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October 29, 2007

Richard Florida

Generation Innovation

« Mark DeSantis | Main | Drop Out Factories »

Max Levchin is the 32 year old founder of PayPal which made him rich. He's bored, so he's launching a new company at age 32.  He's a serial entrepreneur, like many in the San Francisco Bay area.  This New York Times story provides a nice profile, quoting Stanford's Bob Sutton: "In other parts of the country, things like a great estate are the symbols people most respect. But here the greatest status symbol is a person's ability ... to still bring out new hot new companies ... working on hot new technologies."  It's a fascinating tale.

The key point, which the article breezes past, is this: He's an immigrant - born Maximilian Rafael Levchin in Kiev, Ukraine. His family migrated to  Chicago when he was 16 years of age.  And when immigration restrictions were far less stringent.  Maybe the Levchin's would be admitted to the United States today.  But with stricter immigration controls, then again maybe not.  And the real question is How many more families like Max Levchin's are making decisions on where to migrate to today?  How many will choose locations like Canada, Australia, New Zealand, the United Kingdom or elsewhere around the world?  We'll know the answers in another 16 years.  That's when the seeds of these location decisions will be harvested.

No one can say for sure where the PenPal's, Google's, and E-bay's of the world will crop up in the year 2025 or 2030. But there's one thing I'd bet on: Because of immigration restrictions. many many more will end up outside the U.S. - that's where the "human seeds" of those innovations are planting themselves today.

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Comments

Wendy

If I understand start-ups, angel investing, and technology clusters correctly, particular urban regions of the US still have a global advantage when it comes to experienced angel investors who not only offer seed money to worthwhile ideas and the entrepreneurs behind them, but also in helping these entrepreneurs succeed. Silicon Valley is of course famous for this.

As long as the money is there, innovative companies will spring forth. But rival regions could also emerge elsewhere in the world. So perhaps the question is where else in the world will offer similar financial backing (along with the other ingredients like good nearby educational facilities and an attractive place to live).

I wonder if it will be former US-residents from places like India, who made considerable $ in Silicon Valley, while gaining a wealth of experience, who return home to become venture capitalists.

Gary Dare

Wendy, a writer on the San Jose Mercury News' SiliconValley.com site (link in my byline) named Vindu runs one such fund that invests in his homeland. Needless to say, his first column attracted a lot of heat from the local crowd angry at globalization. I'd hazard to say that Vindu's not the only one. On business trips to India, I have met many "repatriates" of which a large number are US, UK or Canadian citizens who live under their new dual citizenship rules as "overseas" despite being in Bangalore, etc. They cannot vote but they also cannot be deported for any infractions. Also many British, American and Canadian children of Indian immigrants who know some of the customs and language but it's hard to hide that they are, really and truly, westerners.

A favourite expired SiliconValley.com article from last spring recounted the tale of Sand Hill Road VC veteran Tom Melcher who moved his entire family to Shanghai. His kids picked up Mandarin Chinese very quickly and are now their guides, helping to navigate their family around China much like the Canadian and American children of past (and even present) Chinese immigrants.

That news site sometimes turns on registration, it's usually clear during the day in the Pacific time zone if you don't want to register.

Jochem

How do you hammer this in the heads of our political leaders?

RF

Great comments, all. My hunch is these environments or ecosystems are endogenous. They will spring up where the people go. Fifty of sixty years ago Silicon Valley wasn't the entrepreneurial ecosystem it is today. But because of its open-mindedness and acceptance people who "didn't fit in" elsewhere started to migrate and their ideas somehow took root there. Once upon a time, Pittsburgh and Detroit were hot-beds of entrepreneurship - and then the squelched it out. One can look at the dynamics between openness and new business formation by looking at art and music scenes. Berlin once had the world's most thriving creative scene. It was killed off inside a decade. During the '20s, '30s and '40s, there was a mass migration of European talent to the United States. Some of that talent went to Bos-Wash, but a whole lot headed west, including many intellectuals. The rest, as they say, is history. Silicon Valley is not the end of history, though it may have a relatively long life span. The seeds of the next generation of innovative and creative centers are being sown now. Trust me, the won't be the places most people are looking or where government invests the most in R&D. They'll be the places that are most open to people and our ideas.

Gary Dare

Fortune's Global Forum 2007 is taking place in India this week. (link provided in my byline) Not much on VC's and start-ups, most of the activity is corporate-centered and that's the focus of that magazine. US Treasury Secretary Hank Paulson spoke tonight.

Gary Dare

P.S. to Professor Florida: my personal observations on Silicon Valley is that it is becoming like Wall Street. The top management, analysts and strategists are still in Manhattan but lower layers of the pyramid have been dispersed further and further away ... first to other boroughs, then upstate NY and NJ, then Florida, and now abroad (particularly India). Hardware and software engineering jobs have been disappearing from Silicon Valley (the SJ Merc reports that work force is shrinking) but the deal makers and visionaries are still there. Few plans do not include a tipping point where expansion shifts to India or, say, Eastern Europe.

Gary Dare

News from today's EE Times ... Cisco has started a $100 Million venture fund to sponsor Indian start-ups. (link provided in byline)

A few months ago, I also read an article in either the EE or the NY Times that Cisco is targeting to have 1 in 6 of their executive and engineering staff (I believe that means 1 out of 6 R&D staff, not execs and techs one-to-one!) based in India.

Michael Wells

To go back to the beginning of the post, the problem for American isn't that there is competition, it's that we're backing away from being competative. A large part of the country and the government is becoming isolationist and the manifestation is anti-immigrant policies. Along with this is reduced funding for primary research and a 19th century industrial policy aimed at rewarding extraction industries.

In the long run, we all benefit from prosperity and innovation being spread around the globe. Would it be better for us for India to stay poverty and disease stricken?

From another angle, what is it about the British legal or economic system that promotes economic growth? Look at the countries Richard notes: Canada, Australia, New Zealand, the United Kingdom. Add Ireland, the US, Hong Kong, Singapore, South Africa and yes, India. Compare this to the former Spanish, French or other empires. Something's going on -- and I suspect that identifying it could lead the way out of poverty for much of the rest of the world.

Michael Wells

You can put this in either the world is flat or spikey, I don't care, but I have a personal history of how technology has affected communications. I think this has a great effect on things like international venture capital and people working around the world.

My wife has traveled to India every few years to study yoga in Pune. When we were first dating in 1988 she went and I called her, allowing for the 13 hour time difference. Part of the time I would dial the 15 digit number and get the message "All lines to that country are busy" in an East Asian accent -- I pictured a recording in a satellite over Hong Kong. When I did get through, the only telephone in the hotel was at the front desk, so the night desk clerk had to run to her room and get her.

A couple of years later they had a fax machine, so we could send letters and not worry about time zones. Of course sometimes the desk lost the faxes, but that's India.

By the mid-'90's there were Internet Cafes and we could e-mail, although she was working at dial-up speeds.

Her last trip 3 years ago, they had a phone in the room and could connect a laptop. I'm sure if we wanted, she could have had a cell phone.

Today, if we knew how we could use Skype and video-conference.

Wil

WE have witnessed a surprising shift in Canada during the last five years. The Canadian ecomony has pulled away for that of the USA and the American dollar has dropped substantially versus the "Loonie". Almost no young person that I have talked to in Canada wants to live in the USA. These facts tell me that the Silicon Valley of the next generation will not be in the US.

Wil

WE have witnessed a surprising shift in Canada during the last five years. The Canadian ecomony has pulled away for that of the USA and the American dollar has dropped substantially versus the "Loonie". Almost no young person that I have talked to in Canada wants to live in the USA. These facts tell me that the Silicon Valley of the next generation will not be in the US.

Gary Dare

Silicon Valley itself (San Jose, Santa Clara, Palo Alto, Los Gatos, etc.) is not that interesting once you get beyond the technology industry. Exclude the tech industry and there's nothing much different from Schaumburg, Illinois except for nicer weather and geography. It's San Francisco and the immediate area (Berkeley, Half Moon Bay, Sausalito) where things are happening culturally. Living in the City and commuting to work in the Valley is not practical anymore, given the heavy traffic that has set in.

Quality of life in the Valley has improved, though, actually beginning to take on more aspects of being creative class friendly. But that's the opposite direction of the process that Professor Florida describes. As the tech industry continues to globalize and actual technical grunt work dwindles, Silicon Valley will have to evolve into a better place to live and attract other industries as a good place to work.

Michael Wells

Palo Alto has always had Stanford, but San Jose and Los Gatos were agricultural into the 70's at least, just like the areas around Gilroy and Salinas are now. Not high culture or hip at all, it's the people Steinbeck wrote about. San Jose is larger than SF in population, but it's all sprawl with no real downtown. I expect people will always go to the Bay Area proper for interesting culture, even if Silicon Valley gets good restaurants and club music.
But there's the technology, talent and tolerance there to attract the driven geek creative class segment.

Gary Dare

I believe that SF retook the larger population crown a year or two ago, due to SJ's loss of population since 2001.

Wil

I actually found two places to park side by side in downtown S.F. in 2001 after the boom was over. Many people left rather suddenly after the jobs dried up... The real opportunity for bohemians who still want to live in the Bay Area is Oakland. Oakland is the garage workshop of the region.

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