Economy is cyclical, and so is Silicon Valley

SJ Mercury News ^ | 2/22/03 | Mike Langberg

[NormsRevenge]

There's been more than a little dark, bottom-of-the-cycle muttering in recent weeks -- some in the pages of this newspaper -- suggesting Silicon Valley is broken, that the engine of entrepreneurial growth has conked out.

The Internet and telecommunications boom of the late 1990s, the pessimists contend, was entirely a bubble and everything we gained has disappeared.

[Gorzaloon]

Economic cycles follow the old law of physics that says there is an equal and opposite reaction to every action. In other words, a long and prosperous period of growth is inevitably followed by an equally long and deep recession.

Umm, No. Thank you for playing "Whistle past the Graveyard".

An "Economic Cycle" is not an oddity or perversion like the South Sea Bubble, some of the Railroad scams, or the Dot Com Frauds.

I recall a few years ago, when our NASA/JPL contract expired, and NASA had a huge layoff, there were senior people all saying, over and over, "The xxx Project will come back". They chanted it like a religious litany, because the reality so terrified them they could not envision life without it.

Of course it is not coming back nor will it, nor will Consolidated Buggy Whip or Peerless Steam Looms ever make the Fortune 100.

[JNB]

When the boom started in 94, the cost of living in the Silicon Valley was not nearly was high as it is today. That alone would make corporations and people think twice about moving there.

[Billy_bob_bob]

...because Silicon Valley is and will remain the world headquarters of technology innovation."

True for the near term, but not for the long term. Detroit was one the world headquarters for automotive innovation. Although there are still companies there to this day the fact is that automobiles are designed and built all over the place. Detroit, while important, is no longer the be-all and end-all of the auto business. Same thing will happen to Silicon Valley. The whole "quality of life" issue is dragging that area down, there are lots of people leaving not because they can't get work but because they can't stand living there.

[q_an_a]

"But anyone departing simply because they believe the grass is greener somewhere else is making a big mistake, because Silicon Valley is and will remain the world headquarters of technology innovation."

Innovation is created by the hungry. You can bet that some of that innovation will move as business finds less expensive places to find solutions. Calif is like France the end started in the 80s had a short bump of five years (95-2000)and now is going back down. Someone turn out the lights when the last business person leaves.

[nwrep]

Umm, No. Thank you for playing "Whistle past the Graveyard". An "Economic Cycle" is not an oddity or perversion like the South Sea Bubble, some of the Railroad scams, or the Dot Com Frauds.

Thank you, Gorzaloon. Some people will not listen to reason. I remember some Tech CEOs being in denial in early 2001 when the semi/comm. market nose-dived, saying, don't panic, don' you know this is cyclical, we'll rebound in the fall, just like every other year. ...

Well, guess what, it is 2 years later, and the bleeding may have stopped, but the rebound is nowhere in sight!!

This Bay Area guy has the same problem. The reality is too brutal to grasp, so he chooses to bury his head in the sand waiting for another tech bubble. He does not want to see how different the business conditions are today than they were in 1994. Back then, you could start up a chip design company for half a million bucks. The average price of a home in the east bay area was around $125,000. In the Bay area it was around $225,000. Average salary for a new EE grad: $45K.

Fast forward to today. Cost of a chip design start up with the same number of people - $50 million. Av. home price in East Bay: $350,000. Av. home price in the Bay Area: $650,000. Av. salary for a new EE grad: $65K. You do the math.

[buffyt]

Like Rush says, computers replaced typewriters. If you worked at a company that made typewriters it was a DOWN cycle for you, but you could go to work somewhere else and make computers perhaps. Simplified explanation. Whips and buggies gave way to autos. Etc.

But not all cost of living is sky high in Calif. like someone mentioned in another comment. They said it wasn't as expensive in Silicon Valley before 1994. I lived out there in 1988 and parts of Calif. were already expensive. It is still cheap if you aren't limited on LOCATION. There are homes selling for $130 - $400 east of LA, new homes. You might not be able to afford a house in San Marino where a house can cost you $2million. But Victorville is CHEAP and there are other towns where homes are Dirt Cheap, too. In Victorville, a very nice, growing town, you can get a beautiful brand new home for about $100 a square foot.