Silicon Valley was going to disrupt capitalism. Now its enhancing it

The tech giants thought they would beat old businesses but the health and finance industries are using data troves to become more, not less, resilient

The chances that, in a few years time, people will be able to receive basic healthcare without interacting with a technology company became considerably smaller after recent announcements of two intriguing but not entirely unpredictable partnerships.

One is between Alphabet, Googles parent company, and pharmaceuticals giant GlaxoSmithKline. The two have agreed to form a $715m company to focus on the new field of bioelectronics, which involves developing miniature electrical implants capable of treating a number of chronic diseases.

The other announcement was the results of a major new study of genetic markers associated with depression. It was the product of collaboration between 23andme, a Google-backed personal genetics company, and Pfizer, yet another pharmaceuticals giant. It was the largest study of its kind, drawing on DNA data from more than 450,000 23andMe customers, and this scale comes in handy for companies such as Pfizer.

Both collaborations were based on seemingly solid rationale: technology firms hold troves of our personal data but know little about health and dont have much credibility in that industry with the public or with regulators.

This peaceful not adversarial coexistence of old and new in the pharmaceutical industry describes a tacit compromise that might soon emerge elsewhere, challenging the renegade credentials of the technology firms. After all, Silicon Valley built its legitimacy by claiming to lead a frontal attack on the old, crony capitalism, dominated by moribund firms that have become too complacent to be able to innovate and benefit their customers. Such firms were to be disrupted, and a new, leaner kind of capitalism would be all about serving the consumer and at rates that were heavily subsidised by the collection of personal data.

In fact, few have found clever ways to monetise that data especially as Google and Facebook have all but divided the online advertising market, that ultimate data cemetery, between themselves. From early on, it was obvious that wasting all that data on advertising was a move necessitated by desperation rather than astuteness. By and large, this obsession with advertising stemmed from the inability of the tech firms to make a dent in markets such as energy, food, agriculture or insurance, which tend to be far more complicated than advertising and entail higher entry costs.

In retrospect, it seems obvious that the players best positioned to take advantage of all that data are precisely the guardians of the old capitalism, such as GSK and Pfizer. Silicon Valleys self-serving narrative of perpetual and ubiquitous disruption is no longer very believable a truth driven home by the recent capitulation of Yahoo, once the darling of the digital revolution, to Verizon, an established firm that is commonly associated with precisely the kind of old, crony and ineffective capitalism that Silicon Valley was meant to disrupt (for good measure, Verizon also owns AOL, another fallen star of the internet industry).

The takeover and eventual dismantling of the revolutionary potential contained within digital technologies used to take decades; now, its just a matter of years. Just look at the blockchain the continuously growing secure database universally touted as a harbinger of decentralisation and a world where large institutions, be they states or banks, can no longer dictate terms to everybody else.

The idea held for a couple of years but today barely a days goes by without news of yet another large and centralised firm from IBM to Bank of America starting a blockchain business. Nothing indicates how boring and reactionary the blockchain has become better than the recent announcement by PwC one of the four big accountancy firms that it is experimenting with blockchain-based solutions for the wholesale insurance market.



figcaption class=”caption” caption–img caption caption–img” itemprop=”description”> Facebook founder Mark Zuckerberg said the web was all about moving fast and breaking things Photograph: Steve Jennings/Getty Images

The mistake made by many observers of the technology industry a decade ago was to think that Silicon Valley firms would disrupt every other industry as easily as they had disrupted the business of selling music, advertising, or news. This didnt happen: moving into highly regulated industries such as healthcare, finance or energy proved difficult for firms known for arrogance, disobedience and disregard for industry expertise.

Technology companies usual strategy of moving fast and breaking things, as Mark Zuckerberg once colourfully put it, might have trivial consequences in advertising; in other fields, though, such a strategy could be lethal. The spectacular downfall of Theranos one of Silicon Valleys favourites, the blood-testing startup fell into disrepute despite its one-time $9bn valuation is proof that promises of innovation do not easily translate into, well, innovation.

Transport is, perhaps, one area, where the tech industry can still put up a good fight mostly because companies discovered that the vast data troves they had accumulated could be used to develop self-driving cars. But even there the tech firms are busy striking alliances with established players. Even Google, which has developed most advanced technologies, has linked with Fiat Chrysler for the actual development of self-driving minivans.

Big players in the car industry are also investing heavily in artificial intelligence: Toyotas announcement that it is putting $1bn into self-driving cars over the next five years is a case in point. And a consortium of German car manufacturers, having spent a few years asleep at the wheel, has recognised the importance of data and acquired what was left of Nokias mapping business.

Given how many times Silicon Valley firms have failed to make good on their promises to disrupt an industry, its hard to see why they still claim the revolutionary mantle. Googles Nest might have been pitched as a revolution in smart energy and smart living but its fancy design and panoply of data-intensive features have failed to convince consumers.

Once the self-serving disruption narrative bursts, Silicon Valley will wake up to an unpleasant truth: rather than ushering in a new type of flexible capitalism that would rid us of giant, wasteful and hierarchical firms, it may be making the kind of capitalism it claims to despise far more resilient, dynamic and the ultimate irony difficult to disrupt.

Technology firms are the seemingly innocent gateways through which that crony capitalism can penetrate those parts of our lives and bodies that were previously out of bounds, for ethical or political reasons. We might baulk at swallowing electronic data-hoarding sensors handed to us by pharmaceutical or insurance firms, but if Google gives them to us free! why not? By getting into bed with the world of data, capitalism put itself in a position where anyone who opposes it is standing in the way of scientific and technological progress.

In the best case, tech entrepreneurs are rational cynics who are poised to make money regardless of how the rest of the world lives and works. Whether that world is run by JP Morgan and Goldman Sachs or by local co-operative banks would make no difference so long as they use Silicon Valleys data and network infrastructure.

In the worst case, though, they are just useful idiots who, having come to believe their own lofty rhetoric, genuinely believe that they are undermining entrenched power structures and empowering the individual. It might let them sleep well at night but the entrenched power structures couldnt care less.

Read more:

Comments are closed.

Copyright © EP4 Blog