I found myself, once again, in a debate with my friends on whether the Silicon Valley real estate market is currently in a bubble. Could the prices keep going up? And that’s when it dawned on me. They will. No doubt. Why? Because from here on out, all new companies are going to be tech companies. Full stop.
Oh, but you say, what if I went and created a car company? You mean Tesla? That’s a tech company. Or what if I were to start a grilled cheese restaurant chain? Yep – that one’s a tech company too. Or how about a chocolate factory? Todd and Cam are literally writing their own software to operate and measure their chocolate factory because they’re so displeased with the off-the-shelf options at their disposal!
In today’s world, if you’re starting a NewCo and it’s not, at a foundational level, a tech company, then it’s unlikely to succeed. Yes, you can operate a small business any way you’d like, but I’m talking about companies of scale. You’ll be out-maneuvered by a competitor who figures out how to leverage technology to make their operations more efficient. Or you’ll be outgunned by a competitor who’s able to craft a better product for market – more adept at using data and customer metrics to iterate and refine their offerings. The reasons are numerous, but if you are not a tech company, you are at a severe disadvantage.
If you believe this, there are a whole mess of implications – many more than I’ve thought through. A few:
1. To my opening story, Silicon Valley real estate will continue to explode. The network effects within the SF Bay Area around technology make this the easiest place to start a new tech company. Just look at where Tesla, The Melt and Dandelion were founded. That’s not to say that other areas don’t have great technology communities. But the SF Bay Area will continue to have the disproportionate share. The new car companies and chocolate factories will be founded here, and that will bring with it the good and bad of a rapidly expanding local economy.
2. Our education system needs to adapt, now. I look at my alma mater, Yale, and I worry. They don’t attract the best and brightest *technology* minds – those folks go to schools with better CS programs where they will find more like-minded professors and peers. For a school to remain an absolutely top institution, it needs to turn out individuals who are completely comfortable in a technology company, even if their first stop along the way is an investment bank or consulting firm (which are, largely, run on technology in their own right). This is not just about higher education. This is also about molding students from early on – about teaching them to imagine and then make. Two of the most vital skills in a technology driven company.
3. There will be an ever stronger polarization between the haves and have nots in the economy at large. Technology companies are, almost by definition, labor efficient. Those able to work and be productive in technology companies (engineers, product managers, designers, etc) will thrive. Those who are not will find themselves in increasingly commoditized (and therefore lower wage) positions.
4. Non-technology oriented industries will continue to be disrupted by those approaching the same problem with a healthy dose of technology. Just as books, music, and even taxis have now been disrupted, so too will be mining operations, construction, labor, and the like. It’s just a matter of time before a tech-oriented entrepreneur (or two, or three) put their minds to figuring out how to solve the inefficiencies in these spaces.
If every new company of scale is indeed a tech company, what are other societal implications? Comments welcome.
Nice post! I definitely agree – have we ever seen a futuristic movie where technology wasn’t everywhere and manual labor was scarce? It’s hard to imagine any other future. Robotics is barely into its toddler years today, and its explosion is imminent. I long wondered why the hell we send humans down mining shafts – once that changes, we’ll see a sort of revolution. Finally, I am thinking of designing an affordable but high-quality coffee machine. My first problem to solve? Software and tech. It needs to be hella smart and connected if I want it to make the best coffee it can.
I wouldn’t draw conclusions about real estate prices, though. Land will always be at a premium, but actual building costs will drop sharply once the massive 3D printers come online. So I think we may see a slow-down of real estate prices in 5-10 years and they’ll stay horizontal for a bit.
correction: manual labor wasn’t* scarce. No Edit option? Sad face 🙂
I had no idea how to approach this bern-efoow I’m locked and loaded.
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In Silicon Valley, Alex, the land is actually what’s scarce – not the building itself!
Hah, yes, I do know the area. But I meant, you can build more than one dwelling on same parcel of land. They go vertical! So if you take that cost down by 5x for a while (although 3D house printers promise a lot more cost reduction than that), that’s plenty to stall the rising prices.
Put another way – if there’s a technological solution to all other problems, we should at least be fair and consider a possibility of a technological solution for the problem of real estate as well.
Is it worth being pedantic in that it is “every company is a computer technology company” and not “every company is a technology company”. We had technology before computers.
technology; the application of scientific knowledge for practical purposes, especially in industry.
And what is it of computer technology that makes every company now a computer technology company? Is it the transistors or is it the network, the internet? Networked technology? Communication with everyone. Is that the real enabler?
I’m thinking of smart but pedantic people scoffing at the idea of “every company is a technology company” when you talk about Silicon Valley.
I don’t mean to jump in so often, but you have a good point, Paul. I do think it might be a redundant correction – can you have technology today without involving computers (i.e., a chip-driven device)? At the very minimum, you use computers to develop some new technology, thus making your technology computer-driven, or computer-enabled.
I disagree with everything except the real estate growth perspective. This post could have been written in the late 19th century, early 20th century if you cross out the word “technology” and replace it with “electricity” or even “steam engine”. But Yale doesn’t seem to have failed to produce quality graduates due to their ability to manage the ubiquity of electricity or the power of steam power (and its cousin the internal combustion engine) – a requirement for all modern businesses. What makes this time a bit different is that we have continued on a trajectory initiated by the steam engine to be able to use machines to replace human labor. Which means that the need to produce technology is important, understanding how humanity can and should best utilize and produce it is of more important. If manufacturing and distribution of all materials and information is ubiquitous, then we need people who are educated not in the technology itself – creating a myopia – but on the humanities needed to control and manage it.
I’d also warn against believing that the Bay Area’s pre-eminence. Many said the same about Detroit around the turn of the 20th century. There are differences (Ford’s $5/day wage probably harmed Detroit irreparably). The rise in homelessness in the region should be a very dire warning.
You tell it like it is and unfortunately many of the have not’s will not listen. They prefer to gripe in a stew. It is an exciting time with ideas and thoughts still in gear and grinding against the stagnation of the old.
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Reblogged this on tikom25 and commented:
KOMPUTER dan ELEKTRONIKA
Fantastic read!!
Furrealz? That’s mavellousry good to know.
What about the non-tech cos seth? Will they be going down in history as with the rest?
Reblogged this on Our Thoughts: The Law Office of Devona A. Reynolds Perez, P.A. and commented:
You cant beat them so you better join them!
You know the great about the tech bubble is that it never really popped in the so called 90s. It just morphed into a more sophisticated product line. Labor or human beings have been marginalized. This is not good for society at large. I hope I do not have to elaborate further.
Reblogged this on Tech News That Impacts You and commented:
The tech world needs to become more humanistic. I am beginning to understand why Bill Gates is doing these days
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Reblogged this on tanelldbyers and commented:
I like your post. And your rite we need to pay more attention on how the are spending the money
Great post. Your third implication about the polarization between the haves and have nots is particularly interesting. Intelligent machines are making the ability to use and adapt to new technology especially important. Tyler Cowen has a book out, called “Average Is Over” that delves into a lot of the things you talk about. Give it a read if you have some time.
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