Steve Blank is a respected Valley veteran who has written highly insightful and informative materials about the history and development of the Valley (see http://steveblank.com/secret-history/) and so his opinion is worthy of note.
That said, I have been in the Valley since 1968, have watched its ups and downs professionally since the early 1980s, and can say without question that it is currently bursting at the seams with opportunity from every conceivable angle. Yes, the days when silicon was king are well past their "golden" stage but they have been replaced by an era where founders have decided leverage and power to realize great visions without having to overcome the resource/knowledge barriers that predominated just a decade ago, where innovative investors have more ability than ever to leverage early-stage situations in ways that used to be monopolized by just a few top-tier VCs, and where the disruptive impact of technological change generally is leaving old-guard companies staggering as startups who vigorously challenge them proliferate - all to the great benefit of society at large. Plans are afoot at every top-tier company - Facebook, Google, Apple, etc. - to grab control of the whole process and eventually dictate to others how they might participate in it, but such plans have not yet succeeded even when they once seemed almost inevitable (thinking of 90s Microsoft here). As long as companies remain free to innovate, there likely will be successive stages of greatness in the Valley (and, of course, elsewhere where comparable elements exist) and it is a mistake, in my view, to attempt to label any particular outstanding stage in the past, or any particular mode of growth, as "golden" in some special way. As long as human nature is what it is, enterprise will take many forms, each suitable to its time and no one form more particularly special than the other. The key is to capitalize on the opportunities as they exist, leaving history to play itself out as it will.
I don't think the point you make contradicts Steve Blank's at all; to me, Blank's thesis is that startups in the Valley no longer choose to pursue truly disruptive technological innovation because our ecosystem now almost exclusively rewards areas such as social media, where you have to run as fast as you can just to stay where you are, to the detriment of "hard tech" such as biotech, robotics, and the semiconductors of old.
BLANK: In the last bubble there were no customers. Facebook makes $4 per user. The users are customers. They produce real revenue. Nobody's debating whether Facebook can make money. They're debating how much more valuable Facebook's hundreds of millions of users can be, and how fast can they can grow that value. That's an execution problem."
Facebook makes $4 per user from advertisers who LOSE money when they pay Facebook. In other words, Facebook's users LOVE their product. Facebook's customers (advertisers) get nothing from it. Click through rates suck, and actual ROI is negative. Eventually, the new advertisers who show up and realize it's a waste of money will stop paying for nothing, and then the $4/user goes away.
Users and the media LOVED Groupon. The businesses who were Groupon's actual customers HATED it. This is no different. Don't get me wrong, a billion users is incredibly monetizable. Just not the way Facebook is trying to do it. The social B.S. will eventually fade to the real stuff.
It depends on what the users are using. I think it's extremely hard to get people on a platform to socialise* and then get them to do something else that generates revenue. With the exception of purchasing game credits etc, there's no easy way to do it.
One, you presume that advertisers are incredibly naive and don't measure returns. Obviously cleanly measuring advertising returns from fb is hard, but it's still being done.
Second, fb can put up the first credible alternative to adsense since they collect browsing info from their fb login and other widgets. In fact, they can do better than adsense: fb can mix in very accurate demographics alongside the page context. Adsense makes google nearly $10B/year and I'd bet fb could eat half of that. And many pubs that lean heavily on adsense are desperate for a competitor. So I'd say fb is -- at bare minimum -- a $5B/year company. Plus another billion or two from taxing every bit of money that flows through social gaming. Plus it seems like zynga will be able to do poker for money now. Plus I don't believe all the ads on fb proper are worthless, so roll that into the mix.
Finally, from your comments below, you seem to think advertising in general is worthless. If you think companies (US only) spend $400B/year because they're stupid, then I'm too dumbfounded to formulate a response.
I see a lot of comments addressed to "this guy" referring to Steve Blank. Let's not forget he's been involved in silicon valley startups since the 70s, including founding semiconductor companies. While they're no hello world rails startup, he has a proven track record and a first-hand experience of how the valley has evolved.
I suspect many of you haven't seen his take on the history of the valley, which might give context to his views.
Yeah, it amuses me to read the number of people here saying he doesn't get Silicon Valley. He might be wrong, but he certainly isn't ill-informed. You can also read his 10-part history of Silicon Valley on his blog:
The problem Steve Blank is pointing out is one of solving quality of life problems, and sustainability problems when there is easier money to be made in entertaining consumers. Facebook just accentuates the point. Its a bit idealistic to think that Silicon Valley ever really had it right or that government funding is the solution to innovation of 'real' problems.
People have a large dimension of needs. Some of these needs, while necessary for survival thousands of years ago, are now obsolete as a survival utility function. McDonald's designs french fries to exploit these needs; Facebook builds social mechanisms. These needs will always be there - but at the same time there is a finite limit to the amount of attention on earth that can be expended fulfilling these old-world needs - it will plateau when human attention is exploited to the fullest. Meanwhile, there is arguably no cap for fulfilling the set of user needs that make the quality of human life better, and give our civilization the ability to sustain its own existence. Over the long-term, the set of human needs that have utility in our current environment should present the best investment opportunities - at least I sure hope so.
Upvote and comment: for many users, Facebook is indeed solving a "quality of life" problem -- how do I stay in touch with people? It's a first-world problem, sure, and maybe it looks a bit like entertainment, but it's a real problem that they are solving.
Something that has been concerning to me over the past few years is the shortsightedness at the national level.
Sure, a national endeavor for growth can include tax policies, broadband programs, educational reform, capital investments, flexible monetary policies, etc.
BUT, I think one of the most important and worthwhile goal should be the decentralization of high-growth job centers.
Setting up shop in Silicon Valley these days is ridiculously expensive. Besides, basing a large percentage of your high-growth businesses in an area that may be ravaged by a natural disaster at a moment's notice is clearly unwise.
Furthermore, the success of the nation should not be tied to the fate of Silicon Valley, or the fate of 3-5 major job centers.
Hence, a national priority should be to decentralize this economic activity across the country.
There is no catch-22 here, contrary to what people say. ("We set up shop here because all the qualified workforce is here.")
With real estates, school expenses, public transportation capacity and urbanization reaching unsustainable levels, there is no doubt start-ups would benefit from setting up shop in less expensive areas, where their employees could live without mortgaging themselves to retirement or sacrificing the well-being of their family members.
You mean like Austin, Seattle, Boulder, Huntsville, D.C., and so forth, just to rattle a few off the tip of my finger? The Bay Area is already not the center of the tech universe, contrary to what the HN Opinion Amplifier might lead you to think.
I'm not sure if I buy his argument, but if you accept it, I think there's a natural limiting factor: recruiting.
The best engineers will produce the best products, either for local-mobile-social apps or space exploration. At some level, good software people are somewhat fungible -- a great engineer could work on either, given some orientation.
I believe the best engineers would rather cure cancer, colonize space, create anonymous digital currencies, etc., and produce infrastructure and developer tools which support those things, rather than work on ad networks, games, photo sharing sites, etc., given equal access. The reason people haven't gone into space for the past 30-40 years is that working for NASA is a horrible experience for an entrepreneur, and creating software or technology startups is much easier.
Now that "software has eaten the world" (which I do believe), a great software engineer can effectively start a space company. Sure, your first 10-20 employees at a new ad network or game company might be able to make enough on equity to do it, but employee 50 or employee 500 would sure rather be working on something amazing like space than yet another ad network.
Given the macro trend of "software is eating the world", its very likely that investors will chase $$ for dot com startups (or mobile apps nowadays). I completely agree that SpaceX, Tesla, Google Self-driving cars are proper engineering projects but I will try to be devil's advocate. Google (even thought its a Internet company) revolutionized the information organization and retrieval, we are much better because of it. Facebook connected the whole world on the Internet. LinkedIn created professional network where it is much easier for people to connect and benefit (especially Sales guys and recruiters). Twitter is helping in democratic movements across the globe. GroupOn made it easier for local SMBs to advertise. And there are companies like AirBnB who made it possible to profit from entirely new concepts.
Of course, for every Facebook there is a Zynga whose major accomplishment is pasting cows on the Internet. Unfortunately, too many "real engineers" are jumping on SoLoMo bandwagon and that is hampering real innovation.
Prof. Blank's blog entries aimed at selling his "Startup Manual" are creepy. Framed as stories of walking through the woods with former students it just stinks of cheap, manipulative internet marketing. Is this what he is teaching kids? Then at the end a link to his book on Amazon. Just terrible.
Thanks for lowering the bar, Mr. Blank.
"Where the money is." Indeed. Money that could be invested in more worthwhile research. He's right. Thank God for NIH, NSF and the SBA, because now we have educators giving in to the lure of low brow internet marketing. Sad.
I think the valuations are a bit of a bubble, but social media is real.
In the dotcom bubble of 2001 I heard the same thing except with "internet" replacing "social media".
In the last bubble there were no customers. Facebook makes $4 per user. The users are customers. They produce real revenue. Nobody's debating whether Facebook can make money.
This may be true but how much of that $4 per user is driven by the bubble itself? How much advertising is coming from companies that are within the Silicon Valley gravity well? If the (so-called) tech bubble pops, people will still need cars, vacuum cleaners and food so how well does Facebook do with those kinds of advertisers?
The reason a bubble is scary is because it distorts your normal metrics of what a healthy company is. It doesn't matter how much money you're making selling hotdogs at the boardwalk if one day people stop going to the beach.
Thinking about this some more the part that drives me crazy is this: Facebook makes $4 per user. The users are customers.
That just doesn't follow. The advertisers are the customers. They happen to pay $4 for every person right now. If the advertisers dry up - because say, they go out of business or decide facebook isn't great value - then the facebook users are 'worth' a lot less.
This. Of course social media is real, of course having 900M customers is worth something. But trowing infinite amounts of money means you spend more that what is worth, in other words, it is a bubble.
In Spain we had this houses boom, and everybody said: but houses are real, you need them, they are necessary so they will never go down.
It is not qualitative, but qualitative. They make $4, but they need $100 for the stock to be fair price.
Fb founders are selling as much as they let them, Goldman S are going to sell at least 50%. This is the biggest scam I had seen for a while.
Social media is not going to be "where the money is" when all these companies founded by 20-year-olds hit the wall because Facebook is the only one making any money off social. Eventually VCs will realize, hey maybe we should fund some of these guys with big ideas over here. Social is just a gold rush, but these things are cyclical.
TLDR: Agree with parts of Steve Blank and Grellas...
15 year veteran of the valley here, and as much as I agree with Steve Blank that the herd money is chasing social media right now (and why not?), I don't agree that the long-term payout investments are gone - just look at Planetary Resources for an instant counterexample (I know, they're based in Seattle so they don't count, right?).
But more importantly, all of Web 2.0's 30ish billionaires are as mortal as the rest of us. The difference is that they actually can throw money at that problem and stand a good chance of at least a modest payout (just look at Sergei Brin and Parkinson's research). And while I agree with Steve Blank about the importance of government funding for long-term technological development, I think we're about to see a Cambrian explosion in biotech as these guys try to fight off the inevitability of death. Because what good are all their toys if they don't stick around long enough to play with them?
Meanwhile, the north end of Silicon Valley has quietly transformed itself into a mecca for biotech and bioinformatics in recent years. Silicon Valley itself started out as farmland and look at it now. I see this as just the latest in a series of transformations to whatever is the next big thing.
If you have doubts about what he means, he is essentially saying this: The state of mobile and social has come to such an advantageous point for startups that it is not feasible for investors to go for the hard, truly disruptive things. And he is very right.
Thanks to Apple products, now you can reach millions of people by writing an app. Due to the viral nature of social apps, you can now expect a useful app to reach for the masses without spending on marketing and advertisement. Can we say the same for anything other than mobile/web and social? No.
Until the social/mobile market matures, we will see each potential founder working on a mobile phone application instead of attacking a non-viral problem with a doubtful market/new technology.
Reading through these comments I feel that people are focusing on the wrong issue. At a high-level, let's not focus on high-tech vs. relatively low-tech. Rather, as Steve is, we should be discussing whether companies are pushing to solve significant world problems and pushing real sciences forward, or whether entrepreneurs and VCs are eager to tackle gimmicky but real quick buck businesses.
I feel that we have brilliant minds looking for quick paydays, which is understandable, but does not say much about our community. We need more Palantirs, Fusion IOs, and SpaceX type companies and fewer email, flash sales, and gaming companies.
The last commercial Fab in the valley closed some five years ago. Many of the companies that were essential still have their HQ in the valley, but are transferring more of their operations over seas, Applied Materials for one.
The valley has evolved over time too, and in order to be an interesting place it must continue to evolve. I have yet to see an end to interesting conversations, ideas, and things coming out of here.
Who cares what this guy thinks? He doesn't count either the iPhone or iPad among the most important innovations of the last 5 years, but two of his 4 choices are about cars, and another is Google Goggles.
He also surmises that Silicon Valley is dead because of a few observations about Facebook, while ignoring that Apple has become the largest company in the history of the known universe.
No doubt his comment about "Dancing on the grave of Silicon Valley" will join counterparts like "640K ought to be enough for anyone" and "Who wants to print faster than they can read?"
It is a bit short sighted, and while I disagree with the premise I'm certainly fine with Blank having an opinion that the 'glory days' of Silicon Valley are behind it.
But when I read that article I thought to myself, "Wow, here is someone that doesn't 'get' the valley at all." Because he didn't seem to remember that the valley "died" in 1984, if you recall that is when semi-conductor companies started going out of business and silicon was dead, it was all going off shore. Except that systems companies like Sun were being born, and Cisco, and a host of other infrastructure plays that were going to lead into the a huge up welling of innovation (and sadly patents). Then the dot com bubble burst and Silicon Valley 'died' again, no more would anyone build innovative tech companies in 'the valley' after all it was a wasteland, a burned out cinder that had burned brightly for half a dozen years, only to leave behind an infertile plain of concrete layups and landfills with t-shirts from companies nobody would ever remember. And now we've got Google, a re-born Apple, Ebay Etc. Facebook's IPO heralds the "end" of Silicon Valley? Really?
So when ever someone tells me that the valley is dead, and can't explain why this time it is actually going to die when the last several times it didn't die, I know that they don't understand why it lives, and thus can't reliably prognosticate about its death.
Its always interesting to read though. And when folks things it's dead, well smart people go out looking for the saplings.
"This guy" is Steve Blank[1]. He's kind of a big deal in SV and the startup scene in general. Whether or not you agree with his assessment of Valley culture, his personal cachet is such that it behooves you to take notice.
The iPhone and iPad were absolutely not a "project" (the word he uses in the article) of the past five years. They're part of a project that started more than ten years ago. I certainly don't think they're old technology - they're still ahead of the tablet and arguably the smart phone market, I think - but I don't really classify them as small projects that have a lot of potential that were just invented in the past five years. Heck, you could easily argue that the iPad is the fruition of a vision, and a project, that Steve Jobs started decades ago. And if you want to get technical, the iPhone was in active development before five years ago.
There's a couple of problems with that argument. Apple is a great Silicon Valley success story, but they don't make products in Silicon Valley. They design them there, but they are manufactured elsewhere. In its heyday, Silicon Valley used to make things. Tangible things.
Manufacturing companies not only provide direct labor employment opportunities, but they also create 2-3 jobs in the local economy for every direct labor position.
The hardware companies of yesteryear made products that had a compounding value in the economy. Test and measurement equipment, processors, workstations, etc., were put to use making other products that had value, hence the compounding effect. I'm sure Apple products have a compounding value effect, but a company like Facebook probably doesn't, at least to the degree the old SV companies and their products did.
agreeing with what others have said. Blank has basically redefined the study of entrepreneurship (in addition to starting and exiting quite a number of companies).
>while ignoring that Apple has become the largest company in the history of the known universe
Sorry that's Microsoft, not Apple (even if during the dot com boom).
From Wiki:
Record Market Capitalization
On December 30, 1999 Microsoft reached an intraday high share price of $119.94[3]. With 5,160,024,593 outstanding shares (as of November 30, 1999),[4] it had a market capitalization of $618.9 billion. This was the highest market capitalization ever reached by a publicly traded company[5]. Adjusting for inflation to 2012, Microsoft's market capitalization would be $846 billion[
He's Steve Blank. He probably has way more accomplishments, credentials, followers and respect than you do. You really should look before you leap before making comments like that. Also, he's clearly speaking at a strategic, coarse-grained level.
Elon Musk: I think we can put a man on Mars within 10 years.
My take on this article is this: it's short-sided to put so much money into one particular sector, and to encourage others to pull them out of longer-to-realize-profit sectors. That the end result is a diminishing return in the long run for the country, or region as a whole. This being caused by a lack of "long-term tech investment."
However, the striking problem with the statement is that it is not backed up by data. How much money that would've been invested in "core" technology (technology used to enable other technology), pharmaceutical, or other investments was instead funneled for short-term gains into social start-ups? I'd understand that if one just read tech news, one might think all investment goes to SV software firms these days, but I have a hard time believing that's a fact and not just a matter of media selection.
Innovation can come from unlikely places, especially when people connect and come together. I don't think social is just about where the money is, I think it can be powerful force in the way we live our lives and also a source for future innovation. I'm not just talking about Facebook, but tools that bring the world a lot closer together.
I wonder if people criticized the telephone as much when people instead of "working" spent time chatting on the phone with their friends. Sure there will be people who waste time doing that, but I think in broader terms, it will help open up communication channels, enable new collaborations, allow a free exchange of ideas, and also lead to more innovation. It's just hard to see where things are going, but I would bet that they are headed in a positive direction.
It's easy to downplay the impact of Facebook compared to the kind of stuff Elon Musk is doing, but it was only last year that we saw dictators being overthrown with the help of social networks like Facebook. That's pretty cool too, no?
I think you are vastly overestimating the impact Facebook had on the so-called Arab spring. Internet penetration in that part of the world is not high enough for social media to trigger an uprising at that scale. Also, just because a dictator is overthrown doesn't mean things automatically change for the better. See Afghanistan, Iraq, Libya, and much of subsaharan Africa.
I like Steve Blank. In fact, he is one of my "mentor idos" (people I would lie to emulate, but no hero worship here). I also think he is wrong.
There is no "true path" of SV that it can fall off of and be over. Instead, there is a continued cycle of very technical people working together to build significant equity that is then recycled for more new tech people to do the same.
When that stops happening, SV will die. In the meantime (like any other time), there are sparkly things drawing people's attention. And I would be willing to wager the crop of people making big exits today aren't going to be happy investing everything in what they just did.
[+] [-] grellas|14 years ago|reply
That said, I have been in the Valley since 1968, have watched its ups and downs professionally since the early 1980s, and can say without question that it is currently bursting at the seams with opportunity from every conceivable angle. Yes, the days when silicon was king are well past their "golden" stage but they have been replaced by an era where founders have decided leverage and power to realize great visions without having to overcome the resource/knowledge barriers that predominated just a decade ago, where innovative investors have more ability than ever to leverage early-stage situations in ways that used to be monopolized by just a few top-tier VCs, and where the disruptive impact of technological change generally is leaving old-guard companies staggering as startups who vigorously challenge them proliferate - all to the great benefit of society at large. Plans are afoot at every top-tier company - Facebook, Google, Apple, etc. - to grab control of the whole process and eventually dictate to others how they might participate in it, but such plans have not yet succeeded even when they once seemed almost inevitable (thinking of 90s Microsoft here). As long as companies remain free to innovate, there likely will be successive stages of greatness in the Valley (and, of course, elsewhere where comparable elements exist) and it is a mistake, in my view, to attempt to label any particular outstanding stage in the past, or any particular mode of growth, as "golden" in some special way. As long as human nature is what it is, enterprise will take many forms, each suitable to its time and no one form more particularly special than the other. The key is to capitalize on the opportunities as they exist, leaving history to play itself out as it will.
[+] [-] jluan|14 years ago|reply
[+] [-] JPKab|14 years ago|reply
BLANK: In the last bubble there were no customers. Facebook makes $4 per user. The users are customers. They produce real revenue. Nobody's debating whether Facebook can make money. They're debating how much more valuable Facebook's hundreds of millions of users can be, and how fast can they can grow that value. That's an execution problem."
Facebook makes $4 per user from advertisers who LOSE money when they pay Facebook. In other words, Facebook's users LOVE their product. Facebook's customers (advertisers) get nothing from it. Click through rates suck, and actual ROI is negative. Eventually, the new advertisers who show up and realize it's a waste of money will stop paying for nothing, and then the $4/user goes away. Users and the media LOVED Groupon. The businesses who were Groupon's actual customers HATED it. This is no different. Don't get me wrong, a billion users is incredibly monetizable. Just not the way Facebook is trying to do it. The social B.S. will eventually fade to the real stuff.
[+] [-] asto|14 years ago|reply
* blanket term for status/photo/video sharing
[+] [-] skmurphy|14 years ago|reply
[+] [-] waterlesscloud|14 years ago|reply
[+] [-] earl|14 years ago|reply
Second, fb can put up the first credible alternative to adsense since they collect browsing info from their fb login and other widgets. In fact, they can do better than adsense: fb can mix in very accurate demographics alongside the page context. Adsense makes google nearly $10B/year and I'd bet fb could eat half of that. And many pubs that lean heavily on adsense are desperate for a competitor. So I'd say fb is -- at bare minimum -- a $5B/year company. Plus another billion or two from taxing every bit of money that flows through social gaming. Plus it seems like zynga will be able to do poker for money now. Plus I don't believe all the ads on fb proper are worthless, so roll that into the mix.
Finally, from your comments below, you seem to think advertising in general is worthless. If you think companies (US only) spend $400B/year because they're stupid, then I'm too dumbfounded to formulate a response.
[+] [-] jstrate|14 years ago|reply
I suspect many of you haven't seen his take on the history of the valley, which might give context to his views.
http://www.youtube.com/watch?v=ZTC_RxWN_xo
[+] [-] wpietri|14 years ago|reply
http://steveblank.com/category/secret-history-of-silicon-val...
[+] [-] jonmc12|14 years ago|reply
People have a large dimension of needs. Some of these needs, while necessary for survival thousands of years ago, are now obsolete as a survival utility function. McDonald's designs french fries to exploit these needs; Facebook builds social mechanisms. These needs will always be there - but at the same time there is a finite limit to the amount of attention on earth that can be expended fulfilling these old-world needs - it will plateau when human attention is exploited to the fullest. Meanwhile, there is arguably no cap for fulfilling the set of user needs that make the quality of human life better, and give our civilization the ability to sustain its own existence. Over the long-term, the set of human needs that have utility in our current environment should present the best investment opportunities - at least I sure hope so.
[+] [-] robterrell|14 years ago|reply
[+] [-] EternalFury|14 years ago|reply
Sure, a national endeavor for growth can include tax policies, broadband programs, educational reform, capital investments, flexible monetary policies, etc.
BUT, I think one of the most important and worthwhile goal should be the decentralization of high-growth job centers.
Setting up shop in Silicon Valley these days is ridiculously expensive. Besides, basing a large percentage of your high-growth businesses in an area that may be ravaged by a natural disaster at a moment's notice is clearly unwise.
Furthermore, the success of the nation should not be tied to the fate of Silicon Valley, or the fate of 3-5 major job centers. Hence, a national priority should be to decentralize this economic activity across the country.
There is no catch-22 here, contrary to what people say. ("We set up shop here because all the qualified workforce is here.")
With real estates, school expenses, public transportation capacity and urbanization reaching unsustainable levels, there is no doubt start-ups would benefit from setting up shop in less expensive areas, where their employees could live without mortgaging themselves to retirement or sacrificing the well-being of their family members.
[+] [-] usaar333|14 years ago|reply
[+] [-] Daniel_Newby|14 years ago|reply
[+] [-] rdl|14 years ago|reply
The best engineers will produce the best products, either for local-mobile-social apps or space exploration. At some level, good software people are somewhat fungible -- a great engineer could work on either, given some orientation.
I believe the best engineers would rather cure cancer, colonize space, create anonymous digital currencies, etc., and produce infrastructure and developer tools which support those things, rather than work on ad networks, games, photo sharing sites, etc., given equal access. The reason people haven't gone into space for the past 30-40 years is that working for NASA is a horrible experience for an entrepreneur, and creating software or technology startups is much easier.
Now that "software has eaten the world" (which I do believe), a great software engineer can effectively start a space company. Sure, your first 10-20 employees at a new ad network or game company might be able to make enough on equity to do it, but employee 50 or employee 500 would sure rather be working on something amazing like space than yet another ad network.
[+] [-] dm8|14 years ago|reply
Of course, for every Facebook there is a Zynga whose major accomplishment is pasting cows on the Internet. Unfortunately, too many "real engineers" are jumping on SoLoMo bandwagon and that is hampering real innovation.
[+] [-] 38f0ia|14 years ago|reply
Thanks for lowering the bar, Mr. Blank.
"Where the money is." Indeed. Money that could be invested in more worthwhile research. He's right. Thank God for NIH, NSF and the SBA, because now we have educators giving in to the lure of low brow internet marketing. Sad.
[+] [-] po|14 years ago|reply
In the dotcom bubble of 2001 I heard the same thing except with "internet" replacing "social media".
In the last bubble there were no customers. Facebook makes $4 per user. The users are customers. They produce real revenue. Nobody's debating whether Facebook can make money.
This may be true but how much of that $4 per user is driven by the bubble itself? How much advertising is coming from companies that are within the Silicon Valley gravity well? If the (so-called) tech bubble pops, people will still need cars, vacuum cleaners and food so how well does Facebook do with those kinds of advertisers?
The reason a bubble is scary is because it distorts your normal metrics of what a healthy company is. It doesn't matter how much money you're making selling hotdogs at the boardwalk if one day people stop going to the beach.
[+] [-] po|14 years ago|reply
That just doesn't follow. The advertisers are the customers. They happen to pay $4 for every person right now. If the advertisers dry up - because say, they go out of business or decide facebook isn't great value - then the facebook users are 'worth' a lot less.
[+] [-] forgottenpaswrd|14 years ago|reply
In Spain we had this houses boom, and everybody said: but houses are real, you need them, they are necessary so they will never go down.
It is not qualitative, but qualitative. They make $4, but they need $100 for the stock to be fair price.
Fb founders are selling as much as they let them, Goldman S are going to sell at least 50%. This is the biggest scam I had seen for a while.
[+] [-] dasil003|14 years ago|reply
[+] [-] varelse|14 years ago|reply
15 year veteran of the valley here, and as much as I agree with Steve Blank that the herd money is chasing social media right now (and why not?), I don't agree that the long-term payout investments are gone - just look at Planetary Resources for an instant counterexample (I know, they're based in Seattle so they don't count, right?).
But more importantly, all of Web 2.0's 30ish billionaires are as mortal as the rest of us. The difference is that they actually can throw money at that problem and stand a good chance of at least a modest payout (just look at Sergei Brin and Parkinson's research). And while I agree with Steve Blank about the importance of government funding for long-term technological development, I think we're about to see a Cambrian explosion in biotech as these guys try to fight off the inevitability of death. Because what good are all their toys if they don't stick around long enough to play with them?
Meanwhile, the north end of Silicon Valley has quietly transformed itself into a mecca for biotech and bioinformatics in recent years. Silicon Valley itself started out as farmland and look at it now. I see this as just the latest in a series of transformations to whatever is the next big thing.
[+] [-] robot|14 years ago|reply
Thanks to Apple products, now you can reach millions of people by writing an app. Due to the viral nature of social apps, you can now expect a useful app to reach for the masses without spending on marketing and advertisement. Can we say the same for anything other than mobile/web and social? No.
Until the social/mobile market matures, we will see each potential founder working on a mobile phone application instead of attacking a non-viral problem with a doubtful market/new technology.
[+] [-] AznHisoka|14 years ago|reply
[+] [-] crosh|14 years ago|reply
I feel that we have brilliant minds looking for quick paydays, which is understandable, but does not say much about our community. We need more Palantirs, Fusion IOs, and SpaceX type companies and fewer email, flash sales, and gaming companies.
[+] [-] RedwoodCity|14 years ago|reply
The valley has evolved over time too, and in order to be an interesting place it must continue to evolve. I have yet to see an end to interesting conversations, ideas, and things coming out of here.
[+] [-] Bud|14 years ago|reply
He also surmises that Silicon Valley is dead because of a few observations about Facebook, while ignoring that Apple has become the largest company in the history of the known universe.
[+] [-] ChuckMcM|14 years ago|reply
It is a bit short sighted, and while I disagree with the premise I'm certainly fine with Blank having an opinion that the 'glory days' of Silicon Valley are behind it.
But when I read that article I thought to myself, "Wow, here is someone that doesn't 'get' the valley at all." Because he didn't seem to remember that the valley "died" in 1984, if you recall that is when semi-conductor companies started going out of business and silicon was dead, it was all going off shore. Except that systems companies like Sun were being born, and Cisco, and a host of other infrastructure plays that were going to lead into the a huge up welling of innovation (and sadly patents). Then the dot com bubble burst and Silicon Valley 'died' again, no more would anyone build innovative tech companies in 'the valley' after all it was a wasteland, a burned out cinder that had burned brightly for half a dozen years, only to leave behind an infertile plain of concrete layups and landfills with t-shirts from companies nobody would ever remember. And now we've got Google, a re-born Apple, Ebay Etc. Facebook's IPO heralds the "end" of Silicon Valley? Really?
So when ever someone tells me that the valley is dead, and can't explain why this time it is actually going to die when the last several times it didn't die, I know that they don't understand why it lives, and thus can't reliably prognosticate about its death.
Its always interesting to read though. And when folks things it's dead, well smart people go out looking for the saplings.
[+] [-] redthrowaway|14 years ago|reply
"This guy" is Steve Blank[1]. He's kind of a big deal in SV and the startup scene in general. Whether or not you agree with his assessment of Valley culture, his personal cachet is such that it behooves you to take notice.
[]1 http://en.wikipedia.org/wiki/Steve_Blank
[+] [-] recursive|14 years ago|reply
[+] [-] koeselitz|14 years ago|reply
[+] [-] nhebb|14 years ago|reply
Manufacturing companies not only provide direct labor employment opportunities, but they also create 2-3 jobs in the local economy for every direct labor position.
The hardware companies of yesteryear made products that had a compounding value in the economy. Test and measurement equipment, processors, workstations, etc., were put to use making other products that had value, hence the compounding effect. I'm sure Apple products have a compounding value effect, but a company like Facebook probably doesn't, at least to the degree the old SV companies and their products did.
[+] [-] DanBC|14 years ago|reply
[+] [-] steauengeglase|14 years ago|reply
[+] [-] derwiki|14 years ago|reply
[+] [-] asto|14 years ago|reply
[+] [-] dataisfun|14 years ago|reply
[+] [-] drumdance|14 years ago|reply
[+] [-] recoiledsnake|14 years ago|reply
Sorry that's Microsoft, not Apple (even if during the dot com boom).
From Wiki:
Record Market Capitalization
On December 30, 1999 Microsoft reached an intraday high share price of $119.94[3]. With 5,160,024,593 outstanding shares (as of November 30, 1999),[4] it had a market capitalization of $618.9 billion. This was the highest market capitalization ever reached by a publicly traded company[5]. Adjusting for inflation to 2012, Microsoft's market capitalization would be $846 billion[
Apple only reached $600B.
[+] [-] mkramlich|14 years ago|reply
Elon Musk: I think we can put a man on Mars within 10 years.
Bud: Who cares what this guy thinks? (...)
see what I mean?
[+] [-] derwiki|14 years ago|reply
[deleted]
[+] [-] tnash|14 years ago|reply
Nope. The users are the product, not the customers.
[+] [-] drone|14 years ago|reply
However, the striking problem with the statement is that it is not backed up by data. How much money that would've been invested in "core" technology (technology used to enable other technology), pharmaceutical, or other investments was instead funneled for short-term gains into social start-ups? I'd understand that if one just read tech news, one might think all investment goes to SV software firms these days, but I have a hard time believing that's a fact and not just a matter of media selection.
[+] [-] akg|14 years ago|reply
I wonder if people criticized the telephone as much when people instead of "working" spent time chatting on the phone with their friends. Sure there will be people who waste time doing that, but I think in broader terms, it will help open up communication channels, enable new collaborations, allow a free exchange of ideas, and also lead to more innovation. It's just hard to see where things are going, but I would bet that they are headed in a positive direction.
[+] [-] jonny_eh|14 years ago|reply
[+] [-] yannickt|14 years ago|reply
[+] [-] SoftwareMaven|14 years ago|reply
There is no "true path" of SV that it can fall off of and be over. Instead, there is a continued cycle of very technical people working together to build significant equity that is then recycled for more new tech people to do the same.
When that stops happening, SV will die. In the meantime (like any other time), there are sparkly things drawing people's attention. And I would be willing to wager the crop of people making big exits today aren't going to be happy investing everything in what they just did.