Silicon Valley ended 2018 somewhere it had never been: embattled.
Lawmakers across the political spectrum say Big Tech, for so long the exalted embodiment of American genius, has too much power. Once seen as a force for making our lives better and our brains smarter, tech is now accused of inflaming, radicalizing, dumbing down and squeezing the masses. Tech company stocks have been pummelled from their highs. Regulation looms. Even tech executives are calling for it.
In the face of such a sustained assault, this might be a good moment for Big Tech to lie low. It could devote some of its mountains of cash – Apple Inc. alone has US$237-billion in the bank – to genuine good works, and allay widespread fears it wants to control your data and your destiny.
That is not the path the companies are taking.
“The tech companies are not flinching,” said Bob Staedler, a Silicon Valley consultant. “Nothing has hit them on the nose hard enough to tell them to cut back. Instead, they are expanding. They’re going around the country acquiring the best human capital so they can create the next whiz-bang thing.”
There is so much of life that remains undisrupted. The companies are competing to own the cloud – to become, in essence, the internet’s landlord.
They have designs on cities: Google made a deal in 2017 to reimagine a chunk of waterfront Toronto from the ground up. Amazon.com Inc. is reworking the definition of community from the inside, as warehouses in rural areas provide the urban middle class with everything they want to stay home all weekend.
These changes are only beginning to redefine society.
When every home has an Amazon Echo, Google Home, an Apple HomePod or some other smart speaker, the companies are already signalling, all human and metaphysical needs will be fulfilled. For those who insist on venturing out, there will be driverless cars operated by Big Tech. And the companies are plunging further into artificial intelligence, with consequences unclear even to them.
To accomplish all this, Big Tech needs hundreds of thousands of new employees, which means it needs somewhere to put them. This isn’t a matter of reconfiguring a floor or two at corporate headquarters. It means building new campuses around the country.
Big Tech’s push into New York and the Washington area has been well-documented in recent months, with Google bulking up in the first and Amazon planning satellite offices in both. But even in its backyard of Silicon Valley, which is a mess of traffic congestion and housing prices that have attained levels even well-paid engineers can scarcely afford, there is a boom that, if anything, is accelerating.
Anyone who wants to believe Big Tech is chastened should visit a section of San Jose, Calif., just west of downtown, a jumble of car washes and autobody shops with a sprinkling of modern apartments. On a short street there is a house nearly a century old, a tiny thing with only one bath. Google bought it and another house last month in a package deal for US$4-million, according to county documents reviewed by the San Jose Mercury News.
Multiply that real estate transaction by dozens, big parcels and small, totalling hundreds of millions of dollars to date. Google is planning very long term here. The buses, light rail, Caltrain and Amtrak trains that converge on the Diridon Station transit centre will give the company an opportunity to embed mass transit into its growth. The eventual result will be a new Google campus of eight million square feet with offices for 20,000 workers, a figure that is more than the company’s total employment in 2009.
But Diridon Station is just a part of Google’s Silicon Valley expansion. A week before the company got the two houses, it bought a 100,000-square-foot building in Palo Alto, Calif., for US$70-million.
Facebook Inc. keeps growing, too. In the spring, it leased one million square feet in the Silicon Valley community of Sunnyvale for its fast-growing community operations team, which deals with safety and security issues confronting Facebook users. And it will soon move this year into 750,000 square feet in a San Francisco tower, making it the third-biggest tech tenant in the city, after Salesforce.com Inc. and Uber Technologies Inc.
In total, Google’s employment increased 21 per cent in the last year. Facebook’s work force rose by 45 per cent in that time, to 34,000, and it is advertising 2,700 additional jobs.
Amazon’s head count tripled over the last three years, thanks to its warehouses and the acquisition of Whole Foods Market Inc. It is only the second company in the United States to employ more than 500,000 people – and that is not counting its contractors.
The expansion underlines the dizzying truth of Big Tech: It is barely getting started.
“For all intents and purposes, we’re only 35 years into a 75- or 80-year process of moving from analogue to digital,” said Tim Bajarin, a long-time tech consultant to companies including Apple, IBM Corp. and Microsoft Corp. “The image of Silicon Valley as Nirvana has certainly taken a hit, but the reality is that we the consumers are constantly voting for them.”
That’s evident in how robust Big Tech’s businesses remain. In March, 2018, research firm eMarketer said Facebook, including its less controversial photo-sharing site, Instagram, would earn US$21-billion this year from digital ads in the United States. In September, it raised that forecast to US$22.87-billion.
EMarketer also revised up its forecasts of Google’s digital ad revenues in the United States for 2018, 2019 and 2020. The third big digital advertising recipient is Amazon, which is far behind the leaders but gaining ground fast.
The contradiction is becoming increasingly obvious. One important way Big Tech serves its customers is by tracking their movements and purchases, which is beginning to unnerve at least some of us. In a Pew Research Center survey in June, 42 per cent of adult Facebook users said they had taken a break of several weeks from the site. But even as we say we trust tech less, we invite it deeper into our lives.
Apple, Amazon, Facebook and Alphabet Inc., Google’s parent company, together generated US$166.9-billion in revenue in the third quarter of 2018 alone – up 24 per cent from a year earlier, when the four companies hauled in US$134.4-billion.
“Much as people are now wary or even unhappy with the outsized power held by Facebook, Google, Amazon, etc., they are simultaneously quite dependent on the services they provide,” said David Autor, an economist at the Massachusetts Institute of Technology.
Big Tech needs to be regulated, many are beginning to argue, and yet there are worries about giving that power to the government.
“The government doesn’t have a good clue,” Mr. Bajarin said. “They’re not even asking the kind of questions that would drive to regulation.”
Which leaves regulation up to the companies themselves, always a dubious proposition.
“For Facebook to have a better year in 2019, it needs to be more upfront and transparent,” said Debra Aho Williamson, an analyst at eMarketer.
This was also the advice Facebook got for 2018, to little avail.
All this could change if the anti-tech mood continues to swell or the economy hits a really rough patch. On the other hand, the most recent recession tended to work in Big Tech’s favour by giving smaller competitors even more to worry about.
During the 2008 financial crisis, Amazon’s North American media sales increased 20 per cent. Borders, one of its biggest book-selling competitors, saw revenue drop 9 per cent, reported a record loss and was soon defunct.
With so little to really worry about, Big Tech is planning for a future far beyond any present-day turmoil. Google, which has 3,500 job openings, says it is too early to say what the thousands of Diridon employees will do. But Jonathan Taplin, director emeritus of the Annenberg Innovation Lab at the University of Southern California, has a good idea: everything.
“They’re in the transportation business, the medical business, every business,” said Mr. Taplin, a frequent critic of how Big Tech took over a decentralized, independent internet. “There is no aspect of your life that they will not be involved in.”