The Luddite

Two tech stories have been making the rounds lately. First, there's the Twitter rebrand. Since his time at PayPal, Elon Musk has wanted to create X, the "everything app." Now that he has purchased Twitter, he has rebranded it to X. Then there's Worldcoin, a cryptocurrency company that has been giving its shitcoins¹ to users throughout the developing world in exchange for an opportunity to scan their irises with their stupid creepy orb. Though these may seem like very strange and unrelated stories, I argue that they are both instances of the same core phenomenon, not unique to these two companies, but endemic to the entire tech industry.

But first, what even is the tech industry? In tech, we commonly use the acronym "FAANG," (Facebook, Amazon, Apple, Netflix, Google) as a stand-in for a large tech company. One might say, "I want a FAANG job when I graduate." These five companies, which the zeitgeist has chosen as the exemplar tech companies, feel like they go together so naturally because we are used to seeing them grouped together. But what do they actually have in common?

At their core: Facebook is a social media site; Amazon is an online store; Apple makes devices; Netflix is an online streaming platform; and Google is a search engine. Facebook and Google are both actually advertising companies under the hood, offering a free service to everyone and making their money off ads, but Netflix is a subscription service that is increasingly cracking down on free access via account sharing, which is the opposite of Google and Facebook. Google and Apple have the Play Store and the App Store respectively — Amazon also dabbles in this space with the Kindle — but the other two don't.

To further confound the matter, consider WalMart. What makes Amazon a tech company and not WalMart? It's true that WalMart has physical locations, but so does Amazon, a part of their business they rapidly expanded when they acquired Whole Foods; meanwhile, the percentage of WalMart's business done online is growing. Both allow third-party sellers on their e-commerce platform (as do many other retail brands). Amazon does offer Amazon Web Services (AWS), but other than that, these two companies seem to have so much more in common than Amazon does with any of the FAANG companies.

In 2023, every large company must be, at least to some capacity, like a tech company. Even newspapers, often called "legacy media" to distinguish them from the new generation of post-digital media, have social media functionality, usually in the form of comments. Though I am sure that there are many edge cases, the most reliable single criterion to distinguish between what we call a "tech company" and what we do not is probably not what they do, but when they were founded. How else does one distinguish between a regular movie studio, many of which have launched competing streaming platforms, and Netflix? Or a new cab company and Uber? It's tempting to distinguish them by saying that these tech companies focused primarily on the technology, but isn't every new company that way? Were one to start a movie studio today, it would probably look more like Netflix than a legacy movie studio, just like any modern cab company would presumably also come with an app. Why start a hotel chain when digital technology allows for a cheaper alternative like AirBnB? This is exactly what the "legacy" hotel chains are now trying to do. Instead of thinking of tech companies as their own industry, perhaps it's best to think of some industries as being transformed by digital technologies, and those that we consider tech companies were often just the first to stake their claim on this new, previously unsettled cyberspace.

Then, once their cyberspace is claimed, they become rent-seekers. They're cyberlandlords.² Even Apple, which makes physical devices, jealously guards digital access to their customers' phones, on which it is verboten to download software from anywhere other than their App Store.

Criticizing capitalism for its rent-seeking tendencies is not new, but I argue that so-called tech companies are qualitatively different, in part because of their continued evasion of mainstream criticism for their rent-seeking, but mostly for their scale. There is (roughly) only one internet, and it covers the whole world. This lack of physical constraint cuts both ways, though. Competitors can come from anywhere in the world. A hardware store, tailor, or coffeeshop doesn't have to worry about competition from more than, conservatively speaking, 100 miles away, limiting their market to 0.00016% of the Earth's land. This is not true for tech companies. On the other hand, a dominant so-called tech company can occupy a dominant market share in a market six orders of magnitude bigger than previously possible.

As a result, competition — the thing capitalists point to as the linchpin of their system but also do their best to avoid — is fierce in cyberspace, while successful rent-seeking enterprises, once established, are all-encompassing. This dynamic has become deeply ingrained in the tech industry. Anyone who has ever had the misfortune of pitching their idea to venture capitalists has been asked about "defensibility." The standard analogy for defensibility is telling: You must create a "moat" to stop competitors from taking over your business. This common analogy places the founder in the role of a feudal lord. The purpose of a moat is not to compete with other lords to have the best, coolest moat and attract more peasants, but to defend a castle, or in this case, a business, built with and maintained by rents taken on the value of other people's labor, from other would-be lords seeking to do the same.

The vast majority of business advice to which I have been subjected creates a taxonomy for different kinds of moats, usually acknowledging that the best moat is a "network." This is the social media trick — the value of a social media app is entirely in its user base. New competitors to Facebook must cross the "moat" of Facebook's preexisting mass adoption. This is why people are still using a rapidly deteriorating Twitter. Calling Twitter a technology company in the way most people mean it, as some sort of innovative engineering venture, is a stretch. Their core offering allows people to post and read 140 characters at a time. The entire value of Twitter is the network. All their actual and very real engineering efforts go into widening the moat and figuring out how to extract rents.

Here we see what makes what Cory Doctorow calls "enshittification" ubiquitous: Companies are willing to spend whatever it takes to claim the largest chunk of cyberspace as fast as possible. They will subsidize free two-day shipping (Amazon), pay famous people undisclosed sums to write on their platform (Substack), and so on. Competing on the internet is a tenuous business strategy; better to use bottomless capital to become an indispensable middleman. It might not be a sustainable business model, but they'll sort that out once people become dependent on it. Anyone who has ever had a landlord knows that once you're moved in, you're at their mercy.

This brings us back to X. Elon Musk is not actually an engineer. He's a venture capitalist. From TechCrunch:

Tesla was founded not by Elon Musk, but rather by Martin Eberhard and Marc Tarpenning in July 2003. The two bootstrapped the fledgling auto company until Elon Musk led the company’s $7.5 million Series A financing round in February 2004, when Musk became the company’s Chairman of the Board.

From the perspective of a venture capitalist concerned with defensibility, X is the best possible app. It is supremely defensible. He's thinking like a landlord. He isn't trying to figure out what people want to buy from him; he's trying to charge them rent on what they already need. The insight he thinks he had is that he doesn't have to limit himself to charging rent on just some things. He's trying to claim the entire internet, all of cyberspace, in the way that a landlord might buy up a whole town.

Worldcoin, with their stupid creepy orbs, is doing the same thing. They're thinking like venture capitalists. They've found a piece of cyberspace they'd like to own — a database of all of humanity's irises — and they're making it and claiming it, like China building islands in the South China Sea. All the rest of their business plans, or claims about social services Worldcoin will provide, are secondary. They say those things the way a landlord says they'll fix the leaking sink.³ They, and most of the so-called tech industry, don't actually care. They just have to maintain a polite veneer on their rent-seeking operations.