Big Tech at the End of History

Plus! Belt & Road & Vial; CCP and SMBs; Hire Fast, Transfer Fast; Life Imitates Science Fiction; More...

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Big Tech at the End of History

A few weeks ago, I gave a talk to a group of employees at a large  tech company.[1] Topic: parallels between how tech companies grow and  how countries go from poor to rich.

The two processes have some interesting similarities:

The original point of that model was to say: this has happened  before, just on a slower timescale. Growth starts out scalable and  apolitical, but naturally slows over time. In a mature economy, wages  are high, growth is low, the obvious high-return investments have all  been picked over, and life is comfortable, boring, and more driven by  politics than technological advances. So, too, at mature tech companies.  Nobody talks about “resting and vesting” at the Series A level. (At  least, not at companies that are going to have a decent Series B.)

But that’s not a story with a happy ending, because it doesn’t really  have an ending. “At first, progress happens fast at the cost of hard  work, uncertainty, and some material deprivation. Eventually, growth  slows but most of the major problems go away, and everyone involved is  quite well-off. The… end?”

The End of History, etc.

Fortunately, there’s a guidebook to what can happen next. Francis Fukuyama’s The End of History and the Last Man  is all about the question of what comes after we’ve solved all of the  big problems. Fukuyama’s book came out at an opportune time. Today,  books about the broad sweep of recent history either talk about how bad things have gotten, or about why it’s contrarian to think the world is not so bad.[3] It’s very 1990s to write a book that makes the obvious point that everything is going absolutely great, and to ask the contrarian question of what could go wrong.

The End of History and the Last Man was and is a  controversial book. Some of Fukuyama’s critics clearly didn’t read the  whole thing, and some of them didn’t even make it all the way through  the title. The term “The End of History” is pretty easy to interpret:  all the big questions have been answered, capitalist democracy is the  system everyone eventually adopts, and it’s hard to imagine a successor,  so the big events are all in the past. “The Last Man” takes things in a  darker direction: it’s a term from Nietzsche, referring to someone with  no urge to create, no willingness to take risks, someone who has been  spiritually poisoned by peace and comfort. The Last Man has lost all  desire for recognition from peers, and is ruled by baser desires.

The book makes a smooth segue from the end of history to the last  man, so reading it today is an increasingly enjoyable experience, as  Fukuyama transitions from being a delusional fool who seems to have  overdosed on episodes of The West Wing to sounding like a  prophet. It may be a testament to pre-Internet attention spans that  Fukuyama could put the caveats 300 pages after the arguments and expect  people to read them.

Fukuyama’s end-of-history argument, even including the caveats, is in  retrospect a little weak: he argues that only capitalist democracies  can marshal the resources necessary for scientific advances, and that  ultimately military threats force every country to converge on the  system that works. So his model is: the more capitalist and democratic a  country is, the more it can mobilize resources towards new  technologies; some of those technologies have military applications; in  the long run, everyone who fails to achieve military parity gets  conquered, so anyone who doesn’t converge on a working model voluntarily  will eventually do so at gunpoint.

This gives Fukuyama’s model of history some direction: science  accumulates over time, so if science and capitalist democracy feed on  themselves, science pushes history in only one direction. Science does  indeed accumulate over time, but imperfectly: the cause and cure for scurvy was repeatedly discovered and forgotten, the US may have forgotten how to produce some nuclear weapon components, we still don’t know for sure what Greek Fire was,  etc. And some stories that appear to have a moral about superior  technology have something else going on entirely: the Spanish military  did indeed have better equipment than the Aztecs, but Spain was outnumbered 100:1, and won by assembling a coalition, not through their own superior firepower. Military coalitions are not exactly a new idea; the earliest work of western literature, The Iliad, partly revolves around managing one.

Some technologies have negative side effects, and different countries  can adopt uniquely effective subsets of technology in order to be more  effective than more advanced countries. On paper, the US was far more  powerful than Vietnam, Iraq, or Afghanistan, but a country that has  fancy guns, fancy bombers, napalm, Agent Orange, and television and elections does not necessarily have an enduring advantage against a country that imports the guns but not the TVs and elections.[4]

And some of the evidence Fukuyama cites for a post-history world  overfits the data. He notes the decline in Europe of nationalist wars  after 1945, but as Tony Judt points out, nationalism in postwar Europe was less important because nation-states' borders largely corresponded to ethnic groups,  through a combination of redrawn maps and wholesale forced migration.  In Judt’s reading, Europe’s post-1945 peace largely vindicated Neville Chamberlain.

It’s extremely unfair to critique Fukuyama’s mid-90s viewpoint based  on what happened since, especially since his book shows escalating  concern over the possibility that the End of History does not mean  indefinite utopia. For Americans, the End of History came to a  spectacular end on 9/11. Bin Laden, among his other undesirable traits,  was such a ham-handed literary symbolist he’d make the most pretentious  MFA student blush. Crashing planes owned by a company called “United”  and “American,” targeting a “World Trade Center”—we get it, the system ultimately contains deep and irreconcilable contradictions, give it a rest.

What 9/11 symbolized was not just the physical risk that a safe and  prosperous country could face, but the ideological risk that modern  liberal values could be thoroughly rejected, and the technological  fruits of those values could be redirected towards mass destruction.

The rise of China, too, represents a serious challenge to the End of  History. Prudently, Fukuyama draws attention to precisely this:

[D]espite the apparent absence of a systematic  alternatives to liberal democracy at present, some new authoritarian  alternatives, perhaps never before seen in history, may assert  themselves in the future. These alternatives… will be created by two  distinct groups of people: those who for cultural reasons experience  persistent economic failure, despite an effort to make economic  liberalism work, and those who are inordinately successful at the capitalist game.

Later in the same thought, he even hints at the origins of the 9/11  attackers, noting that fundamentalists backed with oil money can do a  lot of harm, and that religious fundamentalism is strongest in modern  countries. (The 9/11 hijackers were mostly well-off and well-educated;  Mohammed Atta was born in Egypt but radicalized in Hamburg. And the  operation was financed by Bin Laden’s family money, which derived from  Saudi Arabia’s oil-funded construction boom.)

To Fukuyama, the core of the “last man” problem is thymos,  which can be literally translated as “spiritedness” and more  figuratively and vividly means the desire for recognition and glory. Thymos  describes the urge to excel, even—especially!—at great risk to oneself.  Fukuyama’s ultimate source, Hegel, spends a lot of time meditating on  the original thymos-inducing practice of forcing another human  being to submit to one’s will; modern societies find healthier and less  direct ways to harness this desire. Plato divides the soul into reason,  desire, and thymos. Reason and desire are enough for a pleasurable existence—you have wants, and you figure out how to meet them. Thymos is necessary to motivate sacrifices for public service and glory.

Fukuyama’s immediate predecessor in the end-of-history business,  Kojève, thought the End of History arrived when everyone was perfectly  satisfied. Kojève announces that at the end of history, humans will  still have desires and reason, but they won’t have any higher  desires; we’ll revert to a stage of very advanced, comfortable,  happiness-seeking animals. To him, the End of History arrived when  Napoleon crushed the Prussian Army at the Battle of Jena in 1806;  everything since then has been an extended mopping-up of various remnant  factions of humanity still stuck in history. The end result is a long  march to universal satisfaction.

But it seems that successful people are perennially dissatisfied. They’ve retained some thymos.  Growing up in the upper middle class, attending an elite prep school  and then going to Harvard sounds like a guarantee of about as much  material comfort as any human being could ever ask for, and yet two  of the most valuable companies in the world were founded by people who  rejected that life path. Arnold Schwarzenneger managed to be  dissatisfied with his life as a monstrously fit millionaire property  developer, and decided to become a movie star instead. Then he decided that  wasn’t enough, either, and decided to be governor of the world’s  fifth-largest economy. There are similar stories about plenty of other  immensely successful people. Both Warren Buffett and Andrew Carnegie  once memos-to-self in their mid-thirties, summing up their respective  net worths and noting that this was more than anyone would need, and  that it was enough for a life of quiet contemplation and charitable  giving.

Interpreted with maximum charity, both Fukuyama and Kojève, with  varying amounts of intellectual humility, describe life at the high  point of an unsteady upward trend towards the end of history. Zoom in  enough, and a sine wave looks like a straight line; zoom out enough, and  a sine wave plus a linear term is a straight line for all  useful purposes. History’s sample size is frustratingly small, and the  data are noisy, so it’s possible to over-extrapolate a temporary  deviation or to underestimate mean-reversion. Fukuyama’s model points to  the possibility of exactly the sort of reversion that history promptly  supplied.

Big Tech and Thymos

Where does all this leave Big Tech? Each of the largest tech  companies has a very America-in-the-90s feel. They’ve conquered the big  problems. They still have problems, but they’re relatively  small-scale; the risk is a bad quarter, not bankruptcy. And yet, most of  the well-paid tech workers I know feel deeply dissatisfied. When they  look at how much revenue their work generates, and how valuable and  profitable their employers are, they feel underpaid. When they consider  the effort required to keep getting promotions, though, they feel  overpaid. Life at a large tech company is, in Plato’s model, satisfying  reason and desire, and ignoring thymos entirely.

Is there an escape? Of course. Some people quit completely, and  retreat to monasticism, or perhaps podcasting. Others quit and form  startups. That’s a serious problem for Big Tech, though: in The Republic, when Plato divides his ideal society into classes based on this model of the soul, the thymoeides are the ones tasked with defending the city from outsiders. If everyone at Facebook who could give their all to a company decides to quit and give their all to some other company instead, it’s ultimately defenseless.

Facebook has inspired thymos among its workers in the past. When Google+ launched, Mark Zuckerberg’s speech is described like this:

The contest for users, he told us, would now be direct  and zero-sum. Google had launched a competing product; whatever was  gained by one side would be lost by the other. It was up to all of us to  up our game while the world conducted live tests of Facebook versus  Google’s version of Facebook and decided which it liked more… It was the  sort of nagging paternal reminder to keep your room clean that Zuck  occasionally dished out after Facebook had suffered some embarrassing  bug or outage…. Rounding off another beaded string of platitudes, he  changed gears and erupted with a burst of rhetoric referencing one of  the ancient classics he had studied at Harvard and before. “You know,  one of my favorite Roman orators ended every speech with the phrase Carthago delenda est.  ‘Carthage must be destroyed.’ For some reason I think of that now.”…  Zuckerberg’s tone went from paternal lecture to martial exhortation, the  drama mounting with every mention of the threat Google represented. The  speech ended to a roar of cheering and applause. Everyone walked out of  there ready to invade Poland if need be.

That’s some thymos! Carthage was destroyed.  But now, Facebook’s threat isn’t an external enemy that wants to copy  their features and take their users; it’s regulation, and internal  conflicts over what, exactly, the company should accomplish.

Some companies find ways to maintain their thymos well into maturity. Good design can be a source of thymos:  companies that produce nice-looking, well-functioning products have a  stronger motivation to excel. You can feel some pride and esprit de corps  from wanting your side to win over a different company, but it’s more  deeply distressing to think that, if the product fails, everyone will  use something ugly and broken instead of what you and your  colleagues built. Employees at Stripe and Apple can be motivated by the  thought that, if they don’t work hard and innovate, the world will get  similar services that are uglier and less elegant.

Amazon seems to have some thymos left, too. When Jeff Bezos  talks about having a single-digit share of retail sales, the intended  audience is legislators worried about the company’s market dominance.  But inside the company, the subtext might be: we can 10x this, and we  still won’t be done.

But every success saps a little more thymos over time. High  margins are the result of vanquished enemies, but if your company  culture is built on repeated victories, what can you do when there’s  nobody left to beat? Some people rest and vest, letting the hedonic  treadmill ensure that $500k is just as insufficient as $100k was. Others  quit.

On a national level, it’s hard to permanently exhaust a country’s thymos  because it’s always being renewed. Some people emigrate, but emigrants  can come home. A company isn’t home, though; if they lose their most  ambitious employees, or select for the wrong kind of ambition, it takes  extraordinary effort to turn things around.

Every big company should internally compare itself to the world that Fukuyama describes in The End of History and the Last Man. And then they should take note of the fact that history has emphatically refused to end.

Further reading: This piece owes a lot to The End of History and the Last Man. If you enjoyed that and want some more, Fukuyama’s book is an extension of, and response to, Kojève’s Introduction to the Reading of Hegel.  And one interesting response to the end-of-history thesis, a reply to Kojève and others, is Peter Thiel’s “Straussian Moment” chapter in Politics and Apocalypse.

[1] The company in question is large enough that it has policies on  exactly how to refer to such things—not “I was invited to speak at X,”  but “I was invited to speak by a group of employees at X,” etc.  I’d rather not accidentally break the letter or spirit of that  agreement—and the phenomenon is not specific to them—so I’ll just note  that it’s a large company and you’ve more likely than not used one of  their products in the last thirty minutes. And, of course, that the  invitation did not represent an endorsement of anything I say.

[2] Japan seems to be a democracy now, but sources in the 60s and 70s  had no problem calling it a democracy back then, too. Japan seems to  have democratized gradually and discreetly, as bureaucracies discredited  themselves through poor planning in the 90s. But it’s hard to tell how  much stories about, e.g. new PM Yoshihide Suga wearing out shoes from door-to-door campaigning represent a change in the system or just a more evolved form of political theater.

[3] I am fibbing a bit. Actually, the subjects of contemporary books  on the state of the world tend to cover a wide variety of topics,  ranging from Trump to Donald J. Trump to the current President of the  United States to the guy who got Barack Obama’s job. Ironically Fukuyama  name-checks Trump twice, as a typical example of an ostentatious rich  guy.

[4] And there’s also the possibility of self-destruction. Robin  Hanson points out that Fermi Estimates of life make it very implausible  that intelligent life came into existence exactly once, and we’d expect  to pick up radio transmissions from other species—unless there’s some “Great Filter”  that wipes civilizations out once they reach a certain level. Maybe  it’s a weapon—perhaps we’re one of a million species to invent nuclear  weapons and the only one to get enough lucky breaks.

The anthropic principle is always a useful framework. The first time I  read the Pentateuch, I was struck by how often the Israelites were  threatened with annihilation, and had to rely on luck, mercy, or Moses'  persuasive ability to survive. I wondered if I was reading the story of  something that happened once, or the story of the first group of people  to be chosen and to not mess it up.


Belt & Road & Vial

China is expanding vaccine testing to 18 countries ($, Nikkei),  with an emphasis on participants in the Belt and Road Initiative.  Vaccine diplomacy is a tool for closer diplomatic ties, as well as  closer economic ties—it’s a way for China to directly help an entire  country, and at a more limited scale a way to create green zones that  include Chinese cities and overseas import and export partners.

Tyler Cowen has a more detailed look at vaccine diplomacy. He makes an important point about China:

It is the rich countries that are calling most of the  shots when it comes to vaccines. In this respect, China may be unique:  It has some properties of a rich country (a big, advanced scientific  establishment), but it has a poor country’s willingness to take risks.  That’s one reason China might end up leading on vaccines. The U.S. is  ahead of China technologically, but Chinese priorities are more in sync  with those of many other countries in the world.

An unbalanced economic model, with more emphasis on heavy industry  (in the past) and high tech (right now) compared to domestic consumption  has its downsides, but in cases like this it gives China distinct  advantages.

CCP and SMBs

The Chinese government has announced plans to more tightly control small private-sector companies,  by, among other things, setting a minimum quota for party members even  at smaller firms. In the past, some entrepreneurs in China have been reluctant to acknowledge party membership, so in one sense this just represents a more open approach to an existing standard.

Hire Fast, Transfer Fast

Alex Kantrowitz profiles an Amazon effort to automate their pricing.  An increasingly common phenomenon in white-collar work is a new spin on  training your replacement: machine learning models generally rely on  human-labeled inputs, so replacing a human-driven process with an  automatic one generally requires those same humans to do a lot of the  implementation. Amazon has found an effective workaround for the obvious  morale problems this causes: instead of firing employees once they’re  replaced by an algorithm, Amazon transfers them to new jobs whose  replacement by algorithm is further off.

Life Imitates Science Fiction

A group of state-sponsored hackers working on extensive industrial  espionage have been caught because they also hacked into video games to  steal virtual items. This is, of course, the plot of Charles Stross' 2008 novel Halting State, and also the plot of 2020’s headlines.  Video games represent a great honeypot for security issues: in-game  money-laundering is trivial, so games are a tempting target, but the  sums involved are small. As long as there’s an overlap between people  who hack for a living and people who play videogames for fun, it’s a  conveniently tempting target.

Koanic SaaS Secrets

How did Snowflake become the most valuable software IPO of all time? Their CEO has thoughts.  Most of this essay is easy to nod along to but—as the author  acknowledges—hard to implement. But it’s worth keeping in mind: the  management techniques behind extraordinarily successful companies may  not be especially complicated, but that doesn’t make them easy.

(Previously on The Diff, I wrote up Snowflake’s S-1.  One surprising thing about Snowflake is that it’s a tech infrastructure  company that, even prior to its IPO, was more famous to investors than  to tech people.)

Interactive Brokers' Big Option Trade

Institutional Investor has a writeup of the traders alleging that negative oil futures prices were the result of market manipulation.  This will be hard to prove; the futures contract in question was  relatively illiquid, because most traders had moved to the next month’s  contract, and illiquid assets often do crazy things during times of high  uncertainty. There were certainly traders who would profit from a  deeply negative price, but since every trade has a counterparty, there  was plenty of money at stake in manipulating the price up. Inevitably, lawsuits are brewing. One interesting detail:

After taking a closer look at the Interactive Brokers settlement documents [in which IB released traders from paying for their full losses from negative oil futures], Institutional Investor  can reveal that traders receiving compensation from the company must  not only agree to release it from any legal claims arising from the  negative-oil-price events, but also transfer any of their own related  claims against third parties to Interactive Brokers, assisting the  company with its own litigation and providing testimony; attending  hearings or trials; and procuring paperwork, if needed.

This is a very interesting trade. IB’s system broke down during the  oil crash, since it couldn’t handle negative prices, so it makes sense  that they’d compensate traders for their losses. But if IB thinks it’s  possible that the market was manipulated, and that they can prove it in  court, getting customers to sign over the rights to legal claims is a  good way to capture that upside. Depending on how fines are calculated  and how many parties get fined, it’s hypothetically possible for the  total value of the settlements to exceed the losses. Usually  settlements like that are eaten by lawyers, especially if there are many  parties with relatively small losses, but since IB has acquired so many  claims, it can negotiate better economics with lawyers. Like any  good-but-unlucky trader, they took their losses, took stock of the  situation, and found an opportunity to reenter the trade at a more  favorable price.