The Ugly Side of Silicon Valley

This is the Chapter 23 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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You may have noticed throughout this book that I have maintained an optimistic and positive tone about Silicon Valley’s culture and the characteristics that make the ecosystem great. This chapter will be a chance to redeem myself and weigh in on the bad stuff.

A land of contrasts

Foreigners that have not been to the San Francisco Bay Area have the erroneous impression that Silicon Valley is the Eldorado of the developed world, where futuristic buildings abound, rich people stroll in the streets with their latest gadgets, and the infrastructure shines on. Regrettably, the actual scenario is quite the opposite.

Despite being one of the richest regions in the world, Silicon Valley boasts a Third World infrastructure. Compared to European or East Asian countries, the public transportation is inefficient, slow, and expensive, roads are full of potholes, and basic services like broadband Internet or public schools are just average. Airports are old, the largest cities are dirty, and a huge concentration of homeless and crazy people share the streets with the wealthy.

Oakland became the third most violent city in America and even in San Francisco people do not feel totally safe. There are too many break-ins, car thefts, and drug addicts wandering around. The super rich cities of San Jose and Palo Alto also have enormous bastions of poverty.

I really do not understand how this can happen. My impression is that local politicians are either incompetent or corrupt. The Bay Area has a GDP equivalent to Switzerland and even so, sometimes, you wonder where all this money from taxes is going. Cities like Shanghai or Tokyo, which are several times the size of the Bay Area, look like futuristic outposts of more advanced civilizations.

Maybe the chaos and the wealth inequalities of Silicon Valley influence, somehow, the creativity of local entrepreneurs as they go through extremes during the same day, from working on the artificial intelligence to make cars self-driving to calling the police to remove a homeless person defecating on their doorstep.

Affordability

You may have heard that San Francisco is now the most expensive city in the world due to a housing crisis. Locals are being expunged from the city due to the influx of tech millionaires. Residents pay premium prices for living here and receive, in return, mediocre service. The same happens all around the South Bay.

Affordability is a big problem for the ecosystem. Entrepreneurs are having problems paying their bills, and the cost of living is becoming so high that even a $150,000 gross salary is not enough for a couple to save money or to have a comfortable life. A one bedroom apartment rental in San Francisco, with utilities included, costs around $4,000.

Higher rentals mean higher salaries which, therefore, mean less competitive companies and more expensive products. If Silicon Valley does not solve the affordability crisis in the short term, the ecosystem will probably lose talent to other cities in the United States and the world.

Bad behavior

Silicon Valley prides itself on its work ethics, meritocracy, and progressive values, and I sincerely believe most people living here are doing good to the world. However, there have been, recently, numerous cases of discrimination, fraud, misogyny, and favoritism in the Valley; and they happen more frequently than I would like to admit.

Theranos, for instance, pitched a story about a young Stanford dropout inventing a new painless blood test that would require only a drop of blood. Its founder, Elizabeth Holmes, was a media darling for many years and often compared to Steve Jobs. Theranos attracted $700 million dollars in venture capital and, in 2015, was valued at $9 billion.

Her secret? She was born into a rich and influential family, and her company was able to draw important political, military, and business figures to the board to add credibility to her startup. The strategy did not work for long as the company fell into a downward spiral after a whistleblower revealed the truth to the Wall Street Journal, proving their technology did not work and that the company lied to regulators and investors.

After the episode, Elizabeth continued to double down on the lies. She did not present any evidence to shut up the criticisms about Theranos technology and accused the health care industry of orchestrating a smear campaign. It was too late as the startup’s reputation in Silicon Valley and elsewhere was already destroyed. Key people left the company, which is now facing, along with Elizabeth, criminal and civil lawsuits. Theranos alleges innocence.

Lily robotics is another emblematic case. The startup ran a very successful Kickstarter campaign for a cute drone that could be thrown in the air to follow users autonomously. The company got $35 million in pre-sales and $15 million in private funding. By all accounts, Lily Robotics was considered to be a success and an example of Silicon Valley’s ingenuity.

In late 2016, however, everyone was caught by surprise when the startup announced its bankruptcy alleging manufacturing difficulties. It was demonstrated that the startup’s video on Kickstarter was faked with footage belonging to a rival drone and that Lily Robotics was never able to make a final product. As of May 2017, Lily was being sued by San Francisco’s district attorney for fraud and was required to reimburse all the customers who paid for the product on Kickstarter.

Uber has also been in the news due to many cases of misogyny, unethical behavior, and unsavory attitudes from the executive team toward women, drivers, competitors, and the press. Differently from Theranos, though, Uber’s CEO apologized, took responsibility for their actions, and promised to change course. Time will tell if the Uber brand will recover from the accusations and mess-ups caused by a hyper competitive and toxic culture.

These cases are emblematic because they affect the reputation of the whole ecosystem. Fortunately, the majority of startups in Silicon Valley take their responsibilities seriously, and most investors, executives, and entrepreneurs have voiced their repudiation against bad apples.

The immigrant Catch 22

Around one-third of the Bay Area’s population was born outside the United States. On the one hand, this makes diversity and acceptance of differences a core tenet of the Silicon Valley ecosystem. On the other hand, some attitudes toward immigrants continue to be truly backward.

One of them is the indifference and lack of appreciation toward the numerous struggles foreign professionals face to come here. Americans tend to treat immigrants as if they were coming from another state. I heard once from an investor that he understood what I went through in my journey because he too was an immigrant, from Chicago. This is no joke.

I think most Americans do not realize how life is tough elsewhere and how difficult it is to immigrate to another country and adapt to a new environment. Sometimes, immigrants fight for years for the opportunity to come to a better place and, internally, they are completely burnt out. What I advocate is not compassion, but recognition of immigrants’ talents that may be useful to the ecosystem. Talents like persistence, optimism, charisma, and interpersonal skills.

I could argue immigrants have solved very hard problems to come legally to the United States, but the skills used to make their journey a reality are not taken into consideration in job interviews or when raising money for startups. Actually, it is quite the contrary.

Immigrant entrepreneurs are expected to behave exactly like a white American Stanford graduate even though they face financial, linguistic, cultural, and educational adversities for many years. Companies seem to not have any programs to acclimatize recently arrived foreigners and explain to them how Silicon Valley’s culture works and what is the expected behavior.

What happens is that local Silicon Valley folks take their culture for granted and do not think this is a big deal. Some people said to that, if someone wants to be here, he or she will find a way. As if entrepreneurs can solve unsolvable problems like Visas, a bad educational system in their country of origin or lack of history in Silicon Valley.

Often, the best immigrants may take years to learn the basic lessons contained in this book and this lack of sync with the Silicon Valley culture ends up being prejudicial to the ecosystem’s overall productivity.

Tech’s dark secret

One might think that mental health issues in the Bay Area may be restricted to the homeless population, but this is far from the truth. Entrepreneurship is harder than people imagine and can really crush one’s mind. It is not uncommon to hear stories about depressed founders or people who took their lives because they could not withstand the pressure.

Austen Heinz, the founder and CEO of Cambrian Genomics, took his life in 2015 after a trip to Del Mar. “That was a reminder to me that you can’t predict which founders are struggling,” said former Y Combinator president Sam Altman. Many others have followed this path as well, including Aaron Swartz, the Reddit co-founder who faced (unfounded) hacking charges that could have landed him in jail for decades.

These founder suicides are just extreme cases of the tech industry’s quiet battle with depression and other mental illnesses, exacerbated by the stress of starting a company and creating something successful. Actually, a recent study by Dr. Michael Freeman, an entrepreneur and clinical professor at UCSF, was one of the first of its kind to link higher rates of mental health issues to entrepreneurship.

Of the 242 entrepreneurs surveyed, 49 percent reported having a mental-health condition. Depression was the number one reported condition among them and was present in 30 percent of all entrepreneurs, followed by ADHD (29 percent) and anxiety problems (27 percent). That’s a much higher percentage than the U.S. population at large, where only about 7 percent identify as depressed.

More surprising was the incidence of mental health in the families of entrepreneurs: 72 percent said they either had mental-health problems themselves or in their immediate family.

According to Dr. Freeman, a founder who has no history of mental illness from a family with no history either is the exception, not the rule.

Monolithic culture

A very annoying cultural phenomenon has been consuming Silicon Valley over the last five years. We refer to it as the Hollywoodization of the ecosystem. This recent issue, caused by high wages and dreams of getting rich fast, is attracting spoiled young professionals with big egos and a sense of entitlement that does not reflect the Valley’s down to earth values. These new entrants in the San Francisco Bay Area are epitomized by HBO’s Silicon Valley TV series as the “brogrammers.”

Foreign immigrants also complain the region gravitates too much around tech and business. When you go out to a party or to a bar, the subjects always gravitate around startups or what someone is doing. It is rare to have a normal conversation about life, culture or politics. Or a dinner without talking about business.

Silicon Valley should be more aware and self-critical about this monolithic culture because it may impair the attraction of future talent. People have much more to offer than their entrepreneurial skills.

A true meritocracy?

Over the last few years, I have witnessed many successful entrepreneurs or executives, coming from countries that privilege relationships over meritocracy, having trouble understanding and adapting to Silicon Valley’s rules. Often times, these folks start questioning if the ecosystem is truly meritocratic.

For example, I met a super smart European girl with several Ph.D.s that was pissed with the interviewing process at Facebook, where the interviewers asked her to solve real problems before being hired. She found the request really offensive and really did not understand why there were so many interviews if her academic credentials were so great. She thought the Valley was a fraud because, at home, everyone was fighting to hire her.

Another acquaintance was a super successful entrepreneur in Latin America who came here to build a tech startup. His business got a lot of media, a lot of hype, but he was never able to be successful in Silicon Valley. He started blaming it on everything the Valley represented and moved out after he felt ostracized by the ecosystem.

As I have explained before, people in Silicon Valley expect any immigrants that come to the Bay Area to prove their value by succeeding here. Due to the cultural and behavioral adaptations immigrants need to face, that can take years, even for the most talented foreign entrepreneurs. It is super hard, and it changes you. The options are either to run from the realization you are not special or be humble and learn within the ecosystem. Most people choose to run.

My two cents

To finish this chapter, and to be fair to everyone that welcomed me so warmly and openly, I want to say that, despite all its imperfections, Silicon Valley is the closest thing to a true meritocracy I have ever experienced.

After living in many countries and doing business with different cultures around the world, I could compare the pros and cons of each ecosystem and say meritocracy in Silicon Valley is as real as it gets. There are indeed injustices and bugs in the ecosystem, but the results obtained by local companies are the best evidence the system functions pretty well.

If you are smart, work super hard, and assimilate to the culture, you will find your way in Silicon Valley. Success, though, requires strategic patience, fast learning, collaboration, and the humility to withstand an emotional rollercoaster.