The Rich Ecosystem Of Silicon Valley

Technology and globalization, the two most powerful forces of our age, find their nexus today in that consistently amazing place, Silicon Valley. To be sure, other locations exist where ideas hum through the office hallways, where the future is written every day in computer code. Microsoft Corp., a continual prod to companies in the Valley, is lodged way north in Redmond, Wash. And chipmakers and computer makers blanket Asia. But in the globally integrated, high-tech arena, no other locale has the heft, the mass, the sheer significance of Silicon Valley. Today, one-fifth of the world's 100 largest high-tech companies make their home there, and the top five alone boast combined revenues of $40 billion, with a market capitalization exceeding $250 billion. Today, in this sunny valley where suburban office sprawl stretches across what formerly were orchards, people come from around the world to promote their ideas, make some money, and change the world.

Over the past 40 years, thousands of companies, hundreds of new products, and millionaires by the bushel have emerged from this fertile basin. Laboring in those now-famous garages, Stanford University grads William Hewlett and David Packard developed the audio oscillator; a generation later, Steven P. Jobs and Stephen Wozniak cobbled together the first personal computers for the consumer market. In many ways, their experiences reveal the quintessential story of American invention--that anyone with a good idea, perseverance, and a little bit of help from the right people can make it. Nearly two centuries ago, Robert Fulton, a jeweler's apprentice taken with the potential of water transport, tinkered and experimented, and with backing from U.S. ambassador to France Robert R. Livingston, designed the first steamboat, which plied the Hudson River in 1807. Thomas Alva Edison, of course, was the ultimate inventor-entrepreneur. With more than 1,000 patents to his name, he brought countless inventions into use, toiling in his New Jersey laboratory with craftsmen from England and Switzerland at his side.

But in Silicon Valley, the process of innovation and commercialization has gone way beyond anything that came before--in scale, in wealth creation, and in the diffusion of technology to the rest of the world. How did this happen? The Valley has its heroes and its legends, to be sure. But no one person, or even any collection of individuals, made the powerhouse that is Silicon Valley today. It is, rather, the quotidian way that people, ideas, and money come together in endlessly different combinations. You could call it a cluster. That's how Michael Porter described the beehives of specialized industrial activity in northern Italy, central Germany, and elsewhere in his 1990 book, The Competitive Advantage of Nations. Interestingly, companies in Silicon Valley for the most part aren't vertically integrated, and they buy everything they need from other firms in a tightly connected network of local suppliers. That's much the way companies behave in clusters elsewhere in the world.

You might do better, though, to characterize Silicon Valley as a rich ecosystem, as does Hungarian-born Intel Corp. Chief Executive Andrew S. Grove. Within that ecosystem are teeming species, some unique to the Valley. Brash young techies who careen down slides to get to their meetings, double-quick. Dreamers who hammer out concepts for new products while trading ideas over a beer. Venture capitalists who put up the dough for startups. New companies that crash and burn. Secretaries who become millionaires. Folks like these you don't find anywhere else--at least not all in the same place. The habitat is unique, and as long as those precious nutrients, ideas and money, keep flowing, the population and the species seem to flourish.

The rest of America--indeed, the rest of the world-- could take a cue from that pulsating environment where brains, not brawn, are paramount, and knowledge is the great leveler. What college you went to doesn't matter (though many went to Stanford University or the University of California at Berkeley). It makes no difference if you're from Buffalo or Bombay. In Silicon Valley, hierarchies have been flattened, daredevil risk-taking encouraged, mistakes tolerated, and hard work generously rewarded with stock options and perks. To varying degrees, these tenets have been accepted and adopted elsewhere in Corporate America. Too often, though, while knowledge and brainpower may be recognized as the key assets in the Information Economy, they aren't given the environment in which to flourish. Managers may talk about leveling hierarchies but do little to see that accomplished. Risk-taking may be encouraged, but, truth be told, publicly held companies cannot afford to make mistakes the way a startup can. And largesse in the form of special compensation plans has yet to spread through the lower ranks of Corporate America, despite the fact that top managers have become convinced that incentives matter.

Still, the denizens of Silicon Valley should not be too smug. Hubris is often a byproduct of stunning success, and the Valley has its share of both. It pays to remember that ecosystems can become unstable. Even today, Silicon Valley is no Eden. Sky-high housing costs mean that even people with middle-class incomes are shut out of affordable housing, while pockets of poverty persist among the plenty. And Silicon Valley, as it has before, may run into unforeseen problems or constraints. Only a decade ago, the semiconductor industry, battling stiff Japanese competition, received trade protection. In its earlier years, Silicon Valley got one-quarter of its orders from the government. Yet the region has been able to adapt and reinvent itself, and competition from without helps to further that process. But as Silicon Valley's "repeaters"--those folks who failed and survived to try something new--can tell you, there is no such thing as a sure thing.