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Special Silicon Valley Issue | Cover Story / Tech life

Valley of the Stunned Raccoons

Why the Walking Wounded Have a Familiar Look, and Why They'll Probably Survive

March 09, 2003|Shawn Hubler | Shawn Hubler is a Times staff writer based in San Francisco.

People in Slicon Vlley have reached the point where they tell their stories in shorthand, like the survivors of natural disasters and show business. "I was running a bistro in Los Gatos when I went into telecom. You really need to hear more?" Bruce Schmidt says.

Schmidt is standing, eyebrows raised, in a wine bar. He looks meaningfully at the all-too-quiet street outside. The implication: Doesn't this situation speak for itself? Doesn't everyone know this story? "For Lease" posters hang in the shop windows. The Compaq-Hewlett Packard merger has all but evacuated a landmark mid-rise. Waiters have spent most of the past lunch hour loitering outside Spago Palo Alto on the next block, whose empty courtyard once overflowed with deal-makers. Stately homes in the part of town where Apple co-founder Steve Jobs lives are suddenly sporting "For Sale--Price Reduced!" signs.

But all right. Schmidt will summarize how he got here: Maitre d' listens to tech hype, goes back to school. Becomes a support technician in the data center of a telecom start-up just in time for dot-com collapse, massive layoffs. The start-up was in Chapter 11 when he last looked.

"You have to remember how it was here before," says Schmidt, a tall, middle-aged man in a shirt and tie. He sighs. "Every day was sunny. Everybody was an instant millionaire. Of course, now it all sounds very foolish." More shorthand comes to mind--decent guy belatedly joins gold rush, ends up sighing to strangers in wine bars.

Except that isn't what happened to Schmidt.

Instead, last year--as pink slips appeared in the office cubicles around him, and his marriage started to unravel, and his workouts got longer, and his bosses dumped the company stock in big blocks--he got a call from an old restaurant buddy. The guy wanted to open a new place and had lined up a tech-millionaire investor; now they were looking for a partner, ideally an ex-maitre d' from this memorable Los Gatos bistro. Eleven nerve-racking months later, Schmidt and his friend opened Lavanda, the Provence-themed restaurant and wine bar where we are standing.

"It's taking a little longer than we'd wanted to turn a profit," he says. "But I can't say I'm sorry to have moved on."

Moving on is a big theme these days for people in Silicon Valley, who in a scant couple of years have morphed from capitalist icons to objects of the nation's morbid curiosity. What's next? The question suffuses this place, in ways large and small. Will the valley pull off another comeback? Will somebody think of something, as somebody always has in past slumps? Or has tech itself "moved on"?

The answers will depend, in large measure, on the people who are becalmed here, and who are only now coming to terms with their new place in the national economy's doldrums. "A lot of people here are out of work who've never been out of work before," says Paul Saffo, a director of the Silicon Valley-based Institute for the Future. "A lot of people are walking around this valley like stunned raccoons."

What has played out elsewhere as a recession is being felt as a depression here in high-tech's cradle. Unemployment rates in Santa Clara County are among the nation's highest. The region has lost tens of thousands of tech positions. Job hunters are relocating. Investments have shriveled. Support groups for the out-of-work have long since passed the point that most people can bear to attend them. Local charities and municipalities are hip-deep in red ink. Consolidations and bankruptcies have shuttered whole buildings and office parks.

The pain isn't entirely relentless--a lot of people cashed stock options at the peak of the bubble to buy houses, for example, and low interest rates have kept the demand for real estate from tanking, at least for now. Also, psychology has helped: Gold rushes have always self-selected the confident, the adventurous, the optimistic. The tech casualties who've remained here tend not to say--as have other recession victims in other places--that they feel betrayed or robbed or regretful. The emphasis remains, almost stubbornly, on what they have "learned," or what they'll do "for the next chapter," or how this "break" from work actually had "an upside" that will inform the way they work when (never "if") the valley rebounds.

That attitude, incidentally, maddens outsiders.

"I can't stand it," cries a lawyer in San Francisco at the mere mention of "the Peninsula," as people in the Bay Area call the valley to the south. "The tech bubble nearly caused the disintegration of our law firm. We had to relocate out of Menlo Park when our lease came up for renewal because E-Trade offered the landlord three times what we were paying. We'd been in that office, never missing a payment, for 14 years, and the landlord met with us for five minutes and then said, 'I don't know why I'm even talking to you.'

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