
Peter Thiel: Silicon Valley’s monopoly on big growth tech companies is over - champagnepapi
https://www.cnbc.com/2017/10/26/peter-thiel-silicon-valleys-monopoly-on-tech-companies-is-over.html
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adrianratnapala
No idea if Mr. Thiel is right in this decade, but long term silicon valley has
lost its main advantage: silicon.

The physical business of building computer parts, especially chips, involves a
lot of hard science and deep magic and requires a kind of priesthood steeped
in that magic. SV's original success was built on this -- it got rich because
it is where the silicon priests lived. But now things have evolved so the it
is the Chinese who know how to build the computers and (sometimes) the
Californians program them.

Except writing apps is not really deep magic, and is something that can be
done anywhere. So SVs advantages move to ever more nebulous things like
networking and mentorship -- which are also human universals that happen
everywhere.

~~~
leggomylibro
It's a shame that this happened, but you can see how it did.

Those chips were built on the fervor of people imagining what we could someday
_do_ with them. They could create a connected world, solve and create so many
problems on a global scale...it's not super surprising that their successors
went on to do those things.

What is surprising, and shameful, is how investors reacted, buying into the
mania hook line and sinker. There cannot be a Bell Labs or Fairchild Semi in
silicon valley today, because they could not promise 10,000,000% user growth
and a massive acquisition in N years.

It seems like the market equivalent of snorting pixie sticks instead of eating
a balanced meal, but _I 'm_ not the person with billions of dollars to swing
around.

~~~
mi100hael
_> There cannot be a Bell Labs or Fairchild Semi in silicon valley today,
because they could not promise 10,000,000% user growth and a massive
acquisition in N years._

Sure there can, they just can't have VC as a part of their business plan.

Thankfully, more and more startups are realizing that VC is not their only
option, nor usually their best one.

~~~
leggomylibro
Good point - they will still need someone to front a lot of money, though.
Talent and film-deposition facilities ain't cheap.

I guess they could go with a Bajillionaire Patron, or get funding through
usury. Sorry, those aren't even close to fair comparisons, but 'bootstrapping'
does seem pretty out of reach these days, for people who don't already have
8-10 figures laying around.

~~~
mi100hael
Yeah, I agree. It's not like Bell Labs was ever "scrappy," though.

~~~
leggomylibro
Ha, yeah I guess they did sort of get the 'wealthy benefactor' thing with Ma
Bell.

------
11thEarlOfMar
One of the attributes of The Valley that are not easily reproduced is the
forced cross pollination of knowledge and experience among the tech work
force. This is forced through layoffs as companies, industries and the economy
run through their cycles. This cross pollination leads to several outcomes: 1.
the workforce is diverse in experience; 2. employees tend to work harder and
longer hours in order to keep their job; 3. employees that are released from
projects that they still believed in are more likely to take that project
elsewhere, or, seek funding themselves.

These cycles work like a bellows, re-shuffling engineering teams en masse and
thereby fueling innovation. It's actually pretty painful, but is an important
factor and remains unique not in the fact that it happens, but in the scale
that it happens in The Valley.

~~~
kevan
Why do you think this is unique to the valley? At a first glance every major
metro area has this, what's so different?

~~~
esteban85
I believe whats special in the Valley that I have not seen anywhere is the
sheer concentration of startups, investors and qualified people and the
willingness for them to share. Sharing comes in many formats in the valley of
knowledge, their own startup, contacts and advise. The last two are the
hardest to find elsewhere at the scale that you see in SV, I havent found it
in Asia I havent found it in Europe... this for me is the competitive
advantage of being in the Valley

------
replicatorblog
This is already happening. Just look at the drone industry.

DJI, founded in Shenzen, has 87% market share at the most popular price point,
and 48% share in the next closest. This is an $8B market and will likely
double or triple in the coming years. US companies won the web, but China is
making a run for the IoT.

[http://www.marketwatch.com/story/businesses-want-cheaper-
dro...](http://www.marketwatch.com/story/businesses-want-cheaper-drones-so-
parrot-is-selling-them-2017-10-24)

------
icu
With the greatest respect for Mr. Thiel and his accomplishments I'm skeptical.

I've travelled the world and my experience is that very few places in the
world have America's, often irrational, can-do attitude, appetite for new
venture risk, and societal acceptance of new venture failure as an important
part of the entrepreneurial process.

I just don't think it's that easy to graft these cultural norms to other
cultures, let alone replicate the new venture capital, both human and
monetary.

As someone in London I wouldn't be on hacker news to 'keep my finger on the
pulse' if I believed otherwise.

~~~
melling
He referenced China. Any big startups come out of there?

~~~
rm_-rf_slash
China is a different case. Any successful tech company will be ruthlessly
copied and scaled in China by mercantilist policies which work quite well.

But there are no Chinese brands that are widespread household names out of
China. Even if a billion Chinese use renren the rest of the world uses
Facebook (and maybe vk). Even if a billion Chinese use Baidu the rest of the
world uses google (and maybe yahoo, in Japan, for some reason).

~~~
gitah
Just walk around a BestBuy in the US and you'll quickly realize how many
Chinese brands there are: TP-Link routers, Huawei routers and phones, Lenovo
laptops, Hisense TVs, ZTE phones, DJI drones, Haier appliances, Ninebot
scooters, Instantpot press cookers, etc. If you also count brands owned by
Chinese companies than include GE appliances and Motorola, Alcatel, Blackberry
smartphones.

Go on Amazon.com and Chinese brands are bestsellers in many electronic
categories: Anker/Sunvalleytek in phone accessories, Yi in action cameras and
dash cams and security cameras, TCL in televisions, etc.

Also the rest of the world isn't just US. Chinese smartphone __brands __have
50% marketshare world wide. Xiaomi, Huawei, OPPO are growing fast in South
Asia, South East Asian and MENA. Transsion (you 've probably never even heard
of this company) owns phone brands that dominate Africa and is the marketshare
leader there. Chinese home appliance and consumer electronic brands are also
big in non-western countries.

------
curiouslurker
Could he just be pandering to his hosts? The concentration of talent and a
whole ecosystem that supports entrepreneurs is a significant advantage. It
will take time for any other region to amass the same advantages.

~~~
aaron-lebo
Talent is remote and talent is willing to move, especially when they can make
an extra 50% through cost of living differences. That ecosystem produces some
great stuff, but a lot of it is garbage. Those advantages are perhaps
overstated unless your goal is to move to SV and become a unicorn. It's almost
tautological.

~~~
adventured
> but 90% of it is garbage.

That's inherent to the process of all creation and business starting. 90% of
everything is garbage. That's a case where there's nothing unique about
Silicon Valley. I'm sure you're at least vaguely aware of the very high
failure rate of _all_ new businesses within just a five year span.

Or see: last 200 years of industrial history. There were hundreds of
automakers just in Detroit in the US, experimenting with just about everything
they could. Most of it was garbage. It's a required part of the process of
experimentation. If someone stands up and proclaims that aspect is stupid and
a waste and they know better (they'd never make such mistakes, they'd never
need to perform such wasteful experimentation), well, at least then you know
who you're dealing with.

~~~
aaron-lebo
It was an observation, not a normative statement. The only part anyone really
cares about is the 10%, so if your goal isn't to have an ecosystem that is
always churning through stuff, that aspect isn't a huge advantage.

~~~
adventured
There's no such thing as an ecosystem that isn't always churning through stuff
(other than a dead one). The premise you're floating doesn't exist.

Silicon Valley's 10% is better than the 10% anyone else produces. It also does
it at a higher volume simultaneously. That's why it's Silicon Valley and
nobody has managed to match it in the last 50 years.

~~~
aaron-lebo
But some of that ecosystem is just dead slack. It exists because it exists,
because part of how SV works is VCs have to find new winners and people want
to change jobs and have more options. If that is not your main goal, you don't
need the ecosystem.

SV is good at what it does, it's the best at what it does, but that's
orthogonal to building a great company. We believe it's necessary because
that's how it has been done.

------
komali2
>You just need some talented people...

Well, yea, hence silicon valley. Like begets like - if there's a place where
all the best engineers are hanging out, why wouldn't a budding engineer head
out there? This is literally why I moved to San Francisco from Houston :P

And then, the best of the best engineers making oodles of money are probably
not going to want to live in like, Michigan, growing tech sector or no. Give
up good weather, quick access to great vacation spots (mexico, vegas, anythign
over the pacific, all the national/state parks...), legalized weed, etc? Nah
man.

edit: My language is assertive but I am very open to being challenged on this.

~~~
junkcollector
Sure, you're making a mistake that is very common around HN. You're conflating
technology and programming. If you wanted to study chemistry and be a chemical
engineer, Houston is absolutely where you would be flocking to instead of SF.
I think the next big tech market is going to be medical and genetics which
means Minneapolis and Boston are the places to be watching.

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tryingagainbro
My bet is that still it will be in USA. Among many other things, there's no
shame in "failing" in USA. Investors and banks take a chance, fully knowing
that most will fail.

In a lot of countries failure will follow you for the rest of your life. Not
to mention that you'll be broke owing to banks, friends and tax authorities.

~~~
adventured
There are only half a dozen or so nations on the planet that can compete with
the US _at all_ when it comes to technology start-ups. Nobody else has enough
of the required ingredients. For example Sweden has something very interesting
going on - yet they are very unlikely to ever produce a Facebook or Google,
the fractured European market and cultural system and their tiny local
population base is a very big friction point (unless they go after the US
market early on, as with Spotify, becoming a proxy US start-up).

The rapid lead that the large, unified market of the US + Canada provides, is
extraordinary. Only China offers something competitive to that and as an
outsider you can't move to China and form successful large start-ups (which is
why among their major tech companies, there are no cultural foreigners or non-
Chinese running businesses like Tencent, Baidu, Alibaba, Didi, Alipay, etc and
there never will be). The US + Canada = near $21 trillion in economy, with
extremely high disposable income levels, that mostly all uses/understands
English.

Fundamentally this is why Europe has struggled so immensely to produce new
tech giants in the last 20 years, compared to the US or China. It's not the
lack of risk-seeking capital; although that's less than in the US, there is
still enough. There is some cultural restraint depending on the country.
Mostly though, it's because of how extremely difficult it is to adopt to all
the various nation by nation differences early into the life of a product and
acquire market dominance in enough of them to then have a strong foundation
from which to springboard globally.

------
dogruck
Summary: soon, we will start to see more successful tech companies emerge out
of areas other than Silicon Valley.

------
smaili
> The concentration of global tech companies in one small region in California
> has been a peculiar feature of the industry.

Couldn’t the same be said about Hollywood in LA or Wall Street in New York?

------
rdiddly
There really is no rational reason why the phenomenon of Silicon Valley should
exist. And at this point if there were anything special Silicon Valley knew
that nobody else did, that knowledge has been pretty widely disseminated. And
yet for all that, I suspect he's still wrong.

~~~
rothbardrand
He's right, but "Silicon Valley" only exists in the minds of silicon valley
maximalists who live in a bit of a filter bubble.

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csomar
> speaking at the Future Investment Initiative in Riyadh, Saudi Arabia,
> Thursday.

Should we be more careful since this was said in an investment fund which is
not located in Silicon Valley? Or should we trust Peter for his words?

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melling
That’s not a bad thing. Having more places of innovation is better for
everyone. Hopefully, we’ll see more world class research universities too. A
Stanford University (or two), for example, in every location.

~~~
bob_loblaw
My wife previously worked at Harvard Business School and currently works at
Stanford. One of the big differences she noticed is that Stanford encourages
students to start their company, while HBS steers their grads towards Wall
Street.

------
dmode
This is not a profound statement, but rather obvious. If may calculations are
right, there are roughly 6 billion 993 million people outside of Silicon
Valley

~~~
twblalock
Why did Silicon Valley ever become what it is, and why did it continue to be
dominant in the tech industry for so long, when there were billions of people
outside of Silicon Valley the entire time?

Clearly population numbers are not sufficient in themselves to explain why the
situation will change.

~~~
dmode
Thanks for the down votes. But if you haven't realized, the world has changed
dramatically since valley became Valley. There is a lot more wealth
distribution around the world and technology is easily accessible. Look at the
50s and look at now and see how Asia has emerged as a dominant economic force.
China is #2 in total GDP, and India is #7. Couple this with the fact that
these two countries have unlimited workforce, it is quite obvious that big
growth companies will start forming outside of the US, often focused on their
local market. And capitalizing in capturing a lion's share of the local
economic growth. And that's exactly what's happening. Alibaba, Tencent, Didi,
Ola, FlipKart, OYO rooms, Grab.

This is not some profound statement from Thiel, but something very obvious.

~~~
refurb
No actually, it's not that obvious.

Look back to the 1980's. I remember watching news clips on TV of people
smashing up Japanese electronics because they were taking over the US. It was
_plainly obvious_ they were going to displace the US as the leading economic
power. Hell! They were buying up all the largest buildings in the US!!

Didn't quite turn out that way, huh?

~~~
dmode
It is not about "displacing the US". It is about a monopoly being over. Which
means, there will be big tech companies from SV, but also from China, India,
Indonesia, Korea, Europe etc. etc. And it is already true. Chinese companies
raised $56bn last year.

The world is also significantly different from 80s. China's GDP in 1980 was
$200 bn. Now it is $11 trillion

