Neil Malhotra on Silicon Valley's Shift Away From Gavin Newsom

The Silicon Valley Shift: Examining Tech Elite Involvement in the Newsom Recall

The outcome of Tuesday’s recall election concerning California Governor Gavin Newsom may be influenced by a focused segment of influential individuals within Silicon Valley. These tech industry leaders are actively supporting efforts to remove him from office, a surprising development considering their historical support for Democratic candidates.

To gain insight into this situation, we consulted with Neil Malhotra, a political economist and professor at Stanford Business School. He shared findings from his 2017 research on the political viewpoints of the tech elite, and explained the reasons behind their apparent change of heart regarding Governor Newsom. The following is a lightly edited version of our discussion.

Origins of the Research

NM: My research was spurred by historical observations. Throughout American political history, significant shifts in parties and policies have frequently been driven by powerful business interests and substantial wealth. The era of the “robber barons,” including figures like Leland Stanford, serves as a prime example. It appears we are currently experiencing a comparable period.

Distinct Attitudes of Silicon Valley

TC: How do the perspectives of individuals in Silicon Valley differ from those of the broader California and national populations?

NM: It’s important to note that “Silicon Valley” is used as a representative term. Many individuals fitting this description reside in other areas, such as Boston, Austin, the Research Triangle, and Los Angeles. However, the attitudes of this group of technology leaders are demonstrably unique and unlike those found elsewhere in the population.

I’ve termed them “liberal-terian.” Unlike libertarians, they generally hold liberal views on social issues and globalization, including immigration and free trade. They also advocate for wealth redistribution, demonstrating strong support for universal healthcare. However, they strongly oppose government regulation.

Regulation, Redistribution, and the Labor Market

NM: This distinction between supporting redistribution and opposing regulation is what sets this group apart, even among affluent individuals in the United States.

TC: Does this opposition to regulation extend to labor laws, restrictions on skilled immigration, or the gig economy?

NM: They are staunchly supportive of immigration and the gig economy, and oppose any restrictions on the labor market.

Furthermore, they generally oppose labor unions, differentiating them from other segments within the Democratic Party. Their core belief is that allowing the market to operate freely, followed by wealth redistribution through taxation and social programs, will maximize economic growth while still promoting equality. They believe that imposing restrictions beforehand will stifle innovation and reduce overall prosperity.

Sincerity of Redistribution Rhetoric

TC: Many in the tech sector discuss wealth redistribution but simultaneously protect their own assets or those of their companies. What are your thoughts on the sincerity of their commitment to this concept, based on your research?

NM: They express support for high income taxes. However, this may be self-serving, given that much of their wealth derives from capital gains. It’s plausible they would be less enthusiastic about capital gains taxes, not necessarily due to the direct impact on their wealth, but because they fear it could hinder innovation.

Chamath Palihapitiya, a prominent figure in Silicon Valley, cited California’s high taxes as a reason for his support of the recall.

Key Issues Driving Recall Support

TC: Were taxation concerns a primary driver for recall supporters, or were other issues more prominent?

NM: The COVID-19 restrictions were a significant factor. There’s a sense that these tech entrepreneurs identify with entrepreneurs in general, including small business owners, restaurant owners, gym owners, and small landlords. They believe the government has unfairly penalized these individuals throughout the pandemic.

Additionally, they generally oppose public sector unions, such as teachers unions. Consequently, the restrictions on school reopenings resonated strongly with this demographic.

Impact of Financial Resources

TC: Governor Newsom’s campaign has significantly outspent his recall opponents. Do you believe this financial advantage will substantially affect voter turnout?

NM: Every factor has a marginal impact. The substantial funds are being used for advertising and get-out-the-vote initiatives. However, a genuine movement can often overcome financial disparities. Hillary Clinton significantly outspent Trump, and while those funds undoubtedly helped, the crucial question remains: who is truly motivated to vote? The $70 million may be necessary to persuade those who are not particularly enthusiastic about participating in this election to cast their ballots in support of the Governor.

Potential Benefits for Tech Leaders

TC: Several tech leaders are supporting this recall. How might they benefit from Newsom’s removal? Does this represent a gamble on creating instability?

NM: Congressman Ro Khanna provides an interesting case study. In his 2014 campaign against Mike Honda, he presented himself as a Silicon Valley technocrat and received support from Sheryl Sandberg and other tech luminaries, but lost the election. He then adopted a more progressive stance, becoming a national co-chair of Bernie Sanders’ campaign and aligning himself with the “squad” on the far left.

This shift is revealing. It’s almost a microcosm of the Democratic Party initially embracing the tech community, and then becoming increasingly critical of it. This recall could potentially reshape those alliances once again.