In Silicon Valley there is a curious event happening, there's lots of investment, but still the area is losing technology jobs. Why?
C|NET has an interview with Stephen Levy, director of the Center for the Continuing Study of the California Economy about this strange trend in Silicon Valley. Many of the things he has to say, I find myself in agreement with from my vantage point of being here on the ground working in the tech industry.
In Silicon Valley, help not wanted ( February 10, 2005, 11:00 AM PT By Ed Frauenheim Staff Writer, CNET News.com):
The index shows a curious combination of strengths and weaknesses. For example, venture capital investment in Silicon Valley rose by 15 percent last year, and the region now receives 35 percent of the nation's venture capital, up from 14 percent in 1995. What's more, job losses were less severe than in the previous two years. On the other hand, the gap between low-income households and other households increased. And housing became less affordable, especially for the poorest residents.
Now, why is this happening? You'd think investment is rising, so jobs would be rising to match the investment, yes? Nope, that's not what is happening. Further, all the empty buildings left over from the .COM BOOM are still empty, especially the see through buildings that have never been occupied.
Steven Levy is close to the mark but I think he's too dismissive of what I see as the major force here. Namely, globalization. With the computer networks today allowing rapid communication and especially rapid exchange of data such as the source code to software, it is much easier today to locate engineers in farflung places. But here's what Levy has to say:
What do you say about the impact of offshore economic trends? In other words, sending work to India and China and the Philippines. Is that playing a role in the job losses?
I think it plays a modest role nationally. There's always been globalization. Now there's globalization in services. I would emphasize that what's different now is the spigot of new company creation; it's a lot less forceful than it was (in the late 1990s).
You've got to be inventing something new to do, because the older stuff gets mature. We've stopped doing the creation side, and so the outsourcing is more visible, but I don't think it's accelerated that much.
What I see as an employee in the tech industry here is that the job growth is happening in Bangalore and Beijing and other farflung places. Companies are taking that investment money, and forming overseas development groups. The job growth in Bangalore especially isn't just "services" but are engineers involved with product development.
Levy says later in the interview that Silicon Valley's niche is "innovation". Hmm... Yes, it is, that's been Silicon Valley's historical role. Today, though, innovation is happening in other places as well as in Silicon Valley. We (Silicon Valley, that is) don't have a lock-hold on this, and it is the Internet that is allowing it to happen.
To collaborate on something like software or chip design there are large quantities of data involved. The data is source code, chip design files, test programs, etc. To collaboratively work on that product between farflung offices means being ablt to share that data over long distances. In the past it wasn't feasible because the communications infrastructure wasn't there, but today it is, and today it's feasible.
Not only is it feasible, it's happening in a wholescale fashion.
Despite this statement:
I think we're kind of trying to live off of our legacy. It's not a Silicon Valley problem; it's a national problem. There are other countries, including China and India, that now have science, technology and skilled people. And the Internet is a great leveler. So, yes, that's a national threat.it seems like he's out of touch with the reality here. Yes, we're in a competition with the farflung places, and yes the job growth is happening there rather than here. So why is he poopooing the effects of offshoring on the Silicon Valley tech industry?
He closes with this thought that's supposed to give us a bright hope for the future:
And there's a big nanotech initiative at NASA here that the congressmen got funded. We could be the nanotech center and the stem cell center.Okay, but how is either of those related to the industry and the people who are here on the ground in Santa Clara County? The industry and people located here are specialized on semiconductor design and software design. Maybe nanotech is close enough to the materials science work done by companies like Applied Materials, but stem cells have nothing to do with Santa Clara County's workforce. He's just out of touch...?
I should note; yes, there is a lot of biotech companies in the bay area. They just aren't heavily represented in Santa Clara County, instead they're nearer to San Francisco.