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Is the golden age of Silicon Valley coming to an end? | Technological sector

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Huge layoffs at SnapchatSharp valuation declines at Meta and Apple, as well as hiring freezes at other big tech firms, have given new fuel to the increasingly common question: Is Silicon Valley’s golden age coming to an end?

The answer is complicated, experts say. The tech industry has been experiencing impressive growth for some time, fueled in recent years by the pandemic that has brought much of the world online and boomed demand for tech services. This explosion—and the high salaries and office perks that came with it— seems to be slowing down.

“This party couldn’t go on forever,” said Margaret O’Mara, a professor at the University of Washington and author of The Code: Silicon Valley and the remaking of America. “In a lot of ways, we’re just getting back to normal after a huge ramp-up where everything went super-sized.”

These trends are being exacerbated by the larger global recession — from which the tech world is not immune, she added. The Federal Reserve System has picked up interest rates will triple as early as 2022, and further increases are expected.

The previous low-interest-rate environment fueled the tech boom, helping to create a parade of “unicorns”—companies worth more than $1 billion. Notable examples include Airbnb and Uber – valued at $47 billion and $82 billion in their respective IPOs. But as interest rates change, O’Mara said, “money is getting tighter,” and investors are going to invest “much more wisely.”

“Some investors will still have money, but during a downturn like this, deal flow will cool,” she said.

The rapid growth was also tempered by a series of high-profile warnings, from the decline of WeWork yes the collapse of Theranosa blood-testing firm that rose to prominence in a hot press environment, eventually raising more than $1 billion before its claims were found to be untrue.

Stories like these, coupled with increased scrutiny of the tech industry as a whole over the past decade — including whistleblowers revelations against Facebook and public grilled technical managers in Congress shake the image of Silicon Valley. Even some of the most vocal supporters, including former President Barack Obama, seem to have changed their minds. Obama used Facebook extensively in his 2008 campaign praised the company in his speech on the position of the Union in 2011, only to condemn him role in spreading misinformation, especially around elections, in a recent speech at Stanford University.

“One of the most important reasons for the weakening of democracy is the profound changes that have occurred in the way we communicate and consume information,” Obama said.

US lawmakers and federal agencies have now jumped into the fray. With increasing actions by the Federal Trade Commission (FTC) and upcoming legislation from Congress, Big Tech may face its biggest obstacles yet.

Public perception of technology in general has also changed: 68% of Americans they say they believe tech firms have too much power and influence in the economy – up from 51% in 2018.

“Americans don’t really like big things — people are concerned about concentrated power,” O’Mara said. “No one can become the golden child and be a $2 trillion company. It’s part of the life cycle.”

Silicon Valley is expanding beyond California

The geography of Silicon Valley is also changing, experts say. A catch-all term for the area south of San Francisco, the Valley has cemented itself in the public ethos as a center of innovation for nearly a century. It began its rise as a technology center when US military operations created contract research sites in the 1930s, a trend that continued in the private sector for the next few decades.

But the tech industry is expanding far beyond the Bay Area, a trend the pandemic has accelerated. In 2021, the electric car company Tesla moved its headquarters in Austin, Texas, after similar steps from other technology firms such as Oracle and Hewlett-Packard.

That’s also reflected in hiring, said Brent Williams, who works at staffing firm Michael Page, adding that the industry is calling the effect “the winter of venture capital.”

“Covid has changed the whole game,” he said. “Companies have become extremely competitive for talent because they’re competing not just for people in the Gulf, but against everyone in the U.S.”

That trend, coupled with the rise of work-from-home policies, would have been shocking in pre-pandemic times — when tech companies invested billions in their sprawling campuses, providing employees with perks like transportation to and from work and on-site prepared meals.

“The industry’s obituary was written prematurely”

“Despite growing obstacles, Silicon Valley remains incredibly resilient,” said Stanford University economics professor Nicholas Bloom. It has been through “several cycles,” including downturns in 2001 and 2008, and has recovered each time, he added.

“While some firms may migrate due to work from home and globalization, Silicon Valley is still ground zero and no other area even comes close to its industry prominence,” he said.

Indeed, O’Mara said, we’re unlikely to see much departure from the Valley’s heritage or its physical location in the heart of the Bay.

“The Bay Area and San Francisco have a resilience and distinctive qualities that are hard to replicate anywhere else,” she said. “There’s a reason why people come to live there – they want to be there.” That remains true even as California faces a housing crisis as workers flock to cheaper states.

“A number of times the industry’s obituary has been prematurely written,” she added. “It may be the end of an era for Silicon Valley, but it’s unlikely to be the end of Silicon Valley.”

https://www.theguardian.com/business/2022/sep/17/tech-silicon-valley-layoffs-interest-rates-valuation-slow-growth

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