Is Silicon Valley Dead?

It's a it's it's it's one that I've seen bandied about a bit since uh we started talking about this topic. But endy inventions reach their limit long ago, and I see no hope for further development. Um. It is not the patent office, which is the other famous one. Yeah. That that is a funny, funny quote. This is Julius Frontinus of the first century a d. A Roman engineer who worked in the water. Uh the management essentially back in the back in the day, which was a Thursday.

Um he uh sorry, I almost a he uh so Yeah, he said back then like inventions had to reach their limit, and then that's it. We are. We have gone about as fur as we could go. As people in Oklahoma would say, and I'm talking about Oklahoma, the musical, not the state. But it's okay. Uh the he Yeah, he said that that they, we humans had reached the peak of ingenuity. He's not the first person to say that.

He's not the last person to say that. Another very famous quote that's been bandied about recently, again more bandying, was from Charles H. Dwell, who was the Commissioner of the U. S Office of Patents in eight so just before the turn of the century. He said famously, everything that can be invented has been invented. Yeah, he submitted. That was in his resignation. Yeah, I'm resigning his head of the Patent Office because it's all it's all been done. Yeah,

we're done. Yeah, it's just a barnicked lady song. Now we're done. And like to hand him. I don't know, Um, let's let's think of something obsolete already, like uh, you know, eight track tapes, right, and take a look at this and this this is something that this is something we don't use anymore. Um unless here you can have it, unless you're in my dad's car. So yeah, they I'm

just kidding, just kidding. Yeah, that player hasn't worked for years. So, yeah, the two quotes of people famously saying that we have reached the level of of ingenuity that we are capable of reaching, and nothing beyond that is within our grasp and we should just settle down and and make ourselves

at home. The reason why I bring those up is because the topic we're talking about today is the whole reason we're talking about is because of a discussion that happened online on Facebook, of all places, on Facebook, on Facebook, and it was started by a guy named David Sachs who was a founder of Yammer Yammer. Uh is this Uh it's an enterprise social network, so social network meant

for businesses and here a popular business social network. He founded it and then sold it in June of two thousand and twelve to Microsoft for one point to billion with a B dollars. It's a princely some princely some. Indeed, you could buy a lot of pie with that princely some pie. And uh so, yeah, he created this company, sold it off to Microsoft. Well, the reason why we're talking about this is on Facebook he posted and I'm gonna read the full quote. I think Silicon Valley as

we know it may be coming to an end. In order to create a successful new company, you have to find an idea that one has escaped the attention of the major Internet companies, which are better run than ever before. Two is capable of being launched and proven out for around five million dollars the typical seed plus Series A investment, and three is protectable from the onslaught of those big companies once they figure out what you're onto. How many

ideas like that are left? So he's essentially saying the environment that we now all live in is not conducive to a small, nimble startup coming out and challenging these big goliath companies that are in the text space. Um and so saying that it's it's getting increasingly difficult, if not impossible, to make a successful company. However, his question and how many ideas like that are left? How many?

How many people can come up with an idea that's effective, that is going to capture people's imaginations to get support and it has not already been thought of by one of these big companies. Uh Well, a fellow by the name of Mark and Reason answered that question and said, yeah, I know that name. Yeah, I'm sure it an escaped you. Um, he's so, and reason said an infinite number human creativity is limitless, which doesn't make it easy, but does mean

the opportunity is an ending. So andreeson saying you can't put a cap on human ingenuity. Every time we've done that, people have proven that it was a premature statement and that there are always going to be people out there who come up with these great ideas and uh, and

to say otherwise is not really being honest with yourself. Uh. And then there became this big dicussion through lots with lots and lots of people, Andresa bombarded the Facebook page with about seven or eight comments in a row where he was making his points and refuting the points that sax had made, and it became a discussion between the two. So today we wanted to talk about Silicon Valley. Are it's days numbered? Does it even make sense to refer

to the industry in general as Silicon Valley now? Um? And and maybe or are we all just arguing over semantics? Could we just agree that Silicon Valley kind of encapsulates the idea of the tech industry and it doesn't really refer to a geographic region anymore. And once we get past that is everything cool. Well yeah, so let I guess first we need to talk about what Silicon Valley is. It's it's a place, so it's Silicon Valley refers to a region in California where a lot of tech companies

first got their start, big big name tech companies. Yeah, yeah there. Uh, as it turns out, there's a university out there called Stanford. Yeah. A lot of a lot of smarty pants were there in Stanford. Yeah, we've we've mentioned that many, many, many many times. Uh, just simply because uh, it's it's one of the places where technology folks um ended up going to school in the first place. And then um, they didn't really go far physically to start their companies. They went you know, I like it here.

So yeah, apart from the earth place that's not really whether um not here. The geologic formation is nice apart from the earthquakes. Um, but yeah, I mean it's a it's a nice place to be around a lot of other smart people, and um, you know, even people who didn't necessarily go to Stanford, Uh, like Cooper Tino. You know,

they're garages, right, there are a lot of garages out there. Actually, that that's something we should talk about, is that, you know, it is something of a trope to talk about Silicon Valley and getting your start in a garage, but several of them actually did. If you've been listening to tech stuff or any like the time, you've actually heard us talk about some of these HP started in a garage. Google started in a garage. Apple started in a garage.

Origin Systems, Origin Games, I should say Origin Games started in a garage Richard Garriad. Of course that was not in California, that was in Texas. But the garage thing, Yeah, the garage thing was this, you know, this idea that there was a time and perhaps that time is now over, but there was a time where and enterprising and innovative person or group of people could get together in a space like a garage, build a a concept, turn it into reality, and make a viable business out of it.

Not just a viable business, but potentially an empire. I mean, it's hard to describe Google as anything other than an empire at this point, at least as far as you know, Web advertising goes and and Internet search as well, and and making big roads into things like smartphone adoption and and other areas of technology. Uh that all started in you know, building a few servers in a person's garage,

and then it took off from there. Yeah, and that isn't that isn't really too um to put down the rest of the technology world, of course, Um, they're famous. Other areas where lots of tech companies have gathered, of course, Uh the Seattle area in Washington where Microsoft and and Nintendo famously have headquarters. Places in Texas around Austin and Dallas, you know, t I and and Dell and all those

guys are down there. Uh you know there. There's lots of tech innovation going on in other places, uh around m I T in Massachusetts and Harvard they're together, um places down here in Atlanta where Georgia Tech is the Georgia Institute of Technology. So and other other countries in the world too. I mean there are company examples in Japan and in Germany and and really any country you can you can almost all of the countries have some sort of tech presence. Not all of them all, obviously,

but many of them do. Israel has a strong tech community, so that it's it's not that that Silicon Valley is the be all and end all, it is not the Omega and the alpha or the alpha and the omega. Right. However, it did have uh a nifty name. Somebody decided to call it Silicon Valley because in the valley right there, there are lots of tech companies, and I think that at frankly it's it's inadvertently a marketing thing. So we

we think of tech coming from Silicon Valley. So if you think of it as Silicon Valley, the region, uh, the actual region, you could you could argue that, yeah, the era of Silicon Valley, like new companies coming out of Silicon Valley is if not over, uh slowed to a crawl because you've got so many established companies there already. And frankly, something as practical as the amount of money it would take to rent a garage has increased to the point where it is prohibitively expensive for a new

company that doesn't have any money. So if you, if you permit me an analogy, sure, um, it sort of reminds me of a a want a an up and coming actor moving to Los Angeles or New York City.

I was going to say, to break into movies or TV, um to New York City or Broadway at your you know what, I'm gonna go up there and I'm gonna get a job if I can make it there, and I'm gonna, you know, stake out a famous director's house, or I'm gonna be on the corner half a because I know so and so was discovered there really um and you know, Okay, So I'm going to move to Silicon Valley and I'm gonna start a brand new tech company with this idea I've got, and doesn't it doesn't

always work like that, yea. So if we if we think of Silicon Valley as like that, that physical place, then I guess you could argue maybe that, yeah, maybe maybe that era is over. But if you look you at Silicon Valley more as a general term for the technology industry and the idea of small, nimble companies starting up and really making a go at it and and becoming these big companies later on, like like the Google's and the Amazons and the Apples out there and the

hps UM. I think it might be a little premature to call that now, To be fair to Sacks, he did later go and and elaborate upon his point. Because this was a Facebook status that he posted, and it wasn't It was in an article for a magazine or newspaper um and I think it was more of a thing he was mulling over in his head, and maybe we should also be fair, all right, So let's let's

think about this for a second. His company had just earlier than in the summer, been bought by Microsoft, right, so he had the experience of building a company up and seeing him seeing that company go up against some really established, big companies, and he saw that the the opportunities for his company to succeed on its own were limited, and that it was going to be a very difficult road if he chose to keep his company his own and not to sell to anyone, it would be really

hard to make a success story out of it because of the competition he faced against these monolithic companies. And he has a point. If you come up with an idea that's really really uh innovative and is uh is popular, that it's only a matter of time before one of these other big companies makes a go at that same space.

You know, they might not be copying your idea, you know exactly, but they may be aiming for the same general target that you're aiming for, and then they these companies have way more resources than you do, so it may just be a matter of time before they end up, you know, wiping you out. And so his point is saying, uh, yeah, you don't, you know, look at my experience, like I I sold to Microsoft. So there's some critics who have said that he he's taking too narrow a view because

of his own personal experience with this situation. And in fact, I would argue that there are success stories, relative success stories out there that contradict what he said. Uh, in the sense of think about Twitter. Twitter is the the short messaging version of social networks that is popular. Well it's not the only one that was out there, and and some of them were backed by big companies. Google had Jaiku, which was very similar to Twitter. Yeah, they

acquired Jaiku. They bought Jaiku and you but you there you go, You've got Jaiku that was again a smaller competitor first and then bought by Google. They suddenly had the the power of Google behind them. But that that went away. Twitter became the place everyone went to. So you know, it is possible, I think, for a company to do this because if they do it well. There's no guarantee that a giant company is going to do

it well. They might be able to throw a lot of money in it, but doesn't mean that their product is going to be compelling enough to convince people to use it versus some startups company uh startup product. Well, yeah, I mean, why bother starting something like Facebook when you've already got friends too? Yeah? Yeah, I mean that those are good arguments though. I mean, granted, Facebook's at a

level that Frinster never was. But but the point but my Space, my Space was was dominating for the longest time, and people couldn't even imagine someone dethroning my Space from the social uh network scene. And then Facebook did it and handily as it turns out. So the I can see what what Sacks's point is here. I don't entirely

agree with it. Now. He did come out and say later that he wanted to clarify he thought that if if you were to create a startup, you should aim for the fringe of what is already out there because the big companies he he likened those two redwood trees. He's enormous redwoods, right, Yeah, it does. There might be especially since he was his company was bought by Microsoft, right, so he yeah, but close enough. Um, he's got these giant so these giant redwood trees that are casting lots

of shade on the ground. So to plant a startup in the shade, you don't have a lot of chance of having it grow. It's not gonna get the sunlight it needs. So he says the better thing to do is go to the edge of the forest and plant your start up there. And what he means by that is, don't look to provide a service that one of these giant companies already is providing. So we'll use maps as

an example. Let's say that there's a startup where they feel like we've got the killer approach to providing online maps. Problem is, you've already got companies that are doing that. You've got Apple and you've got Google, both doing it in the mobile space and on desktops. So what and and there are others as well. Those aren't the only two. It's just those are two I just grabbed right at

the top. So the barrier you have is huge. But but if you come up with a service that none of these come these are doing yet none of them have figured out how to do or they none of them have even thought of doing this particular thing. And you start a company, then you have a much greater

chance of success. Um. And I think a lot of the people who are initially criticized Sax's point, which again you know was probably the first thing he had thought of, he hadn't made necessarily, really debated it heavily by the time he posted on Facebook. Um, I think they would agree with that. I think Andreason would agree with that because and Reason's point is that, Yeah, for for a large company to go up against a small company, uh,

it needs to not just be big, but competent. And that's a that's a big point because these like I said, these big companies might be able to do certain things really well, but when it comes to adopting something new, that's hard for a big company to do, and they may not be as agile exactly and making changes no pun intended well. And that that's a natural evolution for

most companies. Right when when you're a startup, your nimble, you can try lots of things and you are, uh, you're very quick to act on those things and to build your business that way, and you take lots of risks. Once you get established, well, then you're looking at stability. You're not necessarily looking to continue taking these crazy risks

because you've got a lot more at stake now. So you're looking at how do I sustain what I have and build on it without going crazy and running all over the place like I did when I was when the company was tiny. And so you know, they don't have that luxury that the smaller companies have. And so they may have the money, and they may have a lot of resources, but they might not have the um the flexibility to do that. So and that's a good

point as well. Yeah, I was. I was hardened to see that the conversation that they were having was civil and productive, you know, unlike some I mean, it was primarily the two of them. They did. They did make it public. Know, there were there were lots and lots of comments. It was a really good discussion. Was not

a YouTube, which was nice, no, no, um. But you know, I was also reading this is one of the reasons I was interested in looking at this, UM was I was reading recently that about some of the other areas in the world that uh, you might not necessarily think of as being UH tech stars are sort of coming on, you know, making a name for themselves in the tech world to UM. Apparently, UH Mexico actually has quite a few tech startups UM that have been launching recently. UM,

and there's a lot of American investment. UH. You know, you'd think of the venture capitalists out in Silicon Valley and other places looking for startups here, but they also look abroad and they have been taking notice of a lot of the places in Mexico and also in UM UH places like Chile, UM where there are venture capital funds and in some cases UM like for example, a startup Weekend UM, which is a founded or you know, gets its money from the Coffin Foundation now has UH

thirteen chapters in Mexico and that second only to the United States. UM and UH there are other governments around the world that are are encouraging UH tech innovation. So it is very possible that UM, in addition to our own literal Silicon Valley, there will be others like it UM in other countries all over the world. UM, and there will be innovations coming UM for those markets specifically, and things that that you know may become global sensations

in their own right in the years to come. And so it's funny because well, uh, he's looking at you know, we're talking about the possibility of um silicon valley here in the United States sort of waning in its ability to generate new products, UM other places uh that maybe you know are on the edge of the forest in that in that analogy, you know, might be taking off. Yeah, And I read an article on inc I n C Business magazine written by Eric Sherman which was titled and

into Silicon Valley not even close. And Sherman also was obviously refuting Sex's points, but there was one thing that he said that I don't think was I don't think that was sex. He's refuting something that I don't think Sex was establishing. And his statement was about how, uh

the idea about protecting your idea from big companies. And one of the problems is that that a small business might find itself in is running into patent issues where big companies own thousands and thousands of patents and it may be that some aspect of that small companies business model could infringe upon a patent, and then where did they go if they can't license it, then they're out

of luck. So um, But Sherman says that the big companies often buy these smaller companies, Like, how how can you say that these aren't viable, because, like you were saying with with Jaiku, Google bought them, and you know, Google bought the company that designed Android and all that kind of stuff. But I think Sax's point was that he was talking about the company being successful as its own entity, not as something that gets bought by another company.

And so that that's one point that Sherman makes that I don't think addresses what Sex was actually saying. Um. I think you know, it's it's access. Idea of success means that you are making it based upon the the viability of your company and how it can compete in the market, not whether or not you're attractive enough to get bought. But I think we will definitely sometime in the future have to have an episode about companies that were designed or seemingly designed from the ground up specifically

so they would be purchased by another company. Yeah. Yeah, and there have been many of those. Yeah, or at least that's what it appears to be, you know, because sometimes it's hard to tell and Sometimes you see a company that gets brought up by another company and you're thinking, was that their plan the whole time? Uh? And then there's some companies that you would think, well, if that was their plan, why haven't they done it yet? Twitter?

Twitter is the one I always think about, because, you know, the whole revenue question for Twitter has been a big issue since it launched, and everyone, I think expected someone else to weep in and buy Twitter. But at this point it might just be too big to be bought, at least not for any for anything less than an astronomical sum of money. I was gonna say, if Yahoo's not too big to buy? Yeah, well yeah, right? Were we already talked about you who extensively so that we

don't need to go back to that that one? All right? Well, I think that's a good discussion. I think, I think I think Chris and I both agreed that Silicon Valley, at least as far as the idea of the startup tech industry version of Silicon Valley, is not dead. It's definitely more challenging. Yeah, it's more challenging to get a company off the ground and make it successful and and keep it going without too much interference from the big companies.

It's definitely harder, but it's not impossible. And it all depends on your idea and the execution of it, and and that you know, the fact that you have good business sense as well as a good you know, just a good product. It's a tough combo to get. Not everyone can manage it um, but I think it's still attainable.

So guys, if you have any topic suggestions for things that we should talk about on this show, you should email us our addresses tech stuff at Discovery dot com or drop us a line on Facebook or Twitter, or handle it both of those locations. Is tech Stuff, H. S. W and Chris and I will talk to you again Releason for more on this and thousands of other topics because it how staff works. Dot com