As I See It: Bad Boys Rising
Published: June 11, 2012
by Victor Rozek
A few decades back when Stanford University decided to drop its mascot moniker "Indians," the administration held a naming contest open to the student body. Students were encouraged to submit suggestions, and the most frequently chosen name would win. Things were progressing nicely until someone decided to check the tally. The students, evidently inspired by the business practices of the university's founder Leland Stanford, voted to replace the politically incorrect "Indians" with the economically incorrect "Robber Barons." The contest was quickly retired and some quivering bureaucrat selected "Cardinal" as the new mascot--the color, mind you, not the bird. Probably didn't want to risk offending bird lovers.
Although Palo Alto has been a Robber Baron-free zone for well over a century, its spawn, Silicon Valley, appears to be resurrecting the time-honored capitalist tribute. In the last two months alone, a pair of national publications, Time and Newsweek, devoted considerable column inches to savaging the heroes of the Internet revolution. Two crack investigative journalists independently arrived at the stunning discovery that when companies built on good intentions acquire excessive money and power--hypocrisy and naughty, naughty behavior result. Who would have thought?
If the articles were blogged by angry Druids, they could be dismissed. But these periodicals have sober journalistic credentials. The titles alone speak to the reputation IT is etching among serious people, or at least those who still read. Learning to Hate Big Tech, Time proclaims, with a sub-head that accuses technology companies of being so corporate that "IT firms are becoming as popular as banks." Really? I didn't know Yahoo started foreclosing. Two months earlier, Newsweek published The Ruthless Overlords of Silicon Valley, calling the heads of Facebook, Google, and Zynga "successors to the big money magnates of the gilded age." It would appear that the authors' esteem for IT firms can be measured in inverse proportion to the popularity of the gadgets and services they provide.
So why the lack of love? Well, the short list includes tolerating appalling working conditions, tax evasion, antitrust violations, price fixing, indifference to copyright, disdain for privacy, outsourcing, and a paucity of domestic job creation. It all sounds suspiciously familiar, like a slow day on Wall Street.
Given the ethical sewer that so much of corporate America inhabits, such transgressions should barely prompt the raising of a weary eyebrow. Except that from the start, Internet and social media giants have wrapped themselves in moral superiority. Rob Cox, writing for Newsweek, notes that before Google went public in 2004, its founders, Larry Page and Sergey Brin, "penned a letter to prospective shareholders that has become the Internet industry's version of the Magna Carta." In it, they disavowed conventional concerns (oh, like say, profiteering), and declared themselves committed "to making the world a better place." Who could have known that doing God's work might require circumventing antitrust laws.
The Federal Trade Commission is currently investigating Google and considers its violations significant enough to warrant unleashing the prosecution's version of the Big Dog, "the former prosecutor of the Oklahoma City bombing case," according to Time's Rana Foroohar.
And while they're at it, maybe the FTC will slap Google's wrist for altering its computer code "to trick the Safari web browser on Apple's iPhones into overriding the privacy settings of millions of users." Can't you just feel the world getting better?
But Google is not alone. Mark Zuckerberg, a digital moralist in his own right, insists that "people want to use services from companies that believe in something beyond simply maximizing profits." Yet just a few days after Facebook's ballyhooed IPO, its stock price dropped 18 percent after news emerged that underwriters like Morgan Stanley, with the probable collaboration of Facebook itself, shared damaging assessments of the company only with institutional investors--not with the millions of little people who may actually use its service. To be fair, Zuckerberg was probably right about what people want, he just wasn't terribly serious about giving it to them.
While Facebook is discrete with its own information, it has a movable standard for its users. Facebook, too, has had run-ins with the Federal Trade Commission. In November it settled allegations that it misled users about the handling of their personal information. "Misled" is a polite euphemism for we-do-what-we-want-until-we're-caught. Google, always eager to be first, agreed to a similar settlement eight months earlier.
The abysmal working conditions in Apple's outsourced China factories have been well publicized. Starvation wages, inhuman hours, and chronic maltreatment. But Chinese laborers will be relieved to know that Apple has a code of conduct for its suppliers, and it doesn't prohibit covering windows with netting so that employees can't commit suicide. Gives new meaning to getting away from the office. It's hard to believe that in any civilized society a place like Foxconn is allowed to exist. Sadly, it has become all too easy to believe that American firms will do business there.
Less publicized than Apple's foreign affiliates is its shell game of mail drops and token offices in tax havens from Nevada to the Netherlands. It's all legal, of course, but it helps to have industry lobbyists write the laws that make tax evasion possible.
And speaking of taxes, Amazon had to be dragged into court to pay sales taxes on transactions originating in Texas and California. Apparently, among elite Internet firms, good citizenship does not come voluntarily.
On many levels, IT companies are, in Cox's words, "pushing the boundaries of what is generally considered acceptable, even decent" and, as a result, state and federal governments are paying closer attention. Not surprisingly, what drives these behaviors is the desire to increase profits. No shame in that. Except when the means devolve from offering superior products and services to employing a strategy of clever deviousness.
As Foroohar notes, the information technology sector is "where most of the new growth and income creation in this country is right now." And heady times invite excess and risk-taking. The authors are implying that Internet-based companies, drunk on power and possibility, have lost true North. And, as success becomes its own justification, it grows more doubtful that the industry can re-embrace its professed values and be satisfied making profits honorably and legally.
It's hard to know how much of this is a teenage rebellion phase in the maturation process of what is essentially a fledgling industry. Or how much is reflective of the Internet culture itself where, in the words of Garth Saloner, the dean of Stanford's business school, "the only rule is there are no rules." Like mountains that make their own weather, the sheer size of these companies creates a potentially destructive wake. Facebook's motto, "Move Fast, Break Things," doubtless worked well when it was a jet ski. It is a far less responsible strategy for an oil tanker or an aircraft carrier.
Defending access without restriction, championing universal democracy, making the world a better place, not being evil; "underneath the haughty language of moral superiority," writes Cox, "lies the same profit motive that drives all businesses--and a ruthlessness rivaling history's greatest industrial bullies." The original bad boys of capitalism would be proud.
The Robber Barons had two things in common: they were all exceptional men and they were all ruthless. While ruthlessness is seldom openly celebrated, almost everyone wants to believe the rules don't apply to them. And many secretly admire people who are bold enough to flaunt convention, and that includes conventional morality.
Nietzsche once opined that "a pair of powerful spectacles has sometimes sufficed to cure a person in love." To date, in spite of increased press scrutiny, there is no evidence that the public is falling out of love with its social network providers and gadget makers. I guess if you're going to be ruthless, it helps to be both rich and exceptional.
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