Silicon Valley: Have you lost your way? A view of the valley from a Luddite

Alternate title:Silicon valley or silly-con valley?

As silicon valley enters its 5th decade, it is interesting to look at the path of innovation of silicon valley and what has worked and what branches of the “innovation tree” have been, well let's say, a detour.

The main trunk of the innovation tree has been the semiconductor.  The breathtaking innovation that has taken place in the semiconductor industry has been nothing but astonishing.  That innovation continues today.  NANDflash, 3D disk storage geometries are just some recent examples.

The move into computers was also incredibly innovative.  Apple, while not always a commercial success until much later, pioneered PC design, and later music, phones, pads, and, well perhaps watches.  (We'll reserve comment on that last one).

Then in the 90’s came Google who disrupted advertising and created enormous value for advertisers, consumers, and Google shareholders.  As in the cases above, significant economic progress was achieved.

But, silicon value has another branch to the innovation tree, one where fantasy value creation has replaced true innovation.  For example, startups which have taken the “offline” world and tried to bring them into the virtual world.  This branch is of a significantly different character.  Instead of creating economic value for shareholders, it has in the end been a transfer of wealth from shareholders to consumers.  And when this transfer ends, the company has no value and usually ceases to exist.  This is consistent with economic theory: where there is no innovation, there is no value.

Indeed, there is no innovation in companies of these ilk.  There have been many of these “on-liners”, but the poster child for them are companies such as Amazon, Tesla, Uber, Handy, Task rabbit,  and the numerous other “unicorns” (at least the ones who haven't gone bankrupt by time you read this). 

Let’s take Amazon, which has the longest track record.  There is little innovation in catalog retailing, a concept that has been around for decades.  The innovation is really the concept of getting investors to fund a transfer of wealth to consumers by rolling a truck to their door to deliver toothpaste.  How can that possibly be called innovation?  How can that possibly be economical?  When drones do it, maybe, but you could have sent the drone from your nearest Walmart.  Amazon, 20 years on, has made very little money for shareholders of course, as economic theory would have foretold.  In the end, after this 20 years, all we have done is shifted capital from Mom-and-pop to the management of Amazon, who, has in turn built rocket ships for their amusement.  Hardly comparable or recognizable to the silicon valley pioneers.  Bob Noyce should roll in his grave!

Uber is another example.  Yet to make money, and their innovation ultimately is an “app”.  Shame on taxi companies for not thinking of this, but in the end we just moved capital from unwitting livery companies to a small few in silicon valley.  Darwinism is key to our economy but this amounts to foolish shareholders funding a non-productive enterprise.  I fear they will get what they deserve in creating the world’s most expensive taxi app.

I fear some of the detours of the silicon valley innovation engine have run into a ditch.  Ultimately, the same Darwinistic forces that shifted this wealth around will shift it again.  I welcome that so we can get silicon valley back on the road.  Biotech anyone?