The right downturn metaphor for Silicon Valley is not a bubble; it’s a loop. BigMeanInternet reports on how the dot-com crash created Palo Alto’s clueless investor class
Photo-Illustration: Intelligencer; Photos: Getty Imageshistory. Narratives usually have a rising and falling action. Conflicts build, peak, resolve. The end. How, then, to tell the story of Palo Alto, where the conflicts swell but never seem to crest? Here, Icarus dusts himself off and pivots to zeppelins.
Silicon Valley’s favored downturn metaphor is the bubble. In a land of exciting inventions and instant fortunes, enthusiasm tends to get out of hand, pop, and return to manageable levels. But if the bubbles keep happening, then there must be a bubble machine of some sort, a structural reason why the tech industry tends toward effervescence. The right metaphor is not a bubble, actually; it’s a loop.
The question wasn’t whether there was a connection between internet stocks and what Greenspan called the “real economy” — the economy of production, jobs, and commodity prices — but rather what the precise nature of the relationship was. Greenspan’s worry was that a popping asset bubble could take it all down. Whether it actually would in the midst of the “portal wars” in 1996 was an open question.
The Y2K bubble was overdetermined; it had more causes than it needed. One was that technology hedge funds bid up stock prices with a plan to jump out at the high and leave less sophisticated capital holding the heavy bag. That strategy worked well enough, and the funds mostly came out of the experience surprisingly whole. But if the failure of Pets.
When the dot-com bubble popped, it left a layer of winners: the middlemen at the big financial institutions, the bottom-feeders and big firms that cleaned up after, and the founders who happened to sell at the right time. Caught up in the frenzy, most large firms were stuck writing off at least one overvalued internet acquisition, effectively giving away millions of dollars to a cohort of web entrepreneurs based on the misperception that those dudes came up with important, useful stuff.
The original plan for UberCab was for an elite members-only service leveraging the GPS-enabled smartphones that affluent consumers started to carry around, allowing them to summon a cab on demand. “Faster and cheaper than a limo but nicer and safer than a taxicab” was the pitch, and the membership model and high price ensured a “respectable clientele.” Camp bootstrapped the earliest work and talked Kalanick into joining.
It’s a mistake, then, to think of Uber’s carcinized business strategy as driven by its scandal-prone leader, Kalanick, and his bad personality. Nor can we dump all the fault on the Jam Tub and the “Party like it’s 1999” brosphere it represents. There are larger forces at play.
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