by Andrew Keen
But this, like so much else that Zuckerberg and Sandberg say, is entirely wrong. Having multiple identities—as a citizen, a friend, a worker, a woman, a parent, an online buddy—is actually an example of somebody with so much integrity that they are unable to compromise their different social roles. And as more and more young people are recognizing, maintaining one’s “authenticity” in the digital age may well mean leaving Facebook and finding a less well-lit place to hang out at on the Internet.99
Inspired by Max Weber’s Protestant Ethic and the Spirit of Capitalism, the American sociologist Robert Merton popularized the idea of the “unintended consequences” of purposeful social action. The history of Facebook is an excellent example of Merton’s theory. Facebook has been designed to bring us together as a happy global village. But the reverse is true. Rather than uniting us, a 2013 study by the University of Michigan psychologist Ethan Kross shows, Facebook is making us unhappier and more envious of others.100 Rather than establishing trust, a 2014 Reason-Rupe poll of Americans found, Facebook was trusted with our personal data by only 5% of the respondents, significantly less than either the 35% of people who trusted the Internal Revenue Service or even the 18% who trusted the National Security Agency.101 Rather than cheering us up, a 2013 study of 600 Facebook users by the Institute of Information Systems at Berlin’s Humboldt University found, Facebook made more than 30% of its users feel lonelier, angrier, or more frustrated.102
None of this should be surprising. It’s what happens when you hand over the conversation to a geek who talks like a computer. It’s what happens when you trust somebody with zero empathy.
Distributed Capitalism
To explain the decentralized design of the World Wide Web, Tim Berners-Lee liked to compare it with the capitalist free-market system. “I told people that the Web was like a market economy,” he wrote in his autobiography. “In a market economy, anybody can trade with anybody, and they don’t have to go to a market square to do it.”103
But in today’s libertarian age, the similarities between the Web and capitalism are more than just architectural. Silicon Valley has become the new Wall Street because Berners-Lee’s invention has become the vehicle for a twenty-first-century networked model of capitalism that offers astounding financial rewards to its winner-take-all entrepreneurs. “We live at a time when almost everything can be bought and sold,” notes the moral philosopher Michael Sandel about an “era of market triumphalism” that began at the end of the Cold War.104 And the Internet, John Doerr’s “largest legal creation of wealth in the history of the planet,” engineered by Cold War scientists and coming of age in the same year that the Berlin Wall fell, has become particularly fertile ground for the triumphalism of free-market ideologues like Tom Perkins. There’s much, of course, for Perkins to be triumphant about. Larry Page and Sergey Brin are now worth $30 billion apiece because they successfully cornered the market in the buying and selling of digital advertising. Jeff Bezos has made his $30 billion from an Everything Store that offers better pricing and more choice than its rivals. Facebook founder and CEO Mark Zuckerberg has accumulated his $30 billion by monetizing friendship.
In the quarter century since the invention of the World Wide Web, the Internet has gone full circle from banning all forms of commerce to transforming absolutely everything, especially our privacy, into profitable activity. “Social media businesses represent an aggressive expansion of capitalism into our personal relationships,” notes Snapchat CEO Evan Spiegel about this monetization of our inner lives by social networks like Facebook. “We are asked to perform for our friends, to create things they like, to work on a personal brand—and brands teach us that authenticity is the result of consistency. We must honor our true self and represent the same self to all of our friends or risk being discredited.”105
Berners-Lee’s definition of capitalism, however, is too pedestrian. Rather than just a static market economy that enables trading, capitalism is what the Austrian economist Joseph Schumpeter called an “evolutionary” process of economic change that “never can be stationary.” In his 1942 magnum opus Capitalism, Socialism and Democracy, Schumpeter used the term “Creative Destruction” to describe the constant cycles of disruptive invention and reinvention that drive capitalism. “This process of Creative Destruction is the essential fact about capitalism,” Schumpeter insisted. “It is what capitalism consists in and what every capitalist concern has got to live with.”106
Internet economics, therefore, needs to be understood as a historical narrative rather than as just a static set of market relationships. In both the Web 1.0 and 2.0 periods, the Internet mostly disrupted media, communications, and retail. And so, in the twenty years after Jim Clark and Marc Andreessen founded Netscape in April 1994, Schumpeter’s gale of creative destruction mostly swirled around the photography, music, newspaper, telecommunications, movie, publishing, and retail industries.
Over the next twenty-five years, however, that digital gale will grow into a Category 5 hurricane and radically disrupt every industry from education, finance, and transportation to health care, government, and manufacturing. This ongoing storm will be fueled by the relentless improvements in the power of both computing (Moore’s law) and the network (Metcalfe’s law), the increasing speed of broadband access, and the shift in all computer applications to the cloud. The fall in the price of smartphones and the growth in wireless networks, Patrik Cerwall’s research team at Ericsson reminds us, will mean that by 2018 there will be 4.5 billion smartphone subscribers. As computer chips become so small, affordable, and powerful that they can be knitted in our clothing and even ingested, as everything we do on our computing devices will be networked, both the Internet of Everything and an Internet of Everyone will, for better or worse, become inevitable.
Just as the Internet will be everywhere, so will the networked market. This digital marketplace is already beginning to resemble Jonas Lindvist’s chaotically decentered graphic image on the wall of Ericsson’s Stockholm office. Enablers and middlemen in industries as disparate as finance, transportation, and tourism are now mimicking Google’s distributed business model. Distributed capitalism equals ubiquitous capitalism. That’s the evolutionary logic of networked economics.
In the financial market, Bitcoin already has its own trading indexes where hundreds of millions of dollars are speculated on the electronically networked currency. Digital money like Bitcoin represent a peer-to-peer alternative to centrally controlled currencies like the US dollar or Swedish krona, an alternative in which middlemen and thus banks and banking fees are eliminated. Writing in the New York Times to explain “why Bitcoin matters,” Marc Andreessen—who now is the managing partner of Andreessen Horowitz, a $4 billion Silicon Valley venture fund with $50 million invested in Bitcoin-based startups like the virtual wallet Coinbase—argues that this new digital money represents “a classic network effect, a positive feedback loop.” As with the Web, Andreessen says, the more people who use the new currency, “the more valuable Bitcoin is for the people who use it.”107
“A mysterious new technology emerges, seemingly out of nowhere, but actually the result of two decades of intense research and development by nearly anonymous researchers,” writes Andreessen, predicting the historical significance of this networked currency. “What technology am I talking about? Personal computers in 1975, the Internet in 1993, and—I believe—Bitcoin in 2014.”108
What Silicon Valley euphemistically calls the “sharing economy” is a preview of this distributed capitalism system powered by the network effect of positive feedback loops. Investors like Andreessen see the Internet—a supposedly hyperefficient, “frictionless” platform for buyers and sellers—as an upgrade to the structural inefficiencies of the top-down twentieth-century economy. Along with peer-to-peer currencies like Bitcoin, the new distributed model offers crowdfunding networks like the John Doerr investment Indiegogo, which enable anyone to raise money for an idea.
As an enabling platform that sit
s between the entrepreneur and the market, Indiegogo captures the essence of this new distributed economic system in which anything can not only be bought or sold, but also crowd-financed. Indiegogo offers anyone the opportunity to fund other people’s home renovations, sports cars, $10,000 African safari vacations, potato salad (which, in one bizarre July 2014 campaign, raised more than $30,000),109 even their breast implants.110 It is the reverse, the exact opposite, of the old top-down system of the post–World War II era in which government-appointed wise men like Vannevar Bush and J. C. R. Licklider funded the invention of major public projects like the Internet rather than potato salad.
Another of Andreessen Horowitz’s venture investments is Airbnb, a peer-to-peer marketplace founded in 2007 that allows anyone to rent out a room in their home, transforming it into a hotel. By the end of 2013, Airbnb had topped 10 million guest stays from an active list of 550,000 worldwide properties in 192 countries that included spare rooms in homes, castles, and yurts.111 And in February 2014, the 700-person startup raised a $475 million round of investment at a valuation of $10 billion,112 which makes it worth about a half as much as the $22 billion Hilton corporation, a worldwide chain with 3,897 hotels and 152,000 employees. Airbnb cofounder Brian Chesky describes the company as a platform of “trust” in which the reputations of guests and of hosts will be determined by feedback on the network.113 But Airbnb has been beset by such a scarcity of trust from the authorities that 15,000 New York City hosts were subpoenaed in May 2014 by New York State attorney general Eric Schneiderman because they may not have paid taxes on their rental incomes.
Andreessen Horowitz has also ventured into the car-sharing market, where it is backing a 2012 San Francisco–based middleman called Lyft, a mobile phone app that enables peer-to-peer ride sharing. But the best-known startup in the transportation-sharing sector is Uber, a John Doerr–backed company that also has received a quarter-billion-dollar investment from Google Ventures. Founded in late 2009 by Travis Kalanick, by the summer of 2014 Uber was operating in 130 cities around the world, employing around 1,000 people, and, in a June 2014 investment round of $1.2 billion, was valued at $18.2 billion, a record for a private startup company. It made Kalanick a paper billionaire and gave his four-year-old startup with its 1,000 employees almost the same valuation as that of Avis and Hertz combined,114 companies which together employ almost 60,000 people.
“Everybody’s Private Driver” Uber markets its distributed taxi network, and in July 2013 also introduced “UberCHOPPER,” a $3,000 private helicopter service which whirled wealthy New Yorkers over to the exclusive Hamptons.115 “Blair Waldorf, Don Draper, and Jay Gatsby got nothing on you,” Uber boasted in advertising UberCHOPPER. “This is the epitome of luxury, convenience, and style.”116
“Uber is software [that] eats taxis,” an admiring Marc Andreessen stated in describing the San Francisco–based transportation service.117 Yet that’s not all it eats. Tom Perkins promised that Silicon Valley’s one percent entrepreneurs are “job creators.” But tens of thousands of taxi drivers around the world would disagree. Indeed, Uber is so disrupting the livelihoods of these professional taxi drivers that in June 2014 there were strikes and demonstrations in many European cities, including London, Paris, Lyon, Madrid, and Milan, against its introduction.118
And yet Uber remains an iconic company in Silicon Valley, where it is “seen as the messiah” and the next $100 billion Internet sensation by San Francisco’s tech crowd.119 Marc Andreessen certainly admires the customer-friendliness of the mobile service. “You watch the car on the map on your phone as it makes its way to you,” he said, complimenting the app’s real-time user interface. “It’s a killer experience.”
What’s making its way to us, however, is more than just an image of an Uber limousine blinking across our mobile screen. It’s the creative destruction inflicted by distributed capitalist networks like Uber or Airbnb, in which anyone can become a cabdriver or a hotelier. And Marc Andreessen—whose Mosaic Web browser opened the Internet’s moneyed second act—is right. Uber is certainly going to be a “killer experience” for its early investors, who stand to make 2,000 times their initial outlay.120
But while a lucky handful of investors turned $20,000 angel investments in Uber into $40 million fortunes, the consequences of this casino-style economy are much more troubling for the rest of us. And the most important Internet story isn’t Tom Perkins’s “successful one percent.” It’s the other 99% who haven’t invested in Uber, don’t own Bitcoins, and aren’t renting out spare rooms in their castles on Airbnb.
CHAPTER THREE
THE BROKEN CENTER
The Future
“Everybody’s private driver.” Thus Uber boasts about its radically disruptive black limousine service. But there were no Uber cars at Greater Rochester International Airport in upstate New York when I arrived hungry and cold one gray afternoon in the winter of 2014 on a drafty United Airlines plane that had rattled all the way from Chicago. Nor were there any UberCHOPPERs available at the airport to twirl me on a three-thousand-dollar helicopter ride to downtown Rochester.
That was fortunate, really, because Rochester’s downtown—a landscape of boarded-up stores and homeless people wheeling their earthly possessions in rusty shopping carts along empty streets—resembled a picture from the dystopian future. From Blade Runner, perhaps, Ridley Scott’s 1982 movie about a twenty-first-century world in which human beings and robots have become indistinguishable. Or from Neuromancer, William Gibson’s 1984 science fiction novel, the subversive classic about an electronically networked world that not only popularized the word cyberspace but also may have foreseen Tim Berners-Lee’s invention of the World Wide Web five years later.1
“The sky above the port was the color of television, tuned to a dead channel,” Gibson—known on Twitter, perhaps not uncoincidentally, as @GreatDismal—began Neuromancer. And, like Gibson’s dismal image of the future, downtown Rochester was tuned to a dead channel. The heart of this industrial city had been ripped out and not even the most nostalgic of Instagram photographic filters could have brought it back to life. It was a broken place, a town that time had forgotten. Best known for its high unemployment and crime rates—the city’s notorious number of robberies being 206% above the US national average and its murder rate almost 350% higher than that of New York City in 20122—the only buzz in the dead sky above downtown Rochester was from police choppers. No wonder the city is now known as “the Murder Capital of New York.”
“The future is already here—it’s just not very evenly distributed,” you’ll remember Gibson once said. And there are few places where the future is less evenly distributed than in Rochester, a rusting industrial city of some 200,000 souls on the banks of Lake Ontario in upstate New York. No, Rochester’s downtown definitely wasn’t worth a three-thousand-dollar private helicopter ride—unless perhaps you had, like me, come to the city in search of a quarter century of failure.
One of the most ludicrous Silicon Valley cults—its most “striking mantra,” according to the Guardian3—is its religious veneration of the idea of failure. Peddled by thought leaders like Tim O’Reilly, it’s the idea that business failure is a badge of success for entrepreneurs. Idolizing failure is the hottest new meme for the alpha geeks of the Valley. The bigger their success, the more exaggerated their claim to being serial failures. “How I Failed,” O’Reilly thus titled a much-hyped 2013 keynote speech at one of his own successful events.4 But O’Reilly has some stiff competition in this failure Olympiad. Reid Hoffman, the billionaire founder of LinkedIn, advises entrepreneurs to “fail fast.”5 Paul Graham, a multimillionaire angel investor, calls his incubator of startup Internet ventures, which has hatched many successful startups, including Alexis Ohanian’s Reddit, “Failure Central,”6 while Dave McClure, another wealthy angel, not to be outfailed by his successful rival, talks up his equally successful 500 Startups incubator as “Fail Factory.”7 Indeed, the cult of failure has become such a mania in the Valley
that there is now even an entire event, a San Francisco conference called FailCon, dedicated to its veneration.
But, of course, winner-take-all entrepreneurs like Reid Hoffman, Tim O’Reilly, and Paul Graham know as much about failure as Michael and Xochi Birch know about running a village pub. And so to find failure, a genuine Failure Central, I’d flown 2,700 miles east, from San Francisco to Rochester. But, on my arrival, the only hint of “failure” in the airport terminal was the glossy cover of a technology business magazine displayed in the window of an airport bookstore.
Silicon Valley had come to Rochester. Or, at least, to this bookstore. The image was of an energetic young entrepreneur with a dark goatee and black-framed glasses dressed in a hoodie, frayed jeans, and old sneakers. The guy, who might have been outfitted to hang out at the Battery, was wielding a sledgehammer with which he was energetically smashing some plastic objects into smithereens.
REALLY CREATIVE DESTRUCTION, the magazine’s headline screamed in letters as black as the dude’s goatee and glasses.8
One doesn’t need to be a semiotician to grasp the significance of seeing this picture—with its “move fast and break things” message—in Rochester, of all places.
Much of Rochester’s industrial economy had itself been smashed into smithereens over the last twenty-five years by a Schumpeterian hurricane of creative destruction. The significance of that magazine cover was, therefore, hard to miss: the sledgehammer mirrored the destructive might of the digital revolution; while the plastic objects being destroyed represented the broken city itself.