This article first appeared in our (no longer weekly) Hackwatch newsletter on media accountability. Subscribe here to get it delivered straight to your inbox, and check out our Hackwatch website.
Welcome back to Hackwatch and Happy New Year!
Last year, my colleague Henry Burke and I wrote for The American Prospect about how Silicon Valley has turned lawbreaking into a supposedly “innovative” business strategy. By refusing to adhere to the rules of the road, Silicon Valley pioneered new businesses that undercut existing players in the market, and it worked phenomenally—for the venture capitalists. By betting on slow government response coupled with regulators too scared to actually crack down on lawbreaking, Silicon Valley hacked capitalism, and as of November 2024 – the White House.
We think this approach has come to define much of our current political moment. Wealthy tech oligarchs, empowered by decades of government inaction, have come to see the government as something they can ignore. And, not content to rest on their expensive laurels, the oligarchs are also buying off politicians to keep things this way. This corruption fundamentally erodes trust in government, but it also undermines our democracy and markets. If a regulation is outdated or actually hinders innovation it should be removed by the elected officials empowered to do so by the democratic process, not by wealthy tech investors who undermine it until it becomes functionally unenforceable. The rule of law does not have an algorithm exception.
Reid Hoffman—a prominent tech investor, founder of LinkedIn, and billionaire political donor— termed the breaking the law first approach to regulation “blitzscaling.” We have another name: “the technobabble defense.” Using technical jargon to obscure what the business actually does is the core part of this business plan, and we think it should be highlighted as such. “Blitzscaling” is yet another euphemism in Silicon Valley’s fake-innovation lexicon, and like most euphemisms, the term obscures what it actually is. Science fiction shows infamously feature “technobabble” as a plot device to create a plausible-seeming explanation for how something is happening, which is how you wind up with scenes featuring ultra-technical nonsense like, “the hyper-warp plasma manifold is out of alignment, pass me that quantum recoupler so I can fix it.” Silicon Valley venture capitalists have brought this practice out of the writer’s room and into political economy.
For an example of technobable, look no further than Uber, the now-ubiquitous ride hailing app. Taxi regulation existed before Uber, but Uber’s entire “disruption” was predicated on pretending that its app-based gig system made it a technology company, not a car service. Of course, Uber doesn’t make money by selling or licensing its software. It makes its money through taking a cut from the service provided by its drivers. Even the company’s defenders recognize that this is regulatory arbitrage. They just conveniently ignore that the difference in regulation is because Uber just flagrantly violated existing law.
Long before Uber, though, Microsoft pioneered the technobabble defense when it argued that actually, it’s not an antitrust violation when you do it on a computer. Obviously, they didn’t literally say it like that. Their position was that preloading the Internet Explorer browser onto Windows computers was not a violation of antitrust prohibitions on “bundling” using market share in one market to disadvantage competitors in a separate but related market. The Department of Justice alleged that packaging Internet Explorer with Windows parlayed Microsoft’s monopoly in operating systems into an anticompetitive advantage in web browsing, attempting to take the legs out from under rivals like Netscape.
Defending his company, Bill Gates explicitly appealed to innovation and the rapidly changing nature of the technology industry, saying “Can any Microsoft endure future competition without innovation? The answer is no. We’ve got to keep changing.” This appeal to fluidity fundamentally misunderstands the challenge to Microsoft’s conduct. The issue was not that Microsoft was innovating new features within its operating system, it was that it was packaging complimentary goods with a product they exercised monopoly power over, creating barriers to entry for competitors in that industry. The idea that a company’s need to innovate in order to continue into the future somehow negates existing law’s application in the here and now is foundational to the technobabble defense.
Across a range of industries, companies have taken to invoking this defense to justify why their conduct is not subject to government oversight. RealPage argued that coordinating prices across rental properties was not a form of cartelization or price manipulation, because they were using an algorithm. Sports betting apps launched in violation of state gambling restrictions by claiming that their apps were actually mobile strategy games, not betting sites. The entire premise of cryptocurrency is that speculative assets don’t count as securities if you throw them on a blockchain. Hell, now we even have companies claiming that betting on the outcome of sports games isn’t gambling — it’s investing in swaps.
Silicon Valley-backed firms have been permitted to play cute with the rule of law for nearly two decades, but they’ve become even more brazen in the first year of Trump 2.0, emboldened by the cartoonishly open pay-to-play regulation across the economy and the president’s embrace of technobabble’s greatest ever user: crypto. Crypto has become central to Trump, his fortune, and his administration in a way that grants legitimacy to the technobabble defense. Now that the sharks sense blood in the water, they don’t want to remain confined to a handful of industries. Much of our economy is now overseen by corporate executives eagerly hunting for end-runs around public accountability.
To highlight this issue, we’re going to be producing a short newsletter series tracing technobabble through different industries highlighting the way corporations have been able to wield the excuses of “innovation,” “algorithms,” and other jargony drivel as an end run around consumer protection laws, securities regulations and more.
Image credit: “Binary code” by Christiaan Colen is licensed under CC BY-SA 2.0.