The Revolution in the Mirror is Closer than it Appears

The father of modern chemistry Antoine-Laurent Lavoisier was beheaded in 1793 in what is now the Place de la Concorde. A victim of France’s post-revolutionary Reign of Terror, he was specifically marked for execution by one vengeful, lesser scientist named Jean-Paul Marat, whose incorrect theory about combustion had been publicly scorned by Lavoisier at the royal academy.

It’s rare when revolutions do not produce new tyrants, and of course the fact that our own war of independence avoided this fate is a legitimate source of national pride for Americans.  This doesn’t mean we’ve managed to avoid tyranny altogether, only that our despots tend to be CEOs instead of warlords.

In an article for Evonomics, Lawrence Lessig writes, “ … the biggest danger to free markets comes not so much from antimarket advocates (the Communists and worse!) as from strong and successful market players eager to protect themselves from the next round of strong and successful market players.”

Lessig is of course referring to historical precedent in which “old innovation” employs—or even revises—legal mechanisms as a means of protection against “new innovation”.  The familiar narrative is one in which the legacy industry clings to power for as long as it can while new industry inexorably builds the market of tomorrow.  Referring to the protectionist as capitalism’s biggest enemies, Lessig sets the stage as follows:

“…there are only two things we can be certain of when talking of free markets:  first that new innovation will change old; and second that old innovation will try to protect itself against the new.”

In the article, he identifies this protectionism as exactly the kind of crony capitalism in Washington that ought to make allies of “progressives on the Left and free-market advocates on the Right”. And indeed, this type of alliance did manifest in 2012 with the shouting down of the SOPA and PIPA bills, when we saw paradoxical solidarity among members as divergent as the ultra-conservative Heritage Foundation and the anarchic hacktivist group Anonymous. And those bills were certainly labeled “protectionist”, although there were no reasonable grounds for portraying either their intent or their mechanisms in that light.  Still, one cannot deny that an overtone of rhetoric, which continues to muddy the waters, is a broad narrative of Old v New, with New having the advantage of at least appearing to be on the “right side” of history. After all,  history will tell you that New always wins.  That’s why it’s called New.

But the crucial detail Lessig leaves out of his otherwise reasonable premise is that New already won quite some time ago. The yearning revolution he’s talking about is in the rear-view mirror.  The self-proclaimed innovators—the market leaders who are presently writing the future and leading the public debate—already have the lion’s share of wealth at their backs.  Google, Apple, Facebook, UBER, Amazon, et al are not seedling enterprises trying to grow through the concrete and rusted barbed wire of outdated policy; they are the crown jewels of Wall Street and private equity with the capital to do just about anything they want and the PR budgets to tell the market that it’s what we want, too.  Far from banging their heads against a wall of protectionism, New industry is actively and effectively rewriting policy and public opinion; and Lessig is correct that both progressives on the Left and free-market advocates on the Right are cheering them on.  Though I don’t think he’s quite right that they should be.

Neither progressives nor free-market advocates (and I personally consider myself both) should be bamboozled by the rhetoric of innovation yet to come.  This is not to say that new inventions and new paradigms are not on the horizon—no doubt they are—only to propose that the corporations most likely to be at the forefront of the biggest changes, for better or worse, are already among the most financially and politically powerful entities in the world.  And Lessig is right that the powerful will use protectionist measures to entrench their interests, but the funny thing about our market today—in which a company like UBER goes from start-up to a $60bn market cap in five years—is that Silicon Valley’s leaders and VCs have disrupted protectionism itself and renamed it progress.

Not surprisingly, in this broader narrative about protectionism, Lessig invokes criticisms of both patent and copyright law.  With regard to the former, he refers to an increase in patent litigation from 2007 to 2011, with particular focus on the “patent troll”, who might litigate away an otherwise useful innovation.  Although patent trolls are a problem—the worst are sort of the ambulance-chasers of IP law—these actors do not generally represent a protectionist agenda for legacy business.  Ironically enough, though, the Google and Facebook-backed “reform” bill HR-9 is a protectionist proposal inasmuch as its language so broadly defines “patent trolls” that the law could actually harm small, entrepreneurial inventors while entrenching already-big patent owners—like Google and Facebook.

With regard to copyright, Lessig accuses the recording industry of seeking Internet radio rates “designed” to stifle diversity and competition online.  But in describing he innovation being hindered in this case, he first broadly conflates amateurs and enthusiasts with big, corporate players and then blames the RIAA for assuming the online radio market will consolidate.  It’s a bit hard to summarize his point here since he begs some important questions.  You can read the section for yourself, but his larger argument that the recoding industry “wants” a smaller market seems to overlook clear evidence that the networked economy tends to produce monopolies by its own means, and not because of so-called protectionist maneuvers by traditional industries.

Moreover, given that Lessig’s broader thesis is a criticism of money in politics, it seems especially disingenuous to ignore the fact that the VC money behind most of these technology plays is very much betting on market consolidation rather than expansion. In this extensive profile of Marc Andreessen, Tad Friend, writing for The New Yorker, describes the sensibilities of Silicon Valley’s major venture capitalists, who make big bets with the understanding that just one needs to become the “unicorn” while the others can fail entirely.  It’s a rationale driven by an instinct for knowing that the 1000x return is somewhere in the mix of proposals that may sound like haphazard lunacy to many of us, but which sound like the future to this niche club of mostly male investors. But the point not to be missed is that this culture produces extraordinarily powerful, competition-resistant companies that go from zero to Forbes cover at historically unprecedented speed. And the political influence they wield scales in tandem, as we see when Google shifts in a matter of a few years from virtually no lobbying to ranking among the top ten in the country.  So, Lessig’s portrayal of private industry leveraging public policy is accurate; it’s simply looking in the wrong direction.

Perhaps most importantly, the ideology of the venture capital behind the businesses we tend to aggregate under the generic term innovation is one that has almost no kinship with Lessig’s stated political reform agenda (i.e. getting money out of politics).  Guys like Marc Andreessen and Peter Thiel don’t talk about “fixing” American politics; they talk about rejecting it altogether—taking themselves quite seriously with proposals to establish alternative, technocratic states.  Ideas like Seasteading may be appealing to any number of libertarians and anarchists out there, but it’s a world view that should not in any way be confused with, for instance, a Bernie Sanders-like proposal to effect reform from within the system. In fact, the two interests are wholly antagonistic since Sanders-style political reform is predicated on forcing American-made wealth to reinvest in America itself—not on billionaires building autonomous islands akin to Ayn Rand’s magic valley in Atlas Shrugged.

Meanwhile, the extent to which Silicon Valley’s brand of libertarian ideology speaks with money in Washington, it is often disguised as anti-protectionist, legislative reform proposals just like HR-9.  Political clout is not exclusively a matter of pay-to-play; it’s also a manifestation of market capitalization that buys even unproven companies a seat at the table simply because they’re too disruptive to ignore. Meanwhile, it’s clear that there is a lot of stable, economic value in “old” industry. And so, this narrative that, for instance, the rights of individuals—be they authors or inventors—are just nuisance barriers to be innovated around, can foster our own economic reign of terror in which lesser innovators are financially incentivized to decapitate greater genius.

© 2016 – 2017, David Newhoff. All rights reserved.

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