It's Settled: Silicon Valley Is Dying. So What's Next?

http://www.psmag.com/navigation/business-economics/legacy-economy-silicon-valley-dying-detroit-74001/

by Libertatea • 12 years ago

48 58 12 years ago

VLM• 12 years ago

Boomer fodder, all the memes are at least a decade or two out of date. The great lakes area is not the rust belt, it rusted and blew away in my grandfathers generation half a century ago. Innovation economy is not CRUD apps with quirky marketing, at least not since '95. The general idea of the article is more or less correct. I checked the byline and its only four hours old although it sounds much more ancient.

I am strongly biased because I don't like articles about this topic, the vultures should stay away. Yeah, you'll all freeze in the snow, so best not come here. Nope we don't have any money or quality of life, I advise staying away, LOL.

Given that immense level of bias my evaluation of the style and memes of the article might be tainted.

techsupporter3• 12 years ago

I am strongly biased because I don't like articles about this topic, the vultures should stay away. Yeah, you'll all freeze in the snow, so best not come here. Nope we don't have any money or quality of life, I advise staying away, LOL.

Ah, if only that worked. Austin, Dallas, Seattle, Portland, Nashville, Kansas City...all of their residents have said the same thing and the "vultures" keep on coming. It's the circle of life, my friend.

stcredzero3• 12 years ago

my evaluation of the style and memes

Are you saying you're using as a primary evaluation tool, the newness of the authors meme references? How about evaluating the ideas from first principles? You might just have inadvertently demonstrated what's generally gone wrong with scenes like SV.

yummyfajitas3• 12 years ago

Newark is an instructive geography. The ambitious head to New York or San Francisco out of tradition. For the same reason, they avoid Newark. It’s off the map...

That's not why people avoid Newark. Plenty of people are moving to Jersey City and Hoboken which have the same "bridge&tunnel" stigma.

People avoid Newark due to legitimate fear of being robbed, raped or murdered.

rayiner• 12 years ago

Its like he's never even been to Newark.

odonnellryan2• 12 years ago

Even Jersey City isn't 15 minutes from Manhattan... Last I checked, almost takes an hour (45-60 minutes depending on congestion) just to get the path to take me to WTC.

odonnellryan2• 12 years ago

Newark isn't THAT bad.. it's pretty bad, but not that bad.

busterarm• 12 years ago

Newark is fine if you live in Ironbound. I lived there in Newark for 6 months and it was the best 6 months I had in 26 years living in/around New York City.

Would live there again in a heartbeat.

Artists have moved to Newark. All of those old warehouses were converted to lofts and sold in < 2 years.

yummyfajitas3• 12 years ago

Good to know. If I return to the US I'll take a look.

codemonkeymike• 12 years ago

I live in North Newark, its really not as bad as people say as long as you stay away from the west side of town. Much like most cities east of the Mississippi. Also if you take NJ transit in Newark it is exactly 20 minutes from the train station, the Path on the other hand is more like 35 min to 33rd street or 25 min to WTC.

smaili• 12 years ago

Anyone else getting annoyed by these YAASVAs (Yet Another Anti-Silicon Valley Article)?

michaelochurch6• 12 years ago

I get annoyed by the lack of understanding.

Most of the anti-SV crowd want the VC funding and the same essential culture. They just want to move it to another place in the country. That would be a marginal improvement-- and massively beneficial to me as a 30-year-old who'd be able to get in on the ground level and buy housing-- but it wouldn't fix the underlying problem. It's like a revolution where the people revolting want the same damn system but with themselves on top.

You can't have it both ways. Silicon Valley is defective because of its culture. If you copy the VC feudalism and the California softie NIMBYism somewhere else, that place will become just as broken in a matter of a few years (assuming that copy operation is successful, which it almost certainly won't be).

stcredzero3• 12 years ago

If SV is as severely broken as you say, then it should be possible to repeat the same phenomenon elsewhere, but better, provided you can manage to attract true talent which has been cast-off by SV for the wrong reasons. Create an alternative without the sexism, ageism, and groupthink, and it will attract the mistakenly rejected talent. Getting the right ingredients together might take the resources of a state, however.

walshemj• 12 years ago

yes I want that 100k job right in my local town - unfortunately the real world isn't like that.

logfromblammo5• 12 years ago

Not quite. What I want is to be able to easily find a new job on the strength of my skills and aptitude rather than my social connections, without having to move my entire household. Again. I want to be able to work with both younger people and older people, with managers that used to do what I do, even if they weren't as good at it. And I want a 40-hour work week or less.

That isn't exactly a tall order. It is possible to find companies that do treat employees like people with lives outside the office. Larger and more dysfunctional companies apparently like to swallow them whole, digest them, and crap out the useless cost centers. It would be nice to not have to uproot and relocate every time that happens.

adwf2• 12 years ago

Seems specious to me. SV is a centre for innovation because of two major things: Funding and Talent. So firstly, it's unlikely that any VC's are going to move out because their personal rents are too high, while there's still the high concentration of talented people in the area. They might branch out to other locations, but personal choices over where to live are usually about far more than just money. So the Funding is unlikely to relocate.

It's possible they might start encouraging businesses to move further afield to increase their survivability, but ultimately a lot of founders will take <$30k salary when starting a company and accept any hardship in order to succeed. So suggesting that corporate finances at startups are suffering because of high rent is also a shaky premise. There may be a few borderline companies that fail "just before" they "would've made it big", but that'll be true at any burn rate.

If anything, investors probably like high rents because it forces higher burn rates and hence encourages startups to generate revenue or flip quickly. Either of which is preferable to a long, drawn out investment with no end in sight.

It's not like Detroit where a combination of cheaper manufacturing elsewhere and a lack of demand for US cars, led to necessary relocation/offshoring/downsizing.

I can't see there ever being a lack of demand for what SV produces. Businesses. Unless people start running out of ideas in and of themselves, I can't see how it'll die any time soon.

michaelochurch6• 12 years ago

So the Funding is unlikely to relocate.

I agree.

ultimately a lot of founders will take <$30k salary when starting a company and accept any hardship in order to succeed. So suggesting that corporate finances at startups are suffering because of high rent is also a shaky premise.

Most of those people have no other options. You don't want to fund people (in general; obviously there are outliers with 150+ IQs and fucked-up careers, I was one and, who knows, may be one in the future) who don't have other options. You want to fund people who could actually get the $250k hedge fund quant jobs. They'll come down to a savings-neutral (with no children) $125k, but not $30k. Not in the Valley.

The people who'll take $30k in the Valley are (a) rich kids with parental sources, and (b) the truly desperate. Founders are not an exception.

If anything, investors probably like high rents because it forces higher burn rates and hence encourages startups to generate revenue or flip quickly.

True, but the real reason VCs want to stay in one area (and keep their companies there) is that the collusion among VCs would be dangerous and possibly legally hazardous if it happened on paper instead of through a mouth-to-mouth social network.

I can't see there ever being a lack of demand for what SV produces. Businesses.

The whole country produces businesses: restaurants, cleaning companies, indie bookstores. Most HNers find those lines of work uninspiring-- and starting one of those is way riskier to one's tech career than working at Google. Oh, and those businesses tend to get crushed by big corporations (see: WalMart) and landlords and changing trends.

So, there's no lack of businesses being generated in the US. What there is a lack of is inspiring and truly innovative businesses, but SV is no longer producing inspiring companies, so what use is it?

jes51992• 12 years ago

in general; obviously there are outliers with 150+ IQs and fucked-up careers

Is that really the exception? I only know a handful of founders, but none of them had stable careers before they started doing the founder-game. Most of them were working in fits and starts, or were in college but dropped out.

Has anyone done a survey of this?

ktd• 12 years ago

Most of those people have no other options. You don't want to fund people (in general; obviously there are outliers with 150+ IQs and fucked-up careers, I was one and, who knows, may be one in the future) who don't have other options.

http://www.paulgraham.com/marginal.html

yuhong• 12 years ago

Of course, this does not mean that bootstrapping is the only option. Good VCs are not impossible (as far as I know). What do you think of this BTW: http://blog.ycombinator.com/new-yc-partner-investment-policy

eloisant• 12 years ago

I agree on funding, but talent (1) can be found elsewhere (2) is much easier to attract when you're not in Silicon Valley, competing with thousands of other great companies.

Talent is in Silicon Valley only because opportunities, and opportunities are in Silicon Valley only because of funding.

adwf2• 12 years ago

Yes that's perfectly true, but the initial funding frequently requires the talent to go find the money.

Take YC for example; Many people from Europe would love it if YC accepted applications from London or Berlin - and - let them stay there for the duration. But instead if they want to join, they're required to move out to California for a while. Because it's not possible (or at least, easily feasible) for PG to run it remotely, or franchise, or double-up each year, etc...

It's the sheer concentration of talent and capital that gives SV its lead imo. I wouldn't necessarily go there just looking for a job, but I certainly would when looking for funding, even though that would be an international leap for me. Then if the startup fails, there's dozens of others looking for talented people of any skillset in the area, there may not necessarily be so elsewhere. Then after a while, you can go try founding another startup of your own.

The safety net of being able to easily jump to another startup can't be underestimated.

NB: Also note that SV has international reputation that can't be understated either. I can imagine shifting from London to SV for funding, but it's a much harder sell to shift to Austin just because the rent is cheaper. If I'm following the rent rather than the funding/talent, why not move elsewhere within my own country?

michaelochurch6• 12 years ago

I'm not sure there is a "next", at least not in the U.S. I think the Boomers and the venture capitalists have pulled the ladder up for good.

Silicon Valley dying (and slowly) does not mean that a B-list city will replace it. I wish it were otherwise, because we have a lot of infrastructure and a hell of a lot of talent that's still in the B-list cities. However, I don't see much hope for most of those places. I wish I were wrong about that, but when the spirit is crushed it takes a long time for it to come back.

Corporate America "proper" (i.e. Fortune 500s outside of banking and elite startups) is in decline, because most corporations don't exist for any purpose other than their own mindless growth at this point. Talented people don't give a shit about the default corporate mission (make rich people richer) and move through them seeking their own career goals, not caring (and why should they?) what really happens to the firms as they go. The end result of this is documented by the "Gervais Principle" analysis of Venkatesh Rao, and I continued the analysis in the "Gervais / MacLeod" series on my blog.

The "big reveal" for those of us who came of age in the past 10 years is that VC-funded "startups" are just an outgrowth, and an especially dysfunctional one, of this uninspiring system. VC-istan isn't an alternative to corporate serfdom. It's a newer and generally worse form of it: shittier benefits, less investment in employees, faster firing, worse career paths, more ageism and sexism and classism. I would actually prefer the old corporate system (with at least some investment in the employee's career) seen in larger banks and hedge funds, but after having worked in tech (where most jobs become pointless after a few months, thanks to constant reorgs and broken promises) for 8 years, I've had "too many" jobs and the hedge funds aren't really an option anymore.

The big problem with the VCs is that they play outside of companies in ways that would be illegal if their interactions were more documented. They collude. Even if you refuse to take VC funding, they can still destroy you by funding your competition. What they really are is a social network designed for insider trading of marginal, non-public microcaps. One of the reasons why they prefer to fund companies in their geographic areas (and, also, why VCs outside of the Valley and New York will never really matter) is that much of their collusion would be legally dangerous to them if it happened in writing, rather than informally and socially within a closed network of people they trust.

Here's why I think the future outlook is grim. The Soviet system destroyed the entrepreneurial spirit of several countries for generations. (The reason Russian business is so tightly intertwined with crime is that the people who retained that know-how were the black-marketeers.) It didn't spring back in a year or even ten, and it wasn't without some nasty conflicts even 20+ years after the Soviet system was formally gone.

The American corporate system, culminating in the VC-funded clusterfuck we see every day in Valleywag, has had similar effects. Although its decline is evident, peoples' spirits have been so thoroughly crushed that I don't see a replacement coming for at least a generation.

bdunbar2• 12 years ago

The author may have a point about Silicon Valley driving out employees, or deterring potential ones.

I looked into moving there, for the opportunity. I networked. I had (I flatter myself perhaps) the right skill set for my niche.

I looked at the cost of living.

I've got kids, two dogs. For any kind of a reasonable non-sh*tty living situation I'd double my living expenses, plus a two-hour commute.

I moved to Nashville instead.

jes51992• 12 years ago

Sure, but one result of that is that in SV, networking is less important. You can email your resume to a recruiter at any funded company, they'll fly you out for an interview, nobody is expected to know anything about you other than what they can discern in an interview. You'll get 5 to 10 thousand dollars in relocation/sign-on bonus. And the salaries are significantly higher than in Tennessee.

And then you can start networking.

logfromblammo5• 12 years ago

Salaries are higher in SV, but you'll have more disposable income in Nashville, and probably a more comfortable home. Also, the local politics and culture are different. As much as it may surprise the people who do like it, some people don't like the way California operates.

bdunbar2• 12 years ago

I took into account salary diffs between Wisconsin and SV.

And I'd still be living in a sh*tty house with a teeny-tiny yard two hours from the office.

paulgb• 12 years ago

I don't usually defend the Valley when articles like this come up, because as a tech employee I like having the ability to work anywhere and the concentration of tech in the valley is counter to that.

That said, the main arguments here are are 1. wages are too high and 2. rent is too high.

Given that both of these are set by the market, this smacks of "nobody goes there anymore, it's too crowded"

rkuykendall-com• 12 years ago

"No one in New York drove. There was too much traffic."

-Fry, Futurama

coreyw• 12 years ago

Why is it when an article is written talking about the downfall of Silicon Valley, or talking about other great tech oriented cities, that Chicago is hardly ever mentioned. Chicago is the third largest city in the country with a booming tech culture here.

techsupporter3• 12 years ago

I don't mean to sound flippant but is there any city of greater than, let's say, 100,000 people that's located in the United States that people would not say has "a booming tech culture?" Numerous posts on HN talk up, in alphabetical order: Atlanta, Austin, Chicago, Dallas, Detroit (yes, really), Fort Worth, Houston, Kansas City, Las Vegas, Nashville, Orlando, Pittsburgh, Portland, San Antonio, Seattle, and I'm sure I missed a few.

Simply put, I'd like to know the inverse, if nothing but sheer inquisitiveness: Let's say you either hate technology startups and want nothing to do with them, or you love them and want to make the biggest career mistake ever. What city do you choose?

norswap• 12 years ago

I wouldn't be surprised to see Detroit & co rise again, if only because of the dirt cheap price of housing.

fidotron2• 12 years ago

I would, because the infrastructure is crumbling, the tax base to fix it is non-existent, and the bureaucracy running the city is overbearing and corrupt. Detroit is still in the early stages of a death spiral, and it would take something mind bendingly huge to snap out of it.

Detroit is going to stand as the lesson to all cities in North America.

Xdes• 12 years ago

Detroit isn't going anywhere. The residential community may be on the decline, but the business community is thriving and private interests are investing in the infrastructure themselves. The business community doesn't need to rely on the city for infrastructure when there is plenty of capital available to invest directly versus waiting on the corrupt bureaucracy.

freehunter2• 12 years ago

Mind-bendingly huge like the mayor forcibly removing the elected city officials and installing emergency city managers to cut down on the corruption and bureaucracy? Mind-bendingly huge like the largest US city to ever successfully declare bankruptcy ($18.5 billion in debt)?

Because that's what happened. Now we wait to see if it works.

username317• 12 years ago

It looks like the plan in Detroit may be to bring in a lot of EB-2 visas. I'm not sure how I feel about this. It would be great to bring more people to the area, but also there would be more competition for tech jobs.

http://www.reuters.com/article/2014/01/23/us-usa-detroit-imm...

diydsp• 12 years ago

There's a bigger, MUCH bigger, point to be made about geography and finding other creative people than this article, with its glib, provably inaccurate quoting (1) can make.

The big picture is that there are always under-stated, inexpensive places where you can get creative work done which are outside the major, known centers (SV, NYC, LA, etc.). They are tricky to find because they don't have metrics like insane rent, barking realtors, etc. to mark them.

For example, everyone (including me) used to laugh at Kansas City. Then I met a world-traveling DJ who told me KC was one of the hippest places, where the "kids" where the most into the music than anywhere else.

But beware: places that become symbolically cool and ideal attract posers. In contrast, there are people who evaluate tons of metrics to choose where to live and work. I suggest evaluating towns on the quality of their makerspaces as one useful feature. Tech accelerator programs' presence is another signal.

Another town I'm hearing is great to work in is Boulder.

(1) I just googlemapsed Newark to Manhattan (mid-town). It's 17 miles, 30 minutes best case, 45 in 10:00am weekday traffic.

thedufer• 12 years ago

I just googlemapsed Newark to Manhattan (mid-town). It's 17 miles, 30 minutes best case, 45 in 10:00am weekday traffic.

Its also $140/month, which is on top of the MTA fare unless you work within walking distance of Penn Station.

jaimebuelta3• 12 years ago

"Silicon Valley is dying because it's too crowded."

Wait, what?

logfromblammo5• 12 years ago

Haven't you ever played Conway's Life? Cells that are surrounded die. Cells that are isolated die. Cells that have neighbors and room to grow multiply.

jaimebuelta3• 12 years ago

Sure. But that assumes you don't have space to go. If SF is too crowded, people will move out until it's not that much.

Calling this "dying" is a little too much in my opinion.

stevewilhelm• 12 years ago

I have been in the valley for a quarter of a century. It has never been so vibrant. Here are some links to prove the point:

http://www.jointventure.org/images/stories/pdf/index2014.pdf

http://www.siliconvalley.com/sv150/ci_23055045/sv150-searcha...

http://www.bizjournals.com/sanjose/news/2013/12/24/the-years...

http://www.forbes.com/sites/joelkotkin/2013/05/06/americas-b...

http://news.stanford.edu/news/2013/march/applications-set-re...

placeybordeaux• 12 years ago

I just choose not to move to SF in part due to the high prices, a high wage doesn't mean that it compensates for it properly.

DanielBMarkham• 12 years ago

My best guess is that SV has jumped the shark. "Dying" is probably an adjective too far. Microsoft is "dying". Still might have another 40 years of profitability left in it, though, and if that's dying, dying looks pretty good.

SV is not going to be replaced anytime soon. Rather, what's happening is that there are a thousand small places that each will amount to about 1% of SV. In the aggregate, that means that SV will have a smaller piece of the pie. Due to location and network effects, though, I don't think any of that's going to be clear for some time.

California is busy re-engineering its society. Good for them. But hell if I'll work there, and hell if I'd try to launch a startup there. I love the folks in SV and am terribly jealous of all the cool stuff going on. Having said that, it's simply not worth the effort to fool around with all the obstacles in place. And more are on the way. Sure, it's still great and awesome for those that win the SV beauty contest, but not so much for us little fry. That's what "jumping the shark" looks like.

islon• 12 years ago

It's Settled: Journalism Is Dying. So What's Next?

It's Settled: Silicon Valley Is Dying. So What's Next?

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