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+---
+ID: 38950
+post_title: >
+  Silicon Valley Isn’t Reckless, The
+  Rest of The Country is Overcautious
+author: Joshua Montgomery
+post_excerpt: ""
+layout: post
+permalink: >
+  http://mycroft.ai/blog/silicon-valley-isnt-reckless-the-rest-of-the-country-is-overcautious/
+published: true
+post_date: 2018-06-18 13:25:10
+---
+<span style="font-weight: 400;">Now that Theranos Founder Elizabeth Holmes has been indicted, commentators around the country are </span><a href="https://slate.com/business/2018/06/elizabeth-holmes-deserves-prison-but-her-indictment-wont-make-silicon-valley-any-less-reckless.html"><span style="font-weight: 400;">calling out Silicon Valley</span></a><span style="font-weight: 400;"> for its reckless behavior. Setting aside the fact that Theranos was overwhelmingly backed by </span><a href="https://www.cnbc.com/2018/05/04/theranos-devos-other-investors-reportedly-lost-over-600-million.html"><span style="font-weight: 400;">investors from outside the Bay Area</span></a><span style="font-weight: 400;"> (</span><a href="https://www.marketwatch.com/story/betsy-devoss-family-lost-100-million-in-theranos-investment-2018-05-03"><span style="font-weight: 400;">one</span></a><span style="font-weight: 400;"> is now in charge of the Department of Education) and that its board of directors was staffed by Washington D.C. insiders (</span><a href="https://www.vox.com/2018/3/16/17124288/mattis-theranos-board-trump"><span style="font-weight: 400;">one</span></a><span style="font-weight: 400;"> is now in charge of the Department of Defense), this narrative is patently false. Yes, a few outliers have misled investors, but overall Silicon Valley isn’t reckless, the rest of the country is overly cautious.</span>
+
+<span style="font-weight: 400;">Of course, I might be the only one here in Silicon Valley calling attention to this. Investors here like things as they are. The rest of the world won’t invest in early stage startups so hungry entrepreneurs leave their homes and flock to Silicon Valley where investors accept risk and write checks to back “crazy” ideas.</span>
+
+<span style="font-weight: 400;">This approach has paid off for them. Silicon Valley has generated more wealth for its investors than any other community in the history of mankind. The top 5 tech companies in Silicon Valley represent a combined market capitalization of more than 3 trillion dollars. That’s 2.3% of the net assets of the entire country. And there are dozens of other companies in the Bay Area who have generated huge returns for their investors. Of the </span><a href="https://www.recode.net/2018/5/19/17370288/silicon-valley-how-many-billionaires-start-up-tech-bay-area"><span style="font-weight: 400;">143 tech billionaires</span></a> worldwide, half of them call Silicon Valley home<span style="font-weight: 400;">.</span>
+
+<span style="font-weight: 400;">Investors in the valley earn huge returns by investing in early stage companies with huge, unreasonable and risky visions. “Transportation as reliable as running water, everywhere for everyone.” (Uber: </span><a href="https://qz.com/1167616/uber-likely-isnt-the-worlds-most-valuable-startup-after-the-softbank-tender-offer/"><span style="font-weight: 400;">Valuation $48B</span></a><span style="font-weight: 400;">) or “To organize the world’s information and make it universally accessible and useful.” (Google: </span><a href="https://www.google.com/search?q=google+valuation"><span style="font-weight: 400;">Valuation $790B</span></a><span style="font-weight: 400;">). On their face these visions look ridiculous, but clearly they are achievable.</span>
+
+<span style="font-weight: 400;">How? By helping companies “fake it till they make it”. That means backing companies when they are nothing but an idea and helping the founders to make the idea a reality. These founders are passionate and do a great job telling the story of the company’s future. Investors back them because they like the story, they like the founders and they want to be a part of making the story into a reality. What was fake during the first investor pitch becomes real a few years later.</span>
+
+<span style="font-weight: 400;">Rather than whipping Silicon Valley for its risk taking, the news media should be looking at places like Appalachia, Detroit, and North Dakota and asking questions like:</span>
+<blockquote><i><span style="font-weight: 400;">“In the face of overwhelming evidence that risky startups can pay off big, why are investors outside Silicon Valley so risk averse?”</span></i>
+
+<i><span style="font-weight: 400;">“Why aren’t small investors flocking to Title III Regulation Crowdfunding sites?”</span></i>
+
+<i><span style="font-weight: 400;">“Why do smart people send their money to Wall Street where playboys, sociopaths and sycophants have been ripping them off for decades?”</span></i></blockquote>
+<span style="font-weight: 400;">Investment, job growth, and wage growth in Silicon Valley has exploded. Salaries increase year after year, nearly every business in the community has a “Help Wanted” sign in the window, and the schools are great. This has created some problems of course – housing shortages, untenable real estate prices, and traffic congestion -- but overall Silicon Valley is winning, and they are winning because investors in Silicon Valley take risk.</span>