Silicon Valley is dead! Long live Silicon Valley!

TLDR

Remote work and the current health crisis has made Silicon Valley obsolete. Companies and workers are moving away in droves. Will they find a new place like Silicon Valley?

Yes and No. The end of the health crisis will enable a resumption of office work. However, having invested in and adopted remote work, organizations that embrace a hybrid remote+office business model will be more successful. New “Silicon Valleys” are forming at the optimal balance points of virtual and geographic communities.

Essay/personal notes

Note: This personal essay/post is definitely a work in progress (WIP). I am sharing this early version to get feedback and will continue making updates over time. Please feel free to comment and contribute your thoughts.

The future is already here; it’s just not evenly distributed.

Tim O’Reilly, founder and CEO of O’Reilly Media

I’m reading They Can’t Leave the Bay Area Fast Enough – As a tech era draws to an end, more workers and companies are packing up. What comes next? in the New York Times.

Great article. But I can’t get over the irony that so many of the interviewees are trying to recreate a Silicon Valley in Austin, Miami, Tallinn, or Topeka. Don’t you get it, with remote work, you will never find another place like Silicon Valley.

Wherever you point, there you are

In the Times’ article, John Gardner, founder and CEO of Kickoff, complains about the Bay Area:

But right now it’s just like: What else can God and the world and government come up with to make the [Bay Area] less livable?

John Gardner in “They Can’t Leave the Bay Area Fast Enough“, The New York Times, January 14, 2021

This was probably just one phrase out of a longer conversation with the journalist, Nellie Bowles, but it’s ironic that he points a blaming finger outward.

Entrepreneurs and tech workers like John and I absolutely flocked to the Bay Area to cash in on a mind-boggling inflow of venture capital, ballooning salaries, skyrocketing real-estate prices, and the occasional unicorn startup. We were the primary drivers of the nosebleed rents, million dollar bungalows, and soul-crushing commutes.

However, that stampede had a silver lining: We created the problems and started solving the problems we had created: We created the technology and culture that enabled remote work. By 2020, these innovations had become a metaphorical salt dome beneath the paradigm of work based on physical proximity.

As the corporations go…

Communications technologies transformed how and where businesses could operate.

New technologies appear decades before they and replace old ones and change paradigms.

In the 1860‘s, transatlantic and transcontinental telegraph enabled organizations in urban centers, like large banks, to open branches in other major cities.

By the 1970‘s, multinational organizations were using telephone, teletype, and jet courier services to communicate with and operate far-flung branches in cities, towns, and hamlets around the world.

In 1976, Jack M. Niles et al. published The Telecommunications-Transportation Tradeoff, which envisioned telework and addressed questions such as “Are central business districts obsolete?”

Finally, the late 1980‘s saw an exodus of large corporations moving their headquarters out of high-priced central business districts. For example, following similar moves by Texaco, Mobil and J.C. Penney, Exxon closed its headquarters in The Rockefeller Center on 5th Avenue in Manhattan, and relocated it to Dallas Texas.

the Dallas area offered the best combination of factors from the standpoint of our employees’ personal and professional lives and from an overall business standpoint.

Exxon Chairman, Lawrence B. Rawl, “Exxon Will Move Its Headquarters to Texas,” James Barron, New York Times, October 27th, 1989).

Why North Texas? Because this move brought Exxon back to the heartland of America’s oil/energy industry: Oklahoma, Texas, and the Gulf Coast. Many of its employees were from these regions. Some of them found living in New York expensive and hard on their families. By returning, Exxon saved a bundle on real-estate and relocation expenses, and gained better access to a labor pool that had industry experience.

…so go the individuals

Similarly, the communications and computing revolutions had a transformative effect on individuals.

In the mid-to-late 1990’s, the first dot-com boom made Bay Area real estate prices explode. Many tech and office workers had moved to more affordable areas an hour or more from the offices where they worked. And they spent hours commuting daily back into those urban centers, where they worked at a computer. Many of us had a flashbulb moment: While installing 56k dial-up modems in our home computers or stuck in traffic during an expensive 2 hour bus ride to San Francisco we asked, “can I just work from my computer at home? And the answer was…“No. Not yet.”

Between 2000 to 2020, many elements came together to enable remote work:

• Tech companies, faced with a skilled work shortage and competitive labor market, started offering remote work to attract, recruit, and retain tech workers.
• Tech-savvy managers replaced traditional ones.
• Software evolved to support remote work and was widely adopted.
• High-speed always-on internet became the norm for many households.
• Outsourcing to India other locales normalized distributed teams.
• The cost of office space made scaling expensive.

But that wasn’t enough.

The salt dome collapses…

The current pandemic is the forcing function that has normalized remote work. Now many organizations have implemented remote work across the board. Employees have embraced it.

It would be an exaggeration to say “There’s no going back. The toothpaste is out of the tube. The worms are out of the can. (Who has ever opened a real can of worms?!) Most organizations still own the physical office space they had before the crisis. When we find a way to do it safely, if the vaccines are successful, we will be able to resume working in our offices.

I’m not an economist, but I’d guess that:

• During economic growth cycles, it will be faster and cheaper hire remote workers and maybe close some offices.
• During recessionary cycles, it will be faster and cheaper to close some office spaces and hire or retain remote workers.

So, what next?

• There’s no need to live and work in Silicon Valley.
• People and businesses are moving to more affordable locations.

And then what?

• A fundamental change hiring patterns.
• Downward pressure on salaries and wages, as companies gain access to a much larger talent pool.
• A new “Lagrange point” where the costs and benefits of living in any particular locale balance out against the new semi-local and remote labor market.

These costs and benefits will include housing, quality of life, taxes, access to health care, the quality and speed of internet connections, business and personal taxes, and possible regional specializations based on legacy industries.

It is more important than ever to participate in virtual professional communities, hone your skills, and become indispensable and for your unique blend of skills.