Published in Svenska Dagbladet, 2024-10-15. Translated from Swedish.
As long as the money kept flowing in, venture capitalists didn’t need to care about politics. A young lawyer changed that. Now the liberal tech power centre of Silicon Valley is a pillar of the conservative movement that wants to make Trump president.
The audience cheers. The stage is framed by stone, with an engraved reminder about the importance of education. We are in Royce Hall at UCLA in Los Angeles — just south of Bel-Air. Duke Ellington and George Gershwin have performed here. But we won’t find jazz musicians today. Quite the opposite. Seated in a row of grey sofas and armchairs are four Silicon Valley venture capitalists. Before a full house, the suited men are interviewing guests including Google co-founder Sergey Brin, Tesla CEO Elon Musk, and outspoken Uber founder Travis Kalanick.
This is the All-In Summit, an annual gathering born from the popular tech podcast of the same name. The talk — and the bickering — between David Sacks, Jason Calacanis, David Friedberg and Chamath Palihapitiya has become one of the most popular tech podcasts in the United States, with hundreds of thousands of weekly listeners.
The next guest on stage, however, is no tech bro like the rest of them. But he is indicative of a larger shift that has taken place in Silicon Valley ahead of this election. “Welcome vice-presidential candidate JD Vance to the stage!” In the 2024 election campaign, technology has become politics — and vice versa.
JD Vance is admittedly a former venture capitalist himself, but that is not why he is visiting. The most outspoken of the hosts, David Sacks, is a vocal Republican who has increasingly steered the podcast toward political topics. One segment of the conversation with Vance is subtitled “how to practically approach deportations, and who is coming through the southern border” — not an entirely obvious subject for an event full of tech enthusiasts. This election year the range of topics in Silicon Valley has expanded dramatically. A new kind of political power player is emerging. But why is this happening now?
Silicon Valley’s liberal image is well-known. In the Castro district, a giant rainbow flag has flown for many years — a marker of the city’s openness toward the LGBTQ movement. Silicon Valley as a whole — the area stretching from San Francisco south to San Jose — is in many ways a textbook example of a well-functioning melting pot. About 37 percent of the area’s population are immigrants, and three of the biggest companies in the tech industry — Google, Nvidia and Microsoft — all have immigrants as their top executives. The region is a mix of nationalities and worldviews, though the heavy concentration of engineers means the range of professional backgrounds is fairly narrow.
This has contributed to the image of a liberal tech sector — and one that has not cared much about party politics at all. Silicon Valley has been like California writ large: a reliable Democratic win, every election year. Uncontroversial, and therefore rather uninteresting. But the reality has always been more complex.
A 2017 survey revealed more nuance. Among tech company founders, views were liberal on social issues — abortion, immigration, support for the less well-off — but significantly more conservative on questions of regulation. And especially on labour regulation — trade unions and the like. Looking at the last presidential election, Trump received more than a third of California’s votes. In Santa Clara County — the district that is home to the headquarters of Apple and Nvidia, among others — one in four people voted for Trump.
Silicon Valley and the surrounding Bay Area is also an economically very prosperous region. Of around 7.5 million residents, over 300,000 are millionaires in dollar terms. The average price of a house in Atherton — an upscale suburb sandwiched between Menlo Park and Redwood City — is roughly 75 million kronor. There is, simply put, enormous wealth — and there has been for a very long time. And that very wealthy individuals tend to vote more to the right than the left is a pattern easy to identify, even within this otherwise liberal enclave of America.
The tech elite’s newly awakened interest in politics can be traced back to a specific date: March 22, 2021. That was when Joe Biden nominated Lina Khan, a young law professor from Columbia Law School, as the new head of the Federal Trade Commission. Her arrival was a turning point in how tech companies needed to relate to politics. It had been relatively easy and quiet until then. The tech giants had been allowed to become giants, with minimal intervention from regulators. That was about to change.
Khan was already well-known before her appointment. As a 27-year-old doctoral student she had published an academic article in the Yale Law Journal. “Amazon’s Antitrust Paradox” was the title — a nod to a well-known 1970s book on competition law, Robert Bork’s “The Antitrust Paradox.” In her article Khan argued for the opposite of what Bork’s book claimed. Judging competition cases by whether consumer prices went up or not — Bork’s main argument — was not applicable across all contexts, she argued. For tech companies — and Amazon in particular — low prices for consumers could still lead to a long-term erosion of competition. Amazon’s data on consumer behaviour helped it build a better store, to the point that competing with it could become nearly impossible over time. What felt cheap to individual buyers on Amazon could end up being very costly for society as a whole. The article had major impact and set the tone for how the FTC would approach competition cases in an era dominated by a handful of tech giants.
Under Lina Khan’s leadership, the FTC sued Microsoft when it tried to acquire Activision Blizzard, one of the world’s largest video game companies. It sued Amazon over convoluted subscription cancellation flows for Prime. And in autumn 2023 the agency sued Amazon for holding an illegal monopoly in the e-commerce market — the thesis Khan had advanced in her original article. The message is clear: maintaining fair competition in the tech sphere is worth fighting for.
For the first time since today’s tech giants grew large, they now have to reckon with politics. For boards and investors it has become an almost existential question. For Silicon Valley’s venture capitalists, Lina Khan has become a symbol of how politics interferes with and ruins a functioning market. In a blog post, venture capitalist Marc Andreessen wrote that “regulators are blocking and punishing startups from being acquired” — leaving little doubt about which regulator, and which relatively newly appointed head of it, he had in mind.
Investor Peter Thiel was one of the few to take political sides early — he spoke at the Republican National Convention as far back as 2016. This year he has been joined by heavyweights including Marc Andreessen and Ben Horowitz, two of the most influential venture capitalists in the world, both now publicly backing Trump (though Horowitz recently also donated to Kamala Harris). Why are they so invested in ending Biden and the Democrats’ time in power?
Part of the answer lies in venture capital’s fundamental business model. They invest in high-risk small companies, and if some of them grow, they can either be sold or listed. The modest initial investment has by that point multiplied and generates the fund’s entire return. But this model has run into trouble in recent years — roughly since Lina Khan took over at the FTC. The problem: no one is buying companies any more. Meta has not made a single major acquisition in the past two years. Google has made only two minor ones. Compare that to the equivalent period before Khan’s arrival, when each company completed around ten such deals per year.
At the same time, tech IPOs are at their lowest level since the 2008 financial crisis — worse than any year going back to 1980. The tap that watered venture capital has been turned off. The big companies no longer dare make the same kinds of deals as before, for fear of having them blocked by Lina Khan and the FTC. Buying Instagram for a billion dollars, as Facebook did in 2012, is today unthinkable.
As an alternative, many venture capitalists — including Andreessen and Horowitz — have invested billions in cryptocurrencies, a sector that appears headed toward heavier regulation, which is the last thing investors want. Trump has taken a clear stance on this. He spoke at the major bitcoin conference in Nashville earlier this year, discussing among other things using the cryptocurrency to pay down the national debt — exactly how was unclear. But the crowd cheered when Trump promised to fire Gary Gensler, head of the financial regulator SEC, who has become the face of all cryptocurrency regulation. After making the promise, Trump called out: “I didn’t know he was so unpopular!” For that audience, he is. And Trump’s message may be opportunistic — but it is at least clear: under him, there will be no more regulation of this industry.
Back at UCLA, David Sacks sits at the far right of the stage. This summer he hosted a fundraising dinner for Donald Trump’s presidential campaign at his home on what is known as “billionaire’s row” in San Francisco. Tickets started at around three million kronor. Sacks is no newly minted Republican, but his profile and volume are higher than ever before. As the political world steps into the tech world’s territory, figures like David Sacks have decided to make the reverse journey loudly. It is easy to understand why. After twenty years of near-total political free rein to do whatever they wanted, the region’s enormous wealth has only grown. The deals have got bigger, and so have the profits.
Now Washington DC is trying to catch up. And Silicon Valley — which until now has had every incentive in the world to stay quiet and keep its head down — is slowly waking up to a world where it may no longer be able to do exactly as it pleases.
