Category Archive 'Joel Kotkin'

06 Jun 2023

Silicon Valley’s Decline

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Joel Kotkin, in the Spectator, finds the former hub of innovation today sunk in decadence and decline.

    ‘We used to build the future. Then we designed it, now we just think about it’

The collapse of Silicon Valley Bank is the latest indicator that the Valley – site of nothing less than an economic miracle in recent decades – is now in big trouble. Other signs include mass layoffs in the tech sector and a post-pandemic real estate downturn. The Valley, it seems, is entering a period of decadence that raises the prospect of long-term decline.

The start of this decline has coincided with a shift from the physical to the virtual. The Valley’s roots were in the old engineer-driven economy, one connected to the rest of the country, and to working-class America – somebody, it’s easy to forget, has to make the hardware. Today tech is dominated by a cognitive elite of Ivy Leaguers, management consultants and MBAs. ‘We used to build the future,’ Leslie Parks, who formerly directed redevelopment efforts in San Jose, once told me. ‘Then we designed it, now we just think about it.’

But the Valley has slowly left the industrial battlefield – it has lost over 160,000 manufacturing positions over the past two decades. It bought into the idea that the unique genius of its financial and corporate culture would be enough for it to thrive and profit as production headed first to Japan, then China and, more recently, to other parts of North America.

This is a familiar story. Consider, for example, how British industry lost its edge: the Industrial Revolution created a new class of tycoons; then the tycoons’ sons sought a return to the aristocratic past, eschewing dirty factories for elegant postings in the City or a relaxed life in their country estates. More recently, Detroit’s world-beating automotive industry squandered its technological and manufacturing advantages in a rush, pushed by Wall Street and its own financial managers, to earn easy profits from inferior products.

To be clear, the Valley is not done as a major tech centre. It still boasts a venture capital community, a remarkable concentration of engineering and other management talent, powerful universities and the headquarters of some of the biggest companies in the world. And it remains home to many of the tech giants that now exploit their monopolistic advantages. But that is not the same thing as being the place where the world looks for a vision of the future, as it once was. Even if the Valley still matters, it may no longer dominate the future as its denizens once assumed it would. Instead, it will face fierce competition for tech supremacy – from other countries, and other parts of this one.

This reflects two different phenomena: rising competition from other regions – and an internal rot that has infected the Valley. In its first few remarkable decades, the Valley was defined by its openness, its culture of competition and connection to the general economy. The people who built it, such as David Packard and Bill Hewlett, Fairchild Semiconductor co-founder Robert Noyce, and Apple’s Steve Jobs were, foremost, industrialists. They had a vision of how to use new technology to enhance productivity and make money.

Over the last decade or two, the Valley has outsourced much of its industry. Apple produces two-fifths of its products in China, more than four times what is made in the United States. Other tech giants don’t make anything. Rather than trying to build a better mousetrap, big tech now makes much of its billions off surveillance – the source of the wealth generated by Google and Meta – and by disintermediating retail businesses. It is a far cry from the optimistic promise of a better tomorrow on which the Valley was built.

Three tech firms now account for two-thirds of all online advertising revenues, which now represent the vast majority of all ad sales, controlling in some cases upwards of 90 per cent of the market. Even in bad years, they can persist by laying off employees, relying on inertia to garner income without worry of competition in what the author David P. Goldman neatly summarises as ‘the transformation of disruptive tech companies into rent-seeking monopolies.’

Many progressives persist in seeing the Golden State, and particularly Silicon Valley, as harbingers of a better, greener, more egalitarian future. In the words of two leading academics ‘California Capitalism’ remains ‘distinctive,’ ‘a model of an environmentally friendly economy that epitomises fiscal responsibility, innovation’ as well as ‘inclusive, sustainable, long-term growth.’

This vision could not be further from reality. The stranglehold of mega-firms and the associated Wall Street and venture capital money machine has undermined competition in fields from video games to artificial intelligence to cloud services to the metaverse and AI. To be sure, there’s some competition among the giants, much as there was between aristocratic clans in Europe or Japan’s feudal daimyo, but there are vanishingly diminished opportunities for the sort of startup that made up much of Silicon Valley Bank’s deposit base. Tech today is largely a game played between giants who, if they see promising technology, simply acquire it. Tech entrepreneur turned author Antonio García Martínez has called the contemporary Valley ‘feudalism with better marketing,’ a ‘highly stratified’ quasi-medieval society ‘with little social mobility.’ With control of key markets, firms that columnist Michael Lind refers to as ‘toll-booth companies’ can exact money from consumers who have little choice of going elsewhere – a bit like feudal lords. And if these barons compete, it is against one another. Largely ignored has been the impact of these changes on the people who live in the Valley. In the Eighties and Nineties it was heralded as ‘an exemplar of middle-class aspiration.’ No longer. And that, too, is thanks in part to deindustrialisation.

The kinds of tech jobs being created in the Valley produce opportunities only for a narrow subset of highly skilled, well-connected or credentialed employees. The Bay Area has been described as ‘a region of segregated innovation.’ Lower- and even mid-level workers at firms such as Google sometimes sleep in their cars while others have been forced into mobile-home parks or even homeless encampments.

RTWT

10 Jan 2022

Has the Gramscian “Long March” Reached Its Limits?

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Everywhere you look the Left appears to have won the culture wars and owns the Establishment. The universities are full-on bastions of Marxism and Critical Studies. Even Science and Math are being “de-colonized.” The NFL and NASCAR piously preach the Black Lives Matter Party Line. Corporate America is on totally board, too. Amazon bans books questioning the Transgender Movement. Big consumer brands have purged Uncle Ben, Aunt Jemima, and the Land of Lakes Indian maiden. The Social Media giants routinely enforce Politically Correct Speech, “fact checking” and even banning dissenters. Even the US Military is adding indoctrination against “extremism” to its basic training.

But Joel Kotkin notes that the Progressives’ triumph remains limited to the Institutions, and their conversion is visibly costing them in terms of prestige and credibility.

Over the past several decades, the progressive Left has successfully fulfilled Antonio Gramsci’s famed admonition of a “long march through the institutions”. In almost every Western country, its adherents now dominate the education system, media, cultural institutions, and financial behemoths.

But what do they have to show for it? Not as much as they might have expected. Rather than a Bolshevik-style assumption of power, there’s every chance this institutional triumph will not produce an enduring political victory, let alone substantially change public opinion.

RTWT

20 Oct 2020

The Impending Internal Democrat Party Civil War

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Joel Kotkin argues that, even if the democrats manage to win the presidency this year, the tripartite Democrat Party coalition is inherently unstable and its factions are bound to fall apart.

The [Democratic] Party now enjoys predominant influence over mainstream media, rising influence among wealthy elites, a stranglehold over education and entertainment industries, and the domination of the burgeoning non-profit world. Remarkably the self-styled “party of the people” now accommodates the big Wall Street firms and tech oligarchies alongside the progressive, neo-socialist, activist base and an ever-diminishing remnant of traditional working-class voters.

This powerful coalition is also a fundamentally unstable one—a three-headed hydra whose heads, particularly after Trump leaves, will soon be biting each other furiously. One faction, the corporatist elite, genuflects and even profits from the progressive mantra on climate, gender, and race. Some, like former Twitter CEO Dick Costolo, are so committed to gentry progressivism that he recently suggested those who don’t get with the program could “face a firing squad.” Others, like the Marxists and rioters of BLM, seek a total social revolution and increasingly speak of ending “racial capitalism.”

Many on the Right, having learned nothing since Reagan, simple-mindedly identify each of these two dominant groups as “liberal.” A more accurate assessment would be “corporatist” and “socialist.” …

[I]ncreasingly, the policies of the party’s two dominant factions—the corporatists and the socialist Left—are out of sync with working- and middle-class interest. On issues like climate change, patriotism, and housing, notes Berkeley law professor Alli Joseph, both the progressives and corporatists evidence “class cluelessness or class condescension” that undermines the party’s populist appeal. The Left’s agenda, as epitomized by the New York Times’s 1619 project, and widely adopted by the corporate elite, is no winner on Main Street. Even the World Socialists see it as “a gift to Donald Trump” and “a falsification of history” which denies “the great Democratic legacy of America’s revolutions” and alienates most working class Americans.

RTWT

12 Jun 2017

Kotkin on California’s Feudal Socialism

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San Francisco Bay area from Grizzly Peak

Joel Kotkin admires the contradictions inherent in California’s Socialism.

The oligarchs of the Bay Area have a problem: They must square their progressive worldview with their enormous wealth. They certainly are not socialists in the traditional sense. They see their riches not as a result of class advantages, but rather as reflective of their meritocratic superiority. As former TechCrunch reporter Gregory Ferenstein has observed, they embrace massive inequality as both a given and a logical outcome of the new economy.

The nerd estate is definitely not stupid, and like rulers everywhere, they worry about a revolt of the masses, and even the unionization of their companies. Their gambit is to expand the welfare state to keep the hoi polloi in line. Many, including Mark Zuckerberg, now favor an income stipend that could prevent mass homelessness and malnutrition.

Unlike its failed predecessor, this new, greener socialism seeks not to weaken, but rather to preserve, the emerging class structure. Brown and his acolytes have slowed upward mobility by environment restrictions that have cramped home production of all kinds, particularly the building of moderate-cost single-family homes on the periphery. All of this, at a time when millennials nationwide, contrary to the assertion of Brown’s “smart growth” allies, are beginning to buy cars, homes and move to the suburbs.

In contrast, many in Sacramento appear to have disdain for expanding the “California dream” of property ownership. The state’s planners are creating policies that will ultimately lead to the effective socialization of the regulated housing market, as more people are unable to afford housing without subsidies. Increasingly, these efforts are being imposed with little or no public input by increasingly opaque regional agencies.

To these burdens, there are now growing calls for a single-payer health care system — which, in principle, is not a terrible idea, but it will include the undocumented, essentially inviting the poor to bring their sick relatives here. The state Senate passed the bill without identifying a funding source to pay the estimated $400 billion annual cost, leading even former Los Angeles Mayor Antonio Villaraigosa to describe it as “snake oil.” It may be more like hemlock for California’s middle-income earners, who, even with the cost of private health care removed, would have to fork over an estimated $50 billion to $100 billion a year in new taxes to pay for it.

In the end, we are witnessing the continuation of an evolving class war, pitting the oligarchs and their political allies against the state’s diminished middle and working classes. It might work politically, as the California electorate itself becomes more dependent on government largesse, but it’s hard to see how the state makes ends meet in the longer run without confiscating the billions now held by the ruling tech oligarchs.

RTWT

19 Apr 2015

“California Is So Over”

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California-Fruits-Flakes-and-Nuts

Joel Kotkin explains that California has fallen into the hands of the rich and spoiled and ideologically deluded who are determined to embrace a pious environmentalist agenda which will preclude the maintenance or new development of the kinds of infrastructure needed by the rest of the population.

California has met the future, and it really doesn’t work. As the mounting panic surrounding the drought suggests, the Golden State, once renowned for meeting human and geographic challenges, is losing its ability to cope with crises. As a result, the great American land of opportunity is devolving into something that resembles feudalism, a society dominated by rich and poor, with little opportunity for upward mobility for the state’s middle- and working classes.

The water situation reflects this breakdown in the starkest way. Everyone who follows California knew it was inevitable we would suffer a long-term drought. Most of the state—including the Bay Area as well as greater Los Angeles—is semi-arid, and could barely support more than a tiny fraction of its current population. California’s response to aridity has always been primarily an engineering one that followed the old Roman model of siphoning water from the high country to service cities and farms.

But since the 1970s, California’s water system has become the prisoner of politics and posturing. The great aqueducts connecting the population centers with the great Sierra snowpack are all products of an earlier era—the Los Angeles aqueduct (1913), Hetch-Hetchy (1923), the Central Valley Project (1937), and the California Aqueduct (1974). The primary opposition to expansion has been the green left, which rejects water storage projects as irrelevant.

Read the whole thing.


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