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California: Eating the Valley's seed corn

Interesting article on the demise of the valley by Tim Oren

"And don't expect the companies to do a single thing to stop [outsourcing]. The big guys, the HPs, the Intels, the Suns, have already spread their presence around the world, and can easily readjust. For the startups that I deal with, the idea of having a chunk of the engineering overseas is already routine. If we see a plan with engineering in India, China or even Armenia, the question isn't whether that is wise, just whether you have the right team. A few funds are seriously positioning themselves as regional outsourcing experts, able to held the fledgling company deal with the local risk factors in their chosen geography. Some are even saying there's an 80% outsourcing rule from VCs (I haven't seen it yet). An increasing number of startup companies will be two part pyramids - senior execs, financiers, and sales teams here, the rest somewhere else. (The state is just helping us define how many people will be in the local team, that's all.)"

http://www.pacificavc.com/blog/2003/09/06.html

Just me (Sir to you)
Monday, September 08, 2003

This reminds me of another story seen this morning: China has plans to start building and selling their Metrorapid/Transrapid trains (magnetic levitation instead of rails) which have been intially built by German companies ThyssenKrupp and Siemens on their own. Chinese officials say that although both two companies hold vital patents in the field they failed to register those patents correctly in China.
When will we see Chinese and Indian companies selling "Miracle 9i Database" or "WebSeer Application Server"?

Johnny Bravo
Monday, September 08, 2003

China generally "plays dirty" on the world economic and trade scene (which is why many of the products you own are made in China). For instance China, along with several other Asian countries, has "pegged" its currency against the US $, so rather than the natural increased valuation of their dollar which would occur with increased success in the market (it's sort of a check and balance, and it's one of the reasons the US is in the doldrums: Its economy got so hot that its dollar became too expensive in many nations, and things like outsourcing became more economical, etc), and hence reduced demand for their goods as they get more expensive, China continues to flourish. While it's good for them, it's "unfair" as far as general international trade goes.  While the US could ignore this sort of thing when things were good, I anticipate that these sorts of actions are going to get some very close attention in the coming months.

Anonymous Cowboy
Monday, September 08, 2003

The US should take care of Osama Ibn Laden, Saddam Hussein and WMD.

Howard The Duck
Monday, September 08, 2003

I said it before and I will say it again, the U.S. and many other industrialized nations are NOT simply experiencing "a typical downturn" in their economies.  Imo, some fundamental economic structures have changed because of trade liberalization and globalization (corporate-driven market globalization that is) and many people simply aren't willing to accept or acknowledge this fact yet.

While I agree with author's premise that much of the economic woes of Silly Valley and the rest of country are the fault of our government leaders, I don't believe that California's state government is threatening to unravel the innovative fabric of Silicon Valley.  Imo, California businesses have done a fine job of causing this all by themselves.

"...A lot of this was due to the local real estate (and hence salary) costs, but it's increasingly driven by regulation."

Disagree with the regulation is always bad spiel. 

The less skilled and lower compensated jobs are not the only ones that have moved elsewhere!  As for why all of this is outsourcing and gloablization is happening today rather than thirty years ago, I think many of the answers are fairly obvious.

"...I have no truck with protectionist policies, which are inevitably counterproductive, and pointless in an industry where such impediments can be rounted around with the speed of an IP packet."

Protectionist policies are only counterproductive and pointless when you have multi-national corporations running the show and making the rules instead of local governments that listen to the citizens they represent.

Globalization as it exists today is primarily a partnership of elites to exploit as much of the world population as possible and not much more.  What is currently sustaining industrialized countries such as the United States is the fact that it is so easy to acquire more debt.  Our federal government is currently deeply in debt, many of our states are deeply in debt, and so is a lot of the middle class.  Somewhere down the road there is going to be a huge price to pay.

One Programmer's Opinion
Monday, September 08, 2003

"... the U.S. and many other industrialized nations are NOT simply experiencing "a typical downturn" ...  fundamental economic structures have changed because of trade liberalization and globalization"

Its been 20 years since graduating with a BS in engineering.  It was the same story then, and its the same story now.  If you think that programmers are somehow immune to globalisation, or that someone will have more pity on you than a steelworker, textile worker or other factory line worker - you are mistaken.

The same people that used to operate assembly lines in Bloomington, IN will continue to buy their Sony TV sets from WalMart which are manufactured in Mexico.  They won't think for a second that the store's DB admin is located in India.  Neither will I.

I suggest that the only way to compete is to be competetive.

just coffee black (egg white to you)
Monday, September 08, 2003

"Disagree with the regulation is always bad spiel."

Well of course, but do you think the SPECIFIC regulations he addressed in the article are bad?

As he points out, we can already see the outcome of such a system in Europe.  Should the American economy be more like Europe's?

Jim Rankin
Monday, September 08, 2003

How'd you qualify Europe's economy?

Johnny Bravo
Monday, September 08, 2003

"Chinese officials say that although both two companies hold vital patents in the field they failed to register those patents correctly in China."

The reason they try to get away with this is simple.  China has little intellectual property of its own to protect.  This may change soon, however, if more technology products are developed in China.

I'm still waiting for a politician to take this issue and run with it.  Any of the Democratic candidates could surge to the front of the pack (or in Dean's case, leave the rest hopelessly behind) by championing the trade issue.

Jim Rankin
Monday, September 08, 2003

"How'd you qualify Europe's economy?"

Hey, I'M asking the question here! :)

But I think the author has a valid point.  Raising the fixed costs of employment affects low wage earners much more than high wage earners.  Which means higher "structural" unemployment (whatever that means).

Western Europe consistently has higher unemployment than the U.S.  Now, there may be other aspects of the European economy that make it better overall.  But higher unemployment definitely seems to be one consequence of the European system.

Jim Rankin
Monday, September 08, 2003

Well, actually it's corporate America and Europe which give their technology away for free. Their greed makes them believe their "investments" will pay back in the future with huge profits.

"Fat Cats: Giving away our economies' seed corn"

Johnny Bravo
Monday, September 08, 2003

Here's another one:

"Business is indeed war in the sense that the casualties are real."

Johnny Bravo
Monday, September 08, 2003

In much of Europe, companies won't hire as rapidly as the US in up cycles because they can't lay them off as rapidly in down cycles.  I like having my upside potential. I'll take the risk.

In silicon valley much of the innovation is being done by foreign nationals who employ workers in the US and their native country.

But the hostile tax and regulation environment will do more harm to California than globalizaion.

And all of the comapnies  I know (just a few , not a representative sample) are avoiding VC like the plague.

fool for python
Monday, September 08, 2003

"Its been 20 years since graduating with a BS in engineering...."

Who said anything about technology workers being immune to globalization as it is practiced today?

"I suggest that the only way to compete is to be competetive."

In many instances this simply isn't possible.  There are a lot people in this world working 16 hours a day seven days a week for wages that may or may not allow them to pay for food, shelter, and clothes.  How do we compete against that?

"Well of course, but do you think the SPECIFIC regulations he addressed in the article are bad?"

Refresh my memory,  I only remember reading about a proposed state health care system.

"Raising the fixed costs of employment affects low wage earners much more than high wage earners.  Which means higher "structural" unemployment (whatever that means)."

Yes, I agree.  But that is because a company or individual business owner really only has two choices.  He/she can either hire fewer low wage workers or pay his higher wage workers less money. Of course, there is a third option which is to pay himself/herself less money, but realistically that isn't an option most business people are willing to consider.

I don't have all the answers, however, one area where I believe our government could be doing a better job is in the removal of excesses that currently exist within publicly held corporations.  For example, I don't believe a corporate executive should be receiving a $100 million plus compensation package from people he/she is friends with (the board of directors).  I  also don't believe corporate executives should be allowed to serve on numerous corporate boards. 

One Programmer's Opinion
Monday, September 08, 2003

> If you think that programmers are somehow immune to globalisation, or that someone will have more pity on you than a factory worker - you are mistaken.

The thing is that this time the targets of this corporate profiteering are articulate members of the middle classes, not powerless workers.

It has taken a while for the affected groups to learn to stand up for their own interests, and they're still learning, but corporate managements are about to learn some unpleasant lessons.


Monday, September 08, 2003

> In silicon valley much of the innovation is being done by foreign nationals who employ workers in the US and their native country.

Yeh, sure. Another way of phrasing this is to say that spivs are grabbing low-hanging business by rorting the immigration systems. In so doing, they destroy business and career opportunities for tax-paying natives, including legitimate migrants.


Monday, September 08, 2003

> Well, actually it's the Open Source Movement which gives their technology away for free. Their greed makes them believe their "investments" will pay back in the future with huge profits from consultign and modifications.

> "Open Source: Giving away our economies' seed corn"

Well sure, that much is obvious.

Polar Bear
Monday, September 08, 2003

> There are a lot people in this world working 16 hours a day seven days a week for wages that may or may not allow them to pay for food, shelter, and clothes.  How do we compete against that?

It's not as hard as you think. A great brickie coder can produce 10x more than an average one. An average one 10x more than a bad one. So if you are a good one and the guy working 16 hrs a day for 2 cents an hour is bad, you can be 100x more productive than him thanks to your superior nutrition, resources, electrical power and phone availability, and so forth. At this point, you can be productive selling your services at $2 hr. Consider the 'two times' factor for work done in a different time zone, and you can charge $4/hr and do well, provided you are willing to work 16 hrs a day. That's a decent wage that should enable you to get my in many parts of the west as long as you don't have any greedy materialistic habuts. Just drive an old car for goodness sake and get your clothers at the thrift store. It's definitely doable so go do it rather than sit around complaining. The brickies we got coding in Cambodia don't complain half as much as you. No wonder tehy are more efficient.

Polar Bear
Monday, September 08, 2003

It's interesting to see how all those outsourcing topics boil down to "we need to get better to compete with them".

Ever considered this:

http://www.deanforamerica.com/site/PageServer?pagename=policy_statement_labor

Drink Or Die
Monday, September 08, 2003

Nope.

yep
Monday, September 08, 2003

Polar Bear,
Are you saying that the answer to outsourcing is that we should become more competitive?

If so, I agree wholeheartedly.

Entrepreneur
Tuesday, September 09, 2003

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