Welcome to the Snapchat Economy

It’s Silicon Valley’s latest darling, the Next Big Thing. What amounts to a few lines of code, it’s a company with no assets and no revenues. The flagship product represents nothing more than the incremental evolution of the text message—except this one self destructs, the sort of differentiating innovation that could be objectively classified as a gimmick.

None of this would stop Facebook from offering Evan Spiegel $3 billion for the company he started just two years ago. Google stepped up soon after with the hopes that an extra billion would tempt the 23-year old college dropout. There’s talk that Yahoo could join the bidding war. This is the Snapchat economy.

Spiegel brazenly declined. What moxie, the tech world fawned over his apparent audacity. Way to not be Instagram, they swooned—the consensus, of course, being that the popular photo app’s founders lost their nerve and cashed out too early for a measly billion and change. These days, a message timer or a photo filter is all you need to take over the world, as long as you have the fortitude to keep holding out. $1 billion isn’t cool. You know what’s cool? $100 billion.

It’s the ultimate mutation of our capitalist society. We are no longer consumers. We’re just users. If the old-school economy wanted our money, the new kids on the block only require our attention. At least Wall Street was direct, eyeing our hard earned dollars. This latest iteration of the Valley wants our soul. It is perhaps the tech industry’s greatest innovation. They’ve succeeded in building a business model around the fact that we’re broke.

On the other hand, corporations have never been more flush. Apple is sitting record cash reserves thanks to interest rates near zero, deemed necessary by the Federal Reserve given the ailing economy. They’re the Valley’s real customers, anyway. They will either buy you, or, if you hold out long enough, eventually start paying you. Google makes the bulk of its revenues by selling ads to other companies. So does Facebook. Seduce the people, then proceed to sell them out. Snapchat will likely follow a similar path. With 400 million transient photos processed daily, the company is well on its way.

If the idea of a free app anyone can download presents an illusion of inclusivity, we remain on the fringe, irrelevant voyeurs of what remains an exclusive club. You can look, but you can’t touch. This is the nature of the new economy, where the 99 percent can play, but they can never truly participate in a meaningful way. Not only do we not have the means, we are no longer necessary. If the idea of capitalism was that we would vote with our dollars, then in Silicon Valley, capitalism is obsolete.

Google prodigy Sebastian Thrun learned this lesson the hard way. After inventing the self-driving car and Google Glass, he founded Udacity with the aim of disrupting higher education. Why limit myself to a single classroom when I can teach hundreds of thousands around the world, the Stanford professor boldly wondered. His initial online course went viral, and with Thrun as CEO, venture capitalist firm Andreessen Horowitz plunked a cool $15 million into the budding venture. Virtually overnight, Thrun had become the “godfather of free online education.” The New York Times proclaimed 2012 to be “the year of the MOOC,” or massive open online course, the clunky moniker for Thrun’s game-changing app.

While the dream of liberating the masses with quality, commoditized education was romantic, it was also short-lived. The results of Thrun’s pilot program were appalling. Less than 10 percent of the 160,000 students who signed up completed the course. Providing college credit as motivation, in a partnership with San Jose University, produced a meager boost. Only a quarter of the students who ponied up $150 for a remedial math MOOC passed, versus 52 percent for those who actually went to class, forcing the school to suspend the program. More pressingly, Udacity wasn’t making money. “Free” hardly pays the bills.

As successful tech entrepreneurs often do in the face of failure, Thrun pivoted, trading his save-the-world idealism for Silicon Valley’s trademark pragmatism. Rather than tailor his program toward debt-laden students from low-income high schools, like the ones drawn from the SJU trial, Thrun shifted his focus towards Fortune 500 firms, presumably to the delight of his anxious investors.

In the last year, Udacity partnered up with a dozen companies including Nvidia, Autodesk, and Intuit. The curriculum is composed of classes sponsored by Google, essentially a certification boot camp designed to attract developers to the search titan’s various platforms. Even the much bally-hooed partnership with Georgia Tech, where students are charged $6,600 to take classes in the online master’s program, is ultimately a clever corporate training program in disguise. AT&T, which provided $2 million in seed capital, plans to enroll a sizeable contingent of its own employees.

Yet again, corporate interests take precedence. After all, they’re the ones paying the bills, and as such, the real customers of the second great tech boom. And so it’s little wonder that Snapchat is already worth billions, even when its users can download it for free. As the saying goes, “if you build it, they will come.” But by “they,” they really mean each other. Because in the Silicon Valley economy, it’s never actually about us.

@sfnuop