The Internet Is Not the Answer (15 page)

The cofounder, with Elon Musk, of the online payments service PayPal, Thiel became a billionaire as the first outside investor in Facebook, after being introduced to Mark Zuckerberg by Sean Parker, the cofounder of Napster and Facebook’s founding president. The San Francisco–based Thiel lives in a “ten thousand square foot white wedding cake of a mansion,”
⁷⁰
a smaller but no less meretricious building than the Battery. His decadent house and dinner parties are the stuff of San Francisco high-society legend, featuring printed menus, unscheduled Gatsby-like appearances from the great Thiel himself, and waiters wearing nothing except their aprons. The reclusive Thiel has reinvented himself as a semi-mythical figure—a Gatsby meets Howard Hughes meets Bond villain. He’s a Ferrari-driving, Stanford-educated moral philosopher, a chess genius and multibillionaire investor who is accompanied everywhere by a “staff of two blond, black-clad female assistants, a white-coated butler and a cook who prepares a daily health drink of celery, beets, kale, and ginger.”
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It would be easy, of course, to dismiss Peter Thiel as an eccentric with cash. But that’s the least interesting part of his story. He is, in fact, an even richer, smarter, and—as a major funder of radical American libertarians like Rand Paul and Ted Cruz—more powerful version of Tom Perkins. Peter Thiel has everything: brains, charm, prescience, intellect, charisma; everything, that is, except compassion for those less successful than him. In the increasingly unequal America described in Packer’s
The Unwinding
, Thiel is the supreme unwinder, a hard-hearted follower of Ayn Rand’s radical free-market philosophy who unashamedly celebrates the texture of inequality now reshaping America.

“As a Libertarian,” Packer notes, “Thiel welcomed an America in which people could no longer rely on old institutions or get by in communities with long-standing sources of security, where they knew where they stood and what they were bound for.”
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Thiel would, therefore, certainly
welcome
today’s age of the unthinkable, in which conformity to old ideas is lethal. He would probably
welcome
the sad fate of old industrial towns like Rochester. He might even
welcome
the sadder fate of those fifty thousand retirees at Kodak who lost their pensions because of the company’s bankruptcy.

So what?
Thiel might say about these impoverished old people who spent their entire lives working for Kodak and who no longer even own their pensions.
So what?
the multibillionaire with the black-clad female assistants, the white-coated butler, and the cook might say about today’s libertarian age, in which a twenty-first-century networked capitalism is collapsing the center of twentieth-century economic life.

You Better Watch Out

To pin all the blame for society’s broken center on the Internet would, of course, be absurd. However, Internet economics are now compounding the growing silicon chasm in society. Robert Franks and Philip Cook’s 1995
The Winner-Take-All Society
was one of the first books to recognize the corrosive impact of information technology on economic equality. Up till then, it was assumed that technological innovation was beneficial for society. Vannevar Bush, in the “Science, the Endless Frontier” report he wrote for Roosevelt in 1945, took it for granted that constant scientific and technological progress would inevitably lead to both more jobs and general prosperity. And this optimism was reflected in the work of the MIT economist Robert Solow, whose 1987 Nobel Prize in Economics was awarded for his research showing that over the long term, labor and capital maintained their share of rewards in a growing economy. But even Solow, whose research was mostly based on productivity improvements from the 1940s, ’50s, and ’60s, later became more skeptical of labor’s ability to maintain its parity with capital in terms of reaping the rewards of more economic productivity. In a 1987
New York Times
Book Review
piece titled “We’d Better Watch Out,” he acknowledged that what he called “Programmable Automation” hadn’t increased labor productivity. “You can see the computer age everywhere,” he memorably put it, “but in the productivity statistics.”
⁷³

Timothy Noah, the author of
The Great Divergence
, a well-received book on America’s growing inequality crisis, admits that computer technology does create jobs. But these, he says, are “for highly skilled, affluent workers,” whereas the digital revolution is destroying the jobs of “moderately skilled middle class workers.”
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The influential University of California, Berkeley economist and blogger J. Bradford DeLong has suggested that the more central a role information technology plays in traditionally skillful professions like law or medicine, the fewer jobs there might be.
⁷⁵
Loukas Karabarbounis and Brent Neiman, two economists from the University of Chicago’s business school, have found that since the mid-1970s, the relative amount of income going to workers has been in decline around the world.
⁷⁶
Meanwhile the research of three Canadian economists, Paul Beaudry, David Green, and Benjamin Sand, found a similarly steep decline of midlevel jobs—a depressing development that MIT’s David Autor, Northeastern University’s Andrew Sum, and the president of the Economic Policy Institute, Larry Mishel, have also discovered with their research.
⁷⁷

Many others share this concern about the destructive impact of technology on the “golden age” of labor. The George Mason University economist Tyler Cowen, in his 2013 book,
Average Is Over
, concurs, arguing that today’s big economic “divide” is between those whose skills “complement the computer” and those whose don’t. Cowan underlines the “stunning truth” that wages for men, over the last forty years, have fallen by 28%.
⁷⁸
He describes the divide in what he calls this new “hyper-meritocracy” as being between “billionaires” like the Battery member Sean Parker and the homeless “beggars” on the streets of San Francisco, and sees an economy in which “10 to 15 percent of the citizenry is extremely wealthy and has fantastically comfortable and stimulating lives.”
⁷⁹
Supporting many of Frank and Cook’s theses in their
Winner-Take-All Society
, Cowen suggests that the network lends itself to a superstar economy of “charismatic” teachers, lawyers, doctors, and other “prodigies” who will have feudal retinues of followers working for them.
⁸⁰
But, Cowen reassures us, there will be lots of jobs for “maids, chauffeurs and gardeners” who can “serve” wealthy entrepreneurs like his fellow chess enthusiast Peter Thiel.

The feudal aspect of this new economy isn’t just metaphorical. The Chapman University geographer Joel Kotkin has broken down what he calls this “new feudalism” into different classes, including “oligarch” billionaires like Thiel and Uber’s Travis Kalanick, the “clerisy” of media commentators like Kevin Kelly, the “new serfs” of the working poor and the unemployed, and the “yeomanry” of the old “private sector middle class,” the professionals and skilled workers in towns like Rochester who are victims of the new winner-take-all networked economy.
⁸¹

The respected MIT economists Erik Brynjolfsson and Andrew McAfee, who are cautiously optimistic about what they call “the brilliant technologies” of “the Second Machine Age,” acknowledge that our networked society is creating a world of “stars and superstars” in a “winner-take-all” economy. It’s the network effect, Brynjolfsson and McAfee admit, reflecting the arguments of Frank and Cook—a consequence, they say, of the “vast improvements in telecommunications” and the “digitalization of more and more information, goods and services.”

The Nobel Prize–winning Princeton economist Paul Krugman also sees a “much darker picture” of “the effects of technology on labor.” Throughout the second half of the twentieth century, Krugman says, workers competed against other workers for resources. Since “around 2000,” Krugman notes, “labor’s share of the pie has fallen sharply” both in the United States and the rest of the world, with workers being the victims of “disruptive” new technology.
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This has happened before, Krugman reminds us. In a June 2013
New York Times
column titled “Sympathy for the Luddites,” he describes the late-eighteenth-century struggle of the cloth workers of Leeds, the Yorkshire city that was then the center of the English woolen industry, against the “scribbing” machines that were replacing skilled human labor. Krugman is sympathetic to this struggle, which, he says, was a defense of a middle-class life under mortal threat from machines.

Some will accuse Krugman of a Luddite nostalgia for a world that cannot be re-created. But this is exactly where they are wrong. Nostalgia isn’t just for Luddites. And that, I’m afraid, is one more reason to mourn the end of the Kodak Moment.

CHAPTER FOUR
THE PERSONAL REVOLUTION

The Instagram Moment

In the summer of 2010, Kevin Systrom, a six-foot-seven Silicon Valley entrepreneur, took a trip with his girlfriend, Nicole Schuetz, to a hippie colony on the Baja peninsula in Mexico. It was one of those retro artistic communities on the Pacific coast still bathed in the fuzzy glow of the sixties counterculture—an appropriately laid-back place to reinvent oneself. Despite graduating from Stanford University with an engineering degree and having worked at Google for three years, the twenty-seven-year-old Systrom considered himself a failure.

Systrom had come out west to Silicon Valley from New England to, as he delicately put it, “get rich really quickly.”
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But he’d yet to make the kind of “fuck you” money that would have given him the ostentatious mansions, the Bombardier private jets, and the UberCHOPPER rides that some of his contemporaries, churned out of what
Forbes
magazine calls Stanford’s “billionaire machine,”
²
already took for granted. Worse still, he’d gotten agonizingly close to two epic deals: first turning down an invitation in 2005 by a Harvard dropout named Mark Zuckerberg to develop a photo-sharing service for a social media startup known as “TheFacebook,”
³
and second, eschewing an internship with Jack Dorsey at Odeo, the San Francisco–based startup that would later hatch into Twitter.

“It was like . . . Great. I missed the Twitter boat. I missed the Facebook boat,” he later admitted.
⁴

Systrom had come down to Baja to figure out not only how to avoid missing any more boats, but how to launch a big boat of his own. He had a startup called Burbn, an online check-in service backed by Andreessen Horowitz. But there was little about Burbn in the summer of 2010 that distinguished it from market leaders like Foursquare—a well-funded check-in service that enabled its millions of users to broadcast their exact location to their network. And so, to fall back on that well-worn Silicon Valley cliché, Systrom needed a “radical pivot.” Burbn really had failed. His me-too startup needed to be blown up and rebooted as a big bang kind of disruption.

So Systrom went into the picture business. Even as a high school student at the exclusive Middlesex School in Massachusetts, where he’d been president of the photography club, Systrom had loved taking pictures. As a Stanford undergraduate, Systrom had even spent a semester studying photography in the Italian city of Florence, where he’d become interested in filtering technology that gave photos a warm and fuzzy glow—a retro aesthetic reminiscent of the hippie colony on the Baja peninsula.

Systrom’s pivot was to reinvent Burbn as a social photography-sharing app—a kind of Flickr meets Foursquare meets Facebook app designed exclusively for mobile devices. And it was on a Mexican beach in the summer of 2010 that he made his great breakthrough. As they walked hand in hand together beside the Pacific Ocean, Systrom—ever the consummate salesman—was pitching Nicole on the idea of a social network built around photographs taken from smartphone cameras. But she had pushed back, saying that she didn’t have sufficient faith in her creative skills to share her mobile photos with friends. It was then that Kevin Systrom had his
“aha” moment, the kind of alchemic epiphany that transformed a serial failure who’d missed both the Facebook and Twitter boats into the next Marc Andreessen.

What if this app featured filters
? Systrom thought. What if it enabled its users to create photos that had a warm and fuzzy glow, the sort of sepia-tinged snaps that appeared so retro, so comfortably familiar that even the most untalented photographer wouldn’t be ashamed to show them off to their friends? And what if this personalized technology was engineered to operate so intimately on mobile devices that users not only intuitively trusted the social app but also believed that they somehow owned it?

Systrom—all six feet, seven inches of him—was inspired.
Forbes
describes a scene that sounds like a Silicon Valley remix of Jimmy Buffett’s hit song “Margaritaville”: “He spent the rest of the day lying on a hammock, a bottle of Modelo beer sweating by his side, as he typed away on his laptop researching and designing the first Instagram filter.”