Silicon Valley is Running out of Juice in 2018

By Michael K. Spencer

What if Silicon Valley was a fraud leading Capitalism down a dangerous path? Photo: Chamath Palihapitiya

The majority of technological innovation no longer takes place in California. This is the silent revelation of the future of technology that has occurred in 2018.

The collapse of consumer trust in Facebook and Google and their ponzi scheme digital advertising attention economy and monopoly has not just inhibited the startup-cycle, it’s led to the likes of Softbank, China’s BAT tech dynasty and even Saudi Arabia royalty outmaneuvering it in terms of venture capital for the future of technology and startups.

There have been major signals that America’s startup cycle is broken with a dysfunctional and male-dominated Venture Capital Silicon Valley presence for years, but in 2018 the competition has really been running circles around them. Softbank Vision Fund has been exploring a majority stake in WeWork, and startups have emerged in China like ByteDance, Meituan, Ant Financial and many others that could change the face of innovation in the decade ahead.

There are no American equivalents to the scale of the startups China is producing. There’s no turning back the clock — Silicon Valley has already lost the race to AI and innovation. There’s no realistic chance America can keep up or ever again be at the forefront of entrepreneurship and the startup cycle.

This isn’t just bad news for American Capitalism, it shows a systemic problem of leadership in Silicon Valley, among tech executives and venture capital folk. I have to agree with Chamath Palihapitiya when he recently told CNBC that the entire Start-up economy is a ‘Ponzi scheme’.

America isn’t just losing global influence, it’s forgotten how to be entrepreneurs. A few tech companies have risen to the top, effectively creating anti-trust issues around the entire market. That’s a bottleneck that not only accelerates wealth inequality but stifles innovation. Facebook and Google are perfect examples of this. They cannot afford to be too innovative if it could disrupt their cash cow of digital Advertising. Their dominance has corrupted the entire world wide web, to the point that consumers are fleeing and having an ‘exodus from social media apps’.

California profiteers have led American Capitalism down a slippery slope and China is out-working Silicon Valley. The Silicon Valley we knew in the early 1990s no longer exists. The decline of American innovation has arrived and there’s nothing we can do about it.

The startup slump is and will continue to drag down the economy. Meanwhile places like China are entering a golden age of startups, innovation and AI. By 2025, they will be the undisputed leaders of the world in technological influence, if they are not already. This is because how they invest in startups, collaborate and work is fundamentally different, with incredible Government oversight. American democracy has already fundamentally failed to regulate algorithms and AI or technological monopolies.

Softbank Vision Fund is overtaking Silicon Valley in terms of venture capital activity. If ride sharing, autonomous vehicles and AI are the future, Softbank is certainly well positioned to keep growing. China itself possess kinds of startups that don’t exist in America. Take for example facial recognition computer vision companies. Government policy fuels the direction of technology in China, not the other way around as in America. American capitalism fueled by a perversion of Silicon Valley could result in the decline of America as a whole. What this amounts to is an epic failure of leadership, governance and organization.

Silicon Valley’s unending appetite for growth isn’t just dishonest, it inherently has lacked long-term vision. Chamath is calling it a “charade”, but that’s incorrect, it’s actually much more dangerous. It’s a wealth inequality hack by the economic elite against the American Middle class. So when Silicon Valley tycoons speak well of universal basic income, we should be thinking what they have to gain from making such statements. It’s more than likely American capitalism has been hacked and Silicon Valley’s lack of ethics is to blame.

The machinery of Silicon Valley and a dated and centralized Venture Capital, even with its tricks and games, can no longer compete on the international stage. It’s no longer leading technology or innovation. As China ascends, American declines and that’s the chief narrative I see coming in technology, startups and AI in the decade ahead. The trade war could delay it, but it is inevitable and Silicon Valley has known this for quite some time. You cannot pretend to lead the world if your system is no longer functional.

Silicon Valley is running out of juice in 2018, but it’s nothing compared to what’s coming.