Dreams come true in California’s Silicon Valley, where 60 new millionaires are created every day. Paul Simpson asks whether the work models there represent the future
Silicon Valley is a crystal ball in which you can see the future of what used to be known as the free world. The rule of thumb used to be that what happened in California happened in the rest of the US five years later and in Britain 10 years after that. Information technology has rewritten that timescale and created Silicon Valley, a pseudo-geographical entity, an industrial base and a state of mind.
Unlike the dream factory of Hollywood, the Valley doesn’t sell dreams to the rest of the world. Ironically, given that its major contribution to the world has been a means of communication that enables people to work anywhere on the globe and keep in touch with their colleagues, you have to come to the Valley to make your dream come true. And come true they do. John Knell, author of a report on the free worker for the Industrial Society, estimates that 60 new millionaires are created here every day.
Your first impression is that no space is left unfilled by an advertisement, usually for something with .com at the end. The economy is so buoyant that the bigger companies in the area are considering setting up their own power stations because the national grid may have trouble keeping up with the demand for electricity (usage is up 35 per cent in 10 years across the US, thanks largely to the computer and its accessories).
For all the anonymous expanses of industrial parks – black glass seems to be a particular architectural favourite – you cannot help but be impressed by the sheer vitality of the place. Just don’t stay too long. Because the longer you stay, the more people you talk to, the more likely you are to be confronted with the downside of this modern day gold rush.
Silicon Valley cannot be found on any map. The Santa Clara Valley, which stretches from Palo Alto (30 miles south of San Francisco) to San Jose, is reputed to be the birthplace of the microcomputer and has therefore been dubbed Silicon Valley. However the community is defined, it is probably home to 2.3 million people and gains at least 30,000 new residents every year. It’s the kind of growth many other communities around the world would envy, but there is one drawback – these 30,000 have to fight for just 7,500 new housing units built each year.
If they do find a place to live, they will probably have to pay at least two-and-a-half times the national average for their property (the average house price in the Valley last year was £220,000 and rising) or rent somewhere. Even this is not exactly a cheap option – rents are expected to double in the next six years.
Anybody moving into the area with young children and who is not already a millionaire will have to enter the childcare lottery. There are an estimated 52,000 childcare slots in the Valley. And if they manage to overcome all these obstacles, they still have to drive to work and the typical commuting distance in Silicon Valley last year was 26.5 miles – 14 per cent more than the average for 1998.
While the number of millionaires keeps growing exponentially – there are 65,000 in Santa Clara County alone – 40 per cent of the Valley’s inhabitants struggle to afford a two-bedroom house. Last year, the top 767 bosses in the Valley took home $2.3bn (£1.6bn) in salary, bonuses, shares and other forms of remuneration.
In some companies, bosses earned more in one year than their employees could in 4,000 years. This was an increase of 70 per cent on the year before. Compare this to an average pay rise of less than 6 per cent in 1998 for workers in the San Jose area, which forms a crucial part of the Valley.
The IT boom is the biggest single reason why the average US chief executive officer takes home 34 times the pay of a factory worker (the average multiple in Europe is 11-13 times). This is one side-effect of the Internet boom that US politicians don’t talk about in public. Yes, IT is probably responsible for the country’s above-average productivity rate but it is also creating the kind of inequalities between rich and poor that are normally found in developing economies such as Brazil and Mexico.
These figures are not particularly good news for optimists like science broadcaster James Burke who believe that the Third Industrial Revolution will, eventually, be placed at the service of mankind as a whole. "The Internet is making information available to everybody," he says. "All this talk of an information underclass doesn’t take into account the falling cost of the technology. I have friends in the computer industry who tell me they can foresee a time when a computer costs less than £10. Very few are going to be excluded from that because of cost."
Besides, as Burke points out, society is not reverting to a Victorian-style division between haves and have-nots. The war for talent in the Valley is now so acute that one company, Egghead.com, is moving many of its operations to Vancouver, Canada, partly because this will save 25-30 per cent of operating costs but also because, says president Jeff Sheagan, "employees are more loyal in Vancouver – there is not the same pursuit of the almighty dollar there".
It would be tempting to regard this as a blip but another company, InsWeb, is moving its offices to Sacramento (where one square foot of office space costs only a fifth of the going rate in the Valley) because it is fed up with so many of its staff being poached.
Work is the Valley’s secular religion. Most staff who arrive there say that, whereas elsewhere they rarely talked about work socially, in the Valley, technology is the main if not the sole topic of conversation. The Valley is as obsessed with the Internet as Hollywood is with the movies, perhaps even more so because, as authors Jean Lip-Blumen and Harold Leavitt say of the Valley’s workers in Hot Groups, "By far the most outstanding characteristic [is their] dedication to a task. This dedication obliterates mere ordinary life from their personal screens. The more challenging and impossible the task, the more it grabs them."
But dedication to the project is not the same as loyalty to the company and Aryae Coopersmith, who chairs a Silicon Valley HR forum, says skilled IT staff are the Michael Jordans of the new economy, free workers who can sell their skills to the highest bidder – or the most exciting. Salaries, stock options, on-site dentists, office retreats in Hawaii – companies are doing anything to attract and retain employees.
But critics say one thing the Valley is not doing is drawing on the pool of older, experienced workers. The IT industry maintains it has 300,000 unfilled vacancies in the US but unions say this is only because it refuses point blank to hire anyone over the age of 45. And if you talk to any IT or Internet manager about their company, one of the first things they will boast about is how young their workforce is (the closer it is to the mid-20s, the assumption goes, the more cutting-edge the company). As one programmer notes, "All the programmers doing the exciting stuff are in their mid-30s. There either aren’t many people in their 40s around or they’re in the corner doing boring stuff like quality control." Newness, as expressed in the title of Michael Lewis’s book The New New Thing, is a cardinal virtue of the new economy.
Most recent immigrants to the Valley say they work harder than they did before. The family dinner may be sacrosanct but afterwards, pa or ma may get down to some more work, either at home or in the office. The concept of a work-life balance may seem a little academic in a society that tells admiring stories about which founder of which fabulously successful start-up was famous for sleeping in his cubicle. This is changing as more "Generation X" employees come into the workplace (70 per cent of new recruits in the Valley are Generation X but only 1 per cent of the bosses are) to take over from the baby boomers.
These new workers have seen what ambition did to their parents’ marriages – and in many cases saw that devotion to work rewarded by lay-offs in the 1980s and 1990s – and say in surveys that they would happily sacrifice career advancement for more time with their families.
Vani Kola is not a Generation X-er but she quit her job as chief executive officer of start-up RightWorks this August to be with her kids. Michele Bolton, author of a book on the pressures that work and family place on women in the Valley, found that many women worry about how taking time off would affect the power base in their marriage. Although many companies are light years ahead of the average employer in terms of the support they offer families, at the same time the speed of change, the intensity of work and peer pressure combine to make it hard for most women to emulate Kola.
Such is the Valley’s success that imitators have sprung up all over the world – in Austin, Texas, which has four Internet start-ups for every 10 in the Valley, in Silicons Glen and Fen in the UK and in Andhra Pradesh, India. There are even 100 Internet start-ups in Poland.
But how typical is the Valley’s experience and does its present really represent our future? It is easy to dismiss this over-publicised chunk of California as hype but "knowledge work" – the term the IT industry uses to describe its type of work – is destined to be the biggest part of the world economy.
The US Department of Labor predicts that half of the country’s wealth will either be derived from IT or will use IT heavily. Manufacturing will eventually generate about 2-3 per cent of gross domestic product, about as much as agriculture does today.
Indeed, as services now account for 60-70 per cent of most developed Western economies, we already live in a post-industrial society.
Silicon Valley offers many different models for the future of work. Surprisingly, considering it is the most wired place in the world, its experience does not suggest that we will all be working from home all the time.
According to the Silicon model, the gap between rich and poor will grow initially, although a new rich class of free workers will emerge. The distinction between work and the rest of our lives will blur if not disappear. We will work longer hours but spend a shorter period at each company, assuming we have not joined the growing ranks of the self-employed.
The traditional safety nets for employees – pensions, job security, unions – are a growing irrelevance in the Valley but that may not be the case in the rest of the world where different political and social pressures will come into play. After all, Silicon Valley is, at best, a distorted mirror of our future. But it is a vision that is increasingly being reflected elsewhere.
On the other side of the US in the less high-tech community of Stanford, Connecticut, you can see many of the same forces at work. Unemployment in Fairfield County, just across the state line from Manhattan, has fallen to 2 per cent and most of the billboards are not taken up with dotcom adverts but those for companies desperately seeking people. When one local media services company was asked why it had to turn down a major new account, the president said simply, "Because I can’t find any human beings to work on your account."
That is the bright side of Silicon Valley’s model for the future. The flipside of the dream is a society where inequality is almost as great as in the Third World, where workers over the age of 45 are on the scrapheap and where everybody is working harder than ever before.
Bettina von Stamm, head of the Innovations Exchange, believes the choice is, to some extent, down to us. "The future doesn’t just happen to us – we make it happen," she says.
Perks play major role in luring staff
Forget the contributory pension scheme – if you’re going to compete in the 21st century war for talent, you have to be a little more creative than that. How creative? Just read on to find out.
Free BMWs. Yep, all full-time staff at Atlanta software company Revenue Systems have a free BMW. Since the scheme was launched in July 1999, headhunting costs have been slashed and CVs have been flooding in.
Free oxygen. When it’s all getting a bit much, staff at Californian Internet business incubator Campsix plonk themselves in the free on-site oxygen bar and hook up to an air-filled box.
Free food. Florida company Kron Chocolatiere offers staff all the chocolate they can eat, a free lunch every day, a cake, a £17 gift token every birthday and a free honeymoon cruise if they get married.
Discounts for pets. Adams Haberdashery in New Jersey offers pet-owning employees 25 per cent off their vet’s bills and up to half off pet supplies.
Free flying lessons. OK, so they cost £2,700 but free flying lessons seem to have done the trick for Midwest ad agency Sullivan Higdon & Sink, where six staff have become qualified pilots.
Free haircuts. So far it’s mostly male employees at on-line design company Metrius who have taken up this benefit. Female staff among the 100-strong workforce don’t trust the on-site hairdresser.
Unusual perks offered by small businesses in the US
Casual dress every day
Help giving up smoking
Advice on losing weight
Martial arts training