President Obama Courts Silicon Valley’s New Digital Aristocracy

Joel Kotkin
Editor of NewGeography.com and Presidential fellow in urban futures at Chapman University

Crossposted on New Majority

President Obama’s San Francisco   fundraiser with the tech elites today, along with the upcoming IPO for   Facebook, marks the emergence of a new, potentially dominant political   force well on its way to surpassing Hollywood and even Wall Street as the business bulwark of the Obama Democratic Party.

In 2008 the industry gave Obama more than $9 million, three times what it raised for any other politician; it was the first time the digerati outspent Hollywood. The numbers will surely go up this   year.

“The   Facebook instant millionaires and billionaires are about all   Democrats,” said Morley Winograd, a longtime California Democratic   activist and chronicler of information-age politics. “There’s an   enormous amount of power residing there—and it will only get greater.”

Even   when they’ve competed with and acted like more established power   brokers, the digital ruling class are treated with kid gloves compared   to other wealthy elites, rarely suffering the disdain aimed at amoral   bankers and at Hollywood’s general venality. Instead, the creators of   our iPhones, social networks and Twitter accounts are held up as tool   makers and business titans. That esteem is most pronounced among   millenials, 75 percent of whom use social media, more than twice the   percentage for boomers, according to Pew. When asked what makes their generation “unique,” the most common answer to the open-ended question is technology.

Those who will benefit most from Facebook and other IPOs resemble   the “one percent” about as much as Wall Street.

In   effect, it’s OK to be in the “1 percent”—or even the .0001 percent—if   you develop nifty devices and invest in green companies. “We live in a   bubble, and I don’t mean a tech bubble or a valuation bubble. I mean a   bubble as in our own little world,” Google chairman Eric Schmidt   recently told the San Francisco Chronicle. “And what a world it is: companies can’t hire people fast enough. Young   people can work hard and make a fortune. Homes hold their value. Occupy   Wall Street isn’t really something that comes up in daily discussion,   because their issues are not our daily reality.”

For   their part, the “Occupiers” who struggled mightily to shut down the   blue-collar Port of Oakland seem to never have considered an action   against the pampered techies at Facebook’s lavish campus.

The new plutocrats are unburdened by the obligations that come with existing large institutions; with no union presence, they don’t have to   worry about anxious retirees or redundant older workers. Green pet  causes that align with their financial interests buy more cover from the   left, while conservatives, who rarely see anything wrong with extreme   wealth, seem somewhat unconscious about the political orientation of the   emerging new elite. Ninety-two percent of Facebook executive donations so far this year went to Democrats. This exceeds even the rock-solid support the   Democrats enjoy among more established firms like Google and Apple, where support for Democrats runs to the high 80s. Although its former   CEO, Meg Whitman, ran as the Republican candidate for governor in 2010,  96 percent of eBay-associated donations went to Democrats. The Seattle area’s two top digital firms, Amazon and Microsoft make two thirds or more of their donations to Democrats.

The Obama administration’s opposition to the anti-piracy bills SOPA and PIPA came despite intense lobbying for the bill by his party’s long-time allies in Hollywood. Whatever the bills’ failings, their defeat also formally introduced the   new power of the digerati moguls and their millions of followers. The   presence of Steve Jobs’s wife, Lauren, as Michelle Obama’s guest at the State of the Union speech further cemented the ever-closer ties  between the valley’s upper echelon and the president’s party.

In   California, the alliance between progressive Democrats and high tech is   palpable. The digital elite has been a consistent backer of Gov. Jerry   Brown’s jihad on greenhouse gases, helping finance the campaign against a   2010 measure intended to reform state’s draconian and likely   job-killing energy and land-use laws. Google has emerged both as a key   backer of the state’s climate-change politics and sought to profit by investing nearly a billion dollars in renewable-energy companies.   These firms in turn depend on the state’s strict mandates on utilities   to use “green” electricity for their revenues. It’s no coincidence that prominent valley VCs have been particularly active in alternative-energy   firms such as Solyndra.

Brown and the Democratic Party increasingly have come to regard these companies as a potential source of fiscal salvation for the perennial cash-short state. As the Golden State has banked on   the valley, the tech firms have become ever more indispensable and now  are even dipping their toes in the grubby waters of municipal politics,   helping finance the campaign of San Francisco Mayor Ed Lee—who generously concocted new tax breaks for local firms such as Twitter and Zynga.

The   leftward shift by tech firms is a fairly recent development. In the   1970s and 1980s, the formative period for Silicon Valley, the area was   politically contested. Valley constituencies routinely sent to Congress   moderate Republicans like Pete McCloskey, Ed Zschau, and Tom Campbell.   Today the GOP is virtually absent from the valley at all levels of   government.

Some   old-line companies, like Hewlett-Packard and Intel, still tend to be   fairly evenhanded in their political donations, but they are   increasingly rare. Long-time valley maven Leslie Parks explains that the shift came as the Valley’s economy changed. In the 1980s and 1990s—the   area’s greatest period of growth—its roots stood solidly in high-tech   manufacturing. Now it focuses almost exclusively on product design and   information: software, search, and social media. Over the past decade   the San Jose area lost one third of its industrial workforce while the   neighboring San Francisco region lost some 40 percent—the largest   consistent loser among the nation’s 51 metropolitan areas.

High-tech   firms once concerned themselves with many of the same things as other   manufacturing companies. They worried about electricity rates, obtrusive   environmental legislation, high housing prices, and dysfunctional   public education. Many naturally supported Republicans, or   business-oriented Democrats.

But as tech separated from industry, the valley moved leftward.

Today’s   digital aristocrats manufacture virtually nothing here; anything made   in volume is produced outside California and usually out of the country.   Software-based firms don’t worry about energy costs, since they can   simply place their heavy user server farms in places like the Pacific   Northwest with low electricity rates. They do not use much in the way of   toxic chemicals or groundwater, making it easier to avoid scrutiny and   harassment from California’s hyper-aggressive environmental regulators.   Because they rely on an increasingly narrow band of highly educated   employees from elite schools, the secular decline of the state’s higher   education system hardly impacts them. And as many of their employees are   young and tend to buy houses after collecting the spoils of an IPO,   even high housing costs and poor public K-12 education don’t matter   much.

The   growing diversity of the valley has also helped the Democrats. Although   relatively few Latinos or African-Americans work in the new companies,   new immigrants from Asia and the Middle East and their offspring abound.   “You had a big change in diversity, and let’s face it the Republicans   do not do well with diversity,” said Parks, who is Japanese-American.   “The Democrats, particularly Obama, recognized appealing to these people   was a necessity.

Many   who celebrate this emerging power elite are still slow to recognize   that they are in these company’s sights. As we become more dependent on internet based news and entertainment, cultural power is migrating away   from New York publishers and Los Angeles studios towards Palo Alto and   Menlo Park. Old-line media firms such as newspapers, book companies and   the major networks may find themselves overmatched.

This   growing power may do more to concentrate economic power than any   development since the Second World War. With their stockpile of personal   data on their hundreds of millions of users, firms like Google and   Facebook could prove the biggest threat to privacy since Big Brother. As   Jason Lanier, a scholar-at-large at Microsoft Research, noted in a recent New York Times op-ed piece, the same companies that led the fight to keep the Internet “free” want   to sell hundreds of billions of dollars in advertising built from that   free, user-provided information.

While   the old valley empowered people by supplying technology, says Chicago   law professor Lori Andrews, social-media firms instead leverage our   personal information into fodder for not just advertisers but people   reviewing job applications, medical records, and more.

What’s   more, the dominant firms are rapidly becoming oligopolies. In the old   days, valley companies battled over everything from semiconductor chips   and disk drives to servers and operating systems. In contrast, today’s   digital industry tends to gravitate to the best-financed (usually by   venture capital) and most well-connected companies. Microsoft, for   example, still controls 90 percent of the operating-system-software industry; Facebook is likely to continue with a 60 percent to 70 percent share of the social-media marketplace. Google enjoys a higher than 80 percent share in search.

This   is a degree of control that exists in few older industries. Like the   railroads of the old robber barons, those few firms who control the   limited number of digital platforms can limit the profitability of   smaller would-be competitors—and could end up slowing the rate of   innovation in order to maintain their own positions. They may wear   T-shirts to work, but the tycoons of Silicon Valley are, in some   respects, J.P. Morgan’s true heirs.

Populism   may now be de rigeur inside of the Democratic Party, but the world   being created by the new digital haute bourgeoise is anything but social   democratic. Parks notes that the lower end of the valley economy, like   janitors or food-service workers, generally labor for flinty-eyed   outside contractors so they share as little as possible of the wealth   collected by higher-skilled employees.

Even   Silicon Valley’s geography is increasingly unfriendly to the mass   middle class, much less the aspiring working class. Due largely to   strict land-use regulations, median housing costs, even adjusted for   income, are among the highest in the nation, more than twice as high as   those in places like Raleigh, Salt Lake City, Houston. or Dallas. With a   2,300-square-foot home in Palo Alto going for nearly $1.8 million, the digital heartland is largely off limits for most of us.

Those   who will benefit most from Facebook and other IPOs resemble the “1   percent” about as much as Wall Street. They may see themselves as   “progressive,” but they create few broad-based opportunities for members   of the middle and working class. A bit of their wealth may trickle down   to Democratic politicians, but the rest of us, as dependent as we have   become on their technology, have reaped little financial benefit from   them. Whatever the value of their creative efforts, the new digital   aristocracy’s political ascendency threatens both the populist roots of   the Democratic Party and perhaps the delicate social balance of our   Republic as well.

This piece originally appeared in TheDailyBeast.

 

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