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silicon valley drama

The Government Shutdown Has Revealed Silicon Valley’s Dysfunction Fetish

Chamath Palihapitiya of Social+Capital Partnership speaks onstage at the TechCrunch Disrupt NY 2013 at The Manhattan Center on April 29, 2013 in New York City. Chamath Palihapitiya

Chamath Palihapitiya is not a dumb or heartless man. A former Facebook employee, venture-capitalist multimillionaire, and owner of the Golden State Warriors, he's gotten into Silicon Valley's inner circle as a prominent backer, for instance, of FWD.us, Mark Zuckerberg's political lobbying group, and he's spent a lot of his social and financial capital pushing for good causes in areas like health care. He's clearly not someone who takes the suffering of others lightly.

So it's surprising that in an interview last week, Palihapitiya revealed that he is entirely emblematic of Silicon Valley's extreme myopia when it comes to the political system, and dismissive of those who suffer when the system grinds to a halt.

Here's the key moment, which occurred late in an interview with "This Week in Start-ups" host Jason Calacanis. Palihapitiya begins by talking about companies and entrepreneurship, then, at around 31:00, Calacanis makes a joke about the government shutdown, which prompts this exchange (emphasis added):

Palihapitiya: The government, they're completely useless.

Calacanis: The government got shut down today and the stock market went up 1 percent.

Palihapitiya: We're in this really interesting shift. The center of power is here, make no mistake. I think we've known it now for probably four or five years. But it's becoming excruciatingly, obviously clear to everyone else that where value is created is no longer in New York, it's no longer in Washington, it's no longer in LA. It's in San Francisco and the Bay Area. And when you look at sort of, like, how markets react to things like that, and when there's no reaction, it should be taken as a very subtle signal that the power dynamics have changed. Because markets value meaningful events, markets discount meaningless events. And so the functional value of the government is effectively discounted to zero ...

Companies are transcending power now. We are becoming the eminent vehicles for change and influence, and capital structures that matter. If companies shut down, the stock market would collapse. If the government shuts down, nothing happens and we all move on, because it just doesn't matter. Stasis in the government is actually good for all of us. It means they can neither do anything semi-useful nor anything really stupid. They just sit there and they just kind of, you know ...

[Applause.]

Calacanis: There you have it.

This exchange is extraordinary for a few reasons. First, it's factually suspect. Palihapitiya implies that the stock market's tepid response to the debt-ceiling shenanigans means that investors don't care about political outcomes — an assertion that doesn't square with the stock market's huge rally today on news that House Republicans were getting ready to sign a debt-limit extension.

But the bigger takeaway from Palihapitiya's rant is that a certain strain of influential Silicon Valley thought has moved past passive political apathy and into a kind of anarchist cheerleading. Dysfunction and shutdowns are good, this line of thinking goes, because it hamstrings Washington's ability to mess with the private sector's profit-making schemes. And as long as the Bay Area is still churning out successful start-ups, what does it matter if hundreds of thousands of government workers are furloughed, essential services are cut off for low-income Americans, and the threat of a sovereign default endangers the entire economy?

Palihapitiya isn't the only Silicon Valley bigwig who has made the claim that government dysfunction is a good thing, on the whole. His statement mirrors what venture capitalist Marc Andreessen said last year, when he proclaimed, "I love gridlock!"

You could chalk this view up to simple short-sightedness — Andreessen and Palihapitiya, after all, are the kind of very rich investors who will never need to draw on Medicaid or worry about making their mortgage payments next month because of the government shutdown. For them, government is mostly a hindrance — a regulatory obstacle to the kinds of disruptive start-ups they fund, and an enemy of a looser immigration policy that would allow their portfolio companies to recruit more talented foreign engineers.

But the message they're pushing isn't as simple as small-government libertarianism or selfish profit-seeking. It's a kind of regional declaration of independence. The entrepreneurial community in San Francisco and Silicon Valley increasingly thinks of itself as a semi-autonomous region within the U.S. — one that has its own funding scheme, its own leaders, and its own paths to success. And the message they're sending is simple: We matter, you don't.

It would be an easy view to write off, if it weren't so influential. Silicon Valley is, after all, the country's most lucrative economic engine right now, and it is accumulating political capital to accompany its profits. If tech leaders like Palihapitiya and groups like FWD.us have their way, future bouts of dysfunction in Washington might not just be about the tea party clashing with Democrats and the Republican Establishment. One day, they might be carried in by a Bay Area breeze.

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Photo: Brian Ach/Getty Images