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The Superball Economy--In the Silicon Valley compression only sets up the economic explosion.
Wall St Journal ^ | 3-3-03 | ANDY KESSLER

Posted on 03/03/2003 4:58:39 AM PST by SJackson

Edited on 04/22/2004 11:48:20 PM PDT by Jim Robinson. [history]

PALO ALTO, Calif. -- It's not quite a ghost town in Silicon Valley, but the two hottest brands whose signs I see on every building are "Available" and "To Lease." Starbucks and Kinko's are filled with laid-off programmers. Despair is in the air. So fasten your seat belts, it is about time for an upturn.


(Excerpt) Read more at online.wsj.com ...


TOPICS: Business/Economy; Editorial; Technical
KEYWORDS:

1 posted on 03/03/2003 4:58:39 AM PST by SJackson
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To: 2Fro; all_mighty_dollar; Battle Hymn of the Republic; Bullgoose; CheneyChick; cmhogan; ...
Silicon Valley
Send FReepmail if you want on/off SVP list

2 posted on 03/03/2003 5:04:34 AM PST by martin_fierro (SOUTH American Idol)
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To: SJackson
I think this guy's right... a little historical perspective:

http://www.freerepublic.com/focus/news/519186/posts
Internet II: Rebooting America: Getting Real and Getting It Right
Forbes Magazine ^ | 10 September 2001 | Michael S. Malone, Forbes ASAP, 09.10.01
3 posted on 03/03/2003 5:06:58 AM PST by backhoe (Just an old keyboard cowboy, ridin' the trackball into the sunset...)
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To: martin_fierro
Thanks for the ping!
Great article. I'm hoping he's right, I have lots of friends out of work and still looking.

4 posted on 03/03/2003 5:23:41 AM PST by LisaAnne
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To: backhoe
I'll say it again: the recovery will be led by the TECH sector, and the "bust" in the tech sector was NOT all "dot.com's" and "overspeculation," but was a series of REAL WORLD difficulties, including regulatory, legal, and "last mile." These are being worked out, and will be settled.

This period in the U.S. economy is quite similar, in my view, to the 1870s when despite massive DEFLATION, some of the biggest companies in American history were forming, and the giant U.S. industrial spurt started.

5 posted on 03/03/2003 5:49:50 AM PST by LS
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To: LS
some of the biggest companies in American history were forming,

But back then they weren't forming in China, why would they form here when it's been decided that American labor costs too much and Indian programmers can do a better job being paid far less money?

6 posted on 03/03/2003 6:02:26 AM PST by FITZ
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To: FITZ
You made some really Good points there and they are TRUE as well!! UNFORTUNATELY!!
7 posted on 03/03/2003 6:32:23 AM PST by crazykatz
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To: LS
This period in the U.S. economy is quite similar, in my view, to the 1870s

That's an intriguing parallel- I think the future will be very interesting.

8 posted on 03/03/2003 6:33:02 AM PST by backhoe (Just an old keyboard cowboy, ridin' the trackball into the sunset...)
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To: LS
In your view, women would still be wearing heavy corsets and horses would still be the major form of transportation.

The past is past...over, gone.... we are NOT in any situation anywhere like the 1880's or 90's.... geeze, where did you get your degree in Economics????

9 posted on 03/03/2003 6:35:36 AM PST by crazykatz
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To: backhoe
You are kidding, right?
10 posted on 03/03/2003 6:36:22 AM PST by crazykatz
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To: SJackson
I am looking forward to this if it is true.
11 posted on 03/03/2003 6:36:50 AM PST by bmwcyle (Semper Gumby - Always Flexable)
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To: crazykatz
Nope- dead serious.
12 posted on 03/03/2003 6:44:01 AM PST by backhoe (Just an old keyboard cowboy, ridin' the trackball into the sunset...)
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To: dennisw; Cachelot; Yehuda; Nix 2; veronica; Catspaw; knighthawk; Alouette; Optimist; weikel; ...
If you'd like to be on or off this middle east/political ping list, please FR mail me.
13 posted on 03/03/2003 6:54:03 AM PST by SJackson
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To: SJackson
Hope springs infernal.
14 posted on 03/03/2003 6:56:06 AM PST by dennisw ( http://www.littlegreenfootballs.com/weblog/weblog.php)
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To: SJackson
Economy goes up, economy goes down. I seem to remember something in Genesis about a similar situation and a dream about storing away grain for the bad times. Not sure how many people got the message.

On a lighter note (sorta) check out the Johnny Cash video 'hurt' - kicks a$$ Link

15 posted on 03/03/2003 7:01:35 AM PST by chance33_98 (Freep On)
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To: LS
"...and the "bust" in the tech sector was NOT all "dot.com's" and "overspeculation,"..."

Not "all", but most.

Investors went positively able-sugar over "dot coms" and threw obscene amounts of money into businesses with questionable business plans. It was if someone decided that the rules for business had simply disappeared (you know..........little things like "a company needs to actually turn a profit"). It was nuts; I was smack in the middle of it, and I kept advising my clients (I was a consultant at the time) to take heed ("......don't go stupid on me here; understand that you MUST have a business plan that "closes"; don't think you'll strike it rich by having an Internet focus only...").

It gives me zero pleasure to say that I saw it coming.......big time. When the balloon burst and tens of thousands were bounced out of work (most with huge debts), I didn't blink an eye, much as I felt for 'em.

Still...........I think the whole misnamed "dot bomb" thing was healthy. It separated the wheat from the chaff and made the world of online business grow up fast. e-commerce didn't go away; far from it. It morphed quickly into a real business model......and that sorely needed to happen.

16 posted on 03/03/2003 7:18:43 AM PST by RightOnline
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To: SJackson
So what has 2002 set up? Beats me.

Beats me, too. All I know is the only things that are the same as they were twenty years ago here in Silicon Valley are the weather & the cost of living. Everything else appears to have vamoosed.

17 posted on 03/03/2003 7:26:02 AM PST by skeeter (Fac ut vivas)
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To: LisaAnne
Thanks for the ping!
Great article. I'm hoping he's right, I have lots of friends out of work and still looking.

Like me.

18 posted on 03/03/2003 7:30:31 AM PST by null and void (<------ Will micromachine, do nanotech, bioMEMS for food...)
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To: crazykatz
What are you talking about? Care to make sense?
19 posted on 03/03/2003 7:45:07 AM PST by LS
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To: FITZ
Nope, you're wrong. The arguments were EXACTLY the same. "American steel can't compete against cheap European steel." So they subsidized many steel makers---but not Carnegie, who made it without subsidies. Same arguments, different countries.
20 posted on 03/03/2003 7:46:23 AM PST by LS
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To: RightOnline
I agree there were a lot of companies that didn't have a business plan. But it was more than some on-line businesses folding. This also had to do with projected growth that was stymied because of lack of "last mile," the NAPSTER-related content legality issues, and a massive deflation that hit venture capital. I maintain that in ANY rapidly growing economy you will have about the same percentage of speculative ventures. We just saw them accumulated in one sector.
21 posted on 03/03/2003 7:52:14 AM PST by LS
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To: FITZ
Good points. We need to ask ourselves why U.S. companies would want to move operations offshore. I can think of five reasons right off the bat:

We need to get the nanny government out of our hair and out of our businesses. That will take care of issue number one. We need to pass some serious tort reform that will reduce the amount of frivolous lawsuits, such as lawsuits against McDonalds because their hamburgers are high in fat. This will alleviate issue #2 and also address issue #3. We need to reduce taxes, that will take care of issue #4. Issue #5 is a tougher nut to crack, but it is evident that unions have long outlived their usefulness and those who belong to the labor unions (most of which are mobbed-up) have simply exchanged one oppressor for another.

22 posted on 03/03/2003 7:55:23 AM PST by SamAdams76 (California wine tastes better - boycott French wine!)
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To: backhoe
I think this guy's right...

Nah, the guy is just wistfully dreaming of the "good old days".
He thinks he's playing with a superball when it's actually a paintball.
The doggone thing went splat when it hit, and anything of substance squirted over to Taiwan, Singapore, India and China.

23 posted on 03/03/2003 8:17:16 AM PST by Willie Green (Go Pat Go!!!)
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To: backhoe
"That's an intriguing parallel- I think the future will be very interesting..."

The pessimism is so thick you can cut it with a knife. I believe that the technologies described in the article will catalyze the real Internet revolution.

It looks as if WI-FI will be hidden "force multiplier" that by solving the "last mile problem" will reinvigorate thet Tech sector.
24 posted on 03/03/2003 9:29:25 AM PST by ggekko
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To: FITZ
But back then they weren't forming in China, why would they form here when it's been decided that American labor costs too much and Indian programmers can do a better job being paid far less money?

You really think communist can beat capatilists in the game of capitalism??????? Sorry, but we will kick China's butt in the game of business. We may not have the cheap labor, but we know how to use it.

25 posted on 03/03/2003 9:40:00 AM PST by Always Right
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To: SJackson
I've been in Silicon Valley for 15 years so this is the 2nd downturn for me.
I am just starting to see an upturn but some SV companies will never recover.
26 posted on 03/03/2003 10:24:56 AM PST by Zathras
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To: Cool Guy
SV ping
27 posted on 03/03/2003 11:04:39 AM PST by anymouse
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To: anymouse
Thanks for the ping.
28 posted on 03/03/2003 11:20:25 AM PST by Cool Guy (In God We Trust.)
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To: LS
We've been in effective deflation for the past 30 years. During that time, the power of technology -- especially, but not only information technology -- has reduced the price and improved the quality of practically everything. Only continued counter-deflationary (i.e., inflationary) fiscal and financial policies have prevent prices from actually going down. Some genius (Greenspan?) figured out that a minor amount of apparent inflation is actually good for the economy -- it prevents deflationary crises, increases consumer confidence, and prevents people from holding onto their money in anticipation of lower prices tomorrow.

The big improvements in the economy come when the counter-deflationary infusion takes the form of tax cuts, which give consumers money to spend and incentives to work.

That's my theory of the day. Have at it.

29 posted on 03/03/2003 11:22:10 AM PST by AZLiberty
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To: AZLiberty
You have it quite right. Computing power has increased productivity so fast that companies are still having trouble adjusting to it. 100% right on tax cuts.
30 posted on 03/03/2003 12:00:14 PM PST by LS
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To: skeeter
Cost of living? Please tell me what part of San Jose you're living in!
31 posted on 03/03/2003 12:23:14 PM PST by nickcarraway
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To: nickcarraway
Cost of living? Please tell me what part of San Jose you're living in!

I didn't mean the cost in real terms was the same; I meant the cost of living is the same, as in sky high - barely affordable!

32 posted on 03/03/2003 1:07:43 PM PST by skeeter (Fac ut vivas)
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To: skeeter
I didn't mean the cost in real terms was the same; I meant the cost of living is the same, as in sky high - barely affordable!

I would still think the cost of living was not so bad then, as it is now. The housing prices started to move up 20 to 25 years ago. Thank goodness for prop 13.

33 posted on 03/03/2003 1:13:00 PM PST by nickcarraway
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To: Zathras
All,

A friend is going to be doing some work for Sun Microsystems. They're up to something very interesting. Could be big.
I'll try to squeeze him like the CIA is squeezing Kahlid.
34 posted on 03/03/2003 1:22:34 PM PST by muleskinner
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To: ggekko
It looks as if WI-FI will be hidden "force multiplier" that by solving the "last mile problem" will reinvigorate thet Tech sector.

Absolutely. Fiber-and-wireless plays are primed to be huge. But you have to have both components; pure wireless sucks technically, and pure fiber is too damn expensive for the laterals. To harness both you have to put a wireless skin on a fiber skeleton, which means a company that can do both well and integrate them seamlessly. This company will NOT be one of the big telcos.

Another thing hot in the hopper is media/IP convergence. For real this time. Imagine every movie and TV show ever made on demand to your television when you want it. Not only does the network become your Tivo (and then some), it also becomes the worlds biggest video store, and at prices that are very competitive with existing cable and dish TV services. This requires the fiber/wireless hybrid networks mentioned above, but those are being deployed as we speak and the media convergence is being worked on in parallel with that.

These are what's hot technologically. On the hardware side, anybody that can make big wire speed L2/L3 Ethernet switches is a good bet as well. The comprehensive scalable L2/L3 feature set support is what will distinguish the winners from the losers here. Everyone sees this coming (ubiquitous metro and longhaul Ethernet supplanting everything else), but a lot of big companies like Cisco are scrambling to develop this capability and some smaller companies are definitely the front runners in this arena.

As for the general economic state of The Valley, the last couple years were rough, with very little capital flow. This year is looking quite good though. The VCs are opening the purse strings and looking to dump some serious money into core technologies and the next generation of rugged new startups. The buds of spring in Silicon Valley are starting to bloom, so fasten your seatbelt.

35 posted on 03/03/2003 1:37:13 PM PST by tortoise
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To: tortoise
"This company will NOT be one of the big telcos...."

The Baby Bells are dogmeat. Even their lawyers won't be able to save them this time.

"This requires the fiber/wireless hybrid networks mentioned above, but those are being deployed as we speak..."

Any examples that you would care to provide?

If the "last mile problem" can be solved convergent multi-media offerings will come on like a tsunami; it will drive a new cycle of capital spending.

36 posted on 03/03/2003 2:39:52 PM PST by ggekko
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To: SamAdams76
Also we need to drastically cut welfare spending and do something about taxes that make American labor so expensive that it can't compete. One reason Mexicans can get buy earning $4.50 a day and Chinese even less is they don't have to pay into an expensive Social Security tax or FICA etc and they have a much cheaper cost of living. Insurance is sky high because of lawyers and because doctors and hospitals have to make up for the for the free care given out to the uninsured.
37 posted on 03/03/2003 8:22:34 PM PST by FITZ
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To: SamAdams76
And there lies the problem, I would also add the junk products of public education. Eliminate any 3 of these, and we could "turn the corner".
38 posted on 03/04/2003 7:32:29 AM PST by Dead Dog
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To: ggekko
It looks as if WI-FI will be hidden "force multiplier" that by solving the "last mile problem" will reinvigorate thet Tech sector.

Yup. One computer in my household doesn't cut it anymore, so I just went down for a laptop just for lil ole me. Hook me up with a wireless router to go with that embedded 802.11b in the laptop, and I'm there.

Now, I love electronics but I hate cords. If a company comes out with a decent, affordable home entertainment system that is wireless, I'll be saying "I gotta get me some of that", but not until they do.

39 posted on 03/04/2003 5:37:53 PM PST by Citizen of the Savage Nation
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To: SJackson
Freepers might enjoy this graph-packed analysis of the recession, especially in the tech sectors.
40 posted on 03/05/2003 7:41:36 AM PST by RightOnTheLeftCoast
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