The problem is that you're overplaying policy and politics, when the outcomes you describe are market-driven. What the hell do party politics and public employee unions have to do with the concentration of technology workers that live in Silicon Valley? If those factors are so overriding, then wouldn't it stand to reason that the highest value activities would move out of state too? Yes, it's expensive to live in Silicon Valley, and yes, the activities in Silicon Valley are very high value and employers are willing to pay the higher costs because that's where the talent (and technology suppliers, and centers of innovation, and venture capital) is.
You're overlooking the factors that drive Silicon Valley by fixating on the negatives about the state as a whole, many of which are not applicable to most of the SF Bay Area.
Quite the contrary. Detroit was a place where a worker with limited skills could live a middle class lifestyle. The disruption occurred initially because technology allowed for the same output with fewer workers, and the latter disruption occurred when much of manufacturing shifted overseas. Detroit the municipality is bankrupt, but that's because much of the economic activity in the region migrated out to the suburbs. Economies function regionally, and Detroit the region is doing quite well.
By comparison, Silicon Valley has always been a knowledge-driven economy and a relatively expensive place to live. The example that you cite with manufacturing is a static economy. Silicon Valley is comparatively very dynamic and has had to reinvent itself multiple times. It has diversified from hardware design to software to cloud-based computing. Even after wafer production and component assembly moved elsewhere, the constants in Silicon Valley have been a highly educated and skilled workforce, high concentrations of venture capital, and two world-class innovation centers in Stanford and Berkeley. There's nothing accidental about a knowledge-driven region repeatedly reinventing itself. That capacity to adapt was the missing piece in Detroit and other regions that heavily depended on manufacturing. Apple has had to reinvent itself as well, and that would have been exceedingly difficult to do had they been rooted in most other regions.
Manufacturing hasn't died. It's moved. Drive I-85 from Atlanta to just south of Montgomery and you'll see some of the most sophisticated auto manufacturing factories on the planet. Mile after mile of factories and subcontractors all located along a convenient freeway and rail line. The ecosystem for making cars has moved to the South. Boeing is in South Carolina. Airbus in settling in Mobile. And those jobs in highly automated factories are better places to work than anything Detroit ever had to offer.
And here again, you're citing manufacturing. Yes, the south has done a good job of attracting manufacturing facilities, but how is the scenario that you describe any different than the hubris that you ascribe to Detroit? Manufacturing hasn't died, but its share of the total employment base and value to the economy continues to decline.
Don't kid yourself. There's no 'always and forever' in history, culture or economics. The Greeks called it hubris, meaning the sort of over-weaning pride that thinks you're exempt from failure and disaster. That's California's coastal elite. That's Apple's upper management. That's the folly of putting all your corporate design and development eggs into a extremely expensive spaceship that can't fly.
Check on the Internet for photographs of today's Detroit. You'll discover what were once marvelous and beautiful buildings now abandoned, covered in graffiti, and turning to rubble. There's no law in any universe that says that can't happen to Silicon Valley. There's nothing that says that the broken windows in Detroit can't come to Apple's new building.
And this is where your argument runs off the rails. You're presuming that the assets that underlie Silicon Valley are fungible and readily transplantable to other regions. Other regions have tried to create their own "Silicon _______" but they are trying to recreate the Silicon Valley model without the innovation centers, labor force, and venture capital in place. As I said, there's a reason why the cost-sensitive activities are setup in other states, while the highest value activity is concentrated in Silicon Valley. There's no hubris in pointing out the factors that created and continue to feed Silicon Valley.
If anything, the biggest competitor to Silicon Valley right now is 50 miles north in San Francisco, where many tech workers now live because of its more urban lifestyle and where companies like Twitter and LinkedIn are headquartered. Loaded terms like "coastal elite" ignore the fact that management for not just Apple, but most of the other tech giants (including Samsung), place their major engineering and design centers in Silicon Valley for entirely market-driven reasons. Yes, there are also culture and lifestyle aspects, but those actually work in favor of economic growth for the sectors that populate Silicon Valley.
Are markets and economies subject to disruption? Of course they are. But, if anything, the underlying economic infrastructure that supports Silicon Valley is more adaptable to driving future innovation than the factors that support auto manufacturing in the south.
Originally Posted by Inkling
What's troubling about Apple is that it's rah-rah "Made in California" is jingoistic.
I disagree. As a non-American, I don't find 'Designed in California' jingoistic at all. It shows pride in your place of origin without chanting "USA! USA! USA!" in your face. The reality of California is far less important than the perception of it from outside, as well.
Edit: And it seems the reality of California and Silicon Valley may not be as you describe, if Woochifer's posts are an accurate indication.
Actually, the oddity is that Apple's devices say "Designed in California" (a state) but "Assembled in China" (a country). Why not "Designed in the USA" or "Assembled in [Chinese province]," particularly since Chinese provinces differ far more than U.S. states. There's a weird, odd lack of symmetry, particularly given that the norm on almost every product shipped globally is to give the country of origin. In fact, apart from Idaho potatoes and Florida oranges, I can't think of another product that claims a state of origin.
I'm also fully aware that perceptions of U.S. states overseas vary from their perceptions here. I lived for a short time on a Caribbean island and I gave up trying to explain to the locals that Brooklyn was different from the country as a whole. Here in the U.S., any mystique that attached to California has faded dramatically since the 1970s. Try, for instance, to think of a movie in recent decades that's like the beach and suffering movies of the 1960s. When movie makers want to portray a society in collapse, they place it in LA.
Finally, note the point I made about the difference between jingoism, praise having little basis in reality, and genuine patriotism, which recognizes faults and tries to correct them. The coastal California elite doesn't seem willing to admit that the state has serious problems nor do they seems inclined to exert themselves to correct them. As long as their little affluent enclaves are OK, they think all is OK. The rest of the state can go to hell. Most other states aren't like that.
I expect sometime soon to see someone organize Potemkin Village tours of the more dismal areas of the state for this coastal elite. It'd include "Happy Peasants Celebrating the Harvest" (the Imperial Valley where unemployment is around 40%) and "A Lively Street Music Festival" (crime, gang, and drug infested South-Central LA). For those who don't know their Russian history, this is the meaning of Potemkin Village from Wikipedia:
"The phrase Potemkin villages (an alternative spelling is Potyomkin villages, derived from the Russian: ???????????? ???????,Potyomkinskiye derevni) was originally used to describe a fake village, built only to impress. According to the story, Grigory Potemkinerected fake settlements along the banks of the Dnieper River in order to fool Empress Catherine II during her visit to Crimea in 1787. The phrase is now used, typically in politics and economics, to describe any construction (literal or figurative) built solely to deceive others into thinking that some situation is better than it really is."
Despite the enormous increase in the role of the federal government since FDR, most of what impacts our lives come from the states we live in. States exist in their own right, being merely federated into the national government. Cities and clusters of cities like Silicon Valley are creations of a state. The laws that matter--like those against murder, rape and assault--are state laws. The prisons and schools are funded by the state. If California goes bad--as indeed it is--then no force on this earth is going to protect slices of that state. And the very prosperity of Silicon Valley means it will be Target #1 for tax increases. The needed money simply won't exist elsewhere. That's why, were I a Silicon Valley executive, I'd have an 'exit from the state' strategy ready to go. I wouldn't want to see my company destroyed by politics beyond my control.
In addition, there's nothing as mobile as talent. I can, in about two days, move what talent I possess almost anywhere in the world. If I own a factory, a store, or even a software development company, that's not true. There was far more reason for manufacturing to stay in the Great Lakes region than there is for high-tech to remain in Silicon Valley. And yet industry has moved. And now all the presence of all those immobile physical assets favor the industrializing South.
Don't downplay industry. When a Apple employee buys some models of Kia, Mitsubishi, Honda, Hyundai Toyota and Mercedes, he's contributing toward better schools in Alabama, Georgia and Tennessee. When I was a kid, no cars were made in Alabama. Now almost a million a year are. Even in our down economy, the multi-billion dollar Hyundai factory near Montgomery is running three shifts around the clock, making over 350,000 cars a year.
Those better schools then feed their own centers of innovation. I live in Auburn, Alabama and got my degree in electrical engineering a few years before Tim Cook did, also at Auburn. Then, the choices for engineering graduates in the entire South were very limited, mostly power plants, paper mills or aerospace in Huntsville. That's why it's not surprising that Tim Cooks went west. That's no longer true. There are a host of high-tech engineering jobs not just in the South but in an easy commute from Auburn itself. Starting this year, GE is making precision jet engine components in a 300,000 square foot facility in Auburn itself.
You're also making a mistake creating a money-talent circularity. Money can buy talent, you claim. Talent can create money, you believe, with all that staying confined to a specific region. Not so! Talent can be driven by other reasons, including talented Asians who rather remain in their homeland no matter how much Silicon Valley wants to pay. We'd talked about those having jingoism/patriotism about California. The Chinese can be as proud of seeing products labeled "Designed in China" as any Apple executive is about California.
For a historical parallel, forget Detroit. Even in its heyday, no one accused it of innovating anything but mass production techniques. Turn instead to New York and before that New England. Both were at one time centers of innovation. New York still calls itself the Empire State, which I assume refers to business empires. And we once talked about Yankee ingenuity as if that were a special, regional trait. Those have faded and so will that in the Silicon Valley. The only question is when.
That fade will happen all the more quickly if the region doesn't recognize the dangers it's facing, both from its own hubris and from what's happening in the rest of the state. I fear all night stands writing code, adolescent drugs, rock music, and who knows what else has left too many in Silicon Valley ignorant of what John Donne wrote long ago:
No man is an island,Entire of itself,Every man is a piece of the continent,A part of the main.If a clod be washed away by the sea,Europe is the less.As well as if a promontory were.As well as if a manor of thy friend'sOr of thine own were:Any man's death diminishes me,Because I am involved in mankind,And therefore never send to know for whom the bell tolls; It tolls for thee.
Just because John Donne (1572-1631) never owned an iPhone, doesn't mean he was stupid. Apple's staff can chant "Designed in California" until their faces turn blue, but they cannot avoid being seriously impacted by what's happening in the darker and more dismal corners of their unfortunate state.
--Michael W. Perry, My Nights with Leukemia: Caring for Children with Cancer (yes, it's available from Apple)
Profits are more important than market share, but market share is generally a good indicator of where *future* profits are going to go.
Apple is not an 'epic fail' by any stretch. They still have the highest operating income, but their income is in decline year over year.
Samsung still is enjoying tremendous growth in operating income (looking at the data they've already matched 2012's yearly income in only 3 quarters so anything they make in the 4th is pure year over year growth).
hmmm..... One company's market share declining.... its operating income declining.... One company's market share growing.... its operating income growing....
So I'll let you come to your own conclusion whether market share matters or not (and it appears you already have).
I'd say both Apple and Android win because both make a lot of their fans happy.
So, an 'anal-yst' says "Apple & Samsung take massive 109% of mobile industry profits while competitors lose money"
I'm not sure which is worse, their prose or their math.
A profit that does not occur is called a "loss". It is not called a "profit". Therefore it does not contribute to the ratio "vendor profits divided by total industry profits".
These are the same 'anal-ysts' that say "Apple is losing market share to the beige-box smartphone manufacturers" . . .
They contribute nothing; indeed, they confuse and obsfucate.
They need to E.S.&.D . . .
And again, here's where your politics belies your ignorance of how the Silicon Valley economy actually works. For companies like Apple, Google, Facebook, and any of the plethora of technology startups that dot the landscape, this fixation on comparative taxes simply does not exist. The operations that obsessively focus on taxes and incentives are not the high value innovation activities.
But, the talent mobility that you describe is drawn to places like Silicon Valley, which have the lifestyle amenities and open entrepreneurial culture to go along with the economic infrastructure. Skilled labor, like the "creative class" described in Richard Florida's book, is not going to locate somewhere just because some business wanted to save some money and locate in a backwater tax haven. The reality with manufacturing is actually the opposite of what you describe -- facilities can pick up and move easily, and they are readily transferable because concentrations of low skill labor are easier to find than the highly skilled one that exists in Silicon Valley. Having worked in the Imperial Valley, I can tell you that part of that region's high unemployment was due to cross-border maquiladoros uprooting their manufacturing operations and shipping entire plants over to China. Dismantling and moving entire facilities took only a matter of weeks.
And yet, the actual centers of innovation for those companies are in Stuttgart, Tochigi, Tokyo, Kyoto, and Seoul.
Oh, and by the way, Kia Hyundai's North American R&D center is in California. And that's also where the Sonata and Genesis, among other models, were designed. Toyota, Nissan, Honda, Mazda, Ford, and Mitsubishi also have major design and engineering centers and/or their North American headquarters operations in California. Innovation is attracted to talent and the centers of technology. Manufacturing is more drawn to low costs. That's simple reality, and has nothing to do with playing down industry.
Your anecdotes are all well and good, but there are few regions in the world that can compete with the concentration of institutes and elite universities located in California. Consider that Stanford and Berkeley grads alone ranked first and third among U.S. universities for producing entrepreneurs. I don't think it's an accident that both schools are in close proximity to Silicon Valley.
And here your disdain for California clouds your argument. Naysayers have been predicting Silicon Valley's demise since vacuum tubes and transistors first became commodified. The Valley just keeps adapting to economic disruptions and dashing the hopes of people like you.
The fact of the matter is that talent is indeed drawn to regions. Those are what define functional economies, and it also revolves around lifestyle and culture. And what Silicon Valley also brings to the table, aside from the monetary rewards (whether it's income or stock options or what not), is simply being in the middle of where the action on the technology front is happening. It's also the broad opportunities with the number of startups and leading companies based in the region, and it's also the culture of entrepreneurship that draws people to Silicon Valley. While other regions have had varying degrees of success at attracting and developing technology companies, the leading companies located in Silicon Valley truly believe that they are defining the future and changing the world. And that belief is pervasive, and IMO unique to Silicon Valley. For someone who wants to work on innovative projects that they believe are revolutionary in scope, that kind of personal reward is just added incentive.
Silicon Valley and New England have historically had similar assets with elite universities, venture capital, and skilled labor force. However, Silicon Valley outpaced New England decades ago because of its more open and entrepreneurial culture. Silicon Valley has been able to adapt and reinvent itself, whereas New England was ultimately tied too closely to the more corporate and closed culture of the northeast. The cultural aspects that you disdain about California are actually a positive for attracting the kind of talent that develops innovative technology.
Nobody ever said that California was perfect, but you seem to be denying the very reasons why so much of the leading edge technology and innovation comes out of Silicon Valley.
True. Imagine that you and I played a cash game of poker, each putting in $100. If I came away with $120 and you left with $80, I would have earned "100% of the profits" because I earned a profit and you didn't. Similarly, if I walked with $200 and you with $0, I still would have walked with "100% of the profits" because I earned a profit and you didn't.