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How Silicon Valley is eating itself
Something significant is happening in the San Francisco Bay Area at the moment. Everyone wants to leave. That was the inescapable vibe I got on a visit to the famous city, and the sprawl that surrounds it, last week.
Locals bemoan real the real estate prices in this metropolis, steep even by Australian standards. Living costs are also exorbitant - San Francisco ranked 16th in a recent list of the world's most expensive cities. (Sydney was 32nd, Melbourne 64th.) And its homelessness problem is shocking - espeicially for a town that houses vast wealth, and has served as the world's fountain of innovation.
"Success brings with it its own series of problems, and San Francisco is not immune to that," James Allworth, an Australian ex-pat who co-hosts one of the best and most influential podcasts on tech and business, told me over lunch in the city's financial district.
The onetime capital of American counter-culture now houses the establishment. The world's biggest and most powerful corporations are based there, or nearby in Silicon Valley.
The town that gave birth to the hippie movement, that was known for its anti-authoritarian streak and its creative communities, is now completely, utterly dominated by tech. Talk of psychedelic drugs and revolution is long gone. These days it's all pitch-decks, funding rounds and the blockchain.
Peter Thiel, one of the most powerful tech industry executives (and unusually for that industry, a strong supporter of Donald Trump) last month reportedly decided to move to Los Angeles, citing the pervasive group-think in Silicon Valley.
A US-based journalist at an event I attended last week recently made a similar move south. LA, a city often derided for being filled with vain people with huge egos, and also dominated by a single industry (showbusiness), was much more culturally diverse and vibrant, he said. San Fransisco had beome insufferable.
The city has proved resilient in the past. It was burnt to the ground over a century ago, and recovered. It also bounced back from the last tech bubble and bust at the turn of the millennium. But the Bay Area's current predicament should give all the thought leaders around the world so desperate to copy it - including in Australia - pause for thought.
On the nose
The past couple of years haven't been great for the tech industry's standing in society, at least in the US. Polls show that distrust of tech giants is rising. In San Francisco, people have been firing pellets from guns at the buses that transport tech industry workers from the city to the Valley, about 50 kilometres south.
There has been growing anger at Facebook and Google's failure to stop fake news - which might have affected the 2016 US elections - hate speech and other disturbing forms of content on their platforms, as part of what is being described as an information apocalypse. Even more alarming is the reluctance of the platforms to take any responsibility for this.
Success brings with it its own series of problems, and San Francisco is not immune to that.
James Allworth
Just this week, for example, Google's YouTube unit said it would start placing Wikipedia articles next to conspiracy videos (which have been going viral in the wake of last month's Florida shooting). Rather than, you know, removing them.
There are also growing concerns about the addictive nature of smartphones and the social media apps that operate on them.
'Important lesson'
On Thursday morning, Australian time, the latest tech industry SNAFU emerged. America's corporate watchdog charged the founder of what was once one of the country's most hyped tech start-ups with "massive fraud".
Theranos, which was backed by some of the Valley's top venture capital funds, and whose founder was described as the Steve Jobs of biotech, and graced the cover of some of America's most prestigious magazines, claimed it could significantly reduce the cost of blood testing.
Theranos CEO Elizabeth Holmes. The SEC said the Theranos story was an important lesson for Silicon Valley.
Photo: APBut its CEO and chairman engaged in "elaborate, years-long fraud in which they exaggerated or made false statements about the company’s technology, business, and financial performance", the Securities and Exchange Commission alleged.
“The Theranos story is an important lesson for Silicon Valley,” an SEC official said. “Innovators who seek to revolutionise and disrupt an industry must tell investors the truth about what their technology can do today, not just what they hope it might do someday.”
It's a damning statement, worth keeping in mind the next time you read about someone disrupting something.
Sowing the seeds
An exodus from the Bay area might help sow the seeds of innovation in other cities, including Sydney and Melbourne. But surely the situation in San Francisco, and the broader 'techlash' offers a chance to reassess the infatuation with the tech culture that emerged from that city, that is now sweeping through business and society.
Maybe, just maybe, a culture that celebrates "hustle" as a virtue, that used to talk gleefully about "moving fast and breaking things", doesn't drive the greatest outcomes for broader society.
Technology itself is a relentless, unstoppable force. There is no point fighting it. But we should be sceptical and vigilant. Even more so in regards to the business culture underpinning it.
John McDuling writes about business, technology and the economy. Previously he was a reporter for Quartz in New York, covered telecommunications and markets for the Financial Review, and worked in the finance industry.
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