laying off a large number of workers in snap chatDramatic valuations have fallen at Meta and Apple, and hiring freezes at other big tech companies have given new fuel to an increasingly common question: Is Silicon Valley’s golden age coming to an end?
Experts say the answer is complicated. The tech industry has been experiencing impressive growth for quite some time, buoyed in recent years by the pandemic that has forced most of the world online and led to a boom in demand for tech services. This explosion–and the higher salaries and office benefits that came with it– It seems to be slowing down.
“This party can’t go on forever,” said Margaret O’Mara, a professor at the University of Washington and author of The Code. Silicon Valley Re-industrialization of America. “In many ways, we’re getting back to normal after a long period of high altitude during which everything has gone big.”
These trends, she added, are exacerbated by the larger global downturn — a world not immune to. The Federal Reserve has Starch Interest rates have already tripled in 2022, and more increases are expected.
The previous low interest rate environment had fostered a technology boom, helping create a parade of “unicorns” – companies worth more than a billion dollars. Notable examples include Airbnb and Uber – With a value of $47 billion and $82 billion in public offering each. But as interest rates change, O’Mara said, there is “less money flowing” and investors will use cash “in a wiser way.”
“Some investors will still have liquidity, but during a recession like this, the deal flow will cool,” she said.
Rapid growth has also been tempered by a series of high-profile cautionary tales, from WeWork retreat to me Theranos crashthe blood-testing company that rose in popularity in the glowing environment of the press, eventually amassed a valuation of more than $1 billion before finding its claims were untrue.
Stories like this, combined with more scrutiny of the tech industry in general over the past decade — including whistleblowers Revelation against Facebook and public Interviewing tech executives in Congress – Silicon Valley picture shakes. Even some of its most vocal heroes, including former President Barack Obama, seem to have reconsidered. Obama used Facebook extensively in his 2008 campaign and Praise the company In his 2011 State of the Union address, only to owes her A role in spreading misinformation, especially about elections, in a recent talk at Stanford University.
“One of the biggest reasons democracy is weakening is the profound change that has occurred in the way we communicate and consume information,” Obama said.
US lawmakers and federal agencies have now entered the fray. With increased action from the Federal Trade Commission (FTC) and looming legislation from Congress, Big Tech may face its biggest hurdles yet.
Public perception of technology in general has also changed, with 68% of Americans They say they believe Tech companies have a lot of power and influence in the economy – up from 51% in 2018.
“Americans don’t really like big things — people worry about concentrated force,” O’Mara said. “No one can be the golden child and be a $2 trillion company. It’s part of the life cycle.”
Silicon Valley is expanding out of California
Experts say the geography of Silicon Valley is changing, too. An umbrella term for the area south of San Francisco, the Valley has established itself for nearly a century in the public ethos as a center of innovation. Its rise as a technical hub began when US military operations established sites for decades of research beginning around the 1930s, a trend that continued in the private sphere over the next few decades.
But the tech industry has been expanding far beyond the Gulf of California — a trend that has been accelerated by the pandemic. In 2021, the electric car company Tesla relocation based to Austin, Texas, After similar moves From other technology companies such as Oracle and Hewlett-Packard.
This has been reflected in hiring as well, said Brent Williams, who works for Michael Page’s recruitment agency, adding that the effect is what the industry calls “the winter of venture capital.”
“Covid has changed the whole game,” he said. “Talent acquisition has become very competitive for companies because they target not just people in the Gulf, but everyone in the United States.”
This trend, along with the rise in work-from-home policies, would have been shocking in pre-pandemic times — tech companies invested billions in their sprawling campuses, providing employees with perks like transportation to and from work and preparing meals on site.
‘The industry’s obituary was written prematurely’
Despite the growing list of roadblocks, “Silicon Valley remains incredibly strong,” said Stanford economics professor Nicholas A. Bloom. He added that it had endured “multiple cycles,” including downturns in 2001 and 2008, and recovered each time.
“While some companies may migrate abroad due to work from home and globalization, Silicon Valley is still ground zero, and no other region is even close to its prominence in the industry,” he said.
In fact, O’Mara said, it’s unlikely we’ll see a major shift away from the valley’s heritage or its physical place in the heart of the bay.
“The Bay Area and San Francisco have a resilient appeal and distinctive characteristics that are hard to replicate anywhere else,” she said. “There is a reason why people come there to live – they want to be there.” That remains true, even as California grapples with a housing crisis, as employees flock to cheaper states.
“The industry’s obituaries were prematurely written many times,” she added. “This may be the end of an era for Silicon Valley, but it is unlikely to be the end of Silicon Valley.”