Silicon Valley's Secret Love Affair with the State

In March 2023, as Silicon Valley Bank collapsed, America's libertarian, small-government preaching tech leaders rallied for state intervention. The same executives who championed free markets and derided government oversight frantically dialed Capitol Hill, Treasury officials, and Federal Reserve contacts. Within 72 hours, the federal government announced extraordinary measures to protect depositors. The episode scratched out an open secret in Silicon Valley: underneath the anti-government posturing is a deep, dependent relationship with the state.

You've heard the story before - they way they want you to hear it. A scrappy startup in a garage disrupts an entrenched industry, fighting against regulatory capture and bureaucratic resistance. The narrative has become Silicon Valley gospel, repeated in pitch decks and TED talks across San Francisco. But reality tells a different story.

Palantir Technologies built its $100 billion market cap largely through government contracts. The company's data analytics platforms power operations across the Department of Defense, FBI, CIA, and numerous other agencies. In 2022 alone, Palantir secured over $1.5 billion in federal contracts. Peter Thiel, Palantir's OG co-founder, investor and advocate, publicly criticizes government overreach while the company's growth depends on strengthening ties with the very institutions he denounces.

But it's not just Palantir. It's every tech giant. Amazon Web Services hosts classified data for intelligence agencies, Microsoft's cloud infrastructure builds the rails for military operations, and Google's artificial intelligence capabilities power defense systems.

Would the Internet itself exist without this collaboration? ARPANET, the Internet's predecessor, emerged from Defense Department research. GPS began as a military technology. The same pattern continues today with quantum computing, autonomous systems, and artificial intelligence. Silicon Valley's technological revolution stands on the shoulders of government investment.

The marriage of tech and state power follows historical precedent. America's railroads expanded through government land grants and contracts. The aerospace industry soared on defense spending. Even Bell Labs grew from a regulated monopoly. What's different today is the extensive effort to obscure these relationships.

Tech leaders champion disruption while courting federal dollars, decry regulation while leveraging government-granted patents, and preach decentralization while building surveillance tools for intelligence agencies. It begs the question: How do they maintain their cognitive dissonance?

Part of the answer is in Silicon Valley's origin story. The region's counterculture roots—from Stewart Brand to Steve Jobs—emphasized individual empowerment against institutions. This anti-establishment ethos proved remarkably adaptable; it could simultaneously justify pursuing government contracts (disrupting outdated systems from within) and criticizing government oversight (fighting against innovation-killing regulation). The narrative bent both ways.

But Silicon Valley grasped something vital about modern state power: it flows through information systems. The ability to collect, analyze, and act on data increasingly defines government capability. By positioning themselves as essential providers of these systems, tech companies gained leverage without appearing to seek it. They became the plumbing of state power while maintaining an image of independence.

Facial recognition technology is a prime example. Companies developing these systems emphasize private sector applications—retail analytics, phone unlocking, and an ever-easier way to organize your photos. But government contracts, particularly in law enforcement and border control, drive much of the market's growth. The same companies opposing regulation of facial recognition actively sell the technology to state agencies.

This pattern repeats. Social media companies resist content moderation requests while maintaining close relationships with intelligence services. Cloud providers challenge data privacy laws while building tools for government surveillance. The public sees the resistance; the cooperation happens behind closed doors.

Does this hypocrisy matter? After all, public-private partnerships have driven American innovation for generations.

The problem is how tech obscures its dependence on and collaboration with the public sector. It paints itself as a collective of benevolent philanthropists who deign to give their technological marvels to us mere mortals, as though they are providing a service out of the goodness of their hearts rather than honoring their contractual commitment to the state or recognizing that tax payer dollars paved the way to their billions.

This smoke and mirrors trickery has implications. Startup founders internalize a false narrative about the government's role in innovation. Policymakers struggle to have honest discussions about tech regulation. The public lacks context for crucial debates about privacy, competition, and national security.

It creates a concentration of power. When private companies control a state's technological infrastructure while publicly denying that control, accountability becomes nearly impossible. Who oversees the overseers? How can citizens evaluate systems they don't know exist?

The solutions aren't simple. Greater transparency about government contracts would help, but too many details will always remain classified. Stronger oversight could improve accountability, but with Trump openly encouraging the wolves to sojourn with the sheep, that seems entirely unlikely.

The first, realistic step is acknowledging the truth: the purely private tech sector is a myth. Silicon Valley's success was built on a combination of private initiative and public support, sustained by regulation and paid for by the blood, sweat and tears of tax payers.

The next time you hear a tech executive rail against government interference, look deeper. Check their company's federal contracts. Note their patents, research grants, and regulatory exemptions. My guess is, you won't find an inspirational story of independent disruption - you'll find yet another example of the private/public partnerships that shape our world far more than either side cares to admit.