In the U.S., there is a city where industrial visionaries, state leaders, and financial titans all clamor to go. They want to see the future being made today. Revolutionary new ways of working are being combined with technology to create a better standard of living for the employees, cheaper products for the consumers, and unimaginable returns for the investors. Driving around, you can see the boom everywhere you look. Factories. Warehouses. Mansions. This town is going to be the center of a new world. This town is Detroit in 1920.
Today Detroit is synonymous with capital flight and urban decay, but there was a time when it was synonomous with the future. Henry Ford made a new kind of corporation that, in turn, made Detroit. Ford’s methods were so influential that they became known simply as Fordism (something that Google and Facebook still haven’t achieved.) A poll in the 1920s found that college students rated him the third most important person in human history after Jesus and Napoleon. Polls today might not celebrate Zuckerberg or Musk as saints in quite the same way, but there is certainly a sense that they aren’t far behind. If we think Silicon Valley’s apotheosis is unique, we are mistaken.
Yet Detroit fell. Detroit followed the Ford and Fordism in losing ground. It is hard to imagine that as the economic moment that buoyed Silicon Valley passes, it too will not suffer the same fate. And here, I mean literally the people, communities, and built environment circling the Bay.
Facebook, now Meta, built so many buildings in the pre-pandemic years, spanning from Palo Alto up to Redwood City, that they could be measured in miles, not square feet. As we all know, office vacancies are at unprecedented levels as employees have begun to demand to work from home. This summer, Meta, like many other Silicon Valley giants, took $2 billion in losses as it tried to offload its inventory. While the shift to work-from-home has reduced, and will reducel demand for office space, the real question is when we shift from Facebook/Meta, or in the longer term, from the Silicon Valley economy.
As we think about Silicon Valley’s rise, we must also think about its inevitable fall. In doing so, Silicon Valley seems less like a discontinuity than just another case in the history of capitalism. While its fall might be inevitable, the consequences of that fall might not be, especially if we plan ahead.
I have great faith, disappointing as it might be for some, that capitalism will continue to reinvent itself, but little faith that it will do so in the same place over and over again. Cities rise and fall. And given our own short history, we have seen many quick rises and even faster falls. Places, like Detroit, but also Buffalo, St. Louis, which were at one time engines of wealth creation, fall apart. The real estate crisis of the office might be a signal of Silicon Valley’s end or not, but those buildings created for a particular moment will last long after the companies are gone.
As we think about the future of Silicon Valley, we should always think about the history of Detroit, as a useful analogy, considering what will be after the heyday, and how best to create a path forward after the saints are gone, in a near future era when their sanctuaries are crumbling into desuetude and ruin.
{ 14 comments }
Brian Weatherson 11.08.23 at 6:43 pm
This is a weird analogy, because it relies on using “Detroit” to mean two different things.
If by Detroit you mean the city, then yeah there has definitely been capital flight and urban decay. I’m not sure if it’s now known for that, since those trends have been in reverse for 10-15 years, but it’s definitely part of the story.
On the other hand, if that’s what you mean by Detroit, you can’t talk about Ford because Ford has never been in Detroit. It’s always been in Dearborn, which has a very different history.
Ford is definitely in the Detroit metro area. Dearborn is literally right next door to Detroit. But the metro area hasn’t had capital flight and urban decay. The Detroit suburbs are pretty well off, and always have been. The white flight in the 1960s and 1970s was often literally to the other side of the road. The places immediately north of 8 mile got very rich in those years.
Now if you want to use a Michigan analogy for what might happen to the Bay Area, the towns around Saginaw Bay might be a real cautionary tale.
bekabot 11.08.23 at 9:30 pm
“It is hard to imagine that as the economic moment that buoyed Silicon Valley passes, it too will not suffer the same fate.”
Silicon Valley, unlike Detroit, has always been a government project. It never was anything else, and its status isn’t a secret. The American taxpayer may have footed the bill for industrialism indirectly (or been made to do it), but he/she has paid the freight for postindustrialism right upfront and in the full blaze of the headlights. What’s hard to imagine is that once the cloud of free-market malarkey begins to thin out enough that it stops making people see things which aren’t there, Uncle Sam won’t simply step back in and reclaim Silicon Valley as a Federal protectorate. If and when (let’s say) American consumers run short of the money to pay for complicated toys, weapons (not necessarily conventional ones) will still have to be forged and surveillance will still have to be conducted. No, I don’t think Silicon Valley is going anywhere. Nothing bad will happen to it because it will continue to be too useful for that. The clock may be ticking, though, for the mythology which has sustained it through the recent tech boom. The boom may be fading, and if it is, it’ll be time to spin another yarn.
Ned Resnikoff 11.08.23 at 10:13 pm
To add to the above commenter: Another problem with this analogy is that various tech companies and investors have tried to withdraw their capital from Silicon Valley. At various points over the past few years, I’ve heard that Miami, Denver, and Austin are the new Silicon Valley.
But despite some rather dramatic attempts to break the Bay Area’s status as America’s tech capital — Elon Musk moving to Texas, for example — Silicon Valley is still Silicon Valley. And the frankly insane home valuations in Silicon Valley suggest that it remains a highly desirable place to live for affluent tech workers.
Why? Part of it surely has to do with the Bay Area’s natural amenities: the climate, the proximity to stunning natural beauty, and so on. But it’s also because agglomeration effects are very sticky. As Brian Weatherson notes, Ford is still in the Detroit metro area. So are the other two members of the “Big Three.” They may have shifted much of their manufacturing to right-to-work states, but the corporate headquarters are still in or near Detroit.
Zamfir 11.09.23 at 9:00 am
There’s a vry nice book called “Nature’s metropolis”, by William Cronon. It describes the eneromous growth of Chicago in the 19th century, and its role as concentration point for agricultural products from the midwest. It describes for several industries how, for a long while, there were strong economics of scale that made producers send their products to 1 city, for processors to be based their, for customers in the US east to get their products mostly from that 1 city.
It also describes how those concentrating effects graudally disappeared, and Chaicgo’s 19th centruy huge industries would move away, to more distributed places with lower costs and closer bonds to suppliers or customers. Thsi clearly did not kill Chicago, though it changed to a different kind of city.
Charlie W 11.09.23 at 10:00 am
The office park type has looked like a solution to a non-existent problem since at least the 1980s. Even ‘downtown’ offices repurpose to residential badly: office park buildings barely repurpose at all. Everyone knows the solution, which is a set of policies promoting:
Densification and zoning reform;
Public transport & active travel;
Urban retrofit;
Building designs (where new build happens) that are robust & adaptation friendly.
All of that tends to make for varied, interesting & generally alive cities. It demands a bit more humility from corporations, though. They would no longer be in the business of making orderly little realms surrounded by neat lawns and all signalling ownership & success.
David in Tokyo 11.09.23 at 1:28 pm
Well, getting office space needs wrong, and getting the number of programmers needed wrong, are two different things. As Elon should have figured out by now (but probably hasn’t), you need tech staff to run a tech company regardless of your office space situation.
But what happens if the AI bubble bursts? If people finally realize that, under the hood, LLMs only process undefined tokens and can’t do any of the things we normally consider to be basic to “reasoning”. If people finally realize that “neural nets” aren’t anything like neurons, that the processing they do is fundamentally and radically different from how humans and other mammals do things, and that the computational properties of the things are really hairy and ugly (they can’t tell us why/how they decided something, and when we finally figure out what they did, it’s often so stupid we didn’t think of it). (At the back of my mind here is the very first rule of statisices: “Correllation is not causation” (just because things match up in the data doesn’t mean there’s something actually going on). But the whole neural net game is predicated on finding subtle correlations that mere humans have missed, even though there’s probably nothing causal actually there.)
Neural nets don’t do causal models, they do correlation extraction. Similarly, LLMs don’t do logical reasoning, they do statistical template instantiation.
Here, Elon may come to our rescue, since he’s jumping on the AI bandwagon extremely late and with extreme amounts of money. If he lures all the unneeded AI programmers away from tech companies that are actually doing useful things, then he’ll have done the industry a large service, making the crash that much less painful. Thanks, Elon!
Sorry about the grumpiness. AI, quantum computing, fusion energy are all things that aren’t going to be doing anything useful in our lifetimes. Meanwhile, we’ve probably already trashed the planet to the point that it won’t be human habitable within the lifetimes of at least some of the people reading this. Among other things, the human immune system can’t handle molds and fungi, but molds and fungi can’t handle 98.6 (F). If climate change induces molds and fungi to evolve to handle even slightly higher temperatures, then those evolved versions won’t mind 98.6 degrees in the slightest.
Jon W (from my office in Detroit) 11.09.23 at 8:27 pm
Building on Brian Weatherson’s excellent comment: It’s the case that while the population of SE Michigan (Wayne/St. Clair/Macomb/Oakland /Livingston/Washtenaw/Monroe) more than tripled between 1910 and 1930, and had passed the 4-million-person mark by 1960, the metro area’s population growth stalled out in the late 1960s, and has been mostly flat-to-slightly negative since then. We can see the part played there by the decline of the US auto industry. But the city-to-suburbs exodus that gave rise to Detroit’s more recent challenges wasn’t fueled by economic stagnation; it was fueled by the racism and racial tensions that rocketing economic growth had covered over. If other cities wants to plan for their own industrial decline by being less racist, that sounds like a good plan to me.
dilbert dogbert 11.10.23 at 1:12 am
“frankly insane home valuations in Silicon Valley”
Here are some numbers to help define “insane”.
1971 paid 34.6K for my San Jose house. Not in the white highlands of Saratoga Palo Alto etc. Down in the flats near the intersection of hwy 280 and hwy 17.
2022 sold for 2.25M. It was a rental since 1996. At least the renters paid enough to pay for the repairs needed to get a new tenant and to prep for selling. Never a landlord be.
Trader Joe 11.10.23 at 11:54 am
I think what this analysis misses is that Sili Valley has a mechanism to keep regenerating itself in a way that Detroit never did.
Legions of auto workers (both white and blue collar) didn’t work years at Ford to then spawn some new auto or auto related industry. By contrast the likes o HP, Apple, Google and more have spawned literally hundreds of start-ups some of which went on to glory and some of which failed. That network effect never existed among Detroit auto makers.
Forever is a long time and Sili valley has its problems, but the runway seems pretty long right now.
Cranky Observer 11.10.23 at 5:34 pm
Just on the terms as described the spinoff economy absolutely did exist in Detroit – from 1890-1930. St. Louis, Cleveland, Muncie, and a few other places were involved, but the excitement and cross-pollination eventually gravitated to the Detroit area. Where to a certain extent it remains: every new-tech auto startup has at least an engineering and sourcing office somewhere around Detroit (even Tesla).
I would say this description also greatly underestimates the dynamism of the Ann Arbor – Detroit – Sterling Heights corridor. I’ve been driving that route since 1988 and the hi-tech offices have sprung up like roadside weeds. A good friend of mine was employee #10 in a spinoff from one of the Big 3 that transformed crash energy analysis from arcane art to straightforward engineering problem, which as I pointed out to them at their retirement was responsible for saving at least 100 million human lives since they released their first tool to the general market. And as an added bonus my friend go done out of their early equity stake when the 3 super-founding partners got taken to the cleaners during a refinancing with an investment capital firm, so that made it even more like Silicon Valley.
Silicon Valley used to be a place where people designed truly new things and set up corporations to make and sell them over the long term, or at least license them – the proverbial Hewlett-Packard. Although it is an exaggeration to say that today SV is all financial misengineering not much different from Wall Street it isn’t far off as far as I can tell from recruiters and job postings – which is also how General Motors and US Steel destroyed themselves back in the day.
mw 11.10.23 at 5:58 pm
Ford is still in the Detroit metro area. So are the other two members of the “Big Three.”
Not just that, but so are the foreign transplant automakers and suppliers. For example, both Toyota and Hyundai/Kia have engineering/tech centers outside Ann Arbor. The foreign makers won’t put assembly plants anywhere that the UAW might be able to organize them, but they have no problem putting auto-engineering centers where the automotive engineers are concentrated.
People really get the story of what happened to the city of Detroit wrong almost all of the time. The city’s population peaked in 1950 and shrunk steadily during the next two decades that saw some of the domestic auto industry’s strongest times. The biggest blow to the city came with the 1967 riots — years before the Arab oil embargo and the rise of Japanese imports. The flight to the suburbs had far more impact on the city than the stagnation of the domestic auto industry. In 1950, the Detroit CSA was about 3 1/2 million split about equally between city and suburbs. Now it is about 5 1/2 million and almost 90% live outside the city. Between 1950 and 2022, the city went from 1.8M to 600K and the ‘burbs went from 1.8M to 4.8M. The city’s population shrank by 2/3s while the burbs almost tripled in size.
Fake Dave 11.12.23 at 3:18 am
I think the biggest difference is that Motor City was consolidated around a particular consumer product and its subsidiary industries and stayed largely blue collar well into its decline whereas Silicon Valley has already gone through multiple rounds of financialization and outsourcing. The computers and phones already are made elsewhere and much of the workforce is global as well. San Francisco itself and the strip of East Bay running south from Berkeley are not precisely coterminous with Silicon Valley (and frequently bemoan the influx of “tech bros”) and I would argue they’ve tracked a course similar to inner London or Lower Manhatten as an aspirational playground for rich kids, the upwardly mobile and others who want to be “where the action is” and complain about the price of everything while protesting that they couldn’t imagine living anywhere else. The same constellation of first rate technical and liberal arts schools and government labs that the Valley emerged from is still there and multiple bursting bubbles haven’t done much to stall its growth.
An argument can be made that the American West has historically been under-urbanized with a fetish for freeways and suburban sprawl that reflects but doesn’t serve our rapid population growth. While the East and Midwest had a surfeit of mid-sized industrial towns and commercial hubs, the Pacific coast only has five major urban areas (San Diego, Los Angeles, the Bay Area, Portland and Seattle-Tacoma). Inland cities like Las Vegas and Sacramento are growing (some of them rapidly), but tend to lack the infrastructure and high-wage jobs to become powerhouses or suffer from less-than-livable climates (looking at you, Phoenix). A new flight to the suburbs is happening thanks to the housing bubble and remote work and some of these places might become contenders for the “next” Silicon Valley, but there remains a strong countervailing force of ambitious and educated young people looking to “escape” from over-built, stagnant suburbs to somewhere with more jobs, culture, and people who think like them. We’ll see how it all shakes out when the housing crisis subsides (the shortage is artificial and all bubbles must pop), but there are still people who remember (or at least nostalgize) the Bay before Silicon Valley emerged from the suburbs and are confident they can do without. I’m not sure a general collapse is imminent or that they’ll ever really ready, but we shall see.
Psychoceramicist 11.13.23 at 3:22 am
@12
Overwhelmingly I think it’s the fact that Silicon Valley developed in an urban political economy that didn’t really allow for real physical expansion anymore. Before the 1960s-70s every urban area in the US had rich, middle class, and poor people living in relatively close proximity. The idea that entire metro areas (like those on the West Coast) would become unaffordable to whole classes of people would have been unthinkable. Had urban growth had been as unconstrained as it was 70 years ago I’m pretty sure the Bay Area would be right behind the NYC area as the second biggest US metro. Detroit got to build itself up and then declined commensurately – despite all the hand wringing about the “doom loop” in SF and Oakland the population decline is less related to a lack of opportunity and more resembles people being pushed into the sea from an overcrowded boat.
Jan Wiklund 11.15.23 at 6:43 pm
“Silicon Valley has already gone through multiple rounds of financialization and outsourcing”
That seems to be the usual beginning of decline, according to economic historians like Charles Kindleberger (World Economic Primacy 1500-1990), George Modelski & William Thompson (Leading sectors and world powers), and Bas van Bavel (The invisible hand?). When a center stops producing and settle for controlling financially it’s done for. After a generation or two the control slips out of their hands and nothing is left.
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