Chapter 70 Chapter 5 Eternal and Evergreen

In China, there was a novel called "The Great War" more than 20 years ago, but not many people may remember it now.The novel tells a story that happened in the late Qing Dynasty.The protagonist Sha Er has practiced the miraculous braiding kung fu since he was a child, and he has few opponents in the cold weapon era.Later, he joined the Boxer Regiment, and was completely defeated in the confrontation with the Eight-Power Allied Forces and fake foreign devils with foreign guns and cannons.The silly second who survived the catastrophe cut off his braids, practiced the sharp spear technique of piercing Yang with a hundred steps, and punished the traitors with his gun.He told others: "The braids are gone, but God left them." Silicon Valley is the same, or semiconductors are not the real essence of Silicon Valley.The soul of Silicon Valley is innovation.Silicon is gone, but the soul of innovation remains, which ensures the prosperity and development of Silicon Valley.

I really like a sentence said by a German poet: The ancient and evergreen yesterday is always the past and will always come again.This sentence could not be more appropriate to describe Silicon Valley.When the myth of Fairchild and Intel has become a thing of the past, the heat wave of starting a semiconductor company in Silicon Valley has continued for a period of time, but the myth of Intel has not reappeared, and it will be difficult for new semiconductor companies to do it in the future Intel's size.Although some investors lamented that they missed Intel's opportunity, people quickly found a new gold mine in Silicon Valley-the software industry.

In the information age, Microsoft proved to the world that computer software can become a profitable industry independently of computer hardware systems.At the same time (in the enterprise market) to prove this point, is Oracle.Before Oracle and Microsoft, computer software had to be sold along with computer hardware, whether it was IBM, the mainframe company, or DEC and Hewlett-Packard, the minicomputer companies.IBM's business model used to be, and today is still a bundled sale of hardware, software and services.In the past, if you want to use IBM's system, you have to buy IBM's hardware, plus a high service fee of about 10% per year. Its software is not only sold.Oracle Corporation tried a new business model, and it quickly became a success.This kind of business model is too simple to say today, it is a one-time sale of the right to use software, and this was a disruptive revolution to IBM's business model at the time.In this way, users no longer need to pay high service fees to companies such as IBM every year.Oracle took a fancy to the largest database software in the market at that time, and developed a SQL database system to compete with IBM. It quickly occupied the market by "selling software", and became the world's largest database software application software only relying on the database system. The second largest software company.Later, even IBM followed Oracle to sell software.After the success of Oracle, many people in Silicon Valley followed suit and set up various software companies, including the very successful Adobe of Photoshop and Intuit of financial software TurboTax (Google's neighbor).Although many PC-based application software companies are constantly being squeezed by Microsoft, there are always new ones emerging and growing stronger.Enterprise-level software companies are more likely to survive because they have fewer conflicts with Microsoft.

When the wave of computer software entrepreneurship has not yet completely subsided, the Internet has risen in Silicon Valley.We have already introduced Cisco, which is related to the Internet, and will introduce Google and Ebay in the future, so I won't repeat the development of the Internet here.It is worth mentioning that Internet companies represented by Google and Yahoo have subverted the business model of software companies represented by Microsoft to collect money from each end user (End User).Revenues from online advertising ensure that end users can enjoy previously paid services for free.In addition to the three largest Internet companies in the world today, Google, Ebay and Yahoo, are located in Silicon Valley, two of the three largest Web2.0 companies in the world, YouTube and Facebook, are also here. (Another Myspace is in Hollywood.)

People in Silicon Valley, whether they are investors or entrepreneurs, are used to this kind of rapid industrial change, and people are constantly looking for the next Cisco, the next Google.In fact, innovation in Silicon Valley is not limited to the IT field.Biotechnology is undoubtedly another bright spot in Silicon Valley.Today's Silicon Valley is also the place where emerging biological companies are most concentrated in the world.Silicon Valley has two of the top ten medical schools in the United States - UC San Francisco School of Medicine and Stanford School of Medicine, as well as the world's best chemistry department at UC Berkeley.Coupled with sufficient venture capital funds, conditions have been created for the establishment of biological and pharmaceutical companies.Of course, the entrepreneurial enthusiasm of Silicon Valley people played a decisive role, otherwise there should be many bio companies around Harvard University and Johns Hopkins University.

It is more difficult to start a biotechnology company than the average IT company, mainly because of the restrictions of the US Food and Drug Administration (FDA), which makes it difficult for a biotechnology invention to be launched in a short period of time, that is, within a few years. into products and profits.Therefore, the establishment of a biological company requires a large investment and a long cycle.But in the adventurer's paradise of Silicon Valley, there are still plenty of gritty, successful biotech entrepreneurs out there.The most typical one is Gene Technology Company.The company was founded in 1975. In the early days, it relied on the UC San Francisco School of Medicine, specializing in the research and production of anticancer drugs such as Avastin and Rituxan.Today, Gene Technology is the largest biopharmaceutical company in the world, with more than 10,000 employees, including countless outstanding scientists, and a market value of US$80 billion.And, before Google, it was the best employer in America.

The successful experience of genetic technology is worthy of special mention.However, since it falls outside the scope of our entire series, I did not make a separate chapter for it.However, through genetic technology, we can see the soul of Silicon Valley, so we briefly introduce this company that you may not be familiar with. Before introducing Gene Technology, it is necessary for us to introduce the simple situation of the US pharmaceutical market, so as to understand the business model and operation mode of Gene Technology companies.In the United States, in addition to health products such as American ginseng and lecithin, medicines are divided into two categories, one is prescription drugs such as antibiotics, and the other is over-the-counter drugs such as Tylenol for colds.Of course, the profit of the former is much higher than that of the latter, and among them, patented new drugs make the most money.For example, there are only ten kinds of drugs sold in the market for genetic research, the lowest sales of each drug are hundreds of millions of dollars a year, and the highest annual sales of Avastin are nearly three billion dollars.The U.S. patent law guarantees the intellectual property rights of new medicines for twenty years.That is to say, in the past two decades, an effective new drug can make a lot of money, but after the patent period, when other manufacturers can imitate it, its profits will plummet.The investment in research and development of new drugs is huge, but the cost of its production is negligible (even the cost of piracy is very low).In this respect the pharmaceutical industry is very much like the software industry. (In fact, the piracy of medicines in the world is even more serious than software piracy.) Although the pharmaceutical market does not have anti-Moore's theorem to limit its profits and force pharmaceutical companies to invent new drugs, the patent law plays the same role. It not only protects inventions, It also prevents individuals and companies from monopolizing inventions for a long time.If the patent of a company's old mainstay drug expires, but the new patented drug has not caught up, the company's performance will plummet.This was the case with Merck two years ago.Therefore, the key to the competition of pharmaceutical companies is the competition of innovation and scientific research efficiency.

Logically speaking, medicine is a very large-scale industry, and there should be many new companies emerging.However, the U.S. Food and Drug Administration (FDA) has artificially created extremely high barriers to entry for this industry.According to the regulations of the FDA, all prescription drugs, medical devices for clinical use, and even clinical trials of treatment methods must be approved by the FDA, let alone sold on the market.And these licenses are extremely difficult to obtain, and countless comparative tests must be carried out and all possible side effects must be understood and reduced as much as possible. The FDA's original intention is good, because human life is at stake, but it also makes it almost impossible for small companies to enter the market for prescription new drugs.The direct result is to protect the original interests and monopoly profits of large companies. (One view is that big pharmaceutical companies maintain their existing interests through the FDA.) The research departments of traditional large pharmaceutical companies such as Pfizer and Merck are very similar to Bell Laboratories thirty years ago. Scientists go in and work for a lifetime.And the high monopoly profits of these companies can also support these scientists.Of course, overstaffing, inefficiency and bureaucracy are also common in it.Due to the protection of the FDA, it is very difficult for small entrepreneurial companies to break the monopoly of existing pharmaceutical companies.This is why it is difficult for us to see small bio companies succeed.

Silicon Valley, known for its innovation, dares to challenge tradition.The rise of gene technology companies has broken the calm waters of the traditional pharmaceutical industry and created a myth.Compared with Pfizer, which has a history of 150 years (its Viagra is famous all over the world), and Merck, which has a history of more than 100 years, gene technology with a history of 30 years can only be regarded as the grandson.Although its sales volume today is only a quarter of that of Pfizer, it is developing at a rate of 20 to 30 percent per year. Pfizer Pharmaceuticals is basically at a standstill, and its turnover fluctuates from time to time. Therefore, Gene Technology surpasses Pfizer only time issue.In the early stage of gene technology, it cannot compare with companies such as Pfizer in terms of financial resources, manpower, and relationship with the FDA.The key to its success lies in innovation and persistence.Unlike Pfizer, which produces hundreds of medicines and health care products, Gene Technology can only focus on a few specific anti-cancer drugs, and guarantees that each type has an annual sales of more than 100 million yuan.In order to prevent the sharp drop in profits brought about by the expiration of patents, Gene Technology invested 20% of its sales, which was 2.3 billion U.S. dollars last year, into the research and development of new drugs.In its current research and development product line, 14 drugs and treatments have entered the final stage before marketing, 15 drugs and treatments have entered the second stage of development, and 13 are in the initial stage.It can be said that in the next few years, the gene company's product line will continuously launch new drugs, replacing the old drugs whose patents are slowly expiring, becoming a new growth point.

Innovation must rely on technical strength.Like Google, Genetech is also the company with the highest doctor density per office area in the world.Even its seven directors have five PhDs, and its nine executive officers have six PhDs.The scientists in Gene Technology are the best among their peers and have a high status within the company.Gene Technology is the only company that introduces all its senior scientists (Staff Scientists) among the hundreds of annual reports of large companies that I have read.Of course, technology is only one of many necessary conditions for a company's success, but it is far from sufficient.To ensure innovation, the company's system is very important.This is like a country, its system determines its development.In traditional pharmaceutical company Pfizer, a giant pharmaceutical company that does everything from commodity products (the division was recently sold to Johnson & Johnson) to the most profitable drugs, it occupies one of the ten most profitable drugs in the United States. Four seats, its annual research and development funds for new drugs are as high as 8 billion US dollars, fully four times that of gene technology, but its research and development efficiency is the lowest among major pharmaceutical companies, and its money-making drugs mainly rely on Purchase patents instead of developing them yourself. (Because of the threshold set by the FDA, it is difficult for a university research laboratory or a small company to obtain an FDA license, so it adopts the practice of selling patents to large pharmaceutical companies.) This is not because the level of Pfizer scientists is not as good as that of Gene Technology, nor is it They don't try hard enough.As long as the company system is good, a rich company like Pfizer will not have to worry about finding the best scientists. As long as there is an effective way to transform good knowledge into technology and then into products and a fair distribution system, these scientists will not be able to develop it. good medicine.It is a pity that Pfizer's old-fashioned system just can't do this, but Gene Technology is completely operated in accordance with the model of an IT company, but it has achieved this.

Innovation is the guarantee of being invincible in the competition, which is a truth that any leader of any country knows.Many countries have invested a lot of money to build their own technology parks similar to Silicon Valley to encourage innovation, but few have succeeded.The main reason is that it is difficult for other places to replicate Silicon Valley's timing (the development of the IT industry after World War II), location (backed by Stanford and Berkeley) and harmony.Among them, human harmony is the most important, which is a new type of production relationship developed in Silicon Valley.This is the most special place in Silicon Valley in the world, and it fully guarantees innovation.In the relationship of production, in industries dominated by technology, the role of means of production is negligible. For companies like Microsoft and Google, after excluding cash, assets account for less than one-tenth of the market value.Then the role of people is the key, specifically the distribution of profits and the relationship between people.The option system of technology companies ensures that employees at all levels can get a share of the company's profits in addition to their salaries.Therefore, their interests are closely related to the interests of the company.For Silicon Valley technology companies (including biological companies such as Gene Technology) before they go public, the equity of ordinary employees can account for 10 to 15% of the company.That means companies the size of Google, Intel, and Cisco each have billions of dollars of wealth in the hands of their employees.Employees can earn more from stocks than their own wages, which is the motivation for everyone to work hard.In terms of the relationship between people, employees and employers, the environment in Silicon Valley is the most favorable for the creativity of employees.Although there are differences in levels between the upper and lower levels in the company, they respect each other. (Sometimes, the level and income of an excellent employee may be higher than his direct superior.) In this way, everyone will feel relatively "comfortable" working together, and everyone can easily do their duties with peace of mind, instead of Must intrigue to climb up.Silicon Valley's Gene Technology and Google have been rated as the best companies to work for in the United States in recent years.Silicon Valley companies also have loose restrictions on employees, and generally do not prevent employees from changing jobs, let alone suing them.Even when employees take advantage of their positions to invent and create (as long as they don't steal technology) and then go out to start a business, Silicon Valley companies (including various research institutes) will not pursue it as hard as companies in other parts of the United States, and generally use the method of investing in shares to do so. Win-win.This is how the intellectual property issue was settled between the founders of Cisco and Stanford.It is no exaggeration to say that the mainstream production relations in Silicon Valley are the most advanced in the world, which is why the creativity of Silicon Valley is guaranteed to last forever. Today, I am afraid that there is no gold ore near San Francisco. The name "San Francisco" can only represent its past history.Maybe one day, there is no semiconductor company left in Silicon Valley, and everyone will say that there used to be a semiconductor industry here.But it will never decline from here, like Detroit and Pittsburgh, and will still be the technology capital of the world, because the silicon is gone and the innovation stays.The competition in Silicon Valley will still be fierce. Old companies will perish, old industries will decline, new companies will be established and grow, and new industries will be born and prosper.Silicon Valley used to be, today is tomorrow, and it is still the place where young people's dreams begin.