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How to Be Silicon Valley

(This essay is derived from a keynote at Xtech.)

Could you reproduce Silicon Valley elsewhere, or is there something unique about it?

It wouldn't be surprising if it were hard to reproduce in other countries, because you couldn't reproduce it in most of the US either. What does it take to make a silicon valley even here?

What it takes is the right people. If you could get the right ten thousand people to move from Silicon Valley to Buffalo, Buffalo would become Silicon Valley. [1]

That's a striking departure from the past. Up till a couple decades ago, geography was destiny for cities. All great cities were located on waterways, because cities made money by trade, and water was the only economical way to ship.

Now you could make a great city anywhere, if you could get the right people to move there. So the question of how to make a silicon valley becomes: who are the right people, and how do you get them to move?

Two Types

I think you only need two kinds of people to create a technology hub: rich people and nerds. They're the limiting reagents in the reaction that produces startups, because they're the only ones present when startups get started. Everyone else will move.

Observation bears this out: within the US, towns have become startup hubs if and only if they have both rich people and nerds. Few startups happen in Miami, for example, because although it's full of rich people, it has few nerds. It's not the kind of place nerds like.

Whereas Pittsburgh has the opposite problem: plenty of nerds, but no rich people. The top US Computer Science departments are said to be MIT, Stanford, Berkeley, and Carnegie-Mellon. MIT yielded Route 128. Stanford and Berkeley yielded Silicon Valley. But Carnegie-Mellon? The record skips at that point. Lower down the list, the University of Washington yielded a high-tech community in Seattle, and the University of Texas at Austin yielded one in Austin. But what happened in Pittsburgh? And in Ithaca, home of Cornell, which is also high on the list?

I grew up in Pittsburgh and went to college at Cornell, so I can answer for both. The weather is terrible, particularly in winter, and there's no interesting old city to make up for it, as there is in Boston. Rich people don't want to live in Pittsburgh or Ithaca. So while there are plenty of hackers who could start startups, there's no one to invest in them.

Not Bureaucrats

Do you really need the rich people? Wouldn't it work to have the government invest in the nerds? No, it would not. Startup investors are a distinct type of rich people. They tend to have a lot of experience themselves in the technology business. This (a) helps them pick the right startups, and (b) means they can supply advice and connections as well as money. And the fact that they have a personal stake in the outcome makes them really pay attention.

Bureaucrats by their nature are the exact opposite sort of people from startup investors. The idea of them making startup investments is comic. It would be like mathematicians running Vogue-- or perhaps more accurately, Vogue editors running a math journal. [2]

Though indeed, most things bureaucrats do, they do badly. We just don't notice usually, because they only have to compete against other bureaucrats. But as startup investors they'd have to compete against pros with a great deal more experience and motivation.

Even corporations that have in-house VC groups generally forbid them to make their own investment decisions. Most are only allowed to invest in deals where some reputable private VC firm is willing to act as lead investor.

Not Buildings

If you go to see Silicon Valley, what you'll see are buildings. But it's the people that make it Silicon Valley, not the buildings. I read occasionally about attempts to set up "technology parks" in other places, as if the active ingredient of Silicon Valley were the office space. An article about Sophia Antipolis bragged that companies there included Cisco, Compaq, IBM, NCR, and Nortel. Don't the French realize these aren't startups?

Building office buildings for technology companies won't get you a silicon valley, because the key stage in the life of a startup happens before they want that kind of space. The key stage is when they're three guys operating out of an apartment. Wherever the startup is when it gets funded, it will stay. The defining quality of Silicon Valley is not that Intel or Apple or Google have offices there, but that they were started there.


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