Silicon Valley of death: Why the tech hub’s golden days are over
Other parts of the US and the world now have what made Silicon Valley special
“Winter is coming,” says Russell Hancock, chief of think tank Joint Venture Silicon Valley. “The markets don’t lie.”
Hancock, who knows Silicon Valley like the back of his hand, might be spot on.
House sales in San Jose have soared by 131%, the highest rate in America, according to 2019 figures from real-estate giant Redfin.
Rising living costs, a growing homelessness crisis, Donald Trump and a sense of crisis at some of Silicon Valley’s most successful companies is driving a wave of departures from San Francisco.
The Bay Area has been the thriving home of the world’s most famous tech hub for decades, witnessing the dot com boom and bust and the flood of workers looking to make their fortunes at Facebook, Apple, Netflix and Google while incubating a side-project a venture capitalist might take a gamble on.
But as PayPal co-founder and tech investor Peter Thiel said in November: “Perhaps there aren’t as many big breakthroughs left in consumer internet.”
With companies such as Amazon and Google pumping billions into big new campuses in New York, Washington DC, Nashville and Austin, some believe Silicon Valley may be on the wane.
In contrast, smaller regional hubs in the US and European cities like Berlin, London and Stockholm are growing in importance.
Thiel, who moved to LA from San Francisco a year ago, is not the only one to observe the trend.
Critics have taken aim at Apple, which has failed to ignite excitement over its launches in recent years.
Former fans are left wondering how long it will be until we see another industry-changing invention like the first iPhone (2007) and Apple Watch (2015).
Concerns over a stagnating smartphone market have caused recruits to think twice about the future of the company, which looks and acts more like a blue-chip electronics manufacturer by the day.
Equally, the lure of quirky startups is waning. Facebook is reportedly struggling to attract talent in the way it used to, with bright young graduates questioning whether they want to work for a company that has earned a dismal reputation due to fears over data privacy and concerns over fake news.
“A lot of people are looking to move elsewhere to live and maybe commute back to San Francisco every few weeks if they need to," says a UK technology executive who returned to London last year after a decade in the valley.
While Silicon Valley remains a powerful economic machine, he says many are making a lifestyle choice to live in other cities where costs are lower, outside of the “tech bubble”.
Then there’s Google, which is weathering a storm from sexual harassment scandals and ethical questions over how it has been using people’s data to sell advertisements.
This week it became the first technology company to be fined under new European data protection law. The political climate under Donald Trump is not helping. A critic of Silicon Valley and its so-called “left-wing bias”, under Trump we have seen Google boss Sundar Pichai, Facebook’s operations chief Sheryl Sandberg and Twitter’s Jack Dorsey grilled by congressmen.
Once seen as the most progressive city on the planet thanks to its history of LGBT activism and the last remaining influence from the free-loving hippy movement, the area has now spawned countless jokes, memes about “tech bro” spoiled-brat stereotypes and inspired a satirical – and absurd – sitcom, Silicon Valley.
It is becoming increasingly difficult for socially conscious graduates to square queuing for a $22 sandwich from lunch spot Deli Board while watching homeless men and women roam the street. People on six-figure salaries are officially “low-income”.
Then there is the pressure on social media, where people are increasingly criticising companies that once proclaimed not to be evil covering up alleged sexual harassment among their highest ranks.
“People are starting to think about other options than Silicon Valley in terms of building out tech teams,” says top technology headhunter Ali Behnam at Riviera Partners.
“Housing is astronomical, public schools are not that good, so families are looking for other technology hubs, plus the politics is polarising.”
Most are moving to secondary towns like Austin and Salt Lake City and North Carolina, he says. Some are returning to New York.
“All the big boys are starting to do it. Amazon, Facebook, Airbnb are all starting up headquarters in secondary cities.”
Amazon, based in Seattle, will create two new hubs in New York City and Arlington, Virginia.
Google has satellite offices in Venice, LA and New York. Apple is to open a campus in Austin, Seattle, Denver and San Diego.
With technology stocks weathering their worst three months on record, analysts and pundits are predicting a downturn.
And that might not be a bad thing. Hancock says: “The market is the great sorting device. They clear the way like a well-managed, forced fire clears out that dead wood and in so doing it makes space for new growth.”
– © The Sunday Telegraph