Book Reviews: George Gilder's 'Life After Google' Disappoints
A few years ago, film and television producer extraordinaire Brian Grazer published A Curious Mind. The book described Grazer’s meetings with rather interesting and accomplished people from all walks of life. Though an indifferent reader, Grazer is of the belief that a successful life is “about asking the questions.” And so he does. Grazer periodically meets with people far away from the entertainment world to learn about them, what they do, and why they do what they do. My conclusion upon completing Grazer’s book was that his next “curiosity conversation” should take place with the great George Gilder. So live and fascinating is Gilder’s mind, I thrilled at what Grazer could learn – and unearth - from the policy savant and futurist.
About Gilder, no less a personage than Ronald Reagan quoted him more than any other living writer. And while Reagan never quoted me, I can conclude with reasonable confidence that no living writer quotes Gilder more than I do. To read my opinion pieces and books is to see regular references to Gilder, not to mention how much his thinking has influenced mine sans direct attribution.
I preface my review of Gilder’s latest book (Life After Google: The Fall of Big Data and the Rise of the Blockchain Economy) with the above mainly to clarify up front what a profound influence Gilder has had on me. I also do this to calm any Gilder fans who might view my review of Life After Google as ideological or biased. Gilder remains a heroic thinker to me. At the same time Life (as it will be called going forward) was a disappointment. Billed as a book that will among other things explain the coming “blockchain” revolution, I closed it 284 pages later still unclear about what it is and why it excites so many.
Much of the rest of Life reads as a stream of consciousness chock full of references to some of the biggest names in technology, along with lots of insider-y tech talk. Numerous Ray Kurzweil mentions for instance, Carver Mead too, and lots of passages that techies might enjoy along the lines of:
“At 4.27 am on February 13, 2016, they got the first server up and running with the GTX 980 TI Maxwell architecture. The peak compute rate was 5.63 teraflops, so they had four modules per machine, for a total of 225.2 teraflops, putting them on the list of the world’s top supercomputers with a near-quarter-petaflop cluster.”
The problem for this reader is that much of the book reads like the above passage. Endless references to petaflops and amazing minds, but the references didn’t seem to go anywhere. As for the policy analysis that underlay the tech talk, I found myself disagreeing with the author with disturbing regularity. Though Life sounds like Gilder, it doesn’t sound like him. This review will address some of the disagreements, along with Gilder’s analysis more broadly.
Up front, and as Life’s title indicates, Gilder thinks Google’s days are numbered. As the author puts it, though Google “is by far the most important, paradigmatic company of our time,” it “will fail because its every major premise will fail.” And while Google’s status as the world’s third most valuable company indicates that markets presently disagree with the author, Gilder’s views obviously rate serious attention. They do for many reasons, but most notably when we consider what he said about smartphones around the publication of his book Life After Television:
“The most common personal computer of the next decade will be a digital cellular phone with an IP address…connecting to thousands of databases of all kinds…it will be as portable as your watch, and as personal as your wallet; it will recognize speech and navigate streets; it will collect your mail, your news and your paycheck.”
Gilder predicted all of the above in 1994. He knows things, so when he says Google’s days are numbered, we must listen. Furthermore, history strongly supports Gilder’s contention. When the 21st century began GE was the most valuable U.S. company, yet Google wasn’t even public yet, Amazon was mocked as “Amazon.org,” Apple was just emerging from near bankruptcy…History says that companies we’ve never heard of will soon enough topple the giants of commerce today. It’s what always happens in dynamic economies like ours. Since it always does it’s hard to dismiss Gilder’s not-terribly-out-there prediction about Google. At the same time, it was easier to dismiss his reasoning within Life.
According to Gilder, Google will once again decline because, among other things, it’s free. The author contends that the “Google philosophy smacks of disdain for the money-grubbing of bourgeois society,” that it “celebrates giving – free offerings with no expectations of return – as the moral center of an ideal economy of missionaries rather than mercenaries.” Except that the latter isn’t true, and Gilder well knows it’s not true. Rather explicit in what’s free is that Google will aggressively charge for the search data of its free users who will ultimately buy what is not free. To reiterate, Gilder knows all of this very well. As he notes on p. 42, “When Amazon’s Whole Foods loads up the refrigerator, Google will know. It hopes to use these data to enrich its advertising systems….” You see?
Gilder is far from blind to Google’s business model, and that’s why it’s odd that he would take the profit-disdainful posing of Google’s executives seriously. It’s plainly fakery meant to obscure a powerful interest in profits. Some would call it marketing or branding. And if not, as in if Google’s employees don’t take earnings seriously, their investors surely do. So while history says Google will eventually be replaced (as will the other giants of technology), and that the economy’s dynamism will perhaps lead to its replacement sooner than investors think, it’s hard to countenance Gilder’s reasoning for Google's eventual descent. Time will tell.
Importantly, it’s not just Google that’s being indicted in Life. Gilder seems cranky, and very pessimistic about a whole region. Silicon Valley is rotting, and he’s making blanket assertions about the rot. As he sees it the Valley “has pretty much given up" on progress, and that its businesses are instead focused on do-gooder stuff like hiring “another vice president of diversity.” Gilder goes on to lament the “profitless prosperity” of the Valley’s “hungry herds of ‘”unicorns”’ that yearn to be in league with the locale’s “neo-Marxist” titans who think today’s technology “is the definitive human achievement.” On its own it’s hard to fully embrace Gilder’s rather narrow view of a pretty individualistic place. But if it is in fact indicative of what's actually unfolding in the Valley, wouldn't investors be pricing this negative conformist evolution in brutal fashion?
Indeed, the idea that the Valley is a monolith laboring under the assumption of mass unemployment for others thanks to its technology, along with the end of advance thanks to the impossible-to-surpass brilliance of its technology, is belied by the fact that billions flow there every month in pursuit of new ideas. Markets once again discount things; most notably locales where progress is set to cease.
As for robots and AI, Gilder expertly rejects the popular narrative that robots will put us all out work, and along those lines dismisses what he deems a monolithic view inside the Valley that their innovations will do just that. Except that Gilder's contention that Valley types believe robots will put us mere mortals out of work is more evidence that the futurist is taking the Valley's poses way too seriously. Why would they invest in advances meant to serve the needs of people heading for the dole? After that, the brilliant supply-sider in Gilder knows Say's Law intimately: production is an expression of a desire to consume, but also a prerequisite. All demand is preceded by production. Importantly, this works both ways. Not only would Silicon Valley's great minds not produce for those on aid, their incentive to produce more broadly would be shrunken. Implicit in the feverish investment in otherwordly companies is that there will be rather amazing things for Valley types to exchange their brilliant production for. Robots and AI won't put us out of work as much as they'll make us fall in love with work thanks to the automation stripping work of all that's disagreeable about it. Silicon Valley businesses will achieve nosebleed valuations precisely because they'll propel the individual productivity of workers outside the Valley to remarkable levels that will make their present prosperity seem Dickensian by comparison.
Regarding the region’s “neo-Marxism,” surely Gilder knows that it’s all an affectation. Let’s not forget that most who live and work in Silicon Valley didn’t grow up there. They chose the Valley, and they did so because they aim to get rich. All the affectations are just their sheepish way of hiding how much they lust for wealth. Better yet, even if they don’t care about wealth or profits, their investors once again do. Gilder also knows much better than this writer the failure rate among Valley start-ups. According to Andy Kessler (whom Gilder knows rather well), 9 out of 10 start-ups there die. It’s a reminder that the “unicorns” are the exceedingly rare seen that obscure the bankruptcy norm. More important, it’s a reminder that whatever the posing of the Valley’s inhabitants as Democrat, socialist, Green, or even anarchist, underlying it all is a rather ruthless profit motive that is the polar opposite of Marxist. Gilder’s sweeping generalizations about people and a place ignore just how many billions of dollars are there in search of innovation that will render the present rather primitive. Can investors be this dense as to fund what Gilder claims is disdainful of profits and wealth? Gilder doesn’t address the question.
Instead, he contends that the future is the “security first” cryptocosm. He writes that “Capitalism requires companies to serve their customers and to accept their proof of work, which is money.” He argues that in offering their services for free, “companies devalue their customers.” Apparently blockchain technology will author this change in how business is done, but at least for this reader, Gilder’s description of blockchain was once again insufficient when it came to creating an understanding of why it so excites technologists. This is where the book really became a string of consciousness as the great Gilder seemingly went on an endless search for Satoshi Nakamoto, the creator of the protocol used in blockchains and the bitcoin currency, and whom Gilder describes as the “first prophet of life after Google.” This possibly fruitful search for Satoshi (perhaps an Aussie by the name of Craig Wright) lent Life a level of weirdness that was unexpected. Giving Gilder the benefit of the doubt, all great advances sound odd at first. Maybe blockchain’s opaque nature (try to get anyone to explain to you what in the world it is) is the source of its eventual genius.
As for bitcoin itself, it’s a junk currency. It is because in terms of volatility, it exhibits all the dollar’s worst qualities in exponentially greater fashion. While one bitcoin was exchangeable for roughly $800 when 2017 began, it famously fetched over $20,000 for a brief spell in early 2018. Readers can obviously see why it can’t function as a currency in its present state. I’ll pay you/lend you/sell to you for “for x many bitcoin” would clearly lead to chaos. Money is only money if it’s stable, or at least reasonably so. Bitcoin isn’t, so it can’t replace the dollar. At least for now. That the latter is a given amounts to a blinding glimpse of the obvious, but Gilder oddly billed what he knows intimately as some kind of revelation brought to him by a 6’5” airline pilot. Ok, but Gilder knows that money isn’t money absent stability. His insertion into Life of an alleged seer from the skies to explain something he knows well merely added to the book's strange tone.
At the same time, and assuming blockchain is ultimately about private money lubricating trade and investment, amen to that. A capitalist economy that can create flying machines, air conditioning, and supercomputers that sit in our pockets can surely replace the floating dollar with something that’s stable as a measure of value. Figure that bitcoin had the chance to gradually be Amazon to the dollar’s WalMart, but the creator(s) of it focused on supply of the currency over stability. They erred in much the same way that modern monetary economists have in their relentless need to dismiss Adam Smith's common sense. As Smith made plain, the “sole use of money is to circulate consumable goods.” Money is a measure that facilitates investment and the exchange of wealth. Nothing more, nothing less. Its genius comes from its stability as a measure, not scarcity as so many faux "sound money" types witlessly presume. Capitalists should find replacing the dollar a breeze. Let’s hope.
Indeed, as Gilder has long pointed out, floating measures of money have led to over $5 trillion worth of currency trading each day. As he’s articulated so well, the loss of productivity is sick inducing. All these great minds trading measures rather than curing cancer, adding wings to the driverless car, or putting Google out of business. Gilder’s been right about the horrors of floating money for a long time. Yet that’s why his analysis in Life was so disappointing.
A third of the way through Life he writes that “Unmoored money changes the culture of capitalism. Wall Street banks relish volatile currencies, their downside protected by government. Main Street and Silicon Valley want stable money for long-term investments, the upside guaranteed by the rule of law.” No, this is incorrect. At least about Wall Street.
What we call “Wall Street” was much healthier when the dollar was strong, and as Nathan Lewis has pointed out, rather stable from the 1987-2002. With a stable dollar, the investment that Gilder rightly contends “Main Street and Silicon Valley want,”’ surged. Goldman Sachs’s investment banking and capital markets divisions were healthiest – by far – during the last relatively stable dollar era, as was its wealth management division. Well, of course. Wealth surges when money is relatively reliable as a measure of value simply because investment does. Crucial is that these business lines are quite a bit more profitable than always ephemeral trading profits are.
Fast forward to the 2000s, and George W. Bush departed from the dollar policies of Ronald Reagan and Bill Clinton. But far from elevating Wall Street, the floating dollar led to its demise. If anyone doubts this, they need only look up a ranking of the top five investment banks in 2000 versus 2010. Stated simply, floating money has been disastrous for Wall Street as have the bailouts been. For Gilder to presume that Wall Street benefits from the chaos of weak, floating money, and the inevitable financial crack-ups that both bring, is for him to ignore history.
Gilder adds that government benefits from lousy money, that it “fabricate[s] dollars by the trillions out of thin air to pay its bills.” Ok, but how? Implicit in such a belief is that the producers of real goods and services gladly hand them over for money that buys quite a bit less. Sorry, but markets aren’t this stupid. People aren't this stupid. Let's never forget that all trade is products for products; money just a measure that facilitates the exchange. Yet Gilder would have us believe governments armed with printing presses and powerful computers can skip the production part by producing dollars that command the world's plenty. Markets once again don't work this way. Crucial here is that Gilder knows this. He knows that England was able to run up debts that were 250% of its GDP in the early 1800s precisely because the pound had a stable definition in terms of gold, yet now he’s migrated to the neo-Austrian view that governments backed by central banks can "print" as much spending as they like? Along these lines, toward book’s end Gilder goes alarmist on readers about government debt pumped up by unmoored money having us “in a [debt] crisis now.” No. The latter is not the Gilder I've been reading for decades. Without defending government waste for even a second, Gilder has long made the point that government debt isn’t the crisis, but socialism is. That’s near exactly what he wrote in Knowledge and Power, so it was more than disappointing to see him get caught up in what doesn’t matter.
Gilder also takes aim at hedge funds and other computerized forms of trading as the profitable creators of “no net wealth,” but that’s not fair. These businesses are an effect of floating money, and because they are they facilitate the creation of enormous wealth. Indeed, where would the world be without brilliant minds mitigating the chaos of money that lacks an anchor?
At the same time, Gilder beautifully writes that “wealth is not a thing or a random sequence. It is inextricably rooted in hard won knowledge over extended time.” So true, but let’s once again not blame hedge funds or Wall Street. The real money is always and everywhere in moving capital to its highest use on the way to crucial information. Low-entropy money makes wise capital allocation more likely and less risky at the same time. Let’s have it without presuming something ill on the part of those who mitigate the chaos that stable money personifies. If you irrationally hate hedge funds you’ll quite rationally despise life without them much more.
And while it’s certainly true as Gilder notes that elite American education is ridiculous, and ever focused on “stopping progress, barring new power plants, dismantling chemical facilities….”, not asked by the author is when it hasn’t been ridiculous. More important, who cares that elite education is ridiculous? As Gilder wrings his hands about how universities are “teaching the students how to stop things” rather “than how to create them,” the technology world that he runs in is a reminder that none of the absurd campus stuff has any real-world relevance. Getting right to the point, school can’t teach what they’re doing in Silicon Valley, and it never could. Gilder once again knows this.
Elite education is an effect of wealth creation as opposed to a driver of it or a barrier to it. The richer the U.S. gets, the more ridiculous its schools will become. It’s paradoxically a sign of progress, so when Gilder mused about “a historic transition of intellectual and economic leadership from the old American elites to a prophetic new generation” produced by schools such as Guatemala’s Francisco Marroquin, it almost felt like he was kidding around. No doubt free markets are crucial to progress, but since ½ of all the world’s VC funds migrate to California, it’s hard to countenance a theory that a murderous country like Guatemala is soon to replace it thanks to one school teaching classical economic theory.
Toward the end of Life, Gilder concludes that it’s “time to move beyond the slippery slopes of the Internet and provide an immutable database on which to build new structures of trust and truth.” It’s hard to know what was exactly meant, but it’s fair to say that Gilder will be right. Google will eventually be replaced, and eventually we’ll look back on the Internet as rather primitive.
Unknown is whether Gilder’s specific vision will come true. It’s hard to say one way or the other mainly because Life After Google seemed to indicate that Gilder himself is unclear. So while the book was a disappointment, George Gilder isn’t. Whatever the great or not so great of Life, his many fans (including this one) will continue reading him and learning from him as we search for truth through this most brilliant of minds.