7 ms·

Silicon Valley Abandons the Culture That Made It the Envy of the World

89 points by sxp 7y ago

Merrill 7y ago
It is just a matter of the maturity of the industry. Beginning in the late 1890s there were about 3000 automobile companies in the US. After a few decades there were the big three and a few also rans. The IT industry is undergoing a similar consolidation as it matures.
- buzzkillington 7y ago
  The 'big three' were eaten alive by cars from abroad after a few decades of stagnation and were only saved because we paid for their bailouts. Time and time again. Break up Facebook and Google, use the government to keep the market efficient by not allowing any market distorting entities from forming.
  - neilk 7y ago
    Your comment convinced me that I’ll live to see the day when the government bails out Google.
  - adventured 7y ago
    > The 'big three' were eaten alive by cars from abroad GM wasn't eaten alive by foreign competition, nor was Ford. GM was eaten alive by extraordinarily bad financial decisions by management, not due to a collapse of their business. The bankruptcy put them back to profitability for a reason: they weren't in fact eaten alive. If the business had been destroyed by competition, they would neither exist nor have produced $30 billion in operating income the prior four years. Why did the bankruptcy get them back to sound profitability? Because they were able to crawl out from under layers of bad financial decisions from the past, not due to competition (the competition didn't end with the bankruptcy). GM + Ford = $300 billion in sales. That's what eaten alive looks like? Two of the largest automakers on the planet.
    - buzzkillington 7y ago
      I'm talking about the 70s.
  - temp20160423 7y ago
    The key factor that doomed the big 3 car makers in US is the unions. They forced a high cost structure and no one was able or willing to fix this (automation that reduced labor costs meant less jobs). The big 3 were forced to make giant SUV's/trucks that had higher margins, but sales evaporated when gas prices went up in 2000's. This is documented in Paul Ingrassia's Crash Course. As long as the tech companies don't unionize, I don't think they will require government bailouts. In fact, we've already seen the pattern; tech companies that pass their peak undergo layoffs.
    - buzzkillington 7y ago
      And yet Germany is making better cars with better unions.
- anongraddebt 7y ago
  Couldn't one tell a bit of a different story? Namely, that there is a difference between the pure software industry and the utilization of software in old and entirely new industries that have yet been built. In this story, it's true that the automobile industry went from fragmentation to consolidation within a handful of decades. But, what was interesting at the time of consolidation was a new industry (IT) that was born.
lkrubner 7y ago
As an antidote, I'd like to recommend Peter F. Drucker's 1985 book, "Innovation and Entrepreneurship": https://www.amazon.com/Innovation-Entrepreneurship-Peter-F-Drucker/dp/0060851139/ https://www.amazon.com/Innovation-Entrepreneurship-Peter-F-D... Drucker was a critic of the idea that small firms are more innovative than large firms. He provides a wealth of innovation about the styles of innovation that large firms produce. About this: "But there’s a more troubling possibility. Maybe something has changed about the nature of innovation, at least in software." When was this era? From the 1940s to the early 1980s, software development was mostly done at big firms such as IBM and Hewlett Packard. The rise of the personal computer allowed a wave of software firms, such as Microsoft and Adobe, to get going, but even then, the costs of getting such a startup going was much higher than now. The era of the really cheap software startup was basically the era of the CRUD app moved to the Web, basically 1995 to 2015, give or take a few years on either side. My point is, that era is more the exception than the rule, given the history of the industry. It seems melodramatic to claim that a specific culture was lost, though it is absolutely true that the industry has matured and therefore the situation has changed. We are unlikely to see any more startups come out of Silicon Valley and become huge like Microsoft or Adobe or Google or Facebook.
- Steltek 7y ago
  Exactly, before Google, FB, and Apple, there was IBM, HP, and MS. IMO, what's hampering Silicon Valley innovation right now is the outrageous cost of living. It's hard to take a leap when you have a million dollar mortgage. Startups still happen of course but only with significant capital backing. But I'd wager the pace has slowed significantly.
  - GrayTextIsTruth 7y ago
    >what's hampering Silicon Valley innovation right now is the outrageous cost of living. I wish a “remote hub” concept would become popular. Where you work remote but need to be close enough to come in once a week or for big meetings. This would allow people to move a little further away and would possibly allow areas right outside the bay to become an extension of Silicon Valley.
leoh 7y ago
This is a highly political piece. It suggests that smaller companies are not effective and is wielding that idea to suggest that Facebook should be broken up. Facebook is naturally going to do whatever they can to hold on and given the way their business functions, they need to be large. Microsoft did the same thing in the 90s. Even if companies should be smaller for greater effect, it's possible that things have shifted due to the natural growth curve of technology, as opposed to there being a deliberate cultural shift. For example, Ford was once a small company, disrupted the world, grew to be its size, and in general (barring companies like Tesla that are also competing with relatively radical new technologies and will grow to be a large size barring enhanced robotics [another emerging technology]) it is necessary for companies to be large to compete. In other words, it seems to me there its always David versus Goliath; David is the old, Goliath is the new. Until there are new technologies, we are looking at Goliaths.
Barrin92 7y ago
Silicon Valley is simply maturing from a new emerging market into a more traditional, but no less innovative one. As Schumpeter pointed out many decades ago the idea that 'small is beautiful' is not really true. The equilibrium for innovative ecosystems is not small-scale but rather monopolistic competition, because complex production processes require scale and knowledge that can only be managed by sufficiently large institutions. In mature industries, the competition happens between monopolistic players who for a while earn surplus profit through the collection of economic rent and are then replaced through creative destruction by another player (think Myspace and Facebook), rather than the bazaar economy that this article seems to advocate in which profits are constantly burned away by competition, it is surplus capital of monopolistic firms that enables innovation. This also shows in productivity statistics, wages and so on, where large firms simply win out. And as one data point, Apple is worth about as much as all unicorns on the planet combined. People tend to overrate the importance and size of startups for what I think are ideological reasons. And also, in addition, it should be pointed out that the American government played a significant role in enabling the 'old' silicon valley in the first place. This role (also one which Schumpeter introduced) of the entrepreneurial state seems to be forgotten on occasion. It wasn't just smart kids in garages but also the defence department which contributed to the development of the SV ecosystem.
- RcouF1uZ4gsC 7y ago
  Completely agree with your take. People forget that Bell Labs and Xerox Parc which were at the forefront of innovation were the result of cash rich monopolies.
  - WalterBright 7y ago
    Xerox evolved out of Haloid, which struggled near bankruptcy for years to build an impossible machine - the photocopier - one of the great disruptive innovations.
- zzzcpan 7y ago
  > it is surplus capital of monopolistic firms that enables innovation This is purely ideological assertion that just excuses predatory behavior. Surplus capital does not enable innovation whatsoever. Innovation is more like quality, it is habitual and cultural. Give all the right people an opportunity to apply themselves and you get innovation and, of course, give everyone a chance to become the right people, to raise their children that way, educate them the right way, not indoctrinate, etc. The role of capital and startups here is not creating such people, but that of wealth and power: to take ownership of future innovations that could be created by such people and remain wealthy and powerful.
DayDollar 7y ago
I recently pitched a idea to my boss, and you know what- it was not even considered. The idea was simple. Drones around the outside of a house will be numerous and ubiqitous. Cleaning windows, painting, repairing, cleaning roofs, solarpanels, replacing cameras and sensors.. etc. These drones, will then discover that infrastructure (rails, anchor points) for these drones is needed- on each house, and that even some overlap for drones exist- aka, one drone, several tools is the most wise approach. These drones need energy, water and internet. To be the first to define a standard for such a outside maintenance drone, and convince house building companys to roll it out, together with you, seems like a rather conservative bet. This bet was openly laughed about in my presence in my company. The same laugh, people would have had about the suggestion of a google, a amazon, a anything in my country, ten years ago. Nobody laughs about that in the valley. They know how quick things can change and scale.
- matchbok 7y ago
  Maybe because that's a bad idea. Unpopular != future Amazon. Sorry.
  - DayDollar 7y ago
    To define a electric standard, before a society is electrified and set the wheels in motion for others to adhere to it - is a bad idea? It always needs to be a Edison vs Tesla war, before things are settled?
jstrieb 7y ago
> Quantitative research suggests that big companies do different kinds of R&D than their more modest counterparts. Instead of coming up with new products, they come up with process improvements. "If the nature of innovation is distorted toward selling to an incumbent, you're going to get more feature-driven innovation rather than systemic disruption," ... I can anecdotally confirm this. I spent the summer in 2018 doing research at Carnegie Mellon's Human-Computer Interaction Institute. While there, I attended a presentation by the director of the Future Interfaces Group[0], Chris Harrison. He described some incredibly cool technology his group had developed over many years (for example, ViBand in 2014[1]). At the end of his presentation I asked: if this technology has existed for years, with accessible implementations available from researchers, why isn't it in consumer products yet? His exasperated response echoed the quote above -- big companies like the safety of the status quo, and don't need to innovate if what they have is working well-enough. In other words, they are extremely risk-averse when it comes to revolutionary technology. More recently, I had the pleasure of meeting Dr. O'Mara at a presentation about her book. Based on her informative book talk, and a skim of the book, I can highly recommend it. [0]: http://www.figlab.com/about-us http://www.figlab.com/about-us [1]: https://www.youtube.com/watch?v=Poi0MeASmuY https://www.youtube.com/watch?v=Poi0MeASmuY
TinyBig 7y ago
I think the economic incentives, rather than the culture, is what has changed over the past decade or so. As the article mentions - companies stay private and the probability of IPO is so low these days that working for a non-FAANG company is effectively return-free risk. Combine this with a high-and-rising cost of living and rising college debt and I would guess that fewer people today have the means to strike out on their own. Perhaps this will reverse should ZIRP end someday.
jedberg 7y ago
> Apple, a start-up at the time, would famously popularize PCs instead. I have a hard time accepting the conclusions of this article when this one line is so inaccurate. It was IBM, a very old company even in the 1970s, that popularized PCs. Apple was barely a blip.
- Vomzor 7y ago
  IBM didn’t take the personal computer seriously until they saw the succes of Apple and other manufacturers.
- perl4ever 7y ago
  Maybe it seems like just a few years difference in hindsight, but personal computers were a huge boom before IBM got in. Things changed very fast in those days. Look up VisiCalc.
jammygit 7y ago
The best part of startup culture is the idea of being able to create something that can grow big while starting as a small player. The rest is just marketing and envy over ceo bonuses. My town doesn’t really have that culture, but we have a decent small business culture at least.
zuhayeer 7y ago
The world has always been this way, where it seems like the giants will live forever. And that smaller companies don't stand a chance to dethrone any of these incumbents. But history has always proven that wrong. Just look at the landscape now, it's already so different than just 5 years ago. These so called large companies haven't even been alive for most of our lifetimes. > That means the only way their investors will get their money out will be via an acquisition by one of the large companies. Google, Facebook, and their ilk “have become enormous by swallowing small companies” This point about acquisitions always held true. Most companies will get their exit through an acquisition. There will have been many acquisition conversations had at any company that has IPO-ed. The media has us well poised to believe that a company must IPO to succeed, when most startup successes are buried in the boring stories of acquisitions. Very occasionally does a company breakthrough and IPO. And if anything, this shows that small is still incredibly powerful – if they feel the need to acquire you instead of mobilizing their large numbers of employees, then, whether they admit it or not, they definitely believe in the value of small too.

89 points by sxp 7y ago

It is just a matter of the maturity of the industry. Beginning in the late 1890s there were about 3000 automobile companies in the US. After a few decades there were the big three and a few also rans. The IT industry is undergoing a similar consolidation as it matures.

buzzkillington 7y ago
The 'big three' were eaten alive by cars from abroad after a few decades of stagnation and were only saved because we paid for their bailouts. Time and time again. Break up Facebook and Google, use the government to keep the market efficient by not allowing any market distorting entities from forming.
- neilk 7y ago
  Your comment convinced me that I’ll live to see the day when the government bails out Google.
- adventured 7y ago
  > The 'big three' were eaten alive by cars from abroad GM wasn't eaten alive by foreign competition, nor was Ford. GM was eaten alive by extraordinarily bad financial decisions by management, not due to a collapse of their business. The bankruptcy put them back to profitability for a reason: they weren't in fact eaten alive. If the business had been destroyed by competition, they would neither exist nor have produced $30 billion in operating income the prior four years. Why did the bankruptcy get them back to sound profitability? Because they were able to crawl out from under layers of bad financial decisions from the past, not due to competition (the competition didn't end with the bankruptcy). GM + Ford = $300 billion in sales. That's what eaten alive looks like? Two of the largest automakers on the planet.
  - buzzkillington 7y ago
    I'm talking about the 70s.
- temp20160423 7y ago
  The key factor that doomed the big 3 car makers in US is the unions. They forced a high cost structure and no one was able or willing to fix this (automation that reduced labor costs meant less jobs). The big 3 were forced to make giant SUV's/trucks that had higher margins, but sales evaporated when gas prices went up in 2000's. This is documented in Paul Ingrassia's Crash Course. As long as the tech companies don't unionize, I don't think they will require government bailouts. In fact, we've already seen the pattern; tech companies that pass their peak undergo layoffs.
  - buzzkillington 7y ago
    And yet Germany is making better cars with better unions.
anongraddebt 7y ago
Couldn't one tell a bit of a different story? Namely, that there is a difference between the pure software industry and the utilization of software in old and entirely new industries that have yet been built. In this story, it's true that the automobile industry went from fragmentation to consolidation within a handful of decades. But, what was interesting at the time of consolidation was a new industry (IT) that was born.

lkrubner 7y ago

As an antidote, I'd like to recommend Peter F. Drucker's 1985 book, "Innovation and Entrepreneurship": https://www.amazon.com/Innovation-Entrepreneurship-Peter-F-Drucker/dp/0060851139/ https://www.amazon.com/Innovation-Entrepreneurship-Peter-F-D... Drucker was a critic of the idea that small firms are more innovative than large firms. He provides a wealth of innovation about the styles of innovation that large firms produce. About this: "But there’s a more troubling possibility. Maybe something has changed about the nature of innovation, at least in software." When was this era? From the 1940s to the early 1980s, software development was mostly done at big firms such as IBM and Hewlett Packard. The rise of the personal computer allowed a wave of software firms, such as Microsoft and Adobe, to get going, but even then, the costs of getting such a startup going was much higher than now. The era of the really cheap software startup was basically the era of the CRUD app moved to the Web, basically 1995 to 2015, give or take a few years on either side. My point is, that era is more the exception than the rule, given the history of the industry. It seems melodramatic to claim that a specific culture was lost, though it is absolutely true that the industry has matured and therefore the situation has changed. We are unlikely to see any more startups come out of Silicon Valley and become huge like Microsoft or Adobe or Google or Facebook.

Steltek 7y ago
Exactly, before Google, FB, and Apple, there was IBM, HP, and MS. IMO, what's hampering Silicon Valley innovation right now is the outrageous cost of living. It's hard to take a leap when you have a million dollar mortgage. Startups still happen of course but only with significant capital backing. But I'd wager the pace has slowed significantly.
- GrayTextIsTruth 7y ago
  >what's hampering Silicon Valley innovation right now is the outrageous cost of living. I wish a “remote hub” concept would become popular. Where you work remote but need to be close enough to come in once a week or for big meetings. This would allow people to move a little further away and would possibly allow areas right outside the bay to become an extension of Silicon Valley.

leoh 7y ago

This is a highly political piece. It suggests that smaller companies are not effective and is wielding that idea to suggest that Facebook should be broken up. Facebook is naturally going to do whatever they can to hold on and given the way their business functions, they need to be large. Microsoft did the same thing in the 90s. Even if companies should be smaller for greater effect, it's possible that things have shifted due to the natural growth curve of technology, as opposed to there being a deliberate cultural shift. For example, Ford was once a small company, disrupted the world, grew to be its size, and in general (barring companies like Tesla that are also competing with relatively radical new technologies and will grow to be a large size barring enhanced robotics [another emerging technology]) it is necessary for companies to be large to compete. In other words, it seems to me there its always David versus Goliath; David is the old, Goliath is the new. Until there are new technologies, we are looking at Goliaths.

Barrin92 7y ago

Silicon Valley is simply maturing from a new emerging market into a more traditional, but no less innovative one. As Schumpeter pointed out many decades ago the idea that 'small is beautiful' is not really true. The equilibrium for innovative ecosystems is not small-scale but rather monopolistic competition, because complex production processes require scale and knowledge that can only be managed by sufficiently large institutions. In mature industries, the competition happens between monopolistic players who for a while earn surplus profit through the collection of economic rent and are then replaced through creative destruction by another player (think Myspace and Facebook), rather than the bazaar economy that this article seems to advocate in which profits are constantly burned away by competition, it is surplus capital of monopolistic firms that enables innovation. This also shows in productivity statistics, wages and so on, where large firms simply win out. And as one data point, Apple is worth about as much as all unicorns on the planet combined. People tend to overrate the importance and size of startups for what I think are ideological reasons. And also, in addition, it should be pointed out that the American government played a significant role in enabling the 'old' silicon valley in the first place. This role (also one which Schumpeter introduced) of the entrepreneurial state seems to be forgotten on occasion. It wasn't just smart kids in garages but also the defence department which contributed to the development of the SV ecosystem.

RcouF1uZ4gsC 7y ago
Completely agree with your take. People forget that Bell Labs and Xerox Parc which were at the forefront of innovation were the result of cash rich monopolies.
- WalterBright 7y ago
  Xerox evolved out of Haloid, which struggled near bankruptcy for years to build an impossible machine - the photocopier - one of the great disruptive innovations.
zzzcpan 7y ago
> it is surplus capital of monopolistic firms that enables innovation This is purely ideological assertion that just excuses predatory behavior. Surplus capital does not enable innovation whatsoever. Innovation is more like quality, it is habitual and cultural. Give all the right people an opportunity to apply themselves and you get innovation and, of course, give everyone a chance to become the right people, to raise their children that way, educate them the right way, not indoctrinate, etc. The role of capital and startups here is not creating such people, but that of wealth and power: to take ownership of future innovations that could be created by such people and remain wealthy and powerful.

DayDollar 7y ago

I recently pitched a idea to my boss, and you know what- it was not even considered. The idea was simple. Drones around the outside of a house will be numerous and ubiqitous. Cleaning windows, painting, repairing, cleaning roofs, solarpanels, replacing cameras and sensors.. etc. These drones, will then discover that infrastructure (rails, anchor points) for these drones is needed- on each house, and that even some overlap for drones exist- aka, one drone, several tools is the most wise approach. These drones need energy, water and internet. To be the first to define a standard for such a outside maintenance drone, and convince house building companys to roll it out, together with you, seems like a rather conservative bet. This bet was openly laughed about in my presence in my company. The same laugh, people would have had about the suggestion of a google, a amazon, a anything in my country, ten years ago. Nobody laughs about that in the valley. They know how quick things can change and scale.

matchbok 7y ago
Maybe because that's a bad idea. Unpopular != future Amazon. Sorry.
- DayDollar 7y ago
  To define a electric standard, before a society is electrified and set the wheels in motion for others to adhere to it - is a bad idea? It always needs to be a Edison vs Tesla war, before things are settled?

jstrieb 7y ago

> Quantitative research suggests that big companies do different kinds of R&D than their more modest counterparts. Instead of coming up with new products, they come up with process improvements. "If the nature of innovation is distorted toward selling to an incumbent, you're going to get more feature-driven innovation rather than systemic disruption," ... I can anecdotally confirm this. I spent the summer in 2018 doing research at Carnegie Mellon's Human-Computer Interaction Institute. While there, I attended a presentation by the director of the Future Interfaces Group[0], Chris Harrison. He described some incredibly cool technology his group had developed over many years (for example, ViBand in 2014[1]). At the end of his presentation I asked: if this technology has existed for years, with accessible implementations available from researchers, why isn't it in consumer products yet? His exasperated response echoed the quote above -- big companies like the safety of the status quo, and don't need to innovate if what they have is working well-enough. In other words, they are extremely risk-averse when it comes to revolutionary technology. More recently, I had the pleasure of meeting Dr. O'Mara at a presentation about her book. Based on her informative book talk, and a skim of the book, I can highly recommend it. [0]: http://www.figlab.com/about-us http://www.figlab.com/about-us [1]: https://www.youtube.com/watch?v=Poi0MeASmuY https://www.youtube.com/watch?v=Poi0MeASmuY

TinyBig 7y ago

I think the economic incentives, rather than the culture, is what has changed over the past decade or so. As the article mentions - companies stay private and the probability of IPO is so low these days that working for a non-FAANG company is effectively return-free risk. Combine this with a high-and-rising cost of living and rising college debt and I would guess that fewer people today have the means to strike out on their own. Perhaps this will reverse should ZIRP end someday.

jedberg 7y ago

> Apple, a start-up at the time, would famously popularize PCs instead. I have a hard time accepting the conclusions of this article when this one line is so inaccurate. It was IBM, a very old company even in the 1970s, that popularized PCs. Apple was barely a blip.

Vomzor 7y ago
IBM didn’t take the personal computer seriously until they saw the succes of Apple and other manufacturers.
perl4ever 7y ago
Maybe it seems like just a few years difference in hindsight, but personal computers were a huge boom before IBM got in. Things changed very fast in those days. Look up VisiCalc.

jammygit 7y ago

The best part of startup culture is the idea of being able to create something that can grow big while starting as a small player. The rest is just marketing and envy over ceo bonuses. My town doesn’t really have that culture, but we have a decent small business culture at least.

zuhayeer 7y ago

The world has always been this way, where it seems like the giants will live forever. And that smaller companies don't stand a chance to dethrone any of these incumbents. But history has always proven that wrong. Just look at the landscape now, it's already so different than just 5 years ago. These so called large companies haven't even been alive for most of our lifetimes. > That means the only way their investors will get their money out will be via an acquisition by one of the large companies. Google, Facebook, and their ilk “have become enormous by swallowing small companies” This point about acquisitions always held true. Most companies will get their exit through an acquisition. There will have been many acquisition conversations had at any company that has IPO-ed. The media has us well poised to believe that a company must IPO to succeed, when most startup successes are buried in the boring stories of acquisitions. Very occasionally does a company breakthrough and IPO. And if anything, this shows that small is still incredibly powerful – if they feel the need to acquire you instead of mobilizing their large numbers of employees, then, whether they admit it or not, they definitely believe in the value of small too.