This piece originally ran in The American Prospect. Read the original here.
Arguably the most lucrative innovation to come out of Silicon Valley in the past decade and a half has been a willingness to break the law. The conscious decision to defy existing regulation—frequently by reference to “blitzscaling,” a strategy of rapidly expanding businesses promoted by LinkedIn co-founder Reid Hoffman—is now the easiest way to find success in America’s crowded startup economy.
Blitzscaling, exemplified by Uber and other venture capital–backed tech companies, is now being put to use by the Trump administration and its techno-fascist staffer class. Much like Silicon Valley investors, administration officials have learned that the structures governing the American economy and its liberal democratic order are no match for unadulterated speed. Like Uber, the Trump administration has found regulators, law enforcement, and courts asleep at the switch, unwilling to fight to enforce the most basic of guardrails. By blowing past the laws that stand in the president’s way, the administration is hoping to bring about an end to those laws altogether, and unilaterally reshape the country. If Democrats seek to restore order in a post-Trump world, they must also take aim at corporate impunity.
Far too often, blitzscaling has become a euphemism for a three-step process of building a tech giant through intentionally flouting the law. The process is simple: (1) Introduce a tech product that circumvents the law, claiming your technology exempts you from existing regulation; (2) Use the competitive advantage that lawlessness provides to rapidly scale up your business so that you can; (3) Use the newfound incumbency, clout, and money to preempt enforcement and/or modify the law, often advocating for changes to ostensibly protect consumers, while actually codifying that the tech industry gets to play by different rules.
This was the model pioneered by Uber as it muscled its way into taxi markets across the U.S. and the globe. The company was not the first to use a GPS-enabled smartphone app as a means of calling a taxi—its true innovation was instead flagrant disregard of existing taxi regulations and employment law, most notoriously with its “Greyball” tool that prevented regulators and law enforcement from using the app. (After this scandal broke, Uber said it shut down the tool.) This allowed the company to circumvent licensing laws that limited the number of drivers on the road, fare and vehicle inspection requirements, and other regulations.
Uber’s Silicon Valley arrogance also enabled it to misclassify drivers as “independent contractors”—both an end run around employee protections and a means of evading employer-side payroll taxes.
By not playing by the rules that existing driving services did (and using venture capital to artificially lower the cost of rides), the company was able to quickly gain sizable market share that allowed it to defeat the occasional regulatory pushback. Uber’s might even protected it from the rare serious threat to its business model: California’s Assembly Bill 5. Rather than comply with the law, which would have put an end to the company’s misclassification of employees as independent contractors, the company (led by chief legal officer Tony West—Kamala Harris’s brother-in-law and a top adviser to her campaign) organized a $200+ million ballot proposition campaign to exempt rideshare and food delivery companies from the law. Outspending the opposition by 13 to 1, the proposition passed in 2020.
Unlike other innovations from Silicon Valley, Uber’s strategy of willful dismissal of the law was not proprietary, and other firms quickly hopped on the app-summoned bandwagon. Lyft followed Uber’s well-worn path of ignoring driving regulations and engaging in worker misclassification, while food delivery companies (which Uber also became) wholeheartedly embraced the independent-contractor revolution, forming what has become known as the “gig economy.” But the lawlessness did not stop there.
When sports betting companies FanDuel and DraftKings exploded in popularity, they relied upon a legal fig leaf and regulatory indifference to grow. By the time the New York attorney general ordered the companies to cease and desist their operations in the state, alleging the firms were operating illegal gambling websites, it was too late. While the companies were temporarily banned, their ability to operate in New York state was legalized less than a year later, as the firms’ years of unchecked growth had enabled them to build the political capital to force legislation through. The message of this PR campaign? Claiming that new legislation was necessary to protect consumers—regulation that was needed because the industry’s noncompliance effectively nullified existing state gambling laws.
But blitzscaling reached its apotheosis with cryptocurrency. The industry began more as a curiosity for libertarian tech nerds, but steadily grew throughout the Obama years, mostly ignored by federal regulators. Under Trump’s first term, the industry grew rapidly and finally drew real regulatory attention with Biden’s appointment of Gary Gensler to lead the Securities and Exchange Commission in 2021. After years of lawlessness, the industry was taken aback at the idea that they would be forced to comply with long-standing securities law. Crypto firms claimed their products were substantially different from existing securities because of their digital nature, and were therefore not subject to the same regulations that govern all other securities. Gensler’s all-too-restrained attempt to rein in the industry and make it operate under the same rules as Wall Street was met with a complete meltdown by Silicon Valley, and hundreds of millions of dollars in campaign expenditures. Coupled with the crypto industry’s claims to desire new regulation in order to protect consumers (while fighting the SEC’s efforts to enforce existing regulation), the industry built up a substantial set of adherents in both parties. This has already resulted in sweetheart legislation, with the promise of more to come.
Once again, even a relatively strong reformer like Gensler was not nearly aggressive enough. The crypto “industry,” whose core customer base includes numerous international crime rings, drug cartels, and terrorists, deserved to have the book thrown at them. Instead, the Biden administration managed to infuriate them without seriously denting their power.
MANY PROGRESSIVES HAVE LONG BEEN CRITICS of the Silicon Valley approach, both because it undercuts important policy goals—like robust public transportation, strong employee protections, and a well-regulated financial system—and because it fundamentally undermines the democratic process. But to others, Silicon Valley’s supposed innovations justify firms usurping democratically enacted laws.
Last month, when academic Hilary Allen wrote that Uber’s disregard for existing regulations represented “a cautionary tale,” prominent centrist pundit Matt Yglesias took to Twitter to lambaste Allen and followed up with an entire column entitled “Ride-Sharing Apps Are Good, Actually.” Notably, Yglesias does not engage with the claims of illegality (much like his muddled defenses of the cryptocurrency industry), which are the most important part of the progressive critique. Yglesias is not alone in celebrating this lawlessness. Economist Adam Ozimek has written about how technology should exempt Silicon Valley companies from regulation that governs the behavior of ordinary firms, while Herbert Hovenkamp, “the dean of American antitrust law,” compared Uber’s disregard for the law to the civil disobedience of Rosa Parks, in a since-deleted tweet. Northwestern Law professor Michael Kang even claimed that this lawbreaking is somehow beneficial to democracy.
Nothing could be further from the truth. Silicon Valley’s lawless conduct has helped erode trust in institutions, weakened regulatory oversight, and encouraged ever greater lawbreaking. A new form of blitzscaling can be seen in Washington today, where the Trump administration has launched a furious campaign of entrenching its policy preferences through flagrantly violating federal law, often led by the very same tech investors that helped build the strategy in Silicon Valley.
It’s not a coincidence that the architecture of Trump’s blitzscaling came straight from Elon Musk, an erstwhile poster boy for Silicon Valley and the promise of technological innovation, and himself a habitual flouter of the law. Indeed, even DOGE’s name is a reference to one of the many meme coins that proliferated amid crypto’s evasion of securities regulation. (Incidentally, the Trump administration has rated Uber and DoorDash among their “good partners,” per recent reporting from Axios on a “loyalty score card” from the White House.)
Much has been made of the break between high-profile tech figures and the Democratic Party, despite the fact that an Uber executive, who had previously been soft on corporate crime as a Justice Department official, was driving the economic-policy platform of Kamala Harris’s campaign, and her debate prep team included Google’s lawyer. This narrative also ignores how cryptocurrency titans were able to co-opt multiple progressive candidates after scaring them with the onslaught unleashed on skeptics like Sherrod Brown and Katie Porter.
Pundits have blamed the Biden administration’s reassertion of long-standing rules for figures like Jeff Bezos, Marc Andreessen, and Elon Musk embracing Trump. Rather than trying to bring them back into the fold, Democrats should reflect on the fact that their alliance was predicated on exempting the tech sector from the rule of law. If weak oversight that simply requires everyone to respect the democratic process and the resulting legal frameworks is enough to provoke a pivot to outright fascist machismo, perhaps they weren’t invested in the Democratic Party’s goals to begin with and don’t belong in the tent.
As Democrats and progressives search for a path back from the wilderness, they have to contend with widespread perceptions of their party as captured by elite interests on Wall Street and in Silicon Valley. The pitch for ending Trumpian chaos cannot be simply settling for the simpler times when only tech titans and billionaires got to ignore the rule of law.
Any serious push to not only remove Trump from office, but restore the trust in institutions he helped erode, must end the era of blitzscaling. For too long, regulators and the Democratic Party have allowed illegal behavior to fester until it becomes a serious problem, and each time it comes back to haunt them. Any serious reckoning with the past decade must take aim at this weakness, and begin to rebuild the public’s trust by ending elite impunity, whether justified by ludicrous wealth or the cloak of technological process.
Image credit: The above photo, a work of the federal government, is in the public domain.