Silicon Valley Can’t Be Copied
For 50 years, the experts have tried to figure out what makes Silicon Valley tick. The answer is people.
Classic cluster: The team at Fairchild Semiconductor, shown here in 1960 in San Jose, California, would produce the first integrated circuit from silicon. Two, Gordon Moore and Robert Noyce, would later found Intel.By 1960, Silicon Valley had already captured the attention of the world as a teeming technology center. It had spawned the microwave electronics industry and set a pattern for industry-academic partnerships. French president Charles de Gaulle paid a visit and marveled at its sprawling research parks set amid farms and orchards south of San Francisco.
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.
Soon enough, other regions were trying to copy the magic. The first serious attempt to re-create Silicon Valley was conceived by a consortium of high-tech companies in New Jersey in the mid-1960s. They recruited Frederick Terman, who was retiring from Stanford after having served as provost, professor, and engineering dean.
Terman, sometimes called the “father of Silicon Valley,” had turned Stanford’s fledgling engineering school into an innovation engine. By encouraging science and engineering departments to work together, linking them to local firms, and focusing research on the needs of industry, he created a culture of coöperation and information exchange that has since defined the region.
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.)
New Jersey’s business and government leaders, led by Bell Labs, decided that the solution was to build a university much like Stanford. And that is what they hoped Terman would do.
Terman drafted a plan, but he could not get it off the ground, largely because industry would not collaborate. This history was documented by Stuart W. Leslie and Robert H. Kargon in a 1996 paper titled “Selling Silicon Valley.” They tell of how RCA would not sign up for a partnership with Bell Labs, how Esso didn’t want to share its best researchers with a university, and how Merck and other drug firms wanted to keep their research dollars in house. Despite common needs, companies would not work with competitors.
Terman would later try again in Dallas. But he failed for similar reasons.
In 1990, Harvard Business School professor Michael Porter proposed a new method of creating regional innovation centers—this time around an existing research university. He observed that geographic concentrations of interconnected companies and specialized suppliers gave certain industries productivity and cost advantages. Porter postulated that by bringing these ingredients together into a cluster, regions could artificially ferment innovation (see “In Innovation Quest, Regions Seek Critical Mass”).
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.
University of California, Berkeley, professor AnnaLee Saxenian understood the importance of people, culture, and connections. Her 1994 book Regional Advantage: Culture and Competition in Silicon Valley compared the evolution of Silicon Valley with that of Route 128—the ring around Boston—to explain why no region has been able to replicate the California success story.
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. Immigrants like me who came to Silicon Valley found it easy to adapt and assimilate. We were able to learn the rules of engagement, create our own networks, and participate as equals. These days, the campuses of companies such as Google resemble the United Nations. Their cafeterias don’t serve hot dogs; they serve Chinese and Mexican dishes, and curries from both northern and southern India.
This is the diversity—a kind of freedom, really—in which innovation thrives. The understanding of global markets that immigrants bring with them, the knowledge they have of different disciplines, and the links that they provide to their home countries have given the Valley an unassailable competitive advantage as it has evolved from making radios and computer chips to producing search engines, social media, medical devices, and clean energy technology.
The Valley is a meritocracy that’s far from perfect, however. And some of its flaws tear at the very fabric that makes it unique. Women and certain minorities like blacks and Hispanics are largely absent from the ranks of company founders and boards. Venture capitalists have a herd mentality and largely fund startups that produce short-term results—leading to a preponderance of social-media and photo-sharing apps. Real-estate prices are so high that most Americans can’t afford to relocate there.
All these things slow the Valley down, but they won’t stop it. 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.
Vivek Wadhwa is the author of The Immigrant Exodus: Why America Is Losing the Global Race to Capture Entrepreneurial Talent (Wharton Digital Press, 2012). Follow him on Twitter @wadhwa.
Searching for Silicon Valley
Peter DaSilva for The New York Times
WHILE on a bike ride in the hills behind Stanford University, I was helping a fellow cyclist fix a flat tire when a rental car full of lost Italian tourists pulled over. Clutching a map in his hands, the driver beseeched us, “Can you tell us where we can go to see Silicon Valley?”
The cyclist, Tony Fadell, an Apple engineer who led the iPod and iPhone design teams, and I grinned at each other, but we had to sympathize with the driver’s plight. Perhaps more than any region, Silicon Valley has transformed the world in the last half century. Yet exploring — or even finding — this patchwork quilt of high-tech research and development centers, factories and California suburbia can be baffling. That’s because the valley is as much a state of mind as it is a physical place.
Consensus has it that Silicon Valley — a phrase first used by the journalist Don C. Hoefler in the early 1970s to describe the home of an emerging chip industry — is defined as the southern half of the San Francisco Bay Area. It stretches north of Palo Alto toward the San Francisco airport, spills over the Santa Cruz Mountains to the southwest, and sprawls to the east and south of San Jose.
But in a tangle of freeways and low-slung technology design and marketing campuses, trying to find the real Silicon Valley is no easy task. Certainly, there are the corporate headquarters like those of Apple,
The region has given us the semiconductor chip, the microprocessor, the personal computer, the Internet and Google, and yet there remains an ethereal quality about Silicon Valley — fitting, as the workings of a computer are essentially the invisible flow of electrical pulses. Even so, it’s possible — and enjoyable — to find touchstones of the valley’s history, and explore the technology that has emerged from it.
The technological powerhouse that displaced Santa Clara County’s fruit orchards grew in part from the vision of Frederick Terman, the dean of engineering at Stanford, who as early as the 1930s sought to create an industry so his students wouldn’t have to leave the valley for electronics firms in the East.
Once defined by its factories, Silicon Valley is now more synonymous with product design and interactive digital media. The digital technologies incubated there have transformed each industry they touched — music, Hollywood, newspapers and books, to name a few.
Riding the exponentially increasing power of the computer chip, the valley has demonstrated the ability to reinvent itself relentlessly. And each new generation of technology has been quickly cannibalized by the following one, in a perfect enactment of the economist Joseph Schumpeter’s notion of creative destruction.
In the Silicon Valley creation story, mainframe computers begat minicomputers, which begat personal computers, which begat laptops and today’s “smart” cellphones.
When I was growing up in Palo Alto in the 1950s, Santa Clara County still retained much of its original agricultural spirit, which early on had led it to be known as the Valley of Heart’s Delight. The county once produced a large percentage of the nation’s prunes, and orchards and pastures occupied a meaningful percentage of the space between Palo Alto and San Jose.
The temperature always seemed to be somewhere near 70 degrees, the fog that so often drenched San Francisco during the summers was held at bay by the Santa Cruz Mountains that are the backbone of the San Francisco peninsula, and traffic still hadn’t reached Los Angeles proportions.
A strong regional conservation movement that has preserved tens of thousands of acres has made it possible to enjoy some of the region’s original pristine quality. Two favorites for short hikes are Windy Hill and Monte Bello, open space trusts in the hills above Portola Valley and Palo Alto.
But it is what has taken place indoors that has secured Silicon Valley’s place in the nation’s folklore. Images of Bill and Dave (Hewlett and Packard) and the two Steves (Jobs and Wozniak) tinkering in their garages are emblematic of how teams of inspired inventors and entrepreneurs can create entirely new industries.
Today it is possible to drive down a quiet street in the Palo Alto neighborhood known as Professorville, just off the Stanford campus, where at 367 Addison Avenue, you can then peek over the fence at the 12-foot-by-18-foot garage where Mr. Hewlett and Mr. Packard, both Stanford graduates, with the encouragement of Mr. Terman, built an audio oscillator for Walt Disney Studios in 1939. The spot, however, is marked only by a modest plaque.
Another, more cerebral way to observe the forces that power Silicon Valley is to drive through the Googleplex in Mountain View and see the Googlers — most of whom appear to still be of college age — tooling around on their bicycles and Segways. Then, cross town to Sand Hill Road in Menlo Park and watch the venture capitalists come and go in their BMWs and their Porsches.
For a more conventional interpretation, drive south a few miles along the 101 freeway to the Computer History Museum in Mountain View. Now ensconced in a splashy high-tech building that was originally occupied by
A copy of the original Babbage Engine, arguably the first computing machine ever designed, is now on display, as well as a room full of early computers. My favorite is the Alto, the
Thirteen miles south in San Jose, the Tech Museum of Innovation offers a hands-on experience for younger visitors. For more tech history, Intel has an in-house museum, as does the
Over the last four decades, the dream of being the next Jobs or Wozniak has captured the world’s imagination and turned the valley into a global crossroads.
Nowhere is that more clear than on a visit to the Naz 8 Cinemas in Fremont, the manufacturing community southeast of San Francisco Bay. Billed as the first multicultural entertainment multiplex, it shows Bollywood movies from India as well as films from Pakistan, Afghanistan, China, Taiwan, Korea and the Philippines on eight screens with 3,000 seats and 5,000 parking places.
That diversity is immediately apparent almost anywhere in Silicon Valley. You can see it on Castro Street in Mountain View, dotted with a proliferation of ethnic restaurants. Elsewhere, you can turn down a street seemingly at random and find the shop signs are all in Chinese or Spanish or Vietnamese.
Standout restaurants include La Costeña, a hole-in-the-wall grocery in Mountain View that has great burritos (and a Guinness World Record claim for making the largest), and Evvia in Palo Alto, which serves a spectacular version of arnisia paidakia, or lamb chops.
Given the cycles of boom and bust, and innovation and imitation, perhaps the favorite sport of valley-watchers is trying to predict the Next Big Thing.
In the aftermath of the Sept. 11 attacks, when new obstacles to immigration were erected, it appeared the United States was on the verge of stanching the flow of the region’s most precious resource: intellectual capital.
But eight years later the valley continues to thrive, even in a deep recession. There are hints that the green technology fad that has swept the venture capital community here in recent years may translate into a return to manufacturing. Heavily financed startups like Nanosolar in San Jose and MiaSolé in Santa Clara are building factories. A co-founder of PayPal, Elon Musk, is designing the battery-powered Tesla automobiles in San Carlos.
The future of Silicon Valley can probably best be pondered from the terrace of Thomas Fogarty Winery & Vineyards, on Skyline Boulevard in the Santa Cruz Mountains, with all the valley spread out beneath you.
From there, a glass of wine in hand, you can gaze down at the unremarkable patchwork of offices and suburbs that has changed the way the world works. It’s obviously the place I should have directed the lost Italians.
IF YOU GO
Three airports provide easy access to Silicon Valley: San Francisco International and Oakland International are within 30 minutes’ driving distance, and San Jose International is in the heart of the region. Another option is Caltrain.
Admission is free at the Computer History Museum (1401 North Shoreline Boulevard, Mountain View; 650-810-1010; www.computerhistory.org" target="_">
The Tech Museum of Innovation (201 South Market Street, San Jose; 408-294-8324; www.thetech.org) is open daily from 10 a.m. to 5 p.m. Admission is $8.
The NASA Ames Research Center (Moffett Boulevard and Highway 101; 650-604-5000; www.nasa.gov/centers/ames) is open Tuesday to Friday from 10 a.m. to 4 p.m.; and weekends, noon to 4 p.m. Free admission.
The Intel Museum (Robert Noyce Building, 2200 Mission College Boulevard, Santa Clara; 408-765-0503, www.intel.com/museum/visit.htm) is open Monday to Friday, 9 a.m. to 6 p.m.; Saturday, 10 a.m.to 5 p.m. Free admission.
WINE AND VIEWS
The tasting room at Thomas Fogarty Winery & Vineyards (19501 Skyline Boulevard, Woodside, 650-851-6777; www.fogartywinery.com) is open Wednesday to Sunday from 11 a.m. to 5 p.m.
WHERE TO EAT
Evvia (420 Emerson Street, Palo Alto, 650-326-0983) is open daily for lunch and dinner. Lunch weekdays only. The arnisia paidakia, — rib-cut, mesquite-grilled lamb chops with olive oil roasted potatoes — is $31.
For burritos, try La Costeña (2078 Old Middlefield Way, Mountain View; 650-967-0507).
Hunan Garden Chinese Restaurant (3345 El Camino Real, Palo Alto, 650-565-8868) is open daily for lunch and for dinner until 9:30 p.m. Try the flounder filets with spicy salt, $12.95.
WHERE TO STAY
Cowper Inn (705 Cowper St., Palo Alto; 650-327-4475; www.cowperinn.com) is just off the Stanford campus. It offers two separate houses with four suites and seven single rooms. Rooms and suites begin at $175.
The Art Deco Hotel De Anza (233 West Santa Clara Street, San Jose, 408-286-1000; www.hoteldeanza.com) opened in 1931 and was nicely remodeled in 1990. Various package stays begin at $165 a night.