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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."
Look back at the innovative days of Silicon Valley and pick something, anything you can think of and think of what would happen if you were to try and perform the same thing again today. You could never do it, because overzealous IP has killed all American engineering innovation. Many products now spend a significant amount of their budget on patent attorneys and cross license costs. You simply cannot innovate in today's climate as things presently stand.
Some simple ideas that would help protect IP and turn the tide back for innovation:
A patent fee, every patent that is held by an organization (or it's parents organization) doubles in costs.
- Allows the small time inventory to register patents without undue cost while adding some measure of expense to patent warchest building.
A patent tax, every patent is taxed at a rate that makes large patent war-chests financially unfeasible.
- You can cripple IP trolls on this by increasing the tax for a patent that is not in active production.
Shortening the length of time that a patent is good for based on the type of patent.
- Decreasing a patent's shelf life to 5 years would probably do more to free up the IP logjams than any other thing.
Make RAND rates standardized for everyone and don't allow them to be offset. /reasonable/ rate.
- Everyone pays the same RAND rates and if your patent is essential than anyone can license it at a fixed and
End massive patent paydays like Apple's recent billion dollar court win.
- Reform the financial benefits for 'going nuclear' and seeking large court settlements for patent violations and make the penalties fixed.
There is no room for failure. Without failure, and the ability to take risks, you'll get a lot of me too ish. Silicon Valley thrived when it was cheap to fail, now that it nolonger is you need to look to other places. I'd expect something more radical outta Detroit (where the buildings are almost free) or Kansas City, with the Google Fiber, than the Valley.
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?
Silicon valley, and more about economic theory. Do free-markets drive the world in the right direction, or does the government? This, as in most things, seems to boil down to a compromise.
We need agile markets, able to open and close companies overnight, therefore allowing for innovation, failure and re-birth. BUT, we also need big, slow-moving government to keep those businesses from harvesting short-term profits and dumping losses on investors/governments.
The problems that we have today (a bit off topic here) are related to business being tied a bit too close to government. Why do we have the lowest congressional approval rating that I can remember? Because they all seem to be bought and sold by the same companies. In reality, though, they're not outright bought and sold, they're just trying to secure a sweet, sweet consulting deal after they retire from government. But I digress.
This article isn't about the hypocrisy in silicon valley in particular, and more about the hypocrisy in people lauding free-market capitalism.
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.
The flying car was your grandfather's future, and it now sounds weird to use it as a symbol for the future.
The flying car is a symbol for a future that never was.
Look where all this talking got us, baby.
Newton, Xerox Star, Next, Intel's iAXP432, Xanadu Project, the Windows 2001 Tablet, Japan's HD analog TV R&D project, that company that tried to make an online MS-Office competitor with Java applets, and many other "bold" ideas that were ahead of their time failed.
The market and technology has to be "just almost ready" for stuff to take off. If you are too early, then your configuration and vision are probably all wrong. It takes trial and error with consumers and users to tune products right. The first shot at something bold is usually just too quirky or too expensive.
Palm Pilot did Newton better than Newton, and smart devices improved up the ladder through Blackberry until they were ready for mainstream with iPhone having the right mixture of features and ease of use. (Sorry fans, but Newton sucked from a practicality angle.)
And the few times big gambles get wings, competitors usually make a better run at the idea and the payoff is not big enough to justify the up-front risk. VisiCalc, the first spreadsheet is just such an example. After about 3 years of strong sales, Lotus came along and did it better, faster, and cheaper (gambling on IBM PC instead of CPM), and VisiCalc went belly-up. (Software patents didn't really exist back then, which will be another problem with very new ideas.)
In investing, you usually don't want to take a big risk unless there is a big potential payoff. But history shows for big-leap projects, the risks are big but usually not the payoffs. Incremental innovation looks like a better mix of risk and reward to rational investors who study history.
Table-ized A.I.
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.
I don't think you're getting it. Sales and marketing are, of course, important aspect. But the thing they are saying is instead of selling new things, they are selling old things (sometimes with incremental improvements) in new ways.
But this problem is much larger really. Everything from music to movies and TV shows are doing this sort of thing. How many super hero movies? The new territory seems to be fairy tales. Why aren't they writing really original stuff?
Max Levchin, co-founder of Paypal, is right. Silicon Valley should instead focus on providing services that treat their customers like dirt and everyone hates, like Paypal.
More Twoson than Cupertino
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
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.
When you're talking about the stock market, yeah, it does simply 'evaporate like water'. Market value is a collective hallucination, not a checking account.
It's easy to say PayPal is low risk now. I bet it didn't seem low risk before it took off when loads of start ups were no doubt trying to do essentially the same thing and everyone assumed Visa et al would enter the market and wipe them all out.
It's like Microsoft with DOS. Sure in retrospect it seemed certain. Back in he day I be Gates was shitting himself that Gary Kildall might wake up and accept the $250K he was offered or IBM would decide to give the OS job to the legions of programmers they had on he payroll and probably not even doing anything that anyone would miss. Or that Tim Patterson might meet an IBMer in a bar and sell them QDOS for $5000.
In each case there were a lot of people trying to do the same thing. Some of them were in a lot better position to win than the person that did. It just that everyone but the winner screwed up in some way. Some way that wasn't even clear until later. Kildall might have done the deal with IBM if he knew the other options they had. Patterson would have ended up running the equivalent of Microsoft if he'd have known a few more people at IBM.
echo -e 'global _start\n _start:\n mov eax, 2\n int 80h\n jmp _start' > a.asm; nasm a.asm -f elf; ld a.o -o a;
Everything from music to movies and TV shows are doing this sort of thing. How many super hero movies? The new territory seems to be fairy tales
It's always been this way. Look in any decade since the 1930s, and the vast majority of movies are 'me-too' movies. For that matter, it's not a huge exaggeration to say that most pop music in the last 40 years is 'me-too' copying the Beatles. And the Beatles were just 'me-too' Tin Pan Alley players.
The problem is, something original is extremely rare. If you get a truly new good thing once in a decade, you're doing good.
"First they came for the slanderers and i said nothing."
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.