Silicon Valley Takes the MAGA Pill

Silicon Valley has officially taken the MAGA pill. Although it’s been drifting towards the right for the last few years, Elon Musk and other top leaders in the tech universe have recently announced they’re spending millions to support former President Trump’s election campaign. Musk, who reportedly pledged $45 million a month to Trump’s campaign but then backed away from the commitment, has started putting both thumbs and the entire rest of his body on the X/Twitter scales. Meanwhile other major venture capitalists including Marc Andreessen and Ben Horowitz of the Valley’s most prominent investing firm, a16z, have likewise announced they are officially throwing their weight behind former President Trump.

A combination of a toxic ideology and toxic investments in crypto have pitted Silicon Valley, long a liberal bastion except where certain government regulations come into play, against the Biden administration. In Trump, they see someone corrupt enough to offload crypto onto the U.S. government’s balance sheets before it crashes. In the MAGA movement, they see a weapon against what they view as creeping constraints of liberal “woke” ideology. With their support for Trump, they’re hoping he can, for a price, make their problems go away. 

Two broad policy changes on antitrust and interest rates by the Biden administration explain the material basis for SV’s turn away from the Democrats. After working in an environment of sub-2% and often effectively 0% interest rates since 2009, Silicon Valley got used to making big bets on companies that promised growth and market share above all else, and that would take time to pay off. The cost of debt being virtually zero made it easy to throw money at everything that came their way, and lower interest rates made these companies’ theoretical future cash flows more valuable in the present. 

Uber is the perfect example of the zero-interest-rate startup ecosystem. It promised to take over the global ride-hailing market by beating taxis on cost, driving them out of business, and then solving self-driving cars to eliminate their costly drivers. A monopoly in a global market with zero labor costs was a story too rich for VCs to let pass by. However, the economics of taking over taxi services and creating self-driving cars are tough on any balance sheet.

Founded in 2009, it wasn’t until last year that Uber finally turned a quarterly operating profit. Its cumulative losses since 2014 total $31.5 billion, and its long-term outlook still rests on solving self-driving cars to allow the company to take off, as its IPO documents explain. It only made sense in a ZIRP (zero interest rate policy) environment that pushed VCs to ignore profitability for growth and sustainability over disruption. 

A pandemic and a Russian invasion of Ukraine later, and the ballgame had changed. Interest rates quickly rose above 5% in 2022 — that meant annual payments on investments, and thus profitability, not growth, became the priority.

The other significant policy change Biden’s administration undertook was cracking down on antitrust violations. For their pre-2022 investments, VCs needed to go public or get acquired as soon as possible. But with Lina Khan heading the Federal Trade Commission, that calculus changed as well. Suddenly, the FTC challenged what Silicon Valley considered a typical acquisition for Facebook in court. While the FTC lost that particular case, they have since won a string of victories in antitrust and labor protections, including successfully blocking Nvidia’s $40 billion acquisition of Arm. Due to higher interest rates, VC’s investments are turning sour at the same time that relying on acquisitions as a golden parachute is much more difficult. 

Cryptomania is the last gasp of ZIRP tech investing and may be the most flawed example of it. The crypto industry is a ticking time bomb of debt and evaporated fund money without a bailout in sight. It is no coincidence, then, that the VCs most exposed to crypto’s potential bubble bursting are the ones most loudly taking the MAGA pill.

For example, Andreessen & Horowitz, one of the largest and most successful VC shops, invested $7.5 billion in crypto companies alone. Now, they’re worried those investments are headed not to the moon but possibly to zero. Sequoia lost $150 million just from FTX’s collapse.

In 2021, Silicon Valley poured $30 billion into the crypto industry at the height of the feeding frenzy. Those investments were made before interest rates rose from less than 0.5% in 2021 to over 5% today, heightening the exposure if any particular startup goes to zero. Exchanges are closing down, and crypto’s path to profitability is murkier than any ZIRP-era software startup. As always, Bitcoin’s price has stayed impressively high, but the broader crypto market is in trouble.

At the same time that the economics of crypto is increasingly dimming, the Biden Administration has given crypto the cold shoulder, seeing the industry as something fundamentally extra-legal and simply bad for society. The Securities and Exchange Commission has pointedly refused to write new rules for crypto that exempt the industry from basic requirements all other financial instruments must clear. Gary Gensler, the SEC Chair, has blasted crypto as “rife with fraud, scams, bankruptcies, and money laundering” and promised stricter enforcement moving forward.

Several high-profile crypto founders, including FTX’s Sam Bankman-Fried, Luna’s Do Kwon, and Binance’s Changpeng Zhao, have been convicted of fraud. Gensler’s position is that most crypto coins are inherently fraudulent—they are “unregulated securities” like a stock or bond and, therefore, illegal to sell. The crypto industry maintains it is something entirely new, outside the SEC’s jurisdiction, and needs new rules from Congress. 

In response to an administration more hostile to crypto, some in Silicon Valley have turned to the open corruption of Republicans for help. Most recently, Senator Cynthia Lummis (R-WY) proposed a “strategic reserve fund” of Bitcoin in which the US government buys and holds onto BTC for at least 20 years as a hedge against inflation. In practice, this is a bailout fund for BTC, hilariously pitched as a sound investment and diversified backstop for the dollar should the $27 trillion treasury markets fail.

Some might ask what good it is for emergencies like the global treasuries market failing if you can’t sell it for another 20 years, or what kind of crisis would be alleviated by a strategic reserve of BTC anyway. But crypto is about going to the moon; get your ‘logic’ out of its face. Plus, former President Trump recently spoke at a crypto conference, promising to “end the persecution” of the crypto industry and deliver them from regulation altogether. And he’s a man who’s never been too proud to be bribed, no matter how stupid the scam is. 

Still, the material interests and policy needs don’t wholly explain the MAGA transformation of much of Silicon Valley. There’s also a cultural, vibes-based piece to the growing separation. While sunny California has always been considered very liberal, Silicon Valley, in particular, has had a contrarian, libertarian ethos that, like much of the right these days, has curdled into something more sinister. These VC MAGAnauts have left libertarianism behind and now demand something the writer John Ganz has called “to borrow a term from the history of apartheid, baasskap—boss-ism,” a kind of dictatorship at work with companies unbound by any government regulation. 

For example, Elon Musk wants to rule his companies with an iron fist. In his increasingly delusional view, nothing should get in the way of a man saving the human species in ways small and personal (having as many babies as possible with as many different women as possible to combat declining birthrates) and grandiose (ensuring humans become a “multi-planetary species” by colonizing Mars). According to bossism, in these quests the government should have no power to restrain Musk.

If he runs his electric vehicle company in a way that workers allege is racist, he should be allowed to because he’s saving the planet. If the National Labor Relations Board is strengthened, leading to stronger unions, particularly in the auto sector, that’s an unacceptable hurdle for the modern-day Henry Ford. If he wants DEI initiatives and labor protections to be weakened to fight the woke mind virus and to wield power over his employees to make it challenging to sue him after he shows you his penis at work, he is, after all, the savior of our species taking us to a new planet.  

This privileging might of the executive connects us to today’s MAGA movement. As Ganz later noted, Trump’s personal style is that of the mobster boss, the Don. In it, the red-pilled VCs see the same mirage many other people see in Trump: a weapon capable of vanquishing the vast forces that are holding people like them back. Musk may want to get rid of Democrats for policy reasons, like fearing the cost of a union, but more than that, he wants to be able to rule over his workers with an iron fist. All the liberals who believe in constraints on him, like DEI initiatives or higher taxes, must be defeated, and Trump is their champion.

In one of his many manifestos, Marc Andreessen called for accelerating innovation and technology, decrying anyone who wanted any regulation as a “de-cel,” an enemy of civilization and progress. This is a fundamentally anti-democratic ideology, one motivated by, as Peter Thiel once wrote, people who “no longer think that freedom and democracy are compatible.” If democracy stands in the way of a boss’s freedom, democracy has to go. Most fundamentally, a democracy in which their vote is equal to anyone else’s is a threat to their ideology as great men; on this, they agree with Trump. Swallowing the MAGA pill is a hope for all that to go away with the proper medicine.