WHAT’S HAPPENED TO SILICON VALLEY? (Part 1) by Scott Budman
Silicon Valley has been world famous for decades. And, like other worldwide icons (Columbus, Madonna, Tiger Woods), the Valley has been both loved and hated over the years. Lately, there have been clouds parked over Silicon Valley, and people in and out of the tech world have become skeptical about where we go from here.
We decided to dig deep into Silicon Valley, its culture, and its businesses, for a week-long series of reports called “Boom, Bust, and Beyond.” We got a lot of help from Valley heavy hitters. Some, like Joint Venture Silicon Valley CEO Russell Hancock, say that after a series of ups and downs, the Valley faces a current slump it may not be able to get out of. On the other hand, Yahoo! CEO Carol Bartz says she’s seen worse, and the tech industry always finds some new way to bounce back and create new magic.
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I just got my new 3G iPad, and through the miracle of the Internet, was able to track it’s shipping progress, along with each of the components I purchased (camera module, jacket, etc.) ALL on ships and planes from China. This isn’t new, but Silicon Valley long ago became as much a branding capital as an invention capital.
For decades our political leaders have behaved as if it is unquestionably good to spread our knowledge and wealth to every corner of the globe. The theory has definitely provided cheaper products and, perhaps, faster innovation, but at what cost? We treat the nations we give our technology to as “trading partners”, as colleagues. Most of the nations in Asia we trade with such as China and India consider us rivals and competitors. Their trade policies, much like Japan’s, are actually quite predatory. But whereas, due to demographics, and the displacement of Japan by the other Asian tigers, it seems our fear of Japanese dominance in the 80s and 90s were overdone, the titanic forces animating China and India cannot be written off so easily. They have both, so far, remained immune to the recent tumult roiling the entire West. We caught the flu, and they have prospered.
I think we have been catastrophic idiots in our willingness to share our tech with any and all comers. We have also turned our backs on education in America. There was never any reason to import “talent” from abroad had we educated our citizens with emphasis on America First, and with an eye towards the centrality of science and tech.
Turn the tables, and if China emerges on the top of the economic heap, any innovations which emerge from China Inc. will come with heavy heavy price tags for the rest of the world. They won’t squander their treasures like the West has done for decades. I predict that the new hegemon will leverage and extract value from their innovation for the corporate benefit of China. They don’t have the same messianic and delusional notions that the West has, and that probably means that we will see less innovation in the future, that newer tech will be more costly and less efficiently invented and distributed, that there will be far less individual wealth generation, and that personal freedoms will be under increasing threat under the new global regime.
Where did you get the notion that assembling a product somewhere is the equivalent of giving them our technology?
Do you believe that just because a country has enough technology to solder a chip onto a circuit board that they can now turn around and design the next generation of computer chip?
Even if the foundry for the chip is also in that country, the knowledge of how to build chips that are fast and work, is still in this country.
As to colleagues vs. competitors, in business there are no colleagues, only competitors. That’s true inside this country as well. When companies work together, it isn’t out of a sense of collegiality, it’s because for this deal, this is the best solution for both of them. But both companies are quite aware that on the next deal, they could just as easily end up competing instead of cooperating.
As to China’s fiscal health, here’s someone who disagrees with your rosy outlook:
http://www.bloomberg.com/apps/news?pid=20601010&sid=aMbfBKW.uKn4
As to what price Chinese companies will charge for their products, they will charge whatever price point maximizes their total profit. That doesn’t mean they will jack up the prices to the sky. It means they will find the point where the drop in volume due to increasing prices equals the extra money they get per unit. The same as every other company in the world does. I don’t know where you get the idea that companies in this country believe in “messianic” values? They don’t. They are doing what is necessary to maximize profits on the global stage.
Well put, Mark. China isn’t all the media make it out to be. Japan’s reversal of fortunes since the 80’s should demonstrate that.
Actually, Mark, we *are* giving others that technology. According to Richard Clarke (cf. “Cyber War”), Microsoft had to turn over the source code to Windows as the price of doing business in China. They’ve got the code to Cisco routers too. And given how many engineers *they* are turning out, it doesn’t take long to reverse engineer the rest.
But the fact that Silicon Valley does so little manufacturing means there’s no larger infrastructure of skilled workers that would not just support the overall economy but inspire further innovation and creativity – a virtuous cycle, if you will.
California in general has become a very expensive place to do business, given local taxes. Maybe that’s why Apple – one of the real superstars of Silicon Valley – chose to build their new server facility in North Carolina.
It’s true that Silicon Valley provided the original model of an innovation cluster; we’re now seeing such clusters emerge elsewhere. The most prominent example is, of course, Israel, which has generated thousands of startups in the last 20 years. Some stand and succeed on their own, some fail, while others get bought out by bigger companies like IBM, HP, Paypal and Siemens. Sound familiar?
Handing over source code.
Many countries in Europe have made similar demands. Heck, our own govt makes similar demands.
I don’t know if China is going to do any nefarious with that code, but many govts want to examine the code that is going to be used in their offices, to make sure that there aren’t any hidden back doors that can be used to facilitate spying.
Beyond that, there is little you can do with source code, that you couldn’t do more easily by just illegally copying a distribution CD.
Say what?! This comment demonstrates an incredible naivete. The main reason why there are no open source drivers from nVidia and ATI is precisely because the source reveals so much about how the hardware works! You think having the code to Cisco IOS won’t end up translating into competitive benefits for companies like Huawei which is already becoming a very competitive company in its own right?
If you want to know how a PC works, there are 10,000 books on the subject to choose from.
Do you honestly believe that all source code reveals insights into how hardware works? If you do, you have no idea how software works.
I have some on my bookshelf at home. None of them cover proprietary details like the specifics of how nVidia and ATI’s internal mechanisms work for their 3d technologies. A lot of that “secret sauce” is contained in proprietary driver code.
But of course, you already knew that.
Of course not and nice strawman! There are plenty of non-hardware algorithms that are important in Windows like the scheduler in the NT kernel in Windows 7, the way that DirectX works, etc. All of these things reveal insight to China and other countries on how to write their own code to be even better than what our companies do. That whole “standing on the shoulder of giants” thing, you know.
Your original argument was:
Which is patently wrong. If they have the source code, they can do all sorts of things, including forking the Windows code base altogether. With that source code, they can do whatever they want, unless you are one of those people who thinks that no great power would eeeeeevvvvver violate international trade agreements.
So much paranoia. So little connection to what I actually wrote.
“We’re facing enormous challenges when it comes to building start-ups, long the lifeblood of Silicon Valley. Venture funding (long the lifeblood of start-ups) has dried up,”
You think it’s dried up now, wait until congress passes the ‘financial reform’ bill. New income restrictions on who can invest in start-ups and delays of up to 4 months to await SEC review will put a severe crimp on capital available to start-ups.
http://venturebeat.com/2010/03/26/angel-investing-chris-dodd/
Take that a step further and remember that prior to Sarbanes-Oxley, the US stock markets carried about 85% of the IPOs world-wide. Since S-O, we do about 25%. IPOs now are much more difficult, but even more so now in the US.
I work in Silicon Valley and do our manufacturing here, and no, we will not let the Chinese have any information or access to our equipment because they will steal every last innovations we make. Our model is a small staff of highly trained techs and engineers working long hours for long-term benefits. Frankly, if we could all agree where to relocate, we’d be long gone from here. High taxes, lousy services, and risible prices for cracker-box homes make other states very appealing. And my local representative never saw a pork spending bill or illegal he didn’t want to give my paycheck to.
uburoisc: ” Frankly, if we could all agree where to relocate, we’d be long gone from here. High taxes, lousy services, and risible prices for cracker-box homes make other states very appealing. And my local representative never saw a pork spending bill or illegal he didn’t want to give my paycheck to.”
Move to Hillsboro, Oregon. Taxes are still to high but it (and the surrounding area) have a small town feel. I grew up in California and moved away in 1984. Wild (wild)horses could not drag me away……
Hillsboro, Oregon has a depressingly huge amount of rain. I would rather live in Palo Alto with all its problems than move back to Oregon.
The silicon valley company for which I used to work, and many others, have opened design centers in the Raleigh, NC area because they couldn’t get anyone to move to Silicon Valley.
One of the “long-term benefits” used to be incentive stock options but the company kill those off because of Sar-Box which was the last “reform”. It’s one of the reasons I bailed. I didn’t want to work that hard since the government confiscated the pot of gold at the end of the rainbow.
<sarcasm>If it’s any consolation, Sar-Box has done a great job at curbing financial fraud! </sarcasm>
The capital per employee that American industry oppeerates on has been drained.
The second highest corporate taxes in the world the effort of courrupt local politicians to finance
vote buying schemes on the back of “comercial property” taxes, capital gain taxes, all make it
difficult to operate any industrial concern in the United States.
Add Capital gain taxes and inheritence taxes and capital formation become a harder for an American
than for a Chinese. Then there is the low status we accord our geniuses. Who wants to be a NERD
knowing that if a girl socializes with you her friends will make fun of her for doing so.
Then the is the H!B program. People who have to pay as much as $125 per credit hour more than the law
students only to find that for pay they have to compete with barely literate Indians for jobs in
a market that has shrunk in total numbers every year since 1996. Welcome to the Laffer Curve.
“Where did you get the notion that assembling a product somewhere is the equivalent of giving them our technology?”
You’re kidding, right? If you think that totalitarian China isn’t riveted on stealing as much intellectual property from America as it possibly can get it’s hands on, you’re living in a narcoleptic fugue state. It’s this kind of blinkered thinking I write about. Westerners like you assume China’s actions are driven by the same motives as your own.
Try to go to China and conduct espionage and see what happens to you. Whereas Chinese operatives are here in their thousands, at labs, in academia, and at businesses shipping intelligence and stealing technology back to the mother ship. We invited them here! We think this is a good idea…
Without respect for private property (clue: communist china has some trouble with this concept)’ there’s no notion or ethic which would prevent them from taking whatever they want to serve the collective.
Now that we know your primary motive is paranoia, we can move on.
You first made the claim that we were giving our technology away. And as proof of this, you claim that China is stealing it.
Do you even realize that we aren’t laughing with you?
Narcoleptic fugue state it is.
Paranoia does not have objective data to back it up.
The Japanese have been (barely legally) stealing US Tech
ever since their industrial base got up to speed;
The Chinese copied that move as soon as they were able,
with somewhat less restraint. The legal paperwork doc-
umenting this fact, if stacked up and placed on the
chest, would squeeze all the air out of the lungs.
This practice has in the past been restrained by the
power of the US to hurt offenders, economically;
As the economic correlation of forces shifts, this power
goes away, and soon the Chinese, and perhaps the Japanese,
will abandon all restraint; The US will protest, and the
Yellow Peril will laugh, even more loudly than they do now.
The future of the US is in capitalizing on creativity,
a natural resource we still have most of, and which the
YP cannot copy, in riding the leading, bleeding edge of
the shock-wave of change; We will not get off the beach
until the US laws restricting this sport are changed.
FYI – the Chinese are currently shipping many thouands of gigabytes of data – intellectual property and other sensitive data out of many of the fortune 1000, the .gov domains, and the .mil domains. Who knows what they’re doing with it. But they are definitely taking it.
Well, China does have a population problem, in that it is extremely lopsided towards males, and its birth rate is plummeting. Interesting times indeed.
India will likely be a less hostile rise, provided China doesn’t invade/nuke them. They seem to have picked up the entrepreneurial bug we’ve had.
SarbOx, oxymoronic option “expensing”, other regs and taxes on capital means no IPOs. No IPOs no venture money. That simple.
Immigration, long a pipeline for new talent and brain power, is slumping badly, partly because of a crackdown here at home , , ,
I had no idea that foreign PhDs were having to climb over the fence to get into the country.
Hey, here’s a wacky idea. How about we fix the US educational system by purging it of the teacher’s unions, failed leftist “self esteem” education theories and disciplining active boys with psycho drugs and put it back on line producing students of a similar calibre to those from overseas?
At one time, there was a special immigration category for people with advanced degrees.
The anti-competition types worked hard to kill it.
Sarbanes-Oxley has taken a bite out of the entrepreneurial engine of SV as well. It’s raised the cost of being successful (i.e., IPO). One wonders if SOX compliance wasn’t a way for the big fish to keep the little fish from becoming big fish.
What’s really troubling to me is that there’s a new wave of startups in Silicon Valley that are resorting to unethical practices to make money. Look at http://www.dirtyphonebook.com as just one example of this. People are posting peoples phone numbers and personal secrets and committing libel about everybody and this company is trying to profit on this. There’s a lot more than meets the eye here with a lot of companies. Don’t get me started about Yelp. What’s going on there with their controversey over fake reviews is just a tiny drop in the bucket as of now.
How about Sarbanes-Oxley as a problem? Doesn’t that make it harder to go public?
Bunch of whinny posters. Quit blaming the government for your troubles, and quit group thinking about exporting of jobs (like they were ever yours in the first place) if the job is in China, go learn chinese, and hop a freaken plane. Its not that hard.
The fact that high taxes and absurd regulations drive companies and jobs away is not something that people should complain about?????
I don’t know if this counts or not, but here it goes….
I used to work for Advanced Micro Devices (AMD) in Texas as an engineer. While I never worked in AMD’s Sunnyvale offices the corporate culture was very similar in both places. At the time (and perhaps even today – I have not worked in the semiconductor business for two decades) AMD was widely seen as a “copycat” – taking the designs of Intel’s microchips obtained under a second-source agreement and selling them under the AMD label. AMD did not have many proprietary products that customers were clamoring for.
What fascinated me about the corporate culture at AMD (I have no firsthand knowledge about Intel, Motorola, Mostek, Cypress and other semiconductor companies-both still existing and defunct) was the apparent disconnect between what the managers said and what they did. Many of them professed to be free-market capitalists, yet constantly demanded government protection from the Great Satan of cheap Japanese memory chips.
Because there was a constant movement of engineers from one semiconductor company to another industrial espionage was rampant. Lawsuits among semiconductor companies were as common as flies, and I’m willing to bet that the legal departments of these companies had budgets that rivaled any R&D projects they had going. There was a particularly long fight between AMD and Intel that made their lawyers filthy rich, but didn’t do a lot for the rest of us.
I found the loud demands by AMD officials for government intervention in the name of free enterprise bizarre, to say the least. Among many of the engineers I worked with there was a constant buzz about how the USA needed a government-enforced industrial policy “just like Japan” (how is that working out?). Many officials in the semiconductor industries constantly schemed to use the American legal and political systems against the Japanese and each other, and it’s not surprising (to me, anyway) that today many Silicon Valley businessmen are marching in lockstep with today’s “green movement”, the drive for nationalized health care, and many other government hazards that free enterprisers used to avoid. The “gangster government” we are presently saddled with had a helping hand from Silicon Valley semiconductor bigwigs.
Anyway, those were interesting times.
#4 Raymond in DC….Give them the source code to MS Windows. It’s not that big a deal. It’s full of bugs and a pretty lousy product. Besides having the source code to this version isn’t the same thing as having the 20,000 brains in your office every day writing the next two versions.
The gold disc that source code is on won’t be good for anything but a coaster in 12 months. People need to understand that if you can’t hand your business plan to your biggest competitor, you don’t have a real business plan or business.
the source code for linux – superior OS to windows – is freely available on internet to anyone, including chinese government. lots of good it did them…
cisco routers run on linux, so ditto.
the real intellectual property is in the sum total of engineers that run it. if microsoft fired all its engineers today, they would collapse, regardless of ownership of code or hiring new engineers.
japanese learned this hard way in 80s, when they spent billions of dollars on american companies that disintegrated in their hands because people didn’t want to work in their corporate culture.
I’m a research scientist at a large company in Silicon Valley, with a Ph.D., a fairly hefty list of patents to my name. I am also consistently rated among the top 10% of the talent in my company, as rated by my annual reviews. My salary is good in absolute terms, but fairly average for engineers in the valley.
Tonight, my wife and I were discussing moving. Why? Because despite my qualifications and achievements, I can’t afford to live in the Bay Area. I moved back here in the late nineties and never was able to buy an affordable house in a decent neighborhood. Even renting takes up almost 1/2 my take-home salary. With taxes expanding year-on-year, that take-home salary is shrinking.
We’ve thought about moving to second tier cities where my company has a corporate presence. Or even moving to a smaller town and working on a consultative/contract basis. Even with a smaller salary, the quality of life should be higher, and we’ll be able to keep more of our earnings.
Add to the cost of living, the terrible business/political climate here (taxes, regulations, red tape, unions, social fragmentation, oppressive political correctness, etc), it’s no wonder that the Valley is drying up.
There are lots of people moving to my home here in Austin, Texas for many of the reasons you listed. I’ve noticed a few CA-based companies moving their tech people here too because of lower costs. Salaries here aren’t as high as the Bay Area, but you can still find good housing here in the 200s (sometimes even less) and there’s no state income tax. The barbecue’s good too!
But please leave the liberal politics in California.
> I am also consistently rated among the top 10% of the talent in my company, as rated by my annual reviews. My salary is good in absolute terms, but fairly average for engineers in the valley.
There’s a disconnect there – top performer, average salary.
Neverthless, average engineer salary in the valley is around $120k/. This person is married, so less than 1/3 will go to taxes, leaving us with $80. Half of that is $40k.
You’re really paying $40k/year in rent?
That pays for a rather hefty mortgage, especially if you had bought in the mid 90s.
Rent for a two bedroom apartment in Arlington VA (a somewhat comparable area) can easily be $2k/month. I paid $2100 for one in Fairfax County. Silicon Valley is even more expensive than Metropolitan DC, so I would easily believe a $30k-$40k rental rate because there were $2500-$3000/month apartments just across the street from where I lived.
Average tract homes in houses in Cupertino are easily going for $900k. A 30yr 600k fixed mortgage@4.7% will run you $4k a month – or $48K a year.
I would say 50% of the problems facing silicon valley is housing cost. 25% sarbox, 25% US recession.
> There’s a disconnect there – top performer, average salary.
Not at all. Top performer + struggling company = top salary *for the company* but barely average for the area. Illiquid stock options (aka “golden handcuffs”) keep you with the company.
> You’re really paying $40k/year in rent?
> That pays for a rather hefty mortgage, especially if you had bought in the mid 90s.
But you didn’t. You spent all the time you could frantically saving up a down payment. And then the kids got old enough that you couldn’t wait any longer to buy a house so they could go to a decent school. And, yeah, my fifty-year-old 3/2 tract house costs me over $60k/yr (PITI). I could cut that in half by moving to an area with lousy schools, but private schools here are so expensive that it’s a losing proposition overall.
The average income for a good engineer in Silicon Valley buys a lifestyle that the rest of the country would think of as barely middle-class. What used to draw people here was the weather and a realistic chance for great wealth via IPO. I guess we’ve still got the weather …
In addition to kicking Jews around, Pharaoh Hussein has made uncertainty the keyword: in law, in finances, in resources (immigration).
When the overwhelming feeling is one of uncertainty, then decision makers defer decisions.
The lie of political correctness (eg each terror incident is just an isolated one) adds to the uncertainty because of the insecurity it creates in the population.
Sarbox has definitely been the skunk at the garden party. Also, too many software startups are basically marketing exercises and don’t have much in the way of actual technology.
The good signs I’ve been seeing is more startups that welcome older talent – the “nosering.com” syndrome of a few years ago has past – and business plans that involve making more money earlier in the company lifecycle. Also, people have figured out how and when to use offshoring/outsourcing – and when not to.
Optimism, pessimism, statism! That & litigation makes doing biz in this country irrational. I don’t know why anyone would want to put their ass on the line, when simply failing to make your dream come true is the best case scenario: worse is success that can and will be looted from you.
Like NN @19 above, I have an engineering PhD and more than a dozen patents. I work for a startup I helped found some years ago. We would have gone public in 2007 or 2008 if it weren’t for Sarbanes-Oxley. IPO’s have to be bigger now, to be able to cover the deadweight $1 million or so per year that Sarbox costs without hurting the bottom line too much. And it takes a year or two to reshape the accounting systems of a typical startup into Sarbox compliance. And while we were spending that extra year or two growing, and rebuilding our accounting systems, Wall Street did its dipsy-doodle. So instead of an IPO, we had a 30% layoff, and the survivors got a 15% pay cut, and we’ve abandoned the Sarbox compliance effort because it adds no value unless you’re going public. My stock options remain worthless, thanks to Senator Sarbanes. And here comes Senator Dodd to nail down the lid on the coffin.
The cost of housing here is hard for outsiders to comprehend. You can’t buy a house in a good school district for much less than $1 million — and for that you’ll get a crumbling 3/1 tract house from the 1950’s, on a busy street. Yes, there was a California real estate meltdown, but only in neighborhoods with lousy schools. Near good schools, prices are still at 2006-2007 levels. My mortgage takes over half my gross pay at this point. To make ends meet, we do most of our shopping at WalMart, Costco, and Goodwill. I can’t remember the last time I visited a mall. But my gross income is high enough, on paper, that governments at all levels are looking to raise my taxes to plug their budget holes. Don’t know where we’ll find room for higher taxes in our budget. It’s not like I’m going to get a raise anytime soon.
NN also mentioned “oppressive political correctness.” Sing it, brother. Groupthink loudly celebrates “tolerance” while remaining rigidly intolerant of differing views — and never even notices the contradiction. My voter registration shows that I’m a member of the “decline to state” party, and I never talk politics or religion with my neighbors. It’s just not safe — too much intolerance out there.
I’m stuck here in the Valley for family reasons. If it were possible for me to leave, I would have already left. Austin, Dallas, Houston, Research Triangle — somewhere with sane government.
I like the use of the word “baring” in the article. I lived and worked in SV back in the early 70s when streaking was popular, and things were “baring” down on us even back then.
The real reason the place has crashed and burned is the loss of the ability to read and write standard English.
Hey, that’s as good a theory as any other…
Mark,
Perhaps it would interest you to note that IBM is focusing nearly all it’s growth in India and China. Employees laid off here are offered a job in one of these countries…at lesser wages, of course. Now it could be an interesting experience, but my point is that IBM is NOT investing here like they are investing there. There’s nothing to say that IBM Beijing or wherever won’t have research facilities. They have them all over the world.
So… it could happen. They could be up to parity with us rather quickly if they wish. And who is graduating the next generation of these guys – Americans, or others? They won’t need to be location-specific to succeed, either.
Most Americans, Brits, etc. living in Hong Kong fear nothing more than being transferred back to their home country with the onerous regulations and taxation. It is no wonder that those that go to the US to study from China, India, etc. have little interest in settling in the US any more. Why live in a country that confiscates more than half your pay, finds raising VC funds next to impossible, and where the cost of living is a fraction of living in Silicon Valley? And if they choose to stay in the US, places such as Tennessee and Texas with no state income taxes, affordable housing, and a higher quality of life are much better alternatives. California has taxed themselves out of competitiveness. Extremely cheap rents due to massive vacancies is their only competitive advantage…..
As a native Californian raised in the bay area who wrote his first app at 13 and has started 3 software companies, here are a couple of observations:
* The focus is on the wrong stuff. The valley should be focused on hyper-productivity. It is instead focused on consumer gadgets and mindless social apps. Look at what is happening in Europe and what will soon hit the US. Without leaps in productivity there won’t be a market for gadgets much longer
* The US will produce record numbers of college graduates in the next few years and, as a percentage, we will have the fewest engineering graduates in the industrial / post industrial era. On top of that, engineering curricula are watered down as space is made for required classes on what can only be described as “social re-engineering” topics such as women’s studies and ethnic studies.
I would suggest the taxpayers stop subsidizing public colleges, EXCEPT for those courses that lead to a degree the economy needs (engineers, nurses, etc ..). It will reduce taxes and may encourage students to study something that costs a fraction of the usual.
Consumer gadgets…
The consumer economy is fading fast; There will soon be an
increased demand for Security Systems, but still..
They say that necessity is the mother of invention; Perhaps
the US can invent the infrastructure the developing world
needs to provide all those people with the necessities of
life at an affordable price, and save some of it for the
home-grown Underclass we must provide for here.
Every time an illegal gets stopped in Phoenix a startup dies in California. I don’t know how to fix Silicon Valley’s problems but I have my doubts that more maids, landscapers and drug smuggling is the answer.
SV was a place of vibrant new little fish that did, in many many cases, grow big — that place (70s-90s) died in the dot.com bubble pop and the 10 year shakeout with the real estate boob & bust (I like the ‘typo’).
Palo Alto’s a GREAT place to live, but not at $1 mn for 3 or 4 BR 40+ old house. Sunnyvale, Mt. View too; Redwood City (Oracle) not so bad. Stanford’s a great place to study (but $30k/year or more???).
But 20 years ago I left for Slovakia (for free market reasons, now stay for family). There’s a LOT of smart, hard working people all over the world, ready to do the moderately tough thought work that needs to be combined with genius/ vision for successful new companies. The Apple (II / Mac) Valley (& Intel, AMD, etc) of the 80s is never coming back.
I hope Austin / Dallas / Houston take up the Sili Valley (& New York???) baton, but India and China will certainly be doing a LOT of any successful company’s manufacturing.
Rich California in the 80s should have been spending LESS by gov’t — since ‘rich’ folk don’t need as much gov’t help. But the democratic voting for more dishonest ‘free lunch’ benefits of spending has doomed CA.
Even if they go for school vouchers now, it will be 5-10 years before CA education gets as good as it was (before the liberated ‘good teacher’ women left teaching for better jobs, leaving the Peter Principle teachers to keep babysitting in gov’t schools).
Taxes too high; because state benefits/ spending are far, far too high.
SoBox is so terrible.
Regulations are so terrible.
So predictable, so sad, so terrible, so unnecessary (?) — but so inevitable from voters educated by soft-socialists (or hard anti-capitalists).
Society gets better thru peaceful, private agreements, not thru forced gov’t “solutions” that create worse unintended consequences.
To thedude;
I agree that real estate is killing silicon valley.
Part three of the series is about just that. It hits tonight at 11pm (on NBC Bay Area), and I’ll send it along to edgelings as well.
Thanks,
scott
“Group think loudly celebrates “tolerance” while remaining rigidly intolerant of differing views — and never even notices the contradiction.”
Amen to that. I am so tired of hearing mindless sanctimonious leftist claptrap all over the place. More right of center people should be open about their views and challenge the oppressive group think.
Only if you don’t want to get a job. Shortly after one of the local startups was bought out by Cisco, there was a bunch of predictable leftist whining about how unfair it was that a bunch of local people had become millionaires and up. (Some, way up.) I wrote a column for the local paper defending the wealth involved–but also suggesting there comes a certain point where you can’t spend that much wealth, and those who were now blessed with tens of millions of dollars might want to consider spending some of it alleviating human needs in our society. The flaming multimillionaire liberals were so angry that I called them on their loudly expressed beliefs, and expected them to actually follow through, that I became unemployable.
Amen to that brother!
So far from the comments this is starting to sound like a big ol’ “grass is greener on the other side” gripe-fest. If you think SV is “drying up,” then by all means, blame the government or whomever, and move elsewhere. I’ll stay here, innovate, … and make money. But be forewarned.
For example: you want to move to RDU, huh? Hey, I’m from there originally. Had a successful tech career there. Grew up in small-town NC, even. Lovely area. But guess what? High income taxes … some of the highest in the nation. And no, house prices aren’t as bad as CA, but there is a bubble, mostly due to the relentless wave of transplants.
North Carolina is the New South, meaning they have all the features of the Old South (insane heat and humidity), with some new features you might not enjoy so much like bloated government, high unemployment, and frankly a slow pace of innovation. Please, somebody, anybody, name for me the big North Carolina tech success stories of the last ten years. Anyone?
To the commenter above mentioning Apple’s move there — look to local officials and state government that pays off big companies to come in to “create jobs.” The state passed a special $46 million tax credit just for Apple to come in and create 50 jobs. NC is desperate — they will use all manner of payola to bring in companies regardless of net benefits; but the Democratic legislature will never make the overall business climate or tax burden better across the board. Sound familiar?
As to Valley culture …
VC is drying up? That hasn’t been particularly my impression, but let’s assume it’s true for the sake of argument. The reality is that VC was never a great model for funding early-stage companies. Except in its most rare-ified forms, it’s basically a lottery where a pointy-haired investor bets big on 10 companies hoping to score on 1. In most cases, the founders lose. This is the optimal setup for innovation we should bemoan losing?
Moreover it’s gotten cheaper to start businesses because a lot of infrastructure has been commoditized, and that’s a good thing. The Valley shouldn’t rely on a Ponzi scheme like VC to fund innovation. It should rely on smart, crafty, creative individuals willing to take calculated risks using their own fortunes, or that of investors whom they know and trust.
Immigration is slumping? Offshoring, outsourcing and remote work are rising. Yin, meet yang. In the age of wires (or a series of tubes as it were) that cross the ocean, we don’t need mass immigration to tap into smart folks everywhere.
This talk about SV slumping, in light of the above, sounds a lot like the moaning over the newspaper business declining. The medium — paper, in the case of newspapers, VC & mass immigration in the case of SV — is what holds each back. Except in the case of newspapers, they cling to their medium; SV has handily dumped both in favor of outsourcing and a lean startup mentality. Don’t mistake transformational change for a “slump.”
And it’s just amazing how any article about SV can go by (even part one) without mentioning Apple, a company that’s presently worth more than Wal-Mart. Hey, when do we get the article about Bentonville slumping?
Yes, the overall CA economy sucks. The state is very badly run. Real estate prices are high. But on the flip side, name one other state that has produced tech companies with reach like Google, Apple, or Facebook. There’s something in the water. Yes, it is very likely a clique of elitists. But that’s life. NYC has Wall Street, So. California has Hollywood, and we have Silicon Valley. All successful business climates represent a critical mass of committed individuals. You can’t just duplicate culture by lowering taxes or real estate prices. Trust me, if it were possible, NC would have ten Silicon Valleys by now.
And no, the grass isn’t always greener on the other side.
I worked in Silicon Valley in the 1980s, and in Telecom Valley (north of Marin County) in the 1990s. I miss working in startups. As much as I want to blame the problems on real estate prices–they were absurd even back then. I would look at Sarbanes-Oxley as the big problem. It was shortly after this passed that the gravy train started to end.
But there were other problems. Yes, a lot of otherwise sensible people became too enamored of how wonderful it was to be far left and obscenely rich. One of my favorite examples of how everything just went crazy was a recruiting email that I received from a South of Market dot-com startup that included among the other virtues of working there, that it was a “clothing-optional workspace.” Grow up, kiddies.
Another tipoff that some of those involved were just a little too sure that their feces didn’t smell was a job interview I went on with a startup in Redmond, Washington. At this point I had more than 20 years of software engineering experience, writing in a variety of languages, leading small engineering teams that had successfully gone from a blank sheet of paper to a delivered product. During the interviews, I ran into a technique that apparently came out of Microsoft, where you would be given some mildly difficult coding problem to solve while they watched.
I hadn’t done a job interview in a number of years because guess what? I was busy getting products off the ground–and the people that hired me at one startup knew what I was capable of at another startup, because they had seen me in action. I was so startled by this interviewing technique that I guess I flubbed it. And that was the end of the interview! This is the sort of question you ask a fresh college graduate, who has no references to check, and no track record of actually getting stuff created and out the door. Weird. And while I was clearly not anywhere near good enough to work for this tremendously smart and clever bunch–a year later, they were out of business.
Arrogance is a bad thing–and wealth bred plenty of it by the late 1990s.