Famous investor and entrepreneur Peter Thiel says he’s leaving Silicon Valley and taking his investment company with him. He’s decamping for LA and told the New York Times that Silicon Valley is over, which the Times points out is a popular trope among those who’ve had enough—enough wealth creation, invention and creativity, and fun. Stuff like that.
We must award Thiel points for honesty though his logic seems to be more of what works for a broken clock, occasionally right but more often off the mark. San Francisco is exhibit one. It is expensive, crowded, sometimes supercilious and unequal. If such characteristics presage a fall then, sure, the entire Bay Area might be in for a comeuppance.
But this isn’t the Bible or even a classical epic. It’s real life and while there are signs of change all around—Moore’s Law is tipping over—the signs also point to challenges that make people rich. I was struck by this Thiel line in the Times piece describing a generation’s work inventing new technologies:
“These technologies enabled globalization. They were about destroying the tyranny of place,” he said. “It was a bit paradoxical that the overwhelming majority of them emerged in this very small place.”
How quickly we forget. It is precisely the concentration of people, capital, and ideas in a small place that drives not only single inventions but a whole culture that goes with them. Having just written a book concerning all this (The Age of Sustainability) it is surprising and concerning that Thiel apparently doesn’t recall that textile manufacturing as well as its machinery development started and excelled in the British Midlands, a small place. So, did iron and steel making to support machinery development.
Detroit became Motor City for similar reasons. Henry Ford and the Dodge brothers were real people and so was Alfred P. Sloan. The point is that talent converges on a place where the brightest of the bright can interact, share ideas, and flourish. That’s what San Francisco and the Valley are all about.
For most of the last year I have been pitching the argument for K-waves, long economic cycles lasting 50-60 years in which industries are born and go through most of their lifecycles. The Information and Telecommunications Age is certainly getting long in the tooth and I believe a new K-wave is starting that will focus on renewable energy and producing ecosystem services like making fresh water and removing carbon from the air for profit. But this doesn’t mean the Valley is kaput.
Look at the long history of K-waves since the Industrial Revolution and you will notice that each succeeding wave gets support from industries in earlier waves. Sustainability won’t be possible without a healthy dose of modern IT including AI and IoT. And without sustainability, well, I don’t want to think about it.
So, Peter Thiel might be right about the Valley being over but it’s more about the end of an era, not the end of the world. If he wants to move to LA, he certainly should. But no one is clairvoyant or infallible. Thiel doubled-down on Donald Trump during the last election. How’s that one working out?