Silicon Valley and the Second American Century

How Sandhill Road got back with the national security state

So the day that I got back final edits on a forthcoming piece on how Silicon Valley has turned start-up culture into a homebrew theory of global politics, Marc Andreessen and Ben Horowitz published this!

There is no reason American technology, economic, and military leadership cannot continue for decades to come.

There is no reason the 21st Century cannot be a Second American Century. … the vanguard of American technology supremacy has always been the startup. From Edison and Ford to Hughes and Lockheed to SpaceX and Tesla, the path to greatness starts in a garage.

A startup is what happens when a plucky group of outcasts and misfits comes together with a dream, ambition, courage, and a particular set of skills – to build something new in the world, to build a product that will improve peoples’ lives, and to build a company that may go on to create many more new things in the future.

… Regulatory agencies have been green lit to use brute force investigations, prosecutions, intimidation, and threats to hobble new industries, such as Blockchain. … the government is currently proposing a tax on unrealized capital gains, which would absolutely kill both startups and the venture capital industry that funds them.

… when big companies can weaponize the government against startups, the result is stagnation and then decline. … The way to prevent this outcome is to encourage new startups – to drive innovation, competition, and growth – and to prevent big companies from weaponizing the government to crush them.

It’s mildly annoying - that’s some excellent grist for the mill. But only mildly. That blogpost is the simplified programmatic version of a much longer unedited conversation that Andreessen and Horowitz published a couple of months ago, which I was able to read. And now that they’ve published this, I can talk more about something I couldn’t really squeeze into my article: the changing relationship between certain bits of Silicon Valley and the national security state.

For sure, the We Can Build The Second American Century rhetoric is in part Andreessen-Horowitz talking its book - bigging up the prospects of helping companies in which it has investments and talking down potential threats and rivals.* Indeed, Andreessen straight up says in the aforementioned conversation that “when we’re advocating on behalf of Little Tech, obviously there’s self-interest … we’re a venture capital firm and we back startups.”

The background is that Andreessen-Horowitz is long on investments in crypto, but has a complicated relationship with the current AI boom. VC firms want to invest in start-ups that could one day dominate their industry, but that is hard to do in AI, since start-ups are by definition not going to be able to pay the eye watering amounts of money needed to train their own LLMs. That means that wannabe start-ups are going to be structurally dependent on the incumbents that do have enough money to train models and control access to them, and hence unlikely to ever really be able to develop their own stranglehold. And that in turn means that Andreessen-Horowitz is in a harder place than it might like in the current investment cycle. Hence, its doubling down on crypto, and its desire to kneecap big companies like OpenAI (if you listen to the conversation, it is interesting to hear the two principals say that they agree in principle with some of the Biden administration’s antitrust approach, even if they are not so sure about the execution).

This explains why Andreessen Horowitz is putting very large amounts of money into supporting pro-crypto politicians and opposing those who want crypto regulation. According to Puck:

Behind closed doors, executives from Andreessen Horowitz have communicated the firm’s willingness to spend tens of millions of dollars on campaigns. … The firm has also quietly provided millions for a new pro-crypto dark-money 501(c)4 group called Digital Innovation for America, per sources. The group, which has strong ties to the Republican-aligned consulting shop Targeted Victory, has attacked politicians seen as skeptical of cryptocurrencies. … Andreessen Horowitz’s management committee—under the names of Marc and his co-founder, Ben Horowitz—has also put $22 million into a network of super PACs, called Fairshake, that would oppose anti-crypto legislators, such as current congresswoman and Senate hopeful Katie Porter of California. Willed into existence by Democratic powerbroker and former Gore-ite Chris Lehane, the group has collected similarly sized checks from crypto companies Ripple and Coinbase, and currently has some $85 million to spend, a staggering sum.

This is, for all the grandiose rhetoric about Innovation Awesome and Supporting Little Tech, standard sordid lobbying - buying politicians’ favor and threatening to swamp enemies with primary challenges - albeit at a much bigger scale than usual.

But behind it, there lies a more complicated shift. Silicon Valley companies have, over the last few years, mostly moved away from talking about how software will liberate the world. Instead, they have begun articulating their interests in the language of national security. In a policy debate that is dominated by fears of China, they are looking to argue that the best way to defeat the hated adversary is to boost Silicon Valley.

As Margaret O’Mara’s fantastic history of Silicon Valley, The Code, makes clear, this is in some ways a reversion to the beginning. O’Mara explains how Silicon Valley had its beginnings in the national security state. Lockheed Missile and Space Company’s manufacturing facility was the Valley’s biggest employer “for decades.” When Fairchild Semiconductor figured out how to use silicon to make chips, it sold them to NASA, which used them for the Apollo rocket and ICBM guidance systems. This was gradually forgotten amidst Defense Department cutbacks, the development of private sector customers, and the move from hardware manufacturing to software. But it was important.

Equally, the early Silicon Valley companies like Fairchild Semiconductor and its daughters were not big political players. They began as subcontractors to big defense contractors, and then started building up their own independent business relationships. When they started to come to Washington DC, it was to push back against capital gains taxes that they feared would hurt Silicon Valley’s investment models (Andreessen and Horowitz are still worried about this, decades later). It wasn’t to claim that they and their business model were the most critical element to ensuring a New American Century.

Nor is Andreessen and Horowitz’s version the only tech infused vision of American Greatness that is out there. Back in the dying days of the Trump administration, Mark Zuckerberg moved decisively away from his earlier embrace of China (he had reportedly invited Xi to name his unnamed daughter) to denouncing the Chinese threat, and in particular TikTok, which was beholden to Chinese government censors. That TikTok was a commercial threat to Facebook (and one that it was no longer in a position to buy and incorporate or extinguish), was doubtless entirely coincidental. He was semi-explicitly making a point to legislators considering antitrust action against Facebook. They might not like Facebook very much, but at least, Facebook was an American champion. They would like a world dominated by Chinese champions much less.

These different models partly merge into a third: the increasing re-integration of Silicon Valley with the US military. There are lots of journalistic accounts of this development (see e.g. this from the Financial Times) a few days ago), some very good but none, by the nature of short-to-medium form journalism, truly comprehensive. The summarized version as I understand it is that many Silicon Valley companies have decisively Moved On from the fractious relationship of a decade ago, where CEOs condemned the US national security state for screwing up their business model through NSA spying. Now, they see the national security state as an important customer. This model has a decidedly MAGA tinge - Peter Thiel has invested in many of the companies that are doing this. These include Anduril, which is run by Palmer Luckey, who was one of the first Silicon Valley figures to support Trump. Companies with a moderate left-liberal tinge like Google have had a harder time moving into this market, because of objections from their employees.

Finally, there is a fourth model of direct intellectual influence. One of the most momentous policy documents of the last decade is the National Security Commission on Artificial Intelligence Final Report, written by a commission co-chaired by Eric Schmidt. I haven’t ever seen a really detailed account of its influence - but it is an essential part of how the US came to see Chinese AI capabilities as an urgent threat to national security, and semiconductors as a chokepoint that could be used to strangle them. Maybe the biggest shift in US security thinking in the last couple of decades came about in part through a quiet integration of a particular skein of Silicon Valley thinking with a realignment of the national security establishment’s approach to China.

In its infancy, Silicon Valley was a foster-child of the US national security state. Now that it has grown up, it has a very complicated relationship with its parent, with the Andreessen Horowitz document just being the most recent manifestation.

The four different skeins of the relationship that I talk about above, entwine and work against each other in some weird ways, which I don’t fully understand. For example, I’d love to know more about what motivated Thiel’s move from condemning Bitcoin as ““in part . . . a Chinese financial weapon against the U.S.” in 2021, to giving a keynote address at a 2022 Bitcoin conference, where he called on his listeners to “go out from this conference and take over the world” (shortly after his investment fund had quietly sold down its cryptocurrency). It’s a mistake to ignore the financial interests of Thiel, Andreessen and others. Equally, it is a mistake to see this as just cynical maneuvering. There is ideology at work here too. But we don’t have good research that I know of, that really brings these things together (in part because we still do not have a well developed field of American Political Economy to carry out this kind of research - it’s getting there, but slowly).

What I do know enough to say is that Silicon Valley’s ideological justification for existing has shifted from a diffuse ‘we are creating a better world for everyone’ in the direction of a more particular ‘we will make the world safe for America, and maybe its allies if they are lucky’ over the period of a few short years. The transformation isn’t complete - but it is quite clear. In part, this is a product of Silicon Valley adapting to exogenous changes in the world - much of its past self-justificatory language rode on the back of a simple model of globalization that doesn’t work any more. Some is the result of Silicon Valley figures promoting these changes, because of their business interests, their political beliefs, or some amorphous combination. We’d need real work to figure out how much of this broad change is due to Silicon Valley adapting, and how much is due to it starting to drive the debate.

The result is not that everyone in these debates will agree, or have shared interests, any more than they had in the past. It is that they will shift to a different register of rhetorical moves to justify their interests and their disagreements. Andreessen and Horowitz will use the language of the Second American Century to promote the interests of venture capitalists like themselves. They want to make money from investing in “plucky groups of outcasts and misfits”** who will take down the current incumbents to build their very own future monopolies. The current incumbents will use similar language to explain why their continued dominance is good for American dominance too. And as Silicon Valley becomes more invested in national security, and national security comes to look more to Silicon Valley, the intellectual debate will change too. There is a weird and consequential political transformation happening. I’d love to see more serious work by people to actually figure out what is going on.

* As an aside - when I Googled “talking its book” in the hope of a quick definition for that financial markets phrase that I could point people to, this was on the first page of results.

** It’s not clear whether Andreessen and Horowitz were deliberately or accidentally riffing on the fantasy/TV trope when they used this language. I suspect it’s accident but could be be mistaken.