Silicon Valley Learns to Love the Government — at Least When it’s Friendly
- 01Theme 1: The Death of Free-Market Orthodoxy in Silicon Valley
- 02Theme 2: OpenAI's Hard Pivot to Enterprise
- 03Theme 3: AI's Public Approval Problem Is a Real Political Risk
- 04Theme 4: AI Video Is Still a Live Investment Category
- 05Theme 5: AI Startup Pricing Is Unsettled
"Silicon Valley Learns to Love the Government — at Least When It's Friendly" Eric Newcomer | March 27, 2026
1. Key Themes
Theme 1: The Death of Free-Market Orthodoxy in Silicon Valley — Industrial Policy Is Now Mainstream
What was once a minority position held by Founders Fund and a16z has rapidly become the consensus across tech, finance, and government. The China competition narrative is doing the ideological heavy lifting.
"I think you have to use industrial policy now," said Dimon, while hedging that he came to that view 'reluctantly.'"
"This new bipartisan consensus holds that onshoring manufacturing and energy production, opening the checkbook for military technology, and building lots of AI data centers are all part of the same mission to strengthen America against its geopolitical rival."
"General Catalyst's Hemant Taneja said it was an urgent matter, noting that only 11% of all factories globally will be in the US by 2030."
Theme 2: OpenAI's Hard Pivot to Enterprise — Consumer and Creative Products Are Casualties
OpenAI is aggressively narrowing its focus to enterprise, agentic coding, and API revenue. Consumer and media-adjacent products like Sora are being cut to free up GPU resources. This has major implications for which AI companies will win in creative verticals.
"The company is locked in a major battle with Anthropic to win the agentic coding and API businesses — allocating GPUs to a resource-hogging, essentially revenue-free product like Sora is a luxury the company cannot afford."
"OpenAI is now a couple weeks into its hard pivot into being an enterprise oriented company, jettisoning projects like ballast from a hot air balloon."
Theme 3: AI's Public Approval Problem Is a Real Political Risk
Industry insiders are beginning to grapple with the possibility that public anxiety about AI — particularly around job displacement — could generate a political backlash severe enough to threaten the entire transition. Yet the forum showed little self-reflection about whether the industry's own behavior is contributing to the problem.
"Vinod Khosla predicted that 'the single biggest issue in the 2028 election will be fear of AI.'"
"Sen. Mark Warner warned that youth unemployment could hit 30 to 35 percent within four years and economic anxiety at that scale would fuel populism from both the left and right. That could threaten the entire AI transition. 'If we don't figure this out we're going to get screwed,' he said."
Theme 4: AI Video Is Still a Live Investment Category — Just Without OpenAI
Despite Sora's collapse, the article explicitly signals that AI's integration into Hollywood is accelerating. The competitive set has quietly shifted to non-OpenAI players, including Chinese models.
"Sora was not a top-of-the-line video model. Google's VEO, Runway ML, Luma Labs, and increasingly the Chinese-made Seedance are better. Even if the film purists hate it, Hollywood is embracing AI at an accelerating rate."
"This hardly foretells the death of AI's integration into movies."
Theme 5: AI Startup Pricing Is Unsettled — Hybrid Models Are Winning for Now
The old SaaS subscription playbook doesn't cleanly apply to AI, and companies haven't converged on a solution. The dominant approach is hybrid pricing, but the model mix varies significantly by company type.
"Unlike SaaS, running AI for several thousand users can quickly run down margins, so the old playbook of selling subscriptions doesn't neatly apply."
"Few AI companies are switching to a fully usage-based pricing structure... AI application companies are also predominately hybrid, but more have stuck with the traditional subscription model."
2. Contrarian Perspectives
Perspective 1: Silicon Valley's Pro-Government Shift Is Transactional, Not Principled — And the Public Knows It
The article argues that the tech industry's embrace of industrial policy isn't ideological conviction but rather political dealmaking — and that this cynicism is precisely why the Hill & Valley agenda polls poorly. The industry's selective outrage (silent on Trump corruption, vocal on Biden sins) undermines its credibility with the public.
"Loyalty to the government, though, apparently depends on favored policies. Stephens said in a fall podcast that tech leaders turned on Biden when they realized that 'all of this time and effort and money that they put into courting the Democratic establishment didn't really give them the connectivity to drive any of the change that they wanted to see.'"
"Perhaps the public doesn't support the Hill & Valley agenda in part because they see it as self-serving, and don't appreciate the 'connectivity' with an unpopular administration whose affections are based on fealty and money. That's not just a messaging problem."
Perspective 2: Anthropic's "Doom" Messaging May Be a Competitive Liability, But Courts Are Now Protecting It
While Anthropic was being criticized at the Hill & Valley Forum for spreading AI pessimism, a federal judge simultaneously ruled that the government's attempt to punish Anthropic for that messaging was unconstitutional — reframing "responsible AI" communication as protected speech and creating a legal shield for dissenting voices in the industry.
"Anthropic CEO Dario Amodei, who consistently cites AI risks including mass job-losses, was backhand blamed for spreading doom about AI. Yet at the very same time he was being subtly dragged by his rivals, US District Judge Rita F. Lin in San Francisco was observing that the government's designation of Anthropic as a 'supply chain risk' looked like punishment for disagreeing with the White House on AI regulation."
"Lin blocked the supply chain designation, ruling that the administration's actions amounted to 'classic illegal First Amendment retaliation.' Anthropic, she wrote, was being knee-capped for the crime of 'asking annoying questions.'"
Perspective 3: OpenAI Was Never Serious About Hollywood — The Disney Deal Was a Warning Sign, Not a Milestone
Conventional wisdom treated the OpenAI-Disney deal as a landmark moment for AI in entertainment. The article reframes it as a case study in Silicon Valley's casual disrespect for Hollywood — a deal built on misaligned incentives, unclear internal strategy, and a conflict-of-interest-laden board connection.
"One executive at a movie studio told us he'd get different answers from different OpenAI employees — one would say it was all for robotics; another would say it was a consumer AI video play; and another would say it was indeed an effort to infiltrate the moviemaking process."
"A company whose core technology rides on a cavalier interpretation of IP rights is not going to fit well into the temperamental and litigious entertainment industry."
"When OpenAI killed Sora, Disney was given a less than 24 hours' notice."
3. Companies Identified
| Company | Description | Why Mentioned | Key Quote |
|---|---|---|---|
| OpenAI | Leading AI lab | Killed Sora product; pivoting hard to enterprise, competing with Anthropic for agentic coding/API market | "The company is locked in a major battle with Anthropic to win the agentic coding and API businesses." |
| Anthropic | AI safety-focused lab | Designated a "supply chain risk" by the government; court ruled designation was unconstitutional First Amendment retaliation | "Anthropic was being knee-capped for the crime of 'asking annoying questions.'" |
| Disney | Entertainment conglomerate | Signed a $1B deal with OpenAI for Sora integration; given less than 24 hours' notice when Sora was killed | "That deal is a blemish on former CEO Bob Iger's record." |
| Shield AI | Defense tech company | Raised $2B; cited as example of defense tech investment momentum | Mentioned in the Week in Short summary |
| Kleiner Perkins | Venture capital firm | Raised $3.5B across early and growth stage funds; cited as a comeback story under Mamoon Hamid | "Kleiner Perkins lands $3.5 billion in early and growth stage funds as comeback builds under Mamoon Hamid." |
| Runway ML | AI video startup | Named as a superior AI video model to Sora; active in Hollywood | "Google's VEO, Runway ML, Luma Labs, and increasingly the Chinese-made Seedance are better." |
| Luma Labs | AI video startup | Named alongside Runway as a stronger Sora competitor | Same as above |
| Asteria | AI film studio | CEO provided the epitaph for Sora; company positioned at intersection of AI and Hollywood production | "Sora 2 was AI slop. Thank God it's gone." |
| General Catalyst | Venture capital firm | Managing partner cited manufacturing decline stat as urgency argument for industrial policy | "Only 11% of all factories globally will be in the US by 2030." |
| Founders Fund | Venture capital firm | Long-time advocates for rebuilding American industrial capacity; central to Hill & Valley ethos | "For at least half a decade, some of the Founders Fund and Andreessen Horowitz investors who've embraced the Hill & Valley ethos have been arguing that America needs to shore up its ability to build things." |
| Andreessen Horowitz (a16z) | Venture capital firm | Co-cited as early advocates for industrial policy and American manufacturing revival | Same as above |
| Thrive Capital | Venture capital firm | Major OpenAI shareholder; Josh Kushner's firm; Bob Iger was a venture partner there during Disney-OpenAI deal | "Iger is pictured above with Thrive's Josh Kushner." |
4. People Identified
| Person | Description | Why Mentioned | Key Quote |
|---|---|---|---|
| Jamie Dimon | CEO/Chairman of JPMorgan Chase; honorary chairman of corporate America (per author) | Endorsed industrial policy at Hill & Valley Forum, signaling mainstream business acceptance | "I think you have to use industrial policy now." |
| Vinod Khosla | Founder of Khosla Ventures | Predicted AI fear will be the defining issue of the 2028 election | "The single biggest issue in the 2028 election will be fear of AI." |
| Trae Stephens | General Partner at Founders Fund | Gave stump-speech-style address on tech's patriotic duty; also candidly explained why tech turned on Biden | "When founders start companies, they should ask how does this strengthen the country that is making this success possible?" |
| Hemant Taneja | Managing Partner at General Catalyst | Cited alarming manufacturing data to argue urgency of industrial policy | "Only 11% of all factories globally will be in the US by 2030." |
| Fidji Simo | Chief of Apps at OpenAI | Architect of the "no side quests" mandate that led to Sora's cancellation | "The sun in this case was app chief Fidji Simo's crusade against so-called 'side quests.'" |
| Dario Amodei | CEO of Anthropic | Criticized at the forum for "spreading doom"; simultaneously vindicated by federal court ruling protecting Anthropic's speech | "Backhand blamed for spreading doom about AI." |
| Bob Iger | Former CEO of Disney; Venture Partner at Thrive | Criticized for the Disney-OpenAI/Sora deal, which collapsed with minimal notice to Disney | "That deal is a blemish on former CEO Bob Iger's record." |
| Mamoon Hamid | Managing Partner at Kleiner Perkins | Leading the firm's comeback; oversaw $3.5B fundraise | "Kleiner Perkins lands $3.5 billion… as comeback builds under Mamoon Hamid." |
| Sen. Mark Warner | U.S. Senator (D-VA) | Warned of 30-35% youth unemployment within 4 years due to AI; framed it as existential political threat | "If we don't figure this out we're going to get screwed." |
| Sen. Bernie Sanders | U.S. Senator (D-VT) | Filed a bill proposing a moratorium on AI data centers | Mentioned in the Week in Short as filing a "moonshot AI data center moratorium bill" |
| Rita F. Lin | U.S. District Judge, Northern District of California | Blocked the government's "supply chain risk" designation of Anthropic as unconstitutional | "The administration's actions amounted to 'classic illegal First Amendment retaliation.'" |
| Brynn Mooser | CEO of Asteria (AI studio) | Delivered the definitive industry verdict on Sora's quality and demise | "Sora 2 was AI slop. Thank God it's gone." |
| Matt Mahan | Mayor of San Jose; California gubernatorial candidate | Argues Democrats must prioritize affordability over attacking tech; reduced homelessness in San Jose by a third without raising taxes | "Rare among prominent Democrats in his willingness to say out loud that California's failure to fix housing, homelessness, and energy costs has handed the MAGA movement its best ammunition." |
| Josh Kushner | Founder of Thrive Capital | Noted for Thrive's major OpenAI stake and Bob Iger's venture partner role there during the Disney deal | Pictured with Bob Iger in the article |
5. Operating Insights
Insight 1: Killing Low-Revenue, High-Compute Products Is Now a Competitive Necessity at Scale
OpenAI's Sora decision is a case study in GPU prioritization. For any AI company operating at scale, resource-hogging products with no clear revenue path are not just inefficient — they are strategic liabilities in a race where compute allocation determines who wins enterprise contracts. The "side quests" framework is a useful forcing function for product leaders.
"Allocating GPUs to a resource-hogging, essentially revenue-free product like Sora is a luxury the company cannot afford."
Insight 2: Hybrid Pricing Is the Default for AI Startups — But It's a Holding Pattern, Not a Strategy
Most AI companies have landed on hybrid pricing (subscription + usage) not because it's optimal, but because neither pure subscription nor pure usage-based models work cleanly. Founders should treat this as an active area of competitive differentiation, not a settled question.
"Unlike SaaS, running AI for several thousand users can quickly run down margins, so the old playbook of selling subscriptions doesn't neatly apply."
"Few AI companies are switching to a fully usage-based pricing structure... AI application companies are also predominately hybrid, but more have stuck with the traditional subscription model."
Insight 3: Don't Sign Strategic Partnerships With Companies That Don't Have Internal Alignment on the Product
Disney's Sora deal is a cautionary tale for any enterprise or media company considering a deep integration with an AI provider. When the AI partner's own employees can't agree on what the product is for, the partnership is built on sand.
"One executive at a movie studio told us he'd get different answers from different OpenAI employees — one would say it was all for robotics; another would say it was a consumer AI video play; and another would say it was indeed an effort to infiltrate the moviemaking process."
6. Overlooked Insights
Insight 1: Chinese AI Video Models Are Quietly Becoming Competitive in Hollywood
Buried in the Sora post-mortem is the mention of Seedance, a Chinese-made AI video model, as one of the better alternatives to Sora — named alongside Google VEO and Runway ML. At a moment when geopolitical tensions are high and the Hill & Valley Forum is rallying against Chinese tech competition, the fact that a Chinese model is gaining traction in Hollywood represents a quietly significant market development.
"Google's VEO, Runway ML, Luma Labs, and increasingly the Chinese-made Seedance are better."
Insight 2: The Anthropic Court Ruling May Create a Legal Precedent That Protects AI Companies' Policy Speech
The ruling by Judge Lin is framed primarily as a news item about Anthropic's vindication, but its implications are broader: it establishes that the government cannot use procurement or supply-chain designations as weapons against AI companies for their public statements on regulation. This could have lasting effects on how AI companies engage in policy debates.
"Lin blocked the supply chain designation, ruling that the administration's actions amounted to 'classic illegal First Amendment retaliation.' Anthropic, she wrote, was being knee-capped for the crime of 'asking annoying questions.'"