Tuesday, November 27, 2007

Is Silicon Valley still dominant?

In summarizing the Nokia “Web 3.0” article, I forgot to mention one key point. The whole tenor of the article (and the accompanying series) is part of the Merc’s crusade to reassure locals that Silicon Valley is still the center of the technology world. For example, this photo caption from Sunday’s paper (not on the web):

Engineers test imaging technology at Nokia Research Center Palo Alto. The opening of the facility a year ago illustrates how the valley’s pre-eminence as an incubator of innovation has been enhanced by economic globalization, not diminished.
Monday’s Part 2 carries on the theme with the headline “Valley’s edge: Success hard to copy.” I’m sorry, but this is way too Pollyanna-ish for my taste — seriously in denial as to the reality of globalization and the product life cycle.

I have no problem saying that there are times that the jobs moving to Silicon Valley outnumber those leaving the valley, and that more such times may lie ahead. But technology jobs are moving to Singapore, Tel Aviv, Banaglore, Beijing, Kiev, and any number of other places, not to mention other technologies being created and growing where the center of action is elsewhere (like Helsinki and Tokyo for mobile phones). So as with any other high-wage, high value-added industrial cluster, Silicon Valley faces the constant challenge of re-inventing itself to find new innovations that can only be created here. It can be done, but it’s not a sure thing.

I’m sure the CEOs and VCs of Silicon Valley don’t believe that SV is invincible, because for the past decade they have been pouring their money into other parts of the world. For many entrepreneurs, there is no other option — the kids’ soccer league and public schools are here, as are their professional networks — so they will start firms here no matter what. As in the past 50 years, some of these will succeed and many will fail.

But what about employment of the rank-and-file? Like London and Geneva, the Bay Area is becoming impossibly expensive for clerical staff, schoolteachers, cops etc. etc. (For example, for hospitals Northern California has 9 of the 10 most expensive labor costs in the entire U.S., a third higher than the national average.) Eventually these labor costs will push the cost of middle class living even higher. So even with the success of valley companies, how much of that success will accrue to local employees and the local economy?

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