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The Hypocrisy In Silicon Valley's Big Talk On Innovation
glowend writes "James Temple writes in the San Francisco Chronicle: 'In the fall of 2011, Max Levchin took the stage at a TechCrunch conference to lament the sad state of U.S. innovation. "Technology innovation in this country is somewhere between dire straits and dead," said the PayPal co-founder, later adding: "The solution is actually very simple: You have to aim almost ridiculously high." But for all the funding announcements, product launches, media attention and wealth creation, most of Silicon Valley doesn't concern itself with aiming "almost ridiculously high." It concerns itself primarily with getting people to click on ads or buy slightly better gadgets than the ones they got last year.' I feel like this may be true as more money and MBA types invade the Silicon Valley. There's a lot of 'me-too' startups with some of the best and brightest figuring out ways to sell me stuff rather the working on flying cars."
Computers have been getting "slightly better than last year" for a few decades now.
Because of that, I'm now running a Quad i7 with a Geforce and a couple terabytes of SSD+HDD rather than a IBM PC with a monochrome adapter and two floppies.
I'm not complaining.
How can I believe you when you tell me what I don't want to hear?
And you have hit the nail on the head here. The problem is crony capitalism that is where we are heading too (and in many places already are). The excessive protection to big business IP and interests is what hinders any kind of innovation, and, as time progresses, laws keep being enacted to give them more and more power. There is no more need to innovate when you can control the markets by force of law. You can just slow crawl and make lots of cash.
The money did not evaporate like water, so who got the $$$ that millions of american lost by "investing" in Silicon Valley companies?
But there is another issue here, one that is hardly ever mentioned and that's the coining of the term "innovation." This word, which was hardly used at all until two or three years ago, feels to me like a propaganda campaign and a successful one at that, dominating discussion in the computer industry. I think Microsoft did this intentionally, for they are the ones who seem to continually use the word. But what does it mean? And how is it different from what we might have said before? I think the word they are replacing is "invention." Bill Shockley invented the transistor, Gordon Moore and Bob Noyce invented the integrated circuit, Ted Hof invented the microprocessor. Of course others claimed to have done those same three things, but the goal was always invention. Only now we innovate, which is deliberately vague but seems to stop somewhere short of invention. Innovators have wiggle room. They can steal ideas, for example, and pawn them off as their own. That's the intersection of innovation and sharp business.
This needs to be +5, Awesome. It's exactly right.
Flying cars are DOA until we have self driving cars. On the way home last week, I saw a 5 car pile up. Nose to tail, every one. How did that happen? Either some moron managed to plow into the last car in a row hard enough to drive them all together (been there, done that as one of the hit cars, not the moron) or a chain of morons was all following so closely they couldn't stop as the first moron plowed into stopped cars.
These are the people the "flying car" crowd want flying. I don't even want these people driving, let alone driving over my head at 150 mph or more. These people can have flying cars when we have self-driving flying cars, and never before or the carnage will be obscene.
The problem is that everyone now thinks that all technology is IT-related. IT has become the ultimate Groupthink. Everyone just wants to do the same old dotcom crap. And dotcoms have now become to IT what plastic dogshit became to manufacturing. IT has sucked away bright minds from every other field. Nobody wants to do anything difficult and risky anymore, because they're more comfortable settling into the same old IT slog.
going from say $10 billion market cap to $226 billion does not mean someone invested that money into the company. it just means people bid up the price of the shares based on beliefs of the company's future earnings and ability to pay dividends. chances are only a small percentage of shares held actually changed hands.
same thing with the fall in valuation. people dump their shares at lower and lower prices and the market cap goes down. not like people lose real money
It's rare to see someone post something so perfectly opposite of the truth.
Herbert Hoover spent over $3 billion via the Reconstruction Finance Corporation to bail out Wall Street cronies, instead of letting them go bankrupt as Warren Harding did in 1920. That's why the 1930s depression did not end until a significant fraction of Europe's population was murdered and their industrial production destroyed while the 1920 depression only lasted 18 months.
Unsurprisingly, Herbert Hoover was the Treasury Secretary in 1920 who argued for bailouts at the time but was ignored. When he was in charge and able to implement exactly what he advocated a decade before the Great Depression was the result.
Maybe that person said "this is crazy, I gotta get out", or maybe they rode the tide all the way up to $226 billion and said "I want to buy a house with my proceeds, gotta sell". or they noticed that rapid gains in the tech sector had left their asset allocation unbalanced so they said "Gotta rebalance--sell half the tech and buy some other sectors and a few bonds"
The value of the company evaporated, but the money was already gone. The people who kept their money aren't that different from the people who were left holding the stock when it fell...it's just what happens when you toy with a bubble.
Bottles.
What it really boils down to is having enough cash flow to freely innovate.
So yes, it means Joe the Plumber being able to afford cheap housing and life to be cheap enough for him to take a few years off 'regular' work to pursue his dream. Let's not discount this. People like Thomas Edison basically pursued this model. He worked pretty regular clerk like jobs to then work on his inventions in his off time.
At the corporate level, it means having stable cash-flow.
Microsoft Research for example is able to do all kinds of wonky things basically because Microsoft has a big STABLE cash cow to fund regular operations.
Google is able to throw money at all kinds of wonkey things like self-driving cars because it has very STABLE cash-flow with the ad business.
If you see a big company doing innovative things, look to find the stable cash-cow to fund it.
Back in the days, ATT used to do a lot of good research. Wait for it... the big STABLE cash-flow was a monopoly on the telecom sector. Government splits up ATT and kills the monopoly... and well Bell labs/ATT basically died and hasn't done anything.
I'm much more in favor of so called monopolies as long as they are well regulated then most of my engineering people. This is not to say I support the model... just that, I don't see it as being that bad.
Or at least, it is much better than the current model where venture capitalists funneled by cheap debt start random companies, hope it gains enough attention, then goes IPO, and no one sees any long term vision to being a researcher or engineer.
The money was given to previous stockowners who sold their shares. If AOL IPOs at $10, gets sold to person A for $20, sold to person B for $40, sold to person C for $75, and sold to person D for $100, then the stock crashes to $10, the $90 person D lost was distributed as:
$25 to person C
$35 to person B
$20 to person A
$10 to person AOL
Note that the company is not the beneficiary of its own high stock price (unless it held onto and decides to sell additional stock at a later date). The capital AOL received for its IPO was (number of IPO shares sold) * (stock price at IPO). $10 in the above example even though its stock peaked at $100. Also, don't make the mistake of thinking from the above example that the economy is zero-sum. It's not. But increases in the valuation of stock have to be linked to real increases in productivity for everyone to get "richer". If AOL had introduced real long-term productivity gains to the economy, their stock wouldn't have have crashed, and person D would still be holding onto $100 of real value instead of $10.
Furthermore, money is a representation of value/productivity. In fiat monetary systems like ours, it's created out of thin air to try to keep its value proportional to the size of the economy. If you do this right, the price of goods stays relatively constant (though you want a small amount of inflation to encourage people to use money to try to improve their productivity, instead of hiding it under a mattress waiting for its value to go up). If you do it wrong and make too much money, or a bunch of money is made and its value evaporates due to an economic bubble popping, the economy normalizes for this by increasing the price of goods (the money becomes worth less because there's more of it per unit of productivity than there used to be, though weak economic growth replacing some of the lost valuation can also help the normalization). This process of normalization is what causes a recession (slowdown in velocity of money).
This is the same reason why simply increasing the minimum wage to make it a living wage doesn't work. The value of the work done by minimum wage workers - the productivity their jobs add to the economy - has to be sufficient to live off of before it can be paid a living wage. If its not, then raising the minimum wage doesn't magically make it possible to make a living doing those jobs. It simply eliminates those jobs from the market since the employer would be paying the worker more than the value they get for the job being done.