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Big layoffs at Snapchat, dramatic valuation declines at Meta and Apple, and hiring freezes at other big tech companies have given new fuel to the familiar question: Is Silicon Valley’s golden age coming to an end?
The answer, experts say, is complex. The tech industry has been booming for some time in recent years due to the pandemic that has brought most of the world online and the demand for tech services has increased. That boom — and the high salaries and office benefits that came with it — appears to be slowing.
“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 and the Remaking of America. “In many ways, we’re getting back to normal after a big run where everything was dominant.”
Those trends have been exacerbated by the Great Global Recession — to which the tech world is no exception, she added. The Federal Reserve has tripled interest rates by 2022, and more hikes are expected.
The previous low-interest environment fueled technological growth, helping to create a lineup of “unicorns” – companies valued at more than $1 billion. Notable examples include Airbnb and Uber – valued at $47bn and $82bn in their respective public offerings. But when interest rates change, Omar said, “there’s less money going around” and investors are going to deploy money “more judiciously.”
“Some investors will still have money, but during this kind of turmoil the deal flow slows down,” she said.
Its rapid growth has been fueled by a series of high-profile cautionary tales, from WeWork’s decline to the collapse of Theranos, a blood-testing company that gained popularity in the hot press and eventually reached a valuation of more than $1. bn before the claims were proven to be untrue.
Stories like these, along with increased scrutiny of the tech industry over the past decade — including the whistleblower revelations at Facebook and public statements by tech executives in Congress. – They are rocking the image of Silicon Valley. Even some of his vocal champions, including former President Barack Obama, seem to be reconsidering. Obama in 2011 He used Facebook extensively in his 2008 campaign and praised the company in his 2011 State of the Union address, but denounced its role in the spread of disinformation, particularly around elections, in a recent speech at Stanford University.
“One of the biggest reasons for the weakening of democracy is the profound changes that are taking place in the way we communicate and use information,” Obama said.
Lawmakers and US federal agencies have now jumped into the fray. With growing action from the Federal Trade Commission (FTC) and legislation looming from Congress, Big Tech may face its biggest roadblock yet.
Public perception of technology has also changed, with 68% of Americans believing technology companies have too much power and influence in the economy – up from 51% in 2018.
“Americans don’t like big things — people worry about concentrated power,” O’Mara said. “Nobody can be a golden boy and become a $2tn company. It’s part of the life cycle.”
Silicon Valley expands from California.
The geography of Silicon Valley is also changing, experts say. A catch-all term for the area south of San Francisco, the Valley has been cementing itself as a center of innovation in folk music for nearly a century. U.S. military operations began to emerge as a technology center beginning around the 1930s when they established research contract sites, a trend that continued into the private sphere over the next few decades.
But the tech industry is expanding far beyond California’s Bay Area — a trend accelerated by the pandemic. In the year In 2021, electric car company Tesla moved its headquarters to Austin, Texas, following similar moves by other tech companies like Oracle and Hewlett-Packard.
Brent Williams, who works at Michael Page’s recruitment agency, says this has also been reflected in hiring, resulting in what the industry calls a “venture capital winter”.
“Covid has changed the whole game,” he said. “It’s become very competitive for companies to find talent because they’re not just going to people in the Bay Area, they’re going to everyone in the United States.”
This trend, coupled with increased work-from-home policies, was alarming before the pandemic — with tech companies investing billions in their sprawling campuses to provide workers with things like transportation to and from work and on-site meals.
‘The ghost story of the industry has been written prematurely’
“Silicon Valley is incredibly resilient,” said Nicholas A. Blue, a Stanford economics professor, despite the growing list of roadblocks. In the year He said it had weathered “many cycles” including collapses in 2001 and 2008 and recovered each time.
“Although some companies are migrating from home and abroad due to globalization, Silicon Valley is still ground zero. There is no other area in the industry that even comes close to its prominence,” he said.
In fact, O’Mara said, we’re unlikely to see much change from the valley’s legacy or physical location in the heart of the bay.
“The Bay Area and San Francisco have strong pull and unique qualities that are hard to replicate elsewhere,” she said. “There’s a reason people come there to live – they want to be there.” This is true even as California faces a housing crisis, with workers flocking to cheaper states.
She added: “The industry’s ghost story has been prematurely written a few times. “It may be the end of an era for Silicon Valley, but it may not be the end of Silicon Valley.”
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