Discuss Detroit » Archives - Beginning July 2006 » How to Be Silicon Valley - a waste of time for Detroit? « Previous Next »
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Tomoh
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Post Number: 215
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Posted on Friday, June 16, 2006 - 12:47 pm:   Edit PostDelete Post   Move Post (Moderator/Admin Only)


quote:

What you can't have, if you want to create a silicon valley, is a large, existing population of stodgy people. It would be a waste of time to try reverse the fortunes of a declining industrial town like Detroit or Philadelphia by trying to encourage startups. Those places have too much momentum in the wrong direction. You're better off starting with a blank slate in the form of a small town. Or better still, if there's a town young people already flock to, that one.




From this essay by Paul Graham: http://paulgraham.com/siliconv alley.html

The general supporting arguments aren't really new, much of it a subset of Richard Florida's Creative Class ideas. You need smart people (nerds), rich people, and an attractive place to live. But while the author argues that a Silicon Valley could be created in Buffalo, he says it could not in Detroit specifically.

I'm not sure I agree it's a waste of time for someone with the money to try to turn Ann Arbor-Detroit into a high tech corridor. We all know Detroit sorely lacks the number of institutions of higher learning (not to discount the ones that do exist), whereas the city of Ann Arbor has one very big and strong one, especially in high tech research. Ann Arbor does have a small startup scene. Ann Arbor has the cafes (probably more in the DDA district than any other area of an American city I can think of), and Ann Arbor has the used book stores (most per capita or something like that). Annarbourites hate tall buildings, but the city does lack sunlight. So what else is missing?

What Ann Arbor also lacks is a more attractive neighbor city in Detroit, compared to Cambridge/Boston or Berkeley/San Francisco or even Boulder/Denver. Ann Arbor/Detroit sorely lacks a venture capital scene, despite the amount of wealth in Detroit's suburbs. Much of the population of Ann Arbor also lacks any means of getting to Detroit to take advantage of the attractions that do exist in the city.

Anyways, I don't think it's a waste of time to nurture a startup scene in the Detroit area. An attractive downtown Detroit benefits the startups in TechTown as well as Ann Arbor. A growing tech industry in Ann Arbor connected by commuter rail to Detroit benefits Detroit.

Thoughts, anyone? I know some of you despise Ann Arbor. Fine, keep Ann Arbor where it is, but connect to it via rail. Some of you despise Detroit -- but you should realize that an attractive Detroit helps attract the people to the region who would found startups there.

And for those who wonder if it's possible to create a high tech industry by paying top nerds to come to your city just look at the biotech industry in Singapore.
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Ndavies
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Posted on Friday, June 16, 2006 - 1:00 pm:   Edit PostDelete Post   Move Post (Moderator/Admin Only)

I think the opposite question is more important. "When will Silicon Valley become like Detroit."

When will the current high tech industries become like the last generation of High tech industries. When will the current high tech industries start to see the consolidation and job losses of the Auto and Aeronautics industries are currently seeing.

All these authors seem to forget Detroit was the equivalent of Silicon Valley at the last turn of the century. When does that entrepreneurial spirit that started these places become the bureaucratic quagmires that they are currently railing against.
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Tomoh
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Posted on Friday, June 16, 2006 - 1:05 pm:   Edit PostDelete Post   Move Post (Moderator/Admin Only)

That was a long ramble. Most importantly, I think the main two things holding back the region from having a bigger startup scene are 1) (more) local venture capital and 2) a (more) attractive core city.
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_sj_
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Posted on Friday, June 16, 2006 - 1:42 pm:   Edit PostDelete Post   Move Post (Moderator/Admin Only)

They have already went through those corrections.
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Ndavies
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Posted on Friday, June 16, 2006 - 1:56 pm:   Edit PostDelete Post   Move Post (Moderator/Admin Only)

They've only started to go through those corrections. Those corrections are continuous for all non emerging technologies. Where will they be after 100 years of those corrections? Where will they be when the infrastructure built in the last 25 years becomes 100 years old?

The auto and aerospace industry has been going through those corrections for 100 years now.

At one time horse power using real horses and water power were the high tech industries. Where are those businesses. It was then followed by steam power, then fossil fuel, then high power electrical, and transistors, now micro chips.

Technology has steadily moved east to west across this country. Each new technology replacing the last. What will the next new technology be? Where will it be headquartered? Why would it move to the silicon valley with it's now high startup costs and ingrained aging technology ways.
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Burnsie
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Posted on Friday, June 16, 2006 - 2:03 pm:   Edit PostDelete Post   Move Post (Moderator/Admin Only)

Hey, don't you remember? Ann Arbor is just a suburb of Detroit, anyway.
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Ndavies
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Posted on Friday, June 16, 2006 - 2:09 pm:   Edit PostDelete Post   Move Post (Moderator/Admin Only)

And to answer the first question. There isn't really any other choice. You have to create an entrepreneurial environment.

Very few companies move from one place to another. The ones that do are being hounded by every other job hungry place on the globe. The only reliable way to get businesses here is to grow them from scratch.
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Merchantgander
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Posted on Friday, June 16, 2006 - 2:12 pm:   Edit PostDelete Post   Move Post (Moderator/Admin Only)


quote:

Very few companies move from one place to another. The ones that do are being hounded by every other job hungry place on the globe. The only reliable way to get businesses here is to grow them from scratch.




Amen!
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Tomoh
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Posted on Friday, June 16, 2006 - 3:58 pm:   Edit PostDelete Post   Move Post (Moderator/Admin Only)

I think the next high tech industry is biotech. And if you look at the big biotech centers, you'll find they overlap with the big infotech centers. This is because the money that was made on IT was kept for reinvesting in biotech, and the other factors stayed the same -- smart people, good schools, an attractive place to live, and (to reiterate) local venture capital. We're not seeing the Bay Area or Boston decline yet.
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Ray
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Posted on Saturday, June 17, 2006 - 2:19 am:   Edit PostDelete Post   Move Post (Moderator/Admin Only)

Finally, a topic I can speak on productively without ranting and speculation.

I live in the Detroit are commute to work in Silicon Valley. My customers are startups, VCs and larger tech companies. This strange lifestyle has given me an interesting -- and often heartbreaking -- perspective on Silicon Valley and Detroit.

There's no question that people and culture totally dictate the outcome in Silicon Valley vs. Detroit. But I think the picture is more complicated than the article suggests.

1. The Network Ecosystem.

First, Detroit has a ton of technology, "nerds" and money. So, if these alone were the requirements, we'd be set. What makes Silicon Valley Silicon Valley is (a) a now massive, highly-networked human infrastructure for start-up making; and (b) the right group of enablers, and (c) the right culture.

First the infrastructure. The key idea here is "ecosystem" and this is something that requires a major culture shift for Detroit. The ecosystem is a compelx, botttom-up network of a large number of individudual actors: scientists, engineers, entraupenuers, VCs, lawyers,finance people, marketing people, etc. The key idea here is that these groups are networked so they fluidly assemble quickly as necessary to meet the hyperspeed demands of the start-up world and to provide unique cross-fertilzation of ideas.

For example, say we want to create a start up to commercialize a new kind of high-speed memory chip. Through the network, the promoters of this idea will quicly find the right engineering and sales people. They'll quickly get introduced through a friend-of-friend to the professor at Berkley who's a guru in SRAM and have her on their board. Okay, you get the idea. It's not rocket science and it's a process that is theoretically easy to replicate.

So, why can't Detroit have this same kind of network. We can, but first and foremost, the business community, probably from the auto-industry experience, is widly oriented "top-down" and many of the initiatives reflect this thinking. We're always looking for the 'big solution' like an assembly plant. We don't culturally understand and appreciate the power of the network.

Two, there's something known as the network effect that says a network gets more powerful with size. The Silicon Valley network of qualified start-up personnel and investors is massive. Massive beyond belief. It's 50 to 100 times (my best guess) the size of the fragmentary network here in Detroit. And the power of that network increases exponentially.

So, for example, if I want to start some esoteric business to make a specific kind of interial sensor to stop jitter in hand-held cameras, there probably are very few people in southest michigan who would be optimal direct and indirect participants. And given our paltry network, they would be hard to locate. In Silicon Valley, a few phone calls by the company's VC or founder would start to genreate significant leads for talent.

So, if you think about competing with Silicon Valley, you have to understand the enormous incumbent advantage they have.

Third, Detroit's physical plant, that is the sprawl over thousands of square miles, really hurts the development of the network ecosystem because you don't generate the critical mass and the casual human interactions that define the network. Silicon Valley may be a suburb, but the penninsula is like 3 miles wide and 20 miles long. So it's very dense. Everybody knows everybody and lives 10 mintues part. And of course, while not Silicon Valley proper, SOMA/Mission Bay and Emmerville/Berkley are dense, teaming hotbeds of technology development. Again, think coral reef. Think rain forest. You can't have a rain forest planting the trees 100 yards apart. The technolgoist living in Howell is not going to bump into the VC living in Gross Pointe at the Starbucks. But these casual interactions are a crucial part of the fabric of the ecosystem.

2. The Superstar Players

Okay, that's the infrastrucre and it's the easy part. The hard part is this. Silicon Valley knocks out companies the way Hollywood knocks out movies. There is an art and a science and a PROCESS to this. And the core group of VCs and serial founders who are really good at this industry of "company-making" just happen to live there. Just like the people who are good at the PROCESS of movie making happen to live in LA.

I believe these core leaders are indispensible. So, for example, it's like we want to have a football team and we want to win the Superbowl. So we build a stadium. And we recruit 100,000 fans to fill it. And we buy uniforms and training eqipment. And we do everything humanly possible, but if we don't have those rare talents, those 1-in-10,000 athletes, we don't have a football team that's going to the Superbowl.

I think this is what the guy in the article meant by "nerds" and "people with money". But it's so much more. The nerds are not really nerds. They are founders, and if you've ever met a founder I'm not sure "nerd" is the right word. Maniac. Meglomaniac, maybe. I don't know. But these people have gift, a vision and a drive. They basically don't sleep. Not all of them are big technologists either. The other camp, the VCs, aren't just "people with money." The world is full of "people with money." There are trillions of dollars of liquidity washing round in the capital markets, but almost all of it is worthless if your goal is to build a true Silicon Valley. A top VC is not a guy with money, he's a plan manger of a factory that makes companies and he has a set of amazing skills for doing this job. For example, he has personal contact with 1000-1500 well placed individuals. He knows a sector or a technology better than anyone in the world. He can discern a quality businss plan in 30 seconds. These are not "guys with money." They are the NBA stars of business and they are as scarce as hen's teeth. Now, there are a huge number of dumb money wannabe VC's and they too can dump cash into financing. It's just that 99 percent of their portfolio is garbage that doesn't create the Intels, Yahoos, Cisco's, Googles and other giants of tomorrow.

I don't know how you "manufacture" these people. They are born, all over the world (including a lot from the Detroit area!) and the come to Silicon Valley and other similiar centers the same way that actors go to Hollywood. We're probably talking about a core group of 4000 people, and they are not coming to Detroit anytime soon.

I'm stuck on this one... I don't have any productive solutions yet.

3. The Culture of Risk Taking and Innovation.

The final hurdle is the region's culture. Silicon Valley is about: thinking outside the box, taking risks, speed of execution, collaboration, and above all, driving relentless urgency.

I find the culture in Detoit is, well, not emblematic of these qualities.

People here think on the glacial timescale of the auto industry -- 3-5 years. They also -- perahps to their credit -- have other priorities, like their kids.

There needs to be a burning sense of urgency. You do a start-up, you are going race to market. You are going to work 16 hours a day for weeks or months. Forget about your family. In Silicon Valley, families are referred to as "drag" as in areodynamic, as in a dangerous distraction from the primary task of getting our beta version into the field well in advance of the trade show. If your kid has a basketball game, tough shit have your wife email you a picture from her cell phone.

That probably offends many of you, which is good and healthy and you'll make fine parents, but technology start-ups might not be your optimal career path.

So, there's nothing in the world that would prevent Detroit from being a high-tech mecca if we had cultural will and the core talent group (VCs and founders) to lead us.

By analogy, say we wanted to by Hollywood. Ten thousand of us could agree tomorrow to pitch in and do it. We could quit our jobs, go to Hollywood and work as unpaid interns for 2-3 years. We could learn how to work the cameras and build the sets. Etc. However, when we got back, we would still need 50-100 movie stars and producers. Otherwise we would flounder.

Similiarly, we could go go work in start-up in Silicon Valley and pretty much after 2-3 years get a good idea of how it all works. But, as with the movie analogy, when we got back we would flounder without the leadership of the core group of founders and VCs, the "stars" who drive the whole machine.
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Livernoisyard
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Posted on Saturday, June 17, 2006 - 2:41 am:   Edit PostDelete Post   Move Post (Moderator/Admin Only)

Besides, much of the Silicon Valley and the Silicon Hills can easily be offshored and is...
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Lmichigan
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Posted on Saturday, June 17, 2006 - 3:40 am:   Edit PostDelete Post   Move Post (Moderator/Admin Only)

Does Detroit want to be Silicon Valley? It's ironic how that region recently experienced a lot of Detroit-esque problem banking its entire existence on one industry that went bust. In fact, San Jose (and the region) was losing thousands of people after 2000, but has since only modestly recovered for what we'd call a sunbelt sprawler.

I certainly hope Detroit is aiming to be a lot more than "the next big thing." That's what destroyed it in the first place.
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Tomoh
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Posted on Saturday, June 17, 2006 - 4:50 am:   Edit PostDelete Post   Move Post (Moderator/Admin Only)

Ray, thanks for that awesome explanation of the VC scene. I think the finest point in all the talk of a 'creative class' is that what matters most is attracting the rockstars, the NBA athletes of the business world. The labor, even the creative labor, will follow the money. Uhh, it's late, so I'm going to re-read what you wrote in the morning, but it does sound like you described a VC "scene", a product that I think Detroit should try to create, or rather increase.

Those who are pointing out the potential future collapse of the Bay Area and America's IT industry are focusing too much on the specific companies of today I think. The point of a startup factory such that Silicon Valley is is that new companies are created that are continually at the forefront of *technology*, whatever the technology may be. Yesterday it was software and the internet, today it's biotech, tomorrow who knows... nanotech? Alternative energy?
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Rustic
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Posted on Saturday, June 17, 2006 - 5:08 am:   Edit PostDelete Post   Move Post (Moderator/Admin Only)

Ray, thanks for sharing your perspective re Silicon Valley. It describes well the post dotcom/telecom bust Si valley financial and cultural infrastructure.

Right now Si valley remains a unique confluence of factors. Plenty of regions have tried to mimic SI valley's model with, at best limited success. Whether Si valley remains self-sustaining as US tech mfg off-shores it's last slivers remains to be seen. One thing to consider tho, is Ray's decsription of the type of tech professional a Si valley startup requires. This represents only a fraction of the labor force. If an industry can train and employ enough people such that the fraction of these types of people is large enough to provide enough of a talent pool then this model works. IF not ... well ....

That said, Si valley has survived several upheavals in the past: ossification of the defense industry by the 60's, the erosion of the domestic consumer electronics core companies by the 80's, relentless competition from Japan and Taiwan, dotcom hustlers-dumb money and the inevitable crash, the telecom crash immediately afterward so maybe it will survive.

From a historical perspective tho other comps DO exist to Si valley (e.g. Detroit ~1890-1930, Conn River Valley ~1810-1880, NY/NJ ~1870-1920). There are other historical comps of smaller scale as well (Cleveland and Pittsburgh in the late 1800s, Boston and LA since WW2). Historically as things have eventually dried up the money and talent moved on or evolved. If I was betting money I'd bet on the Wash DC area becoming the relatively big tech innovation hot bed in the US as Si valley wanes.

To address the title of this thread: would it be a waste of time for Detroit to try to be like Si valley. Yes since
(1) it already WAS silicon valley a hundred years ago and
(2) what possible tech area could Detroit focus on outside of automobiles? The tech base of the region has incredible expertise in the r&d, design and industrial mfg of automobiles and subsystems working in the context of extremely LARGE very mature companies. One could imagine gleaning enough startup caliber workers from this pool in today's job market, but outside of autos (or MAYBE alt energy) it is difficult to imagine is what tech areas to emphasize. Re automobiles, well the auto industry is mature and well beyond requiring small companies for innovation (those days dried up by the 1950s, one of the reasons imo Detroit hit the skids, but that's a topic for another thread).

(Message edited by rustic on June 17, 2006)
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Rustic
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Posted on Saturday, June 17, 2006 - 12:15 pm:   Edit PostDelete Post   Move Post (Moderator/Admin Only)

My point of (2) in my preceeding thread was not that Detroit is tech doomed, but that for Detroit to flourish via tech development it WON'T be via the Si valley startup model.

IMO what Detroit SHOULD do is center a SEMATECH style auto industry super RnD facility funded by GM, TOYOTA FORD and DMC to address their COMMON problems. The spinoffs of this sorta thing would be huge. This will never happen tho it takes WAAAY too much vision in an industry plagued by dull management and cooperation in an industry so hypercompetitive.

Another thing Detroit COULD do is for the domestics to spin off their RnD to startups or subcontract companies, but this would take HUGE balls as this model has kinda failed spectacularly in two complimentary models one auto industry related (the Delphi and Visteon parts spinoffs) AND one high tech related (the trainwreck that is Lucent). Subcontracting out the RnD is what the Pharmas have done for their non Drug related tech development (assay, sample handling, sample prep, bioinformatics etc.) and the jury is still out as to the efficacy of this model.

A third thing that MIGHT happen is that as the Domestics go through their inevitable contractions and death spasms what survives might have the resources to support tech development directly the old fashioned way and that this smaller leaner tech is centered in the metro area.

No matter what it is a HAAAARD HAAARD road ahead, much more difficult than simply throwing up some tech incubators, and some ancillary condo playground neighborhoods to attract an imaginary demographic.
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Sticks
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Posted on Sunday, June 18, 2006 - 2:46 pm:   Edit PostDelete Post   Move Post (Moderator/Admin Only)

In fact, San Jose (and the region) was losing thousands of people after 2000, but has since only modestly recovered for what we'd call a sunbelt sprawler.

According to the Federal Government, while SJ didn't really lose thousands they really didn't gain much either from 2000 to 2003:

http://www.fedstats.gov/qf/sta tes/06/0668000.html
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Lmichigan
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Posted on Sunday, June 18, 2006 - 5:06 pm:   Edit PostDelete Post   Move Post (Moderator/Admin Only)

You may be right. I thought I remember estimates back earlier in the decade showing a loss for San Jose. Anyway, estimates showed a large loss for San Francisco (which may still be losing), and maybe a stagnation or loss for San Jose because I seem to remember that even with Detroit's continued loss, it took San Jose (a boom town at one time) just until very recently to pass it. In fact, San Francisco is estimated down a little over 32,500 since 2000. And, San Jose has posted a moderate (considering its former boom) gain of nearly 10,000.

(Message edited by lmichigan on June 18, 2006)
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Tomoh
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Posted on Sunday, June 18, 2006 - 10:38 pm:   Edit PostDelete Post   Move Post (Moderator/Admin Only)

Population in SF proper plummeted immediate following the dot com crash. It's probably gained some of that back in more recent years, giving a net loss of not really too much.

It sounds like Detroit is not going to be a Silicon Valley anytime soon because 1) it wasn't Silicon Valley yesterday 2) the culture 3) lack of VC/startup scene. But I think I should reframe my question a bit. Should Detroit diversify its economy? Duh. Should Detroit diversity with some high tech non-manufacturing industries that are not directly related to the auto industry such as software and biotech? I think so. And if so, it sounds like there are things that need to change within the region. Some things would be to increase networking oppurtunities for people in the VC scene, get them to sit next to each other at the bar, the coffee shop, on the train.
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Livernoisyard
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Posted on Sunday, June 18, 2006 - 10:45 pm:   Edit PostDelete Post   Move Post (Moderator/Admin Only)

Population statistics in CA surely must be viewed with caution, considering the ready inclusion of illegals, many of whom are suspected to have minimal education.
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Lmichigan
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Posted on Monday, June 19, 2006 - 12:00 am:   Edit PostDelete Post   Move Post (Moderator/Admin Only)

Livernois, nice overgeneralization, but San Francisco is too expensive for most immigrants, and is not like the immigrant magnets of LA or San Diego. It is definitely losing, though for vastly different regions than Detroit.
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_sj_
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Posted on Monday, June 19, 2006 - 10:15 am:   Edit PostDelete Post   Move Post (Moderator/Admin Only)


quote:

They've only started to go through those corrections. Those corrections are continuous for all non emerging technologies. Where will they be after 100 years of those corrections? Where will they be when the infrastructure built in the last 25 years becomes 100 years old?




I disagree, overhiring and overpaying are not continuous. Granted they all have spurts but the amount of wealth gained and destroyed during the tech boom and crash will probably never be seen again.
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Ndavies
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Posted on Monday, June 19, 2006 - 10:49 am:   Edit PostDelete Post   Move Post (Moderator/Admin Only)

Overhiring and overpaying are consitent with all new businesses and technologies. As markets mature, the new technologies become commodities and process improvements are implemented, the no longer emerging industries shed jobs. It has happened with every technology we have ever invented. Emerging technologies are not immune to this happening. It's happened in food production, clothing, trains, planes, cars, consumer electronics, banking and computers. There are no industries immune from this effect.

All new technologies hire people as fast as possible, the market matures and they then begin to shed jobs.
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Jerome81
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Posted on Friday, June 23, 2006 - 3:36 am:   Edit PostDelete Post   Move Post (Moderator/Admin Only)

Thinking that what happened to Detroit and Pittsburgh and other older cities can't happen to Silicon Valley is just dumb. Most of the large companies here are already starting to mimic the huge auto companies. They move slowly, they grow slowly. They employ thousands and lay them off when times are bad. The good news is that so far there are many smaller companies behind them picking up some of the slack.

Even working out here, you know its only a matter of time before more and more jobs disappear or get shipped to India. When growth is no longer exponential and systems evolve that can automate the jobs of hundreds or thousands, it will happen.

Add in that as silicon valley becomes more successful, it becomes a harder place to live. Too expensive and too crowded. People look elsewhere (like Boise or Phoenix or Las Vegas). And don't think for even 1 second that a massive earthquake here wouldn't end the whole damn thing. This is probably the biggest, scariest thing possible. The companies that do survive would likely seriously look elsewhere to re-start, and the number of residents to work those jobs would drastically decrease. Think New Orleans, except 10 times that scale. If we go from 10 million to 5 million, and business can start over from scratch any where they want, you bet your ass they will.

Being arrogant enough to think that it won't happen to you is exactly what happened to Detroit, Pitt, Philadelphia, etc. When times are good, you think they'll last forever. They didn't, they never have, and that will continue. Eventually Silicon Valley will be just another settled, stable, everyday area of the US, and some other place will be the one with the money, drive, and ideas to be the next silicon valley.
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Tomoh
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Posted on Saturday, June 24, 2006 - 1:52 pm:   Edit PostDelete Post   Move Post (Moderator/Admin Only)

Beyond the Valley: 10 Blooming U.S. Cities for Tech
http://www.eweek.com/article2/ 0,1895,1977764,00.asp

Okay, so Detroit may never compete with the real Silicon Valley. I just don't buy that there isn't the potential, though, to have as strong a tech segment of the economy as cities like Philly, Atlanta, or, hell, Charlotte.
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Trainman
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Posted on Sunday, June 25, 2006 - 12:17 pm:   Edit PostDelete Post   Move Post (Moderator/Admin Only)

Detroit was the silicon valley 100 years ago and can be again. We should let the nerds run the Detroit to Ann Arbor rail and public bus service because 100 years ago they did it without taxes and they can do it again.

It's time to privatize public transportation. Let's face up to the facts here in southeast Michigan.

1. The high paying un-skilled union jobs are gone

2. The days of both federal and state transit money from fuel taxes are gone.

3. The taxes are already too high to attract more good jobs.

4. SMART and DDOT are among the most expensive transit systems in the world

5. The August 8, 2006 SMART renewal is a charity cause.

Raising transit taxes will not bring people out of poverty or attract jobs to this area. For these things to happen we need high tech mostly young nerds who know how to run bus and rail systems.

I work for Norfolk Southern railroad which owns the rails and they will do the job of moving passengers without more taxes. I saw this and documented exactly how this can happen on a website.

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