Bit Tyrants: The Political Economy of Silicon Valley

Abstract

As evidenced by the actions of the United States legislative and executive branches of the last few years, the future of the American economy is being guided by a revived interest in industrial policy and a heightened awareness of the importance of basic and translational research. The 117th Congress was characterized by three enormous industrial and research spending bills. Two were bipartisan: the Infrastructure Investment and Jobs Act (aka the Bipartisan Infrastructure Law) enacted on 15 November 2021, and the Chips and Science Act enacted on 9 August 2022. A third was partisan: the Inflation Reduction Act, enacted on 16 August 2022. While the Trump administration did try to cut research spending in the executive branch budget proposals, the former president ultimately signed budgets passed by Congress that raised scientific research spending at a faster rate than during the Obama administration. The success of Operation Warpspeed in developing COVID-19 vaccines shows the power and potential of federally directed translational scientific research spending and technology implementation. It is unlikely that the divided 118th Congress will change the trajectory of industrial and science policy, and it is difficult to imagine even the most ardent deficit hawk opposing the success of the Chips and Science Act in the face of elevated levels of economic nationalism due to industrial competition with China. Industrial policy, however, comes with the political criticisms that it gives government the power to “pick winners and losers” and gives private sector corporations the ability to take advantage of publicly funded research to build private wealth and power, sometimes to a monopolistic degree. In his book Bit Tyrants: The Political Economy of Silicon Valley, Rob Larson chronicles the monopolistic journey of several big tech Silicon Valley firms (Microsoft, Amazon, Google, and Facebook) and the ongoing battle over net neutrality. While the Silicon Valley firms exert their power in different ways, all four of the firms and their egotistical leaders (the “bit tyrants”) outlined by Larson take advantage of publicly funded research to build their power into a monopoly through business maneuvering and a keen understanding of network effects. Network effects are likely not as powerful in building big tech as Larson believes (Knee 2021), but throughout the book, Larson reiterates that a critical factor that enabled the rise of all the big tech companies is their initial reliance on publicly funded basic research. For example, Larson reiterates both the well-known history of the internet originating out of DARPA and the not-so-known reliance of nearly every component of Apple products on publicly-funded research (e.g., lithium-ion batteries originating out of Department of Energyfunded electrochemistry research). The federal government, through its many alphabet agencies, is great at funding potentially high-risk and low-reward, resource-intensive basic research. For any government, the challenge is not how to fund research, but rather how to assist basic research translate into on-the-ground, meaningful gains for the largest number of people. The solution to this challenge is where I diverge from the author. Larson’s valuable economic analysis of the big tech platforms is let down by his hopeful, yet ultimately disappointing, final chapter calling for socializing internet technology. Indeed, the author does such an excellent job outlining the arguments against internet socialization that his own defense of his call-to-action pales in comparison. Larson points