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Regional Profile: Silicon Valley

Home to technology pioneers and visionaries

By Peggy Albright

They say Silicon Valley is not a place. It’s a state of mind.

The highly acclaimed technology region in Northern California is well-known as home to many of the planet’s most visionary entrepreneurs and companies who have pioneered some of society’s most revolutionary products and services. The area is lauded for its deep-rooted spirit of innovation, which lures in the world’s best and brightest technology professionals hoping to take part in ground-breaking work, and its unrivaled success in commercializing ideas. Underlying all of these distinctions is something else that is special, and that is its distinct and almost tangible notions of place and purpose.

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“We are talking about a culture that is different from everything else in the world,” said Peter Friess, president of the Tech Museum of Innovation in San Jose, Calif. “It is singular. Many have tried to copy this because they’ve seen the power of this culture and the outcome and they would love to have the same. But we have to state that nobody has really achieved that goal.”

A prime destination

Silicon Valley encompasses numerous cities and suburbs south of San Francisco, including San Mateo and Palo Alto on the San Francisco Peninsula. The region reaches further southward to include Cupertino, Mountain View, Santa Clara, Sunnyvale, and San Jose, and some others beyond.

The region is home to roughly 7,000 technology companies, led today by the likes of Apple Computer and Google, as well as top engineering universities Stanford University, the University of California at Berkeley, and San Jose State University.

Built on a foundation of ideas, the former agricultural area has become synonymous with innovation. R&D for World War II military and intelligence radar gave rise to the semiconductor industry, the personal computing industry, and then the Internet.

The Silicon Valley has been a money magnet, attracting more venture funding than any other US region. According to the February “Index of Silicon Valley” published by the Joint Venture: Silicon Valley Network and the Silicon Valley Community Foundation, the region drew nearly one-third (30 percent) of all US VC investments last year. The software industry is the main beneficiary: it has attracted the region’s greatest percentage of venture funding since 2002 (although the level of software investments dropped from 25 to 20 percent since 2002 as opportunities in other industries, like cleantech, have gained).

The area is also rich in intellectual property, another measure of the region’s value. As of 2008, the region hosted seven of the top 15 US cities for patent registrations. It produced more than 12 percent of US patents issued that year and 49 percent of those issued in California.

Not adverse to risk-taking

While the region’s influence is widely recognized, its distinct culture makes it tick. One of its main attributes is its tolerance for risk, according to Steve Blank, an entrepreneur and instructor at Stanford and at UC Berkeley who is considered one of the area’s leading influencers.

“This is not a risk-averse culture, this is risk-centric,” he said. “It is one of the biggest contributors to the valley’s success.”

Blank traces the risk-taking to policies Stanford University implemented during the 1950s. Departing from academic tradition, the administration encouraged graduate students to start companies, suggested that professors consult to companies and sit on corporate boards, and let faculty and researchers benefit financially from their intellectual property. The then-radical policies were later adopted by other universities, integrating higher education and private enterprise to drive innovation and commercialization.

Silicon Valley has high number of foreign-born residents (about 36 percent of the region’s population) who play a fundamental role in building and leading its companies. The region’s ability to attract the best and the brightest from other areas is well known. More than half of the region’s founders and CEOs are from out of the country. Blank suggests that the immigrant experience itself helps Silicon Valley succeed.

“To be an immigrant you had to be a risk taker,” he said.

The tolerance of risk adds other differentiators to Silicon Valley’s character, where it’s professionally acceptable to make dramatic career changes and attempt startup businesses, and where failing at an endeavor is not a career problem or stigmatizing. Leaving one company to join another or start a new business is a part of the region’s history. That’s how founders of Fairchild Semiconductor, one of the original semiconductor firms, did it in the late 1950s, leading Fairchild engineers to generate new companies, such as Intel.

Friess, from the Tech Museum, says individuals can leave one business for another because the region doesn’t have the “burden of history.” He says that unlike traditional European cultures, for example, where an individual would be expected to build a business for several succeeding generations, those in Silicon Valley don’t have that obligation.

”That is what the rest of the world has never established and therefore you will not find any spot in Europe that can accommodate that,” he said.

Decentralized ecosystem

Because Silicon Valley has evolved to create different industries, its businesses and personnel have become highly specialized and diversified. The succession of industries has deepened its capabilities and created decentralized areas of differentiation, which all contribute to make the region more robust and adaptable, according to AnnaLee Saxenian, UC Berkeley dean and professor in the school of information and department of city and regional planning.

“It built up a very rich ecosystem of people with differentiated skills unified by crosscutting networks that allow individuals to learn and innovate quickly,” she said.

Cooperation among competitors

Silicon Valley’s approach to professional and personal networking is unusual for tech communities. The culture of cooperation is taken for granted. It’s common for individuals to advise others without expecting anything in return—a trait that Blank views as a holdover from the semiconductor era’s early days, when engineers would swap stories over lunch. Today it’s common for individuals to socialize with peers from rival firms, and for competing companies to collaborate.

Sense of process

Underlying these characteristics is a general sense of optimism and open mindedness that Friess believes originates from local professionals’ dedication to process and logic. A process orientation means that even incremental accomplishments from a day’s work can contribute to a sense of satisfaction and well-being.

It gives people the mindset needed to function and create well in their various and challenging roles. It also helps explain many people’s expectation that they will discover “the next best thing.” Friess, who has lived in Europe and India, says he’s never seen this type of creative framework anywhere else.

A place to work

Silicon Valley is a desirable place to work considering its weather and proximity to some of the world’s top urban and tourist destinations. The region enjoys a mild, Mediterranean climate, the nearness of San Francisco and the Pacific Ocean, an abundance of open space, and spectacular destinations such as Yosemite National Park within a half-day’s drive.

The region’s workers are higher paid than many in the country. Personal income is about 50 percent higher than the rest of the US, and the median household income is nearly 70 percent higher.

IT-related professionals benefit from that. The field holds a major place in the Silicon Valley economy. The “information products and services” category represents the second-leading area of economic activity (following the community infrastructure sector), providing more than 20 percent of the region’s jobs, or nearly 275,000 employees, as of the second quarter of 2009. While the sector (and the region as a whole) was slower to incur job losses during the recession, second quarter job figures were down 7.7 percent over the previous year.

The cost of living is one of Silicon Valley’s main drawbacks. Good housing is difficult to afford, even for highly paid professionals, though rents and housing prices have declined as a result of the economic downturn, slightly easing these pressures for local employees. Transportation is a challenge for companies and employees; commutes can be long and traffic congestion is among the worst in the country. For high-achieving knowledge workers seeking good schools for their families, the state’s budget crisis is taking its toll on classroom sizes, and funding available for basic programs at all levels of schooling.

The state government’s failure to solve its budget crisis has created a sense of urgency among Silicon Valley technology and business leaders, who consider it among the region’s most important challenges. CW (17 May, 2010)
 

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