No one disputes that Silicon Valley is the global capital of the tech world. But this wasn’t always so. It is the Valley’s dynamism and networks which have given it an unassailable advantage. Silicon Valley has simply left rivals like Boston’s Route 128 in the dust.
I mentioned a little bit about my first Columbus Day in California in a previous column. But I didn’t tell you the whole story. I was invited to three amazing events on the night of October 12. Venture capital firm Alsop-Louie—known as one of the wackier and unconventional VC firms—invited me to their legendary Columbus Day party. On that same evening I had an invite from Henry Chesbrough, Executive Director of the Center for Open Innovation at the University of California-Berkeley to attend a dinner party for his forum. Down in Silicon Valley I also had an invite to speak at an event with India’s former Minister of Disinvestment, Arun Shorie—the guy who was once in charge of privatizing the country’s moribund nationalized firms and who is as close as you can get to financial royalty in India.
It was a really hard decision which one to pick. And I found myself wondering, where else in the world would I have to face such a decision? The answer is nowhere. Silicon Valley, which has expanded to embrace the entire Bay Area as an engine of entrepreneurship and innovation, is a unique place of powerful and concurrent overlapping networks. As a new arrival to Silicon Valley and San Francisco, I had read about this and did believe it. But it was hard to understand to what degree these types of concentric circles of connections were pervasive in the Valley. I am now studying how some of these networks develop and their influence on success rates in entrepreneurship.
I am focusing on what is possibly the largest of these networks, an organization called The Indus Entrepreneurs (TiE). This started as an Indian network and served as a mechanism for those from the Subcontinent to help each other. Silicon Valley is the birthplace of TiE and remains its stronghold. But at the latest TiE Global Conference, held in Silicon Valley a few weeks ago, an interesting debate broke out among the Board of Directors. While the organization remained largely Indian in composition, a significant number of non-Indians had joined TiE and become very active members (some had risen to the role of chapter president). Some members of the board thought it was time to change the name of TiE from The Indus Entrepreneurs to The International Entrepreneurs. They eventually agreed to drop the “Indus” from the name and to just call the organization TiE. The fact that such a debate even took place illustrates both the power of networks to embrace outsiders and draw them in, as well as the power of these networks, when unconstrained by convention or conservative establishment rules, to grow in unexpected ways. It’s a metaphor for Silicon Valley.
Which brings me to Boston. Ever heard of Route 128? To my surprise, neither have any of my students at Duke or the entrepreneurs I’ve met in Silicon Valley. I’m surprised because it wasn’t so long ago that Silicon Valley was considered a poor cousin of Boston’s tech center—a cluster of technology companies located along this freeway which partially rings the city. Starting in the 1960s and on through the 1980s, Route 128 was, if anything, more closely associated with tech than Silicon Valley. Today few young technology workers even know where Route 128 is located, let alone its importance in the tech world. Silicon Valley has simply left Boston’s tech center behind.
In the 1980’s the Silicon Valley and Route 128 looked very similar—a mix of large and small tech firms, world class universities, venture capital, and military funding. If you were betting on one you’d have been wise to bet on Route 128 because of its longer industrial history and proximity to a large number of high quality educational institutions (Harvard, Yale, Brown, MIT, Tufts, Amherst) and proximity to Bell Labs and other large corporate research centers. You remember Bell Labs, right? It’s where the transistor was invented. Now, aside from big biotech breakthroughs, Boston is a distant second nationally to Silicon Valley in technology entrepreneurship. So, what happened to Boston?
A young professor at UC-Berkeley, AnnaLee Saxenian, wrote a book in 1994 which answers this question. At a time when Boston still thought it was the powerhouse of the tech industry, Saxenian declared Boston the loser in the tech race and explained why it would only fall further behind. This book was titled Regional Advantage: Culture and Competition in Silicon Valley and Route 128. It kicked off a firestorm of criticism from the Boston elite. Saxenian also alienated friends at her alma mater, MIT.
She noted that Silicon Valley had an amazing dynamism about it. There were extensive professional networks, job hopping was the norm, information was exchanged openly, and the culture encouraged risk taking. The Silicon Valley ecosystem supported entrepreneurial experimentation and collective learning. In other words, Silicon Valley was a very open network—a giant social networking site working in analog before the concept of such a thing even existed.
This organizational mechanism was in sharp contrast to that of Route 128. Dominated by large, vertically integrated, and secretive minicomputer producers such as DEC, Wang, Prime, and Data General. Technology, skill, and know-how were trapped within the boundaries of the large corporations.
The differences were evident at many levels: venture capitalists in Silicon Valley had deep roots in local networks and were far more nimble than their east coast counterparts; educational institutions and research labs in the West partnered with local startups as well as more established firms, while those in the East worked only with the largest corporations; and the meritocratic openness of Silicon Valley made it a magnet for non-traditional talent and immigrants.
By the mid-1990s the east had missed the shift from minicomputers to personal computers as the flexible Silicon Valley ecosystem sped ahead with innovation across a diversifying range of components and systems going from chips, routers, and application software to ecommerce and search engines. Today Silicon Valley is the leading location for cleantech venture activity, an area widely considered to be the next big value creation engine for the U.S. and the world.
Boston, however, is no slouch. The Route 128 community remains the second biggest in the U.S. in terms of venture funds committed. Boston has powerful research institutions, still, and lots of very strong companies. In some areas, such as biotech, Boston may even rival Silicon Valley. But overall, its pretty clear that the Valley has not only won but is racing further ahead.
Most entrepreneurs and engineers that come to Silicon Valley, come to experience this network and to embrace the culture it has created. That’s why I came, too. Network effects don’t just work for fax machines. But then again, most of them knew that intrinsically. University guys like me need to do a bunch of surveys to figure it out. They voted with their hearts and feet.
Editor’s note: Guest writer Vivek Wadhwa is an entrepreneur turned academic. He is a Visiting Scholar at UC-Berkeley, Senior Research Associate at Harvard Law School and Director of Research at the Center for Entrepreneurship and Research Commercialization at Duke University. Follow him on Twitter at @vwadhwa.
I was about to join but had a look at here
http://www.tie.org/chapterHome/membership/GlobalCharterMembers200712078934212177/viewInnerPagePT
It had Nandan and N Murthy as it’s members (They are founders of Infosys whose employees still use IE6 to browse the web…Imagine more than 100,000 still using IE6 as browser )
So backtracked from my decision of joining it ..
Ramanean, so you are judging the entire organization by the version of a browser which a company founded by one of its members uses?
@ramanean I am sure there is some other reason which would explain this comment of yours..:)
This is the only reason I have
IE6 ====>Wasting time ===>To Code/test it…
A lot of time would be wasted in switching to and fro between two different IE6 windows rather than tabs..100,000 working under them would wasting a lot of time daily
What they are going to do here ? if they can’t even save time or bring in a change in lives of 100,000 (make life better by switching to tabbed) working under them?How I can expect them to guide me ???
Having lived and worked in both areas I think you somewhat overstate the separation.
That said, SiliValley is miles ahead of RT128 in consumer technology products. I think that greatly effects the perception of the differences.
Professor, this is a really brilliant and insightful post. You make some really good points.
I’ll give you an A+!
Thank you Mary. I give you an A+ for your comments.
Based on my experiense 128 is a perfect location if you are in the roll-out phase of your business (especially software business). The valley is a good place to be for a tech start-up (especially in the web business). long story short: if customers and revenue count – go to 128.
Frankly, if I was launching an enterprise software company, I would probably launch on the east coast — that is where the customers are. But for web applications, cleantech, etc. East coast provides no advantage.
Professor you write amazing stuff. I give you 10/10 on insightful blogging…:)
Following you on Twitter too
Cheers,
Arvind
Arvind, an A+ for you also.
Very interesting topic to me. I was recruited away from Boston to Silicon Valley 4 years ago, and after some success out there, have recently relocated back to Boston. 4 years ago, you drove up 128 and it seemed like a ghost town (empty Sun and Microsoft buildings). But I think there’s a lot of growth happening here. Startups have bled the valley dry of local/student talent. The Valley doesn’t match up to the flood of talent that Boston schools produce, and the cost of living makes it too hard for young, out-of-towners to get a fresh start there. Check out Adobe’s huge new Waltham campus, right on 128, and several others that are popping up again. Boston’s VC and startup scene may be smaller, but its conservative nature has protected it better from the recent downturn. Older money and colder weather still can produce innovative ideas. Boston may never even up, but it soon won’t be far behind.
While I think you make some great observations about the cultural differences between the east and west coast tech scenes, your lack of knowledge about the current state of tech in Boston is quite apparent (perhaps because you are no longer here?). The mere fact that you would bring up the 128 belt tells me that you’re comparing “Boston of yesteryear” to today’s Valley. And I think: well of course the Valley would win, hands down. Now put the rumbling hotbed of ideas, science, research, tech, entrepreneurship, and clean energy in Cambridge (where it is now really taking place in Boston) up against the Valley? And you’ve got a game that’s not quite over. Be careful not to declare premature victory, Professor. I think you would be wise to do some more research on what is really happening in the Boston tech scene today.
Rebecca, I am from that part of the world and I can tell you there is a HUGE difference in energy and vitality. But I look forward to seeing Boston catch up!
i’m not holding my breath waiting for the Rte 128 and Boston tech scene to rival the Valley. Silicon Valley is way more open and egalitarian than Boston will ever be, just like in real life.
interesting post, but overlooks one key point. the mindset of venture capitalists in the NE is hugely different from that in silicon valley. SV VC’s will fund anyone that might make them a buck. while NE VC’s are weighed down by old thinking of pedigree.
Great post. Regarding studying how some of these networks develop and their influence on success rates in entrepreneurship, you are probably already familar with your colleague Prof. Porter’s work in clusters.
One topic I’m not sure he touched on is whether workers within clusters are more easily able to find a job what maximizes their value since there are so many firms in the area they can easily move if unhappy with current position. I believe this allows workers within tech clusters to optimize their output since the transaction costs typically associated with such moves (e.g., finding job openings, moving costs, etc.) are greatly reduced in clusters.
Moreover, failure is less risky (and therefore people are less adverse to it) since your next opportunity could be next door or discovered during a visit at the local coffee shop (often crowded with founders of other startups).
JB, I am gradually coming to the conclusions that the emphasis on “clusters” is misguided. Regions have spent billions on forming industry clusters and pools of venture capital. Yet no region in the world has been able to come close to Silicon Valley’s success.
I think the magic happens with the networks: It is all about people — not buildings and infrastructure.
this topic was never interesting or relevant and has by now been beaten entirely to death. thanks for kicking the ciorpse again.
who cares?
Except for not acknowledging the role weather plays (where CA has a big competitive advantage) in attracting talent your analysis here is pretty good.
Yes, that was an oversight. The weather does make a difference.
I live in Boston and coincidentally, I’m founding a start-up here (Boston Digital Media) and I have to say, you’re correct about the cultural differences of CA vs. MA. This is in my opinion, the biggest factor.
In Boston it feels like you need to have a 1200 page business plan, 5 year sales growth projection charts, and multi-variate risk analysis assessments in order to get the attention of local VC.
Out in CA’s SV (I’ve not yet been so I can’t say this with certainty) it seems like it is a much more “shoot from the hip” kind of mentality with VC funding. Which is one reason why when Facebook was looking for VC here in Boston they couldn’t get it and so they started up in CA and the rest is history.
route 128 is closed due to aids
Yes, it’s true that Boston area VCs and employees are more risk-averse and thus missed out on the chance to spawn the next Facebook or Twitter, and Massachusetts is burdened with an obsolete stance on non-competes, but it doesn’t have the absurd real estate prices of California and doesn’t have a dysfunctional political system that spends more money on prisons than schools. And besides, can you name a high-tech company more secretive than Apple?
non-competes are a big difference.
Job-hopping is pretty tough in Boston if it will likely lead to a law suit by your former employer.
Dr. Wadhwa – huge fan of your writing. I have worked both in rt.128 and the valley and the most noticeable difference to me apart from all the points you raise is that the Rt. 128 companies seem to be either silicon or near silicon tech companies while the valley has a great mix of above silicon software companies. Could it be that too much focus on only hardware or embedded software could be why Rt.128 has lagge? (all the great software companies seem to be based in the valley and not in Boston/NH.)
As AnnaLee Saxenian noted in her book, Regional Advantage, Silicon Valley was able to adapt more readily to technology changes because of its culture and values. I think that made the real difference.
Vivek, great piece (again). I moderated a TieCon panel about five years ago, 8 a.m. on a Sunday. The ballroom at Santa Clara was packed with Indians and probably Pakistanis too. It was then that I realized that the Silicon Valley is a place and metaphor as well.
California as a place has been burned down, flooded over, rattled down by earthquakes forever. The minute the dust settles (and sometimes before) we start building again. What separates Silicon Valley from 128 is that New England sense of permanence, that things have done a certain way for 300 years. I think that tends to inform each generation, discouraging risk to some degree.
Brian, I agree. I didn’t realize the difference in attitudes until I spent some time here. That is what a lot of the people from Boston who are posting here don’t realize either. You have to live here to understand what you are saying.
I moved for Silicon Valley to Boston 3 years ago….Boston is no comparison..Even Texas and Illinois & NJ fare better….Forget Route 128….It may go down in history for some recognition it gained in 1980’s….Now completion with International cities is more fierce then 20 yrs ago for such a status..
Dude or Dudette,
Stay on the left coast…
AND…wait for Arrrrnald to “stop” your state from going broke OR global warming from making NV ocean front property OR earthquakes to relocate SV into a Silicon open pit mine OR shortage of water for water-cooled servers/mainframes turned into TSO dumb terminals or power outages/brown-outs to fry your IC’s, OR mudslides to put your Disaster Recovery plans in motion, OR riots/gangbangers to carjack your customers.
Yea we’re in your dust because we’re flying over LA… and heading to China.
SO…Shut down your iphone…go to your Ashram and don’t let your Karman run over your Dogma.
And as your Govern-na-tor says…We’ll be BAAAAK!
Boston Entrepreneur
Regan P. McCarthy
PS Race ya…to the financial finish line.
A subtle shift is happening and the level of networking and energy that silicon valley had in 90’s has shifted to Boulder, CO. I wouldn’t be surprised if Boulder takes over Silicon Valley as the number one entrepreneurial destination in a decade.
Agreed. Seems like many have departed Silicon Valley for Boulder -it’s got quite a tech scene and seems to be growing. Most of my team is based there as Ridgefield, CT has not yet become a hotbed for tech startups (although we have Priceline.com, Kayak.com and Indeed.com down the street in South Norwalk).
Question is whether the VC firms will follow.
Boston is too cold for SE Asians….CA is much warmer.
Wait a minute!
California has 6 times the population of Massachusetts. Of course they are going to have more activity.
I think that New York and Texas and Florida have 3-4 times the population of Massachusetts, but not 3-4 times the tech activity. Also the Boston metro area population is just slightly less than the Bay area. Is it a matter of population size or are other factors more important? It’s interesting to note the countries with small populations that have produced disproportionate amounts of tech innovation, such as Sweden, Denmark, and The Netherlands.
For anyone that wants to further dive into this topic, may I suggest Kawasaki’s “Reality Check”.
There is a whole section on “How to kick Silicon Valley’s butt.”
Interestingly, if you go back even further, to, say, 1940, things looked even more different. Philadelphia, more than any city in the country, looked like it was going to be the nation’s center of science and technology. The first computer, ENIAC, was even invented there. That, for many reasons, obviously didn’t happen.
Here is my team of 8 currently – three Indians, two chinese(asian), one Israeli, two russians and one south american.
Is this possible anywhere else besides bay area?
I didn’t discuss the role of immigrants in Silicon Valley. That is a huge factor in its present success.
Blah blah blah. Insider is right: you’re kicking a dead corpse. There are so many reasons why CA has more startups – population included but the pace is unsustainable. I think instead of competing against each other, it’s time to start working together, along with other big markets like Seattle, Austin and Raleigh. We have much bigger competition from Asia now. I’m proud that we have so many good competitors to be totally honest. Each has their own merits and talent and we should embrace that and again choose wisely when we start our companies in respective cities.
Cultural differences loom large between Silicon Valley and anything in the East, Research Triangle Park included. I’ve consulted and lived in Silcon Valley and in the Northeast, and done product development consulting in Dublin and Austin and other wannabes. I enjoy the differences and each adds a strength or two. The Northeast cultural block I think is largely and network that tends toward compartmentalization based on the school you attended. I am generalizing, of course, but it’s my experience. Sitting at dinner in the Northeast inevitably there is a contest of schools, where you went and where your kids are going, often with legacy guarantees. Sitting at dinner in Silicon Valley (well, actually, it’s often breakfast before work) no one cares where you went to school. It’s about the work, the ideas. The chance to get rich or to feed the addiction of creating new stuff that changes the world of technology is the topic. My barber in Los Gatos felt equal to us all, and had grand plans for his software project, and could get a hearing. That’s tough in the Northeast Corridor, as Princeton, Harvard, MIT, et al networks are largely closed. An odd thing is there are a lot of those folks in Silicon Valley, but in our meetings it rarely comes up as a ticket of entry.
Stephen, I had an interesting email discussion with Erick Shonfeld and Mike Arrington on my last post on elite education. I had started that piece off by saying that “there is a popular belief that an Ivy League education provides a huge advantage in entrepreneurship”. Erick didn’t agree. I was surprised that he said the opposite was true.
I chalked this up to a difference between East coast and West coast. Here your pedigree isn’t important. It is all about how smart and ambitious you are. There it is as you say.
Great post. If you want another proof point just look at where the MIT grads go. In my class, the vast majority (probably 70%) of the tech focused grads left Boston for SV. The rest were split between Boston, Seattle, and Austin.
Garrett, I am amazed that your estimates are so accurate. I did a study titled Education and Tech Entrepreneurship (downloadable for free from: http://ssrn.com/abstract=1127248) which analyzed the percentage of company founders who start their companies in the state from which they graduate.
Mass: 29.0%
CA: 69.2%
Nice article. Think this would be the first article of yours that has escaped the war of words & flaming.
Justin, wait till tomorrow. I have no doubt the xenophobes will find their way here!
I am knowing that 128 was the place to be for DSP only. It was best plece for doing hardwares design. It is not good highway for having softwares only.
Good article..
However, I want to point out Bell Labs guys published so many valuable results in comparison to some researchers from some of the big companies in the ‘open’ west coast – apparently they are fed well but not allowed to publish much.
Publishing papers has nothing to do with creativity and innovation. The Silicon Valley crowd isn’t very secretive…
Fail fast, fail often – there is no stigma associated with failure in the valley. That may be one of the factors that make the valley vibrant and nurturing.