The Ideas Underlying Silicon Valley's Success

Commonwealth Club of California, 2011-Sep-12 (event page)

Synopsis

[...] a local detour into the reasons for the phenomenal success of Silicon Valley's innovative institutions. Imitated often, but never duplicated, and in spite of its spectacular ups and downs, Silicon Valley's companies and entrepreneurs seem poised to continue to have an outsized worldwide impact on technological and cultural change in the decades to come. Why? Hear the opinions of a panel of experts who've lived the experience, and then ask them your own questions about what makes the Bay Area so suited to this particular kind of success.

Speakers

  • Dan Cooperman, Former General Counsel; Apple and Oracle
  • Mark Tuttle, Former Entrepreneur
  • Fred Turner, Associate Professor of Communications, Stanford University; Author, From Counterculture to Cyberculture: Stewart Brand, the Whole Earth Network, and the Rise of Digital Utopianism

Dan Cooperman

There are 7 factors that underlie Silicon Valley's success:

  1. World class universities

  2. Deep talent, especially technical, partly thanks of the universities, partly thanks to migration and immigration

  3. Cross fertilization between universities and tech talent, and a support system ("soft infrastructure") for entrepreneurs: universities, angel investors and VCs, lawyers (and the legal system), bankers, accountants, landlords, head hunters

  4. Culture: the Valley is favorable to risk taking, and tolerates failure

  5. Cultural diversity

  6. Money (there's no recession here)

  7. Work ethics: hard work, around the clock, because people like what they're doing. Also, hero worshiping: Steve Jobs, Mark Zuckerberg, Gordon Moore (of Moore's Law), Larry Ellison

Mark Tuttle reduces the factors to three

  1. World class universities
  2. Rich engineering tradition
  3. Risk taking (as compared to the risk-averse New England) and failure tolerance (as compared to China's culture of ostracizing those who fail).

To understand why Silicon Valley greatly outperform Route 128 (the New England area centered around Massachusetts), read the 1996 book Regional advantage: culture and competition in Silicon Valley and Route 128 by AnnaLee Saxenian. Quote: "Silicon Valley is now home to one-thirs of the 100 largest technology companies created in the United States since 1965."

Both Silicon Valley and Route 128 had prestigious universities, and both were involved in research post war. The most profound difference between the Northeast and California is about risk. The New England view of business is highly risk averse. California is where the Gold Rush happened. The people who came here wanted to make it big. The American dream ends at the Santa Monica pier - the farthest point west.

The industrial culture in new England was for historical reasons centered on secrecy. For example, DEC never outsourced anything. The Swiss are the extreme version of New England. In Silicon Valley you could bootstrap by making something that all others needed.

The gene pool diversified in Silicon Valley by people jumping ship, and employees from different corporations communicating much more freely than in the Northeast.

Silicon Valley has a tolerance of failure: if you fail with a startup, others take you seriously because you tried and you have experience. New England favors elitism - you have to be the wonder boy, the Phi Betta Kappa. Silicon Valley cares about what makes the community better.

Fred Turner

Silicon Valley has:

  1. Ethos (the Gold Rush mentality; where the real reason was self interest), and
  2. Ecology (speaker didn't expand on that)

The race against the Russians to reach the Moon moved the focus from military to science. NASA gave us a huge advantage; the space race shifted education from social to scientific.

World War II brought together for the first time specialists of different disciplines. The 1960's post-war culture exhibited outside rigidity, but interdisciplinary interaction on the inside.

Alan Kay populated the PARC library with all the books mentioned in The Whole Earth Catalog.

Google shut down in 1999 to go to Burning Man. Eric Schmidt was hired in part because he went to Burning Man.

In 2006, 50% of Google products were developed during 20% time. Late night Google is where the action is.

To match Silicon Valley, other places would have to change their culture, which is very difficult.

Q&A

Q: Can Silicon Valley be duplicated?

A: Not that easily, though there are efforts. The best contenders are:

  • Cambridge, Massachussets - good in biotech, computer science
  • South Korea has made some progress
  • India too
  • London - international finance
  • Japan spent $400M in the 80s and failed (see the Fifth generation computer initiative)
  • China has cultural problems (failure intolerance)

Q: What are the biggest threats to Silicon Valley's continuing success?

Dan Cooperman: government regulation. SV has developed outside Washington and its philosophy is "the further away government stays the more we thrive". Even though the government has been a catalyst with for projects like ARPANET and NSF funding, its regulations, including business-unfriendly immigration regulations, are the biggest threat.

My Question: In the era of videoconferencing and telepresence, why don't we see more geographically-distributed successful startups appearing in cyberspace?

Dan Cooperman: most of the 7 points don't work over cyberspace.

[Moderator]: In my experience, negotiating deals was much harder to do without meeting in person, because you need to the check personality of your partners and connect with them.

Q: What are your opinions on the reverse brain drain to India and China?

A: AnnaLee Saxenian has great a book on the topic: The New Argonauts: Regional Advantage in a Global Economy.

Q: Is optimism driven by climate?

A: (!) Geographically separated Native American tribes mimic the current culture found throughout the US. For example, those in California were closer to "hippies" and more inclined to gamble, than those in the Northeast, who were more prone to warfare.

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