The Prof G Pod with Scott Galloway - The Making of Silicon Valley — with Margaret O’Mara

Episode Date: February 10, 2022

Margaret O’Mara, a professor of history at the University of Washington, joins Scott to discuss how tech has and will continue to shape the economic map of the US, as well as the importance of public investment in the tech sector. Follow Professor O’Mara on Twitter, @margaretomara.  Professor O'Mara's book recommendation: The Republic for Which It Stands Scott opens with his thoughts on Amazon and Google’s advantage over Facebook, specifically when it comes to digital advertising.  Algebra of Happiness: a week of learnings. Learn more about your ad choices. Visit podcastchoices.com/adchoices

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cards, savings accounts, mortgage rates, and more. NerdWallet, finance smarter. NerdWallet Compare Incorporated. NMLS 1617539. Episode 137. Morgan Freeman was born in 1937. Supposedly, Mr. Freeman has been accused of sexual abuse, which means he can no longer play God, just priests. Sorry, Scott, but that's not correct. What's not correct? That Morgan Freeman has been accused of sexual abuse. I'm not really sure where you're getting that from, and I don't want people to even think that's true. Ah, I

get it. So I get it. But it's okay to be vulgar, right, Caroline? We just have to fact check like any responsible media organization before we put out misinformation that not only slanders an individual, but perhaps spreads misinformation on, I don't know, maybe vaccines. But it's our right to be vulgar. I just, we just need to qualify it. Is that correct? Correct. Anyways, onto the show. Go, go, go.

Welcome to the 137th episode of The Prov G-Pod. In today's episode, we speak with Margaret O'Meara, the Howard and Francis Keller Endowed Professor of History at the University of Washington. We have all these ridiculous titles in academia such that we can put people's names in front of ours. We give money so we can have tenure and begin to become unproductive and hemorrhage money. But then we supplant that inefficiency with student debt. Not to say that Professor O'Meara isn't fantastic. I'm just, I don't know where I was going with that. Anyway, she's outstanding. She's outstanding. And she teaches at the University of Washington undergraduate and graduate courses in U.S. political and economic

history, urban and metropolitan history, and the history of technology. She's also the author of three books. We discussed with Professor O'Meara how tech has and will continue to reshape the economic map of the U.S., as well as the importance of public investment. Our producer, Carolyn, was very excited about tracking down Professor O'Meara and really enjoyed the conversation with her. She's clearly a clear blue flame thinker. And University of Washington just has such a nice feel, such a nice brand. Great place to see a football game, by the way. And every year we used to get our asses kicked by their rowing team or their crew team. Anyways, what's happening?

What's happening? It appears that the lunch cafeteria, the cafeteria of Big Tech, is fed up with the Lindsay Lohan of technology, and that is Facebook. And that is they've decided to kick Facebook out of big tech, at least in terms of market capitalization. Facebook is now sort of big tech-ish after it threw up and hemorrhaged about 100, I don't know, $180 billion in market cap

after reporting poor user growth and poor earnings. Think about this. All the shit, all the scandal, all the teen depression, all the threat to our democracy, all the privacy violations, and it took an earnings miss to take the stock down 20-odd percent. All right, so let's look at some other earnings reports. Amazon brought in, get this, $31 billion in advertising revenue last year. That's more than Microsoft, Snapchat, and Twitter combined. While this may only represent 7% of the company's total 2021 revenue, the majority of this type of revenue comes from sponsored products that show up when you search for, say, a pair of Nikes, Energizer batteries, or Pantene shampoo.

More on this in a minute. At the same time, Alphabet registered record annual revenue of $200 billion in the same year, with Google's advertising business continuing to make up roughly 80% of total revenue. Meanwhile, Facebook suffered its largest one-day stock drop in the company's history, shaving off about $230 billion in market value. I said it was $180 billion. It was $230 billion. Wow, imagine that. They lost the value of Boeing Airbus and throw in Ford and General Motors in one day. This all came after reporting a decline in profits and the number of daily users, which declined for the first time in their 18-year history. Just to give you a sense of

scale here, the Wall Street Journal reports that Facebook's market decline was more than the individual market capitalizations of 472 companies in the S&P 500. So they lost basically the value of every company in the S&P 500 except for 28 of them. Meta CFO cited several headwinds as the reason behind the company's weak performance, including increased competition for people's time, see above TikTok,

and Apple's iOS changes last spring that made it so users have to opt into ad tracking. So what's happening here? What can we learn from this latest round of earnings? What's the 411? What's the end to the site? What's going on here? What the fuck? Question mark. See above, profane, and I'm vulgar. Live with it. We're entering what we would call, or this is an example of what we would refer to as the funnel wars. And that is slowly but surely,

Amazon and Google are flexing their advantage over Facebook regarding their ability to utilize search as a positive advertising mechanism rather than relying on targeting you with all sorts of obnoxious ads. Facebook, Google, and Amazon have long controlled US digital ad spend, making up nearly two thirdsthirds of the market.

But Facebook's Achilles heel has been that despite its incredible breadth over a billion users, actually I think it's like 1.8 billion, but anyways, it doesn't go that deep. It has very little access to the point of purchase. Remember, the reason companies spend billions on advertising is to drive ultimately to a consumer purchase. So the further you get down the funnel, think of the funnel as awareness intent and then purchase. That's why essentially the shit or the shelf space at the register or the checkout where your kid grabs stuff and you have to put it back, that is the most expensive shelf space in the store. And the most expensive shelf space in the store that is the internet is search because you're pretty much, when you type in BMW 318i, 36-month lease deal, Delray Beach, you're basically saying I'm pretty close. I'm pretty goddamn far down the

funnel. Facebook is where people congregate for socializing, for news, for entertainment. So it's a great place to get messaging and advertising in front of a lot of people, but it is more about awareness and reinforcing associations, what we traditionally think of as branding, as opposed to going full funnel or further down the funnel, which is more valuable. But Amazon is by virtue of the company and the offering already starts pretty far down the funnel. People are in the store. Did you know there's more money spent on what's called shopper marketing? That is the displays, the cardboard displays showing Tom Brady at the end of an aisle saying, Bud Light, $9.99 six-pack. I have no idea what six-packs cost right now. I'm like,

if I were president, they would be horrified that I do not know what anything costs. I do not go into grocery stores. I order in, I eat out, or someone else buys my food. I don't think I've been in a grocery store other than to buy Advil or vitamin water or, I don't know, something, something in a long, long time. Anyways, but when you're in the store, you are down the funnel. You're ready to buy. So brands spend more money in marketing inside the store than they do outside on traditional branding. Amazon is that store. People actually buy things, and Google is where people are looking for or putting together their list, assembling their list of things they want to buy. So Amazon and Google are further down the marketing funnel towards the bottom where the purchase actually happens

and makes them a stronger place to put in this type of advertising. I don't even like calling it advertising. Right in front of the consumer who have their credit cards out and are ready to go, or better yet, their credit cards already saved on file. To date, Facebook has overcome this advantage with massive amounts of data and claims of pinpoint targeting. But there's more and more evidence that Facebook's targeting isn't nearly as good as the company claims. And so as a result, we are seeing a massive shift in value from Facebook down the funnel to Google and Amazon to search. Why did Amazon have such an impressive quarter? Well, one, that $30 billion in advertising revenue may seem like a small amount

of Amazon's total revenue, but it's got to be 95 plus points of margin versus the teens or 20s or 30s in margin for the other stuff where you actually have to fulfill atoms versus fulfilling bits. In addition, it's search. They shouldn't call it Amazon Media Group. They should call it Amazon Search Group. So what can be learned here? What should Meta do? Let's pretend we like Meta and we don't think that they're mendacious fucks depressing our teens and weaponizing our elections. They're doing it. They're saying, okay, we've got to get control of the end distribution. And they're trying to do that with their virtual reality labs. They've gone from 1 billion in sales to 2 billion,

although it cost them 10 billion to get there. With the Oculus, they're trying to have an end device and control the end distribution. They are going vertical. This is the right thing to do. And also they're making a massive, visionary, staggering investment in trying to keep that unbelievable growth engine humming.

However, however, I don't think the tactics personally work. I think that the Oculus is a flaming bag of shit. I just don't see people wearing this thing. I think the metaverse is already out there. Basically, people are going to declare victory on the metaverse because they're going to claim that video games are the metaverse and it's growing. So whatever happens here, there's so much capital going into the metaverse. We're all talking about it. Renaming the company Meta was genius. That was such an elegant brand move because it changed the conversation away from depression and from

insurrection to the brand new future of the metaverse. But the tactics, specifically the Oculus, I don't think Facebook has ever made a thing that has worked. It's not easy. Apple is obviously great at it, maybe best in the world at it. Amazon is pretty good at it. Google can't do it. And in a distant fourth is Facebook, as evidenced by the anemic sales of the Oculus, despite the massive investment. I think we're going to start to see this thing unwind in three to six months when the data begins to support that this is kind of magic leap version 2.0. And that is it's an interesting idea, but tomorrow never becomes today, so to speak. So I think they're doing the right things. They're diversifying their revenues. They're trying to figure out end distribution. They're trying to fight back. They're not afraid to make

huge investments. But I think the combination of the full frontal attack of TikTok, Apple kicking them up the funnel by taking their targeting, regressing their targeting or taking their targeting abilities back five or 10 years, plus a misguided investment in distribution known as Oculus is going to be an incredible blow to meta. Now, having said that, it's core business. Look at its core business. It's still crazy. This is an amazing business. It'll still be worth several hundred billion dollars. But I would argue that it's going to be a rough 12 or 24 months for Facebook. I think that will actually ease up the pressure on them, the regulatory pressure, as people

begin to see that, oh, competition works and you don't need to break them up and we don't need to go after them, that the marketplace is handling it themselves. It'll be very interesting to see if TikTok continues to play the key role here. What's the key role for TikTok? Why don't I jump around? Their ability to convince consumers and regulators across Western Europe and the United States that there is somewhat of a Chinese wall, Chinese wall, ironic fitting here, between the company and the CCP's ability to weaponize this data and begin telling or programming content that our 15-year-olds see that they should not join the U.S. Army or that U.S. democracy and capitalism are not working.

First evidence of that on TikTok, and oh my gosh, they are in trouble. They are not accessing capital markets. But at the same time, I imagine they have to thread the needle of ensuring that democracies don't feel that they're weaponized AI Chinese warriors coming for our babies, but also not piss off the CCP to the extent that they say, hey, we're willing to go gangster on you and basically put your company out of business as they've done with some tutoring companies and what they appear to be doing with Didi and also disappearing Jack Ma. Jesus Christ. Yeah. Yeah. Complain about America, everybody. Go start a company in China and start mouthing off and see what happens. Anyways, anyways, it's going to be interesting, folks. It's going to be interesting. Oh, by the way, did you see there are rumors that either Amazon

or Nike are in talks to acquire Peloton? Who would have thunk it? Who would have thunk it? Oh, my God. Oh, my God. Is he for real? Is he for real? Should we stab him with a fork? Should we stab him with a fork to make sure that he's not the devil and can see into the future? No. I also said that Alibaba was a great buy at 180 bucks a share, and it's now, I think, down to 120 or 130. So anyways, I get it wrong a lot, but occasionally, occasionally, we hit gold. We hit gold. And also, who's been added as a third potential suitor? Apple. So it looks like we may have not only gotten this one right, but even picked the right suitors. This is a great buy, a $9 billion entree into the metaverse known as Peloton. The companies with the two best supply chains are one, Apple, number two, Amazon. They come in, they lay over Peloton with this cold, comfortable blanket of supply chain excellence. And what's

going to happen because they have a dual-class shareholder company that will give the shareholders a 30 or 40% premium, but the people who make bank here are John Foley, who just became chairman and the new CEO, who was the former CFO. And Amazon will say, you know what, we'll give you an earn-out deal, which will be just outrageous because we can scale this thing 10x by rolling it into Amazon Prime or you're on your Peloton and it pops up, would you like to buy the entire outfit of your instructor? Would you like to commit to having a better diet the next seven days as you get off of your ride? Oh, we were taking on a bike ride through Paris. Would you like to book a trip? I mean, there's just, the possibilities are endless. They're endless.

I'm exhausted just thinking about it. Anyways, the problem or one of the many problems with dual-class shareholder structure is a lot of the value will leak from the shareholders to the individuals who control the sale of the company. And that's what I don't like about it. It just accretes too much power to too few individuals. That's the problem with the difference between democracy and autocracy is that the temptation to sacrifice the rights of the many for your own benefit, i.e. cronyism, become too great. And the same thing happens with dual-class shareholder companies. Anyways, bit of a diversion, bit of a diversion. Anyways, it's going to be very interesting, right?

What have we learned? What have we learned? Vertical matters. Vertical matters. And also, also that the metaverse, the cheapest metaverse for sale right now is, in fact, Peloton. We'll be right back for our conversation with Professor Margaret O'Meara. Support for this show comes from Constant Contact. You know what's not easy? Marketing. And when you're starting your small business, while you're so focused on the day-to-day,

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Subscribe wherever you get your podcasts. Published by Capital Client Group, Inc. Welcome back. Here's our conversation with Margaret O'Meara, professor of history at the University of Washington and author of The Code, Silicon Valley, and the Remaking of America. Professor, where does this podcast find you? I'm in Seattle, Washington,

on the campus of the University of Washington, where I teach history. That would make sense. That would make sense. That would make sense. All right, let's bust right into it. For Wired, you recently wrote an article where you said you don't have to travel far in Silicon Valley to find a techno-libertarian proclaiming that the sector's success is purely the result of entrepreneurial hustle and that the best thing government can do is get out of the way. But that conclusion ignores history. All right, so start there. What can history tell us about the state of high-tech economies? That the government played a really critical role in starting the flywheel going,

but it's the way that it happened that actually helps us explain both the magic and also the collective amnesia about how it all went down. It really starts in the 1940s in earnest with the military spending of the war and especially the Cold War, which involved a lot of spending on small electronics and communication devices, which happened to be things that Stanford University and a few startups nearby founded by alumni, including notably Hewlett-Packard, which was founded in a garage in 1939. That's what they did. And so all of this money just flew westward into California. All of these companies, electronics companies, located there to kind of get on the military-industrial complex bandwagon. And for the first two decades of this valley's existence,

the defense industry and also the space industry, NASA, the Apollo program, was responsible for a main part of the book of business of Silicon Valley companies, including some of its most iconic early venture-backed startups like Fairchild Semiconductor? It feels like it's more psychological than historical that people, especially I find this, infects the Valley. There's a conflation of luck and talent where there's, you know, they think that everything is a function of, quite frankly, they correlate their success and failure with the individual as opposed to the circumstances. And I agree, there's just a ton of massive government subsidies and investment that have been a function or kind of put wind in the sails. When you look historically

at societies that are at this point now looking forward, do you think, well, history repeats itself and this is likely to happen over the next decade? History doesn't repeat itself. There are patterns. There are common characteristics and tendencies and human nature that we can read back. Look, history gives you lots of reasons to be pessimistic, for sure, particularly when you're taking an honest and frank look at it. But also, I think there's plenty of reason to be optimistic and to look at possibility. And look, the Cold War is not good.

We're not going to sort of replicate that moment, the moment of, you know, kind of serendipity and opportunity and people being able to take advantage of getting on this incredible escalator of business creation and upward mobility. But when we look back, we do see it's possible that the U.S. government can put its thumb on the scale to advance the state of the art of really blue sky technology when there's political will and imagination to do so. That it is possible to not only invest in tech, but invest in people, invest in people that aren't maybe, you know, already part of the power structure, already don't easily come into it. And let me tell you, like the history of Silicon Valley actually is a really,

really instructive in this way. Look, Silicon Valley is then and now is no model of diversity. It has been a very white, very male place throughout its history. But if we go back to the fifties and sixties, the young men who were part of that were, by and large, people from pretty humble backgrounds. Bob Noyce, who's the co-founder of Intel, he's a preacher's kid from small-town Iowa. You have Gordon Moore, who grew up in a tiny little cottage, working-class kid. These were scholarship students. These were people without connections. If they'd had connections, they would have stayed East and gone to work for a Fortune 50 company or their father's law firm. They were coming West because they didn't have other options. And they were able to take advantage of this publicly financed education, GI Bill, public higher ed like the University of, and as well as this money that's flowing into the industry. Have you looked at cities at all? I think of Seattle, San Francisco,

now Austin, Boston. There are certain regions that just create a tremendous amount of stakeholder value due to the explosion of technology in those regions. Is there an alchemy to this? If you're advising a mayor or a government official on how do you create these epicenters of wealth creation, what's the magic and the mystery that comes together? Yeah, there is a decent amount of magic, but there also, I think, is something of a formula that we see not just in tech hubs,

but kind of across human history, like start from the very beginning, which is, you know, there are core competencies that create capacity, but those are sparked and able to scale by what I identify as three things. One is you need resources, you need money, capital. You need someone with, you know, you need the Medici to make bank so then they can be patrons of, you know, the artists and commission great art. So you need that. Second thing you commission great art. So you need, you need that. Second thing you need is institutions. So you need spaces for people to create stuff that is free from

market pressures. So in this, now we would say it's universities. So you look at the geography of tech. Now you've got university of Texas at Austin. You've got in Boston, you have MIT and Harvard. You have in the Bay area, you've got Stanford and Berkeley. Here in Seattle, you've got the university of Washington. That is those, Those spaces are critical. It's talent production, it's idea production. And then the third thing is a little squishier, which is quality of life. And now we think of like, oh, that's perks and whatever. It kind of changes over time and space, but think about the things that make a place attractive and sticky. So when you have a super mobile workforce, you want a place that makes sense for people to choose to move to and stay there.

And that can also be affordability and good schools and that stuff. Yeah, I always thought that it started, I've said that it's difficult to find a company that's created more than 100 billion in market capitalization that isn't a bike ride from a world-class engineering university. I mean, isn't it all about Paul Allen giving the University of Washington, what was it, $100 million? Universities really are, because kids graduate, start a company, they decide they want to stay, they get sold, they make a ton of money, and they decide to start their own venture capital firms

in that region and wash, rinse, and repeat. Yeah. Yeah. I think that's right. I mean, the other thing, and this is a hard message for whether you're a mayor or an entrepreneur to hear, but part of the other secret is time, right? So all the places we're talking about have been at this for a while. So even at UW, we had, you know, in the 1920s, Boeing was helping to jumpstart the first aerospace engineering program in the world here. Stanford, actually Stanford's story is really interesting. I mean, Stanford's kind of really unique. It's a private university that had a lot of flexibility to remake its curriculum pretty comprehensively, which it did in the early 50s, to bump up physics and engineering and the things that the Cold War military-industrial complex needed. And there were also trade-offs. There were other programs that shrunk and got less attention. Public universities can't do that. The place I work can't do that. It's there

to serve the people of the state of Washington, among other things. Berkeley can't really do that. But yeah, you need higher ed. And again, it's not just the tech. It's not just tech spinoffs. It's people. It's people power. And do you think, I mean, it's something I'd be curious to get your viewpoint. One of the things that bothers me about these great universities is they've adopted sort of this rejectionist feel to them, that they take pride in their exclusivity. I don't know if the same is true of the University of Washington, but the stat my listeners are sick of hearing is when I applied to UCLA, it was 72% acceptance. Now it's 12. Do you see the same thing happening? I'm curious what your thoughts are

being another insider at an educational institution around how they're evolving or not evolving. I mean, look, it's a finite resource and demand has increased, right? So part of this is more, and then you have this sort of new model of the way kids apply to college, which is they apply to a whole bunch of them. And so that affects the metrics. I think one piece of the puzzle that is missing is on the economics of higher ed and particularly public higher ed, which used to be extremely affordable. Like really cheap. Like Berkeley was 50 bucks a semester. who were coming up in the homebrew generation, all these people who are instrumental to the Silicon Valley we know today, they're going to college for cheap,

including Stanford was really cheap. So the price tag is also, I think, a piece of that and just the debt that a lot of people, particularly first-gen college attendees, carry when they're leaving is pretty damaging. And that's a result, certainly in the public university size, of state disinvestment in higher ed. It's not been very fashionable to pour money into universities. But that state investment is, you can't get Paul Allen to finance to undergraduate tuition. But the money that comes in from private sources is directed in different, goes to different things.

And so there's been a real kind of austerity politics that has been damaging to the kind of, again, accessibility and affordability was part of the magic here in the middle part of the 20th century. And that's diminished. Oh, gosh, agreed. UCLA, I spent my total tuition, undergrad and grad, for degrees from UCLA and a graduate degree from Berkeley. Total tuition all seven years was $7,000. It's just crazy. So talk a little bit about the politics in the Valley. You wrote that they're neither left nor right, but can be defined as techno-optimism, the belief that technology and technologies are building the future that the rest of the world, including government, needs to catch up. I'll, I'm more cynical than you.

I find that they'll say anything, uh, and believe in any politics that says, don't regulate me and don't hold me responsible for these silly things like diversity or paying taxes or regulation, that they don't look left, they don't look right, they just look down at their Benjamins. That defines their politics. Yeah. Yeah. I mean, look, Silicon Valley grew large and wealthy in a 40-year period that was also a time when government was not in fashion, right? Big government was also a time when, you know, government was, you know, not in fashion, right? Big government was unfashionable on both left and right. Skepticism in institutions was increasing. And, you know, the technologies we use, social media platforms, all those things are

obviously, you know, can increase that skepticism because of all the information flowing across them. But that was a pre-existing condition, you know, we sort of starting from the Vietnam and Watergate era. So it's a really interesting politics in the Valley, which is, yeah, again, you know, there are a lot of people who have not only, you know, first we're kind of choosing to focus their attention on computer hardware and software as kind of a small P political project of we're going to connect the world. We're going to put a computer on every desk. And once that's, those conversations are happening, that all of the messiness of the divisions of the world and all the failure, all its failures are going to be overcome. And this abiding belief that there must be a better app for that, so to speak,

there must be a better technological path to affix to it. It's something that actually is, you know, even some of those in Washington who are the fiercest, you know, pro-tech regulation lawmakers, some of those conversations are kind of like, well, can't you just make the algorithm, you know, work in a way that does X, right? And, you know, the answer is sometimes there isn't a tech answer. Maybe the answer is big P politics and the messy reckoning of, you know, real life, old school interactions. You know, and look, techno-optimism is also fueled by the fact that tech has made a lot of people a lot of money. I mean, there's, you know, it is kind of replaced, you know, became the new Wall Street and the dot-com boom and certainly has

scaled up even more in terms of a destination where people are coming not just to build things, but also thinking that perhaps that's going to make them incredibly rich as it has so many other people. So we like to think, or I always thought that when I lived in San Francisco, we got the sense that innovation literally stopped once you got about seven miles from SFO. And if you look at China, they've arguably produced companies that in many ways are more innovative than ours. And in terms of product development and speed to market, they are arguably kind of neck and neck. What is it about the relationship or how is the relationship different between public and private sector there? And what do you think is good and bad about each system? It's, well, it's a very different look. It's, you know, we haven't had, we talk about a,

you know, it's the tech cold war and it's a very different political system, a lot of the Soviet Union and the United States. But the thing that's tricky is that's different from, say, the U.S., from the original Cold War, is that in the Soviet era, they built their own self-contained computer systems. Behind the Iron Curtain, there were those computers, and then on the other side of it, there were other systems. And now, when it comes to tech, the systems themselves, not only are supply chains entangled with one another, but the tech itself is very hard to unwind in terms of the technologies that are inside the machine, inside the router, so to speak. You know, China has in many cases, you look at what China's doing now, and they clearly looked at what the U.S. did in the 50s

and 60s, took notes, and is doing many of the same things at a time that the U.S. is not doing that at scale, investing in advanced technologies, higher education en masse, finding favorite industries. But there has been a public-private entanglement in the United States since the get-go. The U.S. has, you know, encouraged industrial development through indirect spending. That's certainly how the Cold War money flowed. That's one reason it was so hard to see and to acknowledge because it was flowing to private entities and universities. But in China, that's different, right? There's a different kind of command and control structure and accountability. And governments, the CCP at all levels is much more, much more intensely involved in operations.

And it's, you know, I don't think I have a clear answer yet on the sort of the ultimate meaning of that, because I do see American style capitalist democracy as an integral part of the Silicon Valley story, that what happened here was a quintessentially American phenomenon, and the structure of how tech hubs grew and how they've continued to thrive is very much a reflection of American political culture. So in a different place and context in history, it's going to be, it's going to shape up quite differently. We'll be right back. should you ultimately watch out for? And to help us out, we are joined by Kylie Robeson, the senior AI reporter for The Verge, to give you a primer on how to integrate AI into your life. So tune into AI Basics, How and When to Use AI, a special series from Pivot sponsored by AWS, wherever you get your podcasts.

Support for the show comes from Alex Partners. In business, disruption brings not only challenges, but opportunities. As artificial intelligence powers pivotal moments of change, Alex Partners is the consulting firm chief executives can rely on. Alex Partners is dedicated to making sure your company knows what really matters when it comes to AI. As part of their 2024 tech sector report, Alex Partners spoke with nearly 350 tech executives from across North America and Europe to dig deeper into how tech companies are responding to these changing

headwinds. And in their 2024 digital disruption report, Alex Partners found that 88% of executives report seeing potential for growth from digital disruption, with 37% seeing significant or even extremely high positive impact on revenue growth. You can read both reports and learn how to convert digital disruption into revenue growth at www.alexpartners.com. That's www.alexpartners.com. In the face of disruption, businesses trust Alex Partners to get straight to the point and deliver results when it really matters. You touched on the diversity or the lack of it, and I was shocked I saw this one step that said

40% of venture capitalists are from Harvard or Stanford. And then I thought, it's probably worse if you look at capital allocated. It might be, and I don't know this, then I thought, it's probably worse if you look at capital allocated. It might be, and I don't know this, but I would bet it's bigger than 40% of capital allocated is from people who come from Harvard or Stanford. It just feels as if for some reason, this industry evolved in a very homogenous way, more so than most industries. It's not the West Coast. The media industry developed with a lot of people from different backgrounds. And there's just even finance feels as if it's got more diversity. There's something about the Valley and especially venture capital that feels very milquetoast.

Any thoughts? Yeah. You know, it's funny. I think this goes to something that's both Silicon Valley's great advantage and it's Achilles' heel when it comes to bringing new voices into the conversation to make better products. Quite frankly, that's why diversity matters, not just because you're checking a box, which is that it's the networking, right? Silicon Valley kind of grew up off to the side of the main action of American and global capitalism. It was tightly connected to flows of capital coming out of Wall Street and old money. It was tightly connected to Washington because of the Cold War and the space race. But it was kind of, you know, it was a place that grew apricots and prunes and had about three restaurants that all closed around

nine o'clock. And you, you were, it was a very small town. And it was a single industry town. It was a company town that was built around tech. And in those early days, engineering programs were entirely white and male. There wasn't significant inflows of immigration, kind of meaningful immigration until the 1970s, which was transformative and critically important. But also it was just a very, it was, you know, where did the original, the OGs of the

whole industry, where did they all come from? They didn't all come from elite programs necessarily, nor elite backgrounds, but they were coming from engineering environments, MBA programs that, you know, then Harvard Business School didn't let women in, right? So these are incredibly homogenous places they're coming from. So this is the pattern. This is what Steve Jobs described as handing the baton down from one generation to the next,

which again, incredibly generative and critical to understanding why Silicon Valley is able to do what it does. You have people who are executives, operators in one tech generation. They have a big exit. They become VCs in the next. Then they pick the winners of the future generations. And it isn't just, as you know, and your listeners know, it's not just money. It's mentorship. It's showing people how to run a company. It's showing how a bunch of 22-year-olds who might be good at engineering, but don't know anything else. It's being there, connecting them in with the right lawyers and the right marketing and PR people and all of the kind of wraparound

services that you would need. You know, all of these kind of qualitative factors are shaping these decisions in ways both conscious and often unconscious. No one put a sign on the door saying no girls allowed, but effectively that did play out that way. I'm curious what your thoughts, so, and again, my questions are always pregnant with a comment, so I'll just be transparent. I find it very nihilistic and strange that the wealthiest people out of the Valley either want into a different universe or want to go to a different planet. And I'm curious what your thoughts are

about the metaverse as a concept, a focus of all this additional capital and kind of the latest obsession. What do you think of the metaverse and what it says about technology? Well, I think the metaverse, you know, it is a success to a point in that we're all talking about the metaverse when it's a bunch of hypotheticals. Take it away or not, yeah. Yeah. I mean, look, it reflects the huge mountains of cash these companies are sitting on, right?

The concentration of capital and they've got money to spend and they've got money to spend on R&D. It also reflects the need to, for the next new thing, right? The constant need to iterate and build on. I just have a lot of questions. I wonder, you know, these are, you know, new products or new ideas that are moving on without solving the problems inherent in the old idea, like the problems of social media and of disinformation and harassment and those sorts of things, a privacy and saying, well, we're going to address that as we get to it. But at a time when trust has been eroded in some of these companies, it seems like a real challenge to convince users, particularly new

users, that this is a great thing. I'm also just wondering after two years of pandemic life, when we've all had full body immersion in screens and have perhaps have new appreciation for those real life connections that were, you know, not normal for most of the planet for the last two years. If something that is immersing us in an even more immersive digital environment is that attractive, but hey, look, I'm a history professor. I'm not, I'm not a futurist and I am readily, you know, no, I know that I may be proved wrong, but I don't quite see, I see this, you know, I also see in whether you're flying to's thinking and that not necessarily in a way that speaks to the rest of us. I wonder, I'll put forward to Thesis and you tell me what you think. I wonder if it's the opposite that we have an entire generation of young people who have gone into the metaverse and they

may never come out, that they're playing video games so long and they spend so much time online socializing because they weren't in school, that they're, I don't want to say trapped there. Maybe the optimistic way to look at it is they're just more comfortable in the metaverse. And then my second concern is that, especially among young men, the chasm between the quality of their life in a fake universe and a fake reality, then their reality in terms of socialization, their ability to attach to school, attach to a job, attach to a mate, makes the metaverse more and more appealing. And that, you know, it's sort of like those futuristic movies where I'd rather just be, you know, numbed up and plugged in and just checked out. This is, you know, it's the alternative. The real universe is becoming less and less appealing for a lot of people. So anyways, is this a dystopic future?

Are we going to go? I hope you're right. I hope we go back to our herb gardens and playing soccer and going on dates. I hope that happens. Well, look, technology is never happening, occurring in the vacuum, right? It's a product of the society and adoption is reflecting what's going on in the bigger world. And I think this, you know, why did social media take off in the way that it did? Partly because these other gathering places, these other opportunities for people to come together and form communities in real life had eroded. People were moving far away from the places they grew up. They were living in sprawling suburbs where it was more challenging and where they were working all the time and didn't have time to go bowling and do all the things that used to be more, the instability of working class jobs,

the gig economy, the, again, the erosion of solidarity and a feeling of optimism about the future, which is structural and material and has to do with politics. And, you know, these are bigger things, not individual choices necessarily. But I see that in the, you know, not only in the talking about virtual worlds and gaming, but although, you know, to be clear, I think with any wave of new technology that's sort of entertainment and absorbing, there's been a panic about, oh, are children going to be swallowed up by, you know, Hollywood films, silent films were considered to be just the devil, you know, Hollywood films, silent films were considered to be just the devil's work in the 1920s because everyone was going to the movies

all the time. And there was, everyone was convinced that young people were going to be lost to, you know, Mary Pickford. Elvis shaking his hips. So it's all relative, but I think there's, there's a, you know, the thinking about crypto, right. And web three and these, and decentralized finance and the way that, you right, and Web3 and decentralized finance and Robinhood and GameStop and the way that young men in particular are getting involved in those markets as a way to, and partly because they feel boxed out by and alienated from these traditional financial institutions. They can't get a piece of it. So maybe this is a way in. So a couple of final questions. Economic history, you look at this, you study it.

No one has a crystal ball, but when you look at the market, do you have a sense if you were to say over the next three or three years, this played out, are there certain scenarios in the markets that you think are more likely than others? Yeah. Well, it's a boom and bust economy. What goes up must come down. And tech has certainly had notable booms and busts. I think the Fed is, in the last half century, the Fed has been a critical orchestrator of the possible and tech has

grown up in that world. So I think the sort of what the central bankers do and don't do is going to have, you know, if the tap on this, right now, you know, venture capital, venture capital used to apply to kind of a relatively small band of investment finance, right? It was venture capitalists were sort of these guys and they're mostly on Scan Hill Road and maybe a few other places. And now venture capital involves all of these, you know, sovereign wealth funds. I mean, the kind of the people who are playing and kind of venture backed companies is enlarged. So, you know, what do I see that happened? I'm thinking not just of the dot-com boom and bust, which I am thinking a lot about, where you did see a lot of froth,

but then after the bust, you saw some fundamentals emerge and the valley itself was left with more wealth after the bust than it entered the boom with, considerably more. So, you know, even though, and that created a runway for companies like Google and Facebook and the next generation to grow, the generation of platform companies. And I think regulation is going to be, the regulatory conversation is going to be significant. I'm also thinking a lot about 1873 and 1893 and the various panics and market volatility of the 19th century and how regulation, antitrust enforcement, and putting guardrails on big companies and limiting what they did and forcing them to share a little bit of the goodies

in terms of the things they invented was instrumental. I think a lot about Bell Labs and how a consent decree forced AT&T to share the transistor as a piece of technology so that silicon semiconductor companies in Silicon Valley could build off of it and iterate on it. That sort of sharing of ideas and the deconcentration of money, power, and ideas and talent is pretty necessary if we're able to get to where we, you know, a real generative tech economy again. I like that. Deconcentration. I'm a big fan of deconcentration. So final question, Professor, for those of us who recognize as we get older that understanding some basics or understanding more about history is just such a fantastic context for decision-making and understanding

how we got here. What three or four books would you recommend for those of us who want to do a masterclass in history, if you will? My gosh. Well, that's a very hard question to pose to a history professor I'm talking to from a room full of books, and it's hard to choose just one. It's like choosing your favorite children. We'll give you three or four. And by the way, I'm going to take two away from you, because I've asked this question to Neil Ferguson, to a variety of historians, and the two that always come up, and I'm not going to let you pick them, are sapiens and guns, germs, and steel are the two that I hear the most.

Yeah, they're not on my list. Oh, go on. And I think that's really telling. Actually, this is a side, this is not what you asked me, but the histories that certainly tech leaders glom onto are the big ones, the big sweeping narratives that kind of give coherence to millennia. Yeah, meta trends, big history, big data. And I think there are real limits to what insight you can get from that. I think that where you get more insight

is in the more granular stories of human failings and triumphs, of having a deeper sense of context and contingency and the things that went well because of happenstance and the things that went well because someone actually did something, you know, meaningful and deliberative.

So here's, I'm going to throw out one that I'm sure no one has suggested, which is the republic for Which It Stands, which is a big mammoth bookstop of a history by Richard White, who was a professor of history at Stanford. He recently retired. And it's about the Gilded Age. The first one starts in Reconstruction. So it's 1865 to 1900, roughly speaking, the American history of that period. It's part of the Oxford history of the United States, which is a really great

series of original monographs, not textbooks, but kind of big books about a period by leading historians. And what Richard does is he is showing a nation that is both struggling to recover from the civil war materially, politically, racially, socially, reckon with industrialization and capitalism and what to do about capitalism and how does, what's the role of government and balancing this new states and markets. It's super interesting and it's incredibly relevant for where we are right now, if you're ready for a big meaty book. That's the sort of big history that I think really gives us insights that are applicable, useful, relevant, as well as just understanding more about how we got to now. Understanding more about how we got to now.

Margaret O'Meara is the Howard and Francis Keller Endowed Professor of History at the University of Washington. She's also the author of three books, Cities of Knowledge, Pivotal Tuesdays, and The Code, Silicon Valley, and The Remaking of America. She joins us from her home in Seattle. Professor, thanks for your time and stay safe. Thanks for having me, Scott. It was great to be here. Okay, Algebra of Happiness. It's been a, not a tough work, but a learning week,

which is usually learning around some of the controversy surrounding Spotify. And for us, the decision to pull Prop G off of Spotify, received some really thoughtful emails. And I'm genuine in saying, I appreciate those emails. They've been very civil. And you sound as if you're hearing from a friend who's trying to help you. And the general gist is, the writer says, I think you did the wrong thing here, that we live in this dangerous era of cancel culture where people want to shoot and ask questions later. The dissenter's voice is really important. That speaking truth to power even offends people or challenges the conventional

wisdom, just as people challenge the wisdom around masking. And it looks like a lot of them were right. People challenge the conventional thinking around the severity of lockdowns. And it looks like there was some truth to that, that we have to appreciate the dissenter's voice, that Joe Rogan didn't bring any malice, that he was just generally trying to create or hear the other side of the conversation, and that you are getting on a very slippery slope and we expected better from you. I agree with most of that. And I really do believe that these people are trying to be genuine and not engaging in, I don't know, an opportunity to try and dunk on me. So I appreciate it. I hear you. I agree with

a lot of what you said, but let me be clear. This isn't even for me about Joe Rogan. This is about Spotify. Specifically, I think media companies, including all the media companies I work with, have a responsibility based on the gravity of the subject and the influence to do some baseline level of fact-checking. I think that Spotify could have solved this problem by just sitting down with Joe Rogan and its other content that it controls and says, guess what? We're bringing in somebody who can fact-check around health-related issues.

It won't really interrupt the programming, but if you say on your program that vaccines alter your DNA, we're probably going to ask you to either push back or we're going to take it out. This is, for me, is a nod to science. It's a nod to vaccines, which every piece of data coming out shows that they have more and more efficacy. It's a nod to my cousin, Andy, who passed away from COVID. And as far as I can tell,

the only reason he passed away was the bad decision to not get a vaccine. So I don't think there's both sides here. I don't think there's two sides to this debate. What I don't like, what bothers me is the piling on that is taking place, specifically people whipping out their guardians of gotcha costumes, loading up or loading into the time machine with editing software and going back and making a person look terrible by taking a couple dozen years of content, finding the worst moments, stringing them together out of context, and then engaging in the politics of personal destruction. I think that is bullshit. I think this is about Spotify not behaving like other responsible media companies, full stop. I think it's about capitalism,

Indiari or whoever, or Mary Trump or yours truly have the right not to work with Spotify. I'm not gonna engage in this cancel culture bullshit or piling on or... I think comedians get a lot, get a very wide berth around societal issues, whatever you want to call it.

I think around health issues, we all have a responsibility in a pandemic to really keep our shit tight and fact check. What I have also learned, one, that if you are inconsistent, no one has moral clarity. I advertise on Facebook. I have advertised on Google. They are much worse about this topic than Spotify. And initially, I thought I'm not going to pull myself off of Spotify because I knew I would get criticism for advertising on Facebook. That is entirely fair, that criticism.

I also believe that it's almost impossible to live a life of moral clarity in a capitalist society because you need to make a living. You need to provide economic security for you and your family. And you're going to find that the moment you erect a glass house, stones are going to start flying. But that shouldn't exonerate you or shouldn't make you less willing to try and do the right thing across every individual situation when you can do the right thing. The other thing I've discovered, and this is a good thing, is what I would refer to as off the mat in yoga. They talk about how if you spend 90 minutes focusing on

balance and being mindful and in the moment and doing exercise, that your behavior off the mat gets better. You start eating better. You start trying to be kinder. And what I have found is since deciding to pull my content or Prof G from Spotify, my off the mat behavior is getting better. You start trying to be kinder. And what I have found is since deciding to pull my content or Prof G from Spotify, my off-the-map behavior is getting better. I've reached out to the CEO of Section 4 and asked, what would happen to our business plan if we decided to stop advertising on Instagram or Facebook? What would it mean for our plan? And even if it took our revenue down, should we think about it? I am seriously considering, and I'm not advertising on YouTube at the moment, but stopping advertising there. So let me finish where I started. I really appreciate people reaching out. The comments have been really thoughtful, really civil,

and people took a lot of time. And it's almost as if you're hearing from a friend who cares about you. They have been constructive and quite frankly, moving that people would take that amount of time to try and... They generally think they're trying to help me. And I appreciate that. Also, I think we should all think about being brave. Even if you don't live a life that is a ball that is perfectly round and rolls perfectly across the surface, that doesn't exonerate us from trying to do the right thing across every individual situation. And also when you take a stand, there is an added benefit, and that is your behavior off the mat improves. Our producers are Caroline Shagrin and Drew Burrows. Claire Miller is our assistant producer.

If you like what you heard, please follow, download, and subscribe. Thank you for listening to the Prop Sheet Pod from the Vox Media Podcast Network. We will catch you next week on Monday and Thursday. And one quick reminder before we sign off, we answer your questions about business trends, big tech, career pivots, and whatever else is on your mind every Monday on the pod. To submit a question, please visit officehours.propertymedia.com. Again, that's officehours.propertymedia.com to submit a question. Support for this podcast comes from Klaviyo.

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