Contributor Post Created with Sketch. San Francisco Unleashes Destructive Creation on Silicon Valley

 

Hans Vestberg, CEO of Verizon Communications, speaks about the deployment of 5G wireless technology during the TechCrunch Disrupt forum in San Francisco.
Politicians kvetch a lot about Big Tech, but government officials everywhere would love their country, state, or city to have its own Silicon Valley. Alas, there’s no magic formula, no blueprint for top-down constructing a fertile ecosystem of technological innovation and entrepreneurship. As economist Enrico Moretti has noted, “If you look at the history of America’s great innovation hubs, we haven’t found one that was directly, explicitly engineered by an explicit policy on the part of the government.”

That’s just not how it seems to work in America. It’s more of an organic, idiosyncratic, indirect thing. As University of Washington historian Margaret O’Mara, author of “The Code: Silicon Valley and the Remaking of America,” told me in a recent podcast, the story of Silicon Valley isn’t “a story of big government coming in with giant research labs and command-and-control” although Washington certainly played a critical role.

But if directly constructing an entrepreneurial tech hub is maddeningly difficult, destroying one might well be considerably easier. And how would one go about doing such a crazy thing? San Francisco appears intent in running an experiment in destructive creation. City officials want to create an Office of Emerging Technology that would give “notice to proceed” to entrepreneurs before they released their products into the wild — assuming, of course, OET thinks the products are expected to generate “a net result is for the common good.” So permits for innovation instead of permissionless innovation.

Think about it: If you’re a San Francisco-based entrepreneur with a service or device that cleverly exploits a gray area in a musty law or regulation, get ready for an awkward appointment with the OET before making it available to the public. Better hope those bureaucrats are a tech-savvy, forward-thinking bunch able to fully understand your product and your use case. Also better hope that some politically connected competitor doesn’t complain.

More broadly, however, this new gatekeeper would really undercut the ethos of permissionless innovation that’s woven into the Valley’s DNA. Some comments from Y Combinator’s Hacker News message board make this point. Here’s one: “Just one more nail in the coffin for SF/bay area as an innovation center. It’s been really sad to see that rent-seeking and bureaucracy have completely choked that place out. I’m not sure if there will ever be another time and place like existed in silicon valley [sic] from the 70s-2000s where forward-thinking creative individuals can come together in a critical mass, with an environment that allows risk-taking and innovation. Maybe it will/is happening outside the US but I don’t think it’s here anymore.”

And another, this one soaked in sarcasm: “finally the city is doing something about those whizz-kid whippersnappers and their goofy gizmos. i’m [sic] tired of shaking my cane at these freaks when they blast by me on an electric ouija board or whatever new-fangled gadget is in mode this week. between this and the city banning all new housing developments, we’re finally going to clean up the problems that really threaten quality of life here.”

I hope this is an isolated case and not a harbinger of more societal pushback against dynamism and disruption.

Published in Economics
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There are 10 comments.

  1. Zed11 Lincoln

    I grew up in Menlo Park when it was a simple suburb (b. 1969). As a kid, computers were refrigerators and then they became boxes on desks. Have seen every tech wave pass through, without having been involved in the industry. Now, back in house I grew up in, am actively looking at properties outside of California. Frankly, this area was more diverse forty years ago than it is now. Oh there’s “diversity,” but everyone is the same. (All work in the local steel mill. If you don’t, you’re not wanted.)

    Steve Wozniak basically said that we must never criticize engineers. The guy who hacked phone lines pre-dated the Google-ites who profess to not be evil. The hubris here is palpable. I like Woz, but that thinking is dangerous.

    Then today I saw someone on CNBC’s Fast Money say (paraphrasing), “I have daughters. I’m more afraid of what they digest on Facebook than… if they take drugs.” My friends in the industry viciously police what their kids do on soc media. (Disclosure: have never had a Facebook page.) Am thankful general population has finally wised up to the idea that people run these tech companies. Like people who, I don’t know, sell tobacco, or fossil fuels, or pharmaceuticals, or “organic” products with extreme environmental bent. They’re there to make money, first.

    Now I am not saying that this particular bureaucratic boondoggle is good, but I do think the notion of throwing multiple speedbumps at Moore’s Law is decades in the making. Be it antitrust, new “platform access is a civil right” laws, or whatever, I’m open to curbing the coddling of my neighbors.

    • #1
    • October 21, 2019, at 6:37 PM PST
    • 3 likes
  2. James Lileks Contributor

    I’m fine with this. I suspect that the affected people support the candidates who make the requisite noises about Social Justice and other amorphous concepts that have no impact on the tech company’s actual purpose or activities. I suspect they believe in heavy regulation of other old-style industries, because those industries are immoral: energy sector kills the planet, insurance is predatory, medicine has a profit element, etc. Perhaps they believe they are the good guys because they’re just making an app, and what could be greener?

    I’m perfectly fine with California forbidding a financial investment app from coming to the market because its projected client base is insufficiently egalitarian. Alas, the developers would probably go to places less inclined to inject their social visions into the approval process, and promptly set about insisting those places resemble California. 

    • #2
    • October 21, 2019, at 10:38 PM PST
    • 5 likes
  3. I Walton Member

    Maybe in San Francisco they’re not educable, or the educable folks leave, but the rest of the nation can watch it self destruct and learn. The idea that bureaucrats, no matter how good or bright or well meaning could stay on top of evolving technology and guide it, is patently absurd. 

    • #3
    • October 22, 2019, at 3:17 AM PST
    • 1 like
  4. Seawriter Member

    I don’t mind if San Francisco does this. If they do, Texas is likely the winner – so long as the displaced entrepreneurs who move realize it was Progressive politics that forced their move, and they leave Progressivism at California’s borders.

    • #4
    • October 22, 2019, at 6:07 AM PST
    • 1 like
  5. Stad Thatcher

    James Pethokoukis:

    But if directly constructing an entrepreneurial tech hub is maddeningly difficult, destroying one might well be considerably easier. And how would one go about doing such a crazy thing? San Francisco appears intent in running an experiment in destructive creation. City officials want to create an Office of Emerging Technology that would give “notice to proceed” to entrepreneurs before they released their products into the wild — assuming, of course, OET thinks the products are expected to generate “a net result is for the common good.” So permits for innovation instead of permissionless innovation.

    Think about it: If you’re a San Francisco-based entrepreneur with a service or device that cleverly exploits a gray area in a musty law or regulation, get ready for an awkward appointment with the OET before making it available to the public. Better hope those bureaucrats are a tech-savvy, forward-thinking bunch able to fully understand your product and your use case. Also better hope that some politically connected competitor doesn’t complain.

    Yet another reason to leave California. Look for innovators to move to places where there is no OET . . .

    • #5
    • October 22, 2019, at 6:15 AM PST
    • Like
  6. Old Bathos Member

    This is the formula for government abuse and corruption at its most basic. An amorphous standard of review combined with absolute control over the existence of a product line or an entire company. Suggested applicant info sheet for the new agency:

    We at the OET will pretend to evaluate your new tech on the merits but do not kid yourself. The real issues include but are not limited to:

    • Have you hired enough people from this month’s most favored victim categories and/or relatives of Democratic politicians and their top donors?
    • Is anyone affiliated with this new product a Republican or a donor to Republican candidates?
    • Have you given an adequate proportion of shares of stock/cash/board seats to groups, organizations, and individuals we favor? We will let you know what “adequate” means in your case.
    • Will this product in any way disproportionately enhance the lives, wealth, or political influence of conservative or disfavored religious groups? Can the product be denied to such entities or disabled?
    • How will you make the product available to the homeless?
    • Is it consistent with the New Green Deal 2.0 or have you purchased the approval of a recognized green lobbyist group?
    • #6
    • October 22, 2019, at 6:17 AM PST
    • 1 like
  7. RushBabe49 Thatcher

    On their way to the OET interview, they should be careful not to step in one of the piles of human excrement all over the streets.

    • #7
    • October 22, 2019, at 7:15 AM PST
    • 1 like
  8. El Colonel Contributor

    Funny thing about innovation; if there is money to be made people will exploit it. It doesn’t matter whether or not it is illegal, immoral, exploitative or unnecessary. If it’s illegal, people will change or ignore the law. If it’s immoral, people will extol its virtue. If it’s exploitative, people will blame the exploited and the free market. If it’s unnecessary, people will claim it is desirable. Money is the end and the means. 

    We rely on a law abiding citizenry with sufficient practical and moral rectitude to recognize harmful innovation or exploitative actors, to make good choices and to dampen the markets for toxic technology. But with liberty comes the possibility that some will make poor choices and suffer. 

    With the support of voters, government may intervene in an attempt to identify, regulate or even ban the most destructive or dangerous technology. But governmental intervention should always be suspect, prone as it is to corruption and the influence of rent seekers. Preemptive government approval seems to me to be completely antithetical to a free and open marketplace. Rather it is indicative of the oppressive, central command and control economic system of statism. And that is toxic to a free people and their liberty.

    • #8
    • October 22, 2019, at 8:43 AM PST
    • 1 like
  9. Bill Nelson Member

    James Lileks (View Comment):
    and promptly set about insisting those places resemble California. 

    Exactly. I grew up in Montana, and a famous saying was “Don’t Californicate Montana” (local A&W actually had this on their sign). It’s happening. Look at Oregon and Washington.

    • #9
    • October 22, 2019, at 11:54 AM PST
    • Like
  10. Joseph Stanko Member

    This article seems to have missed a basic point of Bay Area geography: San Francisco isn’t in Silicon Valley. The valley lies further south, with most major tech companies located in San Jose, Santa Clara, Fremont, Palo Alto, Menlo Park, Cupertino, and Redwood City.

    Yes, some startups set up shop in the City, and San Francisco may well drive them out, but they will just head south or move across the Bay Bridge to Oakland, which is cheaper anyway.

    • #10
    • October 22, 2019, at 9:03 PM PST
    • Like