If you read the headlines and analyses of German-language media, Silicon Valley is dying and the technology companies there are at the end of their rope. The carnage of mass layoffs that have rocked these companies since late last year can be nothing more than a sign that Silicon Valley must have peaked and the rest of the world can finally exhale and not be disrupted again by technology coming from there.

The world sounds so simple as wishful thinking when you apply it to your own, local circumstances and forget that not only the USA ticks quite differently from Europe, and especially again the area between San Francisco and San José. But let’s look at the incidents in detail.

Layoffs

Silicon Valley entrepreneur Roger Lee has posted a compilation of all layoffs worldwide and in Silicon Valley over the past few weeks online on a specially created website called Layoffs.fyi. Silicon Valley firms laid off 122,528 employees in the process. Not only does that sound like a lot, it’s also a lot, albeit scattered all over the world. It’s important to remember that many of these companies operate globally in dozens of countries, and Silicon Valley alone accounts for only a fraction of the layoffs.

The layoffs also need to be put into context. For example, when Meta, Facebook’s parent company, laid off more than 11,000 employees in November 2022, that was 13 percent of its workforce. But Meta more than doubled its workforce in the last two years during the pandemic to more than 87,000 from about 40,000 employees in early 2020. From January to September 2022, Meta’s workforce increased from 71,970 to 87,314, an increase of more than 15,000. These layoffs return Meta to a March 2022 workforce level.

And the companies are highly profitable. No talk of layoffs due to losses. Meta, Google, Microsoft and Co still make dozens of billions of profit per year. Apple, Microsoft, Google parent Alphabet, Meta and Amazon earned a measly $243 billion in 2022, down 24 percent from the previous year. Honestly, is this what decline looks like?

Startups and Founder Wave

ZipRecruiter evaluated a survey of more than 2,500 U.S. workers on the current job situation from the fourth quarter of 2022, which showed that 54.2 percent of job seekers had a new job within a month. Also, for 50.3 percent of job seekers, employers responded to the application within 3 days and 89.6 percent within a week. In the past, a period of one to three weeks was common. Not only is this a sign of a saturated labor market, but also the bargaining power that lies on the side of the employees. 62.6 percent received a better offer and current employers improved offers to keep their employees. For two-thirds of the employees (67.5 percent) who received higher salaries, the salary increase was as high as at least 11 percent, in addition to other benefits that included working from home.

Although the big tech companies have laid off, this now opens up the opportunity for smaller startups that have been desperate for engineers. They simply could not compete with the salaries paid at the Googles & Co. Auch die Dynamik von Neugründungen sollte nicht unterschätzt werden. Highly skilled, former employees of tech companies are taking advantage of this moment to branch out on their own and start their own companies. This is in tandem with a startup wave that is taking place in a venture capital market like Silicon Valley, where the available venture capital has doubled in recent years and can now be invested in such startups.

Job Openings

The consulting firm Bain & Company has analyzed how these layoffs are affecting the Silicon Valley job market. Although job growth at tech firms has slowed worldwide, demand for employees with skills in cloud computing, AI and machine learning, data science, Web 3 or cybersecurity remains high. Since the end of 2020, demand has increased between 70 and 237 percent.

Surprisingly, it is now primarily companies from non-tech sectors that show a higher number of job postings than traditional tech companies. This trend was already apparent before the pandemic, but was distorted by the pandemic, during which many tehcnology companies hired very heavily to meet pandemic-related demand. However, with the end of the pandemic, this has reversed. Banks, insurance companies and other non-tech firms are now hiring more engineers than the tech firms themselves.

New Technologies

Headlines, such as that of Spiegel’s Silicon Valley correspondent Alexander Demling, that Silicon Valley was running out of ideas, seem merely puffery and out of touch with reality in light of the sudden interest in artificial intelligence. OpenAI, an artificial intelligence company co-founded by Elon Musk, has brought a breath of fresh air to the search engine market with image and text generators that woke up Microsoft and Google in one fell swoop. Metaverse, autonomous cars, electric mobility, crypto – and this despite the collapse of the crypto exchange FTX – and the discussions around the world on the perceived risks and opportunities of such AI transformers as ChatGPT, DALL-E or Midjournay show that Silicon Valley is neither running out of ideas, nor the rest of the world out of interest.

I personally notice this in the intense demand for delegation trips to Silicon Valley, in the requests for talks and insights into these trends that Silicon Valley is bringing forward and driving (see also the recording of a talk on five trends to keep an eye on in 2023). With the end of the pandemic, interest has risen massively again.

Summary

We recognize that these layoffs have little in common with those taking place in other countries. Thanks to a good job market, most find a new job very quickly or take advantage of the opportunity and available venture capital funds to start their own tech companies. The pessimism or gloating expressed from other countries is rather misplaced. Silicon Valley has reinvented itself time and time again, and recent technologies in particular prove that it is about to do just that again.

I’ve included some of my books here, which are also always about technology and Silicon Valley. I would like to recommend it to you herewith.