What makes “Silicon Valley” Silicon Valley?

Russian President Dmitry Medvedev visited Silicon Valley during June 2010 to experience first-hand what has made companies like Cisco Systems, Google and Facebook what they are today. Medvedev was joined by California Gov. Arnold Schwarzenegger.

In different geographic areas all over the United States and the world, people want to emulate Silicon Valley to create jobs and vibrant economies. Silicon Valley is often imitated but has never been duplicated.

I grew up in Silicon Valley, graduated from San Jose State University and Santa Clara University, and have had the pleasure of working and living here in the world of high technology. I offer my random thoughts on the “secret sauce” that makes our beloved Silicon Valley truly unique in the world. While some attributes certainly carry more weight than others, e.g., access to capital, it is the collective impact of all these attributes that make Silicon Valley what it is.

  • Access to capital (angel investor money, venture capital) from investors willing to take risks in exchange for a future “big payday” event
  • Terrific higher education system: Stanford, University of California at Berkeley, San Jose State University, Santa Clara University, strong junior college programs
  • The western U.S. was built by pioneering folks who made great sacrifices; that pioneering attitude must be in our DNA as it fuels great innovation and a drive to succeed in spite of what are often long odds
  • Competitive benefits: medical insurance, personal time off (vacation, sick-time), 401-K
  • Burning desire of entrepreneurs and employees to compete and win in the marketplace—“failure is not an option” even though some situations lead to failure
  • Risk aversion: there is some measure of safety in knowing that you or your company can fail and there will be another employment opportunity somewhere
  • No one expects to join a company and retire from it
  • Big paydays: these used to occur with great regularity in the 80’s and 90’s when a company would “go public” by offering its stock on a stock exchange. In the decade of the 2000’s, big pay days are rare. Today’s strategy is more about companies being acquired rather than going public. So, instead of seeing the value of your companies stock go through a meteoric rise, you now watch the value of the acquiring company’s stock rise.
  • Opportunity to be part of something exciting, have some impact on the world and your personal finances.
  • Work hard; play hard
  • Tolerance for less than perfect operational systems—some systems are simply “good enough”
  • Willingness to sacrifice family time and personal life for company time—usually for a “big payday”
  • Dress code—we invented “business casual” and it’s gotten even more casual over the years
  • Lack of pretentiousness
  • Open door policy—eschew hierarchical or “command and control” leadership
  • H1-B visas allow people from other countries to come to the U.S. to work in high-technology—provides rich diversity and sufficient talent to do amazing things
  • Embrace diversity—Silicon Valley tends to be pretty inclusive rather than exclusive—people who come here from other geographies or nationalities aren’t treated as outsiders
  • Wonderful year-around weather helps to attract talent to the San Francisco Bay Area
  • Great companies of the world thrive here: Apple, Google, Cisco Systems, Intel, Applied Materials, Hewlett Packard, Oracle; these companies routinely acquire other companies

What Silicon Valley does not provide?

  • Pensions or retirement programs
  • Attractive home prices
  • Low cost of living
  • Attractive California state income tax system

Does Silicon Valley always get it right? Certainly not! The investment community understands this better than any single group. The dot com bust showed irrational exuberance on the part of investors and executives to create any Internet-based company they could. Lots of money was lost and many folks lost their jobs when the question, “who wants to buy and why” wasn’t asked and answered appropriately.

So, can Russia create its own Silicon Valley? Yes, but, it won’t be like the Silicon Valley I know and love. Russia will need to see a cultural shift to be more open and trusting.

Russia has some fantastically creative and talented computer scientists and engineers who, given the opportunity, will do some great things for themselves, their companies and their country. Best wishes to Russia and President Dmitry Medvedev on their journey.

I would love your comments and reaction to this.

Dave Gardner, Gardner & Associates Consulting http://www.gardnerandassoc.com


2 Responses to What makes “Silicon Valley” Silicon Valley?

  1. Dave,

    Serial entrepreneur and author Steven Blank has a wonderful series of posts on the history of Silicon Valley titled: The Secret History of Silicon Valley.

    Here’s the link: http://steveblank.com/category/secret-history-of-silicon-valley/

    Blank’s thesis is that the rise of Silicon Valley (as opposed to say Boston’s high-tech Route 128 Corridor) was a direct result of the confluence of Stanford’s Engineering School accomplishments; the Cold War and it’s growing dependence on microwave technology; and the rise of high-tech defense contractors such as Lockheed and ESL.

    Nothing contradictory to what you’ve already stated, but just the same, it’s quite an interesting series of posts. Take a look when you have a chance – I think you’ll quite enjoy his writing.

    Great post!



  2. Dave says:

    Thanks, Patrick…I’ll check out Steven Blank’s postings.


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