In light of the election, I’m republishing this story from July on disruption and the Donald Trump campaign. It remains to be seen to what degree the president elect follows through on his many promises to remake the American economy.
Silicon Valley Lingo: Donald Trump Disrupts the Disrupters
July 25, 2016
By Douglas Messier
Recently, 145 Silicon Valley tech executives wrote an open letter opposing the candidacy of Donald J. Trump for president. In the letter, they basically declared the billionaire to be a threat to America’s very future.
We believe in an inclusive country that fosters opportunity, creativity and a level playing field. Donald Trump does not. He campaigns on anger, bigotry, fear of new ideas and new people, and a fundamental belief that America is weak and in decline. We have listened to Donald Trump over the past year and we have concluded: Trump would be a disaster for innovation. His vision stands against the open exchange of ideas, free movement of people, and productive engagement with the outside world that is critical to our economy—and that provide the foundation for innovation and growth.
The tech moguls’ concerns were genuine — and more than a little ironic. The irony centers around one of Silicon Valley’s favorite buzz words: disruption. The valley’s denizens are quite proud of how they have fundamentally transformed industry after industry with their cell phones, websites, apps and other innovations. Amazon, Facebook, Google, Uber, airbnb, SpaceX, PayPal…the list of disruptive, multi-billion dollar companies goes on and on.
In Trump, these tech executives face an opponent who is actually pretty skilled at disruption. He’s already upended the Republican Party and the presidential race. If elected, he’s promised to disrupt decades of economic policies supported by Republicans and Democrats alike that are fundamental to how Silicon Valley functions.
A Party Turned Upside Down
So, how did we get here? Let’s first look at Trump’s disruption of the Republican Party and the presidential race.
The modern Republican Party is built on a handful of bedrock principles: small government, pro-business, anti-regulation, free trade, pro-military and traditional family values. It’s strongest support lies among white voters whose once unchallenged majority is rapidly shrinking with the rise of other groups.
Trump is the anti-thesis of most of the things the party holds dear. He is on his third marriage to a much younger wife, is known to have cheated on his first two wives, and has bragged that sleeping around in his youth was his “personal Vietnam” war — a conflict he avoided through deferments and an exemption. In other words, he’s not exactly the type of family values guy who would traditionally appeal to the Republican base.
Trump’s Make America Great Again campaign is no better aligned with the GOP’s economic priorities. The candidate has threatened to build a wall across the southern border with Mexico, renegotiate long-standing free trade agreements, stop the outsourcing of jobs abroad, end a visa program popular with tech companies that has been blamed for putting Americans out of work, bar entire classes of people from entering the country, and prevent corporations from dodging taxes by stashing billions in revenues overseas.
So, if Trump is so antithetical to what the Republicans believe in, how did he win the nomination? He did it by tapping into the anger of people who feel their lives have been disrupted by open borders, free trade and rapid technological change — the very things that Silicon Valley embodies.
Workers have watched while well-paying jobs are shipped overseas. They’ve seen their wages stagnate while corporations have run up massive profits. They’ve paid for bailouts of corporations that helped tank the economy. They have watched while millions of legal and illegal immigrants have come over the country’s borders to compete for jobs.
Now, it is true that Silicon Valley has brought us immense advancements in computers and communications that have improved the quality of life. It had generated enormous wealth and prosperity, helping to boost the American economy and competitiveness.
However, when you read the list of Trump’s grievances, you find a close correlation between the practices he decries and how Silicon Valley operates. Here are but a few examples:
- outsourcing manufacturing jobs to Chinese factories staffed with low-paid workers and ringed with suicide nets (Inside Apple’s Foxconn Factories);
- abusing the H-1B visa program to import lesser skilled foreign workers to fill jobs Americans can do (How the H-1B Visa System Can Hurt American Workers );
- silencing laid-off workers with non-disclosure agreements to hide abuses of the visa program (Laid-Off Americans, Required to Zip Lips on Way Out, Grow Bolder);
- replacing full-time workers with contractors and temps who earn less and have few benefits (With ‘Gigs’ Instead of Jobs, Workers Bear New Burdens)
- forming illegal cartels to suppress wages (Judge Approves $415M Settlement in Apple, Google Wage Case);
- increasing income inequality by giving top executives enormous compensation packages and severance packages regardless of their actual performance (Making Failure Pay: Marissa Mayer Could Get $55-million Severance for Not Turning Yahoo Around); and,
- holding trillions in revenues overseas subsidiaries to avoid paying taxes on it (U.S. Companies Are Stashing $2.1 Trillion Overseas to Avoid Taxes).
When Trump rails against an economic system rigged by those at the top to benefit themselves, he might well be talking about the tech sector. That is why he is viewed as such a threat.
Disruption: You Ain’t Seen Nothing Yet
As disruptive as these changes have been, they are just beginning. The pace of technological change is accelerating and, with it, there is the possibility that the economic system we know today could be completely upended.
Take, for example, the ride-sharing service Uber. “Visioneer” Peter Diamandis, one of the tech execs who signed the anti-Trump letter, praises Uber for its innovation and for lowering the cost of his ride to LAX from $35 to $11.
“Uber is one of a new generation of dematerializing, demonetizing and democratizing technologies that’s disrupting the status quo,” he writes.
A great benefit for consumers, for sure. Diamandis is thrilled that Uber is “dramatically” improving a “broken” taxi system. But, what about the people affected? Professional cab drivers working to support themselves and their families are being replaced by freelancers who toil for far less money without benefits or job security.
If this sounds like an exercise in downward mobility — and little different from replacing full-time workers with foreign ones on temporary work visas — then give yourself a pat on the back. You’ve looked past Peter D’s complex, multi-dimensional branding (dematerializing! demonetizing! democratizing! disrupting! digitizing!) to understand the collateral damage involved and why Trump has gained a following.
But, there’s even more to come. Uber will eventually use artificial intelligence (AI) and automation to make the very act of driving obsolete — a prospect that Diamandis is very excited about.
So, first professional cab drivers are put out of their jobs by temps. Then AI comes along to make all of them obsolete. That’s going to put a lot of people — cabbies, truck drivers, bus operators — out of work.
Diamandis and his fellow visioneers talk about AI becoming so powerful and ubiquitous that it produces a job-less future where almost nobody works. It’s a terrifying prospect that could dwarf all previous economic crises in magnitude and severity.
One solution discussed by Diamandis and others is “guaranteed basic income,” payments the government would make unemployed people to meet their essential needs. If that sounds like a combination of the welfare, unemployment and Medicaid programs packaged under some fancy branding, give yourself another pat on the back. You’ve got it.
The big question is, with so many people unemployed, where would the government find the money to support them all? From the tech executives and companies they run like Google and Apple that are so skilled at avoiding taxes?
Yeah, right. Good luck with that.
And what happens to corporations — addicted as they are to continuous growth — when the majority of people are living on subsidence incomes? How will they be able to afford to all the fancy gadgets the AI factories are turning out? Even if you assume, as some do, that manufacturing costs will decline toward zero, the desire by entrepreneurs and shareholders to accumulate vast wealth will not.
The Road Ahead: Bumpy
So, the future is scary no matter which road we take. Our technological elite is rushing full speed toward a possible job-less future that could replicate the worst aspects of the Roman Empire, where about 5 to 10 percent of the population were wealthy and controlled society, and the rest survived at subsidence levels with little power.
Meanwhile, Trump is playing on people’s insecurities with talk of rising crime and terror attacks while promising to roll back decades of disruptive economic policies. He speaks for millions of angry people who feel they have lost control over their lives, their future and their country.
How a billionaire like Trump — who has been accused of gaming the system as well as anyone — managed to position himself as the champion of the downtrodden will be something for generations of historians to ponder.
Whether the tech executives’ cri de cœur will persuade anyone not already convinced of the dangers of a Trump presidency is unclear. It might well have the opposite effect, particularly if the candidate seizes upon it as an example of everything he is fighting against.
Whether Trump succeeds at winning the presidency and implementing his agenda remain to be seen. A bigger question is whether a set of protectionist policies would solve any of the country’s pressing economic problems, or merely create a host of new problems by driving companies abroad.
Trump’s insurgency may be a case of too little too late, akin to fighting the last war or closing the barn door after the rest of the building has become fully engulfed in flames.
If Diamandis is right, we’re facing a series of disruptions that will completely upend the world’s economic structure. Neither Trump nor Hillary Clinton are addressing the possibility, much less offering any solutions.
Amid all the uncertainty, one thing is clear: the campaign is going to be a stormy one. Fasten your seat belts, it’s going to be a bumpy ride.
Entrepreneurial Lingo Series