A Humbling Moment for Tech
Friday’s shocking collapse of Silicon Valley bank reverberated across the tech sector throughout this past weekend as nervous founders, investors and bankers awaited the U.S. government’s response. While the actions taken by the Fed look to have stabilized things in the short term, amongst the chaos and drama of the weekend, one thing became clear:
American’s really don’t like Silicon Valley.
While the tech industry was frantically trying to get money out of SVB and making backup plans and backup backup plans (along with a lot of tweeting and doomscrolling), the rest of America showed little sympathy. Following Sunday’s announcement of a rescue plan by the Fed, both sides of the political spectrum went into overdrive with derision and blame for the “tech elite”.
From the Left
From the Right
For Canadians (or anyone else in tech outside of America), it can be hard to understand the degree to which the U.S. tech sector is detached from the rest of the country. It’s even harder to understand the level of contempt that Middle America has for Silicon Valley, particularly when the rest of the world very much idolizes it.
To understand this dynamic, we need to go back to the turn of the century…
A Chip on the Shoulder
One of the historically common characteristics of people in tech is that many of them have a sizeable chip on their shoulder. They were often the nerdy kids in school, marginalized or bullied for being different (I was definitely not the “cool kid” growing up). In the late-90s and well into the 2000s, that shared experience and “us against them” mentality brought together many of the people who migrated to Silicon Valley.
When I moved to Palo Alto in 2002 (to do a Master’s Degree in Computer Science, no less) I was amazed to be surrounded by people like me. Smart, quirky, driven individuals who often didn’t fit in. But in Silicon Valley, the nerds were the majority. In those days, you were as likely to run into friends at the local electronics superstore as you were over beers at the Nut House.
I can’t begin to tell you how many hours I spent here ✨
For nearly a decade after that, Silicon Valley remained deeply uncool. There weren’t any celebrity-filled tech parties or private members clubs, just tens of thousands of quirky people from around the world coming together to build things. But that all started to change after the 2008 financial crisis. As the economy flourished and the world became more dependent on technology, money poured in at an unprecedented rate and Silicon Valley reaped the rewards.
Unfortunately, many people in tech haven’t fully accepted that they’re now at the top of the mountain. Far too many billionaire founders and influential VCs continue to act as if they’re the underdogs. They genuinely believe that they are still David fighting against Goliath. But with the the average salary of a mediocre engineer at a big tech company exceeding $250K, while the median salary for Americans is barely above $50,000, it’s long past time for us to stop and read the room.
Unfortunately, many in Silicon Valley haven’t.
It’s true that people in tech work crazy hours. In fact, they’re some of the hardest working people I know. Alex Iskold (above) has spent a good portion of the last year raising money for his native Ukraine, in addition to running 2048 Ventures and supporting hundreds of founders around the world.
But let’s be honest, a big part of the “sacrifice” people make in startupland is in pursuit of the pot of gold at the end of the proverbial rainbow. That doesn’t make it any less work, but it’s a hell of a lot less risky to join a venture-backed startup than to put your entire life’s savings into starting a traditional small business.
When I joined Aster Data as the company’s first employee in 2005, I took a big risk. But I also knew that if things didn’t work out, I could walk across the street to Google, Apple or a host of other companies and get an incredibly well-paying job in a matter of weeks. The worst case scenario was never going to be that bad. That is the absolute definition of privilege.
The fact of the matter is people in tech are elite. And if you ask most of Middle America, we’re completely out-of-touch.
The Silicon Valley Bubble
If you’ve only visited the Bay Area for brief periods of time, it’s hard to grasp just how much of a bubble it really is.
And how hard it can be to escape.
Jim Carrey knew a thing or two about living in a bubble
Over the years, the mantras popular with startups have encouraged an explosion of companies designed to service other startups. We build things for ourselves and champion “dog fooding” of our products. We invent and reinvent solutions to problems that only people in tech have, while turning a blind eye to the challenges of the rest of the world. (I won’t even begin to talk about all of the self-reinforcement that’s driven by the lack of representation across founders and funders.) These companies have absolutely moved the world forward in incredible ways — and in doing so, created enormous amounts of wealth — but for the average person, the benefits often seem isolated and far away.
To be clear, there are many people in Silicon Valley who are aware of these problems. People who’ve taken everything they’ve learned (and earned) and are using it to bridge the considerable social, cultural and economic gaps between Silicon Valley and the rest of America. But many more are emerging from last weekend’s rollercoaster to the slow realization that the rest of America doesn’t see them as the heroes we often imagine ourselves to be.
What About Canada?
If you’re in tech in Canada, all of this may very well sound foreign. Broadly speaking, our country is far more collaborative across industries and geographies. In general, Canadians are supportive and proud of our tech industry. Why is America so different?
There are two significant factors that have contributed to considerably different relationships between our respective tech industries and the rest of the country:
The U.S. tech industry is overwhelmingly concentrated in Northern California, whereas Canada’s is far more geographically distributed.
Canada’s system of equalization payments serves to ensure that the economic gap between the provinces never gets to big.
Canadians often lament our equalization system, but by ensuring that our entire country benefits when any one province “strikes gold,” we constantly reinforce our social fabric. “A rising tide lifts all boats.”
Canadians overwhelmingly see a growing tech sector as benefiting the entire country.
In the U.S., the situation is quite different. While the tech industry has seen an explosion of success over the past decade (along with unprecedented wealth creation), the rest of the country saw little or no benefit. To the contrary, during that same period of time, much of America suffered through crippling layoffs, a devastating opioid crisis, and increasing poverty.
Americans outside of tech see a growing tech sector as benefiting only the “tech elite”. And they’re not entirely wrong.
In the 80s, Wall Street was the target of Middle America’s ire. Today, Silicon Valley is the bad guy.
So What’s The Takeaway From All Of This?
While the majority of the media’s attention over the past few days has (rightly) been concentrated on analyzing the lead-up to SVB’s collapse and the Fed’s subsequent reaction, a growing subplot is focused on how the rest of America perceives Silicon Valley’s near-disaster.
For many in tech, the disdain and derision that Middle America has demonstrated towards the tech sector has been surprising or even shocking to witness. When we look back at this week’s events, they may prove to be an important wakeup call that helps refocus Silicon Valley on the challenges that exist outside of the Bay Area.
For those of us in Canada, there are plenty of lessons to take away. The reaction of Middle America to the challenges of Silicon Valley should serve as a reminder to all of us that we are part of a broader ecosystem and must remember that we are very much in positions of privilege.
Tech can change the world. We just have to remember to pay attention to it.
