The Crisis in the Valley

Someone said that the first sign of company decline is the erection of imposing new headquarters. By this standard, Apple, Google, and Facebook could be in peril indeed. Back in 1992, I moved my 3D graphics company to Silicon Valley, after first defecting from communistic Czechoslovakia and then spending ten years in New York City. Despite the economic crisis, Silicon Valley was an exciting place to live and work. My company did well, and to this day I am grateful for the opportunity Bay area provided for me. Today, however despite seeming prosperity of internet giants, my excitement is gone, and I wonder whether there is much future for Silicon Valley as a nurturing cradle of big ideas.

The signs of decline are everywhere. Let us start with Apple. It is mind-boggling that since the death of Steve Jobs in 2011, Apple failed to introduce a single new major product innovation. Tim Cook put his efforts in ill-conceived Apple watch, introduced as a luxury accessory, complete with $17,000 Gold edition. After years of milking iPhone innovation, iPhone X sales are abysmal and just today rumors are circulating about the “AR headset with two 8K displays”. An idea of two 8K rendering engines crammed into a lightweight headset is wrong on so many many levels. It reminds me of Intel’s Paul Otellini proudly introducing a single core 4Ghz CPU in 2005. In 2006, Intel chips started to melt, and Intel laid off 10,000 people. Apple may soon follow.

The moral of the story? The problem is cultural, not technical, as engineers are always trying to extend the old paradigm with more transistors, faster clock, more memory, more pixels, etc., instead of inventing a new paradigm, better suited to changing market demands. In the CPU case the new paradigm was the multi-core architecture, for the AR headsets it will be a better understanding of human eye which concentrates most of its sensors in the fovea and moves the fovea 3–5 times per second to interesting scene objects via saccades. I estimate that static frame display wastes 99.9% of its GPU cycles compared to the dynamic operation of the mammalian eye and brain. Sure, the dynamic display is harder to make, but staying with static frame display will simply not work. It takes a visionary to see that, but today, vision is in short supply in Silicon Valley.

Prolonged ignorance of human physiology had even more dire consequences for wearable sensor technologies. It explains the abysmal lack of progress in fitness and health assistants and personal assistants in general. Typically, the sensor companies start with some hardware sensors onto which they add a low level, low-quality UI, forcing the user to interpret meaningless data such as the number of steps per day. What is needed instead is understanding of the meaning of multimodal streams of data by correlating in real time all modalities with current intentions of users. As it turns out engineers do not understand how people form intentions in the context of their daily activities. Whence we expect a wearable computing equivalent of Steven Jobs iPhone? I would not hold my breath.

Finally, AI and computer scientists convinced themselves that human brain is simply a PC-like CPU. If they bothered actually to study the brain, they would find out that nothing could be farther from the truth. Neural science could provide the answers, but Silicon Valley AI “experts” and cognitive scientists awash with VC money are not interested in anything contradicting their “vision.” Sand Hill road VC’s after watching too many Hollywood movies about “killer AI’s wiping the mankind like a virus,” pour money into countless AI startups with little to show for it. Elon Musks basks in visionary glory while Tesla is forced to remove AI robots from Model 3 production factory floor of as AI’s can not keep up with human workers. Similarly, Google’s Sergey Brin in an annual letter to all Google employees claims that “the new spring of AI is the most significant development in my lifetime” and “I fear that AI robots can manipulate us.” The simple truth is that AI technology never worked and never will. Elon Musk is a frequent Pentagon visitor and another AI proponent, Google’s Eric Schmidt is the chairman of Pentagon’s influential Defense Science Board. The real benefactor of “AI revolution” is the Pentagon budget as US citizens, scared by “killer AI’s,” look to the government for protection from this “menace.” The real truth is that threat of Hollywood AI’s is great for increased military funding; only Hollywood aliens can compete with that.

As bad as this is, there is an even bigger problem on the horizon. As the existing internet of information is being replaced with the new internet of value, there are no Silicon Valley companies leading or even following the ongoing crypto revolution. Worse, Google, Facebook, and Twitter are actively censoring news about cryptocurrencies. Why? The ugly truth is that it is not just the lack of vision and creativity slowing down Silicon Valley progress but the active involvement of the government which is protecting US banking industry rather than banks customers.

How close is the Silicon Valley to Washington? The answer is very close indeed. On November 7th, 2012, Google’s CEO Eric Schmidt, was working hard inside one of the presidential candidate’s election headquarters, directing the power of Google’s mighty technology to sway the results his way. Two months later, the government, in turn, dropped the Google anti-monopoly lawsuit and from 2013 to 2015 Google executives attended several hundreds of meetings inside the White House. The frequency of the meetings increased every year, from 32 in 2009 to 97 in 2014. Altogether, during this period 55 individuals moved from positions at Google into the federal government, and 197 people moved from the government positions to jobs at Google, including Darpa director, Regina Dugan, who became a VP of Google. The latest addition to Google’s board of directors is the former board member of the US Federal Reserve, Roger Fergusson. As of today, for all practical purposes, there is no difference between Google and the government.

Did Google have to succumb to the government lawsuit so readily? Certainly, the threat of a company break-up is scary, but Google and later others did not even put up a fight, seeking the government protection eagerly at a high cost of freedom of all US citizens. A few years earlier Microsoft did not give up in a similar situation. Why did Google betray their customers so readily? As Ron Paul remarked during his farewell speech to Congress, the answer may lie in the lack of virtues of new American leaders.

It is no coincidence that Google Assistant, Amazon’s Alexa, Microsoft’s Cortana, etc. with a possible exception of Siri are spying on its customers and that Google, Facebook or Amazon forward their customer’s private information to the government in bulk. “You can now talk to your house” is the punch line of a popular TV ad, but in reality, it is not your house but Eric Schmidt and Jeff Bezos who listen to you 24/7. Soon, US customers will wake up to that.

Netflix too is no longer serving their customers, but manipulating them in an explicit, broadcast fashion. In 2015, Netflix eliminated excellent peer to peer user recommendation of “viewers like you,” and replaced them with Netflix produced ratings, not surprisingly pushing their shows, Time-Warner style. The collateral damage of this decision was that Netflix made virtually inaccessible 15 years of my ratings. From my point of view, Netflix deliberately destroyed 15 years of my memories. I resent that.

Finally, In a massive blow to the first amendment right to a free speech, Twitter, Facebook, and Google recently joined the old style mass media and implemented both visible and invisible censorship. Through shadow banning and algorithmic filters, the big three resorted once more to the tired AI moniker and “science” to justify the blatant violation of our rights.

But there is a price to pay. When the government itself becomes the real focus of Silicon Valley companies, the service to existing customers becomes less important. Worse, free innovation at protected companies is restricted or outright suppressed. Over time, in a free market, the government protected companies become uncompetitive as new technologies gain market share and eventually replace them.

Do we still have a free market in the US or are the government monopolies perhaps becoming all-powerful Orwellian Big Brothers forcing us to live in Huxleyan Brave New World of leisure paid for by our submission to mind control by mass media and web giants? The time will tell, but the emergent crypto revolution may offer a different alternative. With the internet of value delivering the next generation of social networks, news and financial services both superior to Google and Facebook and at the same time ferociously protecting the privacy of their users, the future of Silicon Valley web monopolies if not secure. Far from it, there is a strong possibility that new decentralized internet of value will replace them.

SEC is trying to stop innovative companies from getting funded directly from their customers and public investors through ICO’s rather than banks here in the US, but with the emergence of distributed exchanges, a physical location of the company will be irrelevant. As we see on a daily basis, crypto pioneers such as Binance, EOS or Telegram can relocate easily around the world to countries like Switzerland, Malta or Slovenia, whose governments are eager to attract the emerging new industry. Internet will continue to evolve, as Jurassic Park says: “Life will find a way.” When that happens, the real estate prices in Bay area will not be the only assets whose prices may finally come down to earth.



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Roman Ormandy

Roman Ormandy


High tech entrepreneur working on wearable personal assistants grounded in neural science and blockchain. Founder of Embody Corp.