The Next Silicon Valley
Every conversation about technology and innovation eventually turns to the "Next Silicon Valley" question and prospects for some seemingly promising second-tier hub. This conversation belongs in the Not-Even-Wrong category. The idea of the "Next Silicon Valley" is simply the spatial version of the "Next Big Thing": a kind of wishful thinking that romantically yearns for a new, pristine frontier. But the real prospects for non-Silicon-Valley software technology regions are actually brighter if you drop Silicon-Valley-envy as a frame. Why?
(p.s. This is an illustrated newsletter, turn on image display!)
The Next Silicon Valley Ultimate Wrestling Championship. Illustration by Grace Witherell.
1/ I have lived in 5 "Next Silicon Valley" (NSV) wannabe cities: Bangalore, Austin, Washington DC, Seattle, and Las Vegas.
2/ Four deserve "A for effort" even though their startup scenes still pale relative to Silicon Valley. The 5th, Las Vegas, is a joke.
3/ Around the world, most such efforts are abject failures. Even if 1-2 big successes emerge, an SV-scale startup scene does not take root.
4/ NSV projects tend to be based on one of 3 terrible theories: culture begets economics (CbE), Cold War redux (CwR), Next Big Thing (NBT)
5/ CbE is the idea that a great music scene, cafes and coworking spaces create a tech scene. This theory confuses cause and effect.
6/ CwR is the idea that mimicking Cold War history - radar, missiles - can do the trick. This confuses history rhyming for history repeating
7/ NBT is the theory that some other technology, say biotech, can do for region X what software did for Silicon Valley.
8/ All three are wishful fantasies. When I hear such theories, I fell like yelling AARGH! TECH EVOLUTION DOES NOT WORK THAT WAY!
9/ Technology evolves in layers, like geological strata. Each world-eating technology adds a layer and builds on the previous one.
10/ "Eating" revolutions are special and rare. They radiate out from just 1-2 epicenters and cover the ENTIRE world over 50-100 years.
11/ The "Last Silicon Valley" was the 1870s-90s mass manufacturing revolution that radiated out from New York and the Connecticut Valley.
12/ There can be no "Next Silicon Valley" for a while because you cannot repeat an eating revolution or do-over from a different epicenter.
13/ Neither can you cut ongoing revolution short because you have macroeconomic ADD. You have to play game that's on, not game you want.
14/ There is unlikely to be a "Next Silicon Valley" for at least 50 years because it'll take 2-3 generations to absorb the impact of this one.
15/ So long as majority of potential of software eating the world remains untapped, all technology hubs will be shaped by SV gravity field
16/ Shenzen is an example. It is not a "Next Silicon Valley," but neither is it a "First Shenzen." It is shaped by (and shapes) Silicon Valley.
17/ Shenzen is neither a substitute for SV, nor independent of it, but a younger complement. A child node in an evolutionary-explosion tree.
18/ A pair of concepts from political science, "pristine state formation" and "competitive state formation" help explain how this evolution works.
19/ When virgin territory is colonized by humans, the first states that emerge are pristine states. They are shaped by natural constraints.
20/ Once a territory is occupied, new states emerge that are shaped not by natural constraints, but filial competition with existing states.
21/ Silicon Valley was shaped by the nature of semiconductors, and shaped the world. It is a pristine state that occupies the world.
22/ Shenzen and other hubs have been/are being shaped more by the presence and power of Silicon Valley than by Moore's Law directly.
23/ How will the geography of s/w evolve in the future? The history of New York/Connecticut Valley provides clues.
24/ As manufacturing matured, New York turned into a financial capital and technology work moved first to Midwest, then Europe, then Asia.
25/ In the process it was commoditized. Today's geography of manufacturing is shaped by proximity to unskilled labor, raw materials, markets
26/ As pristine innovation slows, these proximity factors offer increasing advantages and activity shifts in response.
27/ In the process, customer-driven or supply-driven companies rise, pristine-innovation driven companies decline.
28/ But while pristine innovation dominates, advantage is with regions with high concentration of creative labor and financial capital.
29/ s/w is unlike manufacturing in 2 ways: One, there seems to be no natural plateau beyond which proximity factors trump product innovation
30/ Two, human creativity is the dominant raw material. Not counting electricity for data centers, there is no other supply to "control".
31/ SV's advantage lies in its ability to unleash, not minor trickles, but huge floods of talent at product scaling opportunities.
32/ SV is like a hydraulic empire of human talent. Instead of Egyptian pyramids, we get unicorn companies. https://en.wikipedia.org/wiki/Hydraulic_empire
33/ So-called "unicorns" -- high-value companies with very high market-cap-to-labor ratios -- require large, liquid talent pools to grow.
34/ They also require an ecosystem of market-makers, such as experienced angel investor, recirculating tech scaling experts, universities.
35/ Other hubs can get there, but not through naive formulas like CbE, CwR and NBT. Talent liquidity at scale is not THAT easy to achieve.
36/ As virtual collaboration, VR tech improves, entirely virtual hubs will also join the fray. The second tier is going to get interesting.
37/ The role of "pioneer" has already been claimed by SV, but there are plenty of roles to be filled in the software-eating-world drama.
38/ Make no mistake: some of these roles may be less sexy and lack pioneer bragging rights, but might be MORE economically valuable.
39/ Reaching towards your region's unique software destiny is the game of regions breaking smart. Stop wasting time on SV-envy.
40/ How do you get there? For starters, read http://breakingsmart.com if you haven't already.
_Check out Breaking Smart Season 1 for the deeper context behind this newsletter. If you're interested in bringing the Season 1 workshop to your organization, get in touch. You can follow me on Twitter @vgr
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