An unprecedented flow of wealth is concentrating wealth among Silicon Valley companies that have capitalized on global lockdown amid the pandemic, raising fears that a dramatically lopsided recovery will distort the Bay Area’s economic future.
“Any time the economy takes a jolt…those who can benefit most will benefit significantly,” said Derrick Seaver, CEO of the San Jose Chamber of Commerce. “We are particularly focused on ensuring that those companies that have been on the negative end for the last two years are given a fair framework to recover.”
Apple’s sales soared to a record $366 billion last year, up from $275 billion in 2020 when the virus started wreaking havoc and from $260 billion in 2019 before the pandemic, fueled by device sales and services to people suddenly living through screens. Google’s revenue grew to a record $258 billion in 2021 from $183 billion in 2020 and $162 billion in 2019. And Facebook’s revenue grew to a record $118 billion from $86 billion in 2020 and $71 billion in 2019 as advertisers scramble to target ads to demographics who shop more online. All three also achieved record profits.
Meanwhile, other industries such as tourism, hospitality and bricks-and-mortar retail faltered.
“The big story of the Silicon Valley pandemic years was money, money and more money,” said Margaret O’Mara, a professor at the University of Washington who studies the technology industry. “The last two years have also further strengthened and consolidated the power of the really big players. The Valley has always had large and dominant employers, from Lockheed and HP in the early years to Intel and other chipmakers a few decades later. But the intense concentration of wealth and talent in some very large companies…is new.”
A similar bounty also flowed into smaller companies that have been able to turn lockdown living into staggering profits.
San Francisco-based grocery and grocery delivery apps made money delivering groceries and supplies, with DoorDash generating nearly $5 billion in revenue in 2021, more than five times 2019 levels Private company Instacart’s revenue tripled during this period. San Jose-based video conferencing company Zoom conducted remote workplace meetings and grew revenue tenfold in 2021 to $4.1 billion from the year before the pandemic. Los Gatos-based streaming company Netflix, which replaces closed theaters and entertains the isolated, saw its revenue jump 50% to $30 billion in 2021 compared to 2019. Salesforce, a San Francisco-based enterprise software and cloud computing company, whose digital tools have become key solutions for businesses adapting to the pandemic, recently reported its 2022 revenue of nearly $27 billion, double 2019’s.
Corporate earnings and market valuations in Silicon Valley’s technology industry grew “orders of magnitude greater than what the Valley saw during the dot-com and personal computing boom,” O’Mara said.
The consolidation of wealth and power in big tech companies will reduce competition, potentially leading to higher prices for consumers, more aggressive extraction of personal data and fewer opportunities for new innovators, said Omar Ocampo, a researcher at the left-leaning think tank Institute for Policy Studies.
“What does this mean for new players looking to enter the market? They either can’t compete, or they’re being bought out, or they exist only to be acquired by a particular company,” Ocampo said.
While San Jose Chamber CEO Seaver hailed the achievements of the region’s big winners from the pandemic, his organization wants government aid to be targeted at companies that are still struggling and wants companies that follow the guidelines formulate for remote work, taking into account that “employees leaving home to come to work has a stimulating effect on the overall economy.”
Growing markets and “so much cash” have allowed Google and Facebook to “spend big bucks on advanced research and continue to grow their real estate presence and workforce in the Bay Area,” O’Mara noted, but they’ve also fueled expansion elsewhere, with businesses and others technology company.
That’s a problem for the Bay Area, said Jeff Bellisario, executive director of the Economic Institute at the Bay Area Council, a group that represents hundreds of big employers, including Apple, Google and Facebook. Despite massive sales growth at certain tech companies, the Bay Area is still down 150,000 jobs from just before the pandemic, the council’s analysis showed. Meanwhile, Bay Area companies are telling the council they are shifting their plans for future employment to other locations, Bellisario said.
“There needs to be a little more recognition in the region that we can’t just look back at the last 10 years of growth and think we can count on that for the next 10 years,” Bellisario said. “It’s recognized that you can find talent elsewhere and build new technology hubs elsewhere.”
Growing “second tier” tech hubs with lower cost of living like Boise, Austin, Denver and Nashville are attracting tech companies and tech workers, Bellisario said. Bay Area tech icons Oracle and HPE both relocated their headquarters to Texas during the pandemic.
The massive influx of wealth into a handful of tech companies poses greater risks, said Ocampo, a researcher at the Institute for Policy Studies. Median household wealth in the US has been falling since 2019, Ocampo said. “Contrast that to the tech industry,” he said. “The pie is growing, but the vast majority of people are getting a smaller and smaller piece.”
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