Silicon Valley Abandons the Culture That Made It the Envy of the World
theatlantic.com
theatlantic.com
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.
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.
I think this makes an assumption that industry equilibrium relies on complex production processes. There is a lot of interest in simple production processes and I think that one trend that will continue in the next few years is the (both open and closed source) productization of production processes for consumption by progressively-less-technical individuals over time. This drastically reduces the amount infrastructure (and corresponding capital) required to bring innovative new products to market, unseating incumbents and breeding healthy competition.
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.
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.
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.
If you only come to the office once a week and otherwise live outside of the valley, that gets a lot harder to do.
I live in the south bay and already feel the pinch, as most of the meetups I'd want to go to are in San Francisco, about an hour's drive away. When I worked in SF, it was no big deal to stick around for a meetup or a drink. Now it's 1/2 a day's outing.
I ignore 99% of such events, and keep communication almost exclusively online. Am I missing much? (I'm an engineer, though, not an entrepreneur.)
I meet founders, some of whom will eventually be household names and others not. I've kept up email correspondence with a few of my fellow user group managers and I try to take them out to lunch when I return.
Probably will be in SF in April if any HN'ers want to hit me up, especially those interested in the No Code space.
In particular here though I was just talking about better commuter trains and (the existence of) HSR, neither of which is really dependent on density.
NYC subway is only efficient because Manhattan is so dense, and much of areas around it are reasonably dense.
Commuting from further away, like a couple dozen miles into NY or NJ, becomes massively more burdensome, because a train has to go all this distance, and the station is not close to home. Of course, you can spend this hour or two reading, or maybe writing or even sleeping on the train, unlike driving.
Think about this, a house that costs i. The low two digits to build is being sold for $400,000 in sunnyvale because of the crunch and the wages that bigCo SC firms put on the situation...
There is an enormous opportunity here.
That's nice to sell a book, but I see no need to read that pablum. A large established company vs a startup (<50 employees) is night and day.
Having worked for decades in the "industry", which is a conglomeration of all industry, an Amazon team pushes a production button style change and it goes on the quarterly release notes with fanfare, while small companies are iterating daily. JPMorgan, Experian, Cambia...you hear VPs talking about meetings with congress critters, but it's largely to pull blood from stone, not to make a better product. That would be incidental, if ever, as long as the metrics they are fed show an incline.
Maybe it would expose you to information that's outside your own personal experience?
AT&T was quite a big company in its prime, a monopoly in fact, but extremely innovative. Same goes for Xerox. I suspect Google's longer-reaching research efforts (quantum computing, machine learning) could pay off similar dividends eventually, if they aren't regulated out of existence.
Yes, big companies are often hampered by bureaucracy. Many are not innovative. And in all cases, the majority of employees need to focus on the bread-and-butter work that keeps the lights on. But big companies also have the resources needed to invest in long-term R&D with potentially big payoff down the road.
Conversely, you could make the case that most SV start-ups are actually not that innovative, and that SV as a whole gets perversely fixated on the past: every occasional success, whether it's social media or mobile apps or the gig economy, spawns a thousand imitators hoping to cash in on past success. Do we really need to be funneling hundreds of billions of dollars to create more "Like X but for Y" smartphone apps?
I've seen this stuff for DECADES. Another book is not on the menu. NOTHING has changed and pretending there's new insight is pointless.
> big companies also have the resources needed to invest in long-term R&D with potentially big payoff down the road.
Very few do this (AMZ is one, MSFT another). The exceptions do not make a rule, nor do they "innovate" (iterative improvement) as much as "experiment" to break into new markets. This is an important observation, which is a good indicator of the level of analysis performed.
It's important to note, innovation itself rarely lends to a successful company, which is a different discussion and necessarily colors the state of things.
The book is 35 years old, and Drucker himself was 76 years old when it was published. He was considered a well-respected guy in the field, to understate it somewhat, and he had also seen this stuff for decades.
Many management books are not worth the time it takes to read them. But in my opinion, Drucker is always worth the investment even if he turns out to be wrong about a particular topic.
> 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.
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.
Break up Facebook and Google, use the government to keep the market efficient by not allowing any market distorting entities from forming.
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.
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.
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.
Unpopular != future Amazon. Sorry.
It always needs to be a Edison vs Tesla war, before things are settled?
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.
Look up VisiCalc.
My town doesn’t really have that culture, but we have a decent small business culture at least.