There it was on Craigslist yesterday – an ad for “young, successful professionals living in America’s most emerging area, Silicon Valley,” ostensibly posted by a “major cable network” that’s looking to cast a Silicon Valley reality show.
No wonder. While many Americans are suffering through an abysmal economy, Internet startups seem impervious to bad news of any kind. Valuations have been rising for several years straight; companies like Zynga, Facebook, and Twitter are minting millionaires left and right; and many young outfits can’t hire skilled, highly paid software engineers or salespeople fast enough.
To get the picture, one only need look to the invitation-only, tequila-fueled industry party that entrepreneur-investor Sean Parker hosted two weeks ago. Split-roasted pigs, Dungeness crabs, and sashimi bars were a mere warm-up to nationally known musical acts like The Killers.
Silicon Valley has much to celebrate. It has the most highly educated workforce in the nation and boasts the highest economic productivity – almost twice the U.S. average, according to the Bay Area Council Economic Institute (BACEI). It also deserves kudos for creating the social media tools that have been empowering revolutions around the world.
But Silicon Valley sometimes seems as tone-deaf as Wall Street to the economic straits that most Americans face, and it’s in for a “shock,” says renowned Silicon Valley futurist Paul Saffo. He likens the Valley’s view of economic protests like Occupy Wall Street as “storms in other men’s worlds.”
“Because [Silicon Valley] has such a monomaniacal obsession to innovate, people tend to overlook things,” observes Saffo. It’s even easier to lose perspective, given that many in Silicon Valley are a part of the top 1 percent that accounts for 24 percent of the nation’s income and 40 percent of its wealth.
Still, Saffo thinks the region will not be able to ignore the economic unrest for long. “There is plenty of unemployment and underemployment in Silicon Valley, and it sorts by age,” he notes. “This is where new college grads with technical degrees are very much in demand. But people in their 40s and 50s are finding themselves in a difficult position. We have a real class system in Silicon Valley, with lots of people who are contract employees at places like Google and who are treated like hired hands and don’t get a piece of the action. So there’s plenty of anxiety [about the economy] to go around.”
Saffo doesn’t know where all of this economic dissatisfaction will lead, but he is worried. “I think there’s a sea change afoot that’s going to sweep over everything the same way,” he says. “I still think there’s a lot of uncertainty, but all my instincts as a forecaster tell me this has the feel of something very big happening. I’m standing on the beach and noticing the water heading back out toward the horizon.”
Jon Haveman, vice president and chief economist at BACEI, also sees telltale signs that the water may be receding. For the month of August, his institution observed declining employment data in Silicon Valley for the first time in roughly a year. “One month does not a trend make,” he says, “but it’s a number that bears watching. That there has been significant growth in the region [up to that point] is of note.”
In Haveman’s view, it makes perfect sense that Silicon Valley’s fortunes could also flag. “We provide services and equipment to the rest of the country, and the purchase of both will wane as the U.S economy nears a double-dip recession,” he reasons.
Neither Saffo nor Haveman think that Silicon Valley techies are going to be marching on with pitchforks any time soon. But both think they’ll eventually be engulfed in what is happening elsewhere in the country, whether or not they’re prepared for it. Saffo is even willing to guess when.
“Between increasing wealth concentration, a Supreme Court docket stuffed with controversial cases, and two national political conventions next summer — plus the heat,” says Saffo, “let’s just say that if I had to pick a time to go on vacation, it would be next summer.”