New Reality: Silicon Valley Wealth Machine – The Rebooting Meritocracy

Businessweek has a post about Silicon Valley wealth machine. Silicon Valley is going through another downturn. It’s the second major downturn in less than 10yrs. I’ve been on the ground for all of those years. It’s down, but not completely ‘out’.

Silicon Valley is a special place for entrepreneurship, and it continues to be. The issue is not that there is a wrench in the machine, but that the machine is broken. It’s rebooting.

One thing I love about Silicon Valley is that there are no handouts. It’s the ultimate entrepreneurial meritocracy. Change happens and it happens both from the bottom up (entrepreneurs) and the top down (capital market). The question is which force is driving the change.

Redistribution of wealth is upon us. The entrepreneurs and investors that move on this current market opportunity will capture the proverbial “chips on the table”. As an entrepreneur, I love this market. Opportunities are everywhere. Unlike the dot com bust, this tech (entrepreneurial) market never really crashed. Everywhere I look I see discounts and new opportunities. Smart money will move around, but in select places. Is the market scary? If you’re an incumbent it sure is scary.

Silicon Valley Web 2.0 is hurting, but not for the obvious reasons. A bigger force is at play here – massive redistribution of wealth is taking place. Some are scared, and some are welcoming the opportunity of possibly acquiring the wealth “on the table”. I think that Facebook and Twitter are great examples of what might be possible. Facebook will become the next Google. The only thing holding them up is that the ‘new revenue’ model that is soon to arrive at the “station”. When that “train” arrives (and it will) Facebook will say Goodbye to all the naysayers.

Research & Development Void?

The bigger picture is more long term and that’s all about research and development. Judy Estrin recently came out to talk about something really important – the innovation gap. Let me translate her thesis – we are screwed if we don’t have steady research unencumbered by short term agendas. Think how important institutions like Stanford, MIT, and SRI have been to Silicon Valley and entrepreneurship. Without these deep research institutions we would not have many innovations that created wealth – hello Ethernet; hello Apple; hello Cisco; hello Google, ..etc.

The lack of institutional research leaves a void in the Silicon Valley ecosystem. John Markoff postulates in his book “What the Dormouse Said” that the culture and research of the 60s drove the PC revolution. The question now is what revolution are we developing and where is the research? Will we miss the next important energy, medical, or tech breakthrough? Where is our modern day moonshot mandate?

How will it play out? The future is unwritten.

Update: The Wall Street Journal has a great perspective on how regulation is hurting entrepreneurship. Add the lack of research mentioned above and the opinion is complete.

Author: John

Entrepreneur living in Palo Alto California and the Founder of SiliconANGLE Media

16 thoughts on “New Reality: Silicon Valley Wealth Machine – The Rebooting Meritocracy”

  1. Excellent post.

    If Silicon Valley *ever* asks for a handout, I’ll eat a bag full of paper plates.

    The best part about the 2002 downturn was that the tourists finally went home. The people who stayed really had a passion for making new, interesting, useful, innovative, and even important things. It killed me that Silicon Valley pundits were tying the region, and the term “innovation”, to [insert commodity here]-on-the-web business plans.

    We’ll see this effect play out again this time around.

    To this day, I thank God that I didn’t build my career on dot-com craziness during the decade I was there.

  2. Corporations don’t share their research. If you think about it SRI shared their technology (web 2.0 speak) or better yet entrepreneurs stole it. In today’s market sharing and collaborating will be the norm.

    Problem: slow down in core research is choking the entrepreneurial market.

    Open source software is a shining light and the model for all research. Make it open and good things happen.

  3. Phil
    Right on! One thing I really like about the younger entrepreneurs now is that they have energy and guts to really do big things. I hope this market flushes out the tourists. What we need is ‘gravity’ to get the ball rolling in all sectors not just tech.

    Engago team: thanks for the video link; I forgot to mention HP’s influence (I was lucky enough to spend many years at that company). We need core research. Maybe Obama can lead in DC here.

    Trust = Collaboration = Invention

  4. Judy: I think the NY Times is certainly taking the same perspective as what I wrote. To say they copied me is a bit off. I’m happy to see Friedman on the same page as me, but his points are more about Sarbox not so much about research. I did notice his mention of moonshot and what that did for innovation. It is a great article and very timely. I think Obama has a great opportunity.

  5. http://www.linkedin.com/answers/financial-markets/equity-markets/MKT_EQU/391139-1791599

    1) Vocational Entrepreneurship vs. Necessity Entrepreneurship;

    2) Historically speaking, higher resource allocation towards US-based startups vs. the rest of the world–read, so much more money available to spray the field of ideas;

    3) Government mandated innovation (e.g. healthcare record management, green-energy);

    4) Less attractiveness of the US model combined with higher protectionism (immigration-, and commerce-wise);

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