An unprecedented flow of riches is concentrating wealth among Silicon Valley companies that capitalized on the world’s locked-down lives amid the pandemic, raising fears that a dramatically lopsided recovery will warp the economic future for the Bay Area.
“Any time you have a jolt to the economy … those that have the ability to most benefit from that will benefit handsomely,” San Jose Chamber of Commerce CEO Derrick Seaver said. “We have a particular focus on making sure that the businesses that were on the negative end of the last two years are given a fair playing field to recover.”
Apple’s revenue skyrocketed to a record $366 billion last year, from $275 billion in 2020 as the virus began wreaking havoc, and from $260 billion in 2019 before the pandemic, propelled by device sales and services to people suddenly living through screens. Google’s 2021 take leaped to a record $258 billion from $183 billion in 2020 and $162 billion in 2019. And Facebook’s income surged to a record $118 billion from $86 billion in 2020 and $71 billion in 2019, as advertisers scrambled to target ads to populations shopping much more heavily online. All three also reaped record profits.
Meanwhile, other industries like tourism, restaurants and brick-and-mortar retail floundered.
“The big story of Silicon Valley’s pandemic years was money, money and more money,” said Margaret O’Mara, a University of Washington professor who studies the technology industry. “The last two years also further strengthened and consolidated the power of the very biggest 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 a few very large firms … is new.”
A similar bounty also poured into smaller companies able to leverage locked-down lives into eye-popping gains.
San Francisco-based food and grocery delivery apps cashed in by providing sustainability and supplies, with DoorDash hitting nearly $5 billion in revenue in 2021, more than five times its 2019 level. Private company Instacart’s revenue is estimated to have tripled in that period. San Jose video-conferencing company Zoom took workplace meetings remotely and saw its revenue multiply tenfold to $4.1 billion in 2021 from the year before the pandemic. Los Gatos streaming firm Netflix, replacing shuttered movie theaters and entertaining the isolated, saw its revenue jump 50% to $30 billion in 2021 compared to 2019. San Francisco business software and cloud-computing firm Salesforce, whose digital tools became key solutions for companies adjusting to the pandemic, recently reported its 2022 income – at nearly $27 billion, double its 2019 take.
Corporate revenues and market valuations in the Silicon Valley tech industry grew “orders of magnitude larger than what the Valley saw during the dot-com and personal-computing booms,” O’Mara said.
The consolidation of wealth and power into major 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 actors who want to enter the market? They either can’t compete, or they get bought out, or they only exist to be absorbed by a particular company,” Ocampo said.
While San Jose Chamber CEO Seaver applauded the successes of the region’s big pandemic winners, his organization wants to see government aid targeted toward businesses that are still hurting, and wants companies formulating remote-work policies to consider that “employees leaving home to come to work has a stimulating effect on the broader economy.”
Expanding markets and “so much cash on hand” have allowed Google and Facebook to “spend big on advanced research and further grow their real estate footprint and workforce in the Bay Area,” O’Mara noted, but have also fueled expansions elsewhere by those companies and other tech firms.
That’s a problem for the Bay Area, said Jeff Bellisario, executive director of the Economic Institute at the Bay Area Council, a group representing hundreds of major employers including Apple, Google and Facebook. Despite massive revenue growth at certain tech firms, 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 bit more recognition in the region that we can’t just look back on the last 10 years of growth and think we can rely on that for the next 10 years,” Bellisario said. “There’s recognition that you can find talent elsewhere and cultivate new tech hubs elsewhere.”
Growing “second-tier” tech centers with lower costs of living, such as Boise, Austin, Denver and Nashville, are attracting tech companies and tech workers, Bellisario said. Bay Area tech icons Oracle and HPE both moved their headquarters to Texas during the pandemic.
The massive influx of wealth into a handful of tech companies poses wider risks, said Institute for Policy Studies researcher Ocampo. Median household wealth in the US has fallen since 2019, Ocampo said. “Compare that to how the tech industry has done,” he said. “The pie is growing but the vast majority of people are getting a smaller and smaller slice.”