A public battle has broken out among the titans of Silicon Valley. One side, led by Elon Musk, PayPal co-founder Peter Thiel and venture capitalists Marc Andreessen and Ben Horowitz, is backing Donald Trump for president. The other, led by LinkedIn co-founder Reid Hoffman, is behind Kamala Harris.
We should not make the mistake of thinking this is a battle over ideology or policy. It’s a battle to maximize Silicon Valley’s profits regardless of the consequences for society.
On this objective, both sides agree. Andreessen Horowitz is one of the largest investors in cryptocurrency and artificial intelligence, and Trump has signaled that he would keep the government out of its business. Meanwhile, soon after donating $7 million to a Harris super PAC, Hoffman called for her to oust Federal Trade Commission Chairwoman Lina Khan, who has brought antitrust cases against Big Tech and introduced rules to protect workers.
Silicon Valley, a longtime engine of human achievement, has become a significant source of human harm. Aware of the gathering backlash, its leaders have dived into the political fray to protect their wealth.
Two Silicon Valley obsessions threaten the most damage: creating human addiction to increase profits and eliminating humans altogether to decrease costs.
Social media platforms, which started out by bringing old friends together and giving voice to the otherwise powerless, have become “social slot machines” compelling excessive use. Gaming companies have a similar objective. Teenagers today spend more than eight hours a day on screens, fueling digital advertising revenues that reached $225 billion last year.
Meanwhile, the artificial intelligence revolution promises to cut labor costs. A recent study by MIT economist Daron Acemoglu found that 50% to 70% of the growth in inequality between more and less educated workers can be attributed to automation. Poverty rates in Silicon Valley’s home state are rising even as AI makes Big Tech richer.
The broader prospects are equally concerning. AI is enabling killer robots, autonomous weapons and massively destructive misinformation.
The root of the problem is that the United States and Silicon Valley in particular are dominated by what we call an “investor monoculture.” Modern corporations are designed to serve investors and no one else. About 80% of public company stock in the United States is owned by institutional investors, most of which have one objective: to maximize profits, largely in the short term and without regard to the costs for society. In 1980, their share of stocks was just 29%.
Venture capital firms, the biggest funders of Silicon Valley startups, have grown from under $400 billion in assets in 2010 to nearly $4 trillion today. Their performance is measured by “multiples on invested capital,” or “MOIC,” as insiders call it.
Suicide rates among young people are up more than 60% since 2007, and U.S. democracy is in danger. But these are not investors’ concerns.
Regulation and advocacy can certainly make a difference. But Big Tech is cash-rich, lawyered up and capable of running circles around regulators.
It’s time for a different approach. When businesses are owned and governed by employees, customers, suppliers or communities, they become less predatory and more benign. And as it turns out, corporations have been designed in such ways across time and cultures. Capitalism comes in many forms.
Farmers, employees or customers own and govern some of the world’s most respected companies, including Ocean Spray, Publix Super Markets, Organic Valley, New York Life Insurance Co. and Vanguard. Corporations such as Patagonia, Rolex, Novo Nordisk and Ikea are owned or controlled by nonprofits, trusts or foundations, which have no investors and thus face less pressure to boost profits.
Silicon Valley has examples too. Mozilla, which operates the web browser Firefox, is owned by a nonprofit. It has no incentive to maximize profits, which explains why it does not sell user data to advertisers. Wikipedia, among the world’s most visited websites, is also run by a nonprofit, which shows that scale and impact don’t always depend on investor capital.
A nonprofit owns a majority of ChatGPT maker OpenAI, a design it chose to “ensure that artificial intelligence benefits all of humanity.” But its minority investors, such as Microsoft, are profit-driven, which has led to concerns that it’s releasing products at an irresponsible pace.
Many technology companies would be more benign if they were owned and governed by their users. Users have the most to lose from tech-driven addiction and automation, and their data generate most of the companies’ value. User-owners would share in this value and have an incentive to keep companies from causing harm.
How might users come together to start and run more technology companies? Bringing together a disparate and dispersed group of people is difficult; economists call this the collective action problem.
Influential nonprofits such as the Center for Humane Technology and Project Liberty can play an organizing role, incubating a new generation of user-owned social media businesses. While it’s a competitive field with entrenched players, social media technology is not complex, and there is a real hunger for more benign versions.
Existing firms can also be redesigned. Instead of raising capital from profit-seeking corporations, OpenAI could seek funding from users and give them representation on its board. And with users on the board, the company might take more care to launch products safely and dedicate resources to maintaining employment. Most important, more of the financial gains of the AI revolution would flow to the people creating the value.
If Keith Gill, also known as Roaring Kitty, could organize retail investors to drive up the market value of GameStop by $10 billion, could a similar approach have been employed to acquire Twitter for users in 2022? Given the millions of defections from the platform since Musk purchased it, it may not be too late.
The government can also help if it’s not headed off by Big Tech political contributions. The Small Business Administration, the Department of Energy and the National Science Foundation should encourage user ownership of the companies they fund.
The venture capitalists of Sand Hill Road will of course scream that this is socialism, but they will be wrong. It’s just business.
Hans Taparia is a clinical professor and Bruce Buchanan is a professor of business ethics and marketing at New York University’s Stern School of Business.
