June 3, 2007 In Silicon Valley, the Crash Seems Like Just Yesterday By GARY RIVLIN
Grandpa lived through the Depression, and life thereafter was indelibly shaped by haunting memories of soup kitchens and hobos. Similarly, the digerati of Silicon Valley endured the 1990s dot-com bubble, and since then have lived with the psychic shock of its ignoble end.
The average valley entrepreneur tends to spot bubbles everywhere, much the way granddad feared financial ruin every time a grandchild carelessly scraped leftover food into the trash.
“There’s such a heightened sense of bubble awareness in Silicon Valley that people confuse any expression of enthusiasm for a bubble,” said Paul Kedrosky, the executive director of the William J. von Liebig Center for Entrepreneurism and Technology Advancement at the University of California, San Diego.
“It’s like people in the valley had bombs dropped on their heads six or seven years ago,” he said, “and now they’re so hyperaware that if they even hear what they think is a lit fuse, they’re scurrying for the exits, yelling, ‘Bubble, bubble, bubble.’ ”
Yes, Silicon Valley is back, and one might think that its residents would see that as a good thing. The venture-capital money is once again flowing, and the entrepreneurial spirit is now so robust that the joke of the moment is that people can’t find anyone to work at their start-ups because everyone is too busy working on their own. But a once cocksure region is also displaying a deep-seated insecurity — raising the question of whether there’s really a bubble about to pop or whether Silicon Valley is just suffering from post-traumatic stress.
The latest display of self-flagellation in Silicon Valley was sparked by a jeremiad posted May 22 by Michael Arrington, who since 2005 has edited a popular blog, TechCrunch. He titled his lament, “Silicon Valley Could Use a Downturn Right About Now,” and over the next week readers added more than 200 postings. Most agreed with Mr. Arrington, who wrote that the “madness” started about a year ago.
“It’s just like the old days again, and Silicon Valley is no longer any fun,” he wrote. “It may be time for some of us to leave for a while and watch the craziness from the outside.”
Many children of the boom often romanticize the early days of Silicon Valley as a period of pure, nonentrepreneurial geekdom. But it might be time for Mr. Arrington and those who agree with him to embrace the effervescent nature of Silicon Valley, a place that Paul Saffo, a technology consultant who saw the rise of the P.C., is inclined to describe as a “cappuccino economy.”
“We always have lots of little bubbles in Silicon Valley,” Mr. Saffo said. “It’s like the froth on cappuccino. A little froth is a very good thing. A lot of froth, especially if you mix in a lot of inexperienced people, that’s a bad thing.” ...
<http://www.nytimes.com/2007/06/03/weekinreview/03rivlin.html>
Carl
"Even apart from the instability due to speculation, there is the instability due to the characteristic of human nature that a large proportion of our positive activities depend on spontaneous optimism rather than mathematical expectations, whether moral or hedonistic or economic. Most, probably, of our decisions to do something positive, the full consequences of which will be drawn out over many days to come, can only be taken as the result of animal spirits -- a spontaneous urge to action rather than inaction, and not as the outcome of a weighted average of quantitative benefits multiplied by quantitative probabilities."
-- J. M. Keynes, General Theory
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