Motley Fool Money - Charles Duhigg on How Silicon Valley Learned to Lobby

Episode Date: November 17, 2024

Campaign contributions are just table stakes for companies trying to make legislation in their favor. Charles Duhigg is a Pulitzer Prize winning journalist, and the author of Supercommunicators and The Power of Habit. Mary Long caught up with Duhigg to talk about his latest article in The New Yorker. They discuss: - How Airbnb mobilized voters in San Francisco. - The battle to regulate artificial intelligence. - How the crypto industry is building political power. Check out Duhigg’s article on lobbying in Silicon Valley: https://www.newyorker.com/magazine/2024/10/14/silicon-valley-the-new-lobbying-monster Companies discussed: MSFT, ABNB, COIN Host: Mary Long Guest: Charles Duhigg Producer: Ricky Mulvey Engineers: Tim Sparks, Austin Morgan Learn more about your ad choices. Visit megaphone.fm/adchoices

This episode is brought to you by Indeed. Stop waiting around for the perfect candidate. Instead, use Indeed sponsored jobs to find the right people with the right skills fast. It's a simple way to make sure your listing is the first candidate C. According to Indeed data, sponsor jobs have four times more applicants than non-sponsored jobs. So go build your dream team today with Indeed. Get a $75 sponsor job credit at Indeed.com slash podcast. Terms and conditions apply.

For investors, as you're looking at these companies, do a little bit of research to see, are they simply just handing out cash? Or are they actually going out and doing campaigns that target voters to say, we think you are an Airbnb voter or we think you are an Uber voter and we want you on our side? If they're organizing, they're going to be even more effective. I'm Ricky Mulvey and that's Charles Duhigg. He's a Pulitzer Prize winning journalist and a best-selling author of super communicators and the power of habit. He's got an article in the New Yorker titled Silicon Valley, the new lobbying monster.

My colleague Mary Long caught up with Dohigg to talk about it. They discussed how Airbnb won an existential election, the message that a powerful lobbying group sent to politicians about crypto and what tech giants have kept from their underdog days. Charles, you wrote recently a fascinating story in The New Yorker about Silicon Valley's changing relationship with the lobbying industry and with Washington, more broad. It was fascinating for many reasons, one of which is that reading this in 2024, even pre-election, it was wild to think, wait, Silicon Valley didn't always have a lobbying relationship with Washington. So maybe we start at the beginning, like take us back to a decade plus ago. Why did Silicon Valley consider itself, I think the word you use is detached from electoral politics. And they did hire lobbyists, right?

Particularly like after Microsoft was taken to court in the late 90s, everyone in Silicon Valley realized, oh, we got to have a couple of lobbyists, but they didn't like them, right? They would call them up and gossip with them, but they just thought politics was stupid. They thought it was like, it was like, if you were really smart, you'd go into tech. And if you weren't that smart, you'd go into politics and they'd give you some like senator role or maybe a cabinet position. So there was just basically this total like dismissal of politics until about 2010. And up until 2010, you could get away with that, right? Because most of the internet companies were just doing their own thing. They were operating on their own. Their biggest goal was don't let Washington,

D.C. screw this up. Then in 2010, a new kind of company emerges, the sharing economy company. And this is like Uber and DoorDash and TaskRabbit. And they start playing in these industries, labor, driving, delivery, that regulators and politicians have felt like it's their prerogative to oversee and to regulate for decades. And so suddenly, you had the situation, where Silicon Valley companies were worth a billion dollars. And if some city counselor in some podunk town decides to outlaw whether Uber is allowed there, then suddenly you're threatening this huge company. So they decide really quickly and they realize really quickly, they have to get smart about politics.

And a person who helps these companies get really smart about politics and who is a central character in this article is named Chris Lehane. And he started his career in Washington and then moves to Silicon Valley. How and why does Lahane make that move from Washington to Silicon Valley? So Chris Lehane was really a visionary. And he's actually a great guy to spend time with. If you ever get a chance to have dinner with Chris Lehane, you absolutely should. But what he did is he was working in the Clinton administration. And he's the guy who was defending the administration from Whitewater and Monica Lewinsky attacks.

He actually came up with a phrase, a vast right-wing conspiracy that Hillary Clinton started using all the time. And after the Clinton administration, he realizes the future is in Silicon Valley. The future is out west. So he picks up and he moves to California without a job. And he kind of puts himself out there as like a political gun for hire. And he wants to get hired by the tech companies. But the tech companies still don't think that politics matters. So he goes and he works for groups like the California trial lawyers, for other,

for environmentalists here in California. And then in 2015, he gets. a phone call from Airbnb. Because Airbnb headquartered in San Francisco had just learned that there's going to be a proposition put on the ballot, Proposition F, which would essentially try and put Airbnb out of business. And the argument that the proponents of this ban are offering is Airbnb keeps on driving up rental rates. It makes them more expensive. They keep having these parties. And like when you move to a neighborhood, you don't expect to suddenly have a hotel appear in the middle of it. And so they have legitimate complaints. But Airbnb realizes if they don't figure out how to fight this, this is

going to happen everywhere and they are screwed. So Lahane and Airbnb get together. And maybe like, how do they get connected in the first place? It's actually, it's kind of this wonderful thing where Brian Chesky knew about Chris Lahane. And a number of people, including some of the venture capitalist had recommended that he reach out to Lahane. And so at some point, the board of directors is meeting talking about this crisis. And they call up Chris Lehane on his cell phone. And they say, hey, can you be here as fast as possible? And he says, sure, I'll be there in 10 minutes.

So he's at his kid's Little League game. And he's wearing like the Little League coach's uniform. And he's like, tells his wife, like, take care of the kids, gets in the car, runs over to the Airbnb's headquarters, goes into the office. And he's before all these, you know, folks and suits and really fancy. people and he's in this uniform. And he tells him, you're seeing this all wrong. You guys think this is a crisis. This is actually a huge opportunity. And this opportunity, he effectively mobilizes Airbnb hosts as if they are a voting block. And this really stuck out to me. I'm in Denver,

Colorado. And in this past election, in a ton of elections, we have to vote on a lot of propositions and amendments. Like this past one, we had over 15 that we have to vote on. And of course, like, I go through town and I see signs that are trying to persuade me to vote one way or another, but I have not witnessed anything here that even seems to compare to what Lahane orchestrated back in 2015. How is he able to make Proposition F or any other initiative? Like San Francisco is a big city, bigger than Denver, but how does he go about building such a massive operation for such a like small localized initiative? Yeah, it's a really interesting question. This is what he saw as the opportunity, because

you're exactly right. Most of us don't. pay any attention to all those propositions or ballot initiatives that we vote on. But Chris LeHain said, look, we have an opportunity now. We have an excuse to put together a political campaign that's pro-Arb. So what he does is he goes and he recruits a couple of people who had worked on the Obama campaign. Some of them were already there. He brings in more. And they start hiring people like crazy. And they tell these folks, okay, look, here's what we want you to do. We want you to call every single Airbnb host, anyone who's rented out their property via Airbnb in San Francisco and ask them if they'll write a letter to their local politician,

if they will have a meeting where they invite their friends to learn about why Airbnb is so important. We want you to register people to vote. We want you to be vocal. Then they do the exact same thing with everyone who stayed at an Airbnb in San Francisco. So suddenly, suddenly these ballot propositions, you're exactly right. There's usually five or ten people working on them, maybe 20. They have thousands and thousands of people.

out there who are canvassing, who are knocking on doors, who are asking people to host home meetings, and the message is the same every single time. Airbnb is important. Airbnb is innovative. It gives nurses and teachers a way to make money by renting out that spare bedroom. And if you oppose Airbnb, then we, the voters, we're going to kick you out office. We are the Airbnb voter. So Airbnb winds up winning this initiative, correct? Overwhelmingly. Yeah. And obviously that, like, if I'm going to ask you about money because I'm hearing about all these

resources and even just comparing it to like how most local initiatives turn out. I can assume that it takes a lot of cash to like get that manpower behind this initiative to make these fights happen. In 2015, when this is playing out, Airbnb has an insane valuation, but it's yet to make a billion dollars in revenue. Obviously, whatever money they spent on making this happen had a great return on investment. because it's still around today and the proposition worked out in the company's favor. But back then, like, where is all the money, whatever it costs to back this?

Where is all that money coming from? It's coming from Airbnb. And it's most importantly coming from their venture backers, right? So Airbnb ends up spending $8 million opposing Proposition F. That's roughly 20 to 30 times as much as all of the advocates for Proposition F combined spent supporting it. And it comes directly from Airbnb. And the argument behind it is pretty simple. You know, Airbnb goes to their venture capitalists and they say, look, if this succeeds

in San Francisco, every other city is going to try and do the same thing. And this is an existential threat. You have an investment right now in a billion dollar company. But if this starts passing, if we don't have the ability to rent in many large markets, then we're no longer a billion dollar company. We're a hundred million dollar, maybe even less company. And so in order to protect your investment, we want to take some of the money you gave us and use it on politics. And it turned out that the ROI, the return on investment for Airbnb was fantastic because they protected a now multibillion dollar brand and business simply by spending $8 million to defeat this proposition.

There's this great line in your article. It's a quote from a VC who says to Lahain at a party or something a few years after he's become Airbnb's head of global policy. and public affairs. And this VC says it used to be hiring the right CFO was the important thing to making sure a company goes public. But you've proved a political person is just as important. Like we're a show for investors. So much of this world feels so far removed from what we're often, from the information that investors typically have access to, individual investors typically have access to. How can somebody who's sitting at home and listening, how can they learn to better evaluate a company's political efforts, whether that's the money that they're spending on these efforts or the

person that they're putting in charge of spearheading them. I think both the answer to both is looking, right? Just paying attention to it. Because what you're going to find is there's a bunch of companies that give campaign contributions. And the campaign contributions are basically worthless, right? It's kind of the price of admission to be able to call up a senator or call up a congressman. But then there's other companies that say, look, we are going to organize voters for you.

And this is the big shift. With Chris Lehane, Silicon Valley moves its focus from Washington, D.C. and hiring lobbyists to elections and hiring people who can sway the voter at home. And when the company does that, they actually have not only the power of giving some politician a dollar. They have the power to go in and say, look, we have 30,000 people inside your district that we've identified that care about this issue, our issue. And if you don't help us out, if you don't vote the way we're asking you to vote, we're going to send every single one of them a message saying you should vote against Senator X because he opposes everything that's right and good about innovation and democracy. So for investors, as you're looking at these companies, do a little bit of research to see, are they simply just handing out cash? Or are they actually going out and doing campaigns that target voters to say, we think you are an Airbnb voter or we think you are an Uber voter? we want you on our side. If they're organizing, they're going to be even more effective.

A really important point to all this is that a key part of Lehane's strategy is not to side with one part of the aisle versus another, not to label an issue as a Democratic issue or a Republican issue, but to intentionally be, I guess, bipartisan is the right word? Or just, or like to not tie an issue to a particular party over another. And instead to focus on this, the Uber voter, the Airbnb voter. Exactly. In 2015, that, that seems. seems to me to be like a pretty compelling picture to paint in part because at that part point, despite its massive, like its huge valuation, Airbnb is still kind of an underdog a little bit. Do you think that that changes at all as companies scale?

Like now if Airbnb were to face a regulatory issue, I would assume it would look a little bit different than Proposition F did almost 10 years ago. But do you think it has the ability to like mobilize its hosts in the same way now that it did then? It does. It does. And I think particularly when we get to crypto, we'll see how that manifests. Because what has happened is that you're exactly right. These companies were the underdogs. They saw themselves as, you know, fighting the giants and putting together resources in a clever way to win over voters. But today, tech companies are the giants. And yet, they have not given up how well they can communicate with their users, with their customers, with their clients. If you go back 20 or 30 years, the only groups that could mobilize 10,000 or 20,000 voters were groups like the labor unions, right? They could turn out their membership. Maybe churches, priests go on the pulpit or pastors go on the pulpit and tell everyone

to go vote a certain way. Maybe, maybe country clubs could turn everyone out, right? Now, labor unions, churches, country clubs, they're all in decline. What is emerging in its place? the tech companies, the platforms. Airbnb has the ability to speak to over a billion people just by pushing a button. Facebook can put things in our feed every single day. We just saw what happened with Twitter, now X and Elon Musk, jamming it with the message

that he thinks is important. The only people who can mobilize voters today with this efficiency are the tech companies. And because they're no longer the underdogs, they now have things that they want. they've essentially become bullies and they threaten politicians. If you don't go with us, we're going to come and get you. And so, yeah, let's move to crypto because that is a, that is a industry where you see this influence, or you, in particular Charles, who was reporting on this, see the influence that that industry has had on politicians.

Before we kind of like dive into more into that, I want to like broadly step back. And I love your take on how we were talking before we started recording, kind of about how even pre-election, okay, there was this notable, I had noticed this shift in, okay, you're hearing crypto markets are a lot quieter than they used to be in 2020, 2021. But there's a lot happening behind the scenes. Again, even pre-election, a lot of these coins had shot up to all-time highs. Now they've gone even further. But along with that, within that paradox, I'd also noticed a change in how a lot of

of politicians spoke about crypto. Only a few years ago, it was very normal to hear many politicians, no matter their party association, express a lot of skepticism when it came to crypto. That is no longer the case. What caused that change? So it's a really interesting story because you're exactly right. The crypto industry has been incredibly active over the last few years. But in contrast to what they used to do when they would have fights with each other on Twitter and they would sort of make these big announcements. Now the adults have stepped in. The professionals are here and they want to do everything as quietly as they can. A couple of years ago, Coinbase, one of the largest crypto exchanges here

in the U.S., one of their funders, a board member, said, you should hire Chris Lehane. Chris Lane was still at Airbnb. He was still doing Airbnb stuff, but they said, look, you should start working with Chris because what they did at Airbnb, we should do it for crypto. And so Chris comes in and he makes the same basic spiel. He says, look, this is an opportunity. What we need to do is we need to convince politicians who right now are beating up on crypto and saying it's a scam. We need to convince them that there's actually a crypto voter. There's someone who will only vote for you if you support crypto and will vote against you if you're anti-crypto. And if we can do that, then suddenly the politicians will be terrified to cross us. Now, there was at the time some legitimate

question as to whether a crypto voter existed, right? The Fed had done a bunch of studies that had shown not many people own crypto and the people who did own crypto. It wasn't at the top of their list of priorities on how they made decisions about politics. So Chris Lehane said, if a crypto voter doesn't exist, we're going to create one. And they go out and they start conducting these polls. The polls that show that many, many millions of people, 50 million people own cryptocurrencies and that this is the most important thing in their life. So they start building the army and the army, the ground troops are really, really important because in every district, the politician from that district, the elected official knows, if there's 10,000 or 5,000

people who are against me, then they can actually flip this election. I could lose just because of this small group being vocal enough that they hate me. So the easiest way to make sure that they don't hate me is just not to get on the hit list for crypto. So I'm going to stop saying anti-crypto things. But that's not enough because you don't want people just to stop saying anti-crypto things. You want them to actually say pro-crypto things. So here's the second prong of this strategy. First wrong is build your ground army by recruiting people to say that they are the crypto voters. The second prong is we are going to go spend millions and millions and millions of dollars attacking politicians who are anti-crypto or who we can paint as anti-crypto. And once we get them defeated,

Once they know that if you're not on the side of crypto, we're going to come after you and we're going to attack you, all of a sudden politicians will start flocking to us and we'll start saying that they think crypto is the best thing on earth. And the case study of this was Katie Porter in California. Katie Porter in California was a Congresswoman who represented Orange County and she'd become pretty well known because she was really good on TV. And she decides to run for Senate to replace Diane Feinstein. There's a couple of other people in the Senate race, but she's a She's expected to at least come in second in the primary, which will get her a chance to run in the general runoff election. But with just a few weeks before the primary election, a group named Fair Shake, a super PAC, which it turns out or is actually backed by some of the largest crypto investors and some of the largest crypto companies, comes in and they announced that they're going to spend $10 million overnight attacking Katie Porter.

Now, $10 million might not sound like a lot of money, but in a Senate race, it's a huge amount of money. Katie Porter had raised $30 million to finance her entire race, and that had taken her years and years and years. And here this group is coming in saying, oh, you know, overnight, we're going to spend $10 million attacking you. Then they release the ads. And the ads don't say anything about crypto or tech. They don't reveal who the funder is or what Fair Shake cares about.

What they do instead is they make all these basically baseless accusations of Katie Porter. that she's a bully, that she's mean to people, that she takes money from big pharma and big banks, which in fact is not true at all. But it works. When people go to the polls, they vote for other people besides Katie Porter. She comes in third. She's knocked out of the race. And the message is sent across the nation. If you are someone who is not adamantly pro-crypto and Katie Porter was not adamantly pro-crypto, then we can come in and we can send missiles to to nuke your candidacy and we'll win.

Yeah, that's the thing that sticks out to me so much in this. Because I was going to ask you, like, Katie Porter has not come out at all as being anti-crypto, but she gets internally labeled as such within Fairshake for not being pro-crypto. So how are they? It's even more like tenuous than that. Basically, they decide that she's anti-crypto because she's friends with Elizabeth Warren. Right? And Senator Elizabeth Warren is in fact anti-crypto. But Katie Porter really hadn't said anything about crypto, but she was easy to paint as anti-crypto. And the people who are funding

this fair shake and the companies that are funding fair shake, they don't actually care about Katie Porter. They don't really care who wins or loses this race. What they care about is sending a message that terrifies other people. And what they effectively said was, it doesn't even matter if you're pro or anti-crypto in your heart. If you're not pro-crypto in what you're saying, we might come after you anyways. And that's scary. All told, I think this election cycle, Fairshake raised over $170 million, which is more than any other super PAC.

Are there any grumblings of a resistance or something building that's counter to this movement? Yeah. And I should mention it's not more than any other super PAC. but it is close to more than any other super PAC, particularly a super PAC that is funded by corporate donations, just because there's like the Trump super PAC, which is huge. But yeah, there is this resistance that's emerging. And what's interesting is it's emerging around Chris Lehane's next battle, AI. So after working with Coinbase for a little while, Lehane goes to open AI and he's

brought on there to essentially do for AI what he did for Airbnb and for cryptocurrencies at Coinbase, which is to figure out how to have influence over politicians, to figure out how to be a part of the conversation where they can't ignore you. And if you want, you can actually push the politicians around and get them to do what you want. What's interesting, though, is that when it comes to crypto and when it comes to Airbnb, pretty much all of the tech industry, all of Silicon Valley, they're in alignment, right? They think Airbnb is good. It should be allowed to operate. Some of them aren't huge crypto fans, but they're fine with crypto kind of plugging along. They don't think that crypto should be made illegal. When it comes to AI, though, within the valley, there's a huge

division. There are some people who think we should be developing AI as fast as humanly possible. And in fact, if we don't, China will and we want to have democracies rather than authoritarian governments controlling AI technology. But there's other technologists who say, that is terrifyingly dangerous. AI is so powerful that the robots could rise up and kill all of us and take over the world. So we have to be very, very cautious about how we develop AI. So now, for the first time, what we're seeing is a debate within the valley over the politics of how AI should be regulated. And Chris Lehane and Open AI, they are at the center of that debate, but there are other powerful people who disagree with them and who are opposing them. Do you have any insight into like what

that those other powerful people are? What I think of this, it comes to mind is like, okay, You've got Open AI and Sam Altman. And then I would say on the other side, you have like Anthropic and Dario Amadai. And they have like, okay, perhaps smaller than Open AI, but they've got big money backers too. Jeff Bezos has backed Anthropic. They're kind of calling for a more. Dario before he founded Anthropic was director of safety at OpenAI. So he's kind of calling for a more cadenced safety first type approach.

How is how, what are those tensions looking like? How does it play out? It's really hard to tell because it changes every single day. So OpenAI also talks a lot about safety, right? They say that safety is important. I'll also mention that Anthropic, which used to be put safety first, is now growing very, very quickly. And then some people are saying that they're putting safety to the side because it helps them financially. I think the answer is nobody really knows how this is going to play out.

They know that there's some people who feel much more cautious than other people. And they know that the federal government, the U.S. is going to regulate AI at some point. And so what they want is they want to seat at the table. They don't know what the regulations are going to look like. They're not even certain what regulations they like and which ones they dislike. But they know that if they aren't at that table, they won't have a voice in how the regulations get ridden.

And the best way to protect their financial interests is to make sure that they have political clout, that they have the ability to threaten or to cajole politicians because they have enough money behind them to threaten whether they get elected or not. And once that's true, then regardless of where the conversation goes, they'll be participating at it and they can help shape it. There's a line really early on in your article where you warned that Silicon Valley's new position as perhaps the most powerful lobbying force in American politics allows it to wield great power and, quote, remake the nation as it sees fit.

What does that vision look like? How do the tech corporations want to remake the nation? So I think there's a charitable answer to that and an uncharitable answer to that. The charitable answer is that there's a lot of people who are techno-optimists, right? Techno-utopians. And Mark Andreessen, who's one of the biggest venture capitalists in the world and one of those powerful people in tech, he's written a manifesto about this. What they believe is that they believe the solution to our problems is through technology. And that things that allow technology to prosper should be embraced and endorsed.

because they'll make the world a better place. And look, if you look at history, there's a lot of arguments to support that vision, right? Think about a world before antibiotics were developed. Think about a world before the internal combustion engine was widespread. Think about a world before there were computers. Those were worlds that had greater levels of poverty. They had greater levels of people dying early because they couldn't fight disease or they couldn't get transported to places that they could find that treatment.

So technology has, in fact, improved. our world a lot. Now, what some people would say to the techno optimist is they say, yes, you're right. However, like anything, if you eat too much of it, you're going to get sick. And the thing that we're worried about is that you think all the answers come from technology and that all technology is good. And what we actually think is that if we don't do it slowly, if we don't take baby steps, if we don't stop ever so often and ask ourselves, are we still doing the right thing? Then what we're going to end up with is we're going to end up with AI with weapons that are powered by AI, that some rogue country could set upon America and that we would be hard to defend against.

So that's the generous version of what Silicon Valley wants for the future. The less generous version is they just want to get rich. And they will support whatever helps them grow their profits and grows their dividends and grow their stock prices. And in fact, we do see some of that, right? President Biden proposed exploring taxing unrealized gains. And I'm not a huge fan of that because it seems like really complicated to me. But Silicon Valley reacted as if he had said that he thought we should all go murder our mothers overnight. Right.

And the reason why is because almost all of their wealth is created in unrealized gains. They learn how to borrow against it so that they don't have to sell it off and realize those gains. So there is an ungenerous way, which is, there is an ungenerous way of looking at Silicon Valley in the future that they are seeking that is probably partially rooted in truth that what they'd really like to do is they'd like to continue the golden days going and line their pockets as much as possible. As always, people on the program may have interests in the stocks they talk about, and the Motley Fool may have formal recommendations for or against, so don't buy yourself stocks based solely on what you hear. All personal finance content follows Motley Full editorial standards and are not approved by advertisers.

fool only picks products that it would personally recommend to friends like you. I'm Ricky Mulvey. Thanks for listening. We'll be back tomorrow.