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Scott Wharton
Scott Wharton
CEO
Published Oct 24, 2018
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I’ve noticed an increase in comments about the upcoming demise of Silicon Valley. Both in the popular press, but also in some of my recent conversations. The reasons people cite for its imminent death vary. Some are from other parts of the world, and some are simply disgruntled locals fed up with the skyrocketing cost of housing, increase in traffic, etc.
I’m a Silicon Valley transplant turned enthusiast. And while some global tech companies are looking to open new headquarters in the Midwest and East Coast, I believe that Silicon Valley is alive and well, and that’s not going to change anytime soon. Here are six reasons why:
- Risk-embracing culture. Silicon Valley has a heritage in being risk-tolerant, and that’s not an easy cultural shift. The Valley’s risk-tolerant innovation is what has made the area the home for disruptive companies that have changed how people work with technology and interact with others. While many cities have very smart people and leading universities, few embrace the fail-fast and go-for-it culture that exists here. Failure can be a badge of honor and learning whereas in most of the world, it’s a black listing for future opportunities.
- Unique ability to scale. Entrepreneurs are encouraged to start new businesses around the world. But most businesses fail and very few tend to scale significantly. Growing a company to $10 million in sales vs. $10 billion requires a very specialized skill set. The Valley has unique co*cktail of trained people who know how to grow a business rapidly and to great size. This consists of venture capitalists who tend to be more patient and not sell out too early plus founders who have a fundamental desire to disrupt an industry - getting rich quick may be a result of their actions, but it’s not necessarily the driving force.
- Openness. Everyday, people meet around the Valley area and share ideas, contacts, and favors freely. It’s a special culture of giving something of great value and not immediately expecting something back in return. When I lived and worked on the East Coast, I often found entrepreneurs would do the opposite - they might hoard contacts and favors, fearing that if they made an introduction to a powerful person, they would be giving up “ownership” of the special relationship rather than paying it forward and potentially creating a future chit to collect when needed.
- Winner-take-all markets. As the world moves more to Internet and software-based business models, success becomes less evenly distributed. In a connected world, a true innovator may gain initially gain success in their local market, which sometimes leads to them dominating the global market. Think of Google, Facebook, and Amazon. These players not only own the North American market, they’re also global leaders, leaving smaller players to struggle and pick up the leftovers. China is a special case, where the combination of market focus and protectionism tend to help with local players, e.g. WeChat, Alibaba, Tencent and more. But as a general rule, Valley leaders often become global leaders.
- Diversity. As mentioned, China is a formidable player in the global economy. But to truly be innovative, it’s a takes a diversity of thought. Silicon Valley attracts people from all over the world and the best and brightest want to be here, whereas Chinese companies tend to be less diverse. Research shows that diversity facilities better outcomes and this diversity and multiculturalism is a big strength compared with more hom*ogeneous cultures.
- Location, location, location. Let’s face it - location isn’t everything, but it sure does help. Silicon Valley offers easy (albeit sometimes traffic congested) access to San Francisco for urban amenities and culture, the Sierra Nevadas for outdoor enthusiasts, Napa and Sonoma for wine lovers, and the beautiful beaches of Santa Cruz and Monterey. And the with the weather we have here, it’s a hard place to beat.
I’m not suggesting that other cities can’t and won’t do well. Of course they will and many great companies will be created and developed around the world. Many cities will also thrive as Valley companies expand around the world, hiring the best and brightest wherever they can find them.
The model of old where the majority of people in a company serve in HQ with smaller numbers outside will be flipped on its head. Given the very high costs in Silicon Valley, I envision the headquarters will become relatively small with a lean but nimble core team. Just like most manufacturing is outsourced to Asia for favorable economics, so too will the rest of the functions including accounting, human resources, IT, and most others that don’t require some of the success factors that Silicon Valley hosts.
As the velocity of technology and business speeds up, this all plays to Silicon Valley’s key strengths, and for better or worse, an increasing concentration of success… which means I believe Silicon Valley’s best days are yet ahead.
What do you think? I’d love to hear where you stand on the future of Silicon Valley and what that means for other geographies.
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Brett Layton CPA, MST
Independent Tax Consultant at Brett Layton, CPA
5y
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Silicon Valley is great and I was born, raised, educated, and worked in San Jose most of my life. I am now semi retired in Orange County (Newport Beach / Irvine) within a mile of UCI. O.C. and the UCI complex is a great place also. Not on the massive scale of Silicon Valley, but exciting just the same. Competition exists so do not get too complacent. The internet and the cloud are making where you are less important all the time.
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Curtis Sasaki
Senior Advisor to LG NOVA,Advisor to Pure Watercraft,Advisor to 2 Stealth Startups, former VP and Head of Product Management at Samsung Electronics
5y
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I also remember during the dot.com bust how commercial real estate along 101 had for lease signs everywhere and traffic was much lighter. But housing prices weren't effected much. Even after the Loma Prieta earthquake, companies didn't move out. What I think really helps SV are the schools, VC's, lifestyle). Some areas may have one or two of those, but having alignment on all factors is challenging. Seattle seems to have also done well - surviving Boeing HQ moving. A nice city to live as well - but where traffic is also now a problem.
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Bill Gough
Global Alliance Leader | Expert Strategist and Influencer | Creative Deal-Maker| Skilled Communicator | Bitcoin Evangelist
5y
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I completely agree, Scott. I recall seeing the same negative chatter on Silicon Valley during the dotcom boom when traffic congestion was at a peak and housing at a premium (sound familiar?) and then again during the bust when it was hard to imagine how the Valley was going to recover and re-invent itself. But it did. One more reason to add to your list: access to a young talent pool from world-class local universities. What a great combination!
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Chantal Neri, Ph.D.
5y
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Scott, your analysis is 100% on target. Other great places in the world are moving forward with innovation and offering great locations. Only one for now is a master of Scale. It's the Valley. With the same enthusiasm, Cheers!
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Johan Pirot
Passionate making innovative, customer-centric solutions and partnerships to work
5y
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I'm also a "transplant turned enthusiast" and for all the reasons Scott mentions, working in the Valley is fun ... if you don't mind sweating. There is also a "can-do" mentality. This results in huge motivation to innovate and move at a speed which is hard to understand for many others. It attracts more like-minded people and will keep the rest of us here. The Valley will not stop growing anytime soon.
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