Most people think of Wall Street as a self-centered, untrustworthy, but very smart industry that manipulates money and people with no qualms, finding ever exotic and often scammy ways to make money at everyone else's expense, while pretending to be working for the rest of us.
Most people think of Silicon Valley as a creative, benign, and very smart industry that creates amazing innovations that make our lives, work, and play more fun, productive, and compelling. The folks there may seem a little odd, but they're the new heroes, with politicians around the world trying to make their own Silicon Valleys and extolling the virtues of reaching kids to code so they can one day join the Valley.
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The truth is that Silicon Valley has become a lot like Wall Street -- and not necessarily in a good way. In my 30-plus years covering the technology industry, I've observed how Silicon Valley has become more and more like Wall Street, and less and less like the change-the-world, Horatio Alger-style engineers glorified in movies like "Jobs" and TV shows like "Halt and Catch Fire."
Silicon Valley's evolution from cool toys to money games
In the 1970s, there were two Silicon Valleys: the Route 128 corridor near Boston, made famous in Tracy Kidder's classic book "The Soul of a New Machine," and the actual Silicon Valley centered around Santa Clara, Calif. Both had strong engineering and computer science universities nearby to attract young talent and provide the training and connections. Route 128 was more focused on computers and software than Silicon Valley, which favored chips, aerospace/defense, and electronics systems.
Then came the personal computer revolution, invented in Albuquerque by Ed Roberts and Forrest Mims III in the form of the Altair but made real -- and human -- by Steve Wozniak and Steve Jobs at Apple in Silicon Valley. Route 128 declined, along with the big computer systems it had specialized in, but Silicon Valley grew and grew.
In the late 1970s and early 1980s, events like the West Coast Computer Faire created the "change the world" image we now associate with Silicon Valley: Hippies, professors, geeks, and businessmen mingled at the show while pot smoke wafted overhead, and the passion for democratized computing fueled us all.
Don't get me wrong: People wanted to make money back then, but the financial ambitions were modest, for both the pioneers of the time at Apple, Dell, and Microsoft, as well as at older companies that "got" it and embraced the new computing, such as Hewlett-Packard and IBM. They desired comfortable, middle-class lives.
In the late 1990s, a new passion emerged: the Web. That too was invented elsewhere, in Switzerland by Tim Berners-Lee (HTML) and in Champaign, Ill., by Marc Andreessen (the Web browser). But Silicon Valley quickly became ground zero for companies trying to exploit the Internet for more than post-nuclear-war communications (its original purpose), such as for e-commerce and publishing.
That marked the beginning of the VC culture in Silicon Valley -- and Silicon Valley's adoption of Wall Street's selfish mentality.
Some smart venture capitalists truly have a passion for technology innovation. But most VCs aren't that way. They're more akin to hedge fund managers, building portfolios they can use to attract other people's money, then sell off for profit.
To such people, soybeans, mortgage loans, and social networks are all the same: vehicles for investing and trading, not the actual point of the investment. In the old Silicon Valley, the engineers and geeks wanted to create stuff to do great things. The product is what mattered -- but not so much in the financial mindset of VCs.
Such a mentality usually leads to excess, as the focus shifts to creating more and more elaborate schemes to get other people's money. That's why we get a steady trickle of Ponzi schemes like the Bernie Madoff affair and, worse, a financial meltdown every few decades: the savings and loan crisis in the 1980s, the double whammy of the Enron energy-market manipulations and the dot-com bust of the early 2000s (on top of the severe blow wrought by the 9/11 terrorist attacks), and the financial-derivatives manipulations in the mid-2000s.