California dreamin'

6 reasons Silicon Valley still leads in creating a culture of innovation

Quick summary:

• Silicon Valley is retuning back to normal pre-pandemic operations

• While other communities have attempted to emulate their success, Silicon Valley remains a unique place and key driver of innovation around the globe

• Remote work allows for access to top talent, but physical location still matters

Does location matter in a world of remote work?

I was in Silicon Valley this week to attend the Plug and Play Summit which was one of the first large in-person gatherings since the pandemic began back in early 2020. Over 3,000 people registered for the event and about half were from international locations. There were clearly pent-up demand for returning to face-to-face networking and everyone was in a joyful mood. I took lots of notes from the sessions and will be sharing key trends over the next few weeks in this newsletter, but for today’s edition I will focus on what makes Silicon Valley special as a continued engine for innovation in America and around the world in my experience.

One of the running side conversations this week among the attendees was whether other parts of the world are able to successfully replicate Silicon Valley in terms of being an innovation hub of a similar size and magnitude. Many locations has marketed themselves as the “Silicon Valley of X”, and during the pandemic there was some debate about whether physical location matters at all any more. I believe that many areas around America and the world have attempted to emulate Silicon Valley with varying degrees of success, but none that I have visited to date have fully capture its spirit. I also believe that while remote work is well suited for nurturing relationships and tapping into the best talent from across the globe, there remains large benefits to face-to-face gatherings, serendipitous encounters, and forming lasting partnerships that cannot be easily replicated digitally.

There is a reason that many major companies, governmental entities, and other organizations have a physical presence, even a small one, in Silicon Valley. The connections built through networking leads to insights and access to expertise that cannot easily be gained anywhere else due to the depth of talent and resources in the area. Yes, the real estate and cost of living is ridiculously expensive - but no matter how many people leave the area (and there were many during the pandemic), others are there to take their place. Someday, the costs will outweigh the benefits and Silicon Valley will be in decline, but that day appears far off at this moment in time.

6 reasons that make Silicon Valley special

As a Texas resident, I’ve had the opportunity to travel a lot to major U.S. cities such as New York and Chicago and spend significant time in technology hotbeds such as Austin and Boston. I’ve traveled a bit abroad as well, not enough to speak with much authority on other countries but enough to gain some first-hand experience in places such as London, Istanbul, and Sydney. Perhaps as an American living in the explosion of the Information Age, the mythology that has been built up around Silicon Valley has biased my thinking significantly; I’ll readily admit this is my personal view.

I’ve been to Silicon Valley periodically over 20 years. My first trip was in 1998 in the midst of the dot-com boom, and my second visit was in 2001 right after the dot-com bust of 2000. I’ve been a handful of times since then; enough to gain some familiarity with the place but not so much to be immersed in the culture or build strong ties to the area. The list below is based on my perspective as an outsider who has had the good fortune to have just enough exposure to the area to discern some patterns. An internet search is likely to provide a whole host of articles on the same topic with varying opinions, but these are the 6 reasons that resonate most with me to explain the lasting impact that Silicon Valley has as a leader in driving innovation.

1. No problem is too big, no idea is too crazy

The most refreshing part of any trip to Silicon Valley is the entrepreneurial “can do” spirit of the place. It pulses with youthful energy, of newly minted engineers and MBAs who want to be the next Steve Jobs or Sheryl Sandburg. The phase “misfits are welcome” definitely applies; people don’t look to fit in, they look to stand out. This is evident by the way they dress, the way they talk, the swagger they possess. As an older insurance professional myself, I come from a world that is conservative and cautious. People in Silicon Valley are arrogant and annoying; they are also ambitious and awe-inspiring. That ambitious and belief that no problem is too big and no idea is too crazy to work is what separates the place from any other I have experienced.

2. Diversity of the community

One of the most striking things about being in Silicon Valley is the sheer diversity of the population. There are some of the brightest people anywhere on Earth that have migrated to this single location to work together on our biggest challenges. Yes, there has been a lot written about the “bro culture” that is pervasive and definitely exists, but there are also a lot of amazing and accepting people, usually working at lower levels in organizations, that spark ideas and drive implementation. There is also a lot of job hopping and cross-pollination of the best ideas among many firms; here, the “Great Resignation” is a benefit to the community and not a hindrance from a macro perspective.

3. Rebelliousness

Perhaps the most striking part of a place that possesses so much wealth and power within a single location is the utter lack of regard for most established institutions. In a wide-ranging podcast, famed Netscape founder and co-founder of the well-known Andreessen Horowitz VC firm Marc Andreessen shared that humans have basically settled on two forms of social organization: hierarchies and peer-to-peer. Peer-to-peer characterized most of early human life, but hierarchies have proven to be the most scalable. Much of Silicon Valley’s ethos is focused on enabling a peer-to-peer model at scale; every hour you hear someone talk about the “democratization of X”. The rise of crypto and decentralized finance (DeFi) is but one recent example.

Silicon Valley is about as far away from the traditional American power centers of New York and Washington, D.C., as possible. Andreessen notes that Silicon Valley is run by “math people” - engineers mostly - while traditionally power has accrued to “word people” - lawyers mostly. Andreessen goes on to state that the technology that has come out of Silicon Valley has proven it can effectively tear down established hierarchical institutions, but what is yet to be proven is whether new peer-to-peer institutions can replace those older ones. Established institutions are now looking to leverage technology to stay entrenched, which is leading to some of the back-and-forth we have been experiencing over the past two decades and which remains unresolved and a major source of tension in our daily lives.

Regardless of how this tension is ultimately resolved, Silicon Valley’s lack of adherence to traditional standards in areas such as attire and climbing up the corporate ladder will ensure it remains committed to challenging institutional power for the foreseeable future.

4. Relationships and rumors

Perhaps the most under-appreciated fact about Silicon Valley is that it is a community and small enough where there is a tight web of relationships. Often Silicon Valley is used as a generic term more akin to something like “the Borg”, but I think it is more helpful to think of it as a country club. The sheer number of overlapping connections makes it very conducive to the spread of new ideas and collaborations. Most larger cities are more siloed and distinct disciplines do not overlap as much, limiting the amount of innovation which often occurs at the intersection of two or more areas.

This may be best reflected by the amount of crazy-sounding rumors that I hear every time I visit the Valley; you never know which ones to believe but they spread like wildfire. There is also a tolerance for people; for example, while both the mainstream press and social media have been following every twist and turn of the Elon Musk and Twitter saga, I found that most people in Silicon Valley had a more muted reaction. Most people were watching with a sense of bemusement rather than concern, and while there were a variety of opinions on the ultimate outcome, no one seemed to care much either way.

5. Support system starting with Stanford

A lot has been written previously about the support system that has built up in Silicon Valley starting with the prominent role that Stanford University has played over the years, so I won’t spend much time commenting on this. Several startups from oversees mentioned how valuable they found the venture capital community in Silicon Valley to be ahead of a planned entry into the U.S. market. One startup I spoke with mentioned specifically that they had relocated from Hong Kong to Singapore for the main purpose of being more attractive to VCs in the United States and to enable their penetration of the U.S. market. They still did quite a bit of business in Hong Kong, but were concerned that keeping their headquarters in HK would harm their chances of success in America. There are a wealth of accelerators, mentors, access to tech talent, and many more benefits of being in Silicon Valley; the entire area is designed to help startups launch and scale. Most other locations do not have the same singularity of purpose.

6. Weather

I was initially going to list only the first five reasons, but multiple people this week mentioned to me how much the sunny weather and mild climate mattered in Silicon Valley. It makes some sense; nice weather makes it more conducive for people to be out and about, whether sipping coffee or getting ice cream, going on walks, etc. Compare the pleasant year-round temperatures with places like New York City where the winter months make people want to stay inside most of the time and summers can be sweltering.

Silicon Valley continues to be highly influential

While the strict pandemic restrictions over the past two years, combined with congested traffic, high prices, and smoke from wildfires drove a lot of relocations from Silicon Valley to places like Austin, I would bet that any predictions of demise are premature. My favorite is seeing visiting corporate types embrace the jeans and hoodie ethos, if only for a short time. I feel that visitors tend to loosen up with visiting the Valley and the change of scenery leads to a change in their thinking. To me, Silicon Valley remains a special place that is unlike any other I have visited and its spirit will continue to lead impactful innovation for this decade and beyond. If you have the occasion to visit, I highly recommend it as it is worth immersing yourself in its culture at least once in your life.

Have you been to Silicon Valley or do you live there? What has your experiences been? Do you believe Silicon Valley will remain as relevant over the coming years? Why or why not? I’d love to hear your stories and thoughts in the comments below.