Sunday, January 15, 2006

history is history

a sillicon valley maven no less than larry ellison declared the valley dead in 2005. to be more accurate, he said valley is headed towards becoming the next detroit. labor outsourcing and high cost of living were the two most cited reasons why media pundits were skeptical if the valley would survive. many saw 2005 as the tech market top and end of the economic growth cycle. fears of bubbles abound and inevitable comparisons to 2000 have been whispered. the consumer has been declared overspent, over-indebted, and dead. housing market is said to be at a peak.

the view from the ground level is considerably different. commercial and residential real estate is getting tight. job market is blossoming. VC money is pouring into the community. most tellingly, the backyard barbecues are abuzz with ideas and optimism. there is a huge disconnect between the valley we read about in the Mercury News and the valley we see everyday. if anything, 2005 felt a lot more like 1995 than 2000. if so, we may be at the early stages of a significant boom in the valley. and due to clear memories of the false start of 2005, this one may prove more enduring and far more grand.

naysayers would point to the fact that history repeats itself and those that ignore it will get burned. all true as human nature has not had sufficient time to evolve about from dislocations exposed by modernity. however, the way we use history is rapidly changing. in the past, history could repeat itself in part because no one could remember it. were people heading into the great depression reminded incessantly about the tulip bubble? point is, history itself has become a participant in history unlike ever before as we have information about the past like never before. these history lessons become sources of distortions and agendas. nowadays, declared reminders of the lessons of history means that the re-enactments will be considerably distorted. no doubt the past will occur again, but perhaps not in the exact way, since we keep reminding ourselves that it will happen and are too vigilant about it.

not that cyclical nature of history is about to disappear. we started 1990 at the peak of optimism that was destroyed by recession and war the next 5 years. by 1995 optimism had returned but noticed only be the leading edge whlie the pack was licking its wounds.

getting back to the state of the valley, what happened during the last decade was a ideal set of events compressed into a short 10 years. tons of wealth transfer to SV, which raises the standard of living. tons of first-hand experience of failure (largely at other's expense, unfortunately) that teaches important lessons. importing of enormous talent both nationally and internationally into the community. emergence of a new meritocracy and social order and reduction of complacency. outsourcing of functions that have become low-value such as software programming as valley continues to climb the levels of intellectual abstraction. rising cost of living which acts as an effective filter for talent by weeding out the non-leaders.

if all this holds true, it may be time to fasten our seat-belts. 2005 may be the 1995 of this decade and we all know what ensued.

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