Are Silicon Valley's Glory Days Over? 335
Hugh Pickens writes "Pete Carey writes in the Mercury News that there are 'clear warning signs' that Silicon Valley has entered 'a new phase of uncertainty' in which its standing as a tech center is at risk and that decisive action by business, government and education is needed if the region is to retain its standing as the world's center of technical innovation. 'It could be that Silicon Valley has a different future coming,' says Russell Hancock. 'It's not a given that we will continue to be the epicenter of innovation.' Among the troubling indicators in the Silicon Valley Index (PDF): 90,000 jobs lost in the last two years; the influx of foreign science and engineering talent has slowed; venture capital funding has declined; per capita income is down 5 percent from 2007; and the number of people working as contractors rather than full-time employees is rising. Adding to the valley's problems is a malfunctioning state government that is shortchanging investment in education and infrastructure."
We never needed foreign workers (Score:4, Interesting)
Actually we needed the exact opposite of H-1B, V1, B1 and all the rest. We built the tech industry without these corporate communist regulations because without them wages went up. Rising wages brought people into the field and encouraged risk.
All the federal government's interference in the US labor market has driven down wages and increased fear. It has also discouraged the best and brightest American students from entering tech. And what people seem to not understand is that Americans bring unique skills to technology. A diverse workplace is good. We had that back in the '90s. But today, we are way past that. In my office I am the only American. Mostly we have Indians. When you get over 25% Indians on a team you start to see their cultural influence. Hindus believe in a cast system where certain people are just better than others.
It starts to kill the team. And that's were I see most teams today in my company. They are Hindu teams where it matters which cast you are from more than anything else.
Slowing the influx is a good thing! (Score:0, Interesting)
> the influx of foreign science and engineering talent has slowed
That's a good thing. For many years the biggest challenge with hiring here has been with weeding through all of the Indians and Chinese with fake degrees. After hiring over four dozen Indians and about half that many Chinese, I've found that only about ten percent of them have at least an equivalent to an AA. Slowing the insurgency of useless employees would be a great help towards helping the area rebound.
Re: Right Wing Heaven (Score:4, Interesting)
In this state's case, a lot of things led to poor money situation, but two stand out: 1) when times were good, they didn't allow themselves a 'rainy day fund' and mandated that any surpluses had to be spent out. 2) Net taxes paid OUT to the federal gov. are staggering, and California is the gross highest - in 2001, their "balance of payments" [ppinys.org] figure was 58 BILLION dollars.
Re:We never needed foreign workers (Score:2, Interesting)
You're right about their irrational hatred Indians have of each other being a big problem in the workplace, but the bigger problem is the lack of education among the Indians. After three decades of managing software development in the area, I've found that a masters from most of the Indian schools is equivalent to about an associate degree from a US community college. Having, given your example, 25% of your employees unable to contribute really hurts the company.
Silicon Valley VCs have become risk averse (Score:4, Interesting)
Part of the problem in Silicon Valley is that the venture capital community has become noticeably more risk averse than it was many years ago. Many (most?) firms act more like investment banks than high-risk, high-tech venture funds.
Additionally, I think the rise of social media has biased venture capital deals in strange ways, steering even more money toward social network and media whores than actual tech ventures.
It's the manufacturing, stupid. (Score:5, Interesting)
First, bypassing the "story" and a layer of blogs, is the actual report [jointventure.org].
What's really happened in Silicon Valley is that it's been hollowed out. Silicon Valley used to be a major manufacturing center. San Jose once had the highest percentage of manufacturing employees of the major US cities, something like 54%. Today, the assembly plants are gone. Most of the fabs are gone. Much of the engineering is gone. This is what happens when you "outsource". Eventually, everything moves to where the production is, including management and finance.
Part of the problem was the "dot com boom", with its fake companies and fake prosperity. That caused a major change in the culture, away from engineering and towards marketing. When the bottom fell out of the dot-com boom, most of the marketing types left. The number of twentysomethings in San Francisco dropped by half. (A friend in the club business says "and the other half are working their butts off and don't go out much.") The big name in Silicon Valley now is not HP or Intel or IBM or National Semiconductor or Fairchild. It's Google, which is an ad agency. That's a huge change in emphasis.
The innovation culture is declining. Portola Valley (a rich suburb) used to have the highest percentage of patent holders of any US community. That's dropped. There's not that much exciting innovation going on. I go to venture capital meetings, and the ideas being presented are just not very exciting. (I've heard a pitch for a social network for cats. And that made it through two rounds of filtering before I heard it.)
People are still struggling to get semiconductor line widths down, solar fab costs down, and such. But that's a grind. Mobile devices are not a fun area in which to work - the weight budget, the cost budget, the power budget, and the time budget are all very tight. The manufacturing is in Asia, anyway, and the engineering is going there. New areas aren't appearing.
There's noise about "green tech", but realistically, "green tech" is either vaporware, like the "smart grid", silly, like small windmills, or something that requires massive manufacturing, like big windmills. Five years ago, the noise was about "biotech", which doesn't employ many people.
Fewer young people in the US are going into engineering, and that's a rational decision. It's hard, it's expensive to study, your job may be outsourced, and it's now a low-status field. In 1970, lawyers and electrical engineers made about the same amount of money. That was a long time ago. On the other hand, in Asia, an EE degree puts you in the top few percent of the population in terms of income and status.
US government polices haven't really had much of an effect one way or the other on Silicon Valley, except that allowing the runup in real estate increased living costs substantially and that free trade has made outsourcing so easy.
Re: Right Wing Heaven (Score:3, Interesting)
2) Net taxes paid OUT to the federal gov. are staggering, and California is the gross highest - in 2001, their "balance of payments" figure was 58 BILLION dollars.
Wait, doesn't that mean that the bread and circuses/Keynesian method, high immigration numbers, and social service spending is working? If they finally legalize marijuana and reform their enormous prison system, looks like they'll continue to be the top performing state economy in the US.
Re:Outsource to Detroit (Score:4, Interesting)
Detroit? Yeah right, you need to have money to attract money.
I was previously part of a tech start-up that grew out of research at the University of Michigan. The founder tried like hell to get funding but no one would listen to someone based in the Midwest. And no VC in this state understood the industry well enough to risk the amount of capital we needed. Eventually he got the VC needed from a couple of places in the Valley, conditional that the corporate HQ be based there (so they could keep an eye on their money and handpick the leadership). So we had most of the engineering going on in Michigan while the sales/marketing/leadership rubbed elbows in Cali. It was a very inefficient system. But you had the engineers who refused to relocate to CA and the bigwigs who refused to move to the Midwest.
There was always this odd tension between the two offices. The Cali guys treated us like we were some backwater boys who didn't know how to run with the big dogs. We viewed them as pretentious mercenaries. Anyhow... I'm rambling. Point is that while I really dislike the Valley culture, I don't think that Midwest is ready to compete with it.
Three Word: Cost of Living (Score:4, Interesting)
I left Apple a year after my former company, NeXT, merged with Apple because the cost of living and going through a divorce was bankrupting my ass. The cost has far surpassed the cost of living adjustments and it is not worth going back.
Newsflash: teh economy am badd!!1! (Score:3, Interesting)
Malfunctioning state government?! Cripes, man, the state government here has basically declared open warfare on anyone remaining in the state who exhibits a microgram of productivity or independence. And when questioned (by the rare few in the news media that even bother) about the sanity of their actions in such a bad economy, they pretty much come out and admit they don't give a shit about anything other than some legacy involving bunnies and unicorn farts. Nearly every professional person I know is planning on leaving as soon as they can by looking for out of state work, getting their homes cleaned up for sale, etc.
And for the record, this state spends a lot on education- nearly half the state budget. The whole thing needs to be torn down and rebuilt from the foundations. Hell, you probably want to dynamite the foundations as well. But the political brain trust will just throw more money down the black hole, and they'll sit and wonder why it didn't help, and throw some more because doing anything else is ideological heresy. Rinse and repeat until the sate declares bankruptcy or armed insurrection occurs.
Re: Right Wing Heaven (Score:3, Interesting)
For some reason you are posting from 2008. We just had the largest state tax increase in national history here in California last year. The Republicans capitulated in backroom deals, thus giving the required 2/3 majority.
We're now the highest taxed state in just about every area.
Guess what? It didn't help. It just raped an already bleeding economy in the ass.
Re:shortchanging investment in education... (Score:3, Interesting)
Ah, a millionaire complaining about class war, how quaint.
Re:shortchanging investment in education... (Score:5, Interesting)
And stop with the Prop 13 blame. It's BS. Jebus, even many progressive politicians here don't trot that one out anymore. Go back and look at what led up to Prop 13. It didn't form out of a vacuum. People were having to get *loans* to pay their property taxes. It is INSANE to tax people on unrealized gains!
You may think its insane, but it is clearly benefiting property owners over tenants. Over a long enough time, there will be the few with property, and the rest that rent from them, because it will no longer be economical to buy or sell property to lose the locked in property tax rates.
Also, there is stupid stuff in prop 13 which allows for commercial property to qualify for the locked in rates. Companies just buy and sell the shell companies that own the real estate, rather than buy it outright and reset the property taxes.
Its simply broken.
Re:shortchanging investment in education... (Score:2, Interesting)
I am going to be accused of being a racist here but the problem is obvious. Half the state is filled with Mexicans who do not pay taxes and go to hospitals and have their kids go to our schools while the legal citizens foot the bill. Many get knocked up and go to San Diego across the border so they have an achor baby and then can legally stay in the US or just sneak through and stay at relatives.
I am not racist at all against Hispanics, but stating the facts economically. Its ruining the whole state.
I used to live in Riverside where 70% of the population is not even American anymore. My wife told me back in the 1980's it was only 30% Mexican and you could get jobs, find cheap housing, and live in a crime free area. Today you can not find any blue collar jobs. Why should a corporation hire an American when they can pay under the table and get a tax break. Employers get a head tax for each employee they hire. So if you have 10 employees who are illegal you can claim you are a sole proprietor and do not have employees and get a tax break.
Worse the state government is trying to fix this by increasing taxes which is making businesses close shop and move overseas or to other states.
They are being bled dry and many think free amnesty might be the only solution so they can pay taxes like everyone else and pay for things like hospital visits and education.
Re:Shortchanging education??? (Score:3, Interesting)
Then how about Berkeley? That's only about 45 miles from Silicon Valley. Apparently, Berkeley High School is considering eliminating its science labs and teaching staff in order to help "struggling students".......
"The proposal to put the science-lab cuts on the table was approved recently by Berkeley High's School Governance Council, a body of teachers, parents, and students who oversee a plan to change the structure of the high school to address Berkeley's dismal racial achievement gap, where white students are doing far better than the state average while black and Latino students are doing worse.
Paul Gibson, an alternate parent representative on the School Governance Council, said that information presented at council meetings suggests that the science labs were largely classes for white students. He said the decision to consider cutting the labs in order to redirect resources to underperforming students was virtually unanimous."
http://www.eastbayexpress.com/ebx/berkeley-high-may-cut-out-science-labs/Content?oid=1536705 [eastbayexpress.com]
Re:shortchanging investment in education... (Score:3, Interesting)
One man's production, is another man's consumption.
Re:We never needed foreign workers (Score:2, Interesting)
I vouch for that Indian caste system thing. We have a guy who even told us you can tell which caste Indians are in by their last name.
Stop blaming H-1 ! (Score:5, Interesting)
Wanna blame? Blame yourselves !
Silicon Valley's glory and gloom has nothing to do with H-1.
Silicon Valley bloomed in yesteryears because of the incentives that were there for innovators to innovate.
Innovators were aplenty, and they were willing to share the findings to each others, and they actually encouraging each others to do more !
There were no patent trolls back then. No teams of lawyers who will sue innovators to bankruptcy or subpoena them to court to explain why they come up with this little piece of code/gadget/idea which happens to have similarity to another piece of code/gadget/idea.
In other words, there were no rent-seekers back then.
Nowadays? There are more rent-seekers in Silicon Valley than the innovators.
Blaming the H-1 visa is too easy, and everyone is doing just that. But will that help Silicon Valley?
What if all the H-1 visas are revoked tomorrow? Do you seriously think that Silicon Valleys can magically bloom again, just like that?
C'mon, guys ! Use your brain for once and stop regurgitating the vomit of others.
And PS. I was in Silicon Valley when it blooms, and yes, I was one of the innovators. Now I am no longer in the Silicon Valley, and heck, I am no longer staying in the United States, and you know why? Because I have had enough of those rent-seekers !
Re:It's the manufacturing, stupid. (Score:4, Interesting)
This is a common misconception, that no one wants to work in a factory. No one wants to feel exploited, but at the same time, factories are a better place to work for those without an advanced education. Those working in the auto industry, even if they were only being paid $20/hour would probably still be fairly happy with their job. Factory work does NOT need to be a horrible experience, but bad management will make it(and just about any other work) a horrible experience.
The real key is how employees are treated, and to provide proper encouragement for hard work. The auto industry could be fixed by paying a fair BASE wage in manufacturing with a bonus based on volume of properly completed units that employee works on. Even in low-end manufacturing, start with a base minimum wage, but then offer a decent compensation based on properly produced products the employee has produced(with a QA process that looks to push quality, rather than just trying to avoid paying the person working in manufacturing). So, the higher the volume the person in manufacturing produces, the better the pay, and those who are fast and do a good job(vs. those who are fast but are sloppy) will get paid more.
The other side is to make employees feel pride in what they are doing, and to make people take pride in what they produce. Back in the mid 1990s, technical support was treated as a skilled job, and the manager I worked under took the attitude that if you could solve the customer problem with one phone call, it was better to take 3 hours on that one call than to make the customer call back again, and again, and again. As a result, we had very few people calling in a second or third time to solve their problems, and customer satisfaction with support was fairly high. Eventually we had a "suit" come in that treated technical support like customer service, where the average time on a call was more important than making sure that a customer problem was fixed. This "you have to average six minutes per call" attitude drove call volume through the roof, but also lowered the morale of employees and made people take less pride in their job because they couldn't take the time to make sure the job was done properly. That job STARTED where tech support was something employees could take pride in doing, and ended up taking the feeling of being responsible for our jobs go away. Fortunately or unfortunately, it also drove those with knowledge to get out of support into Operations as soon as possible, but it also made it so those who came from support had less desire to help the managers in support with problems due to how poor employees in support were treated.
Re:Fewer jobs? More H-1bs! (Score:3, Interesting)
'It's not a given that we will continue to be the epicenter of innovation.'
All I can say is, "Welcome to the real world!" The corporations broke the power of labor in the steel industry around '82 or '83. I heard men saying "Let them move their steel mill to (pick your favorite 3rd world nation), they'll be back, because NO ONE can make steel like we do!"
The steel workers learned, and so can the techies.
Offshoring is such a wonderful practice. Only problem is, when they can hire labor for pennies a day, who is going to be bringing home a paycheck with which to buy their products? The economy is still going downhill, and it will continue to do so, until we INVEST in America. Giving jobs away to 3rd world nations just helps to bleed us more rapidly.
Phht. It amazes me that no one in government has figured this out yet, or figured out how to stop all the offshoring.
Re:No, not well. (Score:3, Interesting)
No, his problem is MS. It's just that people who need medication think they are entitled to it, and its a pretty reasonable to thing to just give it to them when it is cheap, but, now, that is expensive, that question needs to be reasked.
That's like being forced to renegotiate your fire insurance between discovering your couch is on fire and your house has burned down. The whole point of insurance is that you pay a small premium on an unlikely event, and if it strikes you get compensated far more than you paid in. The way people with health problems are treated in the US is the greatest insurance fraud in history.
But I don't care, I don't need that.
You don't need it now, so you don't care now. This precious son of yours, does he have a medical insurance? Or is your theory you can just hit him over the head real hard and make a new one if he ever has a serious medical problem? And if he did develop a problem, would you like it if they just cheated their way out of paying for treatment and hiked the premiums until you couldn't afford it?
The reality is that spread across the whole population, health care is not that expensive. I just checked out national budget here in Norway and the costs for all the hospitals was 4.5% of the GDP/captia. That is all medical facilities excluding nursing/senior citizen homes (local, so no central figure) and subsidized health related supplies (another 1.0%). If you include all health stations and school nurses and whatnot that's another 0.4%, but then you're really scraping the barrel. For that, I don't have a private health insurance and I don't know anyone else that has either, unless they're professional athletes or the like.