Is it more similar to the top 1 percent or the working class?
Have upper-middle-class Americans been winners in the modern economy — or victims? That question has been the subject of a debate recently among economists, writers and others.
On one side are people who argue that the bourgeois professional class — essentially, households with incomes in the low-to-mid six figures but without major wealth — is not so different from the middle class and poor. All of these groups are grappling with slow-growing incomes, high medical costs, student debt and so on.
The only real winners in today’s economy are at the very top, according to this side of the debate. When Bernie Sanders talks about “the greed of billionaires” or Thomas Piketty writes about capital accumulation, they are making a version of this case.
.. “What do the upper middle class care most about in my district? They want a pluralistic America that is engaged with the world and embraces technology and future industries. What they don’t want is a backlash to diversity, a backlash to globalization, a backlash to technology.”
The upper middle class doesn’t deserve the blame for our economic problems. But it doesn’t deserve much government help, either.
Its A380 debacle shows how hard it is for state planners to outguess markets.
Years ago, when an editor asked me if Boeing would be around to pay off a 100-year bond it had recently offered, I flippantly replied that 100 years was only two product cycles for the company.
I underestimated the duration of its products. The Boeing 747 first flew in 1969 and a freighter version will continue to be built near Seattle at least through 2022. The Boeing 737, which first flew in 1967, faces an order backlog that extends through 2027. An all-new replacement for the commuter workhorse is unlikely to appear until the 2030s.
Which makes all the more anomalous Airbus’s decision to end production of its impressive and giant A380, which has been flying only since 2005.
Socialism is currently in vogue. If the word means anything in today’s context, it means projects of unusual government ambition, built on our globally shared capitalist technological and commercial base. The A380 was exactly such a project. Underwritten by massive European government subsidies, the plane was an engineering sensation. Passengers loved the roomy jet. Yet now it’s kaput. What went wrong? Or to phrase the question more usefully, what technological and commercial realities would its sponsors have had to overrule to assure its success?
The list is not a short one. They would have had to overrule the desire of passengers to fly direct, bypassing the crowded hub airports (like London’s Heathrow) for which the A380 was built.
They would have had to overrule the preference of business travelers for frequent departures. With 535 seats to fill, the superjumbo was hopelessly matched against operators offering more convenient schedules by using smaller planes.
Most of all, they would have had to overrule the public’s appetite for lower fares. On a per-seat basis, a new generation of super-efficient twin-engine planes such as the Boeing 787 proved cheaper to operate even though the four-engine A380 could accommodate twice as many customers.
In the end, enough socialism could be mobilized to get the plane built, but not enough to make it commercially viable. Europe’s governments would have needed to extend their dominion beyond their own taxpayers who financed it. They would have needed to dictate to the world’s airlines and travelers and even the aerospace industry’s global supplier base, which proved unwilling to develop a new fuel-efficient engine for a plane with a doubtful future.
This should guide us in our thinking about what kind of “socialism” is possible today. Governments can tax their own people until they rebel at the ballot box, refuse to pay, or emigrate. They have no power, in our world, to dictate what kinds of goods and services and technologies (green or otherwise) the global marketplace will accept.
When the end came, it came because the A380’s last dedicated customer, the government-backed Emirates Airline of Dubai, gave up on the superjumbo. Planes in pristine condition were lingering unsold on the used-plane market. A 10-year-old jet was recently retired by Singapore Airlines. Now it’s being broken up for scrap, proving once again socialism’s knack for making grown men cry.
Boeing’s management was vilified at the time for declining to compete with Airbus to replace its own fabulously successful 747 jumbo jet. But Boeing treated its business like a business. Its forecasts showed the market was likely to evolve in ways unfavorable to another very large passenger plane.
French and German politicians ignored such considerations. They were more interested in making a showy statement about Europe’s technological prowess. Boeing chafed for decades at the subsidies they poured into Airbus. Airbus, for its part, was not above portraying the money U.S. taxpayers spent defending the free world as a backdoor handout to Boeing through its defense business. This debate is likely now to get an ugly second wind if U.S. negotiators insist that Airbus pay back the estimated $20 billion in “launch aid” the A380 failed to recoup (the answer will certainly be no).
The parallel to California’s bullet train hardly needs to be drawn. Gov. Gavin Newsom seems already to be walking back his apparent cancellation of the grossly over-budget project. He may hope that Green New Deal dollars from Washington will become available after 2020 to replace the funds California isn’t willing to provide.
But California voters have already gotten the right message: Billions were poured into the project so former Gov. Jerry Brown wouldn’t have to admit a mistake.
The same consideration for years deterred Airbus from blowing the whistle on the A380, but let’s end on a positive note. Today the socialist miscalculations of our infallible leaders are measured mainly in dollars. This represents a great leap forward over the socialist failures that characterized the last century.
Ideas from the Right, the Left, and across the Atlantic to mend what’s broken in our economy.
Antitrust Pivot
Many of the U.S.’s biggest economic ills—rising inequality, stagnant wages, low productivity growth—stem in large measure from corporate consolidation and monopoly power run amok. That’s the message from a new breed of policy wonk urging a return to the trustbusting days of the early 20th century.
The movement—labeled the New Brandeis School by its proponents and derided as Hipster Antitrust by its critics—is looking to ditch the Chicago School approach that’s dominated antitrust enforcement since the late 1970s. The Chicago School hews to what’s known as the consumer-welfare standard, which finds mergers anticompetitive only if they raise prices.
The new model takes its inspiration from Supreme Court Justice Louis Brandeis, who emphasized the need to restrain big companies and the concentration of economic power. Lina Khan helped galvanize the movement with a 2017 paper she wrote as a law student at Yale that made the case that Amazon.com Inc. is a threat to competition, even though it’s lowered some prices for consumers.
The ideas in Khan’s paper aligned with those of economists and lawyers, such as Tim Wu, a Columbia Law School professor, who’ve been arguing that the current antitrust framework is ill-equipped to deal with today’s technology titans. Among their recommendations is preventing tech platforms from vertically integrating into different lines of business, where they can potentially favor their own services and harm rivals. In this view, Facebook shouldn’t be allowed to own Instagram.
Defenders of the current framework say the New Brandeis School is nothing more than a big-is-bad ethos that would punish companies for being successful and popular with consumers. Yet it’s hard to ignore the growing body of research documenting the relationship between rising corporate consolidation and worrying economic trends, including a drop in the number of startups and tepid wage growth.
One sign of the movement’s increasing influence is that Joseph Simons, chairman of the Federal Trade Commission, one of the country’s two antitrust watchdogs, has organized hearings on the new enforcement approach. Also, Democratic presidential candidates such as Senator Elizabeth Warren are making antitrust enforcement a central part of their campaigns. —David McLaughlin
Supply-Side Economics
The broad contours of the Republican plan to optimize capitalism don’t look much different today than they did in the 1980s. The supply-side pitch is that reducing taxes on companies and top-earning individuals, curtailing spending on welfare programs, and slashing regulation spurs business investment. This leads to faster economic growth that benefits all Americans. Even the cast of characters is familiar. President Trump’s top economic adviser, Larry Kudlow, promoted a similar agenda as an official in the Reagan White House.
The first piece of the formula is already in place: A Republican-controlled Congress approved tax cuts at the end of Trump’s first year in office. (The jury is still out on whether those have permanently lifted the U.S. economy onto a higher growth track, as proponents argued.) The other piece—reducing future obligations of major entitlement programs—will be difficult to pull off now that Democrats control the House of Representatives and the political winds blow in the direction of a more relaxed attitude toward government budget deficits.
Still, it’s seen as a key ingredient. In a 2017 white paper, John Cogan, Glenn Hubbard, John Taylor, and Kevin Warsh—all pillars of Republican establishment economic policy circles—argued that “without significant spending restraint, even with positive effects on economic growth, the tax rate reductions would likely be limited and temporary, limiting their economic benefits.”
The contention is that spending on welfare eventually will account for an ever-growing share of the economy, “crowding out” private-sector investment and weighing on growth.
This view is still widely held among Washington policymakers. At a Jan. 30 press conference, Federal Reserve Chairman Jerome Powell said, “It is a long-known fact that the U.S. federal government budget is on an unsustainable path,” citing rising health-care costs and an aging population.
Conservative economists will likely have a difficult time rallying voters to their cause in 2020 because of the public perception that the orthodox prescription is partly to blame for widening inequality. It’s a fact that wealth disparities in the U.S. have been rising ever since the early 1980s—the last time Republicans presided over a sea change in the economic agenda. —Matthew Boesler
German Model
The search for better ways to distribute the fruits of American capitalism has some looking to Europe for inspiration. Germany offers a model of how corporate governance could be revamped to give American workers a bigger say over what happens to company profits. A law that took effect in 1976 formalized what had been common practice at many German companies as far back as the 1920s. It dictates that in a corporation with more than 500 employees, a third of supervisory board seats must be filled by directors elected by workers, a share that rises to one-half for companies with more than 2,000 employees.
The German system, known as co-determination, allows employees to have a say in working conditions, such as contractual terms and pay. It also gives them a voice in how profits are deployed—say, for a new research and development center vs. more dividends for shareholders. Some researchers say co-determination has helped spur productivity and innovation at German companies.
At the root of co-determination is the idea that companies should balance the interests of their various stakeholders, a group that includes equity owners but also workers, customers, and even local communities. That was also the ideal in the U.S. until the early 1980s, when under the influence of economist Milton Friedman it was supplanted by the belief that corporate managers’ sole responsibility is to maximize returns for shareholders. That single-minded devotion to stockholders has been cited as a factor in the stagnation of U.S. wages.
In August, Democratic presidential hopeful Elizabeth Warren unveiled her Accountable Capitalism Act, which draws from the German experience. The plan would allocate a minimum of 40 percent of a company’s board seats to directors representing workers. The requirement would apply to U.S.-domiciled corporations with more than $1 billion in annual revenue. Warren’s proposal is designed as a corrective to a trend that has been drawing increased scrutiny of late: Publicly traded companies in the U.S. have been devoting more and more of their profits to share buybacks and dividends. Given that less than half of U.S. households own stocks, the chances that workers will benefit when their employer succeeds improve markedly when profits are plowed back into the company. —Carolynn Look
Modern Monetary Theory
Any ambitious government-led project to reshape the U.S. economy usually runs into the same objection: We can’t afford it. One school of economic thought says that’s all wrong.
Modern Monetary Theory, a once-fringe set of ideas now getting some mainstream attention, says governments borrowing in their own currency have more room to spend than they think. The U.S., for example, can run deficits without having to worry about going bust, because it creates the dollars in the first place. The real constraint only kicks in when there’s too much spending relative to a limited supply of goods and services—in other words, when inflation spikes. And there’s been little sign of that in America for decades.
MMTers argue that their system isn’t so radical; it’s the way things already work, at least some of the time. Presidents, including the current one, haven’t balked at measures to boost the military or cut taxes, even when the resulting deficits run into the hundreds of billions. And emergencies, such as the 2008 financial meltdown, typically push concerns about balanced budgets deep into the background.
Now there’s a different sort of emergency on the horizon: climate change. Since the threat is arguably greater than economic depression or even war, it requires action on a suitably vast scale, argue Democrats who’ve picked up on the issue.
And MMT offers a key to unlock the financing. That’s why freshman Representative Alexandria Ocasio-Cortez, one of the first U.S. politicians to talk publicly about MMT, is also at the forefront of the drive for a Green New Deal. The maximal version of that program includes shifting the U.S. to 100 percent renewable energy within 10 years. If that wasn’t ambitious enough, the plan also calls for the government to guarantee a job for everyone who wants one—an MMT favorite that’s also a throwback to Franklin D. Roosevelt’s New Deal.
“Clearly, the environment matters more than entries on balance sheets,” says Randall Wray, a senior scholar at the Levy Economics Institute of Bard College and one of MMT’s most prominent proponents. “The environmental thing is real. It’s not financial.”
MMT’s detractors say government spending on that scale could trigger the kind of inflation that would wreck the whole economy. America’s national debt has already ballooned since the Great Recession, they warn, and adding more will erode the country’s creditworthiness and undermine the dollar’s role in global finance.
While those warnings are still frequently heard, there are signs that they’re losing their impact as the debate leans left. Several renowned economists who aren’t MMTers have recently tried to downplay the risks attached to deficits and debt. They include Olivier Blanchard, former chief economist at the International Monetary Fund, and Obama administration heavyweights Larry Summers and Jason Furman. Bank of England chief Mark Carney has made the case that action on climate change represents an economic opportunity, not a burden.
Ocasio-Cortez didn’t manage to garner enough Democratic support for her first attempt at actual legislation, a proposal to set up a Green New Deal committee. But there’s broad sympathy for the idea in principle, including among several of the party’s presidential candidates, and many of them have also endorsed a jobs guarantee. —Katia Dmitrieva
Tech to the Rescue
Amazon.com Inc. Chairman and Chief Executive Officer Jeff Bezos wishes there were a trillion human beings in the solar system. With room for that many people, there would be “a thousand Einsteins and a thousand Mozarts,” he told the Economic Club of Washington, D.C., in September. The world’s richest man is funneling $1 billion or more a year into a company, Blue Origin, that he hopes will help make extraterrestrial settlement a reality, creating places to live for all those Einsteins and Mozarts.
Bezos and others argue that innovation is the essential ingredient in human betterment. They have a point. Life would be pretty awful without the advances made by past generations, such as indoor plumbing, vaccines, refrigeration, and telephones. Bezos even asserts that freedom itself, not just material well-being, depends on technological progress: “I don’t even think stasis is compatible with liberty,” he told the Washington audience.
In the view of the tech-to-the-rescue crowd, innovation can solve just about every problem humanity faces. Global warming can be fixed with better electric cars, solar cells, wind turbines, and batteries. Income inequality can be solved by educating or retraining workers for the high-tech jobs of the future.
The Information Technology & Innovation Foundation, a Washington think tank founded in 2006 to propagate this philosophy, argues that using antitrust law to break up or discipline the big technology companies can backfire, discouraging innovation and harming consumers. Robert Atkinson, president and founder of the ITIF, co-wrote a 2018 book with Michael Lind called Big Is Beautiful: Debunking the Myth of Small Business.
The techies welcome a prominent role for government in paying for education and conducting or supporting research and development. But the movement is split on trade. The nationalists want to keep the U.S. in the tech vanguard and are willing to resort to tariffs and subsidies to preserve its dominance. The globalists, including some heads of multinational companies that earn lots of their profits abroad, are happy to see other countries advance technologically, figuring that the benefits of breakthroughs—say, a cure for cancer—will be shared by all of humanity regardless of their origin.
The common theme is that prosperity depends on a robust tech sector. “We’re in a 10-year productivity depression” that’s hurting living standards, says Atkinson. “Tech is really the only way we’re going to raise productivity growth.” —Peter Coy
Tariff Truthers
If there’s one thing most economists around the world today can agree on, it’s that tariffs are bad. Protect one domestic industry with an import tax, and you hurt a swath of others. Tariffs reduce choices for consumers and push up prices for goods. They stifle competition and deter innovation. And they invite other countries to retaliate, leading to the sort of tit-for-tat behavior that’s left U.S. soybean farmers watching crops once destined for China rot in their fields.
The president, of course, disagrees. “I am a Tariff Man,” he proclaimed in a Dec. 4 tweet. Besides Trump, the maligned tariff has a small core of defenders on the fringes of mainstream economics who claim an intellectual history going back to Alexander Hamilton and his “Report on Manufactures” to justify the value of duties. Tariffs, argues Jeff Ferry, chief economist at the Coalition for a Prosperous America (CPA), preserve jobs and help unleash investment.
The Washington-based CPA has close ties to the administration. Its chairman, Dan DiMicco, is a former Nucor Corp. chief executive and was a vocal advocate for the steel tariffs Trump introduced in 2018. He also led the transition team that picked Robert Lighthizer for the job of trade czar.
The Trump tariffs have so far hit more than $300 billion in U.S. imports from around the world. And there may be more to come, with the U.S. Department of Commerce now finalizing an investigation into possible auto duties.
The Trump administration and groups such as the CPA that favor greater protectionism say the levies have helped trigger a manufacturing boom that led to the addition of 284,000 jobs in 2018, according to official statistics. “If you look at the evidence, tariffs are contributing to the growth of our economy,” wrote Ferry in a column published on the CPA’s website in December.
Many dispute those numbers. They also argue the tariffs will lead to longer-term economic harm by reducing the attraction of the U.S. as a location for export-oriented plants. Volvo Cars, for example, has scrapped plans to expand a South Carolina plant to ship cars to China. General Motors Co., meanwhile, has said the fallout from duties on foreign steel and aluminum have cost it at least $1 billion. But Ferry dismisses any such complaints. “Tariffs are a step in the right direction,” he says. “The evidence is all around us.” —Shawn Donnan
Libertarianism
Devotees of small government were stirred by candidate Trump’s vow to “drain the swamp” and pull U.S. troops out of foreign quagmires. But President Trump, with his tariffs and deficits, has proved to be “the opposite of a libertarian,” the Libertarian Party declared in March.
Still, the free-market purists aren’t giving up the fight. One of their bugbears is the Federal Reserve and its cheap money—a distortion of the market’s natural efficiency, according to Austrian economist and libertarian idol Friedrich Hayek. When Ron Paul, America’s highest-profile libertarian, ran for president in 2012, he pushed for the Fed’s abolition and a return to the gold standard. “If you want to restrain government, you restrain the power to create money,” he said. “That’s what gold does.”
The Fed can probably rest easy. Americans aren’t exactly clamoring for a return to gold, while hyperinflation and other disasters predicted by libertarians in the easy-money decade since 2008 haven’t come to pass.
Some libertarian ideas are finding a larger audience. Among them are the call for stripping back zoning rules, because they limit the construction of affordable housing, and their criticism of patents that lock in profits for Big Tech or Pharma and licensing requirements that insulate professionals like doctors from competition. A common theme of such critiques—that the economy is rigged in favor of big and established actors—commands growing support among mainstream economists.
And beyond the realms of U.S. policy, the world is evolving in ways that give libertarians hope. Those who deplore the “tyranny” of central banks are rejoicing at the explosion of cryptocurrencies. (The Libertarian Party accepts donations in Bitcoin.) Recreational marijuana use is already legal in 10 states and backed by more than 6 in 10 Americans, according to a poll by the Pew Research Center.
Paul, who outperformed most expectations during his own tilt at the presidency, says a popular Libertarian candidate could well emerge in 2020. It’s a stretch to say he’s cheerful about the wider outlook, though. “It’s a bubble economy in many, many different ways, and it’s going to come unglued,” he told the Washington Examiner. —Andrew Mayeda
Stanford has established itself as the epicenter of computer science, and a farm system for the tech giants. Following major scandals at Facebook, Google, and others, how is the university coming to grips with a world in which many of its students’ dream jobs are now vilified?
At Stanford University’s business school, above the stage where Elizabeth Holmes once regurgitated the myths of Silicon Valley, there now hangs a whistle splattered in blood. More than 500 people have gathered to hear the true story of Theranos, the $9 billion blood-testing company Holmes launched in 2004 as a Stanford dropout with the help of one of the school’s famed chemical engineering professors.
When Holmes was weaving the elaborate lies that ultimately led to the dissolution of her company, she leaned heavily on tech truisms that treat dogged pursuit of market domination as a virtue. “The minute that you have a backup plan, you’ve admitted that you’re not going to succeed,” she said onstage in 2015. But Shultz and Cheung, who faced legal threats from Theranos for speaking out, push back against the idea of pursuing a high-minded vision at all costs. “We don’t know how to handle new technologies anymore,” Cheung says, “and we don’t know the consequences necessarily that they’ll have.”
The words resonate in the jam-packed auditorium, where students line up afterward to nab selfies with and autographs from the whistleblowers. Kendall Costello, a junior at Stanford, idolized Holmes in high school and imagined working for Theranos one day. Now she’s more interested in learning how to regulate tech than building the next product that promises to change the world. “I really aspired to kind of be like her in a sense,” Costello says. “Then two years later, in seeing her whole empire crumble around her, in addition to other scandals like Facebook’s Cambridge Analytica and all these things that are coming forward, I was just kind of disillusioned.”
..But the endless barrage of negative news in tech, ranging from Facebook fueling propaganda campaigns by Russian trolls to Amazon selling surveillance software to governments, has forced Stanford to reevaluate its role in shaping the Valley’s future leaders. Students are reconsidering whether working at Google or Facebook is landing a dream job or selling out to craven corporate interests. Professors are revamping courses to address the ethical challenges tech companies are grappling with right now. And university president Marc Tessier-Lavigne has made educating students on the societal impacts of technology a tentpole of his long-term strategic plan.
As tech comes to dominate an ever-expanding portion of our daily lives, Stanford’s role as an educator of the industry’s engineers and a financier of its startups grows increasingly important. The school may not be responsible for creating our digital world, but it trains the architects. And right now, students are weighing tough decisions about how they plan to make a living in a world that was clearly constructed the wrong way. “To me it seemed super empowering that a line of code that I wrote could be used by millions of people the next day,” says Matthew Sun, a junior majoring in computer science and public policy, who helped organize the Theranos event. “Now we’re realizing that’s maybe not always a good thing.”
.. Because membership costs $21,000 per year, the career fairs tend to attract only the most renowned firms.
“Honestly, I think they’re horrific,” says Vicki Niu, a 2018 Stanford graduate who majored in computer science. She recalls her first career fair being as hectic as a Black Friday sale, with the put-on exclusivity of a night club. (Students must present their Stanford IDs to enter the tent.) But like other freshmen, she found herself swept up in the pursuit of an internship at a large, prestigious tech firm. “Everybody is trying to get interviews at Google and Facebook and Palantir,” she says. “There’s all this hype around them. Part of my mind-set coming in was that I wanted to learn, but I think there was definitely also this big social pressure and this desire to prove yourself and to prove to people that you’re smart.”
Stanford’s computer science department has long been revered for its graduate programs—Google was famously built as a research project by Ph.D. students Larry Page and Sergey Brin—but the intense interest among undergrads is relatively new. In 2007, the school conferred more bachelor’s degrees in English (92) than computer science (70). The next year, though, Stanford revamped its CS curriculum from a one-size-fits-all education to a more flexible framework that funneled students along specialized tracks such as graphics, human-computer interaction, and artificial intelligence. “We needed to make the major more attractive, to show that computer science isn’t just sitting in a cube all day,” Mehran Sahami, a computer science professor who once worked at Google, said later.
The change in curriculum coincided with an explosion of wealth and perceived self-importance in the Valley. The iPhone opened up the potential for thousands of new businesses built around apps, and when its creator died he earned rapturous comparisons to Thomas Edison. Facebook emerged as the fastest-growing internet company of all time, and the Arab Spring made its influence seem benign rather than ominous. As the economy recovered from the recession, investors decided to park their money in startups like Uber and Airbnb that might one day become the next Google or Amazon. A 2013 video by the nonprofit Code.org featured CEOs, Chris Bosh, and will.i.am comparing computer programmers to wizards, superheroes, and rock stars.
Stanford and its students eagerly embraced this cultural shift. John Hennessy, a computer science professor who became president of the university from 2000 to 2016, served on Google’s board of directors and is now the executive chairman of Google parent company Alphabet. LinkedIn founder and Stanford alum Reid Hoffman introduced a new computer science course called Blitzscaling and brought in high-profile entrepreneurs to teach students how to “build massive organizations, user bases, and businesses, and to do so at a dizzyingly rapid pace.” (Elizabeth Holmes was among the speakers.) Mark Zuckerberg became an annual guest in Sahami’s popular introductory computer science class. “It just continued to emphasize how privileged Stanford students are in so many ways, that we have the CEO of Facebook taking time out of his day to come talk to us,” says Vinamrata Singal, a 2016 graduate who had Zuckerberg visit her class freshman year. “It felt really surreal and it did make me excited to want to continue studying computer science.”
In 2013, Stanford began directly investing in students’ companies, much like a venture capital firm. Even without direct Stanford funding, the school’s proximity to wealth helped plenty of big ideas get off the ground. Evan Spiegel, who was a junior at Stanford in 2011 when he started working on Snapchat, connected with his first investor via a Stanford alumni network on Facebook. “Instead of starting a band or trying to make an independent movie or blogging, people would get into code,” says Billy Gallagher, a 2014 graduate who was the editor-in-chief of the school newspaper. “It was a similar idea to, ‘Here’s our band’s vinyl or our band’s tape. Come see us play.’”
..But it’s not just that coding was a creative outlet, as is often depicted in tech origin stories. Working at a big Silicon Valley company also became a path to a specific kind of upper-crust success that students at top schools are groomed for. “Why do so many really bright young kids go into consulting and banking?” asks Gallagher. “They’re prestigious so your parents can be proud of you, they pay really well, and they put you on a career path to open up new doors. Now we’re seeing that’s happening a lot with Google and Facebook.”
By the time Niu arrived in 2014, computer science had become the most popular major on campus and 90 percent of undergrads were taking at least one CS course. As a high schooler, her knowledge of Silicon Valley didn’t extend much further than The Internship, a Vince Vaughn–Owen Wilson comedy about working at Google that doubled as a promotional tool for the search giant. She soon came to realize that landing a job at one of the revered tech giants or striking it rich with an app were Stanford’s primary markers of success. Her coursework was largely technical, focusing on the process of coding and not so much on the outcomes. And in the rare instances when Niu heard ethics discussed in class, it was often framed around the concerns of tech’s super-elite, like killer robots destroying humanity in the future. “In my computer science classes and just talking to other people who were interested in technology, it didn’t seem like anybody really cared about social impact,” she says. “Or if they did, they weren’t talking about it.”
In the spring of her freshman year, Niu and two other students hosted a meeting to gauge interest in a new group focused on socially beneficial uses of technology. The computer science department provided funding for red curry and pad thai. Niu was shocked when the food ran out, as more than 100 students showed up for the event. “Everybody had the same experience: ‘I’m a computer science student. I’m doing this because I want to create an impact. I feel like I’m alone.’”
From this meeting sprang the student organization CS + Social Good. It aimed to expose students to professional opportunities that existed outside the tech giants and the hyperaggressive startups that aspired to their stature. In its first year, the group developed new courses about social-impact work, brought in speakers to discuss positive uses of technology, and offered summer fellowships to get students interning at nonprofits instead of Apple or Google. Hundreds of students and faculty engaged with the organization’s programming.
In Niu’s mind, “social good” referred mainly to the positive applications of technology. But stopping bad uses of tech is just as important as promoting good ones. That’s a lesson the entire Valley has been forced to reckon with as its benevolent reputation has unraveled. “Most of our programming had been, ‘Look at these great ways you can use technology to help kids learn math,’” Niu says. “There was this real need to not only talk about that, but to also be like, ‘It’s not just that technology is neutral. It can actually be really harmful.’”
Many students find it difficult to pinpoint a specific transgression that flipped their perception of Silicon Valley, simply because there have been so many.
For Facebook it was not only the Russian meddling, but also last year’s Cambridge Analytica privacy scandal, which showed the company’s carelessness with user data.
Microsoft, employees signed a petition protesting the company’s contract with ICE.
At Google, 20,000 workers walked off the job last November because of the unsavory manner in which the company paid off an executive accused of sexual harassment.
The torrid pace of bad news has been jarring for students who entered school with optimistic views of tech. Nichelle Hall, a senior majoring in computer science, viewed Google as the ideal landing spot for an aspiring software engineer when she started college. “I associated it so much with success,” she says. “It’s the first thing I thought about when I thought about technology.” But when she was offered an on-site interview for a potential job at the search giant in the fall, she declined. Project Dragonfly, Google’s (reportedly abandoned) effort to bring a censored search engine to China, gave her pause. It wasn’t just that she objected to the idea on principle. She sensed that working for such a large corporation would likely put her personal morals and corporate directives in conflict. “They say don’t do evil and then they do things like that,” she says. “I wasn’t really into the big-company idea for that reason. … You don’t necessarily know what the intentions of your executives are.”
..Google has hardly been the most damaged brand during the techlash. (The company says it has not seen a year-over-year decline in Stanford recruits to this point.)
Students repeatedly bring up Facebook as a company that’s fallen out of favor.
Uber, with its cascade of controversies, now has to “fight to try and get people in,” according to junior Jose Giron.
And Palantir, the secretive data-mining company started by Stanford alum Peter Thiel, has also lost traction due to Thiel’s ties to Trump and worries that the company could help the president develop tech to advance his draconian immigration policies. “There’s a growing concern over your personal decision where to work after graduation,” Sun says.
“There’s a lot of personal guilt around pursuing CS. If you do that, people call you a sellout or you might view yourself as a sellout. If you take a high-paying job, people might say, ‘Oh, you’re just going to work for a big tech company. All you care about is yourself.’”
Landing a job at a major tech firm is often as much about prestige as passion, which is one reason the CS major has expanded so dramatically. But a company’s tarnished reputation can transfer to its employees. Students debate whether fewer of their peers are actually taking gigs at Facebook, or whether they’re just less vocal in bragging about it. At lunch at a Burmese restaurant on campus, Hall and Sun summed up the transition succinctly. “No one’s like, ‘I got an internship at Uber!’” Sun says. Hall follows up: “They’re like, ‘I got an internship … at Uber …’”
The concerns are bigger than which companies rise or fall in the estimation of up-and-coming engineers. Stanford and computer science programs across the country may not be adequately equipped to wade through the ethical minefield that is expanding along with tech’s influence. Sahami acknowledges that many computer science classes are designed to teach students how to solve technical problems rather than to think about the real-world issues that a solution might create. Part of the challenge comes from computer science being a young discipline compared to other engineering fields, meaning that practical examples of malpractice are emerging in real time from today’s headlines.
Vik Pattabi, a senior majoring in computer science, originally studied mechanical engineering. In those classes, students are constantly reminded of the 1940 collapse of Tacoma Narrows Bridge: A modern marvel was destroyed because its highly educated engineers did not foresee all the possible threats to their creation (in that case, the wind). Pattabi’s CS coursework hasn’t yet included a comparable example. “A lot of the second- and third-order effects that we see [in] Silicon Valley have happened in the last two or three years,” Pattabi says. “The department is trying to react as fast as it can, but they don’t have 30 years of case studies to work with.”
Another issue is the longstanding divide on campus between the engineering types—known as “techies”—and the humanities or social sciences majors, known as “fuzzies.” Though the school has focused more on interdisciplinary studies in recent years, there remains a gap in understanding that’s often filled in by stereotype. This sort of divide is a common aspect of college life, but the stakes feel higher when some of the students will one day be programming the algorithms that govern the digital world. “There’s things [said] like, ‘You can’t spell fascist without CS.’ People will tell you things like that,” Hall says. “I think people may feel antagonized.”
The school’s deep ties to the Bay Area’s corporate giants, long a much-touted recruitment tool, suddenly look different in light of the problems that the industry has created. At the January career fair, members of Students for the Liberation of All Peoples (SLAP), an activist group on campus that aims to disrupt Stanford’s “culture of apathy,” handed out flyers that urged students not to work at Amazon and Salesforce because of their commercial ties to ICE and the United States Border Patrol. (Employees at the companies have raised similar concerns.) “REFUSE to be part of the Stanford → racist tech pipeline,” the flyer reads, in part.
Two students in the group said they were asked to leave the career fair by Computer Forum officials. When the students refused to comply, they say they were escorted out by campus police under threat of arrest for disrupting a private event. A Stanford spokesperson confirmed the incident. “The protesting students were disruptive and asked by police to leave,” the spokesperson said in an emailed statement. “The students were given the option to protest outside the event or in White Plaza. They chose to leave.”
For members of SLAP, the exchange reinforced the ways in which Stanford institutionally and culturally cuts itself off from the issues occurring in the real world. “You might hear this idea of the ‘Stanford bubble,’ where Stanford students kind of just stay on campus and they just do what they need to do for their classes and their jobs,” says Kimiko Hirota, a SLAP member and junior majoring in sociology and comparative studies in race and ethnicity, who participated in the career fair protest. She said many of the students she talked to had no idea about the tech firms’ government contracts. “To me the amount of students on campus that are politically engaged and are actively using their Stanford privilege for a greater good is extremely small.”
The computer science major includes a “technology in society” course requirement that can be fulfilled by a number of ethics classes, and teaching students about their ethical responsibilities is a component of the department’s accreditation process. CS + Social Good has expanded its footprint on campus, teaching more classes and organizing more events like the Theranos talk starring the whistleblowers. Yet the flexibility of the CS major cuts both ways. It means that students who care to take a holistic approach to the discipline can combine rigorous training in code with an education in ethics; it also means that it remains all too easy for some students to avoid engaging with the practical ramifications of their work. “You can very much come to Stanford feeling very apathetic about the impact of the technology and leave just that way without any effort,” Hall says. “I don’t feel as though we are forced to encounter the impact.”
On a Wednesday afternoon, students spill into a lobby in front of a standing-room-only auditorium in the School of Education, where Jeremy Weinstein is talking about the promise and perils of using algorithms in criminal justice. Next year Californians will vote on a bill that would replace cash bail with a computerized risk-assessment system that calculates an arrested person’s likelihood of returning for a court appearance. The idea is to give people who can’t afford to make bail another way to get out of jail through a fairer policy. But such algorithms have been found to reinforce racial biases in the criminal justice system, according to a ProPublicainvestigation. Instead of being a solution to an unfair process, poorly implemented software could create an entirely new form of systemic discrimination. Students were asked to vote on whether they supported cash bail or the algorithm. The class was evenly split. Unlike in most CS classes, Weinstein could not offer students the comfort of a “correct” answer. “We need to deconstruct these algorithms in order to help people see that technology is not just something to be trusted,” he says. “It’s not just something that’s objective and fair because it’s numerical, but it actually reflects a set of choices that people make.”
Though Weinstein is a political science professor, he’s one of three educators leading the new version of the CS department’s flagship ethics course, CS181. Teaching with him are Sahami, the computer science professor, and Rob Reich, a political science professor and philosopher. The trio devised the course structure over a series of coffee-fueled meetings as the tech backlash unfolded during the past year and a half. After discussing algorithmic bias, the class will explore privacy in the age of facial recognition, the social impacts of autonomous technology, and the responsibilities of private platforms in regard to free speech. The coursework is meant to be hands-on. During the current unit, students must build their own risk-assessment algorithm using an actual criminal history data set, then assess it for fairness. “We run it like a talk show,” Weinstein says. “There’s a lot of call-and-response, asking questions, getting people to talk in small groups.”
While Stanford’s computer science program has had an ethics component for decades, this course marks the first time that experts in other fields are so directly involved in the curriculum. About 300 students have enrolled in the course, including majors in history, philosophy, and biology. It provides an opportunity for the techies and fuzzies to learn from one another, and for professors removed from the Valley’s tech culture to contextualize the industry’s societal impacts. In the course overview materials, the moral reckoning occurring in the tech sector today is compared to the advent of the nuclear bomb.
The course’s popularity is a sign that the gravity of the moment is weighing on many Stanford minds. Antigone Xenopoulos, a junior majoring in symbolic systems (a techie-fuzzie hybrid major that incorporates computer science, linguistics, and philosophy), is a research assistant for CS181. She wasn’t the only student who quoted a line from Spider-Man to me—with great power comes great responsibility—when referencing the current landscape. “If they’re going to give students the tools to have such immense influence and capabilities, [Stanford] should also guide those students in developing ethical compasses,” she says.
..While the early years of the decade saw prominent tech executives like Holmes and Zuckerberg teaching students how to lifehack their way to success, the new ethics course will bring in guest speakers from WhatsApp, Facebook, and the NSA to answer “hard questions,” Sahami says “I wouldn’t say industry is influencing Stanford,” he says. “I would say the relationship with industry allows us to have more authentic conversations where we’re really bringing in people who are decision-makers in these areas.”
.. Some of the more critical voices from within the industry are also taking on more permanent roles at Stanford. Alex Stamos, the former chief security officer at Facebook, taught a “hack lab” for non-CS majors last fall, helping them understand cybersecurity threats. He’s now developing a more advanced computer science course, to be piloted later this year, that explores trust and safety issues in the era of misinformation and widespread online harassment. Stamos led Facebook’s internal investigation into Russian political interference on the platform and clashed with top executives over how much of that information should be made public. He left the company in August to join Stanford, where he hopes to impart lessons from his time battling a digital attack that was waged not through hacking, but through ad purchases, incendiary memes, and politically charged Facebook events. “One of the things we don’t teach computer science students is all of the non-technically advanced abuses of technology that cause real harm,” Stamos says. “I want to expose students to [things like], ‘These are the mistakes that were made before, these are the kinds of problems that existed, and these are the company’s reactions to those mistakes.’”
Stamos rejects the idea that ethics is the correct framework to think about addressing tech’s most pressing issues. “The problem here is not that people are making decisions that are straight-up evil,” he says. “The problem is that people are not foreseeing the outcomes of their actions. Part of that is a lack of paranoia. One of our problems in Silicon Valley is we build products to be used the right way. … It’s hard to envision all the misuses unless you understand all the things that have come before.”
While he says that Stanford bears some responsibility for the Valley’s tunnel vision, he praises the school for welcoming tech leaders with recent, relevant experiences to help students prepare for emerging threats. “When I was going to school, computers were important, but we weren’t talking about building companies that might change history,” Stamos says. “The students who come to me are really interested in the impact of what they do on society.”
Stamos regularly fields questions from students about whether to work at Facebook or Google. He tells them that they should, not in spite of the companies’ mounting issues, but because of them. “If you actually care about making communication technologies compatible with democracy, then the place to be is at one of the companies that actually has the problems,” he says. “Not working at the big places that could actually solve it does not make things better.”
The tech giants continue to consolidate power even as they face withering criticism. Facebook’s user base growth accelerated last quarter despite its scandals. Uber will go public this year at a valuation as high as $120 billion. Apple, Amazon, and Google are all planning to open large new offices around the country in the near future. And for all the optimistic talk of working at ethically minded startups among students, creation of nascent businesses is at roughly a 40-year low in the United States. Small firms that enter the terrain of the Frightful Five are typically acquired or destroyed.
It is hard to find a Stanford computer science student, even among the ethically minded set CS + Social Good has helped cultivate, who will publicly proclaim that they’ll never work for one of these dominant companies, as all of them offer opportunities for high pay, engaging individual work, and comforting job security. International students have to worry about securing work visas however they can; students on financial aid may need to make enough money to support other family members. And for many others, it’s not clear that anything that’s happened in the Valley is truly beyond the pale. In that sense, the engineers are just like us, aghast at the headlines but still clicking away inside a system that’s come to feel inescapable. “These events feel too big for most students to take into account,” says Jason He, a master’s student in electrical engineering. “At the end of the day, I think for a lot of students who have been paying a lot of money for their education, if the six-figure salary is offered, it’s pretty hard for students to turn down.”
There is still an opportunity, the thinking at Stanford goes, for every company to do good. Nichelle Hall, the senior who declined the Google interview, landed a job working on Medium’s trust and safety team. But she recognizes that she may have set her qualms aside if Google had been her only employment option. “Some of the feedback that CS + Social Good gets is, ‘Oh, the members end up working for Facebook, they end up working for Google,’” says Hall, who’s been involved with the organization since 2017. “People who care about this intersection of social impact and computer science will go to these companies and do a better job than if they weren’t interested in this stuff.”
Impact is the word that I heard more than any other while on campus. It’s how students framed their decision to go to Stanford, to pursue a career in computer science, to do good in the world after graduating. It’s a word that Hoffman used to describe his Blitzscaling class, and one Holmes used to explain to students why she dropped out of school. “I had the tools that I needed to be able to go out and begin making this impact,” she said. It’s the currency of Silicon Valley, that people spend for good and for ill.
The ability to create impact with a few lines of code has long been what separated software engineers from the rest of us, and turned the Valley into a self-proclaimed utopia of young rebels using technology to save the world from its older, antiquated self. But that’s not the image anymore. Now aspiring engineers draw a comparison between their chosen profession and investment banking. The finance industry wrecked the world a decade ago because of its misunderstanding of complex, automated systems that spun out of control—and its confidence that someone else would ultimately pay the price if things went wrong. You see this confidence in Zuckerberg’s incredulous response when anyone suggests that he resign, and in Google CEO Sundar Pichai’s initial refusal to testify before Congress. And you can see it at Stanford, where the endowment has never been higher, the fundraising has never been easier, and the career fair is still filled with slogans vowing to make the world a better place.
Perhaps this entire strip of land known as the Valley will fully calcify into a West Coast Wall Street, where the people with all the insider knowledge profit off the muppets who can’t stop using their products. If today’s young tech skeptics turn to cynics when they enter the working world, such a future is easy to imagine. But—and this is the hopeful, intoxicating, dangerous thing about technology—there’s always bright minds out there who think they can build a solution that just might fix this mess we’ve made. And people, especially young people, will always be enthralled by the romance of a new idea. “We’re creating things that haven’t necessarily existed before, and so we won’t be able to anticipate all the challenges that we have,” says Hall, who graduates in just four months. “But once we do, it’s important that we can reconcile them with grace and humility. I’m sure it will be a hard job, but it’s important that it’s hard. I’m up for the challenge.”