Sunrise on Silicon Valley

The reputation of Silicon Valley precedes itself in the manner of Manchester’s mills during the birth of the industrial revolution or New York skyscrapers in the boom years after the end of World War I. The power and economic might of these epicentres of commerce should be manifest in an immense physical presence towards which would-be Horatio Algers are drawn with their bright shiny dreams.

Perhaps a virtual world deserves only virtual wealth. Despite repeated assurances that visitors will rub shoulders with millionaires in the shopping districts of Silicon Valley, and that this stretch of uninspiring real estate is the engine room of the Californian economy (one of the world’s largest), you still get the feeling that you are the victim of the world’s biggest practical joke. Where is the ostentation of Monaco and the condescension dripping from the walls of family estates in England?

Exit the six-lane highway at any of the towns along Highway 101—Palo Alto lies to the north of Stanford University, or the strangely Orwellian district of Sunnyvale that is home to Google, Yahoo and the NASA research park—and there is little to break the monotony of blue skies, perma-smog and low slung glass buildings glinting in the Californian sunlight. It all looks as impermanent as a spaghetti-western film set. Given that this phenomenon has arisen in only the last two decades and has already had its booms and busts, it can be excused for creating the impression that it could all be packed up and trucked out the day after tomorrow.

The ready-to-go dynamism that makes this place the world capital of work and commerce is underpinned by a nonchalance born of the knowledge that the denizens of digitalia have us just where they want us. We surf the websites they have built, and buy their software and the bits of stuff that go with them as acts of faith, pretending to know what it’s all for. Our struggle to make sense of all the gigabytes of content our media stream at us is the revenge of the nerds we used to humiliate at school by selo-taping them to prominent landmarks. We’re in their world now, flapping helplessly like upturned turtles.

The geniuses who have made all this possible are suitably smug coming to work at 10am in their Birkenstocks and checkered shirts and spending an allotted day a week on research projects of their own choosing. James, a senior software engineer with Yahoo, talks casually of running software development teams in Bangalore and capturing the Asian market for internet shopping. ‘We aren’t working the insane hours we used to during the bubble’, he says as he separates guacamole and salsa into neat piles on his plate in a Tex-Mex restaurant in downtown Mountain View. ‘But it seems as if we are coming into another period when everyone is getting excited again. We can’t hire fast enough and we have two people to a cubicle.’

The stories from recent years of internet companies launching shares on the NASDAQ without turning a profit, or any clear indication as to when they might, have become legends. Remember Netscape, the search engine that was the market leader until the man who cannot be denied, Bill Gates, caught up and overtook it with Microsoft Explorer? In 1996 its shares debuted on NASDAQ and soared 167 per cent from the $US28 issue price within hours of going on sale, hitting $US75 before settling down to $US58 at the end of the trading day. After its Microsoft mauling, AOL picked up Netscape for a song in 1998 as part of its ill-fated strategy to turn searching the net into cash. Netscape only turned a modest profit for a couple of quarters in 1996–97.

Cautiously and without fanfare—so as not to disturb the still-skittish investors who lost their shirts in the first dot.com boom—venture capitalists have been looking at technology companies, most of them internet companies, that have good prospects. In turn the venture capitalists are coaxing reluctant banks to get interested in underwriting share offerings again. The hook is the upcoming initial public offering of Google, the quixotic search engine which has spawned a proprietorial verb in ‘to Google’ in the same mould as ‘Hoover’ and ‘Xerox’. (I am particularly looking forward to ‘google’ working its way through a regular conjugation and we start reading phrases such as ‘They will have been googled’ and ‘Methinks there is some googling afoot here’).

Started in a garage in 1998, by Sergey Brin and Larry Page, two computer science graduates from Stanford, the search pioneer company has ridden to pre-eminence on the back of search technology that was superior long enough for them to surge ahead of competitors. Google attracted a cult-like following for its principles of no content and open and egalitarian access. In 2003 the company reported turnover of nearly $US1 billion with a net profit of $US105 million brought in exclusively by a strip of paid links that appear on the right margin of every Google page.

The share-offer is being sold to the public through a convoluted bidding process that Google is promoting as another example of how the company eschews the big-end of town, delivering shares into the hands of average-Joe investors. It is expected to raise $US2.7 billion and make its founders and executives—who bought into the company for a snip of the $US100–$US140 a share the market is expected to pay—extremely wealthy individuals.

The typical pattern of IT innovation is that somebody comes up with a good idea and starts selling it. Competitors copy what is now proven to be a good idea, but try to do it better. This is presently happening in Silicon Valley as Yahoo, Google and Microsoft compete to become the kings of search. What isn’t clear is who has the initiative. Each company is jockeying for position, launching or preparing to launch new products. We mugs, with cash in hand, then subscribe to services offered by Google Mail or Yahoo Living Room. (Don’t ask what that’s all about because I haven’t got a bloody clue).

In the meantime, Larry Choy, the head of careers at Stanford University does not have to set foot inside the computer science department because ‘undergraduates are walking out of here into $US75,000 jobs, so we spend our time worrying about the humanities majors’.

So shut the blinds on sunny days, put on a tape of rain and thunder and encourage your kids to get closer to the computer screen. There’s a pot of gold at the end of the phone line. 

Jonathon Greenaway is a freelance writer and consultant based in London.

 

 

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