Silicon Valley's Imminent Demise Is Way Overrated

It has become almost obligatory for every publication to occasionally write about a piece on the imminent decline of Silicon Valley, and the opportunities that exist elsewhere (the latest being NYT, with its "Silicon Valley Is Over, Says Silicon Valley" article). The only issue with such statements? They often don't have a shred of evidence to support it.

All right, maybe that wasn't entirely fair. The declining costs of starting a company and bringing the product to the market, combined with the ever-increasing interconnectedness of the world, have in fact created fertile ground for startup hubs to grow throughout the world — although I would argue that the actual vitality of many of the places typically mentioned by the media is rather overrated. Then, there are also several cities/regions that have done a great job attracting the biggest tech companies to open offices there, or even establish regional headquarters (with Ireland and Singapore being perhaps the most prominent examples). Finally, there is, of course, plenty of organizations that have been established in places other than Silicon Valley to begin with, and have grown to successfully challenge their Silicon Valley rivals.

But all in all, Silicon Valley is alive and well, and isn't going anywhere. And the surest way to confirm that would be to try and find any reasonable metric that shows that something is amiss in the Valley, compared to the previous year, or the years before that. Mind you, I'm not talking about the data that shows that other places are doing well (thankfully, building and growing companies isn't a zero sum game, after all). Rather, if one wants to claim the decline of Silicon Valley, it seems reasonable to ask for data that clearly shows just that.

The problem is, it's extremely hard to build a case for it with data, especially if you try to account for the influence that the outside factors (e.g. the economy experiencing a recession, or a period of active growth) might have on the tech world, or the natural variability that is an inherent part of any sort of business (e.g. a single mega-round of financing might influence the statistics for VC investments, yet wouldn't mean much to the overall health of the ecosystem).

Consider, for example, the metric NYT references in its recent article: according to RedfIn, in the last three months of 2017, San Francisco lost more residents to outward migration than any other city in the country. At the first glance, this fact seems impressive. However, there are several issues with this kind of logic. First, inferring any conclusions from a single data point is dangerous in itself. Second, Redfin report doesn't provide any insights into the demographics of those leaving the city. In my opinion, it actually stands to reason to assume that the fact that people are fleeing SF is more likely to be an indicator of the success of the tech sector — which, unfortunately, also brings the issue of the ever-rising cost of living — and that there is absolutely no reason to conclude that it's the tech workers who are leaving the city. Finally, drawing conclusions for the entire Silicon Valley based on the data for San Francisco seems presumptuous at best.

Other arguments typically used to argue for the decline of Silicon Valley don't stand up to the scrutiny either. Major tech companies opening offices in other cities/countries? But why is that necessarily a sign of things going awry? As long as they aren't downsizing their offices in Silicon Valley, it actually seems reasonable to view it as a confirmation that everything is going well, with those new offices being part of the expansion plans. Some places offering attractive real estate at bargain prices? And how is this different from 5, or 10, or 15 years ago? Yes, the real estate prices in Silicon Valley are through the roof, but they've been like that for years, and if anything, there is some evidence of the prices actually declining a bit recently, at least in SF. Not to mention that the idea that coming up with affordable real estate offerings has not once helped anyone to attract the best companies - and believe me, this has been tried many times all over the world. The investors moving to the new city? But what is the context for this move? Is it really about the great future of that place, or does it have more to do with coming up with a bold thesis for a new fund they're raising right now?

Again, I'm not saying that other places cannot successfully compete with, or even rival, Silicon Valley. There are plenty of cities that did extremely well in the last 10-20 years, both in the U.S. (Seattle, New York, Boston, LA and so on), and elsewhere (London, Berlin, Tel Aviv, Shanghai, to name just a few). But I would argue that the rise of those places doesn't automatically constitute the decline of Silicon Valley — if anything, in the modern world, the well-being of many of them is tied to that of Silicon Valley, same as Silicon Valley significantly benefits from the existence of vibrant ecosystems in those places. Still, if you want to argue that Silicon Valley is experiencing a decline right now, that's fine - just try to come up with at least somewhat convincing data first.