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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.
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.
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
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.
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.
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.
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.
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
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.
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.