Silicon Valley and the Miracle of Spontaneous Combustion

One of the truly interesting discussions among really smart business people is how to replicate new “Silicon Valleys” in different parts of the country and world.  There are certainly vibrant technology communities in places like the Research Triangle in North Carolina, New York City and, for that matter, most of the nation of Israel.  But when we say “Silicon Valley,” we refer to something special, something I would define as a geographic region that produces extraordinary innovation, commercial success and global impact over multiple generations. 

AnnaLee Saxenian, Dean of the School of Information at the University of California Berkeley, was interviewed recently on the occasion of the 20^th anniversary of her superb book, Regional Advantage: Culture inSilicon Valley and Route 128. In it, she contrasted Silicon Valley with the Route 128 technology loop (nicknamed “America’s Technology Highway” in the 1970s) in Massachusetts.

A grad student at the time, Saxenian learned that “being able to innovate very, very quickly and being able to be the first to market with new products, being able to adapt to crises and to change quickly was a much more sort of enduring advantage” for Silicon Valley, which had a dynamism “rooted in a structure that was very decentralized and very flat and allowed for very rapid change.”  This all seems like gospel now; after all, how else would a company compete in 2014?  But at the time Sexenian was helping us understand (what seemed) a new phenomenon—a region that created extraordinary innovation and, when faced with collapse (as it was when Japanese firms upended the silicon market), was able to engineer a kind of self-healing that allowed it to come roaring back in a whole new and formidable shape.  (Read and hear the audio here.)

Of course, Route 128 was held up as a model of innovation for a generation or more as well thanks to large, vertically-integrated minicomputer companies like Data General, Digital and Prime Computer.  But in the East, management was top-down, business was close-mouthed, and companies siloed—a GM and defense-inspired model so effective in 1950--such that the flat, fluid ecosystem by which SV is now defined never had the opportunity to develop.

Consequently, for a generation or more we have watched, analyzed and debated what makes Silicon Valley so great but been stumped and frustrated about how to actually go about planting the next one. 

Another Way to Come At It

In my own research I have taken a slightly different look at the question: I’ve been wondering not so much how to plant the next one, but if, instead, there might not have been others.   If so, what did they look like?  How did they compare to last generation’s Route 128 or this year’s Silicon Valley?  And—most importantly--how did they get started?   Were there certain commonalities that we could divine in the long historical view that are not so obvious staring at the offices on Sand Hill Drive?

This question, of course, is the invitation to a monumental long-form essay that won’t be written here—in the interests of having a life, getting some real work done, and keeping my digital sharecropping to a minimum.   But a less-than-monumental overview might still be fun, and below is my shorthand for the next few paragraphs to come:

An overview of six "Silicon Valleys" in American history.

The Spontaneous Birth of Silicon Valley

Perhaps it’s best to remind ourselves first how Silicon Valley came to be.  Sometimes we credit the success of SV to geography, which Saxenian described as “a relatively narrow stretch of land hemmed in by the San Francisco Bay to the east and the mountains to the west [which] ensured a density of development that minimized physical distances between companies and facilitated intensive informal communications.”[i]  Sometimes we credit it to climate, or Stanford, or the founding of HP (in 1938).  But the truth is that SV came to be in 1956 when William Shockley, the creator of the transistor, moved from New Jersey to Mountain View, California, to found Shockley Semiconductor Laboratory.  He chose Mountain View for no other reason more profound than because he needed to live near his ailing mother in Palo Alto.

Shockley was a technology genius and gifted at hiring brilliant engineers, but a dreadful manager who practiced both creative destruction and just plain destruction.  In the end, he drove his best and brightest to create firms like Fairchild Semiconductor Corporation, the granddaddy of them all; at a 1969 semiconductor industry conference held in Sunnyvale, California, less than two dozen of the 400 men present had never worked at Fairchild.

The point is this: Silicon Valley was created by an act similar to spontaneous combustion.  It falls into that legendary (if tenuous for-want-of-a-nail) line of historical reasoning that says if it had not been foggy on the night Washington crossed the Delaware, we’d all be drinking tea today instead of coffee at Starbucks.  In other words, if William Shockley’s mother was well, maybe Silicon Valley would not have come to be, or would have been based in New Jersey, or would have happened but 25 years later.  The weather, HP, Stanford and geography were all there and had been for a while; they seem descriptive but not causal, at least at birth.  It was William Shockley bringing together a profoundly talented group of engineers that just happened to bisectone of the Big Ideas of the 20^th century that birthed SV.  The culture then developed to meet the needs of its big idea.

Hang onto that simple thought: Committed Individuals bisecting a Big Idea.  We have many of the first but only get a couple of the latter every century--and they're tricky to spot.  For what it’s worth, too, it seems that first-mover status in innovation communities is as important as first-mover status for the next technology product or service.  All of this begins to make Silicon Valley itself sound like an innovation--which is, of course, sneaking up on the main point.

The First SV of the 20^th Century: Detroit

Detroit sits front and center when we talk about remarkable innovation communities in America.  From about 1900 when the Olds Motor Works moved there until about 1975 when the Japanese automobile companies clobbered the Big Three, Detroit was a global juggernaut of commercial success and vast innovation.

In a brilliant essay entitled “Why Michigan,” technology historian John B. Rae wondered why Michigan became the capital of the automotive world.   It would have helped dramatically to answer the question, he said, had the automobile been invented in Detroit, but it “was born in Germany and brought up in France,” and the first American gasoline car was built in Springfield, Massachusetts, and first made in volume in 1897 in Hartford, Connecticut.  “Detroit was barely visible on the automotive scene in 1900,” Rae wrote, and for several years after was competing with Hartford, Cleveland, Buffalo, Toledo, Indianapolis, Kenosha, Moline, Kokomo and Elkhart, Hagerstown and York as a promising center of development.  By 1910, however, Detroit had begun edging out its competitors and by 1915 was the unchallenged center of automotive development in America and the world.

Rae dismissed all of the usual suspects--easy access by water to coal and ore (just like Chicago, Toledo, Cleveland and Buffalo);  hardwood forests that had attracted carriage and wagon manufacturing (but which extended into Ohio and Indiana, where, in South Bend, the world’s largest manufacturer of horse-drawn vehicles was in 1900); a healthy ecosystem of machine-shop facilities and skilled labor (also incredibly abundant in southern New England, where the first American automobile was manufactured).

“Detroit may have been foreordained to become the automotive capital of the world,” Rae wrote, “but for some of its inhabitants in 1903 the finger of fate seems to have been wavering uncertainly.” 

What Professor Rae concluded will sound like an awful lot like the Shockley story:  “I do not believe that there was a compelling reason for these impersonal forces to operate by themselves,” he wrote.  “There had to be a catalyst, and this catalyst was a remarkable concentration in time and place of a group of individuals who became attracted to the possibilities of the motor vehicle and who brought to it exceptional entrepreneurial and technical talent.”  These men had one thing in common: “They became utterly dedicated to the manufacture of motor vehicles, to the point where they seem to have preferred to go broke making automobiles than to get rich doing anything else.”[ii]  The fact that one of those men, Henry Ford, had a singular vision and built his company near his home had more to do with Detroit’s future preeminence than most anything else.

As Freud might have said, it all comes back to our mothers.

The automobile was a Big Idea of the 20^th century--and perhaps its biggest (especially if you include innovations in design, the model year, new forms of consumer finance, inventions in rubber, steel, and farming, the suburbs, highways, decentralized management, forecasting, long-term R&D, etc.)  When a group of committed entrepreneurs bisected with that idea, Detroit became the first Silicon Valley of the 20^th century.  It could have happened in South Bend, Indiana, or Hartford, Connecticut, but it did not, for precisely the same reason that right now you feel like having a Caramel Brulee Latte and not an Earl Grey hot.

If you still think of Detroit as the home of tone-deaf commercial dinosaurs, travel back in time to the early 20^th century with Alfred Sloan, the future CEO of GM.  There he sat at the Pontchartrain Hotel, where passionate entrepreneurs exchanged motorcar gossip every day.  “When the crowd thinned out of the dining room,” he remembered, “the tablecloths would be covered with sketches: crankshafts, chassis, details of motors, wheels, and all sorts of mechanisms.  Partnerships were made and ended there.  New projects were launched.[iii] 

Exchange the crankshafts for code and it will remind you of a coffee shop in a sunny innovation hub on today’s West Coast.

I Promised Not to Long-Form This

I’d like to say a word about New Bedford, Massachusetts, which led the world in whale oil for a century, lubricating the Industrial Revolution and lighting homes around the globe.  I’d like to tell you that it was probably the richest American city per capita for most of the 19^th century, innovating everything from the toggle harpoon to the use of whale oil to protect orange trees in Florida.  And I’d like to tell you how it employed its expertise in risk-taking, capital accumulation and mechanical inventiveness to undertake a massive pivot to textiles beginning around 1840--while the whale oil trade was still booming--remaining one of the wealthiest small cities in America.  I’d also suggest it is the longest-lived innovation hub in American history—begun because a ship caulker moved there and decided whaling, which Nantucket seemed to be pursuing successfully, might pay the bills.  But I promised I’d keep this short.

How about New Orleans?  If I had time I’d tell you that few places were more “open source” than this complex city as it innovated an entirely new American art form around 1900.  Night after night entrepreneurs combined raw materials to create new music, tested their creations on live audiences, and adjusted and readjusted to meet the pressing demands of commerce.  The competition for ears and dollars was fierce.  (In a preview of Apple's walled garden, Freddie Keppard threw a handkerchief over his fingers to stop other coronet players from copying his fingering.)  Bands traveling on horse drawn wagons would lock wheels at an intersection in a "cutting contest," trying to blow one another down and drag the audience along with them.  Kings were anointed--Buddy Bolden, Keppard, Joe Oliver.  Backrooms, attics and front stoops became places of constant invention.  Entrepreneurs ate, drank and slept their craft.  Fortunes were made and lost.  Indeed, in fundamental ways, New Orleans displayed patterns of innovation in 1900 less like the traditional centers of nineteenth-century European music and more like those we see today in the coding culture of software. 

And, like Detroit and Silicon Valley, nobody could have seen it coming.  By 1900 New Orleans had suffered from a long arc of economic decline dating back to the Civil War and rise of the railroads.  The city also groaned under a crushing racial re-segregation after the collapse of Reconstruction.  It was a world of sharp class distinctions, defined neighborhoods guarded with broomsticks and knives, and a destination best known by travelers for having, in Storyville, the most famous red light district in America.  Indeed, there are few places that appear, on the surface, more hostile to sustained creativity and the rise of a robust entrepreneurial class.   (I recognize that New Orleans does not meet the “multiple generations” criteria of my original definition, but if not for racism, it might have innovated two or three additional music forms by now.)

The Most Important Innovation Hub in World History

And finally, if I had more time, I would tell you about southern New England—an axis from Springfield to Hartford to New Haven, spilling back into Rhode Island.  It is the single most important innovation hub in world history (with apologies to Florence and the Renaissance).  It is the only American “silicon valley” with its own character (thanks to Mark Twain) in the guise of Connecticut Yankee (and time traveler) Hank Morgan.  In the same way Silicon Valley’s software is eating the world, southern New England’s machine tools and mechanization ate the world for 150 years, starting right after the American Revolution.  In the process it drove the Industrial Revolution, created a steeper growth in wealth than the world had ever seen, launched the automobile and the American Dream, and pivoted countless times through a variety of innovations.  Silicon Valley owes much to the Connecticut Yankee.  Hank said it well, engineering the revolution from Camelot:

The first thing you want in a new country is a patent office; then work up your school system; and after that, out with your paper.” Then he listed his accomplishments:  "The telegraph, the telephone, the phonograph, the typewriter, the sewing-machine, and all the thousand willing and handy servants of steam and electricity were working their way into favor.  We had a steamboat or two on the Thames, we had steam warships, and the beginnings of a steam commercial marine; I was getting ready to send out an expedition to discover America. 

It's a good reminder that if we want to create the next Silicon Valley, we need to check out the Springfield Armory in 1800, Eli Whitney in New Haven, Samuel Slater in Pawtucket, Eli Terry in Plymouth, Elias Howe in Bridgeport, Pratt, Whitney and Colt in Hartford and on and on.  Together, they created what Europeans came to call the “American system” defined as “the sequential series of operations carried out on successive special-purpose machines that produce interchangeable parts.”[iv]

To steal a great line from Michael Lewis, the Connecticut Yankee was to America in 1850 what the American was to the rest of the world.

While an imperfect measure of innovation, patent activity in the first half of the 19th century suggests the emerging
dominance of southern New England as an innovation hub.

The Big Idea was to manufacture uniform products by transferring the skills of workers to machines. By using specialized machines, like Thomas Blanchard’s coping lathe, and relying on fixtures and gauges, semiskilled laborers could produce large numbers of similar parts.  No longer was manufacture dependent on skilled craftsmen using general purpose tools.  The parallels with today are staggering.

How did it start?  It was partly organic, partly the result of the US government investing in ordnance and encouraging experimentation (itself the topic for a separate essay), but mostly the result of resolute Americans of all stripes bisecting a Big Idea.  Historian Brooke Hindle wrote, “It was common for craftsmen to drift easily into and out of business: one year working for a master, another year farming, the next year setting up their own shop or factory, only to go bankrupt and head for the cheap land of the West a year or two later.”[v]  A contemporary observer reported, “there is not a working boy of average ability in the New England States. . .who has not an idea of some mechanical invention or improvement. . .by which, in good time, he hopes to better his position, or rise to fortune and social distinction.”[vi]

Does any of this sound familiar?

What I cannot explain is how the automobile escaped becoming the next great innovation of this fierce, brilliant, flexible and competitive community.  There was a direct line, however, epitomized by Henry Leland.  He worked at the Springfield Armory, carried this knowledge to Brown & Sharpe Manufacturing Company when it was making both machines tools and Wilcox & Gibbs sewing machines, next created the Cadillac Motor Car Company and finally the Lincoln Motor Company.”[vii]  He traveled from guns to cars, and then he schooled Alfred Sloan.  (See here for my Prophet of Quality post from last year.)

David Meyer makes an eloquent case that mechanics comprised the first players in a true American innovation machine.  From 1790 to 1860 machinists in the eastern U.S. created the nation's first high tech industry.  Joseph Whitworth, who surveyed machinery works and armories in the eastern United States for the British, reported to the House of Commons in 1854 on what he described as "universal application of machinery effected with a rapidity that is altogether unprecedented."[viii]

The Times of London concluded simply that “the American mechanizes as an old Greek sculpted, as the Venetian painted.”

See, It's Easy!

So, these are the pieces to an evolving argument that says we can explain Silicon Valley but we’re going to have a much harder time replicating it.  Historically speaking, the most remarkable innovation communities operated differently each time (but just right for their times), appeared in the strangest of places, and arose through a kind of spontaneous combustion. 

Remember when Monty Python taught us how to play the flute?  It was, I think, “blow in one end and move your fingers up and down on the outside.”

Likewise, if we want to create the next Silicon Valley, find a group of committed, resolute and brilliant entrepreneurs.  Spot a Big Idea.  Then allow them to bisect.

(Just as I was going to press, friend Matt sent me this from the Huffington Post.  I promise to take another look at Carnegie and Pittsburgh!)

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[i] AnnaLee Saxenian, Regional Advantage: Culture and Competition in Silicon Valley and Route 128, New York: Harvard University Press, 1996, 30.

[ii] John B. Rae, “Why Michigan?”, The Automobile in American Culture, David L. Lewis and Laurence Goldstein, eds.,  Ann Arbor: The University of Michigan Press, 1986, 1-9.

[iii] Alfred P. Sloan, Jr., Adventures of a White-Collar Man, New York: Doubleday, 1940, 80.

[iv] David A. Hounshell, From the American System to Mass Production, 1800-1932: The Development of Manufacturing Technology in the United States, Baltimore: The Johns Hopkins Press, 1984, 15.

[v] Brooke Hindle and Steven Lubar, Engines of Change: The American Industrial Revolution 1790-1860, Washington, D.C.: Smithsonian Books, 153-154.

[vi] Brooke Hindle, Emulation and Invention, New York: W. W. Norton, 1981, 140.

[vii] David A. Hounshell, “Mass Production in American History, 1800-1932,” Polhem 2, 1984, 1-28.

[viii] Meyer, David, "Machinists in Networks: Building America’s Earliest High Technology Industries," Paper presented at the annual meeting of the American Sociological Association, San Francisco, CA, August 14, 2004, 3.

Posted by Entrepreneur Generations

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