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Peak Silicon Valley?
Howard Lindzon
September 02, 2018
Kudos to The Economist for a clever cover story titled ‘Peak Valley‘:
I plan to take all the profits I made shorting ‘the internet‘ after The Wired 2010 cover story ‘The Web is Dead’ and roll them into shorting Silicon Valley…said nobody wealthy!
With the Nasdaq at all-time highs, I would be more rattled by an Economist headline titled ‘Silicon Valley Is Just Getting Started‘. I think Silicon Valley long term might benefit the most from Peak Valley fever in the short term.
Fred covers it best in his post yesterday on the subject:
What is true is that Silicon Valley has gotten extremely expensive to operate in. We see that across many dimensions. Valuations of startups in Silicon Valley are significantly higher than outside of Silicon Valley. Cash compensation for employees is significantly higher in Silicon Valley than outside of Silicon Valley. Equity compensation for employees is significantly higher in Silicon Valley than outside of Silicon Valley. And the cost of living for employees in Silicon Valley is much higher than outside of Silicon Valley.
All of that means that capital (both human capital and invested capital) needs to achieve a much higher return on input in Silicon Valley than outside of Silicon Valley, all things being equal. I am not sure all things are equal though and that is really the rub.
Silicon Valley has always had one important advantage over other regions when it comes to the tech sector. There is a much higher density of talent, capital, employment opportunity, and basic research in Silicon Valley versus other locations. When I say density, I mean physical density. If you walked a mile, how many tech companies would you pass along the way? That metric in Silicon Valley has always been higher than elsewhere and still is. So even though the return on capital (human and invested) has significant headwinds in today’s Silicon Valley, it is still a lot easier to deploy that capital there. And I think that will continue to be the case for a long time to come.
Let’s check back on on this Peak Valley headline in the year 2025.
Have a great labor day.
PS – These (here and here memes cracked me up. For a moment Fat Nixon seemed human because he looked like every other home video creator and podcaster on the planet.
PSS – Here are some great reads I have enjoyed recently…
I like ‘The Hustle’ daily email because they are covering business from the eyes of a younger audience that hustles. This story was YouTube side hustles and monetization
If you read me here you know I am speculating on India markets a bit. It’s not horrible that Warren Buffett is making huge investments there as well.
In yet another way that Twitter confounds me is they do not dominate the press release business. The actual cash flow business of press releases is broken. Not only would Twitter print cash from attacking it (perfect product/market fit), they likely would have saved Elon Musk a pile of headaches. Here is why hackers love public company press releases.
If you hate Apple, or maybe just don’t want to pay Apple prices for a machine you just use for web browsing, Fred is shopping for a Chrombeook and the comment section has all you need and is a fun rabbit hole.
Not to just pick on Apple, if you are worried Google is watching your searches too closely, try the private search engine called DuckDuckGo .
Finally, I highly recommend Polina Marinova’s weekly newsletter “The Profile,” which features the best profiles on successful people & businesses. Sign up here.
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