(2022-11-04) Rao Silicon Valley Vibe Shift

Venkatesh Rao: Silicon Valley Vibe Shift. It’s been a tumultuous week in Silicon Valley, marked by significant layoffs. I don’t normally comment on this sort of thing, but this time it is entangled with what feels like a generational Silicon Valley vibe shift comparable to the dotcom bust of 2000.

The highlight of the last week for me was not Elon Musk’s messy circus of an acquisition, which includes layoffs, but the big layoff at Stripe.com. A well-managed payment processor doing a big layoff is a sign of serious economic trouble, since it is otherwise such a stable business

opinionated inventory of historical developments (which will be wholly or partly familiar to all but the youngest of you) and an attempt at calibrating relative proportions

Axios has a good roundup, but the highlights are:
Amazon and Apple hiring freezes
13% layoffs at Lyft
Probably 50% at Twitter (3700 of 7500 is the rumor)
14% at Stripe
Big cuts coming at Meta

The 2022 shift is like the 2000 shift in magnitude, and in that it has economic, technological and cultural components. Like 2000, the 2022 shift is a “full-stack” shift.

Technology Shift, 2000 vs. 2022

On the technology front, in 2000 what happened was overbuilt telecom infrastructure driving a decade of crashing bandwidth costs

rebuilding started almost immediately after the crash, but the results only started becoming visible to people outside the tech world after around 2006.

This time around, the technology front shift is clearly around machine learning and crypto

and a continuing shift from keyboard to camera and audio as the primary input (which is a big low-level reason why the momentum is shifting from textual to video media).

All of these developments rely on similar ongoing evolutions at the lowest level of hardware: 5 and 7nm GPU and AI hardware coming online.

There are other subtle things going on in semiconductors, with big implications up the stack. For instance, Nvidia has had a bad quarter for the first in a long time

And with the ARM acquisition being blocked, ARM — which drives almost everything low-powered — is in trouble.

All you really need to know is that some very discontinuous changes are happening in the industry to deliver that on-track Moore’s Law goodness, and that the nature of the Moore’s Law goodies is changing. The inflection in 2000 gave us iPhones and AWS. The 2022 inflection is going to give us cheaper/different AI, crypto, and vision.

What is truly new though, with no comparable element in 2000, is the US-China trade war (verging on military conflict) and the uneasy position of Taiwan’s TSMC, which for the moment leads the world in semiconductors.

It is not obvious how this will play out, but it is obvious why it matters: the silicon must flow.

Silicon really is replacing oil as the new Dune-like spice.

We are seeing a pair of new industrial-culture forks now — big FAANG companies are forking away from traditional startups, and traditional startups are forking away from crypto and AI startups. All driven by how each subculture uses silicon.

The point being, any “vibe shift” is downstream and up-stack of technological shifts at the silicon level, not some sort of vague purely cultural development.

Culture Shift, 2000

In 2000, the vibe shift was from the old, pre-dotcom-bust Silicon Valley (~1980-2000), marked by a a kind of expansive frontier idealism, to a much more pragmatic and transactional business mindset

Perhaps most significantly, the sector went from big enterprise IT paying the bills to AdTech paying the bills.

The pioneers of the pre-dotcom-bust generation are still around, alive and kicking, and still quite young. Mostly in their 50s or 60s

The successful people from this cohort are now generally investors

Elon Musk is a rare member of the generation who is still actively in the core of the fray. Another is Linus Torvalds, who still drives the evolution of Linux.

After the crash, all these people slowly shifted gears from making their first millions to turning the millions into billions (via investment or growing the big companies and open-source ecosystems). In 2022, they are mostly shifting gears from economic to political ambitions

It’s worth glancing briefly at the not-so-successful individual outcomes too

Eric St. Raymond

Richard Stallman

More peripherally, prominent commentators like Robert Scoble, Michael Arrington

Only a few, like Kevin Kelly, rise to eminence grise status

Usually because they are unusually nice, not because they continue to be right about everything.

The post-dotcom bust Silicon Valley culture was shaped partly (like 20%) by the successful alumni of the crash

But it was mostly shaped (to the tune of 80%) by the post-crash generation — Mark Zuckerberg (38), Matt Mullenweg (WordPress, 38), Jack Dorsey (Twitter, 45) and others who were old enough to be intelligent spectators/bit players in the dotcom crash, but young enough to invent and run a very different playbook.

What were the salient features of this post-dotcom-bust culture? In my view the key features were:... (list)

A lot of this, of course, unfolded over 10-15 years, not immediately. But the crash of 2000 was the impulse function that shaped it all, and almost everything that happened can be explained entirely with reference to the events of 2000.

Unlike in the rest of the economy, the Global Financial Crisis of 2008-12 (Credit Crisis 2008 did not add significant additional dynamics with the exception of one big one: the Culture War.

Almost everything about the Culture War can be explained in terms of young Millennials graduating during the GFC, failing to find good jobs, and turning their online skills towards more ambitious, angry, and lucrative ends

If it hadn’t been the GFC, it would have been something else. The maturing tech world would have run into some sort of mid-life crisis and interacted with the dynamics outside of tech with roughly similar results. The GFC was not the full-stack shift the 2000 crash was.

Culture Shift, 2022

So where to next?

the biggest element of the vibe shift is the one caused by the pandemic and reinforced by post-pandemic economic uncertainty: the collapsing power of money.

Enough people got enough of a taste of working from home

there has been a secular re-valuation of priorities across age groups

In every cohort, there is a turn away from all-consuming obsession with “making it.” Because it is no longer clear what that means, why it is valuable, and what futures open up if you “make it.”

The “successful” older people it might have been a no-brainer to emulate in 2000 today seem to be caught up in thankless and frustrating later-career games.

There are more cautionary tales around than life-scripts worth imitating.

What does this all mean? I’ve seen too many pronouncements of “Silicon Valley is dead” to take such pronouncements seriously or make them myself. But I do think Silicon Valley is no longer special

The era of Silicon Valley exceptionalism is ending, along with the era of American exceptionalism.

somewhere out there, a few 20-something types are paying careful attention and figuring out the playbooks that will invent the next future. I doubt they are in Silicon Valley though, or particularly want to go there.