Despite the obvious contradiction in the entitling of this post, I am hopeful that it piques the senses of the reader (we will just assume that they exist) in some way. In my own magniloquent universe, I predict, perhaps even delight in, a severe correction to occur, in the software universe. Having existed (insignificantly, if I may add) in the tech mecca (two years in the hinterland, or the greater heartland, if you will, in Walnut Creek and Berkeley), and two years in the heartland right inside Silicon valley, in what has to be the most overpriced land in the world, something intuition tells me that this is all going to collapse very soon. There aren't too many solid facts that I can present that would demonstrate the point, but there is considerable evidence that we are in the midst off a "bubble", and this goes beyond my deep seated distaste for the Silicon(e) valley start up culture and enterprise.
Let me organize my words to comb through my disorganized thoughts, leaving aside the emotional component for now. I work in a company that manufactures chips - a real product. The current watchword is energy efficiency, or performance per watt (what?). This is real technology which can then be used to create devices that are energy efficient. Moving down the pipeline (yes, we use that word often nowadays), enterprising software people write software to do things with this hardware; some great things, some not so great things, and some useless things. Then there is another phenomenon called social networking that appeals to the commoner. The great social networking sites have enabled millions to connect with the other millions. Coupled with the advent of mobile technology, the wave has swept everyone away so that it might now not be possible to envisage how we existed in more primitive times. People write web apps that allow us to do ever more useful things with these things. For instance, we can access our bank account from our little mobile device - an excellent innovation. Social networking sites can generate revenue by hosting advertisements (you now get to watch mandatory 15 sec pieces of bilge if you yield to the craving of listening to Chopin's Fantasie impromptu on youtube - not a social medium in itself, but I can't help mentioning it).
Smaller tech companies get bought over by bigger tech companies based on promise. People tell us all the time that we must look beyond employment towards eventually creating a start up oneself. America is the land of opportunity and Silicon Valley is the headquarters. What I do not understand though is how these start ups have improved our quality of life. Just the other day, my wife was showing me pictures of cute dogs from peeinterest, which I totally did not react to in an enthusiastic way. The same goes for many of the text heavy jokes that I have trouble parsing - maybe I just have ADD in these matters. The buzz surrounding them seems a little unreal. People seem to be reacting the same way they did during the 99 tech stock bubble (yes, they were fascinating times) where any mention of tech stocks would generate mass hysteria. Well, I am getting ahead of myself since I do not understand the mechanics of how the web and technology 'ecosystems' work. My premise is that venture capitalists invest based on promise, in the hope that if some of these investments go big, they make a ton of money. The same goes for the big firms that buy them out.
It is only natural that any new, useful technology creates interest. Nevertheless, at some point this interest transforms to irrational exuberance. The markets are now at an all time high (local maximum maybe?). Ad revenue is king; the common consumer is fodder (in the nuts and bolts space); markets reward volatility and hype fuels it.
There is yet another conjecture that I would like to put forward. Since we cannot have increasing returns in an economy based on scarcity, all gains made by one sector must be backed up by something else. People cannot invest in technology indefinitely unless their basics are better off than before. Since we do not have any fundamentally life changing changes in other spaces - debt levels are increasing, wage levels are not getting any better, there are no major scientific breakthroughs, oil is getting scarcer and scarcer, and no means have been found to treat the energy crisis. It is a zero sum game in other words. Hotspots generated by silicon valley things have time scales associated with them. There are local, or small time scales (investments, buzz, start ups, angel sharks, etc.) in which all we hear about is how great it is to be part of this revolution, and how some of these youngsters can buy private jets. It is the longer timescale that interests me. At what point do we know that the bubble will burst. How does this locally generated source term travel across the global economy - it is in many ways like a wave problem (hyperbolic?), an instability. One sector cannot indefinitely feed on the rest. Demand for consumer items will fall and there will be a correction.
Silicon valley has some expensive real estate. My apartment management had recently informed me that our lease renewal price was $2200 per month. This is for a 1 BR, 700 square foot thing - albeit except for the size it is truly a luxury space, excellent people and all that. Buying a house in the area - a normal, 3 BR maybe - might cost one something like a million or close. I suspect that this is all fueled by the giants like google and facebook, who are essentially driving everyone else away (wonder where the support staff live?). The countless number of start ups do the same thing.
Some day, not in the very distant future, we will see that the (expected) demand for these software products have fallen. Software engineers will get fired, and this will then cause a correction in general. If you are a young starry eyed wannabe software engineer (let us apply the term globally, for there are all kinds of software engineers, yours truly included), just be warned that there is hell to pay later on. I would also like to posit that unless these software engineers are truly useful they will get the boot. People hired to do unnecessary things will get kicked out. There will be an exodus of Indians and Chinese skilled laborers leaving the country.
I do not envision that the place will be wiped out since we do have real companies making real products with real revenue. But if we have internet companies (okay okay, ad revenue is an old concept; companies living off them have been doing so for a long time) taking (quantitatively) the top spots in market valuation, this is all a delusion.
We should wait for the fed to raise interest rates. This is actually a godsend if you are looking to make a killing by speculating against this trend, and for once, being happy as a result of it. The key point is, 'when'.
Let me organize my words to comb through my disorganized thoughts, leaving aside the emotional component for now. I work in a company that manufactures chips - a real product. The current watchword is energy efficiency, or performance per watt (what?). This is real technology which can then be used to create devices that are energy efficient. Moving down the pipeline (yes, we use that word often nowadays), enterprising software people write software to do things with this hardware; some great things, some not so great things, and some useless things. Then there is another phenomenon called social networking that appeals to the commoner. The great social networking sites have enabled millions to connect with the other millions. Coupled with the advent of mobile technology, the wave has swept everyone away so that it might now not be possible to envisage how we existed in more primitive times. People write web apps that allow us to do ever more useful things with these things. For instance, we can access our bank account from our little mobile device - an excellent innovation. Social networking sites can generate revenue by hosting advertisements (you now get to watch mandatory 15 sec pieces of bilge if you yield to the craving of listening to Chopin's Fantasie impromptu on youtube - not a social medium in itself, but I can't help mentioning it).
Smaller tech companies get bought over by bigger tech companies based on promise. People tell us all the time that we must look beyond employment towards eventually creating a start up oneself. America is the land of opportunity and Silicon Valley is the headquarters. What I do not understand though is how these start ups have improved our quality of life. Just the other day, my wife was showing me pictures of cute dogs from peeinterest, which I totally did not react to in an enthusiastic way. The same goes for many of the text heavy jokes that I have trouble parsing - maybe I just have ADD in these matters. The buzz surrounding them seems a little unreal. People seem to be reacting the same way they did during the 99 tech stock bubble (yes, they were fascinating times) where any mention of tech stocks would generate mass hysteria. Well, I am getting ahead of myself since I do not understand the mechanics of how the web and technology 'ecosystems' work. My premise is that venture capitalists invest based on promise, in the hope that if some of these investments go big, they make a ton of money. The same goes for the big firms that buy them out.
It is only natural that any new, useful technology creates interest. Nevertheless, at some point this interest transforms to irrational exuberance. The markets are now at an all time high (local maximum maybe?). Ad revenue is king; the common consumer is fodder (in the nuts and bolts space); markets reward volatility and hype fuels it.
There is yet another conjecture that I would like to put forward. Since we cannot have increasing returns in an economy based on scarcity, all gains made by one sector must be backed up by something else. People cannot invest in technology indefinitely unless their basics are better off than before. Since we do not have any fundamentally life changing changes in other spaces - debt levels are increasing, wage levels are not getting any better, there are no major scientific breakthroughs, oil is getting scarcer and scarcer, and no means have been found to treat the energy crisis. It is a zero sum game in other words. Hotspots generated by silicon valley things have time scales associated with them. There are local, or small time scales (investments, buzz, start ups, angel sharks, etc.) in which all we hear about is how great it is to be part of this revolution, and how some of these youngsters can buy private jets. It is the longer timescale that interests me. At what point do we know that the bubble will burst. How does this locally generated source term travel across the global economy - it is in many ways like a wave problem (hyperbolic?), an instability. One sector cannot indefinitely feed on the rest. Demand for consumer items will fall and there will be a correction.
Silicon valley has some expensive real estate. My apartment management had recently informed me that our lease renewal price was $2200 per month. This is for a 1 BR, 700 square foot thing - albeit except for the size it is truly a luxury space, excellent people and all that. Buying a house in the area - a normal, 3 BR maybe - might cost one something like a million or close. I suspect that this is all fueled by the giants like google and facebook, who are essentially driving everyone else away (wonder where the support staff live?). The countless number of start ups do the same thing.
Some day, not in the very distant future, we will see that the (expected) demand for these software products have fallen. Software engineers will get fired, and this will then cause a correction in general. If you are a young starry eyed wannabe software engineer (let us apply the term globally, for there are all kinds of software engineers, yours truly included), just be warned that there is hell to pay later on. I would also like to posit that unless these software engineers are truly useful they will get the boot. People hired to do unnecessary things will get kicked out. There will be an exodus of Indians and Chinese skilled laborers leaving the country.
I do not envision that the place will be wiped out since we do have real companies making real products with real revenue. But if we have internet companies (okay okay, ad revenue is an old concept; companies living off them have been doing so for a long time) taking (quantitatively) the top spots in market valuation, this is all a delusion.
We should wait for the fed to raise interest rates. This is actually a godsend if you are looking to make a killing by speculating against this trend, and for once, being happy as a result of it. The key point is, 'when'.
