Sam Altman sits behind his desk with his knees pulled up to his chest, eating dried apricots. He's 29, but even the most laissez-faire bartender would card him. His hand is forever grabbing his hair while he thinks, making it stick up in Einsteinian tufts. He says his main interest is indeed physics, though when he got to Stanford University he majored in computer science because "I already knew a lot about physics." His T-shirt reads "make something people want," the slogan of Y Combinator, the accelerator he runs. In exchange for 7 percent equity, it hands out $120,000 and three months of Wi-Fi, coffee, parking, and free advice to brand-new startups. Airbnb and Dropbox are a couple of its successes. Asked why people think Silicon Valley tech entrepreneurs are such jerks, Altman finishes an apricot, twists some hair between his fingers, and says, "It's not helped by the large number of arrogant f-‍-‍-s in Silicon Valley."

Behind this week's coverDavid Brandon Geeting for Bloomberg BusinessweekBehind this week's cover

Lately there's been a backlash against the arrogant f-‍-‍-s. Over the past 18 months or so, liberal-on-liberal violence has broken out as demonstrators rallying against the gentrification of San Francisco slashed the tires, broke the windows, and, in one instance, purposely barfed on the private buses Google (GOOG) and Yahoo! (YHOO) use to transport employees from the city to their offices 40 miles south in Mountain View and Sunnyvale. In a January letter to the Wall Street Journal, 82-year-old Silicon Valley billionaire venture capitalist Tom Perkins likened these attacks on the 1 Percent to Nazi persecution of the Jews, which, like most Nazi comparisons, did not elevate the conversation. At least two people have been attacked in San Francisco for being Glassholes, which is to say, wearing Google's much-mocked eyewear with a built-in camera. When Mary Elizabeth Phillips, a 98-year-old who has been living in San Francisco since 1937, faced eviction, protesters swarmed the real estate firm that bought her apartment building, blaming tech money (and landlord avarice) for her circumstance.
San Francisco had an unemployment rate of 10.1 percent in January 2010, before Mayor Ed Lee offered incentives to tech businesses to stay in the city; now it's at 4.4 percent and driving companies to Oakland, where the rate has gone from 17.6 percent to 8.9 percent, and is far, far lower for baristas. These aren't problems most of the world would object to, but even positive disruption causes negative "externalities," as a Palo Altan might put it. In April protesters put it another way, organizing outside the San Francisco home of a 37-year-old Google Ventures partner, putting up fliers with smiley faces that read:

Kevin Rose is a parasite. … The start-up he funds bring the swarms of entrepreneurs that have ravaged the landscapes of San Francisco and Oakland. … We are the ones who serve them coffee, deliver them food, suck their c-‍-‍-s, watch their kids, and mop their floors.

Mike Judge, a former engineer who created the TV series Beavis and Butt-head and King of the Hill and the movies Office Space and Idiocracy, made HBO's sitcom Silicon Valley, which skewers the wholly superior attitude of engineers. "Up until recently the Occupy Wall Street people didn't seem mad at Steve Jobs or much of the tech world at all. Even though that's the .001 Percenters," he says. Occupy Silicon Valley has begun.

Most of these protests are about the cost of housing and income inequality. They're also about whether the U.S. has invested too much of its resources in twentysomething coders who make smartphone apps, and whether it's given these guys too much trust with e-mails, Web searches, and personal photos. Facebook (FB) took a hit last month when it revealed that it had conducted a psychological experiment on unwitting users; all the big tech companies are getting slammed for giving info to the federal government (despite the fact that many refused and were court-ordered to do so). Google's optics couldn't be much worse: the giant, dark-windowed buses; the cooperation with the National Security Agency; Big Brother cars with rotating cameras soaking up "street views" for Google Earth; buying Boston Dynamics, which makes military robots that can't help but evoke Hollywood cautionary tales; the "don't be evil" slogan that inevitably raises the question whether they are, in fact, doing evil.

Given the applause at a hacker conference for a "Titstare" app, which allowed dudes to share photos of themselves staring at cleavage, and Snapchat co-founder Evan Spiegel's sexist leaked e-mails (from when he was at a fraternity at Stanford), it also seems like the avenging nerds might treat women worse than jocks. In short, people are wondering if these strivers who keep assuring us that they're changing the world are actually complete douchebags.

Photograph by Chip Somodevilla/Getty Images

Part of the problem is that the market is over-rewarding the inanities on smartphones. "When you have people doing things that seem inconsequential, that aren't changing the world as they claim … people really hate that. That's a special kind of arrogance," says Altman, noting that he gives company founders almost no general advice at Y Combinator, except "don't overpromise" and "don't become one of the arrogant founders." He adds that when Yo, an app that does nothing but post the word "yo" to a phone, gets $1.5 million in funding at a $10 million valuation in July, it's hard to keep people from questioning all of Silicon Valley. That's why he uses his own money to invest largely in energy, biotechnology, and artificial intelligence. "People feel we're very lucky and should be working on meaningful things," he says.

If Yo is easy to deride, it's also not that representative. More often than not, when the Valley's startups brag that they're doing what established corporations and government can't, they're right. While the government negotiates with car companies to tweak corporate average fuel economy standards, Elon Musk has made an electric roadster everyone wants. That law requiring car companies to phase in backup cameras starting in 2016 might save 69 lives a year; Google's self-driving cars have yet to cause a collision. Uber is a far more practical solution to drunk driving than public service announcements. If someone told you that a map of 140-character texts where everyone shares what they're eating is going to change the world, they would have seemed like idiots until Twitter (TWTR) went on to become the main tool for organizing the protests in Tahrir Square. In August, Israelis started using Yo to warn each other about rocket strikes, according to the BBC and other news outlets.
Arrogant or not, Silicon Valley continues to lead the economy. Old-school American optimism is still the rule in the Bay Area, where immigrants are welcome, hard work is rewarded, and everyone believes their children will have a better life. Bismarck Lepe, a 34-year-old Stanford grad who, at 5, was helping his Mexican migrant farmer parents pick strawberries in Oxnard, Calif., started Ooyala (online video) and Wizeline (product management). He says all you need to know about the Silicon Valley ethos is in Steve Jobs's 1997 Apple (AAPL) ad:

Here's to the crazy ones. … The ones who see things differently. They're not fond of rules. And they have no respect for the status quo. You can quote them, disagree with them, glorify or vilify them. But the only thing you can't do is ignore them. Because they change things. … Because the people who are crazy enough to think they can change the world, are the ones who do.

"You could really change 'crazy' with 'arrogant,' " says Lepe. "Because you have to be arrogant to change the world."
Photograph by David Paul Morris/BloombergOn Tuesdays the Y Combinator startup founders gather for dinner and a speaker; two recent ones were Facebook founder Mark Zuckerberg and venture capitalist Peter Thiel. On these evenings, the accelerator's Mountain View offices seem like a developing-world coffee shop—two dozen young dudes and three women wearing name tags and typing on laptops on a series of long tables with cheap folding chairs. The orange walls are covered with foam soundproofing, which would make sense if computer programmers made noise. Because the accelerator doesn't make second-round investments, founders are free to admit their shortcomings in group meetings that feel a bit like therapy sessions. At one in July, it quickly becomes clear that tech arrogance is partly a front to win partners, investors, and recruits. One guy sighs, admitting he can't figure out a way to keep users on his site long enough to get their e-mail addresses; others try to cheer him up with ways he might trick them into it. They all lament that there are regulations keeping him from having people deliver prescriptions and suggest he go to some malls and ask older women what kind of weird over-the-counter pills they take. If these world-changers-in-training are insensitive about the harm of disruption, it might be because they've disrupted their own lives: moving from other towns or countries, turning down well-paying jobs to take small salaries, living in the office, and being at least dimly aware that their businesses are almost surely going to fail.

They sit under a portrait of angel investor Ron Conway and his dog that was originally a birthday gift from Laurene Powell Jobs, Steve Jobs's widow. Conway quickly rejected it, and it has now become an object of kitsch—a signifier of how alien Silicon Valley's ethics are to the East Coast. Acting like a self-satisfied rich dude is not the right kind of arrogance. What would be cool is if someone oil-painted your awesome code.

Photograph by David Paul Morris/Bloomberg

Altman, like most Silicon Valley guys, dresses as though he's still in middle school. Y Combinator funded his company, Loopt, a Foursquare competitor that lets people share their location with friends. He started Loopt in 2005 after dropping out of Stanford, then sold it in 2012 for $43.4 million. Since his windfall, he's bought a few cool cars (engineers tend to like cars), but he still rents an apartment in San Francisco with his two brothers and drinks out of the same Ikea glasses he had in his Stanford dorm. He finally bought a bed frame a few years ago after water leaked on the mattress he kept on the floor and it grew a surprising amount of mold. "In most cities like New York and Los Angeles, they value short-term cash or compensation. But in Silicon Valley there's a lot of deferred investment, and that builds companies," he says. "In New York there's pressure to have a house in the Hamptons or send your kids to private school. The high-status thing here isn't to drive a superfancy car or have a big house or new clothes. It's to angel invest. The bigger the risk, the better." Yes, they're obsessed about how much each other's companies are valued at, but that's their highly competitive way of keeping score. When people mocked Spiegel for turning down $3 billion from Facebook, they didn't understand that he doesn't want more money; he wants to build and control a huge, influential company. Most Silicon Valley entrepreneurs don't start companies just to get rich. They're more ambitious than that.

Mike Furlong, 23, saw a lot of spending and yelling as a bond trader at Citigroup in New York. He came to Y Combinator to start a site that groups people together so they can buy small slices of hedge funds. "Wall Street doesn't care about what's right," he says. "They care about what's legal. Here they care about what's right." Even if tech executives overstate their abilities to change the world, isn't that a better goal than bottle service at the Cosmopolitan of Las Vegas?

Photograph by David Paul Morris/Bloomberg

This has been part of the Valley's DNA since the beginning. In a CNN special from 1999 that explored the excitement and extravagances of the dot-com boom, venture capitalist Steve Jurvetson challenged the show's assumption that Silicon Valley is a West Coast Wall Street. "It's almost criminal to think someone would say, 'I'm just in it for the money.' The reason you're doing this is because you want to change the world," he said. Reached by phone in July, Jurvetson thought the Valley's goals hadn't changed; they'd become, if anything, grander. "There are increasing numbers of entrepreneurs who think globally, dealing with the rich-poor gap or health care," he said. "They're not thinking about Obamacare, because that's too small. They ignore the existing education infrastructure and create this new platform for MOOCs [massive open online courses]. You just ignore everything that's stuck in a government quagmire and just create a new system."

Danae Ringlemann, 36, runs the crowdfunding site Indiegogo out of her brick-walled offices in San Francisco's SoMa district, where guitars hang from one wall, employees' bicycles line another, and another has been decorated during a graffiti lesson. The word "empower" is written in lights near the elevator. She props her foot, in a cast from a late-night sidewalk fall in Norway, on a table under a giant chandelier. A rare San Francisco native, she's got thick-rimmed glasses and long blond hair parted in the middle. Her parents ran a struggling moving company that declared bankruptcy when she was in college. She went to a private high school (on scholarship), where math class often meant sitting around in a circle and debating math problems. Later this month, she's attending Deepak Chopra's Sages & Scientists symposium.

Through Indiegogo, she tries to get funding for everyone with a deserving idea, including artists lacking commercial ambitions. Providing funding to people far outside Silicon Valley, somewhat ironically, has made her very Silicon Valley company huge. "My dad would always tell me the world doesn't like change," says Ringlemann. "It likes to say no. It's not trying to be evil. It just doesn't know better. It's your job as an entrepreneur to fight against that. They'll be glad you did later. But don't expect them to thank you for it. Business is an incredible source for good. It's probably the best source for good." In Silicon Valley, even hippies sound like Ayn Rand.

Photograph by Patrick T. Fallon/Bloomberg

Lawrence Lessig, an author and Harvard Law professor who founded the Center for Internet and Society, has argued that West Coast code (programming) is in conflict with East Coast code (laws). Earlier this year he started a super PAC that's spending $12 million on ads for candidates that want to get rid of super PACs. Lessig says the inchoate libertarian tendencies of technology leaders in the first decade of this century have been replaced by the practical frustration of dealing with government. "This one Yahoo engineer, a real genius, was talking to me about his research on auction theory," he says. "I said to him, 'Do you ever think your talents would be better deployed on health care or Social Security?' He said, 'I went to the Department of Health and Human Services that was dealing with drug pricing because I had an idea, and they wouldn't let me in.' " The U.S. has such a backward way of resourcing government, he says, that it can't make use of novel ideas.

At HealthTap, a startup on University Avenue in Palo Alto that allows users to video-chat with a local doctor for an evaluation, founder Ron Gutman, 41, is even more serious about making the world a better place. "In the interview, if they don't talk about wanting to do good and make a difference, we don't hire them. No matter how good they are, that's the end of the interview process," he says. He puts down his iced green tea and walks to the front of the upstairs half of his office, in front of the wooden stand-up desk, the Buddha statue, and potted flowers for the start of his weekly all-company meeting. There is more clapping here than at a volleyball game. They clap for me when I'm introduced. They clap again after I say hi. "The world will change the day we launch HealthTap. It will change," he says, to applause. At the end of the meeting, people have to talk about how something they're doing relates to one of the company's core values. Then all 50 employees do the wave.

Gutman has a claim to changing the world. More than 14,000 people have written him e-mails saying his app has saved their lives. And not many would disagree with his mission statement, either: "I think health care is a human right. And I think government is horrible at providing that right," he says. An Israeli immigrant, Gutman eats the same salad from Sprout Café, a nearby take-away place, each day for lunch. He says he isn't putting ads on his site, passing up tens of millions of dollars, because it would compromise his content. "How many salads from Sprout can I eat if I have a lot of money?" he asks. " 'Change the world' are the three most abused words in Silicon Valley. But my life mission is to change the world in a very meaningful way."
Photograph by David Paul Morris/BloombergBesides the money, one thing that quickly inflates the egos of tech founders is all the opportunities to get funded. Naturally, critics are quick to point out that these opportunities seem to favor a familiar demographic group: white guys. That's not quite right, though.

Yes, technology entrepreneurs are overwhelmingly male, and fewer women than ever are entering the field. In 2012, 18 percent of computer science majors were female; in 1985 it was 37 percent. But they're not all white; the Valley's startups are full of Indians, Chinese, Koreans, Pakistanis—and a few WASPs.

"White is a euphemism for blending in," explains Elissa Shevinsky, the co-founder of Glimpse, a Snapchat competitor that lets users send photos and videos that quickly disappear. Shevinksy grew up with a single mom and went to public school in Queens, N.Y. When she took her first job, she says, "I did my best to minimize the ways I would come across as other. I just went along with the jokes. I didn't feel like I had the choice. There were just so many porn jokes. Even built into the code." When she applied for funding at an accelerator, in an effort not to make people nervous about her gender, she wrote that "I discovered that I have the sense of humor of a 24-year-old boy."

Photograph by Patrick T. Fallon/Bloomberg

Shevinksy says a small percentage of the people she's met are brogrammers—hard-drinking MIT-frat guys whose idea of dating was having Boston University women bused in for parties—but brogrammer culture dominates enough to tolerate two guys at the TechCrunch Disrupt SF hackathon presenting the Titstare app. Shevinsky quit Glimpse after her business partner tweeted his defense of Titstare. He apologized, and she returned, with the new title "Ladyboss."

For women working in the Valley, Shevinsky says, things are slowly improving. Y Combinator's board now has four female partners and runs an event for women called the Female Founders Conference, and Google and Twitter's transparency about the lack of women and minority employees (70 percent male, 91 percent white and Asian for Google; 70 percent and 88 percent for Twitter) is making tech companies focus on diversity. But it's not Silicon Valley's natural state to worry about such issues. "There's this freewheeling libertarianism that allows a lot of things," says Shevinsky. "One of my first startup lawyers told me that startups are an HR disaster. They violate a whole lot of laws, and that's overlooked. And that's a good thing, because otherwise those companies couldn't go to the next level."

Silicon Valley has its own politics, too. Call it liberalitarian. The fact that liberal and libertarian positions sometimes conflict—smaller government and gun control, helping the poor, deregulating industries—doesn't bother most, since they think about politics so rarely. When they do, it's generally to prove who is the more politically correct. Mozilla co-founder and Chief Executive Officer Brendan Eich was discovered in April to have given $1,000 to support California's anti-gay marriage proposition back in 2008. He was forced to resign. That doesn't happen in the fast-food chicken industry.

The extreme libertarian side of Silicon Valley has talked about making Silicon Valley its own state (a genuine 2016 California ballot proposition put forth by venture capitalist Tim Draper); sea-steading, by creating floating cities off the U.S. border (an actual institute is working on this, with a $500,000 contribution from Thiel); offices on cruise ships to evade immigration laws (Blueseed, a company with $9 million in pledged funding); and creating a virtual world with its own virtual laws (a proposal from venture capitalist Balaji Srinivasan of Andreessen Horowitz, in which Bloomberg LP, which owns Bloomberg Businessweek, is an investor). Patri Friedman, a grandson of economist Milton Friedman who works on the sea-steading plan, says, "Silicon Valley's ways of doing things are significantly better ways to solve most problems. Applying them to government is not hubris. We've got these 19th century and 20th century governments, and they're not doing well in the 21st century. Government has all the traits of an industry ready for disruption."
On a recent Friday evening, Aaron Levie, the 29-year-old co-founder of Box, which provides data storage to companies, shows off his huge Los Altos office of more than 1,000 people. Levie, who takes notes by writing on his hands, was called "Screech" in his Mercer Island (Wash.) high school because his Jewfro and manic energy reminded classmates of the Saved by the Bell nerd. Levie says he's in discussions with other CEOs about how to engage with government regulators more informally. It's a struggle—the regulators seem not to understand the latest technology. As he walks, he asks each employee by name if they're working on anything cool. They're not, but that doesn't deflate his enthusiasm. There's a giant yellow spiral slide, sounds of ping-pong, and a sign telling guests to log in to the free Wi-Fi with the password "Q2MakeM0mPr0ud!" Levie lived in his office for years and only got a bed recently, when his girlfriend, a public interest lawyer, demanded it. "There wouldn't have been any utility in having a bed. Building an Ikea thing required too much time," he says. "We still don't have air conditioning. We'd have to call someone."

Levie has joined (CRM) CEO Marc Benioff in SF Gives, a $12 million fund for local charities that Benioff raised in 60 days from tech companies soon after the Google bus protests began. has more than 5,000 employees in San Francisco, who take up almost 1.5 million square feet of office space. "We would be the biggest example of what's wrong, but no one is pointing the finger at us as the problem, thank God," says Benioff. A fourth-generation San Franciscan whose grandfather created the Bay Area Rapid Transit system, he says he thinks Salesforce has been insulated from the protests because it gives 1 percent of equity, profits, and employee time to local charities. "Our people are tutoring their kids, and when they go to the hospital, our employees are there to greet them," he says. "Our employees are inside the homeless shelter. So we have some good karma out there."

Erin McElroy agrees. A 31-year-old activist who taught herself to code, she created the Anti-Eviction Mapping Project, which shows all the evictions in San Francisco and names the landlords. "I'm not saying I have no critiques of Salesforce," she says. "But there is a reason we've been protesting Google, Apple, Facebook, etc., and not Salesforce."

Benioff, who has given $200 million to endow a children's hospital at the University of California at San Francisco, handed $12 million from SF Gives to Daniel Lurie, the stepson of philanthropist and former Levi Strauss CEO Peter Haas. Lurie runs Tipping Point, a sort of venture capitalist firm for local charities; he gives $250,000 to nonprofits he thinks will help most. Part of Lurie's office is given over to the new T Lab incubator, where nine "problem solvers" are given grants to spend six months blue-skying solutions to affordable child care, early childhood education, and prisoners' reentry into society.

Despite its abundance of young, libertarian rich guys, Silicon Valley gives plenty to charity and will likely give more. The problem, McElroy says, is that those big donations—and many tech companies—have a limited benefit in the Bay Area. "They're still disconnected from the local," she says. "It's about changing the people's lives far away, which is connected to this neocolonialism. There isn't much awareness of the impact their businesses are having here. Google and Apple are offshoring money and exploiting people elsewhere."

Dropping out after two years at Harvey Mudd College, Tom Preston-Werner founded Gravatar in 2004, sold it, and later built GitHub, which allows coders to share and store code. In 2012, Andreessen Horowitz invested $100 million at a $750 million valuation; the office has a bar, a DJ, and a full-size replica of the Oval Office, with the presidential seal replaced by the "United Meritocracy of GitHub." In April, Preston-Werner resigned following claims of gender bias and intimidation at the company by former employee Julie Ann Horvath. (GitHub's investigation found no legal wrongdoing; Preston-Werner denied the allegations but admitted to "mistakes" and apologized in a blog post.)

Since he left GitHub, he and his wife have started a nonprofit that provides $200 Chromebooks to poor kids in the CoderDojo nonprofit coding clubs. "Maybe they'll solve other problems than another image-sharing website," he says over coffee at Fiore Caffé, which is right near his apartment in the Mission District, the epicenter of San Francisco gentrification. Preston-Werner has a hipster beard and speaks slowly and earnestly: "These kids have other problems growing up: Their education was s-‍-‍-; they maybe had sanitation problems." He worries about a future in which Silicon Valley is even more powerful and the rest of the country is left behind. "In the future there's potentially two types of jobs: where you tell a machine what to do, programming a computer, or a machine is going to tell you what to do," he says. "You're either the one that creates the automation or you're getting automated." That's eerily close to what someone wrote on that smiley-face flier outside Kevin Rose's apartment building.