all, which was more viable these days? Tech companies helped these lobbyists wield more power. The industry had deeper pockets, and its CEOs were often so young and innocent that they didn’t even know how best to empty them.

  Take Fitbit for example, a device that tracks steps and calories. How was the company of the same name to know that its product could soon be scrutinized by the FDA for carrying consumer data? Fitbit had to make sure its branding and marketing materials met FDA standards before it was too late, she explained as she showed off a sleek, black Fitbit on her wrist.

  James Proud’s company fell into that category. Lately, these lobbyists for incumbents such as the taxi and limousine commissions, the egg lobby, the meat lobby, and the auto dealers, to name a few, were becoming more aware of these upstart start-ups earlier and earlier. It was a reason that Podesta suggested companies hire her as soon as possible.

  Uber’s and then Airbnb’s battles with the government in order to be allowed into various markets were probably the most public cases in which the tech industry came head-to-head with a species opposite to them—government workers—in a really do-or-die kind of way. Uber’s triumph over the attempted regulations both inspired and terrified a host of other companies. But at least it could be done—victory against one of the country’s and most cities’ strongest unions—thanks to a young lobbyist by the name of Bradley Tusk.

  Tusk, forty-two, grew up in Brooklyn, New York, and then went on to the University of Pennsylvania, where he became interested in politics early. In college, he got a job working for Philadelphia mayor Ed Rendell, whom he met after he got a ticket to the Democratic convention through a friend in the carpenters’ union. He saw the mayor sitting alone. He sat next to him, started chatting, and then showed up at his office to leave a note about wanting an internship with him. He got it.

  Tusk wasn’t traditionally charismatic, but he had a familiar way about him. He put you at ease. At a cafe across the street from his New York office, he treated the waitstaff as if he’d known them for years, even though he said it was one of the few times he went there. These days, he represented companies such as Tesla and FanDuel, DraftKings and Mytable, the latter a marketplace for locally cooked meals. But it was Uber that really made his name when Travis Kalanick offered him equity instead of cash in exchange for his help.

  But that came much later. After Tusk left the Philadelphia mayor’s office, he moved back home, where he worked for the New York City Department of Parks & Recreation. The commissioner then, Henry Stern, he recalled, “hired young, white Jewish men for twenty-two thousand dollars a year to basically run big chunks of the agency.” After a stint in law school in Chicago, he went back to the Parks Department and then down to Washington, DC, where he worked as New York senator Charles Schumer’s communications director for two years. “It was so crazy, because Chuck is the most media-hungry, aggressive member of Congress, and also 9/11 happened after my first year there,” he remembered.

  Then, when Michael Bloomberg was elected mayor of New York in 2001, Tusk left DC to work for him. Now that he could see how easily politicians could be manipulated through lobbying, he respected Bloomberg’s unpopular decisions, made possible because he didn’t need anyone’s money to help get him reelected.

  When Lehman filed for bankruptcy in 2008, he got another call from Michael Bloomberg, who asked him to help change the term limits for mayoralty in New York and organize his campaign for reelection. He came back to New York. Bloomberg won a third term. Tusk didn’t stay on in the administration, however. Instead, he decided to start his own consulting firm, which would turn into five separate businesses: a venture business, a consulting business, an archive business in which he’d create digital archives for foundations such as the Rockefeller Foundation or high-net-worth individuals such as hedge fund manager Ken Griffin, as well as a casino business and a family foundation.

  A few years later, Tusk got a call from the Illinois governor’s office, asking him if he would be deputy governor of the state. So at age twenty-nine, he went to work for Governor Rod Blagojevich, who was later convicted of corruption. “I think there’s a benign reason I got hired and a less benign reason,” he explained. The benign one was that Tusk was young enough that he figured Blagojevich assumed he would put up with working more than ninety hours a week. The less benign version was this: “I was a kid, and he could rob the place blind and I would never notice, which was also probably true.” When Blagojevich was removed from office in 2009, much of the legislation Tusk had written had to be checked for validity. The governor was absent so often that the prosecutors doubted he had anything to do with any legislation passed during his tenure.

  That experience led Tusk to leave the public sector and go into business. He became familiar with the Chicago lottery system and decided he would figure out a way to make it more profitable and broadly appealing. So he took his idea to all of the big investment banks, saying that he wanted to build a business to privatize state lotteries. “Both rightly and wrongly, I picked the wrong bank, which was Lehman Brothers,” he said. “They were totally true to their word, which is why I picked them, but they also took down the global economy.”

  His ability to branch out into that many areas was made possible through his Uber equity. One day in 2012, Tusk got a call from a small transportation start-up that the government was trying to shut down. It was Kalanick, who told him that he couldn’t afford Tusk’s fee but would pay him inst
ead with stock. Tusk Strategies turned into Uber’s first government relations department. It would run campaigns against city officials, such as New York City mayor Bill de Blasio, who wanted to support entrenched interests such as taxi medallions and limousines.

  Now Tusk’s other companies relied on him for the same thing. They would come to him and say, “I want to be like TK”—Travis Kalanick—to get past government hurdles in the same way. Until recently, Tusk thought, the tech industry had no idea how to deal with the government. As it started creating entire new industries and payment systems, there was no existing legislation for stand-alone car companies or stand-alone virtual currencies such as Bitcoin, for example. Tusk became a ready and willing go between.

  One of Tusk’s clients, Ripple, a distributed ledger company, was the underlying system that makes Bitcoin possible. In its case, he thought it would be beneficial for officials to regulate Bitcoin, because he thought the intervention would help legitimize the business. A regulatory system would make customers more comfortable with the new currency and make Bitcoin seem like less of a currency outsider. “When you’re trying to introduce a new currency, you need to know how to deal with the government,” he said. “It’s not true that every start-up just wants to avoid regulation at all costs; some want to be left alone, some want an even playing field—it’s totally dependent on each start-up.” With regulations, both parties could benefit, he thought. “What if you could pay your taxes in Bitcoin, or parking meters in Bitcoin?” Tusk asked. “What if the government could use Bitcoin to pay for things too?”

  Tusk would run the strategies for each company like he would a political campaign. He worked with both the government and the industry side by side after all. As he was working with his eight tech companies, he was also putting together Bloomberg’s unlikely and later abandoned presidential bid as an independent in early 2016.

  Tusk wanted politicians to start seeing tech companies as donors and their customers as voters. The five million people who played FanDuel, an online fantasy sports site, for example, voted, and might not like New York attorney general Eric Schneiderman capping their usage. They might not look too kindly on him if he were to run for a new position someday. Public schools might not have liked AltSchool, a technology-driven “micro­school,” but parents who weren’t pleased with their children’s education options also voted.

  Tusk enjoyed the fight. “We just basically kicked the shit out of the mayor and the taxi industry until they backed down,” he remembered of his fight on behalf of Uber during the summer of 2015. He would do the same for Tesla against the auto dealers who tried to get the electric car company regulated because Teslas were sold directly to consumers, bypassing dealers. It was a matter of assessing a company’s business goal and coming up with a way to achieve that while fighting off any policies that might be in the way. Tusk took a multipronged approach. Every morning, each client was emailed a detailed strategy listing all the tactics that would be used that day.

  “Our view is unless we’re bringing the intensity of a political campaign, nothing gets done,” he said. “Uber, in many ways, was the beginning of it because even though there was the Google and Microsoft suit in the 1990s, those companies had these big federal issues; it was one issue with one federal agency about privacy or market domination. But Uber was a totally new way of doing something,” he explained. “They were pissing off an entrenched interest with every city that’s politically active.” Uber, he thought, was the first instance of the new norm.

  For Tusk and his companies, it was only a matter of time before each new company would need to deal with the government. The question, he said, was, “When do you beg for forgiveness, and when do you ask for permission?” For those with passionate customers, it was easier to wait until a company had to beg forgiveness from the government because by then, it had built up a ready group of defenders. Once the newcomer did decide to fight, it took grassroots emails, legislature targeting, and placing stories in papers such as the San Francisco Chronicle, New York Times, and Los Angeles Times.

  For fights like Uber to stay in Las Vegas, for example, the customers often had to pitch in with petitions to fight one of the most powerful taxi unions in the country. Luckily for Uber, tourists familiar with using the service in their home cities were eager to argue that they should stay there because Uber made their vacations easier.

  In some markets, particularly Las Vegas, “The structure is very friendly to incumbent interests,” said Tusk. The medallion owners and unions were known for their campaign contributions and tried to use that to reinforce the status quo. “We might be fighting a particular legislator who is in the pocket of the auto dealers,” he explained. He said it happened all the time.

  Tech companies, however, were largely unfamiliar with the political favor game. They were far away from Washington, DC, first of all, and second of all, the founders weren’t naturally political. Engineering geeks barely knew how to make friends or navigate a cocktail party, let alone be politically manipulative. There was also an ingrained idea that the tech industry could solve everything and that the government wasn’t necessary. Of course, there were exceptions, and those were some of the successes. Tusk was trying to change those habits. He wanted tech companies to become familiar with how to handle politicians—that give-and-take would benefit both parties, he thought. He admitted that it would probably be a ten-to-twenty-year process to get tech companies used to the idea.

  For now, Tusk was thinking of the short term. He wanted to make sure that each of his companies could still operate, and then he would worry about the laws that would keep them in business in the long term. He hoped to someday influence the laws around self-driving cars, as well as shape public opinion about them. He wanted to make sure that Uber didn’t have to face any new game-changing regulations. Next, he was getting on a call with AirMap, a coordinating body for drones. Tusk wasn’t even sure he understood the revenue model, or if drones even had one yet, but he wanted to get in at the beginning.

  Drones, recreational and commercial, were an entirely new world. Would FedEx fight them? Would they be safe for consumers? Would they be used for war? Who owned the airspace in which to fly them? “No one’s ever thought about it before,” he said. “There may not be an evil egg industry or taxi cartel, but there will be something.”

  Otherwise, Tusk said, he tried to avoid young seed-stage companies. He would instead wait until the company was big enough to need him to mount a fight. A company needed time to grow and then later mobilize an enthusiastic customer base so that he could get the job done. With Uber, at least, the customers’ experiences with the cars was often so much better than with the local taxi industry—the incumbent—that as early as 2012, they were able to sign up a hundred thousand customers to go to city hall in New York to argue for the government to leave Uber alone. FanDuel had the same public support. “I think it’s pretty rare to build a product that people are that passionate about,” he said.

  Generally speaking, Tusk found entrepreneurs in the San Francisco Bay Area to be in denial about their weaknesses in the face of government regulation. He considered many of the companies that approached him too arrogant about their potential to stay off the radar of the law. So many founders, he said, would scoff, “I went to Stanford, then I went to Y Combinator, so when the stupid regulators see my business plan, of course they’ll do what I want because I’m so special!” He found that attitude prevalent through the tech industry.

  The other problem was that many start-ups didn’t even realize who their future enemies would be. For example, the meat industry put up a huge fight to quash food companies that came up with substitute hamburger—products that would never even appeal to meat eaters.

  Tusk, though biased, was starting to find that companies whose customers were aware of their cooperation with the government tended to have better public perceptions. He didn’t approve of Apple’s refusal to comply wit
h the FBI to hack into the San Bernardino shooter’s iPhone. “What I worry about is Apple looks in some ways so cavalier that your average taxi regulator thinks, ‘These effing start-ups, they’re arrogant,’ and it hurts all my companies.” He thought that Apple was hurting start-ups in more regulated situations.

  These days, he contended, tech companies no longer existed in a single industry anyway; all new companies were tech companies. And most companies in general were regulated. “A tech company is no different than Amazon; something delivered to your door,” he said. “There are a lot of opportunities for us these days.”

  • • •

  Young James Proud’s promotional materials reflected Sense’s ability to track and manage sleep rather than to help people sleep or counter insomnia. Instead, he positioned it as a wellness device, not a product that could provide some kind of prescriptive fix. All branding materials now are more general, hinting at possible new uses for the Sense tracker, such as using it to enhance athletic performance—or as home décor.

  For the most part, the Thiel fellows had yet to brush up against the government in any real way. Laura Deming’s life-­extending drug research was still in the laboratory, so dealing with the FDA was years away. Plus, she didn’t have to tackle regulation directly. She could decide which biotech companies to invest in based on the likelihood of their eventual approval.

  At least Silicon Valley was generating enough new technologies and new science in entirely new fields without any prior incumbents. In many cases, there was no existing industry to disrupt. While technology replaced existing jobs, it also created brand-new fields. Artificial intelligence, for instance, would be a whole new headache for government regulators as well as entrepreneurs—and society. Suddenly, thanks to Silicon Valley, new areas of thought, ethics, and laws would have to be crafted. These go-betweens such as Bradley Tusk were now at the center.