Stephen Fry, British author and host of a book/BBC series on his travels in the United States, offers up a paean to America in the May 9 edition of The Spectator. At times lightly scabrous, often hilarious, Fry gives a depiction of America that sounds much like Silicon Valley today:
[With some not insignificant exceptions]...America is comprised of the descendants of men and women who at some point over the last 300 years or so wanted to improve their lives. They left their miserable shtetls and peasant hovels and urban slums and blighted potato fields and sailed the Atlantic. 'We can do better,' they said as one. '___ Europe.' They were animated by a restless desire to move on and make something of their lives...A belief in improvability is written into the gene pool of their descendants, today's Americans....
We Europeans, on the other hand, we are descended from those who said, 'Oh, well, could be worse, I suppose. Not getting into one of those nasty ships and going to a new world. Typical of uppity cousin Frank to think he can just march off and start again. Who does he think he is?'
Regardless of whether you buy into Fry's depiction of Europeans, I think the first paragraph describes very well Silicon Valley's gene pool and, indeed, the gene pool of the wider technology community. It's no longer about becoming American, per se: it's about becoming a techie.
This is why it's so critical to open that gene pool further to immigrants, as Microsoft's Bill Gates has been arguing since 2005. It's also why we, as the technology industry, need to "___ Europe," as it were, by discarding a too plodding and careful approach to innovation.
Cisco is a good example here for the wider industry. Despite its massive heft, the company is using its cash hoard to attack 30 different markets, as BusinessWeek reports. Cisco could content itself with simply incrementally improving its network equipment business, but instead it's dramatically challenging the industry's status quo well beyond its core business.
We need more of this. We need to continue to push the envelope on innovation. We need to continue to import those modern-day pilgrims that leave China, India, Europe, and elsewhere and ensure that they want to stay.
That's what Silicon Valley and the technology industry have long been about. It's in our gene pool. Especially now, downturn be damned, we must do more.
Follow me on Twitter @mjasay.
Silicon Valley was late to the recession "party," but the global financial crisis is causing companies to tighten their belts, leaving a stretch of Highway 101 relatively traffic-free and out-of-work entrepreneurs with some difficult choices.
A new report from the Joint Venture Silicon Valley and the Silicon Valley Community Foundation, as The New York Times details, indicates a 1.3 percent drop in Silicon Valley employment. That may not sound like much, but if you've driven in Silicon Valley lately in rush-hour traffic, you can see a real difference.
Not everyone, however, is being hit equally:
The report also showed that the gap between the wealthiest and the poorest residents continued to grow. The percentage of households earning more than $100,000 a year rose to 42 percent in 2008, from 35 percent in 2002, while the number of households earning $35,000 or less rose to 20 percent, from 19 percent in the same period.
In other words, venture capitalists and successful technology executives are likely to weather the recession in comparative style, but the fire fighters, janitors, and rank-and-file technology workers are going to feel significant pain.
Importantly, such people really have nowhere to go: many live at a considerable distance from Santa Clara and other primary places of employment, commuting an hour or more to get to work each day. There are few alternative industries in Silicon Valley to absorb technology's outcasts.
This has always been a problem with Silicon Valley's technology-fixated economy, and it's about to get worse. Hope springs eternal in Silicon Valley, however, and clean technology and other cutting-edge technologies will almost certainly spur investment and, hence, jobs. In the long term, Silicon Valley will also benefit from a trend toward the creative class congregating in urban centers.
But that's later. For now, Silicon Valley won't be the land of opportunity for too many that support, but don't commensurately profit from, the technology economy. Move on, Tom Joad. Move on.
Follow me on Twitter at mjasay.
It may well be that the world is now flat and location doesn't matter. Just don't tell that to the rising creative class that increasingly congregates in cities.
I've suggested before that companies in Europe and elsewhere beyond the borders of Silicon Valley need not relocate to Silicon Valley to be relevant. While I still believe that's true, a recent article by Richard Florida in The Atlantic cogently argues that the recession will push ever-greater concentrations of the creative class into cities and out of suburbia.
While Silicon Valley won't be the sole beneficiary of this geographic shift, it stands to benefit as secondary suburban outposts (like Utah, where I live) will likely suffer in the midst of an economy the increasingly depends on premium ideas rather than cheap goods:
Suburbanization--and the sprawling growth it propelled--made sense for a time. The cities of the early and mid-20th century were dirty, sooty, smelly, and crowded, and commuting from the first, close-in suburbs was fast and easy. And as manufacturing became more technologically stable and product lines matured during the postwar boom, suburban growth dovetailed nicely with the pattern of industrial growth....
But that was then; the economy is different now. It no longer revolves around simply making and moving things. Instead, it depends on generating and transporting ideas. The places that thrive today are those with the highest velocity of ideas, the highest density of talented and creative people, the highest rate of metabolism. Velocity and density are not words that many people use when describing the suburbs. The economy is driven by key urban areas; a different geography is required.
Thomas Friedman, author of The World Is Flat, might disagree, countering that the Internet 'flattens' geography, anyway, making location secondary to the value of one's ideas. Maybe.
However, as much as we may like to celebrate social interaction over the Web, it comes in a distant second place to face-to-face interaction, whether in the office or over drinks at the local pub. Florida's argument is that density (of disparate people and, hence, disparate ideas) matters in any economy that depends upon intellectual property, as the United States increasingly does.
So while your next job may be in Louisville, Kentucky, it's more likely to be in Waltham, Massachusetts. There are fantastic people in Louisville, but they're unlikely to help you devise the next big breakthrough in semiconductors or software.
That breakthrough, for better or worse, is likely going to be in Silicon Valley or another urban technology hub, or by people who have moved away from Silicon Valley and have stretched their networks to accommodate their desire to live elsewhere.
Follow me on Twitter at mjasay.
Not that anyone was in doubt, but The New York Times is reporting that venture capitalists are struggling to sell their start-ups. With technology entrepreneurs having little prospect of a big exit through the IPO or M&A markets, is the bi-weekly paycheck the new god of Silicon Valley?
Maybe, maybe not. Silicon Valley culture is heavily entrepreneurial and that's unlikely to change anytime soon. However, I suspect that the rank and file at companies like Digg are going to be much more concerned with their paychecks than their underwater stock options for the next year. Cash is king in a recession, both for companies and for their employees.
As BusinessWeek suggests, the short-term effects on Silicon Valley aren't positive:
Declining valuations are throwing a wrench into the gears of Silicon Valley's wealth machine. In the worst cases, the money dries up and startups are shut down. But even for fortunate companies such as Digg that can still raise money, complications abound. Falling prices can make it harder to attract the best and brightest. Morale can suffer, and workers with stock options underwater may be less likely to stick around. Such pressures can force companies to grant new options at lower prices or reprice existing options, which can infuriate venture capitalists backing the company.
On the other hand, the recession is doing one thing that nothing else seemed capable of doing: getting technology start-ups to focus on revenue and profit, rather than eyeballs and downloads. From Digg to Sun to Google, the focus on actually making money will have long-term, positive implications for Silicon Valley.
Indeed, I'd go so far as to suggest that this recession will be the making of the next Microsoft (or IBM, if you'd prefer), but one born and raised on the Web. It will start with the employees that make up this and other technology companies, employees who now have the most serious incentive of all to help their companies figure out how to make money from an open Web and open source: their paycheck.
Ever wonder what the American automobile industry would be like if it actually made good cars? ZDNet takes it a step further to speculate as to what GM would look like under Steve Jobs' guidance, speculation that is worth further discussion.
No one is suggesting that Steve Jobs has any interest in reforming GM and the U.S. automobile industry, but don't you wish he would? Or for the Microsofties among you, how about Steve Ballmer? Or Marc Benioff? Or anyone from the technology industry?
In technology, we don't have the benefit (and problem) of years of government subsidies, regulations, and unionization. If we don't deliver compelling products, we die.
Today politicians are trying to funnel mountains of cash to the domestic auto industry, conveniently overlooking the other U.S. automobile industry run by Honda, Toyota, and others that employs more than 100,000 people and makes much better cars. For what? To perpetuate its utter incompetence and pander to union votes. It's shameless and, frankly, shameful.
I don't blame Democrats or Republicans for this--both have their pet bailouts. But until the U.S. automobile industry learns how to innovate and make good products again, we should let it struggle to compete. Maybe Detroit will die and those jobs will move to the Honda factories elsewhere. Is that a bad thing?
The U.S. automobile industry could learn a thing or two from the technology industry, like how to compete without expecting a handout.
Silicon Valley's economy is sliding into the doldrums, with unemployment now topping 6.6 percent, but it's not the only place to live.
In fact, as researchers recently uncovered and which the Wall Street Journal reports, there are lots of other great places in the United States to live, places with people who are equally open to new ideas, while being much more extroverted, conscientious, and agreeable, and far less neurotic (their words, not mine).
As published in Perspectives on Psychological Science, researchers combed through more than 600,000 personality questionnaires and discovered that certain states attract or shape concentrations of similar personalities. Intriguingly, this may affect the types of industries and health care problems that arise in certain states:
Even after controlling for variables such as race, income, and education levels, a state's dominant personality turns out to be strongly linked to certain outcomes. Amiable states, like Minnesota, tend to be lower in crime. Dutiful states--an eclectic bunch that includes New Mexico, North Carolina, and Utah-- produce a disproportionate share of mathematicians. States that rank high in openness to new ideas are quite creative, as measured by per-capita patent production. But they're also high-crime and a bit aloof. Apparently, Californians don't much like socializing, the research suggests.
... Read more
Apparently, Apple engineers get paid less than their Silicon Valley peers. Some are speculating that Apple will need to cough up more cash or face a rash of defections.
I doubt it.
For one thing, Apple's engineers also get stock. Have you noticed the stock price lately? There's more than one way to get paid.
There's also the Apple mystique. No, it doesn't put granola on the table but it counts for something. As Fabrizio Capobianco, my friend and Funambol's CEO, often tells me, Juventus can get top-notch players for less because many of the best soccer players want to play for Juventus at any price.
Lastly, where are these developers going to go? We have a looming recession on our hands. I doubt the employment market is going to see considerable froth in the near term. A safe job at a successful company probably looks more appealing today than a job with an uber-cool start-up that may not pay the bills a year from now.
In sum, Apple has time to figure this out and may not need to do anything.
I'm closing up my quarter today (Not sure who said open source is easy, but.... :-), but wanted to highlight a few of the more interesting stories I read today.
- Despite my vain imaginings to the contrary, it turns out that Silicon Valley really is the center of the universe. Who knew? Well, except for you Silicon Valley smugsters? Actually, the real news in CNET's article is how much R&D is moving away from the Valley.
- Red Hat is revealed as the driving force behind The Simpsons, whose writer and co-producer (Joel Cohen) credits Red Hat Enterprise Linux by suggesting that "the volume and speed of material that was created for the movie could never have been done without that Red Hat-fueled system. Cohen also shows a true understanding of innovation by declaring his own inspiration comes from "shamelessly ripping off other people's ideas."
- TechCrunch's Erick Schonfeld takes a fascinating look at the growth of YouTube relative to Google, but questions its seeming inability to turn popularity into cash: "Either YouTube is unable to make money from a large portion of its user-generated video inventory....Or YouTube just hasn't turned on the money-gushing hose yet." (Sounds like an open-source quandary, no?)
... Read more
It was just a matter of time. Silicon Valley, which has remained largely impervious to the increasingly global economic downturn, is starting to feel the strain, according to The New York Times. It's not that housing prices are in freefall (they're not) or that people are being laid off en masse (they're not), but rather that the exit opportunities have largely dried up. According to the Times:
During the first three months of the year, only five companies backed by venture capital investors went public on Wall Street...That is down from 31 in the fourth quarter of last year, and is roughly the same level as at the nadir of the dot-com bust.
There was also a sharp falloff in the acquisition of start-up companies by bigger corporations...There were only 56 acquisitions in the first three months of the year, down from 83 in the fourth quarter.
... Read more
Ah, a breath of fresh air from a former Financial Times reporter:
We spend way too much time inside our small Silicon Valley worlds. It often feels as if I constantly see the 400 or so people that run this place, and that drive the main conversations here, it is like a high school cafeteria.
I liked it a lot last year, I still like the life here, but increasingly I think the best advice is to get out into the real world occasionally. Yet I know plenty of people that hardly ever, except for family occasions, spend any time outside of the closeted worlds of Silicon Valley.
What do you discover outside the valley and the technology world it venerates?
... Read more
