Sutter: Silicon Valley can afford end poverty

23 Mar 2015 | Author: | No comments yet »

Is Silicon Valley’s investment bubble about to burst?.

Having built an entire industry on the disclosure of personal information, however, it seems they are a little more guarded when it comes to their own.

Many of the Silicon Valley venture firms gambling on new, inexperienced tech companies will soon fall on their own swords causing another big tech bubble burst, says prominent technology investor Bill Gurley.The rise of today’s progressive-dominated Democratic Party stemmed from a brilliant melding of minorities, the poor, the intelligentsia and, quite surprising, the new ultrarich of Silicon Valley. The famously discreet technology set are going to extraordinary lengths to keep their affairs secret, regularly employing what is legally referred to as a “domestic non-disclosure agreement”. Speaking at the SXSW Interactive event last week, Gurley, a current partner at Benchmark, a San Francisco-based venture capital firm, has been predicting a Silicon Valley bubble burst for some time. “There is no fear in Silicon Valley right now,” he said at the South by Southwest music and technology conference. “A complete absence of fear.” He cites the multiplicity of so-called unicorns, or private companies valued at more than $1 billion (1944 million) by investors. For the past decade, this alliance has worked for both sides, giving the tech titans politically correct cover while suggesting their support for the progressives’ message can work with business.

The agreements, or gag orders as they are more commonly known, do not concern matters relating to their businesses however, but rather to innocuous home renovation work. The documents can compel contractors to keep quiet on everything from the details of a house’s floorplan to the styling of the garden shrubbery and the colour of the paint. Some of these companies compete in the same field, like Stripe and Square, two payments start-ups, or the ride-hailing services Uber, Kuaidi Dache and Lyft. After the 2012 election, a host of former top Obama aides – including former campaign manager David Plouffe (Uber) and press spokesman Jay Carney (Amazon) – have signed up to work for tech giants.

Perhaps even more revealing was the politically inspired firing last year of former Mozilla CEO Brendan Eich for contributing to California’s Proposition 8, which banned gay marriage. Such confidentiality agreements have previously only been employed by a few of the biggest names in Hollywood, but now figures in the tech industry; from Facebook founder Mark Zuckerberg right down to little-known company CEOs and mid-ranking engineers at firms such as Twitter and Google, are demanding them.

Valuation on users “Some of the big products that sell themselves on having lots of users rather than making money have huge valuations currently,” says Paul Quigley, chief executive of Irish news aggregator NewsWhip, who have to date raised $1.1 million in VC funding. “I don’t know if that’s justified or not. And after eight years of the Obama administration’s naked cronyism and support of Wall Street even as the middle class has suffered, the opportunities are there. Their widespread use, and the industry’s obsessive desire for discretion, was last week revealed in court documents filed in a lawsuit against Mr Zuckerberg, whose social media firm has previously been accused of violating users’ privacy in order to sell more adverts. The 30-year-old entrepreneur is being sued by Romanian developer Mircea Voskerician, who claims he was duped into selling Mr Zuckerberg the rights to buy a property overlooking the CEO’s home in Palo Alto he shares with his wife Priscilla, for a reduced price.

Not only have tech giants like Apple and Google engaged in what a federal court called an “overarching conspiracy” to prevent wage competition, but Silicon Valley firms also abuse H-1B visas to bring in immigrant competition at lower wages, a practice that’s now spreading to other industries. (In Los Angeles, Southern California Edison is firing workers and replacing them with immigrants now). Mr Zuckerberg, who wanted to buy the house in the hope of keeping away prying neighbours, allegedly promised in return to introduce him to powerful friends in the business. In my experience, most Irish venture start-ups are focused on making money,” says Quigley. “In Ireland you can’t just focus on making a lot of noise and getting attention.

First, a much stricter prevailing wage law for H-1B visas, with big damages against violators designed to make plaintiffs’ attorneys zero in on this area. Like the nobles of the Middle Ages or the corporate hegemons of the industrial era, Silicon Valley billionaires are increasingly asked to take responsibility for many of society’s ills. The information covered by the NDA “includes, but is not limited to, any and all financial, business or personal information” regarding Mr Zuckerberg.

Such disclosure, the contract reads, “would cause the protected parties irreparable harm.” However, Mr Voskerician, who said he turned down a higher offer, contends that following the sale Mr Zuckerberg evaded him for months despite his efforts to set up meetings. The tech companies’ excuse for hiring immigrants is that they can’t find enough qualified Americans, not that they just want to pay sweatshop wages, though that excuse is bogus. Companies also draw out the H-1B application process to keep workers under their thumbs and away from competitors, something called “handcuffing.” Maybe shortening the fuse on the application process there would be a good idea, too, or — again — creating damages that trial lawyers can exploit. (Most GOP types reflexively hate trial lawyers, but, like Kurt Schlichter, I think it’s better to have them working for you than against you). Mr Voskerician is now requesting that Mr Zuckerberg disclose his personal financial information, beyond his holdings in Facebook, to establish how much they should try to claim in punitive damages if he is found to have committed fraud. It is complemented by capabilities in other clusters linked to Silicon Valley both within and outside the USA, like Dublin. “If this ‘bubble’ does burst we’ve got some time to see it coming and work through it.

It is part of a normal cycle of adjustment and Ireland is in a much stronger position now. “But stay tuned, we are closer than ever before – impending bust or no bust.” – Additional reporting: New York Times Better family affairs Now there’s an app for that Can you run a family like a business? Another of his homes, which is currently being remodelled in the increasingly trendy Mission district of San Francisco, is equally shrouded in secrecy. Stanford researcher Vivek Wadhwa describes the Valley as still “a boys’ club that regarded women as less capable than men and subjected them to negative stereotypes and abuse.” This pattern of sexual discrimination and outright misogyny has been cited in a recent suit brought by Ellen Pao, a former employee, against one of the Valley’s premier venture-capital firms, Kleiner Perkins, which, she alleged, maintained a workplace steeped in sexism and locker room arrogance.

And who could be against paying a “living wage?” For added fun, have some hearings where fat-cat Silicon Valley oligarchs are grilled about worker exploitation. Some industry executives, bowing to pressure from feminists, have agreed to tone down and even alter their games’ story lines to makes them more acceptable to women’s groups. These are people who deal with confidentiality agreements every day at work so for them it’s a natural extension to seek such privacy in their other dealings,” said Mr Draper, who is representing Mr Voskerician. But there’s also strong blowback among game designers, who feel they may be forced to toe the “party line,” even in their essentially frivolous industry. One contractor told The Telegraph he has signed more than seven such agreements in the last two years, most of which for individuals the public is unlikely to have ever heard of.

Due, in part, to rapid deindustrialization – Silicon Valley has lost 80,000 manufacturing jobs since 2000 – some areas, notably, San Jose, where manufacturing firms were clustered, look more like a Rust Belt relic than an exemplar of tech prosperity. America could use much more in the way of legislation and oversight to remedy these abuses — which, frankly, have been permitted mostly because the entertainment industry and Silicon Valley have been big donors to the Democratic Party for years.

You have to ask what these tech execs know that the average homeowner does not.” He said most workers signing the documents were probably unaware of how strict the liability is if a DNDA is breached and how expensive the consequences. “The homeowner doesn’t even need to prove there has been any resulting damage,” he said. “However, social media users who sue for violation of privacy have a much higher burden of proof – they have to show they have suffered irreparably harm. Using a quote from Psychology Today in 2012, Reid makes the case for opening up families to more financial pellucidity: “Couples fight about many things – from child rearing to sex, to household chores, to dealing with in-laws. The GOP could change all that, and if it’s smart, the Republican-dominated Congress will be passing bills to protect American workers and consumers from the depredations of these industries between now and 2016.

But above everything else, frequency of money disputes remains the single best predictor of divorce.” “Couples are more likely to know each other’s weight than their salaries. Some see this unwillingness as a support for free markets, but there’s a big difference between support for Big Business and support for free markets.

There is a valley of haves, and a valley of have-nots.” This class divide is increasingly central to progressive politics, which is bad news, indeed, for the tech oligarchs. Tech execs are keen to disguise their wealth as they face a growing backlash from local residents, who blame them for the spiralling rent costs in San Francisco and the surrounding Bay Area.

But it shouldn’t be, particularly between spouses.” For this reason, Reid argues that family budgeting should be approached in exactly the same way a company might run its finances. “A good financial system needs to be available to everyone in the family which is simple, has a good balance sheet, profit and loss statements and rough budgeting.” Reid also recommends recording and collecting data on family experiences in much the same way as a business might. “Keeping records of business activity allows us to shift deadlines, avoid wasting resources, and make more informed decisions,” he says. Death of starvation is still a possibility but death of content starvation is no longer in the cards.” Recently, a progressive-focused newsletter, Capital and Main, has launched a direct assault on some of Silicon Valley’s most prominent companies, accusing them of “driving inequality” in California. Among the five firms targeted by the group have been some top California-based corporations, including four tech firms – Cisco, Intel, Oracle and Hewlett- Packard.

If you really support free markets — in which competition is based on price and quality, not government preference — then you’re going to find yourself opposing Big Business fairly often. The fifth company, Chevron, appears to be somewhat tacked on, and, in any case, is irrelevant as California seems determined to chase its last long-standing energy giant out of the state. Glenn Harlan Reynolds, a University of Tennessee law professor, is the author of The New School: How the Information Age Will Save American Education from Itself.

Opposition to Uber, Airbnb and other “sharing” companies has come primarily from progressives concerned with effects on professional taxi drivers or renters. Although tech firms may be publicly in support of such policies, in practice, these ideas run counter to an industry that continues to locate headquarters in primarily car-oriented suburban locales.

Apple’s new headquarters in Cupertino already has come under attack by smart-growth advocates who deride it as “sprawl-tastic.” Certainly, newly announced plans by Google and Linked In to expand in suburban Mountain View could also offend the retro-urbanist sentiments of the state’s planning officials, as well as their allies in the pundit class. Further down the road, the use of environmental laws to force densification and restrict peripheral growth seems certain to boost housing prices – already among the highest in the nation – and will make it ever harder to attract middle-age managers and technologists to the Bay Area, particularly if they have families. This will become more of an issue as the tech industry moves from youth-oriented apps to the “Internet of things,” which will need to attract more experienced employees, including experts in heating and cooling systems, automobiles and medical devices. The immediate response from the oligarchs, and their swelling ranks of highly paid public-relations consultants, will likely be symbolic, mouthing the politically correct stance on climate change, even as they take off in their private jets.

Also expect them to put more money into charitable activities, which could turn displaced cab drivers or factory assemblers into future wards of the tech elite. And the stakes are large: If the negative impacts of tech are not addressed, the population will seek to tax more of the oligarchs’ holdings and restrict their freedom of operation. Early signs can be seen in some left-tilting cities – San Francisco, Portland, Ore., Los Angeles and even Madison, Wis. – where progressives have opposed Uber’s rise in favor of licensed cab drivers, a working-class group that still aspires to make a decent living.

In coming years, this could alter the now one-sided nature of California politics, and perhaps spark a serious debate nationally about how to make technological progress more of a benefit to society as a whole without slowing beneficial innovation. Hobbs Fellow in Urban Studies at Chapman University in Orange and the executive director of the Houston-based Center for Opportunity Urbanism (

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