Bill Davidow on Silicon Valley Values

Written by Sean Murphy. Posted in Silicon Valley, skmurphy

Concerned about Silicon Valley values, William Davidow wrote “What Happened to Silicon Values” in 2012 and concluded, “Silicon Valley is no longer as concerned about serving the customer, and even sees great opportunity in exploitation.” Here are some excerpts with additional comments.

Silicon Valley Values

“I arrived in the San Francisco Bay Area as a young engineer in 1959, before there even was a Silicon Valley. Four years earlier, the physicist William Shockley had brought silicon businesses to the Santa Clara Valley when he founded Shockley Semiconductor Laboratory, and the transformation began. Out came the apricot orchards and in went Silicon Valley.”
William Davidow in “What Happened to Silicon Values

I arrived in Silicon Valley in the fall of 1976 to attend Stanford University. The Homebrew Computer Club had just started meeting the year before and Apple Computer was three months old. Personal computers were for hobbyists: my first programming course was on an IBM mainframe, the rest were on the DECSYSTEM-20 (which I also used in my first real job and again fifteen years later when I joined Cisco where they had managed to keep a few alive in captivity).

The Stanford Computer Science Department only offered a graduate degree, undergraduates had to register for an interdisciplinary studies degree called Mathematical Sciences that blended courses in Computer Science, Operations Research, Statistics, and Mathematics (a lot of mathematical theory which I have never really found a use for since: the ancient Greek and Latin I studied in High School has been much more valuable).

Putting The Customer First

“I think it’s worth exploring some of the values of the leaders who first shaped Silicon Valley, because they provide a sharp contrast to those of recent Internet entrepreneurs.

HP was focused on delivering advanced technology of great value, then servicing and supporting the customer to make sure he derived value from what he bought. Customers trusted Hewlett-Packard. I remember one customer who so trusted the salesman who took care of his account that he let the sales rep purchase what he needed. That period of trust went on for a long time. The salesman told me his secret: He never bought anything for the customer that the customer did not really need.”
William Davidow in “What Happened to Silicon Values

A strong commitment to customer service was the norm at the large companies I worked at during the next two decades: Monolithic Memories, Advanced Micro Devices, 3Com, Cisco. At one point a Cisco support person chartered a plane at no small expense to get parts to a customer with a network down because we had missed the cutoff for FedEx. He was promoted and went on to become on of the architects of Cisco’s CCIE program.

Exploiting The Customer

“I’ve become increasingly concerned about one thing that is seldom discussed: the valley is no longer as concerned about serving the customer, and even sees great opportunity in exploitation. We are beginning to act like the bankers who sold subprime mortgages to naïve consumers. In such an environment, we are less likely to create the role models of the past who guided the valley to its future.

The unapologetic pursuit of wealth is perhaps the most obvious explanation. Less obvious is the loss of customer power.”

William Davidow in “What Happened to Silicon Values

I think what this misses is that the consumers who rely on firms like Google, LinkedIn, and Facebook are not the customer–the advertiser is the customer–they are the product to be sold. Or more accurately their attention is. They are effectively media plays.

Consumers Have Less Bargaining Power Than Business

In the past, serving a powerful and demanding customer kept us honest. At the dawn of Silicon Valley, most companies sold products to industrial companies and the government. More often than not, suppliers were managed by purchasing agents who possessed power and a long memory. If you violated customer trust, you were severely punished. Sometimes you were cut off as a supplier.

Many Silicon Valley customers are no longer industrial companies. They are consumers, not companies represented by purchasing agents, and those consumers have less power in dealing with their suppliers. (Nothing better gets a corporation’s attention than a purchasing agent threatening to take away a $50 million order.) Instead of such people to keep us in line, we now have government regulators who are slow to react, subject to lobbying influence, and, in many cases, ineffective.
William Davidow in “What Happened to Silicon Values

The advertisers who are the large customers ask for more personal information and surveillance on their target consumers and the large media firms, for the most part, have been only too happy to comply. It seems to me that in ten or 20 years Google, Facebook, and LinkedIn will all be regulated like utilities that supply Internet search, personal social network identity, and professional social network identity in the same way that we now have consumer credit and food safety and other regulation that addresses historical problems.

Internet Consumer Markets Are Winner-Take-All

Internet consumers get locked in to one company and find it difficult to escape. In the process, they lose their power.  [..] When corporate leaders pursue wealth in the winner-take-all Internet environment, companies dance on the edge of acceptable behavior. If they don’t take it to the limit, a competitor will. That competitor will become the dominant supplier — one monopoly will replace another. And when you engage in these activities you get a different set of Valley values: the values of customer exploitation.
William Davidow in “What Happened to Silicon Values

The thing I cannot understand is do the people who are running these large companies really want their children to live in world they are creating. I have no regrets working on chips and networking gear (and the software used to design and manage them) that have melted almost invisibly into the fabric of our lives. But an iPhone is starting to resemble a parolee tracking bracelet; a web browser is now much like a telescreen, the combination television and security camera in Orwell’s 1984 that monitors your every move as you watch it.

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