So I'm back for a week in Californicate, for the first time since the bubble burst. I was in Sillicone Valley earlier and now I'm down in La-la land. The fact that this is my first time back since 2001 is an indication of just how bad the tech smash was, no one had the do$h to pay for international business trips, and how much it has recovered in the past few months - my boss is back for his second trip in three months and I'm likely to be here again before year end as well.
There are changes (different bits of freeways are being rebuilt) and there is less wasteland and more and more housing. I guess the torrential rains they had this year demonstrated that the river defenses are adequate because there is a heck of a lot of housing being built in what is most certainly the floodplain (I know I used to live there) of N San Jose. However the big thing really is how little things have changed. Anyone who had been put in suspended animation for four or five years wouldn't notice the difference unless he looked really closely. Although I'm less familiar with La-la land, I'd say the same applies, certainly as you head out along 101 towards Agoura and Calabasas things look almost unchanged from my first visit to the area over a decade ago. One thing that most certainly hasn't changed is the Californian love of cars big enough to house a family of four in Hong Kong as the picture above notes.
And talking of Hong Hong, one thing that has changed, or maybe I'm just misremembering it, is the population mix in Silicone Valley. To put it bluntly: where are the white guys? there are Asians everywhere with entire mall complexes and supermarkets dedicted to serving them. This existed before - I was a regular at the McCarthy ranch one from the day it first opned - but it seems to me there are more of them, and tons of Asians, not to mention Hispanics, in every company in the valley. In fact at only one company that we visted did we talk to a native "WASP". Everyone else was an immigrant or child of immigrants, be they Indian, Chinese or something else. This is not a complaint you understand, just an observation, heck one thing I miss in the South of France is real Asian cooking and I may possibly have gone overboard in my dabbling in Asian cuisines on this trip. However if all the Silicone Valley startups are being powered by Indians and Chinese then I would think this says something relatively negative about the USA's native education and drive. It is great that immigrants can thrive in America, it is kind of worrying when it seems like they are the creative force with the native sons and daughters relegated to service roles.
Going back to motor transport - hey Detroit why are your cars so god-damn UGLY? the Ford Mustang is a case in point. It's no wonder that the only way GM, Ford or Chrysler can sell a car is by practically giving the thing away when it looks like that. Even assuming the US car had the same fuel economy and reliability as the Japanese or Korean one I still wouldn't buy it because I'd be embarassed to drive around in something so aesthetically displeasing. About the only good thing going for Detroit is that they seem to have slipped some of the same designers into the Japanese factories in the South - because the native built Nissans and the like are beginning to look bad too.
On a slightly more serious note, one of the reasons I'm here is because we are working for a company in the automotive space. Let me tell you, if there is a an industry that is more screwed up the the automotive one when it comes to sales and customer service I can't think of it. Revenues may be OK but profits are low and declining and show no sign of recovery. Needless to say with profits down on the sales of cars there is great incentive to start screwing the customer on the service side so we see higher prices and worse service there too. This trend has become more pronounced over the last year or two. The US car makers spend (between advertising and rebates etc.) well over $3000 per vehicle sold in marketing costs (GM in June spent around $4500), and while lower it isn't as if Toyota etc are not doing the same. Maybe they are only spending $2000/vehicle but that is still something like 5-10% of the actual selling price. This is not the end, their dealers chip in an additional $500 or more on average per car sold. Is it any wonder that the gross profit on car sales for dealers mostly comes from the "back end" i.e. warranties, financing and insurance? and is it any wonder that the parts and service sections of the dealership are the profit centers?