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The Silicon Valley Can Be Replicated In Two Easy Steps

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Many self proclaimed experts on innovation claim that the Silicon Valley cannot be replicated. They present many reason why this seems to them to be true. Yet replicating the Silicon Valley as a location for fundamental technological paradigm breaks is possible, if not easy

One often cited idea why it is impossible to replicate Silicon Valley is that of the Matthew Effect, or the notion that locations that already have advantages tend to accumulate them. The only silicon valeyproblem is that the Mathew effect isn’t real–if it was, the Roman Empire would have never collapsed. But decline happens even to the most advantaged.

Another reason why imitating Silicon Valley is presumed to be impossible is the star effect, or the notion that star researchers tend to attract more star power. But why do stars want to come to locations marked by such high competition? Your most dangerous competitor, after all, is someone who is very much on your level of performance.

These two effects seem to reinforce one another, creating a clustering effect: because talented people like to be around other talented people, locations that already have a significant number of talented people will not only attract more talent, they will attract most of the available venture capital. Hence, this clustering assures that places like Silicon Valley will remain impossible to replicate.

Thus an apparently insurmountable problem for imitators: how do you get to the starting point? How do you overcome path dependence and get the star researchers and companies to come to a place that doesn’t have other talented people or companies there?

Such conundrums often indicate a faulty interpretation rather than a genuine problem. Shifting our point of view, seeing things from a new box, can lead to a revelation. Here, instead of asking how we should ask why. The question to ask,then, is not how to attract star researchers and companies to come to your city or region but what attracts these individuals to Silicon Valley in the first place. Why do they want to be around other talent? More provocatively, do they even want to be around other talent?

The reality is that truly talented people and star companies don’t want to be around other talented people and star companies because these are their most dangerous competition. Competition, despite the myth, is the last thing star performers want and businesses desire because competition reduces profits. And if you’re a star performer, going to a place where there are other star performers reduces your star power relative to other competitors. But your power as a star rests precisely in your ability to differentiate yourself.

Star performers do not want to come to Silicon Valley–they have to come to Silicon Valley because that’s the only place where there is easy money. All that you need is a great idea. There is no bureaucracy or a lengthy grant approval process fraught with politics. There is only money looking for great ideas and willing to risk millions on the chance that they might work.

All that you need to replicate Silicon Valley,then, is money. And lots of it. Easy money. And this is where most attempts at imitation fail off the bat. As political pet projects, they are underfunded. Whatever money there is available is also too precious and therefore risk averse to actually be invested. Investment is, after all, risk. But politicians who want to replicate the Valley cannot take risks with any significant public funds. And the reason for this is that their projects are pet projects rather than projects that have significant public support. Failure of the project and the loss of funds would be used by their political enemies to destroy them by charging corruption. As a result, the expectations attached to such attempts are impossible to meet: political money driving imitation attempts expects the impossible, spectacular success after a year or two. These attempts also fail because they focus on incentives for private companies to come to the location and presumably conduct research on their own dime. Why would they? What’s the point?

Such project fail because that’s not how things work when it comes to research and innovation. Silicon Valley was not built that way. Innovation is the product of a long term commitment to doing world class research work. It is a commitment measured in decades and in tens of billions of dollars in investment.

Such commitments can only be made by the federal government or very big corporations, which, more likely than not, do such significant research because of federal funding or federal contracts for groundbreaking technological solutions. And the reason why such commitments are made by the government has everything to do with the need to make breakthroughs for national security reasons. Research framed as national security needs are a lot harder to criticize than attempts by cities or regions to spend public money on innovation, which makes such projects less politically risky. And failures can also be kept secret, further reducing political costs. Cities and regions have no such cover, making them politically vulnerable to critics and cost cutting demagogues.

What you really need to replicate the Silicon Valley is a war or something like it. You need, in other words, a profound level of commitment, measured in decades and in billions of dollars, to conducting bleeding edge research for the sake of making fundamental breakthroughs rather than for the sake of artificial deadlines or specific commercial products in mind. It was the impetus of wars that was the founding force of the Silicon Valley. World War I necessitated further research into radio. But it was during the Second World War that a tidal wave of military research dollars poured into the Stanford University. This funding continued during the Cold War as government sought to fund scientific breakthroughs in radar and electronics in order to overcome the Soviet Union.

In this context, Steve Jobs’ Apple computer was a consequence of investments in electronic miniaturization made at the behest of federal projects looking to shrink electronic components for defense purposes. Jobs or any of the other figures of Silicon Valley lore did not invent anything as far as the basic technology was concerned, he merely configured already existing technological surplus, evolved over decades by the military industrial complex, into a consumer usable computer. Without such basic research, however, without the government funding and the surplus of technology, it would be impossible to  create the Apple computer. Federal funding for fundamental research is essential as it creates over the long term the technological surplus which can be exploited by venture capitalists.

Though it is often seen today as the essence of Silicon Valley’s secret, venture capital had little or no role in creating Silicon Valley as a location technological paradigm breaks, for it never did and never can fund basic research because such research has no immediate commercial applications. Yet commercial product innovation cannot happen without breakthroughs in basic research that opens up new technological paradigms. Venture capital, then, is not a force for innovation but for commercialization of technologies developed through federally funded research.

To be sure, there was research and entrepreneurial activity in the Stanford University area before the Second World War, as Timothy J. Sturgeon shows in “How Silicon Valley Came to Be” but the effect of the tidal wave of funding and pressure to make fundamental breakthroughs occasioned by the Second World War and the Cold War were elemental to the creation of the Silicon Valley as a location where new fundamental research was being done, laying the groundwork for venture capitalists in the 1980s to appear and commercialize the treasure trove of wonders. But venture capital did not create the Silicon Valley or the technologies that would become the blocks of the information age–they merely exploited the work funded by government and big corporations.

Even in the 1910s, Sturgeon writes, military spending was essential to push the boundaries of radio research. The Navy wanted equipment that was more powerful than that any commercial user would want at the time. And the Navy had the money to spend on pie in the sky research that had potential to generate fundamental breakthroughs but was not commercially viable. Navy funds supported the work of Federal Telegraph Company, which, in turn, relied on Stanford’s High Voltage Laboratory, creating the prototypical public-private partnership.

Thus the secret of creating areas such as the Silicon Valley: the desire to push boundaries of research and the ample funding to make those breakthroughs happen. Because cities or regions have no desire or ability to invest in supporting breakthrough research, they always fail in projects to replicate the Silicon Valley. But the chance to work on such projects is what really attracts star researchers. More than anything, they want a chance to push the boundaries of the possible.

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About A. Jurek

A. Jurek is one of the editors at Blogcritics. Contact me at: a.jurek@blogcritics.org