RECENTLY I SPENT a couple of weeks in Silicon Valley, the urban sprawl between San Francisco and San Jose. This is the place where the future is being invented as you watch, and home to many of the world’s leading technology companies.
It’s been a while since I’ve been and it was interesting to see how these companies have grown in stature and global influence. There are several of them that are no longer, in any meaningful way, subservient to any government.
These include Apple, now the world’s largest business of any kind, which has successfully graduated from selling computers to dominating the phone and tablet markets, and are now rumoured to have their sights set on TV and automobile markets. It would be a brave pundit who would bet against them winning – in whatever field they chose to enter next.
Google, established in 1998, has sucked up much of the advertising around the world, along the way winning this revenue away from traditional local and national advertising-supported businesses such as newspapers, magazine, radio and TV, but unlike Google, all of these competitors are required to pay tax. In 2015, Google will take 55% of the world’s online advertising revenue, an astonishingly dominant market share.
And perhaps most impressively, Facebook, the world’s leading social media company which although only an astonishing 11 years old, now has a market capitalisation of $250bn.
I visited Facebook’s attractive campus – a set of buildings in manicured gardens complete with on-site 24-hour food, dry cleaning, and a drop-in arcade gaming room. There seemed little need to ever leave the premises except to shower and change clothes – although you suspect that some of the geekier geeks there don’t always manage that.
Across the road and connected by shuttle tram is the hugely impressive brand new headquarters building designed by celebrity architect Frank Gehry which opened this summer. It feels more like an aircraft hangar than an office, with it’s 40,320 square metre floorplan and 7 metre high ceilings; it’s all open plan – even founder Mark Zuckerberg doesn’t have his own office. However it is the roof garden that really impresses – on top of this giant building is a massive nine acre garden covered in mature trees, shrubs and grasses, with a one kilometre path winding through it – ideal for informal chats as you wander among the trees, admiring the distant views of San Francisco bay.
They might not have the fountains that they have in Versailles, but this building is in every real sense an imperial palace at the centre of its own global empire of over 1.4bn individuals, or about one in six of everybody on the planet.
Last year Facebook made $2.9bn profit on global sales of $12.5bn and analysts estimate that around 10% of that business is from UK-based advertisers which could mean approximately $290m profit is realised here. But it doesn’t quite work that way when you have your own empire – Facebook books all its UK business from Ireland, and passes all the cash to a sister organisation in the Cayman Islands, where no tax is levied on it. As a result, last year Facebook paid less that £5,000 in UK Corporation Tax.
Tom Wolfe’s 1987 novel ‘Bonfire of the Vanities’ described Wall Street traders as ‘Masters of the Universe’ as they seemed not to be bound by the rules the rest of us have to obey. But these days the ‘Masters of the Universe’ have moved west, and are now to be found in Silicon Valley.