Is Silicon Valley a Myth?
This is the Chapter 1 of my e-book Silicon Valley for Foreigners, that can be downloaded for free on www.siliconvalleybook.com or purchased for $2.99 on the iBookStore and Kindle. A new chapter will be posted on this blog every week.
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Maybe due to the bitter memories of the 1999 dot-com bubble, many people still believe Silicon Valley is more fantasy than reality. Something akin to a digital version of Hollywood. The bad news for these believers is that the facts and numbers tell a different story.
Silicon Valley has given birth to the world’s most valuable and influential technology startups. Companies such as Apple, Google, Facebook, and Netflix dominate our digital lives while other behemoths like Intel, Cisco, Oracle and NVidia power our technology infrastructure. The trend continues to be carried on by other successful startups.
By the end of 2016, almost half of the world’s population owned a smartphone. The operating system of 99 percent of these devices (iOS and Android) is provided and controlled by Apple and Google. On the PC side, Microsoft has an unchallenged 90 percent market-share (Windows) of the 2.5 billion PCs in existence.
Ninety percent of all people who access the Internet, around 4 billion, use a web browser provided by Google, Apple or Microsoft. Google, Microsoft, and Yahoo own a 92% market-share of all the world’s online searches.
Facebook properties have more than 2 billion people logging in every day. WhatsApp and Messenger users send three times more messages per day than all the SMSs sent by all the wireless carriers in the world.
In 2017, Amazon will be responsible for half of all online sales in the United States. Its subsidiary, AWS, hosts 50 percent of all startups and companies in the public cloud infrastructure, including large players such as Netflix, with a hundred million subscribers.
Amazon and Netflix have recently become content makers and will outspend the largest Hollywood studios in 2017, investing $12 billion to produce and buy exclusive shows for their platforms.
Apple, Google, Microsoft, Amazon, and Facebook are now the largest companies in the world by market capitalization and have, as of May 2017, $600 billion in the bank. This amount may triple in the next decade as they raked, in 2016, an astonishing $100 billion in profit.
Enormous profits are allowing tech giants to invest their money in categories outside their core businesses. The big five have diversified their investments to areas such as contactless payments, robotics, drones, satellites, artificial intelligence, autonomous vehicles, virtual and augmented reality, blockchain, biotech, clean energy, quantum computers, nano materials, etc.
I would argue that traditional industries are being slowly eroded by competition from startups and tech companies from Silicon Valley. Google’s advertisement revenue, for instance, is now larger than all print media combined. Netflix destroyed Blockbuster, and the iPhone cannibalized many industries from video games to alarm clocks to cameras. I believe this trend will only accentuate in the coming years and will reach other industries.
Industries like car manufacturers. Tesla Motors, for instance, was the first successful automaker to have an IPO in the United Sates since Ford in 1956. Once laughed at by competitors, Tesla expects to sell half a million vehicles by 2020, all of them electric and capable of full autonomy. As of May 2017, Tesla became the most valuable American car company.
SpaceX became the first entity in the world, public or private, to successfully launch and retrieve reusable autonomous rockets, which are lowering the costs of space travel by a factor of 10. The company plans to launch an ambitious constellation of satellites to provide global broadband coverage by 2020. And most importantly, SpaceX plans to send a spaceship and colonize Mars by 2030.
Even the controversial Uber boasts astonishing numbers. In 2016, it made $20 billion in bookings, $6.5 billion in revenue and $2.8 billion in losses. Uber is subsidizing its fares to not only disrupt taxis but also transportation and logistics. That is the main reason the startup raised so much private money (at the time of this writing, more than $15 billion). With a fleet of autonomous cars and a subscription model looming on the horizon, Uber may even disrupt automakers and insurance companies. Airbnb is another Silicon Valley darling that is leaving a mark in history. Founded in 2008, the startup has recently become the largest accommodation company in the world without owning a single room. By 2020, it is expected to book half a billion nights a year from $79 million in 2016.
Food is also being disrupted by technology. The startup Impossible Foods launched the first vegetarian burger made in a laboratory that feels, smells, and tastes like meat. It is already being commercialized throughout the United States. I tried the Impossible Burger and found it to be great.
In the next few decades, other sectors such as health care, finance, insurance, aerospace, automotive, energy, and even politics will succumb to the power of large and small tech startups. The trend set in motion with the invention of the first microchip, 60 years ago, is irreversible. Computer science knowledge has become crucial to any profession.
Silicon Valley tech giants and startups are stealing the spotlight and protagonism of Wall Street and Main Street as Earth’s financial and power capitals. Software is eating the world and disrupting industries that were once immune to innovation.
Top executives from investment banks and the federal government are moving to the West Coast to join tech companies and, most importantly, the top graduates across the country are choosing to start their careers in the information technology industry.
Tech companies are only going to expand their reach and wealth in the next decades. The Silicon Valley ecosystem has not only produced tremendous financial success but also has influenced and inspired entrepreneurs around the globe.
As the world enters a new era driven by technology, it is time to reconsider Silicon Valley as a myth. This ecosystem will become much more powerful than Wall Street ever was. What is going to happen here in the next few decades will affect our lives. It is a good time to understand what lies at the heart of Silicon Valley.