The surprise is how long a backlash took to come. When I was a child in a heat-hazed suburb to the north of Palo Alto, almost no one had heard the term Silicon Valley. In common with the hamlets scattered around it like points on one of my join-the-dots colouring books – Cupertino, Sunnyvale, Santa Clara, Woodside – it was an unassuming place, with pretty, straw hills and decent schools; a good, honest incubator for the aspirant lower middle class; benign spot for Hispanic incomers to land.

Now Palo Alto is the spiritual epicentre of Silicon Valley, the Detroit of the 21st century. An average home costs $2m, despite an eastern flank still mired in poverty, even as rich young "tech" workers glide in from nearby San Francisco aboard white, smoked-glass, Wi-Fi equipped buses, shielded by headphones and shades – a target for resentment that could only be improved if they wore handlebar moustaches and snatched kids' iPods on the way past. Is the resentment fair? When I last came here, the Valley was still reeling from the great dotcom crash of 2000, with Amazon shares trading at $3 and the fledgling industry on its knees. And although it's hard to believe now, no one was predicting that by 2014 our lives would be very largely shaped here, by an army of software engineers – programmers or "coders" – who are progressively recasting the human environment in their own image, forcing the rest of us to adapt to this radically reconfigured landscape in the only way possible: by becoming … more … like … them.

Yet, for all we see and hear about the Valley's gilded apps and networks, glimpses of the people behind them are rare. Who are they and what does the society they have made for themselves (the template for our own) look like by light of day? A recent anti-tech protest in San Francisco became the first to draw attention from the FBI. What don't San Franciscans like about the tech titans to the south who have made their city rich?

East Palo Alto. Photograph: Barry J Holmes for the Observer

Gliding into Santa Clara, home to Intel among others, the last question is not so hard to answer. Silicon Valley runs from San Francisco in the north to San José in the south and is here thanks to an unlikely alliance of Stanford University computer pioneers and hippies who saw that while acid hadn't made the world more free and open, computers just might. Sixties and seventies originals such as Douglas Engelbart (inventor of the mouse and a conceiver of the web) and Stewart Brand (founder of the first online community The Well) hoped for wisdom and enlightenment through the spread of information, as a bulwark against The Bomb or World War Three. Counter-cultural rhetoric still suffuses the Valley tech industry.

Talk of "disruption" and "changing the world" assails you like tinnitus the moment you arrive, and if "making a difference" often devolves into piddly goals such as "improving the end-user experience", it still contains an idealistic sheen.

What to make of some tech insiders' recent pronouncements, then? The first Frisco protests followed a speech by biotech entrepreneur Balaji Srinivasan last October, in which he decreed that the rest of America was holding Silicon Valley back and it was time to consider secession. Lest this be taken for a joke, a venture-capitalist investor named Tim Draper duly filed a petition to split California into six, with an independent Silicon Valley – putatively the richest state in America – abutting Central California, which would be poorer even than Mississippi.

And it got better. In the absence of independence, another venture capitalist, Tom Perkins, suggested that, at the very least, rich techies should be given extra votes and went on to compare criticism of his industry to the Nazi persecution of Jews.

With spectrum-friendly timing, the billionaire CEO of social network Yammer, David Sacks, then spent $1.4m throwing himself a Marie Antoinette-themed 40th birthday party under the banner "Let Him Eat Cake", even as Valley legend and Facebook billionaire Sean Parker (played by Justin Timberlake in the movie The Social Network) spent a reported $10m on a wedding in which guests were dressed by the costume designer from Lord of the Rings (at least it wasn't Star Wars), and a young startup founder named Peter Shih penned a blog post entitled "Ten Things I Hate About You: San Francisco Edition", in which hate number six was given as "homeless people". Is there an app for hubris?

British comedian John Oliver, in hosting a tech awards ceremony called the Crunchies, gently roasted his guests with the quip: "I heard that the new design for the buses had tinted windows, but with the tint on the inside: 'Look, I don't mind if the peasants see me, but I'd rather not see them'." Laughter in the hall was muted.

Workers glide into the Valley aboard anonymous white, smoked-glass, Wi-Fi equipped buses. Photograph: Barry J Holmes for the Observer

Like bankers in the UK, techies seem surprised at what is happening to them. So in many ways am I. For all the gathering cultural divide, driving through Silicon Valley is still an awesome experience. Around every turn stands the glinting HQ of another household name, or two, or three – and not just the big ones you expect, but the everyday others you seldom think about. Look! There's Adobe, Cisco, Hewlett Packard, Pixar, SanDisk, Symantec …now to Oracle, Netflix, Asus, Atari, Groupon, LinkedIn, Logitech, Electronic Arts, Mozilla, PayPal, Twitter, YouTube, McAfee, Yelp, Atari, Nvidia, Yahoo!, Tesla, Sun Microsystems … not hundreds, but thousands, tens of thousands, everywhere you look.

Even those giants with headquarters elsewhere – Microsoft, Nokia, Panasonic, Samsung, Amazon, Nasa – have research centres here, such is a concentration of tech talent. The sensation is of having stepped like Alice through your computer screen and even the disposable-looking architecture whispers of the Valley's exotic, hyper-Darwinian credo of "creative destruction". The phrase you hear everywhere is "innovate or die", which is not intended to relax you.

My first mass encounter with the present workforce comes on a Saturday night in Mountain View, home to Google and Microsoft among others, and it couldn't be more startling. Last time I was here, I phoned an editor at the San José Chronicle to ask where the geek people hung out. "You won't believe this," he chuckled, "but if you go to the cafe at Fry's Electronics superstore, that's where you'll find them."

I did, but every time I tried to speak to one, they stared at their sneakers and scuttled away like crabs clutching circuit boards. They were of a stereotypical piece, though, which is why first sight of Mountain View's bright-lit main drag is such a surprise, because the scene doesn't look American. It's populated mostly by knots of generically-dressed young men, the vast majority from the Indian subcontinent or Asia, looking lost, as though not sure what to do away from their screens.

Later I'll check the census figures to find that more than three-quarters of tech workers are now born outside the US, with China, India, Korea and Japan supplying most, often via Ivy League universities, with a small contribution from eastern Europe. Given that women are outnumbered 25 to one, the modern Valley is at once highly international and culturally monocular, adding to the air of transience. Minority female tech workers complain of a frat-housey "brogrammer" atmosphere within the industry. I'm floored by what I see.

Molly Magees. Photograph: Barry J Holmes for the Observer

Inside Molly Magees, an ersatz Irish pub, which turns out to be one of only three places you can dance in Silicon Valley, the music is overwhelmingly from the decade in which most of its clientele was born, the 1980s (and I abruptly realise that this is what most the local radio stations are playing, too). Most of the women cutting a rug together are from local colleges and universities, but the genders operate for the most part at a tangent.

Asked what dating is like in this apparent 25:1 paradise, women tend to roll their eyes or laugh ruefully. "The odds are good, but the goods are odd," one tells me. "Most are just interested in money or programming," says another, echoing screeds of anguished posts on tech forums. I soon see what they mean. Conversations with the men are mostly fluid, but tend to resemble those you have at technology "meetups", where the unspoken question is "Can we do business together?" When I mention this unexpected gregariousness, an important truth is explained: that the people in Molly's are not "tech people", that there is a clear divide between tech people, meaning coders, and "non-tech" people, which is to say entrepreneurs, financiers, idea and business people. Good coders are in short supply and tend to regard themselves as an elite, with the best being paid six-figure bonuses just to stay at places such as Google and Facebook.

Coders, I quickly learn, are almost universally regarded as weird. A Valley entrepreneur I contact in an effort to find some to speak to (he asks not to be named) warns that "a small percentage of the good ones are not so autistic/introverted that they might be willing to talk", and, as if to script, two of the three candidates he suggests as being in this category subsequently refuse, one sniffing airily, "No, I don't really want interviews with journalists."

I do meet one coder at Molly's, a 26-year-old goateed American named David, who looks more hipster Shoreditch than Banana Republic Valley, who has travelled through Europe and chats easily about Breaking Bad and Mad Men and whose favourite bands are the Pixies and Sigur Rós rather than Metallica – not the stereotype at all. So the stereotype is flawed, I rejoice! But no, he groans.

"In truth, I feel kind of isolated, 'cos I'm intellectually curious and outgoing. As a single guy who likes women, it's hard. I mean, I just work with nerdy guys and there are hardly any women – it's horrible, man." Why does he stay? "The money's really good," he says with a shrug. "It's hard to walk away." I ask what he earns, and he smiles. He doesn't want his name used.

Later I meet a woman in her mid-twenties named Sunny Allen whose ex-fiance was a coder. Her eyes widen as she tells me: "They're the real hardcore. He would work for 36 straight hours, sleep for four, then get up and work another 36. Eighty-hour weeks are the norm for those guys and weekends don't exist. They work harder than any group of people I've ever come across."

It's as if these people are not so much a different breed, as a new species. An ad in the back of the main San José listings magazine reads: "Computer Systems Analyst, Sunnyvale, CA. Bachelor and five years experience required." What is this place?

Machines from the 70s and 80s on display at the Computer History Museum, in Silicon Valley. Photograph: Barry J Holmes for the Observer

I drive home to Santa Clara thinking about the society being made here. The average age of employees at Facebook is said to be 26, which is exactly the same as at Nasa during the moon landings of the 1960s and early 70s. A Brit I meet named Mark Whelan (one of very few Brits out here) says he loves being in the Valley, where finance is available for risky good ideas – unlike at home. Now on his third "startup", for an electronic payment system, he tells me that he loves being around (software) engineers, "a unique breed, because they're always trying to solve problems, that's what they care about – getting the job done".

The question, of course, is whether the problems being solved are worthy of such energy, intelligence and investment. With the honourable exception of Elon Musk, founder of SpaceX and Tesla Motors, the challenges they address are not big ones requiring years of commitment, they are the local concerns of Ivy League-educated twentysomething males with a surfeit of cash and no off-screen responsibilities. Not to mention a widespread awkwardness with people; an empathy deficit that may explain not just the prevailing libertarian, often Ayn Randian politics, but the much-trumpeted techy grail of "connection". Because hardly anyone seems to have noticed that connection is not the same as engagement, upon which deeper relationships are built, and may even run counter to it.

Is this disjunct written into Valley DNA? Top venture-capitalist investor Marc Andreessen has pointed out that by the time most techies are 22, they've done the 10,000 hours work which Malcolm Gladwell, in his book Outliers, claims to be the main constituent of "genius". As Andreessen says: "[That] doesn't happen in other fields … you can't start designing bridges at age ten." True. But those 10,000 hours can only come at the expense of other activities we associate with the process of transcending youth, growing up, finding a place in the here-and-now.

If this is the case, should we be more afraid of these men than we currently are? As a graduate computer science student named Yiren Lu noted in a New York Times piece headed "Silicon Valley's Youth Problem": "If the traditional lament of Ivy League schools has been that the best talent goes to Wall Street, a newer one is taking shape: why do these smart, quantitatively-trained engineers, who could help cure cancer or fix healthcare.gov, want to work for a sexting app?" Why do programmers do what they do, in the obsessive way they do it?

Alison Chaiken is in her fifties, and made a career switch from physics two years ago. Her challenge to Valley norms is more a source of awkwardness for the young men she works with than for her, she chuckles, "because I'm used to it – it's 100% of the time for me". The cult of youth around startups exists because "if you want people to be willing to die for the cause, who are willing to work long hours for almost no money, you have to get 'em young".

Asked if she thinks coders are weird, she pauses: "Well, this is an elliptical answer, but I'm a person who loves music, and there are certain fields like music and math – and a lot of people love both – where you have to be a little bit obsessive and quite devoted to be good at your craft. And to maintain your skills you have to spend an awful lot of time keeping up with recent developments.

"So to be a real professional coder you have to put in a lot of hours. And if you don't really love it, you can't motivate yourself to do it, so the motivation has to come from within, same as for musicians or writers."

Right. Except that most neutrals can appreciate the pull of music or writing. Why does coding appeal? "I think part of it is a feeling of power and mastery, in that you can solve problems. That is very reassuring. The other thing is instant gratification. People always talk about 'gamifying' interfaces, where you're getting points totals and a lot of feedback … and with programming, you get that same kind of feedback. Every time you add a function and it works, it's like a little mini accomplishment."

Or as another coder, Jesse Monroy, has it: "The overwhelming reason I know that people program is the certainty of the outcome … the way a small amount of work can make a profound difference." Do coders deserve their reputation for weirdness, I ask? "Yes," he says. "Good coders are a bit weird." And they're busy redesigning society for us. Excellent!

Tech Museum of Innovation. Photograph: Barry J Holmes for the Observer

Next morning I follow the sun south to San José, a bigger point on the map because, like San Francisco, it's had its own song. José is a light-washed picnic blanket of a town, gathered around featureless buildings barking the cryptic handles of tech firms such as InvenSense and SunWize. Nicknamed "Man José" for the dearth of females, it houses the sheeny Tech Museum of Innovation, a paean to digital technology, which should be exciting but presents as a lesson in fatuousness. I snigger at bold, declarative wisps of nothing, such as "digital technologies bring people together to work, learn and play".

Brilliantly, nowhere is it explained what "digital technology" is or suggested that anything existed before it. In a society so fixated on the future, does the past become a kind of irritant, an inconvenience? Facebook's Mark Zuckerberg is on record as having declared that young people are "just smarter" than older people (even while supporting politicians opposed to Obamacare and in favour of Arctic drilling), which may have more to do with disdain of history than elders. As per much of Silicon Valley, the Tech Museum, which is funded by the likes of Intel and Microsoft, betrays no concern for context and is quite simply the most arcane museum I've ever seen. Battalions of schoolkids look bored out of their trees and would undoubtedly be better off running outside to climb something.

There is still something Las Vegas-ly thrilling about Silicon Valley. Tourists flock to the Facebook, Apple and Google "campuses" just to cop a sense that they are real and exist in physical space, a surprisingly hard mental adjustment to make. At Google, as elsewhere, you find nothing much to see, except that as you drive through the maze of lanes radiating from a huddle of inscrutable main blocks, dodging staff on Google-liveried bikes, it seems to go on forever.

In fact, this HQ belonged to a fleetingly massive 1990s tech firm called Silicon Graphics – creative destruction in motion – and Google has staked out a yet grander estate to rise on the hills opposite. For the first time, the scope of its empire seems tangible.

Then, an unexpected turn. While queuing to take the obligatory tourist snap with the giant corporate "like" sign outside Facebook – simultaneously wondering why I'm doing it – a likewise-engaged Indian startup founder named Jagmeet Lamba steers me towards a very different kind of place: a startup "incubator" called Hacker DoJo.

Hacker Dojo, Mountain View. Photograph: Barry J Holmes for the Observer

DoJo is remarkable: an airy tech playground in which anyone can grab a desk or couch and work for free, 24/7. More valuable even than desk space is the proximity to other dreamers, and the space is full of them, by turns absorbed in their screens or playing pool or ping-pong or chatting over bites to eat. All at once, the desire to be in the Valley makes sense.

On a couch near the entrance I find Sunny Allen, the sometime fiance of a coder, herself a Kentuckian linguistics major who took a second degree in biology and is now developing "bio-reactors" which produce algae for processing into food, fuel or biodegradable plastics for clearing up water pollution or sequestering carbon from the atmosphere. She smiles at my observation that she is the only woman here, saying: "Yes, it's definitely a male-dominated environment. I shouldn't say this, but sometimes I walk through here and I feel that the men just look at me like wolves. I feel like meat."

That familiar roll of eyes. Yet, when I ask if she likes this sexless, drab-seeming milieu, her response is emphatic. "Oh yeah – I love it! And because everyone's so focused on work, I never feel excluded. As a woman it's not assumed that I have skills, but once I've proved I have, I'm accepted. I feel like this is the place where the ideas are coming from. You need to be here."

Better yet, when Observer photographer Barry Holmes turns up to take snaps at DoJo, he finds a Londoner named Simon Brooks, a non-tech app developer who read about the incubator one Thursday night while living in Kentucky, held a yard sale over the weekend and drove to Cali with his cat and two dogs the following Monday. That was six months ago, since when the money's run out, Izzy the cat has died and he sleeps in his battered '99 Lexus with the dogs.

Simon Brooks, from the UK, who is sleeping in his car with his dogs, as he waits for success in Silicon Valley. Photograph: Barry J Holmes for the Observer

Asked what his parents, a GP's receptionist and plant machinery mechanic respectively, think of his decision, he says: "They don't understand the startup thing, so they're not too happy." about it A weary pause. "And it's absolutely not ideal. But I know I've got something really good and just need to get that break to get me to the next stage. As long as you've got goals, you have to reach for them."

A longstanding fan of word games such as Scrabble, Brooks has already released a word game app called Gadzookery and is about to launch a Kickstarter campaign to fund another. Inspired by the immensely popular "Words With Friends", but without that game's susceptibility to cheats, this new app sounds like a winner to me (who once watched two close woman friends fall out over allegations of Words With Friends cheating). If the Kickstarter campaign works, he will hire a budget mobile home and take his scratch team of coders to the Mojave desert to "build" it.

There they will party, but mostly work absurd hours to have it done in a fortnight. After that, it'll be two weeks' testing, another two fixing bugs, then launch: six weeks, start-to-finish. Given that Words With Friends had 80 million users at its peak, the prize is clear. Hence Silicon Valley. Remarkably, Brooks had never been to Silicon Valley before hitting the well-worn trail west to join personal heroes like Mark Pincus of the game-makers Zynga. He has watched others arrive and slink home, tails between legs, having failed to build a viable team.

"And I definitely felt that I was being watched at first. But the good thing is that, unlike home, it makes no difference here who you are or where you're from: it's all about what do you know? The really, really important thing, though, is that there's no shame in failure. As long as you can learn from it, failing won't be held against you, it's just part of the process."

Isn't there a hierarchy, with coders aloof, a little superior, I ask? Weren't they hard to recruit? "Funny you should say that. Yes, I think the coders do think like that. But you can build a bridge, can usually prise the interaction out of them. What I learnt is to just keep saying 'hi' – and don"t push it! It's a bit like with a pet. Show them that you want to know them, then wait for them to come to you. If you don't stroke that cat, then it'll come and sit on your lap and wonder why you haven't stroked it – he-he!"

Brooks claims not to be interested in the big yacht or end-of-rainbow lifestyle, dreaming instead of using future money to build an orphanage. Does he meet many Valley folk with similarly idealistic goals? "Do you know what? No. Most people are just here for one reason – to make money. But there are a few of us." And the inequality doesn't bother him? "Inequality?" The vast gulf between the Harvard-educated billionaire Mark Pincus and you? "Ha ha. Yeah, in the UK there would be a war if it was like this! But here there's not that class divide to tie people to. It's all mixed up. So it's not a problem for me." Like most Dojo dwellers, Brooks works 15-16 hour days, six or seven days a week; anything less would open the way to chance. The successful social networking site Pinterest was developed at DoJo, he says, so the dream is for real.

After the Tech Museum debacle, it takes every ounce of willpower to stop at the Computer History Museum en route north to Woodside, but the effort is handsomely rewarded. As understated as its predecessor was brash, this collection revels in a sense of continuity; is all about context and the colourful people who first imagined then built the machines now mediating our lives. A working version of Charles Babbage's 165-year-old Difference Engine No 2 is joyful, but the highlight for me is a Cray supercomputer from the 1970s, which consists of an alluring 8ft tall, semi-circular tower, finished with an exterior bench in kinky red leather (iMac, eat your heart out). I could wander this place for hours.

A property in the hills of Woodside owned by a successful Silicon Valley Investor. Photograph: Barry J Holmes for the Observer

The drive to Woodside is heart-stoppingly beautiful, with clapboard mansions atop wooded picturebook hills – yet the biggest estates, such as those belonging to squillionaire Oracle founder Larry Ellison and the late Steve Jobs – are tucked into the valleys. I've come to break bread at Buck's, a bustling luncherie in which some of the biggest deals in Valley history have been inked, relating to companies like PayPal, Google and Tesla.

Having opened the venue in 1990, proprietor Jamis MacNiven has known many of the big tech names over the years (seems that Jobs, though a friend, really was an asshole) and can tell you about the Google founder who, rich beyond imagining in his twenties, lost all impetus and now wanders through his vast garden strumming a guitar to no one in particular … a story which concludes: "So, he lucked out, but then again, did he?" A Burning Man festivalgoer of long standing, MacNiven doesn't think Valley people have changed generationally. Being at the centre, he still hears lots of stupid pitches, like a recent one ("the dumbest so far, I think") extolling the virtues of a networked toothbrush.

Yet dumb ideas are sort of the point, he says, revisiting Brooks's observation that the big difference between here and everywhere else is the willingness to countenance and even embrace creative failure. His impression from a recent trip to London is that if you fail once there, you're off the list, out of the club, with no way back, and I think he is right. When I spend time in London's rebranded "Tech City", I hear a lot of people playing safe, trying to insert themselves between the makers and the market – perhaps mirroring the dysfunctional finance industry upon which they rely – rather than stepping up to the plate and building things. After visiting Silicon Valley, once thing is clear: Tech City won't succeed without a better funding model.

What are we make of all this? I barrel back to LA with a complex suite of feelings. The California tech industry's embrace of risk is clearly encouraging to some forms of innovation (a word I can hardly stand to hear after a few days in the Valley). And some of the innovations can be bigger than they look: the great media theorist Marshall McLuhan would say that anything that enables us to engage each other in new ways is ipso facto profound, regardless of the content of that engagement.

At the same time, I see a plethora of connection but little engagement in the tools Silicon Valley provides, because for all the excitement and convenience they generate, the tech people are giving us a world which suits them, which we need to start treating with far more caution than we presently do. After all, no one ever grew or acquired wisdom through convenience.

©Andrew Smith. Andrew Smith is author of Totally Wired: the Wild Rise and Crazy Fall of the First Dotcom Dream and Moondust. @wiresmith

• This article was amended on 12 May 2014 to update the sub-heading. An earlier version wrongly implied that Orinda is a suburb of Palo Alto.