Silicon Valley Has Learned to Love the Bust

An anonymous reader writes "Fortune's David Kirkpatrick interviews scores of valley execs who have stopped worrying continued innovating. He writes: 'The underlying tech boom that began the bubble actually has never stopped. It just stopped paying off. Says Eric Schmidt, CEO of Google, the company that has emerged as the head of the new class: "If anything, the rate of innovation in technology has increased in the past couple of years. But that doesn't necessarily make it a good business. The beneficiaries are the end users." Agrees Rob Carter, the CIO of FedEx: "The sound we heard wasn't the bubble bursting; it was the big bang."'"

Comments

couldnt last 4ever

[deadsaijinx*]

the bust was bound to happen. what goes up must come down, and the faster it goes up, the faster it seems to come down. but at the same time, there was no danger of the technology disapearing. its not like i'm typing away on a typewriter, or a pen and paper, or a rock and chizel. the bust was just economical evolution, shaking off the weak and wasteful companies that wouldnt have made it very far. fp

Re:couldnt last 4ever

[the-build-chicken]

I remember reading an article back in 1998 in (I think) fortune magazine...it talked about the sustainability of the dotcom economy...they said that, it would continue to go crazy, until early into 2000, when there would be lots of industry shake outs, lots of ppl loosing jobs etc, which would continue till 2005, and by 2005 the industry would settle down into a stable industry of development, mainly populated by the a hand full of companies that actually made their cash in the boom and didn't waste it...with little new development (or startups) entering the market...wow, they were kinda right on the money huh?

Re:couldnt last 4ever

[LaCosaNostradamus]

I take great exception to your laying much of the blame for the bubble on all those individual investors (I prefer to call them gamblers), which I assume you are doing when you say "largely the fault of the unreasonably [...] optimistic investors".

Those investors certainly relied upon a financial information system for their optimism. But more and more this system turned to outright fraud in order to continue to pull investment money (from whatever source, large and small, centralized and diffused) out past any barrier of hesitation or consideration.

A good book has been recently released called "Buy, Lie and Sell High" (available here, here and here), which more than emphasizes this point. There is also enough information out on various news services about the too-cozy relationships between investment banks, regulators and institutional investors. The bubble was a period of burning investment capital like is was so much cord wood ... and there were many financial professionals who threw morals, guidelines and law books to the wind in order to fan the flames.

To sum up: The yokel doing the the day-trading I could chalk up to simple stupidity ... but the professionals behind the financial information system operated in full knowledge of the fraud.

CEO/CIO versus the grunt laborer at the bottom

[reporter]

The grunt workers, who bore the brunt of the layoffs, at the bottom of the company hierarchy are likely to have a far different perspective of the bust than the million-dollar-salaried CEO of Google and the million-dollar-salaried CIO of FedEX. The bust can come and go, yet the CEO and the CIO shall live well.

By contrast, the grunt workers, of whom most are Americans, will need to scramble for the next job. In this climate, the next job does not appear for more than a year. When a potential job does arise, the grunt worker will need to fend off droves of H-1B workers.

But then all that big-bang innovation will make up for the months of unemployment ....

Re:CEO/CIO versus the grunt laborer at the bottom

[Anonymous Coward]

That guy that wants to put in a 40 hour week and dosent build / hone there skills dosent belong in this business period.

So here's a married man, with two kids, trips to little league and ballet practice, active in the community, likes to travel, and volunteers at his church. This guy doesn't belong in the business?

And then we have a 21-year-old, fresh out of college, no kids, no relationship, lives on taco bell and mountain dew, works 70 hours a week on code. He does belong in this business?

Are you familiar with the term "drag coefficient" with a slightly revised definition? An alternative definition is: "having a life." The article I just linked to was written in 1999, but it's nice to see the attitude is alive and well in 2003.

Re:CEO/CIO versus the grunt laborer at the bottom

[Tablizer]

More importantly how many people do you know that got into the tech industry in the boom and have no real ability there.

Not true. They often have one ability that "true geeks" lack: social and marketing skills. They are often favored because of this. They speak the same language as the boss (even if that language is sometimes BS). Raw tech is either not appreciated, or easier to move overseas. IOW, the less people want or need to interact with you face-to-face, the easier it is to farm your job off to India or China for $2/hr. This is the big catch-22 that us nerds now face. The boss will not know whether or not you know how to normalize a database, but he/she will know when you irritate or bore them. It is a people game out there more than a tech game.

Re:I love...

[Pharmboy]

its called finding the silver lining in the cloud.

My industry (very not related to tech) has been down 30% a year for a few years. We have grown in excess of 40% per year during this time. We found a way to grow in turbulent times. This doesn't make us bad, or the fact that we did hogwash. It means we are playing the game smarter.

The top 25% and the top 1% are generally there for a reason. I don't begrudge anyone who is more successful than I am, and would rather emulate them than bitch. That may be why we succeed where other just complain.

No one wants to interview an unsuccessful person. Failing is easy, just complain and don't try. Kicking ass in this economy is hard, and worth looking at.

Re:Great time to be a startup company?

[PCM2]

They only make their money by pumping in money into startup companies likely to succeed.

Actually, some of them make their money by pumping money into startups whether they have any merit or not, helping to generate a lot of buzz, then gutting the company when they figure the momentum has run out. Some of the happiest entrepeneurs I've spoken to keep that way precisely because they stayed the hell away from V.C. money and funded their companies in other ways.

What small business owners have known forever.

[rice_burners_suck]

Too many folks have become accustomed to the myth that huge multinational corporations have a God-given right to eternal, perpetually increasing profits and market share. This view is wrong because:

• The market is finite.
• At some point, someone will come up with a better equation (to selling), displacing the current market leader.
• Arrogance in a large corporation, in conjunction with utter greed, two negative virtues that have a tendency to come to those in power, will cause the downfall of even the most powerful entity.

One day, people will figure out the sorry fact that what goes up must come down.

Some corporations in silicon valley have figured out what small business owners have always known and used to their advantage: In a time of economic bust, one of two things happen:

1. You go miserably out of business.
2. You innovate so that when things turn around, you have a head start against the competition.

Don't worry, though... They'll forget this lesson long before the next economic downturn.