How to Be Silicon Valley

[How to Be Silicon Valley]

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| May 2006(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 TypesI 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 BureaucratsDo 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 BuildingsIf 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.So if you want to reproduce Silicon Valley, what you need to reproduce
is those two or three founders sitting around a kitchen table
deciding to start a company. And to reproduce that you need those
people.UniversitiesThe exciting thing is, all you need are the people. If you could
attract a critical mass of nerds and investors to live somewhere,
you could reproduce Silicon Valley. And both groups are highly
mobile. They'll go where life is good. So what makes a place good
to them?What nerds like is other nerds. Smart people will go wherever other
smart people are. And in particular, to great universities. In
theory there could be other ways to attract them, but so far
universities seem to be indispensable. Within the US, there are
no technology hubs without first-rate universities-- or at least,
first-rate computer science departments.So if you want to make a silicon valley, you not only need a
university, but one of the top handful in the world. It has to be
good enough to act as a magnet, drawing the best people from thousands
of miles away. And that means it has to stand up to existing magnets
like MIT and Stanford.This sounds hard. Actually it might be easy. My professor friends,
when they're deciding where they'd like to work, consider one thing
above all: the quality of the other faculty. What attracts professors
is good colleagues. So if you managed to recruit, en masse, a
significant number of the best young researchers, you could create
a first-rate university from nothing overnight. And you could do
that for surprisingly little. If you paid 200 people hiring bonuses
of $3 million apiece, you could put together a faculty that would
bear comparison with any in the world. And from that point the
chain reaction would be self-sustaining. So whatever it costs to
establish a mediocre university, for an additional half billion or
so you could have a great one.
[3]PersonalityHowever, merely creating a new university would not be enough to
start a silicon valley. The university is just the seed. It has
to be planted in the right soil, or it won't germinate. Plant it
in the wrong place, and you just create Carnegie-Mellon.To spawn startups, your university has to be in a town that has
attractions other than the university. It has to be a place where
investors want to live, and students want to stay after they graduate.The two like much the same things, because most startup investors
are nerds themselves. So what do nerds look for in a town? Their
tastes aren't completely different from other people's, because a
lot of the towns they like most in the US are also big tourist
destinations: San Francisco, Boston, Seattle. But their tastes
can't be quite mainstream either, because they dislike other big
tourist destinations, like New York, Los Angeles, and Las Vegas.There has been a lot written lately about the "creative class." The
thesis seems to be that as wealth derives increasingly from ideas,
cities will prosper only if they attract those who have them. That
is certainly true; in fact it was the basis of Amsterdam's prosperity
400 years ago.A lot of nerd tastes they share with the creative class in general.
For example, they like well-preserved old neighborhoods instead of
instead of national chains. Like the rest of the creative class,

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