The Unemployed vs. Silicon Valley

Here’s a bit of a departure from my usual writing about startup strategies and growth. This one highlights an elephant in the room — unemployment and its damage to reputation of the tech industry.

We are in a strange time in the tech world right now. Tech leaders have become a group of people who are simultaneously admired and hated by those who are not part of the “Tech World”. Working class people all over the world aspire to be part of the this high paying, secure, intelligent world — at a startup, a digital agency or in a large company. Mid career professionals in other industries in other industries want to shift over to a similar mid or high level tech position, but are usually put off as not having the “right experience”.

To most normal humans, the Silicon Valley tech scene is an elusive subculture that is impossible to be a part of. They’re not sure which parts of the tv show SILICON VALLEY are true (sadly, almost all of it). Combine that with the dichotomy of our current general economy — a small number of high paid young workers and startup millionaires vs. the millions of “employable unemployed” and you have a new reality unlike anything we’ve seen in almost a century.

In our new society you have more rich vs. poor than ever before in this country. Included vs. excluded, cool tech people vs. the rest, rich vs. poor, the people eating $250 meals in San Francisco vs. the unemployed former professional looking in through the window. There are $15 million mansions a block from homeless people on the street.

Then you have the under employed and underpaid in Silicon Valley and San Francisco. More than half of the bay area population is now earning far less than required to live and thrive. Many of them also are spending more than ever to try to have the appearance of acceptability to their peers or potential employers. They’re intimidated when they see the well dressed smug person acroos the desk who has the power to hire them. They feel like they are being judged by how new and hip their clothes are, etc.

So they overspend on movies, monthly cell phone bills, the newest iPhone, a MacBook Pro with maximum RAM, $20 burgers, $80,000 cars, $15 beers. These are some of the required status symbols in order to get those people who are employed and who hand out the jobs to accept an outsider.

Why am I writing this and not spinning some positive thoughts for innovation like I usually do? Because I’m embarrassed by the way much of the Silicon Valley power structure has evolved, or devolved over the past 15 years. Not all of them, but many of our tech industry leaders have become elitist, self important, merciless people who count money, collect toys and close their circle tighter and tighter, wanting to be around other wealthy techies.

What happened to us?

San Francisco | Vitaly Taranov
“The Bay Area does have something of a have and have-not economy”
Jon Haveman, Silicon Valley economist

Unless you’re a very strong software developer, more and more of the “jobs” available in the valley are at the lowest entry level or “contractor” gigs with no benefits or stability. All this while profits and top level compensation is in the stratosphere. Facebook made $2.7 billion in net profit last quarter. That’s 43% margin. Where does all that money go?

This isn’t how it used to be. Silicon Valley used to have a ton of altruism, giving, helping the entire world be a better place. It was founded on egalitarian principles by people like Hewlett and Packard. Everybody did well. I’ve watched secretaries become millionaires and bragged to people about how generous we were in tech.

Profits were usually 10% at most, the rest going into the business and hiring people and paying for benefits and ensuring long term employment. Instead of the giant job creating machine that it once was, Silicon Valley is now the cause for increases in unemployment for all but their very few. Firing people used to be much more rare than it is today.

Not everyone is hurting. Friends of entrepreneurs, roommates, specialized engineers and higher management are all doing extremely well. But the other 95% are suffering. They get demoted, downsized, or unceremoniously dismissed at will, often with no severance or dignity.

Silicon Valley is also teaching the rest of the tech communities in the U.S. how to be ruthless, pay low, fire at will, call people contractors to avoid costs. Luckily it isn’t taking hold in many of these other places.

Dan Lyons captured all of this well in his recent book “Disrupted: My Misadventure in the Startup Jungle”. He was an unemployed baby boomer who wound up in a Boston clone of a Silicon Valley company. Because he was an outsider he was shocked by what was accepted as reality inside one of these companies, and how they duped young people into thinking they were lucky to just be in the building. They fed them candy and beer and t-shirts in lieu of their proper pay and fired people instantly. When he pointed this out to the young employees they looked at him like he was a crazy old man. His book is one of the few honest statements about this phenomenon that most of us are pretending doesn’t exist.

Every day thousands of people fall off the cliff of a stable job and security. Many of them try to disguise it with a new car or using their credit card to buy that $10 coffee. Depending on their savings, in a few months or years their unemployment can become dire financial straits or even homelessness. Many cases of this in the valley and San Francisco.

In part, the financial chasm is growing because in the tech industry we hire differently and fire more indiscriminately than we did before the 2008 crash.

Why do we do this? After 2008, many tech companies realized they could sell a much weaker deal to anxious unemployed and at times desperate people than they had before — less pay, no health benefits, but ping pong and foosball and free soda. The expectation of being fired at any time with no recourse became o.k., sitting elbow to elbow at a table with other workers so you can “communicate” better while a supervisor looks over your shoulder became o.k. All these things are for cost savings and no-risk disposability of the employee. This never would have worked in the past, but it is the norm now.

Age Hurts

Mark Zuckerberg infamously said “Young people are just smarter.” He didn’t really mean that, it was obfuscation. What he really means: young people are cheaper and more naive.

Unfortunately, many tech companies, from startup to giant, have also realized they could now practice blatant ageism without any repercussions — avoid hiring anyone over a certain age. It’s easy now to discriminate against older candidates before and during interviews by googling them or just looking at them. Young tech people want other young people around them. It’s technically against the law but almost impossible to enforce. Lyons discusses this in his book also.

They also fire people over 30-35 as a general practice, culling the herd. Again, what happened to us?

So what can be done about this? For many, especially younger workers, the idea has been to build their own, DYI, create a business where they can control their future and not be instantly fired by an employer. This is obviously easier said than done, and has been the main focus of much of my startup consulting for the past few years.

There needs to be a middle ground where you gain some control over your financial stability even if you can’t come up with the super duper high growth startup. I’ll talk about that in a future post.

Until then, if you’re in a hiring mode and have the power to make a change here, do so. Try to help the unemployed around you that are suffering. Do something crazy and hire someone that doesn’t look exactly like you.

And if you’re in Silicon Valley or San Fran, it’s even more important, because as Silicon Valley does, the rest of the tech world will follow.

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