The Internet Is Not the Answer (10 page)

Sequoia Capital chairman Michael Moritz, Google’s other Series A investor and, along with KPCB’s John Doerr, the most successful Silicon Valley venture capitalist, places this new generation of Web companies like Google and Facebook into a broader historical context by comparing them with factories from the industrial age. In the old manufacturing economy, Moritz explains, factories were discrete places in which entrepreneurs invested in machinery and labor for the production of goods that were then sold in the marketplace. At night, the gates of these factories would be locked, its machinery shut down and its laborers sent home.

But in the networked age, Moritz says, the logistics of the industrial economy have been turned inside out. The gates of what Moritz calls our new “data factories” have been flung open. The factory’s tools are now available to everyone. It’s what Moritz—a former
Time
magazine technology journalist who made his fortune being right as an early investor in Google, PayPal, Zappos, LinkedIn, and Yahoo—describes as the “Personal Revolution.” We can all enjoy the free tools and services with which Google and Facebook equip us to search for information and network with our friends and colleagues. Indeed, the more we use the Google search engine, the more accurate the product becomes. And the more of us who join Facebook, the more Metcalfe’s law kicks into place and so the more valuable Facebook becomes to us.

“Right here between San Francisco and San Jose something utterly remarkable has been going on, is going on and will go on. It’s something that has only occurred in one or two places in the whole course of human history,”
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Moritz says in describing this personal revolution engineered by data factories like Google, Facebook, LinkedIn, Instagram, and Yelp.

It seems like a win-win for everyone, of course—one of those supposedly virtuous circles that Sergey Brin and Larry Page built into PageRank. We all get free tools and the Internet entrepreneurs get to become superrich. KPCB cofounder Tom Perkins, whose venture fund has made billions from its investments in Google, Facebook, and Twitter, would no doubt claim that the achievement of what he called Silicon Valley’s “successful one percent” is resulting in more jobs and general prosperity.

But as always with something that’s too good to be true, there’s a catch. The problem, of course, is that we are all working for Facebook and Google for free, manufacturing the very personal data that makes their companies so valuable. So Google, with its mid-2014 market cap of over $400 billion, needs to employ only 46,000 people. An industrial giant like General Motors, on the other hand, with its market cap hovering around $55 billion, employs just over 200,000 people to manufacture cars in its factories. Google is around seven times larger than GM, but employs less than a quarter of the number of workers.

This new data factory economy changes everything—even the monetary supply of our global financial system. In early 2014, the global economy’s top five companies’ gross cash holdings—those of Apple, Google, Microsoft, as well as the US telecom giant Verizon and the Korean electronics conglomerate Samsung—came to $387 billion, the equivalent of the 2013 GDP of the United Arab Emirates.
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This capital imbalance puts the fate of the world economy in the hands of the few cash hoarders like Apple and Google, whose profits are mostly kept offshore to avoid paying US tax. “Apple, Google and Facebook are latter-day scrooges,” worries the
Financial Times
columnist John Plender about a corporate miserliness that is undermining the growth of the world economy.
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“So what does it all mean?” Michael Moritz rhetorically asks about a data factory economy that is immensely profitable for a tiny handful of Silicon Valley companies. What does the personal revolution mean for everyone else, to those who aren’t part of what he calls the “extreme minority” inside the Silicon Valley bubble?

“It means that life is very tough for almost everyone in America,” the chairman of Sequoia Capital, whom even Tom Perkins couldn’t accuse of being a progressive radical, says. “It means life is very tough if you’re poor. It means life is very tough if you’re middle class. It means you have to have the right education to go and work at Google or Apple.”
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It means, Michael Moritz might have added, that the Internet is not the answer.

The Cult of the Social

Jeff Bezos isn’t entirely wrong about the chaotic nature of history. Determinists like Kevin Kelly argue that network technology has a soul that is transporting us toward a digital promised land. But such narrative fallacies—whether of the left or the right, or of the religious or the secular—are the wishful thinking of eschatologists like the born-again Kelly, whose faith trumps his reason in his reading of history.

The only law of history is that there aren’t any laws. Rather than having a mind of its own, history is unknowing, unexpected, and unintentional. In his classic 1904 essay
The Protestant Ethic and the Origins of Capitalism
, the German sociologist Max Weber traces how, unwittingly, ascetic Calvinists laid the groundwork for modern capitalism with their belief that the accumulation of wealth was a sign of redemption. And the history of the Internet is equally arbitrary. Created mostly accidentally by public-minded technologists like Paul Baran, J. C. R. Licklider, and Tim Berners-Lee, who were all indifferent and sometimes even hostile to money, the Internet has triggered one of the greatest accumulations of wealth in human history. The story of the Internet’s preeminent company, Google, is also laced with irony. Invented by a couple of idealistic computer science graduate students who so mistrusted online advertisements that they banned them on their home page, Google is now by far the largest and most powerful advertising company in history.

But for the unintentional and the unexpected, nothing beats the history of Facebook, the Internet’s dominant social network, which was created by a young man so socially awkward that many consider him autistic. In his aptly named
Accidental Billionaires
, the bestselling story of Facebook’s early years on the campus of Harvard University, and on which David Fincher’s Academy Award–nominated 2010 movie
The Social Network
movie is based, Ben Mezrich reveals that the twenty-year-old Mark Zuckerberg was seen as a total misfit by Harvard contemporaries. Eduardo Saverin, Zuckerberg’s cofounder of “
Thefacebook.com
,” which they launched together in February 2004, thought of his partner as the socially “uncomfortable” and “awkward kid in the class,” a “complete mystery” with whom communication “was like talking to a computer,” while other Harvard students saw him as a “weird” and “socially autistic” geek with a “dead fish handshake.”
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Even after Zuckerberg dropped out of Harvard later in 2004 and, a decade later, built Facebook into the Internet’s dominant social network, he still hadn’t shaken off his image as a socially disabled loner suffering from what
Wired
dubs “the Geek Syndrome.”
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Facebook’s onetime head of engineering, Yishan Wong, claimed that Zuckerberg has a “touch of Asperger’s” and “zero empathy.”
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And other seasoned Zuckerberg watchers, like Nicholas Carlson, the chief business correspondent at
Business Insider
, agree, seeing both his “obvious brilliance” and “his inability to hold conversation” as a “symptom” of his autism.
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But, in spite of—or, perhaps, because of—his inability to fashion a conversation, Zuckerberg has created the greatest generator of conversation in history, a social computer network whose 1.3 billion users were, by the summer of 2014, posting 2,460,000 comments to one another every minute of every day. With its mostly advertising revenue of $2.5 billion and record profits of $642 million in the first quarter of 2014,
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Facebook has become the winner-take-all company in the Internet’s social space. By successfully monetizing the data exhaust from our friendships, family relations, and love affairs, Facebook reached a July 2014 market cap of $190 billion, making it more valuable than either Coca-Cola, Disney, or AT&T.

Just as Google wasn’t the Internet’s first search engine, so Facebook didn’t invent the idea of a social network—a place on the Internet where users nurture their social relationships. Reid Hoffman, the cofounder of LinkedIn, created the first online social network in 1997, a dating site called SocialNet. This was followed by Friendster in 2002 and then, in 2003, by the Los Angeles–based MySpace, a social network with a music and Hollywood focus that, at its 2008 peak, when it was acquired by News Corporation for $580 million, had 75.9 million members.
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But Facebook, which until September 2006 was exclusively made up of high school and university students, offered a less cluttered and more intuitive interface than MySpace. So, having opened its doors to the world outside of schools and universities, the so-called Mark Zuckerberg Production quickly became the Internet’s largest social network, amassing 100 million members by August 2008.

And then the network effect, that positive feedback loop that makes the Internet such a classic winner-take-all market, kicked in. By February 2010, the Facebook community had grown to 400 million members, who spent 8 billion minutes each day on a network already operating in 75 different languages.
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Facebook had become the world’s second most popular Internet site after Google, a position that it’s maintained ever since. By the summer of 2014 Facebook had grown to rival China’s population—hosting more than 1.3 billion members, around 19% of the people in the world, with 50% of them accessing the social network at least six days a week.
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Like Google, Facebook is becoming ever more powerful. In 2014 it made the successful shift to mobile technology, its app being “far and away the most popular service” on both the iOS and Android platforms, with its users spending an astonishing 17% of all their smartphone time in it. Mark Zuckerberg’s ten-year-old Internet company is thus likely to remain, with archrival Google, the Internet’s dominant company over the second decade of its remarkable history.

Like Google, Facebook’s goal is to establish itself as a platform rather than a single website—a strategy that distinguishes it from failed Web 1.0 “portal”-style networks like MySpace. That’s why David Kirkpatrick, the author of the definitive Facebook history,
The
Facebook Effect
,
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argues that the launch of Facebook Connect in 2008 and its Open Stream API in 2009, platforms that enable the creation of websites that resemble Facebook itself, was a “huge transition” and “as radical as any [Facebook] had ever attempted” because it enabled developers to turn the Internet inside out and transform it into an extended version of Facebook. Like Google, Facebook seeks ubiquity. “Facebook everywhere” is how
Fast Company
’s Austin Carr describes its 2014 mobile strategy.
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It wants to become what Kirkpatrick, echoing Tim O’Reilly’s definition of a revolutionary Web 2.0 network, calls “a storehouse of information, like a bank, but also a clearinghouse and transit point, like the post office or the telephone company.”
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Where Facebook does differ from Google is in its almost religious insistence on the social importance of the network. “Facebook is founded on a radical social premise—that an inevitable enveloping transparency will overtake modern life,” explains Kirkpatrick. For Mark Zuckerberg, the network is defined by a collective sharing of our personal data in a brightly lit McLuhanesque village. As Kirkpatrick notes, McLuhan “is a favorite at the company” because “he predicted the development of a universal communications platform that would unite the planet.”
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Zuckerberg shares McLuhan’s narrative fallacy, seeing the Internet “as just this massive stream of information. It’s almost the stream of all human consciousness and communication, and the products we build are just different views of that.”
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One ominous 2009 Facebook project was thus the Gross Happiness Index, a classically utilitarian attempt to measure the mood of its users by analyzing the words and phrases that they publish on their Facebook page. Another was the even creepier 2012 company study that altered the news feeds of 700,000 Facebook users to experiment with their mood swings.
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Sergey Brin’s “big circle” of data is, for Mark Zuckerberg, the recursive loop of the social Web. The more people who join Facebook, the more valuable—culturally, economically, and, above all, morally—Zuckerberg believes Facebook will become to us all. He even came up with what has become known as Zuckerberg’s law, a social variation of Moore’s law, and which suggests that each year our personal data on the network will grow exponentially. In ten years’ time, Zuckerberg told Kirkpatrick, “a thousand times more data about Facebook users will flow through the social network. . . . People are going to have to have a device with them at all times that’s [automatically] sharing. You can predict that.”
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It’s a disturbing prediction that, I’m afraid, is already being realized in Facebook’s dominance of the mobile Web and the development of smartphones as “the ultimate surveillance machine,” which will know not only exactly where we are but also exactly what we are doing.
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