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Places Where the Silicon Valley Bubble Could Pop
waderoush writes: "If Silicon Valley is in a bubble — which it is – how will it finally burst? Where is the bubble's membrane being stretched so thin that it's in danger of tearing open and letting the real world rush in? This commentary from Xconomy picks real places around the San Francisco Bay Area embodying tensions, imbalances, injustices, or dangers that could escalate into a show-stopping crisis for the technology economy. One is Bank of America's former headquarters in the heart of San Francisco's Financial District; another is an elementary school in Oakland that happens to sit on the Hayward Fault. 'If we can identify the fractures that threaten to destroy the innovation machine, we might be able to patch them up and keep the system going for a while longer — and maybe even point it in a smarter direction,' the piece argues."
It was disjointed and didn't really seem to have any sort of point or theme. Now I can't get that time back. :(
No, no, you're not thinking; you're just being logical. --Niels Bohr
It is WAY over valued.
If you are so much smarter than the market, then you should be able use your superior intellect to make a fortune by taking a perfectly timed and highly leveraged short position. After you cash out, come back and post a picture of your yacht.
This is a complete waste of time. Don't even bother to read it.
It's a random list of stuff that's not quite right or might go wrong... nothing to do with Silicon Valley, really.
I don't read your sig. Why are you reading mine?
Honestly, I don't even take these kind of posts seriously anymore. At least the tech industry in general puts out products(as meaningless as some of them are). How about the real estate market, where houses are overvalued tremendously in most cities and real estate agents are making a living from something that can be done more efficiently by yourself online?
How about the stock market in general, where it's basically reduced to trying to make money from micro trades instead of long term investment? How about when that bubble pops?
How about any number of other sections of our economy(the over-regulated medical industry, the government protected entertainment industry, etc) that are propped up by things that are seemingly fragile and unstable?
Don't get me wrong, I'm worried about the tech industry(and silicon valley at it's heart), but not nearly as much as the many sections of our economy which are less productive.
It is WAY over valued.
If you are so much smarter than the market, then you should be able use your superior intellect to make a fortune by taking a perfectly timed and highly leveraged short position. After you cash out, come back and post a picture of your yacht.
Your conceptualization is turned around the wrong way.
It doesn't take a smart person to see Facebook is overvalued. It takes a lot of really dumb investors to overvalue social media, hence the bubble.
The Romans as a civilization may be gone, but Italians and the beautiful city or Rome are still here. I was there just a few weeks ago.
Remember London? That city burned to the ground, I think, 3 times in the middle ages? I was there a week before I went to Rome and yeah, still there.
Those were HUGE events in history that, by all means, should have destroyed them, but they carried on. I am sure we will be saying that about Detroit in a few decades.
Markets can remain irrational longer than you can remain solvent
- Keynes
I think a lot of those games should be banned. Especially the ones that force you to pay in order to not take YEARS to advance in the game.
This is /. most probably didn't read it before they came here to rant and rave in their comment
"That's right...I said it."
In other news, solar energy will never be viable as long as innovation bubble engines continue to run on coal and oil.
The author states that Silicon Valley is a bubble. What does he mean by that? Does he mean that real estate prices in Silicon Valley are over-valued? Does he mean that the tech companies in Silicon Valley are over-valued? Does he mean that the advantages for a tech company, or a technology professional to be located in Silicon Valley are over-valued? Or does he mean something else?
I did not read the article because the summary made me think that the author never defined what he meant by that statement. Without that meaning being defined there is no way to evaluate the soundness of his arguments about it (well, actually, there is. One concludes that the reason it is left poorly defined is to hide how unsound his arguments are).
The truth is that all men having power ought to be mistrusted. James Madison
I mean, I've been seeing a lot of columns/op-eds/blogs lately about how California and/or SF & Silicon Valley sucks. This article is tame, but it hits on every single political talking point -- much like a back-handed compliment. When you have to bring up employer-sponsored shuttle buses (remember vanpools?) and a hypothetical future earthquake, you've got nothing.
California just raised $18 billion surplus in tax revenue from a booming economy and from raising taxes -- and they're arguing about how much debt to pay off. OTOH Kansas cut taxes and is getting close to $500 million in the hole with high unemployment -- and they're arguing about how much more taxes to cut. Missouri's governor just vetoed a plan similar to Kansas' basically saying KS is crazy -- now the legislature wants to impeach him.
Unemployment is down nationwide and 288,000 jobs were gained this month. If your state is still in a recession, it's your own state's leaders.
I guess there's a narrative that people have to tell themselves while watching success from the viewpoint of the bottom of the pit they dug themselves.
It's also campaign season.
is complete lack of developers. When I, as a high school drop-out, can get a job in less than a week after I decide to start looking, there just aren't enough developers. I changed jobs 19 times in the 15 years I lived in San Mateo, and it was never hard to find a job. Despite jumping around a lot and having some terrible recommendations, it's still easy to find a job there if you can spell Java. That is killing innovation, and I don't think SV will survive the drought. I since moved to Seattle, and while there are almost no good devs around there, the job market is much smaller so the problem isn't nearly as severe as SV. My last job here took me two days to get an interview and one day to get the offer after I started looking.
The article had no thesis, and really was just mindless rambling.
Why is there no similar rant about New York, Malibu, or many other very expensive places? New york may be more expensive yet.
This only works with rational actors. Problem is 100 billion flies simply CANT BE WRONG!!1 So eat that shit up.
Who logs in to gdm? Not I, said the duck.
Me too. I should have stopped at the "which it is".
It's a total jingoistic piece that's more or less written as a rant about how much nicer things used to be, before the (presumed) current tech bubble.
Why do we care if large "funny money" transactions are happening? It's not like an all stock purchase of supposedly valueless companies by a supposedly valueless company matters to anyone, in an economic sense.
I have no idea why he brings up BofA, which has little to do with tech funding, why he brings up "Google Busses" then references a much better article that disproves his own thesis, ageism (except at HP, IBM, and Oracle), why anyone in SV should care about Oakland falling into a huge crack in the Earth, or why the Market street "gentrification" (which was disproven by the article he brought up during his discussion of "Google Busses").
But I guess some Wookies *do* want to live on Endor... or it would make no sense, right?
"Problem is 100 billion flies simply CANT BE WRONG!!1 So eat that shit up."
100 billion flies are NOT wrong. It is the one thinking that what's good for a fly is good for people the one being wrong.
Assuming that there is a bubble, it will burst and take the dumbass fools who think the dot-com glory days are about to make a comeback.
Nothing of true value will be lost. Stupid people and money will be parted.
Assuming that there is a bubble in the first place.
Which I am told there is, but that might be BS.
Slashdot is like that.
Beta still sucks.
Left MS Windows for Linux Mint and never looked back!
Vote for Bernie in 2016!
So you are basically saying that Silicon Valley will still exist and humans will still live there, but it will having nothing to do with its former glory? I think that is pretty much what the article said as well.
-- All that is necessary for the triumph of evil is that good men do nothing. -- Edmund Burke
Neither 1 Infinite Loop nor 1600 Amphitheatre Parkway nor 1 Hacker Way were on the list.
He's still dead. Or are you looking for the Humanities at MIT article from yesterday?
If people still remember the current era of Silicon Valley over 3000 years from now, it would be a miracle. If people care about it so much they restore some of the monuments, it would be a greater miracle.
Yes, the statue of Ozymandias -- Ramses II -- that Shelley referred to has been restored and re-erected. Not bad for a king dead for millenia. And that's not the only surviving statue.
simply means a bigger mess when it happens.
California has had surpluses before, it does not have a revenue problem. What California has is a spending problem. When surpluses occur the legislature usually goes wild with spending, and some of the governors join in. They act as if the current peak in the economic cycle is the new normal and spend accordingly.
Gov Gray Davis saw revenue increase by about 10% but he and the legislature increased spending by about 30%. Things were so out of control Davis was recalled and Schwarzenegger was voted in.
So seeing a budget surplus in California may simply be a precursor to the next budget disaster.
If you want to pick a Bank of America symbol, go for 1455 Market, not 555 California! Nothing "important" was in 555; 1455 was carefully guarded by 1 South Van Ness which actually had a BofA sign, but no real operations.
1455 is now the home of Square, among others, and the abandoned buildings adjacent were rebuilt as domiciles for the tech elite... That building is the quintessential icon of the Silicon Valley bubble burst (in SF), helipad and all!
(OT 555is Ha Ha Ha in Thai...)
The really puzzling bits are where he talks about how it'd be a shame if the bubble popped because of all the cool innovative stuff those guys are working on... that's news to me, I thought it was all mobile-phone versions of sweatsox.com.
"Our knew app automatically counts sidewalk cracks, and allows you to post the total to your facebook page!"
Remember, the idea doesn't matter, it's only the execution that counts!
I don't know if I'd call it a tech bubble, it's more of a froth- lots of little bubbles. During the original tech bubble that started in the late '90s, pretty much everything was massively overvalued, and pretty much every shitty startup would go public and see its stock rocket up, even (especially) if they didn't make a profit and didn't have a business plan. It was widespread financial insanity, collective economic madness. The average stock on the S&P 500 traded at 40 times earnings, versus about 18.8 today. In other words, the average company costs about twice as much (relative to its earning potential) then as now.
Today, there are definitely some overvalued tech stocks. Facebook has a P/E of 76, Netflix has a P/E of 128, Amazon has a P/E of 428. Which means that at current earnings levels, a dollar invested in Facebook will pay off in 76 years, that same dollar invested in Netflix will pay off in 128 years, and Amazon stock will pay for itself in a little over four centuries. You're speculating (i.e. gambling) if you buy any of those companies. But other tech stocks are more reasonably priced. Google has a P/E of 28, Microsoft's P/E ratio is 15, Apple's is only 14. We are seeing bubble-like behavior in certain companies and in certain industries (social media, for example) but it's going a little far to say that the entire industry is in a bubble.
Or tech companies can just start or move to somewhere else. This isn't the 19th or early 20th century where everyone in one industry has to be close to one another. Even the auto industry is spread out all over the World now. And with something like software, there is absolutely no reason to be in SV - I can't think of any other industry that is more portable than software.
And don't tell me that nonsense of "it's where the skilled people are".
Well there is a great debating technique; just call their rebuttal nonsense before they even say it. Although it works much better when you actually give reasons why the predominant theory is nonsense instead of just throwing it out there without backing it up.
While people may want to believe that technology has progressed far enough that it doesn't matter where you live, reality does not seem to back that up. Humans still seem to be far more social. I know I work better with the coworkers that come to the same office than I do with our remote workers; mostly because I have built friendships with them. I have good rapport with many remote coworkers, but it is not the same.
There are many tangible examples of the benefits of living close to coworkers. Topics we talk about during lunch or while playing golf or poker benefit not only our current job but improve job prospects in the future. I have networked at a coworker's barbeque, at fundraising events, at house warming parties, etc. While it is hard to track just how much of a benefit these interactions are, even if they rarely yield million dollar contracts they are probably worth the extra cost of living in or very near a major city.
Employers and employees both gain employment opportunities by being near a critical mass of employees. More employers means you have more "job security" because you can easily find new work. More employees means you can find better employees or more specialized employees if you need to, or ramp up/down for projects easily without needing to hire consulting firms at $200+ per hour. Even in the suburbs it can be very hard to find talent.
On top of that, most affluent people simply want to live near large cities. The larger the city, the more culture/food/entertainment is available. I grew up in a farm town, and I cannot express just how much better life is living in the suburbs. The food is much better, the schools are immeasurably better, the options for what to do on a Friday night don't include "hang out in the Walmart parking lot", etc.
Like it or not, having a city densely population with talented workers is still a useful thing.
-- All that is necessary for the triumph of evil is that good men do nothing. -- Edmund Burke
Markets can remain irrational longer than you can remain solvent
- Keynes
Eventually, the bubble pops, the collective delusion ends, and gravity and other natural laws reassert themselves, the whole thing comes crashing down. The key word being "eventually". Bubbles are self-sustaining, there's a feedback loop. People buy in because the price goes up, as more people buy in, the price goes up more, and so on. Sober, rational people look at fools making money and eventually decide they've made a mistake and start jumping in even as the whole thing starts racing towards disaster and becoming more unstable, so the bubble converts more people over time. The media eventually start calling it a bubble, but lots of people stay in the game even though they know it's unsustainable because they think they can time the market. They know their luck can't last, but they money is too good so they stay in. Like a gambling addict at a casino, they tell themselves they'll just play one more hand...
The result of all these things is that bubbles take years to play out. If you look on Google Trends you'll see that "Housing Bubble" becomes popular in 2005, a full three years before the financial crisis and the collapse of the housing market. People realized we were in a housing bubble and yet the whole thing kept going, becoming more and more delusional, until it finally exploded. The same thing happened with the Internet Bubble- it popped in 2000, but in 1999 there was already a book called "The Internet Bubble."
Selling short into a bubble is a bit like being the one sane guy at a cult compound trying to tell everyone that no, the magical silver spaceships are not coming to take you to heaven when the world ends. Yes, eventually the whole thing will burn to the ground and the survivors will realize that the Shining Leader was just a creepy perv with serious mental health issues. But it's anybody's guess when that will happen.
But there are plenty of large cities out there that arent silicon valley that companies can move to that are much more affordable, I think thats more his point. I definitely agree you cant telecommute everyone, especially in engineering that just doesnt work at all. But there is absolutely no reason for all these companies to have to be within the same 60mi radius of each other anymore when there are plenty of places out there that offer all the same amenities with a cost of living thats half as much.
Thats why I never interview with offers from places in the valley. They would have to double my salary just to maintain the same standard of living, let alone add on more on top of it to even make it enticing to move. So, from the example of Denver where I am, we have plenty of tech companies around including google, oracle, couple of storage companies, tons of startups in boulder, and a large amount of engineering all over the area that all these companies pull from. Finding companies to work for here is not hard at all (we have people leaving ours at a fairly high rate now but thats more a reflection on my current employer). So with housing prices here being less than half of silicon valley but with all the financial benefits, having a large city nearby, and everything that the state itself offers, Im not sure why more companies dont move here or all the cities like here in other states.
But not in the way the website intended. When I navigate to the link using Chrome with Ubuntu 12.04 a popup appears and stays on the screen making it had to read the text of the article. I might save the page to see if I can defeat the advertising, and that is why Silicon Valley Tech is a bursting bubble. The greed-driven intrusions companies are creating on their web pages is driving people away. There is only so bang for the buck that can be squeezed out of the real estate of a web page without getting disruptive and either web designers don't really know how to handle all the browsers correctly or they don't care and want the advertisers to interfere with the user's experience. I wanted to read what the writer had to say since I live in Silicon Valley, and I have become a critic of the economics of business on the web, especially social media, that seems to be the latest fad in Silicon Valley. Having been through the dot gone bust of 2000 I can tell you that what turns on investors and what drives the economics of Silicon Valley may have little to do with reality, at least of view of it longer than six months.
Do you really believe that stock prices and investment in today's economy is really connected to anything of value? I have my doubts. I also doubt that monitory policy is real important, it is a right-wing red herring used to cover up the speculation going on by international investment that is based on HFT and little else. The bubble that will burst is a global economic one, and we will get more guys like Putin as a result. We have been down this road before, like 75 years ago, The causes are the same, an unfair and imbalanced economic system driven by the interests of an oligarchy, a capitalist oligarchy, and the result is predictable enough, violence on a global scale as sociopaths like Putin, like Hitler, take, advantage of discontent in the have not's and disrupt wealth and investment, the only recourse they have against selfishness. We are all insane; having made the same grand mistake over and over. The only trouble is that now we are capable of destroying all of humanity in each cycle until we learn that economics is lethal and that ecology is what we need. We should eat the rich.
I had trouble with a popup when I first loaded the linked page, but going back to it the popup wasn't there and I got to read the article, and I agree with it mostly. I have said many of the same things it does in my posts here. I live in SV and am pretty critical of what it has become especially after 2000. I am critical of investment, the amount of capital companies with dubious business plans have been able to raise. That and the banking situation and the face that the problems that caused the Bubble of 2008 haven't really been addressed either by government or investors, and the result is an imbalanced and unfair economy. That is true not only in SV but worldwide and it has caused continuing unrest in the rest of the world and sows dragon's teeth for war and disruption.
I would say that the problems in the Bay Area with housing and the unrest that is could cause shows that investors do not care very much about side-effects and especially the unintended consequences of their decisions. A worse possibility is that investors, people who buy public equities, venture capitalists, and private investors are all elitists, perhaps emboldended by the way they have been able to rig finance and possibly by having Conservative political views, and simply don't care who their actions may hurt.
Greed and denying inclusiveness to protect advantage is the norm in history, it is nothing new, but as many notorious cases of the rich and powerful being brought to heel, lately being Donald Sterling, that unintended consequences are being brought to bear sooner than most of the powerful expect, and often their efforts to use public relations to obscure their transgressions are not enough; the sole benefit of social media, which, though, depends on the issue being very easy to grasp. That is why the uproar over Google Bus is so important and why people who would call themselves innocents become targets because of association. It is the speeding up of effects that matters and why people who might have not have gained the limelight might now get exposed to it and be totally unaware of why. People are beginning to question whether having a super-intelligent elite is really a benefit to most who rub shoulders with them. They will question weather the companies in SV with the huge market caps were good investments when the stock tanks in the next burst, and hopefully it will dawn on people that investors aren't all that smart and why did we ever set our priorities in society to make it super easy for them. They may not rregret the exodus of 200,000 jobs from Silicon Valley. At least the housing market wil return to some kind of sanity.
Don't blame Al Gore. He is only an effect, a hanger-on. The guys you should be looking at are harder to find and examine. Might I suggest that the guys you should be looking at are the economists in the Stanford University School or Economics and School of Business who proposed in about 2004 how to monetize web-site click counts into a market and began to persuade investors to spend good money after bad in companies like Facebook and Google. Before that Silicon Valley might have had a legitimate claim to fame for supplying mil-spec hardware, although it could be argued that Social Media is but Signals and Code technology originally developed for radars applied to streams of words supplied by people.
I live in Silicon Valley. Yesterday, the news media reported with some hoopla that BART has bored a nice tunnel under Lake Elizabeth in Fremont for its extension to Warm Springs and Silicon Valley. Nice, now tech workers can live in the East Bay and get to work in San Jose faster. What they didn't tell you, and I should know because I have my degrees in Geology and studied the geology of the Bay Area, is that Lake Elizabeth is probably a sag pond associated with if not in the Hayward Fault. The OP link to the article which correctly pointed out that an expected M = 6.5 to 7.5 quake on the Hayward Fault in the East Bay would have much more effect than even the Loma Prieta even on the San Andreas Fault in 1989, because the epicenter could be very close to major population density. So a tunnel in soft sediment very near or across a active fault line that could have six feet of strike slip could result in disruption of the commute line, if not risk for passengers. I was quite shocked that this is where BART chose to dig a tunnel and at the potential risk. Judging by BART's recent history, I can say that I have doubts about the quality of its management, and I guess that is a general problem with business and government in a financialized world. Too many people with business backgrounds that deny scientific findings.
It's in the nature of materials or systems under stress that they'll break somewhere else, if you apply a patch to one identified weak point.
Birds are not dinosaur descendants;birds are dinosaurs, for all useful meanings of "birds", "are" and "dinosaurs"
The cities with tech presence in other states (from SF Bay and Denver) generally include LA, Austin, Pittsburgh, Seattle, and some I know less about (Chicago? DC? Raleigh? Massachusetts?).
Few of those have preferential weather and enough tech jobs that to allow failed startup employee reabsorbtion like SF &Denver. The result is huge SF Bay growth and decent Denver growth.
I tried Austin for a few years and yeah you get a nice house, but you'd better enjoy it because you won't step outside with the heat, crazy bugs, worst allergens anywhere (Mountain Cedar affects everyone). Seattle really is depressingly gloomy most of the year. Most developers want their weekends to include the option for a nerd to go outside comfortably.
Science & open-source build trust from peer review. Learn systems you can trust.
Even Silicon Valley has had some in past. Teh dot.com/9-11 downturn vacated lots of SoMA property. A dozen years before that th post cold-war demilitarization and dud products like A.I. and pen-OS slowed the market. If you could time the next downturn you'd be rich. All we can say is it will happen again.
Thats why I never interview with offers from places in the valley. They would have to double my salary just to maintain the same standard of living, let alone add on more on top of it to even make it enticing to move.
There. You just answered why businesses show up where they are. It's because most people decide where they want to live first, move there, and then look for a job. Deal is that the people working in tech companies aren't living in SF because that's where the jobs are, but the jobs are there because that's where the people are. Lots of colleges, lots of night life, lots of things that attract 20 somethings looking for jobs. In the first .com boom, Nashville tried very hard to get those tech companies to locate there. They were somewhat successful, but what was much harder was getting the people that those companies needed for employees to move to Nashville. Some people will prefer it, like how you prefer Denver, but many others, the majority, prefer moving to places like SF or Seattle because it offers them the standard of living they desire.