A History of Silicon Valley

Chapter 23: The Selfies (2011-18)

Table of Contents | Timeline of Silicon Valley | A photographic tour
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These are excerpts from Piero Scaruffi's book
"A History of Silicon Valley"

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(Copyright © 2018 Piero Scaruffi)


The Saga of Apple

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The Age of the Smartphone App

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Gaming

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Virtual and Augmented Reality

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Wearable Computing

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Ubiquitous Computing

The 2000s were bringing back the hardware. The biggest revolution of the 2000s may not have been the Internet (which has been hijacked by the likes of Google and Facebook to become an advertising platform) but the sensor revolution. Thanks to progress in micro-electronics, batteries and wireless connectivity, sensors had become orders of magnitude cheaper and thickly networked. Sensors were opening virtually infinite horizons to a new generation of applications. Wearable computing, self-driving cars, embedded nanotechnology, robots and so forth were the "real thing". By comparison, social media were simply entertainment, that are replacing late-night clubs and bars. There was a reason that they were called "social" and not "industrial"...

Bendable Gadgets

The flat panel display was slowly being replaced by the flexible display. In 1974 Xerox PARC had invented the "electronic paper": Nicholas Sheridon produced the "Gyricon", the first flexible e-paper display. But real progress began only after the introduction of the organic light-emitting diode (OLED), invented in 1987 by Hong Kong-born Ching Tang at Eastman Kodak. In 2006 Philips had introduced the first rollable display, and in 2008 Nokia had demonstrated a flexible OLED display for mobile phones (the Morph). Also in 2008 German-based Plastic Logic (founded in 2000 by Henning Sirringhaus at Cambridge University to make plastic electronics) had announced a bendable display, although it was never released. In 2010 Japan's Sony had demonstrated a rollable OLED display. After so many promises, the bendable display became a reality in 2013 when South Korea's Samsung first demonstrated an AMOLED bendable color screen and then introduced the world's first mobile phone with flexible display, the Galaxy Round. Also in 2013 Intel, Plastic Logic and Queen's University in Canada built the tablet computer PaperTab with a plastic flexible display. In 2016 South Korea's LG demonstrated an OLED bendable color screen that could be rolled up like a piece of paper, and Polyera, founded by Phil Inagaki in 2005 at Princeton University to develop flexible transistors, introduced the Wove bendable smartwatch.

3D Printing

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Big Data

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Beyond the Cloud

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Biotech

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Neurotech

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The Sharing Economy

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Space Exploration

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From Productivity Tools to Entertainment Tools

One of the fundamental changes in the nature and spirit of Silicon Valley was the transformation from a maker of productivity tools (integrated circuits, microprocessors, personal computers, groupware, database management systems, search engines) to a maker of entertainment platforms (mainly videogames and social media).

Silicon Valley from the 1950s to the 1990s was one of the technological centers that contributed to a rapid and significant increase in industrial productivity. Its customers were the big industrial centers of the world, not only households. There was a direct chain of transmission from the innovation in Silicon Valley to the innovation at the assembly line or in millions of offices.

In the 2010s Silicon Valley innovation (at least the commercially successful one) was mainly in videogames and social media. The impact on productivity of a new Facebook timeline or of a new Zinga game was obviously not as big as the impact that the first microprocessors or the first relational databases or the first personal computers had. After all, the dotcom revolution had failed when it had tried to make money out of productivity tools sold to the usual customers (the industrial and financial powerhouses). The dotcom startups succeeded when they started targeting the spare time of ordinary people and started making money out of advertising products to those masses. The gigantic creation of wealth in Silicon Valley during the 2000s had little to do with increasing productivity.

Among the new social-networking platforms, NextDoor, launched in 2011 in San Francisco by Sarah Leary, Nirav Tolia, Prakash Janakiraman and David Wiesen was a social network for neighborhoods that required users to verify their physical address.

Web-based videoconference was now mature enough. The main players were Skype, Google Hangouts (launched in 2013), Webex (acquired by Cisco in 2007, an evolution of Min Zhu's ActiveTouch of 1997 that was an evolution of his previous Future Labs document-collaboration software launched in 1991), and Zoom, a Webex spinoff started in 2011 in San Jose by a former Cisco executive, Eric Yuan.


Internet of Things

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Greentech: Electric Vehicles

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Wireless Power Transmission

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E-shopping

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Bitcoin

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Fintech

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The Micro-startup

When in 2015 Microsoft acquired LiveLoop (Powerpoint groupware), Sunrise (calendar app for iPhone) and Accompli (mobile email), it added exactly 42 people to its workforce. Twitter added a grand total of 13 people from acquiring Vine (video sharing) in 2012 and Periscope (video streaming) in 2015. Facebook added 16 from acquiring Instagram in 2012 and Luma (video sharing) in 2013. Google's acquisitions in 2015 of Odysee (photo sharing) and Tilt Brush (painting in virtual reality), among others, hardly changed its headcount. One can go back to 2005, when Google acquired a nine-people startup, Android, that went on to dominate the smartphone market. By comparison YouTube, that Google acquired in 2006 when it already had 65 employees, looks like a ridiculously large deal. The moment something goes viral on the Internet there is a big corporations ready to buy it; but sometimes this happens even before that something has had a chance to go viral; in fact Twitter acquired both Periscope and Vine before they launched. (Vine had just been founded in New York two months earlier by Dom Hofmann, Rus Yusupov, and Colin Kroll) What the corporations are looking for is simple: talent. Google, Twitter, Facebook and Microsoft were founded by talented people and remember how important talent was when they started. They were neither the first in their field nor possibly the best, but they had the talent to succeed where others did not. Silicon Valley attributes this attitude to Google's acquisition of 45-people Applied Semantics in 2003, the deal that coined the term "acqui-hire": that team went on to develop AdSense, a major source of revenues for Google. Seattle, on the other hand, may claim that Microsoft pioneered this model when it acquired Groove in 2005: Microsoft never did much with Groove's peer-to-peer collaboration software, but Groove's founder Ray Ozzie eventually replaced Bill Gates as Microsoft's chief software architect. In other words, Microsoft had acquired Ozzie's talent, not Groove's product. (Silicon Valley can, however, respond that Microsoft acquired Danger and did nothing with it, whereas Google acquired Danger's founder Andy Rubin and its Android technology, and for a much cheaper price than Microsoft paid for Danger).

Exponential Organizations

A new buzzword was created in 2014 when Salim Ismail, a founding director of Singularity University, co-wrote with Michael Malone and Yuri van Geest "Exponential Organizations" (2014): 3D printing had gotten 400 times cheaper over just 7 years, industrial robots got 23 times cheaper over 5 years, drones got 143-times cheaper in 4 years, and sequencing the human genome got 10,000-times cheaper in 7 years.

Semiconductors

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The Investment Bubble of 2013

A staggering 88 of the 100 largest venture capital rounds of all times took place between 2007 and 2014. A huge amount of money was flowing towards Silicon Valley, largely attracted by stellar evaluation for high-tech startups. In 2014 Airbnb set a new record raising $500 million, while the even younger Lyft  raised $200 million. On the East Coast, a seven-year old Dropbox raised $250 million. Silicon Valley, in fact, had not started this trend: in Texas at the end of 2008, in the middle of the worst economic recession since the Great Depression, the small HomeAway had raised $250 million. The traditional venture capital firm was increasingly joined by the hedge funds, the mutual funds and private equity firms. This phenomenon was allowing startups longer incubation periods, but it was also viewed by many as an alarm bell that a new bubble was about to burst.

This was the era of the "unicorns," or billion-dollar start-ups: Square, Stripe, Airbnb, Pinterest, Uber, Dropbox, Snapchat, Palantir, GoPro, Slack, Cloudera, Eventbrite, electronic notebook Evernote (founded by Stepan Pachikov in 2008 in Sunnyvale), Stemcentrx (a biotech company founded in 2008 in South San Francisco by Stanford scientist Scott Dylla and investment banker Brian Slingerland to treat cancer under the assumption that cancer is caused by a small population of stem cells) enterprise social media platform Sprinklr (founded in 2009 in New York by Ragy Thomas), discount shopping site Jet, founded by Marc Lore, who had sold his e-commerce company Quidsi to Amazon in 2010; etc. Most of these startups generated no cash flow, i.e. were losing money. In 2015 WhatsApp hit the one-billion user mark, but it still didn't know how to make money out of them. At the beginning of 2016 Magic Leap was valued at $4.5 billions without even having demonstrated its product. By 2015 there were 144 unicorns with a total value of $505 billion. Utah, the state with the fastest economic growth in 2014-15, had 4 unicorns (Domo. Pluralsight, Qualtrics and InsideSales).

The unicorns were also emblematic of the decline of the Initial Public Offering (IPO). Apple had gone public in 1980 with a market valuation of $1.8 billion, Microsoft was worth less than a billion dollars at its 1986 IPO, Netscape had gone public in 1995 when it was worth $2 billion, but Twitter waited until it was worth about $25 billion and Facebook until it was worth more than $100 billion. And now many of the unicorns showed no intention of going public. Part of the reason was bureaucratic. The government had reacted to the Enron scandal, revealed in October 2001, with the Sarbanes-Oxley legislation, but that legislation, meant to protect investors and consumers, ended up being a gigantic tax on small businesses because it requires fleets of lawyers and accountants. To protect smaller investors from discrimination, the government had enacted the Regulation Fair Disclosure legislation of 2000. This mandated that all publicly traded companies should disclose information to all investors at the same time. Ironically, this made it difficult for small companies to counter hostile rumors that could devastate their stock values. Generally speaking, the regulatory system began to favor big corporations and discouraged startups from going public. Venture firms such as Marc Andreessen's explicitly stated that their goal was not to take companies public.

Until 2012 the government forced companies to go public when they reached 500 shareholders. In 2011 if a company had 500 employees and each one had been paid some shares in the company, that company was required to file for an IPO. In 2012 the government passed the JOBS Act that raised the number of maximum shareholders for a startup to 2,000. This number made a big difference in the age of the slim IT company (in 2015 a $16 billion colossus like Facebook had only 12,000 employees) because most unicorns had only 100 or 200 employees and 10 or 20 external investors.


Management for Delight

Silicon Valley had always pioneered new forms of management. Fairchild and Intel allowed engineers to behave in a more casual manner than their counterparts on the East Coast, and Xerox PARC made it even more casual. HP pioneered a family-style approach to management. And so forth.

At the beginning of the new century new experiments characterized the biggest success stories. Larry Page debuted as CEO of Google by fighting bureaucracy, to the point that eventually middle management was wiped out; but only to retract and re-hire all those supervisors. However, Larry Page had shifted the emphasis to hiring the right people, even if that meant slowing down the pace of growth, and that principle remained in place even when the hierarchy was reintroduced.

Twitter embraced the principle that "the purpose of hierarchy is to destroy bad bureaucracy" (credited to Chris Fry). So hierarchy is good but bureaucracy is bad. That became a recurring theme. Ask people to obey a boss and they will be happy to be followers; ask them to fill a form and they will quit. So much so that Adobe removed the yearly performance evaluation, one of the most common practices in the USA, and replaced it with a year-long feedback from the boss; basically "guidance" instead of "examination".

A lot of startups also realized that the DIY (do it yourself) model is not always productive and, alas, often alienates engineers, who would rather focus on what they do best. Hence the DIFM (do it for me) model, in which the engineer expects the structure to provide everything that is needed for engineers to focus on their tasks. Even the concept of the "job description" was not always clear. Facebook hired the best and then sent them to a six-week boot camp to figure out the best way for them to contribute to the organization. Slogan: "every job is temporary". Team work was always important in Silicon Valley, but this was the age when most companies, large and small, recognized Richard Hackman's rule of thumb that "no work team should have membership in the double digits". And Bob Sutton at Stanford admonished that "one deadbeat cuts team performance by 30-40%". Combine the two rules of thumb and you get the typical engineering team of the 2010s. As for customer relationships, Intuit's Stephen Gay spoke of "Design for Delight", create an organization that "evokes positive emotion throughout the customer's journey".

Unspoken but widespread was the rule that an organization must be able to steal from others, and morally and legally justify it, while at the same time making sure, on both moral and legal grounds, that others didn't steal from itself. The history of Silicon Valley had often been the history of how a "genius" stole an idea from someone else and turned it into a runaway success (semiconductors, personal computers, database management systems, social media). Terms like "traitors" and lawsuits settled out of court are as much part of the history as the more widely publicized products.


WeChat vs Everybody Else

The truth is that, despite the ridiculous valuations, the unicorns and the million startups, the Internet world (and the world of so-called "smart" devices in general) had never been so maddeningly complicated, with thousands of "smartphone apps" on dozens of different devices. The crisis was not felt in the USA, where competition was still viewed as beneficial to the investment community (certainly not to the user, who had to use myriad applications during an average day). The crisis was not felt in China either, but for a different reason: Weixin/Wechat had largely solved the problem in just a few years since its founding. Launched in 2011 by Tencent (that originally simply offered a copy of ICQ called QQ), within 5 years Wechat had learned how to combine messaging, voice calling, video conferencing, group chatting, Facebook, Twitter, Paypal, Dropbox, and more into one simple and fast app. The original chat/messaging system designed by Xiaolong Zhang had rapidly become a universal platform for all sorts of online needs. 700 million Chinese were using it, and they were spending on average 35% of their online time on it, with little or no distinction between work and private life. Wechat had turned into a smartphone feature almost every ordinary action. For example, exchanging business cards had been reduced to beaming a QR code from one smartphone to another one. In 2016 the cash-less economy was a reality in China, where even taxi drivers and humble family restaurants accepted payment with smartphones (both Tencent's Wechat and Alibaba's Alipay) when it was still a very confusing rarity in Silicon Valley. The smartphone was a frustrating experience in the USA, where the proliferation of apps, notifications and mandatory updates was rapidly becoming more of a distraction than an attraction; whereas in China the smartphone had indeed become an indispensable limb of the body.

Culture and Society

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The Empire Continued

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The Virtual Clusters

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The Hyper-visionaries

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The Boom of all Booms 2014-17

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(Copyright © 2016 Piero Scaruffi)

Table of Contents | Timeline of Silicon Valley | A photographic tour | History pages | Editor | Correspondence