The absurdity of Silicon Valley

Innovators like to congregate in Silicon Valley because other innovators congregate there too. VCs and a host of other people feed off the phenomenon and set up shop there too. The attractiveness of Silicon Valley is not that you can dig up innovation ore in the area. In other words, there is no resource whatsoever that attracts anybody there. People are only attracted by each other.

The problem is that the inclination of congregating there costs a hell of a lot of money. Housing prices and rents are very high. These innovators are forking over way too much money to other people for no good reason at all.

Most Silicon Valley startups are in the field of software. What they need, are developers to help building the software and users to start using their platform. If these startups set up shop in Silicon Valley, they automatically face a shortage of developers, because the other Silicon Valley startups are hiring in the same pool as they are. What’s more, they have to pay their developers much more, in order to compensate for the very high cost of living in the area.

All of these additional expenses do not translate into higher platform adoption by users. The development and ongoing expenses are much higher than elsewhere, but the likelihood of success is the same.

Another problem is funding. If you can fund a startup by yourself, you do not have to deal with potentially annoying outside investors dictating the policies in your company. VCs are known to be a pain in the butt. By setting up your startup in Silicon Valley, you pretty much guarantee that you will need outside money.

Outside investors are often more than just a pain in the butt. If you look at the history of Google Search or Facebook, you can clearly see that you first have to build something that users want and appreciate. Monetization should only be a secondary afterthought.

That is how Google operated in the beginning. They built a great search engine and only started thinking of monetization very late in the game, but that is not how outside investors think. They want monetization first, while building a great product is of little importance to them. The problem is that this is not how you build a company, such as Google, that will eventually be worth half a trillion dollars. Overture used to be an investor-led company competing with Google.  They lost the battle against Google. Instead of being worth half a trillion, they are now worth nothing at all, while their outside investors have moved on to another victim to destroy with their greed.

Another problem is that outside investors will insist that the startup goes public. From there on, their greed will join up with Wall Street greed in the glorification of stupid greed. They will want to sacrifice user satisfaction and staff retention for the next quarter’s profits. Instead of developing half a trillion dollars of genuine value, the entire thing will just go to the dogs. Wall Street should stay out of technology because they are utterly stupid. Their glorification of greed only works when other people are equally stupid. It does not work in technology.

The sky-high rents and housing prices in Silicon Valley keep dragging in the wrong kind of crowd, who in exchange for funding early startups, will infect them with their greed and ultimately destroy them. In my opinion, innovators will start staying away from there, because it is just not worth it.

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eriksank

I mostly work on an alternative bitcoin marketplace -and exchange applications. I am sometimes available for new commercial projects but rather unlikely right now.

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