What Makes Silicon Valley Unique? by Greg Satell

In a recent interview, tech guru Marc Andreessen noted that, although Beijing has great potential to be the next Silicon Valley, it probably never will be.  Despite the great engineering talent and enormous market, its lack of openness is a serious liability.

While many might argue with Andreessen’s conclusions (it’s always hard to tell when he is offering genuine insight and when he is merely trying to be provocative), the questions he raises are important ones.

Why is it so hard to create another Silicon Valley?  How should a society encourage innovation?  Why are some places with great technical talent (like the former Soviet Union) seemingly unable to produce innovative firms?  While there is no strict formula,there are some conditions that must be met for innovation to thrive.

How The Bay Area Became The Technology Center Of The World

While the computer revolution came to its fruition in Silicon Valley, it didn’t start there. Thefirst modern computer was developed back east, at the Institute of Advanced Study (IAS) at Princeton under the direction of John von Neumann.  Even today, our computers are arranged in what’s called the von Neumann architecture after that very first design.

Perhaps not surprisingly, the further development of technology was centered around East Coast institutions, such as AT&T’s Bell Labs in Murray Hill, NJ, IBM Research in Yorktown Heights, NY and the Route 128 corridor near Boston.  These were the places that had both the academic and corporate resources to make innovation happen.

However, that changed after World War II.  The old line academic establishment was uncomfortable with engineering (the original IAS computer, always controversial at Princeton, was abandoned after von Neumann’s untimely death).  Big corporations, for their part, were skittish about investing in risky ventures with uncertain profitability.

So military research budgets found a home out west, at places like Stanford, whose linear accelerator attracted some of the world’s greatest scientific talents.  Other places, like Moscow and Dubai are trying to recreate Silicon Valley’s success by developing innovation hubs likeSkolkovo and Media City.

Unfortunately, it takes more than geeks to make innovation happen.

The Creative Class

In The Rise of the Creative Class, urbanist Richard Florida makes the case that attempting to create innovation hubs in sterile office parks is counterproductive.  After all, if young, tech savvy professionals can work anywhere, why wouldn’t they want to work someplace fun, with a thriving music and art scene, underground bars and cafes?

He points to Pittsburgh as an example, where he was once a Professor at Carnegie Mellon, one of the world’s premier research institutions.  However, for all the great technical talent that comes through, few stay.  They leave to places like the Bay Area, Austin and the Research Triangle in North Carolina.

In Florida’s view, building an innovative place requires three elements:  talent, technology and tolerance.  Places like Beijing, Moscow and Dubai have an abundance of the first two, but a gaping void in the third and that will make it difficult for them to ever achieve a decent return on their investment in technology.

While Florida has his detractors, after spending most of my adult life in Eastern Europe, I find that his ideas ring true. There was never a lack of technical talent in the Soviet Bloc, but the sense of intolerance was (and, increasingly, still is) palpable.   Anybody with a taste for Pussy Riot and Anonymous, will most likely be happier somewhere else.

Tech Catalysts

One often overlooked element in creating an innovation center (and one that government has little control over) is the emergence of a company which becomes a catalyst by creating a network of tech savvy angel investors with close ties to the community.

Hewlett Packard, among others, served that purpose in Silicon Valley by helping to build the “garage entrepreneur” culture.  ICQ, in Tel Aviv, created vast wealth for its founder, Yossi Vardi, who in turn almost singlehandedly forged Israel’s VC movement.  The new book Tech and the City points to Doubleclick’s role in catalyzing New York’s startup scene.

Again, culture plays an important part.  Start-up moguls in Silicon Valley and other tech meccas tend to stick around and reinvest their money, time and energy in the community. Meanwhile capital flight remains endemic in places like China and Russia.  For people like Mail.ru’s Yuri Milner, Steve Jobs is surely an example, but so is Mikhail Khodorkovsky.

The True Wealth of Silicon Valley

Read MORE