How Silicon Valley is finally growing up (sort of)

Teslas jockey for one of 12 electric-vehicle charging stations in the parking lot. A sea of mostly men gathers in the lobby of the Computer History Museum, some giving each other quick hugs. “How’s my investment going?” one shouts to another across the room. A bell chimes, and it begins to feel like church. The boisterous crowd files quickly into the auditorium and becomes quiet. The doors close. Demo Day is about to begin.

Over the next two days, entrepreneurs from 132 start-ups pitch well-rehearsed two-minute spiels about how they are going to change the world. Turns out, there are countless ways to do that. Radar sensors on bedroom ceilings in nursing homes. Drones that check utility lines. Machine learning for cargo shippers. A laundry-detergent subscription service aimed at men.

On average there’s a future billion-dollar company in every group, Michael Seibel, CEO and partner at Y Combinator, tells the Silicon Valley investors. “Your job is to figure out which one it is,” he says. His firm helps entrepreneurs develop their ideas.

First up is Public Recreation, which offers group workouts in parking lots and other open spaces to exercisers who pay a subscription. “Our secret sauce is, we don’t pay rent,” says one of the founders.

Is that a big market, I wonder as everyone claps. And what about rain, snow, insects, and high-pollen-count days? But we’re on to the next big idea—container optimization for ports using predictive algorithms. The hush in the room is respectful.

During my years as a reporter writing about Silicon Valley, I’ve learned to stifle the urge to guffaw at business ideas. Billions have been made on start-ups I dismissed as toys, solving problems I didn’t know people had. Maybe if Plan A doesn’t work, Public Recreation can switch to Plan B, like Justin.tv, which started by live-streaming the antics of one person, Justin, then anyone, and then turned into Twitch Interactive, which enables one to watch others play online games. In 2014, Amazon bought it for $970 million.

Silicon Valley is a place that is always “fleeing into the future,” says Paul Saffo, a longtime Silicon Valley observer. The entrepreneurs pitching on this Demo Day paint a picture of lives made better by artificial intelligence, augmented reality, robots, drones, and sensors everywhere.

Silicon Valley’s optimism and the pragmatic dreamers who keep it going have long fascinated me. But recently there’s been a sobering-up of sorts.

Responsibility and empathy are the new buzzwords. Silicon Valley knows it is being held accountable for everything: the demographics of its workforce, the industries upended and the pain caused by technology, the hate spread faster because of its social networks, and even the effects of innovation on people here. Even some workers with six-figure incomes have trouble affording housing. And around the world in places such as Bolivia, mining the lithium needed to power the devices Silicon Valley invents is raising concerns about exploitation and the environment.

Technology rules the future, but there’s also a grudging acknowledgment that sometimes in the pursuit of making things better and more efficient, you may be hurting people along the way.

“We are surrounded by people who are dreaming big,” says Anne Wojcicki, co-founder and CEO of 23andMe, the personal-genomics and biotechnology firm. “The reality of Silicon Valley is on the right side of history—whether we like it or not, the world has changed. But those transitions can definitely be hard,” she says. “I think we have a responsibility to all those places that are being impacted.”

Everyone has a dream

“Where is Silicon Valley?” out-of-towners ask me when they visit. There’s no capital city or ground zero. There’s no Hollywood-like sign in the hills announcing Tech Town! With low mountain ranges to the east and west, Silicon Valley is a horseshoe-shaped flatland of offices and neighborhoods. Dazzling at the center are the waters of San Francisco Bay, indifferent to the roar of the traffic clogging the roads or the latest breakthrough from Elon Musk, the chief executive of Tesla and SpaceX. I point visitors to the Facebook thumbs-up “like” sign, next to the company’s expanding headquarters. Facebook doesn’t offer tours, nor do most tech companies.

Of course, that “like” sign might not make everyone happy. We know Facebook’s data policies failed to protect users after a researcher sold personal information that was later used to target us with political ads, and Russian operatives stoked political hostilities in the United States by using Facebook as a propaganda arm. Tech’s epicenter might be the site in Mountain View where one of the inventors of the transistor started a company, a place that Apple co-founder Steve Wozniak visited just to touch the building and see the historical marker there. It can be found in a home on a cul-de-sac in Los Altos, where an Indian-born software engineer tucks her kids into bed and gets back online to work on her start-up. Or it can be found in a recreational vehicle with three flat tires parked near Stanford University, where Jim, a Marine Corps veteran and handyman, lives with his dog, Smokey, and bathes each day with hand wipes.

It’s a much different place from what it was in 1982, when National Geographic wrote about Silicon Valley’s “freewheeling egalitarianism that has replaced the rural pace” and said, “this dynamic growth happens behind a deceptively sedate facade … a monotone sprawl of low, rectangular buildings on which corporate nameplates display fusions of high-technology words that give few clues as to what goes on inside.”

Along winding roads in the surrounding hills where deer feed, one can imagine the people here living at a rural pace. Once the home of apricot and plum orchards, the valley has just last year seen the shuttering of a landmark cherry stand and the closure of Orchard Supply Hardware, which was founded in San Jose during the Great Depression. Yet Silicon Valley can fool you: It looks egalitarian, open, and casual, with CEOs in hoodies and venture capitalists in bike shorts, and it is often whimsical, with workplaces that require people to remove shoes or allow them to bring their dogs.

But it’s serious about its ambition. “People are more interested in your start-up than your actual name,” complains Tristan Matthias, 24, an Australian visitor.

The seeds of Silicon Valley’s appeal today began in the early 1990s. As a reporter arriving then, I thought the place felt kind of dead. The decline of the defense industry at the end of the Cold War and a downturn in the economy resulted in layoffs throughout California. The hot categories were desktop publishing, multimedia CD-ROMs, and video games.

Even the great rebel—Apple—seemed to be in decline. Steve Jobs was gone, having left in 1985 after a dispute with the CEO and board; his triumphant return to the company he founded would happen more than a decade later.

An idea was spreading in the mid-1990s: If people could be connected through computers, lives would change. I visited a school that was trying out connected computers with its students so teachers could send messages to parents through a dial-up modem. America Online appeared with its idea of a digital mall you could visit and order flowers from. It was clunky and hard to use, but something big was percolating.

There was a party happening to the north, in Seattle. Microsoft was making computers useful and becoming rich. In August 1995, Microsoft seemed like the winner in a winner-takes-all tech contest. Its executives danced at midnight outside electronics stores, celebrating the launch of the operating system Windows 95. Meanwhile a bomb of sorts was going off in Silicon Valley.

Netscape, which made “browser” software that allowed users to move around the internet, went public less than a year after its signature product was released. Although Netscape was an unproven company with pages of risks outlined for investors, its stock price closed at $58.25 on opening day, giving the company an instant market value of $2.9 billion.

Netscape’s initial public offering (IPO) was the beginning of what came to be known as the dot-com boom, which saw the creation of great lasting companies such as Amazon and Yahoo!—as well as firms that cratered, such as Webvan and Pets.com.

Excitement over what could be done on the internet—sell makeup, rent trucks, find dates, and more—fueled a speculative stock market. In 1999 more than 400 companies, most of them tech related, went public.

Then the market crashed in 2000. More than 200,000 jobs were wiped out.

Embarrassment. Suffering. And yet: “All those start-ups were right,” Wozniak, Apple’s co-founder, told me. “They were all right about what the internet would do for us. It’s just that you can’t change your ways of life that quickly.”

Silicon Valley has its own words that turn failure into something positive. “Iteration” means getting a product on the market without worrying about perfection—the tweaks can come later. “Pivoting” (said without embarrassment) is sharply changing course before the money runs out.

Failure and downturns clear the way for new ideas and new entrants. Google occupies part of what was once the site of Silicon Graphics, Inc., a computer company whose co-founder helped start Netscape. Facebook has updated the old Sun Microsystems campus as it has grown. The attempt to link the internet and television was a bumpy ride. But then YouTube showed up.

The social media era launched. Facebook co-founder Mark Zuckerberg moved to Palo Alto to grow Facebook with its hacker creed “Move Fast and Break Things.” In San Francisco a group of friends and co-workers found a way for people to give updates throughout their day in 140 characters, and Twitter was born.

The great churn of Silicon Valley masks what happens to individuals. For many, innovation’s great “creative destruction” cycles are not observed from 30,000 feet but are wrenching on a personal level. Jobs lost. Skills made obsolete. Households and families upended.

Apple offered another template: the comeback. With Steve Jobs back in the driver’s seat in 1997 after the company bought the other firm he started, NeXT, Apple began a slow recovery. The company released the iPod and then its digital entertainment store, iTunes. The iPhone launched in 2007, delivering on the promise of General Magic’s Magic Cap and Apple’s Newton more than 10 years earlier. Fast-forward to today, and tech companies are grappling with their dramatic impact on people’s lives. Their leaders have been called to Congress to testify about the use of customer data, the ways foreign actors have used these prized technologies to disrupt elections, and potential bias in the algorithms that control what we see.

With the advent of artificial intelligence—computers learning to think like humans—data (with its partner, computational speed) has become the most important resource. The new oil. If computers can “think” one day and make decisions, then what?

After more than 3,000 of Google’s employees signed a letter in protest, the company chose to not extend its contract with a Department of Defense project that uses artificial intelligence to analyze drone images. Then, in November, 20,000 Google employees worldwide walked out to protest the company’s handling of sexual harassment and pay-equity issues. Salesforce created an Office of Ethical and Humane Use of Technology following criticism of its contract with U.S. Customs and Border Protection.

I visit John Hennessy, a former president of Stanford University and now chairman at Alphabet, the parent company of Google. He is congenial but not in a relaxed, academic way. The tech industry’s current moment of reckoning is spurring deeper questions about Silicon Valley’s purpose, he says.

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“The tricky thing right now is for companies to figure out how they’re going to take responsibility and govern themselves in ways that are seen as aligned with not just the interest of their shareholders but also the interest of society broadly,” he says.

The start-up life

The young out-of-towners keep coming.

“You sit in a coffee shop and hear a pitch and people talking about crypto and Google, and that’s a turnoff for some people. But I like it,” says Shriya Nevatia, a product manager from upstate New York who left Boston after graduating from Tufts University.

In three years in Silicon Valley, Nevatia is on her third job. “It sounds bad, but I prefer tiny start-ups,” she says.

In a leafy Palo Alto neighborhood, Joshua Browder sits poolside at the home where Facebook’s Zuckerberg stayed in the summer of 2004 as the social media site was taking off. Inside the house, Browder’s colleagues work at a dining room table on his company’s app—DoNotPay—which is like a robot lawyer fighting parking tickets and finding price loopholes for airline and hotel bookings. The condition of the kitchen—a pan caked with tomato sauce—is just part of the gestalt of the hacker life: living, working, eating, and sleeping in one place as they race to launch the product. The past and present are entwined in tech legends—people who live, work, and invest in tech. Wozniak is a sought-after speaker, getting well over a thousand invitations a year. Part of his appeal is that he’s the “other Steve” in Silicon Valley’s favorite origin story, the creation of Apple. Woz, as he is known, may be a genius, but he sees himself as a regular guy. He retells one of the most famous stories about himself: Around the time of the company’s IPO in 1980, he sold some of his Apple stock at pre-IPO prices to about 80 employees.

“I have a lot of concerns about the distribution of wealth,” he says.

The ‘bro culture’ endures

This is Immigrant Valley today as much as Silicon Valley. The influx of foreign-born people is helping to offset an outflow to elsewhere in the U.S. In some fields, such as computers and mathematics, foreign-born workers now make up more than 60 percent of the workforce. The figure is even higher for women in those fields—78 percent are foreign-born. Indians, Chinese, and Vietnamese are the main groups of foreigners in the region’s tech industry, but people come from dozens more countries: There were 42 people from Zimbabwe working in tech in 2015 and 106 from Cuba.

The international nature of Silicon Valley means companies, even small ones, have become a jumble of cultures and languages. But it also highlights who isn’t making it into the Silicon Valley dream. On average African Americans and Latinos combined make up just 12 percent of the workforce at major tech firms. Women also are vastly underrepresented in what has been called Silicon Valley’s “bro culture”: Slightly more than 30 percent of the workforce at Google, Apple, and Facebook is female. A survey released last September found that women make up just 13 percent of start-up founders and hold only 6 percent of founder equity.

But women are also slowly gaining traction. In 2018, women made up 24 percent of technical jobs and 18.5 percent of firms’ leadership, according to a survey of 80 U.S. companies by AnitaB.org, a nonprofit that works to increase women in tech fields.

When it comes to pay, women in tech are offered less than men more than 60 percent of the time for the same role (with an average gap of 4 percent), according to a report by Hired, a job-hiring firm. Major tech companies say they want more diverse teams, but it’s hard to change employee demographics quickly.

“I’ve heard young women say Silicon Valley is bad for women, and they brace themselves for it,” says Shriya Nevatia, the product manager, over a cup of tea. She has created a group called the Violet Society to help women and nonbinary people during the first 10 years they are in tech, to help get start-ups going. She’s intrigued by the wide networks men have developed during college, through roommates, and in their early careers. Companies, seemingly founded through what seem like chance connections, actually arise from these networks. “We need more women for happenstance,” says Nevatia, who wants to bring women together in the same way.

Squeezed by the boom

As out-of-towners continue to pour into Silicon Valley, driving up real estate and rental prices, many people here who aren’t part of the tech economy—and some who are—see life becoming more difficult, mostly because of the rising cost of housing.

No place is perhaps more squeezed than East Palo Alto, a city of about 30,000 with formidable neighbors: Facebook is just to the north, and Google is to the south. For the past 50 years, the city largely has been a mixture of African-American and Latino families. Now new families, many white and Asian, are moving in. The median home price has already passed one million dollars—up from around $260,000 in 2011, according to Zillow. One million. That’s what passes for affordable housing along the peninsula that stretches from San Francisco to San Jose.

For many longtime residents here who haven’t enjoyed the current tech boom, rents have escalated, and buying a home is out of reach. They move out to the edges of the area, driving for hours each day to and from work. Or they move in with family and friends. Or they leave the area altogether. “They are building one-million-dollar homes right next to homeless shelters,” says Pastor Paul Bains, who with his wife, Cheryl, runs a human-services nonprofit in East Palo Alto.

Patricia Carter lives in East Palo Alto and has a full house: her grown son, his three young daughters under four, and her daughter, plus her son’s ex-partner, who lives in the garage and pays rent. Carter, a UPS driver, faced the threat of foreclosure on her three-bedroom ranch-style home, bought in 2003 for $447,000, but with help was able to save her home.

Michael Seibel, the CEO of Y Combinator, sees a roughly generational shift in Silicon Valley today. Younger workers want their companies to hire diverse employees and act with a bigger social conscience. Firms, desperate to hold on to talent, are falling in line.

And what about his purpose? After graduating from Yale University, Seibel planned to spend his 20s making money, his 30s being a parent, and his 40s going into politics. He moved to San Francisco in 2006 and started a company. He was co-founder and CEO of Justin.tv and Socialcam. Socialcam was sold to Autodesk in 2012, and Justin.tv eventually became Twitch Interactive. Now 36, he just became a father. But politics are out; he feels he has more social impact now.

If Silicon Valley has a spiritual center, it might be the Internet Archive, a nonprofit inside a former church in San Francisco. Servers churn away day and night, archiving much of the public web in its many forms. Nearly every Wikipedia article. About four million tweets a day. More than a half million YouTube videos a week. It’s archived more than 340 billion web pages. The internet’s lost and found.

Fog blowing in through open windows keeps the archive’s servers from overheating.

Scattered among the pews in the archive’s Great Room are more than 120 three-foot-high statues of people who have contributed at least three years to the archive. The internet’s terra-cotta army. I recognize some of them in this eerie but powerful scene.

It’s kind of creepy, these lifelike statues, some holding a book or a cup or a guitar, as if they were interrupted while working on a project or taking part in a sing-along. Or, perhaps, while arguing with each other about the right thing to do.