Some historical context on the current Silicon Valley implosion
Tech billionaires such as Elon Musk and Mark Zuckerberg have lost far more money this year than ever before. Eccentric behavior and questionable decisions have both played a role. But there are examples in U.S. business history that have other clues, writes Daniel Eckert in German daily Die Welt.
Life isn’t always fair, especially when it comes to business. Although he had already registered dozens of patents, during the global economic crisis of the 1930s, tireless inventor Nikola Tesla found himself struggling to put food on the table. Sure, investors today associate his name with runaway wealth and business achievements rather than poverty and failure: Tesla, the company that was named after him, has made Elon Musk the richest man in the world.
Bloomberg estimates the 51-year-old’s current fortune to be $185 billion. While Musk is not a brilliant inventor like Nikola Tesla, many see him as the most successful businessperson of our century.
And yet, over the past month, many are beginning to wonder if Musk is in trouble, if he has spread himself too thin. Most obvious is his messy and expensive takeover of Twitter, which includes polarizing antics and a clear lack of a strategy.
And it is Tesla’s shareholders who are suffering from the CEO’s polarizing antics: This year they saw their share value plummet by 50%.
These losses have suddenly taken the shine off the entrepreneur’s genius halo.
And yet Musk is not the only tech billionaire on the way down. Facebook founder Mark Zuckerberg has lost $82 billion since the start of the year — almost as much as Musk, who has lost $85 billion.
While the renamed parent company Meta is losing advertising revenue and Facebook is experiencing the first drop in user numbers in the company’s history, Zuckerberg is pumping billions of dollars into building a virtual reality space called the Metaverse — although it remains uncertain whether this imaginary sphere will ever earn him any money.
One entrepreneur who has fallen even further than either Musk or Zuck is 30-year-old Sam Bankman-Fried, known on social media as SBF. Up until a few weeks ago he was being touted as a tech prodigy, but now his cryptocurrency trading firm FTX has filed for bankruptcy. Clients and investors stand to lose up to $8 billion. It is now up to the courts to determine whether there has been any foul play, or whether the money was simply lost through over-ambition and mismanagement. One thing is clear, however: SBF is not the financial genius he was thought to be.
Commentators are already talking of the end days of the tech geniuses. Since the start of the year, between them the 10 richest tech entrepreneurs have lost almost half a trillion dollars. These losses can be partly explained by the general downward trend in the stock market: With rising taxes and money no longer flowing into the economy from the Central Bank, investors have become more wary.
“In an era of abundant market liquidity, many investors gravitate towards projects that are trendy, such as the metaverse or cryptocurrencies,” author and Silicon Valley insider Thomas Rappold says of investor behavior in 2020 and 2021. He says that these popular investment sectors are now being recognized for what they are: a gimmick.
In the case of Musk in particular, there are historical parallels to be drawn with legendary entrepreneurs from the past, such as Henry Ford. Just as Ford transformed the automobile from a luxury item into a product owned by the majority of households, Musk popularized the electric car. Ford didn’t invent the assembly line, but in the early 20th century he discovered its enormous potential for the mass-production of cars and turned the automobile industry into a lynchpin of modernization itself.
Politically, the founder espoused a paternalistic worldview with anti-Semitic tendencies. In the 1930s, Ford’s reactionary views even led him to sympathize with the Nazis. His attempt to forge a political career of his own ended in failure.
The multibillionaire — in today’s money his fortune would have stood at around $200 billion — was a highly controversial figure. After 1945 his company got into financial difficulties again and again. But Ford Motors has remained an important player in the automobile industry.
Ford is not the only famous entrepreneur to cut a controversial figure — we can also look to oil magnate John D. Rockefeller. He was one of the first people to recognize the important role that oil would play in the global economy — and built an entire empire out of it. Thanks to industrialization, the company he founded (Standard Oil) grew to be the largest conglomerate in the United States.
Eventually concerns that Rockefeller was gaining a monopoly on the oil market led to the introduction of modern antitrust legislation. In 1911 Rockefeller’s opponents finally won a victory in court: Standard Oil was broken up into 34 independent companies. One of the businesses descended from these, ExxonMobil, is now once again one of the largest companies in the world. But you won’t find the name Rockefeller on the list of the world’s 500 richest people.
A similar dispute played out around 100 years later, this time in the software industry. The genius in question, who was one of the first to recognize the importance of the emerging software technology, was Bill Gates, founder of Microsoft. Although he didn’t invent the operating system, he recognized the immense potential of computers, and negotiated licensing agreements that by the turn of the millennium meant that more than 90% of computers ran on Microsoft software.
The U.S .government filed an antitrust case against Microsoft, which in the end the company only just managed to head off with a settlement. In a different way than Musk, Gates was a difficult character. His short temper had to be balanced out by his more level-headed partner Paul Allen. At Microsoft’s competitor Apple, the easy-going Steve Wozniak played a similar role alongside the eccentric visionary Steve Jobs.
Founders who lack this counterweight can run into difficulties: “Successful visionaries automatically run into a problem, when they no longer have anyone daring to contradict them," says Mario Herger, author and tech trend researcher. "Success means the ‘genius’ becomes surrounded by more and more yes-men.”
The danger is that criticism no longer gets through: “If they then start to fire people who disagree with them,” says Herger, “this sends a clear signal to the rest of their team that they don’t want to hear any bad news or criticism.” This is a real risk for Musk and Zuckerberg.
The example of Microsoft shows that founders can walk away with grace. Eight years after Gates stepped down as chairman in 2014, Microsoft is still one of the largest tech companies in the world. Since then the value of its shares has increased almost tenfold. Sometimes life can turn out to be fair, for founders and shareholders alike.
— Daniel Eckert / Die Welt
• China tightens security as anti-lockdown protests pose unprecedented challenge to Xi: Police in China have stepped up arrests after weekend protests against the country’s strict zero-COVID policy spread to some of its biggest cities. Shanghai has tightened security on Monday and no new protests were reported in major cities after the unprecedented demonstrations Saturday and Sunday, considered the biggest challenge to Xi Jinping’s nearly 10-year reign. (Videos are circulating on social media of the first signs of the crackdown) The public anger was triggered by the death of 10 people in a fire in the western city of Urumqi, who were said to be trapped in their apartments due to lockdown measures.
• Report: Russia may abandon Zaporizhizhia nuclear plant: Moscow has denied claims by Ukrainian Energoatom head Petro Kotin that Russian forces are withdrawing from the Zaporizhzhia nuclear power plant area in southeastern Ukraine. Representatives of the Russian administration in the region wrote that the plant “remains under Russian control."
• Al-Shabab kills four in Mogadishu hotel siege: Al-Qaeda-linked extremist group al-Shabab has claimed responsibility for an attack Sunday night on the Villa Rose hotel used by government officials in the Somali capital of Mogadishu. At least four people have been killed and dozens injured in the ongoing siege to regain control of the building.
• Cocaine “super-cartel” dismantled in Europe: Europol announced a major drug trafficking bust of what it called a “super-cartel” believed to control up to a third of Europe’s cocaine trade. The six-country police operation seized 30 tons of cocaine and led to the arrest of 49 people, including six chief suspects in Dubai.
• Italy landslide death toll rises to seven: The death toll from the massive landslide that hit the southern Italian island of Ischia following heavy rain has risen to seven, including a three-week-old infant. Italy’s government has declared a state of emergency as rescue efforts are still underway to find five missing people.
• World Cup Iran-U.S. dispute, riots in Brussels: Iran has lodged a complaint to FIFA after the U.S. Soccer Federation removed the emblem of the Islamic Republic from its flag on social media posts, to show support for Iranian protesters. Meanwhile, at least 10 people were detained in Brussels following clashes that erupted after Morocco unexpectedly stunned Belgium 2-0 in Qatar.
• “Gaslighting” named world of the year: Online dictionary Merriam-Webster has named “Gaslighting” as its 2022 Word of the Year, as “the act or practice of grossly misleading someone especially for one’s own advantage” saw a 1,740% increase in definition searches throughout 2022. Other picks include “oligarch,” “omicron,” and “queen consort.”
Important things: a rare unfiltered look inside Russian schools
In Russian schools, lessons on "important things" are a compulsory hour pushing state propaganda. But not everyone is buying it. Independent Russian media outlet Vazhnyye Istorii spoke to teachers, parents and students about how they see patriotism and Putin's mobilization.
🏫⚠️ Dmitry, a history teacher: “On Feb. 27, I was asked in history class to read a paper justifying the government's actions retroactively. They said that Nazis were ruling Ukraine and the Americans were giving them orders... After I read and criticized this source, they wrote an anonymous statement to the prosecutor's office, accusing me of not reading what I was given. I learned about the message from the principal, who asked me to be more careful. There were no other consequences.”
📖 Lyubov, a parent: “At my school, ‘lessons about important things’ are simply class hours. They regulate the schedule, and there's no propaganda component. At the neighboring school, the principal is a deputy from the ‘United Russia’ party, and she twists and turns as much as she can. Children are told about Donbas. At one of the lessons, a military officer came and told them how to kill people in Ukraine correctly.”
✈️ Oleg, a recent high school graduate from the Moscow region: “For as long as I can remember, I have had a bad attitude toward Putin. Since ninth grade, I have thought about emigrating to a better country. My emigration plan was mapped out over the years: to enroll in a technical college, cooperate with a foreign company, and apply for a work visa. The war disrupted my plans. After these completely wild laws passed about discrediting the army, I dropped out of school and left with a girlfriend to travel around the country. I explained this to my parents: ‘If I say or do something wrong at school, I'd better not go there.’"
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