On Becoming Silicon Valley, Part 6

In addition to Paul Graham’s take and David Janes’ take, be sure to read this blog entry by one of my tech evangelist role models, Mr. Guy Kawasaki. He wrote an article titled How to Kick Silicon Valley’s Butt, which are three lists of ways to turn your own town into a high-tech hub:

Stuff You Can’t Do Jack About

• Beautiful, but not gorgeous, surroundings. The surroundings shouyld be beautiful enough to attract smart people, but not so beautiful that they’re always distracted from work.
• High housing prices. An interesting argument: “If houses are cheap, it means that young people can buy housing sooner and have kids. When they have kids, they can’t take as much risk and don’t have as much energy to start companies. (I have four kids—I barely have the time and energy to blog, much less start a company.) Also, if houses are cheap, it’s easier to ‘make it big,’ and you want it to be hard to make it big.
• Cities, crowds, and high- if not over- population. Cities and crowd bring out jealousy, which in turn breeds competition (by the way, this is a good thing). Cities also bring people together to work, face-to-face. As Guy says: “People can’t telecommute to a startup. People need to get together to bounce ideas off one another, argue, and cajole.” He also makes this interesting point: “Also, over-crowding gives people something to shoot for: that is, achieving success so they can get out of there.”
• Absence of multi-national companies—especially the finance industry. “If your companies have to compete with conglomerates or banks like Goldman, Sachs throwing money at people, it’s going to be hard to get anyone for a startup. Pity the startups in New York, London, and Singapore. Come to think of it, how many tech success stories have come from these cities? There is intense competition for employees in Silicon Valley too, but we’re using the same currency: the upside of equity, not high starting salaries.”
• Life-threatening enemies. Guy writes: “Israel is a speck of dust that has few natural resources, and it’s surrounded by real enemies. And yet the country has produced some of the world’s best technology companies. There’s nothing like a life-threatening environment to get the entrepreneurial juices flowing, I guess.”

  I have two questions:

  1. Who are Silicon Valley’s life-threatening enemies? Microsoft?

  2. Can Toronto count the 17 people accused of being jihadis planning to detonate a bomb in Toronto and behead the Prime Minister?

Stuff That You Can Do Jack About

• Focus on educating engineers. “The most important thing you can do is establish a world-class school of engineering. Engineering schools beget engineers. Engineers beget ideas. And ideas beget companies. End of discussion.”
• Encourage immigration. This is going to be a sore point at this time, as a number of reactionaries seem to be recoiling from immigration and denouncing multiculturalism as a result of the “terror 17” here in Toronto.

  Guy writes “If I had a choice between funding someone from a family who moved here from Vietnam whose father and mother run a 7-Eleven versus a descendant of a Mayflower passenger with ‘IV’ in his name, I’ll give you half a guess as to my preference. You need to encourage smart, hungry, and aggressive people to immigrate from around the world. And to do that, you need good schools. To mix several metaphors, if you want to cover your ass, you need to open your kimono because trust-fund kids don’t make good entrepreneurs.”

  I will back Guy up by asking if you recall Principal Skinner’s line from The Simpsons: “For a school with no Asian kids, we put on a pretty decent science fair.” To borrow another Simpsons quote: It’s funny because it’s true.

• Celebrate your heroes. “Every region needs its heroes. These folks take role modeling to an extreme; they have names like Steve Jobs, Bill Gates, Ted Turner, Steve Case, Anita Roddick, and Oprah Winfrey. Kids need heroes, so that they can say, ‘When I grow up, I am going to be the next Steve Jobs.’ In many places, a successful person is pulled back down because of jealousy. Sure, there’s jealousy in Silicon Valley, but our way of dealing with it is to try to outdo the person, not pull her back down.
• Forgive your failures. “There is no better place to fail in the world than in Silicon Valley. (Where else can you get your clock cleaned by Microsoft and become a venture capitalist and top-ranked blogger?) Indeed, some people here have made a career of failing. Some of this is cultural—failing in Europe or Asia casts a cloud over one’s family for generations. Not in Silicon Valley. Here, it doesn’t matter (within reason) how many times you fail as long as you eventually succeed. So many entrepreneurs who failed went on to create massive successes that we’ve learned that failure is a poor predictor of future results.”
• Be logical. “A region should use it’s natural, God-given advantages. For example, aquaculture in Hawaii, security technology in Israel, alternative fuels in the Midwest, and solar power in the Sun Belt. There’s a reason why the best woolen sweaters come from Norway and the best Aloha shirts come from Hawaii.”
• Don’t pat yourself on the back too soon. If you are involved in any way in try to turn your city into a tech hub — ICT Toronto, I’m looki’ right at you — read this point: “Many regions declare victory because Microsoft, Sun, or Google opened a branch office. These branch offices don’t hurt but don’t kid yourself into thinking that the existence of a branch office means that you are now a tech center. Truly, a region is a tech center when its companies open branch offices elsewhere, not when tax incentives and kowtowing got a company to open up a branch office in it.”
• Be patient. “There is nothing short-term in these recommendations. I estimate that creating something that begins to look like Silicon Valley is at least a twenty-year process. This is certainly longer than most politician’s reign–hence the challenge of doing the right things for the long run.”

Stuff You Shouldn’t Do Jack About

It’s my mild libertarian streak that leads me to concur with Guy: “The short answer is that the government should not do much except provide more funding to the engineering schools. Unfortunately, that probably won’t seem like enough to most people.”

• Don’t focus on “creating jobs.” “The thinking should be: ‘If this company kicks ass, then it will survive and grow. If it survives and grows then it will create jobs.’ So let startups focus on kicking ass and the jobs will come naturally-or not.”
• Don’t pass a special tax exemption. My accountant Syd always tells me that there’s a good side to paying lots of taxes — it means you’re making lots of income. Guy kind of sounds like Syd here: “There’s an assumption that tax benefits for investing in startups encourages entrepreneurship. I disagree; I think it mostly creates sloppy decisions by unsophisticated investors and crooked ones by others. Indeed, the unstated (and perhaps unrealized) goal of a sophisticated investor is to create, not avoid, tax liabilities. Nothing would make me happier than having to pay $100 million in income taxes. I would hand deliver that income tax return to the White House.”
• Don’t create a venture capital fund. “The thinking here is that a government created venture capital fund would kickstart entrepreneurship because of the influx of money. However, if there’s one thing you can depend on in venture capitalists, it’s greed. If you show them good engineers with good ideas for good companies, they will appear by (private) plane, canoe, dogsled, and camel. Such a region doesn’t need to create a fund. A supply of capital does not create demand from entrepreneurs–at least not the kind of entrepreneurs that you want.”
• Don’t provide cheap office space and infrastructure. “The rationale is that if entrepreneurs had office space, photocopying machines, T1 lines, and adult supervision, they would be successful. I can’t think of a case where cheap space, incubation, whatever caused success. This isn’t to say that there haven’t been successful companies from incubators (eBay is arguably one), but the key point is to determine the actual causes of success. Cheap space, etc, can’t hurt, but I’d buy engineering professors, not crappy buildings. Just because there’s a cheap building doesn’t mean you should create an incubator out of it.”

As always, discussion is welcome and encouraged. Comment away!