Small Tech Companies Starve

As I said, on first glance it's hard not be optimistic about the near future of the high tech industry.

Meanwhile, at the other end of the tech world there are equal grounds for optimism. Deep in the labs of the country's biggest electronics corporations and most important universities, amazing technical breakthroughs are taking place -- discoveries that barely get noticed in the non-technical media, but which could, a decade or two hence, transform our daily lives, change the nature of entertainment and education, and enable us to live longer and healthier.

Some of these are continuations of processes already at work -- such as quintillion bit memories, ever-larger flat screen, 3-D imaging, improved sensors, etc. Others are unexpected and potentially thrilling -- like the Taiwanese company that showed up in the Valley this week with audio speakers made from sheets of paper.

But the most compelling of these breakthroughs are coming from the deepest, darkest corners of solid state physics. Things like single atom switches, nanotechnology, and superconducting. And right now, none of these fields of research is more exciting than carbon, that most basic of elements and the source of all life on Earth.

Right now, scientists are doing amazing -- potentially historic -- things with carbon atoms. One area of interest is carbon nanotubes, which are incredibly small, incredibly strong and have unique electrical and thermal properties that could lead to ultra-high frequency and very, very tiny circuits.

Just as interesting is graphene, which is basically sheets of carbon graphite that are only a few atoms thick. A few months ago, I had lunch with Federico Faggin, inventor of both the microprocessor and the touch pad, and he raved about the potential for graphene to create new generations of cell phones and other devices with chips that are faster, smaller, cheaper and require less power than ever before.

Once again, that's all good news. But I began this column with the metaphor of a sandwich -- now let me explain what I mean.

The high technology revolution that has transformed modern America (and the world) has been driven by three factors. Innovations in applied science -- the bottom slice of bread; large companies -- the top slice; and -- the meat in the middle -- new company creation.

Right now …and as far as I can see in the future …it is that middle that is missing. All of the prosperity I see returning to Silicon Valley is, in fact, something of an illusion. It is almost all money being spent by upper managers in big companies who survived the various lay-offs and now, with profits starting to climb, are seeing both bonuses and real purchasing power. The reality is that the Valley's unemployment rate is now the highest in the fifty year history of "Silicon" Valley. As for the homes being sold; they are being snapped up by the tens of thousands of still employed workers who live outside the Valley and have been dreaming of moving closer to their jobs for a decade or more.

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