The Mysteriously Shrinking Silicon Valley or Whatever Happened to the Real Growth Engine?

 

• The Never-Ending Dollar Dip Creeps on like Chinese Torture
• Gold Prices Keep Moving Up

No surprises from these quarters regarding the above two headlines.  But the raft of headlines coming out of Washington and Silicon Valley yesterday and today got our attention: We hear from the San Jose Mercury News that a group of Silicon Valley luminaries plans to visit Washington in the coming months hat in hand.  http://www.mercurynews.com/mld/mercurynews/news/local/7658800.htm  What do they want: More money in subsidies and tax breaks for tech R&D and, get this, carte blanche when it comes to exporting tech jobs abroad. With extreme chutzpah, Craig Barrett, Intel's CEO said the request would amount to about a $30 billion dollar subsidy for the high tech industry.  He compared it to the amount of money Congress doles out to agriculture, in his words "a Nineteenth Century industry".

Is this the same decidedly libertarian Silicon Valley that we knew oh so few years ago? Tramping back and forth from DC every couple of weeks, we found it hard to make people even want to know what their representatives were cooking up over here.  So now, how can we help but wonder what happened to this once proud (to a fault) industry.  Back in those days, we used to hear that when it came to the real things that made America grow, the East Coast was irrelevant.  The twin engines of American growth, high technology and the media industry were solidly settled in the West.  And with their Convergence, --you'll remember this word-- the synergy would be earth shattering.

We remember hearing the story repeated by a colleague about a co-executive, in the supreme hubris of the moment, arguing before a group of executives a the country's leading bricks and mortar publisher, that the reason the relatively insignificant company --a couple of hundred employees--  they were both working for was valued in the market at a higher price than the publisher and a number of the nation's other greatest companies with hundreds of thousands of employees, was because "the market got it!"  In other words, a stock market valuation of $6 billion for a company with no paying customers, was the true measure of its economic value. 

Ever since then, you might note, he, and I should say, we, have become more and more convinced that much to our chagrin the market doesn't get it at all.  He goes on to recall actually shuttering one day when a working-stiff friend of his told him over a couple of drinks that he had just made a big bet on the stock of this company when it was selling for nearly $100 a share.

The market does get something. It does indeed!  And hopefully, if you're reading here, it won't be yours!

But we are talking about Silicon Valley today and the high tech engine that drives this country's growth: And so we also remember hearing from these same Valley wags that the Japanese, once everybody's bugaboos, were now toast. You remember that expression, too. In Part 2, we will take a look at what's going on with Silicon (and Silicone) Valley and those cooked Japanese.

We have, of course, spent much energy in previous blogs expounding why we think the present bubble is a bubble, and an "echo bubble", at that. Besides the symptomatic collapsing dollar, the widening trade and government deficits, the lack of (real and not too real) job generation, all of which we have belabored with the obsession of a little kid crying, "see, mama, he's not wearing any clothes", what's really got us is the most important question of all:  "Where's the growth engine?"

No, we don't believe we can stick our fingers in the job leak dike and stop companies from farming back office, programming and R&D jobs to India where they can do the same stuff for a fifth of the price --and have it ready by the time business opens over here.  Anybody who understands the power of that much maligned Internet and infrastructure of the global economy, knows that there's nothing that can stop this kind of activity.

But the spectacle of Carly Fiorina and Craig Barrett et al. coming to Washington DC to plead for Congressional blessing for this unfortunate blowback of the Internet revolution, well, that makes me think that, perhaps, Silicon Valley looks a lot more like the Rust Belt than the promised land.

According to the economists who know, the the early 21st Century world, it seems, will continue to rely on the American consumer to power its growth.  Now, can anybody out there figure out where that valiant consumer is going to get his next good paying job?  Surely not at Wal-Marts.

To be continued:  Steve Jobs and Bill Gates, hold onto your hats!

rmb

dymaxionweb@verizon.net

Copyright 2003 Richard Mendel-Black All Rights Reserved

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