Nestled between the Santa Cruz Mountains (Mountains of the Cross) and Mt. Diablo (Devil Mountain), Silicon Valley and its surrounding communities sit at the center of the technology universe. I was born in Silicon Valley and have watched it grow from a town of fruit orchards to a tech mecca where visitors from all over the world come daily to do business with over 800 tech companies, involved with everything from semiconductors, to PC and CE products, to telecommunications, to biotech and green energy.
I was reminded recently that "The Valley," as it is known locally, is doing quite well again, as this area has recovered nicely from the recent recession. In fact, according to a great article in The San Jose Mercury News, the top 150 tech companies in Silicon Valley had their most profitable year ever in 2010. Sales of these top 150 companies rose 20.3 percent, while profits rose 78.6 percent. They are also now on a hiring spree. The SJ Mercury points out that "after shedding 95,000 jobs in 2009, the Silicon Valley 150 increased its total workforce in 2010 to 1.1 million employees worldwide."
But Silicon Valley is not always in an upswing. Indeed, over the 30 years that I have been chronicling its history, this area has had at least four major downturns and has gone through some serious ups and downs, as well as experienced difficult growing pains. Property values here have skyrocketed and the freeways are clogged during rush hours. And because of the high-powered tech talent in Silicon Valley and the overall Bay area, it has become the place to start any new tech venture, thus keeping this area in the forefront of technology.
Interestingly, every time this area goes through a downturn, media stories come out asking if Silicon Valley is dead or dying. These are mostly silly stories written by people who don't really understand the region and what makes Silicon Valley tick. Like many regional economies, the Valley is not immune to recessionary woes or impact from many forms of economic downturns. However, since much of it is built on the backs of intellectual property, its ability to rebound is always much faster then areas dependent on hard goods, traditional manufacturing, or agriculture.
But there are some key reasons Silicon Valley can and does continue to rise from these downturns and has reinvented itself many times over. And it lies in these following traits:
1. Its people are not afraid of risk.
Maybe it is something in the water, but for some reason, this area breed's people who are not afraid to fail. They are willing to make big bets and, in many cases, risk everything to fulfill their business dreams. Starting with Hewlett and Packard, Jobs and Wozniak, and hundreds of others who have followed in their footsteps, these dreamers are willing to work 80-hour weeks and live on donuts and coffee to get their ideas created into products and services and into the marketplace. In the 1990s, I did an article for one of the major news networks that talked about the difference between Silicon Valley entrepreneurs and those in Boston's Route 128 tech area. I can't remember all the details of that piece and can't seem to find it now, but I do remember interviewing some bright engineers in Boston who had a great idea but where not prone to great risk. They worked on it at night and kept their day jobs. And it never took off. On the other hand, I profiled a couple of start up entrepreneurs in Silicon Valley who sold their houses and worked full time at making their company successful. Perhaps these are extreme examples, but I can tell you that in my years covering Silicon Valley, I find this risk-it-all approach to attacking a technology dream or vision more often here than in any other place in the world.
2.This is where the money is.
Over the years, I have made the trek to Page Mill Road in Menlo Park with over 50 startups looking for venture money to start or grow their businesses. This is the area where most of the high tech venture capitalists reside and these are the companies that are willing to take serious risks in startups. In this one region alone, they have over $150 billion in funds to invest in mostly tech related companies. And they have one interesting secret. They want the companies they invest in to be close by. That is why when a Sand Hill Road VC invests in a company, they almost always have it settle in Silicon Valley. While many companies start with angel funds or their own money, if they want to grow, they almost always need serious capital. And these VCs basically rule the Valley. They fuel the entrepreneurial spirit in this region, and since tech is their universe, they literally breed tech start ups and nurture them here in the area. The WSJ had a great piece recently that showed how VCs are rushing to invest in high tech start ups these days and underlines the VC's role in Silicon Valley.
3. It has engineering talent.
I am convinced that I get smarter just by hanging around with the brilliant engineers that work at the many companies that I deal with in the Valley. It is estimated that there are about 100,000 engineers in the Bay Area, which has a population of around 8 million. Although this number represents a cross breed of engineering disciplines, the majority are in software programming and semiconductor and hardware design. This wealth of technical talent is one of the Valley's biggest draws for established companies and tech start-ups who continue to look for the brightest talent they can find to fuel their growth.
4. Its people have a desire to change the world
One of the more interesting things I noticed when I started covering tech 30 years ago was the rather idealistic idea that technology could change the world. This theme started inside Apple when Jobs and Woz first started the company and picked up steam during the time Apple was building the Mac. In fact, when Steve Jobs interviewed former Pepsi CEO John Sculley for the CEO job at Apple, he asked "Do you want to sell sugar water for the rest of your life, or do you want to come with me and change the world?"
Over the years, I have heard this sentiment mentioned often when I talk with a new start up or even an established company who believes their technology has the ability to impact people in a significant way. And to some degree, they have a point. Look at the various new ways computers and now tablets are impacting the field of medicine. Or Facebook's affect on the current uprising on the Middle East. To underscore this theme, the Google executive who helped spur the recent revolution in Egypt, Wael Ghonim, was in Silicon Valley last week, and he implored his co-workers to "change the world with their next invention."
These tech entrepreneur's who drive much of the Valley's tech status forward all seem to have this "change the world" mentality as part of their DNA. That is why many of them, who are billionaires and millionaires and who could retire and sail the world, continue to work crazy long hours and keep pushing themselves and their teams to create the next great thing. Of course, they always have the motive of money, but consider Steve Jobs. He earns $1 a year. Yes, he gets stock, but if you know Jobs, he would still be doing what he is doing with Apple even if the stock was taken from him. He really believes what he is doing is world-changing.
Silicon Valley was first known for test equipment, thanks to HP, and then it became the center of the semiconductor world, thanks to Intel, AMD, and others. Apple and HP are key forces driving the future of the PC and CE devices. And most recently, it has become the center of the mobile world, as well as the nerve center for much of the activity in social media. I am convinced that as long as intellectual property sits at the heart of Silicon Valley and as long as it can continue tap into this wealth of engineering talent and still posses the money to fuel new companies wanting to change the world, Silicon Valley will continue to reinvent itself and thrive well into the future.