'The Golden Age of Silicon Valley Is Over, and We're Dancing on its Grave'

http://www.theatlantic.com/business/archive/2012/05/the-golden-age-of-silicon-valley-is-over-and-were-dancing-on-its-grave/257401/

by waxymonkeyfrog • 14 years ago

197 145 14 years ago

theatlantic.com

toddh• 14 years ago

To a large extent the investment in all that silicon is why developers can play the commodity game today. Many smart people are working on the next substrate for the next revolution and everything will change again. The differences are the breadth of the commodity wave and our consciousness of the time between breakthroughs.

JPKab3• 14 years ago

"THOMPSON: Is Facebook worth $100 billion?

BLANK: In the last bubble there were no customers. Facebook makes $4 per user. The users are customers. They produce real revenue. Nobody's debating whether Facebook can make money. They're debating how much more valuable Facebook's hundreds of millions of users can be, and how fast can they can grow that value. That's an execution problem."

Facebook makes $4 per user from advertisers who LOSE money when they pay Facebook. In other words, Facebook's users LOVE their product. Facebook's customers (advertisers) get nothing from it. Click through rates suck, and actual ROI is negative. Eventually, the new advertisers who show up and realize it's a waste of money will stop paying for nothing, and then the $4/user goes away. Users and the media LOVED Groupon. The businesses who were Groupon's actual customers HATED it. This is no different. Don't get me wrong, a billion users is incredibly monetizable. Just not the way Facebook is trying to do it. The social B.S. will eventually fade to the real stuff.

waterlesscloud• 14 years ago

What's the real stuff?

JPKab3• 14 years ago

Cars that drive themselves. Distributed power generation. Web connected sensors in everything. You know, things that have a material effect on people's quality of life. As opposed to Facebook.

asto3• 14 years ago

It depends on what the users are using. I think it's extremely hard to get people on a platform to socialise* and then get them to do something else that generates revenue. With the exception of purchasing game credits etc, there's no easy way to do it.

* blanket term for status/photo/video sharing

earl3• 14 years ago

One, you presume that advertisers are incredibly naive and don't measure returns. Obviously cleanly measuring advertising returns from fb is hard, but it's still being done.

Second, fb can put up the first credible alternative to adsense since they collect browsing info from their fb login and other widgets. In fact, they can do better than adsense: fb can mix in very accurate demographics alongside the page context. Adsense makes google nearly $10B/year and I'd bet fb could eat half of that. And many pubs that lean heavily on adsense are desperate for a competitor. So I'd say fb is -- at bare minimum -- a $5B/year company. Plus another billion or two from taxing every bit of money that flows through social gaming. Plus it seems like zynga will be able to do poker for money now. Plus I don't believe all the ads on fb proper are worthless, so roll that into the mix.

Finally, from your comments below, you seem to think advertising in general is worthless. If you think companies (US only) spend $400B/year because they're stupid, then I'm too dumbfounded to formulate a response.

JPKab3• 14 years ago

http://www.forbes.com/sites/ryanholiday/2012/05/17/why-i-los...

Advertising isn't worthless, but advertisers are very naive. You talk about companies spending money because they are stupid. I SUSPECT, but only Facebook has the data to KNOW, that there is a high turnover in companies advertising on Facebook. New companies coming in every day, but also many who realize they aren't getting a return on investment and leaving. I think a lot of big companies advertise on it strictly for brand presence, rather than for direct sales. That's fine. But let's not pretend that there is remotely the click-thru rate that Google has.

qohen• 14 years ago

> One, you presume that advertisers are incredibly naive and don't measure returns.

What if there were enough naive newbies to keep things afloat even in the face of advertisers who became disillusioned?

http://www.jperla.com/blog/post/facebook-is-a-ponzi-scheme

(via: http://www.forbes.com/sites/ryanholiday/2012/05/17/why-i-los... )

jlawer• 14 years ago

> One, you presume that advertisers are incredibly naive and don't measure returns.

Working in digital media (in Australia) I would say this is actually accurate.... People measure returns not on the impact on sales because its difficult to account for... people are using metrics such as "likes" and size of the email list to know if a campaign is working. The top advertisers do measure the impact down to the user... but most are not willing to pay the money it costs to gather and analyse the data. Instead they follow the trends, under the impression that if everyone else is doing it, it must be right.

Part of the problem is that

- Most companies run digital through a different team from press, broadcast and other media.

- The digital team is almost always very lightly funded compared to the other mediums (its also cheaper to run). Due to the lighter funding it tends to have the more junior marketers.

- Many companies run each brand in their portfolio through a different marketing team, so that your dealing with small teams (3-10) of people even for large national brands.

- These people are typically not mathematically and technologically trained and typically work with outside vendors to do their work.

Don't overestimate the value of facebook ads, they work really well for certain things (some impulse buys, things on the facebook platform, etc), but It doesn't work well (at the moment) for many other products (expensive, niche).

Facebook has a lot of potential to adapt this going forward but I am thinking that people are betting on facebook like its a sure thing and am not yet convinced they will pull it off.

skmurphy• 14 years ago

The advertisers are the customers, they are the ones paying Facebook. The 'users' are the audience that the advertisers are paying to reach.

Bud2• 14 years ago

Who cares what this guy thinks? He doesn't count either the iPhone or iPad among the most important innovations of the last 5 years, but two of his 4 choices are about cars, and another is Google Goggles.

He also surmises that Silicon Valley is dead because of a few observations about Facebook, while ignoring that Apple has become the largest company in the history of the known universe.

recursive2• 14 years ago

He's absolutely correct. Automated cars will have a much bigger effect than iPads. So much time is wasted driving.

InclinedPlane3• 14 years ago

This is just blatantly wrong. Yes automated cars will be a huge deal, but discounting the iPad is just prejudice pretending to be insight. The mobile OS experience and the tablet PC are very much the next phase of evolution of the computer. Right now the iPad is trailblazing the way as a very high markup luxury good but even so it's proving to be enormously disruptive. When the second shoe drops on the tablet PC revolution the entire industry and indeed the entire world will be shaken up. In a few decades the market for computing devices and software will be vastly larger than it is today. People in Sudan will have dirt cheap solar powered tablet PCs. The degree of disruption on the horizon due to these devices cannot be overstated.

Edit: how are tablet PCs disruptive? In several ways:

First, they have fewer components than any other form-factor complete computer and are cheaper to produce. Cheaper computers means more people that can buy computers which exponentially increases the number of people who buy computers when you consider the developing world. This is a feedback loop, technologically it's likely to be possible to make a profit on tablet pcs in the near future in a price range of tens of dollars per device.

Second, they are more user friendly for average users and their form factor offers advantages for normal users (portability, etc.) This makes them desirable as replacements for laptops and desktops for many people, as witnessed by the massive number of tablet pcs that have already been bought.

Third, they are excellent gaming platforms and will almost certainly compete on equal if not superior footing with other handheld gaming devices (which have sold hundreds of millions of devices already, not including software sales) and even traditional consoles and pcs. That industry is already larger than the film industry and growing rapidly, the growing market share of tablet gaming is nothing to scoff at.

Fourth, tablets don't require the same level of infrastructure as other computers. They have long battery life and low power usage, they don't necessarily need a hardline internet connection or a constant source of electricity. Someone in 2030 living in a 3rd world country could pay 1/100th their annual income for a tablet pc which has an e-ink display and can recharge via solar power. They could use it as an ebook reader most of the time and use it for other purposes such as communication and whatnot when they visit a city or someplace with free wifi or they could communicate point to point with folks with similar devices (using them as phones or relays, for example). That technology will change what it means to live in the 3rd world.

Fifth, the way that apps work on tablets is a natural match for line of business apps and corporate IT deployment and management. Future generations of tablets will make huge inroads in office computing, which is a huge business.

Yes, today they are sometimes toys, but there is a lot of money in toys, and such devices are far less toys than the original PCs were.

akg3• 14 years ago

If time is wasted driving, is building more efficient cars really the solution? I would venture that technology that makes the world a lot smaller and puts information at your fingertips, e.g., tablets, phones, social networks, etc. will be a much bigger disrupter in the way we live our current lives. Maybe in the future we won't have to drive as much since we can just get things done without having to waste time in cars.

pyoung• 14 years ago

The only reason I would buy an automated car is so that I will have more time to play with my iPad :)

nextstep3• 14 years ago

And curing cancer will have an even greater impact. But as of today, cancer still kills millions and I am unable to buy an autonomous vehicle. However, I'm writing a comment on HN on my iPad.

I think that autonomous vehicles will be revolutionary, but it's going to be 5-10 years before such claims are anything more than bold prognostications.

Someone• 14 years ago

I sort-of agree with you, but I wonder whether the effects of automated driving will be positive. Firstly, I doubt most current drivers will be extra productive in the time they gain once they have an automated car. Secondly, I worry whether those who currently drive cars professionally will get any job at all once we have automated cars.

TechNewb• 14 years ago

How about living in, or building, cities that have good enough public infastructure that cars aren't needed. That would have an even larger effect.

ippisl• 14 years ago

I think you should include the iphone and ipad together because they're pretty similar.

Cheap smartphones/tablets will totally transform the third world.

One good example is education:a billion+ people in the third world have awful or nonexistent education.Just imagine them having access to the best teaching in the world via khan academy, coursera etc. How will this change the world ?

What else could cheap smartphones/tablets do for the third world ? help tranform healthcare ? let them organize into big groups to achieve things? let marketers of usefull stuff cheaply reach them ?

The thing is that wasting commute time is a small problem relative to the problems the third world suffer from.And smartphones might have a big role to play in solving those.

asto3• 14 years ago

I believe he's talking about the current crop of startups and research that's getting funded right now.

steauengeglase• 14 years ago

He is lamenting the number of talented high school kids playing baseball, not who won the World Series.

koeselitz• 14 years ago

The iPhone and iPad were absolutely not a "project" (the word he uses in the article) of the past five years. They're part of a project that started more than ten years ago. I certainly don't think they're old technology - they're still ahead of the tablet and arguably the smart phone market, I think - but I don't really classify them as small projects that have a lot of potential that were just invented in the past five years. Heck, you could easily argue that the iPad is the fruition of a vision, and a project, that Steve Jobs started decades ago. And if you want to get technical, the iPhone was in active development before five years ago.

ChuckMcM• 14 years ago

No doubt his comment about "Dancing on the grave of Silicon Valley" will join counterparts like "640K ought to be enough for anyone" and "Who wants to print faster than they can read?"

It is a bit short sighted, and while I disagree with the premise I'm certainly fine with Blank having an opinion that the 'glory days' of Silicon Valley are behind it.

But when I read that article I thought to myself, "Wow, here is someone that doesn't 'get' the valley at all." Because he didn't seem to remember that the valley "died" in 1984, if you recall that is when semi-conductor companies started going out of business and silicon was dead, it was all going off shore. Except that systems companies like Sun were being born, and Cisco, and a host of other infrastructure plays that were going to lead into the a huge up welling of innovation (and sadly patents). Then the dot com bubble burst and Silicon Valley 'died' again, no more would anyone build innovative tech companies in 'the valley' after all it was a wasteland, a burned out cinder that had burned brightly for half a dozen years, only to leave behind an infertile plain of concrete layups and landfills with t-shirts from companies nobody would ever remember. And now we've got Google, a re-born Apple, Ebay Etc. Facebook's IPO heralds the "end" of Silicon Valley? Really?

So when ever someone tells me that the valley is dead, and can't explain why this time it is actually going to die when the last several times it didn't die, I know that they don't understand why it lives, and thus can't reliably prognosticate about its death.

Its always interesting to read though. And when folks things it's dead, well smart people go out looking for the saplings.

DanBC• 14 years ago

iPhone and iPad are not innovations, they're just very very good iteration of existing tech.

redthrowaway2• 14 years ago

>Who cares what this guy thinks?

"This guy" is Steve Blank[1]. He's kind of a big deal in SV and the startup scene in general. Whether or not you agree with his assessment of Valley culture, his personal cachet is such that it behooves you to take notice.

[]1 http://en.wikipedia.org/wiki/Steve_Blank

iamwil• 14 years ago

Be careful not to give him credibility just because he's an expert.

While we should take notice because he has a track record of knowing what he's talking about, we should evaluate his claims on its own, regardless of who makes the claim.

Is it true that VCs no longer invests in the hard sciences? I don't think so. There's VCs that invest in cleantech and biotech.

Is it true that VCs like quick returns and will increase investments in social media? Probably. In addition, they can only invest in what entrepreneurs are building.

Bud2• 14 years ago

Thank you for explaining who this guy is; I honestly did not know. I agree that if a person has a record like that, it's reasonable to give them a listen.

But I still disagree with this particular opinion of his. :)

nhebb• 14 years ago

There's a couple of problems with that argument. Apple is a great Silicon Valley success story, but they don't make products in Silicon Valley. They design them there, but they are manufactured elsewhere. In its heyday, Silicon Valley used to make things. Tangible things.

Manufacturing companies not only provide direct labor employment opportunities, but they also create 2-3 jobs in the local economy for every direct labor position.

The hardware companies of yesteryear made products that had a compounding value in the economy. Test and measurement equipment, processors, workstations, etc., were put to use making other products that had value, hence the compounding effect. I'm sure Apple products have a compounding value effect, but a company like Facebook probably doesn't, at least to the degree the old SV companies and their products did.

recoiledsnake• 14 years ago

>while ignoring that Apple has become the largest company in the history of the known universe

Sorry that's Microsoft, not Apple (even if during the dot com boom).

From Wiki:

Record Market Capitalization

On December 30, 1999 Microsoft reached an intraday high share price of $119.94[3]. With 5,160,024,593 outstanding shares (as of November 30, 1999),[4] it had a market capitalization of $618.9 billion. This was the highest market capitalization ever reached by a publicly traded company[5]. Adjusting for inflation to 2012, Microsoft's market capitalization would be $846 billion[

Apple only reached $600B.

mkramlich• 14 years ago

He's Steve Blank. He probably has way more accomplishments, credentials, followers and respect than you do. You really should look before you leap before making comments like that. Also, he's clearly speaking at a strategic, coarse-grained level.

Elon Musk: I think we can put a man on Mars within 10 years.

Bud: Who cares what this guy thinks? (...)

see what I mean?

dataisfun• 14 years ago

agreeing with what others have said. Blank has basically redefined the study of entrepreneurship (in addition to starting and exiting quite a number of companies).

drumdance• 14 years ago

Apple does not need VC money.

derwiki• 14 years ago

Largest _publicly_ traded company; I believe there is at least one privately held oil company worth more.

dasil003• 14 years ago

Social media is not going to be "where the money is" when all these companies founded by 20-year-olds hit the wall because Facebook is the only one making any money off social. Eventually VCs will realize, hey maybe we should fund some of these guys with big ideas over here. Social is just a gold rush, but these things are cyclical.

muhfuhkuh2• 14 years ago

Wouldn't cars be the domain of Detroit or Tokyo, not the Valley? Why would it? Perhaps the technology behind some of it would come from there, but doesn't that start from consumer electronics anyway?

He's being a bit too forward-thinking, decrying the absolute cultural sea change social media represents for almost all walks (and aspects) of our lives, relationships, and ways to do business. It's, IMO, the biggest revolution in the truest sense since the invention of the Web itself. That it came from the Valley is just a testament to the mindboggling creativity of that small patch of sand in the US.

We'll get to driverless cars and rocketships with HAL and novel cancer cures and all that soon(ish?) enough; but it can't all come from the Valley and (as he correctly posits) alot of it may come from Asia. Yet it won't be because Asia has the inside track to those innovations, or because they poached Valley talent away (Wall St. does enough of that with quant trading); it'll be because the money is so very fluid there and doesn't sit in VC silos to be doled out to the MIT-Stanford-Harvard-Berkeley idea factory.

saraid2165• 14 years ago

Have you been to Detroit lately?

akg3• 14 years ago

Innovation can come from unlikely places, especially when people connect and come together. I don't think social is just about where the money is, I think it can be powerful force in the way we live our lives and also a source for future innovation. I'm not just talking about Facebook, but tools that bring the world a lot closer together.

I wonder if people criticized the telephone as much when people instead of "working" spent time chatting on the phone with their friends. Sure there will be people who waste time doing that, but I think in broader terms, it will help open up communication channels, enable new collaborations, allow a free exchange of ideas, and also lead to more innovation. It's just hard to see where things are going, but I would bet that they are headed in a positive direction.

delinquentme• 14 years ago

I'm just really happy that this made it to the front page of hacker news.

nextstep3• 14 years ago

Google Goggles is an augmented reality app that basically layers Yelp reviews over Google Maps Streetview. Did he mean Google Glass, the AR glasses that Google made a video about? Does this guy really think that the Google Glass project is groundbreaking? If it's so Earth-shattering, why am I typing this on an iPad and not through some next generation AR display on my head?!

ericd3• 14 years ago

Because Glass hasn't been released yet.

grimboy• 14 years ago

The fact that you're not using it yet is almost a necessary condition for it being groundbreaking. The basic technology for the iPad has been around for ages, but the real innovation of the iPad is getting everything working smoothly and cohesively in a way that previous devices didn't. You may well be using AR of some variety at some point in the future but it will be some refined version with the kinks ironed out.

nextstep3• 14 years ago

You're right! The iPad isn't groundbreaking, because it exists and I can buy one today. Something really groundbreaking exists only in promo videos, has no publicly stated timeline for release, and is only actively discussed in tech news comment echo chambers.

koide2• 14 years ago

I'm willing to bet that if Google releases their AR Goggles, Apple will wait a year and then release the iGlasses which will actually work and revolutionize the masses.

drone• 14 years ago

My take on this article is this: it's short-sided to put so much money into one particular sector, and to encourage others to pull them out of longer-to-realize-profit sectors. That the end result is a diminishing return in the long run for the country, or region as a whole. This being caused by a lack of "long-term tech investment."

However, the striking problem with the statement is that it is not backed up by data. How much money that would've been invested in "core" technology (technology used to enable other technology), pharmaceutical, or other investments was instead funneled for short-term gains into social start-ups? I'd understand that if one just read tech news, one might think all investment goes to SV software firms these days, but I have a hard time believing that's a fact and not just a matter of media selection.

fear91• 14 years ago

Is it me or does this feel like a blatant Google PR article?

EternalFury3• 14 years ago

Something that has been concerning to me over the past few years is the shortsightedness at the national level.

Sure, a national endeavor for growth can include tax policies, broadband programs, educational reform, capital investments, flexible monetary policies, etc.

BUT, I think one of the most important and worthwhile goal should be the decentralization of high-growth job centers.

Setting up shop in Silicon Valley these days is ridiculously expensive. Besides, basing a large percentage of your high-growth businesses in an area that may be ravaged by a natural disaster at a moment's notice is clearly unwise.

Furthermore, the success of the nation should not be tied to the fate of Silicon Valley, or the fate of 3-5 major job centers. Hence, a national priority should be to decentralize this economic activity across the country.

There is no catch-22 here, contrary to what people say. ("We set up shop here because all the qualified workforce is here.")

With real estates, school expenses, public transportation capacity and urbanization reaching unsustainable levels, there is no doubt start-ups would benefit from setting up shop in less expensive areas, where their employees could live without mortgaging themselves to retirement or sacrificing the well-being of their family members.

usaar3333• 14 years ago

While centralization has its risks, the benefits of an entire industry being in close proximity to helping good ideas spread cannot be understated.

EternalFury3• 14 years ago

Agreed, but it can also lead to herd behaviors, where every other start-up aims to become another Facebook, Twitter, Google or whatever symbol of the day.

Daniel_Newby2• 14 years ago

You mean like Austin, Seattle, Boulder, Huntsville, D.C., and so forth, just to rattle a few off the tip of my finger? The Bay Area is already not the center of the tech universe, contrary to what the HN Opinion Amplifier might lead you to think.

EternalFury3• 14 years ago

Silicon Valley, Seattle, Austin, Chapel Hill, Boston/Cambridge, New York ~= 90% of the pie. I guess that's not concentrated enough for you.

jonny_eh• 14 years ago

It's easy to downplay the impact of Facebook compared to the kind of stuff Elon Musk is doing, but it was only last year that we saw dictators being overthrown with the help of social networks like Facebook. That's pretty cool too, no?

yannickt• 14 years ago

I think you are vastly overestimating the impact Facebook had on the so-called Arab spring. Internet penetration in that part of the world is not high enough for social media to trigger an uprising at that scale. Also, just because a dictator is overthrown doesn't mean things automatically change for the better. See Afghanistan, Iraq, Libya, and much of subsaharan Africa.

jstrate• 14 years ago

I see a lot of comments addressed to "this guy" referring to Steve Blank. Let's not forget he's been involved in silicon valley startups since the 70s, including founding semiconductor companies. While they're no hello world rails startup, he has a proven track record and a first-hand experience of how the valley has evolved.

I suspect many of you haven't seen his take on the history of the valley, which might give context to his views.

http://www.youtube.com/watch?v=ZTC_RxWN_xo

wpietri• 14 years ago

Yeah, it amuses me to read the number of people here saying he doesn't get Silicon Valley. He might be wrong, but he certainly isn't ill-informed. You can also read his 10-part history of Silicon Valley on his blog:

http://steveblank.com/category/secret-history-of-silicon-val...

dm8• 14 years ago

Given the macro trend of "software is eating the world", its very likely that investors will chase $$ for dot com startups (or mobile apps nowadays). I completely agree that SpaceX, Tesla, Google Self-driving cars are proper engineering projects but I will try to be devil's advocate. Google (even thought its a Internet company) revolutionized the information organization and retrieval, we are much better because of it. Facebook connected the whole world on the Internet. LinkedIn created professional network where it is much easier for people to connect and benefit (especially Sales guys and recruiters). Twitter is helping in democratic movements across the globe. GroupOn made it easier for local SMBs to advertise. And there are companies like AirBnB who made it possible to profit from entirely new concepts.

Of course, for every Facebook there is a Zynga whose major accomplishment is pasting cows on the Internet. Unfortunately, too many "real engineers" are jumping on SoLoMo bandwagon and that is hampering real innovation.

38f0ia• 14 years ago

Prof. Blank's blog entries aimed at selling his "Startup Manual" are creepy. Framed as stories of walking through the woods with former students it just stinks of cheap, manipulative internet marketing. Is this what he is teaching kids? Then at the end a link to his book on Amazon. Just terrible.

Thanks for lowering the bar, Mr. Blank.

"Where the money is." Indeed. Money that could be invested in more worthwhile research. He's right. Thank God for NIH, NSF and the SBA, because now we have educators giving in to the lure of low brow internet marketing. Sad.

RedwoodCity• 14 years ago

The last commercial Fab in the valley closed some five years ago. Many of the companies that were essential still have their HQ in the valley, but are transferring more of their operations over seas, Applied Materials for one.

The valley has evolved over time too, and in order to be an interesting place it must continue to evolve. I have yet to see an end to interesting conversations, ideas, and things coming out of here.

mjwalshe• 14 years ago

This trophe is older than time its self people always say that yesterday was a golden age and those pesky kids today are ruining it.

"I see no hope for the future of our people if they are dependent on frivolous youth of today, for certainly all youth are reckless beyond words... When I was young, we were taught to be discreet and respectful of elders, but the present youth are exceedingly wise [disrespectful] and impatient of restraint" (Hesiod, 8th century BC).

SV is changing but I am sure people complained when software took over from hardware in SV

philwelch• 14 years ago

The problem with that quote of Hesiod is that, for all we know, the youth of Hesiod's time and place were worse behaved than their parents. And in any case, it's a question of how much technical innovation is coming out of an economic center, not whether we're disciplining our kids as well.

If you want to apply some ancient wisdom, here is some: change is constant. And it's not always for the best.

tnash• 14 years ago

"In the last bubble there were no customers. Facebook makes $4 per user. The users are customers."

Nope. The users are the product, not the customers.

jonmc12• 14 years ago

The problem Steve Blank is pointing out is one of solving quality of life problems, and sustainability problems when there is easier money to be made in entertaining consumers. Facebook just accentuates the point. Its a bit idealistic to think that Silicon Valley ever really had it right or that government funding is the solution to innovation of 'real' problems.

People have a large dimension of needs. Some of these needs, while necessary for survival thousands of years ago, are now obsolete as a survival utility function. McDonald's designs french fries to exploit these needs; Facebook builds social mechanisms. These needs will always be there - but at the same time there is a finite limit to the amount of attention on earth that can be expended fulfilling these old-world needs - it will plateau when human attention is exploited to the fullest. Meanwhile, there is arguably no cap for fulfilling the set of user needs that make the quality of human life better, and give our civilization the ability to sustain its own existence. Over the long-term, the set of human needs that have utility in our current environment should present the best investment opportunities - at least I sure hope so.

robterrell• 14 years ago

Upvote and comment: for many users, Facebook is indeed solving a "quality of life" problem -- how do I stay in touch with people? It's a first-world problem, sure, and maybe it looks a bit like entertainment, but it's a real problem that they are solving.

grellas• 14 years ago

Steve Blank is a respected Valley veteran who has written highly insightful and informative materials about the history and development of the Valley (see http://steveblank.com/secret-history/) and so his opinion is worthy of note.

That said, I have been in the Valley since 1968, have watched its ups and downs professionally since the early 1980s, and can say without question that it is currently bursting at the seams with opportunity from every conceivable angle. Yes, the days when silicon was king are well past their "golden" stage but they have been replaced by an era where founders have decided leverage and power to realize great visions without having to overcome the resource/knowledge barriers that predominated just a decade ago, where innovative investors have more ability than ever to leverage early-stage situations in ways that used to be monopolized by just a few top-tier VCs, and where the disruptive impact of technological change generally is leaving old-guard companies staggering as startups who vigorously challenge them proliferate - all to the great benefit of society at large. Plans are afoot at every top-tier company - Facebook, Google, Apple, etc. - to grab control of the whole process and eventually dictate to others how they might participate in it, but such plans have not yet succeeded even when they once seemed almost inevitable (thinking of 90s Microsoft here). As long as companies remain free to innovate, there likely will be successive stages of greatness in the Valley (and, of course, elsewhere where comparable elements exist) and it is a mistake, in my view, to attempt to label any particular outstanding stage in the past, or any particular mode of growth, as "golden" in some special way. As long as human nature is what it is, enterprise will take many forms, each suitable to its time and no one form more particularly special than the other. The key is to capitalize on the opportunities as they exist, leaving history to play itself out as it will.

jluan• 14 years ago

I don't think the point you make contradicts Steve Blank's at all; to me, Blank's thesis is that startups in the Valley no longer choose to pursue truly disruptive technological innovation because our ecosystem now almost exclusively rewards areas such as social media, where you have to run as fast as you can just to stay where you are, to the detriment of "hard tech" such as biotech, robotics, and the semiconductors of old.

rmATinnovafy• 14 years ago

There is a growing number of individuals doing hard tech. They just focus on working, and not on getting Likes.

The valley may be full of social media photo sharing people, but don't forget that the Valley still has strong roots on the homebrew side.

For every social app out there, there are ten hackers pushing code on the local HackerSpace.

temphn• 14 years ago

Elon Musk made his fortune with Paypal, an internet company. Google made its fortune on the internet. There is nothing that prevents people from making the easier dollars first in something like Zynga and then going and putting their personal $10M to work on something of substance.

vibrunazo• 14 years ago

As I understand it, I think they're disagreeing like this:

Blank: The valley used to invest in hard problems that made the world a better place. Now that era is gone for good. Because social media makes so much money, no one will ever want to invest in hard problems in comparison.

Grellas: Yes we are no longer investing in hard problems. But that era isn't gone for good. Because the valley is such a good place for innovative startups, eventually, startups will start solving hard problems again.

po2• 14 years ago

I think the valuations are a bit of a bubble, but social media is real.

In the dotcom bubble of 2001 I heard the same thing except with "internet" replacing "social media".

In the last bubble there were no customers. Facebook makes $4 per user. The users are customers. They produce real revenue. Nobody's debating whether Facebook can make money.

This may be true but how much of that $4 per user is driven by the bubble itself? How much advertising is coming from companies that are within the Silicon Valley gravity well? If the (so-called) tech bubble pops, people will still need cars, vacuum cleaners and food so how well does Facebook do with those kinds of advertisers?

The reason a bubble is scary is because it distorts your normal metrics of what a healthy company is. It doesn't matter how much money you're making selling hotdogs at the boardwalk if one day people stop going to the beach.

forgottenpaswrd• 14 years ago

This. Of course social media is real, of course having 900M customers is worth something. But trowing infinite amounts of money means you spend more that what is worth, in other words, it is a bubble.

In Spain we had this houses boom, and everybody said: but houses are real, you need them, they are necessary so they will never go down.

It is not qualitative, but qualitative. They make $4, but they need $100 for the stock to be fair price.

Fb founders are selling as much as they let them, Goldman S are going to sell at least 50%. This is the biggest scam I had seen for a while.

po2• 14 years ago

Thinking about this some more the part that drives me crazy is this: Facebook makes $4 per user. The users are customers.

That just doesn't follow. The advertisers are the customers. They happen to pay $4 for every person right now. If the advertisers dry up - because say, they go out of business or decide facebook isn't great value - then the facebook users are 'worth' a lot less.

robot3• 14 years ago

If you have doubts about what he means, he is essentially saying this: The state of mobile and social has come to such an advantageous point for startups that it is not feasible for investors to go for the hard, truly disruptive things. And he is very right.

Thanks to Apple products, now you can reach millions of people by writing an app. Due to the viral nature of social apps, you can now expect a useful app to reach for the masses without spending on marketing and advertisement. Can we say the same for anything other than mobile/web and social? No.

Until the social/mobile market matures, we will see each potential founder working on a mobile phone application instead of attacking a non-viral problem with a doubtful market/new technology.

AznHisoka2• 14 years ago

Have you ever launched an app that reached the masses? What do you even mean by viral nature?

robot3• 14 years ago

A social app has a potential to go viral, e.g. spread by word of mouth or via means built into the application. Spreading to all social contacts for example. You can't do that with a startup involving hardware or anything non-social.

crosh• 14 years ago

Reading through these comments I feel that people are focusing on the wrong issue. At a high-level, let's not focus on high-tech vs. relatively low-tech. Rather, as Steve is, we should be discussing whether companies are pushing to solve significant world problems and pushing real sciences forward, or whether entrepreneurs and VCs are eager to tackle gimmicky but real quick buck businesses.

I feel that we have brilliant minds looking for quick paydays, which is understandable, but does not say much about our community. We need more Palantirs, Fusion IOs, and SpaceX type companies and fewer email, flash sales, and gaming companies.

hristov• 14 years ago

This has always been the case. VC money has always gone to the last stage of commercialization of technology and not for basic science or long term engineering projects. That is why you are supposed to have research universities and research government agencies and foundations.

What he says is generally correct, but it is not new. So his pessimism is largely unwarranted.

SoftwareMaven2• 14 years ago

I like Steve Blank. In fact, he is one of my "mentor idos" (people I would lie to emulate, but no hero worship here). I also think he is wrong.

There is no "true path" of SV that it can fall off of and be over. Instead, there is a continued cycle of very technical people working together to build significant equity that is then recycled for more new tech people to do the same.

When that stops happening, SV will die. In the meantime (like any other time), there are sparkly things drawing people's attention. And I would be willing to wager the crop of people making big exits today aren't going to be happy investing everything in what they just did.

mtkd• 14 years ago

Kickstarter is starting to fill this gap.

rdl• 14 years ago

I'm not sure if I buy his argument, but if you accept it, I think there's a natural limiting factor: recruiting.

The best engineers will produce the best products, either for local-mobile-social apps or space exploration. At some level, good software people are somewhat fungible -- a great engineer could work on either, given some orientation.

I believe the best engineers would rather cure cancer, colonize space, create anonymous digital currencies, etc., and produce infrastructure and developer tools which support those things, rather than work on ad networks, games, photo sharing sites, etc., given equal access. The reason people haven't gone into space for the past 30-40 years is that working for NASA is a horrible experience for an entrepreneur, and creating software or technology startups is much easier.

Now that "software has eaten the world" (which I do believe), a great software engineer can effectively start a space company. Sure, your first 10-20 employees at a new ad network or game company might be able to make enough on equity to do it, but employee 50 or employee 500 would sure rather be working on something amazing like space than yet another ad network.

agentgt• 14 years ago

If he thinks the Valley is bad he should try to get investors to invest in something long term on the east coast (Boston).

On the East coast the first question is "What are your Sales number?".(yes they really are like Kevin O'Leary from Shark Tank). And "How is this going to scale?" (Cause lets face it social scales very well yet ironically in the east we didn't have the vision to first invest in it :) )

varelse• 14 years ago

TLDR: Agree with parts of Steve Blank and Grellas...

15 year veteran of the valley here, and as much as I agree with Steve Blank that the herd money is chasing social media right now (and why not?), I don't agree that the long-term payout investments are gone - just look at Planetary Resources for an instant counterexample (I know, they're based in Seattle so they don't count, right?).

But more importantly, all of Web 2.0's 30ish billionaires are as mortal as the rest of us. The difference is that they actually can throw money at that problem and stand a good chance of at least a modest payout (just look at Sergei Brin and Parkinson's research). And while I agree with Steve Blank about the importance of government funding for long-term technological development, I think we're about to see a Cambrian explosion in biotech as these guys try to fight off the inevitability of death. Because what good are all their toys if they don't stick around long enough to play with them?

Meanwhile, the north end of Silicon Valley has quietly transformed itself into a mecca for biotech and bioinformatics in recent years. Silicon Valley itself started out as farmland and look at it now. I see this as just the latest in a series of transformations to whatever is the next big thing.

willpower1012• 14 years ago

There must not be much going on in the world right now. So many headlines have similar grandiose statements recently. The valley is not dead. There are future disruptive companies being ran by two guys in a garage all over silicon valley. Sadly, you have to have the foresight to wait five years while they build momentum. There's never not a next big thing.

willpower1012• 14 years ago

Actually, I want to amend that a little bit. Rocket city, spaceport, JPL, etc., I feel space travel is on the same precipice that tcp/ip and compuserve were in the 80's. The next 20 years will be fun.

'The Golden Age of Silicon Valley Is Over, and We're Dancing on its Grave'

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