Henry Farrell on "The political economy of billionaire derangement"

Henry Farrell, The political economy of billionaire derangement, Programmable Mutter, July 15, 2026.

He opens with two somewhat different quotes about billionaires, Tyler Cowen more or less in favor of them and Tim O’Reilly deeply skeptical of them. He suggests we breed them together:

To be clear: this hybrid would be notably different to Tim’s argument, and likely actively objectionable to Tyler. I alone am to blame. But surprisingly, there is inadvertent support for some of its key elements from Peter Thiel, who is a surprisingly valuable chronicler of the conditions that give rise to billionaire derangement, as well as a living example of it (the Antichrist is here!).2 Here, I’m drawing both on lectures that Thiel gave at Stanford, as summarized by his amanuensis Blake Masters, and the resulting co-authored book, Zero To One. These sources have a lot to say about the connections between entrepreneurship, kingship, and personal eccentricity.

The conclusion I draw is that the forces that Tim identifies, combined with specific aspects of the political economy of Silicon Valley, help explain the derangement of certain Silicon Valley billionaires and their epigones. Old style princes were notorious for their tendencies to deranged behavior, which came not just from their inbreeding, but their power, and the unwillingness and inability of others to contradict or check them. So too, modern princes.

Not too long ago, many people, including Tyler, hoped that the advance of classical liberalism would go hand-in-hand with the growing power of tech billionaires, advancing both causes at once. Now, politically influential tech billionaires have visibly lost contact both with reality and with anything that could plausibly be described as classical liberal values. See the screen shotted quote above. Rather than making snide asides about billionaire derangement syndrome, it might be time for such people to confront what actual billionaire derangement means for the ideological straddle that they have relied on for so long. That is even more so, in a world where markets as well as market-makers are being devoured by the passions.

To summarize the particulars of my theory: Thiel’s lectures and book provide good, if incomplete evidence that the princely passions described by Hirschman didn’t disappear, but went underground. Commerce and power were fused into a new ideology of entrepreneurial virtù that became highly influential among the founder community in Silicon Valley. This combined with Silicon Valley’s (and popular culture’s) tendency to connect genius with eccentricity, not simply selecting people who seemed strange, but compounding their strangeness through self-reinforcing feedback loops. Finally, this all happened in an intimate social environment of founders and funders. Billionaires know each other and measure themselves and their success against those they consider peers, in a dense entangled clique that commingles high degrees of mutual influence with rivalries and jealousies.

Farrell then goes on to quote Thiel’s book at some length, analyzing while going along. And so:

In short then, Thiel - both as reported by Masters and in collaboration with him - suggests that Silicon Valley is a place where being a founder is tantamount to being a king. You have a greater chance of succeeding if you are weird, and if you succeed, your weirdness will likely feed upon itself in feedback loops of positive reinforcement. Finally, it is a closely interconnected social system where the key people are conjoined in a dense tangible clique. They observe each other all the time, and are observed by others for cues of what you need to do to become a made man. [...]

SpaceX perhaps marks a culmination of the kingly ideal, a moment in which, as Tim puts it, someone like Musk can “raise enormous amounts of capital while freeing himself from any restraints from those who provide it, so that he can spend the proceeds on Mars, humanoid robots, artificial intelligence or whatever next satisfies his ambition.” But it is also the moment in which someone who is visibly profoundly disturbed has briefly become the world’s first trillionaire. And it is one in which others want to copy him.

And then a bow to Keynes’s “animal spirits” in the market place:

I’ll finish by noting that this is just one aspect of a greater change. Deranged billionaires like Musk and Thiel are both partly responsible for this transformation, and notable symptoms of it. Still, they are not the whole of it. The reason that the SpaceX IPO temporarily succeeded, even though the numbers make no sense whatsoever, is that investment markets too are ruled by vibes. Tyler’s co-blogger, Alex Tabarrok, devoted years of his life to making the case for prediction markets, arguing that they would distill market wisdom into a more general source of knowledge on a multitude of topics. Now they are here, but all too often it’s spirits, not wisdom, that they seem to be distilling. Even more so for crypto. Matt Levine makes a joke about “Bleebzorx Tokens” to explain the worthlessness of memecoins, and someone else invents Bleebzorx Tokens to make a tidy profit.

There’s more at the link.