Truth And Lies Of Silicon Valley

Brian S Hall / November 25th, 2013

It’s a privilege to write here, and a joy to focus on the long-term trends in technology, the rise and fall of companies and leaders, and the impact this region has upon not only America, but the entire world. I suspect Silicon Valley’s output will come to equal the impact of Detroit, my hometown, which effectively created the middle class, ensured the Allied victory in World War 2, and fundamentally altered how and where people live.

Silicon Valley is also a region that rivals Hollywood and Washington for talking about itself. It frequently displays the worst elements of both pack mentality and herd mentality, and aggressively covers up its failings, including a truly dismaying inequality in wealth and an almost gleeful ageism, all while insisting it knows best for California, the United States, for industry, for government, and for the world.

I now live here. These are my personal, unvarnished observations on Silicon Valley.

Almost all of the work in tech is done by companies and by people which tech bloggers pay scant attention to or worse, openly mock.

Patent lawsuits have about the best margins of any product or service in Silicon Valley. Consider that Apple recently won $290 million in a suit against Samsung. All told, Steve Jobs’ thermonuclear war has resulted in nearly a billion dollars in jury awards. If Apple only ultimately collects less than a third, $300 million, for example, that’s still about a 10X or greater return, no matter how they account for legal fees.

Does Coca Cola even make 10X on its syrup?

Computing is the new oil. The Silicon Valley “ecosystem” integrates smart people, start-ups, venture capital, and a cozy relationship between universities and for-profit corporations, has them all working at light speed and with almost zero consideration of the long-term or the existing order of things. It absolutely can be replicated in many parts of the world. This comes with a caveat, however. This area has optimized on this proven model while focused almost exclusively on computing (hardware, software, standards, apps, data, cloud, social media). Unless the copycats focus their efforts on computing-related activities, their returns will never be like what we have here. Note the very limited impact of Silicon Valley’s biotech efforts thirty years in.

Never, ever believe anyone that says Silicon Valley and Washington, DC do not mix. Washington, DC has the power, Silicon Valley has the money. The courtship is in full swing, and it’s far more than simply Washington leaders searching for big campaign contributions and re-election algorithms. Consider that under President Obama, the annual deficit alone is larger than the total value of Apple, the Valley’s biggest, richest company. Follow the money. Silicon Valley and Washington are the new Wall Street and Washington.

I always assume that any start-up whose value is based upon artificial limits is doomed. For example, Snapchat. The company is optimized for mobile, social media and the visual web. That’s almost a can’t miss. Yet, it is riding atop a temporal distortion, a gimmick whereby owners of digital content and services create artificial limits. In Snapchat’s case, the artificial limit is time (e.g. your picture or ad will vanish in 5,4,3,2,1). We all know this is not true. You may remember the briefly popular, and much-blogged-about Mailbox app, which created a sign-up list, despite the near-infinite scalability of such digital services. It may pay off in the short-term, but if you can’t cash out in the short-term, I suspect you will get burned.

There are real limits and there are made-up limits. If the limit is made-up, I don’t invest.

Speaking of investing, anyone using Snapchat for (illegal) insider trading may wish to re-consider their actions.

Almost everything you do online, and almost every time you carry your smartphone with you outside, is a far greater security risk than leaving your home WiFI open. Stop refusing to share. Stop handing over all your private data so easily.

Most people I meet here are very smart and work very hard. This is critical to their success — and to the region. Bonus: most that I meet are good people.

I have been around the world and all about this great country. Nowhere in the US is there a more socially inclusive environment than Silicon Valley — nor a more politically intolerant one. You will be branded if you are a Republican, a conservative.  Just so you know.

Connections matter above all else. Except, brainpower. If your brainpower sits atop the 0.1%, you will do exceedingly well. If  at the 1%, you will still do great. Nonetheless, and though I can’t say how many people at Apple have actual “humanities” degrees, I can assure you that you better have an engineering degree, science degree, and/or economics degree if you want a good job. It’s not about humanities or the social sciences out here.

Too many here are focused on creating the future or disrupting the current order, and not at all on preserving what is best. This is too bad. Think of all the great stuff we’ve been able to re-capture almost without trying. For example, thanks to iPhone, Yelp and Foursquare, I never again have to eat at fast food joints or franchise restaurants. Now, no matter where I am, I can find a great, local, mom-and-pop eatery. Similarly, classical music in the US, effectively dead on radio, is now readily available, for free, on Pandora and iTunes. I suspect the region is missing a giant opportunity is overlooking things to preserve.

We spend more on apps than on software.

I know of no one here who spends more on television than on connectivity. Internet, WiFi, smartphone and tablet connectivity wildly crush cable television, DVD rentals and the like. And yet, the new cool is to tell the world you’re going to stop reading email, stop tweeting, maybe go off-grid for a week or two. In my experience, no one who tells you this is ever telling you the truth. To be disconnected in Silicon Valley, even for a moment, is to be without air.

In physical space, absolutely no one ever mocks anyone for their choice in smartphone or computer.

Perhaps because there are so many smart, competitive, reasonably well-off people here, but attractiveness and fitness command a premium.

The rest of the world will know soon enough: the best source for breaking news is Twitter. The best links to the best analysis of current events is via Twitter.

In Silicon Valley, the cloud is your real hard drive and your physical hard drive is just a backup, likely to crash.

The last thing we see at night and the first thing we see in the morning is our smartphone.

We get our music recommendations come from iTunes and YouTube.

Design is hard. Really hard. BMW has been making cars for about 100 years. The new 750i is ugly. If BMW still can’t get car design exactly right, 100 years on, it’s probably no wonder that so much hardware, so much software, so many apps, nearly every UI design is so poor. Still, bad design is an obvious failing, with Silicon Valley a leader.

In my time here, I’ve witnessed radically more communications failures and personal angst based on people with obviously different Myers-Briggs assessments than on whether the person was black or white, male or female, for example.

There are so many people out here, so many cars, so little space. Yet barring a literal seismic catastrophe, I believe this area is on a growth trajectory that will continue for at least another generation or two.

Brian S Hall

Brian S Hall writes about mobile devices, crowdsourced entertainment, and the integration of cars and computers. His work has been published with Macworld, CNBC, Wall Street Journal, ReadWrite and numerous others. Multiple columns have been cited as "must reads" by AllThingsD and Re/Code and he has been blacklisted by some of the top editors in the industry. Brian has been a guest on several radio programs and podcasts.
  • Rene Stein

    Interesting post, having never been to Silicon Valley myself, I have no idea what it is about. I would just like to make an addition to your quip about design being hard. I would disagree. The reason you see ugly products like you do is because people confuse design with fashion. Companies want to use vanity and fashion to sell products, so they have a need to constantly change the styles in order to drive demand for goods that last a decently long time. They could get the design right if they wanted to, they choose not to. Compare this to Apple’s laptop design, unchanged over the last 5 years, and not a slave to fashion.

  • Paley

    “Detroit……ensured the Allied victory in World War 2”

    I always enjoy the broader view evinced in Brian’s columns, but in the above phrase a nugget of parochialism creeps in. Even from a purely industrial perspective, the production levels achieved by the Soviet Union, not by the American Mid-West were the decisive factor in the European theatre.

    • steve_wildstrom

      The Soviets did pull off a production miracle, especially considering how they had to move their manufacturing capacity from western Russia to east of the Urals. But the Red Army would have been in big trouble without the thousands of trucks supplied by the U.S.

      • Space Gorilla

        Yes, that was the lend lease program I believe. At least Brian didn’t parrot the line that the US won WWII. Russia won WWII, something like 80 or 90 percent of the German army was killed on the Eastern Front. Granted, aid from the US was key, but Russia did the fighting.

        • WW2 wasn’t only along eastern Europe.

          • Space Gorilla

            Duh. But the vast majority of the German army was killed by Russia. The Eastern Front was critical. The story that America won WWII is just that, a *story*. Don’t take my word for it. Look it up. Not to say that other countries didn’t make important contributions, but when one country is largely responsible for engaging and killing most of Germany’s army, I’m inclined to say those folks won the war. Thanks Russia!

          • DarwinPhish

            I think Brian was referring to The Pacific theatre.

          • Space Gorilla

            Really? I had no idea. Thanks for clearing that up *rolls eyes*.

        • SFBay

          Russia refused to declare war on Japan until we had already dropped the first nuclear bomb. In comparison, we fought the Germans in North Africa, in Italy, and Western Europe – for several years.

          And keep in mind, we didn’t have to do any of that. We were attacked by Japan at Pearl Harbor, not Germany. And while it was inevitable that we would declare war on Germany after they declared war on us, there was nothing that required us to actually show up in Europe and fight in large numbers.

          The U.S. did much more to fight the guys that attacked the USSR, than USSR did to fight the guys that attacked the U.S.

          • Space Gorilla

            You might want to learn a bit about Russia vs Japan border conflicts. Why are people pissing and moaning about giving Russia credit?

          • SFBay

            Ah, gotcha. You can’t carry on a reasonable debate about an interesting historical issue, so you resort to snarky name-calling and childish belittling of the other side. Go away.

          • Space Gorilla

            Oh. Yes. You. Got. Me. Nice. One.

            You might want to start by not saying things that are not accurate, such as “Russia refused to declare war on Japan until we had already dropped the first nuclear bomb”.

            Start your education by looking into the Tehran Conference and the Yalta Conference. Then look into a timeline of Russia vs Japan conflicts dating back to the early 1930s. While the timing of Russia’s declaration of war and invasion re: Japan happened to coincide, the two events were not linked. The timing of Russia’s actions had already been agreed upon, much earlier. Add to that the fact that Russia and Japan had already been engaged in military conflicts, years earlier, and this shaped Japan’s strategy going forward.

            There is no debate here, only history. I find that most people in North America have very little knowledge when it comes to Russia’s contribution to WWII. Every single time I mention it, this is the reaction I get.

            I’m done here. I haven’t got the time or patience.

          • steve_wildstrom

            The United States did not particularly want the Soviet Union to declare war on Japan, especially at the end, because Washington was concerned (rightly, as the dispute of Sakhalin would show) about a Soviet land grab in the northern Pacific.

            The war in the Pacific was peculiar, in that the main actions were of ferocious intensity but involved relatively small forces, especially compared to the Eastern and Western fronts in Europe. Also, the Soviets lacked the naval capability to contribute much to what was essentially an amphibious war.

            That would all have changed with an invasion of the Japanese home island, but that, of course, never came to pass.

          • I had no idea that this post would set off a rather interesting discussion on WW2.

        • klahanas

          Not to diminish the US and Russia’s contributions, or to go too far off topic, but THE ALLIES won WWII. Hitler was supposed to breeze through Greece, but he got fierce resistance. He may have won, but the resistance in Greece gave those three Great Russian Generals (Zhukov, January, and February) the opportunity to pull off what they did. How many other such examples must there be?

          • steve_wildstrom

            This is going way off topic, but I can’t resist.

            We’ve been debating the relative contributions of the western allies (US, UK, Canada, with relatively small contingents from France and Poland) and the Soviet Union to the victory in Europe for 60 years and we’ll probably go on for another hundred.

            What is unquestionably true is that the standard U.S. version of the war drastically understates the Soviet contribution (clearly because of the Cold War). Ask 100 Americans “What was the battle of Kursk?” and you’ll be lucky to get more than a blank stare from one. Yet Kursk was the largest land battle in history and part of a Red Army counteroffensive that broke the back of the German attack in Russia.

            Clearly, the Soviets did the fighting and dying at Kursk, but their victory was helped not only by a vast flow of western materiel, but also by “Ultra” intelligence supplied by the U.S. and British.

            It’s complicated.

  • Scott Sterling

    Nice. Thanks.

  • chano1

    But Brian, it is also good to live anaerobically from time to time. Occasional escapes from the noise of the connected chatterati is.just.great.

  • Have to disagree with this bit, Brian:

    “Patent lawsuits have about the best margins of any product or service in Silicon Valley. Consider that Apple recently won $290 million in a suit against Samsung. All told, Steve Jobs’ thermonuclear war has resulted in nearly a billion dollars in jury awards. If Apple only ultimately collects less than a third, $300 million, for example, that’s still about a 10X or greater return, no matter how they account for legal fees.”

    Except, of course, getting the patents in the first place often costs billions, either in research and development money or by buying them from those who originally spent that money. Google spends $X billion per year and gets X patents, Apple spends $X billion and gets X patents. Google spends $X on Motorola, Apple and its cohort spend $X on Nortel (and both Motorola and Nortel spent billions to make them in the first place).

    Patents, in the kind of cases you’re talking about, are not some free resource which you can dig up from the ground, spend a few million on lawyers’ fees, and make a fortune. You can buy up cheap patents and attempt to use lawyers letters to intimidate tiny companies into handing over fees, as, say, Lodsys do, but that’s not what Apple has done, and not what Google (via Motorola) has done. Whatever you think of the merits of the cases, what they’re both engaged in is games of high-stakes poker with other players that can, at the end of the day, afford to lose.

    • Thanks for the comment. I would love to get a glimpse of some of these figures. We know how much Apple paid for Rockstar, for example, and have clues as to the cost of the patents they have sued Samsung over, and later may get a glimpse of some of the awards or licensing fees received. Seeing the costs and returns, confirmed, would be very interesting.

  • James King

    As far as I can tell, DARPA, CERN and other major government organizations have had a greater positive impact on the world than Silicon Valley. Computer, Internet, GPS, etc. Silicon Valley ran with a lot of the balls given to it. It’s been a major victory for capitalism but the jury is still out on whether SC is doing the world a lot of good.

    I don’t see SC making even a fraction of a dent in the major issues of the world. Pollution? Nah. Injustice? Nah. Social inequality? Maybe but arguable. Financial inequality? Nope. SC is proving to be no different than any other financial culture: First tier (these guys make all the money), Second tier (do much of the real work and are decently compensated), Everyone else (do the grunt and dirty work and are paid in crumbs). How is this any different than Wall St., D.C., Hollywood, Sports, etc.?

    Hell, technology has barely dented paper production, the one industry you would have expected it to disrupt a long time ago. So far, tech seems to be great at making white guys from affluent backgrounds rich (or richer) but very little of meaning has translated to the common person. We have more distractions, sure. But life really isn’t that different as a result of SC “innovations.” Plumbing and electricity are still more profound.

    To me, these guys are just paying one another and patting each other on the back. “Meritocracy” is nonsense, the same type of guys getting rich in other knowledge-based financial cultures are getting rich in tech. If you don’t have their backgrounds, getting into the club is almost impossible. And software development is the be-all and end-all with the exception of those plugged into the VC/angel culture or sales. It’s a self-perpetuating plutocracy.

    That’s not to say there isn’t any good being produced. I just don’t think it is particularly meaningful. SC is changing the world but not necessarily for the better.

    • With the possible exception of Apple, every company in Silicon Valley wants their tech, their service, their platform, in the hands of everyone, everywhere. Ultimately, I think that is good.

  • magnificus

    This is by far the most interesting comment thread I’ve read for any of Brian’s posts, and perhaps of any thread I’ve read in the past year. Thank you all!

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