Silicon Valley: A Reality Check | Hacker News Reader

Silicon Valley: A Reality Check

slatestarcodex.com

249 pointsgbear60568 comments

This is a good article for pointing out the some of the great work going on in SV and why it's an engine for innovation.

That said, the Juicero was ultimately panned because it was a bag squeezing machine (and not a very good one), but it is also the sort of cynical ploy that requires a wifi-connection to "check the expiration date" when we all know it was to enforce their DRMed juice packets. The investors weren't upset that it was a ridiculous product, they were upset that it was suddenly not a Keurig-style landfill-stuffing nightmare that they could charge ridiculous sums to people for DRMed juice.

To paint SV with the Juicero brush is unfair, but let's not pretend there aren't tons of people (and VCs) in SV that would kill to get funding (or fund) just that sort of product.

That's precisely what SV has become - an engine for innovation, rather than a set geographic area. About 6-7 years ago people started referring to San Fransisco as, "Silicon Valley," which, geographically is not true, but it has become accepted because people know that both areas follow a particular brand of innovation. The culture and ways of creating certain types of business models which may have originated largely in Silicon Valley have spread to other areas, much as the London-based capitalist thinking of the 1600s-1700s has now spread across the globe, or the Dongguan-based capitalist legal structure has spread across China since the 1980s.

The term, "Silicon Valley," doesn't even make sense anymore as there are no longer any silicon fabs left in Silicon Valley. When you have all sorts of cities and places around the US saying, "We'll we're the silicon valley of X," or "We're Silicon Prairie." What they are literally saying is, "we're going to start up a bunch of silicon fabs in this region," but what they are actually saying is, "we aspire to be super innovative and follow this particular brand of ethos and culture."

Technological capability tends to be spread out over the world, and teams tend to work remotely. The author of this article is not even based in Silicon Valley, he claims to be based in the midwest. I am not based in Silicon Valley but I work with people from there all the time. I also work with people in Denver, Idaho, Montana, Minnesota, Chicago, etc., who are interested in this innovative industry. Wrapping ones identity up in a particular city-based geographic region to an excessive degree is almost as bad as being an outright nationalist. This city-nationalist way thinking prevents the free flow of ideas.

When people attack Silicon Valley in the news or blogs, they are creating a thesis against the idea of software and internet-based business models as a whole, rather than a geographic region.

While I agree that the SV mindset has spread around the world, I think it is a mistake to overlook the geographic concentration of capital in SV. If Juicero had been located in Kansas City I doubt the story would have gone the same: they never would have been funded. The geographic concentration of VC firms in SV, coupled with VC preference to fund nearby startups they can keep a close eye on, creates a barrier to entry for getting new ideas funded. For the last few years, a bad idea in SV had a better chance of getting funded than a good idea elsewhere. Meanwhile, here in Cape Canaveral, there is not a single VC firm.

The issue with SV isn't that it funds all kinds of crazy ideas. That is great, and how innovation happens. Some of those crazy ideas turn out to be crazy for a reason, some turn out to be crazy because they are genius. The issue is that good ideas elsewhere in the country are at a disadvantage if they don't play the game and move to SV.

I don't want to pick on Moon Express, because I'm a big fan of privatized spaceflight, but it says a lot that landing a robot on the moon is being done by SV guys who came to Cape Canaveral, rather than Cape Canaveral guys who went to SV. That has a lot more to do with funding availability than mindset.

I disagree. Silicon Valley represents a distinct form of tech capitalism, characterized by the 10x firms and sky-high valuations of products that have yet to make a cent in profit.

Tech capitalism has a different tone in other places. A friend of mine works remotely for a company based in the Midwest, and the corporate/VC culture is worlds apart from Silicon Valley/San Francisco.

While this comment is perhaps a little more cynical that I would've gone with, the fact is that a whole lot of the most valuable SV companies have never turned one bit of actual profit. When regulations finally come about that put the lid on a lot of the personal information market, a whole lot of these companies are going to have to find a way to make money that doesn't involve scraping user's information, and I think that will be a red letter day for a lot of these companies.

I think that Juicero articles have nearly nothing to do with Juicero and a lot to do with the growing sentiment against SV.

While there are many good examples in OP's blogpost, most people are familiar only with the past and present unicorns and how they operate.

So there is the story of Uber that is going on: an immoral company with abusive management, avoiding taxes, exploiting employees and killing local business. It may be the biggest factor in this.

Another factor may be that people are becoming more and more aware and wary of the main modus operandi of the SV internet companies: data hoarding.

My point is that Juicero story happened, because people are looking for reasons to dismiss SV, not because Juicero did something exceptional. Unless the reasons for the sentiment are addressed, it probably won't go away.

Another factor is backslash against "change the world" bs where every company framed itself as a bunch of saviors saving us all. You was anti-tech outcast if you disagreed, so it stayed bottled up and once someone breaks it, everyone wants to add his piece.

We ride into town, sack the jobs and torch the communitys- expecting what? Gratitude? Praise for the progress? Gratefullness for the chance to sacrifice onces existance and family on a altar of capitalism with a high priest having aspergers?

Actually its a miracle people did take out theire anger onall the other scapegoats offered and not on th valley.

The part about the rockets is off. SpaceX is based in Hawthorne, CA, which is in the Los Angeles area. LA has a high density of aerospace engineers, which is one of the reasons Musk based SpaceX there.

Source: Worked there.

The spirit of the article was to praise the fruits of SV culture, in which Elon Musk is a revered leader. But yeah, if you want to be pedantic, yes space x is in Southern california.

If you include companies who aren't in SV in an article about SV. What's the point? I guess any startup that is SV funded is assumed to be a SV startup?

Maybe it's a stretch but anything Elon could be seen as an off shoot of the successes of SV. He started and sold Zip2 and PayPal there. He used the money from those ventures to start SpaceX and invest in Tesla. Also iirc much of the capital for these ventures comes from SV players.

Sure, though mentioning the rockets wasn't even a good example of his point, since every launch gets plenty of media coverage.

It's also misleading because there are a lot of government resources in this "private" innovation effort. That's generally true of the fawning over SpaceX, but in this context it's especially silly.

"When Silicon Valley screws up, people who want a pointless Wi-Fi enabled juicer get a pointless Wi-Fi enabled juicer. Which by all accounts makes pretty good juice."

Nope. Silicon Valley screwing up has real world consequences. All the "wifi juicer" startups are taking up resources - money, people, time, materials - that would be better spent elsewhere. One of the biggest problems the valley has is that it wants to keep it's 'hey, we're just insanely great guys having some inconsequential fun' image while ignoring it's real world impact.

>that would be better spent elsewhere

If we want to be cold about it, taking advantage of dumb money is how you re-allocate that capital to smarter people. It's low effort and an efficient want to get your own capital so you can make your own decisions and take your own risks.

The alternative is proving who is smart and will be a good use of time, money, people, and materials and simply giving them the capital in the first place.

(P.S. I'd happily take millions to launch an idea I've been working on. My thing is clearly more useful than a wifi juicer)

https://techcrunch.com/2017/05/09/simple-habit-2-5-million/

Yeah, it was weird reading that argument from Scott, who long ago proposed using dead children as a unit of currency: https://web.archive.org/web/20160318104428/http://www.raikot...

I think both are consistent with each other. In this article, Scott is defending a group of people who he believes are a target of unjustly generalized accusations in media. In particular, wrt. the quoted "if SV screws up" argument, we're still talking orders of magnitude less damage to society and economy than the other two examples.

Scott Alexander is the kind of writer that found his niche reassuring wealthy liberal people that, yes, they actually are living in the best of all possible worlds.

He's now in the same bucket as Steven Pinker, David Brooks, Doctor Pangloss, etc.

    reassuring wealthy liberal people that, yes,
    they actually are living in the best of all
    possible worlds

http://slatestarcodex.com/2015/03/15/answer-to-job/

It is also called taking a glass half full view which is no bad thing. Entrepreneurs are naturally more Tigger than Eeyore.

> Scott Alexander is the kind of writer that found his niche reassuring wealthy liberal people that, yes, they actually are living in the best of all possible worlds.

Huh?! You must have him confused with someone else. This assessment of his writing is so completely wrong that I don't even know where to start correcting it.

He's probably talking about the conclusions your average SSC readers ends up drawing - a literate, wordy reinforcement of the status quo and "problems are hard". Whether this is Alexander's intended effect is another story.

Compared to typical stories everywhere else, with simple and obvious solutions that are totally wrong, I'll take SSC any day. Scott is one of the rare breed of writers who seem to actually think things through.

I'm not sure I agree with the conclusion of the article: "When Wall Street screws up, the country is plunged into recession and poor families lose their homes. When Silicon Valley screws up, people who want a pointless Wi-Fi enabled juicer get a pointless Wi-Fi enabled juicer."

Silicon valley tech is funded by VC money. A substantial portion of that VC money comes from institutional investors (i.e. pension funds). The investors need to see a return at some point. If they don't, the taxpayer will eventually pick up the bill via pension fund bailouts. The chain of causality isn't as clear as with the financial crisis, but all that money has to come from somewhere. If it's squandered, there will be a reckoning eventually.

$58.8 Billion in Venture Capital Invested Across U.S. in 2015 [0]

For comparison, the largest us bank, JP Morgan had a market value of 300b and about double that in debt

I doubt enough people would be hurt in a SV bubble to have enough political pressure for a bailout. Far from too big to fail

http://nvca.org/pressreleases/58-8-billion-in-venture-capita...

That comparison -- Wall Street versus Silicon Valley VCs -- reminds me of a Michael Church observation/complaint on how SV is really a tiny colony, a tail that likes to believe it wags the dog. [Direct link is gone, following text copied from other sources.]

> Zed has a strong point. The startup scene has the feeling of academic politics: vicious intrigue, because the stakes are so small. The complete lack of ethics seen in current-day technology executives is also a result of this. It’s the False Poverty Effect. When people feel poor, despite objective privilege and power, they’re more inclined to do unethical things because, goddammit, life owes them a break.

> That startup CEO whose investor buddies allowed him to pay himself $200,000 per year is probably the poorest person in his Harvard Business School class, and feels deeply inferior to the hedge-fund guys and MD-level bankers he drank with in MBA school.

Most probably, a fall of Silicon Valley would make Wall Street tumble. Then, the government would have to save the "evil banksters."

Of course, all is fine when the money keeps rolling in, no questions asked.

Greedy lending needs greedy borrowers.

> institutional investors (i.e. pension funds)

I don't pensions funds would invest in Start-UPs since they have a low risk threshold.

>I don't pensions funds would invest in Start-UPs since they have a low risk threshold.

You seem to be mistaken. Here's a 2014 article titled "Behind the Venture Capital Boom: Public Pensions" from Bloomberg. Specifically, the article claims (sourcing a Dow Jones report) that "In 2014, they contributed 20 percent of the sector’s overall haul, down slightly from a 25 percent contribution in 2013." It's not that a massive fraction of each pension fund is in venture capital, but a sizable chunk of the money in venture capital is from pensions.

https://www.bloomberg.com/news/articles/2014-09-23/are-publi...

There's another thing that I think is worth bringing up: sometimes the things that we think are useless are, in fact, useful to the people who buy them. See http://theunitofcaring.tumblr.com/post/160054980296/so-of-co... and http://theunitofcaring.tumblr.com/post/160099648056/unverifi...

> that genre of thinkpiece spawned another genre of thinkpiece, which drops the ‘marvelling at how poorly-conceived or scammy products get hundreds of millions in investor funding’ to just settle on ‘sneering at the fact things are sold which I, an enlightened consumer who sees past the horrors of late-stage capitalism, would never buy’.

...

> yes, there exist people for whom getting a package regularly is way less stress and way more convenient than running out to the nearest convenience store. Not everyone lives in cities where the nearest toothbrush is ‘down stairs to the bodega’, not everyone has access to a means of transportation, not everyone can leave their house or pick things up at the store. The store’s hours might be hours you are working. You might be a single parent who can’t nip out for a shopping trip without packing up the kids. You might be disabled. Literally all of those things at once might be true, and are true for many people!

...

> unless you’re a big established company for who [$2300+ is] nothing and the cost of the lawyers is no big deal, it’s way safer not to admit that your product is for disabled people or to advertise in a way that suggests it is a solution to a specific condition. And so we get generically incompetent infomercial people

I wonder if that's what the EZ-Crunch bowl does. I'm not sure what disability it might help with, but I'm hardly an expert on all the disabilities that exist in the world.

I don't understand why the quoted author took issue with Quip in the first place. Modern life is increasingly complicated, and full of small burdens on memory and willpower that add up to a huge background stress load. If I can pay a small amount of money to alleviate just one thing to remember (refreshing my toothbrush every couple of months) and could do that for every other annoying little inconvenience of modern life (car maintenance/insurance/tax, renewing and comparing financial services, buying in food and finding new recipes, tracking my dietary composition and fitness, backing up my computer, expensing mileage, and so many hundreds of little things) then life would be a lot more enjoyable. I have nothing but praise for the companies who focus on the little things and do them well. We could all do with not having to think about and remember so many things.

Yeah. I have no particular problem with the quip. It's an expensive electric toothbrush but not ridiculously so. For me, it ultimately wasn't great as an electric toothbrush for travel which is what I bought it for. But, in general, I take advantage of subscriptions and automated billpaying etc. when I really do want things to be on autopilot as much as possible.

That's fine, this is how innovation works: for every big hit which changes the world, there are 9 scams and 90 plain failures. This is the way it should be. It was same in the age when the car was invented, or a plane - a ton of people got funded with scam projects, and even more tried to bootstrap obvious nonsense. We just didn't have the Internet back then so it received a lot less coverage.

I don't get this logic.

Imagine if doctors had 99 failures for every successful operation. "Well that's just the way it has to be for that success".

Sure, maybe Juicero could make money, but maybe $120 million could have been invested into some slightly more useful things?

Who gets to decide? Obviously the investors and VCs, and it's their money.

VCs simultaenously say that their 1:100 hit rate is part of their big strategies and that everything is luck. You can either be gambling your money or you can be using skill, but you can't do both!

(modulo probabilities a bit higher than lottery ticket odds)

This is an absolutely wrong comparison. Building startups is R&D, it is not the production, so acceptability of failure is much higher. Better compare it this way: what if 99% of all potential new drugs fail clinical trials and never make it to the pharmacy shelves, of which 9% would be deliberate scams devised by con artists to extract funding? That will be just fine, and in fact, that's what it is in the drug world! We are still, as humanity, making great progress in treating diseases.

Marginal decisions are still probablistic.

A doctor with that success rate is terrible because value of success is lower than the cost of failure. A VC with low hit rate is good when value of success is 100x the cost of failure.

VCs are going to have to choose how liberal/risky to be in investing. They could maybe choose to invest less and we'd not have Juicero but we'd also not have many other successful companies. When you investing in many companies some are going to be bad.

Extrapolating Juicero to all of SV is like critisizing a hundred billion dollar infrastructure bill because of one fairly useless hundred million dollar project in it.

It definitely can be both a gamble and a skill - a good investor will get a higher hit rate and a positive net return, and a poor investor won't.

E.g. the difference between getting a 1.5% chance of a 1:100 payout vs a 0.5% chance of the same.

> but maybe $120 million could have been invested into some slightly more useful things?

No. That's precisely why products like this get built.

Interest rates are through the floor, causing assets (stock market, housing, everything) to be pumped up to non-sustainable levels. everyone knows the stock market and housing returns won't be good for the next 10 years. There's waaaayyy too much money floating around. They have to invest it somewhere, and since all the meaningful moonshot innovation is locked up, all that's left is to go for products like this.

I think the SV VC scene is as nutty as anybody, but skill and gambling are most definitely not mutually exclusive. It's not analogous to a lottery, it's more like professional gamblers playing blackjack in Vegas. People can and do make a living at it, even though statistically they're still not going to win the majority of the games they participate in.

Related (yesterday in The Guardian): "America has become so anti-innovation – it's economic suicide"

https://www.theguardian.com/technology/2017/may/11/tech-inno...

    When Silicon Valley screws up, 
    people who want a pointless Wi-Fi enabled juicer 
    get a pointless Wi-Fi enabled juicer. 
    Which by all accounts makes pretty good juice.

No. When SV screws up we get a 1.5 billion person social network that shows indifference towards "fake news"

Is that really different than the fellow who only watches FOX News or the fellow who only watches MSNBC?

I don't know if your question is genuine or whether you were more asking out of anger...it's different from the standpoint of editorial involvement. Fox News and MSNBC have editors who filter the majority of their content, while the users (readers) contribute, "feedback" in terms of what stories are, "hot/trending" as well as comments. In Twitter/Facebook these roles are reversed, with the users filtering the majority of the content, barring outright obscene content.

Fox News and MSNBC do have the option of pushing stories which change the conversation, thereby controlling how things are delivered on a story-by-story basis, like an art form whereas Facebook has dials and levers to tweak particular aspects of how sharing is done. I would say news content on Facebook is 90% sharing, 10% curation while news content on MSNBC and Fox are 80% curation and 20% sharing.

Or the deep social implications of creating self-reinforcing bias loops in the news those 1.5B read, fake or otherwise.

A Devil's advocate might say you need to balance the good of social networks with its evils

Or a product that has positively impacted the lives of most of those 1.5 billion people, as evidenced by the fact that they use it daily.

All the research on the matter I've seen showed that people who use Facebook weren't any more susceptible to fake news than people who didn't.

But if you get your news from traditional media and not social media, you're less likely to be exposed to blatantly fake news and therefore you're less likely to believe fake news.

"there’s not a lot of evidence for silly Juicero-style startups being much of the Silicon Valley business community at all."

"Origin (“Keurig for smoothies”), MoveButter, which compares itself to three different companies I’ve never heard of in its first sentence but seems to be grocery-related in some way; Mere Coffee, a better-tasting coffee machine for small businesses"

All of those businesses just sound like Juicero. A “Keurig for smoothies” is just Jucero with a small pivot.

Given that there are thousands of startups that YC alone has funded, and probably hundreds of thousands in the Bay Area, naming three doesn't really contradict the author's point.

> some sort of enterprise data solution software application package analytics targeting management something something something “the cloud”

that's just flat out hilarious

The biggest problems now, aren't technical, they're more political. For the biggest problems (housing, healthcare and transportation), the biggest barriers to entry are legal/political in nature. I think we'll need venture funds that reflect that, otherwise consumer product innovation will become increasingly meaningless.

Interesting bit- Latest YC batch has 1/4th each of altruistic, cutting-edge, meat-and-potatoes-for-cloud and Uber-for-tacos companies

Most of the counter-examples given as being examples of interesting companies sound terrible to me:

>> ... Neema, an app to help poor people without access to banks gain financial services...

Neema sounds even more useless than Juicero. Poor people have no money so they don't need financial services.

>> ... Kangpe, online health services for people in Africa without access to doctors.

So they don't have access to doctors but they have an iPhone with internet. Totally realistic.

>> Dost Education, helping to teach literacy skills in India via a $1/month course

Does the $1 per month include the cost of the computer/iphone, electricity and internet? It's probably cheaper to just pay a private tutor for one hour a day. Teachers aren't that expensive in India.

>> ... CBAS, which describes itself as “human bionics plug-and-play"

Nice buzzwords but what is the actual point of this? Does it actually improve lives? Is this what people really want or is it what silicon valley wants them to want?

225M people in Africa have a smartphone today (I think that's like 20%?): https://qz.com/748354/smartphone-use-has-more-than-doubled-i...

Meanwhile in some places there's only 1 doctor per 100,000 people: http://mgafrica.com/article/2015-02-05-hullo-where-have-all-...

So yeah, I do think there are probably a lot of people in Africa with a smartphone but not a doctor.

You can get a smartphone in the US for 20USD I can only imagine that number is lower in Africa.

In support of your point.

>Poor people have no money so they don't need financial services.

We already have it in the form of check cashing and payday loan businesses.

>So they don't have access to doctors but they have an iPhone with internet. Totally realistic

Don't underestimate penetration of mobile internet in certaim parts of Africa.

For every Silicon Valley hit, there's a fluff piece (or five). And for every genuinely innovative or helpful product, there's a gimmick product or distracting app.

Useful piece though even if just for it highlighting these valuable startups.

I don't know if the writer understands the fundamental problem in the discussion of Silicon Valley centers on the fact that it's the peak of capitalism gone awry. So for every little research project he listed there's ten or more silly "ventures" into DRM'd juicing machines or spying social media apps.

#NotAllStartups

I can't recommend this article enough.

"Enterprise data solution software application package analytics targeting management something something something 'the cloud'" is my phrase of the week.

"The unwritten story of the Juicero debacle is that high income inequality causes capital to be misallocated towards luxury production."

- Matt Bruenig, with a better take. That, if you look a little closer, also applies to Uber/etc's "sharing servant economy", and even Tesla's "trickle-down environmentalism".

But is this really anything new. The scale of investment may be different (although I'm not sure by how much if you take into account high-end real estate). But walk down Fifth Avenue in Midtown or the typical Las Vegas mall (or even--especially--the high-end shopping streets in Beijing) and there's plenty of money allocated toward making and selling things for the 1% plus that have nothing to do with tech.

Yeah. Even if Juicero had "succeeded," it would have been research and investment into a $400 juicer.

Tech nearly always reached the rich first.

"Computers are type writers for rich snobs who can't type."

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