The Brave New World Comes to California

Comments Off on The Brave New World Comes to California
The Brave New World Comes to California

In a way not seen since the early days of the industrial revolution, the shift to a digital economy has created an enormous accumulation of wealth.  Technology has been a major force in California for decades, but the current surge, and its extraordinary concentration, is unprecedented.  In the five years from 2013 to June 2018, five technology companies grew in value by $2.7 trillion, the fastest increase in growth over a five-year period in American financial history.  And, for the first time in history, the top five companies on the S&P 500 are in the same industry sector.  In past eras, even though we may have seen similar or even higher percentages of concentration among the top-five, they have been from diversified industries.

The clustering of so many top firms in Silicon Valley and the San Francisco Bay Area has generated an extraordinary, and youthful, coterie of the ultra-rich.  In fact, 70% of the 56 U. S. billionaires under 40, live in California; 12 in Francisco alone.  And, as the tech firms exploit their quasi-monopolies and enjoy exceedingly high profits, it’s not costs that are likely to make them go elsewhere.

Three decades ago, the late futurist Alvin Toffler optimistically saw these tech firms as critical to creating “the dawn of a new civilization,” with vast opportunities for societal and human growth.  Instead, the tech economy seems to be creating greater inequality, especially in its Bay Area base.  In fact, it appears we’re heading gradually towards what the Japanese futurist Taiichi Sakaiya described as “a high-tech middle age,” where only a wealthy few control the commanding heights of the economy and political life.  Ironically, as recently as the 1980s, the San Jose area boasted one of the country’s most egalitarian economies.  Jobs in manufacturing, assembly, transportation and customer support helped middle, and even working-class families to achieve “the California dream.”

The shift of employment from industrial to software industries has meant fewer opportunities for assemblers and other blue-collar workers.  Over the past quarter-century, Silicon Valley has greatly expanded in information jobs, but it has lost over 160,000 manufacturing positions.  The new software companies simply need fewer workers per dollar than traditional tech firms do; their revenues per employee are two to three times those of, for example, Intel.  They also often employ non-citizens on temporary visas, who now constitute upwards of 40 percent of their workforce.

Ultimately, what has emerged is a region that is fragmented and divided.  The high-tech community is largely isolated from the broader region and particularly from those parts of the region that are less fortunate...

To continue reading, become a paid subscriber for full access.
Already a Trends Magazine subscriber? Login for full access now.

Subscribe for as low as $195/year

  • Get 12 months of Trends that will impact your business and your life
  • Gain access to the entire Trends Research Library
  • Optional Trends monthly CDs in addition to your On-Line access
  • Receive our exclusive "Trends Investor Forecast 2015" as a free online gift
  • If you do not like what you see, you can cancel anytime and receive a 100% full refund