We basically outlawed everything in the world of atoms; we’ve left the world of bits relatively unregulated . . . there is this extraordinary regulatory double standard.
Peter Thiel, October 2014
Buried in the middle of a two-hour debate in 2014 on religion and modernity is a thought-provoking observation by Peter Thiel regarding technology and the modern economy. Instead of praising Silicon Valley for its tremendous digital inventiveness, Thiel criticized the technological advances of the last fifty years, arguing that “progress in computers and bits” does not constitute real advances in technology, nor does it do much for the human spirit.
The fact that Thiel was the first outside investor in Facebook and still sits on the company’s board of directors makes his critique all the more poignant—or ironic, depending on one’s view of human progress.
The world knows more about Thiel’s political views today than it did in 2014. His position as the only tech billionaire to support Donald Trump’s presidency has given his opinions notoriety in many circles, but there is much to be examined about how Thiel’s arguments concerning technology relate to specific policy issues.
The lack of curiosity from the commentariat on Thiel’s views toward regulating the tech sector is odd, given how he exists at the nexus of current debates on populism, technology, and “Making America Great Again.” Between the Cambridge Analytica scandal, Trump’s attacks on Google’s “rigged” search results, and Google parent Alphabet’s no-show at a Senate hearing concerning the role of social media in elections, threats to regulate the information technology sector are becoming real. And given that the three largest U.S. internet platform firms—Alphabet, Facebook, and Amazon—are worth well over $2 trillion, regulating the major technology companies poses questions about not only freedom of speech or privacy, but also America’s economic future.
If and when a regulatory Ragnarök for social media companies takes place, it will have been foreseen, at least obliquely, by Thiel, whose public speeches since the start of the 2010s return again and again to the subject of technology, decline, and the modern U.S. economy. Thiel’s diagnosis does not include a treatment program, but those interested in the coming era of internet regulation should consider what he has said about the regulatory state, the environmental movement, and their influence on the real economy over the past half century.
Thiel’s Cassandra-like message of U.S. technological decline began with a 2011 article for National Review entitled “The End of the Future.” The article, which historian Niall Ferguson later called one of the most important articles written that year, argues that a slowing rate of technological innovation in the non-digital sectors is the root cause of much of the malaise and political unrest in the advanced economies of the world. He scornfully notes the gap between expectations of future technology in 1964—of flying cars and space travel—and the world of the 2010s, where mobility and energy use have remained essentially unchanged for decades. Examples include disappointing productivity gains since 1980, a plateauing of air and ground travel speeds for two generations, and the slowing of the “Green Revolution.” Thiel views these trends as symptomatic of a technological decline that threatens the social fabric of politically diverse democracies—including the United States. “Would supercomputers become power engines for miraculous creation of wholly new forms of economic value, or would they simply become power weapons for reshuffling existing structures—for Nature, red in tooth and claw?” Thiel asks.
The ability of digital technology to escape both regulation and volatile commodity cycles is as much a devil as a savior for economic life in the twenty-first century, according to Thiel. The rise of the computer, and later the algorithm, epitomizes the shift in capital investment over the past half century from fixed assets like cars, power plants, and airplanes to more intangible property like software, semi-conductors, and proxy servers. This reshuffling of investment from the tangible to the ephemeral—and from industrial America to Silicon Valley and Wall Street—is perhaps the least understood aspect of one of the most important changes in more than two hundred years of industrialization.
Thiel’s National Review article pinpoints 1973 as the beginning of the “broad stagnation of real wages and incomes”—the same year that oil prices quadrupled. The oil shocks of that period tend to overshadow another important tipping point in the economic history of our nation that occurred at very nearly the same time—namely, when the Environmental Protection Agency was created and the first comprehensive environmental legislation went into effect. These legal efforts were unprecedented in American economic history, and their effects on capital investment patterns were larger than originally anticipated.
Rise of the Externalities
We’re challenged, as mankind has never been challenged before to prove our maturity and our mastery, not of nature but of ourselves.
Rachel Carson, April 1963
The core issue that Thiel is getting at, albeit without uttering the words, is the regulation of pollution through the precautionary principle—the“caution in advance” legal standard that has become the guiding force of environmental regulation over the past forty years. The principle, which migrated into the American legal lexicon from Germany in the 1970s, reverses the traditional standard of proof used in American jurisprudence by forcing economic actors to reduce potential hazards before there is strong proof of harm.
Opponents of the precautionary principle consider it anti-scientific, since it replaces empirical risk assessments with political considerations. As pollution worsened in the 1960s, however, U.S. policymakers understood the risks of such a change in legal interpretation but felt there was no other way to curtail physical pollution without forcing polluters to prove that their behavior didn’t create undue externalities (unpriced costs on innocent parties).
Biologist Rachel Carson’s bestselling book Silent Spring, published in 1962, catalyzed the environmental movement by demonstrating the public health costs of, and damage caused by, industrialization. In her writings, Carson placed the blame on chemical and industrial companies for not paying for the environmental damage their products caused.
Carson’s primary concern was the use of the insecticide DDT, a colorless, odorless compound that was indirectly poisoning other parts of the environment. By the end of the decade, lawmakers passed a raft of environmental legislation not just in response to DDT, but to oil spills off of southern California, a burning river in Cleveland, and serious air pollution in many U.S. cities. These actions culminated in the National Environmental Protection Act (NEPA), which mandated that federal agencies make an environmental assessment of, or publish an environmental impact statement on, every major economic development that could cause pollution before it received permission to build.
Since that time, the environmental benefits to the public at large, measured in both lives saved and health care costs, have been massive. Aggregate emissions of six common pollutants dropped 70 percent between 1970 and 2014. According to the EPA, lead pollution has fallen 99 percent since 1990, while roughly 230,000 premature deaths will have been prevented between 1990 and 2020.
But these changes in regulatory policy had other effects.
As regulatory constraints and nascent globalization pressures both took hold of the U.S. economy by the late 1970s and early 1980s, investors began shifting their investments toward what was then a growing industry that didn’t have to worry about the external costs of pollution: the computer industry, with its epicenter in Silicon Valley.
Indeed, there are no environmental laws touching cyberspace; there is no physical environment to despoil. Nor is labor within the computer industry heavily regulated, as compared to most other parts of the economy (at least at that time).
This capital migration is easily observable when comparing the ten largest firms by market capitalization on the Dow Jones Industrial Average in 1964 and 2016. Of the top ten companies measured by market capitalization in 1964, only two remained by the end of 2016: Exxon and General Electric. General Electric has since collapsed in value, leaving only Exxon. On the other hand, four companies formed since 1975—Apple, Google, Amazon, and Microsoft—are now America’s largest companies. And, notably, each of these companies plays a dominant role in the world’s consumption of digital information.
“Threatening Global Democracy”
The short-term, dopamine-driven feedback loops we’ve created are destroying how society works. No civil discourse, no cooperation; misinformation, mistruth.
Chamath Palihapitiya, former vice president of user growth at Facebook, December 2017
Thiel played an important part in technology’s ascent, having been a co-founder of PayPal and the first outside investor in Facebook. In recent years, however, Thiel has become somewhat of a doomsayer on how the internet can be used to violate privacy and how it enables a business model that chooses sales over protecting users from personal abuse.
The outsider role that Thiel filled in Silicon Valley’s political sphere should not be separated from his personal experience regarding the internet’s dark side. Thiel was instrumental in the successful $140 million lawsuit against the Gawker website on the proposition that one should not publish a sex tape of someone else on the internet without his or her consent. Thiel’s animus toward Gawker began in 2007, when the website reported on his personal sexuality without his permission.
Thiel cited the outing as motivation for his support of a lawsuit against Gawker in a 2016 New York Times op-ed, stating that as an internet entrepreneur, he felt “partly responsible for a world in which private information can be instantly broadcast to the whole planet.”
Since Thiel published the op-ed, the intellectual linkages between 1960s pollution and the ongoing debates over personal privacy and data protection have become stronger. Thiel’s view of American capitalism asks whether the freedom from constraints on growth in the digital industries are coming to an end in the same way they did in the physical world after the passage of environmental legislation.
Just consider the negative privacy impacts of the last several years, largely driven by “digital pollution” like identity theft, Russian cybermeddling, and the epidemic of cyberbullying that manifests itself through Twitter, Reddit, and other social platforms. Since 2014, for example, tens of millions of customers’ financial and personal data have been stolen from retailers like Target and Home Depot, health insurance firms like Anthem, and, incredibly, the U.S. federal government. Two major security breaches exposed federal employment records going all the way back to 1986—including information on every American with a security clearance and more than five million digital images of federal employee fingerprints.
It’s also likely that international terrorism as we know it in the twenty-first century has been made much easier by the ubiquity of the internet. The self-radicalization of the San Bernardino and Fort Hood terror attackers via online Islamist propaganda are just two examples. Indeed, the 9/11 hijackers themselves communicated almost exclusively through email. Today, the families of victims slain in the mass shooting at an Orlando nightclub in June 2016 are suing Facebook, Google, and Twitter for allegedly providing “material support” to the Islamic State through online propaganda hosted on their platforms.
Debates over these issues may have reached a tipping point after the Cambridge Analytica allegations, in which a data firm linked to Trump’s presidential campaign improperly used information on as many as 87 million people. The data breach has united Democrats and Republicans over the question of whether poor privacy protections—coupled with social media’s immersion of users in rivers of outrage, insult, and fake news—undermine American democracy.
“We don’t have an oversight model, a government model for Google or Amazon, let alone Facebook,” said David Kirkpatrick, author of The Facebook Effect and an increasingly severe critic of Facebook’s handling of data privacy issues. Kirkpatrick has gone as far as saying the company “is threatening global democracy.”
Will Facebook Soon Be Worthless?
It is not clear whether a capitalistic economic system could function without growth; and it is unlikely that a representative democracy, which requires the give-and-take of win-win compromise, would continue to function.
Peter Thiel, “Against Edenism,” June 2015
It may be the case that much of the cacophony in the current American political system is the unarticulated knowledge that “social pollution” can become as big a risk to the body politic as air and water pollution was to the human body by the mid-twentieth century. If this is the case, our political leaders have not even begun to undertake a real accounting of the problem.
It’s worth noting that efforts to stop the downward spiral of environmental degradation in the United States were underway decades before the 1960s. Only after Congress became exhausted by failed attempts to use existing laws to combat air pollution did it incorporate elements of the precautionary principle into the Clean Air Act of 1970. Almost immediately after its passage, air pollution in the United States began to fall.
And while it’s highly unlikely that federal or state authorities would impose precautionary speech regulations on the American public outside of wartime, by analogy, it was necessary to take such a step to solve the late industrial era’s environmental problems—in the form of economic regulation.
Both Thiel and Carson are prophets of their ages; both worried about America’s ability to withstand and come to terms with its excesses. Thiel is asking readers whether the curtailing of innovation and growth in the physical economy inevitably leads to the destruction of that society’s social contract, and whether this is already happening (see France’s “yellow vests”). Rachel Carson’s question, when addressed to a twenty-first-century audience, is more personal: can we prove “our maturity and our mastery” over ourselves in cyberspace, where basic social norms and behaviors can be jettisoned with little immediate consequence but with ever-compounding social impact over time?
Fears of the United States falling into an inescapable gravity well of slow growth and demographic senility—similar to what parts of Europe and Asia are experiencing—are near the core of Thiel’s political philosophy and are likely at the root of his controversial support for Donald Trump. Trump’s political message has embedded within it the simple theory that economic growth has been the missing ingredient in the American experience for nearly two decades, and only broad-based growth across income classes and identity groups can alleviate many of the social pathologies currently ailing America. But of course, these pathologies are no longer limited to broken families, opioid use, homelessness, and crime; they also involve hyper-partisanship, trolling, doxing, and internet vigilantism—pathologies upon which Trump’s presidency will be remembered not only for thriving under, but for driving forward.
It is these elements of harm—data breaches and privacy violations—that will put Facebook and other social media platforms under intense scrutiny well beyond the Trump era. Two of the top ten companies by market capitalization in 1964—Kodak and Sears—are either at or near bankruptcy liquidation. A third, General Electric, may be headed in the same direction. One suspects Facebook’s immolation could happen decades faster if political outrage over privacy violation continues to stigmatize the social media giant. Black swan threats also exist—such as the U.S. Supreme Court expanding its view of electronic data as private property in a way that makes third-party algorithmic data use too risky and cumbersome to be profitable.
Carson’s thoughts on the digital age are anyone’s guess, though presumably she would not have voted for Donald Trump in 2016. Thiel, meanwhile, sounds increasingly open to less regulation and more optimism in the physical world in exchange for less optimism and more regulation in the virtual world.
Ultimately, both Thiel and Carson view the issue of pollution not simply as a legal or physical problem, but one of the spirit. Carson questions whether humankind can redeem itself after defiling the world’s Eden-like state. Thiel, by contrast, believes man’s fallen nature is his true condition and demands a return to the optimism that allowed humanity to overcome nature’s physical bonds before otherwise becoming trapped in a Malthusian end-state of decline and cultural suicide. In this respect, he is literally “against Edenism.” But the two positions, separated by half a century and the dawn of the digital age, are no longer mutually exclusive.
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