Silicon Valley’s Scapegoat Complex

June 20th, 2016  |  Source:

The recent revelation that tech investor Peter Thiel provided the funding for a series of lawsuits against Gawker Media is one of those periodic stories that divides reaction so sharply it feels like the lines are drawn along inter-dimensional boundaries, not merely sociological ones. Journalists (even the “respectable” kind who would never touch the sort of stories Gawker has become known for) are threatened not just by the troubling precedent of a billionaire annihilating a source of criticism, but also more broadly by a tech industry that appears to show less and less regard for the messy business of journalism even as it assumes more and more dominion over it. The usual tech suspects, meanwhile, have tended to publicly rally around Thiel, smugly applauding his quietly effective, Seal Team 6-like takedown of a hated scourge he famously compared to Al Qaeda.

While not wholly unprecedented in the “money is speech” era (Republican billionaire Frank VanderSloot attempted to destroy Mother Jones in court, for example), the proxy war against Gawker feels like a novel application of modern day Silicon Valley thinking to that time-honored oligarchic staple, the libel lawsuit. It’s easy to imagine Thiel conceiving of his attack on Gawker not as a petty vendetta, but rather as a litigation moonshot — yet another instance of the same sort of audacious, “can do” solutioneering that gave us seasteading and Uber. As with a lot of innovations that come from Silicon Valley today, it can be hard for the outside observer to decide whether to be impressed or terrified. On one hand there’s a vague patina of social benefit (“Taxis are bad and corrupt — let’s disrupt them!” “Gawker is gross — let’s make sure they can’t hurt anyone else!”); on the other there are layers of indirection that obscure who really benefits in the long run and how.

What makes me so queasy about Thiel’s quest to destroy Gawker is that I suspect he and many others in Silicon Valley see this venture in much the same way they see the accumulation of their fortunes: as a passion project in which the personal will-to-power is happily aligned with the general welfare of society. Like John D. Rockefeller, whose near-miss with a deadly train disaster gave him the extremely helpful lifelong conviction that his success was divinely-ordained (and ergo that he was justified in ruthlessly steamrolling anyone who stood in his way), the titans of Silicon Valley have such naive faith in their ends that any question of means pales in comparison. In the context of lingering resentment over Gawker’s 2007 outing of Thiel as gay (an open secret at the time), a decade-long, $10 million secret war on multiple fronts seems like a mind-bogglingly deliberate feat of grudge-holding. If, however, you happen to be the kind of self-styled investor/philosopher king who is capable of connecting your wealth and continuing life’s work to an urgent narrative about human potential (perhaps even human survival!), you’d be doing the whole world a favor by silencing your grubby detractors. Thiel’s essay “The Education of a Libertarian,” makes his lofty sense of purpose abundantly clear: the intrepid technologist is mankind’s only bulwark against retrogressive forces threatening to enslave mankind.

A better metaphor is that we are in a deadly race between politics and technology. The future will be much better or much worse, but the question of the future remains very open indeed. We do not know exactly how close this race is, but I suspect that it may be very close, even down to the wire. Unlike the world of politics, in the world of technology the choices of individuals may still be paramount. The fate of our world may depend on the effort of a single person who builds or propagates the machinery of freedom that makes the world safe for capitalism.

For Thiel, technology is the last frontier in which the Great Man may still perform feats of sheer will free of interference from the corrupt establishment. And, one suspects, if you believe you happen to be that Great Man, it follows that you would be justified in stamping out any cynical establishment parasites who insist on complicating your personal mythology.

Even by Silicon Valley’s hagiographic standards, Thiel seems particularly preoccupied with the power of myth and narrative. In a lecture entitled “Founder as Victim, Founder as God,” presented as part of the “CS 183: Startups” class he taught at Stanford in 2012, he proffers a sort of grand unified theory of entrepreneurial exceptionalism, tinged with classical allusions ranging from Achilles to the founding of Rome. Somewhat improbably for a talk aimed at the Lean Startup set, Thiel develops his argument by borrowing heavily from the philosopher Rene Girard’s theory of “mimetic desire.”

Girard, a professor Thiel came to admire during his time at Stanford, argues that civilization is founded upon the ritualization of an impulse to “scapegoat” certain individuals in order to diminish the antisocial effects of what, for the purposes of this essay, I will simply call “polarizing jealousy.” To Girard, the pre-civilized world is a “war of all against all,” a melee of human desire running amok, until people spontaneously decide to heap all of their opprobrium upon a single, symbolic figure — thus channeling a disorganized general aggression into a common object. Girard feels, somewhat counterintuitively, that this impulse may well also have been what gave rise to the veneration of gods and kings — the idea being that any individual powerful enough to unite a rabble of previously self-interested brutes in such an extreme unified response must also evoke some powerful feelings of awe. God becomes victim, victim becomes god, in an endless continuum.

Thiel connects this notion to the modern day startup founder, whose particular magic he locates in a susceptibility to both roles:

The perfect scapegoat is someone at both extremes. He must be both an extreme outsider and an extreme insider. It can’t be a completely random person drawn from a homogeneous lot. It must be some sort of outsider, lest the people in the crowd get introspective and realize that the sacrificed was essentially just like them (and, next time, may well be them). But neither can the scapegoat be entirely different from the crowd; he must be an insider, since the pretext behind the ritual is that he is responsible for the internal community strife.

To Thiel, startup founders are like the god-king-scapegoats of old: outsiders whose eccentricity imparts a preternatural vision and charm, which in turn leads to their lionization. But that admiration can also just as easily tip over into castigation. This, to Thiel, is the cross that Great Men must bear:

This is not to say that people can or should escape by abdicating the throne. Sometimes the risk is worth it. And maybe you can reduce the risk. There have to be CEOs and founders. Those people are expected to wear the crown. That necessarily involves a certain amount of playing with fire…Bill Gates was incredible through the 1990s, until Larry Ellison and Scott McNealy and a bunch of CEOs from other tech companies effectively started a “We Hate Gates” club, stirred up attention at the DOJ, etc. From Gates’ perspective, he was on perpetual winning arc of never-ending progress. Everything was perfect, and the haters were just envious and pathetic. But once it turns it can turn pretty quickly. The falls are so big that it’s hard to fully recover.

So here we begin to depart from the theoretical and get a sense of what Thiel has in mind when he suggests that startup founders are the modern heirs to Girard’s scapegoats: eventually the lesser people who envy your success/charisma/vision will try to tear you down. A fairly straightforward case of “haters gonna hate,” one might conclude, but by classing it up with the anthropological trappings of Girard, Thiel lends a sort of high church, martyr-ish pathos to his aggrievedness.

Having laid out the case for founder-as-modern-scapegoat, Thiel concludes rather perfunctorily with a plea that, for our own good, we must finally end our scapegoating of Great Men:

The usual narrative is that society should be organized to cater to and reward the people who play by the rules. Things should be as easy as possible for them. But perhaps we should focus more on the people who don’t play by the rules. Maybe they are, in some key way, the most important. Maybe we should let them off the hook.

It’s not difficult to imagine how someone who thinks in these terms could convince himself that a gossip blog is akin to a terrorist organization and that a personal grudge against those who have attempted to undermine his (and Silicon Valley’s) mythology is, in fact, a righteous crusade.

Ultimately, Thiel’s scapegoat-god-scapegoat theory functions as an elaborate rationalization of a number of fantasies modern-day Silicon Valley has about itself: that it’s a refuge for the precocious misfit, a place where the sort of non-conformist genius scorned by the rest of the world is finally given his due, where young dreamers defy corrupt institutions to the benefit of mankind, where eccentric outsiders become powerful insiders in a way they could not in the hidebound world of traditional business or politics. While something resembling this may have been true in, say, the era of Computer Liberation, Steve Wozniak, the Homebrew Computer Club, Xerox PARC, and early personal computers, the notion that Thiel and his circle of staunchly conservative, Stanford-educated, former finance and management consulting peers are the heirs to Silicon Valley’s countercultural roots is aspirational at best. Theirs is a privileged, narcissistic notion of outsiderness — a sort of “Revenge of the Nerds”-meets-Ayn-Rand meritocracy in which they, as insiders, have deliberately recast as themselves as underdog heroes whose triumph is a just reward for their contrarian brilliance. The reality of the situation tends to be more complicated.

Consider the origins of Thiel’s wealth. In 1998 he left his job in New York finance to convince his old Stanford pals to found a startup. In The PayPal Wars, former PayPal COO David Sacks recalls the high-minded, libertarian dream Thiel had in mind when he pitched his friends on what ultimately became PayPal:

“Of course, what we’re calling ‘convenient’ for American users will be revolutionary for the developing world. Many of these countries’ governments play fast and loose with their currencies,” the former derivatives trader noted, before continuing, “They use inflation and sometimes wholesale currency devaluations, like we saw in Russia and several Southeast Asian countries last year, to take wealth away from their citizens. Most of the ordinary people there never have an opportunity to open an offshore account or to get their hands on more than a few bills of a stable currency like U.S. dollars. “Eventually PayPal will be able to change this. In the future, when we make our service available outside the U.S. and as Internet penetration continues to expand to all economic tiers of people, PayPal will give citizens worldwide more direct control over their currencies than they ever had before. It will be nearly impossible for corrupt governments to steal wealth from their people through their old means because if they try the people will switch to dollars or Pounds or Yen, in effect dumping the worthless local currency for something more secure.

Some of this vision has been resurrected today in Thiel’s enthusiasm for Bitcoin, but it certainly wasn’t how things worked out for PayPal. In reality, as PayPal Wars relates, the company — after an initial wave of success fueled by what we’d today call aggressive “growth hacking”— found itself mired in a lopsided war with eBay, the platform monopoly on which it had become almost totally dependent. In the end Thiel and company managed to survive by forcing eBay into an acquisition — mostly thanks to the auction platform’s plodding incompetence in developing its own internal payment solution. An impressive feat of brinksmanship, to be sure, but one that had little to do with Thiel’s original vision.

PayPal’s success may not have been the ideal vindication of Thiel’s internalized narratives, but it did give him a perfect springboard for Clarium Capital, his hedge fund and, at last, a perfect laboratory for his dearly held macroeconomic theories. Clarium did have some initial success, but, unfortunately, stumbled badly in the aftermath of the 2008 financial crisis and ultimately ended up losing 90% of its asset. Bloomberg quotes an unnamed investor on the fund’s failure:

Thiel is too committed to his views, lacks the flexibility to get out of investments in time when they go against him and doesn’t have adequate hedging in place to mitigate losses, the investors said.

George Packer’s New Yorker profile of Thiel offers a similar account:

One of Clarium’s largest investors concluded that the fund was a kind of Thiel cult, staffed by young intellectuals who were in awe of their boss and imitated his politics, his chess playing, his aversion to TV and sports. Clarium continued to bleed. In mid-2010, Thiel closed the New York office and moved Clarium back to San Francisco. This year, Clarium’s assets are valued at just three hundred and fifty million dollars; two-thirds of it is Thiel’s money, representing the entirety of his liquid net wealth. “Clarium is now a de-facto family office for Peter,” a colleague said. “He’s an exceptionally competitive person. He was on the cusp of entering the pantheon of world-class, John Paulson-esque hedge-fund managers in the summer of 2008, and he just missed it.”

Gawker was characteristically less charitable, dubbing Clarium Thiel’s “Big, Dumb Failure” — an assault on the Thiel’s mystique that must have brought to mind his old Stanford professor’s scapegoat theory.

Fortunately, during his post-PayPal years Thiel did make one bet that paid off handsomely — a highly lucrative early investment in a fledgling social networking startup called Facebook. It was this move more than anything else that virtually cemented his continuing status as a multi-billionaire and Silicon Valley power player. Interestingly, though, as Thiel tells the New Yorker, Facebook was one decision in which he put his personal ideals on the backburner:

Thiel concluded that Facebook would succeed where similar companies had failed. His investment was a kind of philosophical concession to his friend Hoffman. Thiel explained, “Even though I still ideologically believed that it’s unhealthy if society is totalitarian or dominates everything, if I had been libertarian in the most narrow, Ayn Rand-type way, I would have never invested in Facebook.”

Once again, we find that Thiel’s attachment to a grand narrative ends up far off the mark, while a fortuitous bet pays off. Thiel is a big thinker who would very much like the world to believe that his success is a reward for audacity and contrarian brilliance. In reality, however, the circumstances of his wealth tend to have as much or more to do with luck and connections (in a word: insiderness) as they do with mercurial outsiderness. That he and others in Silicon Valley are so attached to a scapegoat narrative in the face of scrutiny suggests a good deal of vulnerability about their success.

The more one studies the careers of Silicon Valley’s elite, the more a sort of divergence between narrative and reality tends to emerge. If, as Joan Didion wrote, “We tell ourselves stories in order to live,” Silicon Valley’s elite seem especially to be clinging to their narrative for dear life. I think there’s a simple reason for this: tech — and tech investing in particular — is a business that is ostensibly about predicting the future, but in actuality relies far more on blind luck and connections than most would like to admit. In some ways the “Lean Startup” model, with its emphasis on “pivoting” toward “product-market fit,” is an admission of this and a way of systematizing the intuitive approach through which many successful tech entrepreneurs have more or less groped their way toward success.

This doesn’t mean, however, that once riches and fame arrive the successful founder need sit out the conference circuit. Rather, a sort of complex kicks in as the newly anointed guru and his acolytes feel compelled to demonstrate that success was not a fluke. An ex post facto narrative is invented (“Snapchat’s confusing UI was a brilliant move to keep adults away!”) as proof of the founder’s deliberate genius, and, since a lot of people who start companies are magical thinkers in the first place, the narrative is readily internalized. The investor class, always eager to be seen as ahead of the curve on anything successful, is quick to ratify the narrative, providing social proof to their highly aspirational audience of VC peers and wannabe entrepreneurs. The tech press, which is in the business of finding compelling narratives, is happy to amplify and expand a good story (particularly for access to the rich and powerful). Before too long the whole world has bought in.

If someone in the press actually has the gall to make the odd comment critical enough of the founder that it threatens to pop the narcissistic bubble, the response tends to be severe. The wagons are quickly circled to protect the narrative and the malcontent is roundly censured by a chorus of tut-tutting peers who, always cognizant of the cozy (read: incestuous) interconnectedness of the Valley, know that they need the powerful contact for their next retweet, round of funding, or hot investment opportunity. The protective bubble hardens, the chastened journalist retreats.

Or at least this was how it worked until Gawker set its sights on the Valley. I firmly believe that because of its total lack of compunction about trafficking in gossip, its lurid interest in exposing the more unsavory side of human nature, and its blatant disregard for the consequences of tweaking the rich and powerful, Gawker’s Valleywag singlehandedly changed the way tech is covered. Valleywag’s determined pursuit of dirt on tech’s elite slowly chipped away at the industry’s facade until more respectable publications finally started to decide that perhaps they should apply a bit more scrutiny to the narrative. I strongly suspect that Valleywag’s gleeful assaults on Silicon Valley mythology, combined with evidence of a growing skepticism from the mainstream press, sent Thiel into scapegoat overdrive.

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