Scott Alexander argues that Silicon Valley's reputation - that it's decayed into bubbles around nonsense products such as the San Francisco-based Juicero - is undeserved, that there's still plenty of innovation around. But I think what's really going on is that Silicon Valley doesn't exist anymore.
Scott starts by listing six examples of Silicon Valley companies that are making real and valuable things. He doesn't name them all, but as far as I can tell, they are:
- Berkeley Lights: Berkeley, near a different famous university in the San Francisco Bay Area than the one in Silicon Valley. [ETA: It now seems like they made something real but not valuable, like Juicero.]
- Wave: New York, though the company is international in scope and the people I personally know who work at Wave mostly work remotely, some of them from the Bay.
- SolarCity: San Mateo, in Silicon Valley. An Elon Musk venture.
- SpaceX: Los Angeles, which is not generally considered part of the San Francisco Bay Area, much less Silicon Valley. Also an Elon Musk venture.
- Bigfoot Biomedical: Milpitas, in Silicon Valley
- Memphis Meats: San Francisco.
- Two in Silicon Valley.
- One in adjacent San Francisco.
- One across the bay in Berkeley.
- Two somewhere entirely different.
(As an aside, Juicero itself is headquartered in San Francisco, not the Valley. As a second aside, a full third of Scott's success stories - SolarCity and SpaceX - are Elon Musk ventures. I think basically everyone is happy to grant that Elon Musk is making real things.)
Scott then goes on to list the companies in Y Combinator's current crop of startups. The companies are mostly doing things that seem like they can't reasonably make money without genuinely adding value by producing something new. Scott then lists the companies funded by a top venture capital firm, which seem similar. Overall, Scott makes a good case that top Bay Area institutions are funding things that make sense.
But, when I or my friends actually talk to top Bay Area venture capitalists, they agree that the lower-tier VCs are largely not doing things that make sense. They just write them off as irrelevant.
I'm also confused about how to interpret things like Instavest (an investment platform that pitches people on participating in speculative bubbles by copying people with good track records). Maybe Y Combinator just doesn't have good controls, but I am confused about how a thing like that could happen by accident. It seems like if they accepted a startup whose plan resembles a scam so strongly, maybe I should doubt that the companies claiming to do something real do what they say they're doing.
Then there's the matter of location. Y Combinator happens to be based in Silicon Valley now - though it was founded in Cambridge, MA - but it's not necessarily nurturing startups indigenous to the Valley. People apply from all over. The best way to think of Y-Combinator is as an innovative international business school specializing in entrepreneurship, that charges an equity slice instead of tuition.
But there used to be a real thing called Silicon Valley. At first, it was a bunch of geeks in garages figuring out how to make cool stuff, collocated with a bunch of companies figuring out how to make physical computer tech, and near a major academic research institution, Stanford University. And, that either does not exist anymore or is no longer relevant to what Bay Area Tech has become. It seems to me as though that sort of thing would never have produced a Juicero or an Instavest. It didn't have to try hard not to produce a Juicero or an Instavest, it just wouldn't have occurred to anyone to do that.
In the next generation, the internet was the new thing, but people had still been brought up in a culture based on business that interfaced with material reality. Now we're going through the third wave - a boom around the idea of the startup (high uncertainty and growth potential), social media, and mobile apps. Venture capitalists seem to be chasing yields, a recipe for a speculative bubble.
That doesn't mean nothing real is happening - obviously something real is happening, unless Tesla and SpaceX are truly incredible hoaxes. But, as far as I can tell, Silicon Valley is gone. Housing prices in South Bay are mostly too high for anyone who's not pulling a high salary as a busy engineer at an established firm like Google or Apple (though I know of exceptions, mostly in group housing), there's not really the time and space for idle garage tinkering by people who haven't already got it made, and there's easy money for the right sort of person who dropped out of the right sort of school, in flattering venture capitalists' current prejudices, so there is comparatively little in the way of market tests or need to produce something real.
In his excellent essay on cities, Paul Graham points out that people pick up subtle but powerful messages around what they should be ambitious about, from their local culture:
New York tells you, above all: you should make more money. There are other messages too, of course. You should be hipper. You should be better looking. But the clearest message is that you should be richer.
What I like about Boston (or rather Cambridge) is that the message there is: you should be smarter. You really should get around to reading all those books you've been meaning to.
When you ask what message a city sends, you sometimes get surprising answers. As much as they respect brains in Silicon Valley, the message the Valley sends is: you should be more powerful.
One of the exhilarating things about coming back to Cambridge every spring is walking through the streets at dusk, when you can see into the houses. When you walk through Palo Alto in the evening, you see nothing but the blue glow of TVs. In Cambridge you see shelves full of promising-looking books. Palo Alto was probably much like Cambridge in 1960, but you'd never guess now that there was a university nearby. Now it's just one of the richer neighborhoods in Silicon Valley. 
A city speaks to you mostly by accident—in things you see through windows, in conversations you overhear. It's not something you have to seek out, but something you can't turn off. One of the occupational hazards of living in Cambridge is overhearing the conversations of people who use interrogative intonation in declarative sentences. But on average I'll take Cambridge conversations over New York or Silicon Valley ones.
A friend who moved to Silicon Valley in the late 90s said the worst thing about living there was the low quality of the eavesdropping. At the time I thought she was being deliberately eccentric. Sure, it can be interesting to eavesdrop on people, but is good quality eavesdropping so important that it would affect where you chose to live? Now I understand what she meant. The conversations you overhear tell you what sort of people you're among.
 There are still a few old professors in Palo Alto, but one by one they die and their houses are transformed by developers into McMansions and sold to VPs of Bus Dev.
Some people of exceptional personal virtue and judgment can focus on the right things anyway, but they don't seem to be benefiting from acculturation the way people did in mid-late 20th Century Silicon Valley.
I recently talked to someone at a startup whose product I'm genuinely excited about and seems like a real innovation, and which had no problem getting funding. I asked about how their team interacted with other people in the San Francisco Bay Area startup world. They told me that their team largely isolates itself.
If this reflects well on them, then it reflects very poorly on what's left of Silicon Valley culture. It's a far cry from things like the Homebrew Computer Club.