Silicon Valley faces tough realities in this economic landscape

Layoffs. Hiring freezes. Falling valuations. The headlines coming out of the onetime land of the unicorns have been pretty unromantic lately. It’s a dramatic turn for an industry that has been all about growth.

Over the last two decades, and especially in the first two years of the pandemic, tech exploded as more of the world moved online. But that seems to be changing.

Marketplace’s Meghan McCarty Carino spoke with Kari Paul, a tech reporter for The Guardian, who recently wrote about whether Big Tech is past its prime. Paul said that with the economy in flux, the tech industry is not immune. The following is an edited transcript of their conversation.

Kari Paul: If advertising and the companies advertising are impacted by the broader economic downturn, they’re gonna have less money to inject into these tech firms. And then on top of that, the interest rates are impacting tech right now. When we think about the golden age of Silicon Valley, it used to be a very low interest rate environment that kind of helped bolster the tech boom. We had an era of what we call unicorns, [private] companies whose valuations exceeded $1 billion, and we’re just seeing a slower or smaller rate of those now as interest rates shift.

Meghan McCarty Carino: In your reporting for The Guardian, you say this all might signal a golden era coming to an end. What do you mean by that?

Paul: I mean, this recent golden era has been just these social media startups-turned-major-companies just getting to do whatever they want, basically. And being in Silicon Valley, and they have all of these big campuses where they have on-site chefs and all these fancy living situations, it’s just — this era of tech where having a job in tech was the best thing you could do. But you can only be the, I guess, golden child for so long. Like, nobody is rooting for you anymore when you’re worth billions of dollars. People are kind of starting to change their tune.

McCarty Carino: Right, and there’s been so much scrutiny from government officials, from the public, about anti-competitive kinds of behaviors. Obviously, the proliferation of misinformation has become a huge issue, right?

Paul: Right. I mean, I remember when I started my career, it was around the Arab Spring and things like that, where people were thinking, “Social media is so good for democracy. Like, this is amazing.” And it’s almost funny to think of that being the predominant viewpoint not that long ago because now it seems to be widely accepted that social media is a threat to democracy, like the misinformation that’s running rampant. There’s a lot of concerns that are very widely held. Studies show the majority of Americans think Big Tech needs to be reined in.

McCarty Carino: How do you see the tech industry moving forward from here?

Paul: When we think about the physical space of Silicon Valley, that’s very interesting to me because we’re seeing a lot of these companies move. Tesla moved to Austin, Texas. Oracle and Hewlett-Packard has moved some of their operations to Texas. So when we think about the physical space of Silicon Valley and all the mythology around Silicon Valley, that’s definitely changing.

McCarty Carino: It feels like it’s almost losing some of its gravitational pull.

Paul: Yeah, the physical space of Silicon Valley is losing its gravitational pull. And then, the industry at large is becoming less of a sure bet. I think it used to be very secure to get a job in tech and know that you were gonna make a lot of money and probably have some job security, and now that we’re seeing hiring freezes and layoffs, I think that’s changing.