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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."'"
I love how all the quotes come from the top 25% (nay, even the top 1% in many cases) of the food chain. Hogwash.
Certainly the unemployed fledgeling DBA who never gets interviewed does not love the bust.
People with H1-B visa's are not your problem. I know too many people that got some dinky tech degree from ITT Tech, got paid great money during the Boom, and now bitch and moan about H1-B workers taking their jobs. Its capitalism at is best!
Stop by my site where I write about ERP systems & more
I left a permanent position when the bubble burst to become a contractor and I am finding work just fine, and less headaches trying to park since people left.
For those people who think they have an idea what Silicon Valley (and San Francisco) is like "post-bubble":
It's just recently that you really start to see "for rent" signs in San Francisco, in the way you see it in *normal* cities, like Boston or New York. It's not a ghosttown, it's just normal.
There are plenty of VCs who have money. They're just not spending it so crazily. Not everyone is crying 'poor me'. Not everyone blew all their money here. The media makes it out as if there are 25 year old millionaires sitting in the gutter outside a bar with a suit on, homeless and whining. Far from it. It's not like the area is Flint, Michigan or anything.
Maybe my experience is the exception. Sure, work is not crashing on my door, but I have had thus far an ok time finding work in the area of expertise I had during the bubble.
Agreed.
.com's became so ubiquitous, home investors and online trading also boomed (largely for the same reason: the internet.) For the first time, Joe investor could do extensive research and play complicated strategies all on his own. The problem was that Joe investor didn't have an institutional mind-set. There was no governor on Joe investor's button.
The so-called "Tech Boom" and bust were really an investment boom and bust.
At about the same time that
That, combined with the young entrepaneur who thought you just needed to be a good geeks to survive as a tech company breeded the bubble and consequently the bust.
The recession wasn't the fault of tech (entirely) or Greenspan (entirely), etc. It was largely the fault of the unreasonably (and that's a polite term) optimistic investors.
Hot Damn! It's the Soggy Bottom Boys!
Perhaps its my utter ignorance, but I would think it is a great time to start up a new company. Yeah, there's less money floating around, but VC's are in a bind. They only make their money by pumping in money into startup companies likely to succeed. If you have a credible business plan, and there are no major flaws in your management team, I can't see why you'd have a problem finding investors. (Unfortunately, I don't possess that surefire idea that would make me want to quit my job.)
There is no America. There is no democracy. There is only IBM and AT&T and DuPont, Dow, General Electric, and Exxon
The thing is, Wall Street is still insisting on these growth rates, even though we're in the middle of what's looking more and more like a bad recession. But that's no surprise, because the focus of business for the past ten-twenty years has been on short-term profits over long-term sustainable growth. In fact, that's pretty much the definition of the tech bubble. Circumstances don't matter, viability five years down the road doesn't matter. All that matters is the stock price and next quarter projections until the current stockholders can cash out with a good ROI.
All these publications about how the bubble hasn't really burst, and how techies and the tech market (and R&D) haven't really been hurt are bull. They're just the executives trying to convince themselves that their cash grab didn't really hurt anyone. And that outsourcing every job they can justify to third-world nations for a tenth of what the work is worth is good for the domestic economy.
Why does it happen that when the journalists write about anything that you know at least a little about, you understand that it's bullshit almost 100% of the time?
The whole article consists of random facts collected to support the idea they a priori had. Oh yes, "Adobe Acrobat has brought the same benefits to sending documents over the Web". How insightful. Look what we found! That is surely a sign of things to come...
It's no different from any article written during the dot-com boom. They first decide what they want to write (and what their subscribers want to read) and then dig up the facts to support their preconceived ideas.
This is not research, just a lame article that is not worth the magnetic particles that it is stored on.
Future Wiki -- If you don't think about the future, you cannot have one.
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.
which nearly killed the classic dividend-paying stock model in favor of the far riskier growth stock model.
Most stocks are supposed to pay dividends. In effect, dividend-paying stocks act like bonds with greater risk in exchange for potentially higher payouts (good companies can and will increase their dividend payouts over time; really good companies do so steadily) and not having to pay back any principal. The company can cut its dividend if things go Bad, which is a risk for the investor but can help keep a wounded company from flatlining; a company financed with debt instead of equity would go straight to bankruptcy court.
So most new companies either go with the growth-stock model (which demands growth rates that are rarely plausible) or the debt-financed (junk bond) model (which imposes a crushing payment schedule). All because the American tax code is so fscked up.
Dividend payouts are also a concrete sign of financial health. It's way harder to cook the books when investors are expecting their quarterly checks to clear.
Of course, the odds of Congress actually killing the double-tax (by either letting companies tax deduct their dividend payouts or letting investors receive their dividend payments tax free, not both as is the case today) are slim, because the average lefty journalist and congresscritter thinks it would strictly benefit The Rich (tm).
Anyhow, human greed combined with the bubble-prone growth stock model caused the financial havoc of the past few years. Most of the putrid tech IPOs of the 1990's (literally half of which were dumped on the market by Goldman Sachs, run by Democrats like Sen. Corzine and ex-SecTreas Rubin) couldn't have made it as dividend-paying companies, public or private (and private makes a lot of sense when your capital expenses are small and you're just trying to retain techies), which in retrospect was a major Clue.
Every day I get literally dozens of offers.
Most of them offer lucrative business opportunities from the comfort of my own home. I can make up to $6000 per week, working just a few hours a day, for just a small investigative investment!
Other offers are seven-figure partnerships which often involve travel perks to exotic locations such as Nigeria.
With so many offers coming into my email inbox *without even looking for them*, times have never been better. How can folks say things are tough out there?
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".
... and there were many financial professionals who threw morals, guidelines and law books to the wind in order to fan the flames.
... but the professionals behind the financial information system operated in full knowledge of the fraud.
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
To sum up: The yokel doing the the day-trading I could chalk up to simple stupidity
[You have a stable society when some nut guns down a schoolyard and the law doesn't change.]