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Why Silicon Valley Can't Be Copied


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"For 50 years, the experts have tried to figure out what makes Silicon Valley tick. The answer is people."

Stanford had a lot to do with Silicon Valley:

Stanford University, which is at the heart of Silicon Valley, had given birth to leading companies such as Hewlett-Packard, Varian Associates, Watkins-Johnson, and Applied Technologies. These companies were pushing the frontiers of technology. There was clearly something unusual happening here—in innovation and entrepreneurship.

...

That was the mixture that New Jersey wanted to replicate. It was already a leading high-tech center—home to the laboratories of 725 companies, including RCA, Merck, and the inventor of the transistor, Bell Labs. Its science and engineering workforce numbered 50,000. But because there was no prestigious engineering university in the area, its companies had to recruit from outside, and they feared losing their talent and their best technologies to other regions. (Even though Princeton University was nearby, its faculty generally shunned applied research and anything that smelled of industry.)

The interesting thing about this for me is how quite ahistorical this is; 100 years ago the NY area WAS the Silicon valley of its time; the first phone network in a major city was in Manhattan. There was a network of universities and businesses that were the tech powerhouses of their time, with killer business models,which, over the decades of the early and mid-20th century included the likes of  AT&T, GE, RCA, IBM...not too shabby.

But it wasn't JUST Stanford. It was feedback loops and network effects:

Porter and legions of consultants following his methodology prescribed top-down clusters to governments all over the world. The formula was always the same: select a hot industry, build a science park next to a research university, provide subsidies and incentives for chosen industries to locate there, and create a pool of venture capital.

Sadly, the magic never happened—anywhere. Hundreds of regions all over the world collectively spent tens of billions of dollars trying to build their versions of Silicon Valley. I don’t know of a single success.

What Porter and Terman failed to recognize is that it wasn’t academia, industry, or even the U.S. government’s funding for military research into aerospace and electronics that had created Silicon Valley: it was the people and the relationships that Terman had so carefully fostered among Stanford faculty and industry leaders.

It was also a culture of openness that was friendly to immigration:

Saxenian noted that until the 1970s, Boston was far ahead of Silicon Valley in startup activity and venture capital investments. It had a huge advantage because of its proximity to East Coast industrial centers. By the 1980s, Silicon Valley and Route 128 looked alike: a mix of large and small tech firms, world-class universities, venture capitalists, and military funding. And then Silicon Valley raced ahead and left Route 128 in the dust.

The reasons were, at their root, cultural. It was Silicon Valley’s high rates of job-hopping and company formation, its professional networks and easy information exchange, that lent the advantage. Valley firms understood that collaborating and competing at the same time led to success—an idea even reflected in California’s unusual rule barring noncompete agreements. The ecosystem supported experimentation, risk-taking, and sharing the lessons of success and failure. In other words, Silicon Valley was an open system—a giant, real-world social network that existed long before Facebook.

It also doesn’t hurt that Silicon Valley has excellent weather, is close to mountains and the ocean, and has a myriad of state-park hiking trails. These help foster a culture of optimism and openness.

Note that from 1995 to 2005, 52.4 percent of engineering and technology startups in Silicon Valley had one or more people born outside the United States as founders. That was twice the rate seen in the U.S. as a whole.

I am fascinated by this article about what makes Silicon Valley tick. I agree with (and love) the fact that it's fundamentally not about technology, but about people and relationships. After all, that is what makes any venture truly successful. I think of what Jim Collins said was the most important secret to success in his classic book, Good to Great: having the right people "on the bus." His main point was that it doesn't matter where the bus is going; as long as you have the right people on it, you'll succeed...and you'll enjoy the ride. Silicon Valley's "bus" has an amazing collection of people indeed.

Vivek's final words are a bit concerning:

The only serious challenge I see to Silicon Valley is, ironically, from the same government that once catalyzed its development. Silicon Valley is starved for talent. Restrictions on work visas prevent foreigners from filling its openings. The latest data indicate more than one million foreign workers on temporary work permits now waiting to become permanent residents. The visa shortage means some will have to leave, and others are getting frustrated and returning home.

This brain drain could bleed the life out of Silicon Valley’s companies. Then indeed we will have real competitors emerging in places like New Delhi and Shanghai. But it won’t be because they discovered some recipe for innovation clusters that finally works. It will be because we exported the magic ingredient: smart people.

I read this at about the same time I discovered that Spy Magazine had been uploaded to Google Books. Having lived in Manhattan and now near Portland OR, I can say that every place has its terroir.  There is no way that Silicon Valley would have created the manically great graphic design of Spy (http://books.google.com/books?id=IQ_TRFid5NMC&dq=Spy+Magazine&source=gbs_navlinks_s ). 

Too, Si Valley seems, to someone like me, a tiny bit inbred, inbred in its very cosmopolitan-ness, not unlike the way Manhattanites view New York (remember the famous New Yorker cover?)

Innovation happens everywhere nowadays.  Facebook's presence in Silicon valley is not auspicious.

Well said, John.

Facebook itself moved from right in the middle of Palo Alto (ground zero) to waaaay off on the side where they are not visible to anyone who doesn't seek them out.

So even Facebook is avoiding the limelight of Silicon Valley these days.

I see 8 men hanging out while a dozen women work on STEM, I want more females in STEM but the atmosphere seems to keep them away.

What about the atmosphere keeps them away? The men hanging out?

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