Golden Age of Silicon Valley Is Over With Facebook IPO 222
Hugh Pickens writes "Steve Blank, a professor at Berkeley and Stanford and serial entrepreneur from Silicon Valley, says that the the Facebook IPO is the beginning of the end for Silicon Valley as we know it. "Silicon Valley historically would invest in science, and technology, and, you know, actual silicon," says Blank. "If you were a good venture capitalist you could make $100 million." But there's a new pattern emerging created by two big ideas that will lead to the demise of Silicon Valley as we know it. The first is putting computer devices, mobile and tablet especially, in the hands of billions of people and the second is that we are moving all the social needs that we used to do face-to-face onto the computer and this trend has just begun. "If you think Facebook is the end, ask MySpace. Art, entertainment, everything you can imagine in life is moving to computers. Companies like Facebook for the first time can get total markets approaching the entire population." That's great for Facebook but it means Silicon Valley is screwed as a place for investing in advanced science. "If I have a choice of investing in a blockbuster cancer drug that will pay me nothing for ten years, at best, whereas social media will go big in two years, what do you think I'm going to pick?" concludes Blank. "The headline for me here is that Facebook's success has the unintended consequence of leading to the demise of Silicon Valley as a place where investors take big risks on advanced science and tech that helps the world. The golden age of Silicon valley is over and we're dancing on its grave.""
Re:Facebook (Score:3, Interesting)
This is extremely obvious to anyone who is older than 15 years old and especially for those of us who live overseas and have friends, family and people all over the world and helps to keep in touch with people easily (and no, I'm not going to bother them all by emailing them on little things).
You make a valid point, but this quoted part is pure bullshit.
The actual good Facebook has done is by contributing to projects like Cassandra and a bunch of work it did on MapReduce and Hadoop, memcached and what not. Visit their github.com [github.com] to check on that, though those aren't the only projects they worked on (more like, those are the projects they have started)
what? (Score:4, Interesting)
I read the summary and am completely baffled by the train of thought.
The conclusion doesn't follow from the premises (which themselves are unsupported conjecture).
What is this insane troll logic?
Re:Facebook (Score:2, Interesting)
Re:Who writes this shit? (Score:5, Interesting)
I wish I could agree with, but I can't. You see, Facebook uses the single most readily available resource humanity has - mediocrity, an outlet of which it essentially is. The vast majority of people are simply statistics. Nobody knows or cares about them except maybe for their relatives and a handful of acquaintances. Every like they get, every stupid comment on a picture they post compensates for their lack of self esteem and fuels their exhibitionism. Facebook it's not something you grow out of, but rather something you grow old into, because the older you get, the better you realize you're not worth much.
Re:How did the economy get so disfunctional? (Score:2, Interesting)
You're forgetting that a good many people in finance, and I've known a few, are basically: greedy, self-righteous, "I got mine, fark, you", gimme more, entitled a-holes. The ones that aren't, well, they don't last too long before finding something else. My friend quit a big firm rather than be what they wanted him to be.
Re:Who writes this shit? (Score:2, Interesting)
I don't agree, I still think it will die a very timely death and rightly so, I even think Twitter is a better service, they don't sell peoples info down a river like Farcebook either. Can't wait for the bubble to best, like the MySpace bubble did and the geocities one before that!
there's more to it... (Score:5, Interesting)
It used to be that really high end machines were needed to do audio synthesis. I now have a mellotron on my iPhone and iPad. The iPad, for audio editing, is GEC.
It used to take a super high end computer and a fleet of striped SCSI drives to edit the simplest SD Video. Now, you can edit insanely high quality HD video on a fucking laptop. It is only a matter of time before I can edit video from a Red camera on an iPad. At that point, the iPad is GEC.
Fashioning devices on a 3D printer is presently the domain of a laptop. It's just a matter of time before it is on an iPad or an iPhone.
Again, the iPhone and iPad are GEC. The article talks about investments in things non-Web2.0, and it is largely correct. However, even the digital substrate of Web2.0 is under constraint of GEC. If you live 80 year from cradle to grave, that's about 29,220 days. If you were born with the ability to read from birth and read one book a day on a kindle or iPad and each book was about 5 megs on average - (picture books eat a lot of space compared to text) then you're only talking 146GB of storage. That's GEC...
If you listen to music 16 hours a day from cradle to grave, that's only 28 TB @ 256kbps compression. And if you listen to every song twice, that's 14 TB. And if you listen to every song 4 times, that's only 7 TB. And if you listen to every song 8 times, that's 3.5 TB. And if you listen to each song 16 times, that's only 1.75 TB - a 2 TB drive can be had for less than $100. That's GEC....
And video? Do the same math. If you watch a movie (or basically 2 hours of video) a day every day from cradle to grave, and it's 2GB per hour, that's 4GB per day, or about 117 TB. So, what will store a LIFETIME of entertainment? about 120 TB of storage. If the storage trends of the past 20 years hold, I would suggest that a 120 TB drive will be available for less than $250 (in 2012 dollars) in less than 10 years, possibly less than 5, and probably no more than 15 years.That's GEC in storage.
Soooo, what happens when we put all that together? The internet will cease to be a space for file trading thanks to the concerted actions of governments and IP capital. File trading will go to Sneakernet, and the sneakernet will consist of PirateBoxes in cafes and friends attaching their Thunderbolt drives at home, and moving stupendous amounts of data between machines and watching them on flat screen TV or on their audio kit which will run off the wireless video card in their iPhone or iPad. GEC. Basically, innovation at that point, as in BASIC innovation will cease. Content, as in something stored, simply evapourates onto a "life drive" of media files. Encumbered with patents and a ceiling of perception created by the human sensorium, GEC will reign until the industrial system turns the planet into a smoking dead husk. The biosphere collapses, cities flood, people starve, but damn - did you see American Idol last night? Fuck - that chick sings like an angel...
Re:Spurious valuation too (Score:5, Interesting)
I watched the last 8 mins of trade and **SAW** the huge buys (didn't know who was making them at the time). Something's sour here, indeed.
Having said that, either you're engaging in pureplay sophistry or your understanding of how stocks prices, market cap, and profit interact are pretty damn weak. Handwavy bullshit everywhere.
Market cap is useful. Personally, I only care once I see P/E, which is a Share Price vs. Profit ratio. Newbie rule is that high P/E's (above 10-20) are signs of inflated stocks. Right now, stuff I buy has values like 12, 17, 11, 48, and 7. Seeing n/a or - makes an investor's job harder, since it means 'we lost money last year'.
Applying just this rule, here's what we get: I was considering Red Hat (RHT - hate 'em, but they're 'executing' a profitable business better than Ubuntu or Suse), but dropped that idea because they've got a P/E of 71. Eew, Fsck That. Everyone else already is overpaying a 'but they'll grow' premium for RHT; so much so that RHT has to about triple in size to be worth my investing in a company I can't stand. OTOH, I overruled disdain and bought MSFT at a P/E of 11.
From there, what you can do to find an economic edge is limitless. Stock trading's possibilities for seeking an edge via statistics and predictive models is the proverbial "elephants all the way down".
Back to FB's value: Let me take your 2nd 'graf and say the truth vs. your spin: The conditions under which FB would really be worth $100B are that someone buys all shares available at the asking price associated with $100B, and/or if FB has profitability and business growth that fit such a share price. The first one's getting some serious propping up by institutional investors. That's spooky as fsck.
So, let's look at Facebook's P/E: 88.xx -- (whistles /) Huh. That's pretty damn steep. It really is analogous to AOL-TimeWarner's albatross pricing. Or a bunch of dot-coms. But it's also close to RHT at 71. And freakin' AT&T is selling at a P/E of 48.
Again, what's Facebook worth? Well, a good question is: Between RHT, T (AT&T) and FB (all overvalued according to P/E) : which one's going to do a better job of carving new income streams and profitabilities out of the next 3 years? And if FB deflates to 30 bucks a share, would you change your opinion if it was more profitable per share than T and RHT? If we shrink FB shares to make a P/E of 12, we get '
No conclusions offered -- I'm just watching the show. Full disclosure: I own some MSFT and T, but no FB or RHT. My brother bought some FB, though. When I started writing this, I would have said 'dumbass brother'. Given the ways I could monetize a billion users without even touching their personal information... hmm.
Re:Facebook (Score:3, Interesting)
Maybe you have misunderstood me.
The "connections" are a part of their business strategy. That's what they earn their revenues from: knowing who is interacting with whom, for what etc. So in a way, it is a very selfish (or mutual) thing to do.
Contributions to projects is very selfless, because Facebook is not making direct profits from making the source available (they might be making money from the changes they make, but not from making the code usable to others)
Most people do not care a great deal about Facebook's technology contributions
Agreed. But who does? Most of the technologies are not cared for even though they affect lives in large ways (MapReduce works everywhere from Google search queries, to Twitter, and Facebook. I don't know many people outside /. or IRC channels who'd even know about MapReduce)
According to me, the bigger picture here, is the obvious picture. The details seem more interesting to me. Doesn't sound like Asperger's to me. Sounds like I am just too inquisitive. ;)
Re:Facebook (Score:3, Interesting)
Don't give credit to Facebook for that which existed long before them.
There is no "innovation" behind Facebook, it is merely a social/business/etc contract between a vast amount of interested parties to create, maintain, and improve upon (in their own self interest) conduit for information storage and exchange between people.
Why do they do this? Simple, information and advertising.
Before Facebook there was Myspace, Geocities, ICQ/AOL Instant Messenger/etc. Email, Bulletin Board Systems and vast amount of websites serving a small community.
The main difference now is that Facebook is basically a combination of all of that and serves a more global audience.
"Immersive amount of good for the world"?
The question is, are they doing "good" for the world?
How can we trust a single company with so much personal information?
And now that the world of money and markets is involved, where is it going to take us?
I fear the power that this provides to immoral people and institutions.
I hope that those involved are neither unethical or naive in what is in their hands.
They are not the first, nor the last, and anyone thinking otherwise, is far from wise.
Re:Netscape redux (Score:2, Interesting)
The smart money is still investing in biotech, which actually has a real impact on our lives. Nothing to see here...move along...
I don't know why you say this. The life sciences venture market is well known to be moribund (consider even just this one article [lifescivc.com]) with overall returns negative and venture funds dying. Your specific case is worse: the med device sector is where any action, such as it is in life sciences, is happening. Pharma and biotech are really in trouble. In fact the whole biotech subsector overall may historically never have made a profit, with the gains of a few offset buy the larger losses of the rest.
Sadly the US VCs seem also to be abandoning the energy sector as well. There's more action outside the US.
(ref: I say this all as someone who has founded venture backed companies in software, hardware, pharma and energy. I rather doubt that YMMV)
Re:Netscape redux (Score:4, Interesting)
Indeed. Not only have bubbles like this come and gone since the Tulip bubble in the Verenigde Oostindische Compagnie back in the fifteenhundreds, but the headlines are the same all the time. It feels like the "demise of tape" discussions I had for 16 years at HP, and every year some clown would come and tell me my job would be gone next month. Yet somehow these technologies survive, and yet somehow we all need a good old fashioned piece of hardware to run our software and networks on.
The author of the main article suffers from a pure stroke of cognitive dissonance when this sentence is uttered: "The first is putting computer devices, mobile and tablet especially, in the hands of billions of people". The first argument for the demise of physical technology is the fact that physical technology is now finding its way into the hands of billions of people. That's just, well, ironic.
I'd argue that sites like Facebook and the increasing digitization of all walks of life, be it in communication, documentation or content creation and the enjoyment thereof only spur the profitability of the Silicon Valley giants. Although I do object to the Silicon Valley moniker for any and all hardware development. It would behoove us to realize that the cathode ray tube was a British invention, the mouse/trackball was a Canadian idea, the LED was a Russian invention while LCD seems to have its roots in Austrian and Swiss research, with a lot of ideas from the Koreans and Japanese thrown in.
So firstly Silicon Valley has never been the end-all-be-all of all electronics engineering, secondly the hardware business shows no signs of becoming obsolete any time soon. In short, the main article is self-aggrandizing on quite a few points. I am very happy not to be a student of Mr Blank.
If Silicon Valley is teetering at all, it's down to geopolitical and macroeconomic developments that will see the end of the US as the absolute economic superpower on this planet. I worked at HP for years and years, but for quite a while now the most significant market for HP is the European Union. The GDP's of several Asian nations is steadily growing, the total GDP of the EU is larger than the US GDP and everywhere you see cracks in the US as a whole. Let alone all the unemployed, homeless and uninsured the US counts, but whenever I go to the US, I am struck with the disarray and decay that can be seen everywhere in that country.
Having said that, I don't think the Facebook IPO will bankrupt Apple, HP, IBM, Dell, Canon, Samsung and quite a few other players just yet, so my musings on the balance of power in the world should be taken with quite the pinch of salt.