The March 2011 Silicon Valley Positive Outlook Update

The focus of my last post was on whether or not I believe Silicon Valley has inflated like a 1999 bubble. I don’t think it has, but the stock valuations are still pretty high. If I were to guess, I’d say the apparent investment upswing is a byproduct of cash sitting on the sidelines. Investors have it and big companies have it. Investors plant the seeds and companies like Google buy the fruit at the first sign of flowering.

Silicon Valley is an interesting place though. Many of the companies there don’t want to be viewed as uncool. Once that happens it means a particular culture has set in. Which of these companies seem more exciting: Facebook or Yahoo? Google or Microsoft? You get the picture.

Earlier this week there was an article on cnn.com in the Tech section about the hiring on Silicon Valley. Here are some quotes and stats from the article “Silicon Valley experiencing new hiring boom” by Dan Simon:

  • Silicon Valley: 10.6% unemployment rate
  • Last month’s (March 2011) national average was 8.8%
  • Silicon Valley produced 1,200 jobs last month and expected to add thousands more in 2011.
  • According to SimplyHired.com, a search engine for job listings:
    • nearly 40% of 130,000 open positions in Silicon Valley are for software engineers
    • Since July of 2009 there’s been a 245% increase in openings that have “Facebook” as a keyword
    • Over the same time period, a 421% increase in “Twitter” job postings
  • Innovations in social media, mobile and cloud computing are driving the growth, said Dion Lim, SimplyHired’s president.
  • LinkedIn, the social-networking site for professionals, hired nearly 500 workers last year — almost doubling its workforce.
  • “As we grow the company, we’re always on the lookout for top talent,” said Jeff Weiner, LinkedIn’s CEO.

As Time Goes By, Is the Economy Getting Better or Worse?

It’s time to look back two years ago and see what happened. The trough of the unemployment situation started October 2008 and abated some by April 2009. The losses in those months were historic: -554,000, -728,000, -673,000, -779,000, -726,000, -753,000, and -528,000. A normal really bad month is -250,000. These numbers were 3 times that. All told some 4,741,000 jobs were lost during this time period and remember, this is just the bottom of the trough.

As time passes employment seems to be improving. Just today a key benchmark was surpassed: the weekly jobless claims fell below 400,000 for the first time in two years. These are people filing for unemployment benefits for the first time.

Two years is 104 weeks and unemployment benefits last, at their longest, 99 weeks. It’s estimated that 3,500,000 people are no longer eligible. This social safety net, weak as it is, is gone for an additional 1.13% of the US population. There are two questions now. First, have, or will, these individuals acquire skills that are needed in the marketplace? Second, are they geographically trapped (can they move to a location that does need their skills)? Perhaps it’s a new era of the migrant worker. “Make no mistake, moving is living.”

The answers to these questions will have potentially costly effects on the US economy as conditions slowly improve.

Which reminds me of a year ago. I saw and enjoyed a George Clooney movie called Up in the Air. Clooney plays an employee of a company that conducts lay offs for other companies. Although, the movie coincided with a year into the recession (end of 2009) the theme was about layoffs. There were several scenes featuring people who are shocked, heart broken, and terrified about what is next for them. It’s a stomach punch.

A year or so later comes another similar movie called The Company Men. It stars Ben Affleck, Chris Cooper, and Tommy Lee Jones as three men let go from their jobs. The movie is about their emotional fight of being someone who no longer has a work identity. But as Up in the Air was about ending the employment relationship, The Company Men is about redefining it.

Data Collection is Getting Cheaper, Better, and Automated: Sensors

My last entry was about the subtle delight my Chumby brings me as a device to have around the house. The value of it is two fold: the ease of use and the ability to connect to the internet.

Networking equipment is constantly getting cheaper and better, so the opportunity to innovate up the stack is there. Apple is widely regarded as the best at it, but other companies are very good too, you just don’t hear about it because it isn’t advertised.

Now there are companies taking networking to a greater level. HP, IBM, and others are partnering with enterprises and government agencies to install sensors where ever possible. The size of the sensors are small enough now so that no extra burden is added. The example I read about in a blog entry called Why HP Thinks Sensors Will Lead to The Next Big Wave of Computing by Richard MacManus describes a bridge like the Golden Gate Bridge with thousands of sensors installed and constantly relaying the health of the bridge back to a command center. Each sensor would correlate to a critical component of the bridge and create an opportunity for targeted preventive maintenance. And this is just one example. The internet of things makes these insights boundless.

The problem, and HP and others want to profit from it, is this will further accelerate an already accelerating data explosion. Most companies can barely deal with the data they have now. Privacy leaks, security breaches, and simple bone headed decisions happen frequently. We often want to look at the power of IT and say “fix it” but technology isn’t magic and the problem doesn’t reside there, it’s a people problem. Managing it has to be proactive. 

Here’s HP’s slide show about “Central Nervous System for the Earth” or CeNSE. I especially like slides 14-18:

The Less is More Gadget Guy

I tend to be a gadget guy. The latest and greatest always interests me, but at some point about five years ago I changed my view of it. I began to want ease of use and affordability. Cell phones and camera’s became too time consuming and I didn’t really care enough to figure them out. That is why the Nintendo Wii struck a cord with me. I could play it for 15 minutes, have fun, and turn it off. I can’t commit to more involved gadgets or games.

But there is one device that I love. The Chumby . I got it for Christmas this past year and I use it several times a day. It’s basically an internet alarm clock that can do so much more.

Why it’s great is because it’s an open platform that starts practically as a blank slate. You then go onto the internet, register, and start loading applications and widgets on it. So much of it is customizable. I have the weather, local news, the time, stocks, and some fun quotes rotating every 20 seconds. It has other features I use as well like the music function. I listen to either Pandora internet radio or I stream WBER as I shower. But you can do other things too. There’s Youtube, email, and games as well. Each one available if you want it and they are all very simple.

Other more fancy internet alarm clocks are coming to market as well. The NY Times ran a story called While You Were Sleeping… about devices including the Chumby, a HP device , and Sony . But what I find most important about it is the slimmed down emphasis of it. The apps are widgets, meaning they are very light weight in what they do.

Less is more is a new computing trend and it’s leading to another level of the internet. The movement is called The Internet of Things and the next five years will be the turning point in it.

A Viable Electric Car Business Model?

I like new business models, but sometimes it isn’t a new business model at all, just a new industry to apply it to. That is what Shai Agassi is trying to do. He has a project called Better Place, which is trying to create a viable electric car platform.

The business model Mr. Agassi is using is the same one as cell phone carriers. Instead of buying minutes of use on the network, you buy miles. And just like you need a cell phone to access the network, you need a battery to drive the electric car. That is what I really like about the model, it assumes that battery technology will improve and probably at a fast pace, so why saddle the consumer with that churn? It disincents them to buy an electric car and you never get the scale you need.

David Pogue of the NY Times highlighted Mr. Agassi in a couple of pieces recently. One was in the paper and it’s called Electric Cars for All! (No, Really This Time) and the other was on CBS Sunday News and it is called Making The World A ‘Better Place’

There are still many hurdles to overcome, but two major obstacles have crumbled recently.
    The first is cost. The cost of the electric car was too high for any serious adoption to happen. The cost has to be slightly under the cost of a gasoline car because of the initial hassles and learning curve. This model equates a driving mile to $0.06 to $0.08 whereas a gasoline based mile is $0.10 to $0.12. This cost savings adds up. For instance, if you take the $0.08 for electric and $0.10 for gasoline and drive a typical 12,000 miles over a year then your numbers look like $960 for electric and $1200 for gasoline. A $240 yearly savings.
    The second is the US Auto Industry and their pull in Washington. But it wasn’t just because they are hurting financially. It also is because the variability of the price of oil creates constant management of the decision making process. How do you plan when in June of 2008 the price of a barrel of oil was $143 and by December it was $40. There are significant costs in just managing the what ifs.

I still see two major hurdles in the way though. Infrastructure and Culture. Mr. Agassi is addressing the infrastructure element by working with state governments like Hawaii and California in the US, Israel, and European nations and partnering to cover the cost of installing devices that are similar to a parking meter, but act as a recharger. Many people are habitual with what they buy and a product or service has to be a real differentiator to get people to change. I think this idea is that significant. But good ideas have to leave no doubt and if I’m a 68 year old man in Texas I’m probably not interested.

I recommend looking at Shai Agassi’s resume. He’s the type of person who shapes the future. By 30 years old he was financially set after selling his first start up and before he was 40 he was shaping one of the worlds largest software companies – SAP. Although things didn’t work out for him to become the CEO, he did expand his knowledge of integrating different components for success. In software it could be the business rules, the programming code, the database, and the tech infrastructure. With electric cars it is the battery technology, the fill up behavior, the cost model, and the government. Integrating each of these with scale and timing is a tough task, but it looks like he knows it.

I believe there is an earnest desire in the US to move to an electric car platform. Just make it easy on consumers.

Working Thoughts 03-20-08

Interview Question: How much sleep a night do you get? Part 1