The genuine contributors to evolution are among the recalcitrant tourists, the false negatives, the dissidents, and the antagonist outliers of the subpriming of innovation arbitrage.
I see the judges of innovation in Silicon Valley often refer to the departure of disillusioned entrepreneurs as the “good riddance” of Silicon Valley tourism. And indeed, many wannabes rush into a dream of striking gold, only to disappear as quickly as they came when the going got tough, and “gold” appears not so easy to come by anymore.
Such is what I observed one year before 911 when the bubble of Silicon Valley’s defunct arbitrage burst for the first time (There never was a Tech bubble). The foreigners quickly disappeared – and saliently – so did most of the women, who previously showed up at conferences busting out of their cutesy outfits. “Leaning in” helplessly lost because Sheryl Sandberg’s book was not out yet. Who wants women to be like men? No thanks, I admire our differences – not so much the mimicking of silly male posturing.
Frankly, I smirk at diversity. Diversity is not a cause but a consequence—a consequence of a meritocracy. Let us build a true meritocracy first, in compliance with the principles that establish one, and trust me, diversity will naturally follow.
But I digress.
The insane asylum
At first glance, the culling of desperados sounds like a perfectly natural cleansing process and correction by the efficiencies of a free-market mechanism. That is, until one discovers, as I explain in excruciating detail on this blog, how the arbitrage of innovation actually violates free-market principles.
With the dysfunction of innovation’s oligarchic arbitrage summed up by a founding Facebook engineer as the intellectual capacity of entrepreneurs in Silicon Valley now overwhelmingly being used to produce advertising clicks, his disdain for the arbitrage of today’s subprime innovation arbitrage is clear.
Opinions aside, advertising signals the antithesis of value. Since advertising is merely a mechanism to artificially inflate consumer sentiment that, if the value was genuinely present, would need very little stimulation to make its way to, and increase amongst, eager buyers. Especially with social networking as the big horn of today’s town crier.
The mediocrity accelerates with the attrition of venture capital amidst a massive greenfield of consumer adoption of technology innovation. Only a handful of the 790 original venture capital firms make any consistent, monolithic, and meaningful venture-style return for their investors. So, the investor pickings for groundbreaking entrepreneurs are getting slimmer and needless to say, more oligarchic.
But venture capital has changed, so rebuts a partisan senior editor of a prominent financial magazine. Indeed it has; the deployment of prime risk has succumbed to the much-applied rescue “putty” of subprime, with even our government desperately trying to fill the holes a failing venture capital left behind.
The problem with Silicon Valley is inmates are no longer running the asylum. Hence innovation arbitrage has predominantly turned subprime, with the so-called Paypal mafia looking like rock stars for using their own money to ignore Silicon Valley’s now subprime “best practices” and counter investor socialism infuse a little bit of prime risk back into the fold.
Hats off to Elon Musk.
Real entrepreneurs who fail to submit to subprime must now accept being tagged as losers by Silicon Valley oligarchs, especially when their goals in life are more significant than boosting advertising sales.
Is it too audacious not to want to feed companies who feverishly buy those clicks in a land-grab rat race against each other, with little understanding of how they convert to actual business? And to demand, a business should yield meaningful socioeconomic value rather than artificially inflate temporal value. And to demand a substantial contribution to the quality of our evolution?
Goals, too conflicting with the narrow, self-serving agenda of many investors in Silicon Valley who make money riding the waves of greater-fool economics. It is, after all, still straightforward to obscure the public’s view with the self-induced fog of technology voodoo and walk away with the grand prize before the fog clears.
But do not confound consequence with cause and merely blame investors. A dysfunctional financial system is the cause of investors taking it for a glorious ride. The gravy train we created for those investors is of our own making. By failing to define the paradox every system, in pursuit of universal freedom, requires.
The double entendre here is that the meaning of a tourist, an entrepreneur tagged as a loser, may instead be a recalcitrant winner. An entrepreneur who refuses to submit to the fallacies of the past and with better options than to submit to the mediocrity of despair, may be the dissident outlier investors should be looking for.
Winner or loser?
By definition, any system in violation of free-market principles deploys a highly inaccurate proxy of merit. A meritocracy – if we still dare call our economic fallacies such – confounding winners with losers, and vice versa.
- Should cable companies in the U.S. be allowed to be the true arbiter of content if their distribution strategy violates our constitutional right to free-market access? Is the show most viewers (through oligarchical controlled geographical access) watch indeed the show most Americans are genuinely interested in? Based on the blatant free-market access violation, the answer is categorical “highly unlikely.” Giving the assignment of winners and losers of shows (and Nielsen TV ratings) along with its audience whole new meaning and relevance.
- Can a political system boldly claim leadership if the vast majority of the U.S. population has already disenfranchised itself from such a system and neglects to vote? Should a democratic society not worry about the 70% of “losers,” in the eyes of the oligarchs, who elect not to participate? Are the winners voters who drag themselves through political hogwash and choose from a roster of political “leaders” who could not be further removed from reality?
- Is “innovation” that cannot outlive its founders genuinely worth pursuing? Is the rightful recipient of public (and private) money a cunning technology trojan horse designed to persuade “greater-fool” consumers to buy? Should a sovereign state proud of its unique democratic trajectory endorse the stifling socialism perpetrated by technology systems spanning the globe? Is cunning technology foolery the winner or the loser?
For the sake of our evolution, when will we wake up and deploy leadership that holds firm on what we should do rather than what one generation can get away with in their lifetime?
Back to Silicon Valley
Of course, not everyone who leaves the confines of the now ‘sane’ asylum in Silicon Valley is a genius, and neither are all who stay. Some are gold-diggers who will never hit any vein, no matter how easy it is to land subprime money these days. Many who remain in Silicon Valley are startup-hoppers, leeches who pick up opportunistic equity along the way until right before their true merit is exposed. I have witnessed many instances of this process taking place (also on the investor side).
Not everyone can be an entrepreneur (but an entrepreneur can come from anywhere). But no real entrepreneur will allow his future to be defined by an arbitrage that paints all swans, and thus his future, a monotone white. Prime innovation is irregular and unruly and does not submit to the arbitrage of uniform subprime.
The primary concern I have with the workings of the arbitrage in Silicon Valley is not with the cost of the false positives, one could argue as the cost of doing business in the entrepreneurial arena. But I worry about the similarities with the American auto industry, the sub-priming of innovation so eerily similar to the sub-priming of cars.
We build cars that are as cheap as possible and unbeknownst to buyers, lack the necessary safety measures that make them reliable and secure. In the same way, we build affordable internet consumer technologies, and unbeknownst to its adopters, violate the most basic economic principles we fought wars over to protect.
Technology providers without a solid understanding of modern economics are like student drivers obtaining a driver’s license right after managing to circle the farm once. Dangerous is an understatement.
Faulty consequence of faulty cause
The systems we build lack the fundamentals that establish the free-markets we boast about so frequently. They are the opposite of free. And when our systems are broken, so are their consequences.
So, be careful to assign a negative connotation to a tourist who enters “the club” and leaves. Like a tourist of entertainment who turns off the TV in dismay at the content programming, inundated by advertising, of some two-hundred cable TV channels. Similar to a tourist of politics who, along with 70% of U.S. citizens and apathetic to a dysfunctional political process, decides not to vote. Identical to a tourist of entrepreneurialism who wants to contribute to society more than nebulous advertising clicks.
The real winners of our society are the recalcitrant tourists of its subpriming.
Now sing with me, to the tune of Hotel California by The Eagles:
On a dark desert highway, cool wind in my hair
Warm smell of colitas, rising up through the air
Up ahead in the distance, I saw a shimmering light
My head grew heavy and my sight grew dim
I had to stop for the night
There she stood in the doorway;
I heard the mission bell
And I was thinking to myself,
“This could be Heaven or this could be Hell”
Then she lit up a candle and she showed me the way
There were voices down the corridor,
I thought I heard them say…
Welcome to the Hotel California
Such a lovely place (Such a lovely place)
Such a lovely face
Plenty of room at the Hotel California
Any time of year (Any time of year)
You can find it here
Her mind is Tiffany-twisted, she got the Mercedes bends
She got a lot of pretty, pretty boys she calls friends
How they dance in the courtyard, sweet summer sweat.
Some dance to remember, some dance to forget
So I called up the Captain,
“Please bring me my wine”
He said, “We haven’t had that spirit here since nineteen sixty nine”
And still those voices are calling from far away,
Wake you up in the middle of the night
Just to hear them say…
Welcome to the Hotel California
Such a lovely place (Such a lovely place)
Such a lovely face
They livin’ it up at the Hotel California
What a nice surprise (what a nice surprise)
Bring your alibis
Mirrors on the ceiling,
The pink champagne on ice
And she said “We are all just prisoners here, of our own device”
And in the master’s chambers,
They gathered for the feast
They stab it with their steely knives,
But they just can’t kill the beast
Last thing I remember, I was
Running for the door
I had to find the passage back
To the place I was before
“Relax, ” said the night man,
“We are programmed to receive.
You can check-out any time you like,
But you can never leave! “
Writer(s): Don Henley, Glenn Lewis Frey, Don Felder
Copyright: Fingers Music, Cass County Music