Eurasia Group | Risk 7: The White House vs. Silicon Valley

Risk 7: The White House vs Silicon Valley

3 January 2017
silicon big U.S. President-elect Donald Trump speaks as PayPal co-founder and Facebook board member Peter Thiel (C) and Apple Inc CEO Tim Cook look on during a meeting with technology leaders at Trump Tower in New York U.S., December 14, 2016. REUTERS/Shannon Stapleton

TRUMP HAS SIGNALED that he is willing to take on US corporations, a move that's mostly about putting political points on the board by announcing better “deals” for the American people. Carrier, a maker of air conditioners, gets a tax break to keep a few hundred jobs in the country. Boeing and Lockheed Martin must sharpen their pencils to win government contracts.  Ultimately, these are deals that are made to be signed.  Corporate America and big banks are well represented on Trump's cabinet and are ideologically aligned with much of the policy he wants to pass. Trump will surely go after some high-profile organizations that he, for whatever reason, has a personal gripe with, and many of those companies will take a tumble.  But that's a problem only for individual firms, not a structural issue. 

The conflict with Silicon Valley is different.  Technology leaders from California, the major state that voted in largest numbers against Trump in the election, have a bone to pick with the new president. Aside from Peter Thiel, the valley's entrepreneurs have fundamentally different world views from the new president.  Trump's political agenda leads with national security, while Silicon Valley's core ideology centers on freedom and privacy.  Trump wants jobs, while Silicon Valley is driving workplace automation.  And while support for science was one of Obama's strengths, it's at best a second-tier priority for the Trump administration, and at worst an inconvenient truth.
Technology leaders from California, the major state that voted in largest numbers against Trump in the election, have a bone to pick with the new president.

There are a few arenas in which this fight will take place.  First is new media.  Trump's mastery of social media, big data, and the ability to take advantage of algorithms for news and fake news was critical to his election victory.  Silicon Valley chiefs were slow to recognize the problem (and a libertarian streak generally led to a “hands off” approach); but after Trump's election, information and new media firms made limiting the so-called alt-right's influence a top priority. That means trying to limit the spread of fake news and creating programs that cut off bots that act as individuals.  Trump's preoccupation with the media makes this a critical area of concern for him. It's a direct threat to his ability to maintain his popularity—and the appeal of his brand—and one he'll feel the need to combat. 

The flip side of this conflict is security. Trump sees political influence over intelligence and the broader national security complex as a key component of presidential power, and he would seize the opportunity to expand government control in response to terrorist attacks against the US or US assets abroad. (The terrorist threat is likely to grow, given that Trump's rhetoric creates targets for the Islamic State and other terrorist organizations.)  That means we'll see more fights like the one between Apple and the FBI over access to data after the San Bernardino attacks. A constellation of IT firms will face off with the National Security Agency over potential security threats.  An early test of the issue could be a move to strike down an Obama-era executive order seen as limiting intelligence collection, a move some Trump appointees support. This is an area where Trump will likely push back, not least because it's a lever he can use to ensure more favorable treatment from new media.
And finally there's the jobs angle. During the campaign, Trump made the return of jobs a messaging priority, but he discussed the problem only in terms of globalization rather than technological change, which is now the far larger issue for US workers.  As automation expands, Trump will need to address it. Firms that aren't friendly to him, especially those whose business models center on the use of artificial intelligence and taking labor out of the marketplace, will offer a juicy political target.  Example: driving is literally the top one or two sources of employment in all 50 US states. And many of those jobs are set to disappear over the course of the Trump administration.  It's hard to imagine Trump not directly going after the firms most easily vilified as responsible for job destruction. 

It's not all open warfare. Trump's support for corporate tax reform and more streamlined government regulation will be welcomed by business leaders in Silicon Valley, just as elsewhere. And his anti-immigration policies are likely to hit Mexico, Central America, and the Middle East well before he considers the roll back of H-1B visas that would harm domestic industry. But for the most important driver of the American (and the global) economy, the political headwinds will come as a dramatic change.