back to article So why exactly does almost ALL tech live in Silicon Valley?

It was Ben Bernanke who pointed out that economics isn't really all that much good at predicting the next recession (and the long-standing joke is that economists have predicted 11 out of the past three), but it is pretty good at working out why the world is the way it is. Which brings us to the cutting edge of modern economic …

  1. John H Woods Silver badge

    " ... economics isn't really all that much good at predicting the next recession ... but it is pretty good at working out why the world is the way it is"

    Science is pretty good at working out why the world is the way it is, and we know this because its explanations lead, eventually, to testable predictions. This definition of economics makes it look, to me at least, like little more than a highly specific branch of history.

    1. Christian Berger

      Well economics also has, so far, been known for ignoring facts in favor of dogma. And in the few cases it does make testable predictions, for example when it comes to predicting the growth of a region, those predictions usually are badly correlated to the actual data.

      1. frank ly

        Truly testing an economic theory or model would be very expensive and time consuming. It would need control by governments and involve an entire country or region and take many years as well as having a bad potential downside if it didn't work out. That's why ..... oh....

        1. Christian Berger

          "Truly testing an economic theory or model would be very expensive and time consuming."

          Actually no, even though doing an experiment is hard, you can test models simply by observation. It's how astronomy or meteorology works.... and the testable statements those fields make typically have a very decent correlation to the true world. The weather report has a decent chance of predicting the weather for the next week.

    2. Tim Worstal

      Microeconomics does pretty well with testable predictions. Set the minimum wage to twice the median wage and you'll see lots of unemployment. Just as one example.

      Macroeconomics, running the whole economy, rather tougher task. And as below, running an experiment would rather require taking over a few countries and running them for a few decades.

      Even here we do know a few things. Don't let M4 fall in your economy, you won't like it if you do. Thus QE recently. But you're right all the same, at least this is the way I look at it, that macroeconomics is largely a specialised branch of history. Micro not so much.

      1. John Miles

        RE: Microeconomics does pretty well with testable predictions.

        But do they scale to Macroeconomics?

        1. Tim Worstal

          Re: RE: Microeconomics does pretty well with testable predictions.

          This is known as "macroeconomics having microfoundations". And the answer is a bit tangled.

          For when you try to build your macroeconomic model upon what we think is right about microeconomics, it turns out that the models don't describe the real world very well. Which leave us with two schools:

          1) We need to do better.

          2) Let's build our macro models without reference to the micro!

          I'm in the third bit, the heresy, that says that macro doesn't work very well so let's not do macro. This is a heresy because it would mean all those economists using macro to work for banks and governments would be out of work.

    3. Steve Knox

      Or, to put it into classic analogy form:

      Macroeconomics : Microeconomics :: Climate science : Meteorology.

    4. Yet Another Anonymous coward Silver badge

      > a highly specific branch of history.

      Worse, it's a highly specific branch of politics or philosophy.

      "I think this is a supply side classical recession and we should introduce austerity" - because I'm a right winger who wants to cut taxes / "I think this is a demand led Keynsian recession and we should introduce stimulus spending" - because I'm a bleeding heart liberal who doesn't like to see poor people.

      Engineers might argue about the best solution - but they don't normally choose the alloy based on whether their surname was originally Norman or Saxon.

  2. Christian Berger

    I'm sorry, but some assumptions are wrong

    First of all Silicon Valley isn't about technology of knowledge. Silicon Valley today is mostly about business trying to sell advertisements If any company has a small development branch, it's just there to help sell those. That's why there is next to no innovation in our world today. That's why Ubuntu Phone is near indistinguishable from Android or iOS.

    Then second, the amount of money you get doesn't depend on how much you know, it depends on where you work. And well paying jobs in engineering are usually not the better ones. And even the highest paying jobs in engineering don't even pay a fraction of what even proven to be incompetent upper management people get.

    Without really good education there is simply no market for technology. Why should someone buy the device that's better engineered when they don't understand what's better about it?

    1. Yet Another Anonymous coward Silver badge

      Re: I'm sorry, but some assumptions are wrong

      Selling advertising is just as much about technology as building a rocket that can land on a barge.

      And it gets harder every day, you are competing with other companies also selling advertising and with people becoming immune to advertising. Elon Musk just has to make a control loop faster, he doesn't have to deal with gravity becoming stronger every month.

      I would say SV is one of the areas least guilty of pay disparity between bosses and engineers. You can hire a dozen CFOs on any street corner but I have to pay software devs more than Google will pay (in $ or by promising that their shares will be worth more).

      Layers of incompetent middle managers who got where they are by playing golf with the right people (US) or having gone to the right school (UK) are a lot rarer in a startup than they are in almost any other industry.

    2. Dave 126 Silver badge

      Re: I'm sorry, but some assumptions are wrong

      >Why should someone buy the device that's better engineered when they don't understand what's better about it?

      Why would anyone use a beautifully engineered corkscrew when what they want is a can opener? A device should be judged on its fitness for purpose.

    3. AndrueC Silver badge
      Stop

      Re: I'm sorry, but some assumptions are wrong

      First of all Silicon Valley isn't about technology of knowledge. Silicon Valley today is mostly about business trying to sell advertisements

      Imagine taking that to its logical conclusion. Imagine a world where advertising is the only thing that matters. Oh wait. That was done several decades ago. I think that should be required reading. I read that when I was a teenager and promptly vowed to do everything I could to avoid adverts. Thirty years later I still honour that vow.

  3. J.G.Harston Silver badge

    "And despite the steel works being gone for decades non-ferrous metals trades still set up around Sheffield and Rotherham."

    I think you mean ferrous metals. And Sheffield & Rotherham produce more steel than ever, it's just that nowadays it only needs one man and a dog to do it. The man to feed the dog, and the dog...

    1. Tim Worstal

      No, trust me, I did mean non ferrous. The tungsten, molybdenum and so on, titanium (metal, not oxide) that are added to steel etc. Ferroallys (which are, weirdly, non-ferrous) as well.

    2. Sarah Balfour

      There's a joke in there somewhere about one man and his pig (iron), but I'm fecked if I can fathom it.

    3. Yet Another Anonymous coward Silver badge

      They produce more finished specialist steel than before, but their expertise is in adding all the exotic ingredients - the steel comes from outside. So it's reasonable to say they are in the molybdenum business rather than the iron business

  4. Doctor Syntax Silver badge

    A Zombie concept?

    "Firms in the same trade end up setting up alongside each other simply because it's more convenient to do so. That's where all the skilled workers you're going to poach are, after all."

    The corollary of that being that that's where all the firms who are going to poach all your skilled workers are so you have to get together with them to set up anti-poaching agreements.

    Where physical work is concerned there may still be a rationale for clustering. If you have a non-ferrous metalwork plant you need to be in a place where there's a concentration of skilled staff to operate it and conversely if you're a skilled operator you need to be in a place where there are firms with plant needing operators. But where the plant is mostly laptops that the skilled staff can afford to own and a server which can be located anywhere & rented then "where" resolves to "any place with an internet connection".

    The consequence is that a dispersed workforce has demonstrated the ability to collaborate produce major operating systems and other substantial S/W. Maybe for many types of creative work the clustering concept is already dead, it just hasn't lain down yet.

    1. Yet Another Anonymous coward Silver badge

      Re: A Zombie concept?

      In theory yes, in practice no.

      I can hire developers anywhere in the world, but I have to find them. How do I know that somebody in ToadSuck Ak is any good? Unless they are the inventor of Python/Ruby/etc then I am comparing them to somebody in India charging $1/hour on Elancer. By coming to work in the valley they have proven to me they are good because they were hired by %BIG NAME%, or simply have proved that they can earn enough to pay rent here.

      Similarly the person in ToadSuck Ak who wants to be paid $100/hour can do that by coming to the valley, or by inventing their own language and hope it becomes wildly popular 10years later.

      Once they have a reputation they can move back to ToadSuck and get $250/hour rates because everyone knows them.

      I can (and do) have lawyers, patent agents, accountants completely online. They are a commodity, all accountants are equally good-enough, or I can judge how good they are easily.

      But I need to raise money - so I have to meet VCs - the VCs are here. I could fly to SF every week to see them but at some point they are going to want to meet the team, see a prototype, get "a feel for the company". This is difficult to do if I have to fly a bunch of consultants in from around the world who have themselves never met before - to instantly bond in a motel conference room.

      1. phil dude
        Coat

        Re: A Zombie concept?

        "Going to California with an aching in my heart..."

        P.

        1. Steve Davies 3 Silver badge

          Re: A Zombie concept?

          Have an upvote for the Led Zep lyrics.

      2. Doctor Syntax Silver badge

        Re: A Zombie concept?

        "I can hire developers anywhere in the world, but I have to find them. How do I know that somebody in ToadSuck Ak is any good? Unless they are the inventor of Python/Ruby/etc then I am comparing them to somebody in India charging $1/hour on Elancer."

        If you're considering recruiting on the basis of whether someone was the original dev of a big project you're probably doing it wrong. Firstly as there are very few of them they're not likely to be available. Secondly, they may not be the current project leads; they may not even have been involved with the project very long. Thirdly, and most importantly, you're overlooking the fact that any open source developer's contributions are a portfolio that you, personally, can review. You can actually make a comparison between the ToadSuck developer and the $1/hour Indian if they've contributed to open source projects.

        "By coming to work in the valley they have proven to me they are good because they were hired by %BIG NAME%," so your main recruitment technique is poaching? Then if %BIG NAME%s start using remote developers you'll start poaching those once you've realised that that's how things are going.

        "or simply have proved that they can earn enough to pay rent here." Actually all they may have proved is that they've managed, by fair means or foul, enough stake money to rent a pad there and hope to get hired. Whether they can actually stay hired is unproven.

        "all accountants are equally good-enough, or I can judge how good they are easily." So you go by your judgement for the skill of accountants but not developers if you depend on someone else having hired them first?

        1. Yet Another Anonymous coward Silver badge

          Re: A Zombie concept?

          I was commenting on the difficulty of solving the remote recruiting reputation problem.

          If I have a very simple easily packaged bit of work that I can send out to a remote dev and be able to see if they have done it correctly - then I can probably have it done cheaply by somebody on elancer.

          Otherwise unless somebody has an international reputation it is very difficult to pick somebody from the web to risk person-year projects on.

          Accountants are not only easier to judge but their differences matter less. A great dev can be 10x more effective than somebody picked at random, and if I was George Soros and needed to hide a few $Bn I would be careful in picking the best. But if I simply need form X submitted by a State Certified Y then I don't. The same with lawyers, if I'm Hans Reiser I need Alan Dershowitz, if I need a stock NDA I don't.

  5. Mondo the Magnificent
    Alert

    Question:

    Why does the U.S. place all these blue chip tech companies in the heart of the San Andreas Fault?

    Just an observation....

    1. Doctor Syntax Silver badge

      Re: Question:

      US law forbids the SA fault to open up & swallow them and as we know US law overrides everything else.

    2. Anonymous Coward
      Anonymous Coward

      Re: Question:

      The US didn't place them there. They placed themselves there.

      And the headline is a bit of a farce. All tech is not in Silicon Valley. Boston and routes 128/495 has been described as Silicon Valley East. There's Austin, Texas; Research Triangle Park (RTP), North Carolina; Los Angeles is huge in aerospace. Etc.

      1. Yet Another Anonymous coward Silver badge

        Re: Question:

        But all those grew for exactly the same reason and in the same way as silicon valley - or were a government program to replicate SV. They don't prove that you can do distributed innovation. They prove the exact opposite, that if you want a silicon valley you replicate silicon valley.

      2. Martin Budden Silver badge

        Re: Question:

        And let's not forget about Silicon Roundabout!

        On second thoughts, let's.

        1. BoldMan

          Re: Question:

          Where is Max Zorin when you need him!

  6. x 7

    another element which leads towards clustering is the local authorities views on planning: whether historically they were prepared to accept hazardous processes, environmental issues, etc.

    Thats why historically you had clusters of butchers shops in towns, often known as the "shambles". Keeping the butchers together kept the animals wastes together. On a larger scale, there was a tendancy to group trades such as leathermaking together - usually near a source of water into which waste could be poured. Steelmaking tended to be clustered because thats where the fuel was - initially charcoal, later coal/coke. It was easier to transport the iron ore that it was to shift the bulky charcoal fuel (until the arrival of the railways). But you have to consider second/third technology generation effects as well......why did you get so many IT manufacturing companies setting up in the Clyde area in the 1970's? Because there was a large pool of unemployed labour there of people who could be retrained. People who had proved to be skilled in one job, now redundant, but intelligent enough to be successfully reskilled. None of the "new" Japanese owned UK car plants were in traditional car-building towns. Think Swindon, Derby, Hartlepool, but all had a tradition of skilled engineers who could be retrained. Ironically one of the biggest pools of available labour for the Clyde IT plants was due to the closure of the Linwood Hillman Imp plant

    Another fact is.....spinoffs from local centres of Academic Excellence. All you have to do is cruise around Cambridge in a 15 mile circle and count the number of high-tech chemical/biochemical/drug discovery/electronic/IT businesses which have spun off from projects at Cambridge University. Hundreds if not thousands. The key deciding factor there is closeness to the university, easy access to other academics for mutual support.

    In short, clustering of businesses isn't such a simple art as you imply

    1. Fazal Majid

      Same here. Silicon Valley clustered around Stanford.

    2. Doctor Syntax Silver badge

      "why did you get so many IT manufacturing companies setting up in the Clyde area in the 1970's? Because there was a large pool of unemployed labour there of people who could be retrained."

      Wasn't there another factor - the large pool of unemployed labour lead to govt. grants being poured in?

  7. Anonymous Coward
    Anonymous Coward

    On the other hand...

    Isn't part of it simply to have a business address there so you get reputational points?

    1. Ian Michael Gumby

      Its SVS ... Re: On the other hand...

      The term you are thinking about is 'Silicon Valley Syndrome' or SVS.

      Its a term that got coined in the early 90's when techies from the midwest flocked to San Francisco / Silicon Valley and they felt suddenly superior to the guys back in the Midwest.

      That is to say that you believe your code and ability gets better just by the proximity to Silicon Valley.

  8. jake Silver badge

    Simple answer, really.

    Post WWII, people from all over the world attended Berkeley and Stanford. They discovered that what became Silly Con Valley was a nice place to live, and upon graduation, stayed here.

    This lead to the plowing under of the orchards to create a new suburbia to house the large quantity of educated people.

    In essence, an educated melting-pot made this place what it is.

    Personally, I miss the cherries, plums, apricots, peaches, etc. ...

    1. Anonymous Coward
      Anonymous Coward

      >> I miss the cherries, plums, apricots, peaches,

      Ah, the glory days of tech when every second computer had a fruity name (my school couldn't afford Apricots or Apple IIs, only the Franklin Ace knock-offs: sounding completely inedible they deservedly fell from grace)

  9. Rol Silver badge

    Another question

    If birds of a feather, flock together, then would a few cluster bombs in Dallas sort out the troll problem for good?

    1. Alister

      Re: Another question

      would a few cluster bombs in Dallas sort out the troll problem

      But then you would wake up, and find it was all a dream.

      1. x 7

        Re: Another question

        "would a few cluster bombs in Dallas sort out the troll problem"

        trolls live under bridges and would be protected from cluster bombs. You need a Tallboy or Grand Slam to get a bridge

  10. Anonymous Coward
    Anonymous Coward

    People move their tech businesses to Silicon Valley because...

    Of the low price of real estate...well, no, that's not it.

    Because there isn't much traffic....well, not that either

    Well, the weather is great!

    (More seriously, it's an ongoing network of tech-literate professionals who keep engendering new projects, that require more tech-literate professionals, who engender more new projects, and so on. All this started in the beginning because of HP, and the fact that William Shockley moved his transistor/semiconductor research/business from New Jersey to the Santa Clara Valley to be near his sick mom who lived in Palo Alto. That begat Fairchild Semiconductor, which begat the "Fairchildren", the most notable of which were Intel and AMD--and from there it was off to the races.)

    P.P.S.--there's a great "American Experience" episode titled "Silicon Valley". Well worth watching if those of you who live overseas can find Public Broadcasting Service programming.

  11. martinusher Silver badge

    What is tech, anyway?

    Before Silicon Valley got known as such the centers of computing technology used to be in places like Chicago and Minneapolis. The axis shifted to the Bay Area because of universities like Stamford doing pioneering work in microelectronics. This then morphed through early PCs into networking companies and finally to companies that built software based on the PC/networking infrastructure. The technology, though, is everywhere, not just in this one area. Its just that to participate in this work you need a whole lot more knowledge than just being able to code in the language-du-jour.

  12. Anonymous Coward
    Anonymous Coward

    "why the nerds get paid so damn much"

    Simple, when rent is $2500+ a month and house prices are $600000 and up, you will have a hard time getting by with less than $60000 a year. Not forgetting the other higher costs of living.

    IT workers here don't get paid that much more, considering. The idea that IT wages is sky high in silicon Valley is flawed and misguided. You'd be lucky to be offered more than $70000 a year as a mid level IT person/programmer, with, say, 2 years experience, let alone fresh out of college (good luck getting a job that's more than a crappy underpaid intern position, experience is everything).

    And lots of companies like to hire foreign workers who they can pay considerably less, because they depend on their employer (H1B1 visa abuse).

    Start ups frequently dare to advertise vacancies where the pay is a minimal stipend, with the lure of stock options and a questionable future fortune to be acquired (95%+ of startups fail...). And even if you happen to earn a decent wages you have (or are expected) to work more than 40 hours a week, which renders that wages on an hourly basis quite low.

    The only IT workers making a fortune are those who happened to be lucky (not merit really) enough to own stock options in companies that subsequently grew a lot, or were bought by larger companies. For the other 99% of IT workers here it's the same old grind as anywhere else.

    At least it's sunny with stunning nature at your doorstep (if you like sun, it starts to get to me...).

    1. LucreLout

      Not forgetting the other higher costs of living..... even if you happen to earn a decent wages you have (or are expected) to work more than 40 hours a week, which renders that wages on an hourly basis quite low..... For the other 99% of IT workers here it's the same old grind as anywhere else....At least it's sunny with stunning nature at your doorstep.

      Pretty much all of what you say applies equally to IT in the City in London... right up until that last bit about being sunny, which isn't common here, and nature, which is at least an hours drive in any direction.

      Still, it beats working for a living....

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