How Big Tech’s predatory culture fuels failures like SVB


After 20 years of what appeared to be unstoppable growth, America’s tech industry has spent the past year underperforming the rest of the economy. Product failures in new industries like virtual reality and cryptocurrency, layoffs across the board, lower stock prices, and the failure of Silicon Valley Bank create a teachable moment to talk about the tech industry’s culture and direction.

To an increasing degree over the past dozen years, the tech industry exploited the trust of consumers and policymakers to change the game. Rather than empowering users, many new technologies have exploited human weakness. They have used data and application design to manipulate the choices and sometimes the behavior of users, undermining their autonomy.

The recent collapse of Silicon Valley Bank illustrates a tech industry culture that prioritizes profit over the public interest time and again. For decades, SVB embraced Silicon Valley culture, providing unique services to its community. And until quite recently, Silicon Valley was loyal to its bank.

Four factors contributed to the collapse of SVB. Had the Fed not raised interest rates by 4.75% over the past year, SVB would not have failed. Had Congress not passed a law in 2018 that loosened the regulation of banks such as SVB, SVB would not have failed. Had SVB employed good risk management, it would not have failed. Had bank regulators done their job during a period of rapidly rising interest rates, SVB would not have failed. But even with all four failures, SVB should not have failed.

SVB failed because the community it had supported from its inception abandoned it at a critical moment. A group of venture capital firms that included Peter Thiel’s Founders Fund raised an alarm about SVB and encouraged their portfolio companies to withdraw funds immediately — $24 billion went out the door in little more than a day.

Some in the tech industry would have you believe the collapse of SVB — as with other failures of tech — is unconnected to the culture and business practices of Silicon Valley. That is nonsense, and there are lessons to be gleaned.

One lesson is that loosening regulations on big sectors — such as the rollback of Dodd-Frank financial reforms in 2018 — rarely ends well.

Another lesson is that technology progress is not inevitable. Technology is the work of human beings and reflects their priorities, incentives and values. If we want tech to be a force for good, we need to ensure that the priorities, incentives and values of the people creating it are consistent with the national interest.

A third lesson is higher interest rates and increased geopolitical tension may not support the strategies embraced by startups over the past decade. This may be a blessing in disguise.

The industry will always argue that more regulation would slow innovation. The counterargument is that much of the innovation of the past dozen years has caused significant social harm.

This brings us back to Silicon Valley Bank. The people whose calls to withdraw funds triggered the bank run are successful, wealthy and careless. If leaders in Silicon Valley are unwilling to support SVB, one of their own and a uniquely valuable partner in their ecosystem, it is safe to assume their business goals would not consider, much less act for, the greater good.

The solution to this damaged culture is regulation in three areas: public safety, individual privacy and choice, and competition. Congress has a long history of legislating in all three areas. Engineers do their best work when faced with constraints — and it is time to give them some.

Roger McNamee is a co-founder of Elevation Partners and author of “Zucked: Waking Up to the Facebook Catastrophe.” ©2023 Los Angeles Times. Distributed by Tribune Content Agency.


Source link

Denial of responsibility! galaxyconcerns is an automatic aggregator around the global media. All the content are available free on Internet. We have just arranged it in one platform for educational purpose only. In each content, the hyperlink to the primary source is specified. All trademarks belong to their rightful owners, all materials to their authors. If you are the owner of the content and do not want us to publish your materials on our website, please contact us by email – [email protected]. The content will be deleted within 24 hours.

Leave A Reply

Your email address will not be published.