Chinese shadows over Silicon Valley

Elon Musk entered Twitter headquarters in San Francisco on October 26 carrying a sink, which enabled him to tweet ‘Let that sink in’ testa”, ndt) after buying the social network for 44 billion. It seems like a century has passed since that new beginning”. So begins Jeremy Cliffe’s analysis in the British magazine New Statesman.

“Musk fired about half of Twitter’s employees, demanded immediate changes and discovered in real time that the company is a more complex ecosystem than he thought. The sudden changes caused technical problems. Some indispensable employees have been brought back. Various companies have stopped paying for advertising. Rumors of internal chaos and even impending bankruptcy have been leaked. After believing that control of Twitter would make him the coolest in the class, Musk now resembles a substitute teacher who has lost control of the classroom.

But according to Cliffe, Musk’s tantrums only tell part of the story. The underlying problem is the crisis in Silicon Valley.

“The companies behind the Big Five – Google, Facebook, Amazon, Apple and Microsoft – have collectively lost at least $3 trillion in value this year. American technology companies have lost an estimated 28,000 jobs. In part, this is compensation after Big Tech’s great exploit during the pandemic, when the lockdown shifted people’s social and business activities online and at home. But deeper structural factors are at work. The era of low interest rates is over. Regulators and users have become more stringent when it comes to privacy, data protection and monopolistic practices. Advertising revenues have dropped and there are many uncertainties about the business model in the future: a year ago Mark Zuckerberg changed his name to Facebook, which is now Meta, betting on virtual reality; in 2022 the company has lost seventy percent of its market value.
This is not just a technology story. Silicon Valley is a pillar of American power: in its economic clout, its cultural power, and cutting-edge research and development in big data and artificial intelligence. Its crisis is linked to one of the great geopolitical questions of the twenty-first century: will the United States be able to maintain primacy over China? This is a challenge between radically different systems: between the democratic, individualistic and open American society and the autocratic, collectivist and closed Chinese one. The rapid rise of Silicon Valley was a triumph of the American system. About two-thirds of the workers were born outside the United States, evidence of how the country is able to attract talent from around the world.

Capitalism is radically innovative (…) Silicon Valley is the quintessential traits that the United States and its allies hope will underpin the American superpower for years to come. This brings us back to Twitter. In addition to the chaos, Musk has indicated that he intends to make the social network a ‘digital plaza’ and a ‘super-intelligent cyber collective’. His vision is to cut back on content moderation in the name of press freedom; forcing users to verify their identities and pay to use the site; and in the long term, turn Twitter into ‘an app altogether’, an American equivalent of China’s WeChat, bringing together social networking, payments, messaging, shopping and gaming.

But this strategy is imbued with tensions that tell the story of Silicon Valley’s problems and their significance for the American system. How to implement what Musk calls ‘the absolutism of press freedom’ without turning the site into a platform without rules? And how to do it in a democratic state? How to push towards authentication while protecting user privacy and data? How to create ‘an app at all’ that doesn’t get in trouble with the US antitrust?

The comparison with WeChat reveals an interesting contrast: in the Chinese system all these problems are easier to solve. The platform typically censors content, violates user privacy, and has strong ties to the state; so much so that not even Xi Jinping’s crackdown on social media has had any consequences for the company. Musk’s difficulties, therefore, go far beyond his management style (although this is strongly linked to the chaos of Twitter) and imply fundamental tensions for Silicon Valley and the American system it represents. A system that emphasizes individual rights, open and competitive markets – the essence of its strengths – addresses existential questions in an age of big data and artificial intelligence.

But the Chinese system also has its problems: it can be oppressive, fragile, immobile. And the tech giants have their problems. Xi’s increasingly strict control over the economy and society, for example, raises existential questions about the country’s ability to innovate. Some recent events – from the Ukrainian resistance supported by the West, to Joe Biden’s mammoth climate package to the defeat of conspiratorial Republicans in the midterm elections – advise us not to underestimate the strength of the United States. With their hubris, nerdish bluster, and a lust for assertion that can’t be satisfied with money, titans like Musk, Zuckerberg, or Jeff Bezos are easy to ridicule. But they are simply manifestations of the American system – a system whose resilience and adaptability, for all its dysfunctions, should not be underestimated.

Translation by Gregorio Sorgi