Silicon Valley’s Youth “Problem”: A Rebuttal

By now Yiren Lu’s “Silicon Valley’s Youth Problem” has made it way around both my personal and professional circles. As a young person living and working in Silicon Valley, I felt a strong sense of resentment after reading the article. The author focused on specific and superficial examples to build a case against many of the talented founders and engineers I know, and thereby, completely missed what makes Silicon Valley great. 

In the section titled “Unhappy Valley”, Lu outlines a phenomenon that the layman knows as FOMO: Fear Of Missing Out. But it’s not just a “Silicon Valley problem”, but a symptom of our generation as a whole. Sure, FOMO could make us feel like we’re trapped a giant hamster wheel, forever playing catch-up to the Jones. Every generation has a certain amount of FOMO, and given the speed of information today, our generation just feels it that much stronger. I think of FOMO instead as part of the reason why technology cycles have shortened and innovation has accelerated.

The article also questions whether today’s Silicon Valley has created anything of value. To be fair, many of the buzziest startups are consumer-oriented ones, and the value of a Facebook, Snapchat, or Twitter is undoubtedly tied to ad dollars. Money talks, and naturally, VC’s will continue to fund startups with advertising business models because the advertising market is enormous. Instead of asking whether Valley startups are doing anything worthwhile, shouldn’t the question be instead, what good does advertising do for society? By the same token, the author also discounts the importance of startups such as Uber and Airbnb, who have not only provided an additional revenue stream for thousands of people worldwide, but have also fundamentally changed some of the ways that humans interact.

Naturally, Silicon Valley will always have a so-called “Youth Problem”. Startups are risky, and by and large, younger people will have a higher risk tolerance. That doesn’t mean that substantial valley startups, like Dropbox and Stripe, are not striving to recruit tech veterans in leadership positions (in this example, former Motorola CEO Dennis Woodside and former Google executive Claire Johnson, respectively). Startups, especially venture-funded ones, do not have the hubris to believe that inexperienced 20-somethings are equipped to run billion-dollar businesses on their own.

Perplexingly, the author also tries to paint some of the most positive externalities of Silicon Valley in a poor light, for example, the democratization of tech and the consumerization of the enterprise. Isn’t it great that today’s teenagers, with just a conceptual grasp of computer science, could build an app for his/her own use and/or entertainment? Shouldn’t we support the notion of making enterprise applications easier to implement and more user friendly?

Most importantly, I’ve always believed that the most innovative companies are not necessarily apparent at first. One very prominent example of this is Google, a startup founded by two 23-year-olds in a garage at a time when there were already several search engines on the internet. (Maybe yesterday’s search engine is today’s texting app?) Larry Page, in a recent interview, spoke about grander ambitions for Google:

Even Google’s famously far-reaching mission statement, to “organise the world’s information and make it universally accessible and useful”, is not big enough for what he now has in mind. The aim: to use the money that is spouting from its search advertising business to stake out positions in boom industries of the future, from biotech to robotics.

End of an Era

New York Magazine recently published a feature on the state of New York’s finance industry, somberly titled The End of Wall Street As They Knew It. Much of the article focused on how new regulations, such as Dodd-Frank and Durbin, have dramatically changed how investment banks can continue to operate. 

At the boom’s peak, banks like Lehman and Bear Stearns levered up 30, even 40, to 1. Under the new rules, banks would only be able to borrow $12 for every dollar they spend. In Europe, the rules are even stricter: British regulators have indicated that banks may have to hold as much as 20% on their books.

Inevitably, these stricter conditions will put pressure on the bottom line: 

[Y]ou’d see that these are institutions that need to build up capital and that they’re becoming lower-margin businesses. So that means it will be hard, nearly impossible, to sustain their size and compensation structure.

Belt tightening isn’t only restricted to investment banks – it also extends to the rest of the finance world. 

We used to rely on the public making dumb investing decisions, but with the public leaving the market, it’s just hedge funds trading against hedge funds. At the end of the day, it’s a zero-sum game. […] Over 1,000 funds have closed in the past year and a half.

And all of this shouldn’t really come as a surprise; in the world of hedging and financial vehicles, real value is rarely created for Main Street or the greater economy. Finance was always meant to be the means to an end, to fund other projects and enable economic growth, and never as an end in and of itself. 

So, what comes next?

To a certain extent, Wall Street will never die. Bank executives are always clever enough to adapt to this new, albeit more difficult environment. The Managing Directors of Wall Street will still retain their “masters of the universe” title, with their years of expertise with public transactions and the breadth of their rolodexes. 

Sadly, those who will hurt the most from these changes are the new entrants who have never even tasted the glory of Wall Street. Recruitment stats are a trailing indicator as analysts and associates still flock to Wall Street with hope for high bonuses and a stepping stone to even more competitive positions in hedge funds and private equity. These mis-perceived incentives, along with the changing landscape of the finance world, further commoditize young talent and reinforce the hierarchical nature of the workplace.

Before the crash, when compensation slid, the banks risked seeing their top talent run for the doors to rival firms or hedge funds. Now, with a glut of hedge funds and an industrywide belt-tightening, bank chiefs are calling their star traders’ bluffs. “If you’re really unhappy, just leave,” Morgan Stanley CEO James Gorman bluntly told Bloomberg TV a few days after his bank announced its meager bonus numbers.

So, where should they go? 

While there isn’t a clear-cut answer, the article does offer a glimmer of hope for those disenchanted with Wall Street. A hedge-fund executive said, 

If you’re a smart Ph.D. from MIT, you’d never go to Wall Street now. You’d go to Silicon Valley. There’s at least a prospect for a huge gain. You’d have the potential to be the next Mark Zuckerberg. It looks like he has a lot more fun.

This piece of advice isn’t anything we haven’t already heard. Columbia professor Chris Wiggins, co-founder of HackNY, has been trying to keep students offthe Street” since early 2010. Today’s tech startups are indeed enticing for bankers – it has the same face-paced environment and cut-throat sense of competition. Several NYC tech startups, such as Yipit and Savored, were founded by bankers who left their day job before it became the sexy thing to do.

What troubles me about that quote, however, is not the advice, but the way it’s positioned. "Go to Silicon Valley, because there’s a prospect for huge gains.“ Not, "Go to Silicon Valley, because you can build and create real value.” Or even, “Go to Silicon Valley, because Tech is a huge economic driver.” The advice given here has none of the qualities that made Silicon Valley the beast it is today. Instead, the focus remains on greed and personal gain, simply shifted from one geography to another. Ultimately, going to the Valley with the same Street mentally won’t get ex-financiers very far. As Mark Zuckerberg simply stated in the Facebook S-1,

we don’t build services to make money; we make money to build better services.

So, start building. 

Number 4, meet Number 5.

Back in April, I tweeted bitterly about the possibility of Stanford invading NYC with a science and engineering campus of its own. The possibility of Stanford coming to NYC has resurfaced with recent developments of a partnership with City College. Since then, my feed has also been abuzz with Columbia affiliates reacting to the news. 

As a Columbia alum, I cannot help but feel overly-protective of this city. After all, my school’s full name is “Columbia University in the City of New York”. And as any Columbia student will tell you, we are constantly reminded by professors and administrators of the inherent role New York City plays in our education. 

In many ways, Stanford already has the upper hand over Columbia. Before the 2011 US News & World College Rankings, Stanford has historically been considered the better university. (In 2011, Columbia finally broke through with a #4 ranking to Stanford’s #5.) Many attribute part of Silicon Valley’s successes to Stanford’s accomplishments in educating young minds and fostering entrepreneurship. Stanford also has a strong financial edge; its endowment exceeds $16.5 billion, more than double Columbia’s $7.8 billion.

A big (and emotional) part of me thinks, “Really? Can’t you just let us have NYC?” But ultimately, having another university share our city and support the same interests in technology and an intellectual community will come back to serve even Columbia students. Despite skepticism from NYC tech figures such as Chris DixonFred Wilson, and Caterina Fake, Anil Dash makes a strong argument for the correlation between research universities, innovation, and entrepreneurship.

The NYC tech scene continues to heat up, and to fuel this fire, we cannot simply roll up our sleeves and burn our money. At the YCNYC event, Paul Graham gave credit to New Yorkers’ irresistible greed and guts for its rise as a startup hub, but notes that we still lack strong technical expertise. For Graham, the main reason for the large number of NYC tech startups is the unusual case of good unexpected events here outweighing the bad ones. To maintain this kind of supportive environment for entrepreneurs, we need to continue developing talented and imaginative people, and creating opportunities for serendipitous occurences.

Perhaps NYC can someday truly rival the Valley. But it won’t be a reality that Columbia can accomplish on her own. 

Number 4, meet Number 5.

skandalon: Tumblr vs. Posterous

Peg on Tech: “Why Tumblr is kicking Posterous’s ass”, Jan 19th, 2010

“How come [Posterous is] eating dust from a small startup started by a high school dropout? The answer is as easy as it is counter-intuitive: Tumblr is a New York company and Posterous is a Silicon Valley company. Or, to put it…

Interesting take on the Alley vs. Valley conversation. 

skandalon: Tumblr vs. Posterous