
Silicon Valley Abandons the Culture That Made It the Envy of the World - sxp
https://theatlantic.com/technology/archive/2020/01/why-silicon-valley-and-big-tech-dont-innovate-anymore/604969/
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Barrin92
Silicon Valley is simply maturing from a new emerging market into a more
traditional, but no less innovative one. As Schumpeter pointed out many
decades ago the idea that 'small is beautiful' is not really true.

The equilibrium for innovative ecosystems is not small-scale but rather
monopolistic competition, because complex production processes require scale
and knowledge that can only be managed by sufficiently large institutions. In
mature industries, the competition happens between monopolistic players who
for a while earn surplus profit through the collection of economic rent and
are then replaced through creative destruction by another player (think
Myspace and Facebook), rather than the bazaar economy that this article seems
to advocate in which profits are constantly burned away by competition, it is
surplus capital of monopolistic firms that enables innovation.

This also shows in productivity statistics, wages and so on, where large firms
simply win out. And as one data point, Apple is worth about as much as all
unicorns on the planet combined. People tend to overrate the importance and
size of startups for what I think are ideological reasons.

And also, in addition, it should be pointed out that the American government
played a significant role in enabling the 'old' silicon valley in the first
place. This role (also one which Schumpeter introduced) of the entrepreneurial
state seems to be forgotten on occasion. It wasn't just smart kids in garages
but also the defence department which contributed to the development of the SV
ecosystem.

~~~
RcouF1uZ4gsC
Completely agree with your take. People forget that Bell Labs and Xerox Parc
which were at the forefront of innovation were the result of cash rich
monopolies.

~~~
WalterBright
Xerox evolved out of Haloid, which struggled near bankruptcy for years to
build an impossible machine - the photocopier - one of the great disruptive
innovations.

------
lkrubner
As an antidote, I'd like to recommend Peter F. Drucker's 1985 book,
"Innovation and Entrepreneurship":

[https://www.amazon.com/Innovation-Entrepreneurship-Peter-
F-D...](https://www.amazon.com/Innovation-Entrepreneurship-Peter-F-
Drucker/dp/0060851139/)

Drucker was a critic of the idea that small firms are more innovative than
large firms. He provides a wealth of innovation about the styles of innovation
that large firms produce.

About this:

" _But there’s a more troubling possibility. Maybe something has changed about
the nature of innovation, at least in software._ "

When was this era? From the 1940s to the early 1980s, software development was
mostly done at big firms such as IBM and Hewlett Packard. The rise of the
personal computer allowed a wave of software firms, such as Microsoft and
Adobe, to get going, but even then, the costs of getting such a startup going
was much higher than now. The era of the really cheap software startup was
basically the era of the CRUD app moved to the Web, basically 1995 to 2015,
give or take a few years on either side. My point is, that era is more the
exception than the rule, given the history of the industry.

It seems melodramatic to claim that a specific culture was lost, though it is
absolutely true that the industry has matured and therefore the situation has
changed. We are unlikely to see any more startups come out of Silicon Valley
and become huge like Microsoft or Adobe or Google or Facebook.

~~~
Steltek
Exactly, before Google, FB, and Apple, there was IBM, HP, and MS.

IMO, what's hampering Silicon Valley innovation right now is the outrageous
cost of living. It's hard to take a leap when you have a million dollar
mortgage. Startups still happen of course but only with significant capital
backing. But I'd wager the pace has slowed significantly.

~~~
GrayTextIsTruth
>what's hampering Silicon Valley innovation right now is the outrageous cost
of living.

I wish a “remote hub” concept would become popular. Where you work remote but
need to be close enough to come in once a week or for big meetings. This would
allow people to move a little further away and would possibly allow areas
right outside the bay to become an extension of Silicon Valley.

~~~
foota
This would be trivial if we had more effective mass transit

~~~
lotsofpulp
That would require far more dense housing.

~~~
foota
In general I disagree with this, if we spent a fraction of what we do on car
transit on mass transit we'd be able to support mass transit basically
anywhere, except large cities with ridiculous spread, like Phoenix.

In particular here though I was just talking about better commuter trains and
(the existence of) HSR, neither of which is really dependent on density.

~~~
lotsofpulp
Who would support mass transit? If everyone has the option of low density
housing with the luxury of their own cars, they're going to take that option
instead of mass transit. The proof is everywhere.

~~~
foota
Everyone that lives in the downtown of a city?

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zuhayeer
The world has always been this way, where it seems like the giants will live
forever. And that smaller companies don't stand a chance to dethrone any of
these incumbents. But history has always proven that wrong. Just look at the
landscape now, it's already so different than just 5 years ago. These so
called large companies haven't even been alive for most of our lifetimes.

> That means the only way their investors will get their money out will be via
> an acquisition by one of the large companies. Google, Facebook, and their
> ilk “have become enormous by swallowing small companies”

This point about acquisitions always held true. Most companies will get their
exit through an acquisition. There will have been many acquisition
conversations had at any company that has IPO-ed. The media has us well poised
to believe that a company must IPO to succeed, when most startup successes are
buried in the boring stories of acquisitions. Very occasionally does a company
breakthrough and IPO.

And if anything, this shows that small is still incredibly powerful – if they
feel the need to acquire you instead of mobilizing their large numbers of
employees, then, whether they admit it or not, they definitely believe in the
value of small too.

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leoh
This is a highly political piece. It suggests that smaller companies are not
effective and is wielding that idea to suggest that Facebook should be broken
up. Facebook is naturally going to do whatever they can to hold on and given
the way their business functions, they need to be large. Microsoft did the
same thing in the 90s.

Even if companies should be smaller for greater effect, it's possible that
things have shifted due to the natural growth curve of technology, as opposed
to there being a deliberate cultural shift. For example, Ford was once a small
company, disrupted the world, grew to be its size, and in general (barring
companies like Tesla that are also competing with relatively radical new
technologies and will grow to be a large size barring enhanced robotics
[another emerging technology]) it is necessary for companies to be large to
compete. In other words, it seems to me there its always David versus Goliath;
David is the old, Goliath is the new. Until there are new technologies, we are
looking at Goliaths.

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Merrill
It is just a matter of the maturity of the industry. Beginning in the late
1890s there were about 3000 automobile companies in the US. After a few
decades there were the big three and a few also rans. The IT industry is
undergoing a similar consolidation as it matures.

~~~
buzzkillington
The 'big three' were eaten alive by cars from abroad after a few decades of
stagnation and were only saved because we paid for their bailouts. Time and
time again.

Break up Facebook and Google, use the government to keep the market efficient
by not allowing any market distorting entities from forming.

~~~
adventured
> The 'big three' were eaten alive by cars from abroad

GM wasn't eaten alive by foreign competition, nor was Ford. GM was eaten alive
by extraordinarily bad financial decisions by management, not due to a
collapse of their business. The bankruptcy put them back to profitability for
a reason: they weren't in fact eaten alive. If the business had been destroyed
by competition, they would neither exist nor have produced $30 billion in
operating income the prior four years. Why did the bankruptcy get them back to
sound profitability? Because they were able to crawl out from under layers of
bad financial decisions from the past, not due to competition (the competition
didn't end with the bankruptcy).

GM + Ford = $300 billion in sales.

That's what eaten alive looks like? Two of the largest automakers on the
planet.

~~~
buzzkillington
I'm talking about the 70s.

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TinyBig
I think the economic incentives, rather than the culture, is what has changed
over the past decade or so. As the article mentions - companies stay private
and the probability of IPO is so low these days that working for a non-FAANG
company is effectively return-free risk. Combine this with a high-and-rising
cost of living and rising college debt and I would guess that fewer people
today have the means to strike out on their own. Perhaps this will reverse
should ZIRP end someday.

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jstrieb
> Quantitative research suggests that big companies do different kinds of R&D
> than their more modest counterparts. Instead of coming up with new products,
> they come up with process improvements. "If the nature of innovation is
> distorted toward selling to an incumbent, you're going to get more feature-
> driven innovation rather than systemic disruption," ...

I can anecdotally confirm this. I spent the summer in 2018 doing research at
Carnegie Mellon's Human-Computer Interaction Institute. While there, I
attended a presentation by the director of the Future Interfaces Group[0],
Chris Harrison. He described some _incredibly_ cool technology his group had
developed over many years (for example, ViBand in 2014[1]).

At the end of his presentation I asked: if this technology has existed for
years, with accessible implementations available from researchers, why isn't
it in consumer products yet? His exasperated response echoed the quote above
-- big companies like the safety of the status quo, and don't need to innovate
if what they have is working well-enough. In other words, they are extremely
risk-averse when it comes to revolutionary technology.

More recently, I had the pleasure of meeting Dr. O'Mara at a presentation
about her book. Based on her informative book talk, and a skim of the book, I
can highly recommend it.

[0]: [http://www.figlab.com/about-us](http://www.figlab.com/about-us)

[1]:
[https://www.youtube.com/watch?v=Poi0MeASmuY](https://www.youtube.com/watch?v=Poi0MeASmuY)

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DayDollar
I recently pitched a idea to my boss, and you know what- it was not even
considered. The idea was simple. Drones around the outside of a house will be
numerous and ubiqitous. Cleaning windows, painting, repairing, cleaning roofs,
solarpanels, replacing cameras and sensors.. etc.

These drones, will then discover that infrastructure (rails, anchor points)
for these drones is needed- on each house, and that even some overlap for
drones exist- aka, one drone, several tools is the most wise approach. These
drones need energy, water and internet.

To be the first to define a standard for such a outside maintenance drone, and
convince house building companys to roll it out, together with you, seems like
a rather conservative bet.

This bet was openly laughed about in my presence in my company. The same
laugh, people would have had about the suggestion of a google, a amazon, a
anything in my country, ten years ago.

Nobody laughs about that in the valley. They know how quick things can change
and scale.

~~~
matchbok
Maybe because that's a bad idea.

Unpopular != future Amazon. Sorry.

~~~
DayDollar
To define a electric standard, before a society is electrified and set the
wheels in motion for others to adhere to it - is a bad idea?

It always needs to be a Edison vs Tesla war, before things are settled?

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jedberg
> Apple, a start-up at the time, would famously popularize PCs instead.

I have a hard time accepting the conclusions of this article when this one
line is so inaccurate. It was IBM, a _very_ old company even in the 1970s,
that popularized PCs. Apple was barely a blip.

~~~
Vomzor
IBM didn’t take the personal computer seriously until they saw the succes of
Apple and other manufacturers.

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jammygit
The best part of startup culture is the idea of being able to create something
that can grow big while starting as a small player. The rest is just marketing
and envy over ceo bonuses.

My town doesn’t really have that culture, but we have a decent small business
culture at least.

