Siliconservatism: How New Money Becomes Old Money
You’ve probably encountered the person I’m about to describe. Gen X to Millennial guy that works in ‘tech’. Started his career in a burgeoning industry with pretty consistent growth across the board broken up by periods of explosive growth, depending on the company. He had pretty socially progressive views, the most conservative he would get was when he’d send you a two paragraph meme with a picture of Ron Paul somewhere on it. His job had a lot of forward momentum as the internet started to be integrated even more into everyday life. The person I just described no longer exists. What we have now are what I call Siliconservatives.
I really thought this term was gonna be used to death, but apparently the term Siliconservative is mainly used when referring to when it was first coined. In a 1990 humorous email, UPenn student Ranjit Bhatnagar defined the term simply as "Keep the Free Market free of foreign memory chips!". Bhatnagar wasn’t that far off, at least in one respect, but I’ll get back to that in a later article.
Conservatism has always been in Silicon Valley. An industry dominated by angel investors and 30 year old billionaires is going to be receptive to the party that wants you to have the lowest possible tax rates. Despite this incentive structure, Silicon Valley formed a sort of cultural alliance with liberals in the US. Some combination of California culture, Democratic desire to be better at free markets than Republicans in the 90s, and ability of young people to actually use computers pushed the tech industry into being socially progressive [7]. This arrangement worked pretty well, tech kept itself formally apolitical, while occasional news stories like Tim Cook’s coming out served as reminders that Apple wasn’t Koch Industries. Silicon Valley made it out of the Great Recession better than most. The iPhone’s meteoric rise was barely dented and a new wave of startups began to emerge.
But that was more than 10 years ago, and things have changed. After integrating into almost every aspect of life, tech firms didn’t have any new horizons to conquer, nothing positive to achieve. The Covid pandemic was a boon in terms of share price, but the cultural momentum wasn’t there. The big new app was from China, and everyone was going online because not doing so would probably expose you and your loved ones to a deadly disease. It was time for some soul searching.
After Joe Biden became president, he started to roll out the standard Democrat playbook, to varying degrees of success. There wasn’t anything Joe Biden did that couldn’t have been pretty easily predicted by economists, no huge market upsets. Basically, it was as close to business as usual as we could get at that point.
Then an event happened that will likely shape the history of the right wing in America for years to come. An unprecedented assault on Silicon Valley began during March of 2022 when a man in his late sixties changed a number from .25 to .5 in a masterful financial Blitzkrieg. If you didn’t get it already, I’m referring to the Federal Funds Rate. Almost two years to the day after the rate was lowered to zero in response to Covid-19, the rate was back up. This number would continue to climb to its highest post recession rate (5.00 at time of writing), and may still continue to, albeit much less drastically.
Historically, the Federal Reserve has been able to take actions that allow for short run growth. A good example would be the 1971 “Nixon Shock”, in which the transition away from the Bretton Woods system of gold exchange and protectionist trade measures led to an increased money supply. Nixon was able to coast into another term in 1972 right as the Federal Funds Rate began to spike and the US economy entered a period of stagflation. With the Covid-19 pandemic, similar measures had to be taken in order to prevent the stock market entering free fall. The rate was set to effectively zero by April of 2020. It was probably the right move in the end, the last thing America needed to deal with at that time was a cornered bear. But this had to end at a certain point, especially with mounting inflation. So the Federal Reserve bit the bullet and announced that the rates were going up.
This change caused panic in a lot of Silicon Valley. Look no further than the price of Bitcoin, the darling of start up firms and hopeful prospect of tech giants from 2021 into 2022. Bitcoin’s price surged in 2021, but began a sharp decline in April of 2022. From its absolute height to its lowest low in July of 2021, Bitcoin’s value had been almost quartered. Even so called ‘stablecoins’ like Terra experienced a bank-run spiral in which the coin’s value was reduced beyond that of Weimar era marks as crypto currency doesn’t even make good wallpaper.
It wasn’t just startups that experienced this shock. Facebook had rebranded itself as Meta in 2021, and attempted to roll this into a new project called the Metaverse. This bizarre platform was a chimera of crypto, Slack, and Second Life. It has yet to gain significant traction and resulted in the company losing a grim $700 billion drop in stock price[10]. Investors could forgive crypto currency for being hard to understand, but Facebook is something that your grandmother is able to use and the Metaverse is not.
This was a rude reminder that Silicon Valley had reached the end of its leash. As cryptocurrency gained legitimacy, it seemed more and more likely that tomorrow's financial shot callers wouldn’t be in New York, but in the Bay Area. The new hotshot billionaire, Sam Bankman-Fried, was shaping up to be the next J. P. Morgan: a true financial titan that could hold the reins of capital and establish tech as the backbone of the world economy. But as we all know, that didn’t happen. For as much money was in Bitcoin and Meta, the speed at which that money evaporated proved how systematically weak Silicon Valley really was.
One could call what happened a ‘cracking of the whip’ by the Federal Reserve. If you asked most people familiar, they would say it was a routine and predictable move by the Fed after unsustainably low interest rates. If you asked Silicon Valley venture capitalists, they would tell you that the Federal Reserve was waterboarding the entire US economy. Let's take the average and say it was a cracking of the whip. Discipline had been enforced and investors reanalyzed their priorities, leading to a slump in tech stock prices across the board.
The ideology of Silicon Valley as a whole is one shaped and consistently changed by its conditions. Obviously this is something that happens with pretty much every worldview, but there's something uniquely touch and go about the Siliconservatives compared to even the rest of Silicon Valley. Their techno-libertarianism was born out of new and unregulated capital flowing into early start ups where the old social norms didn’t have a real need to be enforced. Steve Jobs’ choice to wear jeans and turtleneck when announcing the iPhone is a microcosm of a culture that valued results over presentation. Silicon Valley also hired a disproportionate amount of Asian Americans, many of whom were recent arrivals to the country. Silicon Valley’s model for corporate culture roared into the post recession economy like a lion.
Like a lion, hard times left this culture hungry. Its mane remained majestic, but this couldn’t hide the fact its ribs had been exposed as the body ate away at tissue in order to stay alive. Raging against diversity is an example of such, increasingly diverse new talent is the muscle every firm needs to survive. But if you’re an overvalued start up unable to capture those easy financing opportunities, that muscle is burned in exchange for more time that might let you scavenge the market share of another start up. The age was starting to set in, and with it, desperation.
Let's look at how everything I’ve detailed actually plays out. Given the subject matter, it’s almost impossible to express this shift in meaningful graphs and statistics. Instead, I’ll focus on the statements of some specific and significant figures over a period of time.
First is Netscape co-founder and venture capitalist Marc Andreeseen, an already lapsed Republican party voter that nevertheless became a large figure in the online conservative sphere. Andreeseen’s twotter started gaining steam at the end of 2021 and continued to get five digit new follower numbers from December 2021 to May 2022 [2]. Let's take a look at what Marc was talking about before he got noticed by so many people.
Andreeseen’s output was pretty tame and sparse, all things considered. His twotter was mainly linked to other work or public service announcements, none of which were particularly divisive. His personal website isn’t much different, from “Veteran Inclusion Grants” to “Future of Movie Theaters”. All fairly paint by numbers stuff for his field of work.
This pattern ended February 2nd, when Andreeseen posted a link to the Wikipedia page for the Thomas Sowell book Intellectuals and Society. After this, he began tweeting at an eye watering rate. The subject matter took a sharp turn, if that wasn’t already obvious. The style was seemingly meant to be somewhat cryptic, with tweet threads not having any real jumping off points, but was also clearly cultural commentary that didn’t formally connect the dots.
"'Year Zero' is an idea put into practice by Pol Pot in Cambodia, that all culture and traditions within a society must be completely destroyed or discarded, and a new revolutionary culture must replace it, starting from scratch."
https://twotter.com/pmarca/status/1490170837546135555
He continued this bizarre pattern for over two weeks, not replying to many people and posting Wikipedia links to concepts such as moral panic, ostracism, and human sacrifice. This esoteric and referential style of communication may seem like something a mentor might use to test his students. But despite all of the cultural theatrics, Marc couldn’t help himself from talking about the issue that impacts Silicon Valley the most: how the profit margins on technological investment are very thin.
Marc’s sudden tone shift corresponded very closely with the build up to the Federal Reserve's planned rate hikes [5]. It also lined up with Elon Musk’s first purchase of twotter stock on January 31st 2022 [6]. The balance of power in Silicon Valley was clearly beginning to shift by this point, and venture capitalists like Marc were going to be left behind if they didn’t do something to at least temper the storm that was approaching. And I say “like Marc” for a reason, because he isn’t an isolated case of a Silicon Valley entrepreneur supercharging their rhetoric around this time frame.
David Sacks: long time Silicon Valley conservative that, like Marc, lapsed in 2016 to support Hillary Clinton [8] [9]. What was David up to right before early 2022? Let's look in linear order.
I have a pitch for a sitcom: A progressive Speaker of the House, using insider trading gains, retires to a rich Florida community filled with the very people she used to demonize and moralize against, including a former president & top golf pro. High jinx ensues. Too unrealistic?
https://twitter.com/DavidSacks/status/1463546730922881028
The administration claiming that BBB will fight inflation is like a firefighter trying to put out a fire with kerosene.
https://twitter.com/DavidSacks/status/1470795161638559744
First there was Covid. Then there was the overreaction to Covid, both politically and economically. Now we are in the correction to the overreaction. 2022 will be the Great Reset.
https://twitter.com/DavidSacks/status/1471187516032106500
Actually, I expect to be gloating quite a bit in 2022. Lots of told-ya’s are coming.
https://twitter.com/DavidSacks/status/1476262290240376841
Pretty tame stuff at the beginning, but it seems like David is dipping his toes in the water with some more controversial ideas towards the end. This shouldn’t come as a surprise, Sacks is still an (almost) life long conservative that is part of the same PayPal Mafia that Peter Thiel and Elon Musk are a part of. But what happens to a concerned, but outwardly lighthearted man like David Sacks when the aforementioned Federal Reserve Rate hike gets a bit closer? Let's look at February of 2022.
Has anyone else noticed that we’re entering a recession?
https://twitter.com/DavidSacks/status/1489128016508719104
Over the past year, progressives and the administration have acted as though the economy can bear any burden. Now we’re starting to see how fragile it actually is.
https://twitter.com/DavidSacks/status/1489327549821816832
The “new normal” is that the whole country has been red-pilled and is ready for new management.
https://twitter.com/DavidSacks/status/1491543867186765825
What about Erik Voorhees, owner of crypto exchange ShapeShift?
It's fun to joke about the selloff. Old hands have seen this so many times. But for those legitimately worried, be at peace. The arc of history doesn't bend the other direction.
https://twitter.com/ErikVoorhees/status/1467015003295268866
He seems pretty positive about the price of Bitcoin, even if his advice on the arc of history would still leave you down about 43% as of the time I’m writing. Bitcoin had a particularly rough time because of rate hikes, so let's see how Erik is doing some months into his arc of history.
No financial institution nor regulator, in any country, comes close to the transparency, openness, equity, and immutability of a blockchain.
https://twitter.com/ErikVoorhees/status/1483172836797603842
Real tweet from the World Economic Forum.
We must win.
(quote tweet of a World Economic Forum tweet with the text “Welcome to 2030. I own nothing, have no privacy, and life has never been better @IdaAuken http://wef.ch/2hAZrLe”)
https://twitter.com/ErikVoorhees/status/1493430639827116033
It's disgraceful that regulators are stealing $100m from BlockFi.
They did nothing wrong; they harmed nobody. They built a great company that provides a service customers love.
https://coindesk.com/policy/2022/02/12/blockfi-will-pay-100m-halt-high-yield-offering-in-settlement-with-sec-state-regulators-report/… via @coindesk
https://twitter.com/ErikVoorhees/status/1493295793150726144
I could go on and on with examples. What I’ve laid out isn’t the be all and end all of Siliconservatives, merely a prologue. There’s so much I haven’t covered yet, as fun as interest rates are to talk about, they’re far from the only thing that’s kept the Siliconservatives going. Next week, I’ll look at how the war in Ukraine became an ideological sore spot for much of the new right, especially in Silicon Valley. I’ll also have a piece for paid subscribers about the man-child that made the formatting of those links so awful.
https://corporatefinanceinstitute.com/resources/cryptocurrency/what-happened-to-terra/
https://twitter.com/pmarca/status/1490170837546135555
https://twitter.com/pmarca/status/1496348388429901824
https://finance.yahoo.com/elon-musk-takeover-twotter-everything-193231867.html
https://www.nytimes.com/2017/09/06/technology/silicon-valley-politics.html
https://www.businessinsider.com/marc-andreessen-trump-and-clinton-2016-6
https://www.cbsnews.com/news/meta-stock-down-earnings-700-billion-in-lost-value/