The Barbarians are at the Gates in Silicon Valley


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Various newscasts are assailing the fairy tale stories and Ivory Towers that originate from Silicon Valley.  As one of the largest gorillas in technology, Google has been slapped with a US$2.7 billion fine for anti-trust violations. The other technology gorilla, Facebook , faces similar penalties when Germany imposes fines in the millions whenever Facebook publishes anything that remotely resembles hate speech.  And I am sure that restriction will be broadened to malicious content. Even the VCs are being attacked. Various women entrepreneurs have come forward about sexual harassment while seeking funding throughout Silicon Valley.  VCs such as 500 startups have had their co-founders resign. With these claims, they will all face hundreds of thousands of dollars in legal fees and millions of dollars in settlements.  And Uber has as its crowning achievement of having disparate legal claims against it – from regulatory in its operations to sexual harassment.  The question will be whether Silicon Valley will adjust its hubris and reconsider its consistent mantra that disruptive technology has no boundaries.  Or will they fail to learn their lesson and continue their path to many legal minefields?

In my previous blog, I related that Google, in spite of its General Counsel’s unmerited confidence in administrative success during the antitrust proceeding, would face a fine by the EU. https://jrzarco2001.wordpress.com/2015/08/29/google-anti-trust-european-community-law-international/ European antitrust law treats market dominance as being illegal per se.  Obviously, Google and its General Counsel failed to notice that. Instead, they assumed that what applies in the U.S.A. will work in Europe. Not a chance. The bottom line cost for its legal misstep: over $2.7 billion.  The EU rules and regulations, the only good, positive light for Google, have limits on much a company can be fined. Otherwise, its fines would have been substantially higher. Now its senior management team has to huddle during the July 4th weekend to determine the next steps to oblige the European government. And, it will not be surprising that similar antitrust legal assaults will originate from other countries, including the United States.

What about the other elephant, Facebook? In another blog, I also criticized how social media makes billions, displaces legacy newspapers, and never holds itself accountable for tortious abuses within its peer to peer platform. https://jrzarco2001.wordpress.com/2017/05/05/the-dilemma-facing-internet-content-platforms/  The German government has concluded the same: the Facebook platform must regulate its own content.  And it should be held accountable for negligence in doing so. One thing to note about the German regulations – finite time periods.  German culture is such that Facebook must abide within that timeline or face the consequences.  Don’t expect the German government to hand out a “Get out of Jail” card. Notwithstanding that, I can only see another Facebook shortfall.  Facebook claims that it will develop AI to filter unwanted content and hire additional reviewers, about an additional 3,500.  And find that malicious content within its 2 billion users.

Will that work? The Economist and the Chinese are doubtful.  The average Chinese content provider, operating with very strict governmental enforcement policies, hires over 100,000 reviewers while applying some AI to handle a population of 1 billion users to screen its content.  I, myself, have done considerable due diligence to be able to identify software capable of screening multimedia content without metadata. MITRE has also researched this area ad infinitum for the federal government and could only screen metadata and subtitles in the long run. What can Facebook accomplish in several months with 7,500 reviewers that both the Chinese and MITRE cannot? I am betting that dog won’t hunt. The truth has more direct, financial impact: hiring 100,000 reviewers will severely reduce Facebook’s profit margins.  So now Facebook’s dilemma is hiring the necessary resources or pay the fines, just as I surmised in my earlier blog.

Now comes the fun part, the Silicon Valley investors.  Several female entrepreneurs now have accused various investors of sexual harassment. In 2015, one case made the local tabloids where the woman lost at trial, Ellen Pao vs. Kleiner Perkins, against one of the larger firms in SV.  Now, with various accusations coming forward, we all wonder whether Pao’s legal loss was the fault of the quality of her lawyers, not from the actual events.  And we are all familiar with Uber’s situation. One female entrepreneur, Lisa Curtis, who underwent through some form of harassment, knows me personally. I recall that she was discouraged from discussing these acts without jeopardizing her fund-raising efforts. Therefore, SV male population has some growing up to do.

What seems to be the prevalent trend in SV is to ignore or flaunt rules and regulations domestically and internationally under the label of “disruptive technologies.”  Indeed, an early co-founder of Intel who developed the 8086 chip, a writer and journalist from Santa Clara, who flaunted the “creativity of Silicon Valley, and a technology PR senior manager invited me to lunch in Silicon Valley last year. The common theme during that lunch – scientists make great business managers (an attribution to Grove/Intel), and no other parts of the planet can create new technologies for the masses.

What we can conclude is this: in SV, one can startup a company unless you are a woman or over the age of thirty; SV is in the forefront of “every” disruptive technology and will control whatever market worldwide without regard to local regulations; SV can make public statements about its capabilities to screen content, however unrealistic or even false it might be.  Again, I always stated that the motivation here is not changing the world, but it is all about money and fat profit margins.  And it seems that the moneytrees, that is, the VC firms, in that NorCal region turn a blind eye to this behavior, unless the dirty laundry is exposed. I guess that, with their hands not so clean, when now accused of sexual harassment, they managed with loose reins their investments.  We will see how long will that continue.

 

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About Juan Ramón Zarco, SVVGP 胡安•雷蒙•扎尔科

Juan Ramon Zarco, 胡安•雷蒙•扎尔科, Silicon Valley Ventures Growth Partners llp, Hygieia Healthcare Technologies Company, AllRest Technologies LLC, Crimson Growth Partners LLP, jrzarco2001@yahoo.com, is an experienced as CxO, General Counsel and Secretary to public and private companies with global operations. Established track record of producing practical, revenue-focused solutions. As Counselor and Secretary, demonstrating vision, integrity, and sound business judgment, to CxOs. Managed complex, strategic transactions, M&A, contracts support, PE Financing, IPO, SEC compliance, Corporate/HR governance, IP licensing, Budgeting, Staff, outside counsel management, International market access strategies, Domestic & foreign government relations and advocacy. Creative in designing and implementing market access strategies. Practices law beyond conventional model with low-overhead and project-based fees. Effective at managing departments, formulating marketing strategies, balancing budgets, and implementing cost-saving measures. Extensive in-house and private practice experience, advising clients on commercial, corporate, international business, and technology law and policy. http://www.docstoc.com/video/89135472/make-your-business-an-international-presence; http://www.youtube.com/watch?v=fx5gijf3yoc For Sprint, he managed iDen international development in Southeast Asia, Middle East, and Africa, and contractual issues with Verizon. In Private Equity, he worked with Pegasus in vetting international investment deals and interim President for portfolio companies, such as Data Foundation, a data storage company, handling marketing, strategy, fund raising, and accounting. Before Pegasus, Mr. Zarco, as CLO and V.P. of Corporate Development, played a principal role in the structuring, international expansions for 2 telecom companies, U.S. Cable Group and Viatel, Inc. in financing and M&A deals exceeding $200 million. Mr. Zarco earned a J.D. from NYU Law School, M.B.A. from Cornell, and B.A. from Williams College; is fluent in Spanish, Portuguese, French, and German, with working knowledge of Russian, Arabic and Japanese.
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One Response to The Barbarians are at the Gates in Silicon Valley

  1. Pingback: What do Silicon Valley and the Italian dish, Pasta Carbonara, have in Common? | Simple Advice for Entrepreneurs on Capital, Strategy, Legal Services, Management, Entrepreneurship, VC Funding and other things – Juan Ramon Zarco

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