It’s a bold tip about a company whose share price has increased by 1,740pc in 16 years, but Tim O’Reilly suddenly proclaims halfway through our interview is “short on Google”.
He’s talking figuratively. “I’m no stockpicker.” But still, for a man who has been called the “Oracle of Silicon Valley”, this is verging on treason.
In fact, after a recent slew of staggering stock market listings for tech companies – like cloud provider Snowflake (up by 80pc on day one), video game enabler Unity (up by 30pc), and this week data cruncher Palantir (up 50pc on debut) – it seems crazy.
But it should come as no surprise. O’Reilly, 66, who was born in Ireland but emigrated to San Francisco as a baby, has a wandering, counterintuitive mind.
Apple, Google, Amazon and Facebook's growth
The efficiencies of mass electrification, the algorithmic quality of public policy, why Malthus was misunderstood: ideas stream forth, engagingly, the connection between them stretching thin, before elastically recovering their coherence.
Chief among his preoccupations is identifying tech companies that he thinks have gone off the rails, and analysing why. It turns out the stock market is the major culprit.
“We literally have an economy that is optimised for stock growth and that is the cardinal sin that needs to be fixed,” he says. “And if you fix that you’ll actually fix a lot of problems.” Such growth, he insists, demands short-term profit over long-term purpose.
“Google,” he exemplifies, “is no longer doing the thing that was part of its original genius, which was to use all these signals to help you find what you’re looking for and send you on your way.”
Wealth creators
Rather, for some searches these days, travel-related say, “what you see on Google are Google’s own products and ads. You often don’t even see what Google originally did – the results – they are ‘below the fold’”.
That newspaper term for stories tucked away on the bottom half of a broadsheet page – below the fold – betrays O’Reilly’s past as an old-fashioned, pre-digital, ink and dead-tree media man. The books his company produced after he founded it in 1983 – computer manuals mostly – were vastly useful for a specialist audience but not, to the average reader, page turners.
From the early Nineties however, as the internet began its transformation from geek subculture to the new everything, O’Reilly Media’s output became read more widely and O’Reilly himself profited from his ringside seat at the birth of Silicon Valley to think hard about how connectivity would shape the world.
Melding the philosophical, political inquiry celebrated in his native land with the entrepreneurial grit of his adopted West Coast, he crafted a pulpit to diagnose and promote such phenomena as Web 2.0 – in which networking would transform tasks, allowing us all to contribute (as we contribute to Amazon sales by reviewing the products it sells) and Open Source software, in which the code is free to use and update (like the words in Wikipedia articles) rather than owned and locked down.
It also, today, makes him one of the few people old enough, technically able enough, and plugged in enough, to measure how far the tech titans have wandered from the path they set themselves 20 or so years ago. And, when he makes it, to have his judgment respected inside the industry and out.
Google is not alone, he thinks, in having strayed. Amazon has also been tempted away from its self-declared effort to be relentlessly focused on the customer.
Amazon CEO Jeff Bezos, Apple CEO Tim Cook, Google CEO Sundar Pichai and Facebook CEO Mark Zuckerberg
Credit: Pablo Martinez Monsivais Evan Vucci Jeff Chiu Jens Meyer/AP
The “everything store”, he says, used to be very like Google, in that when a customer searched for something, it would trawl through a host of factors – “the number of ratings, the value of ratings, who was buying it, inbound links to it… to suggest the best product to buy. They used to call it the ‘flow’ around the product.”
Today, by contrast, “the things that you see when you do a search on Amazon are Amazon’s products and the products that people will pay them to feature. Retail is really just a vehicle for carrying advertising.”
The numbers are compelling. Last year Amazon made more than $10bn (£7.7bn) from advertising. This year it is expected to top $13bn. “It is,” says O’Reilly, a “fatal flaw”.
“At this point they can’t go back because they’re kind of addicted to advertising… but long term it’s a weakness in their retail business that they’re losing what made them special. And the same is true of Google.”
Instead of these two giants serving as impartial sherpas, skilfully guiding baffled consumers to their true heart’s desire from an infinite array of products or information, O’Reilly suggests they have now become tour guides, depositing their charges before the market stall that offers the best kickback.
Corridors of power
“Amazon, if you understand it correctly, is actually a very small corner store, because you see what Amazon puts in front of you and that’s not very much. You really have to dig to get below that.”
The dominance of such companies, O’Reilly suggests, allows them to extract what he calls “algorithmic rents” from those who create content, or products, but feel compelled to go through them to reach consumers.
It is an idea he has been kicking around with the Italian-American economics professor at UCL, Mariana Mazzucato, who like O’Reilly is a restless thinker about how to improve capitalism by reconsidering what it should value.
It is, they say, a structural issue. Take Facebook. Concerns about social media algorithms reinforcing divisiveness are self-deluding, O’Reilly says, because such algorithms are not aberrations but “doing exactly what their human masters have programmed them to do”.
And the reason their human masters won’t programme them to do something else is not solely, as Facebook executives often protest, because it is “technically hard”, but because to do so “would damage growth” and the quarterly revenue calls demanded of the stock market.
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“Tech’s addiction to addictive behaviour on the part of its users is actually part and parcel of the system we have built.”
If this reads like the lament of a washed-up old Leftie, O’Reilly is quick to defend and celebrate the role of capital and markets in building companies like Amazon and Tesla. It is because he sniffs something amiss that he is so passionate.
He doesn’t deny that there’s still “a lot of innovation” but worries that “we also have created a system where a lot of people can get rich without actually producing a lot of value”.
Many Silicon Valley companies, he fears, are no more than “the financial instruments that led to the 2008 financial crisis. Nobody actually has a clue about how a company is going to make money. It’s designed to be acquired. If it can go public without having profits, that’s just great. But that only works as long as you can sell to the biggest sucker. It’s a pyramid scheme.”
What the next supermen of Silicon Valley think of such jeremiads as they flock to the conferences at his California headquarters that have become a key part of O’Reilly’s business strategy, is anyone’s guess.
Perhaps O’Reilly hopes to change their minds, to create better, more altruistic, long-termist companies in the future. But perhaps it is part of a cannier plan.
Because, ultimately, he sees tech not as the problem, but the answer. Policies, he believes, are just like algorithms – they optimise for, and incentivise, certain behaviours. If tech is going astray, it is because policy has gone astray, creating the wrong incentives. And who better to fix that than those who understand algorithms best.
“This is about how we design systems. So we need to take the lessons of tech and bring them to policy design,” O’Reilly says, unflagging after more than an hour. “And tech companies, for all that’s wrong with them, are good at managing algorithmic systems. Our governments have to learn to get good at it as well.”
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